SEC Filing | Vail Resorts, Inc.

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

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

[X] Annual Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange
Act Of 1934
[Fee Required]
For the fiscal year ended July 31, 2000
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[_] Transition Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934
[No Fee Required]
For the transition period from to
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Commission File Number: 1-9614

Vail Resorts, Inc.
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(Exact name of registrant as specified in its
charter)

Delaware 51-0291762
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Post Office Box 7 Vail, Colorado 81658
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(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code) (970) 476-5601
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Securities registered pursuant to Section 12(b) of Act:

Title of each class Name of each exchange on which registered

Common Stock, $0.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None.
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(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [_] 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 amendments to
this Form 10-K. [X]

The aggregate market value of the common stock held by non-affiliates of
the registrant was approximately $576.7 million on October 16, 2000, and was
calculated using the per share closing price thereof on the New York Stock
Exchange Composite Tape. As of October 16, 2000, 34,903,251 shares were issued
and outstanding, of which 7,439,834 shares were Class A Common Stock and
27,463,417 shares were Common Stock.

Documents Incorporated by Reference
-----------------------------------

The Proxy Statement for the Annual Meeting of Shareholders to be held
December 6, 2000 is incorporated by reference herein into Part III, Items 10
through 13.

Table of Contents

PART I

Item 1. Business....................................................................................... 2
Item 2. Properties..................................................................................... 8
Item 3. Legal Proceedings.............................................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............................................ 9

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................... 10
Item 6. Selected Financial Data........................................................................ 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .................................... 23
Item 8. Financial Statements and Supplementary Data.................................................... F-1
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure........... 24

PART III

Item 10. Directors and Executive Officers of the Registrant............................................. 24
Item 11. Executive Compensation......................................................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 24
Item 13. Certain Relationships and Related Transactions................................................. 24

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................ 24

PART I

ITEM 1. BUSINESS.

General

Vail Resorts, Inc. ("Vail Resorts") was organized as a holding company in
1997 and operates through various subsidiaries (collectively, the "Company").
The Company is one of the leading resort operators in North America. The
Company's operations are grouped into two segments, Resort and Real Estate,
which represented 91% and 9%, respectively, of the Company's revenues for the
2000 fiscal year. The Company's Resort segment owns and operates five resort
properties which provide a comprehensive resort experience throughout the year
to a diverse clientele with an attractive demographic profile. The Company's
Real Estate segment develops, buys and sells real estate in and around the
Company's resort communities. Financial information by segment is presented in
Note 10, Segment Information, of the Notes to the Consolidated Financial
Statements included in Part II, Item 8 of this report.

Resort Segment

The Company's portfolio of resorts currently includes:

. Vail Mountain ("Vail")--the largest single ski mountain complex
in North America, currently ranked the number one ski resort in
North America by SKI magazine;

. Beaver Creek Resort ("Beaver Creek")--one of the world's premier
family-oriented mountain resorts, currently ranked the number
seven ski resort in North America by SKI magazine;

. Breckenridge Mountain ("Breckenridge")--an attractive destination
resort with numerous apres-ski activities and an extensive bed
base, currently ranked the number ten ski resort in North America
by SKI magazine and the most popular ski resort in the U.S. for
the past two years;

. Keystone Resort ("Keystone")--a year-round family vacation
destination, currently ranked the number eight ski resort in
North America by SKI magazine; and

. Grand Teton Lodge Company ("GTLC")--a summer destination resort
with four resort properties in and around Grand Teton National
Park.

Our resorts derive revenue through a comprehensive package of amenities
available to guests, including lift ticket sales, ski and snowboard lesson
packages, a large inventory of resort accommodations, retail and equipment
rental outlets, a variety of dining venues, meeting and event planning services,
private club operations, and other recreational activities such as golf, tennis,
horseback riding, guided fishing, float trips, and on-mountain activities
centers. In addition to providing extensive guest amenities, the Company also
engages in commercial leasing of restaurant, retail and other commercial space,
real estate brokerage services, and extensive licensing and sponsorship
activities with other brand-name companies.

Vail, Beaver Creek, Breckenridge and Keystone, all located within Colorado,
are year-round mountain resorts offering a full complement of on- and off-snow
activities, including skiing, snowboarding, telemark skiing, skiboarding,
snowshoeing, tubing, thrill sledding, mountain biking, golf, etc. GTLC is an
exclusively summer destination resort with operations within Grand Teton
National Park and a golf and tennis club outside the park.

There are over 800 ski areas in North America and over 500 in the United
States, ranging from small ski area operations which service day skiers to large
resorts which attract both day skiers and destination resort guests looking for
a comprehensive vacation experience. Our ski resorts appeal to both day skiers
and destination guests due to the resorts' proximity to Colorado's Front Range
(Denver/Colorado Springs metropolitan areas), accessibility from Denver
International Airport, Vail/Eagle County Airport and Colorado Springs Airport,
and the wide range of amenities available at each resort. Colorado has
approximately 27 ski areas, nine of which are classified as "Front Range
Destination Resorts", catering to both the Front Range and destination skier
markets; the Company's ski resorts account for approximately 69% of total
Colorado skier days in the Front Range Destination Resort market.

The ski industry statistic for measuring performance is skier days, defined
as one person using a ski area for all or any part of a day or night, and
includes both paid and complimentary access. During the 1999-2000 ski season,
combined skier days for all North American ski areas were approximately 69
million, US skier days approximated 52 million, and Colorado ski areas recorded
approximately 11 million skier days. The Company's four ski resorts had 4.6
million total skier days during the 1999-2000 ski season, representing an
approximate 42% share of Colorado skier days, an approximate 8.8% share of US
skier days, and an approximate 6.6% share of the North American market. Skier
days at the Company's four resorts declined 0.2% from the 1998-1999 season to
the 1999-2000 season, which the Company attributes to the slow millennium period
travel patterns across the U.S. travel industry, weak pre-Christmas activity and
unfavorable weather early in the season.

The ski resort industry has undergone a period of consolidation in recent
years, as the cost of capital improvements and infrastructure required to remain
competitive has increased. Despite this consolidation, the industry remains
highly fragmented, as no single resort operator accounted for more than 10% of
the United States' 52 million skier days during the 1999-2000 season. However,
we believe that the consolidation trend will continue, and as such we will
continue to selectively review and pursue those acquisition opportunities which
we believe will provide attractive investment returns.

The ski resort industry is highly competitive. The Company competes with
other ski areas in Colorado, the United States, and worldwide, as well as other
non-ski vacation destinations for guests. The Company's major US competitors
include ski resorts in Utah, Lake Tahoe, New England and other major Colorado
ski areas including the Aspen area resorts, Copper Mountain, Crested Butte,
Steamboat Springs, Telluride and Winter Park. Ski resorts compete for skiers in
a variety of categories, including terrain, challenge, grooming, service, lifts,
accessibility, value, weather/snow and on- and off-mountain amenities. Our
resorts consistently rank in the top 20 resorts in North America according to
industry surveys.

Our ski resorts are highly competitive in all categories with respect to
attracting day skiers and destination guests:

[X] We have some of the most expansive and varied terrain of any resort in
North America--Vail alone offers over 5,200 skiable acres, and an
additional 125 acres are scheduled to open in the 2000-01 ski season
with the completion of the final phase of the Blue Sky Basin expansion
in Vail's famous Back Bowls. Combined, our four ski resorts offer over
10,000 skiable acres, with substantial offerings for beginner,
intermediate and advanced skiers.

[X] Our location in the Colorado Rocky Mountains provides average yearly
snowfall of between 20 and 30 feet, which is significantly higher than
the average for all ski resorts in the Rocky Mountains.

[X] Our resorts are proximate to both Denver International Airport and
Vail/Eagle County Airport, providing ease of access for destination
visitors; day skiers can access our resorts via a major interstate
highway.

[X] We continue to invest in the latest technology in snowmaking systems,
and we have one of the most extensive fleets of grooming equipment in
the world.

[X] We systematically replace lifts and in the past several years we have
installed 12 high-speed four-passenger chairlifts, a state-of-the-art
gondola, and the United States' first double-loading high-speed
six-passenger chairlift at Breckenridge. The Company's plans for the
2000-01 season include installation of a new high-speed six-passenger
lift at Keystone and a new high-speed four-passenger lift at Vail.

[X] We provide a wide variety of quality dining venues both on- and
off-mountain, ranging from top-rated fine dining establishments to
trailside express food service outlets.

[X] Our nine hotels and inventory of over 2,000 managed properties across
all four resorts provide accommodation options for all guests, from
the budget-conscious traveler to families and those seeking a first-
class vacation experience.

[X] We have the largest conference facilities in the Colorado Rocky
Mountain region at Keystone, including a recently completed 49,000
square foot expansion.

[X] We are an industry leader in providing on- and off-mountain amenities,
including substantial full-service retail and equipment rental
facilities, our Adventure Ridge and Adventure Point mountain-top
activities centers, resort-wide charging, which enables guests to use
a lift ticket product to make purchases at all resort facilities, and
our private membership clubs.

[X] Our innovative frequent guest programs and extensive array of lift
ticket products at varied price points provide value to guests.

[X] We are strongly committed to providing quality guest service, from our
best-of-class ski and snowboarding schools, to our teams of on-
mountain hosts and our new technology centers, where guests can try
the latest technical innovations in equipment.

[X] We are actively upgrading and expanding available services and
amenities through our real estate development activities. Current
projects include a major development project at Keystone, a recently
announced master plan proposal for Breckenridge Village development,
ongoing planning for redevelopment of the Lionshead base village at
Vail as well as a proposal for redevelopment of land holdings in Vail
Village. In addition, construction has begun on The Ritz Carlton,
Bachelor Gulch, and we have begun construction of Red Sky Ranch, a
golf community near Beaver Creek that is planned to include two 18-
hole golf courses. Note that a variety of necessary approvals have
been or still must be obtained for these projects before we proceed
with our plans.

We promote our resorts through an extensive marketing and sales program,
which includes direct print media advertising in ski industry and lifestyle
publications, direct marketing to a targeted audience, promotional programs,
loyalty programs which reward frequent guests, and sales and marketing directed
at attracting groups, corporate meetings, and convention business. Additionally,
we market directly to many of our guests through our websites, which provide
visitors with information regarding each of our resorts, including services and
amenities, reservations information and virtual tours (nothing contained on the
websites shall be deemed incorporated herein). We continue to enhance our
website and Internet capabilities, which will provide the opportunity to improve
our overall guest experience and more successfully market our resorts as use of
the Internet grows as a vacation planning tool.

Ski resort operations are highly seasonal in nature, with a typical ski
season beginning in late October and running through early May. In an effort to
counter-balance the concentration of revenues in the winter months, we offer
many non-ski season attractions, such as golf, tennis, guided fishing, and float
trips. In addition, we have established ourselves as a leader in the growing
sport of mountain biking; Vail will host the 2001 World Mountain Biking
Championships.

In addition to summer operations at our ski resorts, we own and operate
GTLC, our first resort with an exclusively summer operating season. GTLC is
based in the Jackson Hole Valley in Wyoming and operates within Grand Teton
National Park under a concessionaire contract with the National Park Service.
GTLC also owns and operates Jackson Hole Golf & Tennis Club, which is located
outside of the park. GTLC's properties have operating seasons that generally run
from mid-May to mid-October; operations are closed during the winter months due
to lack of facility winterization features.

There are over 375 areas within the National Park System covering more than
83.6 million acres across the United States and its territories. Of the over 375
areas, approximately 55 are classified as National Parks. There are more than
500 National Park Service concessionaires, ranging from small privately held
businesses to large corporate conglomerates. The National Park Service uses
"recreation visits" to measure visitations within the National Park System. In
1999, areas designated as National Parks received over 64 million recreation
visits. Grand Teton National Park, which spans approximately 310,000 acres, had
2.7 million recreation visits during 1999, or 4% of total National Park
recreation visits. Four concessionaires provide accommodations within the park,
including GTLC. GTLC offers three lodging options within the National Park:
Jackson Lake Lodge, a full-service 385-room resort with conference facilities
which can accommodate up to 650 people, the Jenny Lake Lodge, a small,
rustically elegant retreat with 37 cabins, and Colter Bay Village, a
family-oriented facility with 166 log cabins, tent cabins, and a 112-space RV
park. GTLC offers dining options as extensive as its lodging options, with
cafeterias, casual eateries, and fine-dining establishments. GTLC's resorts
provide a wide array of activities for guests to enjoy, including cruises on
Jackson Lake, boat rentals, horseback riding, guided fishing, float trips, golf
and guided park

tours. Because of the extensive amenities offered as well as the tremendous
popularity of the National Park System, GTLC's resorts within Grand Teton
National Park operate near full capacity during the operating season.

Jackson Hole Golf & Tennis Club is open to both members and non-members.
The 18-hole golf course, designed by Robert Trent Jones, Jr., is rated number
one in the state by Golf Digest magazine. There are less than 50 golf courses in
the state of Wyoming, and only two in the Jackson Hole area. In addition, the
tennis facility offers six Plexicushion courts.

Real Estate Segment

The Company has extensive holdings of real property at our resorts
throughout Summit and Eagle Counties in Colorado and in the Jackson Hole Valley
in Wyoming. Our real estate operations include the planning, oversight,
marketing, infrastructure improvement and development of the Company's real
property holdings. In addition to the substantial cash flow generated from real
estate sales, these development activities benefit the Company's resort
operations through (1) the creation of additional resort lodging which is
available to our guests, (2) the ability to control the architectural theming of
our resorts, (3) the creation of unique facilities and venues (primarily
restaurant and retail operations) which provide us with the opportunity to
create new sources of recurring revenue and (4) the expansion of our property
management and brokerage operations, which are the preferred providers of these
services for all developments on our land.

In order to facilitate the development and sale of our real estate
holdings, Vail Resorts Development Company ("VRDC"), a wholly owned subsidiary
of the Company, also invests in mountain improvements, such as ski lifts,
snowmaking equipment and trail construction. While these mountain improvements
enhance the value of the real estate held for sale (for example, by providing
ski-in/ski-out accessibility), they also benefit resort operations. In most
cases, VRDC seeks to minimize our exposure to development risks and maximize the
long-term value of our real property holdings by selling developed and entitled
land to third party developers for cash payments prior to the commencement of
construction, while retaining approval of the development plans as well as an
interest in the developer's profit. We also typically retain the option to
purchase at cost any retail/commercial space created in a development. We are
able to secure these benefits from third-party developers because of the high
property values and strong demand associated with property in close proximity to
our mountain resort facilities.

VRDC's principal activities include (1) the sale of single-family homesites
to individual purchasers, (2) the sale of certain land parcels to third-party
developers for condominium, townhome, cluster home, lodge and mixed use
developments, (3) the zoning, planning and marketing of new resort communities
(such as Beaver Creek, Bachelor Gulch Village and Arrowhead), (4) arranging for
the construction of the necessary roads, utilities and mountain infrastructure
for new resort communities, (5) the development of certain mixed-use condominium
projects which are integral to resort operations (such as properties located at
a main base facility) and (6) the purchase of selected strategic land parcels,
which we believe can augment our existing land holdings or resort operations.

Our current development activities are focused on (1) the completion of
three of our resort communities, Beaver Creek, Bachelor Gulch Village and
Arrowhead, (2) preparing for the redevelopment of the Lionshead base area and
other land holdings located within the town of Vail, (3) preparing for the
development of our real estate holdings in the Town of Breckenridge, (4)
participation with our joint venture partner in the development of our base area
land holdings at Keystone, (5) the planning of our real estate holdings in and
around Avon and at the entrance to Beaver Creek, (6) planning for development of
our land holdings in the Jackson Hole Valley, and (7) construction of our Red
Sky Ranch golf course development at Wolcott.

Employees

We currently employ approximately 6,200 year-round and 7,000 seasonal
employees. Approximately 1% of the seasonal employees are unionized. We consider
our employee relations to be good.

Regulation and Legislation

We have been granted the right to use federal land as the site for ski
lifts and trails and related activities, under the terms of permits with the
United States Forest Service. The Forest Service has the right to review and
approve the location, design and construction of improvements in the permit area
and many operational matters. While virtually all of the skiable terrain on Vail
Mountain, Breckenridge, and Keystone is located on Forest Service land, a
significant portion of the skiable terrain on Beaver Creek Mountain, primarily
in the Bachelor Gulch and Arrowhead Mountain areas, is located on Company-owned
land.

After conclusion in the fall of 1999 of protracted litigation initiated by
opponents of the Blue Sky Basin expansion, which failed to overturn Forest
Service approval of infrastructure development of bowl skiing terrain in Blue
Sky Basin, the Company opened 520 acres of Blue Sky Basin in January 2000, for
the 1999-2000 ski season. We plan on opening the remaining 125 skiable acres of
the approved expansion at the beginning of the 2000-01 ski season.

In July 1999, the U.S. Army Corps of Engineers alleged that certain road
construction which we undertook as part of the Blue Sky Basin expansion involved
discharges of fill material into wetlands in violation of the Clean Water Act. A
subsequent review confirmed that the wetland impact involved approximately
seven-tenths of one acre. In August 1999, three organizations and one individual
collectively notified us and the federal agencies that if the alleged violations
were not remedied within 60 days, they intended to file a citizen enforcement
action under the Clean Water Act. No action has been filed as of the date of
this Form 10-K. Under the Clean Water Act, unauthorized discharges of fill can
give rise to administrative, civil and criminal enforcement actions seeking
monetary penalties and injunctive relief, including removal of the unauthorized
fill. In October 1999, the Environmental Protection Agency, the lead enforcement
agency in this matter, ordered us to stabilize the road temporarily and restore
the wetland in the summer of 2000. (EPA - Region VIII, Docket No.
CWA-8-2000-01). We completed the restoration work on the wetland impact this
summer, pursuant to our restoration plan approved by the EPA. The EPA is
considering enforcement action, and although we cannot guarantee a particular
result, we do not anticipate that a material fine will be levied.

In August 1998, we received the approval of the Forest Service to develop a
chairlift, other skier facilities and associated skiing terrain on Peak 7 and a
teaching chairlift, two new ski trails and additional snowmaking on Peak 9, all
located at Breckenridge. As part of that process, certain federal agencies
expressed concern about the analysis of potential future development on private
land that the Company owns at the base of Peak 7. In response to an
administrative appeal of the Forest Service approval decision by certain
individuals and groups, the Regional Forester upheld the approval of the Peak 7
and 9 projects in November 1998. The Forest Service subsequently reviewed our
proposed changes to develop gondola access to the Peak 7 base area and to move
the lower terminal of the lift servicing the terrain and base area from public
lands to private land owned by the Company. Based on an interdisciplinary review
of the proposed changes, the Forest Service determined in September 2000 that
the new information and changes to the proposal did not require an update or
revision of the 1998 E.A. or decision notice. We have applied to the U.S. Army
Corps of Engineers for a wetlands permit for the Peak 7 improvements. The Army
Corps is considering the development of the base facilities on private land and
the ski area improvements on public land as combined actions and is processing
one permit for the combined projects. The Corps of Engineers has not yet issued
a final decision on this permit. Preliminary construction of a portion of the
Peak 7 access road began in September 2000, pursuant to Forest Service
authorization. Also in September 2000, we submitted to the Town of Breckenridge
a revised master plan development application for the private land development
at the base of Peaks 7 and 8.

We have also sought approval from the Forest Service and other agencies to
develop chairlifts, associated skiing terrain, and snowmaking in Jones Gulch,
which is located within the current Keystone permit area. The Forest Service has
advised us that this development will be the subject of an environmental impact
statement, and work on this statement is currently underway. Other agencies will
conduct related reviews. The initial issues include the potential effect of the
expansion on wildlife and wetlands, and it is possible that the future
resolution of these issues could affect whether, in what form, and under what
conditions the project is approved. In December 1998, the Corps of Engineers
notified Keystone that it had preliminarily determined that the wetlands permit
for Keystone's snowmaking diversion limits such diversions to 550 acre-feet
annually. We requested that the permit be modified to allow Keystone to withdraw
up to 1,350 acre-feet annually for snowmaking and in April 2000, the Corps of

Engineers approved our request, subject to certain conditions which we believe
can be satisfied. In March 2000, we announced that Keystone and the Forest
Service would conduct a joint water quality study of the water used by Keystone
for snowmaking. We believe that Keystone is in compliance with state
regulations, but have agreed not to expand snowmaking on the Forest Service land
at Keystone until completion of the study, expected sometime in the fall of
2000.

In the spring of 2000, the Company submitted a proposal to the U.S. Forest
Service concerning additional snowmaking at Vail Mountain and race facility
expansion at Golden Peak. The proposal is in the initial stages of the
environmental analysis and approval process, which is expected to take a year or
more. In addition, the Company submitted a separate proposal to the U.S. Forest
Service concerning a proposed Beaver Creek gondola, a portion of which would
cross public lands on Beaver Creek Mountain within our existing permit
boundaries. The Forest Service has advised us that it intends to defer
commencement of its analysis and decision making relating to the public lands
issues related to the gondola proposal until completion of the Forest Service
revision of the White River Forest Plan, expected sometime next year.

Our resort operations require permits and approvals from certain federal,
state, and local authorities, in addition to the Forest Service and Corps of
Engineers approvals discussed above. In particular, our operations are subject
to environmental laws and regulations, and compliance with such laws and
regulations may require expenditures or require modifications of our development
plans and operations in a manner that could have a detrimental effect on us.
There can be no assurance that new applications of existing laws, regulations,
and policies, or changes in such laws, regulations, and policies, will not occur
in a manner that could have a detrimental effect to us, or that material
permits, licenses, or approvals will not be terminated, non-renewed or renewed
on terms or interpreted in ways that are materially less favorable to us.
Although we believe that we will be successful in implementing our development
plans and operations in ways satisfactory to us, no assurance can be given that
any particular permits and approvals will be obtained or upheld on judicial
review.

The permits originally granted by the Forest Service were (1) Term Special
Use Permits granted for 30-year terms, but which may be terminated upon 30 days
written notice by the Forest Service if it determines that the public interest
requires such termination, and (2) Special Use Permits that are terminable at
will by the Forest Service. In November 1986, a new law was enacted providing
that Term Special Use Permits and Special Use Permits may be combined into a
unified single Term Special Use Permit that can be issued for up to 40 years.
Vail Mountain operates under a unified permit for the use of 12,950 acres that
expires October 31, 2031. Breckenridge operates under a Term Special Use Permit
for the use of 3,156 acres that expires on December 31, 2029. Keystone operates
under a Term Special Use Permit for the use of 5,571 acres that expires on
December 31, 2032. After combining two prior permits covering the Beaver Creek
property, the Beaver Creek Mountain Resort now operates under a Term Special Use
Permit for the use of 2,695 acres that expires on December 31, 2038. The Forest
Service can terminate most of these permits if it determines that termination is
required in the public interest. However, to our knowledge, no recreational
Special Use Permit or Term Special Use Permit for any major ski resort then in
operation has ever been terminated by the Forest Service over the opposition of
the permitee.

For use of our permits, we pay a fee to the Forest Service ranging from
1.5% to 4.25% of sales occurring on Forest Service land. Included in the
calculation are sales from, among other things, lift tickets, ski school
lessons, food and beverages, rental equipment and retail merchandise sales.

GTLC operates three resort properties within Grand Teton National Park
under a concession contract with the National Park Service. The concession
contract expires at the end of 2002, at which time the contract renewal will be
subject to a competitive bidding process under the final rules promulgated
earlier this year to implement the concession provisions of the National Park
Omnibus Management Act of 1998. The renewal provision of the new regulation is
less favorable to the existing concessionaire than the comparable provision
under the old regulation. These final rules are expected to be challenged in
lawsuits filed recently by or on behalf of one or more existing
concessionaire(s). The Company will consider whether it will intervene or
otherwise participate in legal proceedings challenging application or
interpretation of certain of the rules to GTLC's concession contract. Although
we cannot predict or guarantee the outcome of the rules or our prospects for
renewal, we currently anticipate we will be well positioned to obtain the
renewal of the contract on satisfactory terms. Under the final rules, should we
not receive the renewal of the concession contract, we would be compensated for
the value of our "possessory interest" in the assets of the three resort
properties operated under the concession contract, which is generally defined as
the reconstruction cost of such assets less depreciation.

ITEM 2. PROPERTIES.

