<PAGE>


                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Members of NEW YORK-NEW YORK Hotel & Casino, LLC:

We have audited the accompanying balance sheets of NEW YORK-NEW YORK Hotel &
Casino, LLC, (a Nevada limited liability company in the development stage),
(the "Company") as of December 31, 1996 and 1995, and the related statements of
operations, changes in members' equity and cash flows for each of the two years
in the period ended December 31, 1996 and for the period from inception
(December 23, 1994) through December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NEW YORK-NEW YORK Hotel &
Casino, LLC as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
1996 and for the period from inception through December 31, 1996, in conformity
with generally accepted accounting principles.






                                                 Arthur Andersen LLP

Las Vegas, Nevada
January 29, 1997















                                        46
<PAGE>


                     NEW YORK-NEW YORK HOTEL & CASINO, LLC
                        (A Development Stage Company)
                                BALANCE SHEETS
                                    ASSETS
                                (in Thousands)



<TABLE>
<CAPTION>
                                                      December 31,     
                                                1996               1995        
                                              ________          ________       
                                                                               

                                              <C>               <C>       
<S>
CURRENT ASSETS:
   Cash and cash equivalents                  $  6,104          $    504
   Restricted cash                              10,868               -  
   Accounts receivable                             370                30
   Advance deposits                              2,207               -  
   Prepaid expenses                              1,890               -  
   Inventories                                     350                46
                                              ________          ________
Total current assets                            21,789               580
                                              ________          ________

PROPERTY AND EQUIPMENT:
   Land                                         49,563            49,474
   Buildings, fixtures and equipment           380,989               -  
   Construction in progress                        -             107,017
                                              ________          ________
Total property and equipment                   430,552           156,491
                                              ________          ________

OTHER ASSETS:                                                           
   Pre-opening expenses                            -                 786
   Other assets, net                             4,750             3,680
                                              ________          ________
Total other assets                               4,750             4,466
                                              ________          ________
TOTAL ASSETS                                  $457,091          $161,537
                                              ========          ========
</TABLE>














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

                                        47
<PAGE>


                     NEW YORK-NEW YORK HOTEL & CASINO, LLC
                        (A Development Stage Company)
                                BALANCE SHEETS
                        LIABILITIES AND MEMBERS' EQUITY
                                (in Thousands)



<TABLE>
<CAPTION>
                                                      December 31,     
                                                1996               1995
                                              ________          ________       
                                                                               

                                              <C>               <C>      
<S>
CURRENT LIABILITIES:
   Current portion of capital lease           $    172          $    -  
   Accounts payable                             12,683               187
   Accounts payable accrued                     10,231               -  
   Construction payables                        12,625            14,990
   Retention payable                            14,596             3,747
   Other accrued liabilities                     9,291             1,265
                                              ________          ________
Total current liabilities                       59,598            20,189
                                              ________          ________

LONG-TERM DEBT:
   Long-term capital lease                         829               -  
   Note payable                                285,000            59,001
                                              ________          ________
TOTAL LIABILITIES                              345,427            79,190
                                              ________          ________


MEMBERS' EQUITY:
   Member contributions                        127,400            82,400
   Deficit accumulated during the
     development stage                         (15,736)              (53)
                                              ________          ________
Total members' equity                          111,664            82,347
                                              ________          ________
TOTAL LIABILITIES AND MEMBERS' EQUITY         $457,091          $161,537
                                              ========          ========
</TABLE>













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

                                        48
<PAGE>


                     NEW YORK-NEW YORK HOTEL & CASINO, LLC
                        (A Development Stage Company)
                           STATEMENTS OF OPERATIONS
                                (in Thousands)

<TABLE>
<CAPTION>
                                                                      For the
                                                                      Period
                                                                        From
                                                                      Inception
                                                                  (December 23,
                                            For the twelve months       1994)
                                               ended December 31,      through 
                                              _________________________________
                                                                   December 31,
                                                1996        1995       1996
                                              ________    ________    ________ 

                                              <C>         <C>         <C>      
<S>
REVENUES                                      $    345    $    149    $    494 
                                              ________    ________    ________ 

COSTS AND EXPENSES:
   Cost of sales                                   185          88         273 
   Operating expenses                              228         393         621 
   Pre-opening costs                            15,762         -        15,762 
   Abandonment loss                                -           642         642 
                                              ________    ________    ________ 
   Total costs and expenses                     16,175       1,123      17,298 
                                              ________    ________    ________ 
OPERATING LOSS                                 (15,830)       (974)    (16,804)

