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


                                   FORM 10-K


Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
                       1934

                  For the fiscal year ended December 31, 1997
                                  ----------
                        Commission File Number 333-42147

                                  ----------

                             LAS VEGAS SANDS, INC.
           (Exact name of registration as specified in its charter)

            Nevada                                       04-3010100             
---------------------------------------    -------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.) 
  incorporation or organization)           


3355 Las Vegas Boulevard South, Room 1A   
           Las Vegas, Nevada                               89109                
---------------------------------------   --------------------------------------
     (Address of principal offices)                      (Zip Code)             
                                          

                                 (702) 733-5499
               ---------------------------------------------------
               Registrant's telephone number, including Area Code:


Securities registered pursuant to Section 12(b) of the Act: None


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, and (2) has been subject to such filing
requirements for the past 90 days.  Yes |_| No |X|

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. [ ]


The aggregate market value of voting stock held by nonaffiliates of registrant
as of March 27, 1998 was $0.


The Company had 925,000 shares of Common Stock outstanding as of March 27,
1998.
<PAGE>

                             Las Vegas Sands, Inc.

                               Table of Contents

<TABLE>
<S>          <C>                                                                                         <C>
                                                      Part I
Item 1.      Business ................................................................................     1
Item 2.      Properties ..............................................................................    24
Item 3.      Legal Proceedings .......................................................................    24
Item 4.      Submission of Matters to a Vote of Security Holders .....................................    24

                                                     Part II

Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters ...................    25
Item 6.      Selected Financial Data .................................................................    26
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations        27
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk ..............................    32
Item 8.      Financial Statements and Supplementary Data .............................................    33
Item 9.      Changes in and Disagreements With Accountants On Accounting and Financial Disclosure         50

                                                     Part III

Item 10.     Directors and Executive Officers of the Registrant ......................................    51
Item 11.     Executive Compensation ..................................................................    52
Item 12.     Security Ownership of Certain Beneficial Owners and Management ..........................    55
Item 13.     Certain Relationships and Related Transactions ..........................................    55

                                                     Part IV
Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K .........................    59
             Signatures ..............................................................................    63
</TABLE>


                                       i
<PAGE>

                                     PART I

ITEM 1.--BUSINESS

General

     Las Vegas Sands, Inc. ("LVSI") and its subsidiaries (collectively, the
"Company") are constructing and will own and operate the Venetian Casino Resort
(the "Casino Resort"), a Renaisssance Venice-themed resort situated at one of
the premier locations on the Las Vegas Strip (the "Strip"). The Casino Resort
is located across from The Mirage and the Treasure Island Hotel and Casino at
the site of the former Sands Hotel and Casino (the "Sands"). As planned, the
Casino Resort will include the first all-suites hotel on the Strip with
approximately 3,036 suites (the "Hotel"); a gaming facility of approximately
116,000 square feet (the "Casino"); an enclosed retail, dining and
entertainment complex of approximately 500,000 net leasable square feet (the
"Mall"); and a meeting and conference facility of approximately 500,000 square
feet (the "Congress Center"). The Casino Resort will be physically connected to
the approximately 1,150,000 square foot existing Sands Expo and Convention
Center (the "Expo Center"), one of the largest facilities in the United States
specifically designed for trade shows and conventions. Management believes that
the combined facilities of the Casino Resort and the Expo Center (which is
separately owned by an affiliate of the Company) will be one of the largest
hotel and meeting complexes in the United States. Ground breaking for the
Casino Resort occurred in April 1997, with an opening to the general public
scheduled for April 1999.

     LVSI was incorporated in 1988 under the laws of the State of Nevada. In
April 1989, LVSI acquired the Sands from MGM Grand. LVSI owned and operated the
Sands from April 1989 to June 1996 when hotel operations ceased. Construction
of the Casino Resort commenced in April 1997. LVSI is the managing member and
owner of 100% of the common equity of Venetian Casino Resort, LLC ("Venetian").
Venetian is the owner and operator of the Casino Resort. Under a casino lease
(the "Casino Lease"), Venetian will lease the Casino to LVSI, which will
conduct all gaming operations in the Casino Resort. The executive offices of
LVSI are located at 3355 Las Vegas Boulevard South, Room 1A, Las Vegas, Nevada
89109 and their phone number is (702) 733-5000.

     This Annual Report on Form 10-K contains certain forward-looking
statements. See "Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Special Note Regarding Forward-Looking
Statements."

The Casino Resort

     The Hotel

     The Hotel will have approximately 3,036 single and multiple bedroom suites
situated in a 35-story, three-winged tower rising above the Casino. The lobby
will feature a 65-foot domed ceiling decorated with Venetian-themed
fresco-style paintings, a main passageway formed by a barrel-vaulted ceiling
carried on ornamental columns, and a replica of the unique three
dimensional-style marble floors found in Venetian palaces.

     A typical Hotel suite will be approximately 655 to 735 square feet
consisting of a raised sleeping area with a bathroom and a sunken
living/working area. The suite's bi-level configuration is intended to create a
multi-function living space in which guests can sleep, work or entertain and
will include two queen-size beds or one king-size bed, a writing desk, dual
line speaker phones, a fax machine and a sitting area. Furthermore,
approximately 318 of the suites will be of larger size allowing for the
possibility of entertaining from 20 to 100 persons in the living area.

     The Hotel will lease space to (or operate) approximately six restaurants
that will be located adjacent to the Casino. The Hotel is expected to include
upscale restaurants. Hotel guests also will have the option of casual dining at
a 20,000 square foot cafe, which is expected to be operated by a
nationally-recognized operator of premium casual restaurants, and at a 15,000
square foot Venetian-style market food court, both of which will be located at
the casino level of the Hotel. Live entertainment will be offered at a 50,000
square foot "Billboard Live!" entertainment complex in the Mall. Hotel guests
will have access to concierge services and express room service through
pantries that are planned for every other floor of the Hotel tower. In
addition, the Hotel will provide a variety of amenities for its guests,
including a state-of-the-art health spa, with massage and treatment rooms,
exercise and fitness areas and a beauty salon. The Hotel also will feature an
outdoor swimming complex (including five pools, spas, pool bars and cabanas)
surrounded by gardens, waterways, fountains and sculptures. The Hotel has been
designed to accommodate future expansion, including a 1,500 seat showcase
theater.


                                       1
<PAGE>

     The Casino

     The Casino will be approximately 116,000 square feet and will be situated
adjacent to the Hotel lobby. The Casino floor will be accessible from each of
the Hotel, the Mall, Congress Center, the Expo Center and the Strip. The Casino
will be marketed to attract a broad base of patrons, with a specific focus on
frequent premium gaming customers. The Company will market the Casino directly
to this gaming market segment using database marketing techniques, slot clubs
and traditional incentives, such as reduced room rates and complementary meals
and suites. The Company will offer "high roller" gaming customers premium
suites and special hotel services.


     The Casino and its adjacent amenities will be stylized to resemble a
Venetian "palazzo," with architectural and interior design features
representative of Venice's Renaissance era. The ceilings in the table games
area will feature fresco-style paintings of Venetian palaces. The gaming
facilities will include approximately 2,500 slot machines of various
denominations, including the popular multi-property, linked progress games. A
high-end slot area, with a private lounge, will provide slot customers with
premium slot products and services. The Casino's approximately 114 table games
(excluding baccarat tables) will feature the traditional games of black jack,
craps and roulette, Asian games, such as "Pai Gow" and "Pai Gow Poker," and
popular progressive table games, such as "Caribbean Stud Poker" and "Let It
Ride." In addition, the Casino will offer gaming customers an upscale
sportsbook room, a keno lounge, a poker room and an upscale baccarat pit. The
baccarat pit is specially designed for premium, "high roller" gaming, with
baccarat, black jack and roulette, a private lounge with butler service, direct
access to private cash-out windows at the Casino cage and direct access to the
Casino's credit department. Although the Company intends to target "high
roller" gaming customers, it does not expect to target the known top 50 to 100
baccarat players in the world in order to avoid the risks associated with the
amounts wagered by these players.


     The Mall

     The Mall will offer approximately 500,000 net leasable square feet of
shopping, dining and entertainment space located (i) on two levels within the
Casino Resort's main structure, between the Casino level and the Hotel tower,
and (ii) in a separate approximately 28,000 square foot retail annex adjacent
to the Casino Resort's main structure. The Mall is expected to include
approximately seven dining establishments and 55 retail stores. Visitors and
guests can enter the Mall from several different directions, including from the
Strip via a moving sidewalk or by pedestrian bridges, from the main gaming area
of the Casino via escalators, from the Expo Center through the Congress Center,
and directly from the Hotel.


     The Mall has been planned to include well-known restaurants and retail
establishments to draw on brand name awareness, all offered at various price
points in order to appeal to a broad market. The success of brand name and
boutique retailers at The Forum Shops at Caesars Palace Hotel and the Fashion
Show Mall on the Strip, and the success of brand name, premium restaurants at
The Forum Shops at Caesars Palace Hotel and existing themed resorts has
demonstrated the demand in Las Vegas for quality shopping and dining.


     The Company has planned for an array of quality dining experiences for the
Mall, including upscale restaurants that will offer international and American
regional cuisines. The Mall is also expected to offer themed restaurants, such
as the "Billboard Live!" Cafe. The Mall's retail offerings are expected to
include exclusive showcase boutiques, popular brand name mid-priced stores and
themed entertainment concepts. The restaurants and stores will be set along an
approximately one-quarter mile Venetian-themed streetscape, and will front on
the Venetian-themed canal running its length or will be grouped in
"piazza"-style settings. Store and restaurant facades will be designed to
project the Venetian theme, and state-of-the-art lighting will alternately
simulate a day and night sky in an open-air environment beneath the Mall's
vaulted ceiling.


     Expo Center and the Congress Center

     With over 1.15 million gross square feet of exhibit and meeting space,
including four exhibit halls and 22 meeting rooms, the existing Expo Center is
one of the largest trade show and convention facilities in the United States
(as measured by net leasable square footage). As part of the Casino Resort, the
Company is constructing and will own and operate the Congress Center, an
approximately 500,000 gross square foot meeting and conference facility which
will link the Expo Center and the rest of the Casino Resort. The Congress
Center, which management expects will open concurrently with the Casino Resort,
will include an approximately 80,000 square foot column-free "Grand Ballroom,"
an approximately 13,500 square foot "Venetian Ballroom" and a meeting complex
of 42 indi-


                                       2
<PAGE>

vidual rooms which can be combined to create three additional ballrooms.
Together, the Expo Center and the Congress Center will offer nearly 1.65
million square feet of state-of-the-art exhibition and meeting facilities,
which can be configured to provide 108 meeting rooms or accommodate large-scale
multi-media events. Management intends to market the Congress Center to
complement the operations of the Expo Center by target marketing the Congress
Center for business conferences and upscale business events typically held
during the mid-week period. The Company believes that the Congress Center also
can be marketed to generate room night demand during the move-in/move-out
phases of Expo Center events. The Company's goal is to draw from attendees and
exhibitors at Expo Center events and from attendees of Congress Center events
to maintain weekday room-night demand at the Hotel from this higher budget
market segment, when room demand would otherwise be derived from the lower
budget tour and travel group market segment.

     In 1997, approximately 1,150,000 visitors attended the trade shows and
conventions at the Expo Center during 150 show days. The Expo Center hosted 17
events on the 1996 Trade Show Week 200 list of the largest trade shows in the
United States in 1997, including the COMDEX Fall Trade Show, the Spring and
Fall Western Shoe Show and JCK Jewelry Show, as well as the convention of
National Association of Broadcasters, the Automotive Service Industry
Association Week, and the International Consumer Electronics Show, each of
which were multiple location events. In 1998, approximately 16 trade show
events included on the 1996 Trade Show Week 200 list and 145 show days are
scheduled for the Expo Center. For 1999, the Expo Center has already booked or
reserved 37 major trade shows and conventions over the course of 131 show days,
including approximately 16 trade shows of a size that would qualify for the
1996 Trade Show Week 200 list.

     It should be noted that the Company has no ownership or financial interest
in the Expo Center or Interface Group-Nevada, Inc. ("Interface"), the owner of
the Expo Center, and does not exercise any control over the business or
management of the Expo Center or Interface. All of the capital stock of
Interface is beneficially owned by Sheldon G. Adelson, the sole stockholder of
the Company (the "Sole Stockholder"). See "Item 13--Certain Relationships and
Related Transactions."

     The Company and Interface intend to market jointly the Hotel and Casino,
the Mall and the Expo Center. In order to establish terms for the integrated
operation of these facilities, Venetian, Grand Canal Shops Mall Construction,
LLC (the "Mall Construction Subsidiary") and Interface have entered into the
Amended and Restated Reciprocal Easement, Use and Operating Agreement (the
"Cooperation Agreement"). The Cooperation Agreement provides that until
December 31, 2010, Interface will use commercially reasonable efforts to have
the Hotel designated as the "headquarters hotel" for trade show and convention
events at the Expo Center and the Company will use commercially reasonable
efforts to promote the use and occupancy of the Expo Center. In order to obtain
the Casino Resort's "headquarters hotel" designation, the Company has agreed
with Interface that, except under certain circumstances, trade shows of the
type generally held at the Expo Center will not be held in the Congress Center.
Under the Cooperation Agreement, Interface and Venetian will allocate expenses
shared by the Expo Center and the Casino Resort. It should be noted that trade
show and convention promoters will be under no obligation to select the Casino
Resort as the "headquarters hotel" for their events. See "Item 13--Certain
Relationships and Related Transactions--Cooperation Agreement."


                                       3
<PAGE>

                    Major Trade Show and Convention Events
              Booked or Reserved for 1999 at the Expo Center (1)

<TABLE>
<CAPTION>
                                                                                                                    Estimated
                                                                           Show Day     Number of      Days of         1997
Name of Event                                                               Pattern     Show Days     the Week    Attendance (2)
-----------------------------------------------------------------------   ----------   -----------   ----------   --------------
<S>                                                                       <C>          <C>           <C>          <C>
International Winter Consumer Electronic Show (IWCES) (3)                    1/7-10          4         Th-Su           95,000*
GiftSource West - Spring                                                    1/17-20          4         Su-W             7,500
Night Club and Bar                                                          1/19-20          2          T-W             8,000
Aqua '99                                                                    1/19-21          3         T-Th             5,000
World Floor Covering Assn. (Surfaces) (3)                                   1/27-29          3          W-F            37,000
Western Shoe Associates - Spring (3)                                         2/9-12          4          T-F            43,000
Associated Surplus Dealers/Associated Merchandise Dealers
 (ASD/AMD) - Spring (3)                                                     2/21-25          5         Su-Th           50,000
Men's Apparel Guild in California (MAGIC) - Spring (3)                        3/1-4          4         M-Th            80,000*
Int'l Security Conference                                                   3/10-12          3          W-F            12,000
National Archery                                                            3/12-14          3         F-Su             5,000
Bedroom Show                                                                3/17-19          3          W-F             5,000
Century 21                                                                  3/17-19          3          W-F            10,000
Amusement Showcase International                                            3/18-20          3         Th-S            10,000
ASI Show                                                                    3/22-24          3          M-W            15,000
International Gaming Business Expo                                          3/29-31          3         T-Th            10,000
Hospitality Design                                                           4/8-10          3         Th-S            10,000
National Association of Broadcasters (NAB) (3)                              4/19-22          4         M-Th           101,000*
National OTC                                                                  5/2-4          3         Su-T             7,000
Las Vegas Merchandise                                                       5/16-19          4         Su-W             5,000
International Trucking Show (3)                                             5/19-21          3          W-F            31,000
Jeweler's Circular Keystone International Jewelry Show
     (JCK) (3)                                                                6/4-8          5          F-T            35,000
GiftSource West - Fall                                                      6/13-16          4         Su-W             7,500
National Nutritional Foods                                                  6/25-27          3         F-Su             7,500
Furniture & Decorative Expo                                                 6/26-28          3          S-M             6,000
Billiard Congress                                                           7/15-17          3         Th-S             7,000
Western Shoe Associates - Fall (3)                                            8/5-8          4         Th-Su           45,000
Associated Surplus Dealers/Associated Merchandise Dealers
 (ASD/AMD) - Fall (3)                                                       8/15-19          5         Su-Th           50,000
Men's Apparel Guild in California (MAGIC) - Fall (3)                       8/30-9/2          4         M-Th            80,000*
Interbike Show (3)                                                          9/10-13          4          F-M            35,000
Western Nursery                                                             9/22-23          2         W-Th            10,000
Amusement and Music Operator's Assn. (AMOA)                                 9/23-25          3         Th-S             8,500
LV '99 Italian Furniture                                                    9/24-27          4          F-M             5,000
True Serve (3)                                                               10/4-8          5          M-F            20,000
Package Machinery Manufacturers' Institute
 (Pack Expo West) (3)                                                      10/18-20          3          M-W            19,000
Automotive Service Industry Assn. (ASIA) Motor and Equipment
 Manufacturers' Assn. (MEMA) Automotive Parts And
 Accessories Assn. (APAA) (3)                                                11/2-5          4          T-F            80,000*
Softbank COMDEX '99 (3)                                                    11/15-19          5          M-F           220,000*
Aqua 2000                                                                    12/1-3          3          W-F             5,000
                                                     Total                                 131                      1,187,000
                                                                                           ===                      =========
</TABLE>

----------
(1) Shows include those contracted and those reserved, some of which are
    scheduled to occur prior to the scheduled opening of the Casino Resort.
    The Company believes that these shows are representative of the typical
    major events at the Expo Center.
(2) Based solely on the number of attendees for the 1997 trade show or
    convention events. Certain of the estimates for these shows or conventions
    are marked with an asterisk because they were held at multiple locations
    in Las Vegas, and not all attendees visited the Expo Center.
(3) A 1996 Trade Show Week 200 show.

                                       4
<PAGE>

Business and Marketing Strategy

     The Company's business strategy is to (i) create a "must-see" destination
resort at a premier location at the heart of the Las Vegas Strip, (ii) provide
a differentiated superior all-suites product, (iii) capitalize on the link to
the Expo Center and the Congress Center, (iv) utilize the Casino Resort's
unique assets and facilities to appeal to a higher budget customer mix, (v) use
the Casino Resort's themed facilities and location to generate Casino revenues,
(vi) target premium gaming customers, and (vii) carefully manage construction
costs and risks.

     Create a "Must-See" Destination Casino Resort at the Heart of the Las
Vegas Strip
     The Casino Resort, with its extensive theming, dining, shopping and
entertainment, is expected to be a "must-see" destination resort located at the
heart of the Strip. The Casino Resort is designed to provide visitors with the
sense of being surrounded by the festivity and splendor of Renaissance Venice's
architecture, music, art and history. The Venetian-themed setting along the
Casino Resort's frontage on the Strip will include waterways, gondolas, and
replicas of Venetian landmarks, such as the Doge's Palace, the Rialto Bridge,
the Ca Doro and the Campanile Tower. The Mall will feature a one-quarter mile
Venetian streetscape, with intimate "piazza"-style settings and a 630 foot
"grand" canal running its length, with gondolas and water-side cafes and
crossed by authentically-styled Venetian bridges.

     The Company believes that the Casino Resort's Venetian-theming, and its
central location on the Strip will appeal to business travelers, leisure
travelers and gaming customers and will position the Casino Resort to draw
significant pedestrian traffic from the Strip. The Casino Resort will have
approximately 740 feet of frontage on the east side of the Strip and will be
located next to Harrah's and across from some of the most visited casino
resorts and attractions on the Strip, including The Mirage, the Treasure Island
Hotel and Casino and The Forum Shops at Caesars Palace Hotel. Based on
information gathered from public sources, the Company estimates that on average
each day during 1996, approximately 57,000 vehicles passed the site of the
Casino Resort, approximately 13,000 persons watched the pirate show in front of
the Treasure Island Hotel and Casino, and approximately 43,000 persons visited
The Forum Shops at Caesars Palace Hotel.

     Provide a Differentiated Superior All-Suites Product
     The Hotel is expected to offer the only all-suites product with
first-class services and facilities on the Strip. In management's experience,
business and leisure travelers consider suites desirable, superior
accommodations. For business travelers, the Hotel's suites, which will
accommodate informal business meetings and social gatherings, will offer guests
a unique, single location in which to work and entertain in close proximity to
the Expo Center and the Strip. Leisure travelers will appreciate both the
Hotel's spacious suites and extensive facilities. The Company believes that the
all-suites format, together with the Casino Resort's many other unique
attributes, will result in a highly differentiated resort product, and provide
a competitive advantage over other Strip hotel/casino properties and resorts.

     The typical Hotel suite will range in size from approximately 655 square
feet to 735 square feet (compared to 360 to 400 square feet on average for a
standard room in competing facilities on the Strip), and will consist of a
sunken living/working area and a raised sleeping area with a marble bathroom.
The suite's living/working area will include a sitting area and a writing desk
and will offer business amenities such as dual-line speaker phones, a fax
machine and dataport access. The bathrooms will be oversized, featuring a
separate bathtub and shower, dual sinks and a phone. In addition, the Hotel
will offer larger suites, including the "Presidential" and penthouse suites,
with exclusive services such as butlers.

     Capitalize on the Link to the Expo Center and the Congress Center
     The Casino Resort will be the first themed entertainment resort in Las
Vegas designed specifically to accommodate large scale trade shows,
conventions, conferences and meetings. The Expo Center and the Congress Center
are expected to provide recurring, predictable demand for mid-week room nights
from business travelers. During 1997, approximately 1,150,000 visitors attended
trade shows and conventions at the Expo Center. Through the Cooperation
Agreement, the owner of the Expo Center has agreed to market the Casino Resort
to promoters of Expo Center trade shows, conventions and other events as the
"headquarters hotel" for such events. The Casino Resort will offer attendees of
events at the Expo Center and the Congress Center the most convenient hotel
accommodations in Las Vegas. The Expo Center already has booked or reserved 37
trade shows, conventions and business events for the calendar year 1999,
covering 131 separate show days. It should be noted that trade show and con-


                                       5
<PAGE>

vention promoters will be under no obligation to select the Casino Resort as
the "headquarters hotel" for their events. See "Item 13--Certain Relationships
and Related Transactions--Possible Conflicts of Interest." In addition to being
an expected source of room demand for the Hotel, the Expo Center and the
Congress Center are expected to draw pedestrian traffic from guests of hotels
throughout Las Vegas, providing a significant source of traffic for the Casino
and the Mall.

     Appeal to a Higher Budget Customer Mix
     Management expects the Casino Resort to attract higher budget business
travelers and free and independent travelers, resulting in a higher budget
customer mix both on weekdays and weekends. By appealing to customers in these
market segments, the Company expects to reduce its reliance on the lower-budget
tour and travel market. Management believes that business travelers typically
pay more for rooms and spend more on entertainment than weekday customers in
other categories, such as tour groups. Management believes that the Casino
Resort's central location adjacent to the Expo Center and the Strip and its
all-suites hotel product will allow it to compete effectively for the higher
budget mid-week trade show, convention and meeting attendees. On both weekdays
and weekends, the all-suites product at the Hotel is expected to appeal to free
and independent leisure travelers and "high-roller" gaming customers, also
segments of the travel market that spend more on rooms and entertainment.

     Use the Casino Resort's Themed Facilities and Location to Generate Casino
Revenues
     Management believes the Casino will capture gaming revenues from (i) the
foot traffic generated by Expo Center and Congress Center events, (ii) Hotel
guests, (iii) the foot traffic generated by shoppers and diners at the Mall and
the Casino and (iv) visitors attracted to the Casino Resort's unique,
Venetian-themed facilities. The Casino Resort is planned to include a
concentration of some of the finest restaurants in Las Vegas, brand name and
exclusive boutique shopping, and themed entertainment concepts. Letters of
intent have been signed with several well-known restauranteurs, such as
Wolfgang Puck, to operate their "signature" restaurants at the Casino Resort.
In addition, the Company has entered into a lease for the "Billboard Live!"
entertainment complex, which is affiliated with Billboard Magazine. Management
believes that the combination of brand name awareness and extensive theming
will generate significant foot traffic for the Casino Resort. The Casino Resort
has been designed so that foot traffic from the Strip, the Expo Center, the
Congress Center and the Hotel are funneled through the Casino floor in order to
attract and retain a broad base of Casino patrons.

     Target Premium Gaming Customers
     Management believes that the Casino Resort's all-suites product, themed
atmosphere and amenities will offer gaming customers a unique Las Vegas
experience. The Company intends to market the Casino to frequent premium gaming
customers. In particular, the Company will seek to attract "high roller" gaming
customers by offering premium suites and special hotel services. Because of the
all-suites format in the Hotel, the Casino Resort will be able to offer many
gaming customers complementary suites (considered premium accommodations in Las
Vegas) during high occupancy periods such as weekends and holidays when they
would not otherwise be offered such suites by the Company's competitors. The
Company believes that the premium gaming customer is a significant market
segment that has been inadequately addressed by the Casino Resort's
competitors. The Casino Resort will be the first all-Suites resort on the Strip
with facilities and amenities designed from inception to attract and serve
premium gaming customers.