The following table sets forth the principal properties owned or leased by
the Company (all properties are used in the Resort segment, except where the use
indicated is "real estate held for sale or development", which is used in the
Real Estate segment):

Location Ownership Use
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Vail Mountain (12,590 acres) Term Special Use Permit Ski trails

Vail Mountain Owned Ski resort operations, including ski lifts, buildings and
other improvements, commercial space

The Lodge at Vail Owned Lodging, dining and conference facilities, real estate
held for sale or development

Breckenridge Mountain (3,156 Term Special Use Permit Ski trails
acres)

Breckenridge Mountain Owned Ski resort operations, including ski lifts, buildings
and other improvements, commercial space, real estate
held for sale or development

Village at Breckenridge Owned Lodging, dining, conference facilities and commercial
space

Great Divide Lodge Owned Lodging, dining and conference facilities

Keystone Mountain (5,571 Term Special Use Permit Ski trails
acres)

Keystone Mountain Owned Ski resort operations, including ski lifts, buildings and
other improvements, commercial space

Keystone Resort Owned Resort operations, dining, commercial space, conference
facilities, real estate held for sale or development

Keystone Lodge Owned Lodging and resort operations

Keystone Ranch Owned Golf course and restaurant facilities

Inn at Keystone Owned Lodging, dining and conference facilities

Keystone Conference Center Owned Conference facility

Beaver Creek Mountain (2,695 Term Special Use Permit Ski trails
acres)

Beaver Creek Mountain Owned Ski resort operations, including ski lifts, buildings
and other improvements, commercial space, real estate
held for sale or development

Beaver Creek Resort Owned Golf course, commercial space, employee housing and
residential spaces

Arrowhead Mountain Owned Ski resort operations, including ski lifts, buildings
and other improvements, commercial space, real estate
held for sale or development

Bachelor Gulch Village Owned Ski resort operations, including ski lifts, buildings
and other improvements, commercial space, real estate
held for sale or development

Seasons at Avon Leased Corporate offices

Avon Owned Real estate held for sale or development

Avon Owned Warehouse and commercial facility

Jenny Lake Lodge Concessionaire contract Lodging and resort operations, dining

Jackson Lake Lodge Concessionaire contract Lodging and resort operations, dining, conference
facilities

Colter Bay Village Concessionaire contract Lodging and resort operations, dining

Jackson Hole Golf and Tennis Owned Lodging, golf course, tennis facilities, dining,
Club conference facilities, real estate held for sale or
development

River Course at Keystone Owned Golf course and club

Red Sky Ranch Owned Golf course under construction and real estate held for
sale and development

The Vail Mountain and Beaver Creek Mountain Forest Service Permits are
encumbered as security under the Eagle County Industrial Development Bonds.

ITEM 3. LEGAL PROCEEDINGS.

The Company is a party to various lawsuits arising in the ordinary course
of business. Management believes the Company has adequate insurance coverage and
accrued loss contingencies for all matters and that, although the ultimate
outcome of such claims cannot be ascertained, current pending and threatened
claims are not expected to have a material adverse impact on the financial
position, results of operations and cash flows of the Company.

In late July 1999, the U.S. Army Corps of Engineers alleged that certain
road construction we undertook as part of the Blue Sky Basin expansion involved
discharges of fill material into wetlands in violation of the Clean Water Act. A
subsequent review confirmed that the wetland impact involved approximately
seven-tenths of one acre. In August 1999, three organizations and one individual
collectively notified us and the federal agencies that if the alleged violations
are not remedied within 60 days, they intended to file a citizen enforcement
action under the Clean Water Act. No action has been filed as of the date of
this Form 10-K. Under the Clean Water Act, unauthorized discharges of fill can
give rise to administrative, civil and criminal enforcement actions seeking
monetary penalties and injunctive relief, including removal of the unauthorized
fill. In October 1999, the Environmental Protection Agency, the lead enforcement
agency in this matter, ordered us to stabilize the road temporarily and restore
the wetland in the summer of 2000. (EPA - Region VIII, Docket No.
CWA-8-2000-01). We completed the restoration work on the wetland impact this
summer, pursuant to our restoration plan approved by the EPA. The EPA is
considering enforcement action, and although we cannot guarantee a particular
result, we do not anticipate that a material fine will be levied.

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

None.

PART II

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

The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "MTN". The Company's Class A Common Stock is not listed on any
exchange and is not publicly traded. Class A Common Stock is convertible into
Common Stock. As of October 16, 2000, 34,903,251 shares of common stock were
issued and outstanding, of which 7,439,834 shares were Class A Common Stock held
by approximately three holders and 27,463,417 shares were Common Stock held by
approximately 4,500 holders.

Other than a rights distribution in October 1996 which gave each
stockholder of record the right to receive $2.44 per share of Common Stock held,
the Company has never paid or declared a cash dividend on its Common Stock or
Class A Common Stock. The declaration of cash dividends in the future will
depend on the Company's earnings, financial condition and capital needs and on
other factors deemed relevant by the Board of Directors at that time. It is the
current policy of the Company's Board of Directors to retain earnings to finance
the operations and expansion of the Company's business, and the Company does not
anticipate paying any cash dividends on its shares of Common Stock or Class A
Common Stock in the foreseeable future.

The following table sets forth, for the fiscal years ended July 31, 2000
and 1999, and quarters indicated (ended October 31, January 31, April 30, and
July 31) the range of high and low per share sale prices of Vail Resorts, Inc.
Common Stock as reported on the New York Stock Exchange Composite Tape.

Vail Resorts Common Stock
-------------------------------
High Low
--------------- ---------------

Year Ended July 31, 2000
1/st/ Quarter............................................. $ 23 1/2 $ 17 1/16
2/nd/ Quarter............................................. 23 1/8 15 1/16
3/rd/ Quarter............................................. 19 5/8 14 3/4
4/th/ Quarter............................................. 18 3/8 15 1/8

Year Ended July 31, 1999
1/st/ Quarter............................................. 28 5/8 16
2/nd/ Quarter............................................. 26 3/4 20
3/rd/ Quarter............................................. 20 9/16 14 5/16
4/th/ Quarter............................................. 20 3/4 18

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected historical consolidated financial
data of the Company for the periods indicated. The financial data for the fiscal
years ended July 31, 2000 and 1999, the ten-month fiscal period ended July 31,
1998 and fiscal years ended September 30, 1996 and 1997 are derived from the
consolidated financial statements of the Company, which have been audited by
Arthur Andersen LLP, independent accountants, and should be read in conjunction
with those statements and related notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations". The unaudited
pro forma financial data for the twelve months ended July 31, 1997 and 1998 are
restated to reflect the Company's change in fiscal year and assume that the
acquisition of Breckenridge and Keystone and the Company's initial public
offering occurred on August 1, 1996, rather than the actual January 3, 1997
acquisition date and February 4, 1997 initial public offering date. In addition,
the unaudited pro forma financial data below exclude the operations of the
Arapahoe Basin resort, which the Company divested pursuant to a consent decree
with the U.S. Department of Justice. The pro forma results are not necessarily
indicative of the results that would have been achieved nor are they necessarily
indicative of future results of operations. The data presented below are in
thousands, except per share amounts.

Ten-Month Pro Forma
Fiscal Year Fiscal Period Twelve Months Fiscal Year
Ended Ended Ended Ended
July 31, July 31, July 31, September 30,
------------------------ ---------------------------------------------
2000 1999 1998 1998 1997/(2)/ 1997/(1)/ 1996/(3)/
- --------------------------------------------------------------------------------------------------------------------
(audited) (audited) (audited) (unaudited)(unaudited) (audited) (audited)

Statement of Operations Data:
Revenue:
Resort...................... $ 501,375 $ 431,788 $ 336,547 $ 350,498 $ 292,127 $ 259,038 $ 140,288
Real estate................. 51,684 43,912 73,722 84,177 74,356 71,485 48,655
- --------------------------------------------------------------------------------------------------------------------
Total revenue............. 553,059 475,700 410,269 434,675 366,483 330,523 188,943
Operating expenses:
Resort...................... 388,313 345,687 222,201 244,432 204,724 177,378 102,588
Real estate................. 42,066 34,386 62,619 74,057 64,646 66,307 40,801
Depreciation and
amortization............... 61,435 53,256 36,838 42,965 37,997 34,044 18,148
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses.. 491,814 433,329 321,658 361,454 307,367 277,729 161,537
- --------------------------------------------------------------------------------------------------------------------
Income from operations.......... 61,245 42,371 88,611 73,221 59,116 52,794 27,406
Net income...................... 15,338 12,791 41,018 30,073 25,966 19,698 4,735
Diluted net income per common
share....................... $ 0.44 $ 0.37 $ 1.18 $ 0.87 $ 0.75 $ 0.64 $ 0.22
- ----------------------------------------------------------------------------------- --------------------------------
Other Data:
Resort
Resort EBITDA/(3)/(4)/...... $ 113,062 $ 86,101 $ 114,346 $ 106,066 $ 87,403 $ 81,660 $ 46,200
Resort EBITDA margin........ 22.6% 19.9% 34.0% 30.3% 29.9% 31.5% 32.9%
Skier days/(5)/............. 4,595 4,606 4,717 4,717 4,890 4,273 2,228
Resort revenue per skier
day/(8)/................... $ 102.76 $ 91.16 $ 71.35 $ 74.31 $ 59.74 $ 60.62 $ 62.97
Real Estate
Real estate operating
income/(6)/................. 9,618 9,526 11,103 10,120 9,710 5,178 7,854
Real estate held for sale
and investment/(7)/....... 147,172 152,508 138,916 138,916 155,672 154,925 84,055
Balance Sheet Data
Total assets................ 1,127,818 1,089,239 912,122 912,122 814,816 855,949 422,612
Long-term debt (including
current maturities)....... 394,235 398,186 284,014 284,014 236,347 265,062 144,750
Stockholders' equity........ $ 493,755 $ 476,775 $ 462,624 $ 462,624 $ 417,187 $ 405,666 $ 123,907

(footnotes appear on following page)

Footnotes to Selected Financial Data:

(1) The financial data for the year ended September 30, 1997 includes the
results of operations of Keystone and Breckenridge for the 270-day period
from January 4, 1997 to September 30, 1997.

(2) Pro forma twelve months ended July 31, 1997 results are presented excluding
a pre-tax $2.2 million reorganization charge and an $8.5 million one-time
non-recurring charge to resort operating expense.

(3) For the year ended September 30, 1996, resort operating expense included
the following non-recurring charges: (i) $4.5 million related to a rights
distribution to option holders, (ii) $1.9 million of compensation expense
related to the exercise of certain options held by the Company's former
Chairman and Chief Executive Officer and (iii) $2.1 million related to the
termination of an employment agreement with the Company's former Chairman
and Chief Executive Officer. These non-recurring charges are excluded from
the calculation of Resort EBITDA for this period.

(4) Resort EBITDA (earnings before interest expense, income tax expense,
depreciation and amortization) is defined as revenues from resort
operations less resort operating expenses. Resort EBITDA is not a term that
has an established meaning under generally accepted accounting principles
("GAAP"), and it may not be comparable to similarly titled measures
reported by other companies. The information concerning Resort EBITDA is
included because the Company believes it is an indicative measure of a
resort company's operating performance and is generally used by investors
to evaluate companies in the resort industry. Resort EBITDA does not
purport to represent cash provided by operating activities, and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP. For information regarding our historical
cash flows from operating, investing and financing activities, see our
Consolidated Financial Statements included elsewhere in this Form 10-K.

(5) A skier day represents one guest accessing a ski mountain on any one day
and includes guests using complimentary tickets and ski passes.

(6) Real estate operating income is defined as revenue from real estate
operations less real estate costs and expenses, which include selling and
holding costs, operating expenses, and an allocation of the land,
infrastructure, mountain improvement and other costs relating to property
sold. Real estate costs and expenses exclude charges for depreciation and
amortization, as the Company has determined that the portion of those
expenses allocable to real estate are not significant.

(7) Real estate held for sale and investment includes all land, development
costs and other improvements associated with real estate held for sale and
investment, as well as investment in real estate joint ventures.

(8) Resort revenue per skier day excludes revenue generated by Grand Teton
Lodge Company in the calculation.

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

The following is an analysis of the Company's results of operations,
liquidity and capital resources and should be read in conjunction with the
Consolidated Financial Statements included in this Form 10-K. To the extent that
the following Management's Discussion and Analysis contains statements which are
not of a historical nature, such statements are forward-looking statements,
which involve risks and uncertainties. These risks include, but are not limited
to, changes in the competitive environment of the ski and resort industries,
general business and economic conditions, the weather and other factors
discussed elsewhere herein and in the Company's filings with the Securities and
Exchange Commission.

On September 1, 1997, the Company changed its fiscal year end from
September 30 to July 31. Accordingly, the 1998 fiscal period ended on July 31,
1998 and consisted of ten months. This Management's Discussion and Analysis
discusses the following comparisons between the following periods:

[X] fiscal year ended July 31, 2000 versus fiscal year ended July 31, 1999,

[X] fiscal year ended July 31, 1999 versus pro forma twelve months ended
July 31, 1998, and

[X] fiscal year ended July 31, 1999 versus fiscal ten months ended July 31,
1998.

The pro forma twelve months ended July 31, 1998 reflects the Company's
change in fiscal year end and excludes the results of Arapahoe Basin and is
presented to compare year to date results for the new fiscal year.

Results of Operations

Fiscal Year Ended July 31, 2000 versus Fiscal Year Ended July 31, 1999 (dollars
in thousands, except ETP amounts)

Fiscal Year Ended
July 31, Percentage
2000 1999 Increase Increase
--------------- --------------- -------------- ---------------
(audited)

Resort Revenue.................... $ 501,375 $ 431,788 $ 69,587 16.1%
Resort Operating Expense.......... 388,313 345,687 42,626 12.3%

Resort Revenue. Resort Revenue for the fiscal years ended July 31, 2000 and 1999
is presented by category as follows:

Fiscal Year Ended Percentage
July 31, Increase Increase
2000 1999 (Decrease) (Decrease)
--------------- --------------- -------------- ---------------
(unaudited)

Lift Tickets..................... $ 143,547 $ 138,536 $ 5,011 3.6%
Ski School....................... 39,898 37,986 1,912 5.0%
Dining........................... 72,120 62,382 9,738 15.6%
Retail/Rental.................... 86,734 77,793 8,941 11.5%
Hospitality...................... 75,253 65,839 9,414 14.3%
Other............................ 83,823 49,252 34,571 70.2%
------------- ------------- ------------- --------

Total Resort Revenue............. $ 501,375 $ 431,788 $ 69,587 16.1%
============= ============= ============= ========

Total Skier Days................. 4,595 4,606 (11) (0.2%)
============= ============= ============= ========

ETP.............................. $ 31.24 $ 30.08 $ 1.16 3.9%
============= ============= ============= ========

Lift ticket revenue increased due to a 3.9% increase in ETP (effective
ticket price, "ETP", is defined as total lift ticket revenue divided by total
skier days). The increase in ETP is primarily attributable to increased ticket
sales during peak-pricing periods during the third quarter due to increased
visitation, an increase in lead ticket prices at Keystone and Breckenridge along
with a higher sales price on the Company's Buddy Pass season pass product, a
discounted season pass product for Keystone and Breckenridge Mountains. The
increase in ETP from these factors was offset slightly by a downturn in the
percentage of destination and international guests, who tend to generate higher
ETP than local and Front Range skiers. Skier days were impacted by the slow
millennium period travel patterns across the U.S. travel industry, weak
pre-Christmas activity and unfavorable weather early in the second quarter.

Ski School revenue increased due to a favorable shift in the skier
demographic, which resulted in increased participation by a higher percentage of
the Company's ski resort guests. In addition, the favorable demographic drove an
increase in private lesson sales versus group lessons as well as increased
enrollment in children's ski school programs.

The increase in dining revenue is primarily a result of the addition of
eight dining operations with the acquisition of GTLC on June 14, 1999. The
re-opening of Two Elk Lodge on Vail Mountain in December 1999, a strong
operating season for GTLC, and successful repositioning of one of the Company's
fine dining restaurants also contributed to the increased revenues. In addition,
a dining joint venture which had previously been accounted for under the equity
method is now being fully consolidated due to the Company's increased investment
in the joint venture.

Retail/rental revenue increased due primarily to a strong operating season
for GTLC and the inclusion of a full fiscal year's results for GTLC compared to
only two months in fiscal 1999. The Company's retail/rental outlets operated by
SSI Venture LLC ("SSV"), a 51.9%-owned fully consolidated retail/rental joint
venture, also experienced increased revenue over fiscal 1999.

Hospitality revenue increased primarily as a result of a full fiscal year's
results included for GTLC and higher occupancy rates at GTLC during the current
operating season. In addition, the Great Divide Lodge at Breckenridge saw
increased occupancy during fiscal 2000 due to extensive renovations to the hotel
in fiscal 1999 and increased conference room nights due to focused sales
efforts.

The increase in other revenue is primarily attributable to the estimated
net insurance claim from the Company's Reduced Skier Day Insurance Policy along
with the final settlement of the business interruption claim from the Vail fires
(see Note 9, Part II, Item 8 of this Form 10-K). Other revenue also increased as
a result of the increase in commercial leasing revenue, the inclusion of revenue
related to the Internet Service Provider and web site development company
purchased in November 1999 and GTLC's revenues for a full fiscal year, the
openings of the River Course at Keystone and the Bachelor Gulch Club, and an
increase in municipal support operations at Beaver Creek and Keystone, licensing
and sponsorships, and brokerage operations.

Resort Operating Expense. Resort operating expense for the year ended July 31,
2000 was $388.3 million, an increase of $42.6 million, or 12.3%, compared to the
year ended July 31, 1999. The increase in resort operating expense is
commensurate with the increase in revenue over fiscal 1999. In addition, the
Company accelerated implementation of marketing and technology strategies for
the fiscal 2001 ski season into the fourth quarter of fiscal 2000 and employee
benefits expenses rose due to the increasing costs of medical care and
management bonuses payable under the Company's long term incentive plan. A
portion of the increase can also be attributed to the increased variable
expenses associated with the increased level of resort revenue derived from
lower-margin non-lift businesses such as dining, retail/rental and hospitality
operations. These operations tend to have a greater level of variable operating
expenses proportionate to revenues as compared to lift operations. These
increases have been partially offset by a successful cost management program
that was implemented at all levels of the Company's operations throughout the
fiscal year.

Real Estate Revenue. Revenue from real estate operations for the year ended July
31, 2000 was $51.7 million, an increase of $7.8 million, or 17.7%, compared to
the year ended July 31, 1999. Revenue for fiscal 2000 consisted primarily of the
sale of 17 Arrowhead Alpine Club residential condominiums, one residential
condominium each in

Beaver Creek and Arrowhead Villages, the sale of seven development sites in
Bachelor Gulch, the sale of three development sites in Arrowhead, the sale of
one development site in Avon, and the profit share from the Company's investment
in Keystone/Intrawest LLC (the "Keystone JV"). Profits generated by the Keystone
JV during fiscal 2000 included the sale of 113 village condominium units at the
River Run development, and seven single-family homesites surrounding the 18-hole
River Course. Real estate revenue for fiscal 1999 consisted primarily of the
sale of the Bell Tower Mall, one luxury residential penthouse condominium at the
Lodge at Vail, the sale of three development sites at Arrowhead, the sale of two
single-family homesites and four multi-family homesites at Bachelor Gulch, and
our investment in the Keystone JV. Profits generated by the Keystone JV during
fiscal 1999 included the sale of 195 village condominium units, primarily at the
River Run development, and 60 single-family homesites surrounding the River
Course golf course.

Real Estate Operating Expense. Real estate operating expense for the year ended
July 31, 2000 was $42.1 million, an increase of $7.7 million, or 22.3%, compared
to the year ended July 31, 1999. Real estate operating expense consisted
primarily of the cost of sales and related real estate commissions associated
with the real estate sales detailed above for both fiscal 2000 and 1999. Profits
generated by the Keystone JV are recorded using the equity method; therefore
there are no operating expenses associated with this joint venture. Real estate
operating expense also includes the selling, general and administrative expenses
associated with the Company's real estate operations.

Depreciation and Amortization. Depreciation and amortization expense increased
by $8.2 million, or 15.4%, for the year ended July 31, 2000 as compared to the
year ended July 31, 1999. The increase was primarily attributable to an
increased fixed asset base due to the acquisition of GTLC and fiscal 2000
capital improvements.

Interest expense. During the years ended July 31, 2000 and 1999 we recorded
interest expense of $35.1 million and $25.1 million, respectively, relating
primarily to our Credit Facility, the Industrial Development Bonds and the
senior subordinated debt issued in May 1999. The increase in interest expense
for the year ended July 31, 2000 compared to the year ended July 31, 1999 is
attributable to the outstanding senior subordinated notes issued in May 1999,
partially offset by a reduction in the balance outstanding on the Credit
Facility.

Fiscal Year Ended July 31, 1999 versus Pro Forma Twelve Months Ended July 31,
1998 (dollars in thousands except ETP amounts)

The unaudited pro forma results of operations for the twelve months ended
July 31, 1998 give effect to the Company's change in fiscal year end and exclude
the results of Arapahoe Basin, which the Company divested in September 1997.

Pro Forma
Twelve
Year Months
Ended Ended
July 31, July 31, Percentage
1999 1998 Increase Increase
--------------- --------------- -------------- -------------
(audited) (unaudited)

Resort Revenue.................... $ 431,788 $ 350,498 $ 81,290 23.2%
Resort Operating Expense.......... 345,687 244,432 101,255 41.4%

Resort Revenue. Resort Revenue for the fiscal year ended July 31, 1999 and the
pro forma twelve months ended July 31, 1998 is presented by category as follows:

Pro Forma
Twelve
Year Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1999 1998 (Decrease) (Decrease)
--------------- --------------- ------------- --------------
(unaudited)

Lift Tickets................... $ 138,536 $ 147,128 $ (8,592) (5.8)%
Ski School..................... 37,986 38,647 (661) (1.7)%
Dining......................... 62,382 52,371 10,011 19.1%
Retail/Rental.................. 77,793 20,799 56,994 274.0%
Hospitality.................... 65,839 47,128 18,711 39.7%
Other.......................... 49,252 44,425 4,827 10.9%
-------------- ------------- ------------- ------

Total Resort Revenue........... $ 431,788 $ 350,498 $ 81,290 23.2%
============== ============= ============= ======

Total Skier Days............... 4,606 4,717 (111) (2.4)%
============== ============= ============= ======

ETP............................ $ 30.08 $ 31.19 $ (1.11) (3.6)%
============== ============= ============= ======

Lift ticket revenue decreased due to a 2.4% decrease in total skier days as
well as a 3.6% decrease in ETP. Management attributes the decrease in skier days
to above-average temperatures and below-average snowfall throughout the majority
of the ski season, which had a negative impact on the entire Colorado market. In
addition, the adverse perception resulting from the October 19, 1998 fires on
Vail Mountain, and the Canadian dollar exchange rate, which favored the Canadian
ski industry, also impacted skier days. The decrease in ETP is the result of a
shift in the proportion of total skier days to local and Front Range skier days.
Lift tickets sold to local and Front Range skiers tend to have a lower ETP than
tickets sold to destination guests. This shift mainly occurred due to the
popularity of the Buddy Pass, a discounted four-person season pass for Keystone
and Breckvgridge, which accounted for a significant portion of local and Front
Range skier days.

Ski School revenue decreased due to the overall decline in skier days as
well as the shift in the proportion of total skier days from destination guests
to local and Front Range skiers. Local and Front Range skiers are less likely to
purchase lessons than destination skiers are. The decline in revenue from the
drop in skier days was partially offset by price increases as well as an
increase in the percentage of higher-priced packages sold.

The increase in dining revenue is primarily a result of the addition of new
dining facilities through acquisition and new construction, coupled with modest
growth at existing facilities. The Company opened TenMile Station, the first new
on-mountain restaurant at Breckenridge in over 10 years, during the 1998-1999
ski season. The acquisitions of Village at Breckenridge ("VAB") and GTLC in
fiscal 1999 each added eight dining facilities. In addition, the results of the
four dining operations added through acquisition in fiscal 1998 are reflected
for the full fiscal period in fiscal 1999, as opposed to the truncated period
reflected during the acquisition year.

Retail/rental revenue increased significantly due to the Company's
retail/rental joint venture (SSV), which increased the total number of
retail/rental outlets from approximately 40 in fiscal 1998 to approximately 80
in fiscal 1999. Specialty Sports, Inc., the Company's partner in the joint
venture, is one of the largest retailers of ski- and golf-related sporting goods
in Colorado, and contributed approximately 30 retail and rental outlets to the
joint venture.

Hospitality revenue increased as a result of strong performance from
existing operations, achieved through effective yield management and growth of
the managed property inventory. The acquisitions of VAB and GTLC in fiscal 1999
also contributed significantly. In addition to adding lodging capacity, VAB also
added property management operations and a vacation services operation/travel
agency. The Company also received the benefit of

a full fiscal year's revenues from its fiscal 1998 hotel acquisitions, rather
than the truncated period from the acquisition date, which also contributed to
the increase.

