<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
 
For the fiscal year ended December 31, 1997
 
                                       OR
 
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
For the transition period from ....................... to ......................
 
Commission File Number 1-3427
 
                           HILTON HOTELS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                               <C>
            DELAWARE                         36-2058176
  (STATE OR OTHER JURISDICTION            (I.R.S. EMPLOYER
      OF INCORPORATION OR              IDENTIFICATION NUMBER)
         ORGANIZATION)
 
    9336 CIVIC CENTER DRIVE                    90210
   BEVERLY HILLS, CALIFORNIA                 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
            OFFICES)
</TABLE>
 
      Registrant's telephone number, including area code:  (310) 278-4321
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                  Name of each exchange
          Title of each class                      on which registered
----------------------------------------  --------------------------------------
<S>                                       <C>
Common Stock, par value $2.50 per share             New York, Pacific
Preferred Redeemable Increased Dividend             New York, Pacific
  Equity Securities-SM-, 8% PRIDES-SM-,
  Convertible Preferred Stock, par value
  $1.00 per share
</TABLE>
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                                      None
 
    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/    No / /
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
 
    Based upon the March 12, 1998 New York Stock Exchange closing price of $33
per share, the aggregate market value of Registrant's outstanding Common Stock
held by non-affiliates of the Registrant was approximately $6.0 billion. On that
date, there were 246,507,045 shares of Common Stock outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1997 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
 
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--------------------------------------------------------------------------------
<PAGE>
                                     PART I
 
ITEM 1.  BUSINESS
 
                              GENERAL INFORMATION
 
CURRENT OPERATIONS
 
    Hilton Hotels Corporation (together with its majority, wholly owned and
controlled subsidiaries collectively referred to herein as "Hilton" or the
"Company," unless the context indicates otherwise) is primarily engaged in the
ownership and management of hotels and hotel casinos. As of February 1, 1998,
all of these properties were located in the United States, with the exception of
nine hotels and three hotel casinos operated by the Company's wholly owned
subsidiary, Conrad International Hotels Corporation and its subsidiaries
("Conrad International").
 
    On February 1, 1998, Hilton owned or leased and operated 25 hotels and
managed 34 hotels partially or wholly owned by others. In addition, 180 hotels
were operated under the Hilton, Hilton Garden Inn-Registered Trademark- and
Hilton Suites names by others pursuant to franchises granted by the Company.
 
    On February 1, 1998, Hilton operated 11 hotel casinos, six of which are
wholly or majority owned by the Company and are located in Nevada, two of which
are wholly owned by the Company and are located in Atlantic City, New Jersey,
and the other three of which are partially owned by the Company and are located
in Australia and Uruguay. The Company also wholly or partially owns and manages
three riverboat casinos in the United States and owns a 50% interest in a
company which operates one casino in Canada. The Company's gaming operations
accounted for approximately 50%, 33% and 38% of its total operating income in
1995, 1996 and 1997, respectively. The Company's domestic gaming operations are
conducted under the Hilton, Flamingo and Bally brand names. For additional
information, see the Five Year Summary on page 55 in the Company's Annual Report
to Stockholders for the fiscal year ended December 31, 1997 (the "Stockholders
Report"), which report is included as Exhibit 13 hereto and, to the extent
specific references are made thereto, incorporated herein by such references.
 
    The Company is also engaged in various other activities incidental or
related to the operation of hotels and hotel casinos. See "Additional
Information."
 
    Hilton was organized in the State of Delaware on May 29, 1946. Its principal
executive offices are located at 9336 Civic Center Drive, Beverly Hills,
California 90210, and its telephone number is (310) 278-4321.
 
RECENT DEVELOPMENTS
 
    GAMING
 
    In January 1998, the Company opened "Star Trek: The Experience at the Las
Vegas Hilton." In conjunction with the Star Trek attraction, in November 1997,
the Company opened SpaceQuest casino, a themed 22,000 square foot addition at
the Las Vegas Hilton.
 
    In July 1997, the Company opened The Wild Wild West, a new western-themed
casino and entertainment complex connected to Bally's Park Place in Atlantic
City, New Jersey. This complex features 75,000 square feet of casino space. Also
in July 1997, The Atlantic City Hilton completed a 300-room hotel tower
addition. In October 1997, the Company acquired the remaining 42% ownership
interest in Bally's SalooniGambling HalliHotel in Mississippi. In March 1998,
the Company acquired the remaining 8% ownership interest in Bally's Grand, Inc.,
which owns Bally's Las Vegas. Each of these properties was acquired by the
Company as a result of the merger of Bally Entertainment Corporation ("Bally")
with and into the Company (the "Bally Merger") in December 1996.
 
    In April 1997, the Company began construction of the 2,900-room Paris
Casino-Resort, which will feature an 85,000 square foot casino, 13 restaurants,
130,000 square feet of convention space and a retail shopping complex with a
French influence. This project, which is adjacent to Bally's Las Vegas, is
expected to be completed in the 1999 third quarter.
<PAGE>
    HOTELS
 
    In February 1997, the Company acquired a 100% ownership interest in the
591-room Anchorage Hilton. In January 1998, the Company acquired the remaining
92.5% ownership interest in the 458-room McLean Hilton and adjacent office
building complex in McLean, Virginia. In March 1998, the Company acquired a 100%
ownership interest in the 300-room Hilton at Short Hills in Short Hills, New
Jersey.
 
    In December 1997 and January 1998, the Company completed the acquisition
from The Prudential Insurance Company of America ("Prudential") of the remaining
ownership interests in joint ventures which own the Capital Hilton, Chicago
Hilton and Towers, Rye Town Hilton, San Francisco Hilton and Towers and
Washington Hilton and Towers. The Company had acquired a majority of
Prudential's interests in such properties in the 1996 fourth quarter.
 
    In July 1997, the Company's Board of Directors approved a renovation of the
New York Hilton and Towers, including new restaurants, a state-of-the-art
business/conference center, a world-class fitness facility and an exclusive
Towers Lounge overlooking New York City. This project is expected to be
completed in late 1999. In September 1997, the Company began construction of a
new 600-room hotel at the center of Boston's Logan Airport, which is expected to
be completed in late 1999.
 
    In addition, the Company continued to increase its franchise hotels through
the expansion of Hilton Garden Inns-Registered Trademark-. At December 31, 1997,
the Company had approximately 100 Hilton Garden Inn-Registered Trademark-
properties either open, under construction or in development. In December 1997,
the Company signed an agreement with Chartwell Leisure Inc. to franchise 20
Hilton Garden Inn-Registered Trademark- properties throughout Mexico.
 
    INTERNATIONAL
 
    In January 1997, the Company finalized agreements with Ladbroke Group PLC
("Ladbroke"), whose wholly owned subsidiary, Hilton International Co. ("HI"),
owns the rights to the Hilton name outside the United States. The agreements
provide for the reunification of the Hilton brand worldwide through a strategic
alliance between the companies, including cooperation on sales and marketing,
loyalty programs and other operational matters. The Company and HI have
integrated their reservation systems and worldwide sales offices, launched the
Hilton HHonors-Registered Trademark- Worldwide loyalty program, and have
developed and are continuing to develop joint marketing initiatives. In
addition, the alliance permits the Company and Ladbroke to acquire up to 20% of
each other's outstanding capital stock and provides for mutual participation in
certain future hotel development focusing primarily upon management contracts
and franchises. Stephen F. Bollenbach, the Company's President and Chief
Executive Officer, has become a non-executive director of Ladbroke and Peter M.
George, Chief Executive of Ladbroke, has joined the Board of Directors of Hilton
as a non-executive director.
 
    In 1997, the Company opened two new international hotels: the 351-room
Conrad International Sharm El Sheikh Resort in Egypt and the 300-room Conrad
International Punta del Este Resort and Casino in Uruguay. The Company also
acquired an additional 17% ownership interest in Windsor Casino Limited and sold
its 30% ownership interest in the Conrad International Hong Kong during 1997.
 
    POTENTIAL SPIN-OFF OR BUSINESS COMBINATION
 
    On March 13, 1998, the Company announced that it was discussing a possible
transaction in which (i) the Company would split its gaming and lodging
operations into two separate publicly-traded companies through a tax-free
spin-off, and (ii) Circus Circus Enterprises, Inc., ("Circus") would merge into
the resulting gaming company in a stock-for-stock merger. On March 23, 1998, the
Company announced that discussions with Circus had terminated regarding the
proposed transaction. The Company is continuing to evaluate the possibility of
splitting its gaming and lodging operations through a spin-off, either in
connection with a business combination transaction or otherwise. The Company may
also seek to engage in a merger, business combination or other transaction in
the future, whether or not in connection with a spin-off. However, there is no
assurance that the Company will engage in any of such transactions.
 
                                       2
<PAGE>
    ITT OFFER
 
    In January 1997, the Company commenced an offer (the "ITT Offer") to acquire
ITT Corporation ("ITT") in a combination cash and stock transaction. In
connection with the ITT Offer, the Company sought to have its nominees elected
to the ITT board of directors at the ITT 1997 annual meeting of shareholders. On
November 12, 1997, the shareholders of ITT re-elected the existing directors of
ITT at such annual meeting, and on November 13, 1997, the Company terminated the
ITT Offer.
 
    For a more detailed description of the Company's recent developments, see
"Hotel Operations," "Gaming Operations" and "Additional Information--Vacation
Ownership." For a description of the Company's planned expansion activities, see
"Hotel Operations--Expansion Program" and "Gaming Operations--Expansion
Program." For additional information, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 26 through 35 in the
Stockholders Report.
 
INDUSTRY SEGMENTS
 
    Hilton's revenue and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned, leased,
partially owned and managed hotels and franchise fees; and (ii) gaming
operations, which include the operation of Hilton's owned, partially owned and
managed hotel casinos and riverboat casinos. For financial data relating to the
Company's hotel and gaming operations for the three years ended December 31,
1997, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 51 and 52 in the Stockholders Report.
 
    The Company re-entered the international arena in November 1985, with the
opening of a hotel casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
Ireland, England, Hong Kong, Turkey, Belgium, Australia, Spain, Egypt, Singapore
and Uruguay. To date, the amounts of revenues, operating profits and
identifiable assets attributable to geographic areas other than the United
States have not been material.
 
                                HOTEL OPERATIONS
 
OWNED HOTELS
 
    On February 1, 1998, the following hotels were owned in fee and operated by
Hilton:
 
<TABLE>
<CAPTION>
                                                                     YEAR
                                                      NUMBER OF    ACQUIRED
NAME AND LOCATION                                   ROOMS/SUITES   BY HILTON
--------------------------------------------------  -------------  ---------
<S>                                                 <C>            <C>
 
Anchorage Hilton                                             591     1997
  Anchorage, Alaska(1)
Atlanta Airport Hilton and Towers                            503     1960
  Atlanta, Georgia(2)
Chicago Hilton and Towers                                  1,543     1998
  Chicago, Illinois(3)
Palmer House Hilton                                        1,639     1988
  Chicago, Illinois(4)
McLean Hilton                                                458     1998
  McLean, Virginia(5)
New Orleans Airport Hilton                                   317     1959
  New Orleans, Louisiana(2)
New York Hilton and Towers                                 2,041     1996
  New York, New York(6)
Waldorf=Astoria                                            1,380     1977
  New York, New York(7)
</TABLE>
 
                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                     YEAR
                                                      NUMBER OF    ACQUIRED
NAME AND LOCATION                                   ROOMS/SUITES   BY HILTON
--------------------------------------------------  -------------  ---------
<S>                                                 <C>            <C>
Portland Hilton                                              455     1963
  Portland, Oregon
Rye Town Hilton                                              436     1996
  Rye Brook, New York(8)
San Francisco Hilton and Towers                            1,895     1996
  San Francisco, California(9)
Capital Hilton                                               543     1996
  Washington, D.C.(8)
Washington Hilton and Towers                               1,123     1996
  Washington, D.C.(8)
Hilton Garden Inn-Registered Trademark-                      197     1993
  Southfield, Michigan(10)
Hilton Suites                                                224     1991
  Auburn Hills, Michigan
Hilton Suites                                                203     1989
  Brentwood, Tennessee
Hilton Suites                                                230     1989
  Orange, California
Hilton Suites                                                226     1990
  Phoenix, Arizona
</TABLE>
 
---------
 
 (1) The Company managed the Anchorage Hilton from December 1976 until acquiring
    the property in February 1997.
 
 (2) The Atlanta Airport Hilton and Towers and the New Orleans Airport Hilton
    were closed and demolished in 1986 and, thereafter, rebuilt and reopened in
    1989.
 
 (3) The Company owned a 33% interest in the Chicago Hilton and Towers prior to
    the acquisition of an additional 50% ownership interest in the property from
    Prudential in 1996 and the acquisition of Prudential's remaining 17%
    ownership interest in January 1998.
 
 (4) The Company owned the Palmer House Hilton from May 1946 to December 1962
    and, thereafter, operated the Palmer House Hilton under a lease until
    acquiring the property in February 1988.
 
 (5) The Company owned a 7.5% interest in the McLean Hilton until acquiring the
    remaining 92.5% ownership interest in January 1998.
 
 (6) The Company has an ownership interest in excess of 99% in the joint venture
    which owns the New York Hilton and Towers. The Company had a 50% ownership
    interest in this property prior to the 1996 acquisition of substantially all
    of Prudential's ownership interest.
 
 (7) The Company operated the Waldorf=Astoria under a lease from February 1950
    until acquiring the property in April 1977.
 
 (8) The Company had a 50% ownership interest in these properties prior to the
    acquisition of substantially all of Prudential's ownership interest in such
    properties in 1996 and the acquisition of the remaining Prudential interest
    in December 1997.
 
 (9) The Company had a 50% ownership interest in the San Francisco Hilton and
    Towers prior to the acquisition of substantially all of Prudential's
    ownership interest in the property in 1996 and the acquisition of the
    remaining Prudential interest in January 1998.
 
                                       4
<PAGE>
(10) The Company managed the Hilton Garden Inn-Registered Trademark- from July
    1991 until acquiring the property in July 1993.
 
    As of February 1, 1998, none of the hotels referenced in the table above had
any outstanding mortgage indebtedness, except for (i) the Atlanta Airport Hilton
and Towers in the amount of $50 million; and (ii) the New Orleans Airport Hilton
in the amount of $32 million.
 
LEASED HOTELS
 
    Hilton leases the land upon which seven hotels are located. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 52 in the Stockholders
Report. Hilton, in all cases, owns all furniture and equipment, is responsible
for repairs, maintenance, operating expenses and lease rentals, and retains
complete managerial discretion over operations. Generally, Hilton pays a
percentage rental based on the gross revenue of the facility.
 