     Carefully Manage Construction Costs and Risks
     The Casino Resort is budgeted to cost approximately $1.065 billion to
develop, equip and open (such costs include approximately $70.0 million for
certain heating and air conditioning-related and other equipment (the "HVAC
Equipment") to be owned by a third party, but exclude land acquisition costs).
As of December 31, 1997, approximately $228.1 million of this total budgeted
cost has been expended or incurred. Of the amount expended and incurred,
approximately $95.3 million represents cash contributed to the Company by the
Sole Stockholder, through affiliates of the Company.

     As of December 31, 1997, (i) the foundation for the principal structure of
the Casino Resort has been constructed and the superstructure is under
construction and (ii) pursuant to the Construction Management Contract (as
defined herein), and otherwise, trade contracts in excess of $303.7 million for
various components of the project, including excavation, foundations,
structural steel, mechanical and plumbing systems and structural concrete have
been entered into or negotiated. In order to manage its construction risk, the
Company has entered into various agreements designed to protect it against
construction delays and cost overruns (including (i) a guaranteed maximum


                                       6
<PAGE>

price construction management contract (the "Construction Management
Contract"), which protects the Company against certain cost overruns in the
amount of $547.8 million (or approximately 52% of the expected cost of the
Casino Resort) with Lehrer McGovern Bovis, Inc. (the "Construction Manager"),
(ii) guaranties of certain of the Construction Manager's obligations (with
certain limited exceptions) by its parent corporation, Peninsular and Oriental
Steam Navigation Company ("P&O"), and (iii) a liquidated damages insurance
policy for costs of certain construction delays (the "Liquidated Damages
Insurance"). The budget for the Casino Resort contains a Construction Manager's
construction budget contingency and an owner's contingency totaling $66.1
million in the aggregate that can be used to cover cost overruns. Further, the
Sole Stockholder has provided a $25.0 million collateralized completion
guaranty (the "Completion Guaranty"). The Completion Guaranty is not available
to fund any increases in costs attributable to discretionary "scope changes."
Any such "scope changes" may only be implemented if the Company demonstrates
that it has sufficient available funds to cover the anticipated increased
costs, or if the Sole Stockholder increases his Completion Guaranty by such
amount. To the extent that any cost overruns are not covered by the
Construction Management Contract or the other protections described above, such
cost overruns could be substantial and have a material adverse effect on the
Company's liquidity and results of operations and its ability to complete the
Casino Resort.

     To further ensure that there are sufficient funds to construct the Casino
Resort as planned and that such funds are disbursed appropriately, certain
lenders of the Company have entered into a funds disbursement and
administration agreement (the "Disbursement Agreement") to establish the
conditions for and the sequencing of funding construction costs and procedures
for approving construction change orders and amendments to the construction
budget and schedule. The Disbursement Agreement provides that project costs
(other than costs for the HVAC Equipment, furniture, fixtures and other
equipment) will, generally, be funded first from a $95.3 million cash
contribution by the Sole Stockholder and his affiliates (the "Cash
Contribution") and the net cash proceeds of the issuance of $97.5 aggregate
principal amount of the Company's 141/4% Senior Subordinated Notes due 2005
(the "Senior Subordinated Notes"), and thereafter on a pro rata basis from the
proceeds of: (i) borrowings of approximately $150.0 million under a secured
bank credit facility (the "Bank Credit Facility"), (ii) borrowings of
approximately $140.0 million under a secured mall construction loan facility
(the "Mall Construction Loan Facility") and (iii) $425.0 aggregate principal
amount of the Company's 121/4% Mortgage Notes due 2004 (the "Mortgage Notes"
and, together with the Senior Subordinated Notes, the "Notes"). The HVAC
Equipment will be funded through the Disbursement Agreement from a separate
commitment from Atlantic-Pacific Las Vegas, LLC (the "HVAC Provider"), subject
to limited exceptions.

     Under the Disbursement Agreement, a subsidiary of Tishman Corporation
("Tishman"), one of the nation's leading construction managers and largest
hotel developers and owners, acts as construction consultant (the "Construction
Consultant") to such lenders and is required to review each request by the
Company for the disbursement of funds. The disbursement conditions under the
Disbursement Agreement provide that, subject to certain exceptions, funds will
be disbursed to the Company only if it is determined that construction is on
schedule and that there are sufficient available funds to complete the Casino
Resort in accordance with the construction drawings and budget.

The Las Vegas Market
     Las Vegas is one of the fastest growing and largest entertainment markets
in the country. Las Vegas hotel occupancy rates are among the highest of any
major market in the United States. According to the Las Vegas Convention and
Visitors Authority ("LVCVA"), the number of visitors traveling to Las Vegas has
increased at a steady and significant rate for the last ten years from 17.2
million visitors in 1988 to 30.5 million visitors in 1997, a compound annual
growth rate of 6.5%. Aggregate expenditures by Las Vegas visitors increased at
a compound annual growth rate of 11.3% from $8.6 billion (or $531 per visitor)
in 1987 to $22.5 billion (or $760 per visitor) in 1996. In addition, the
population of Las Vegas has grown from approximately 863,000 in 1990 to
approximately 1,193,000 in 1997, a compound growth rate of 4.8%. Management
believes that the growth in the Las Vegas market has been enhanced as a result
of a dedicated program by the LVCVA and major Las Vegas hotels to promote Las
Vegas as a major vacation and convention site, the increased capacity of
McCarran International Airport and the introduction of large, themed
destination resorts in Las Vegas.


                                       7
<PAGE>



                       Las Vegas Convention Market Trends

          [Graph showing Number of Delegates and Number of Conventions]

Number of Conventions
1990           1011
1991           1655
1992           2199
1993           2443
1994           2662
1995           2826
1996           3827
1997           3749


Number of Delegates [millions]
1990           1.74
1991           1.97
1992           1.97
1993           2.44
1994           2.68
1995           2.92
1996           3.31
1997           3.52

Source: LVCVA



     Las Vegas as a Trade Show, Convention and Meeting Destination

     In 1996, Las Vegas was the most popular trade show destination (with a 25%
market share of the Trade Show Week 200 Shows in terms of net square footage)
and the fourth most popular convention destination in the United States. In
1988, approximately 1.7 million persons attended trade shows and conventions in
Las Vegas and spent approximately $1.2 billion. In 1997, the number of trade
show and convention attendees had increased to more than 3.5 million and the
amount spent by trade show and convention attendees was approximately $4.4
billion.


     Trade shows are held for the purpose of getting sellers and buyers of
products or services together for the purpose of conducting business. Trade
shows differ from conventions in that trade shows typically require substantial
amounts of space for exhibition purposes and circulation. Conventions generally
are group gatherings of companies or groups that require less space for
breakout meetings and general meetings of the overall group. Las Vegas offers
trade shows and conventions a unique infrastructure for handling the world's
largest shows, including the concentration of 45,000 hotel rooms located on the
Strip, two convention centers with a total of approximately 3.0 million square
feet of convention and exhibition space, convenient air service from major
cities throughout the United States and other countries and significant
entertainment opportunities. Plans have been announced for the addition of
300,000 square feet of meeting and convention space to the Las Vegas Convention
Center. The expansion of the Las Vegas Convention Center is expected to bring
convention and exhibit space in Las Vegas to over 3.5 million square feet. In
addition, The MGM Grand Hotel and Casino has announced plans to construct
conference and meeting facilities of approximately 300,000 gross square feet.
Management believes that Las Vegas will continue to evolve as the country's
preferred trade show and convention destination.


     Expanding Hotel Market

     During 1997, Las Vegas was among the most popular vacation destinations in
the United States. Following the opening of The Mirage in 1989, Las Vegas
experienced a period of rapid hotel development with the number of hotel and
motel rooms in Las Vegas increasing by 72% from 61,394 in 1988 to 105,347 in
1997. Other major properties on the Strip opening over this time period include
Excalibur Hotel and Casino, The MGM Grand Hotel and Casino, the Treasure Island
Hotel and Casino, Luxor Hotel, The Monte Carlo Resort and Casino, The
Stratosphere Hotel and Casino and New York-New York Hotel and Casino. In
addition, a number of existing properties on the Strip embarked on expansions,
including Harrah's, Flamingo Hilton Las Vegas and The Las Vegas Hilton. Despite
this significant increase in the supply of hotel rooms in Las Vegas, hotel room
occupancy rates (which exclude motels) exceeded on average 92.1% for the years
1993 to 1997, averaged 93.4% in 1996 and 90.3% in 1997. By the end of 1999, it
is anticipated that, in addition to the Casino Resort, at least another 19,800
hotel rooms will be opened on the Strip, including the Bellagio, Paris Casino
Resort and Mandalay Bay Resort under construction, the expansions at Caesars
Palace Hotel and Harrah's, and the planned expansions of Hard Rock Hotel and


                                       8
<PAGE>

Casino, Aladdin Hotel and Casino and The MGM Grand Hotel and Casino. The
Company expects that the concentration of quality themed casino hotels and
resorts will increase visitor interest in Las Vegas as a business event and
vacation destination, and, as a result, increase overall demand for hotel
rooms, gaming and entertainment. In the event that the increased concentration
does not substantially increase visitor interest, overcapacity at these casino
hotels and resorts could lead to price competition in the form of reduced room
rates. Lost revenue from such reduced room rates could materially impact the
Company's financial condition and results of operations.

               Las Vegas Hotel Room Inventory and Occupancy Rates


[Graph showing Hotel/Motel Room Inventory and Total Occupancy Percentage(1)]

Hotel/Motel Room Inventory
1990           73,000
1991           76,000
1992           75,500
1993           87,000
1994           89,000
1995           90,000
1996           98,000
1997          105,500

Total Occupancy Percentage(1)
1990           85%
1991           81%
1992           84%
1993           88%
1994           89%
1995           88%
1996           91%
1997           90%

(1) Occupancy is calculated based on the inventory of Las Vegas Hotel rooms, and
does not include motel rooms.

Source: LVCVA

     The table below indicates mid-week and weekend occupancy rates for all Las
Vegas hotels and motels. While weekend occupancy rates have remained above 90%
for the past 10 years, mid-week occupancy rates have trended upward from below
80% to near 85%. Management believes that due to the lower mid-week demand
demonstrated by the table, many hotels and motels offer reduced room rates and
rely on lower budget tour groups for occupancy.


          Occupancy Rates Mid-Week and Weekend (all Las Vegas Hotels)

[Graph showing Las Vegas Hotel Occupancy Rates]

          Mid-Week       Weekend
1987      78.8%          94.5%
1988      81.4%          93.5%
1989      81.6%          94%
1990      80.9%          93.6%
1991      76%            89.8%
1992      80.4%          92%
1993      87.6%          94.2%
1994      86.5%          94.4%
1995      85.6%          93.5%
1996      88.7%          94.4%
1997      84.1%          91.6%

Source: LVCVA

                                       9
<PAGE>

     Expanding Gaming Market
     The expansion of gaming in the United States has been accompanied by an
increasing acceptance of gaming as a form of entertainment. Gaming has
continued to be a strong and growing business in Las Vegas. Since 1988, Las
Vegas gaming revenues have increased at a compound annual rate of 7.2% from
$3.1 billion in 1988 to $6.2 billion in 1997. With the increased popularity and
public acceptance of gaming, Las Vegas has sought to increase its popularity as
an overall vacation resort destination.

     The following table sets forth certain information derived from published
reports of the LVCVA and the Nevada State Gaming Control Board (the "NGCB")
concerning Las Vegas Strip gaming revenues and visitor volume and hotel data
for the years 1988 to 1997. As shown in the table, the Las Vegas market has
achieved significant growth in visitor volume and gaming and non-gaming tourist
revenues and favorably absorbed significant additional room capacity despite
the occurrence of a series of adverse economic, regulatory and competitive
events during the past decade, such as the recession of the early 1990s, the
expansion of gaming into new jurisdictions, the modification of existing
regulations in other jurisdictions, and the expansion of Native American
gaming.


                                       10
<PAGE>

               Historical Data for Las Vegas Gaming Industry (1)



<TABLE>
<CAPTION>
                                      1988            1989            1990            1991
                                --------------- --------------- --------------- ---------------
<S>                             <C>             <C>             <C>             <C>
Las Vegas visitor volume           17,199,608      18,129,684      20,954,420     21,315,116
Percentage change                         6.1%            5.4%           15.6%           1.7%
Total visitor expenditures(2)     $10,039,448     $11,912,941     $14,320,746    $14,326,554
Percentage change                        16.7%           18.7%           20.2%           0.0%
Las Vegas Strip gaming
 revenue(2)                       $ 1,944,401     $ 2,070,328     $ 2,583,314     $2,539,995
Percentage change                        10.9%            6.4%           24.8%          (1.7)%
Las Vegas convention
 attendance                         1,702,158       1,508,842       1,742,194      1,794,444
Percentage change                         1.5%           11.4%           15.5%           3.0%
Las Vegas hotel occupancy
 rate                                    89.3%           89.8%           89.1%          85.2%
U.S. hotel occupancy rate(3)             63.4%           64.3%           63.5%          61.8%
Las Vegas room supply                  61,394          67,391          73,730         76,879
Percentage change                         5.0%            9.8%            9.4%           4.3%



<CAPTION>
                                      1992            1993            1994            1995            1996            1997
                                --------------- --------------- --------------- --------------- --------------- ---------------
<S>                             <C>             <C>             <C>             <C>             <C>             <C>
Las Vegas visitor volume          21,886,865       23,522,993      28,214,362      29,002,122      29,636,631      30,464,635
Percentage change                        2.7%             7.5%           19.9%            2.8%            2.2%            2.8%
Total visitor expenditures(2)    $14,686,644      $15,127,267     $19,163,212      20,686,800      22,533,258             N/A
Percentage change                        2.5%             3.0%           26.7%            8.0%            8.8%
Las Vegas Strip gaming
 revenue(2)                       $2,625,274      $ 2,896,630     $ 3,485,307    $  3,629,036     $ 3,579,673    $  3,809,395
Percentage change                        3.4%            10.3%           20.3%            4.1%           (1.4%)           6.4%
Las Vegas convention
 attendance                        1,969,435        2,439,734       2,684,171       2,924,879       3,305,507       3,519,424
Percentage change                        9.8%            23.9%           10.0%            9.0%           13.0%            6.5%
Las Vegas hotel occupancy
 rate                                   88.8%            92.6%           92.6%           91.4%           93.4%           90.3%
U.S. hotel occupancy rate(3)            62.6%            63.5%           64.7%           65.0%           65.1%           64.5%
Las Vegas room supply                 76,523           86,053          88,560          90,046          99,072         105,347
Percentage change                       (0.5)%           12.5%            2.9%            1.7%           10.0%            6.3%
</TABLE>

------------
(1) Sources: LVCVA and the NGCB for the fiscal years ended December 31.
(2) In thousands.
(3) Source: Smith Travel Research for the years ended December 31.



                                       11
<PAGE>

     Growth of Las Vegas Retail Sector and Non-Gaming Revenue Expenditures
     An increasing number of destination resorts are developing non-gaming
entertainment to complement their gaming activities in order to draw additional
visitors. According to the LVCVA, while gaming revenues have increased from
$2.8 billion in 1987 to $5.8 billion in 1996, the percentage of an average
tourist's budget spent on gaming has declined from 32.6% in 1987 to 25.8% in
1996, with non-gaming tourist revenues increasing from $5.8 billion in 1987 to
$16.7 billion in 1996. The newer large themed Las Vegas destination resorts
have been designed to capitalize on this development by providing better
quality hotel rooms at higher rates and by providing expanded shopping, dining
and entertainment opportunities to their patrons in addition to gaming.


     Infrastructure Improvements

     Clark County and metropolitan Las Vegas have commenced or completed
several infrastructure improvements to accommodate the increase in travel to
Las Vegas by all modes of transportation. According to the LVCVA, in 1996
visitors to Las Vegas arrived by the following methods of transportation: 44%
by air; 41% by auto; 7% by bus; and 8% by recreational vehicle.

     McCarran International Airport Expansion. During the past five years, the
facilities of McCarran International Airport have been expanded to accommodate
the increased number of airlines and passengers which it services. The number
of passengers traveling through McCarran International Airport has increased
from 16.2 million in 1988 to 30.3 million in 1997, a compound annual rate of
6.9%. A $200 million expansion project was completed in 1995, allowing for the
accommodation of up to 30 million travelers annually. Long-term expansion plans
for McCarran International Airport provide for additional runway and related
areas (a new runway was completed in October 1997), three new satellite
concourses, 65 additional gates, improved public transportation roads and other
infrastructure leading from McCarran International Airport to the Strip and
other facilities which would allow McCarran International Airport to handle up
to 60 million Las Vegas visitors annually. To the extent that McCarran
International Airport is not expanded in accordance with its plans, the
occupancy rates and average daily hotel room rates in Las Vegas could be
adversely affected due to the planned construction of new hotel rooms.

     Spring Mountain Road Improvements. A new high speed off-ramp is being
constructed from Interstate 15 (the primary vehicular access from Los Angeles)
onto Spring Mountain Road to ease traffic congestion on the Strip. Spring
Mountain Road becomes Sands Avenue and intersects the Strip adjacent to the 45
acre project site (the "Project Site"). This major interchange will be located
approximately one-half mile from the Casino Resort and is scheduled to be
completed in 1999.


Competition

     The casino/hotel industry is highly competitive. Strip hotels compete with
other hotels on the Strip and with other hotels in downtown Las Vegas. The
Casino Resort will compete with a large number of hotels and motels in and near
Las Vegas. Many of the competitors of the Company are subsidiaries or divisions
of large public companies and may have greater financial and other resources
than the Company.


     Hotel/Casino Properties

     Competitors of the Casino Resort will include themed resorts on the Strip,
such as Caesars Palace Hotel, The Mirage, the Treasure Island Hotel and Casino,
Harrah's, The MGM Grand Hotel and Casino, the New York-New York Hotel and
Casino, The Monte Carlo Resort and Casino, Bally's Casino Resort Las Vegas and
the Excalibur Hotel and Casino. In addition, the construction of several new
major resort projects that will compete with the Casino Resort and the
expansion of several existing resorts recently have commenced or have been
announced. These include the Bellagio, Paris Casino Resort and Mandalay Bay
Resort under construction, expansions at Caesars Palace Hotel and Harrah's and
the planned expansions of Hard Rock Hotel and Casino, Aladdin Hotel and Casino
and The MGM Grand Hotel and Casino. These projects and others are expected to
add approximately 19,800 hotel rooms to the Las Vegas inventory by the end of
1999. Finally, the Casino Resort will compete with a planned second casino
resort to be owned by a subsidiary of the Company (the "Phase II Resort"), to
the extent its business is not complementary to that of the Casino Resort. The
future operating results of the Company could be adversely affected by excess
Las Vegas room, gaming, conference center and trade show capacity.

     The Company believes that themed resorts are generally more successful  at
generating high volume traffic and higher revenues and operating income when
compared with large-scale non-themed properties in Las Vegas.


                                       12
<PAGE>

The Company also believes that recently developed integrated themed resorts
have been more successful than expansions to existing Strip hotels. Themed
resorts compete on the basis of the quality of theming, as well as on more
traditional bases, such as quality of rooms, pricing and location. Themed
resorts tend to be clustered on the Strip, creating a critical mass of
entertainment experiences which generate significant traffic for the themed
resorts as a group, thereby capturing a larger portion of the Las Vegas hotel
and gaming market than non-themed properties. The Company believes that the
existence of other competitive themed resorts in close proximity to the Casino
Resort directly benefits the Casino Resort. The Casino Resort will be part of a
cluster of themed properties which includes The Mirage, the Treasure Island
Hotel and Casino, the Bellagio and The Forum Shops at Caesars Palace Hotel. The
Company believes that the Casino Resort will benefit from the significant
traffic drawn to these properties. In addition to the advantages of being a
centrally located, themed resort, the Cooperation Agreement and the Casino
Resort's direct connection with the Expo Center will provide the Casino Resort
a unique tie-in with one of the premier trade show and convention facilities in
the United States. With these competitive advantages, the Casino Resort will be
positioned to appeal to the mid-week meeting, trade show, convention and
meeting market composed of customers who pay higher average room rates and have
higher average travel budgets than other categories of weekday customers, such
as tour groups.

     The hotel/casino operation of the Casino Resort will also compete, to some
extent, with other hotel/casino facilities in Nevada and in Atlantic City, with
hotel/casino facilities elsewhere in the world and with state lotteries. In
addition, certain states have recently legalized, and others may legalize,
casino gaming in specific areas, and passage of the Indian Gaming Regulatory
Act in 1988 has led to rapid increases in Native American gaming operations.
Such proliferation of gaming venues could significantly and adversely affect
the business of the Company. In particular, the legalization of casino gaming
in or near metropolitan areas, such as New York, Los Angeles, San Francisco and
Boston, from which the Company intends to attract customers, could have a
material adverse effect on the business of the Company.


     Trade Show and Convention Facilities

     The Expo Center and Las Vegas generally compete, and the Congress Center
will compete, with trade show and convention facilities located in and around
major cities, including Atlanta, Chicago, New York and Orlando. Within Las
Vegas, the Expo Center competes, and the Congress Center will compete, with the
Las Vegas Convention Center, which is located off the Strip and currently has
1.3 million gross square feet of convention and exhibit facilities. An
expansion of 300,000 square feet of meeting and exhibition space is planned for
the Las Vegas Convention Center for 1998. In addition, The MGM Grand Hotel and
Casino has announced plans to construct new conference and meeting facilities
of approximately 300,000 square feet and several other existing or planned
major Strip hotel/  casino properties are intending to expand or construct
conference facilities. The conference and meeting facilities at these
hotel/resorts are expected to be the Congress Center's primary competition.
However, because none of these hotel/resorts plans to offer convention and
trade show facilities on the same relative size as the Expo Center (over 1.15
million gross square feet), the Las Vegas Convention Center is expected to
remain the primary competitor of the Expo Center. To the extent that any of the
competitors of the Casino Resort can offer substantial integrated hotel/casino
and trade show and convention or conference and meeting facilities, the Casino
Resort's competitive advantage in attracting trade show and convention meeting
and conference attendees could be adversely affected. However, the ability of
any such competitor to offer such show facilities equal to the nearly 1.65
million combined gross square footage of the Expo Center and the planned
Congress Center is limited by any such competitor's location and available
contiguous undeveloped land. In addition, trade show and convention centers
book major events three to five years in advance. As a result, any newly
developed trade show and convention facility would experience a significant
vacancy period before events would commit to any such facility. The Company
believes this vacancy period acts as a barrier to entry into the trade show and
convention business by private developers.


     Mall

     The Mall will compete with both themed resorts which offer shopping,
dining and entertainment opportunities to their patrons and other retail malls
in or near Las Vegas. The direct competition of the Mall will include The Forum
Shops at Caesars Palace Hotel and other similar themed mall attractions whose
planned construction has been announced, such as the mall to be constructed on
the site of the Aladdin Hotel and Casino. The Forum Shops at Caesars Palace
Hotel has recently undergone an expansion of approximately 250,000 square feet.
The Mall also will compete with The Fashion Show Mall, a more traditional mall,
located near the Casino Resort. The Fashion


                                       13
<PAGE>

Show Mall is currently undergoing or plans to undergo expansions which will
almost double such facility's size. The Mall also will compete with the planned
retail, dining and entertainment mall in the Phase II Resort.


Construction Schedule and Budget

     Formal ground-breaking for the Casino Resort occurred in April 1997 with
an opening to the general public scheduled for April 1999. The Casino Resort is
expected to be developed on a stand-alone basis as the first phase of the
planned two phase redevelopment of the Sands. In the planned second phase of
the redevelopment, it is contemplated that a subsidiary of Venetian (the "Phase
II Subsidiary") will construct and develop the Phase II Resort, which also is
planned to be a themed resort. The completion and full operation of the Casino
Resort is not contingent upon the subsequent financing or completion of the
Phase II Resort, and the Casino Resort has all the attributes and facilities to
operate as a stand-alone resort. See "Item 13--Certain Relationships and
Related Transactions."

