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

                                ---------------

                                   FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934

  For the fiscal year ended January 31, 2001

                                      OR

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

   For the transition period from        to

                        Commission File Number: 1-8570

                                ---------------

                             MANDALAY RESORT GROUP
            (Exact name of Registrant as specified in its charter)

<TABLE>
<S>                                                <C>
                      Nevada                                           88-0121916
         (State or other jurisdiction of                  (I.R.S. Employer Identification No.)
          incorporation or organization)
</TABLE>

            3950 Las Vegas Boulevard South, Las Vegas, Nevada 89119
              (Address of principal executive offices) (Zip Code)

                                (702) 632-6700
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                                 Name of Each Exchange
               Title of Each Class                                on which Registered
               -------------------                               ---------------------
<S>                                                <C>
         Common Stock, $.01 2/3 Par Value             New York Stock Exchange and Pacific Exchange
           Common Stock Purchase Rights               New York Stock Exchange and Pacific Exchange
</TABLE>

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

                                ---------------

   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

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

   The aggregate market value of the voting stock of the Registrant held by
persons other than the Registrant's directors and executive officers as of
April 20, 2001 (based upon the last reported sale price on the New York Stock
Exchange on such date) was $1,454,799,899.

   The number of shares of Registrant's Common Stock, $.01 2/3 par value,
outstanding at April 20, 2001: 75,526,236.

                                ---------------

                      DOCUMENTS INCORPORATED BY REFERENCE

   PART III--Portions of the Registrant's definitive proxy statement in
connection with the annual meeting of stockholders to be held on June 15,
2001, are incorporated by reference into Items 10 through 13, inclusive.

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                                    PART I

ITEM 1. BUSINESS.

   In this report, when we use the terms "we," "our," "us" and "Mandalay," we
are referring to Mandalay Resort Group and its subsidiaries as a combined
entity, except where it is clear that reference is only to Mandalay Resort
Group. Except as otherwise indicated, cross references in this report are to
sections in this Item 1.

Overview

   We are one of the largest hotel-casino operators in the United States in
terms of guest rooms and casino square footage. Our "Mandalay Mile" is the
largest scaled hotel-casino resort development in Las Vegas, the world's
largest gaming market. This "Mandalay Mile" consists of three interconnected
megaresorts on 230 acres, including our newest property, Mandalay Bay. We
operate 16 properties with more than 27,000 guest rooms and more than one
million square feet of casino space in Nevada, Mississippi, Illinois and
Michigan. Of these properties, 12 are wholly owned and have more than 22,400
guest rooms and more than 800,000 square feet of casino space. In addition, we
own a 50% interest in each of three joint venture casino properties that have
approximately 4,700 guest rooms and more than 200,000 square feet of casino
space and a 53.5% interest in a fourth joint venture casino with approximately
75,000 square feet of casino space.

   We have provided below information as of January 31, 2001 about our
properties which, except as otherwise indicated, we wholly own and operate.

<TABLE>
<CAPTION>
                                        Approximate
                                Guest  Casino Square           Gaming   Parking
       Location/Property        Rooms     Footage    Slots(1) Tables(2) Spaces
       -----------------        ------ ------------- -------  --------  -------
<S>                             <C>    <C>           <C>      <C>       <C>
Las Vegas, Nevada
  Mandalay Bay(3)..............  3,700     135,000    2,219     136      7,000
  Luxor........................  4,404     120,000    1,994     106      3,200
  Excalibur....................  4,008     110,000    2,156      84      4,000
  Circus Circus................  3,744     109,000    2,220      79      4,700
  Monte Carlo (50% Owned)......  3,002      90,000    2,041      71      4,000
  Slots-A-Fun..................    --       16,700      519      26        --
Reno, Nevada
  Circus Circus................  1,572      60,000    1,621      73      3,000
  Silver Legacy (50% Owned)....  1,711      85,000    2,219      79      1,800
Laughlin, Nevada
  Colorado Belle...............  1,226      64,000    1,297      40      1,700
  Edgewater....................  1,450      44,000    1,274      37      2,300
Jean, Nevada
  Gold Strike..................    812      37,000    1,020      20      2,100
  Nevada Landing...............    303      36,000    1,020      21      1,400
Henderson, Nevada
  Railroad Pass................    120      21,000      374       9        600
Tunica County, Mississippi
  Gold Strike..................  1,066      48,000    1,430      53      1,400
Detroit, Michigan
  MotorCity Casino (53.5%
   Owned)(4)...................    --       75,000    2,531     104      3,450
Elgin, Illinois
  Grand Victoria (50% Owned)...    --       36,000      994      53      2,000
                                ------   ---------   ------     ---     ------
Total.......................... 27,118   1,086,700   24,929     991     42,650
                                ======   =========   ======     ===     ======
</TABLE>
--------
(1) Includes slot machines and other coin-operated devices.