    On February 1, 1998, the following hotels were leased and operated by
Hilton:
 
<TABLE>
<CAPTION>
                                             NUMBER OF
                                               ROOMS
                                           (YEAR ACQUIRED
          NAME AND LOCATION                  BY HILTON)      EXPIRATION DATE
-------------------------------------  ------------------------------------------------------------------------
<S>                                    <C>                   <C>
O'Hare Hilton                                   858          2018
  Chicago, Illinois(1)                         (1991)
 
Oakland Airport Hilton                          363          2033
  Oakland, California                          (1970)
 
Pittsburgh Hilton and Towers                    712          2004, with renewal options aggregating 30 years
  Pittsburgh, Pennsylvania                     (1959)
 
San Diego Hilton Beach and Tennis               357          2019
  Resort                                       (1965)
  San Diego, California
 
San Francisco Airport Hilton                    527          1998
  San Francisco, California                    (1959)
 
Seattle Airport Hilton                          178          2004, with renewal options aggregating 30 years
  Seattle, Washington                          (1961)
 
Tarrytown Hilton                                236          2003, with renewal options aggregating 40 years
  Tarrytown, New York(2)                       (1993)
</TABLE>
 
---------
 
(1) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
    Company purchased the then remaining leasehold of the hotel. The O'Hare
    Hilton was closed for renovation in October 1991 and reopened in July 1992.
 
(2) The Company managed and was a joint venture partner with respect to the
    Tarrytown Hilton from 1975 until August 1993, when it acquired the remaining
    equity interest in the joint venture leasing the land underlying the hotel.
 
    During the years ended December 31, 1995, 1996 and 1997, Hilton paid
aggregate rentals, primarily consisting of rentals attributable to the
properties listed in the above table, of $15 million, $18 million and $27
million, respectively. For information relating to minimum rental commitments in
the future, see "Leases" in the Notes to the Company's Consolidated Financial
Statements on page 52 in the Stockholders Report.
 
                                       5
<PAGE>
MANAGED HOTELS
 
    On February 1, 1998, Hilton operated 25 domestic hotels and nine
international hotels under management agreements. Under its standard management
arrangement, Hilton operates a hotel for the benefit of its owner, which either
owns or leases the hotel and the associated personal property. Hilton's
management fee is generally based on a percentage of each hotel's gross revenue
plus, in the majority of properties, an incentive fee based on operating
performance. The expiration dates of Hilton's management agreements range from
1998 to 2021 and generally contain renewal options ranging from five to 20
years, subject to certain termination rights.
 
    Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an equity
interest. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 43 in the
Stockholders Report.
 
    On February 1, 1998, the following hotels were operated by Hilton under
management agreements:
 
<TABLE>
<CAPTION>
NAME AND LOCATION                      NUMBER OF ROOMS/SUITES
-------------------------------------  ----------------------
<S>                                    <C>
DOMESTIC
Anaheim Hilton and Towers                         1,574
  Anaheim, California
Atlanta Hilton and Towers                         1,224
  Atlanta, Georgia
Beverly Hilton                                      581
  Beverly Hills, California
Tamarron Hilton Resort                              282
  Durango, Colorado
Brunswick Hilton and Towers                         405
  East Brunswick, New Jersey(1)
Hilton Hawaiian Village                           2,545
  Honolulu, Hawaii(2)
Long Beach Hilton                                   393
  Long Beach, California
Los Angeles Airport Hilton and Towers             1,234
  Los Angeles, California
Fontainebleau Hilton Resort and                   1,206
  Towers
  Miami, Florida
Miami Airport Hilton and Towers                     500
  Miami, Florida
Minneapolis Hilton and Towers                       821
  Minneapolis, Minnesota
Newark Airport Hilton                               375
  Newark, New Jersey
New Orleans Hilton Riverside and                  1,600
  Towers
  New Orleans, Louisiana(3)
Millenium Hilton                                    561
  New York, New York
</TABLE>
 
                                       6
<PAGE>
<TABLE>
<CAPTION>
NAME AND LOCATION                      NUMBER OF ROOMS/SUITES
-------------------------------------  ----------------------
<S>                                    <C>
Turtle Bay Hilton Golf and Tennis                   485
  Resort
  Oahu, Hawaii
Hilton at Walt Disney World Village                 814
  Orlando, Florida
Pasadena Hilton                                     291
  Pasadena, California
The Pointe Hilton Resort on South                   636
  Mountain
  Phoenix, Arizona
The Pointe Hilton Resort at Squaw                   563
  Peak
  Phoenix, Arizona
The Pointe Hilton Resort at Tapatio                 585
  Cliffs
  Phoenix, Arizona
Hilton Palacio del Rio                              481
  San Antonio, Texas
Hilton at Short Hills                               300
  Short Hills, New Jersey(4)
Hilton Waikoloa Village                           1,239
  Waikoloa, Hawaii(5)
Hilton Suites                                       212
  Oakbrook Terrace, Illinois(1)(2)
Hilton Garden                                       152
  Inn-Registered Trademark-
  Valencia, California(5)
 
INTERNATIONAL
 
Conrad International Barcelona                      412
  Barcelona, Spain(1)
Conrad International Brussels                       269
  Brussels, Belgium
Conrad International Dublin                         191
  Dublin, Ireland(5)
Conrad International Hong Kong                      509
  Hong Kong, China
Conrad International Hurghada Resort                260
  Hurghada, Egypt
Conrad International Istanbul                       625
  Istanbul, Turkey(1)(5)(6)
Conrad International London                         159
  London, England
Conrad International Sharm El Sheikh                351
  Resort
  Sharm El Sheikh, Egypt
Conrad International Centennial                     508
  Singapore
  Singapore
</TABLE>
 
                                       7
<PAGE>
---------
 
(1) Hilton has made loans which are currently outstanding to the owners of each
    of the referenced properties.
 
(2) Hilton has equity interests of 50% in joint ventures which own each of the
    referenced properties. See "Investments" in the Notes to the Company's
    Consolidated Financial Statements on page 43 in the Stockholders Report.
 
(3) Hilton has a 67.4% equity interest in the joint venture which owns the New
    Orleans Hilton Riverside and Towers. See "Investments" in the Notes to the
    Company's Consolidated Financial Statements on page 43 in the Stockholders
    Report.
 
(4) In March 1998, the Company acquired a 100% ownership interest in the Hilton
    at Short Hills.
 
(5) Hilton has equity interests of less than 50% in entities which own each of
    the referenced properties. See "Investments" in the Notes to the Company's
    Consolidated Financial Statements on page 43 in the Stockholders Report.
 
(6) The Company operated a casino in the Conrad International Istanbul from 1992
    until February 1998.
 
FRANCHISE HOTELS
 
    Pursuant to franchises granted by the Company through a subsidiary,
franchise hotels are operated under the Hilton, Hilton Garden
Inn-Registered Trademark- or Hilton Suites names. The franchise hotels operated
under the Hilton name are generally smaller than the full-service hotels
operated by the Company, average approximately 250 rooms in size and target the
mid-market segment of the hotel industry. Franchise hotels bearing the Hilton
Garden Inn-Registered Trademark- name are approximately 90 to 250 rooms in size,
utilize a modular design constructed around a courtyard containing an indoor or
outdoor swimming pool and target the upper mid-market segment. The Hilton Suites
properties operated pursuant to franchise agreements utilize an all-suites
design with approximately 200 to 250 suites. In general, Hilton approves the
plan for, and the location of, franchise hotels and assists in their design.
 
    On February 1, 1998, there were 180 franchise hotels, of which 170 were
operated under the Hilton name, eight were operated under the Hilton Garden
Inn-Registered Trademark- name and two were operated under the Hilton Suites
name. In general, franchisees pay Hilton an initial fee based on the number of
rooms in a franchise hotel and a continuing fee based on a percentage of the
facility's room revenue. Although Hilton does not directly participate in the
management or operation of franchise hotels, it conducts periodic inspections to
ensure that Hilton's standards are maintained and renders advice with respect to
hotel operations.
 
    The Company has continued its ongoing program of monitoring and improving
its franchise operations. The Company added nine franchises to its system in
1997, while two franchise arrangements were terminated. In addition, the Company
has received commitments for an additional 51 franchise hotels scheduled to
commence operation during the remainder of 1998.
 
EXPANSION PROGRAM
 
    Hilton commenced a major expansion of Hilton Garden
Inn-Registered Trademark- properties in 1996. The additional Hilton Garden
Inns-Registered Trademark- are anticipated to be primarily newly constructed
facilities which will be operated as franchise hotels. At December 31, 1997, the
Company had approximately 100 Hilton Garden Inn-Registered Trademark- properties
either open, under construction or in development. The Company anticipates that
approximately 200 Hilton Garden Inn-Registered Trademark- properties will be
either open, under construction or in development by December 31, 2000. In
December 1997, Hilton signed an agreement with Chartwell Leisure Inc. to
franchise 20 Hilton Garden Inn-Registered Trademark- properties throughout
Mexico.
 
    Hilton also intends to expand its domestic operations through the
acquisition of ownership interests in existing hotels, conversion of existing
hotels into management and franchise properties and through development and
management of vacation ownership resorts. The Company will invest in new
domestic hotel projects or conversion properties where the return on investment
meets the Company's criteria.
 
                                       8
<PAGE>
    In 1997, the Company commenced several major new capital projects for hotel
properties. In July 1997, the Company's Board of Directors approved a renovation
of the New York Hilton and Towers, including new restaurants, a state-of-the-art
business/conference center, a world-class fitness facility and an exclusive
Towers Lounge overlooking New York City. This project is expected to be
completed in late 1999. In September 1997, the Company began construction of a
new 600-room hotel at the center of Boston's Logan Airport, which is expected to
be completed in late 1999.
 
    The Company seeks to maintain its competitive advantage by consistently
improving its hotels through renovation programs. A number of the Company's
major properties are commencing renovation programs in 1998, including a
532-room renovation at the Chicago Hilton and Towers, a 164-room renovation at
the New Orleans Hilton Riverside and Towers and a 400-room renovation at the
O'Hare Hilton. The Waldorf=Astoria plans to renovate 299 guestrooms, including
15 of its Waldorf Towers suites, and upgrade the hotel exterior. The Capital
Hilton will begin the renovation of its guest lobby, congressional suite and
constitution suite. Also during 1998, the Hilton Hawaiian Village plans to
complete the renovation of suites and junior suites at its Diamond Head Tower
and begin a 310-room renovation at its Ali'i Tower. The San Francisco Hilton and
Towers plans to complete the renovation of seven presidential suites and begin a
185-room renovation.
 
    The Company has entered into management contracts to operate the following
new international hotels, the anticipated opening dates of which are indicated
parenthetically: the 633-room Conrad International Cairo in Egypt (early 1999);
the 700-room Conrad International Jakarta in Indonesia (1999); and the 400-room
Conrad International Bangkok in Thailand (1999). The Company has a 10% equity
interest in the Conrad International Cairo, which will feature a 17,000 square
foot European-style casino. Future development of international hotels by the
Company will be subject to agreements entered into between the Company and
Ladbroke in January 1997. Pursuant to such agreements, Ladbroke has been granted
rights to future international development using the Conrad brand name and the
Company and Ladbroke will have the opportunity to participate in certain of each
other's future hotel development focusing primarily upon management contracts
and franchises. See "General Information--Recent Developments" and "Hotel
Operations--Territorial Restrictions."
 
    The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally. Certain countries
have also restricted, from time to time, the repatriation of funds. The Company
considers the foregoing factors, among others, when evaluating a management
and/or investment opportunity abroad, but the Company can give no assurances
that changes in law or governmental policy will not adversely affect
international operations in the future.
 
TERRITORIAL RESTRICTIONS
 
    Hilton has entered into various agreements which restrict its right to
operate hotels in various areas. Pursuant to an agreement entered into at the
time of Hilton's distribution on December 1, 1964 to its stockholders of all the
issued and outstanding capital stock of HI, as subsequently amended, Hilton was
prohibited from operating facilities outside the United States identified as
"Hilton" hotels and HI was prohibited from operating facilities within the
continental United States identified as "Hilton" hotels. The Company's
international hotel and hotel casino operations are conducted under the Conrad
International name. See "Hotel Operations--Managed Hotels" and "Gaming
Operations--International Hotel Casinos."
 
    In January 1997, the Company and Ladbroke, the parent company of HI, entered
into agreements to form a strategic alliance which reunites the Hilton name.
Pursuant to these agreements, the Conrad name has been licensed to HI for future
development outside the United States for a period of 20 years. HI has also
licensed the Company to develop franchise properties under the Hilton name in
Canada, Mexico and the Island of St. John, U.S. Virgin Islands. Subject to the
foregoing restrictions as to the use of the "Hilton" name, Hilton and HI can
compete in all, and do compete in certain, markets. The computerized
 
                                       9
<PAGE>
reservation system utilized by Hilton and HI provides information as to their
respective hotels, if any, in each market. See "General Information--Recent
Developments," "Additional Information--Computer Systems" and "Additional
Information--Reservation System."
 
PROPERTY TRANSACTIONS
 
    Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenue and
a favorable return on stockholders' equity.
 
                               GAMING OPERATIONS
 
GAMING PROPERTIES
 
    On February 1, 1998, the following hotel casinos and riverboat casinos were
wholly or partially owned and operated by Hilton:
 
<TABLE>
<CAPTION>
                                                                                                        APPROXIMATE
                                                                         NUMBER OF     YEAR ACQUIRED       CASINO
                          NAME AND LOCATION                            ROOMS/ SUITES     BY HILTON     SQUARE FOOTAGE
---------------------------------------------------------------------  -------------  ---------------  --------------
<S>                                                                    <C>            <C>              <C>
DOMESTIC HOTEL CASINOS
Bally's Park Place Casino - Resort                                           1,265            1996          155,000
 Atlantic City, New Jersey(1)(2)
 
The Atlantic City Hilton Casino Resort                                         805            1996           60,000
 Atlantic City, New Jersey(1)(3)
 
Bally's Las Vegas                                                            2,814            1996           68,000
 Las Vegas, Nevada(1)(4)
 
Flamingo Hilton-Las Vegas                                                    3,642            1971           93,000
 Las Vegas, Nevada(5)
 
Las Vegas Hilton                                                             3,174            1971          100,000
 Las Vegas, Nevada(6)
 
Flamingo Hilton-Laughlin                                                     2,000            1990           58,000
 Laughlin, Nevada(7)
 
Flamingo Hilton-Reno                                                           604            1981           46,000
 Reno, Nevada(8)
 
Reno Hilton                                                                  2,001            1992          114,000
 Reno, Nevada(9)
 
DOMESTIC RIVERBOAT CASINOS
 
Flamingo Casino-Kansas City                                                 --                1996           30,000
 Kansas City, Missouri
 
Bally's CasinoiLakeshore Resort                                             --                1996           30,000
 New Orleans, Louisiana(1)(10)(11)
 
Bally's SalooniGambling HalliHotel                                             238            1996           40,000
 Robinsonville, Mississippi(1)
</TABLE>
 
                                       10
<PAGE>
<TABLE>
<S>                                                                    <C>            <C>              <C>
INTERNATIONAL HOTEL CASINOS
 
Conrad International Treasury Casino, Brisbane                                 136            1995           65,000
 Brisbane, Queensland, Australia(12)
 
Conrad Jupiters, Gold Coast                                                    609            1985           70,000
 Gold Coast, Queensland, Australia(12)
 
Conrad International Punta del Este                                            300            1997           38,000
 Resort and Casino
 Punta del Este, Uruguay(11)(13)
</TABLE>
 
---------
 
(1) The Company acquired the referenced properties as a result of the Bally
    Merger in December 1996.
 