     The Casino Resort (including the HVAC Equipment) is budgeted to cost
approximately $1.065 billion, which includes $637.0 million of construction
costs and $428.0 million of other costs (including furniture, fixtures and
equipment, certain so-called "soft" construction costs (which include fees of
architects, attorneys and other professionals), costs of obtaining required
governmental approvals, pre-opening expenses, construction period interest and
other costs that are not so-called "hard" construction costs, but excluding
land acquisition costs). In order to manage its construction risk, the Company
has entered into various agreements designed to protect it against construction
delays and cost overruns. The Company and the Construction Manager have entered
into the Construction Management Contract pursuant to which the Construction
Manager has agreed to construct the Casino Resort (with certain exceptions, but
including the HVAC Equipment) for a guaranteed maximum price of $547.8 million
(subject to certain conditions and limitations, such as an exclusion from the
guaranteed maximum price of cost overruns due to "scope changes"). The
Construction Management Contract and the guaranteed maximum price does not
include certain construction costs, including $69.7 million of owner managed
construction costs. The Company believes that the construction budget is
reasonable, and the Construction Management Contract contains certain
incentives designed to put downward pressure on the construction budget and
actual construction costs; however, given the risks inherent in the
construction process, it is possible that construction costs could be
significantly higher. If construction costs do exceed the amounts set forth in
the construction budget, potential sources to pay such excess include:

       (i) a Construction Management Contract contingency of approximately $26.1
           million;
      (ii) the owner's contingency of approximately $40.0 million;
     (iii) the Liquidated Damages Insurance and proceeds of other (e.g.,
           casualty) insurance policies;
      (iv) the Construction Manager, Bovis, Inc., the parent of the
           Construction Manager ("Bovis"), and P&O, pursuant to their liability
           to the Company under the Construction Management Contract, the
           guaranty by Bovis of the obligations of the Construction Manager
           under the Construction Management Contract (the "Construction
           Management Contract Guaranty") and the guaranty by P&O of the
           obligations of Bovis under the Construction Management Contract
           Guaranty (the "P&O Guaranty"), respectively;
       (v) other third parties pursuant to their liability to the Company under
           their agreements with the Company; and
      (vi) the Sole Stockholder, pursuant to his liability under the
           collateralized Completion Guaranty of up to $25.0 million.

     As of December 31, 1997, (i) pursuant to the Construction Management
Contract, and otherwise, trade contracts in excess of $303.7 million for
various components of the project, including excavation, foundations,
structural steel, mechanical and plumbing systems and structural concrete had
been entered into or negotiated, (ii) the foundation for the principal
structure of the Casino Resort had been constructed and the superstructure is
under construction and (iii) approximately $228.1 million of the total project
cost of $1.065 billion had been expended.

Advertising and Marketing

     The Company has a $9.4 million pre-opening marketing and advertising
budget, including a planned pre-opening marketing campaign targeted at select
core markets such as Southern California. To date, the Company has spent $2.0
million to create the Casino Resort's preview center (the "Preview Center"),
which opened in August 1997 and includes models of the Casino Resort and a full
scale model suite. The Company intends to use the Preview


                                       14
<PAGE>

Center to market the Casino Resort and Expo Center events. The Company will
advertise in many types of media, including television, radio, newspapers,
magazines and billboards. The pre-opening advertising will promote general
market awareness of the Casino Resort as a unique vacation, business and
convention destination for its first-class hotel, casino, retail stores and
restaurants. It is also expected that Mall tenants, such as "Billboard Live!"
will pursue their own general advertising and promotional activity, which the
Company expects to benefit the Mall. The Company will also actively engage in
direct marketing which will be targeted at specific market segments, such as
the meeting, convention and trade show market and the premium gaming market,
and data base marketing which will focus on high-frequency, high-margin market
segments such as the "high-roller" gaming market.

Design and Construction Team
     The Company has assembled what it believes to be a highly qualified team
of specialists to design and construct the Casino Resort.

     Lehrer McGovern Bovis, Inc.
     The Casino Resort is being constructed by Lehrer McGovern Bovis, Inc., a
leading international construction concern. The Construction Manager is an
indirectly owned subsidiary of Bovis whose ultimate parent company is P&O. The
Construction Manager is primarily engaged in the business of providing
construction management services. The Construction Manager also provides
construction consulting, project and program management, preconstruction,
estimating, design-build and mortgage loan monitoring services. Major market
sectors include commercial, education, transportation, sports and recreation,
healthcare, research and development, correctional, civic and cultural.
Services are performed under contracts whereby the Construction Manager acts as
an agent for an owner supervising the construction activity of trade
subcontractors and others. Projects are also performed under fixed or
guaranteed maximum price arrangements and on certain of these projects, the
Construction Manager may contract directly with trade subcontractors performing
the construction activities.

     Bovis
     Bovis has worked on a number of hotel and resort projects throughout the
world including the Trump Castle Expansion program and the Atlantic City
Seaside Resort in Atlantic City, the Embassy Suites Hotels in New York, La
Jolla, California and Washington, D.C., the Parc Fifty Five Hotel in San
Francisco, California, the Hyatt Regency Grand Cypress and Universal Studios
Florida Theme Park in Orlando, Florida, the 1996 Summer Olympic Games in
Atlanta, Georgia, the Grand InterContinental Hotel in Yokohoma Japan, The
Langham and Canary Wharf in London, England, and Euro Disney Theme Park in
France.

     P&O
     P&O is a corporation based in the United Kingdom and is listed on the
London Stock Exchange. P&O is a holding company which through its subsidiaries
provides a variety of services throughout the world. P&O's businesses include
operating cruise ships and ferries, providing container, cargo and bulk
shipping services, home construction and building and managing construction
projects. Under United Kingdom accounting standards (which differ from
generally accepted accounting standards in the United States ("U.S. GAAP"), P&O
reported that it earned a profit of \P250.6 million on revenues of \P7,090.8
million in 1996 and had net operating assets of \P4,726.4 million at December
31, 1996. Under U.S. GAAP, the Construction Manager reported that it had net
income of $5.7 million on revenues of $703.2 million in 1996 and had total
assets of $248.7 million at December 31, 1996.

     Architects
     Wimberly Allison Tong & Goo ("WATG") and The Stubbins Associates Design
Group ("TSA") are the principal architects for the Casino Resort. WATG is an
architectural, planning and consultant firm active throughout the world. WATG
specializes in the design and planning of resorts and hotels, and in the
related fields of entertainment and leisure design, new town and environmental
design, residential projects from high to low density, mixed-use and retail
centers, office buildings, conference and recreational facilities. WATG has
designed and completed projects in over 65 countries, including The Palace of
the Lost City in South Africa, The Ritz-Carlton Laguna Niguel in California,
Hotel Bora Bora in French Polynesia, Shangri-La Garden Wing in Singapore, Grand
Hyatt Bali in Indonesia, Cheju Shilla Hotel in South Korea, Hyatt Regency Kauai
in Hawaii, Four Seasons Chinzan-so in Tokyo, and Disney's Grand Floridian Beach
Resort in Orlando.

     TSA is an international architecture, planning and interior design firm.
TSA's professional services include: feasibility studies, programming and
master planning; architectural, interior and landscape design; and technical


                                       15
<PAGE>

services including construction documentation and construction administration.
Among TSA's completed hotel/ casino projects are: the Spa at Bally's Park Place
Hotel and Casino and the interior design for Harrah's Marina Hotel Casino in
Atlantic City. In addition, TSA was the principal architect for the Expo
Center.

     Tishman
     Tishman Construction Corporation of Nevada, a subsidiary of Tishman, is
providing construction management consulting services on behalf of the various
lenders, including pre-construction consulting project analysis. The
Construction Consultant also has agreed to review, on behalf of the lenders,
contribution plans and the progress of construction. In addition, the
Construction Consultant will review and approve, on behalf of the lenders,
proposed contracts, proposed plan changes, proposed budget changes and
disbursement requests during the course of construction. Tishman is one of the
nation's leading construction companies and is one of the nation's largest
hotel developers and owners. As a developer and owner, Tishman has developed
5,665 rooms around the country in various types of lodging markets including
downtown commercial, convention and resort hotels. In its capacity as owner and
builder of hotels, Tishman has worked with virtually every major hotel
operator/owner including Hilton, Sheraton, Westin, Hyatt, Marriott, Ritz
Carlton, Holiday Inn Crown Plaza, Four Seasons, The Walt Disney Company, Golden
Nugget, Nikko Hotels International, Fairmont and Loews.

     Other Consultants
     Wilson & Associates, Inc. ("Wilson") and Dougall Designs ("Dougall") are
designing the interior of the Casino Resort. Wilson specializes in the interior
architectural design of hotels, restaurants, clubs and casinos and offers a
full range of interior architectural design services from initial space
planning and design through construction documents and construction
administration. Wilson has designed and installed more than 75,000 guest rooms
in over 150 hotels world-wide. Wilson's interior design credits include The MGM
Grand Hotel and Casino, The Mirage Resorts' Beau Rivage and Caesars Palace
Hotel in Atlantic City and Las Vegas.

     Dougall specializes in the interior design of casino resorts. Dougall's
projects in Las Vegas include The Luxor, The Monte Carlo Resort and Casino, The
Forum Shops at Caesars Palace Hotel, Stardust Resort and Casino and Harrah's.

     Martin & Peltyn ("Martin & Peltyn") is providing structural engineering
services in connection with the construction of the Casino Resort. Martin &
Peltyn has provided structural engineering services for over twenty hotel/
casinos in the United States, including the following Las Vegas resorts: The
MGM Grand Hotel and Casino, The Mirage, the Treasure Island Hotel and Casino,
Tropicana Resort and Casino and The Las Vegas Hilton.

Agreements Relating to the Casino Resort

     Construction Management Contract
     The Company and the Construction Manager have entered into the
Construction Management Contract for the construction (but not the design) of
the Casino Resort (exclusive of certain demolition work, certain furniture,
fixtures and equipment, the fabrication of certain theming elements, the
parking garage/electrical substation facility and certain other items, the
aggregate cost of which is approximately $517.7 million) for a guaranteed
maximum price (the "GMP"). To the extent actual costs incurred or expended in
connection with the construction of the items covered by the Construction
Management Contract exceed the GMP, then, subject to certain limitations and
exceptions, the Construction Manager is liable for such excess. As of the date
hereof, the GMP (the "Initial GMP"), is approximately $547.8 million, including
a 5% contingency amount. After (i) the completion by the Company's architects
and engineers, and approval by the Company, of the final design documents that
set forth in detail the plans and specifications for the Casino Resort and (ii)
the execution of trade contracts for 90% (by dollar amount) of the trade
contracts portion of the GMP, a final GMP ("Final GMP") will be calculated by
adjusting the Initial GMP to take into account (among other things): (a)
certain "scope changes" or other changes implemented at the request of the
Company; (b) the amount by which the actual aggregate amount of the signed
trade contracts is less than the amount allocated to such contracts in the
Initial GMP; and (iii) a reduction in the contingency amount from 5% to 3%. The
GMP does not include the construction management fee to be paid to the
Construction Manager or the fee payable to the Construction Manager's ultimate
parent, P&O, for the P&O Guaranty. The GMP is to be appropriately increased to
reflect (a) deficiencies or changes in the drawings prepared by the Company's
architects and engineers, and (b) Company-mandated "scope changes" and "change
orders."

     The Company will pay the Construction Manager a construction management
fee of 1-1/2% of the Final GMP, payable in monthly installments commencing in
May 1997. In addition, upon final completion of the Casino Resort,


                                       16
<PAGE>

if the total construction costs covered by the Construction Management Contract
fall below the Final GMP, the savings will be allocated 50% to the Company and
50% to the Construction Manager. The Company has paid P&O a $6.5 million fee
for the P&O Guaranty.

     The obligations of the Construction Manager under the Construction
Management Contract are guaranteed by Bovis, pursuant to the Construction
Management Contract Guaranty, and Bovis's obligations under such guaranty are
guaranteed by P&O, pursuant to the P&O Guaranty. With respect to the
Construction Manager's obligation to complete construction on schedule, (i) for
the first 30 days of any delay in such scheduled completion, the Construction
Manager solely (and not Bovis or P&O) is liable for liquidated damages, (ii)
for the 90-day period thereafter, only the insurers under the Liquidated
Damages Insurance procured by the Construction Manager on behalf of the Company
(and not the Construction Manager, Bovis or P&O), subject to certain conditions
and exceptions (including the failure of the Construction Manager to make "good
faith efforts" to prevent or mitigate any delay), are liable for liquidated
damages, and (iii) Bovis and P&O are liable for liquidated damages only to the
extent, if any, that the Construction Manager misses the required deadline by
more than 120 days.


     Liquidated Damages Insurance
     The Construction Manager has obtained on behalf of the Company (and at the
Company's expense) the Liquidated Damages Insurance. The Liquidated Damages
Insurance covers liquidated damages for any delay in achieving "Substantial
Completion" (the stage in the progress of the development of the Casino Resort
when it is sufficiently complete, including the receipt of necessary permits,
licenses and approvals, so that all aspects of the Casino Resort can be open to
the general public) beyond April 1999 (the "Required Completion Date") as
assessed under the Construction Management Contract, provided that the
Liquidated Damages Insurance does not cover liquidated damages with respect to
the first 30 days of any delay in achieving Substantial Completion by the
Required Completion Date. Commencing with the 31st day of any such delay, and
continuing until the 60th day thereof, the Company will receive under the
Liquidated Damages Insurance approximately $300,000 per day until Substantial
Completion is achieved. Commencing with the 61st day of any such delay, and
continuing until the 120th day thereof, the Company will receive under the
Liquidated Damages Insurance approximately $250,000 per day until Substantial
Completion is achieved. The Liquidated Damages Insurance does not cover
penalties assessed after the 120th day of any such delay. Additionally, the
Liquidated Damages Insurance contains various exceptions. For example, the
Liquidated Damages Insurance does not cover delays caused by (i) certain events
of "force majeure" (with respect to some of which the Company will have other
insurance coverage), (ii) any failure by the Construction Manager to make "good
faith efforts" to timely achieve Substantial Completion and to avoid or
mitigate any delay when an event likely to cause a delay occurs (which failure
is a breach by Construction Manager under the Construction Management Contract
with respect to which the Construction Manager, Bovis and P&O, pursuant to the
Construction Management Contract, Construction Management Contract Guaranty and
the P&O Guaranty, respectively, are jointly and severally liable for damages)
and (iii) the "insolvency and/or financial default" of the Construction
Manager, the Company, any trade contractor or any other person or entity.


     Disbursement Agreement

     LVSI, Venetian, the Mall Construction Subsidiary, First Trust National
Association, as Mortgage Note trustee (the "Mortgage Note Trustee"), The Bank
of Nova Scotia, as administrative agent under the Bank Credit Facility (the
"Bank Agent"), the lender under the Mall Construction Loan Facility (the "Mall
Construction Lender"), The Bank of Nova Scotia, as disbursement agent (the
"Disbursement Agent") and the HVAC Provider have entered into a disbursement
agreement (the "Disbursement Agreement"). The Disbursement Agreement sets forth
the material obligations of the Company to construct and complete the Casino
Resort and establishes a line item budget for the Casino Resort and a schedule
for construction of the Casino Resort. The Disbursement Agreement also
establishes the conditions to, and the relative sequencing of, the making of
disbursements from the Cash Contribution, the proceeds from the offering of the
Notes, the Bank Credit Facility, the Mall Construction Loan Facility and the
funding commitment of the HVAC Provider, and establishes the obligations of the
Mortgage Note Trustee, the Bank Agent, the Mall Construction Lender and the
HVAC Provider to make disbursements under their respective funding commitments
upon satisfaction of such conditions. The Disbursement Agreement further sets
forth (i) the mechanics for allocating disbursement requests among the funding
sources, (ii) the mechanics for approving change orders and amendments to the
project budget and schedule during the construction period, (iii) certain
representations, warranties, covenants and events of default that are common to
the various credit facilities, (iv) the conditions for


                                       17
<PAGE>

release of the approximately 14 acres of the Project Site which may be
transferred to the Phase II Subsidiary (the "Phase II Land") and the Mall and
certain related assets (collectively, the "Mall Collateral") from the lien of
the collateral documents, and (v) the conditions to the exercise of the
Disbursement Agent's right to draw on the irrevocable, stand-by letters of
credit furnished by the HVAC Provider if the HVAC Provider does not comply with
its funding obligations set forth in the Disbursement Agreement.

     Cooperation Agreement
     The Company's business plan calls for the Hotel and Casino, the Mall and
the Expo Center, though separately owned, to be part of an integrally related
project. In order to establish terms for the integrated operation of these
facilities, Venetian (as owner of the Hotel and Casino and the Phase II Land),
the Mall Construction Subsidiary and Interface have entered into the
Cooperation Agreement. See "Item 13--Certain Relationships and Related
Transactions--Cooperation Agreement."

Agreements Relating to the Mall

     Mall Lease
     Venetian, as landlord, and the Mall Construction Subsidiary, as tenant,
have entered into a Mall Lease (the "Mall Lease") pursuant to which Venetian
will lease the Mall to the Mall Construction Subsidiary for a nominal annual
rent. The Mall consists of (i) the space within the principal structure of the
Casino Resort located immediately above the Casino and immediately below the
Hotel Tower, (ii) certain additional land (the "Mall Parcel") and (iii) the
improvements thereon. The Mall Lease automatically expires upon the 99th
anniversary of the commencement date of the Mall Lease. The tenant under the
Mall Lease will own all improvements to be made to the Mall Parcel during the
term of the Mall Lease. The Mall Lease will provide that fee title in and to
the Mall Parcel automatically will vest in the Mall Construction Subsidiary
when and if the Mall Parcel becomes a separate legal and tax parcel, and the
Mall Lease thereupon shall terminate.

     Sale and Contribution Agreement
     Venetian, the Mall Construction Subsidiary and Grand Canal Shops Mall,
LLC, a Delaware limited liability company and indirect subsidiary of the
Company formed separately to own and operate the Mall after completion (the
"Mall Subsidiary"), have entered into a Sale and Contribution Agreement (the
"Sale and Contribution Agreement") whereby the Mall Construction Subsidiary
agreed to sell and the Mall Subsidiary agreed to purchase, among other things,
(i) all of its right, title and interest (whether in fee or in leasehold) in
and to the property and improvements that constitute the Mall in their "as is"
condition on the date of Completion (as defined in the Disbursement Agreement),
(ii) monies deposited in certain reserve accounts relating to the Mall, (iii)
all right, title and interest of the Mall Construction Subsidiary in and to a
lease with B.L. International of Nevada, Inc. for a portion of the "Billboard
Live!" entertainment complex which is adjacent to the casino floor and (iv) all
right, title and interest of the Mall Construction Subsidiary (a) as landlord
under Mall tenant leases, (b) under the Cooperation Agreement, (c) in and to
all other easements, fixtures and improvements appurtenant thereto, (d) under
an Energy Services Agreement, dated as of June 1, 1997 with the HVAC Provider
and any other mall intangible property rights, and (e) in and to all mall
personal property (collectively, the "Mall Assets"). In connection with the
sale of the Mall, the Mall Construction Subsidiary also will transfer to the
Mall Subsidiary the proceeds of the final draw under the Mall Construction Loan
(and, under certain circumstances, a specified amount under the Completion
Guaranty). As consideration for such transfers, the Mall Subsidiary shall,
among other things, repay or assume in full the outstanding balance of the
indebtedness under the Mall Construction Loan Facility (or certain refinancings
thereof), including the amount of the final draw thereunder.

     Mall Management Contract
     The Mall Subsidiary has entered into an agreement with Forest City
Enterprises ("Forest City"), a subsidiary of Forest City Ratner Enterprises, a
leading developer and manager of retail and commercial real estate
developments, whereby Forest City Enterprises will manage the Mall and
supervise and assist in the creation of an advertising and promotional program
and a marketing plan for the Mall. Forest City will also be responsible for,
among other things, preparation of a detailed plan for the routine operation of
the Mall, collection and deposit procedures for rents and other tenant charges,
supervision of maintenance and repairs and, on an annual basis, preparation of
a detailed budget (including any anticipated extraordinary expenses and capital
expenditures) for the Mall. The term of the management contract is five years
from the date the Mall opens for business to the public. Forest City will
receive a management fee of 2% of all gross rents received from the operation
of the Mall; provided, that Forest City will receive a minimum fee of $450,000
per year. Forest City is not affiliated with the Sole Stockholder or any of his
affiliates.


                                       18
<PAGE>

     Mall Leasing Contract

     LVSI has engaged the San Francisco and Los Angeles offices of Blatteis
Realty Co. ("BRC") as its retail leasing consultant (the "BRC Contract"). BRC
is a national real estate brokerage organization specializing in the leasing
and sales of high profile retail properties and representation of a select
portfolio of retailers and restaurants. Recent retail leasing transactions that
BRC has been involved with (at locations other than the Casino Resort) have
included the following tenants: Emporio Armani, Giorgio Armani, Jose Eber,
Prada, Salvatore Ferragamo, Barnes & Noble Superstore, The Pottery Barn, the
Disney Store, Williams-Sonoma, Planet Hollywood and Cafe Med. BRC will assist
with planning, marketing and leasing of the Mall. BRC also will advise the
Company and its architects, designers, consultants and other agents with
respect to the Mall's tenant mix and the conceptual layout of tenant space. The
term of the BRC Contract is for a period of 18 months from December 1, 1996,
and may be terminated by either party at any time on 60 days' prior written
notice to the other party. BRC, which is not affiliated with the Sole
Stockholder or any of his affiliates, receives a monthly consulting fee of
$10,000 plus a refundable monthly sum of $10,000 as an advance against, and
credited to the payment of, lease brokerage commissions. Leasing commissions
payable to BRC are calculated on the basis of $8.00 per leased square foot or
$4.00 per leased square foot, depending upon the location of the applicable
leased space within the Mall.


HVAC Services Agreement and Related Documents

     The HVAC Provider is a Delaware limited liability company whose members
are comprised of (a) Atlantic Thermal Systems, Inc., an indirect subsidiary of
Atlantic Energy, Inc., a utility holding company and (b) an indirect subsidiary
of Pacific Enterprises, a utility holding company.


     Thermal energy (i.e., heating and air conditioning) will be provided to
the Casino Resort and the Expo Center by the HVAC Provider, using the HVAC
Equipment. In addition, the HVAC Provider also will provide other energy-related
services. Pursuant to the Construction Management Contract, the HVAC facility
(the "HVAC Plant") is being constructed by the Construction Manager on land
owned by Venetian, which land and HVAC Plant has been leased to the HVAC
Provider for a nominal annual rent. The HVAC Equipment is and will be owned by
the HVAC Provider, and the HVAC Provider has been granted appropriate easements
and other rights so as to be able to use the HVAC Plant and the HVAC Equipment
to supply thermal energy to the Casino Resort and Expo Center (and,
potentially, other buildings), so long as such easements do not materially
interfere with the operations of the Casino Resort and Expo Center. The HVAC
Provider will pay all costs ("HVAC Costs") in connection with the purchase and
installaton of the HVAC Equipment, up to $70 million. Venetian is acting as the
HVAC Provider's agent to cause such purchase and installation to be
accomplished, and is responsible for any costs in connection therewith in
excess of $70.0 million. The HVAC Provider has entered into separate service
contracts with (i) Venetian; (ii) Interface; and (iii) the Mall Construction
Subsidiary, and will enter into separate service contracts with each Mall
tenant, for the provision of heat and cooling requirements at agreed-to rates.
The charges payable by all users will include a fixed component derived using a
fixed annual interest rate of 8.5% (subject to adjustment based on the change
in the rate on 10-year Treasury Constant Maturities from January 23, 1997 until
the service commencement date) applied to the HVAC Costs paid by the HVAC
Provider to recover a portion of the fair value of the HVAC Equipment over the
initial term of the service contracts and leave an agreed-upon residual value
(the "Fixed Rate Portion"). In addition, the users will reimburse the HVAC
Provider for the annual cost of operating and maintaining the HVAC Equipment
providing certain other energy related services (such reimbursement to include
an agreed upon margin to compensate the HVAC Provider for operating and
maintaining the HVAC Equipment). Each user will be allocated a portion of the
total agreed-to charges through its service contract, which portion shall
include paying 100% of the cost of services in connection with the HVAC
Equipment relating solely to such user. Each user will not be liable for the
obligations of the other users; provided, however, that the Mall Subsidiary
will be liable for the obligations of each Mall tenant. In the event of any
substantial capital improvements to the HVAC Equipment, the costs of such
improvements will be spread over the lesser of (i) the useful life of such
improvements and (ii) the remaining term of thermal energy service agreements
with Venetian, Interface and the Mall Construction Subsidiary to receive HVAC
services from the HVAC Plant (collectively, the "HVAC Service Agreements"), and
will include reimbursement to the HVAC Provider for use of its money at a
market rate. The HVAC Service Agreements have an initial term of ten years, and
provide that upon expiration of such term users will have the right, but not
the obligation, to collectively either extend the term of their agreements for
two consecutive periods of five years each or purchase the HVAC Equipment in
accordance with purchase provisions set forth in the service contracts.


                                       19
<PAGE>

Agreements Relating to the Lido Casino Resort

     If the Phase II Resort is constructed, the following agreements may be
entered into by the Phase II Subsidiary and its subsidiaries, on one hand, and
the Company, Venetian and the Mall Subsidiary, on the other hand:


     Casino Lease

     If the Phase II Resort is constructed, in order to avoid the need for a
separate gaming license for the Phase II Subsidiary, LVSI or Venetian may
operate the casino for the Phase II Resort pursuant to a lease (the "Phase II
Casino Lease"). The Phase II Casino Lease will have terms substantially similar
to the Casino Lease except that (i) the rent payable under such lease shall be
equal to all revenue derived from such casino minus the sum of (a) the
operating costs related to such casino (including an allocated portion (based
on gaming revenue) of the Company's or Venetian's, as the case may be,
administrative costs related to its gaming operations) and (b) the lesser of
$250,000 or 1.0% of such casino's operating income (or zero if there is an
operating loss) (determined in accordance with generally accepted accounting
principles), (ii) the Company or Venetian, as the case may be, may agree that
they shall operate the casino in the Phase II Resort and the Casino in
substantially similar manners and (iii) the Company or Venetian, as the case
may be, may agree to have common gaming and surveillance operations in such
casinos (based on equal allocations of revenues and operating costs).