OTHER INCOME (EXPENSE) 
   Interest income, net                            147         921       1,068 
                                              ________    ________    ________ 
NET LOSS                                      $(15,683)   $    (53)   $(15,736)
                                              ========    ========    ======== 
</TABLE>



















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

                                        49
<PAGE>


                     NEW YORK-NEW YORK HOTEL & CASINO, LLC
                        (A Development Stage Company)
                   STATEMENTS OF CHANGES IN MEMBERS' EQUITY
                                (in Thousands)


<TABLE>
<CAPTION>
                                                                      Deficit
                                                                    Accumulated
                                        MGM       PRMA               During the
                                       GRAND,   LAS VEGAS,          Development
                                        INC.       INC.     TOTAL      Stage   
                                     ________   ________   ________   ________ 

                                     <C>        <C>        <C>        <C>      
<S>
INCEPTION, December 23, 1994         $    -     $    -     $    -     $    -   
Members' contributions                 41,200     41,200     82,400        -   
Net loss                                  (27)       (26)       (53)       (53)
                                     ________   ________   ________   ________ 

Balance, December 31, 1995             41,173     41,174     82,347        (53)
Members' contributions                 22,500     22,500     45,000        -   
Net loss                               (7,841)    (7,842)   (15,683)   (15,683)
                                     ________   ________   ________   ________ 

Balance, December 31, 1996           $ 55,832   $ 55,832   $111,664   $(15,736)
                                     ========   ========   ========   ======== 
</TABLE>





























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

                                        50
<PAGE>


                     NEW YORK-NEW YORK HOTEL & CASINO, LLC
                        (A Development Stage Company)
                           STATEMENTS OF CASH FLOWS
                                (in Thousands)

<TABLE>
<CAPTION>
                                                                      For the
                                                                      Period
                                                                        From
                                                                      Inception
                                                                  (December 23,
                                            For the twelve months       1994)
                                               ended December 31,      through 
                                              _________________________________
                                                                   December 31,
                                                1996        1995       1996
                                              ________    ________    ________ 

                                              <C>         <C>         <C>      
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                   $(15,683)   $    (53)   $(15,736)
   Adjustments to reconcile net income to
     net cash provided by operating activities:
     Pre-opening expenses                       15,762         -        15,762 
     Increase in accounts receivable              (340)        (30)       (370)
     Increase in advance deposits               (2,207)        -        (2,207)
     Increase in prepaid expenses               (1,890)        -        (1,890)
     Increase in inventories                      (304)        (46)       (350)
     Increase in accounts payable               12,496         187      12,683 
     Increase in other accrued liabilities      18,257       1,265      19,522 
                                              ________    ________    ________ 
Net cash provided by operating activities       26,091       1,323      27,414 
                                              ________    ________    ________ 

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in property and equipment         (262,211)   (111,544)   (373,755)
   Increase in restricted cash                 (10,868)        -       (10,868)
   Increase in other assets                     (1,070)        -        (1,070)
   Increase in pre-opening expenses            (14,976)       (786)    (15,762)
   (Decrease) increase in construction
     payables                                   (2,365)     14,990      12,625 
                                               ________    _______    ________ 
Net cash used in investing activities         (291,490)    (97,340)   (388,830)
                                              ________    ________    ________ 
</TABLE>












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

                                        51
<PAGE>


                     NEW YORK-NEW YORK HOTEL & CASINO, LLC
                        (A Development Stage Company)
                           STATEMENTS OF CASH FLOWS
                                (in Thousands)

<TABLE>
<CAPTION>
                                                                      For the
                                                                      Period
                                                                        From
                                                                      Inception
                                                                  (December 23,
                                            For the twelve months       1994)
                                               ended December 31,      through 
                                              _________________________________
                                                                   December 31,
                                                1996        1995       1996
                                              ________    ________    ________ 

                                              <C>         <C>         <C>      
<S>
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt               $225,999    $ 59,001    $285,000 
   Increase in deferred financing fees, net        -        (2,480)     (2,480)
   Members' contributions                       45,000      40,000      85,000 
                                               _______    ________    ________ 
Net cash provided by
   financing activities                        270,999      96,521     367,520 
                                               _______    ________    ________ 

Increase (decrease) in cash and 
   cash equivalents                              5,600         504       6,104 

Cash and cash equivalents, beginning of period     504         -           -   
                                              ________    ________    ________ 