(2) Casino square footage includes 75,000 square feet attributable to The Wild
    Wild West casino and 8,500 square feet attributable to the race book.
 
(3) Casino square footage includes 1,500 square feet attributable to the race
    book.
 
(4) On February 1, 1998, the Company owned approximately 92% of Bally's Grand,
    Inc., which owns Bally's Las Vegas. On March 26, 1998, the Company acquired
    the remaining outstanding interest in Bally's Grand, Inc. See "Item 3. Legal
    Proceedings." Casino square footage includes 5,000 square feet attributable
    to the race and sports book.
 
(5) Casino square footage includes 20,000 square feet attributable to O'Sheas
    Irish theme casino adjacent to the hotel.
 
(6) Casino square footage includes 29,000 square feet attributable to the race
    and sports book and 22,000 square feet attributable to the SpaceQuest
    casino.
 
(7) Casino square footage includes 3,000 square feet attributable to the race
    and sports book.
 
(8) An extension of the Flamingo Hilton-Reno casino operation is contained in a
    structure located on an adjacent block with a skywalk connecting it to the
    main building. This structure is held under four long-term leases or
    subleases, expiring on various dates from January 2001 to August 2034,
    including renewal options, all of which may not necessarily be exercised.
    Casino square footage includes 2,500 square feet attributable to the race
    and sports book.
 
(9) Casino square footage includes 12,000 square feet attributable to the race
    and sports book.
 
(10) The Company has a 49.9% ownership interest in this property.
 
(11) The Company has made loans which are currently outstanding to the owners of
    these properties.
 
(12) The Company has a 19.9% ownership interest in these properties.
 
(13) The Company has a 43% ownership interest in this property.
 
    Each of the gaming properties listed in the above table is wholly owned by
the Company, except as referenced therein. With respect to hotel casinos listed
in the above table which are partially owned by the Company, see "Hotel
Operations--Managed Hotels" for a description of the Company's hotel management
agreements.
 
    Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations. As is customary in the gaming
industry, activities are conducted on a credit as well as a cash basis, in
accordance with procedures established and supervised by management.
Fluctuations in collecting casino receivables could have a material effect on
results of operations of these properties. An allowance is provided for
estimated uncollectible casino receivables. Casino receivables aggregated $94
million, subject to an $18 million (approximately 19%) reserve, at December 31,
1995; $106 million,
 
                                       11
<PAGE>
subject to a $30 million (approximately 28%) reserve, at December 31, 1996; and
$129 million, subject to a $24 million (approximately 19%) reserve, at December
31, 1997.
 
NEVADA HOTEL CASINOS
 
    The Company owns and operates six hotel casinos in the State of Nevada: the
Las Vegas Hilton, the Flamingo Hilton-Las Vegas, Bally's Las Vegas, the Flamingo
Hilton-Laughlin, the Reno Hilton and the Flamingo Hilton-Reno.
 
    The Company's Nevada gaming operations reach diverse markets by offering
gaming alternatives for premium players, convention visitors, mid-market
gamblers and budget-conscious customers. The Las Vegas Hilton is located
adjacent to the Las Vegas Convention Center and focuses on upscale individual
leisure guests and convention groups. Bally's Las Vegas is located at the "Four
Corners" on the Strip in Las Vegas and caters to convention groups and the
mid-to upper mid-market, including the group tour and travel segment. Bally's
Las Vegas is also serviced by a public monorail which connects to the MGM Grand
Hotel and Casino. The Flamingo Hilton-Las Vegas and the Flamingo Hilton-Reno
focus primarily on the mid-market, in particular the group tour and travel
segment. The Flamingo Hilton-Laughlin targets the budget and mid-market
segments. The Reno Hilton focuses primarily on the mid-market, in particular
convention groups. Each of these hotel casinos has gaming, convention, dining,
shopping, entertainment and, with the exception of the Flamingo Hilton-Reno,
indoor and outdoor recreational facilities. A variety of popular entertainment
is featured in theaters and lounges at each hotel. The Company also operates a
vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas. See
"Additional Information-- Vacation Ownership."
 
    In January 1998, the Company opened "Star Trek: The Experience at the Las
Vegas Hilton," which was developed in collaboration with Paramount Parks Inc.
("Paramount"). This 65,000 square foot attraction features a motion based
simulation ride, interactive video and virtual reality stations, dining and
souvenir shops. The building housing the Star Trek attraction is owned by the
Company and leased to Paramount. The attraction is also managed by Paramount. In
conjunction with the Star Trek attraction, in November 1997, the Company opened
SpaceQuest casino, a themed 22,000 square foot addition at the Las Vegas Hilton.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 26 through 35 in the Stockholders Report.
 
    In 1997, the Company continued to refurbish and expand existing facilities
in Nevada to maintain their presence as premier properties in the market. The
Las Vegas Hilton renovated approximately 850 guest rooms, remodeled the lobby in
conjunction with the Star Trek attraction, rebuilt a new marquee sign, opened
new retail stores and a parking garage and upgraded its slot machines and life
safety system. The Flamingo Hilton-Las Vegas opened a new restaurant, renovated
the casino and showroom entrance, enlarged its casino bar and added a pool bar.
Bally's Las Vegas renovated its showroom and upgraded the Jubilee Show and also
continued to renovate its life safety and building management systems. The
Flamingo Hilton-Laughlin renovated 1,000 guest rooms, installed a riverside dock
to accommodate a new boat operation and continued its slot machine replacement
program. At the Reno Hilton, the bowling center, guest room suites and
restaurant areas were renovated. The Flamingo Hilton-Reno renovated the casino,
guest rooms and the gift shop and upgraded slot machines.
 
    Each of the hotel casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, "big 6," baccarat, poker, keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is linked by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno. Bally's Las Vegas also operates a race and
sports book.
 
    It is impracticable for Hilton's hotel casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment
 
                                       12
<PAGE>
in the hotels, and occupancy rates in the hotels and in the Las Vegas, Laughlin
and Reno markets. The amount of revenue from gaming operations varies depending
upon the amount of gaming activity as well as variations in the odds for
different games and the factor of chance. Casino activities are conducted by
experienced personnel who are supervised at all times.
 
    As is the case of any business that extensively involves the handling of
cash, gaming operations at the Company's hotel casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all six Nevada properties are monitored by computers.
 
    The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las Vegas,
Bally's Las Vegas, the Flamingo Hilton-Laughlin, the Flamingo Hilton-Reno and
the Reno Hilton invite VIP customers to their casinos and may pay for or
reimburse the cost of their air transportation and provide them with
complimentary rooms, food and beverage. In addition, the Las Vegas Hilton has a
special flight program, pursuant to which free air transportation on Company
owned or chartered aircraft and complimentary rooms, food and beverage are
provided to groups or selected persons. These persons either have established
casino credit limits or cash on deposit in the casino and have previously
evidenced a willingness to put substantial amounts at risk at the casino. The
Las Vegas Hilton hosted 37 special flight programs in 1997, compared to 18 such
programs in 1996.
 
ATLANTIC CITY HOTEL CASINOS
 
    The Company owns and operates two hotel casinos in Atlantic City, New
Jersey: the 1,265-room Bally's Park Place Casino Resort, which includes The Wild
Wild West casino ("Bally's Park Place") and the 805-room Atlantic City Hilton
Casino Resort ("The Atlantic City Hilton").
 
    Bally's Park Place, currently the largest four-star hotel in New Jersey, is
located on an eight-acre site with ocean frontage at the intersection of Park
Place and the Boardwalk. With its strategic location on the Boardwalk and over
2,300 parking spaces, Bally's Park Place is strongly positioned to attract
significant walk-in and drive-in business. The Atlantic City Hilton is located
on approximately three acres at the intersection of Boston and Pacific Avenues
at the southern end of the Boardwalk in proximity to one of the major highways
leading into Atlantic City. This location gives The Atlantic City Hilton a
significant advantage in attracting destination oriented customers arriving by
automobile or bus.
 
    In July 1997, the Company opened its new 75,000 square foot western-themed
casino, The Wild Wild West, located on approximately four acres of boardwalk
property adjacent to Bally's Park Place. Also in July 1997, The Atlantic City
Hilton completed a new 300-room hotel tower, which includes meeting rooms,
restaurants and other related amenities. In January 1998, the Company acquired
the Atlantic City Country Club in Northfield, New Jersey, which features an
18-hole golf course.
 
    The Company's Atlantic City properties have gaming, dining, shopping,
entertainment, convention and meeting facilities, recreational facilities and
parking. A variety of popular entertainment, sports events and production shows
are featured at The Atlantic City Hilton. The Atlantic City casinos are open 24
hours a day, seven days a week, for gaming activities, and feature table games
and slot machines similar to those offered at the Company's Nevada hotel
casinos. Atlantic City casinos do not contain sports books. Revenue and earnings
for the Company's Atlantic City casinos peak during the summer, with less
favorable operating results in the winter.
 
    Bally's Park Place focuses on high-end players and the mid-market segment,
including the mid- to upper mid-market slot player segment. The Atlantic City
Hilton primarily focuses on personalized service for high-end and mid-market
casino customers.
 
                                       13
<PAGE>
RIVERBOAT CASINOS
 
    The Company manages and owns equity interests in three riverboat casinos
operating in the states of Mississippi, Missouri and Louisiana. These riverboat
casinos feature table games and slot machines similar to those offered at the
Company's hotel casinos in Nevada and New Jersey.
 
    The Company owns and manages Bally's SalooniGambling HalliHotel, a casino
and hotel complex in Robinsonville, Mississippi, near Memphis, Tennessee. In
October 1997, the Company acquired the remaining 42% ownership interest in the
entity which owned this property. The complex features a dockside casino and an
adjacent 30,000 square foot land-based facility which includes entertainment
facilities and a restaurant. The Company also owns and operates a 238-room hotel
at this complex.
 
    The Company also owns and manages the Flamingo Casino-Kansas City, a casino
complex in Kansas City, Missouri. This wholly-owned complex features a dockside
casino and concessions and entertainment facilities. An agreement between Hilton
and the Port Authority of Kansas City provides for the Company, subject to
certain conditions, to sell 10% of its ownership interest in the complex to
locally-based minorities. In November 1997, the Missouri Supreme Court ruled
that riverboat casinos operating in man-made basins must meet certain
requirements as to contiguity with the Mississippi or Missouri rivers in order
to comply with the Missouri constitution. The Missouri Supreme Court's ruling,
if made applicable to the Flamingo Casino-Kansas City, could, unless modified by
judicial or governmental action or a statewide voter referendum, have a
significant adverse effect upon its operations. See "Additional
Information--Regulation and Licensing--Missouri Gaming Laws."
 
    The Company has a 49.9% ownership interest in the entity which owns Bally's
CasinoiLakeshore Resort, a riverboat casino facility that operates out of South
Shore Harbor on Lake Pontchartrain in Orleans Parish, which is approximately
eight miles from the French Quarter of New Orleans.
 
    From February 1994 through October 1, 1997, the Company operated a riverboat
casino located adjacent to the New Orleans Hilton Riverside and Towers. Since
January 1996, the Company operated a vessel featuring a 20,000 square foot
casino. This vessel is wholly owned by the Company and was leased to a joint
venture, of which the Company owns a 50% interest. In October 1996, the
Louisiana Gaming Control Board granted the Company's petition to relocate this
vessel from New Orleans to Shreveport, Louisiana by October 1, 1997. The Company
subsequently abandoned its plans to relocate the facility and, on October 1,
1997, the riverboat casino ceased operations. See "Additional
Information--Regulation and Licensing--Louisiana Gaming Laws."
 
INTERNATIONAL HOTEL CASINOS
 
    The Company, through Conrad International, manages three international hotel
casinos which feature table games and slot machines similar to those offered at
the Company's hotel casinos in Nevada and New Jersey.
 
    In January 1997, the Company commenced casino operations of the Conrad
International Punta del Este Resort and Casino in Uruguay. The hotel opened in
stages over the latter half of 1997, and features convention facilities,
restaurants and related amenities.
 
    The Company has 19.9% ownership interests in the Conrad Jupiters, Gold Coast
and the Conrad International Treasury Casino, Brisbane, both of which are
located in Queensland, Australia. The Conrad International Treasury Casino,
Brisbane has the exclusive right to conduct casino gaming in Brisbane until
2005.
 
CASINO WINDSOR
 
    The Company and another shareholder of Windsor Casino Limited ("WCL")
operate the Casino Windsor, an interim 50,000 square foot casino in Windsor,
Ontario, Canada. The Company, through
 
                                       14
<PAGE>
Conrad International, owns a 50% interest in WCL, which operates this property
for the Ontario provincial government. In January 1997, WCL redeemed the
shareholder interest of its third original shareholder. The Company anticipates
that the interim casino will be replaced by a permanent facility in mid 1998,
which will include a hotel of approximately 400 rooms, a 75,000 square foot
casino and entertainment and meeting facilities.
 
    The Company also charters a riverboat to the Ontario provincial government
to serve as a complementary facility for Casino Windsor. This vessel provides an
additional 25,000 square feet of casino space for the property. The riverboat
charter expires in June 1998.
 
EXPANSION PROGRAM
 
    The Company continues to expand its domestic gaming operations through the
development of the 2,900-room Paris Casino-Resort, a new casino resort adjacent
to Bally's Las Vegas which will feature an 85,000 square foot casino, 13
restaurants, 130,000 square feet of convention space and a retail shopping
complex with a French influence. In addition to a 50-story replica of the Eiffel
Tower, the resort will also feature replications of some of Paris' most
recognized landmarks, including the Arc de Triomphe, the Paris Opera House, The
Louvre and rue de la Paix. The Paris Casino-Resort is scheduled to be completed
in the 1999 third quarter.
 
    In 1998, the Company's Nevada hotel casinos are scheduled to complete
additional expansion and renovation programs. The Las Vegas Hilton plans to
renovate an additional 850 guest rooms and the casino and sportsbook, expand
valet parking and renovate the pool and spa. The Flamingo Hilton-Las Vegas plans
to renovate guest rooms and casino areas, upgrade slots and enhance signage and
the cooling and information systems. Bally's Las Vegas plans to continue its
participation in a joint venture to erect pedestrian bridges over the Strip and
Flamingo Road connecting the property to other hotel casinos, and also plans to
remodel the ballroom and events center and upgrade elevators. The Flamingo
Hilton-Laughlin plans to renovate an additional 1,000 guest rooms, along with
the casino and the main level of the property, and continue its slot machine
replacement program. At the Reno Hilton, planned improvements include renovation
of guest room suites, slot upgrades, additional signage and enhancement of the
cooling and information systems. The Flamingo Hilton-Reno plans to continue to
renovate guest rooms and upgrade slot machines.
 