     Phase II HVAC Services Agreement

     The Cooperation Agreement permits the owner of the Phase II Land to enter
into an HVAC Services Agreement to receive HVAC services from the HVAC Plant.
Any such agreement would have to be on terms satisfactory to the HVAC Provider.
See "Item 13--Certain Relationships and Related Transactions--Cooperation
Agreement."


     Phase II Mall Arrangments

     With respect to the future development of the Phase II Resort, the
Cooperation Agreement provides that, prior to the commencement of construction
of the Phase II Resort, Venetian may approve the plans and specifications for
the Phase II Resort, subject to the rights of certain lenders of the Company to
approve any construction or operation of a restaurant or retail mall complex
located in the Phase II Resort and connected to the Mall. Additionally,
Venetian and the Phase II Subsidiary will agree in good faith, and upon
commercially reasonable terms, on: (i) appropriate mutual operating covenants
for the Hotel and the Casino and the Phase II Resort other than the Phase II
Mall, (ii) joint marketing and advertising of the Hotel and the Casino and the
Phase II Resort other than the Phase II Mall, (iii) certain shared casino
operations at the Hotel and the Casino and the Phase II Resort other than the
Phase II Mall, (iv) the sharing of customer information with respect to the
Hotel and the Casino and the Phase II Resort other than the Phase II Mall, (v)
the joint purchasing of insurance for the Hotel and the Casino and the Phase II
Resort other than the Phase II Mall, (vi) shared security operations for the
Hotel and the Casino and the Phase II Resort other than the Phase II Mall and
(vii) any other matters that would be of mutual benefit in owning and operating
the Hotel and the Casino and the Phase II Resort other than the Phase II Mall.


Regulation and Licensing

     The ownership and operation of casino gaming facilities in the State of
Nevada are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act") and various local
regulations. The Company's gaming operations are subject to the licensing and
regulatory control of the Nevada Gaming Commission (the "Nevada Commission"),
the NGCB and the Clark County Liquor and Gaming Licensing Board (the "CCLGLB"
and, together with the Nevada Commission and the NGCB, 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 revenues through taxation and licensing fees. Any change in such laws,
regulations and procedures could have an adverse effect on the Company's gaming
operations or on the operation of the Casino Resort.


                                       20
<PAGE>

     The Company is required to be licensed by the Nevada Gaming Authorities to
operate a casino, and is currently so licensed. The gaming license requires the
periodic payment of fees and taxes and is not transferable. The Company will be
required to be, and has applied for, registration by the Nevada Commission as a
publicly traded corporation ("Registered Corporation") and as such, will be
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, the Company without first obtaining licenses and approvals
from the Nevada Gaming Authorities. The Company will operate the Casino
pursuant to a casino lease between LVSI and Venetian (the "Casino Lease"),
which will provide for a fixed monthly rental payment. The Company and Venetian
have applied for approval by the Nevada Gaming Commission of a registered
exchange offer of the Mortgage Notes and the Senior Subordinated Notes (the
"Exchange Offer"). There can be no assurance that the Company and Venetian will
be granted all the various approvals required to consummate the Exchange Offer.
The offering will not be completed until such approvals are received. The
Company possesses, has applied for, or will apply for, all state and local
government registrations, approvals, permits and licenses required in order for
the Company to engage in gaming activities at the Casino Resort. There can be
no assurance that the Company will be granted all of such approvals. Venetian
intends to apply for a state gaming license, registration or other finding of
suitability, however the receipt of such by Venetian is not required in
connection with the Exchange Offer. If a gaming license is issued to Venetian,
the Casino Lease may be terminated.


     The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Venetian
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 the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for
licensing or a finding of suitability for any cause 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. The applicant for licensing or a finding of suitability, or the
gaming licensee by whom the applicant is employed or for whom the applicant
serves, must pay 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
licensure, the Nevada Gaming Authorities have 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 to continue having a relationship with the
Company or Venetian, it would have to sever all relationships with such person.
In addition, the Nevada Commission may require the Company to terminate the
employment of any person who refuses to file appropriate applications.
Determinations of suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.


     The Company is required to submit detailed financial and operating reports
to the Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by the Company must be reported
to or approved by the Nevada Commission.


     If it were determined that the Nevada Act was violated by the Company, the
registration and gaming licenses it then holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, 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 the Casino Resort and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the Casino Resort) could be
forfeited to the State of Nevada. Limitation, conditioning or suspension of any
gaming registration or license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the gaming
operations of the Company.


     Any beneficial holder of the Company's voting securities, regardless of
the number of shares owned, may be required to file an application, be
investigated, and have their suitability as a beneficial holder of the
Company's 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
investigation incurred by the Nevada Gaming Authorities in conducting any such
investigation.


                                       21
<PAGE>

     The Nevada Act requires any person who acquires more than 5% of the
Company's voting securities to report the acquisition to the Nevada Commission.
The Nevada Act requires that beneficial owners of more than 10% of the
Company's 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, the
"institutional investor" as defined in the Nevada Act, which acquires more than
10% but not more than 15% of the Company's voting securities, may apply to the
Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes
only. An institutional investor shall not be deemed to hold voting securities
for investment purposes unless the 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 the Company's voting securities for
investment purposes only. Activities that 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, policies 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 voting securities who must 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.

     Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or 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 the common stock
of a Registered Corporation 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 Venetian it: (i) pays that person any dividend or interest upon
voting securities of the Company; (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 his voting securities for cash at fair
market value. Additionally, the CCLGLB has taken the position that it has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming license.

     The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file an application, be
investigated and be found suitable to own the debt security of a Registered
Corporation, such as the Notes. 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 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.


     LVSI is required to maintain a current stock ledger in Nevada that 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 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. LVSI stock certificates bear a legend indicating that
such securities are subject to the Nevada Act.


     LVSI and Venetian may not make a public offering of any 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. The hypothecation of the Com-


                                       22
<PAGE>

pany's assets and restrictions on stock in connection with any public offering
will require the prior approval of the Nevada Commission. In addition, if
Venetian receives a gaming license, the hypothecation of its assets and
restrictions on stock in respect of any public offering will require the
approval of the Nevada Commission to remain effective. LVSI and Venetian have
applied for approval by the Nevada Commission of the Exchange Offer, the
hypothecation of assets and restrictions on stock. However, there can be no
assurance such approval will be granted. The Exchange Offer will not be
completed until such approvals are received. Any such approval does not
constitute a finding, recommendation or approval by the Nevada Commission or
the NGCB as to the accuracy or adequacy of the prospectus or the investment
merits of the securities offered. 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 any person whereby he or she 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 NGCB and the Nevada Commission
concerning 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 of 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 licensees, 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: (1) 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 the Registered Corporation's stockholders for the purposes of
acquiring control of the Registered Corporation.

     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 Clark
County, Nevada. 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 also is paid by the Company where certain entertainment is
provided in a cabaret, nightclub, cocktail lounge or casino showroom in
connection with the serving or selling of food, refreshments or merchandise.

     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 NGCB and, thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the NGCB of their participation in such foreign gaming. The revolving fund is
subject to increase or decrease at the discretion of the Nevada Commission.
Thereafter, Licensees are also required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of
honesty and integrity required of Nevada gaming operations, engage in
activities that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employ a person in the foreign operation who has been
denied a license or a finding of suitability in Nevada on the ground of
personal unsuitability.

     The sale of alcoholic beverages by the Company on the premises of the
Casino Resort is subject to licensing, control and regulation by the applicable
local authorities. The Company will also be required to apply for and receive a
Clark County gaming license. 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
Company.


                                       23
<PAGE>

Employees
     The Company anticipates that it will directly employ approximately 3,800
employees in connection with the Casino Resort. The Company will be required to
undertake a major recruiting and training program prior to the opening of the
Casino Resort at a time when other major new facilities may be approaching
completion and also recruiting employees. The Company believes that it will be
able to attract and retain a sufficient number of qualified individuals to
operate the Casino Resort. The Company does not know whether or to what extent
the Casino Resort's employees will be covered by collective bargaining
agreements, as that determination will ultimately be made by the employees.
Most, but not all major casino resorts situated on the Strip have collective
bargaining contracts covering at least some of the labor force at such sites.
The unions currently on the Strip include the Local 226 of the Hotel Employees
and Restaurant Employees Union (the "Local"), the Operating Engineers Union and
the Teamsters Union. Although no assurances can be given, management does not
believe that the representation of its employees by labor unions would have a
material impact upon the Company's results of operations, liquidity or
financial position.

     The Local has requested the Company to recognize it as the bargaining
agent for future employees of the Casino Resort. The Company has declined to do
so, believing that the future employees are entitled to select their own
bargaining agent, if any. In the past, when other hotel/casino operators have
taken a similar position, the Local has engaged in certain confrontational and
obstructive tactics, including contacting potential customers, tenants and
investors, objecting to various administrative approvals and picketing the
opening of the Preview Site at the Casino Resort. The Local has engaged in such
tactics with respect to the Casino Resort and may continue to do so. Although
the Company believes it will be able to operate despite such dispute, no
assurance can be given that it will be able to do so and that such failure
would not result in a material adverse effect on the Company.


ITEM 2.--PROPERTIES

     Venetian currently owns approximately 45 acres of land on or near the
Strip on the site of the former Sands. Such property includes the site on which
the Casino Resort is being constructed and the site on which the Phase II
Resort is planned to be constructed. Approximately 14 acres of such land may be
transferred to the Phase II Subsidiary upon completion of the subdivision for
the Project Site.


ITEM 3.--LEGAL PROCEEDINGS

     The Company and its subsidiaries are parties to various claims and legal
actions arising from the construction of the Casino Resort, in the ordinary
course of their businesses and in the ordinary course of business of the Sands.
Although the amount of any liability that could arise with respect to these
claims and actions cannot be accurately predicted, the Company believes that
any such liability will not have a material adverse effect on the Company.


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

     On November 6, 1997, the Sole Stockholder adopted a written consent in
lieu of a meeting whereby he approved and consented to the following actions:

   (1) an amendment and restatement of the By-Laws of LVSI;

   (2) an amendment and restatement of the Articles of Incorporation of LVSI
       (the "New LVSI Articles");

   (3) a stock split, as of November 14, 1997, with respect to the outstanding
       50,001 shares of common stock of LVSI, so that each share of such common
       stock would henceforth be deemed to represent 18.4996 shares of common
       stock, resulting in 925,000 shares of common stock outstanding on such
       date; and

   (4) the appointment of himself as Stockholder Director and William J.
       Raggio as Special Director (as defined herein) of LVSI upon the filing
       of the New LVSI Articles.


                                       24
<PAGE>

                                    PART II

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

Market Information
     There is no established trading market for the common stock of LVSI and
the Company is not aware of any bid quotations for the common stock of LVSI.

Holders
     As of March 27, 1998, the Sole Stockholder was the only holder of record
of the common stock of LVSI.

Dividends
     On July 31, 1997 and September 30, 1997, LVSI paid cash dividends of $20.0
million and $7.6 million, respectively, from capital in excess of par value to
its Sole Stockholder. The Company's current long-term debt arrangements
prohibit or restrict the payment of cash dividends. See "Item 7--Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Item 8--Financial Statements
and Supplementary Data--Notes to Financial Statements--Note 7 Long-Term Debt."


                                       25
<PAGE>

ITEM 6.--SELECTED FINANCIAL DATA

     The historical selected financial data set forth below should be read in
conjunction with "Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and Notes
thereto included elsewhere in this Annual Report on Form 10-K. The statement of
operations data for the years ended December 31, 1997, 1996 and 1995, and the
balance sheet data at December 31, 1997 and 1996 are derived from, and are
qualified by reference to, the audited historical financial statements included
elsewhere in this Annual Report on Form 10-K. The statement of operations data
for the years ended December 31, 1994 and 1993 and the balance sheet data at
December 31, 1995, 1994 and 1993 are derived from the Company's audited
historical financial statements that do not appear herein. The historical
results are not necessarily indicative of the results of operations to be
expected in the future.

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                             1997          1996(1)        1995(2)       1994(2)        1993(2)
                                        -------------   -------------   -----------   -----------   ------------
                                                         (In thousands, except per share data)
STATEMENT OF OPERATIONS
Data
<S>                                       <C>             <C>            <C>           <C>           <C>
 Gross revenues                           $     895       $  44,044      $ 95,469      $  93,182     $  83,652
 Promotional allowances                          --          (3,483)       (7,046)        (6,779)       (6,781)
                                          ---------       ---------      --------      ---------     ---------
 Net revenues                                   895          40,561        88,423         86,403        76,871
 Operating expenses                          (1,727)         99,890        84,449         82,712        80,321
                                          ---------       ---------      --------      ---------     ---------
 Operating income (loss)                      2,622         (59,329)        3,974          3,691        (3,450)
 Interest income (expense), net              (3,142)         (3,666)       (7,352)       (10,190)      (10,679)
                                          ---------       ---------      --------      ---------     ---------
 Loss before extraordinary item (3)            (520)        (62,995)       (3,378)        (6,499)      (14,129)
 Extraordinary item (3)                          --              --            --             --           633
                                          ---------       ---------      --------      ---------     ---------
 Net loss                                 $    (520)      $ (62,995)     $ (3,378)     $  (6,499)    $ (13,496)
                                          =========       =========      ========      =========     =========
Per Share Data
 Loss before extraordinary item           $   (0.56)      $  (68.10)     $  (2.54)     $   (4.13)    $   (8.99)
 Extraordinary item                              --              --            --             --           .40
                                          ---------       ---------      --------      ---------     ---------
 Basic and diluted loss per share         $   (0.56)      $  (68.10)     $  (2.54)     $   (4.13)    $   (8.59)
                                          =========       =========      ========      =========     =========
 
Other Data
 Capital expenditures                     $ 130,827       $  18,829      $  1,661      $  25,412     $   7,349
 Cash dividends per common share          $   29.84       $      --      $     --      $      --     $      --
</TABLE>


<TABLE>
<CAPTION>
                                                                       As at December 31,
                                             1997            1996           1995          1994          1993
                                         ------------    ------------   ------------  ------------   ------------
<S>                                       <C>             <C>            <C>           <C>           <C>
BALANCE SHEET DATA
 Total assets                             $ 747,767       $ 114,109      $178,099      $ 187,774     $ 161,519
 Long-term debt                             515,612              --       120,066        115,639        81,375
 Stockholders' equity                       111,347         106,335        45,989         53,755        15,364
</TABLE>                          

----------
(1) Results of operations include a charge for the write-down of property and
    equipment of $45,042 resulting from a revaluation of the Company's assets
    as of June 30, 1996, the date the Company approved a quasi-reorganization.

(2) Financial data has been restated to reflect the December 1995 merger of
    LVSI and Nevada Funding Group, Inc. ("NFG"), the common stock of which was
    owned entirely by the Sole Stockholder (the "NFG Merger").

(3) Extraordinary item represents gain on extinguishment of debt related to
    merger of NFG referred to above.

                                       26
<PAGE>

ITEM 7.--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
     The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Financial Statements and the notes thereto
and other financial information included elsewhere in this Annual Report on
Form 10-K. Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
See "--Special Note Regarding Forward-Looking Statements."

Development Activities
     In response to increasing competition and rapid market changes, management
decided to strategically redirect the Company's business, and on June 30, 1996,
the Company closed the Sands and subsequently demolished the facility to make
way for a planned Venetian-themed hotel-casino resort.

     The Company is constructing and will own and operate the Casino Resort, a
large-scale Venetian-themed hotel, casino, retail, meeting and entertainment
complex in Las Vegas, Nevada. The Casino Resort is expected to commence
operations in the second quarter of 1999. Formal ground breaking occurred in
April 1997. In June 1997, LVSI transferred the Project Site to Venetian.
Venetian will lease the Casino Resort to LVSI, which will conduct all gaming
operations in the Casino Resort.

     In November and December 1997, the Company entered into the following
financings to fund the development and construction costs for the Casino
Resort: (i) an offering of $425.0 million aggregate principal amount of the
Mortgage Notes, (ii) an offering of $97.5 million aggregate principal amount of
the Senior Subordinated Notes, (iii) the closing of the Bank Credit Facility,
(iv) the closing of the Mall Construction Loan Facility, (v) the execution of
an agreement to provide $97.7 million of indebtedness secured by certain
furniture, fixtures and equipment (the "FF&E Credit Facility"), (vi) the
contribution of $95.3 million in cash provided by the Sole Stockholder and his
affiliates and (vii) the closing of an agreement to provide a $70.0 million
contribution by the HVAC Provider.

     On December 31, 1997 and December 31, 1996, the Company held cash and cash
equivalents of $0.9 million and $0.9 million, respectively. Cash provided by
(used in) operating activities was $3.9 million for fiscal year 1997 and $(2.6)
million for fiscal 1996, respectively. Restricted cash and investments of
$426.9 million represents the remaining proceeds, net of offering and financing
costs and capital expenditures, from the sale of mortgage and subordinated
notes to finance the Casino Resort.

     The Company utilized operating cash flow, proceeds from preferred interest
in Venetian of $77.1 million and proceeds from the sale of $97.5 million of the
Senior Subordinated Notes during 1997 and additional stockholder contributions
of $11.1 million in 1996 to fund capital expenditures of $130.8 million and
$18.8 million for 1997 and 1996, respectively. Capital expenditures were used
primarily to fund development related costs of the Casino Resort. The cost of
the Casino Resort is currently estimated at approximately $1.0 billion
(exclusive of the HVAC Equipment costs and land costs).

Results of Operations
     On June 30, 1996, the Company suspended operations and closed the Sands to
begin construction of the Casino Resort. The Company's operating income since
June 30, 1996 consists primarily of interest and rental income. The Company's
operating expenses since June 30, 1996 primarily consist of employee-related
costs, legal and accounting fees and other miscellaneous expenses associated
with the winding down and closing of the Sands. Other expenses consist of
non-capitalized interest expense associated with the financing of the Company's
development of the Casino Resort. Accordingly, the historical results will not
be indicative of future operating results.

Year Ended December 31, 1997 compared to the Year Ended December 31, 1996
     Operating Revenues. Overall revenues were impacted by the closure of the
Sands in June 1996. Operating revenues during 1996, including casino revenue of
$23.1 million, room revenues of $8.5 million and food and beverage revenue of
$9.7 million all declined to $0 during the year ended December 31, 1997. Other
revenue declined from $2.8 million to $0.9 million.

     Operating Expenses. Overall operating expenses decreased to $(1.7) million
from $99.9 million, a decrease of $101.6 million. Declines in casino, rooms,
food and beverage and other expenses were directly attributable to no
operations during 1997 as a result of the June 1996 closure of the Sands. The
credit amount reflected in selling general and administrative expenses of $1.8
million during 1997 results from a reevaluation of the accrued closing costs
associated with the closing of the Sands. This amount compares to $18.8 million
during 1996. The write


                                       27
<PAGE>

down of property and equipment of $45.0 million during 1996 was related to the
quasi-reorganization described below.

     Interest Income (Expense). Interest income increased to $ 3.4 million
during 1997 from $ 0.5 million during 1996 as a result of investing proceeds
received from the offering of the Notes. The increase in interest expense to $
6.6 million during 1997 from $0 during 1996 represents the non-capitalized
interest expense resulting from the sale of the Notes in the principal amount of
$522.5 million on November 14, 1997 to fund the construction of the Casino
Resort.


Year Ended December 31, 1996 compared to the Year Ended December 31, 1995

     Revenues. Overall revenues were impacted by the closure of the Sands in
June 1996. Casino revenues declined to $23.1 million from $44.8 million, a
decrease of $21.7 million or 48%; room revenues declined to $8.5 million from
$15.8 million, a decrease of $7.3 million or 46%; and food and beverage
revenues declined to $9.7 million from $18.8 million, a decrease of $9.1
million or 48%. Other income declined to $2.8 million from $8.1 million, a
decrease of $5.3 million or 65%, primarily attributable to a loss realized on
the disposal of property and equipment auctioned after the closing of the
Sands. Rental revenue declined to zero from $8.0 million due to the acquisition
by Interface of the Expo Center building and related land and equipment in
January 1996. Prior to 1996, the Company leased the Expo Center to Interface
for an annual rental of $8.0 million.

     Operating Expenses. Overall operating expenses increased to $99.9 million
from $84.4 million, an increase of $15.5 million or 18%. Declines in casino,
room, food and beverage, depreciation and amortization, and other operating
expenses of $14.7 million, $3.2 million, $6.4 million, $5.0 million and $2.2
million, respectively, were directly attributable to only six months of
operations as a result of the June 1996 closing of the Sands. These declines
were more than offset by an increase in selling, general and administrative
expenses of $1.9 million due primarily to severance and other costs associated
with the closing, and a charge for the write-down of property and equipment of
$45.0 million related to the quasi-reorganization described below.

     Interest Income (Expense). Interest income was consistent with the prior
year. Interest expense to related party declined to $4.1 million from $7.9
million, a decrease of $3.8 million or 48%. The decrease in interest expense to
related party was due to the acquisition and subsequent retirement during 1996
by the Company of all the remaining outstanding amounts of certain mortgage
notes of LVSI acquired in the NFG Merger (the "Second Mortgage Notes") and
Third Mortgage Pay-In-Kind Notes of the Company (the "Third Mortgage Notes").


Liquidity and Capital Resources

     Operation of the Sands Hotel

     Prior to the June 30, 1996 closing of the Sands, the Company utilized
operating cash flow and additional stockholder contributions to fund working
capital requirements and capital expenditures. No significant capital
expenditures were incurred during 1996 related to the Sands.

     In December 1995, the Company completed a merger with NFG through the
contribution of all the outstanding common stock of NFG to the Company. At the
date of the merger, equity of NFG totaled $27.9 million. As of the merger date,
NFG owned $37.0 million of the Company's Second Mortgage Notes purchased from
third parties during 1994. The Second Mortgage Notes bore interest at 15% per
annum to January 15, 1995, at which time the interest rate was reduced to the
short-term quarterly applicable federal interest rate as published by the
Internal Revenue Service. The Second Mortgage Notes were retired as part of the
merger. Historical interest charges related to those notes totaling $2.3
million in 1995 have been eliminated on the assumption that the notes were
retired when repurchased by NFG.

     In April 1995, NFG purchased and retired 41,175 shares of its common stock
from three stockholders. The total price paid for these shares was $13.2
million, which has been recorded as a reduction to capital in excess of par
value. In August 1995, the Company purchased 647,469 shares of its common stock
from the identical three stockholders for $0.2 million. Shares repurchased by
the Company have been retired and restored to authorized and unissued common
stock. Subsequent to these repurchases, both the Company and NFG were owned by
a single stockholder.

     Through 1995, the Company leased the Expo Center to Interface. Pursuant to
the operating lease agreement, Interface paid an annual rental of $8.0 million
and was responsible for all taxes, insurance, and costs to operate


                                       28
<PAGE>

and maintain the facility. During 1996, Interface acquired from the Company the
Expo Center at its carrying value of $66.8 million, in exchange for all of the
Second Mortgage Notes and a portion of the Third Mortgage Notes of the Company
held by Interface. In connection with the transaction, the Company subsequently
retired the Second Mortgage Notes and Third Mortgage Notes received and the
above lease was canceled. In connection with the 1996 acquisition by Interface
of the Expo Center, the Company retired $33.2 million of Second Mortgage Notes
and $32.3 million of Third Mortgage Notes and wrote-off remaining capitalized
financing costs of $1.6 million which are included in amortization expense. The
remaining $59.5 million of Third Mortgage Notes were retired in 1996 by the
Company upon contribution by the stockholder of all the remaining notes held by
Interface.

     In connection with the closing of the Sands, the Company's sole director
and stockholder approved a quasi-reorganization, effective as of June 30, 1996,
pursuant to which the Company revalued certain of its assets as of that date.
This revaluation, in accordance with the accounting principles applicable to a
quasi-reorganization, permitted the Company to eliminate the adjusted
accumulated deficit account as of that date, by a charge against capital in
excess of par value, and to establish a new retained earnings account for the
accumulation of the results of future operations. The quasi-reorganization
resulted in an increase in the carrying value of land of $51.7 million and a
corresponding decrease of $45.0 million in buildings and other property and
equipment net of accumulated depreciation and $6.7 million in severance and
related closing costs. The remaining accumulated depreciation was eliminated
against the cost basis of the remaining property, and the accumulated deficit
of $155.0 million as of June 30, 1996, was transferred to capital in excess of
par value.