                                       2
<PAGE>

(2) Generally includes blackjack ("21"), craps, pai gow poker, Caribbean stud
    poker, wheel of fortune and roulette. Mandalay Bay and MotorCity Casino
    also offer baccarat.

(3) This property includes a Four Seasons Hotel with 424 guest rooms that we
    own and Four Seasons Hotels Limited manages.

(4) This property is being operated pending the construction of a permanent
    hotel-casino facility.

Property Descriptions

   We are providing below, for each of our markets, information concerning our
properties within those markets.

 Las Vegas, Nevada

   Our Mandalay Mile, a 230-acre development situated at the south end of the
Las Vegas Strip, is the site of our newest resort as well as our other two
largest resorts. Mandalay Bay and our other Mandalay Mile resorts, Luxor and
Excalibur, function as a cluster of interconnected entertainment destinations
with more than 12,000 guest rooms and more than 360,000 square feet of casino
space that have no similarly scaled competition in the United States. Mandalay
Bay, Luxor and Excalibur are connected by a monorail system as well as a
climate-controlled skyway system. Our Mandalay Mile, with its approximately
one mile of frontage on the Las Vegas Strip, is a "Strip within the Strip"
that offers our guests three distinctively themed hotel-casinos, complemented
by an array of restaurants, shops and entertainment venues catering to a broad
spectrum of Las Vegas visitors. Our most recently completed entertainment
venue is the Shark Reef at Mandalay Bay, an aquarium exhibit, which opened
June 20, 2000 and is being cross-marketed to guests at all of the hotel-
casinos within our Mandalay Mile.

   Mandalay Bay. Mandalay Bay, our newest megaresort, is located on
approximately 60 acres on the Las Vegas Strip, adjacent to our Luxor property
and is the first major resort on the Las Vegas Strip to greet visitors
arriving in Las Vegas on I-15, the primary thoroughfare between Las Vegas and
southern California. The 43-story South Seas themed hotel-casino resort, which
opened on March 2, 1999, has approximately 3,700 guest rooms, including a Four
Seasons Hotel with 424 guest rooms that provides visitors with the only luxury
"five-diamond" hospitality experience in Las Vegas. Mandalay Bay's attractions
include an 11-acre tropical lagoon featuring a sand-and-surf beach and a
three-quarter-mile lazy river ride. The property also features 14 restaurants
such as Charlie Palmer's Aureole, Wolfgang Puck's Trattoria Del Lupo, China
Grill, Red Square and Border Grill, as well as a House of Blues nightclub and
restaurant, including its signature Foundation Room on the resort's top floor.
Additional amenities include a 125,000-square-foot convention facility and a
30,000-square-foot spa. The property offers multiple entertainment venues that
include a 1,700-seat showroom, the rumjungle nightclub and a 12,000-seat
special events arena that features additional entertainment and sporting
events.