    The Company's Atlantic City, New Jersey hotel casinos are also commencing
renovation projects in 1998. Bally's Park Place plans to renovate 500 guest
rooms and restaurant areas, expand valet parking capacity and add a new bus
terminal. The Atlantic City Hilton plans to renovate the property's previously
existing guest rooms to be consistent with the standard of the guest rooms in
the new 300-room tower addition.
 
                             ADDITIONAL INFORMATION
 
VACATION OWNERSHIP
 
    Hilton Grand Vacations Company ("HGVC"), which is wholly owned by the
Company, currently operates 17 vacation ownership resorts in Florida and one in
Nevada. HGVC has developed the first 168 suites of a 420-unit vacation ownership
resort adjacent to Sea World in Orlando, Florida, and plans to complete an
additional 96 suites in the first quarter of 1999. HGVC is developing a 52-suite
vacation ownership resort in the South Beach area of Miami Beach, Florida,
through the renovation of historic art deco buildings. This resort is scheduled
to open its first 26 suites in fall 1998. HGVC is also developing a 232-suite
vacation ownership resort located adjacent to the Las Vegas Hilton. Construction
of this 16-story resort will commence in spring 1998, with opening scheduled for
summer 1999. HGVC is actively seeking new management, development and
acquisition opportunities in other destination resort locations.
 
                                       15
<PAGE>
DESIGN AND FURNISHING SERVICES
 
    Hilton, through its wholly owned subsidiary, Hilton Equipment Corporation,
and through its hotels division, provides design and furnishing services and
purchases and distributes furniture, furnishings, equipment and supplies to the
Company's hotels and hotel casinos and to hotels owned and operated by others.
The revenues of this operation depend primarily on the number of new hotels
operated or franchised by Hilton and on refurbishing and remodeling of existing
Hilton hotels. Pursuant to an agreement between Hilton and Electronic Data
Systems Corporation ("EDS"), EDS provides certain purchasing and distribution
services on behalf of Hilton Equipment Corporation under a fee arrangement.
 
COMPUTER SYSTEMS
 
    In April 1997, Hilton acquired the remaining 50% ownership interest in
Compass Computer Services, Inc. ("Compass"), which operates a computerized
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets. Compass
is managed by Litton Computer Services.
 
RESERVATION SYSTEM
 
    The Compass computerized reservation system is presently utilized by Hilton
Reservations Worldwide, LLC ("HRW"), the operator of a worldwide reservation
system for hotels owned, operated or franchised by Hilton, HI, their affiliates
and others. Hilton and HI each own a 50% interest in HRW. Pursuant to agreements
entered into in January 1997 between the Company and Ladbroke, the parent
corporation of HI, the companies formed HRW to operate an updated computerized
reservation system. The new computerized reservation system, which will replace
the existing system, is expected to commence operation in late 1998. See
"General Information--Recent Developments."
 
MARKETING
 
    The Company's diversified hotel and gaming segments offer multiple product
lines to a broad range of customers in many geographic markets. The Company's
hotel portfolio includes large urban hotels, airport hotels, suburban/suite
hotels and resorts. The gaming segment, with its major presence in Las Vegas and
Atlantic City, attracts premium players, convention visitors, mid-market
gamblers and budget-conscious customers.
 
    Hotel occupancy at Hilton's metropolitan and airport properties is primarily
derived from the convention and meeting market and the business traveler market
(businesspersons traveling as individuals or in small groups). Hotel occupancy
at the Company's resort properties is primarily derived from the tour and
leisure market (tourists traveling either as individuals or in groups) and the
convention and meeting market. Hotel occupancy at the Company's hotel casinos is
primarily derived from the convention and meeting market, the tour and leisure
market and junket and VIP programs. As indicated under "Business Risks" below,
these sources of business are sensitive to general economic and other
conditions. In addition, the Company participates in certain joint marketing
programs with business partners in the airline, car rental and cruise line
industries. The Company believes that its recent alliance with Ladbroke (which
currently owns the rights to the Hilton name outside the U.S.) will improve the
performance of the Company's operations as its properties benefit from the
worldwide integration of the Hilton brand, reservation systems, marketing
programs and sales organizations. See "General Information--Recent
Developments."
 
BUSINESS RISKS
 
    In 1997, the Company was able to increase average room rates for its owned,
leased or managed hotels and hotel casinos by eight percent and nine percent,
respectively, over 1996. The Company's future operating results could be
adversely impacted by industry overcapacity and weak demand, which could
 
                                       16
<PAGE>
restrict the Company's ability to raise room rates to keep pace with the rate of
inflation. The Company's business could also be adversely affected by increases
in transportation and fuel costs or sustained recessionary periods. The
operating results for the Company's hotel casinos can be volatile depending upon
the table game play of premium players, particularly at the Las Vegas Hilton.
However, the Company believes that its implementation of new casino marketing
and entertainment strategies and the opening of the Star Trek attraction and the
SpaceQuest casino will broaden the Las Vegas Hilton's customer base and create
additional mid-level play.
 
    Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Occupancy ratios at the Company's hotels could also be adversely
impacted by a decrease in travel resulting from fluctuations in the worldwide
economy and by excess industry capacity.
 
COMPETITION
 
    The Company seeks to maintain the diversity and balance of its lodging and
gaming businesses while expanding both domestically and internationally. The
Company intends to improve and expand its core businesses by leveraging its
strong brand names, maximizing operating efficiencies, expanding and enhancing
properties and acquiring or developing properties as appropriate.
 
    Hilton is one of the largest operators of full-service hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. The Company's hotels also compete generally with facilities offering
similar services and located in cities and other locations where the Company's
hotels are not present. The Company's precise competitive position in most areas
in which its hotels are located cannot be determined from the information and
data available to Hilton.
 
    To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. The completion of a number
of room expansion projects and the opening of new hotel casinos led to a six
percent increase in hotel capacity in Las Vegas in 1997 compared to 1996,
thereby increasing competition in all segments of the Las Vegas market. Certain
of the Company's competitors have also announced, or are developing, new casino
projects in Las Vegas and Atlantic City which, if completed, will add
significant casino space and hotel rooms to these markets. Such new capacity
additions to the Las Vegas and Atlantic City markets could adversely impact the
Company's gaming income. The business of Hilton's Nevada hotel casinos might
also be adversely affected if gaming operations of the type conducted in Nevada
were to be permitted under the laws of other states, particularly California.
Similarly, legalization of gaming operations in any jurisdiction located near
Atlantic City, New Jersey, or the establishment of new large scale gaming
operations on nearby Native American tribal lands, could adversely affect the
Company's Atlantic City hotel casinos. The expansion of riverboat gaming or
casino gaming on Native American tribal lands could also impact the Company's
gaming operations.
 
                                       17
<PAGE>
STATISTICAL DATA
 
    The following table sets forth certain statistical information as of and for
the year ended December 31, 1997, with respect to the Company's properties:
 
<TABLE>
<CAPTION>
                                                           PROPERTIES      ROOMS     OCCUPANCY    ROOM RATE    REVPAR(1)
                                                          -------------  ---------  -----------  -----------  -----------
<S>                                                       <C>            <C>        <C>          <C>          <C>
Owned and managed hotels:
  Domestic
    Pacific/Mountain....................................           22       15,382        74.6       138.66       103.40
    North Central.......................................            7        5,494        76.3       132.13       100.82
    South Central.......................................            4        2,601        76.3       128.35        97.89
    New England/Middle Atlantic.........................            9        6,446        78.9       187.12       147.61
    South Atlantic......................................            8        6,371        71.5       133.19        95.17
  International.........................................            9        3,284        67.8       152.28       103.19
                                                                  ---    ---------  -----------  -----------  -----------
  Total.................................................           59       39,578        74.6       145.33       108.42
                                                                  ---    ---------  -----------  -----------  -----------
                                                                  ---    ---------  -----------  -----------  -----------
Franchised hotels.......................................          180       45,092        70.0        90.91        63.67
                                                                  ---    ---------  -----------  -----------  -----------
                                                                  ---    ---------  -----------  -----------  -----------
Owned and managed hotel casinos.........................           12       17,590        85.8        78.81        67.62
                                                                  ---    ---------  -----------  -----------  -----------
                                                                  ---    ---------  -----------  -----------  -----------
</TABLE>
 
---------
 
(1) Revpar is equal to rooms revenue divided by available rooms.
 
    For additional information regarding the Company's properties, number of
available rooms and occupancy ratios, see the Five Year Summary on page 55 in
the Stockholders Report.
 
YEAR 2000
 
    The Company has developed preliminary plans to address the possible
exposures related to the impact on its computer systems of the year 2000. Key
financial, information and operational systems are being assessed and
preliminary plans have been developed to address system modifications required
by December 31, 1999. The financial impact of making the required systems
changes is not expected to be material to the Company's financial position or
results of operations.
 
FORWARD-LOOKING STATEMENTS
 
    Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect the Company's current views with
respect to future events and financial performance, and are subject to certain
risks and uncertainties which could cause actual results to differ materially
from historical results or those anticipated. Although the Company believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
 
ENVIRONMENTAL MATTERS
 
    The Company, like others in its industry, is subject to various federal,
state, local and, in some cases, foreign laws, ordinances and regulations that
(i) govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous or toxic wastes, or (ii) may impose liability for the
costs of cleaning up, and certain damages resulting from, sites of past spills,
disposals or other releases of hazardous or toxic substances or wastes
(together, "Environmental Laws").
 
                                       18
<PAGE>
    The Company endeavors to maintain compliance with Environmental Laws, but,
from time to time, the Company's operations may have resulted or may result in
noncompliance or liability for cleanup pursuant to Environmental Laws. In that
regard, the Company has been notified of contamination resulting from past
disposals of wastes at two sites to which hazardous or non-hazardous wastes may
have been sent from Company facilities in the past. Based on information
reviewed by and available to the Company, including uncertainty whether a
Company facility in fact shipped any wastes to one such site, the number of
potentially responsible parties at such sites and, where available, the volume
and type of waste sent to each such site, the Company believes that any
liability arising from such disposals under Environmental Laws would not have a
material adverse effect on its results of operations or financial condition.
 
    Bally received notice from the current landowner of a prior Bally facility
in Chicago, Illinois that the landowner may seek to recover past and future
costs of investigating and remediating alleged soil and groundwater
contamination at the facility. The Company does not believe that Bally's prior
operations at the site have contributed to the alleged contamination; as a
result, if the current landowner pursues its claim, the Company expects to
vigorously defend against the claim. The Company cannot at this time estimate
the potential costs of investigation or cleanup, if any, however, based on
currently available information, the Company believes that any such costs would
be shared by several parties and, in any event, the cost estimates provided to
date indicate that any such liability would not have a material adverse effect
on the Company's results of operations or financial condition.
 
REGULATION AND LICENSING
 
    Each of the Company's casinos is subject to extensive regulation under laws,
rules and supervisory procedures, primarily in the jurisdiction where located or
docked. Some jurisdictions, however, empower their regulators to investigate
participation by licensees in gaming outside their jurisdiction and require
access to and periodic reports respecting such gaming activities. Violations of
laws in one jurisdiction could result in disciplinary action in other
jurisdictions.
 
    Under provisions of Nevada, New Jersey, Louisiana, Mississippi, Missouri and
other gaming laws, and the Company's Restated Certificate of Incorporation, as
amended, certain securities of the Company are subject to restrictions on
ownership which may be imposed by specified governmental authorities. Such
restrictions may require the holder to dispose of the securities or, if the
holder refuses to make such disposition, the Company may be obligated to
repurchase the securities.
 
    NEVADA GAMING LAWS.  The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, Bally's Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno, are subject to the Nevada Gaming Control
Act and the regulations promulgated thereunder (the "Nevada Act") and various
local regulations. The Company's Nevada gaming operations are subject to the
licensing and regulatory control of the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board") and,
depending on the facility's location, the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Reno. The Nevada Commission, the
Nevada Board, the CCB and the City of Reno are collectively referred to as the
"Nevada Gaming Authorities."
 
    The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local
 
                                       19
<PAGE>
revenues through taxation and licensing fees. Change in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.
 
    Each subsidiary of the Company that operates a casino in Nevada
(individually, a "Corporate Licensee" and collectively, the "Corporate
Licensees") is required to be licensed by the Nevada Gaming Authorities. The
gaming license requires the periodic payment of fees and taxes and is not
transferable. The Company is required to be registered by the Nevada Commission
as a publicly-traded corporation ("Registered Corporation") and as such, it is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information that the Nevada Commission
may require. No person may become a stockholder of, or receive any percentage of
profits from, a Corporate Licensee without first obtaining licenses and
approvals from the Nevada Gaming Authorities. The Company and the Corporate
Licensees have obtained from the Nevada Gaming Authorities the various
registrations, findings of suitability, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
 
    The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or any of
its Corporate Licensees in order to determine whether such individual is
suitable or should be licensed as a business associate of a gaming licensee.
Officers, directors and certain key employees of a Corporate Licensee must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. Officers, directors
and key employees of the Company who are actively and directly involved in
gaming activities of any Corporate Licensee may be required to be licensed or
found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities
may deny an application for licensing for any cause which they deem reasonable.
A finding of suitability is comparable to licensing, and both require submission
of detailed personal and financial information followed by a thorough
investigation. An applicant for licensing or an applicant for a finding of
suitability must pay for all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and, in addition to
their authority to deny an application for a finding of suitability or
licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a
change in a corporate position.
 
    If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or any Corporate Licensee, the Company and the
Corporate Licensee would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Company or a Corporate Licensee
to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or questions pertaining to licensing
are not subject to judicial review in Nevada.
 
    The Company and all Corporate Licensees are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
of a Corporate Licensee must be reported to, or approved by, the Nevada
Commission.
 
    If it were determined that the Nevada Act was violated by a Corporate
Licensee, the gaming licenses it holds could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, the Corporate Licensee, the Company and the persons
involved could be subject to substantial fines for each separate violation of
the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor
could be appointed by the Nevada Commission to operate a Corporate Licensee's
gaming establishment and, under certain circumstances, earnings generated during
the supervisor's appointment (except for the reasonable rental value of the
gaming establishment) could be forfeited to the State of Nevada. Limitation,
conditioning or suspension of any gaming license of a Corporate Licensee or the
appointment of a supervisor could (and revocation of any gaming license would)
have a material adverse effect on the Company's gaming operations.
 
                                       20
<PAGE>
    Any beneficial holder of the Company's Common Stock, Preferred Redeemable
Increased Dividend Equity Securities-SM-, 8% PRIDES-SM-, Convertible Preferred
Stock ("PRIDES") or any other voting security of the Company ("Company Voting
Securities"), regardless of the number of shares owned, may be required to file
an application, be investigated, and have such person's suitability as a
beneficial holder of Company Voting Securities determined if the Nevada
Commission has reason to believe that such ownership would otherwise be
inconsistent with the declared policies of the State of Nevada. The applicant
must pay all costs of the investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation.
 