     Venetian Casino Resort
     As of December 31, 1997, approximately $228.1 million of the total project
cost of $1.065 billion (including approximately $70.0 million of HVAC Equipment
costs, but excluding land acquisition costs) had been expended or incurred to
fund construction and development of the Casino Resort. Of the costs expended
or incurred, approximately $95.3 million represents cash contributed by the
Sole Stockholder and his affiliates to the Company, and the balance represents
proceeds from the Senior Subordinated Notes and year end accruals for
construction payables and contractor retention amounts. The remaining $837.4
million of estimated construction and development costs for the Casino Resort
is expected to be funded from a combination of (i) borrowings of approximately
$150.0 million under the Bank Credit Facility, (ii) gross proceeds from the
offering of the Mortgage Notes of approximately $425.0 million, (iii) remaining
proceeds from the offering of the Senior Subordinated Notes of approximately
$90.5 million (net of original issue discount), (iv) borrowings of
approximately $140.0 million under the Mall Construction Loan Facility and (v)
borrowings under the FF&E Credit Facility of approximately $97.7 million. In
addition, the HVAC Provider will separately contribute up to $70.0 million for
the purchase and installation of the HVAC Equipment, which the HVAC Provider
will own and operate.

     The Bank Credit Facility consists of (i) multiple draw "Term Loans"
(multiple draw term loans of up to $150.0 million) which may be drawn to fund
the development and construction of the Casino Resort, and will be available
for a period commencing upon the closing date of the Bank Credit Facility (the
"Closing Date") and ending on the earlier to occur of (a) April 21, 1999,
subject to extension under the Disbursement Agreement (the "Outside Completion
Deadline") and (b) Completion, and (ii) "Revolving Loans" (revolving credit
loans of up to $20.0 million) which may be drawn to fund certain start-up
operational costs of the Casino Resort, and will be available for a period
commencing eight months prior to the opening date and ending two years from the
initial draw on the Revolving Loans (but in no event later than the second
anniversary of Completion) (the "Term Loan Committment Termination Date"), at
which time all Revolving Loans must be repaid. The Term Loans mature not later
than six years from the Issuance Date (as defined in the Disbursement
Agreement) and are subject to quarterly amortization payments which began on
the earlier of (i) 120 days after the opening date of the Hotel, Casino or
Mall, (ii) the Completion Date (as defined in the Disbursement Agreement) and
(iii) the Outside Completion Deadline. Amortization during the first four
quarters following the amortization commencement date will be 3.75% of
principal per quarter; during the second four quarters, 5% of principal per
quarter; during the third four quarters, 7.5% of principal per quarter; and
during the fourth four quarters, 8.75% of principal per quarter. Up to $15.0
million under the Revolving Loans will be available prior to such eight-month
period: (i) to fund the purchase of certain furniture, fixtures and equipment
to be secured under the FF&E Credit Facility (the "Specified FF&E") (including
deposits thereon), with such amounts to be repaid from funds drawn under the
FF&E Credit Facility and (ii) to support letters of credit related to the
construction of the Casino Resort. All amounts outstanding under the Bank
Credit Facility bear interest, at the option of the Company (subject to certain
limitations) as follows: (A) with respect


                                       29
<PAGE>

to the period prior to the Substantial Completion Date (as defined in the Bank
Credit Facility), (i) at a base rate plus 2.00% per annum; or (ii) at a reserve
adjusted eurodollar rate plus 3.00% per annum; (B) with respect to outstandings
under the Bank Credit Facility for the period between the Substantial
Completion Date and ending on the second full fiscal quarter following the
Substantial Completion Date, (i) at a base rate plus 1.50%; or (ii) at a
reserve adjusted eurodollar rate plus 2.50% per annum; and (C) with respect to
outstandings under the Bank Credit Facility for the period commencing on the
second full fiscal quarter following the Substantial Completion Date, at a base
rate or reserve adjusted eurodollar rate, as the case may be, plus the relevant
margin based on certain leverage ratios set forth in the Bank Credit Facility
loan agreement.

     The Mall Construction Loan Facility consists of (i) a $105.0 million
tranche (the "Tranche A Loan") and (ii) a $35.0 million tranche (the "Tranche B
Loan"). Borrowings under the Tranche B Loan will be used to fund the
development and construction of the Casino Resort, and were available as of the
closing of the Mall Construction Loan Facility. Borrowings under the Tranche A
Loan will be used to fund the development and construction of the Casino Resort
but will not be drawn until the Tranche B Loan is fully funded. Borrowings
under the Tranche A Loan are available until the earlier to occur of (i)
Completion and (ii) the Outside Completion Deadline. The Mall Construction Loan
Facility matures on May 1, 2000 (unless extended). The interest rate on
indebtedness outstanding under the Mall Construction Loan Facility is 275 basis
points over 30-day LIBOR, provided that effective as of April 10, 1998, if the
Mall Parcel is not a separate legal and tax parcel by July 10, 1998, such
interest rate shall be 375 basis points over 30-day LIBOR until such time, if
any, as the Mall Parcel becomes a separate legal and tax parcel.

     The FF&E Credit Facility consists of a $97.7 million multiple draw,
interim loan prior to completion of the Casino Resort, which converts to a term
loan for a period of 60 months after completion of the Casino Resort. If the
FF&E Credit Facility is not fully funded on the Project Construction Completion
Date (as defined in the Disbursement Agreement), the unused portion of the
commitment under the FF&E Credit Facility may be drawn in whole and placed in a
cash collateral account and used to fund the purchase and installation of
Specified FF&E for a period of 120 days, with any proceeds remaining in such
cash collateral account after such 120-day period being used by the lenders
under the FF&E Credit Facility (the "FF&E Lenders") to prepay an equivalent
portion of the outstanding borrowings at such time. Funding will not be
available under the FF&E Credit Facility until the Casino Resort is within
eight months of the opening date of the Casino Resort and is subject to certain
pre-funding conditions, including, delivery of certain customary legal
opinions, filing of UCC-1 financing statements and evidence that the Casino
Resort will open within such eight-month period. Interest on the interim loan,
if paid on a current basis, will be due quarterly in arrears at a floating rate
equal to 30-day reserve adjusted LIBOR plus 375 basis points or at the Base
Rate (the greater of the Prime Rate or the Federal Funds Rate plus 50 basis
points) plus 100 basis points, whichever the Company elects. Upon the same date
as the Project Construction Completion Date but no later than November 1, 1999
(or January 31, 2000 if certain casualty events occur after November 1, 1998
and the Casino Resort can be repaired on or before January 31, 2000) (the
"Basic Loan Commencement Date"), but subject to certain conditions, the interim
loan will convert to a sixty-month term loan with quarterly amortization
payments. Amortization on the FF&E Basic Loan will be 3% of principal for the
first four quarters and 5.5% of principal for the last 16 quarters. Interest on
the FF&E Basic Loan is expected to be a floating monthly rate calculated at the
higher of (a) the reserve-adjusted 30-day LIBOR plus 375 basis points or (b)
the eurodollar interest rate margin in effect on the Bank Credit Facility plus
125 basis points.

     The funds provided by these sources (together with amounts to be provided
by the HVAC Provider) are expected to be sufficient to develop, construct and
commence operations of the Casino Resort, assuming there are no delay costs or
construction cost overruns. If there are any delay costs and construction cost
overruns, the Company expects to use cash received from the following sources
to fund such delay costs and cost overruns (including interest on the Notes):
(i) a Construction Management Contract contingency of approximately $26.1
million, (ii) an owner's contingency of approximately $40.0 million, (iii) the
Liquidated Damages Insurance and the proceeds of other (e.g., casualty)
insurance policies, (iv) the Construction Manager, Bovis or P&O, pursuant to
the Construction Management Contract, the Construction Management Contract
Guaranty and the P&O Guaranty, respectively, (v) other third parties, pursuant
to their liability to the Company under their agreements with the Company, and
(vi) the Sole Stockholder, pursuant to his liability under the collateralized
Completion Guaranty of up to $25.0 million. The Completion Guaranty provides
that, subject to certain conditions and limitations, if available funds are not
sufficient to fund all construction and development costs, the Sole Stockholder
is obligated to fund excess costs


                                       30
<PAGE>

up to a maximum aggregate amount of $25.0 million. The Sole Stockholder's
obligation to fund such excess construction and development costs is
collateralized by $25.0 million of cash or cash equivalents pledged to the
Disbursement Agent. If the Sole Stockholder provides funds under the Completion
Guaranty, the amount of such funds will be treated as a junior subordinated
loan from the Sole Stockholder to Venetian.


     Following the completion of the Casino Resort, the Issuers expect to fund
their operations and capital requirements from (i) operating cash flow and (ii)
additional indebtedness of up to $20.0 million of revolving loans under the
Bank Credit Facility. Assuming an opening of the Casino Resort in April 1999,
the aggregate scheduled principal payments due under the Bank Credit Facility
and the FF&E Credit Facility will be zero dollars, $25.7 million, $47.2
million, $62.7 million, $72.1 million and $40.0 million, payable in 1998, 1999,
2000, 2001, 2002 and all years thereafter, respectively. In addition, the
Company expects that the indebtedness under the Mall Construction Loan Facility
will be refinanced upon completion of the Casino Resort. Upon the completion of
the Casino Resort and the satisfaction of certain other conditions, pursuant to
the Sale and Contribution Agreement, the Mall Construction Subsidiary will
transfer the Mall to the Mall Subsidiary. Upon such transfer, the Mall will be
released by the Mortgage Note Trustee and the Bank Agent and will not be
available as security for the holders of the Mortgage Notes or the indebtedness
under the Bank Credit Facility, and the indebtedness under the Mall
Construction Loan Facility will either be repaid or assumed by the Mall
Subsidiary (with the Company and its subsidiary guarantors being released from
all obligations under such indebtedness).


     To finance the obligations of the Mall Subsidiary under the Sale and
Contribution Agreement, Goldman Sachs Mortgage Company ("GSMC") and an entity
wholly owned by the Sole Stockholder (the "Tranche B Take-out Lender")
separately have entered into commitment agreements with the Mall Subsidiary
whereby GSMC has agreed to provide debt financing to the Mall Subsidiary of up
to $105.0 million (the "Tranche A Take-out Financing") and the Tranche B
Take-out Lender has agreed to provide debt financing to the Mall Subsidiary of
up to $35.0 million (the "Tranche B Take-out Financing" and, together with the
Tranche A Take-out Financing, the "Mall Take-out Financing"). The consummation
of the Tranche A Take-out Financing is subject to certain conditions, including
completion of the Casino Resort and delivery of legal opinions (including
certain substantive non-consolidation opinions). The Mall Subsidiary is not
obligated to draw on the Mall Take-out Financings in order to fund its
obligations under the Sale and Contribution Agreement and may obtain
alternative sources of financing to fund such obligations. Any indebtedness
incurred by the Mall Subsidiary (including the Tranche A Take-out Financing) is
expected to include material restrictions on the ability of the Mall Subsidiary
to pay dividends or to make distributions or loans to the Company and its
subsidiaries.


     Although no additional financing for the Casino Resort is currently
contemplated (other than that described above), the Company will seek, if
necessary and to the extent permitted under the indentures entered into in
connection with the issuance of each of the Mortgage Notes and the Senior
Subordinated Notes (collectively the "Indentures") and the terms of the Bank
Credit Facility and the Mall Construction Loan Facility, additional financing
through additional bank borrowings or debt or equity financings. There can be
no assurance that additional financing, if needed, will be available to the
Company, and, if available, that the financing will be on terms favorable to
the Company, or that the Sole Stockholder or any of his affiliates will provide
any such financing. Finally, there can be no assurance that new business
developments or other unforeseen events will not occur resulting in the need to
raise additional funds.


     Phase II Resort

     If the Phase II Subsidiary determines to construct the Phase II Resort,
the Phase II Subsidiary will be required to raise substantial debt and/or
equity financings. Currently, there are no commitments to fund any portion of
the construction and development costs of the Phase II Resort. The Phase II
Subsidiary is not subject to any of the restrictive covenants of the debt
instruments of the Company (including, without limitation, the covenants with
respect to the limitations on indebtedness and restrictions on the ability to
pay dividends or to make distributions or loans to the Company and its
subsidiaries). Any indebtedness incurred by the Phase II Subsidiary is expected
to include material restrictions on the ability of the Phase II Subsidiary to
pay dividends or make distributions or loans to the Company and its
subsidiaries.


                                       31
<PAGE>

     However, such debt instruments of the Company limit the ability of
Venetian, LVSI or any of their subsidiaries to guarantee or otherwise become
liable for any indebtedness of the Phase II Subsidiary. Such debt instruments
also restrict the sale or other disposition by the Company and its subsidiaries
of capital stock of the Phase II Subsidiary, including the sale of any such
capital stock to the Sole Stockholder or any affiliate of the Sole Stockholder.
In addition, prior to commencement of construction of the Phase II Resort,
Venetian has the right to approve the plans and specifications for the Phase II
Resort. The development, construction and opening of the Casino Resort is not
dependent on the construction and opening of the Phase II Resort. The
development of the Phase II Resort may require obtaining additional regulatory
approvals. Under its debt instruments, the Company has agreed that it will not
commence construction of the Phase II Resort (other than the parking garage on
the Phase II Land) until a temporary certificate of occupancy has been issued
for the Casino Resort.

Year 2000
     The Company has conducted a review of its financial and sales software,
construction job costs software and computer systems in order to identify any
adverse effects of the Year 2000 issue. The Year 2000 issue refers to the
inability of many computer systems to accurately process dates subsequent to
December 31, 1999. Possible Year 2000 problems create risk for a company in
that unforeseen problems in its own computer systems or those of its third
party suppliers could have a material impact on a company's ability to conduct
its business operations. The Company has determined that the internal staff
costs as well as consulting and other expenses to prepare its systems for the
year 2000 will have no material impact on the Company's expenses during 1998
and 1999 and will not have a material impact on its ongoing operating results.
The Company is presently making inquiries to determine whether the Year 2000
issue will have any effect on its suppliers and business partners.

Special Note Regarding Forward-Looking Statements
     Certain statements in this Section and "Business" and elsewhere in this
Annual Report on Form 10-K constitute "forward-looking statements." Such
forward-looking statements include the discussions of the business strategies
of the Company and expectations concerning future operations, margins,
profitability, liquidity and capital resources. Although the Company believes
that such forward-looking statements are reasonable, it can give no assurance
that any forward-looking statements will prove to be correct. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the risks associated with entering into a new
venture and new construction, competition and other planned construction in Las
Vegas, government regulation related to the casino industry, uncertainty of
casino spending and vacationing in casino resorts in Las Vegas, occupancy rates
and average daily room rates in Las Vegas, demand for all-suites rooms, the
popularity of Las Vegas as a convention and trade show destination, the
completion of infrastructure improvements in Las Vegas, including the on-going
expansion of McCarran International Airport, and general economic and business
conditions which may impact levels of disposable income of consumers and
pricing of hotel rooms.

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

Not applicable.

                                       32
<PAGE>

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEX TO FINANCIAL STATEMENTS


                                                                    Page

Report of Independent Accountants                                    34
Consolidated Balance Sheets at December 31, 1997 and 1996            35
Consolidated Statements of Operations for each of the three
 years in the period ended December 31, 1997                         36
Consolidated Statements of Stockholder's Equity for each of the
 three years in the period ended December 31, 1997                   37
Consolidated Statements of Cash Flows for each of the three
 years in the period ended December 31, 1997                         38
Notes to Financial Statements                                        39

     All financial statement schedules have been omitted because they are not
applicable or the required information is included in the consolidated
financial statements or the notes thereto.


                                       33
<PAGE>

                       Report of Independent Accountants




To the Director and Stockholder of Las Vegas Sands, Inc.


     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholder's equity and of
cash flows present fairly, in all material respects, the financial position of
Las Vegas Sands, Inc. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

     As discussed in Note 3 to the financial statements, the Company approved a
quasi-reorganization effective June 30, 1996.




PRICE WATERHOUSE LLP

Los Angeles, California
March 24, 1998

                                       34
<PAGE>

LAS VEGAS SANDS, INC.
Consolidated Balance Sheets
(Dollars in thousands)



<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                                     1997           1996
                                                                                 ------------   ------------
<S>                                                                              <C>            <C>
Assets
Current assets:
 Cash and cash equivalents                                                         $    857       $    879
 Restricted cash and investments                                                    341,725
 Other current assets                                                                   213            362
                                                                                   --------       --------
Total current assets                                                                342,795          1,241
 Property and equipment                                                             279,770        111,233
 Restricted investments                                                              85,186
 Deferred offering costs, net                                                        38,618
 Other assets                                                                         1,398          1,635
                                                                                   --------       --------
                                                                                   $747,767       $114,109
                                                                                   ========       ========
Liabilities and Stockholder's Equity
Current liabilities:
 Accounts payable                                                                  $  1,701       $     77
 Construction payables                                                               25,547          2,617
 Other accrued liabilities                                                           16,507          5,080
                                                                                   --------       --------
Total current liabilities                                                            43,755          7,774
Long-term debt                                                                      515,612
                                                                                   --------       --------
                                                                                    559,367          7,774
                                                                                   --------       --------
Preferred Interest in Venetian Casino Resort, LLC, a wholly owned subsidiary         77,053
                                                                                   --------       --------
Commitments and contingencies
Stockholder's equity:
 Common stock, $.10 par value, 3,000,000 shares authorized, 925,000 shares
  issued and outstanding                                                                 92             92
 Capital in excess of par value                                                     112,977        107,445
 Accumulated deficit since June 30, 1996                                             (1,722)        (1,202)
                                                                                   --------       --------
                                                                                    111,347        106,335
                                                                                   --------       --------
                                                                                   $747,767       $114,109
                                                                                   ========       ========
</TABLE>

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

                                       35
<PAGE>

LAS VEGAS SANDS, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)



<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                      1997          1996           1995
                                                  -----------   ------------   ------------
<S>                                               <C>           <C>            <C>
Revenues:
 Casino                                            $     --      $  23,058       $ 44,840
 Rooms                                                               8,500         15,765
 Food and beverage                                                   9,713         18,772
 Rental income from related party                                                   8,000
 Other                                                  895          2,773          8,092
                                                   --------      ---------       --------
                                                        895         44,044         95,469
Less--promotional allowances                                        (3,483)        (7,046)
                                                   --------      ---------       --------
 Net revenues                                           895         40,561         88,423
Operating expenses:
 Casino                                                             15,235         29,925
 Rooms                                                               3,531          6,767
 Food and beverage                                                   8,136         14,487
 Other operating                                                     4,377          6,581
 Selling, general and administrative                 (1,827)        18,752         16,863
 Depreciation and amortization                          100          4,817          9,826
 Write-down of property and equipment                               45,042
                                                   --------      ---------       --------
 Total operating expenses                            (1,727)        99,890         84,449
Operating income (loss)                               2,622        (59,329)         3,974
Other income (expense):
 Interest income                                      3,439            450            518
 Interest expense, net of amounts capitalized        (6,581)
 Interest expense to related party                                  (4,116)        (7,870)
                                                   --------      ---------       --------
Net loss                                           $   (520)     $ (62,995)      $ (3,378)
                                                   ========      =========       ========
Basic and diluted loss per share                   $  (0.56)     $  (68.10)      $  (2.54)
                                                   ========      =========       ========
</TABLE>

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

                                       36
<PAGE>

LAS VEGAS SANDS, INC.
Consolidated Statements of Stockholder's Equity
(Dollars in thousands)



<TABLE>
<CAPTION>
                                               Common Stock
                                         ------------------------     Capital in
                                             Number                   Excess of      Accumulated
                                             Shares       Amount      Par Value        Deficit         Total
                                         -------------   --------   -------------   ------------   ------------
<S>                                        <C>            <C>        <C>             <C>            <C>
Balance at December 31, 1994               1,572,469      $ 157      $  143,452      $ (89,854)     $  53,755
Capital Contributions                                                    11,142                        11,142
Distributions                                                            (2,148)                       (2,148)
Net loss                                                                                (3,378)        (3,378)
Purchase of NFG shares from
 Minority stockholders                                                  (13,176)                      (13,176)
Purchase of LVSI shares from
 Minority stockholders                      (647,469)       (65)           (141)                         (206)
                                           ---------      -----      ----------      ----------     ---------
Balance at December 31, 1995                 925,000         92         139,129        (93,232)        45,989
Capital contributions                                                    71,601                        71,601
Net loss for the six months ended
 June 30, 1996                                                                         (61,793)       (61,793)
Elimination of deficit through quasi-
 reorganization at June 30, 1996                                       (155,025)       155,025
Adjustment to assets through
 quasi-reorganization                                                    51,740                        51,740
Net loss for the six months ended
 December 31, 1996                                                                      (1,202)        (1,202)
                                           ---------      -----      ----------      ----------     ---------
Balance at December 31, 1996                 925,000         92         107,445         (1,202)       106,335
Capital contributions                                                    33,132                        33,132
Dividends                                                               (27,600)                      (27,600)
Net loss                                                                                  (520)          (520)
                                           ---------      -----      ----------      ----------     ---------
Balance at December 31, 1997                 925,000      $  92      $  112,977      $  (1,722)     $ 111,347
                                           =========      =====      ==========      =========      =========
</TABLE>

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

                                       37
<PAGE>

LAS VEGAS SANDS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                  1997            1996           1995
                                                             -------------   -------------   ------------
<S>                                                           <C>              <C>            <C>
Cash flows from operating activities:
Net loss                                                      $     (520)      $ (62,995)     $  (3,378)
Adjustments to reconcile net loss to net cash provided by
 (used in) operating activities:
  Depreciation and amortization                                      100           4,817          9,826
  Non-cash interest expense due to related party                                   3,087          4,427
  Loss (gain) on disposal of assets                                                2,906            (43)
  Write-down of property and equipment                                            45,042
  Change in assets and liabilities:
   Other current assets                                             (642)          6,354            (65)
   Other assets                                                      137           3,275            816
   Accounts payable                                                  (77)         (1,306)          (540)
   Other accrued liabilities                                       4,861          (3,780)        (5,678)
                                                              ----------       ---------      ---------
Net cash provided by (used in) operating activities                3,859          (2,600)         5,365
                                                              ----------       ---------      ---------
Cash flows from investing activities:
Increase in restricted cash and investments                     (426,120)
Construction of Casino Resort                                   (130,827)        (18,829)        (1,661)
Proceeds from the sale of fixed assets                                             1,766
                                                              ----------       ---------      ---------
Net cash used in investing activities:                          (556,947)        (17,063)        (1,661)
                                                              ----------       ---------      ---------
Cash flows from financing activities:
Proceeds from capital contributions                               25,500          11,134         11,142
Proceeds from preferred interest in Venetian                      77,053
Proceeds from mortgage notes                                     425,000
Proceeds from senior subordinated notes                           90,500
Payments of deferred offering costs                              (37,387)
Payment of dividends                                             (27,600)
Purchase of NFG common stock                                                                    (13,176)
Purchase of LVSI common stock                                                                      (206)
Distributions to stockholders                                                                    (2,148)
Payments of notes payable and capital lease obligation                                             (118)
                                                              ----------       ---------      ---------
Net cash provided by (used in) financing activities              553,066          11,134         (4,506)
                                                              ----------       ---------      ---------
Net (decrease) in cash and cash equivalents                          (22)         (8,529)          (802)
Cash and cash equivalents at beginning of year                       879           9,408         10,210
                                                              ----------       ---------      ---------
Cash and cash equivalents at end of year                      $      857       $     879      $   9,408
                                                              ==========       =========      =========
The following supplemental disclosures are provided for
the consolidated statement of cash flows:
Cash payments for interest, net of amounts capitalized        $      357       $      --      $      --
                                                              ==========       =========      =========
Interest paid to related parties during the year              $       --       $      --      $   3,261
                                                              ==========       =========      =========
Retirement of notes through stockholder contribution          $       --       $  59,454
                                                              ==========       =========
Acquisition of Expo Center by IGN
 Property and equipment sold                                  $       --       $ (66,775)     $      --
                                                              ----------       ---------      ---------
 Reduction of notes                                                               65,500
 Reduction of other related party liabilities                                      2,288
                                                              ----------       ---------      ---------
 Increase of capital in excess of par value                   $       --       $   1,013      $      --
                                                              ==========       =========      =========
Contribution of land by Sole Stockholder                      $    7,632       $      --      $      --
                                                              ==========       =========      =========
</TABLE>

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

                                       38
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements
Note 1 Organization and Business of Company

     Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. Effective April
28, 1989, LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring
the Sands Hotel and Casino (the "Sands"). On June 30, 1996, LVSI closed the
Sands and subsequently demolished the facility to make way for a planned two
phase hotel-casino resort. The first phase of the hotel casino resort (the
"Casino Resort") will include approximately 3,036 suites, casino space
approximating 116,000 square feet, approximately 500,000 square feet of
convention space, and approximately 500,000 square feet of retail shops and
restaurants. In connection with the closing of the Sands, LVSI effected a
quasi-reorganization (Note 3).