The increase in other revenue is a result of the increased popularity of
summer mountain activities, including the Alpine Slide at Breckenridge mountain,
as well as expanded contract services for Beaver Creek, Bachelor Gulch, and
Arrowhead Villages, growth in club operations, expanded licensing and
sponsorship contracts, and increases in commercial leasing revenue. The
acquisitions of VAB and GTLC also significantly contributed to other revenue
through recreation and special events.

Resort Operating Expense. Resort operating expense for the year ended July 31,
1999 was $345.7 million, an increase of $101.3 million, or 41.4%, compared to
the twelve months ended July 31, 1998. The increase in resort operating expense
is primarily attributable to the incremental operating expenses contributed by
VAB, SSV and GTLC. In addition, operating expenses of the Company's fiscal 1998
acquisitions are reflected for the full fiscal year 1999, as opposed to the
truncated period from the date of acquisition for the twelve months ended July
31, 1998. A portion of the increase can also be attributed to the increased
variable expenses associated with the increased level of resort revenue derived
from non-lift businesses such as dining, retail/rental and hospitality
operations. These operations tend to have a greater level of variable operating
expenses proportionate to revenues as compared to lift operations. These
increases have been partially offset by cost saving measures that have been
implemented at all levels of our operations throughout the fiscal year.

Real Estate Revenue. Revenue from real estate operations for the year ended July
31, 1999 was $43.9 million, a decrease of $40.3 million, or 47.8%, compared to
the twelve months ended July 31, 1998. The decrease is attributed to the
sell-out of homesites at Bachelor Gulch Village in the twelve months ended July
31,1998. Revenue for fiscal 1999 consisted primarily of the sales of the Bell
Tower Mall, one luxury residential penthouse condominium at the Lodge at Vail,
the sale of three development sites at Arrowhead Village, the sale of two
single-family homesites and four multi-family homesites at Bachelor Gulch, as
well as the profit share from the Company's investment in the Keystone JV.
Profits generated by the Keystone JV during fiscal 1999 included the sale of 195
village condominium units, primarily at the River Run development, and 60
single-family homesites surrounding an 18-hole golf course development. Real
estate revenue for the twelve months ended July 31, 1998 consisted primarily of
the sales of 38 single-family homesites and five multi-family homesites at
Bachelor Gulch, two development sites at Arrowhead, six luxury residential
condominiums at the Golden Peak base area of Vail mountain and our investment in
the Keystone JV.

Real Estate Operating Expense. Real estate operating expense for the year ended
July 31, 1999 was $34.4 million, a decrease of $39.7 million, or 53.6%, compared
to the twelve months ended July 31, 1998. The decrease in real estate operating
expense is due to the sell-out of homesites at Bachelor Gulch Village in the
twelve months ended July 31, 1998. Real estate cost of sales for the year ended
July 31, 1999 consisted primarily of the cost of sales and real estate
commissions associated with the sale of the Bell Tower Mall, one luxury
residential penthouse condominium at the Lodge at Vail, three development sites
at Arrowhead Village, and two single-family homesites and four multi-family
homesites at Bachelor Gulch. Real estate cost of sales for the twelve months
ended July 31, 1998 consisted primarily of the cost of sales and real estate
commissions associated with the sales of 38 single-family homesites and five
multi-family homesites at Bachelor Gulch, two development sites at Arrowhead,
and six luxury residential condominiums at the Golden Peak base area of Vail
mountain. Real estate operating expenses include selling, general and
administrative expenses associated with the Company's real estate operations.

Depreciation and Amortization. Depreciation and amortization expense increased
by $10.3 million, or 24.0%, for the year ended July 31, 1999 as compared to the
twelve months ended July 31, 1998. The increase was primarily attributable to
the inclusion of depreciation and amortization associated with the three hotel
acquisitions in fiscal 1998 and one hotel acquisition and the retail/rental
joint venture discussed above in fiscal 1999, and an increased fixed asset base
due to fiscal 1999 capital improvements.

Interest expense. During the year ended July 31, 1999 and the twelve months
ended July 31, 1998, we recorded interest expense of $25.1 million and $20.9
million, respectively, relating primarily to our Credit Facility, the Industrial
Development Bonds and the senior subordinated debt issued in May 1999. The
increase in interest expense for the year ended July 31, 1999 compared to the
twelve months ended July 31, 1998 is attributable to the

outstanding senior subordinated notes issued in May 1999, partially offset by a
reduction in the balance outstanding on the Credit Facility.

Fiscal Year Ended July 31, 1999 versus Fiscal Ten Months Ended July 31, 1998
(dollars in thousands except ETP amounts)

Year Ten Months
Ended Ended
July 31, July 31, Percentage
1999 1998 Increase Increase
--------------- --------------- --------------- ------------
(audited)

Resort Revenue.................... $ 431,788 $ 336,547 $ 95,241 28.3%
Resort Operating Expense.......... 345,687 222,201 123,486 55.6%

Resort Revenue. Resort Revenue for the year ended July 31, 1999 and the ten
months ended July 31, 1998 is presented by category as follows (dollars in
thousands):

Year Ten Months
Ended Ended Percentage
July 31, July 31, Increase Increase
1999 1998 (Decrease) (Decrease)
--------------- --------------- --------------- ------------
(unaudited)

Lift Tickets.................... $ 138,536 $ 147,128 $ (8,592) (5.8)%
Ski School...................... 37,986 38,647 (661) (1.7)%
Dining.......................... 62,382 48,246 14,136 29.3%
Retail/Rental................... 77,793 19,975 57,818 289.5%
Hospitality..................... 65,839 43,127 22,712 52.7%
Other........................... 49,252 39,424 9,828 24.9%
------------- ------------- -------------- -------

Total Resort Revenue............ $ 431,788 $ 336,547 $ 95,241 28.3%
============= ============= ============== =======

Total Skier Days................ 4,606 4,717 (111) (2.4)%
============= ============= ============== =======

ETP............................. $ 30.08 $ 31.19 $ (1.11) (3.6)%
============= ============= ============== =======

Lift ticket revenue decreased due to a 2.4% decrease in total skier days as
well as a 3.6% decrease in ETP. Management attributes the decrease in skier days
to above-average temperatures and below-average snowfall throughout the majority
of the ski season, which had a negative impact on the entire Colorado market. In
addition, the adverse perception resulting from the October 19, 1998 fires on
Vail Mountain, and the Canadian dollar exchange rate, which favored the Canadian
ski industry, also impacted skier days. The decrease in ETP is the result of a
shift in the proportion of total skier days to local and Front Range skier days.
Lift tickets sold to local and Front Range skiers tend to have a lower ETP than
tickets sold to destination guests. This shift mainly occurred due to the
popularity of the Buddy Pass, which accounted for a significant portion of local
and Front Range skier days.

Ski and Snowboard School revenue decreased due to the overall decline in
skier days as well as the shift in the proportion of total skier days from
destination guests to local and Front Range skiers. Local and Front Range skiers
are less likely to purchase lessons than destination skiers are. The decline in
revenue was partially offset by price increases as well as an increase in the
percentage of higher-priced packages sold.

The increase in dining revenue is primarily a result of the addition of new
dining facilities through acquisition and new construction coupled with modest
growth at existing facilities. The Company opened TenMile Station, the first new
on-mountain restaurant at Breckenridge in over 10 years, during the 1998-1999
ski season. The acquisitions of VAB and GTLC in fiscal 1999 each added eight
dining facilities. In addition, the results of the four

dining operations added through acquisition in fiscal 1998 are reflected for the
full fiscal period in fiscal 1999, as opposed to the truncated period reflected
during the acquisition year.

Retail/rental revenue increased due to the Company's retail/rental joint
venture (SSV), which increased the total number of retail/rental outlets from
approximately 40 in fiscal 1998 to approximately 80 in fiscal 1999. Specialty
Sports, Inc., the Company's partner in the joint venture, is one of the largest
retailers of ski- and golf-related sporting goods in Colorado, and contributed
approximately 30 retail and rental outlets to the joint venture.

The increase in other revenue is a result of the increased popularity of
the summer mountain activities, including the Alpine Slide at Breckenridge
mountain, as well as expanded contract services for Beaver Creek, Bachelor
Gulch, and Arrowhead Villages, growth in club operations, expanded licensing and
sponsorship contracts, and increases in commercial leasing revenue. The
acquisitions of VAB and GTLC also significantly contributed to other revenue
through recreation and special events.

Resort Operating Expense. Resort operating expense for the year ended July 31,
1999 was $345.7 million, an increase of $123.5 million, or 55.6%, compared to
the ten months ended July 31, 1998. The increase in resort operating expense is
primarily attributable to the incremental operating expenses contributed by VAB,
SSV and GTLC. In addition, operating expenses of the Company's fiscal 1998
acquisitions are reflected for the full fiscal year 1999, as opposed to the
truncated period from the date of acquisition for the ten months ended July 31,
1998. A portion of the increase can also be attributed to the increased variable
expenses associated with the increased level of resort revenue derived from
non-lift businesses such as dining, retail/rental and hospitality operations.
These operations tend to have a greater level of variable operating expenses
proportionate to revenues as compared to lift operations. These increases have
been partially offset by cost-saving measures that have been implemented at all
levels of our operations throughout the fiscal year.

Real Estate Revenue. Revenue from real estate operations for the year ended July
31, 1999 was $43.9 million, a decrease of $29.8 million, or 40.4%, compared to
the ten months ended July 31, 1998. The decrease is attributed to the sell-out
of homesites at Bachelor Gulch Village in fiscal 1998. Revenue for fiscal 1999
consisted primarily of the sales of the Bell Tower Mall, one luxury residential
penthouse condominium at the Lodge at Vail, the sale of three development sites
at Arrowhead Village, the sale of two single-family homesites and four
multi-family homesites at Bachelor Gulch, as well as the profit share from the
Company's investment in the Keystone JV. Profits generated by the Keystone JV
during the year ended July 31, 1999 included the sale of 195 village condominium
units, primarily at the River Run development, and 60 single-family homesites
surrounding an 18-hole golf course development. Real estate revenue for the ten
months ended July 31, 1998 consisted primarily of the sales of 36 single-family
homesites and five multi-family homesites at Bachelor Gulch, one development
site at Arrowhead, five luxury residential condominiums at the Golden Peak base
area of Vail mountain and our investment in the Keystone JV.

Real Estate Operating Expense. Real estate operating expense for the year ended
July 31, 1999 was $34.4 million, a decrease of $28.2 million, or 45.1%, compared
to the ten months ended July 31, 1998. Real estate cost of sales for the year
ended July 31, 1999 consisted primarily of the cost of sales and real estate
commissions associated with the sale of the Bell Tower Mall, one luxury
residential penthouse condominium at the Lodge at Vail, three development sites
at Arrowhead Village and two single-family homesites and four multi-family
homesites at Bachelor Gulch. Real estate cost of sales for the ten months ended
July 31, 1998 consisted primarily of the cost of sales and real estate
commissions associated with the sales of 36 single-family homesites and five
multi-family homesites at Bachelor Gulch, one development site at Arrowhead, and
five luxury residential condominiums at the Golden Peak base area of Vail
mountain. Real estate operating expenses include selling, general and
administrative expenses associated with the Company's real estate operations.

Depreciation and Amortization. Depreciation and amortization expense increased
by $16.4 million, or 44.6%, for the year ended July 31, 1999 as compared to the
ten months ended July 31, 1998. The increase was primarily attributable to the
inclusion of depreciation and amortization associated with the three hotel
acquisitions in fiscal 1998 and one hotel acquisition and the retail/rental
joint venture discussed above in fiscal 1999, and an increased fixed asset base
due to fiscal 1999 capital improvements.

Interest expense. During the year ended July 31, 1999 and the ten months ended
July 31, 1998, we recorded interest expense of $25.1 million and $17.8 million,
respectively, relating primarily to our Credit Facility, the Industrial
Development Bonds and the senior subordinated debt issued in May 1999. The
increase in interest expense for the year ended July 31, 1999 compared to the
ten months ended July 31, 1998 is attributable to the outstanding senior
subordinated notes issued May 1999, partially offset by a reduction in the
balance outstanding on the Credit Facility.

Liquidity and Capital Resources

The Company has historically provided for operating expenditures, debt
service, capital expenditures and acquisitions through a combination of cash
flow from operations (including sales of real estate) and short-term and
long-term borrowings.

Cash flows from investing activities have historically consisted of
payments for acquisitions, resort capital expenditures, and investments in real
estate. Resort capital expenditures for the year ended July 31, 2000 were $77.7
million and investments in real estate for that period were $40.4 million. The
primary projects included in resort capital expenditures were (i) the recently
completed expansion of the Keystone Conference Center, (ii) completion of the
River Course at Keystone, (iii) the first phase of the Blue Sky Basin expansion
in Vail's famous back bowls, (iv) a new six-passenger high-speed chairlift at
Breckenridge, (v) construction of Zach's Cabin, a private on-mountain dining
facility at Beaver Creek, and (vi) upgrades to office and front line information
systems. Also included in resort capital expenditures is $10.1 million related
to the reconstruction and expansion of Two Elk Lodge and related reconstruction
of fire-damaged facilities on Vail Mountain. The primary projects included in
investments in real estate were (i) continuing infrastructure related to Beaver
Creek, Bachelor Gulch and Arrowhead Villages, (ii) construction of the Arrowhead
Alpine Club, (iii) planning and development of the new Red Sky Ranch golf
community, (iv) planning for the construction of The Ritz-Carlton, Bachelor
Gulch, and (v) investments in developable land at strategic locations at all
four ski resorts.

The Company estimates that it will make resort capital expenditures of
approximately $55 million to $65 million during fiscal 2001. The primary
projects are anticipated to include (i) snowboarding halfpipe and terrain park
improvements at Keystone, (ii) a new six-passenger high-speed chairlift at
Keystone, (iii) expansion of Vail's snowmaking capabilities, (iv) new activities
at and renovations to Adventure Ridge at Vail, (v) expansion of the grooming
fleet at Vail, Beaver Creek and Breckenridge, (vi) base area amenity and parking
improvements at Beaver Creek, (vii) upgrades to office and front line
information systems, (viii) significant renovations of the Lodge at Vail, and
(ix) a new high-speed four-passenger chairlift and the expansion of Pete's Bowl
in Blue Sky Basin at Vail. Investments in real estate during fiscal 2001 are
expected to total approximately $45 to $55 million. The primary projects are
anticipated to include (i) planning and development of projects at Vail,
Bachelor Gulch, Arrowhead, Avon, Breckenridge, Keystone and the Jackson Hole
Valley, (ii) continued development of Red Sky Ranch, a golf community that will
include two 18-hole golf courses, (iii) construction of The Ritz-Carlton,
Bachelor Gulch, and (iv) investments in developable land at strategic locations
at all four ski resorts. The Company plans to fund these capital expenditures
and investments in real estate with cash flow from operations and borrowings
under the Credit Facility.

During the year ended July 31, 2000, the Company used $5.1 million in cash
in its financing activities, consisting of net payments on long-term debt of
$4.8 million and $0.3 million used in other financing activities.

During the year ended July 31, 2000, 35,633 employee stock options were
exercised at exercise prices ranging from $6.85 to $10.75. Additionally, 13,176
shares were issued to management under the Company's restricted stock plan.

Based on current levels of operations and cash availability, management
believes the Company is in a position to satisfy its current working capital,
debt service, and capital expenditure requirements for at least the next twelve
months.

INFLATION

Although the Company cannot accurately determine the precise effect of
inflation on its operations, management does not believe inflation has had a
material effect on the results of operations in the last three fiscal years.
When the cost of operating resorts increases, the Company generally has been
able to pass the increase on to its customers. However, there can be no
assurance that increases in labor and other operating costs due to inflation
will not have an impact on the Company's future profitability.

SEASONALITY AND QUARTERLY RESULTS

The Company's ski and resort operations are extremely seasonal in nature.
In particular, revenues and profits at the Company's ski resorts are
substantially lower, historically resulting in losses, in the summer months due
to the closure of its ski operations. Conversely, GTLC's peak operating season
occurs during the summer months while the winter season generally results in
operating losses due to closure of all revenue operations. However, revenues and
profits generated by GTLC's summer operations are not sufficient to fully offset
the Company's off-season losses from its ski resorts. During the 2000 fiscal
year, 76.8% of total resort revenues were earned during the second and third
fiscal quarters. Quarterly results may be materially affected by the timing of
snowfall and the integration of acquisitions. Therefore, the operating results
for any three-month period are not necessarily indicative of the results that
may be achieved for any subsequent fiscal quarter or for a full fiscal year. The
Company is taking steps to smooth its earnings cycle by investing in additional
summer activities, such as golf course development, including acquiring new
resorts, such as GTLC. (See Note 13 of the Notes to Consolidated Financial
Statements for Selected Quarterly Financial Data).

ECONOMIC DOWNTURN

Skiing and tourism are discretionary recreational activities that can be
impacted by a significant economic slowdown, which, in turn, could impact the
Company's operating results. Although historically economic downturns have not
had an adverse impact on the Company's operating results, there can be no
assurance that a decrease in the amount of discretionary spending by the public
in the future would not have an adverse effect on the Company.

UNFAVORABLE WEATHER CONDITIONS

The ski industry's ability to attract visitors to its resorts is influenced
by weather conditions and the amount and timing of snowfall during the ski
season. Unfavorable weather conditions can adversely affect skier days. In the
past 20 years the Company's ski resorts have averaged between 300 and 350 inches
of annual snowfall, significantly in excess of the average for U.S. ski resorts.
However, there is no assurance that the Company's resorts will receive seasonal
snowfalls near the historical average in the upcoming or future seasons. Also,
the early season snow conditions and skier perceptions of early season snow
conditions influence the momentum and success of the overall season. The Company
believes that poor snow conditions early in the ski season for the past two
years has adversely affected operating results for those periods. Although there
is no way to predict whether or not this weather pattern will continue, which
would have an adverse effect on the Company's results of operations, it is
possible that the poor early season snow for the past two ski seasons could
negatively impact visitation for the 2000-01 ski season regardless of actual
snow conditions at the Company's resorts.

LABOR MARKET

The labor market in Colorado is the tightest it has been in decades, and
nationwide unemployment rates are at record lows. As a result the Company has
increased wage rates for seasonal labor in order to attract and retain
sufficient labor levels in operations. While the Company believes it will be
able to offset this increased expense with cost control measures, there can be
no assurance that increasing cost control measures will be successful or that
labor costs will not have an adverse impact on the Company's operating results.

SKIER DAY INSURANCE

As discussed elsewhere in this Form 10-K, the Company derived a significant
portion of its fiscal 2000 revenues from its claim under a reduced skier day
insurance policy covering the 1999-2000 ski season. The Company has not yet
received any payment under the claim. While the Company has no reason to believe
that the claim will not be settled to the full extent of revenue recognized,
there can be no assurance that the actual settlement of the insurance claim will
not differ materially from the amount recognized in the Company's financial
statements. In addition, the Company has not yet decided whether to purchase a
similar insurance product for the 2000-01 ski season, or, if so, whether any
insurance policy will be available on terms satisfactory to the Company.

YEAR 2000 COMPLIANCE

The Year 2000 issue is a result of certain computer programs being written
using two digits rather than four to define the applicable year. Computer
programs which are date-sensitive may recognize a date using "00" as the year
1900 rather than the year 2000, which could result in major computer system or
program failures or miscalculations or equipment malfunctions. The Company
recognizes that the impact of the Year 2000 issue extends beyond traditional
computer hardware and software to embedded hardware and software contained in
equipment used in operations, such as chairlifts, alarm systems and elevators,
as well as to third parties.

Project Results. The Company's Year 2000 Project achieved project close out
with no Year 2000 related failures that impacted the Company's operations or
financial condition. Final project close out occurred in March of 2000. The
Company's significant vendors experienced no disruptions that affected their
ability to provide products and services to the Company. The effect of Year 2000
on revenue and spending patterns is discussed elsewhere in this Form 10-K.

Costs. The final multi-year cost of the Year 2000 project was approximately
$900,000 and was funded from operating cash flow. These costs were not material
to the Company's consolidated results of operations, liquidity or capital
resources. Of the total project cost, approximately $600,000 is attributable to
the purchase of new software or equipment that will be capitalized. In a number
of instances, the Company decided to install new software or upgraded versions
of current software programs that are Year 2000 compliant. In these instances,
the Company may capitalize certain costs of the new system in accordance with
current accounting guidelines. The remaining $300,000 of project costs were
expensed as incurred. Costs exclude expenditures for systems that were replaced
under the Company's regularly planned schedule.

CAUTIONARY STATEMENT

Statements in this Form 10-K, other than statements of historical
information, are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. You
can identify these statements by forward-looking words such as "may", "will",
"expect", "plan", "intend", "anticipate", "believe", "estimate", and "continue"
or similar words. Such forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Such risks
and uncertainties include, but are not limited to:
. a significant downturn in general business and economic conditions,
. unfavorable weather conditions, including inadequate snowfall in the
early season,
. failure to attract and retain sufficient workforce,
. failure to obtain necessary approvals needed to implement planned
development projects,
. competition in the ski and resort industry,
. failure to successfully integrate acquisitions,
. adverse changes in vacation real estate markets, and
. failure or delay in receiving reduced skier day insurance cash
proceeds.
Readers are also referred to the uncertainties and risks identified in the
Company's Registration Statement on Form S-4 for its Senior Subordinated Debt
exchange notes (Commission File No. 333-80621) and elsewhere in this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk. The Company's exposure to market risk is limited primarily
to the fluctuating interest rates associated with variable rate indebtedness. At
July 31, 2000, the Company had $126 million of variable rate indebtedness,
representing 32% of the Company's total debt outstanding, at an average interest
rate during fiscal 2000 of 8.6% (see Note 4 of the Notes to Consolidated
Financial Statements). The Company enters into interest rate swap agreements
("Swap Agreements") to reduce its exposure to interest rate fluctuations on its
floating-rate debt. Swap Agreements exchange floating-rate for fixed-rate
interest payments periodically over the life of the agreement without exchange
of the underlying notional amounts. The notional amounts of interest rate
agreements are used to measure interest to be paid or received and do not
represent an amount of exposure to credit loss. The net cash amounts paid or
received on the agreements are accrued and recognized as an adjustment to
interest expense. As of July 31, 2000, the Company had Swap Agreements in effect
with notional amounts totaling $75.0 million which will mature December 2002.
Borrowings not subject to Swap Agreements at July 31, 2000 totaled $319.2
million. Swap Agreement rates are based on one-month LIBOR. The counterparties
to the Swap Agreements are major financial institutions and management believes
that the risk of incurring credit losses is remote. Based on average floating-
rate borrowings outstanding during the year ended July 31, 2000, a 100-basis
point change in LIBOR would have caused the Company's monthly interest expense
to change by $23,333. Management believes that these amounts are not significant
to the Company's results of operations.

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133". SFAS No. 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133, as amended, is effective for
fiscal years beginning after June 15, 2000, therefore the Company is required to
adopt SFAS No. 133 on August 1, 2000.

SFAS No. 133 requires that changes in the derivative instrument's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS No. 133 also requires that the Company formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133 allows special hedge accounting for cash flow hedges by
providing that the effective portion of the gain or loss on a derivative
instrument designated and qualifying as a cash flow hedging instrument be
reported as a component of other comprehensive income and be reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. If SFAS No. 133 had to be applied to all Swap Agreements in
place at July 31, 2000, the fair value of the Swap Agreements would increase
assets by approximately $2.1 million with an offsetting amount recorded as the
effect of a change in accounting principle. Management does not anticipate that
the adoption of SFAS No. 133 will have a material effect on the Company's
financial position or annual results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Vail Resorts, Inc.

Consolidated Financial Statements for the Years Ended July 31, 2000 and 1999 and
the Ten Months Ended July 31, 1998

Report of Independent Public Accountants.................................... F-2

Consolidated Financial Statements
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Stockholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7

F-1

Report of Independent Public Accountants

To the Board of Directors of
Vail Resorts, Inc.:

We have audited the accompanying consolidated balance sheets of VAIL RESORTS,
INC. and subsidiaries as of July 31, 2000 and 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended July 31, 2000 and 1999 and the ten-month period ended July 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements 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 Vail Resorts, Inc. and
subsidiaries as of July 31, 2000 and 1999 and the results of their operations
and their cash flows for the years ended July 31, 2000 and 1999 and the ten-
month period ended July 31, 1998, in conformity with accounting principles
generally accepted in the United States.