    The Nevada Act requires any person who acquires a beneficial ownership of
more than 5% of Company Voting Securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of Company Voting Securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails the
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires
beneficial ownership of more than 10%, but not more than 15%, of Company Voting
Securities may apply to the Nevada Commission for a waiver of such finding of
suitability if such institutional investor holds Company Voting Securities for
investment purposes only. An institutional investor shall not be deemed to hold
Company Voting Securities for investment purposes unless Company Voting
Securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding Company Voting Securities for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, polices or operations; and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of Company Voting Securities who
must be found suitable is a corporation, partnership, limited partnership,
limited liability company or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation. Barron Hilton, the Company's largest
stockholder, has been found suitable as a controlling stockholder of the
Company.
 
    Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
by the Chairman of the Nevada Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of Company Voting
Securities beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company or a
Corporate Licensee, the Company (i) pays that person any dividend or interest
upon any Company Voting Securities; (ii) allows that person to exercise,
directly or indirectly, any voting right conferred through securities held by
that person; (iii) pays remuneration in any form to that person for services
rendered or otherwise; or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish the voting securities for cash at fair
market value. Additionally, the CCB has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming
licensee.
 
    The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own such debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the
 
                                       21
<PAGE>
loss of its approvals, if without the prior approval of the Nevada Commission,
it (i) pays to the unsuitable person any dividend, interest or any distribution
whatsoever; (ii) recognizes any voting right by such unsuitable person in
connection with such securities; (iii) pays the unsuitable person remuneration
in any form; or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation or similar transaction.
 
    The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner of any Company
Voting Securities. The Nevada Commission has the power to require the Company's
stock certificates to bear a legend indicating that the securities are subject
to the Nevada Act. However, to date, the Nevada Commission has not imposed such
a requirement on the Company.
 
    The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On September 25, 1997, the Nevada Commission granted the Company prior
approval to make public offerings for a period of two years, subject to certain
conditions (the "Shelf Approval"). The Shelf Approval also applies to any
affiliated company wholly owned by the Company (an "Affiliate") which is a
publicly-traded corporation or would thereby become a publicly-traded
corporation pursuant to a public offering. The Shelf Approval also includes
approval for the Corporate Licensees to guarantee any security issued by, or to
hypothecate their assets to secure the payment or performance of any obligations
issued by, the Company or an Affiliate in a public offering under the Shelf
Registration. The Shelf Approval, however, may be rescinded for good cause
without prior notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada Board. The Shelf Approval does not constitute a finding,
recommendation or approval of the Nevada Gaming Authorities as to the accuracy
or adequacy of the prospectus or the investment merits of the securities offered
thereby. Any representation to the contrary is unlawful.
 
    Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
 
    The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licenses, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.
 
                                       22
<PAGE>
    License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Corporate Licensees' respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling or serving of food or refreshments or
the selling of merchandise. Nevada Corporate Licensees that hold a license as an
operator of a slot route, or a manufacturer's or distributor's license also pay
certain fees and taxes to the State of Nevada.
 
    Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of the Licensee's participation in such foreign gaming. The
revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission. Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act. A Licensee is also subject to
disciplinary action by the Nevada Commission if it knowingly violates any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fails to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engages in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employs a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
 
    The sale of alcoholic beverages at establishments operated by a Corporate
Licensee is subject to licensing, control and regulation by applicable local
regulatory agencies. All licenses are revocable and are not transferable. The
agencies involved have full power to limit, condition, suspend or revoke any
such license, and any such disciplinary action could (and revocation would) have
a material adverse effect upon the operations of the Corporate Licensee.
 
    NEW JERSEY GAMING LAWS.  The ownership and operation of casino gaming
facilities in Atlantic City are subject to the New Jersey Casino Control Act
(the "New Jersey Act"), regulations of the New Jersey Casino Control Commission
(the "New Jersey Commission") and other applicable laws. No casino may operate
unless the required permits or licenses and approvals are obtained from the New
Jersey Commission. The New Jersey Commission is authorized under the New Jersey
Act to adopt regulations covering a broad spectrum of gaming and gaming related
activities and to prescribe the methods and forms of applications from all
classes of licensees. These laws and regulations concern primarily: (i) the
financial stability, integrity, responsibility, good character, honesty and
business ability of casino service suppliers and casino operators, their
directors, officers and employees, their security holders and others financially
interested in casino operations; (ii) the nature of casino hotel facilities; and
(iii) the operating methods and financial and accounting practices used in
connection with the casino operations.
 
    Taxes are imposed by the State of New Jersey on gaming operations at the
rate of 8% of gross gaming revenues. In addition, the New Jersey Act provides
for an investment alternative tax of 2.5% of gross gaming revenues. This
investment alternative tax may be offset by investment tax credits equal to
1.25% of gross gaming revenues, which are obtained by purchasing bonds issued
by, or investing in housing or other development projects approved by, the
Casino Reinvestment Development Authority ("CRDA").
 
                                       23
<PAGE>
    The New Jersey Commission has broad discretion with regard to the issuance,
renewal and revocation or suspension of casino licenses. A casino license is not
transferable, is issued for a term of up to one year for the first two renewals
and thereafter for a term of up to four years (subject to discretionary
reopening of the licensing hearing by the New Jersey Commission at any time),
and must be renewed by filing an application which shall be acted on by the New
Jersey Commission prior to the expiration of the license in force. At any time,
upon a finding of disqualification or noncompliance, the New Jersey Commission
may revoke or suspend a license or impose fines or other penalties.
 
    The New Jersey Act imposes certain restrictions on the ownership and
transfer of securities issued by a corporation that holds a casino license or is
deemed a holding company, intermediary company, subsidiary or entity qualifier
(each, an "affiliate") of a casino licensee. "Security" is defined by the New
Jersey Act to include instruments that evidence either a beneficial ownership in
an entity (such as common stock or preferred stock) or a creditor interest in an
entity (such as a bond, note or mortgage). Pursuant to the New Jersey Act, the
corporate charter of a publicly-traded affiliate of a casino licensee must
require that a holder of the company's securities dispose of such securities if
the holder's continued interest would result in the company or any other
affiliate being no longer qualified to continue as a casino licensee under the
New Jersey Act. The corporate charter of a casino licensee or any privately held
affiliate of the licensee must: (i) establish the right of prior approval by the
New Jersey Commission with regard to a transfer of any security in the company
and (ii) create the absolute right of the company to repurchase at the market
price or purchase price, whichever is less, any security in the company in the
event the New Jersey Commission disapproves a transfer of such security under
the New Jersey Act. The corporate charter of the Company has been approved by
the New Jersey Commission. The corporate charter of the Company's subsidiaries
that operate Bally's Park Place and the Atlantic City Hilton and the charters of
their privately held affiliates conform to the New Jersey Act's requirements
described above for privately held companies.
 
    If the New Jersey Commission finds that an individual owner or holder of
securities of a corporate licensee or an affiliate of such corporate licensee is
not qualified under the New Jersey Act, the New Jersey Commission may propose
remedial action. The New Jersey Commission may require divestiture of the
securities held by any disqualified holder who is required to be qualified under
the New Jersey Act (e.g., officers, directors, security holders and key casino
and other employees). In the event that disqualified persons fail to divest
themselves of such securities, the New Jersey Commission may revoke or suspend
the license. However, if an affiliate of a casino licensee is a publicly-traded
company and the New Jersey Commission makes a finding of disqualification with
respect to any holder of any security thereof who is required to be qualified,
and the New Jersey Commission also finds that: (i) such company has complied
with aforesaid charter provisions; (ii) such company has made a good faith
effort, including the prosecution of all legal remedies, to comply with any
order of the New Jersey Commission requiring the divestiture of the security
interest held by the disqualified holder; and (iii) such disqualified holder
does not have the ability to control the corporate licensee or the affiliate, or
to elect one or more members of the board of directors of such affiliate, the
New Jersey Commission will not take action against the casino licensee or its
affiliate with respect to the continued ownership of the security interest by
the disqualified holder.
 
    For purposes of the New Jersey Act, a security holder is presumed to have
the ability to control a publicly-traded corporation, or to elect one or more
members of its board of directors, and thus require qualification, if such
holder owns or beneficially holds 5% or more of any class of the equity
securities of such corporation, unless such presumption of control or ability to
elect is rebutted by clear and convincing evidence. An "institutional investor,"
as that term is defined under the New Jersey Act, is entitled to a waiver of
qualification if it holds less than 10% of any class of the equity securities of
a publicly-traded holding or intermediary company of a casino licensee and: (i)
the holdings were purchased for investment purposes only; (ii) there is no cause
to believe the institutional investor may be found unqualified; and (iii) upon
request by the New Jersey Commission, the institutional investor files a
certified statement to the effect that it has no intention of influencing or
affecting the affairs of the issuer, the casino licensee or its other
affiliates. The New Jersey Commission may grant a waiver of qualification to an
institutional investor
 
                                       24
<PAGE>
holding 10% or more of such securities upon a showing of good cause and if the
conditions specified above are met.
 
    With respect to debt securities, the New Jersey Commission generally
requires a person holding 15% or more of a debt issue of a publicly-traded
affiliate of a casino licensee to qualify as a "financial source" where the use
of the proceeds from the debt issue is related in any way to the financing of
the casino licensee. There can be no assurance that the New Jersey Commission
will continue to apply the 15% threshold, and the New Jersey Commission could at
any time establish a lower threshold for qualification. An exception to the
qualification requirement is made for institutional investors, in which case the
institutional holder is entitled to a waiver of qualification if the holder's
position in the aggregate is less than 20% of the total outstanding debt of the
affiliate and less than 50% of any outstanding publicly-traded issue of such
debt, and if the conditions specified in the above paragraph are met. As with
equity securities, a waiver of qualification may be granted to institutional
investors holding larger positions upon a showing of good cause and if all
conditions specified in the above paragraph are met.
 
    Generally, the New Jersey Commission would require each institutional holder
seeking a waiver of qualification to execute a certificate to the effect that:
(i) the holder has reviewed the definition of institutional investor under the
New Jersey Act and believes that it meets the definition of institutional
investor; (ii) the holder purchased the securities for investment purposes only
and holds them in the ordinary course of business; (iii) the holder has no
involvement in the business activities of, and no intention of influencing or
affecting the affairs of, the issuer, the casino licensee or any affiliate; and
(iv) if the holder subsequently determines to influence or affect the affairs of
the issuer, the casino licensee or any affiliate, it shall provide not less than
30 days' notice of such intent and shall file with the New Jersey Commission an
application for qualification before taking any such action.
 
    Commencing on the date the New Jersey Commission serves notice on a
corporate licensee or an affiliate of such corporate licensee that a security
holder of such corporation has been found disqualified, it will be unlawful for
the security holder to: (i) receive any dividends or interest upon any such
securities; (ii) exercise, directly or through any trustee or nominee, any right
conferred by such securities; or (iii) receive any remuneration in any form from
the corporate licensee for services rendered or otherwise.
 
    Persons who are required to qualify under the New Jersey Act by reason of
holding debt or equity securities and are not otherwise previously qualified,
are required to place the securities into an Interim Casino Authorization
("ICA") trust pending qualification. Unless and until the New Jersey Commission
has reason to believe that the investor may not qualify, the investor will
retain the ability to direct the trustee how to vote, or whether to dispose of,
the securities. If at any time the New Jersey Commission finds reasonable cause
to believe that the investor may be found unqualified, it can order the trust to
become "operative," in which case the investor will lose voting power, if any,
over the securities but will retain the right to petition the New Jersey
Commission to order the trustee to dispose of the securities.
 
    Once an ICA trust is created and funded, and regardless of whether it
becomes operative, the investor has no right to receive a return on the
investment until the investor becomes qualified. Should an investor ultimately
be found unqualified, the trustee would dispose of the trust property, and the
proceeds would be distributed to the unqualified applicant only in an amount not
exceeding the actual cost of the trust property. Any excess proceeds would be
paid to the State of New Jersey. If the securities were sold by the trustee
pending qualification, the investor would receive only actual cost, with
disposition of the remainder of the proceeds, if any, to await the investor's
qualification hearing.
 
    In the event it is determined that a licensee has violated the New Jersey
Act or its regulations, then under certain circumstances, the licensee could be
subject to fines or have its license suspended or revoked. In addition, if a
person who is required to qualify under the New Jersey Act fails to qualify, or
if a security holder who is required to qualify fails to qualify and does not
dispose of the related securities in the licensee or in any affiliate of the
licensee, as may be required by the New Jersey Act, then, under certain
circumstances, the licensee could have its license suspended or revoked.
 
                                       25
<PAGE>
    If a casino license was not renewed, was suspended for more than 120 days or
was revoked, the New Jersey Commission could appoint a conservator. The
conservator would be charged with the duty of conserving and preserving the
assets so acquired and continuing the operation of the hotel and casino of a
suspended licensee or with operating and disposing of the hotel casino
facilities of a former licensee. Such suspended licensee or former licensee,
however, would be entitled only to a fair return on its investment, to be
determined under New Jersey law, with any excess to go to the State of New
Jersey, if so directed by the New Jersey Commission. Suspension or revocation of
any licenses or the appointment of a conservator by the New Jersey Commission
would have a material adverse effect on the businesses of the Company's Atlantic
City hotel casinos.
 
    In November 1996, the New Jersey Commission found the Company qualified as a
holding company for New Jersey casino licensees, Bally's Park Place and the
Atlantic City Hilton. Such licenses are scheduled for renewal in the year 2000.
 
    LOUISIANA GAMING LAWS.  The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Gaming Control Board (the "Board"). The Board is responsible
for investigating the background of all applicants seeking a riverboat gaming
license, issuing the license and enforcing the laws, rules and regulations
relating to riverboat gaming activities.
 
    The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Board. The Board may, in its discretion, also review
the suitability of other security holders of, or persons affiliated with, a
licensee. This finding of suitability requires the filing of an extensive
application to the Board disclosing personal, financial, criminal, business and
other information. On March 24, 1994, the Board's predecessor issued a riverboat
gaming license to Belle of Orleans, L.L.C., a limited liability company of which
the Company owns a 49.9% interest. Belle of Orleans, L.L.C. commenced riverboat
gaming operations in New Orleans on July 9, 1995. On October 13, 1993, the
Board's predecessor issued a riverboat gaming license to the Queen of New
Orleans, a joint venture of which the Company owns a 50% interest. The Queen of
New Orleans joint venture conducted riverboat gaming operations in New Orleans
from February 10, 1994 until October 1, 1997.
 