   Luxor. This property is an Egyptian-themed hotel and casino complex
situated on 64 acres of our Mandalay Mile, between Mandalay Bay and Excalibur.
The resort features a 30-story pyramid and two 22-story hotel towers. Luxor
offers 20,000 square feet of convention space, a 20,000-square-foot spa, a
1,200-seat showroom featuring the unique, off-Broadway show "Blue Man Group"
which opened in March 2000, a nightclub, and food and entertainment venues on
three different levels beneath a soaring hotel atrium. The pyramid's 2,454
guest rooms can be reached from the four corners of the building by state-of-
the-art "inclinators" which travel at a 39-degree angle. Above the pyramid's
casino, the property offers a special format motion base ride and an IMAX
2D/3D theater. Luxor's other public areas include a buffet with a seating
capacity of approximately 800, eight restaurants including three gourmet
restaurants, as well as a snack bar, a food court featuring national fast food
franchises, several cocktail lounges and a variety of specialty shops.

   Excalibur. This property is a castle-themed hotel and casino complex
situated on a 53-acre site immediately to the north of Luxor. Excalibur's
public areas include a Renaissance fair, a medieval village, an amphitheater
with a seating capacity of nearly 1,000 where nightly mock jousting
tournaments and costume

                                       3
<PAGE>

drama are presented, two dynamic motion theaters, various artisans' booths and
medieval games of skill. In addition, Excalibur has a buffet restaurant with a
seating capacity of approximately 1,000, six themed restaurants, as well as
several snack bars, cocktail lounges and a variety of specialty shops.

   Circus Circus-Las Vegas. This property, which is our original resort, is a
circus-themed hotel and casino complex situated on approximately 69 acres on
the north end of the Las Vegas Strip. From a "Big Top" above the casino,
Circus Circus-Las Vegas offers its guests a variety of circus acts performed
daily, free of charge. A mezzanine area overlooking the casino has a circus
midway with carnival-style games and an arcade that offers a variety of
amusements and electronic games. Also available to the guests at Circus
Circus-Las Vegas are four specialty restaurants, a buffet with a seating
capacity of approximately 1,000, a coffee shop, four fast food snack bars,
several cocktail bars and a variety of gift shops and specialty shops. The
Adventuredome, covering approximately five acres, offers theme park
entertainment that includes a high-speed, double-loop, double-corkscrew roller
coaster, a coursing river flume ride on white-water rapids, an IMAX motion
base ride, several rides and attractions designed for preschool age children,
themed carnival-style midway games, a state-of-the-art arcade, a 65-foot
waterfall, animated life-size dinosaurs, food kiosks and souvenir shops, all
in a climate-controlled setting under a giant space-frame dome. Circus Circus-
Las Vegas also offers accommodations for approximately 400 recreational
vehicles at the property's Circusland Recreational Vehicle Park.

   Monte Carlo (50% owned). Through a wholly owned entity, we are a 50%
participant with a subsidiary of MGM MIRAGE in a joint venture which owns and
operates Monte Carlo, a hotel and casino resort situated on 46 acres with
approximately 600 feet of frontage on the Las Vegas Strip. The property is
situated between Bellagio, a 3,000-room resort owned and operated by MGM
MIRAGE and connected to Monte Carlo by a monorail, and New York-New York, a
2,000-room hotel-casino resort owned by MGM MIRAGE. Monte Carlo's casino
reflects a palatial style reminiscent of the Belle Epoque, the French
Victorian architecture of the late 19th century. Amenities at Monte Carlo
include three specialty restaurants, including the popular Andre's gourmet
restaurant, a buffet, a coffee shop, a food court, a microbrewery which
features live entertainment, approximately 15,000 square feet of meeting and
banquet space and tennis courts. A 1,200-seat replica of a plush vaudeville
theater, including a balcony and proscenium arch, features an elaborately
staged show of illusions by the world-renowned magician, Lance Burton.

 Reno, Nevada

   Circus Circus-Reno. This property is a circus-themed hotel and casino
complex situated in downtown Reno, Nevada. Like its sister property in Las
Vegas, Circus Circus-Reno offers its guests a variety of circus acts performed
daily, free of charge. A mezzanine area has a circus midway with carnival-
style games and an arcade that offers a variety of amusements and electronic
games. The property also has two specialty restaurants, a buffet with a
seating capacity of approximately 450, a coffee shop, a deli/bakery, a fast
food snack bar, cocktail lounges, a gift shop and specialty shops.