     The consolidated financial statements as of December 31, 1997 include the
accounts of LVSI and its wholly owned subsidiaries (the "Subsidiaries"),
including Venetian Casino Resort, LLC ("Venetian"), Grand Canal Shops Mall, LLC
(the "Mall Subsidiary"), Lido Casino Resort, LLC (the "Phase II Subsidiary"),
Mall Intermediate Holding Company, LLC ("Mall Intermediate"), Grand Canal Shops
Mall Construction, LLC ("Mall Construction"), Lido Intermediate Holding
Company, LLC ("Lido Intermediate"), Grand Canal Shops Mall Holding Company,
LLC, Lido Casino Resort Holding Company, LLC, Grand Canal Shops Mall MM, Inc.
and Lido Casino Resort MM, Inc. (collectively, the "Company"). The December 31,
1996 and 1995 periods include only the accounts of LVSI. Each of LVSI and the
Subsidiaries is a separate legal entity and the assets of each such entity are
intended to be available only to the creditors of such entity.

     Venetian was formed on March 20, 1997 to own and operate certain portions
of the Casino Resort. LVSI is the managing member and owns 100% of the common
voting equity in Venetian. The entire preferred interest in Venetian is owned
by Interface Group Holding Company, Inc. ("Interface Holding"), which is wholly
owned by LVSI's sole stockholder (the "Sole Stockholder") (Note 8).

     Mall Intermediate, Mall Construction and Lido Intermediate are special
purpose companies, which are wholly owned subsidiaries of Venetian. They are
guarantors or co-obligors of certain indebtedness related to the construction
of the Casino Resort.

     The Mall Subsidiary is an indirect wholly owned subsidiary of Mall
Intermediate and was formed on March 20, 1997 to own and operate the retail
mall in the Casino Resort.

     Construction of the Casino Resort commenced in April 1997 and completion
is scheduled for the second quarter of 1999. The Company expects to expend
approximately $868.0 million (excluding estimated capitalized interest and
financing costs of approximately $131.0 million) to complete construction and
open the Casino Resort.

     The Company has transacted business with a number of related parties
including Interface Group-Nevada, Inc. ("IGN") and Nevada Funding Group, Inc.
("NFG"). The nature of such transactions and the amounts involved are disclosed
on the face of the financial statements and in the notes thereto.

     In addition to its gaming operations, the Company also owned and leased
the Sands Expo and Convention Center (the "Expo Center") prior to January 1996.
As discussed in Note 10, the Expo Center was acquired by IGN in January 1996.

Note 2 Summary of Significant Accounting Policies

Cash and Cash Equivalents
     Cash and cash equivalents consist of cash and short-term investments with
original maturities not in excess of 90 days.

Property and Equipment
     Property and equipment are generally stated at cost or, in the case of
assets under capital lease, at the present value of future minimum lease
payments, calculated as of the date of inception. Owned assets prior to June
30, 1996 were depreciated using the straight-line method over estimated useful
lives ranging from three to thirty years.


                                       39
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 2 Summary of Significant Accounting Policies (continued)

Subsequent to the closing of the Sands, depreciable property and equipment
consist of equipment, furniture and fixtures which are being depreciated using
the straight-line method over their estimated useful life of five years.
Maintenance, repairs and renewals that neither materially add to the value of
the property nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on disposition of property and equipment are included
in the statements of operations.

     In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," management reviews assets for possible impairment of
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Under SFAS No. 121, an
impairment loss would be recognized when estimated future cash flows expected
to result from the use of the assets and their eventual disposition are less
than their carrying amounts. See Note 3 for adjustment of carrying values as a
result of the quasi-reorganization.

Capitalized Interest
     Interest costs associated with major construction projects are
capitalized. Interest is capitalized on amounts expended on the Casino Resort
using the weighted-average cost of the Company's outstanding borrowings.
Capitalization of interest ceases when the project is substantially complete.

Preopening Costs
     Preopening costs, representing primarily direct personnel and other costs
incurred prior to the opening of the Casino Resort are expensed as incurred. No
such costs have been incurred as of December 31, 1997.

Debt Discount and Deferred Offering Costs
     Debt discount and offering costs are amortized based on the terms of the
related debt instruments using the straight-line method, which approximates the
effective interest method. During the year ended December 31, 1997, $0.1
million and $0.5 million of debt discount and offering costs, respectively,
have been included in construction in progress.

Per Share Data
     Basic and diluted loss per share are calculated based upon the weighted
average number of shares outstanding. The weighted average number of shares
outstanding used in the computation of loss per share of common stock was
925,000 in 1997 and 1996 and 1,329,661 in 1995.

Casino Revenue and Promotional Allowances
     In accordance with industry practice, the Company recognizes as casino
revenue the net win from gaming activities, which is the difference between
gaming wins and losses. The retail value of accommodations, food and beverage,
and other services furnished to hotel-casino guests without charge is included
in gross revenues and deducted as promotional allowances. The estimated cost of
providing such promotional allowances has been classified primarily as casino
costs and expenses as follows (in thousands):


                               Year Ended December 31,
                             1997      1996        1995
                            ------   --------   ---------
      Rooms                  $--      $  592     $  931
      Food and Beverage                2,348      4,717
      Other                               38        126
                             ---      ------     ------
                             $--      $2,978     $5,774
                             ===      ======     ======

Income Taxes
     LVSI has elected to be taxed as an S Corporation and its wholly owned
subsidiaries are limited liability companies, each of which is a tax pass
through entity for federal income tax purposes. Nevada does not levy a
corporate income tax. Accordingly, no provision for federal or state income
taxes is included in the statement of operations.


                                       40
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 2 Summary of Significant Accounting Policies (continued)

Concentrations of Credit Risk
     Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of restricted investments.
These restricted investments are placed with a high credit quality financial
institution which invests primarily in U.S. Government backed repurchase
agreements. At December 31, 1997, the Company had no significant concentrations
of credit risk.

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.

Note 3 Strategic Redirection and Quasi-Reorganization
     During 1996, in response to increasing competition and rapid market
changes, management decided to strategically redirect the Company's business.
On June 30, 1996, the Company suspended operations and closed the existing
Sands property to make way for a new hotel-casino resort (Note 1). As a result,
approximately 1,400 employee positions were eliminated. The severance and
related closing costs of $6.7 million are included in selling, general and
administrative expense for 1996. In December 1997, the Company reevaluated its
accrued closing costs and determined the remaining liability to be
approximately $0.9 million. As a result, the Company credited the remaining
unutilized closing costs of $1.8 million to selling, general and administrative
expense.

     In connection with the closing of the Sands (Note 1), the Company's
director and sole stockholder approved a quasi-reorganization, effective as of
June 30, 1996, pursuant to which the Company revalued certain of its assets as
of that date. This revaluation, in accordance with the accounting principles
applicable to a quasi-reorganization, permitted the Company to eliminate the
adjusted accumulated deficit account as of that date, by a charge against
capital in excess of par value, and to establish a new retained earnings
account for the accumulation of the results of future operations. The
quasi-reorganization resulted in an increase in the carrying value of land of
$51.7 million and a corresponding decrease of $45.0 million in buildings and
other property and equipment, net of accumulated depreciation and $6.7 million
in severance and related closing costs. The remaining accumulated depreciation
was eliminated against the cost basis of the remaining property, and the
accumulated deficit of $155.0 million as of June 30, 1996, was transferred to
capital in excess of par value.

Note 4 Restricted Cash and Investments
     The net proceeds of the Company's 12-1/4% Mortgage Notes due 2004 (the
"Mortgage Notes") and its 14-1/4% Senior Subordinated Notes due 2005 (the
"Senior Subordinated Notes" and, together with the Mortgage Notes, the "Notes")
were deposited into restricted accounts and invested in cash or permitted
investments by a disbursement agent for the Company's lenders until required
for project costs under the terms of the disbursement agreement with certain of
the Company's lenders (the "Disbursement Agreement") (Note 7). Additional
amounts have been deposited to other restricted accounts, which are controlled
by the Company but which are also restricted as to use under the terms of the
Disbursement Agreement. At December 31, 1997, $1.7 million of restricted cash
was included in restricted cash and investments.

     At December 31, 1997, all of the Company's investments were classified as
held-to-maturity, which consists of securities that management has the ability
and intent to hold to maturity. These investments are carried at cost plus
accrued interest, which approximates fair value. There were no sales or
transfers of securities classified as held-to-maturity during 1997. Scheduled
maturities of securities classified as held-to-maturity at December 31, 1997
are summarized as follows (in thousands):


  1998          $340,027
  1999            85,186
                --------
                $425,213
                ========


                                       41
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 5 Property and Equipment

     Property and equipment includes costs incurred to construct the Casino
Resort and consists of the following (in thousands):


                                                 December 31,
                                               1997         1996
                                            ----------   ----------
      Land and land improvements             $ 93,634     $ 87,523
      Equipment, furniture and fixtures           422          422
      Construction in progress                185,714       23,288
                                             --------     --------
                                             $279,770     $111,233
                                             ========     ========

     The Casino Resort serves as collateral for various financing facilities
(Note 7).

     Construction in progress at December 31, 1997 and 1996 consists of
payments for construction of the Casino Resort including capitalized interest
of $2.2 million and $0 at December 31, 1997 and 1996, respectively.

Note 6 Other Accrued Liabilities
     Other accrued liabilities consist of the following (in thousands):


                                      December 31,
                                    1997         1996
                                 ----------   ---------
      Accrued closing costs       $   924      $3,658
      Accrued interest              7,809
      Construction retention        6,594
      Other accruals                1,180       1,422
                                  -------      ------
                                  $16,507      $5,080
                                  =======      ======

Accrued closing costs consist primarily of accrued medical costs for severed
employees and legal costs as a result of the closing of the Sands (Note 3).

Note 7 Long-Term Debt
     Long-term debt consists of the following (in thousands):


<TABLE>
<CAPTION>
                                                                      December 31,
                                                                 -----------------------
                                                                     1997         1996
                                                                 -----------   ---------
<S>                                                              <C>           <C>
      12-1/4% Mortgage Notes, due November 15, 2004                $425,000      $  --
      14-1/4% Senior Subordinated Notes, due November 15, 2005
        (Net of unamortized discount of $6,888)                     90,612          --
                                                                  --------       -----
      Total long-term debt                                        $515,612       $  --
                                                                  ========       =====
</TABLE>

     In connection with the financing for the Casino Resort, the Company
entered into a series of transactions during 1997 to provide for the
development and construction of the Casino Resort:

     Mortgage Notes and Senior Subordinated Notes
     In November 1997, the Company issued $425.0 million aggregate principal
amount of the Mortgage Notes and $97.5 million aggregate principal amount of
the Senior Subordinated Notes in a private placement. Interest on the Notes is
payable each May 15 and November 15, commencing on May 15, 1998.

     The Mortgage Notes are secured by second priority liens on the Note
Collateral (defined as real estate improvements and personal property with
certain exceptions) and third priority liens on the Mall Collateral (defined as
improvements to the retail mall space). Pending disbursement of the proceeds of
the Mortgage Notes, the Mortgage Notes also will be secured by a first priority
pledge of the proceeds in the Mortgage Notes Proceeds Account (as defined in
the Disbursement Agreement). The Senior Subordinated Notes are unsecured. As of
December 31, 1997,


                                       42
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 7 Long-Term Debt (continued)

no proceeds from the Mortgage Notes and $80.9 million of the proceeds from the
Senior Subordinated Notes had been expended. The Notes are redeemable at the
option of LVSI and Venetian at prices ranging from 100% to 106.125% during
specified years as set forth in the Notes and the indentures pursuant to which
the Notes were issued (the "Indentures"). Upon a change in control (as defined
in the Indentures), each Note holder may require LVSI and Venetian to
repurchase such Notes at 101% of the principal amount thereof (or with respect
to the Senior Subordinated Notes, prior to November 15, 1999, the original
issue price plus accrued original issue discount) plus accrued interest and
other amounts which are then due, if any. The Notes are not subject to a
sinking fund requirement.

     The Company is committed under a registration rights agreement to use its
reasonable best efforts to effect a registered exchange offer for the Notes or
subject to certain conditions, to provide a shelf registration for the Notes.
Should the Company not meet certain requirements of the registration rights
agreement, liquidated damages in the amount of 0.25% to 2.00% per annum of the
aggregate principal amount of the Notes would accrue until such defaults are
cured.

     The Senior Subordinated Notes bear cash interest at the rate of 10% per
annum, through November 15, 1999 and thereafter at a rate of 141/4% per annum.
The Senior Subordinated Notes were sold at a $7.0 million discount to their
face amount in order to yield 141/4% per annum to maturity and will accrue to
par by the second anniversary date of the issuance.

     Bank Credit Facility
     In November 1997, LVSI, Venetian and a syndicate of lenders entered into a
bank credit facility (the "Bank Credit Facility"). The Bank Credit Facility
provides up to $150 million in multiple draw term loans to the Company for
construction and development of the Casino Resort. The term loans mature not
later than the sixth anniversary of the closing date and are subject to
quarterly amortization payments which, subject to certain exceptions, begin at
the end of either the first or second fiscal quarter following the earlier of
(i) two years after the closing date or (ii) the date completion of the Casino
Resort occurs.

     The indebtedness under the Bank Credit Facility is secured by first
priority liens on the Note Collateral (other than the Mortgage Notes Proceeds
Account) and second priority liens on the Mall Collateral. As of December 31,
1997, no amounts had been drawn under the Bank Credit Facility.

     Up to $20.0 million of additional credit in the form of revolving loans
under the Bank Credit Facility is available generally for working capital
beginning six months prior to the completion date. The revolving loan will
mature on the second anniversary of the initial draw. During the construction
of the Casino Resort, up to $15.0 million of the revolving loans will be
available to fund purchases of certain furniture, fixtures and equipment (the
"Specified FF&E") (including deposits) and provide letters of credit for
construction activities. Any amounts borrowed to purchase the Specified FF&E
are expected to be repaid from the proceeds of a $97.7 million credit facility
secured by the Specified FF&E (the "FF&E Credit Facility").

     Funds borrowed under the Bank Credit Facility bear interest through
Project Completion (as defined in the Bank Credit Facility) at (i) a base rate
plus 2% per annum or (ii) a reserve adjusted eurodollar rate plus 3% per annum.
Upon completion and for six months thereafter, the interest rate will be at (i)
a base rate plus 11/2% or (ii) a reserve adjusted eurodollar rate plus 21/2%
per annum. From six months after completion, the interest rate will be at a
base rate or a reserve adjusted eurodollar rate plus a margin based on certain
leverage ratios set forth in the Bank Credit Facility. In January 1998, LVSI
and Venetian purchased a eurodollar interest rate cap of up to $75.0 million
based on a percentage of the borrowings outstanding under the Bank Credit
Facility to limit the interest on the eurodollar component of the loans under
the Bank Credit Facility to 9%.

     Under the terms of the Bank Credit Facility, a commitment fee equal to
0.50% per annum times the daily average unused portion under the Bank Credit
Facility is payable quarterly in arrears.


                                       43
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 7 Long-Term Debt (continued)

     Mall Construction Loan Facility
     In November 1997, LVSI, Venetian, Mall Construction and a major non-bank
lender entered into a mall construction loan facility to provide up to $140.0
million in financing for the retail mall in the Casino Resort (the "Mall
Construction Loan Facility"). The credit facility consists of two loan
tranches: a Tranche A loan in the amount up to $105.0 million and a Tranche B
loan in the amount up to $35.0 million. All indebtedness under the Mall
Construction Loan Facility matures on May 1, 2000 with an option to extend the
maturity of such indebtedness to November 14, 2000 based on certain conditions
and upon payment of a $0.4 million extension fee.

     The indebtedness under the Mall Construction Loan Facility is secured by
first priority liens on the Mall Collateral. Upon completion of the Casino
Resort, the retail mall is expected to be transferred to the Mall Subsidiary
and the indebtedness under the Mall Construction Loan Facility either will be
repaid with the proceeds of borrowings by the Mall Subsidiary or will be
assumed by the Mall Subsidiary. As of December 31, 1997, no amounts had been
drawn under the Mall Construction Loan Facility.

     The annual interest rate on the facility is 275 basis points over 30-day
LIBOR, with a retroactive in the interest rate to 375 basis points over 30-day
LIBOR to April 10, 1998 if the retail mall does not become a separate legal and
tax parcel prior to July 10, 1998. The increase in the interest rate will cease
on the date on which the retail mall becomes a separate legal and tax parcel.

     The Company has obtained commitments to refinance the Mall Construction
Loan Facility upon the completion of the retail mall under specified
conditions. The availability of such commitments are subject to certain
conditions, including the delivery of certain legal opinions.

     FF&E Financing
     In December 1997, the FF&E Credit Facility was entered into with certain
lenders (the "FF&E Lenders") to provide $97.7 million of financing for the
Specified FF&E and an electrical substation. The financing provides for an
interim loan during construction and a 60-month basic term loan after
completion of the Casino Resort. Funds are generally available either three
months prior to the anticipated project construction completion date if the
Company elects to accrue interim loan interest or eight months prior to
completion should the Company elect to pay interest currently. In the initial
and subsequent draws, the FF&E Lenders will reimburse the Company for any
amounts spent by the Company for Specified FF&E prior to the initial draw.

     Under the terms of the FF&E Credit Facility, a commitment fee equal to
0.50% per annum times the daily average unused portion under the FF&E Credit
Facility is payable monthly in arrears.

     Interest on the interim loan is at a floating rate equal to the 30-day
reserve adjusted LIBOR plus 375 basis points or at a base rate (the greater of
the prime rate or the federal funds rate plus 50 basis points) plus 100 basis
points. If the Company elects to pay interest on the interim loan currently,
interest is due quarterly in arrears.

     Interest on the basic term loan is a floating monthly rate calculated at
the higher of (a) the reserve adjusted 30-day LIBOR plus 375 basis points or
(b) the eurodollar interest rate margin in effect on the Bank Credit Facility
plus 125 basis points. Amortization on the FF&E basic loan will be 3% of the
principal for the first four quarters following the opening of the Casino
Resort and 5.5% of the principal for the next 16 quarters.

     As of December 31, 1997, no amounts had been drawn under the FF&E Credit
Facility.

     The debt instruments described above contain certain covenants and
restrictions that among other things, limit the ability of the Company and/or
certain subsidiaries to incur additional indebtedness, issue disqualified stock
or equity interests, pay dividends or make other distributions, repurchase
equity interests or certain indebtedness, create certain liens, enter into
certain transactions with affiliates, enter into certain mergers or
consolidations or sell assets of the Company without prior approval of the
lenders or noteholders.


                                       44
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 7 Long-Term Debt (continued)

     Additionally the Company is a party to certain intercreditor arrangements,
including certain intercreditor agreements and the Disbursement Agreement. The
intercreditor agreements set forth the lenders interests and claims in the
Company's assets as collateral for borrowings. The Disbursement Agreement
establishes conditions to and the sequencing of funding construction costs and
procedures for approving construction change orders and amendments to the
construction budget and schedule.

     As support for the development of the Casino Resort, the Sole Stockholder
or his affiliates have provided the following:

    (i) a $25.0 million construction completion guaranty collateralized by
        cash or cash equivalents. Such construction completion guaranty may be
        increased under certain circumstances for scope changes (as defined in
        the Disbursement Agreement) to the Casino Resort;

   (ii) a $35.0 million guarantee of the Mall Construction Loan Facility and
        a commitment to provide $35.0 million to refinance a portion of the Mall
        Construction Loan Facility, collateralized by cash or cash equivalents;
        and

  (iii) a $20.0 million unsecured guaranty of the take-out financing for the
        Mall Construction Loan Facility of $105.0 million.

     Scheduled maturities of long-term debt outstanding at December 31, 1997
are summarized as follows: $0 in each of the years 1998 through 2002 and $515.6
million thereafter.

     Construction Loan Payable
     In 1997, interim construction financing of up to $45.0 million was
available. The interest rate was based on the eurodollar rate and averaged 5.9%
during 1997. Approximately $30.1 million was borrowed during 1997 and repaid
upon the closing of the offering of the Notes and other project financings in
November 1997.

Note 8 Preferred Interest in Venetian Casino Resort, LLC
     During 1997, Interface Holding contributed $77.1 million in cash to
Venetian in exchange for a Series A preferred interest (the "Series A Preferred
Interest") in Venetian. The Series A Preferred Interest is non-voting, accrues
no preferred return and is not subject to mandatory redemption or redemption at
the option of the holder. The Series A Preferred Interest may, at any time, be
converted into a Series B preferred interest in Venetian (the "Series B
Preferred Interest"). The rights of the Series B Preferred Interest are the
same as the Series A Preferred Interest except that the Series B Preferred
Interest will accrue a preferred return of 12% and commencing in November 2009,
distributions must be made to the extent of the positive capital account of the
holder. Subject to the restrictions in the debt instruments of the Company,
distributions on both the Series A Preferred Interest and Series B Preferred
Interest may be made at any time at the option of the Company. As of December
31, 1997, there were no distributions of preferred interest or preferred return
paid or accrued.

Note 9 Stockholder's Equity
Increase in Shares Authorized and Outstanding
     In November 1997, the Company's Board of Directors increased the number of
authorized shares of LVSI from 100,000 to 3,000,000 and authorized and
consented to increase the number of shares outstanding with respect to the
outstanding shares of common stock of LVSI, so that each share of such common
stock would henceforth be deemed to represent 18.4996 shares of common stock,
resulting in 925,000 shares of common stock outstanding on such date. The par
value remained $.10 per share. All references to share and per share data
herein have been adjusted retroactively to give effect to the change in shares
outstanding.

Share Repurchases
     In December 1995, LVSI completed a merger with NFG, accounted for at
historical cost in a manner similar to a pooling of interests, through the
contribution of all of the outstanding common stock of NFG to the Company. In
April 1995, NFG purchased and retired 41,175 shares of its common stock from
three stockholders. The total


                                       45
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 9 Stockholder's Equity (continued)

price paid for these shares was $13.2 million, which has been recorded as a
reduction to capital in excess of par value. In August 1995, LVSI purchased
647,469 shares of its common stock from the identical three stockholders for
$206,000. Shares repurchased by LVSI have been retired and restored to
authorized and unissued common stock. Subsequent to these repurchases, both
LVSI and NFG were owned by the Sole Stockholder.


1997 Fixed Stock Option Plan
     The Company established a nonqualified stock option plan which provides
for the granting of stock options pursuant to the applicable provisions of the
Internal Revenue Code and regulations. The stock option plan provides for the
granting of up to 75,000 shares of common stock to officers and other key
employees of the Company.

     Upon approval of the plan by the Nevada Gaming Commission, options are
intended to be granted to fulfill commitments under long-term employment
agreements with certain key executives. As part of the employment agreements,
the Company committed to grant each executive options to purchase shares of the
Company's common stock at an exercise price to be determined by a formula
involving the value of LVSI's land and certain capital contributions. If fully
exercised, shares acquired under such options would represent approximately 5%
of the Company's then-outstanding stock.


Dividends
     During the year ended December 31, 1997, LVSI declared and paid
liquidating cash dividends totaling $27.6 million from capital in excess of par
value, to its Sole Stockholder.


Note 10 Related Party Transactions
     Prior year's financial statements include significant transactions and
balances involving affiliates of the Company. Interest expense relating to the
Second Mortgage Notes and the Third Mortgage PIK Notes totaling $4.1 million
and $7.9 million in 1996 and 1995, respectively, was paid or was payable to
IGN. In addition, through 1995, the Company leased the 1,150,000 square foot
Expo Center to IGN. Pursuant to the operating lease agreement, IGN paid an
annual rental of $8.0 million and was responsible for all taxes, insurance, and
costs to operate and maintain the facility. During 1996, IGN acquired from the
Company the Expo Center building and related land and equipment at its carrying
value of $66.8 million in exchange for all of the Second Mortgage Notes and a
portion of the Third Mortgage Notes of the Company held by IGN totaling $65.5
million. In connection with the transaction, the above lease was canceled, and
the Company subsequently retired the Second and Third Mortgage Notes received
including $59.5 million of Third Mortgage Notes previously held by IGN and
contributed by the Sole Stockholder.


Note 11 Commitments and Contingencies


Construction Costs
     Ground breaking for the Casino Resort occurred in April 1997. The
redevelopment of the site of the Sands is expected to be completed in two
phases (with the first phase being construction of the Casino Resort), subject
to receipt of appropriate regulatory approvals, permits and licenses. There can
be no assurance, however, as to when, or if, such construction will be
completed due to risks and uncertainties inherent in the development process.
The cost of the Casino Resort is currently estimated at approximately $1
billion. In connection with the construction of the Casino Resort, the Company
has signed a construction management agreement (the "Construction Management
Agreement") with a major construction management firm (the "Construction
Manager"). Such agreement provides for a maximum guaranteed price for certain
construction costs currently set at $547.8 million and a guaranteed completion
period of 24 months from the effective starting date of construction. As of
December 31, 1997, the Company was committed to approximately $300 million for
capital expenditures relating to the Casino Resort.

     Development costs are funded first from the proceeds of the Senior
Subordinated Notes and then pro rata among the proceeds of the Mortgage Notes
and draws on the Bank Credit Facility and the Mall Construction Loan Facility


                                       46
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 11 Commitments and Contingencies (continued)

(Note 7). Upon subdivision of the site of the Sands, the land for the second
phase of the redevelopment of the site of the Sands may be released from the
Note Collateral and transferred to the Phase II Subsidiary, which is not a
guarantor of the Notes or any other indebtedness of LVSI or Venetian.