    The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Board approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
 
    If a security holder of a licensee is found unsuitable, it will be unlawful
for the security holder to (i) receive any dividend or interest with regard to
the securities; (ii) exercise, directly or indirectly, any rights conferred by
the securities; or (iii) receive any remuneration from the licensee for services
rendered or otherwise. The Board may impose similar approval requirements on
holders of securities of any intermediary or holding company of the licensee,
but may waive those requirements with respect to holders of publicly-traded
securities of intermediary and holding companies if such holders do not have the
ability to control the publicly-traded corporation or elect one or more
directors thereof.
 
    On April 19, 1996, the Louisiana legislature approved legislation mandating
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit three individual types of gaming. On November 5,
1996, Louisiana voters determined whether each of the following types of gaming
would be prohibited or permitted in the following described Louisiana parishes:
(i) the operation of video draw poker devices in each parish; (ii) the conduct
of riverboat gaming in each parish that is contiguous to a statutorily
designated river or waterway; or (iii) the conduct of land-based casino gaming
operations in Orleans Parish. In Orleans Parish, where the Company's riverboat
casino currently operates, a majority of the voters elected to continue to
permit the three types of gaming described above. The current legislation
 
                                       26
<PAGE>
does not provide for any moratorium on future local elections on gaming.
Further, the current legislation does not provide for any moratorium that must
expire before future local elections on gaming could be mandated or allowed. In
addition, a change of berth by a licensee would require voter approval in the
parish in which the new berth is located.
 
    On October 11, 1996, the Board granted the Company's petition to relocate
the Queen of New Orleans riverboat casino from New Orleans to the City of
Shreveport by October 1, 1997. The Company subsequently abandoned its plans to
relocate the facility and, on October 1, 1997, the riverboat casino ceased
operations. The Company is negotiating with the City of New Orleans and its
partner with respect to certain obligations related to the closure of this
riverboat casino. The Company has filed a petition with the Board for approval
to transfer its interest in the Queen of New Orleans joint venture.
 
    MISSISSIPPI GAMING LAWS.  The ownership and operation of casino gaming
facilities in Mississippi are subject to extensive state and local regulation,
but primarily the licensing and regulatory control of the Mississippi Gaming
Commission and the Mississippi State Tax Commission. An owner and operator of
casino gaming facilities in Mississippi and its related holding companies must
register under the Mississippi Gaming Control Act (the "Mississippi Act") and
its gaming operations are subject to the licensing and regulatory control of the
Mississippi Gaming Commission and various local, city and county regulatory
agencies. Although not identical, the Mississippi Act is similar to the Nevada
Act. The adopted regulations of the Mississippi Gaming Commission are also
similar in many respects to the Nevada gaming regulations.
 
    Mississippi statutes and regulations give the Mississippi Gaming Commission
the discretion to require a suitability finding with respect to any person or
entity who acquires any security of an owner and operator of casino gaming
facilities in Mississippi, regardless of the percentage of ownership. The
current policy of the Mississippi Gaming Commission is to require any person or
entity acquiring 5% or more of any voting securities of a public company with a
licensed subsidiary or private company licensee to be found suitable. If the
owner of voting securities who is required to be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation. The sale of alcoholic beverages by
the Company is subject to licensing, control and regulation by the Alcoholic
Beverage Control Division ("ABC") of the Mississippi State Tax Commission. An
ABC license is revocable and is not transferable. The ABC of the Mississippi
State Tax Commission has full power to limit, condition, suspend or revoke any
such license.
 
    MISSOURI GAMING LAWS.  Missouri has enacted the Missouri Gaming Law (the
"MGL") and established the Missouri Gaming Commission (the "MGC"), which is
responsible for licensing and regulating riverboat gaming in Missouri. The MGL
does not specifically limit the number of licenses that the MGC may grant, but
generally authorizes the MGC to limit the number of licenses granted. The MGL
grants specific powers and duties to the MGC to supervise riverboat gaming,
implement the MGL and take other action as may be reasonable or appropriate to
enforce the MGL. The MGC may approve permanently moored ("dockside") riverboat
casinos subject to specific criteria.
 
    The MGL extensively regulates owning and operating riverboat gaming
facilities in Missouri. Generally, a licensed company and its officers,
directors, employees, related subsidiaries and significant shareholders are
subject to such extensive regulation. The initial license and first subsequent
license renewal for an excursion gambling boat operator generally is for a
period of one year. The MGC, however, may reopen license hearings and may
terminate a license or impose additional regulations upon a licensee at any time
during the term of a license. In addition to the owner's license and operator's
license for the riverboat, individuals participating in gaming operations are
required to obtain an occupational license from the MGC. Applicants and
licensees are responsible for keeping the application and any requested
materials current, and this responsibility continues throughout any period of
licensure. In addition, Missouri has extensive licensing disclosure
requirements. In October 1996, the MGC granted a riverboat gaming license to the
Flamingo Hilton Riverboat Casino, L.P., a limited partnership wholly owned by
the
 
                                       27
<PAGE>
Company. In September 1997, the MGC approved the Company's license renewal
application extending the riverboat gaming license for an additional one year
period, subject to certain conditions.
 
    In November 1997, the Missouri Supreme Court ruled in AKIN, ET AL. V.
MISSOURI GAMING COMMISSION, ET AL. that riverboat casinos operating in man-made
basins must meet certain requirements as to contiguity with the Mississippi or
Missouri rivers in order to comply with the Missouri constitution. The Company
was not a party to AKIN, which has been dismissed. The Company and other
similarly situated riverboat casinos have filed lawsuits against the MGC
relating to these requirements as to contiguity. In January 1998, the Missouri
Circuit Court in Cole County issued a writ prohibiting the MGC from initiating a
proposed disciplinary proceeding against riverboat casinos operating in man-made
basins. The MGC has appealed this ruling to the Missouri Supreme Court. If it is
determined that the AKIN ruling is applicable to the Company's Kansas City,
Missouri riverboat casino and similarly situated riverboat casinos, the
Company's Kansas City gaming operations could be significantly adversely
affected.
 
    Pursuant to its rulemaking authority, the MGC has adopted certain
regulations which provide, among other things, that: (i) no gaming licensee or
occupational licensee may pledge, hypothecate or transfer in any way any
license, or any interest in a license, issued by the MGC; (ii) no ownership
interest in a gaming licensee or a holding company that is not a publicly held
entity may be pledged or hypothecated in any way; (iii) at least 60 days prior
to consummation, a party must notify the MGC of its intention to transfer or
issue an ownership interest in a gaming licensee or a holding company that is
not a publicly held entity (and during such period the MGC may disapprove the
transaction or require the transaction be delayed pending further
investigation); (iv) at least 15 days prior to consummation, a party must notify
the MGC of its intention to: (a) issue an ownership interest in a publicly held
gaming licensee or holding company if such issuance would involve, directly or
indirectly, 5% or greater of the ownership interest in the gaming licensee or
holding company, (b) incur any private debt equal to or exceeding $1,000,000 by
a gaming licensee or any holding company affiliated with a gaming licensee or
(c) issue any public debt and, before or after consummation, the MGC may reopen
the gaming licensee's licensing hearing to consider the effect of the
transaction on the licensee's suitability; (v) not later than 7 days after
consummation, the following transactions must be reported to the MGC: (a) the
transfer or issuance of an ownership interest in a publicly held gaming licensee
or holding company, if such transfer or issuance would result in an entity or
group of entities acting in concert owning, directly or indirectly, a total
amount of ownership interest equaling 5% or greater of the ownership interest in
the gaming licensee or holding company and (b) any pledge or hypothecation of 5%
or more of the ownership interest in a publicly held gaming licensee or holding
company; (vi) no withdrawals of capital, loans, advances or distribution of any
type of assets in excess of 5% of accumulated earnings of a licensee to anyone
with an ownership interest in the licensee may occur without prior MGC approval;
and (vii) the MGC may take appropriate action against a licensee or other person
who has been disciplined in another jurisdiction for gaming related activity.
 
    QUEENSLAND GAMING LAWS.  Queensland, Australia, like the jurisdictions
discussed above, has comprehensive laws and regulations governing the conduct of
casino gaming. All persons connected with the ownership and operation of a
casino, including the Company, its subsidiary that manages the Conrad Jupiters,
Gold Coast and the Conrad International Treasury Casino, Brisbane and certain of
their principal stockholders, directors and officers, must be found suitable and
licensed. A casino license once issued remains in force until surrendered or
cancelled. Queensland law defines the grounds for cancellation and, in such
event, an administrator may be appointed to assume control of the hotel casino
complex. The Queensland authorities have conducted an investigation of, and have
found suitable, the Company and its subsidiary.
 
    ONTARIO GAMING LAWS.  Ontario, Canada also has laws and regulations
governing the conduct of casino gaming. Ontario law requires that the operator
of a casino must be found suitable and be registered. A registration once issued
remains in force until revoked. Ontario law defines the grounds for
registration, as well as revocation or suspension of such registration. The
Company and two other shareholders formed Windsor Casino Limited ("WCL") to
operate the Casino Windsor. The Ontario authorities have conducted
 
                                       28
<PAGE>
an investigation of, and have found suitable, the Company and the other two
shareholders of WCL in connection with the Ontario registration of WCL. In
January 1997, WCL redeemed the shareholder interest of one of its three original
shareholders.
 
    URUGUAY GAMING LAWS.  Uruguay also has laws and regulations governing the
establishment and operation of casino gaming. The Internal Auditors Bureau of
Uruguay is responsible for establishing the terms under which casino operations
are conducted, including suitability requirements of persons associated with
gaming operations, authorized games, specifications for gaming equipment,
security, surveillance and compliance. The Conrad International Punta del Este
Resort and Casino has been authorized to conduct casino operations by the
Internal Auditors Bureau of Uruguay.
 
    IRS REGULATIONS.  The Internal Revenue Service ("IRS") requires operators of
casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain keno, bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.
 
    Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates casinos, or in
which the Company has applied for licensing to operate a casino, require the
reporting of currency transactions in excess of $10,000 occurring within a
gaming day, including identification of the patron by name and social security
number. This reporting obligation commenced in May 1985 and may have resulted in
the loss of gaming revenues to jurisdictions outside the United States which are
exempt from the ambit of IRS regulations.
 
    OTHER LAWS AND REGULATIONS.  Each of the hotels and casinos operated by the
Company is subject to extensive state and local regulations and, on a periodic
basis, must obtain various licenses and permits, including those required to
sell alcoholic beverages. Management believes that the Company has obtained all
required licenses and permits and its businesses are conducted in substantial
compliance with applicable laws.
 
EMPLOYEES
 
    At February 1, 1998, Hilton employed approximately 61,000 persons, of whom
approximately 26,000 were covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel and gaming
industries generally. Although strikes of short duration have from time to time
occurred at certain of Hilton's facilities, Hilton believes its employee
relations are satisfactory.
 
ITEM 2.  PROPERTIES
 
    Hilton considers its hotels and casinos to be leading establishments with
respect to desirability of location, size, facilities, physical condition,
quality and variety of services offered in most of the areas in which they are
located. Obsolescence arising from age and condition of facilities is a factor
in the hotel and gaming industries. Accordingly, Hilton expends, and intends to
continue to expend, substantial funds to maintain its facilities in first-class
condition in order to remain competitive.
 
    Hotels and hotel casinos owned and operated, leased and managed by Hilton
are briefly described under "Item 1" and, in particular, under the captions
"Hotel Operations" and "Gaming Operations." In addition, contemplated additions
to, and major refurbishing and remodeling of, existing properties and new hotels
and casinos presently under construction that will be operated by Hilton are
briefly described under the captions "Hotel Operations--Expansion Program" and
"Gaming Operations--Expansion Program" under "Item 1."
 
                                       29
<PAGE>
ITEM 3.  LEGAL PROCEEDINGS
 
    BALLY MERGER LITIGATION
 
    A purported class action against Bally, its directors and Hilton was
commenced in August 1996 under the caption PARNES V. BALLY ENTERTAINMENT
CORPORATION, ET AL. in the Court of Chancery of the State of Delaware, New
Castle County. The plaintiff alleged breaches of fiduciary duty in connection
with the Bally Merger, including allegedly illegal payments to Arthur M.
Goldberg purportedly denying Bally shareholders other than Mr. Goldberg an
opportunity to sell their shares to Hilton or any other bidder at the best
possible price. In the complaint, the plaintiff sought, among other things: (i)
an order enjoining the Bally Merger; (ii) an award of damages in an unspecified
amount; (iii) an order requiring Mr. Goldberg to disgorge his profits; and (iv)
an award of attorneys' fees and expenses. In orders dated May 13, 1997 and
February 3, 1998, this litigation was dismissed. Plaintiff has appealed this
dismissal to the Delaware Supreme Court.
 
    Two other purported class actions relating to the Bally Merger were brought
against Bally and its directors, one commenced in April 1996 under the caption
KINDER V. BRUNET, ET AL. and the other commenced in June 1996 under the caption
LORD V. BRUNET, ET AL., in the Court of Chancery of the State of Delaware, New
Castle County. These actions were virtually identical, and the plaintiffs also
alleged breaches of fiduciary duty in connection with the Bally Merger. In the
complaint, the plaintiffs sought, among other things: (i) a declaration that
defendants breached their fiduciary duties; (ii) an order requiring defendants
to act in accordance with their fiduciary duties in order to maximize the value
obtained for Bally's shareholders; (iii) an award of damages in an unspecified
amount; and (iv) an award of expenses, including attorneys' fees. On February
27, 1998, these actions were dismissed by stipulation of the parties with the
approval of the court.
 
    BALLY'S GRAND LITIGATION
 
    On June 13, 1997, Bally's Grand, Inc. ("BGI") announced that it had reached
an agreement to settle the IN RE: BALLY'S GRAND, INC. SHAREHOLDERS LITIGATION.
This litigation involved two derivative actions purportedly brought on behalf of
BGI against its directors and Bally, one commenced in October 1995 and the other
in September 1996, which were consolidated under the caption IN RE: BALLY'S
GRAND DERIVATIVE LITIGATION in the Court of Chancery of the State of Delaware,
New Castle County. A third derivative action purportedly brought on behalf of
BGI against its directors, Bally, Hilton and Bally's Grand Management Co., Inc.,
a wholly owned subsidiary of Bally ("BGM"), was commenced in November 1996 under
the caption TOWER INVESTMENT GROUP, INC., ET AL. V. BALLY'S GRAND, INC., ET AL.
in the Court of Chancery of the State of Delaware, New Castle County. This
action was consolidated with the original consolidated action under the caption
IN RE: BALLY'S GRAND, INC. SHAREHOLDERS LITIGATION. Plaintiffs alleged breaches
of fiduciary duty and waste of corporate assets in connection with certain
actions, including the sale by BGI to Bally of the capital stock of BGI's
subsidiary that owns the land and development rights with respect to the Paris
Casino-Resort in Las Vegas (the "Paris Transaction"), alleged improper
delegation of duties by BGI's board of directors by virtue of a management
agreement (the "Management Agreement") between BGI and BGM, BGM's designation
pursuant to the Management Agreement of recipients awarded BGI stock options and
stock repurchases by BGI and Bally. Plaintiffs also alleged fraud, willful
misconduct or gross negligence by Bally and BGM in connection with the
Management Agreement, purchases of BGI stock by Bally while in possession of
material inside information concerning BGI's earnings, violation of Delaware law
by BGI's directors and Bally in connection with the Paris Transaction and aiding
and abetting by Hilton of the breaches of fiduciary duty and waste of corporate
assets by BGI's directors and Bally. The plaintiffs sought, among other things:
(i) rescission of the Paris Transaction; (ii) termination of the Management
Agreement; (iii) appointment of a custodian to manage BGI's affairs; (iv)
disgorgement by defendants of payments and profits earned as a result of the
transactions complained of; (v) compensatory damages; and (vi) costs and
expenses, including reasonable attorneys' fees.
 