Arthur Andersen LLP

Denver, Colorado,
October 14, 2000

F-2

Vail Resorts, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)

July 31, July 31,
2000 1999
------------- ------------

Assets
Current assets:
Cash and cash equivalents....................................................... $ 8,821 $ 18,302
Restricted cash................................................................. 9,847 7,022
Trade receivables, net of allowances of $2,024 and $959, respectively........... 39,427 29,650
Inventories..................................................................... 24,092 22,805
Deferred income taxes (Note 7).................................................. 10,364 10,404
Other current assets............................................................ 7,803 4,512
------------- ------------
Total current assets.......................................................... 100,354 92,695
Property, plant and equipment, net (Note 5)........................................ 655,172 611,141
Real estate held for sale and investment........................................... 147,172 152,508
Deferred charges and other assets.................................................. 26,835 30,011
Notes receivable................................................................... 3,425 1,380
Intangible assets, net (Note 5).................................................... 194,860 201,504
------------- ------------
Total assets.................................................................. $ 1,127,818 $ 1,089,239
============= ============
Liabilities and Stockholders' Equity
Current liabilities:

Accounts payable and accrued expenses (Note 5).................................. $ 105,502 $ 89,445
Income taxes payable (Note 7)................................................... 2,645 1,633
Long-term debt due within one year (Note 4)..................................... 2,037 2,057
------------- ------------
Total current liabilities..................................................... 110,184 93,135
Long-term debt (Note 4)............................................................ 392,198 396,129
Other long-term liabilities........................................................ 31,710 31,146
Deferred income taxes (Note 7)..................................................... 92,577 84,728
Commitments and contingencies (Note 9) ............................................ -- --
Minority interest in net assets of consolidated joint ventures..................... 7,394 7,326
Stockholders' equity (Note 12):
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued
and outstanding............................................................... -- --
Common stock:................................................................... -- --
Class A common stock, convertible to common stock, $0.01 par value, 20,000,000
shares authorized, 7,439,834 shares issued and outstanding.................. 74 74
Common stock, $0.01 par value, 40,000,000 shares authorized, 27,182,123 and
27,092,901 shares issued and outstanding as of July 31, 2000 and 1999,
respectively................................................................ 272 271
Additional paid-in capital.................................................... 404,564 402,923
Retained earnings............................................................. 88,845 73,507
------------- ------------
Total stockholders' equity................................................ 493,755 476,775
------------- ------------
Total liabilities and stockholders' equity................................ $ 1,127,818 $ 1,089,239
============= ============

The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.

F-3

Vail Resorts, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)

Year Year Ten Months
Ended Ended Ended
July 31, July 31, July 31,
2000 1999 1998
----------- ----------- ------------

Net revenues:
Resort............................................................. $ 501,375 $ 431,788 $ 336,547
Real estate........................................................ 51,684 43,912 73,722
----------- ----------- -----------
Total net revenues.............................................. 553,059 475,700 410,269
Operating expenses:
Resort............................................................. 388,313 345,687 222,201
Real estate........................................................ 42,066 34,386 62,619
Depreciation and amortization...................................... 61,435 53,256 36,838
----------- ----------- -----------
Total operating expenses........................................ 491,814 433,329 321,658
----------- ----------- -----------
Income from operations................................................. 61,245 42,371 88,611
Other income (expense):
Investment income.................................................. 1,843 1,624 1,784
Interest expense .................................................. (35,108) (25,099) (17,789)
Gain (loss) on disposal of fixed assets............................ (104) 3,283 (1,706)
Other income (expense)............................................. 32 63 (736)
Minority interest in net income of consolidated joint ventures..... (713) (1,448) --
----------- ----------- -----------
Income before provision for income taxes............................... 27,195 20,794 70,164
Provision for income taxes (Note 7).................................... (11,857) (8,003) (29,146)
----------- ----------- -----------
Net income............................................................. $ 15,338 $ 12,791 $ 41,018
=========== =========== ===========

Net income per common share (Notes 2 and 3):
Basic.............................................................. $ 0.44 $ 0.37 $ 1.20
=========== =========== ===========
Diluted............................................................ $ 0.44 $ 0.37 $ 1.18
=========== =========== ===========

The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.

F-4

Vail Resorts, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)

Common Stock Additional Total
------------------------------------------
Shares Paid-in Retained Stockholders'
---------------------------------
Class A Common Total Amount Capital Earnings Equity
---------- ---------- ---------- --------- ---------- ----------- ------------

Balance, September 30, 1997... 11,639,834 21,765,815 33,405,649 $ 334 $ 385,634 $ 19,698 $ 405,666
Net income for the ten months
ended July 31, 1998........ -- -- -- -- -- 41,018 41,018
Issuance of shares pursuant
to options exercised (Note
11)........................ -- 1,043,271 1,043,271 11 7,990 -- 8,001
Tax effect of stock option
exercises.................. -- -- -- -- 7,669 -- 7,669
Restricted stock issued (Note
11)........................ -- 8,260 8,260 -- 270 -- 270
Shares of Class A Common
Stock converted to Common
Stock (Note 12)............ (4,000,000) 4,000,000 -- -- -- -- --
---------- ---------- ---------- --------- ---------- ----------- ------------
Balance, July 31, 1998........ 7,639,834 26,817,346 34,457,180 $ 345 $ 401,563 $ 60,716 $ 462,624
Net income for the year ended
July 31, 1999.............. -- -- -- -- -- 12,791 12,791
Issuance of shares pursuant
to options exercised (Note
11)........................ -- 67,360 67,360 -- 677 -- 677
Tax effect of stock option
exercises.................. -- -- -- -- 435 -- 435
Restricted stock issued (Note
11)........................ -- 8,195 8,195 -- 248 -- 248
Shares of Class A Common
Stock converted to Common
Stock (Note 12)............ (200,000) 200,000 -- -- -- -- --
---------- ---------- ---------- --------- ---------- ----------- ------------
Balance, July 31, 1999........ 7,439,834 27,092,901 34,532,735 $ 345 $ 402,923 $ 73,507 $ 476,775
Net income for the year ended
July 31, 2000.............. -- -- -- -- -- 15,338 15,338
Issuance of shares pursuant
to options exercised (Note
11)........................ -- 35,633 35,633 -- 314 -- 314
Tax effect of stock option
exercises.................. -- -- -- -- 183 -- 183
Restricted stock issued (Note
11)........................ -- 13,176 13,176 -- 255 -- 255
Issuance of shares in purchase
of technology company...... -- 40,413 40,413 1 889 -- 890
---------- ---------- ---------- --------- ---------- ----------- ------------
Balance, July 31, 2000........ 7,439,834 27,182,123 34,621,957 $ 346 $ 404,564 $ 88,845 $ 493,755
========== ========== ========== ========= ========== =========== ============

The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.

F-5

Vail Resorts, Inc.
Consolidated Statements of Cash Flows
(In thousands)

Year Year Ten Months
Ended Ended Ended
July 31, July 31, July 31,
2000 1999 1998
---------- ---------- ----------

Cash flows from operating activities:
Net income............................................................. $ 15,338 $ 12,791 $ 41,018
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 61,435 53,256 36,838
Non-cash cost of real estate sales................................... 27,402 23,779 49,112
Non-cash compensation related to stock grants (Note 11).............. 229 358 285
Non-cash equity income............................................... (4,482) (224) (2,973)
Deferred financing costs amortized................................... 1,734 742 448
(Gain) loss on disposal of fixed assets.............................. 104 (3,283) 1,706
Deferred income taxes, net (Note 7).................................. 7,889 7,103 19,093
Minority interest in net income of consolidated joint venture........ 713 1,448 --
Changes in assets and liabilities:
Restricted cash...................................................... (2,825) (876) (415)
Accounts receivable, net............................................. (9,777) (5,728) (4,358)
Notes receivable, net................................................ (2,045) 4,263 (93)
Inventories.......................................................... (1,287) (6,554) 2,497
Accounts payable and accrued expenses................................ 16,057 20,136 (16,226)
Income taxes payable................................................. 1,012 (606) 1,914
Other assets and liabilities......................................... 127 (3,995) 5,497
---------- ---------- ----------
Net cash provided by operating activities.......................... 111,624 102,610 134,343
Cash flows from investing activities:
Cash paid in resort acquisition, net of cash acquired.................. -- (48,360) --
Cash paid in hotel acquisitions, net of cash acquired.................. -- (33,800) (54,250)
Cash paid by consolidated joint venture in acquisition of retail
operations............................................................ -- (10,516) --
Cash paid in acquisition of warehouse complex.......................... -- (8,600) --
Investments in joint ventures.......................................... -- (5,000) --
Resort capital expenditures............................................ (77,656) (65,168) (80,454)
Investments in real estate............................................. (40,410) (32,980) (15,661)
Cash received from disposal of fixed assets............................ 2,063 -- --
---------- ---------- ----------
Net cash used in investing activities................................ (116,003) (204,424) (150,365)
Cash flows from financing activities:
Proceeds from the exercise of stock options............................ 314 677 8,001
Payments under Rights.................................................. -- -- (5,707)
Refund of bond reserve fund............................................ -- -- 3,297
Payment of financing costs............................................. (619) (8,099) --
Proceeds from borrowings under long-term debt.......................... 206,450 416,642 334,000
Payments on long-term debt............................................. (211,247) (302,470) (318,345)
---------- ---------- ----------
Net cash provided by (used in) financing activities.................. (5,102) 106,750 21,246
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents....................... (9,481) 4,936 5,224
Cash and cash equivalents:
Beginning of period.................................................... 18,302 13,366 8,142
---------- ---------- ----------
End of period.......................................................... $ 8,821 $ 18,302 $ 13,366
========== ========== ==========

Cash paid for interest..................................................... $ 35,470 $ 21,022 $ 16,336
========== ========== ==========
Taxes paid, net of refunds received........................................ $ 2,768 $ 850 $ --
========== ========== ==========

The accompanying Notes to consolidated Financial Statements are an integral part
of these financial statements.

F-6

Notes to Consolidated Financial Statements

1. Basis of Presentation

Vail Resorts, Inc. is organized as a holding company and operates through
various subsidiaries. Vail Resorts and its subsidiaries (collectively, the
"Company") currently operate in two business segments--resort and real estate.
Vail Associates, Inc., an indirect wholly owned subsidiary of Vail Resorts, and
its subsidiaries, (collectively, "Vail Associates") operate four of the world's
largest skiing facilities on Vail, Breckenridge, Keystone and Beaver Creek
mountains in Colorado. In addition to the ski resorts, Vail Associates owns and
operates Grand Teton Lodge Company ("GTLC"), which operates three resorts within
Grand Teton National Park (under a National Park Service concessionaire
contract) and the Jackson Hole Golf & Tennis Club in Wyoming. Vail Resorts
Development Company ("VRDC"), a wholly owned subsidiary of Vail Associates,
conducts the Company's real estate development activities. The Company's
mountain resort businesses are seasonal in nature. The Company's ski resort
businesses and related amenities typically have operating seasons from late
October through mid-May; the Company's operations at GTLC generally run from
mid-May through mid-October.

2. Summary of Significant Accounting Policies

Principles of Consolidation--The accompanying consolidated financial statements
include the accounts of the Company, its wholly owned subsidiaries and
subsidiaries in which the Company holds a controlling interest. Investments in
joint ventures in which the Company does not have a controlling interest are
accounted for under the equity method. All significant intercompany transactions
have been eliminated.

Cash and Cash Equivalents--The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents. The
carrying amounts reported in the balance sheet for cash equivalents are at fair
value.

Restricted Cash--Restricted cash represents amounts held as reserves for self-
insured worker's compensation claims, owner and guest advance deposits held in
escrow for lodging reservations and compensating balances on the Company's
depository accounts.

Inventories--The Company's inventories consist primarily of purchased retail
goods, food, and spare parts. Inventories are stated at the lower of cost or
market or fair value, determined using an average weighted cost method for
retail inventories and using the first-in, first-out ("FIFO") method for all
other inventories. The Company records a reserve for anticipated shrinkage and
obsolete inventory.

Property, Plant and Equipment--Property, plant and equipment is carried at cost
net of accumulated depreciation. Depreciation is calculated on the straight-line
method based on the following useful lives:

Estimated Life
in Years
-------------

Land improvements................................................. 40
Buildings and terminals........................................... 40
Ski lifts......................................................... 15
Machinery, equipment, furniture and fixtures...................... 1-12
Automobiles and trucks............................................ 3-5

Ski trails are depreciated over the life of their respective United States
Forest Service permits.

Interest capitalized on non-real estate capital projects during fiscal 2000
was $0.9 million.

F-7

Notes to Consolidated Financial Statements--(Continued)

2. Summary of Significant Accounting Policies--(Continued)

Real Estate Held for Sale-- The Company capitalizes as land held for sale the
original acquisition cost (or appraised value as of the effective date, as
defined below), direct construction and development costs, property taxes,
interest incurred on costs related to land under development, and other related
costs (engineering, surveying, landscaping, etc.) until the property reaches its
intended use. The cost of sales for individual parcels of real estate or
condominium units within a project is determined using the relative sales value
method. Selling expenses are charged against income in the period incurred.
Interest capitalized on real estate development projects during fiscal years
2000 and 1999 totaled $0.2 million and $0.2 million, respectively. There was no
interest capitalized on real estate development projects during fiscal 1998.

The Company is a member in the Keystone/Intrawest LLC ("Keystone JV"),
which is a joint venture with Intrawest Resorts, Inc. formed to develop land at
the base of Keystone Mountain. The Company contributed 500 acres of development
land as well as certain other funds to the joint venture. The Company's
investment in the Keystone JV, including the Company's equity earnings from the
inception of the Keystone JV, is reported as real estate held for sale in the
accompanying balance sheets as of July 31, 2000 and 1999. The Company recorded
$3.1 million and $7.7 million in equity income for the fiscal years ended July
31, 2000 and 1999, respectively, related to the Keystone JV.

Deferred Financing Costs--Costs incurred with the issuance of debt securities
are included in deferred charges and other assets, net of accumulated
amortization. Amortization is charged to interest expense over the respective
original lives of the applicable debt issues.

Interest Rate Agreements--The Company enters into interest rate exchange
agreements, or swap agreements ("Swap Agreements"), to reduce its exposure to
fluctuating interest rates. The Swap Agreements, which are derivatives of the
Company's existing debt agreements, exchange the interest rate on all or a
portion of the Company's debt for either fixed- or floating-rate interest
agreements. Net interest is accrued as either interest receivable or interest
payable with the offset recorded in interest expense. Any premium paid is
amortized over the life of the agreement.

Intangible Assets--Upon emergence from bankruptcy on October 8, 1992, the
Company's reorganization value exceeded the amounts allocated to the net
tangible and other intangible assets of the Company. This excess reorganization
value has been classified as an intangible asset on the Company's balance sheet.
The Company has classified as goodwill the cost in excess of fair value of the
net assets of companies acquired in purchase transactions. Intangible assets are
recorded net of accumulated amortization in the accompanying consolidated
balance sheet and amortized using the straight-line method over their estimated
useful lives as follows:

Excess reorganization value........... 20 years
Goodwill.............................. 5-40 years
Trademarks............................ 40 years
Other intangibles..................... 3-15 years

Long-lived Assets--The Company evaluates potential impairment of long-lived
assets and long-lived assets to be disposed of in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SFAS No. 121
establishes procedures for the review of recoverability and measurement of
impairment, if necessary, of long-lived assets, goodwill and certain
identifiable intangibles held and used by an entity. SFAS No. 121 requires that
those assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less estimated selling costs. As of July 31, 2000
management believes that there has not been any impairment of the Company's
long-lived assets, goodwill or other identifiable intangibles.

F-8

Notes to Consolidated Financial Statements--(Continued)

2. Summary of Significant Accounting Policies--(Continued)

Revenue Recognition--Resort Revenues are derived from a wide variety of sources,
including sales of lift tickets, ski school tuition, dining, retail stores,
equipment rental, hotel operations, property management services, travel
reservation services, club management, real estate brokerage, conventions, golf
course greens fees, licensing and sponsoring activities and other recreational
activities, and are recognized as services are performed. Revenues from real
estate sales are not recognized until title has been transferred, and revenue is
deferred if the receivable is subject to subordination until such time as all
costs have been recovered. Until the initial down payment and subsequent
collection of principal and interest are by contract substantial, cash received
from the buyer is reported as a deposit on the contract.

Deferred Revenue--The Company records deferred revenue related to the sale of
season ski passes and certain daily lift ticket products. The number of season
pass holder visits is estimated based on historical data, and the deferred
revenue is recognized throughout the season based on this estimate. During the
ski season the estimated visits are compared to the actual visits and
adjustments are made if necessary.

Advertising Costs--Advertising costs are expensed the first time the advertising
takes place. Advertising expense for the fiscal years ended July 31, 2000 and
1999 and the ten-month period ended July 31, 1998 was $10.0 million, $8.8
million and $8.7 million, respectively. At July 31, 2000 and 1999, prepaid
advertising costs of $661,000 and $610,000, respectively, are reported as
current assets in the Company's consolidated balance sheets.

Income Taxes--The Company uses the liability method of accounting for income
taxes as prescribed by SFAS No. 109, "Accounting for Income Taxes". Under SFAS
No. 109, a deferred tax liability or asset is recognized for the effect of
temporary differences between financial reporting and income tax reporting (See
Note 7).

Net Income Per Share--In accordance with SFAS No. 128, "Earnings Per Share", the
company computes net income per share on both the basic and diluted basis (See
Note 3).

Fair Value of Financial Instruments--The recorded amounts for cash and cash
equivalents, receivables, other current assets, and accounts payable and accrued
expenses approximate fair value due to the short-term nature of these financial
instruments. The fair value of amounts outstanding under the Company's Credit
Facilities approximates book value due to the variable nature of the interest
rate associated with that debt. The fair values of the Company's Senior
Subordinated Notes, Industrial Development Bonds and other long-term debt have
been estimated using discounted cash flow analyses based on current borrowing
rates for debt with similar maturities and ratings. The estimated fair values of
the Senior Subordinated Notes, Industrial Development Bonds and other long-term
debt at July 31, 2000 and 1999 are presented below (in thousands):

July 31, 2000 July 31, 1999
------------------------------- -----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------------------- -----------------------------

Senior Subordinated Notes.................... $ 200,000 $ 150,861 $ 200,000 $ 153,877
Industrial Development Bonds................. 63,200 63,235 63,200 65,746
Other Long-Term Debt......................... 5,035 5,139 4,686 4,627

Stock Compensation--The Company's employee stock option plans are accounted for
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". The Company has adopted the disclosure requirements
of SFAS No.123, "Accounting for Stock-Based Compensation" (see Note 11).

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

F-9

Notes to Consolidated Financial Statements--(Continued)

2. Summary of Significant Accounting Policies--(Continued)

Reclassifications--Certain reclassifications have been made to the accompanying
consolidated financial statements for the year ended July 31, 1999 and the ten
months ended July 31, 1998 to conform to the current period presentation.

New Accounting Standards--In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". In June 1999,
the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133". SFAS No.
133, as amended, establishes accounting and reporting standards requiring that
every derivative instrument be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS No. 133, as amended, is effective
for fiscal years beginning after June 15, 2000, therefore the Company is
required to adopt SFAS No. 133 on August 1, 2000.

SFAS No. 133 requires that changes in the derivative instrument's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS No. 133 also requires that the Company formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting. SFAS No. 133 allows special hedge accounting for cash flow hedges by
providing that the effective portion of the gain or loss on a derivative
instrument designated and qualifying as a cash flow hedging instrument be
reported as a component of other comprehensive income and be reclassified into
earnings in the same period or periods during which the hedged transaction
affects earnings. If SFAS No. 133 had to be applied to all Swap Agreements in
place at July 31, 2000, the fair value of the Swap Agreements would increase
assets by approximately $2.1 million with an offsetting amount recorded as the
effect of a change in accounting principle. Management does not anticipate the
adoption of SFAS No. 133 will have a material effect on the Company's financial
position or annual results of operations.

The Company adopted Accounting Standards Executive Committee ("AcSEC")
Statement of Position ("SOP") 98-1 which provides guidance on accounting for the
costs of computer software developed or obtained for internal use. The adoption
of this SOP had no material effect on the Company's financial statements.

The Company adopted AcSEC SOP 98-5, which requires that all non-
governmental entities expense costs of start-up activities as incurred, in
fiscal 2000. The adoption of this SOP had no material effect on the Company's
financial statements.

3. Net Income Per Common Share

SFAS No. 128, "Earnings Per Share" ("EPS"), establishes standards for
computing and presenting EPS. SFAS No. 128 requires the dual presentation of
basic and diluted EPS on the face of the income statement and requires a
reconciliation of numerators (net income) and denominators (weighted-average
shares outstanding) for both basic and diluted EPS in the footnotes. Basic EPS
excludes dilution and is computed by dividing net income available to common
shareholders by the weighted-average shares outstanding. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised, resulting in the issuance of common shares
that would then share in the earnings of the Company.

Fiscal Year Ended Fiscal Year Ended Ten Months Ended
July 31, July 31, July 31,
2000 1999 1998
----------------------- ----------------------- ----------------------

Basic Diluted Basic Diluted Basic Diluted
----------- ---------- ---------- ---------- --------- ----------

Net income per common share:
Net income.............................. $ 15,338 $ 15,338 $ 12,791 $ 12,791 $ 41,018 $ 41,018

Weighted-average shares outstanding..... 34,599 34,599 34,562 34,562 34,204 34,204
Effect of dilutive stock options........ -- 180 -- 233 -- 547
----------- ---------- ---------- ---------- --------- ----------
Total shares............................ 34,599 34,779 34,562 34,795 34,204 34,751
----------- ---------- ---------- ---------- --------- ----------
Net income per common share............. $ 0.44 $ 0.44 $ 0.37 $ 0.37 $ 1.20 $ 1.18
=========== ========== ========== ========== ========= ==========

F-10

4. Long-Term Debt

Long-term debt as of July 31, 2000 and 1999 is summarized as follows (in
thousands):

(e) July 31,
Maturity 2000 1999
------------ -------- --------

Industrial Development Bonds (a)....... 2003-2020 $ 63,200 $ 63,200
Revolving Credit Facilities (b)........ 2003 126,000 130,300
Senior Subordinated Notes(c)........... 2009 200,000 200,000
Other (d).............................. 2001-2029 5,035 4,686
-------- --------
394,235 398,186
Less: Current Maturities............... 2,037 2,057
-------- --------
$392,198 $396,129
======== ========

a) The Company has $41.2 million of outstanding Industrial Development
Bonds (the "Industrial Development Bonds") issued by Eagle County,
Colorado that mature, subject to prior redemption, on August 1, 2019.
These bonds accrue interest at 6.95% per annum, with interest being
payable semi-annually on February 1 and August 1. In addition, the
Company has outstanding two series of refunding bonds. The Series 1990
Sports Facilities Refunding Revenue Bonds have an aggregate outstanding
principal amount of $19.0 million, which matures in installments in 2006
and 2008. These bonds bear interest at a rate of 7.75% for bonds
maturing in 2006 and 7.875% for bonds maturing in 2008. The Series 1991
Sports Facilities Refunding Revenue Bonds have an aggregate outstanding
principal amount of $3 million and bear interest at 7.125% for bonds
maturing in 2002 and 7.375% for bonds maturing in 2010.

b) The Company's credit facilities consist of a revolving credit facility
("Credit Facility") that provides for debt financing up to an aggregate
principal amount of $450 million. Borrowings under the Credit Facility
bear interest annually at the Company's option at the rate of (i) LIBOR
(6.62% at July 31, 2000) plus a margin ranging from 0.75% to 2.25% or
(ii) the agent's prime lending rate, (9.50% at July 31, 2000) plus a
margin of up to 0.75%. The Company also pays a quarterly unused
commitment fee ranging from 0.20% to 0.50%. The interest margins
fluctuate based upon the ratio of the Company's total Funded Debt to the
Company's Resort EBITDA (as defined in the underlying Credit Facility,
which differs from the definition of Resort EBITDA used elsewhere in
this filing). The Credit Facility matures on December 19, 2002.

On December 30, 1998, SSV established a credit facility ("SSV Facility")
that provides debt financing up to an aggregate principal amount of $20
million. On October 15, 1999, the SSV Facility was amended to increase
the aggregate principal amount to $25 million. The amended SSV Facility
consists of (i) a $15 million Tranche A revolving credit facility and
(ii) a $10 million Tranche B term loan facility. The SSV Facility
matures on the earlier of December 31, 2003 or the termination date of
the Credit Facility discussed above. Vail Associates guarantees the SSV
Facility. The principal amount outstanding on the Tranche B term loan
was $8.5 million at July 31, 2000. Future minimum amortization under the
Tranche B term loan facility is $1.0 million each year during the fiscal
years 2001-2003, and $5.5 million in 2004. The SSV Facility bears
interest annually at the rates prescribed above for the Credit Facility.
SSV also pays a quarterly unused commitment fee at the same rates as the
unused commitment fee for the Credit Facility.

c) The Company has outstanding $200 million of Senior Subordinated Notes
(the "Notes"). The Notes have a fixed annual interest rate of 8.75%,
with interest due semi-annually on May 15 and November 15. The Notes
will mature on May 15, 2009 and no principal payments are due to be paid
until maturity. The Company has certain early redemption options under
the terms of the Notes. Substantially all of the Company's subsidiaries
have guaranteed the Notes. The Notes are subordinated to certain of the
Company's debts, including the Credit Facility, and will be subordinated
to certain of the Company's future debts. The proceeds of the offering
were used to reduce the Company's outstanding debt under the Credit
Facility.

d) Other obligations bear interest at rates ranging from 0.0% to 7.0% and
have maturities ranging from 2001 to 2029.

e) Maturities are based on the Company's July 31 fiscal year end.