Cash and cash equivalents, end of period      $  6,104    $    504    $  6,104 
                                              ========    ========    ======== 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid for interest, net of
     amounts capitalized                      $    -      $    -      $    -   

SUPPLEMENTAL DISCLOSURE OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:

   Capital lease for equipment                $  1,001    $    -      $  1,001 
                                              ========    ========    ======== 
   Retention payable included in
     construction in progress                 $ 14,596    $  3,747    $ 18,343 
                                              ========    ========    ======== 
   Contributed land, at fair market value     $   -       $ 41,200    $ 41,200 
                                              ========    ========    ======== 
   Contributed intangible asset,
     at fair market value                     $   -       $  1,200    $  1,200 
                                              ========    ========    ======== 
</TABLE>

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

                                        52
<PAGE>


                     New York-New York Hotel & Casino, LLC
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS


1. Organization and Operations

MGM Grand, Inc. ("MGM"), a Delaware corporation, and PRMA Las Vegas, Inc.
("Primadonna"), a Nevada corporation, entered into an operating agreement (the
"Agreement") dated December 23, 1994 (inception) to establish NEW YORK-NEW YORK
Hotel & Casino, LLC, a Nevada limited liability company (the "Company"), doing
business as NEW YORK-NEW YORK Hotel & Casino (the "Hotel-Casino"). The
Agreement will expire on December 23, 2024. The purpose of the Company is to
acquire certain unimproved property for development and operation of the Hotel-
Casino which opened to the public January 3, 1997, at an approximate cost of
$460,000,000. MGM contributed to the Company land with a fair market value of
$41,200,000 to comprise its total initial equity investment. Primadonna
contributed to the Company an intangible asset with a fair market value of
$1,200,000 and cash of $40,000,000 for a total initial equity investment of
$41,200,000. Each member contributed cash of $22,500,000 during fiscal year
1996. Each member has a 50% ownership interest in the Company. Profits and
Losses (as defined), quarterly Net Cash Flow Payments (as defined), and
additional capital contributions will be allocated to each member at their 50%
ownership interest. MGM and Primadonna shall not be liable under a judgment,
decree, order of any court or in any other manner, for a debt, obligation or
liability of the Company, except as it relates to the Bank Credit Facility
(see Note 4).

Since the planned principal operations had not commenced as of December 31,
1996, the Company has accounted for its operations as a development stage
company. There were no operations, nor members' equity contributions during the
period from inception (December 23, 1994) through December 31, 1994.
Comparative and cumulative information for 1994 is therefore not presented.

2. Summary of Significant Accounting Policies

a. Use of Estimates

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

b. Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid
investments with original maturates of three months or less.

c. Restricted Cash

Restricted cash represents amounts withdrawn against the Company's Bank Credit
Facility (as defined herein), which are restricted for payment of certain
construction payables.

                                        53
<PAGE>


d. Inventories

Inventories, which consist primarily of beverage and gift shop merchandise, are
stated at the lower of cost, determined on a first-in, first-out basis, or
market value.

e. Property and Equipment

Property and equipment are stated at cost. No depreciation has been charged to
expense in the current year as the property had not yet opened to the public,
and no assets had yet been placed in service.

f. Capitalized Interest

The Company capitalizes interest costs associated with debt incurred during the
active construction and development phases of its facilities and other major
projects. Interest costs capitalized to construction in progress for the year
ended December 31, 1996 and 1995 were $13,951,000 and $759,000, respectively.

g. Pre-opening Expenses

Pre-opening expenses include direct incremental project salaries and other pre-
opening expenses incurred during the pre-opening phase of the project. All pre-
opening costs directly related to gaming and hotel operations are capitalized
as incurred and charged to expense in the period the project is ready for its
intended use. All pre-opening costs were expensed in the period ending December
31, 1996, as the property was ready for use as of December 25, 1996.

h. Income Taxes

The Company is not subject to income taxes, therefore no provision for income
taxes has been made as the members include their respective shares of the
Company's income or loss in their income tax returns.

I. Valuation of Land

The land contributed by MGM has been included in property and equipment at a
value of $41,200,000 (see Note 1). This amount exceeds MGM's original cost
basis and represents the valuation which has been agreed upon by the members.

j. Fair Value of Financial Instruments

The fair value of the Company's financial instruments approximates their
recorded value at December 31, 1996 and 1995.

k. Reclassifications

Certain reclassifications have been made to prior year amounts to conform to
current year presentation.