   Silver Legacy (50% owned). Through a wholly owned subsidiary, we are a 50%
participant with Eldorado Limited Liability Company in a joint venture which
owns and operates Silver Legacy, a hotel-casino and entertainment complex
situated on two city blocks in downtown Reno, Nevada. The property is located
between Circus Circus-Reno and the Eldorado Hotel & Casino, which is owned and
operated by an affiliate of our joint venture partner at Silver Legacy. Silver
Legacy's casino and entertainment complex is connected at the mezzanine level
with Circus Circus-Reno and the Eldorado by enclosed climate-controlled
skyways above the streets between the respective properties. The property's
exterior is themed to evoke images of historical Reno. At the main pedestrian
entrances to the casino (located on all four sides of the complex), patrons
enter by passing store fronts reminiscent of turn-of-the-century Reno. Silver
Legacy's attractions include a 120-foot tall mining rig, which is situated
over a replica of a silver mine and extends up from the center of the casino
floor into a 180-foot diameter dome structure. Silver Legacy also features
four restaurants and several bars, a 25,000-square-foot special events center,
custom retail shops, a health spa and an outdoor pool and sun deck.

                                       4
<PAGE>

 Laughlin, Nevada

   Laughlin is situated on the Colorado River at the southern tip of Nevada
approximately 90 miles south of Las Vegas.

   Colorado Belle. This property is situated on a 22-acre site on the bank of
the Colorado River (with nearly 1,080 feet of river frontage) in Laughlin,
Nevada. Colorado Belle, which features a 600-foot replica of a Mississippi
riverboat, includes a 350-seat buffet, a coffee shop, three specialty
restaurants, a microbrewery, fast food snack bars and cocktail lounges, as
well as a gift shop and other specialty shops.

   Edgewater. This property is situated on a 16-acre site adjacent to Colorado
Belle with nearly 1,640 feet of frontage on the Colorado River. Edgewater's
facilities include a specialty restaurant, a coffee shop, a 600-seat buffet, a
snack bar and cocktail lounges.

 Jean, Nevada

   Jean is located between Las Vegas and southern California, approximately 25
miles south of Las Vegas and 12 miles north of the California-Nevada state
line. Jean attracts gaming customers almost entirely from the large number of
people traveling between Las Vegas and southern California on Interstate-15,
the principal highway between Las Vegas and southern California which passes
directly through Jean.

   Gold Strike-Jean. This property is an "Old West" themed hotel-casino
located on approximately 51 acres of land on the east side of Interstate-15.
The property has, among other amenities, a swimming pool and spa, several
restaurants, a banquet center equipped to serve 260 people, a gift shop and an
arcade. The casino has a stage bar with regularly scheduled live entertainment
and a casino bar.

   Nevada Landing. This property is a turn-of-the-century riverboat themed
hotel-casino located on approximately 55 acres of land across Interstate-15
from Gold Strike. Nevada Landing includes a 70-seat Chinese restaurant, a
full-service coffee shop, a buffet with a seating capacity of 140, a snack
bar, a gift shop, a swimming pool and spa and a 300-guest banquet facility.

 Henderson, Nevada

   Henderson is a suburb located southeast of Las Vegas.

   Railroad Pass. This property is situated on approximately 56 acres along
US-93, the direct route between Las Vegas and Phoenix, Arizona. The property
includes, among other amenities, two full-service restaurants, a buffet, a
gift shop, two bars, a swimming pool and a banquet facility that will
accommodate approximately 200 guests. In contrast with our other Nevada
properties, Railroad Pass caters to local residents, particularly from
Henderson, who may prefer the informal atmosphere and easy access of Railroad
Pass over the casinos on the Las Vegas Strip.

 Tunica County, Mississippi

   Tunica County is located 20 miles south of Memphis, Tennessee on the
Mississippi River. Tunica County attracts customers from Mississippi and
surrounding states, including cities such as Memphis, Tennessee and Little
Rock, Arkansas.