F-11

4. Long-Term Debt--(Continued)

Aggregate maturities for debt outstanding are as follows (in thousands):

As of
July 31,
Due during the twelve months ending July 31: 2000
--------

2001............................................ $ 2,037
2002............................................ 1,780
2003............................................ 120,055
2004............................................ 5,558
2005............................................ 61
Thereafter...................................... 264,744
--------
Total debt.................................. $394,235
========

5. Supplementary Balance Sheet Information (in thousands)

The composition of property, plant and equipment follows:

July 31,
2000 1999
-------- --------

Land and land improvements...................... $156,936 $133,354
Buildings and terminals......................... 316,290 287,870
Machinery and equipment......................... 244,165 208,740
Automobiles and trucks.......................... 15,270 15,300
Furniture and fixtures.......................... 60,749 46,405
Construction in progress........................ 37,412 48,649
-------- --------
830,822 740,318
Accumulated depreciation........................ (175,650) (129,177)
-------- --------
Property, plant and equipment, net.............. $655,172 $611,141
======== ========

Depreciation expense for the fiscal years ended July 31, 2000 and 1999 and
the ten months ended July 31, 1998 totaled $51.8 million, $43.5 million, and
$28.4 million, respectively.

The composition of intangible assets follows:

July 31,
2000 1999
-------- --------

Trademarks...................................... $ 42,721 $ 42,611
Other intangible assets......................... 44,521 43,213
Goodwill ....................................... 146,262 144,775
Excess reorganization value (See Note 2)........ 24,594 24,593
-------- --------
$258,098 $255,192
Accumulated amortization........................ (63,238) (53,688)
-------- --------
$194,860 $201,504
======== ========

Amortization expense for the fiscal years ended July 31, 2000 and 1999 and
for the ten months ended July 31, 1998 totaled $9.6 million, $9.8 million, and
$8.4 million, respectively.

F-12

5. Supplementary Balance Sheet Information (in thousands)--(Continued)

The composition of accounts payable and accrued expenses follows:

July 31,
2000 1999
-------- -------

Trade payables...................................... $ 37,118 $33,434
Deferred Revenue.................................... 18,088 9,327
Deposits............................................ 9,889 11,894
Accrued salaries and wages.......................... 19,782 13,969
Accrued interest.................................... 5,885 6,301
Property taxes...................................... 5,731 5,770
Liability to complete real estate sold, short term.. 1,232 1,718
Other accruals...................................... 7,777 7,032
-------- -------
$105,502 $89,445
======== =======

6. Retirement and Profit Sharing Plans

The Company maintains a defined contribution retirement plan (the "Plan"),
qualified under Section 401(k) of the Internal Revenue Code, for its employees.
Employees are eligible to participate in the Plan upon satisfying the following
requirements: (1) the employees must be at least 21 years old, and (2) the
employees must complete either (a) 1,500 hours of service since employment
commencement date, provided that no employees who complete 1,500 hours of
service are eligible to participate in the Plan earlier than the first
anniversary of their employment commencement date, or (b) a 12-consecutive-month
period beginning on their employment commencement date, or any subsequent 12-
consecutive-month period beginning on the anniversary of their employment
commencement date, during which they are credited with 1,000 or more hours of
service. Participants may contribute from 2% to 22% of their qualifying annual
compensation up to the annual maximum specified by the Internal Revenue Code.
The Company matches an amount equal to 50% of each participant's contribution up
to 6% of a participant's annual qualifying compensation. The Company's matching
contribution is entirely discretionary and may be reduced or eliminated at any
time.

Total retirement plan expense recognized by the Company for the fiscal
years ended July 31, 2000 and 1999 and for the ten months ended July 31, 1998
was $1.5 million, $0.8 million, and $0.8 million, respectively.

7. Income Taxes

At July 31, 2000, the Company has total federal net operating loss ("NOL")
carryovers of approximately $255 million for income tax purposes that expire in
the years 2004 through 2008. The Company will only be able to use these NOLs to
the extent of approximately $8.0 million per year through October 8, 2007
(Section 382 amount). Consequently, the accompanying financial statements and
table of deferred items only recognize benefits related to the NOLs to the
extent of the Section 382 amount.

At July 31, 2000 the Company has approximately $5.4 million in unused
minimum tax credit carryovers. These tax credits have an unlimited carryforward
period.

F-13

7. Income Taxes--(Continued)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of July 31, 2000 and 1999 are as follows
(in thousands):

July 31,
2000 1999
-------- --------
Deferred income tax liabilities:
Fixed assets...................................... $ 76,264 $ 70,254
Intangible assets................................. 17,324 17,964
Other, net........................................ (909) 1,757
-------- --------
Total........................................... 92,679 89,975
Gross deferred income tax assets:
Accrued expenses.................................. 4,825 3,450
Net operating loss carryforwards.................. 11,090 22,393
Minimum tax credit................................ 5,351 2,894
Other, net........................................ -- 261
-------- --------
Total........................................... 21,266 28,998
Valuation allowance for deferred income tax assets.. (10,800) (13,347)
-------- --------
Deferred income taxes, net of valuation allowance... 10,466 15,651
-------- --------
Net deferred income tax liability................... $ 82,213 $ 74,324
======== ========

The net current and non-current components of deferred income taxes
recognized in the July 31, 2000 and 1999 balance sheets are as follows (in
thousands):

July 31,
2000 1999
-------- --------

Net current deferred income tax asset............... $ 10,364 $ 10,404
Net non-current deferred income tax liability....... 92,577 84,728
-------- --------
Net deferred income tax liability............... $ 82,213 $ 74,324
======== ========

Significant components of the provision for income taxes from continuing
operations are as follows (in thousands):

Year Year Ten Months
Ended Ended Ended
July 31, July 31, July 31,
2000 1999 1998
-------- -------- --------

Current:

Federal........................................... $ 2,381 $ 255 $ 1,157
State............................................. 1,404 210 1,082
-------- -------- --------
Total current................................... 3,785 465 2,239
Deferred:
Federal........................................... 7,193 7,880 17,173
State............................................. 696 (777) 1,920
-------- -------- --------
Total deferred.................................. 7,889 7,103 19,093
Tax benefit related to exercise of stock options
and issuance of restricted stock.................. 183 435 7,814
-------- -------- --------
$ 11,857 $ 8,003 $ 29,146
======== ======== ========

F-14

7. Income Taxes--(Continued)

A reconciliation of the income tax provision from continuing operations and
the amount computed by applying the U.S. federal statutory income tax rate to
income from continuing operations before income taxes is as follows:

Year Year Ten Months
Ended Ended Ended
July 31, July 31, July 31,
2000 1999 1998
-------- -------- ----------

At U.S. federal income tax rate........................ 35.0% 35.0% 35.0%
State income tax, net of federal benefit............... 3.0% 3.3% 4.8%
Benefit of state tax reduction......................... -- (3.7%) --
Goodwill and Excess Reorganization Value amortization.. 4.4% 3.7% 1.8%
Other.................................................. 1.2% 0.2% (0.1%)
-------- -------- ----------
43.6% 38.5% 41.5%
======== ======== ==========

8. Related Party Transactions

Resort operating expense includes an annual fee of $500,000 for management
services provided by an affiliate of the majority holder of the Company's Class
A Common Stock. This fee is generally settled partially through use of the
Company's facilities and partially in cash. The fee for the years ended July 31,
2000 and 1999 and the ten months ended July 31, 1998 was $500,000, $500,000 and
$417,000 respectively. At July 31, 2000, the Company's liability with respect to
this arrangement was $499,000.

Vail Associates has the right to appoint 4 of 9 directors of the Beaver
Creek Resort Company of Colorado ("Resort Company"), a non-profit entity formed
for the benefit of property owners and certain others in Beaver Creek. Vail
Associates has a management agreement with the Resort Company, renewable for
one-year periods, to provide management services on a fixed fee basis. During
fiscal years 1991 through 2000, the Resort Company was able to meet its
operating requirements through its own operations. Management fees and
reimbursement of operating expenses paid to the Company under its agreement with
the Resort Company during the years ended July 31, 2000 and 1999 and the ten
months ended July 31, 1998 totaled $5.7 million, $5.2 million and $4.7 million,
respectively.

In 1991, the Company loaned to Andrew P. Daly, the Company's President,
$300,000, $150,000 of which bears interest at 9% and the remainder of which is
non-interest bearing. The principal sum plus accrued interest is due no later
than one year following the termination, for any reason, of Mr. Daly's
employment with the Company. The proceeds of the loan were used to finance the
purchase and improvement of real property. The loan is secured by a deed of
trust on such property.

In 1995, Mr. Daly's spouse and James P. Thompson, President of VRDC, and
his spouse received financial terms more favorable than those available to the
general public in connection with their purchases of homesites at Bachelor Gulch
Village. Rather than payment of an earnest money deposit with the entire balance
due in cash at closing, these contracts provide for no earnest money deposit
with the entire purchase price (which was below fair market value) to be paid
under promissory notes of $438,750 and $350,000 for Mr. Daly's spouse and Mr.
and Mrs. Thompson, respectively. Mrs. Daly's note is secured by a first deed of
trust and amortized over 25 years at a rate of eight percent per annum interest,
with a balloon payment due on the earlier of five years from the date of closing
or one year from the date Mr. Daly's employment with the company is terminated.

In 1999, the agreement with respect to Mr. and Mrs. Thompson's note was
amended to provide that the promissory note, which continues to accrue at a rate
of eight percent per annum, will be payable in full in the form of one lump sum
payment. The lump sum payment shall be due on the earlier of (i) the date the
property is sold, (ii) two years from the date Mr. Thompson's employment with
the Company is terminated for any reason, or (iii) September 1, 2009. The
amended agreement between the Company and Mr. and Mrs. Thompson also
contemplates that the Company's loan will be subordinated to an anticipated
construction loan and, ultimately, permanent financing on the home, on terms and
conditions reasonably acceptable to the Company.

F-15

8. Related Party Transactions--(Continued)

In 1999, the Company entered into an agreement with William A. Jensen,
Senior Vice President and Chief Operating Officer for Vail, whereby the Company
invested in the purchase of a primary residence for Mr. and Mrs. Jensen in Vail,
Colorado. The Company contributed $1,000,000 towards the purchase price of the
residence and thereby obtained an approximate 49% undivided ownership interest
in such residence. The Company shall be entitled to receive its proportionate
share of the resale price of the residence, less certain deductions, upon the
earlier of the resale of the residence or within approximately 18 months after
Mr. Jensen's termination of employment from the Company.

In connection with the employment of Roger D. McCarthy as Senior Vice
President and Chief Operating Officer for Breckenridge, the Company has agreed
to invest up to $400,000, but not to exceed 50% of the purchase price, for the
purchase of a primary residence for Mr. McCarthy and his family in Breckenridge,
Colorado. Based on the actual amount invested by the Company, the Company will
obtain a proportionate undivided ownership interest in such residence. The
Company shall be entitled to receive its proportionate share of the resale price
of the residence, less certain deductions, upon the earlier of the resale of the
residence or within approximately 18 months after Mr. McCarthy's termination of
employment from the Company.

9. Commitments and Contingencies

Smith Creek Metropolitan District ("SCMD") and Bachelor Gulch Metropolitan
District ("BGMD") were organized in November 1994 to cooperate in the financing,
construction and operation of basic public infrastructure serving the Company's
Bachelor Gulch Village development. SCMD was organized primarily to own, operate
and maintain water, street, traffic and safety, transportation, fire protection,
parks and recreation, television relay and translation, sanitation and certain
other facilities and equipment of the BGMD. SCMD is comprised of approximately
150 acres of open space land owned by the Company and members of the Board of
Directors of the SCMD. In two planned unit developments, Eagle County has
granted zoning approval for 1,395 dwelling units within Bachelor Gulch Village,
including various single-family homesites, cluster homes and townhomes, and
lodging units. As of July 31, 2000, the Company has sold 104 single-family
homesites and sixteen parcels to developers for the construction of various
types of dwelling units. Currently, SCMD has outstanding $44.5 million of
variable rate revenue bonds maturing on October 1, 2035, which have been
enhanced with a $40.7 million letter of credit issued against the Company's
Credit Facility. It is anticipated that as the Bachelor Gulch community expands,
BGMD will become self supporting and that within 25 to 30 years will issue
general obligation bonds, the proceeds of which will be used to retire the SCMD
revenue bonds. Until that time, the Company has agreed to subsidize the interest
payments on the SCMD revenue bonds. The Company has estimated that the present
value of this aggregate subsidy to be $20.4 million at July 31, 2000. The
Company has allocated $11.0 million of that amount to the Bachelor Gulch Village
homesites which were sold as of July 31, 2000 and has recorded that amount as a
liability in the accompanying financial statements. The total subsidy incurred
as of July 31, 2000 and 1999 was $6.5 million and $4.3 million, respectively.

At July 31, 2000, the Company had various other letters of credit
outstanding in the aggregate amount of $46.2 million.

On October 19, 1998, fires on Vail Mountain destroyed certain of the
Company's facilities including the Ski Patrol Headquarters, a day skier shelter,
the Two Elk Lodge restaurant and the chairlift drive housing for the High Noon
Lift (Chair #5). Three other chairlifts sustained minor damage. The Company has
completed the reconstruction and reparation of all of the damaged and destroyed
facilities. During the third quarter of fiscal 2000, the Company settled its
insurance claim related to the fires for $24.5 million, including both the
property and business interruption loss claims. The incident did not have a net
material impact on the Company's results of operations or cash flows.

The Company purchased a Reduced Skier Day Insurance Policy, a customized
insurance product, for the 1999-2000 ski season. Under this policy, the Company
receives a fixed payment for each paid skier day below certain targeted levels
for the season. During fiscal 2000, the net benefit recognized in the financial
statements from the

F-16

policy was $13.9 million. The proceeds from the insurance policy have not yet
been received. The Company expects to settle the insurance claim by the end of
calendar 2000.

The Company has executed as lessee operating leases for the rental of
office space, employee residential units and office equipment through fiscal
2008. For the fiscal years ended July 31, 2000 and 1999 and the ten months ended
July 31, 1998, the Company recorded lease expense related to these agreements of
$20.1 million, $11.5 million, $6.4 million, respectively, which is included in
the accompanying consolidated statements of operations.

F-17

9. Commitments and Contingencies--(Continued)

Future minimum lease payments under these leases as of July 31, 2000 are as
follows (in thousands):

Due during fiscal years ending July 31:
2001.............................................. $ 7,615
2002.............................................. 4,858
2003.............................................. 3,847
2004.............................................. 3,626
2005.............................................. 2,593
Thereafter........................................ 8,496
-------------
Total.......................................... $ 31,035
=============

The Company is a party to various lawsuits arising in the ordinary course of
business. Management believes the Company has adequate insurance coverage and
accrued loss contingencies for all matters and that, although the ultimate
outcome of such claims cannot be ascertained, current pending and threatened
claims are not expected to have a material adverse impact on the financial
position, results of operations and cash flows of the Company.

In July 1999, the U.S. Army Corps of Engineers alleged that certain road
construction which we undertook as part of the Blue Sky Basin expansion involved
discharges of fill material into wetlands in violation of the Clean Water Act. A
subsequent review confirmed that the wetland impact involved approximately
seven-tenths of one acre. In August 1999, three organizations and one individual
collectively notified us and the federal agencies that if the alleged violations
were not remedied within 60 days, they intended to file a citizen enforcement
action under the Clean Water Act. No action has been filed as of the date of
this Form 10-K. Under the Clean Water Act, unauthorized discharges of fill can
give rise to administrative, civil and criminal enforcement actions seeking
monetary penalties and injunctive relief, including removal of the unauthorized
fill. In October 1999, the Environmental Protection Agency, the lead enforcement
agency in this matter, ordered us to stabilize the road temporarily and restore
the wetland in the summer of 2000. (EPA - Region VIII, Docket No. CWA-8-2000-
01). We completed the restoration work on the wetland impact this summer,
pursuant to our restoration plan approved by the EPA. The EPA is considering
enforcement action, and although we cannot guarantee a particular result, we do
not anticipate that a material fine will be levied.

10. Segment Information

The Company has two reportable segments: resort operations and real estate
operations. The Company's resort segment operates mountain resorts and related
amenities. The real estate segment develops, buys and sells real estate in and
around the Company's mountain resort communities. The Company's two reportable
segments, although integral to the success of each other, offer distinctly
different products and services and require different types of management focus.
As such, these segments are managed separately.

The Company evaluates performance and allocates resources to its segments
based on operating revenue and earnings or losses before income taxes,
depreciation, amortization, investment income, interest expense, gains or losses
on asset disposals, and the elimination of minority interests ("EBITDA"). Resort
EBITDA consists of net resort revenue less resort operating expense. Real estate
EBITDA consists of net real estate revenue less real estate operating expense.
The accounting policies are the same as those described in the Summary of
Significant Accounting Policies (Note 2).

F-18

10. Segment Information--(Continued)

Following is key financial information by reportable segment and for the
Company used by management in evaluating performance and allocating resources:

Year Year Ten Months
Ended Ended Ended
July 31, July 31, July 31,
2000 1999 1998
--------------- --------------- ---------------

Net revenue:
Resort......................................................... $ 501,375 $ 431,788 $ 336,547
Real estate.................................................... 51,684 43,912 73,722
--------------- --------------- ---------------
553,059 475,700 410,269
=============== =============== ===============
EBITDA:
Resort......................................................... 113,062 86,101 114,346
Real estate.................................................... 9,618 9,526 11,103
--------------- --------------- ---------------
122,680 95,627 125,449
=============== =============== ===============
Depreciation and amortization:
Resort......................................................... 61,435 53,256 36,838
Real estate.................................................... -- -- --
--------------- --------------- ---------------
61,435 53,256 36,838
=============== =============== ===============
Capital expenditures:
Resort......................................................... 79,591 65,168 80,454
Real estate.................................................... 40,410 32,980 15,661
--------------- --------------- ---------------
120,001 98,148 96,115
=============== =============== ===============
Identifiable assets:
Resort......................................................... 655,172 611,141 501,371
Real estate.................................................... 147,172 152,508 138,916
--------------- --------------- ---------------
$ 802,344 $ 763,649 $ 640,287
=============== =============== ===============

Reconciliation to consolidated income before provision for income
taxes:
Resort EBITDA.................................................. $ 113,062 $ 86,101 $ 114,346
Real estate EBITDA............................................. 9,618 9,526 11,103
--------------- --------------- ---------------
Total EBITDA................................................ 122,680 95,627 125,449
Depreciation and amortization expense.......................... 61,435 53,256 36,838
Other income (expense):
Investment income........................................... 1,843 1,624 1,784
Interest expense............................................ (35,108) (25,099) (17,789)
Gain (loss) on disposal of fixed assets..................... (104) 3,283 (1,706)
Other income (expense)...................................... 32 63 (736)
Minority interest in net income of consolidated joint
venture................................................... (713) (1,448) --
--------------- --------------- ---------------
Income before provision for income taxes....................... $ 27,195 $ 20,794 $ 70,164
=============== =============== ===============

F-19

11. Stock Compensation Plans

At July 31, 2000, the Company has three stock-based compensation plans,
which are described below. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for stock-based compensation to employees.
Accordingly, no compensation cost has been recognized for its fixed stock option
plans. Had compensation cost for the Company's three stock-based compensation
plans been determined consistent with SFAS No. 123, "Accounting for Stock Based
Compensation", the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
amounts):

July 31, July 31, July 31,
2000 1999 1998
--------------- --------------- -----------------

Net Income
As reported................................................... $ 15,338 $ 12,791 $ 41,018
Pro forma..................................................... 12,654 9,721 39,320

Basic net income per common share
As reported................................................... $ 0.44 $ 0.37 $ 1.20
Pro forma..................................................... 0.37 0.28 1.15

Diluted net income per common share
As reported................................................... $ 0.44 $ 0.37 $ 1.18
Pro forma..................................................... 0.37 0.28 1.13

The Company has three fixed option plans--the 1993 Stock Option Plan ("1993
Plan"), the 1996 Long Term Incentive and Share Award Plan ("1996 Plan") and the
1999 Long Term Incentive and Share Award Plan ("1999 Plan"). Under the 1993
Plan, incentive stock options (as defined under Section 422 of the Internal
Revenue Code of 1986) or non-incentive stock options covering an aggregate of
2,045,510 shares of Common Stock may be issued to key employees, directors,
consultants, and advisors of the Company or its subsidiaries. Exercise prices
and vesting dates for options granted under the 1993 Plan are set by the
Compensation Committee of the Company's Board of Directors ("Compensation
Committee"), except that the vesting period must be at least six months and
exercise prices for incentive stock options may not be less than the stock's
market price on the date of grant. The term of the options granted under the
1993 Plan is determined by the Compensation Committee, provided that all
incentive stock options granted have a maximum life of ten years. 1,500,000 and
2,500,000 shares of Common Stock may be issued in the form of options, stock
appreciation rights ("SARs"), restricted shares, restricted share units,
performance shares, performance share units, dividend equivalents or other
share-based awards under the 1996 Plan and the 1999 Plan, respectively. Under
the 1996 Plan and the 1999 Plan, awards may be granted to employees, directors
or consultants of the Company or its subsidiaries or affiliates. The terms of
awards granted under the 1996 Plan and 1999 Plan, including exercise price,
vesting period and life, are set by the Compensation Committee. To date, no
options have been granted to non-employees under any of the three plans. At July
31, 2000, approximately 7,000, 107,000 and 1,748,000 options were available
under the 1993 Plan, 1996 Plan and 1999 Plan, respectively.

F-20

11. Stock Compensation Plans--(Continued)

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999, and 1998, respectively: dividend
yield of 0% for each year, expected volatility of 47.0%, 40.7% and 14.7%; risk-
free interest rates of 6.01% and ranges from 4.24% to 5.70% and 5.49% to 6.61%;
and expected lives ranging from 6 to 8 years for each year. A summary of the
status of the Company's two fixed stock option plans as of July 31, 2000, 1999
and 1998 and changes during the years ended July 31, 2000 and 1999 and the ten
months ended July 31, 1998 is presented below (in thousands, except per share
amounts):

Weighted
Average
Shares Exercise
Subject to Price Per
Fixed Options Option Share

Balance at September 30, 1997............... 2,909 $ 15
Granted................................. 96 28
Exercised............................... (1,043) 8
Forfeited............................... (125) 17
----------- ------------
Balance at July 31, 1998.................... 1,837 $ 18
Granted................................. 688 23
Exercised............................... (67) 10
Forfeited............................... (79) 21
----------- ------------
Balance at July 31, 1999.................... 2,379 $ 19
Granted................................. 766 20
Exercised............................... (36) 9
Forfeited............................... (123) 23
----------- ------------
Balance at July 31, 2000.................... 2,986 $ 20
=========== ============

The following table summarizes information about fixed stock options
outstanding at July 31, 2000 (in thousands, except per share and life amounts):

Options Outstanding Options Exercisable
---------------------------------------------- ------------------------------
Weighted-
Average Weighted- Weighted-
Exercise Remaining Average Average
Price Range Shares Contractual Exercise Shares Exercise
Per Share Outstanding Life Per Share Price Per Share Exercisable Price Per Share
- ------------ ----------- -------------- --------------- ----------- ---------------

$ 6-11 563 3.4 $ 8.86 548 $ 8.81
16-20 1,051 8.0 19.29 385 19.82
*20-25 1,223 7.9 23.73 551 24.01
*25-29 149 7.9 27.31 87 27.42
- ------------ ----------- -------------- --------------- ----------- ---------------
$ 6-29 2,986 7.1 $ 19.54 1,571 $ 17.87

* means greater than

During fiscal years 1997 and 1996, the Company granted restricted stock to
certain executives under the 1996 Plan. The aggregate number of shares granted
totaled 12,000 and 62,000 in fiscal 1997 and 1996, respectively. The shares vest
in equal increments over periods ranging from three to five years. Compensation
expense related to these restricted stock awards is charged ratably over the
respective vesting periods. No restricted stock was granted during fiscal 2000,
1999 or 1998, however 13,176, 8,195 and 8,260 vested shares were issued,
respectively.