                                       30
<PAGE>
    Prior to the settlement, Hilton indirectly owned approximately 84% of the
common stock of BGI and public shareholders owned the remaining 16%. Under the
terms of the settlement, BGI repurchased 966,747 shares of its common stock and
102,698 warrants to purchase shares of its common stock from certain plaintiffs
at a price of $52.75 per share in cash for the common stock and $52.75 less the
exercise price per warrant in cash for the warrants. Following such repurchases,
Hilton indirectly owned in excess of 90% of the outstanding common stock of BGI.
 
    On October 9, 1997, Hilton received court approval of the settlement
agreement. Pursuant to the settlement agreement, on March 26, 1998, a Hilton
subsidiary merged into BGI, and the remaining outstanding shares of BGI common
stock not owned by Hilton were converted into the right to receive $52.75 (less
$1.38 in attorneys' fees) per share in cash, and the remaining outstanding
warrants to purchase BGI common stock not owned by Hilton were converted into
the right to receive the difference between $52.75 (less $1.38 in attorneys'
fees) and the exercise price per warrant in cash. The total amount payable to
holders of BGI common stock and warrants in the merger aggregated approximately
$43 million. Holders of BGI common stock are entitled to appraisal rights under
Delaware law in connection with such merger.
 
    BALLY ENTERTAINMENT LITIGATION
 
    Several purported derivative actions against Bally and certain of its former
directors, including Arthur M. Goldberg, originally filed in December 1990 and
January 1991, were consolidated under the caption IN RE: BALLY MANUFACTURING
CORPORATION SHAREHOLDERS LITIGATION in the Court of Chancery of the State of
Delaware, New Castle County. The consolidated complaint alleged, among other
things: breach of fiduciary duty, corporate mismanagement and waste of corporate
assets in connection with certain actions including, among other things, payment
of compensation, certain acquisitions by Bally, the dissemination of allegedly
materially false and misleading information, the restructuring of Bally's debt,
and a subsidiary's allegedly discriminatory practices. The plaintiffs sought,
among other things: (i) injunctions against payment of certain termination
compensation benefits and implementation of the restructuring plan; (ii)
rescission of consummated transactions and a declaration that the complained of
transactions are null and void; (iii) an accounting by individual defendants of
damages to Bally and benefits received by such defendants; (iv) the appointment
of a representative to negotiate on behalf of the former Bally stockholders in
connection with any restructuring; and (v) costs and disbursements, including a
reasonable allowance for the fees and expenses of plaintiff's attorneys,
accountants and experts. On November 6, 1997, this litigation was dismissed by
stipulation of the parties with the approval of the court.
 
    In management's opinion, disposition of pending litigation against the
Company, including the litigation described above, is not expected to have a
material adverse effect on the Company's financial position or results of
operations.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    Not applicable.
 
                                       31
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
 
    The following table sets forth certain information with respect to the
executive officers of the Company:
 
<TABLE>
<CAPTION>
                                                POSITIONS AND OFFICES
NAME                                              WITH THE COMPANY                             AGE
-------------------------  ---------------------------------------------------------------  ---------
<S>                        <C>                                                              <C>
Barron Hilton              Chairman of the Board, and previously served as Chief Executive     70
                           Officer until February 1996, and President until February 1993
 
Stephen F. Bollenbach      President and Chief Executive Officer since February 1996           55
 
Thomas E. Gallagher        Executive Vice President and General Counsel since July 1997        53
 
Arthur M. Goldberg         Executive Vice President and President--Gaming Operations since     56
                           December 1996
 
Matthew J. Hart            Executive Vice President and Chief Financial Officer since May      45
                           1996
 
Dieter H. Huckestein       Executive Vice President and President--Hotel Operations since      54
                           May 1994, and Senior Vice President-- Hawaii/California/Arizona
                           Region until May 1994
</TABLE>
 
    Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1993. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related.
 
    All of the above named executive officers are directors of the Company,
except for Messrs. Gallagher and Hart. Prior to joining Hilton, Mr. Gallagher
served as President and Chief Executive Officer of The Griffin Group, Inc. since
April 1992, and was a partner with the law firm of Gibson, Dunn & Crutcher until
April 1992. During 1995 and 1996, Mr. Gallagher also served as President and
Chief Executive Officer of Griffin Gaming & Entertainment, Inc. (formerly
Resorts International, Inc.). Prior to joining Hilton, Mr. Hart served as Senior
Vice President and Treasurer of The Walt Disney Company since October 1995, and
as Executive Vice President and Chief Financial Officer of Host Marriott
Corporation until October 1995.
 
    Additional information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 7, 1998 (the "Proxy Statement"). Reference is expressly made to the Proxy
Statement for the specific information incorporated herein by the aforesaid
reference. See "Cover Page-- Documents Incorporated by Reference."
 
                                       32
<PAGE>
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    The Company's Common Stock and PRIDES are listed on the New York and Pacific
Stock Exchanges and are traded under the symbols "HLT" and "HLT PR,"
respectively. Information regarding sales prices, dividend payments and record
holders with respect to the Company's Common Stock is set forth under
"Supplementary Financial Information" in the Notes to the Company's Consolidated
Financial Statements on page 54 in the Stockholders Report, which information is
incorporated herein by reference.
 
    On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable. The
Plan expires on July 25, 1998, unless it is extended or the Rights have been
terminated, exercised or redeemed.
 
    Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
 
    If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a market value of twice the Right's exercise price.
 
    Following the acquisition by a person or group of beneficial ownership of
30% or more of the Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.
 
    Prior to the acquisition by a person or group of beneficial ownership of 20%
or more of the Company's Common Stock, the Rights are redeemable for one cent
per Right at the option of the Company's Board of Directors.
 
    "Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
 
    The full text of the Plan has been filed as Exhibit 4.8 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.8.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
    See the Five Year Summary on page 55 in the Stockholders Report and
"Segments of Business" in the Notes to the Company's Consolidated Financial
Statements on pages 51 and 52 in the Stockholders Report.
 
    The ratio of earnings to fixed charges for the five years ended December 31,
1997 is as follows: 1997 - 3.1 to 1; 1996 - 3.3 to 1; 1995 - 3.2 to 1; 1994 -
2.8 to 1; and 1993 - 2.7 to 1. The ratio of earnings to
 
                                       33
<PAGE>
combined fixed charges and preferred stock dividends for the five years ended
December 31, 1997 is as follows: 1997 - 2.8 to 1; 1996 - 3.3 to 1; 1995 - 3.2 to
1; 1994 - 2.8 to 1; and 1993 - 2.7 to 1. The computation of the aforesaid ratios
is set forth in Exhibit 12 hereto.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    See pages 26 through 35 in the Stockholders Report.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    Not applicable.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The consolidated financial statements and supplemental information required
by this Item are contained in the Stockholders Report on the pages indicated,
which information is incorporated herein by reference.
 
<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            -----
<S>                                                                                      <C>
Consolidated statements of income for
  the three years ended December 31, 1997..............................................          36
Consolidated balance sheets as of December 31, 1997 and 1996...........................          37
Consolidated statements of cash flow for
  the three years ended December 31, 1997..............................................          38
Consolidated statements of stockholders' equity for
  the three years ended December 31, 1997..............................................          39
Notes to consolidated financial statements.............................................          40
Report of independent public accountants...............................................          53
Segment data for the five years ended December 31, 1997
  contained in the Five Year Summary...................................................          55
</TABLE>
 
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
 
    Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers of the Company" in Part
I. Other information respecting certain executive officers, as well as the
required information for directors, will be contained in the Proxy Statement,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
    The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The information required by this Item will be set forth under "Security
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information required by this Item will be set forth under "Election of
Directors--Certain Relationships and Interests in Certain Transactions" in the
Proxy Statement, and reference is expressly made thereto for the specific
information incorporated herein by the aforesaid reference.
 
                                       34
<PAGE>
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(A) INDEX TO FINANCIAL STATEMENTS
 
    1.  Financial Statements:
 
            The index to consolidated financial statements and supplementary
            data is set forth under Item 8 on page 34 hereof.
 
    2.  Financial Statement Schedules:
 
<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            -----
<S>                                                                                      <C>
Report of Independent Public Accountants...............................................          36
Schedule II--Valuation and Qualifying Accounts.........................................          37
</TABLE>
 
    All other schedules are inapplicable or the required information is included
elsewhere herein.
 
(B) REPORTS ON FORM 8-K
 
    The Company filed a Current Report on Form 8-K, dated December 17, 1997,
under the caption "Item 5. Other Events." This filing reported the sale of $200
million of 7.20% Senior Notes due 2009 and $200 million of 7.50% Senior Notes
due 2017, the announcement by the Company of certain non-recurring charges in
the fourth quarter of 1997 and the extension by the Company's Board of Directors
of the prior authorization for repurchases by the Company of its Common Stock.
 
(C) EXHIBITS
 
    Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.
 
                                       35
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                            ON SUPPLEMENTAL SCHEDULE
 
To Hilton Hotels Corporation:
 
    We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
2, 1998. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule II to consolidated
financial statements as shown on page 37 is the responsibility of the Company's
management and is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. The supplemental schedule to the consolidated financial statements
has been subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
 
                                          ARTHUR ANDERSEN LLP
 
Los Angeles, California
February 2, 1998
 
                                       36
<PAGE>
                   HILTON HOTELS CORPORATION AND SUBSIDIARIES
 
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                                         CHARGED
                                                              BALANCE AT   CHARGED TO   (CREDITED)                        BALANCE AT
                                                              BEGINNING    COSTS AND     TO OTHER                           END OF
                                                              OF PERIOD     EXPENSES     ACCOUNTS    DEDUCTIONS   OTHER     PERIOD
                                                              ----------   ----------   ----------   ----------   -----   ----------
 
<S>                                                           <C>          <C>          <C>          <C>          <C>     <C>
YEAR ENDED DECEMBER 31, 1997
  Allowance for doubtful accounts
    Hotel and other.........................................    $  10            4          (2)            2        --         10
    Casino..................................................       30           29          (1)           34        --         24
  Reserve for loss on investments...........................        6           --          --             4        --          2
YEAR ENDED DECEMBER 31, 1996
  Allowance for doubtful accounts
    Hotel and other.........................................    $  12            4          (2)            5         1(A)      10
    Casino..................................................       18           25        --              26        13(A)      30
  Reserve for loss on investments                                  20            6        --              20       --           6
 
YEAR ENDED DECEMBER 31, 1995
  Allowance for doubtful accounts
    Hotel and other.........................................    $  14            6          (1)            7       --          12
    Casino..................................................       18           20        --              20       --          18
  Reserve for loss on investments...........................       21        --           --               1       --          20
</TABLE>
 
---------
 
(A) Represents balances acquired during the period.
 
                                       37
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 26, 1998.
 
                                          HILTON HOTELS CORPORATION
                                                     (Registrant)
 
                                          By:           MATTHEW J. HART
 
                                             -----------------------------------
 
                                                       Matthew J. Hart
 
                                                Executive Vice President and
                                                   Chief Financial Officer
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 26, 1998.
 
<TABLE>
<S>                                           <C>
           STEPHEN F. BOLLENBACH                          DIETER H. HUCKESTEIN
-------------------------------------------   -------------------------------------------
           Stephen F. Bollenbach                          Dieter H. Huckestein
   President and Chief Executive Officer                        Director
 
              A. STEVEN CROWN                              ROBERT L. JOHNSON
-------------------------------------------   -------------------------------------------
              A. Steven Crown                              Robert L. Johnson
                  Director                                      Director
 
              PETER M. GEORGE                                DONALD R. KNAB
-------------------------------------------   -------------------------------------------
              Peter M. George                                Donald R. Knab
                  Director                                      Director
 
             ARTHUR M. GOLDBERG                           BENJAMIN V. LAMBERT
-------------------------------------------   -------------------------------------------
             Arthur M. Goldberg                           Benjamin V. Lambert
                  Director                                      Director
 
              MATTHEW J. HART                               DONNA F. TUTTLE
-------------------------------------------   -------------------------------------------
              Matthew J. Hart                               Donna F. Tuttle
        Executive Vice President and                            Director
          Chief Financial Officer
  (Chief Financial and Accounting Officer)
 
               BARRON HILTON                               SAM D. YOUNG, JR.
-------------------------------------------   -------------------------------------------
               Barron Hilton                               Sam D. Young, Jr.
           Chairman of the Board                                Director
 
               ERIC M. HILTON
-------------------------------------------
               Eric M. Hilton
                  Director
</TABLE>
 
                                       38
<PAGE>
 
<TABLE>
<CAPTION>
                                                     INDEX TO EXHIBITS
                                                                                                               SEQUENTIALLY
EXHIBIT                                                                                                          NUMBERED
 NUMBER                                               DESCRIPTION                                                  PAGE
--------   --------------------------------------------------------------------------------------------------  ------------
<C>        <S>                                                                                                 <C>
 
      3.1  Restated Certificate of Incorporation of Registrant, as amended (incorporated herein by reference
           from Exhibit 4.1 to Registrant's Registration Statement on Form S-3 (File No. 333-18523))
 
      3.2  Amendment to Restated Certificate of Incorporation of Registrant, relating to Exhibit 3.1 hereto
           (incorporated herein by reference from Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q
           for the period ended June 30, 1997)
 
      3.3  By-Laws of Registrant, as amended (incorporated herein by reference from Exhibit 4.2 to
           Registrant's Registration Statement on Form S-3 (File No. 333-18523))
 
      4.1  Indenture, dated as of July 1, 1988, between Registrant and Citibank, N.A., regarding Registrant's
           Subordinated Debt Securities (incorporated herein by reference from Exhibit 4.1 to Post-Effective
           Amendment No. 2 to Registrant's Registration Statement on Form S-3 (File No. 2-95746))
 
      4.2  Indenture, dated as of July 1, 1988, between Registrant and Morgan Guaranty Trust Company of New
           York, regarding Registrant's Senior Debt Securities (incorporated herein by reference from Exhibit
           4.1 to Post-Effective Amendment No. 1 to Registrant's Registration Statement on Form S-3 (File No.
           2-99967))
 