   Gold Strike-Tunica. This property is a dockside casino situated on a 24-
acre site along the Mississippi River in Tunica County, approximately three
miles west of Mississippi State Highway 61 (a major north/south highway
connecting Memphis with Tunica County) and 20 miles south of Memphis. The
property features an 800-seat showroom, a coffee shop, a specialty restaurant,
a 300-seat buffet, a snack bar and several cocktail lounges. Gold Strike-
Tunica is part of a three-casino development covering approximately 72 acres.
The other two casinos are owned and operated by unaffiliated third parties. We
also own an undivided one-half interest in an additional 388 acres of land
which may be used for future development.

                                       5
<PAGE>

 Detroit, Michigan

   MotorCity Casino (53.5% owned). On December 14, 1999, along with our joint
venture partner, Atwater Casino Group, we opened MotorCity Casino, a temporary
casino facility in Detroit, Michigan, which is being operated pending the
construction of a permanent hotel-casino. The temporary facility includes, in
addition to a 75,000-square-foot casino, five restaurants and a 3,500-space
parking facility. Under a plan agreed to by the City of Detroit development
authorities but not yet approved by the Detroit City Council, we would expand
our temporary facility into a permanent facility by adding approximately 800
hotel rooms and expanding our gaming areas, adding additional restaurants,
retail space, convention space and other amenities. There can be no assurance
that the Detroit City Council will approve the proposed plan, in which event
the existing agreement to build a permanent casino at a different location
would remain in effect. The cost of the permanent facility, which cannot be
determined at this time, will depend on a number of factors, including the
decision whether we expand the temporary facility or build on a new site and
the ultimate design and schedule for completion of the facility. We are
committed to contribute 20% of the development costs of any permanent facility
in the form of equity and we plan to fund the balance through project-specific
debt financing. We chose to participate in this project due to Detroit's
strong demographics and limited competition and to further diversify our cash
flow stream.

   The development agreement for Detroit provides that Mandalay will guarantee
completion of the project and will enter into a keep-well guarantee with the
city, pursuant to which we could be required to contribute additional funds,
if and as needed, to continue operation of the permanent facility for a period
of two years. When the permanent facility is completed and opened, we will
manage the property and will receive a management fee for our services from
the Detroit joint venture.

   The ability to construct, open and operate the planned permanent facility
is contingent upon the receipt of all necessary gaming approvals and
satisfaction of other conditions. See "Regulation and Licensing--Michigan
Gaming Laws."

   Various lawsuits have been filed in the state and federal courts
challenging the constitutionality of the Detroit Casino Competitive Selection
Process and the Michigan Gaming Control and Revenue Act, and seeking to appeal
the issuance of a certificate of suitability to MotorCity Casino. No assurance
can be given regarding the timing and outcome of these proceedings. An adverse
ruling in any of these lawsuits could adversely impact the status of our joint
venture's operation of the temporary facility, as well as the ability to
obtain a certificate of suitability and a casino license for its permanent
facility. See "Detroit Litigation" in Item 3 of this report.

 Elgin, Illinois

   Grand Victoria (50% owned). Through a wholly owned subsidiary, we are a 50%
participant with an affiliate of Hyatt Development Corporation in a joint
venture which owns and operates Grand Victoria. Grand Victoria is a Victorian
themed riverboat casino and land-based entertainment complex in Elgin,
Illinois, a suburb approximately 40 miles northwest of downtown Chicago. The
two-story vessel is 420 feet in length and 110 feet in width, and provides a
maximum 80,000 square feet of casino space, approximately 36,000 square feet
of which was being used as of January 31, 2001. As a result of gaming
legislation enacted in June 1999, the boat now offers dockside gaming, which
means its operation is no longer restricted by fixed cruising schedules. In
addition to the boat, a dockside complex with an approximately 83,000-square-
foot pavilion has an approximately 400-seat buffet, a 76-seat fine dining
restaurant, a VIP lounge, two movie theaters and a gift shop. Grand Victoria
is strategically located in Elgin among the residential suburbs of Chicago,
with nearby freeway access and direct train service from downtown Chicago.
Grand Victoria is located approximately 20 miles and 40 miles, respectively,
from its nearest competitors in Aurora, Illinois and Joliet, Illinois, and
holds one of only nine riverboat gaming licenses currently granted state-wide.
Recently passed legislation in Illinois would allow a casino in Rosemont,
approximately 16 miles from Grand Victoria. This legislation is being
challenged in court. Repeal of this legislation would also repeal dockside
gaming.