F-21

12. Capital Stock

The Company has two classes of Common Stock outstanding, Class A Common
Stock and Common Stock. The rights of holders of Class A Common Stock and Common
Stock are substantially identical, except that, while any Class A Common Stock
is outstanding, holders of Class A Common Stock elect a class of directors that
constitutes two-thirds of the Board and holders of Common Stock elect another
class of directors constituting one-third of the Board. At July 31, 2000 and
1999, one shareholder owned substantially all of the Class A Common Stock and,
as a result, has effective control of the Company's Board of Directors. The
Class A Common Stock is convertible into Common Stock (i) at the option of the
holder, (ii) automatically, upon transfer to a non-affiliate and (iii)
automatically if less than 5,000,000 shares (as such number shall be adjusted by
reason of any stock split, reclassification or other similar transaction) of
Class A Common Stock are outstanding. The Common Stock is not convertible. Each
outstanding share of Class A Common Stock and Common Stock is entitled to vote
on all matters submitted to a vote of stockholders. Blocks of 200,000 shares and
4,000,000 shares of Class A Common stock were converted to Common Stock during
fiscal 1999 and 1998 respectively, as they were sold to a non-affiliated company
of the prior holder. There were no shares of Class A Common Stock converted to
Common Stock during fiscal 2000.

13. Selected Quarterly Financial Data (Unaudited--In thousands, except per share
amounts)

Fiscal 2000
---------------------------------------------------------------------------
Year Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Ended
July 31, July 31, April 30, January 31, October 31,
2000 2000 2000 2000 1999
-------------- ------------ ------------- -------------- -----------

Resort revenue......................... $ 501,375 $ 59,627 $ 223,761 $ 161,128 $ 56,859
Real estate revenue.................... 51,684 14,937 26,028 1,749 8,970
-------------- ------------ ------------- -------------- -----------
Total revenue...................... 553,059 74,564 249,789 162,877 65,829
Income (loss) from operations.......... 61,245 (22,716) 85,115 31,078 (32,232)
Net income (loss)...................... 15,338 (15,995) 42,830 10,947 (22,444)
Basic net income (loss) per common
share.............................. 0.44 (0.46) 1.24 0.32 (0.65)
Diluted net income (loss) per common
share.............................. $ 0.44 $ (0.46) $ 1.23 $ 0.31 $ (0.64)

Fiscal 1999
---------------------------------------------------------------------------
Year Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Ended
July 31, July 31, April 30, January 31, October 31,
1999 1999 1999 1999 1999
-------------- ------------ ------------- -------------- -----------

Resort revenue......................... $ 431,788 $ 52,442 $ 188,220 $ 156,141 $ 34,985
Real estate revenue.................... 43,912 12,503 14,022 3,816 13,571
-------------- ------------ ------------- -------------- -----------
Total revenue...................... 475,700 64,945 202,242 159,957 48,556
Income (loss) from operations.......... 42,371 (25,500) 61,870 36,856 (30,855)
Net income (loss)...................... 12,791 (13,528) 30,247 16,530 (20,458)
Basic net income (loss) per common
share.............................. 0.37 (0.39) 0.87 0.48 (0.59)
Diluted net income (loss) per common
share.............................. $ 0.37 $ (0.39) $ 0.87 $ 0.47 $ (0.59)

F-22

14. Guarantor Subsidiaries and Non-Guarantor Subsidiaries

The Company's payment obligations under the 8 3/4% Senior Subordinated Notes
due 2009 (see Note 4), are fully and unconditionally guaranteed on a joint and
several, senior subordinated basis by substantially all of the Company's
consolidated subsidiaries (collectively, and excluding the Non-Guarantor
Subsidiaries (as defined below), the "Guarantor Subsidiaries") except for SSV,
Vail Associates Investments, Inc. and Vail Resorts Holdings, Inc. (together, the
"Non-Guarantor Subsidiaries"). SSV is a 51.9%-owned joint venture which owns and
operates certain retail and rental operations. Vail Associates Investments, Inc.
and Vail Resorts Holdings, Inc. are 100%-owned corporations which own certain
real estate held for sale.

Presented below is the consolidated condensed financial information of Vail
Resorts, Inc. (the "Parent Company"), the Guarantor Subsidiaries and the Non-
Guarantor Subsidiaries as of July 31, 2000 and 1999 and for the years then
ended.

Investments in subsidiaries are accounted for by the Parent Company and
Guarantor Subsidiaries using the equity method of accounting. Net income of
Guarantor and Non-Guarantor Subsidiaries is, therefore, reflected in the Parent
Company's and Guarantor Subsidiaries' investments in and advances to (from)
subsidiaries. Net income of the Guarantor and Non-Guarantor Subsidiaries is
reflected in Guarantor Subsidiaries and Parent Company as equity in consolidated
subsidiaries. The elimination entries eliminate investments in Non-Guarantor
Subsidiaries and intercompany balances and transactions.

F-23

14. Guarantor Subsidiaries and Non-Guarantor Subsidiaries--(Continued)

Supplemental Condensed Consolidating Balance Sheet
(in thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------------ -------------- -------------- -------------- --------------

July 31, 2000
------------------------------------------------------------------------

Current assets:
Cash and cash equivalents..................... $ -- $ 18,346 $ 322 $ -- $ 18,668
Trade receivables............................. 200 38,591 636 -- 39,427
Inventories, net.............................. -- 8,720 15,372 -- 24,092
Deferred income taxes......................... 1,134 9,230 -- -- 10,364
Other current assets.......................... -- 7,122 681 -- 7,803
------------ -------------- ------------ ----------- --------------
Total current assets........................ 1,334 82,009 17,011 -- 100,354
Property, plant and equipment, net................ -- 643,680 11,492 -- 655,172
Real estate held for sale and investment.......... -- 141,538 5,634 -- 147,172
Deferred charges and other assets................. 6,452 23,708 100 -- 30,260
Intangible assets, net............................ -- 182,492 12,368 -- 194,860
Investments in subsidiaries and advances to
(from) subsidiaries........................... 691,670 (9,324) (6,004) (676,342) --
------------ -------------- ------------ ----------- --------------
Total assets................................ $ 699,456 $ 1,064,103 $ 40,601 $ (676,342) $ 1,127,818
=========== ============== ============ =========== ==============
Current liabilities:
Accounts payable and accrued expenses......... $ 4,699 $ 89,962 $ 10,841 $ -- $ 105,502
Income taxes payable.......................... -- 2,645 -- -- 2,645
Long-term debt due within one year............ -- 1,037 1,000 -- 2,037
------------ -------------- ------------ ----------- --------------
Total current liabilities................... 4,699 93,644 11,841 -- 110,184
Long-term debt.................................... 200,000 179,198 13,000 -- 392,198
Other long-term liabilities....................... 1,002 30,708 -- -- 31,710
Deferred income taxes............................. -- 92,577 -- -- 92,577
Minority interest in net assets of consolidated
joint ventures................................ -- 100 7,294 -- 7,394
Total stockholders' equity........................ 493,755 667,876 8,466 (676,342) 493,755
------------ -------------- ------------ ----------- --------------
Total liabilities and stockholders' equity.. $ 699,456 $ 1,064,103 $ 40,601 $ (676,342) $ 1,127,818
=========== ============== ============ =========== ==============

July 31, 1999
------------------------------------------------------------------------
Current assets:
Cash and cash equivalents..................... $ -- $ 25,097 $ 227 $ -- $ 25,324
Trade receivables............................. 321 28,790 539 -- 29,650
Inventories, net.............................. -- 8,667 14,138 -- 22,805
Deferred income taxes......................... 1,353 9,051 -- -- 10,404
Other current assets.......................... -- 4,326 186 -- 4,512
------------ -------------- ------------ ----------- --------------
Total current assets........................ 1,674 75,931 15,090 -- 92,695
Property, plant and equipment, net................ -- 600,497 10,644 -- 611,141
Real estate held for sale and investment.......... -- 147,232 5,276 -- 152,508
Deferred charges and other assets................. 8,752 22,519 120 -- 31,391
Intangible assets, net............................ -- 188,197 13,307 -- 201,504
Investments in subsidiaries and advances to
(from) subsidiaries........................... 672,609 14,405 (6,122) (680,892) --
------------ --------------- ------------ ----------- --------------
Total assets................................ $ 683,035 $ 1,048,781 $ 38,315 $ (680,892) $ 1,089,239
=========== =============== ============ =========== ==============
Current liabilities:
Accounts payable and accrued expenses......... $ 5,132 $ 76,341 $ 7,972 $ -- $ 89,445
Income taxes payable.......................... -- 1,633 -- -- 1,633
Long-term debt due within one year............ -- 520 1,537 -- 2,057
------------ --------------- ------------ ----------- --------------
Total current liabilities................... 5,132 78,494 9,509 -- 93,135
Long-term debt.................................... 200,000 182,829 13,300 -- 396,129
Other long-term liabilities....................... 1,128 30,018 -- -- 31,146
Deferred income taxes............................. -- 84,728 -- -- 84,728
Minority interest in net assets of consolidated
joint venture................................. -- -- 7,326 -- 7,326
Total stockholders' equity........................ 476,775 672,712 8,180 (680,892) 476,775
------------ --------------- ------------ ----------- --------------
Total liabilities and stockholders' equity.. $ 683,035 $ 1,048,781 $ 38,315 $ (680,892) $ 1,089,239
============ =============== ============ =========== ==============

F-24

14. Guarantor Subsidiaries and Non-Guarantor Subsidiaries--(Continued)

Supplemental Condensed Consolidating Statement of Operations
(in thousands)

Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- -------------- -------------- -------------- --------------

For the Year Ended July 31, 2000
------------------------------------------------------------------------

Total revenues.................................... $ -- $ 476,977 $ 78,713 $ (2,631) $ 553,059
Total operating expenses.......................... 1,656 417,036 75,753 (2,631) 491,814
----------- ------------- ------------- ------------- -------------
Income (loss) from operations................. (1,656) 59,941 2,960 -- 61,245
Other expense..................................... (18,133) (13,726) (1,478) -- (33,337)
Minority interest in net income of consolidated
joint ventures................................ -- -- (713) -- (713)
----------- ------------- ------------- ------------- -------------
Income (loss) before benefit (provision) for
income taxes............................... (19,789) 46,215 769 -- 27,195
Benefit (provision) for income taxes.......... 8,628 (20,485) -- -- (11,857)
----------- ------------- ------------- ------------- -------------
Net income (loss) before equity in income of (11,161) 25,730 769 -- 15,338
consolidated subsidiaries.....................
Equity in income of consolidated subsidiaries..... 26,499 769 -- (27,268) --
----------- ------------- ------------- ------------- -------------
Net income........................................ $ 15,338 $ 26,499 $ 769 $ (27,268) $ 15,338
=========== ============= ============= ============= =============

For the Year Ended July 31, 1999
------------------------------------------------------------------------
Total revenues.................................... $ -- $ 404,168 $ 73,233 $ (1,701) $ 475,700
Total operating expenses.......................... 1,449 364,598 68,983 (1,701) 433,329
----------- ------------- ------------- ------------- -------------
Income (loss) from operations................. (1,449) 39,570 4,250 -- 42,371
Other expense..................................... (3,842) (15,048) (1,239) -- (20,129)
Minority interest in net income of consolidated
joint venture................................. -- -- (1,448) -- (1,448)
----------- ------------- ------------- ------------- -------------
Income (loss) before benefit (provision) for
income taxes............................... (5,291) 24,522 1,563 -- 20,794
Benefit (provision) for income taxes.......... 2,036 (10,039) -- -- (8,003)
----------- ------------- ------------- ------------- -------------
Net income (loss) before equity in income of (3,255) 14,483 1,563 -- 12,791
consolidated subsidiaries.....................
Equity in income of consolidated subsidiaries..... 16,046 1,563 -- (17,609) --
----------- ------------- ------------- ------------- -------------
Net income........................................ $ 12,791 $ 16,046 $ 1,563 $ (17,609) $ 12,791
=========== ============= ============= ============= =============

F-25

Notes to Consolidated Financial Statements--(Continued)

14. Guarantor Subsidiaries and Non-Guarantor Subsidiaries--(Continued)

Supplemental Condensed Consolidating Statement of Cash Flows
(in thousands)

Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Consolidated
---------- ------------- ------------- -------------

For the Year Ended July 31, 2000
--------------------------------------------------------

Cash flows from operating activities............................... $ 34,055 $ 70,567 $ 7,002 $ 111,624

Cash flows from investing activities:
Resort capital expenditures.................................... -- (72,109) (5,547) (77,656)
Investments in real estate..................................... -- (40,410) -- (40,410)
Cash flows from other investing activities..................... -- 2,111 (48) 2,063
---------- ------------- ------------- -------------
Net cash used in investing activities........................ -- (110,408) (5,595) (116,003)

Cash flows from financing activities:
Proceeds from borrowings under long-term debt.................. -- 206,250 200 206,450
Payments on long-term debt..................................... -- (210,210) (1,037) (211,247)
Advances to (from) affiliates.................................. (33,750) 34,225 (475) --
Other financing activities..................................... (305) -- -- (305)
---------- ------------- ------------- -------------
Net cash provided by (used in) financing activities......... (34,055) 30,265 (1,312) (5,102)
---------- ------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents............... -- (9,576) 95 (9,481)

Cash and cash equivalents:
Beginning of period............................................ -- 18,075 227 18,302
---------- ------------- ------------- -------------

End of period.................................................. $ -- $ 8,499 $ 322 $ 8,821
========== ============= ============= =============

For the Year Ended July 31, 1999
----------------------------------------------------------
Cash flows from operating activities............................... $ 16,082 $ 78,775 $ 7,753 $ 102,610

Cash flows from investing activities:
Cash paid in resort acquisitions, net of cash acquired......... -- (48,360) -- (48,360)
Cash paid in hotel acquisitions, net of cash acquired.......... -- (33,800) -- (33,800)
Cash paid by consolidated joint venture in acquisition of
retail operations............................................ -- -- (10,516) (10,516)
Resort capital expenditures.................................... -- (57,313) (7,855) (65,168)
Investments in real estate..................................... -- (32,980) -- (32,980)
Cash flows from other investing activities..................... -- (13,600) -- (13,600)
---------- ------------- ------------- -------------
Net cash used in investing activities........................ -- (186,053) (18,371) (204,424)

Cash flows from financing activities:
Proceeds from the exercise of stock options.................... 677 -- -- 677
Proceeds from borrowings under long-term debt.................. 200,000 185,190 31,452 416,642
Payments on long-term debt..................................... -- (281,222) (21,248) (302,470)
Payment of financing costs..................................... (8,099) -- -- (8,099)
Advances to (from) affiliates.................................. (208,660) 208,021 639 --
---------- ------------- ------------- -------------
Net cash provided by (used in) financing activities......... (16,082) 111,989 10,843 106,750
---------- ------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents............... -- 4,711 225 4,936

Cash and cash equivalents:
Beginning of period............................................ -- 13,364 2 13,366
---------- ------------- ------------- -------------
End of period.................................................. $ -- $ 18,075 $ 227 $ 18,302
========== ============= ============= =============

F-26

Notes to Consolidated Financial Statements--(Continued)

15. Acquisitions

On June 14, 1999, the Company purchased 100% of the outstanding shares of
GTLC, a Wyoming corporation, from CSX Corporation for a total purchase price of
$55 million. The acquisition was accounted for under the purchase method of
accounting. GTLC operates four resort properties in northwestern Wyoming: Jenny
Lake Lodge, Jackson Lake Lodge, Colter Bay Village and Jackson Hole Golf &
Tennis Club. GTLC operates the first three resorts, all located within Grand
Teton National Park, under a concessionaire contract with the National Park
Service. Jackson Hole Golf & Tennis Club is located outside the park on property
owned by GTLC and includes approximately 30 acres of developable land.

The following unaudited pro forma revenue for the year ended July 31, 1999
assumes the acquisition of GTLC occurred on August 1, 1998. The pro forma
revenue is not necessarily indicative of the actual revenue that would have been
recognized, nor is it necessarily indicative of future revenue. The unaudited
revenue for the year ended July 31, 2000 is provided for comparative purposes.
Pro forma net income and EPS are not presented as the pro forma adjustments are
immaterial to the actual net income and EPS of the Company, and, in the opinion
of the Company, would not provide additional meaningful information to the
reader.

Pro Forma
Year Year
Ended Ended
July 31, July 31,
2000 1999
------------- ----------------
(unaudited)
Total revenue $ 553,059 $ 490,290
============= ================

16. Subsequent Events

In October 2000, the Company acquired a 49% interest in a newly formed
Irish corporation whose purpose is to develop a resort based reservations system
which will enable the shopping, booking and distribution of packaged vacations.
The Company's initial investment is $5 million, with approximately $1 million
paid at closing and the remainder due in quarterly installments over the
following twelve-month period. The Company will be granted a free license to use
the system but will be charged at favorable rates for ongoing maintenance and
on-site support and is obligated to provide certain levels of marketing
assistance. The Company will also earn a commission for all customers referred.
The Company anticipates that such system will be completed and ready for the
Company's use in time for the 2002-03 ski season.

Also in October 2000, the Company entered into a joint venture agreement
with a venture led by an affiliate of Continental Gencom for the construction of
The Ritz-Carlton, Bachelor Gulch (the "Hotel"). The Hotel, scheduled to open in
late 2002, is being developed by The Athens Group, of Phoenix, Arizona, and will
include a 238-room hotel, a 20,000-square-foot spa and fitness center, ski
rental, lesson and retail space, restaurants plus meeting space. In addition, 23
privately owned luxury penthouse residences are also being built above the
hotel. All twenty-three of these penthouses are already under contract. The
Company will acquire a 49% interest in the joint venture in return for a cash
investment of $3.3 million, land contribution with a $3.4 million book value,
and an interest-bearing loan to the joint venture of up to $4.5 million.
Construction of the entire hotel project is expected to cost approximately $162
million. In order to cover construction costs, the joint venture is obtaining
$97 million in debt financing from a syndicate of banks. The remainder is being
funded by a combination of equity and debt contributed by the partners,
mezzanine financing, and the sale of condominiums. Under the terms of the joint
venture, The Company will provide golf, spa and club privileges for a fee of
$3.7 million. The Company will receive $3 million up front and $0.7 million as
penthouse residences close. Separately, the Company will contract with the hotel
joint venture to acquire the 20,000-square-foot spa, plus 8,500 square feet of
skier services area, at the developer's cost of approximately $13 million. The
majority of this expense is expected to be recouped through membership sales in
the Bachelor Gulch Club.

In October 2000, in connection with the employment of Martin White as
Senior Vice President, Marketing, the Company agreed to invest up to $800,000,
but not to exceed 50% of the purchase price, for the purchase of a primary
residence for Mr. White and his family in the Vail Valley. Based on the actual
amount invested by the

F-27

Notes to Consolidated Financial Statements--(Continued)

Company, the Company will obtain a proportionate undivided ownership interest in
such residence. The Company shall be entitled to receive its proportionate share
of the resale price of the residence, less certain deductions, upon the earlier
of the resale of the residence or within approximately 18 months after Mr.
White's termination from the Company.

F-28

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this item is incorporated herein by reference
from the Company's proxy statement for the annual meeting of shareholders to be
held December 6, 2000.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this item is incorporated herein by reference
from the Company's proxy statement for the annual meeting of shareholders to be
held December 6, 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this item is incorporated herein by reference
from the Company's proxy statement for the annual meeting of shareholders to be
held December 6, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated herein by reference
from the Company's proxy statement for the annual meeting of shareholders to be
held December 6, 2000.

PART IV

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

a) Index to Financial Statements and Financial Statement Schedules.
i) See "Item 8. Financial Statements and Supplementary Data" for the
index to the Financial Statements.
ii) All other schedules have been omitted because the required
information is not applicable or because the information required has
been included in the financial statements or notes thereto.
iii) Index to Exhibits

The following exhibits are either filed herewith or, if so
indicated, incorporated by reference to the documents indicated in
parentheses, which have previously been filed with the Securities and
Exchange Commission.

Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ----

3.1 Amended and Restated Certificate of Incorporation
filed with the Secretary of State of the State of
Delaware on the Effective Date. (Incorporated by
reference to Exhibit 3.1 of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No 33-52854) including all amendments
thereto.)

3.2 Amended and Restated By-Laws adopted on the
Effective Date. (Incorporated by reference to
Exhibit 3.2 of the Registration Statement on Form S-
4 of Gillett Holdings, Inc. (Registration No. 33-
52854) including all amendments thereto.)

Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----

4.1 Form of Class 2 Common Stock Registration Rights
Agreements between the Company and holders of Class 2
Common Stock. (Incorporated by reference to Exhibit 4.13
of the Registration Statement on Form S-4 of Gillett
Holdings, Inc. (Registration No. 33-52854) including all
amendments thereto.)

4.2 Purchase Agreement, dated as of May 6, 1999 among Vail
Resorts, Inc., the guarantors named on Schedule I
thereto, and Bear Sterns & Co. Inc., NationsBanc
Montgomery Securities LLC, BT Alex. Brown Incorporated,
Lehman Brothers Inc. and Salomon Smith Barney Inc.
(Incorporated by reference to Exhibit 4.2 of the
Registration Statement on Form S-4 of Vail Resorts, Inc.
(Registration No. 333-80621) including all amendments
thereto.)

4.3 Indenture, dated as of May 11, 1999, among Vail Resorts,
Inc., the guarantors named therein and the United States
Trust Company of New York, as trustee. (Incorporated by
reference to Exhibit 4.3 of the Registration Statement on
Form S-4 of Vail Resorts, Inc. (Registration No. 333-
80621) including all amendments thereto.)

4.4 Form of Global Note (Included in Exhibit 4.3 incorporated
by reference to Exhibit 4.3 of the Registration Statement
on Form S-4 of Vail Resorts, Inc. (Registration No. 333-
80621) including all amendments thereto.)

4.5 Registration Rights Agreement, dated as of May 11, 1999
among Vail Resorts, Inc., the guarators signatory thereto
and Bear Stearns & Co. Inc., NationsBanc Montgomery
Securities LLC, BT Alex. Brown Incorporated, Lehman
Brothers Inc. and Salomon Smith Barney Inc. (Incorporated
by reference to Exhibit 4.5 of the Registration Statement
on Form S-4 of Vail Resorts, Inc. (Registration No. 333-
80621) including all amendments thereto.)

4.6 First Supplemental Indenture, dated as of August 22,
1999, among the Company, the guarantors named therein and
the United States Trust Company of New York, as trustee.
(Incorporated by reference to Exhibit 4.6 of the
Registration Statement on Form S-4 of Vail Resorts, Inc.
(Registration No. 333-80621) including all amendments
thereto.)

10.1 Management Agreement by and between Beaver Creek Resort
Company of Colorado and Vail Associates, Inc.
(Incorporated by reference to Exhibit 10.1 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all amendments
thereto.)

10.2 Forest Service Term Special Use Permit for Beaver Creek
ski area. (Incorporated by reference to Exhibit 10.2 of
the Registration Statement on Form S-4 of Gillett
Holdings, Inc. (Registration No. 33-52854) including all
amendments thereto.)

10.3 Forest Service Special Use Permit for Beaver Creek ski
area. (Incorporated by reference to Exhibit 10.3 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all amendments
thereto.)

10.4 Forest Service Unified Permit for Vail ski area.
(Incorporated by reference to Exhibit 10.4 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all amendments
thereto.)

10.5 Joint Liability Agreement by and among Gillett Holdings,
Inc. and the subsidiaries of Gillett Holdings, Inc.
(Incorporated by reference to Exhibit 10.10 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all amendments
thereto.)

Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----

10.6 Management Agreement between Gillett Holdings, Inc. and
Gillett Group Management, Inc. dated as of the Effective
Date. (Incorporated by reference to Exhibit 10.11 of the
Registration Statement on Form S-4 of Gillett Holdings,
Inc. (Registration No. 33-52854) including all
amendments thereto.)

10.7 Amendment to Management Agreement by and among the
Company and its subsidiaries dated as of November 23,
1993. (Incorporated by reference to Exhibit 10.12(b) of
the report on Form 10-K of Gillett Holdings, Inc. for
the period from October 9, 1992 through September 30,
1993.)

10.8(a) Tax Sharing Agreement between Gillett Holdings, Inc.
dated as of the Effective Date. (Incorporated by
reference to Exhibit 10.12 of the Registration Statement
on Form S-4 of Gillett Holdings, Inc. (Registration No.
33-52854) including all amendments thereto.)

10.8(b) Amendment to Tax Sharing Agreement by and among the
Company and its subsidiaries dated as of November 23,
1993. (Incorporated by reference to Exhibit 10.13(b) of
the report on Form 10-K of Gillett Holdings, Inc. for
the period from October 9, 1992 through September 30,
1993.)