Energy Services Agreement
     During 1997, the Company entered into an energy services agreement with a
heating and air conditioning ("HVAC") provider. Under the terms of the energy
services agreement and other separate energy services agreements, HVAC energy
and services will be purchased by the Company, the Mall Subsidiary, its mall
tenants and IGN over initial terms of 10 years with an option to collectively
extend the terms of their agreements for two consecutive five year periods.

     Pursuant to the Construction Management Agreement, the HVAC plant is being
constructed by the Construction Manager on land owned by the Company and leased
to the HVAC provider. The HVAC equipment is and will be owned by the HVAC
provider, which will pay all costs ("HVAC Costs") in connection with the
purchase and installation of the HVAC equipment, up to $70.0 million. As of
December 31, 1997, HVAC Costs totaled $8.4 million.

     The charges payable under the separate energy services agreements will
include a fixed component applied to the HVAC Costs paid by the HVAC provider
and reimbursement of operational and related costs.

Litigation
     The Company is party to litigation matters and claims related to its
operations. The financial statements include provisions for estimated losses
related thereto. Management, based upon advice from legal counsel, does not
expect that the final resolution of these matters will have a material impact
on the financial position and results of operations of the Company.

Note 12 Summarized Financial Information
     Venetian, Mall Intermediate, Mall Construction, and Lido Intermediate
(collectively, the "Subsidiary Guarantors") are wholly owned subsidiaries of
LVSI. Venetian and LVSI are co-obligors of the Notes and certain other
indebtedness related to construction of the Casino Resort and are jointly and
severally liable for such indebtedness. The Subsidiary Guarantors have jointly
and severally guaranteed (or are co-obligators of) such debt on a full and
unconditional basis (other than indebtedness under the Mall Construction Loan
Facility which is guaranteed only by Mall Intermediate and Mall Construction).
No other subsidiary of LVSI is an obligor or guarantor of any of the Casino
Resort financing. No summarized financial information is presented for any
non-guarantor subsidiaries of the Company, as they had no assets or results of
operations from inception through December 31, 1997. Separate financial
statements and other disclosures concerning each of Venetian and the Subsidiary
Guarantors are not presented because management believes that they are not
material to investors. Summarized financial information of LVSI, Venetian and
the Subsidiary Guarantors on a combined basis as of and for the year ended
December 31, 1997 is as follows (in thousands):


                                       47
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 12 Summarized Financial Information (continued)

                           CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                      Venetian
                                                       and the      Consolidating/
                                      Las Vegas      Subsidiary      Eliminating
                                     Sands, Inc.     Guarantors        Entries          Total
                                    -------------   ------------   ---------------   ----------
<S>                                 <C>             <C>            <C>               <C>
Cash and cash equivalents              $    142       $    715       $       --       $    857
Restricted cash and investments                        341,725                         341,725
Amounts due from Venetian                   894                            (894)
Other current assets                        118             95                             213
                                       --------       --------       ----------       --------
 Total current assets                     1,154        342,535             (894)       342,795
                                       --------       --------       ----------       --------
Property and equipment, net                            279,770                         279,770
Restricted investments                                  85,186                          85,186
Investment in Venetian                  114,132                        (114,132)
Deferred offering costs, net                            38,618                          38,618
Other assets                              1,358             40                           1,398
                                       --------       --------       ----------       --------
                                       $116,644       $746,149       $ (115,026)      $747,767
                                       ========       ========       ==========       ========
Accounts payable                       $     --       $  1,701       $       --       $  1,701
Construction payables                                   25,547                          25,547
Amounts due to LVSI                                        894             (894)
Other accrued liabilities                 2,045         14,462                          16,507
                                       --------       --------       ----------       --------
 Total current liabilities                2,045         42,604             (894)        43,755
Long-term debt                                         515,612                         515,612
                                       --------       --------       ----------       --------
                                          2,045        558,216             (894)       559,367
                                       --------       --------       ----------       --------
Preferred interest in Venetian                          77,053                          77,053
                                       --------       --------       ----------       --------
Stockholder's equity                    114,599        110,880         (114,132)       111,347
                                       --------       --------       ----------       --------
                                       $116,644       $746,149       $ (115,026)      $747,767
                                       ========       ========       ==========       ========
</TABLE>

                      CONDENSED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                             Venetian
                                              and the      Consolidating/
                             Las Vegas      Subsidiary      Eliminating
                            Sands, Inc.     Guarantors        Entries          Total
                           -------------   ------------   ---------------   -----------
<S>                        <C>             <C>            <C>               <C>
Revenues                     $    895        $     --           $--          $    895
Operating expenses             (1,727)                                         (1,727)
                             --------        --------           ---          --------
Operating income                2,622                                           2,622
Other income (expense):
 Interest income                  110           3,329                           3,439
 Interest expense                              (6,581)                         (6,581)
                             --------        --------           ---          --------
Net income (loss)            $  2,732        $ (3,252)          $--          $   (520)
                             ========        ========           ===          ========
</TABLE>


                                       48
<PAGE>

LAS VEGAS SANDS, INC.
Notes to Financial Statements (continued)
Note 12 Summarized Financial Information (continued)

                      CONDENSED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                    Venetian
                                                                     and the      Consolidating/
                                                    Las Vegas      Subsidiary      Eliminating
                                                   Sands, Inc.     Guarantors        Entries           Total
                                                  -------------   ------------   ---------------   -------------
<S>                                               <C>             <C>            <C>               <C>
Net cash provided by (used in) operating
 activities                                         $    (838)     $    4,697          $--          $    3,859
                                                    ---------      ----------          ---          ----------
Cash flows from investing activities:
 Increase in restricted cash and investments                         (426,120)                        (426,120)
 Purchases of property and equipment, net             (25,399)       (105,428)                        (130,827)
                                                    ---------      ----------          ---          ----------
Net cash used in investing activities                 (25,399)       (531,548)          --            (556,947)
                                                    ---------      ----------          ---          ----------
Cash flows from financing activities:
 Proceeds from capital contributions                   25,500                                           25,500
 Proceeds from preferred interest in Venetian                          77,053                           77,053
 Proceeds from mortgage notes                                         425,000                          425,000
 Proceeds from senior subordinated notes                               90,500                           90,500
 Proceeds (payments) of intercompany
 dividends                                             27,600         (27,600)
 Payments of deferred offering costs                                  (37,387)                         (37,387)
 Payments of dividends                                (27,600)                                         (27,600)
                                                    ---------      ----------          ---          ----------
Net cash provided by financing activities              25,500         527,566           --             553,066
                                                    ---------      ----------          ---          ----------
Increase in cash and cash equivalents                    (737)            715                              (22)
Cash and cash equivalents at beginning of
 period                                                   879                                              879
                                                    ---------      ----------          ---          ----------
Cash and cash equivalents at end of period          $     142      $      715          $--          $      857
                                                    =========      ==========          ===          ==========
</TABLE>


                                       49
<PAGE>

ITEM 9.--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
     None.

                                       50
<PAGE>

                                   PART III


ITEM 10.--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     LVSI has a Board of Directors comprised of two persons. One director is
the Sole Stockholder, who has two votes for all matters before the Board of
Directors. In the event that LVSI increases the number of directors comprising
the Board of Directors, the number of votes which the Sole Stockholder has will
be increased so that the Sole Stockholder will have one more vote than the
number of votes of all of the other directors aggregated. The second director,
the Special Director, is unaffiliated with the Sole Stockholder or any other
affiliate of the Sole Stockholder, has no other position with LVSI or Venetian
and has one vote for all matters before the Board of Directors. To the extent
the Special Director receives compensation, it is paid by LVSI from sources
unrelated to and independent from the Sole Stockholder and its affiliates
(other than LVSI and Venetian). The Special Director is required to file an
application for a gaming license with the Nevada Gaming Authorities.


     The table below sets forth the executive officers and the directors of the
Company.


<TABLE>
<CAPTION>
          Name             Age                          Position
-----------------------   -----   ---------------------------------------------------
<S>                       <C>     <C>
Sheldon G. Adelson        64      Chairman of the Board, Chief Executive Officer and
                                  Director
William J. Raggio         71      Special Director
William P. Weidner        51      President and Chief Operating Officer
Bradley H. Stone          43      Executive Vice President
Robert G. Goldstein       42      Senior Vice President
David Friedman            41      Assistant to Chairman of the Board and Secretary
Harry D. Miltenberger     54      Vice President--Finance
</TABLE>

     Sheldon G. Adelson has been the Chairman of the Board, Chief Executive
Officer and a director of the Company since April 1988 when the Company was
formed to own and operate the former Sands Hotel. Mr. Adelson has extensive
experience in the convention, trade show, tour and travel businesses. Mr.
Adelson also has investments in other business enterprises. He has been
President and Chairman of Interface since the mid-1970s and Chairman of
Interface Group-Massachusetts Inc. since 1990. Mr. Adelson created and
developed the COMDEX Trade Shows, including the COMDEX Fall Trade Show, the
world's largest computer show, all of which were sold to Softbank Corporation
in April 1995.


     William J. Raggio was elected as Special Director of the Company upon
consummation of the Offering in November 1997. Since 1991, Mr. Raggio has been
an attorney and shareholder in the law firm of Vargas & Bartlett and since
1972, has served as an elected member of the Nevada State Senate, holding the
positions of Senate Majority Leader and Chairman of the Finance Committee. Mr.
Raggio is also a member of the Board of Directors of Sierra Health Services and
a member of the Board of Directors and an Executive Vice President of Santa Fe
Gaming Corp. since 1984 and 1987, respectively.


     William P. Weidner has been the President and Chief Operating Officer of
the Company since December 1995. From 1985 to 1995, Mr. Weidner was President
and Chief Operating Officer and served on the board of Pratt Hotel Corporation.
From February 1991 to December 1995, Mr. Weidner was also the President of
Pratt's Hollywood Casino-Aurora subsidiary and from June 1992 until December
1995, he served on the board of the Hollywood Casino Corporation. Since
September 1993, Mr. Weidner has served on the Board of Directors of Shorewood
Packaging Corporation. Mr. Weidner directed the opening of Hollywood Casino,
one of Chicago's first riverboat casino hotels, New York City's Maxim's de
Paris (now the Peninsula), and hotels in Orlando and Palm Springs.


     Bradley H. Stone has been Executive Vice President of the Company since
December 1995. From June 1984 through December 1995, Mr. Stone was President
and Chief Operating Officer of the Sands Hotel in Atlantic City. Mr. Stone also
served as an Executive Vice President of the parent Pratt Hotel Corporation
from June 1986 through December 1995.


     Robert G. Goldstein has been Senior Vice President of the Company since
December 1995. From 1992 until joining the Company in December 1995, Mr.
Goldstein was the Executive Vice President of Marketing at the Sands in
Atlantic City as well as an Executive Vice President of the parent Pratt Hotel
Corporation.


                                       51
<PAGE>

     David Friedman has been Assistant to the Chairman of Interface since
October 1995. Subsequently, Mr. Friedman became both Assistant to the Chairman
of the Company and Secretary of the Company. Mr. Friedman is also an officer of
other companies owned by Mr. Adelson. Prior to joining the Company, Mr.
Friedman was the Senior Vice President of Development and Legal Affairs for
President Casinos, Inc. from May 1993 to October 1995. He was Vice President
and General Counsel to Resorts International from 1990 to December 1993. Mr.
Friedman also held various positions at Bally's in Atlantic City.

     Harry D. Miltenberger is a certified public accountant and has been Vice
President--Finance of the Company since February 1997. From March 1995 until
February 1997 he was Senior Vice President and Chief Financial Officer of SUB,
a banking company; from April 1993 to March 1995 he was a Director of Winco
Product Corp. From February 1988 to December 1994, Mr. Miltenberger was Chief
Financial Officer of SPOA Inc., a real estate development company.


ITEM 11.--EXECUTIVE COMPENSATION

     The following table sets forth certain information concerning the
compensation for the last completed year of those persons who were, at December
31, 1997, the five highest paid executive officers of LVSI, which is the
managing member of Venetian. In 1996, LVSI had only four paid executive
officers. Sheldon G. Adelson, the Chairman of the Board and Chief Executive
Officer of LVSI, received no compensation in 1996 and 1997. Notwithstanding the
foregoing, in future years, LVSI plans to provide salary, bonus or other
compensation to Mr. Adelson in his capacity as Chairman of the Board and Chief
Executive Officer of LVSI. Under the limited liability company agreement of
Venetian, LVSI is entitled to be reimbursed for all expenses incurred in
connection with its activities as the managing member of Venetian, including
all employee compensation costs.



                                        
<TABLE>
<CAPTION>
                                        
                                                                               Long Term
                                                                              Compensation
                                                                                 Awards
                                                                             -------------
                                                      Annual Compensation      Securities      All Other
                                                    ----------------------     Underlying     Compensation
       Name and Principal Position          Year       Salary       Bonus       Options           (1)
----------------------------------------   ------   -----------   --------   -------------   -------------
<S>                                        <C>       <C>           <C>        <C>               <C>
William P. Weidner                         1997      $794,915      50,000         --            $ 6,570
 President and Chief Operating Officer     1996       772,717          --         --             26,832

Bradley H. Stone                           1997       510,430      40,000         --                918
 Executive Vice President                  1996       493,606          --         --             20,697

Robert G. Goldstein                        1997       384,220      40,000         --                918
 Senior Vice President                     1996       369,770          --         --             15,859

David Friedman                             1997       228,654      90,000         --                816
 Assistant to Chairman of the              1996       196,154          --         --             21,849
 Board and Secretary

Harry D. Miltenberger                      1997       147,769      30,000         --             12,307
 Vice President-Finance                    1996            --          --         --                 --
</TABLE>

----------
(1) Represents entertainment and other miscellaneous expenses.


Employment Agreements

     William P. Weidner, Bradley H. Stone and Robert Goldstein each has an
employment agreement (collectively, the "Employment Agreements") with the
Company continuing through December 31, 2000 (the "Initial Term"). The
agreements originally had a termination date of December 31, 1998, but have
been extended by the Company through December 31, 2000, in accordance with
two-year extension rights of the Company. If the Nevada Gaming Authorities
refuse to grant the officers licenses, the Employment Agreements terminate.
Pursuant to the Employment Agreements, the officers have such powers, duties
and responsibilities as are generally associated with their offices, as may be
modified or assigned by the Chairman of the Board of Directors (or the
President in the case of Mr. Stone and Mr. Goldstein), and


                                       52
<PAGE>

subject to the supervision of the Board of Directors (and the President in the
case of Mr. Stone and Mr. Goldstein). The agreements provide that, during the
terms of their employment, the officers will not engage in any other business
or professional pursuit unless consented to by the Company in writing.

     The terms of the Employment Agreements provide for an annual base salary
for Mr. Weidner, Mr. Stone and Mr. Goldstein of $794,915, $510,430 and
$384,220, respectively. The foregoing salaries are subject to cost-of-living
adjustments, effective January 1, 1999, if no written incentive compensation
plans have been established for the executives prior to January 1, 1999. The
employment agreements also provide for the grant of options to acquire shares
of common stock of the Company representing 2%, 1.5% and 1.0%, respectively, of
the shares issued and outstanding upon the issuance of all shares for which
options have been granted under the Employment Agreements. However, none of
such options are effective for any purpose whatsoever until and unless the
grant of such options has been approved by the Nevada Commission. See "--Las
Vegas Sands, Inc. 1997 Fixed Stock Option Plan." The officers are also entitled
to receive other employee benefits of the Company. The agreements may be
terminated by either the Company or the officer upon proper notice, pursuant to
the terms of the Employment Agreements. Under the agreements, in the event of a
Cause Termination, Breach Termination, Voluntary Termination or Licensing
Termination (each as defined therein), all salary and benefits shall
immediately cease subject to any requirements of law, all unexercised options
shall be canceled and forfeited and all shares of common stock held shall be
redeemed by the Company at a price equal to the lesser of the exercise price of
such shares or the Fair Market Value (as defined therein) on the date of
termination, payable in sixty equal consecutive monthly installments with
interest at the Applicable Federal Rate (as defined therein). In the event of a
Company Breach Termination, Constructive Termination or Involuntary Termination
(each as defined therein), the Company is obliged to pay to the officer
involved his salary for the rest of the term of the Employment Agreement until
the officer becomes gainfully employed elsewhere, in which event the Company is
obliged to pay the difference in the income earned in such other employment and
the salary payable under the agreement with the Company. The amount that the
officer is entitled to receive upon termination will depend upon the amount of
time remaining in the term of such agreement as of the date of the officer's
termination of employment. If a Company Breach Termination, Constructive
Termination or Involuntary Termination occurred with respect to Mr. Weidner,
Mr. Stone and Mr. Goldstein on December 31, 1997, the amounts that Mr. Weidner,
Mr. Stone and Mr. Goldstein would have been entitled to receive pursuant to
their Employment Agreements as continued salary through December 31, 2000 would
have been $2,318,151, $1,480,818 and $1,109,310, respectively, based on their
salaries of $772,717, $493,606 and $369,770, respectively. Such amounts would
have been subject to mitigation, as described above, if the officer became
gainfully employed elsewhere. In addition, all unexercised options shall be
canceled and forfeited and all shares of the Company held by the officer shall
be redeemed by the Company at a price equal to the greater of the exercise
price for such shares or the Fair Market Value on the date of termination,
payable in 36 equal consecutive monthly installments with interest at the
Applicable Federal Rate. In the case of a Death Termination (as defined
therein), salary shall be paid through the date of death, all unexercised
options shall be automatically cancelled, and all shares of the Company held by
the officer shall be redeemed by the Company for a price payable by the Company
to the officer's estate equal to all sums paid by the officer for the shares
plus the difference between (x) the exercise price paid for the shares and (y)
the Fair Market Value of such shares, payable in 36 equal consecutive monthly
installments with interest at the Applicable Federal Rate. In the case of
Disability Termination, salary, less any applicable disability insurance
payments, shall be continued for a period of six months following the date of
termination and all options and shares shall be treated in the same way as upon
a Death Termination. The employment agreements may not be amended, changed, or
modified except by a written document signed by each of the parties.


Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan

     The Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan (the "Plan")
provides for 75,000 shares of common stock of the Company to be reserved for
issuance by the Company to officers and other key employees or consultants of
the Company or any of its Affiliates or Subsidiaries (each as defined in the
Plan) pursuant to options granted under the Plan. None of the options granted
under the Plan will become effective for any purpose whatsoever until and
unless the grant of such options has been approved by the Nevada Commission.
The purpose of the Plan is to promote the interest of the Company and its
Stockholder by (i) attracting and retaining exceptional officers and other key
employees and consultants to the Company and its Affiliates and Subsidiaries
and (ii) enabling such individuals to participate in the long-term growth and
financial success of the Company. The Board of Directors has the authority to
determine the participants to whom options are granted, the number of shares
covered by each option


                                       53
<PAGE>

or any repurchase or other disposition of shares thereunder, the exercise price
therefor, and the conditions and limitations applicable to the exercise of the
option. The Board of Directors is authorized to make adjustments in the terms
and conditions of, and the criteria included in, options, in the case of
certain unusual or nonrecurring events, whenever the Board of Directors
determines that such adjustments are appropriate in order to prevent dilution
or enlargement of benefits or potential benefits under the Plan. In the event
of any Acceleration Event (as defined in the Plan) any outstanding options then
held by the participants which are unexercisable or otherwise unvested, shall
automatically become fully vested and shall be exercisable pursuant to the
applicable award agreement. The Plan provides that the Sole Stockholder may, at
any time, assume the Plan or certain obligations under the Plan, in which case
the Sole Stockholder will be the administrator of the Plan, the issuer of the
Options, and will have all the rights, powers, and responsibilities granted to
the Company or the Board of Directors under the Plan with respect to such
assumed obligations. The terms of the options are set forth in individual award
agreements between the Company (or the Sole Stockholder) and each participant.
     The Board of Directors may amend, alter, suspend, discontinue or terminate
the Plan or any portion thereof at any time, provided that such shall not be
made without Shareholder approval if such approval is necessary to comply with
any tax or regulatory requirement applicable to the plan and provided that any
such amendment, alteration, suspension, discontinuance or termination that
would impair the rights of any holder of an option already granted shall not be
effective without the holder's consent. The Plan expires, and no options may be
granted under the Plan after the year 2007.
     Upon approval of the Plan by the Nevada Commission, options are intended
to be granted under the Plan to Mr. Weidner, Mr. Stone, Mr. Goldstein, Mr.
Friedman and Mr. Miltenberger (the "Optionees") to acquire shares representing
2%, 1.5%, 1.0%, 0.5% and 0.1%, respectively, of the common stock of the
Company. The Plan allows Mr. Adelson to assume the obligations under the Plan
relating to such options and to enter into award agreements with the Optionees.
The options are expected to be subject to certain vesting and forfeiture
provisions. If the Optionee's employment with the Company is terminated for any
reason, all unvested shares shall be forfeited. The options expire on the
earlier of (i) the eighth anniversary of the date of grant, (ii) the date three
days prior to a Change in Control Acceleration Event (as defined in the Plan),
(iii) the date three days prior to a Public Offering Acceleration Event (as
defined in the Plan) and (iv) the participant's termination of employment
(after receipt of any applicable notice as provided for in the Plan). Shares
issued to the Optionees pursuant to the exercise of an option and held (and
vested) at the time of the Optionee's termination of employment are subject to
redemption by the Company or Mr. Adelson, if he so issued them, in accordance
with the terms of the applicable award agreements of the Optionees and for
Messrs. Weidner, Stone and Goldstein, also consistent with the terms of the
Employment Agreements, as described in "--Employment Agreements" above.


                                       54
<PAGE>

ITEM 12.--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
     The following table sets forth certain information as of March 27, 1998
with respect to the beneficial ownership of the common stock of LVSI by (i)
each person who, to the knowledge of LVSI, beneficially owns more than 5% of
its outstanding common stock, (ii) the directors of LVSI, (iii) all executive
officers named in the summary compensation table in "Item 11--Executive
Compensation" and (iv) all executive officers and directors of LVSI as a group.
 

<TABLE>
<CAPTION>
                                                            Shares of
                                                             Common
Beneficial Owner(1)                                           Stock      Percentage
--------------------------------------------------------   ----------   -----------
<S>                                                        <C>          <C>
Sheldon G. Adelson                                          925,000         100%
William J. Raggio                                                 0           0%
William P. Weidner (2)                                            0           0%
Bradley H. Stone (2)                                              0           0%
Robert G. Goldstein (2)                                           0           0%
David Friedman (2)                                                0           0%
Harry Miltenberger (2)                                            0           0%
All executive officers and the directors of the Company
 as a group                                                 925,000         100%
</TABLE>

----------
(1) The address of each person named below is c/o the Company, 3355 Las Vegas
    Boulevard South, Room 1A, Las Vegas, Nevada 89109.

(2) Does not include options to purchase common stock of the Company not
    exercisable within 60 days of the date hereof. In connection with the
    development of the Casino Resort and pursuant to the terms of each of their
    employment agreements or other agreements with the Company, each of Messrs.
    Weidner, Stone, Goldstein, Friedman and Miltenberger are to be granted
    options to purchase common stock of LVSI representing 2.0%, 1.5%, 1.0%, 0.5%
    and 0.1%, respectively, of the shares of common stock of LVSI outstanding
    after giving effect to the issuance of all shares for which options have
    been granted. However, none of such options are effective for any purpose
    whatsoever until and unless the grant of such options has been approved by
    the Nevada Commission. See "Item 11--Executive Compensation--Las Vegas
    Sands, Inc. 1997 Fixed Stock Option Plan."


ITEM 13.--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Equity Contribution
     As support for the development of the Casino Resort, in 1997, the Sole
Stockholder and his affiliates have provided or contributed to the Company or
its subsidiaries a $95.3 million cash contribution and the approximately 45
acre Project Site.

Preferred Interest
     Venetian currently has two members, the Company and Interface Group
Holding Company, Inc. ("Interface Holding"), which owns all of the capital
stock of Interface. LVSI is the managing member of Venetian and owns 100% of
the common equity interests in Venetian. Interface Holding currently holds a
Series A preferred interest (the "Series A Preferred Interest") in Venetian.
The Series A Preferred Interest is non-voting, accrues no preferred return and
is not subject to mandatory redemption or redemption at the option of the
holder. At any time, the Series A Preferred Interest may be converted into a
Series B preferred interest (the "Series B Preferred Interest"). The rights of
the Series B Preferred Interest are the same as the Series A Preferred Interest
except that the Series B Preferred Interest will have a preferred return of 12%
and upon the 12th anniversary of the closing of the Offering, to the extent of
the positive capital account of the holders of the Series B Preferred Interest,
there must be a distribution on the Series B Preferred Interest. Until the
indebtedness under the Bank Credit Facility is repaid and cash payments are
permitted under the restricted payment covenants under the Indentures, the
preferred return on the Series B Preferred Interest will accrue and will not be
paid in cash. Subject to the foregoing, distributions with respect to the
preferred capital of the holders of the Series A Preferred Interest and the
Series B Preferred Interest may, at the option of the Company, be made at any
time.