                                        54
<PAGE>


3. Other Assets

Other assets at December 31, 1996 and 1995 consist of the following:

<TABLE>
<CAPTION>
                                                  1996        1995
                                               _______    ________
                                                   (in thousands) 

                                              <C>         <C>     
<S>
Deferred financing fees                       $  2,994    $  2,675
Intangible asset                                 1,319       1,200
Organization costs                                 461         -  
Chips and tokens                                   513         -  
                                              ________    ________
   Subtotal                                      5,287       3,875
Less: amortization                                (537)       (195)
                                              ________    ________
Other assets, net                             $  4,750    $  3,680
                                              ========    ========
</TABLE>
Deferred financing fees and costs related to obtaining the Company's long-term
debt facility were capitalized, and are being amortized to interest expense on
a straight-line basis over the period of the loan. In accordance with the
Company's capitalization of interest costs during the development phase, the
amortized portion of these fees was included in capitalized interest.

Intangible asset represents certain rights related to the "New York Theme,"
contributed by Primadonna, in accordance with the Agreement. Upon opening the
Hotel-Casino, this amount will be amortized over the life of the Agreement
(30 years).

Organization costs consist primarily of professional and legal fees incurred to
establish the Company, and obtain requisite Gaming Licenses. Upon opening the
Hotel-Casino, these costs will be amortized over 5 years.

Chips and tokens consist of the cost of purchasing the gaming chips and tokens
used in the Hotel-Casino. Upon opening the Hotel-Casino, these costs will be
amortized over 3 years.



















                                        55
<PAGE>


4. Long-Term Debt

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                    December 31,
                                                  1996        1995
                                              ________    ________
                                                   (in thousands)
                                              <C>         <C>    
<S>
Amount due under Bank Credit Facility at
floating interest rates based on Libor
plus between .75% to 2.00% depending on the
Guarantor Funded Debt Ratio as defined.
Interest on the Bank Credit Facility ranged
from 6.25% to 8.75% during 1996, maturing
March 31, 2002.                               $285,000    $ 59,001

Less-current portion of long-term debt             -          -   
                                              ________    ________
Total long-term debt                          $285,000    $ 59,001
                                              ========    ========
</TABLE>
On September 15, 1995, the Company entered into a secured limited recourse
financing agreement for a $225,000,000 Construction/Revolving Loan (the "Bank
Credit Facility") with a consortium of banks, led by Bank of America. On
September 26, 1996, the Bank Credit Facility was amended to increase the
Commitment to $285,000,000. The Bank Credit Facility was a non-revolving
construction line of credit, which converted to a 5 year reducing revolver upon
the commencement of operations of New York New York on January 3, 1997.
Interest on the Bank Credit Facility is variable based on a formula defined in
the Bank Credit Facility agreement. An initial payment of $20,000,000 is due on
the Initial Reduction Date (as defined, which is March 31, 1998). Thereafter,
quarterly installments are due of $9,375,000 for the next four quarters;
$11,250,000 for the next eight quarters; $12,500,000 for the next three
quarters; and the balance maturing four years after the Initial Reduction Date.
Additional principal payments are due one year after operations commence based
on 50% of Available Cash Flow (as defined).

The Company incurred commitment fees on a quarterly basis on the unused portion
of the Bank Credit Facility (as defined) at .5%. Commitment fees incurred
during the years ended December 31, 1996 and 1995 were $284,000 and $228,000,
respectively; these amounts are included in capitalized interest. Substantially
all property and equipment of the Hotel-Casino is pledged as collateral under
the Bank Credit Facility.

The Bank Credit Facility contains various restrictive covenants including the
maintenance of certain financial ratios and limitations of additional debt,
distributions, disposition of property, mergers and similar transactions.
Compliance with these covenants is not required until the Hotel-Casino
commences operations.

As a condition to the Bank Credit facility, MGM and Primadonna (collectively,
the "Guarantors") guaranteed completion of the Hotel-Casino and, in addition,
entered into a "Keep Well" agreement whereby, if the Company fails to be in
compliance with any of the financial ratio covenants (as defined), the
Guarantors shall contribute Acceptable Cash Equity (as defined) to the Company.


                                        56
<PAGE>


The Bank Credit Facility allows for the issuance of letters of credit of up to
$20,000,000 and the issuance of swing line loans of up to $10,000,000. As of
December 31, 1996, the Company has not issued any letters of credit nor
received advances on the swing line loans.

Interest payable at December 31, 1996 and 1995 was approximately $2,158,000 and
$175,000 respectively, and is included in other accrued liabilities in the
accompanying balance sheets.