10.9 Form of Gillett Holdings, Inc. Deferred Compensation
Agreement for certain GHTV employees. (Incorporated by
reference to Exhibit 10.13(b) of the Registration
Statement on Form S-4 of Gillett Holdings, Inc.
(Registration No. 33-52854) including all amendments
thereto.)

10.10(a) Agreement for Purchase and Sale dated as of August 25,
1993 by and among Arrowhead at Vail, Arrowhead Ski
Corporation, Arrowhead at Vail Properties Corporation,
Arrowhead Property Management Company and Vail
Associates, Inc. (Incorporated by reference to Exhibit
10.19(a) of the report on Form 10-K of Gillett Holdings,
Inc. for the period from October 9, 1992 through
September 30, 1993.)

10.10(b) Amendment to Agreement for Purchase and Sale dated
September 8, 1993 by and between Arrowhead at Vail,
Arrowhead Ski Corporation, Arrowhead at Vail Properties
Corporation, Arrowhead Property Management Company and
Vail Associates, Inc. (Incorporated by reference to
Exhibit 10.19(b) of the report on Form 10-K of Gillett
Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)

10.10(c) Second Amendment to Agreement for Purchase and Sale
dated September 22, 1993 by and between Arrowhead at
Vail, Arrowhead Ski Corporation, Arrowhead at Vail
Properties Corporation, Arrowhead Property Management
Company and Vail Associates, Inc. (Incorporated by
reference to Exhibit 10.19(c) of the report on Form 10-K
of Gillett Holdings, Inc. for the period from October 9,
1992 through September 30, 1993.)

10.10(d) Third Amendment to Agreement for Purchase and Sale dated
November 30, 1993 by and between Arrowhead at Vail,
Arrowhead Ski Corporation, Arrowhead at Vail Properties
Corporation, Arrowhead Property Management Company and
Vail/Arrowhead, Inc. (Incorporated by reference to
Exhibit 10.19(d) of the report on Form 10-K of Gillett
Holdings, Inc. for the period from October 9, 1992
through September 30, 1993.)

10.11 1993 Stock Option Plan of Gillett Holdings, Inc.
(Incorporated by reference to Exhibit 10.20 of the
report on Form 10-K of Gillett Holdings, Inc. for the
period from October 9, 1992 through September 30, 1993.)

Sequentially
Exhibit Numbered
Number Description Page
- ------ ----------- ----

10.12 Agreement to Settle Prospective Litigation and for Sale
of Personal Property dated May 10, 1993, between the
Company, Clifford E. Eley, as Chapter 7 Trustee of the
Debtor's Bankruptcy Estate, and George N. Gillett, Jr.
(Incorporated by reference to Exhibit 10.21 of the
report on Form 10-K of Gillett Holdings, Inc. for the
period from October 9, 1992 through September 30, 1993.)

10.13 Employment Agreement dated October 1, 1996 between Vail
Associates, Inc. and Andrew P. Daly. (Incorporated by
reference to Exhibit 10.5 of the report on Form S-2/A of
Vail Resorts, Inc. (Registration # 333-5341) including
all amendments thereto.)

10.14 Employment Agreement dated July 29, 1996 between Vail
Resorts, Inc. and Adam M. Aron. (Incorporated by
reference to Exhibit 10.21 of the report on form S-2/A
of Vail Resorts, Inc. (Registration # 333-5341)
including all amendments thereto.)

10.15(a) Shareholder Agreement among Vail Resorts, Inc., Ralston
Foods, Inc., and Apollo Ski Partners, L.P. dated January
3, 1997. (Incorporated by reference to Exhibit 2.4 of
the report on Form 8-K of Vail Resorts, Inc. dated
January 8, 1997.)

10.15(b) First Amendment to the Shareholder Agreement dated as of
November 1, 1999, among Vail Resorts, Inc., Ralcorp
Holdings, Inc. (f/k/a Ralston Foods, Inc.) and Apollo
Ski Partners, L.P. (Incorporated by reference to Exhibit
10.17(b) of the report on Form 10-Q of Vail Resorts,
Inc. for the quarter ended January 31, 2000.)

10.16 1996 Stock Option Plan (Incorporated by reference from
the Company's Registration Statement on Form S-3, File
No. 333-5341).

10.17 Agreement dated October 11, 1996 between Vail Resorts,
Inc. and George Gillett. (Incorporated by reference to
Exhibit 10.27 of the report on form S-2/A of Vail
Resorts, Inc. (Registration # 333-5341) including all
amendments thereto.)

10.18(a) Sports and Housing Facilities Financing Agreement among
the Vail Corporation (d/b/a "Vail Associates, Inc.") and
Eagle County, Colorado, dated April 1, 1998.
(Incorporated by reference to Exhibit 10 of the report
on Form 10-Q of Vail Resorts, Inc. for the quarter ended
April 30, 1998.)

10.18(b) Trust Indenture dated as of April 1, 1998 securing
Sports and Housing Facilities Revenue Refunding Bonds by
and between Eagle County, Colorado and US Bank, N.A., as
Trustee. (Incorporated by reference to Exhibit 10.1 of
the report on Form 10-Q of Vail Resorts, Inc. for the
quarter ended April 30, 1998.)

10.19 Credit agreement dated December 30, 1998 among SSI
Venture LLC and NationsBank of Texas, N.A.,
(Incorporated by reference to Exhibit 10.24 of the
report on Form 10-Q of Vail Resorts, Inc. for the
quarter ended January 31, 1999.)

10.20(a) Amended and Restated Credit Agreement among The Vail
Corporation (d/b/a "Vail Associates, Inc"), and
NationsBank, N.A. and NationsBanc Montgomery Securities
LLC dated as of May 1, 1999. (Incorporated by reference
to Exhibit 10.25 of the report on Form 10-Q of Vail
Resorts, Inc. for the quarter ended April 30, 1999.)

Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ----

10.20(b) First Amendment and Consent to Amended and Restated
Credit Agreement among The Vail Corporation (d/b/a
"Vail Associates, Inc."), Bank of America, N.A.,
and the lenders named therein dated as of December
31, 1999. (Incorporated by reference to Exhibit
10.20(b) of the report on Form 10-Q of Vail
Resorts, Inc. for the quarter ended April 30,
2000.)

10.20(c) Second Amendment to Amended and Restated Credit
Agreement among The Vail Corporation (d/b/a "Vail
Associates, Inc."), Bank of America, N.A., and the
lenders named therein dated as of April 21, 2000
but effective as of February 1, 2000. (Incorporated
by reference to Exhibit 10.20(c) of the report on
Form 10-Q of Vail Resorts, Inc. for the quarter
ended April 30, 2000.)

10.21 Employment Agreement dated October 28, 1996 by and
between Vail Resorts, Inc. and James P. Donohue.
(Incorporated by reference to Exhibit 10.24 of the
report on Form 10-Q of Vail Resorts, Inc. for the
quarter ended October 31, 1999.)

10.22 Vail Resorts, Inc. 1999 Long Term Incentive and
Share Award Plan. (Incorporated by reference to the
Company's registration statement on Form S-8, File
No. 333-32320).

10.23 Vail Resorts Deferred Compensation Plan effective
as of October 1, 2000. 31

21 Subsidiaries of Vail Resorts, Inc. (Incorporated by
reference to Exhibit 27 of the report on Form 10-Q
of Vail Resorts, Inc. for the quarter ended April
30, 2000.)

27 Financial Data Schedules

b) Reports on Form 8-K

None.

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.

VAIL RESORTS, INC.

BY: /S/ JAMES P. DONOHUE
----------------------------------
James P. Donohue
Senior Vice President and
Chief Financial Officer

DATED: October 26, 2000

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
James P. Donohue, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments or supplements
to this Form 10-K and to file the same with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing necessary or appropriate to be done with
this Form 10-K and any amendments or supplements hereto, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

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 indicated on October 26, 2000.

Signature Title
--------- -----

/S/ ADAM M. ARON Chairman of the Board and Chief Executive Officer
- --------------------------
Adam M. Aron (Principal Chief Executive Officer)

/S/ ANDREW P. DALY Director and President
- --------------------------
Andrew P. Daly

/S/ JAMES P. DONOHUE Senior Vice President and Chief Financial Officer
- --------------------------
James P. Donohue

/S/ FRANK J. BIONDI Director
- --------------------------
Frank J. Biondi

/S/ LEON D. BLACK Director
- --------------------------
Leon D. Black

/S/ CRAIG M. COGUT Director
- --------------------------
Craig M. Cogut

/S/ STEPHEN C. HILBERT Director
- --------------------------
Stephen C. Hilbert

Signature Title
--------- -----

/S/ ROBERT A. KATZ Director
- --------------------------
Robert A. Katz

/S/ THOMAS H. LEE Director
- --------------------------
Thomas H. Lee

/S/ WILLIAM L. MACK Director
- --------------------------
William L. Mack

/S/ JOE R. MICHELETTO Director
- --------------------------
Joe R. Micheletto

/S/ ANTONY P. RESSLER Director
- --------------------------
Antony P. Ressler

/S/ MARC J. ROWAN Director
- --------------------------
Marc J. Rowan

/S/ JOHN J. RYAN III Director
- --------------------------
John J. Ryan III

/S/ JOHN F. SORTE Director
- --------------------------
John F. Sorte

/S/ BRUCE H. SPECTOR Director
- --------------------------
Bruce H. Spector

/S/ WILLIAM P. STIRITZ Director
- --------------------------
William P. Stiritz

/S/ JAMES S. TISCH Director
- --------------------------
James S. Tisch



                                                                   Exhibit 10.23


                                 VAIL RESORTS

                          DEFERRED COMPENSATION PLAN

                                      31


                                 VAIL RESORTS
                          DEFERRED COMPENSATION PLAN

                               Table of Contents



Section                                                                    Page
                                                                        
ARTICLE 1    Definitions.................................................    1
  1.1        Account.....................................................    1
  1.2        Administrator...............................................    1
  1.3        Beneficiary.................................................    1
  1.4        Board.......................................................    1
  1.5        Bonus.......................................................    1
  1.6        Code........................................................    1
  1.7        Compensation................................................    1
  1.8        Deferrals...................................................    2
  1.9        Deferral Election...........................................    2
  1.10       Disability..................................................    2
  1.11       Discretionary Contribution..................................    2
  1.12       Effective Date..............................................    2
  1.13       Eligible Employee...........................................    2
  1.14       Employee....................................................    2
  1.15       Employer....................................................    2
  1.16       Enrollment Period...........................................    2
  1.17       Investment Fund or Funds....................................    2
  1.18       Matching Contribution.......................................    3
  1.19       Participant.................................................    3
  1.20       Plan........................................................    3
  1.21       Plan Year...................................................    3
  1.22       Retirement..................................................    3
  1.23       Salary......................................................    3
  1.24       Trust.......................................................    3
  1.25       Trustee.....................................................    3
  1.26       Years of Service............................................    3

ARTICLE 2    Participation...............................................    4
  2.1        Designation as Eligible Employee............................    4
  2.2        Commencement of Participation...............................    4
  2.3        Loss of Eligible Employee Status ...........................    4

ARTICLE 3    Contributions...............................................    5
  3.1        Deferrals...................................................    5
  3.2        Matching Contribution.......................................    6
  3.3        Discretionary Contribution..................................    6
  3.4        Time of Contributions.......................................    6
  3.5        Form of Contributions.......................................    7


                                      32




Section                                                                    Page
                                                                        
ARTICLE 4    Vesting.....................................................   7
  4.1        Vesting of Deferrals........................................   7
  4.2        Vesting of Matching and Discretionary Contributions.........   7
  4.3        Vesting in Event of Change of Control.......................   7
  4.4        Amounts Not Vested..........................................   7

ARTICLE 5    Accounts....................................................   8
  5.1        Accounts....................................................   8
  5.2        Investments, Gains and Losses...............................   9
  5.3        Forfeitures.................................................   9

ARTICLE 6    Distributions...............................................   9
  6.1        Distribution Election.......................................   9
  6.2        Payment Options.............................................  10
  6.3        Commencement of Payment upon Termination Employment.........  11
  6.4        Commencement of Payment upon Death or Disability ...........  12
  6.5        Minimum Distribution........................................  12
  6.6        Financial Hardship..........................................  13
  6.7        Early Distribution and Penalty..............................  14

ARTICLE 7    Beneficiaries...............................................  14
  7.1        Beneficiaries...............................................  14
  7.2        Lost Beneficiary............................................  14

ARTICLE 8    Funding.....................................................  15
  8.1        Prohibition Against Funding.................................  15
  8.2        Deposits in Trust...........................................  15
  8.3        Indemnification of Trustee..................................  15
  8.4        Withholding of Employee Contributions.......................  16

ARTICLE 9    Claims Administration.......................................  16
  9.1        General.....................................................  16
  9.2        Claim Review................................................  16
  9.3        Right of Appeal.............................................  16
  9.4        Review of Appeal............................................  17
  9.5        Designation.................................................  17
  9.6        Arbitration.................................................  17

ARTICLE 10   General Provisions..........................................  18
 10.1        Administrator...............................................  18
 10.2        No Assignment...............................................  19
 10.3        No Employment Rights........................................  19
 10.4        Incompetence................................................  19
 10.5        Identity....................................................  19
 10.6        Other Benefits..............................................  19
 10.7        No Liability................................................  20


                                      33




Section                                                                    Page
                                                                        
  10.8       Expenses....................................................   20
  10.9       Insolvency..................................................   20
  10.10      Amendment and Termination...................................   20
  10.11      Employer Determinations.....................................   20
  10.12      Construction................................................   21
  10.13      Governing Law...............................................   21
  10.14      Severability................................................   21
  10.15      Headings....................................................   21
  10.16      Terms.......................................................   21


                                      34


                                 VAIL RESORTS
                          DEFERRED COMPENSATION PLAN

      The Vail Corporation, d/b/a Vail Associates, Inc. a Colorado corporation
(the "Employer"), hereby adopts the Vail Resorts Deferred Compensation Plan (the
"Plan") for the benefit of a select group of management or highly compensated
employees. This Plan is an unfunded arrangement and is intended to be exempt
from the participation, vesting, funding, and fiduciary requirements set forth
in Title I of the Employee Retirement Income Security Act of 1974, as amended.
This Plan is effective October 1, 2000.
                       --------------

                                   ARTICLE 1
                                  Definitions

1.1   Account. The bookkeeping account established for each Participant as
      provided in Section 5.1 hereof.

1.2   Administrator. Shall be a Committee consisting of those individuals
      appointed from time to time by the Executive Committee of the Board of
      Directors of Vail Resorts, Inc.

1.3   Beneficiary. The person, persons, trust or other entity a Participant
      designates by written revocable designation filed with the Administrator
      to receive payments in event of his or her death.

1.4   Board. The Executive Committee of the Board of Directors of Vail Resorts,
      Inc.

1.5   Bonus. Compensation which is designated as such by the Employer and which
      relates to services performed during an incentive period by an Eligible
      Employee in addition to his or her Salary, including any pretax elective
      deferrals from said Bonus to any Employer sponsored plan that includes
      amounts deferred under a Deferral Election or a qualified cash or deferred
      arrangement under Code Section 401(k) or cafeteria plan under Code Section
      125.

1.6   Code.  The Internal Revenue Code of 1986, as amended.

1.7   Compensation. The Participant's earned income, including Salary, Bonus and
      other remuneration from the Employer.

1.8   Deferrals. The portion of Compensation that a Participant elects to defer
      in accordance with Section 3.1 hereof.

1.9   Deferral Election. The separate written agreement, submitted to the
      Administrator, by which an Eligible Employee agrees to participate in the
      Plan and make Deferrals thereto. The Deferral Election will specify the
      amount of Compensation that a Participant chooses to defer.

1.10  Disability. Any medically determinable physical or mental disorder that
      renders a Participant incapable of continuing in the employment of the
      Employer in his or her regular duties of employment, as determined by the
      Administrator in its sole discretion.

1.11  Discretionary Contribution. An Employer Contribution as described in
      Section 3.3 hereof.

1.12  Effective Date.  October 1, 2000.

                                      35


1.13  Eligible Employee. Each Employee designated by the Administrator pursuant
      to Section 2.1 as eligible to participate in the Plan.

1.14  Employee.  Any person employed by the Employer.

1.15  Employer. The Vail Corporation, d/b/a Vail Associates, Inc. and its
      subsidiaries.

1.16  Enrollment Period

      a.  For individuals who are Eligible Employees prior to the commencement
          of a given Plan Year, Enrollment Period means the period set by the
          Administrator, which ends prior to the first day of a Plan Year.

      b.  With respect to an Eligible Employee designated as such by the Company
          effective as of any day after the first day of a Plan Year, Enrollment
          Period means the period beginning with the date of his/her designation
          as an Eligible Employee, and ending prior to the first day such
          Eligible Employee's participation in the Plan commences.

1.17  Investment Fund or Funds. Each investment(s), which serves as a means to
      measure value, increases or decreases with respect to a Participant's
      Accounts.

1.18  Matching Contribution. An Employer contribution as described in Section
      3.2 hereof.

1.19  Participant. An Eligible Employee who is a Participant as provided in
      Article 2.

1.20  Plan. Vail Resorts Deferred Compensation Plan.

1.21  Plan Year. October 1 through December 31, 2000 for the first Plan Year;
      January 1 through December 31 for each subsequent Plan Year.

1.22  Retirement. Retirement means the termination of the Participant's
      employment or contract with the Employer for any reason other than death
      or disability on or after age 60.

1.23  Salary. An Eligible Employee's base salary rate or rates in effect at any
      time during a Plan Year, including any pretax elective deferrals from said
      Salary to any Employer sponsored plan that includes amounts deferred under
      a Deferral Election or a qualified cash or deferred arrangement under Code
      Section 401(k) or cafeteria plan under Code Section 125.

1.24  Trust. The agreement between the Employer and the Trustee under which the
      assets of the Plan are held, administered and managed, which shall conform
      to the terms of Rev. Proc. 92-64.

1.25  Trustee. Wells Fargo Bank, N.A., or such other successor that shall become
      trustee pursuant to the terms of the Plan.

1.26  Years of Service. A Participant's "Years of Service" shall be measured by
      the total number of full twelve (12) month periods that an individual has
      been an Employee.

                                      36


                                   ARTICLE 2
                                 Participation

2.1   Designation as Eligible Employee. The Administrator shall from time to
      time specify one or more persons from a select group of management or
      highly compensated employees as Eligible Employees. Such specification
      shall be in writing, with a copy delivered to the Employer and the person
      designated as eligible, and shall set the date as of when the person
      becomes eligible.

      For the October 1, 2000 - December 31, 2000 Plan Year, and for subsequent
      Plan Years until the Administrator otherwise directs, an Eligible Employee
      shall mean each Employee:

      (a)  who is designated as such by the Administrator; and,

      (b)  has a Salary Grade Level of 30 and above; and,

      (c)  earns at least $120,000 or more.

      An individual's designation as an Eligible Employee may be revoked at any
      time upon written notice of the Administrator to such individual.

2.2   Commencement of Participation. Each Eligible Employee shall become a
      Participant at the earlier of the first day of the Plan Year or the date
      on which his or her Deferral Election first becomes effective.

2.3   Loss of Eligible Employee Status.

      (a)  A Participant who is no longer an Eligible Employee shall not be
           permitted to submit a Deferral Election and all Deferrals for such
           Participant shall cease immediately upon the determination that the
           Participant is no longer considered an Eligible Employee.

      (b)  Amounts credited to the Account of a Participant described in
           subsection (a) shall continue to be held, pursuant to the terms of
           the Plan and shall be distributed as provided in Article 6.

      (c)  A Participant who is no longer an Eligible Employee shall continue to
           receive quarterly statements, and shall retain the right to make
           changes in investment selection according to Section 5.2.

                                   ARTICLE 3
                                 Contributions

3.1   Deferrals.

      (a)  On an annual basis, each Participant may authorize the Employer to
           reduce his/her future Compensation by a percentage not to exceed an
           amount allowed for the Plan Year as established by the Employer, and
           to have a corresponding amount credited to his/her Accounts, in
           accordance with Article 5, by filing a Deferral Agreement with the
           Administrator during his/her initial Enrollment Period or any
           subsequent Enrollment Period preceding the Plan Year during which
           such Compensation will be earned.

                                      37


      (b)  Each Eligible Employee shall deliver an annual Deferral Election to
           the Employer before any Deferrals can become effective. Such Deferral
           Election shall be void with respect to any Deferral unless submitted
           before the beginning of the Plan Year during which the amount to be
           deferred will be earned; provided, however, that in the year in which
           the Plan is first adopted or an Employee is first eligible to
           participate, such Deferral Election shall be filed within thirty (30)
           days of the date on which the Plan is adopted or within sixty (60)
           days of the date on which an Employee is first eligible to
           participate, respectively, with respect to Compensation earned during
           the remainder of the calendar year.

      (c)  The Deferral Election shall, subject to the limitation set forth in
           Section 3.1(a) hereof, designate the amount of Compensation deferred
           by each Participant, the beneficiary or beneficiaries of the
           Participant and such other items as the Administrator may prescribe.
           Such Deferral Elections shall remain effective for the Plan Year.

      (d)  The minimum amount of Compensation that may be deferred each Plan
           Year is one thousand dollars ($1,000).

      (e)  The maximum amount of Compensation that may be deferred each Plan
           Year is ninety-five percent (95%) of the Participant's Salary and
           ninety-five percent (95%) of the Participant's Bonus.

3.2   Matching Contribution. At its sole and absolute discretion, the Board may
      elect to make a Matching Contribution to the Accounts of some or all of
      the Participants. The amount of the Matching Contribution, if any, shall
      be determined by the Board annually and communicated to all Eligible
      Employees. Such Matching Contribution shall be allocated to the
      Participant's Accounts at such Participant's election made in accordance
      with Section 5.1.

3.3   Discretionary Contribution. At its sole and absolute discretion, the Board
      may elect to make a Discretionary Contribution to the Account of some or
      all of the Participants. Nothing in this Plan, however, shall obligate the
      Board to make Discretionary Contributions for the benefit of Plan
      Participants in any Plan Year, nor to make identical Discretionary
      Contributions for the benefit of Plan Participants in any Plan Year. The
      Board expressly reserves the right to make Discretionary Contributions to
      such Plan Participants in such amount or such proportions as it deems
      warranted or appropriate; provided, however, the Board shall not
      discriminate against any Plan Participant in making Contributions under
      this provision on the basis of such Participant's race, nationality,
      religion, gender, marital status or disability. Discretionary
      Contributions shall be allocated to the Participant's Accounts at such
      Participant's election made in accordance with Section 5.1. Nothing in
      this Plan or any other agreement or document shall represent or be
      construed to represent an obligation or promise of the Board to make
      Discretionary Contributions on behalf of a Participant at any time.

3.4   Time of Contributions.

      (a)  Deferrals shall be transferred to the Trust as soon as
           administratively feasible following the end of each payroll period.
           The Employer shall also transmit at that time any necessary
           instructions regarding the allocation of such amounts among the
           Accounts of Participants.

                                      38


      (b)  Matching Contributions and Discretionary Contributions shall be
           transferred to the Trust at such time as the Employer shall
           determine. The Employer shall also transmit at that time any
           necessary instructions regarding the allocation of such amounts among
           the Accounts of Participants.

3.5   Form of Contributions. All Deferrals, Matching Contributions and
      Discretionary Contributions to the Trust shall be made in the form of cash
      or cash equivalents of US currency.

                                   ARTICLE 4
                                    Vesting

4.1   Vesting of Deferrals. A Participant shall have a vested right to the
      portion of his or her Account attributable to Deferrals and any earnings
      on the investment of such Deferrals.

4.2   Vesting of Matching and Discretionary Contributions. Upon completion of 1
      Year of Service, a Participant shall have a 25% vested right to the
      portion of his or her account attributable to Matching Contributions and
      any earning thereon; upon completion of 2 Years of Service, a 50% vested
      right; 3 Years of Service, a 75% vested right; 4 Years of Service a 100%
      vested right. Discretionary Contributions shall vest as determined by the
      Board. The Board may direct the Administrator to accelerate the vesting on
      the matching and or discretionary contributions at any time.

4.3   Vesting in the Event of Disability or Death. In the event of a termination
      based on a Disability, as defined herein, the Participant shall be
      considered 100% vested in their Deferrals and any Matching Contributions
      (not Discretionary Contributions, unless the Administrator is otherwise
      directed by the Board) credited to the Participant's Account as of the
      effective date of termination. In the event of the Participant's death
      while employed, the Participant shall be considered 100% vested in their
      Deferrals and any Matching Contributions (not Discretionary Contributions,
      unless the Administrator is otherwise directed by the Board) credited to
      the Participant's Account as of the date of Participant's death.