Sole Stockholder Guaranty of Mall Construction Loan Facility and Take-out
   Financing
     The Sole Stockholder has guaranteed up to $35.0 million of indebtedness
outstanding under Tranche B of the Mall Construction Loan Facility. The Sole
Stockholder's obligations under such guaranty are collateralized by a cash
collateral account. If any amounts are drawn on the guaranty of Tranche B of
the Mall Construction Loan Facility, the Sole Stockholder will have the right
to elect to treat such amounts as a subordinated loan (the "Substitute


                                       55
<PAGE>

Tranche B Loan") from the Sole Stockholder to Venetian and the Mall
Construction Subsidiary. The Substitute Tranche B Loan will be subordinated in
right of payment to indebtedness under the Bank Credit Facility, the Mall
Construction Loan Facility and the Mortgage Notes. If the Sole Stockholder
makes this election: (i) the interest rate will not exceed that which was
applicable to Tranche B of the Mall Construction Loan; (ii) there will be no
scheduled principal amortization for the Substitute Tranche B Loan and the
Substitute Tranche B Loan will mature on the same date as the Senior
Subordinated Notes; (iii) irrespective of the stated interest payment
schedules, no payments will be permitted on the Substitute Tranche B Loan
unless all payments then due on any debt secured by the Mall Collateral on a
senior basis at that time have been paid in full, and any cash payments that
are due but that are prohibited will accrue; (iv) the Substitute Tranche B Loan
will, until completion and transfer of the Mall to the Mall Subsidiary, be pari
passu in right of payment with the Senior Subordinated Notes; (v) the
Substitute Tranche B Loan provides that Venetian and the Mall Construction
Subsidiary will be released from further liability with respect to the
Substitute Tranche B Loan upon satisfaction of the conditions to the release of
the Mall Collateral and the Substitute Tranche B Loan will be assumed by the
Mall Subsidiary; and (vi) the loan documents will contain certain subordination
provisions (such as no right to object to modifications of debt secured on a
senior basis by the Mall Collateral, and no right to exercise remedies without
consent from the senior lenders and the holders of the Senior Subordinated
Notes).


     The indebtedness under the Tranche A Take-out Financing must be repaid
within three years and is expected to be a $105.0 million loan secured by the
Mall. The Sole Stockholder has agreed to guarantee, on an unsecured basis,
$20.0 million of indebtedness under the Tranche A Take-out Financing. An
affiliate of the Sole Stockholder has also agreed to provide the Tranche B
Take-out Financing. See "Item 7--Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."


Completion Guaranty

     Pursuant to the Completion Guaranty, the Sole Stockholder has guaranteed,
subject to certain conditions and limitations, payment of construction and
development costs in excess of available funds, up to a maximum of $25.0
million. The Sole Stockholder's obligation to fund such excess construction and
development costs is collateralized by $25.0 million in cash or cash
equivalents pledged to the Disbursement Agent. If the LVSI or Venetian want to
implement a scope change or change order, and such scope change or change order
would cause construction and development costs to exceed available funds, such
scope change or change order cannot be implemented unless the Sole Stockholder
increases the maximum amount available under the Completion Guaranty, and
pledges to the Disbursement Agent additional cash or cash equivalents, in the
amount of such excess. The Completion Guaranty does not provide for the
incurrence by the Sole Stockholder, directly or indirectly, of any obligation,
contingent or otherwise, for the payment of the principal, premium and interest
on the Notes, or any other indebtedness under the financings described herein.
If the Sole Stockholder provides funds under the Completion Guaranty, the
amount of such funds, up to a maximum of $25.0 million, will be treated as a
loan from the Sole Stockholder to LVSI and Venetian that is subordinated in
right of payment to the indebtedness under the Bank Credit Facility, the Mall
Construction Loan Facility, the FF&E Credit Facility, the Mortgage Notes and
the Senior Subordinated Notes. Although interest may accrue on such loan, no
cash payments with respect to such loan may be made until all senior
indebtedness (including the Senior Subordinated Notes) is repaid, except for
payments made from certain construction-related recoveries.


Cooperation Agreement

     The Company's business plan calls for the Hotel and Casino, the Mall and
the Expo Center, though separately owned, to be part of an integrally related
project. In order to establish terms for the integrated operation of these
facilities, Venetian (as owner of the Hotel and Casino and the Phase II Land),
the Mall Construction Subsidiary, and Interface have entered into the
Cooperation Agreement. The Cooperation Agreement sets forth agreements among
the parties regarding, among other things, construction of the Casino Resort,
encroachments, easements, operating standards, maintenance requirements,
insurance requirements, casualty and condemnation, joint marketing, the sharing
of certain facilities and costs relating thereto. The obligations set forth in
the Cooperation Agreement bind the respective properties (including (i) the
Expo Center, (ii) the Hotel and Casino, (iii) the Mall and (iv) the Phase II
Land) with priority over


                                       56
<PAGE>

the liens securing the Bank Credit Facility and the Mortgage Notes and the
liens encumbering the Mall to secure the Mall Construction Loan and the Mall
Take-out Financings. Conversely, certain of the obligations under the
Cooperation Agreement are not senior to the previously recorded mortgages
encumbering the Expo Center. Accordingly, the obligations under the Cooperation
Agreement "run with the land" in the event of transfers of the respective
properties (other than a transfer by foreclosure of the existing mortgages
encumbering the Expo Center).

     The Cooperation Agreement sets forth covenants to effect and facilitate
construction of the Casino Resort. The Mall will be constructed within or upon
the areas that will constitute the Mall Parcel and the Retail Annex Parcel,
neither of which is yet a separate subdivided parcel. The Cooperation Agreement
contains cross encroachment provisions which will permit the Mall to encroach,
to a limited extent, on other portions of the Casino Resort, and which will
permit other portions of the Casino Resort to encroach, to a limited extent, on
the Mall Parcel.

     The Cooperation Agreement also contains certain covenants respecting the
operation of the Expo Center and, once the Casino Resort is completed, the
Casino Resort. Such covenants include, for example, to operate continuously and
to use the Hotel and the Casino exclusively in accordance with standards of
first-class Las Vegas Boulevard-style hotels and casinos, the Mall Subsidiary
covenants to operate and to use the Mall exclusively in accordance with
standards of first-class retail and restaurant complexes, and to operate and to
use the Expo Center exclusively in accordance with standards of first-class
convention, trade show and exposition centers. Additionally, with respect to
the joint marketing of the Casino Resort and the Expo Center, the Cooperation
Agreement provides that until December 31, 2010 Interface (upon request from
the owner of the Hotel and Casino) will use commercially reasonable efforts to
have the Hotel designated as the "headquarters hotel" for trade show and
convention events at the Expo Center, and the owner of the Hotel and Casino
will use commercially reasonable efforts to promote the use and occupancy of
the Expo Center. It should be noted that trade show and convention promoters
will be under no obligation to designate the Hotel as the "headquarters hotel"
for their events.

     The Cooperation Agreement also requires each of (a) the owners of the
Casino Resort (including both the Hotel and Casino and the Mall) and (b) the
owner of the Expo Center, to maintain certain minimum types and levels of
insurance, including property damage, general liability and delay in opening or
business interruption insurance.

Administrative Services Agreement
     Pursuant to a certain services agreement (the "Services Sharing
Agreement") among LVSI, certain of its subsidiaries and Interface Holdings
(collectively, the "Participants"), the Participants have agreed to share
ratably in the costs of, and under certain circumstances provide to one
another, shared services, including legal services, accounting services,
insurance administration, benefits administration, and such other services as
each party may request of the other. In addition, under the Services Sharing
Agreement, the Participants have agreed to share ratably the costs of any
shared office space.

Temporary Lease
     On November 1, 1996, LVSI and Interface entered into a lease agreement
whereby LVSI agreed to lease approximately 5,000 square feet in the Expo Center
to be used as its temporary executive offices during the construction of the
Casino Resort. Management believes that the lease agreement, which provides for
monthly rent of $5,000 to be paid by LVSI to Interface, is at least as
favorable as the Company could have obtained from an independent third party.
The initial term of the lease agreement expires on November 1, 1998, and at any
time during the last year of the initial term, LVSI may extend the term for an
additional two-year period.

Retirement Plan
     All of the employees of Interface are eligible to participate in the Las
Vegas Sands, Inc. 401(k) Retirement Plan sponsored by LVSI. Costs related to
the administration of such plan are shared with LVSI based on the number of
employees of each of Interface and LVSI participating in the plan.

Airplane Expenses
     LVSI utilizes a Gulfstream III aircraft, which is operated by an affiliate
of the Sole Stockholder. The aircraft is used primarily for the benefit of
LVSI's executive officers, including the Sole Stockholder. Charge-backs to LVSI
in connection with such use are based on the actual costs to operate the
aircraft allocated in accordance with purpose for which the aircraft is used.


                                       57
<PAGE>

Construction Loan
     A third party acted as the lender under a senior secured construction
loan, which matured on November 14, 1997, and had an interest rate of LIBOR
plus 25 basis points (the "Construction Loan"). The Construction Loan was
guaranteed by the Sole Stockholder, which guarantee was collateralized by
certain assets of the Sole Stockholder. As of November 14, 1997, the
outstanding amount of indebtedness under the Construction Loan was
approximately $30.1 million. The Construction Loan was repaid with the net
proceeds from the offering of the Notes.

Possible Conflicts of Interest
     The common ownership of the Casino Resort, the Phase II Resort and the
Expo Center may present potential conflicts of interest. For example,
management may offer discounts and other incentives for visitors to stay at the
Phase II Resort which might result in a competitive advantage of the Phase II
Resort over the Casino Resort. In addition, management may choose to allocate
certain business opportunities to the Phase II Resort rather than to the Casino
Resort. Although common ownership of both the Casino Resort and the Phase II
Resort often may result in economies, efficiencies and joint business
opportunities for the two resorts in the aggregate, the Casino Resort may, in
certain circumstances, bear the greater burden of the expenses that are shared
by both resorts. In addition, inasmuch as there may be a common management for
both the Casino Resort and the Phase II Resort, management's time may be split
between overseeing the operation of each resort, and management, in certain
circumstances, may devote more time to its ownership and operations
responsibilities of the Phase II Resort than those of the Casino Resort.
Finally, because it is expected that the Company will lease and operate the
casino for the Phase II Resort, potential conflicts may arise from the common
operation of the Casino and the Phase II Resort casino, such as the allocation
of management's time. In order to share expenses and provide for efficient
management and operations of the Casino Resort and Phase II Resort and shared
facilities, LVSI, Venetian and the Phase II Subsidiary are expected to enter
into certain cost sharing and easement agreements, such as the Cooperation
Agreement.

     The common ultimate ownership, and management, of the Casino Resort and
the Expo Center also may result in potential conflicts of interest. The Expo
Center and the Congress Center are potential competitors in the business
conference and meetings business. As a result, the Casino Resort could engage
in certain businesses which may have an adverse impact on the Expo Center.
However, under the Cooperation Agreement, Venetian has agreed that it will not
conduct, or permit to be conducted at the Casino Resort, trade shows or
expositions of the type generally held at the Expo Center. Furthermore,
management may engage in marketing practices with respect to the Casino Resort
that are intended to benefit the Expo Center and may have a detrimental effect
on the Casino Resort.

Other Transactions
     In 1997, LVSI received from, and rendered to, Interface and its
affiliates, certain administrative services. However, the value of such
services was not considered material to the Casino Resort's results of
operations. Any such services are provided either on an arm's-length basis or
at a cost based on the actual costs incurred to provide such services.


                                       58
<PAGE>

                                    PART IV


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

   (a) Documents filed as part of the report.


   (1) List of Financial Statements

       Report of Independent Auditors
       Consolidated Balance Sheets
       Consolidated Statements of Operations
       Consolidated Statements of Stockholders' Equity
       Consolidated Statements of Cash Flows
       Notes to Financial Statements


   (2) List of Financial Statement Schedules


     Schedules are omitted because they are either not applicable or the
required information is shown in the financial statements or notes thereto.


   (3) List of Exhibits



<TABLE>
<S>               <C>
  Exhibit No.     Description of Document
----------------- ---------------------------------------------------------------------------------------------------
    3.1           Amended and Restated Articles of Incorporation of LVSI.*
    3.2           Certificate of Amendment of Amended and Restated Articles of Incorporation of LVSI.*
    3.3           Amended and Restated By-laws of LVSI.*
    3.4           Amended and Restated Limited Liability Company Agreement of Venetian.*
    4.1           Indenture, dated as of November 14, 1997, among LVSI and Venetian, as issuers, Mall
                  Intermediate Holding Company, LLC ("Mall Intermediate"), Lido Intermediate Holding
                  Company, LLC ("Lido Intermediate") and Mall Construction Subsidiary, as Mortgage Note
                  guarantors, and the Mortgage Note Trustee.*
    4.2           Indenture, dated as of November 14, 1997, among LVSI and Venetian, as issuers, Mall
                  Intermediate, Lido Intermediate and Mall Construction Subsidiary, as Senior Subordinated
                  Note guarantors, and First Union National Bank ("First Union"), as Senior Subordinated
                  Note trustee.*
    4.3           Registration Rights Agreement, dated as of November 14, 1997, among LVSI, Venetian,
                  Mall Intermediate, Lido Intermediate and Mall Construction Subsidiary, and Goldman, Sachs
                  & Co. and Bear, Stearns & Co. Inc. (the "Initial Purchasers").*
    4.4           Funding Agents' Disbursement and Administration Agreement, dated as of November 14,
                  1997, among LVSI, Venetian, Mall Construction Subsidiary, jointly and severally, the Bank
                  Agent, First Trust, the HVAC Provider and the Disbursement Agent.*
    4.5           Company Security Agreement, dated as of November 14, 1997, by and among LVSI,
                  Venetian, Mall Construction Subsidiary and The Bank of Nova Scotia ("Scotiabank"), as the
                  Intercreditor Agent.*
    4.6           Mall Construction Subsidiary Security Agreement, dated as of November 14, 1997, between
                  Mall Construction Subsidiary and Scotiabank, as the Intercreditor Agent.*
    4.7           Deed of Trust, Assignment of Rents and Leases and Security Agreement made by Venetian
                  and LVSI, jointly and severally as trustor, to Lawyers Title of Nevada, Inc. ("Lawyer's
                  Title"), as trustee, for the benefit of First Trust, in its capacity as the Mortgage Note trustee,
                  as Beneficiary.*
</TABLE>

                                       59
<PAGE>


<TABLE>
<S>               <C>
Exhibit No.       Description of Document
---------------   ------------------------------------------------------------------------------------------------
    4.8           Leasehold Deed of Trust, Assignment of Rents and Leases and Security Agreement made by
                  Mall Construction Subsidiary, as trustor, to Lawyer's Title, as trustee, for the benefit of First
                  Trust, in its capacity as the Mortgage Note trustee, as Beneficiary.*
    4.9           Disbursement Collateral Account Agreement, dated as of November 14, 1997, by and among
                  LVSI, Venetian, Mall Construction Subsidiary and Scotiabank, as Disbursement Agent and as
                  Securities Intermediary.*
    4.10          Mortgage Notes Proceeds Collateral Account Agreement, dated as of November 14, 1997, by
                  and among LVSI, Venetian and Scotiabank, as Disbursement Agent.*
    4.11          Mortgage Notes Proceeds Account Third-Party Account Agreement, dated as of November
                  14, 1997, by and among LVSI, Venetian, Scotiabank, as Disbursement Agent, and Goldman,
                  Sachs & Co., as Securities Intermediary.*
    4.12          Intercreditor Agreement, dated as of November 14, 1997, among Scotiabank, as Bank Agent
                  and Intercreditor Agent, the Mortgage Note Trustee, GMAC Commercial Mortgage
                  Corporation ("GMAC"), as Interim Mall Lender and First Union, as Senior Subordinated
                  Note trustee.*
    4.13          Completion Guaranty, dated as of November 14, 1997, made by Sheldon G. Adelson, in
                  favor of Scotiabank, as the Bank Agent acting on behalf of the Bank Lenders, GMAC, as
                  the Interim Mall Lender, and First Trust, as the Mortgage Note trustee.*
    4.14          Completion Guaranty Collateral Account Agreement, dated as of November 14, 1997, by and
                  between Sheldon G. Adelson, as Pledgor, and Scotiabank, as Disbursement Agent.*
    4.15          Completion Guaranty Third-Party Account Agreement, dated as of November 14, 1997, by
                  and among Sheldon G. Adelson, Scotiabank, as Disbursement Agent, and Goldman, Sachs &
                  Co., as Securities Intermediary.*
    4.16          Unsecured Indemnity Agreement, dated as of November 14, 1997, by LVSI, Venetian and
                  Mall Construction Subsidiary, to and for the benefit of First Trust.*
   10.1           Bank Credit Agreement, dated as of November 14, 1997, among LVSI, Venetian, the lender
                  parties thereto, Goldman Sachs Credit Partners, L.P. ("GSCP"), as arranger and syndication
                  agent, and Scotiabank, as administrative agent.*
   10.2           Credit Agreement, dated as of November 14, 1997, among LVSI, Venetian, Mall
                  Construction Subsidiary and GMAC.*
   10.3           Energy Services Agreement, dated as of November 14, 1997, by and between the HVAC
                  Provider and Venetian.*
   10.4           Energy Services Agreement, dated as of November 14, 1997, by and between the HVAC
                  Provider and Mall Construction Subsidiary.*
   10.5           Construction Management Agreement, dated as of February 15,1997, between LVSI, as
                  owner, and the Construction Manager.*
   10.6           Assignment, Assumption and Amendment of Construction Management Agreement, dated as
                  of Novembr 14, 1997, by and between LVSI, Venetian and the Construction Manager.*
   10.7           Agreement, effective as of January 1, 1996, between Venetian, as owner, and the architect, a
                  collaboration between the firms of TSA of Nevada, LLP and WAT&G, Inc., Nevada.*
   10.8           Amended and Restated Reciprocal Easement, Use and Operating Agreement, dated as of
                  November 14, 1997, among Interface, Mall Construction Subsidiary and Venetian.*
</TABLE>

                                       60
<PAGE>


<TABLE>
<S>                <C>
  Exhibit No.     Description of Document
----------------- -------------------------------------------------------------------------------------------------
   10.9           Sale and Contribution Agreement, dated as of November 14, 1997, among Venetian, the Mall
                  Subsidiary and Mall Construction Subsidiary.*
   10.10          Indenture of Lease, dated as of November 14, 1997, by and between Venetian, as landlord,
                  and Mall Construction Subsidiary, as tenant.*
   10.11          Commitment Letter, dated as of November 14, 1997, among LVSI, the Mall Subsidiary and
                  GSMC.*
   10.12          Commitment Letter, dated as of November 14, 1997, between the Mall Subsidiary and the
                  Sole Stockholder.*
   10.13          Tri-Party Agreement, dated as of November 14, 1997, among LVSI, Venetian, the Mall
                  Subsidiary, Mall Construction Subsidiary, the Sole Stockholder, GSMC and GMAC.*
   10.14          Casino Lease, dated as of November 14, 1997, by and between LVSI and Venetian.*
   10.15          Amended and Restated Services Agreement, dated as of November 14, 1997, by and
                  between Venetian, Interface Holding, Interface, Lido Casino Resort MM, Inc., Grand Canal
                  Shops Mall MM, Inc. and certain subsidiaries of Venetian named therein.*
   10.16          Completion Guaranty Loan Subordinated Note, dated as of November 14, 1997, made by
                  Venetian in favor of the Sole Stockholder.*
   10.17          Substitute Tranche B Loan Subordinated Note, dated as of November 14, 1997, made by
                  Venetian and Mall Construction Subsidiary in favor of the Sole Stockholder.*
   10.18          Intercreditor Agreement, dated as of November 14, 1997, by and among Scotiabank, as the
                  Administrative Agent, the Mortgage Note Trustee, GMAC, as the Interim Mall Lender, First
                  Union, as Subordinated Note trustee, LVSI, Venetian, Mall Construction Subsidiary and the
                  Sole Stockholder.*
   10.19          Unsecured Indemnity Agreement, dated as of November 14, 1997, by LVSI, Venetian and
                  Mall Construction Subsidiary, to and for the benefit of Scotiabank, as Administrative Agent
                  under the Bank Credit Facility.*
   10.20          Unsecured Indemnity Agreement, dated as of November 14, 1997, by LVSI, Venetian and
                  Mall Construction Subsidiary, to and for the benefit of GMAC.*
   10.21          Construction Agency Agreement, dated as of November 14, 1997, by and between Venetian
                  and the HVAC Provider.*
   10.22          Management Agreement, dated as of April 23, 1997, by and between LVSI and Forest City
                  Commercial Management, Inc., as assigned by LVSI to Mall Construction Subsidiary, by that
                  certain Assignment and Assumption of Contracts.*
   10.23          Primary Liquidated Damages Insurance Agreement, dated August 4, 1997, by and between
                  the Construction Manager and C.J. Coleman & Companies, Ltd.*
   10.24          Guaranty of Performance, dated as of August 19, 1997, by P&O in favor of LVSI, as
                  assigned by LVSI to Venetian by that certain Assignment, Assumption and Amendment of
                  Contracts.*
   10.25          Guaranty of Performance and Completion, dated as of August 19, 1997, by Bovis, LVSI,
                  Venetian and Mall Construction Subsidiary, for the benefit of Scotiabank, as the Intercreditor
                  Agent.*
   10.26          Consulting and Lease Brokerage Agreement between BRC and LVSI, dated as of January 23,
                  1997.*
</TABLE>

                                       61
<PAGE>


<TABLE>
<S>               <C>
  Exhibit No.     Description of Document
------------      --------------------------------------------------------------------------------------------
   10.27          Sands Resort Hotel and Casino Agreement, dated February 18, 1997, by and between Clark
                  County and LVSI, and all amendments thereto.*
   10.28          Las Vegas Sands, Inc. 1997 Fixed Stock Option Plan.*
   10.29          Employment Agreement, dated as of November 1, 1995, between LVSI and William P.
                  Weidner.*
   10.30          Employment Agreement, dated as of November 1, 1995, between LVSI and Bradley H.
                  Stone.*
   10.31          Employment Agreement, dated as of November 1, 1995, between LVSI and Robert G.
                  Goldstein.*
   10.32          First Amendment to Credit Agreement, dated as of January 30, 1998, by and among LVSI,
                  Venetian, the lender parties thereto, GSCP, as arranger and syndication agent, and
                  Scotiabank, as administrative agent.*
   10.33          Term Loan and Security Agreement, dated as of December 22, 1997, among LVSI and
                  Venetian, as Borrowers, the lender parties thereto, BancBoston Leasing, Inc., as co-agent,
                  and General Electric Capital Corporation ("GECC"), as admistrative agent.*
   10.34          Intercreditor Agreement, dated as of December 22, 1997, by and among Scotiabank, as Bank
                  Agent, First Trust, as Mortgage Note trustee, GMAC and GECC.*
   21.1           Subsidiaries of the Issuers and Guarantors.*
   24.1           Powers of Attorney (included on signature pages).
   27.1           Financial Data Schedule.*
</TABLE>

----------------
 * Incorporated by reference from Registration Statement on Form S-4 of the
   Company and certain of its subsidiaries (File No. 333-42147).

(b) Reports of Form 8-K

No report on Form 8-K was filed during the quarter ended December 31, 1997.

                                       62
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 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.


                                          LAS VEGAS SANDS, INC.



                                          By: /s/ Sheldon G. Adelson
                                              ----------------------
                                             Sheldon G. Adelson,
                                             Chairman of the Board and
                                             Chief Executive Officer

     We, the undersigned officers and directors of Las Vegas Sands, Inc.,
hereby severally constitute William P. Weidner and David Friedman and each of
them singly, our true and lawful attorneys with full power to them, and each of
them singly, to sign for us and in our names in the capacities indicated below,
any and all amendments to this Annual Report on Form 10-K, and generally do all
such things in our name and behalf in such capacities to enable Las Vegas
Sands, Inc. to comply with the applicable provisions of the Securities Exchange
Act of 1934, and all requirements of the Securities and Exchange Commission,
and we hereby ratify and confirm our signatures as they may be signed by our
said attorneys, or either of them, to any and all such amendments.

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



<TABLE>
<CAPTION>
         SIGNATURE                            TITLE                        DATE
---------------------------   ------------------------------------   ---------------
<S>                           <C>                                    <C>
 
/s/ Sheldon G. Adelson        Chairman of the Board, Chief           March 27, 1998
-------------------------     Executive Officer and Director
      Sheldon G. Adelson
 
/s/ William J. Raggio         Special Director                       March 27, 1998
-------------------------
      William J. Raggio
 
/s/ Harry D. Miltenberger     Vice President--Finance (principal     March 27, 1998
-------------------------     financial and accounting officer)
     Harry D. Miltenberger
</TABLE>

                                       63