Scheduled maturities of long-term debt are as follows as of December 31, 1996:

<TABLE>
<CAPTION>
                                                   (in thousands)
                                                     <C>         
<S>
1997                                                 $    -      
1998                                                   48,125    
1999                                                   43,125    
2000                                                   45,000    
2001                                                   48,750    
Thereafter                                            100,000    
                                                     ________    
                                                     $285,000    
                                                     ========    
</TABLE>

5. Capital Lease

In December, 1996, the Company entered into a five-year master equipment lease
agreement to purchase various powered supply carts with a fair market value of
$1,001,000 at an interest rate of 7.46%. The future minimum lease payments by
year under the lease, together with the present value of the minimum lease
payments, consisted of the following at December 31, (in thousands):

<TABLE>
<CAPTION>
                                                     <C>       
<S>
1997                                                 $   240    
1998                                                     240    
199                                                      240    
2000                                                     240    
2001                                                     241    
                                                     _______    
Minimum lease payments                                 1,201    
Less: amounts representing interest                      200    
                                                     _______    
Present value of minimum lease payments               $1,001    
                                                     =======    
</TABLE>

6. Abandonment Loss

The Company incurred costs related to the construction of flyover ramps to
divert traffic from the heavily traveled intersection in front of the Hotel-
Casino. Based upon the results of the traffic studies subsequently performed,
management changed their intentions and abandoned construction of these
flyovers; therefore $642,000 of abandonment loss, the cumulative costs incurred
to date, was charged to expense as of December 31, 1995.






                                        57
<PAGE>


7. Related Party Transactions

During the year ended December 31, 1996 and 1995, the Company engaged in
certain transactions with MGM and Primadonna. In 1995 MGM and Primadonna, each,
contributed $5,000,000, respectively to the Company, which amounts were
advanced to, and subsequently repaid by the Company, during the year ended
December 31, 1995. In addition, the Company has reimbursed expenses related to
construction and pre-opening expenses paid for by MGM and Primadonna. These
reimbursed expenses approximated $96,000 and $1,544,000 for 1996 and $414,000
and $2,279,000 for 1995, for MGM and Primadonna, respectively. Included in
these amounts is interest paid of $0 and $4,000 to MGM and Primadonna,
respectively for 1996, and $44,000 and $40,000 to MGM and Primadonna,
respectively for 1995.

The Company leased approximately 5,800 square feet of office space from MGM.
The annual lease expense was approximately $55,500 for the years ended December
31, 1996 and 1995.

8. Commitments and Contingencies

Litigation

The Company is party to various litigation arising in the normal course of
business. Management is of the opinion that the ultimate resolution of these
matters will not have a material effect on the financial position or the
results of operations of the Company.

The Company has been named as a defendant in a trademark infringement and
unfair competition action. The action alleges that the plaintiff owns the
trademark rights for a stylized design mark featuring an apple surrounded by
the words, "New York New York" for restaurant services. Prior to filing the
complaint the plaintiff offered to sell the trademark to the Company for at
least one million dollars; the Company declined such purchase. The
litigation is currently in the early stages of development, and, in the opinion
of management, the ultimate outcome of this matter is not presently known. The
Company has retained outside counsel who have indicated that there is very
little likelihood of a damage award being rendered against the Company, even if
the Court concluded that the trademark infringement had occurred.  However, the
Company could be required to either obtain a  trademark license, or negotiate a
purchase from the plaintiff. 

9. Subsequent Events

The Hotel-Casino opened to the public on January 3, 1997.

On January 15, 1997, the Company signed a letter of intent to purchase improved
real property located at 3782 Las Vegas Boulevard South, from LaQuinta Inns,
Inc. The purchase price is expected to be $13,500,000, and the transaction is
contemplated to close on or before March 14, 1997.







                                        58
<PAGE>


On January 21, 1997, the Company entered into a $20,000,000 Master Security
Agreement for equipment financing with a financial institution (the "Note").
The Note is payable in 58 monthly installments of $254,000 and one final
installment of $5,000,000. The Note contains a Contract Rate of interest equal
to the sum of 1) one and 88/100 percent (1.88%) per annum, plus 2) a variable
per annum interest rate which shall be equal to the one month LIBOR rate. The
Company has the option to convert to a fixed rate, based on the Treasury Rate,
for the remaining length of time on the Note, plus one and 88/100 percent
(1.88%) per annum. 













































                                        59