4.4   Amounts Not Vested. Any amounts credited to a Participant's Account that
      are not vested at the time of his or her termination of employment with
      the Employer shall be forfeited.

                                   ARTICLE 5
                                   Accounts

5.1   Accounts. The Administrator shall establish and maintain a bookkeeping
      account in the name of each Participant. The Administrator shall also
      establish subaccounts, as provided in subsection (a), (b), and/or (c),
      below, as elected by the Participant pursuant to Article 3.

      (a)  A Retirement Account shall be established for each Participant. His
           or her Retirement Account shall be credited with Deferrals (as
           specified in the Participant's Deferral Election) and the
           Participant's allocable share of any earnings or losses on the
           foregoing. Each Participant's Account shall be reduced by any
           distributions made plus any federal, state and/or local tax
           withholding and any social security withholding tax as may be
           required by law.

      (b)  A Participant may elect to establish one or more Education Accounts
           in the name of a "Student" at the time of his or her Deferral. For
           purposes of this Article, Student shall mean an individual who has
           not yet attained the age of thirteen (13) at the time the account is
           initially established. Each

                                      39


           Participant's Education Account shall be credited with Deferrals (as
           specified in the Participant's Deferral Election) and the
           Participant's allocable share of any earnings or losses on the
           foregoing. Each Participant's Account shall be reduced by any
           distributions made plus any federal, state and/or local tax
           withholding and any social security withholding tax as may be
           required by law.

      (c)  A Participant may elect to establish one or more Personal Goals
           Accounts by designating a year of payout at the time the account is
           initially established. The minimum initial deferral period for
           Personal Goals subaccounts shall be five (5) years. Each
           Participant's Personal Goals Account shall be credited with Deferrals
           (as specified in the Participant's Deferral Election) and the
           Participant's allocable share of any earnings or losses on the
           foregoing. Each Participant's Account shall be reduced by any
           distributions made plus any federal, state and/or local tax
           withholding and any social security withholding tax as may be
           required by law.

      (d)  The maximum number of Education Sub-Accounts will be four (4) and the
           maximum number of Personal Goals Sub-Accounts will be five (5). The
           maximum number of Education and/or Personal Goals Sub-Accounts that a
           Participant may have at one time will be nine (9).

5.2   Investments, Gains and Losses.

      (a)  Trust assets shall be invested by the Trustee in accordance with
           written directions from the Employer. Such directions shall provide
           Trustee with the investment discretion to invest the above-referenced
           amounts within broad guidelines established by Trustee and Employer
           as set forth therein.

      (b)  The Administrator shall adjust the amounts credited to each
           Participant's Account to reflect Deferrals, investment experience,
           distributions and any other appropriate adjustments. Such adjustments
           shall be made as frequently as is administratively feasible.

      (c)  A Participant may direct that his or her Retirement Account,
           Education Account and or Personal Goals Account established pursuant
           to Section 5.1 may be valued as if they were invested in one or more
           Investment Funds in multiples of one percent (1%) of the balance in
           an Account. A Participant may change his or her selection of
           Investment Funds no more than six (6) times each Plan Year. An
           election shall be effective as soon as administratively feasible
           following the date of the change as indicated in writing by the
           Participant.

5.3   Forfeitures. Any forfeitures from a Participant's Account shall continue
      to be held in the Trust, and shall be used to reduce the Employer's future
      Matching and Discretionary Contributions under the Plan. If no such
      further contributions will be made, then such forfeitures shall be
      returned to the Employer.

                                      40


                                   ARTICLE 6
                                 Distributions

6.1  Distribution Election. Each Participant shall designate on his or her
     Deferral Election the timing of his or her distribution by indicating the
     type of account as described under Section 5.1. A Participant may not
     modify, alter, amend or revoke such designation for a Plan Year after such
     Plan year begins. Further, amounts in one Account cannot be transferred to
     another Account. Each Participant shall also designate the manner in which
     Retirement Account payments shall be made from the choices available under
     Section 6.2 (a) hereof.

6.2  Payment Options.

     (a)  Retirement Account payments shall commence as soon as administratively
          feasible immediately after the Participant's Retirement. The
          Participant may elect any one of the following forms of payment so
          long as the election is made in writing, delivered to the
          Administrator at least one year prior to the year in which the
          Participant's benefit becomes payable.

          (i)    The normal form of payment of benefits hereunder, and the form
                 of payments to be used if no other election is made, shall be a
                 single lump-sum distribution of the value of the Participant's
                 Retirement Account.

          (ii)   A Participant entitled to a benefit hereunder may elect to
                 receive his/her Retirement Account in substantially equal
                 annual installments over a period not to exceed ten (10) years.

                 The amount of the substantially equal payments described above
                 shall be determined by multiplying the Participant's Retirement
                 Account by a fraction, the denominator of which in the first
                 year of payment equals the number of years over which benefits
                 are to be paid, and the numerator of which is one (1).

                 The amounts of the payments for each succeeding year shall be
                 determined by multiplying the Participant's Retirement Account
                 as of the applicable anniversary of the Participant's
                 Retirement Date by a fraction, the denominator of which equals
                 the number of remaining years over which benefits are to be
                 paid, and the numerator of which is one (1).

          (iii)  A Participant entitled to a benefit hereunder may elect to
                 defer commencement of any distribution of his/her Retirement
                 Account for a period not to exceed three (3) years after
                 retirement. Amounts credited to the Retirement Account of a
                 Participant in this subsection shall continue to be held
                 pursuant to the terms and conditions of this Plan.

                                      41


     (b)  Education Account payouts shall be paid in four annual installments on
          July 1 (or as soon as administratively feasible) of the calendar year
          in which the Student reaches age eighteen (18) and the three (3)
          anniversaries thereof in the following amounts:

                    Year 1                    25% of the account balance
                    Year 2                    33% of the account balance
                    Year 3                    50% of the account balance
                    Year 4                    100% of the account balance

     (c)  Personal Goals Account payouts shall be paid in one lump sum payment
          on January 1 (or as soon as administratively feasible) of the calendar
          year selected by the Participant on his or her Deferral Election.

6.3  Commencement of Payment upon Termination of Employment. Upon the
     termination of Participant's employment with the Employer for any reason
     other than death or Disability, the terminated Participant shall be
     entitled to the following applicable account management procedures:

     (a)  Retirement Account Credits

          (i)   if the Participant's Retirement Account has a credited balance
                equal to, or greater than, $10,000 on the effective date of
                termination, such credited balance shall be distributed to the
                Participant pursuant to the method selected by the Participant
                on his or her Deferral Agreement; or

          (ii)  if Participant's Retirement Account has a credited balance less
                than $10,000, on the effective date of termination, the
                Participant's credited amount will be distributed in a lump sum
                to the Participant as soon as administratively feasible.

     (b)  Education Account Credits

          (i)   if the Participant's Education Account(s) has a credited balance
                equal to, or greater than, $4,000 on the effective date of
                termination, such credited balance shall be distributed to the
                Participant pursuant to the method selected by the Participant
                on his or her Deferral Agreement; or

          (ii)  if Participant's Education Account(s) has a credited balance
                less than $4,000, on the effective date of termination, the
                Participant's credited amount will be distributed in a lump sum
                to the Participant as soon as administratively feasible.

     (c)  Personal Goals Account

          (i)   if the Participant's Personal Goals Account(s) has a credited
                balance equal to, or greater than, $10,000 on the effective date
                of termination, such credited balance shall be distributed to
                the Participant pursuant to the method selected by the
                Participant on his or her Deferral Agreement; or

                                      42


          (ii)  if Participant's Personal Goals Account(s) has a credited
                balance less than $10,000, on the effective date of termination,
                the Participant's credited amount will be distributed in a lump
                sum to the Participant as soon as administratively feasible.

6.4  Commencement of Payment upon Death or Disability.

     (a)  Upon the death of a Participant, all amounts credited to his or her
          Account(s) shall be paid, as soon as administratively feasible, to his
          or her Beneficiary or Beneficiaries, as determined under Article 7
          hereof, in a lump sum.

     (b)  Upon the Disability of a Participant, all amounts credited to his or
          her Account(s) shall be paid to the Participant, in a lump-sum
          payment, as soon as administratively feasible.

6.5  Minimum Distribution.

     (a)  Notwithstanding any provision to the contrary, if the vested balance
          of a Participant's Account at the time of a termination due to
          Retirement is less than $10,000, then the Participant shall be paid
          his or her benefits as a single lump sum as soon as administratively
          feasible following said termination.

     (b)  Notwithstanding any provision to the contrary, if the balance of a
          Participant's Education Account(s) at the time benefit payments are to
          commence is less than $4,000, then the Participant shall be paid such
          Education Account(s) benefits as a single lump sum as soon as
          administratively feasible following said commencement date.

6.6  Financial Hardship. The Administrator may permit an early distribution of
     part or all of any deferred amounts; provided, however, that such
     distribution shall be made only if the Administrator, in its sole
     discretion, determines that the Participant has experienced an unforeseen
     emergency that is caused by an event beyond the control of the Participant
     and that would result in severe financial hardship to the Participant if
     early distribution were not permitted. Any distribution pursuant to this
     subsection is limited to the amount necessary to meet the hardship.

6.7  Early Distribution and Penalty. A Participant may elect to receive a
     distribution of up to ninety percent (90%) of the vested amounts in his or
     her Account on a date prior to that established under the Plan. If such an
     early distribution is requested, the Plan Administrator shall deduct from
     the Participant's account an additional ten percent (10%) of the vested
     amount withdrawn. This additional amount withdrawn by the Plan
     Administrator shall be considered an early distribution penalty, and shall
     be treated as forfeited by the participant. Participants who receive Early
     Distributions shall lose their status as Eligible Employees and will be
     barred from further participation in the Plan until a minimum of twelve
     (12) months have passed

                                   ARTICLE 7
                                 Beneficiaries

7.1  Beneficiaries. Each Participant may from time to time designate one or more
     persons (who may be any one or more members of such person's family or
     other persons, administrators, trusts, foundations or other entities) as
     his or her Beneficiary under the Plan. Such designation shall be made on a
     form prescribed by the Administrator. Each Participant may at any time and
     from time to time, change any previous

                                      43


     Beneficiary designation, without notice to or consent of any previously
     designated Beneficiary, by amending his or her previous designation on a
     form prescribed by the Administrator. If no person shall be designated by
     the Participant as a Beneficiary, or if the designated Beneficiary shall
     not survive the Participant, payment of his/her interest shall be made to
     the Participant's estate. If more than one person is the beneficiary of a
     deceased Participant, each such person shall receive a pro rata share of
     any death benefit payable unless otherwise designated on the applicable
     form.

7.2  Lost Beneficiary.

     (a)  All Participants and Beneficiaries shall have the obligation to keep
          the Administrator informed of their current address until such time as
          all benefits due have been paid.

     (b)  If a Participant or Beneficiary cannot be located by the Administrator
          exercising due diligence, then, in its sole discretion, the
          Administrator may presume that the Participant or beneficiary is
          deceased for purposes of the Plan and all unpaid amounts (net of due
          diligence expenses) owed to the Participant or beneficiary shall be
          paid accordingly or, if a Beneficiary cannot be so located, then such
          amounts may be forfeited. Any such presumption of death shall be
          final, conclusive and binding on all parties. Notwithstanding the
          foregoing, if any such Beneficiary is located within five years from
          the date of any such forfeiture, such Beneficiary shall be entitled to
          receive the amount previously forfeited.

                                   ARTICLE 8
                                    Funding

8.1  Prohibition Against Funding. Should any investment be acquired in
     connection with the liabilities assumed under this Plan, it is expressly
     understood and agreed that the Participants and Beneficiaries shall not
     have any right with respect to, or claim against, such assets nor shall any
     such purchase be construed to create a trust of any kind or a fiduciary
     relationship between the Employer and the Participants, their Beneficiaries
     or any other person. Any such assets shall be and remain a part of the
     general, unpledged, unrestricted assets of the Employer, subject to the
     claims of its general creditors. It is the express intention of the parties
     hereto that this arrangement shall be unfunded for tax purposes and for
     purposes of Title I of the Employee Retirement Income Security Act of 1974,
     as amended. Each Participant and beneficiary shall be required to look to
     the provisions of this Plan and to the Employer itself for enforcement of
     any and all benefits due under this Plan, and to the extent any such person
     acquires a right to receive payment under this Plan, such right shall be no
     greater than the right of any unsecured general creditor of the Employer.
     The Employer or the Trust shall be designated the owner and beneficiary of
     any investment acquired in connection with its obligation under this Plan.

8.2  Deposits in Trust. Notwithstanding paragraph 8.1, or any other provision of
     this Plan to the contrary, the Employer may deposit into the Trust any
     amounts it deems appropriate to pay the benefits under this Plan. The
     amounts so deposited may include all contributions made pursuant to a
     Deferral Election by a Participant.

                                      44


8.3  Indemnification of Trustee.

     (a)  The Trustee shall not be liable for the making, retention, or sale of
          any investment or reinvestment made by it, as herein provided, nor for
          any loss to, or diminution of, the Trust assets, unless due to its own
          negligence, willful misconduct or lack of good faith.

     (b)  Such Trustee shall be indemnified and saved harmless by the Employer
          from and against all personal liability to which it may be subject by
          reason of any act done or omitted to be done in its official capacity
          as Trustee in good faith in the administration of the Plan and Trust,
          including all expenses reasonably incurred in its defense in the event
          the Employer fails to provide such defense upon the request of the
          Trustee. The Trustee is relieved of all responsibility in connection
          with its duties hereunder to the fullest extent permitted by law,
          short of breach of duty to the beneficiaries.

8.4  Withholding of Employee Contributions. The Administrator is authorized to
     make any and all necessary arrangements with the Employer in order to
     withhold the Participant's Deferrals under Section 3.1 hereof from his or
     her Compensation. The Administrator shall determine the amount and timing
     of such withholding.

                                   ARTICLE 9
                             Claims Administration

9.1  General. If a Participant, Beneficiary or his/her representative is denied
     all or a portion of an expected Plan benefit for any reason and the
     Participant, Beneficiary or his/her representative desires to dispute the
     decision of the Administrator, he/she must file a written notification of
     his/her claim with the Administrator.

9.2  Claim Review. Upon receipt of any written claim for benefits, the
     Administrator shall be notified and shall give due consideration to the
     claim presented. If the claim is denied to any extent by the Administrator,
     the Administrator shall furnish the claimant with a written notice setting
     forth (in a manner calculated to be understood by the claimant):

     (a)  the specific reason or reasons for denial of the claim;

     (b)  a specific reference to the Plan provisions on which the denial is
          based;

     (c)  a description of any additional material or information necessary for
          the claimant to perfect the claim and an explanation of why such
          material or information is necessary; and

     (d)  an explanation of the provisions of this Article.

9.3  Right of Appeal. A claimant who has a claim denied under Section 9.2 may
     appeal to the Administrator for reconsideration of that claim. A request
     for reconsideration under this section must be filed by written notice
     within sixty (60) days after receipt by the claimant of the notice of
     denial under Section 9.2.

9.4  Review of Appeal. Upon receipt of an appeal the Administrator shall
     promptly take action to give due consideration to the appeal. Such
     consideration may include a hearing of the parties involved, if the
     Administrator feels such a hearing is necessary. In preparing for this
     appeal the claimant shall be given the right to review pertinent documents
     and the right to submit in writing a statement of issues and comments.

                                      45


     After consideration of the merits of the appeal the Administrator shall
     issue a written decision which shall be binding on all parties subject to
     Section 9.6 below. The decision shall be written in a manner calculated to
     be understood by the claimant and shall specifically state its reasons and
     pertinent Plan provisions on which it relies. The Administrator's decision
     shall be issued within sixty (60) days after the appeal is filed, except
     that if a hearing is held the decision may be issued within one hundred
     twenty (120) days after the appeal is filed.

9.5  Designation. The Administrator may designate any other person of its
     choosing to make any determination otherwise required under this Article.

9.6  Arbitration. A claimant whose appeal has been denied under section 9.4
     shall have the right to submit said claim to final and binding arbitration,
     in accordance with the rules for contractual disputes, by a single
     arbitrator of the Judicial Arbiter Group ("JAG"), in Denver, Colorado, and
     judgment on the award rendered may be entered in any court having
     jurisdiction. The arbiter shall not, however, have the power to direct
     equitable relief. Any such request for arbitration must be filed by written
     demand to the Administrator within sixty (60) days after receipt of the
     decision of the regarding the appeal. The costs and expenses of
     arbitration, including the fees of JAG, shall be borne by the non-
     prevailing party. The prevailing party shall also recover, as expenses, all
     reasonable attorneys' fees incurred by it in connection with the
     arbitration and any appeals therefrom.

                                  ARTICLE 10
                              General Provisions

10.1 Administrator.

     (a)  The committee constituting the Administrator shall elect a chairman
          and shall adopt such rules as it deems desirable for the conduct of
          its affairs and for the administration of the Plan. It may appoint
          agents (who need not be members of the committee) to whom it may
          delegate such powers as it deems appropriate, except that any dispute
          shall be determined by the committee. The committee may make its
          determinations with or without meetings. It may authorize one or more
          of its members or agents to sign instructions, notices and
          determinations on its behalf. The action of a majority of the
          committee shall constitute the action of the Administrator.

     (b)  The Administrator is expressly empowered to limit the amount of
          compensation that may be deferred; to deposit amounts into trust in
          accordance with Section 8.2 hereof; to interpret the Plan, and to
          determine all questions arising in the administration, interpretation
          and application of the Plan; to employ actuaries, accountants,
          counsel, and other persons it deems necessary in connection with the
          administration of the Plan; to request any information from the
          Employer it deems necessary to determine whether the Employer would be
          considered insolvent or subject to a proceeding in bankruptcy; and to
          take all other necessary and proper actions to fulfill its duties as
          Administrator.

     (c)  The Administrator shall not be liable for any actions by it hereunder,
          unless due to its own negligence, willful misconduct or lack of good
          faith.

                                      46


     (d)  The Administrator shall be indemnified and saved harmless by the
          Employer from and against all personal liability to which it may be
          subject by reason of any act done or omitted to be done in its
          official capacity as Administrator in good faith in the administration
          of the Plan and Trust, including all expenses reasonably incurred in
          its defense in the event the Employer fails to provide such defense
          upon the request of the Administrator. The Administrator is relieved
          of all responsibility in connection with its duties hereunder to the
          fullest extent permitted by law, short of breach of duty to the
          beneficiaries.

10.2 No Assignment. No benefit under the Plan shall be subject in any manner to
     anticipation, alienation, sale, transfer, assignment, pledge encumbrance or
     charge, and any such action shall be void for all purposes of the Plan. No
     benefit shall in any manner be subject to the debts, contracts,
     liabilities, engagements or torts of any person, nor shall it be subject to
     attachments or other legal process for or against any person, except to
     such extent as may be required by law.

10.3 No Employment Rights. Participation in this Plan shall not be construed to
     confer upon any Participant the legal right to be retained in the employ of
     the Employer, or give a Participant or beneficiary, or any other person,
     any right to any payment whatsoever, except to the extent of the benefits
     provided for hereunder. Each Participant shall remain subject to discharge
     to the same extent as if this Plan had never been adopted.

10.4 Incompetence. If the Administrator determines that any person to whom a
     benefit is payable under this Plan is incompetent by reason of physical or
     mental disability, the Administrator shall have the power to cause the
     payments becoming due to such person to be made to another individual for
     the Participant's benefit without responsibility of the Administrator or
     the Employer to see to the application of such payments. Any payment made
     pursuant to such power shall, as to such payment, operate as a complete
     discharge of the Employer, the Administrator and the Trustee.

10.5 Identity. If, at any time, any doubt exists as to the identity of any
     person entitled to any payment hereunder or the amount or time of such
     payment, the Administrator shall be entitled to hold such sum until such
     identity or amount or time is determined or until an order of a court of
     competent jurisdiction is obtained. The Administrator shall also be
     entitled to pay such sum into court in accordance with the appropriate
     rules of law. Any expenses incurred by the Employer, Administrator, and
     Trust incident to such proceeding or litigation shall be charged against
     the Account of the affected Participant.

10.6 Other Benefits. The benefits of each Participant or beneficiary hereunder
     shall be in addition to any benefits paid or payable to or on account of
     the Participant or beneficiary under any other pension, disability, annuity
     or retirement plan or policy whatsoever.

                                      47


10.7  No Liability. No liability shall attach to or be incurred by any manager
      of the Employer, Trustee or any Administrator under or by reason of the
      terms, conditions and provisions contained in this Plan, or for the acts
      or decisions taken or made thereunder or in connection therewith; and as a
      condition precedent to the establishment of this Plan or the receipt of
      benefits thereunder, or both, such liability, if any, is expressly waived
      and released by each Participant and by any and all persons claiming under
      or through any Participant or any other person. Such waiver and release
      shall be conclusively evidenced by any act or participation in or the
      acceptance of benefits or the making of any election under this Plan.

10.8  Expenses. All expenses incurred in the administration of the Plan, whether
      incurred by the Employer or the Plan, shall be paid by the Employer.

10.9  Insolvency. Should the Employer be considered insolvent (as defined by the
      Trust), the Employer, through its Board and chief executive officer, shall
      give immediate written notice of such to the Administrator of the Plan and
      the Trustee. Upon receipt of such notice, the Administrator or Trustee
      shall cease to make any payments to Participants who were Employees of the
      Employer or their beneficiaries and shall hold any and all assets
      attributable to the Employer for the benefit of the general creditors of
      the Employer.

10.10 Amendment and Termination.

      (a) Except as otherwise provided in this section, the Employer shall have
          the sole authority to modify, amend or terminate this Plan; provided,
          however, that any modification or termination of this Plan shall not
          reduce, without the consent of a Participant, a Participant's right to
          any amounts already credited to his or her Account, or lengthen the
          time period for a payout from an established Account, on the day
          before the effective date of such modification or termination.
          Following such termination, payment of such credited amounts may be
          made in a single sum payment if the Employer so designates. Any such
          decision to pay in a single sum shall apply to all Participants.

      (b) Any funds remaining in the Trust after termination of the Plan and
          satisfaction of all liabilities to Participants and others, shall be
          returned to the Employer.

10.11 Employer Determinations. Any determinations, actions or decisions of the
      Employer (including but not limited to, Plan amendments and Plan
      termination) shall be made by the Board in accordance with its established
      procedures or by such other individuals, groups or organizations that have
      been properly delegated by the Board to make such determination or
      decision.

10.12 Construction. All questions of interpretation, construction or application
      arising under or concerning the terms of this Plan shall be decided by the
      Administrator, in its sole and final discretion, whose decision shall be
      final, binding and conclusive upon all persons.

10.13 Governing Law. This Plan shall be governed by, construed and administered
      in accordance with the applicable laws of the State of Colorado.

10.14 Severability. Should any provision of the Plan or any regulations adopted
      thereunder be deemed or held to be unlawful or invalid for any reason,
      such fact shall not adversely affect the other provisions or regulations
      unless such invalidity shall render impossible or impractical the
      functioning of the Plan and, in such case, the appropriate parties shall
      immediately adopt a new provision or regulation to take the place of the
      one held illegal or invalid.

                                      48


10.15 Headings. The Article headings contained herein are inserted only as a
      matter of convenience and for reference and in no way define, limit,
      enlarge or describe the scope or intent of this Plan nor in any way shall
      they affect this Plan or the construction of any provision thereof.

10.16 Terms. Capitalized terms shall have meanings as defined herein. Singular
      nouns shall be read as plural, masculine pronouns shall be read as
      feminine, and vice versa, as appropriate.

                                      49


      IN WITNESS WHEREOF, THE VAIL CORPORATION, D/B/A VAIL ASSOCIATES, INC. has
caused this instrument to be executed by its duly authorized officer, effective
as of this 28th day of September 2000.

                                         THE VAIL CORPORATION
                                       D/B/A VAIL ASSOCIATES, INC.


                                By:          /S/ ANDREW DALY
                                      --------------------------------
                                Title:           President
                                      --------------------------------



ATTEST:

By:    _______________________

Title: _______________________

                                      50

 



 5

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VAIL RESORTS
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.

 1,000

                             
                   YEAR
                          JUL-31-2000
                             AUG-01-1999
                               JUL-31-2000
                                          18,668
                                         0
                                   41,451
                                     2,024
                                     24,092
                               100,354
                                         830,822
                                 175,650
                               1,127,818
                          110,184
                                              0
                                0
                                          0
                                           346
                                     493,409
                 1,127,818
                                        553,059
                               553,059
                                                0
                                  430,379
                                60,650
                                     0
                              35,108
                                 27,195
                                    11,857
                             15,338
                                       0
                                      0
                                            0
                                    15,338
                                       0.44
                                     0.44