      4.3  First Supplemental Indenture, dated as of June 30, 1992, between Registrant and Morgan Guaranty
           Trust Company of New York, regarding Registrant's Senior Debt Securities, relating to Exhibit 4.2
           hereto (incorporated herein by reference from Exhibit 4.3 to Registrant's Annual Report on Form
           10-K for the year ended December 31, 1992)
 
      4.4  Indenture, dated as of May 14, 1996, between Registrant and The Bank of New York, regarding
           Registrant's 5% Convertible Subordinated Notes due 2006 (incorporated herein by reference from
           Exhibit 4.6 to Registrant's Registration Statement on Form S-4 (File No. 333-10415))
 
      4.5.1 Indenture, dated as of April 15, 1997, between Registrant and BNY Western Trust Company, regarding
           Registrant's Debt Securities (incorporated herein by reference from Exhibit 4.3 to Registrant's
           Current Report on Form 8-K, dated April 15, 1997)
 
      4.5.2 Officers' Certificate containing terms of 7.95% Senior Notes due 2007 (incorporated herein by
           reference from Exhibit 99 to Registrant's Current Report on Form 8-K, dated April 15, 1997)
 
      4.5.3 Officers' Certificate containing terms of 7.375% Senior Notes due 2002 (incorporated herein by
           reference from Exhibit 99.01 to Registrant's Current Report on Form 8-K, dated June 4, 1997)
 
      4.5.4 Officers' Certificate containing terms of 7% Senior Notes due 2004 (incorporated herein by
           reference from Exhibit 99.01 to Registrant's Current Report on Form 8-K, dated July 17, 1997)
 
      4.5.5 Officers' Certificate containing terms of 7.20% Senior Notes due 2009 and 7.5% Senior Notes due
           2017 (incorporated herein by reference from Exhibit 4.1 to Registrant's Current Report on Form
           8-K, dated December 17, 1997)
</TABLE>
 
                                       39
<PAGE>
<TABLE>
<CAPTION>
                                                     INDEX TO EXHIBITS
                                                                                                               SEQUENTIALLY
EXHIBIT                                                                                                          NUMBERED
 NUMBER                                               DESCRIPTION                                                  PAGE
--------   --------------------------------------------------------------------------------------------------  ------------
<C>        <S>                                                                                                 <C>
      4.6  Credit Agreement, dated as of October 18, 1996, among Registrant, the financial institutions
           signatory thereto, Morgan Guaranty Trust Company of New York, as documentation agent and The Bank
           of New York, as administrative agent (incorporated herein by reference from Exhibit 4.5 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)
 
      4.7  Reimbursement Agreements, dated as of November 15, 1990, among Registrant, Swiss Bank Corporation
           and the financial institutions signatory thereto (incorporated herein by reference from Exhibit
           4.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)
 
      4.8  Rights Agreement, dated as of July 14, 1988, between Registrant and The First National Bank of
           Chicago (incorporated herein by reference from Exhibit 1 to Registrant's Current Report on Form
           8-K, dated July 14, 1988)
 
      4.9  Agreement Amending Rights Agreement, dated as of July 13, 1990, among Registrant, The First
           National Bank of Chicago and Manufacturers Hanover Trust Company of California, relating to
           Exhibit 4.8 hereto (incorporated herein by reference from Exhibit 8 to Registrant's Form 8-A,
           dated May 2, 1996)
 
      4.10 Form of Certificate of Designations, Preferences, Rights and Limitations of Registrant's Preferred
           Redeemable Increased Dividend Equity Securities, 8% PRIDES, Convertible Preferred Stock
           (incorporated herein by reference from Exhibit 4.10 to Registrant's Registration Statement on Form
           S-4 (File No. 333-10415))
 
     10.1  1984 Stock Option and Stock Appreciation Rights Plan of Registrant, together with the Stock Option
           Agreement relating thereto, both as amended (incorporated herein by reference from Exhibit 10.5 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1989)*
 
     10.2  Amendment, dated October 18, 1990, to the 1984 Stock Option and Stock Appreciation Rights Plan of
           Registrant, relating to Exhibit 10.1 hereto (incorporated herein by reference from Exhibit 10.3 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)*
 
     10.3  Amendment, dated November 14, 1996, to the 1984 Stock Option and Stock Appreciation Rights Plan of
           Registrant, relating to Exhibits 10.1 and 10.2 hereto (incorporated herein by reference from
           Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.4  1990 Stock Option and Stock Appreciation Rights Plan of Registrant, together with the Stock Option
           Agreement relating thereto, both as amended (incorporated herein by reference from Exhibit 10.4 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)*
 
     10.5  Amendment, dated January 20, 1994, to the 1990 Stock Option and Stock Appreciation Rights Plan of
           Registrant, relating to Exhibit 10.4 hereto (incorporated herein by reference from Exhibit 10.5 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1993)*
 
     10.6  Amendment, dated January 19, 1995, to the 1990 Stock Option and Stock Appreciation Rights Plan of
           Registrant, relating to Exhibits 10.4 and 10.5 hereto (incorporated herein by reference from
           Exhibit 10.5 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
</TABLE>
 
                                       40
<PAGE>
<TABLE>
<CAPTION>
                                                     INDEX TO EXHIBITS
                                                                                                               SEQUENTIALLY
EXHIBIT                                                                                                          NUMBERED
 NUMBER                                               DESCRIPTION                                                  PAGE
--------   --------------------------------------------------------------------------------------------------  ------------
<C>        <S>                                                                                                 <C>
     10.7  Amendment, dated November 14, 1996, to the 1990 Stock Option and Stock Appreciation Rights Plan of
           Registrant, relating to Exhibits 10.4, 10.5 and 10.6
           hereto (incorporated herein by reference from Exhibit 10.7 to Registrant's Annual Report on Form
           10-K for the year ended December 31, 1996)*
 
     10.8  1996 Stock Incentive Plan of Registrant, as amended*..............................................
 
     10.9  1996 Chief Executive Stock Incentive Plan of Registrant (incorporated herein by reference from
           Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995)*
 
     10.10 1997 Independent Director Stock Option Plan of Registrant*........................................
 
     10.11 Incentive Compensation Plan of Registrant (incorporated herein by reference from Exhibit 10.4 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1980)*
 
     10.12 Amendment, dated as of January 1, 1994, to the Incentive Compensation Plan of Registrant, relating
           to Exhibit 10.11 hereto (incorporated herein by reference from Exhibit 10.7 to Registrant's Annual
           Report on Form 10-K for the year ended December 31, 1993)*
 
     10.13 Retirement Plan of Registrant, as amended and restated (incorporated herein by reference from
           Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
 
     10.14 First Amendment, dated as of November 15, 1995, to the Retirement Plan of Registrant, relating to
           Exhibit 10.13 hereto (incorporated herein by reference from Exhibit 10.11 to Registrant's Annual
           Report on Form 10-K for the year ended December 31, 1995)*
 
     10.15 Second Amendment, effective December 31, 1996, to the Retirement Plan of Registrant, relating to
           Exhibits 10.13 and 10.14 hereto (incorporated herein by reference from Exhibit 10.15 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.16 Third Amendment, effective December 31, 1996, to the Retirement Plan of Registrant, relating to
           Exhibits 10.13, 10.14 and 10.15 hereto (incorporated herein by reference from Exhibit 10.16 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.17 Amendment, effective January 1, 1997, to the Retirement Plan of Registrant, relating to Exhibits
           10.13, 10.14, 10.15 and 10.16 hereto*.............................................................
 
     10.18 Supplemental Executive Retirement Plan of Registrant, as amended (incorporated herein by reference
           from Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the year ended December 31,
           1991)*
 
     10.19 Amendment, effective April 1, 1994, to the Supplemental Executive Retirement Plan of Registrant,
           relating to Exhibit 10.18 hereto (incorporated herein by reference from Exhibit 10.10 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
 
     10.20 Amendment, effective December 31, 1996, to the Supplemental Executive Retirement Plan of
           Registrant, relating to Exhibits 10.18 and 10.19 hereto (incorporated herein by reference from
           Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
</TABLE>
 
                                       41
<PAGE>
<TABLE>
<CAPTION>
                                                     INDEX TO EXHIBITS
                                                                                                               SEQUENTIALLY
EXHIBIT                                                                                                          NUMBERED
 NUMBER                                               DESCRIPTION                                                  PAGE
--------   --------------------------------------------------------------------------------------------------  ------------
<C>        <S>                                                                                                 <C>
     10.21 Directors' Retirement Benefit Plan of Registrant, as amended (incorporated herein by reference
           from Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year ended December 31,
           1991)*
 
     10.22 First Amendment, dated July 31, 1997, to the Directors' Retirement Benefit Plan of Registrant,
           relating to Exhibit 10.21 hereto*.................................................................
 
     10.23 Retirement Benefit Replacement Plan of Registrant, as amended (incorporated herein by reference
           from Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the year ended December 31,
           1992)*
 
     10.24 Amendment, dated as of January 1, 1994, to the Retirement Benefit Replacement Plan of Registrant,
           relating to Exhibit 10.23 hereto (incorporated herein by reference from Exhibit 10.12 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1993)*
 
     10.25 Amendment, effective April 1, 1994, to the Retirement Benefit Replacement Plan of Registrant,
           relating to Exhibits 10.23 and 10.24 hereto (incorporated herein by reference from Exhibit 10.14
           to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
 
     10.26 Amendment, effective December 31, 1996, to the Retirement Benefit Replacement Plan of Registrant,
           relating to Exhibits 10.23, 10.24 and 10.25 hereto (incorporated herein by reference from Exhibit
           10.24 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.27 Thrift Savings Plan of Registrant, as amended and restated (incorporated herein by reference from
           Exhibit 10.25 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.28 Amendment, effective January 1, 1996, to the Thrift Savings Plan of Registrant, relating to
           Exhibit 10.27 hereto (incorporated herein by reference from Exhibit 10.26 to Registrant's Annual
           Report on Form 10-K for the year ended December 31, 1996)*
 
     10.29 Amendment, effective January 1, 1997, to the Thrift Savings Plan of Registrant, relating to
           Exhibits 10.27 and 10.28 hereto*..................................................................
 
     10.30 Executive Deferred Compensation Plan of Registrant, as amended (incorporated herein by reference
           from Exhibit 10.27 to Registrant's Annual Report on Form 10-K for the year ended December 31,
           1996)*
 
     10.31 Amendment, effective January 1, 1997, to the Executive Deferred Compensation Plan of Registrant,
           relating Exhibit 10.30 hereto (incorporated herein by reference from Exhibit 10.28 to Registrant's
           Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.32 Amendment, effective January 1, 1997, to the Executive Deferred Compensation Plan of Registrant,
           relating to Exhibits 10.30 and 10.31 hereto*......................................................
 
     10.33 Employee Stock Purchase Plan of Registrant (incorporated herein by reference from Exhibit 10.29 to
           Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.34 Amendment, effective January 1, 1997, to the Employee Stock Purchase Plan of Registrant, relating
           to Exhibit 10.33 hereto*..........................................................................
</TABLE>
 
                                       42
<PAGE>
<TABLE>
<CAPTION>
                                                     INDEX TO EXHIBITS
                                                                                                               SEQUENTIALLY
EXHIBIT                                                                                                          NUMBERED
 NUMBER                                               DESCRIPTION                                                  PAGE
--------   --------------------------------------------------------------------------------------------------  ------------
<C>        <S>                                                                                                 <C>
     10.35 Form of Change of Control Agreement between Registrant and each of Thomas E. Gallagher, Matthew J.
           Hart, Barron Hilton and Dieter H. Huckestein (incorporated herein by reference from Exhibit 10.16
           to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
 
     10.36 Change of Control Agreement, dated as of January 30, 1996, between Registrant and Stephen F.
           Bollenbach (incorporated herein by reference from Exhibit 10.31 to Registrant's Annual Report on
           Form 10-K for the year ended December 31, 1996)*
 
     10.37 Change of Control Agreement, dated as of April 1, 1997, between Registrant and Arthur M.
           Goldberg*.........................................................................................
 
     10.38 Employment Agreement, dated as of February 1, 1996, between Registrant and Stephen F. Bollenbach
           (incorporated herein by reference from Exhibit 10.21 to Registrant's Annual Report on Form 10-K
           for the year ended December 31, 1995)*
 
     10.39 Amended Consulting and Employment Agreement, dated as of November 12, 1996, between Registrant and
           Arthur M. Goldberg (incorporated herein by reference from Exhibit 10.33 to Registrant's Annual
           Report on Form 10-K for the year ended December 31, 1996)*
 
     10.40 First Amendment, dated as of December 14, 1996, to the Amended Consulting and Employment
           Agreement, relating to Exhibit 10.39 hereto (incorporated herein by reference from Exhibit 10.34
           to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996)*
 
     10.41 Deferred Compensation Agreement, dated as of January 16, 1997, between Registrant and Arthur M.
           Goldberg (incorporated herein by reference from Exhibit 10.35 to Registrant's Annual Report on
           Form 10-K for the year ended December 31, 1996)*
 
     10.42 Letter Agreement, dated as of October 10, 1996, between Registrant and Raymond C. Avansino, Jr.
           (incorporated herein by reference from Exhibit 10.36 to Registrant's Annual Report on Form 10-K
           for the year ended December 31, 1996)*
 
     10.43 Release and Separation Agreement, dated as of February 19, 1997, between Registrant and William C.
           Lebo, Jr. (incorporated herein by reference from Exhibit 10.37 to Registrant's Annual Report on
           Form 10-K for the year ended December 31, 1996)*
 
     10.44 Release Agreement, dated as of March 5, 1997, between Registrant and Eric M. Hilton (incorporated
           herein by reference from Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the period
           ended March 31, 1997)*
 
     11    Computation of Earnings Per Share.................................................................
 
     12    Computation of Ratios of Earnings to Fixed Charges................................................
 
     13    Registrant's Annual Report to Stockholders for the year ended December 31, 1997...................
 
     21    List of Registrant's Subsidiaries.................................................................
 
     23    Consent of Independent Public Accountants.........................................................
 
     99    Undertakings......................................................................................
</TABLE>
 
---------
 
*  Management contracts or compensatory plans or arrangements required to be
   filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation
   S-K, previously filed where indicated and incorporated herein by reference.
 
                                       43
<PAGE>
    Pursuant to Regulation Section 229.601, Item 601(b)(4)(iii) of Regulation
S-K, upon request of the Securities and Exchange Commission, the Registrant
hereby undertakes to furnish a copy of any unfiled instrument which defines the
rights of holders of long-term debt of the Registrant and its consolidated
subsidiaries (and for any of its unconsolidated subsidiaries for which financial
statements are required to be filed) wherein the total amount of securities
authorized thereunder does not exceed 10% of the total consolidated assets of
the Registrant.
 
                                       44
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                    EXHIBITS
                                       TO
                                   FORM 10-K
 
                                     UNDER
                        SECURITIES EXCHANGE ACT OF 1934
 
                            ------------------------
 
                           HILTON HOTELS CORPORATION
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------