                                       6
<PAGE>

Marketing

   We have historically followed a marketing and operating philosophy which
has emphasized high-volume business by providing moderately priced hotel
rooms, food and beverage and alternative entertainment in combination with our
gaming operations. With the opening of Mandalay Bay, which was designed to
attract a higher income customer than we had previously targeted, and to a
lesser extent at Luxor, we have begun to serve higher income casino customers
and to host conventions. Our philosophy remains one of providing the best
value in each of the market segments where we compete.

   Our Mandalay Mile provides us with a unique cross-marketing opportunity. We
have begun to promote the restaurants, entertainment and other amenities
located throughout the Mandalay Mile properties--Mandalay Bay, Luxor and
Excalibur--to each other and to our other properties located outside the
Mandalay Mile. We have utilized a variety of means including video screens,
in-room brochures and displays located within each property and in the skyway
and monorail systems that connect the Mandalay Mile properties.

   Mandalay Bay. Mandalay Bay, which opened March 2, 1999, contributed 22% of
our revenues in the year ended January 31, 2001 (and 22% in the year ended
January 31, 2000). This property offers a level of entertainment and hotel
accommodations which is designed to draw a higher-income customer than we have
historically targeted. Designed with a South Seas theme, Mandalay Bay offers
its guests internationally renowned restaurants which provide a wide variety
of dining options. Mandalay Bay's entertainment attractions include an 11-acre
lagoon with a surfing beach and a lazy river ride, Shark Reef at Mandalay Bay,
a House of Blues, rumjungle, a 1,700-seat showroom and a 12,000-seat special
events arena where brand-name entertainment and sporting events are offered.
In addition, Mandalay Bay's 125,000-square-foot convention facility marks our
entry into competition for the convention and meeting segment of visitors to
Las Vegas.

   Luxor. Luxor contributed 16% of our revenues in the year ended January 31,
2001 (and 17% and 24%, respectively, in the years ended January 31, 2000 and
1999). This property offers a level of entertainment and hotel accommodations
which is designed to attract the top segment of the middle-income stratum of
customers. Designed with an Egyptian theme and highly decorated rooms, Luxor's
30-story pyramid offers its guests a tri-level entertainment area, including
an IMAX theater, dynamic motion rides, a popular nightclub and theatrical
revues. This property also has 20,000 square feet of convention space, a
1,200-seat showroom featuring the unique, off-Broadway show "Blue Man Group,"
which opened in March 2000, and a spa.

   Excalibur. Excalibur contributed 12% of our revenues in the year ended
January 31, 2001 (and 14% and 19%, respectively, in the years ended January
31, 2000 and 1999). This property attracts customers by offering guest rooms,
food and entertainment at medium prices. By way of entertainment, the medieval
castle-themed Excalibur offers a medieval village, an amphitheater where mock
tournaments and costume drama are presented, dynamic motion theaters, various
artisans' booths and medieval games of skill.

   Circus Circus-Las Vegas and Circus Circus-Reno. Circus Circus-Las Vegas and
Circus Circus-Reno together contributed 15% of our revenues in the year ended
January 31, 2001 (and 18% and 24%, respectively, in the years ended January
31, 2000 and 1999). Each of these properties has a popular buffet, attractive
because of its variety, quality and low price. From a "Big Top" above the
casino, each of these properties offers a variety of circus acts performed
free of charge to the public on a daily basis. A mezzanine area overlooking
each casino has a circus midway with carnival-style games and an arcade that
offers a variety of amusements and electronic games. The Adventuredome, an
enclosed and climate-controlled five-acre structure, offers additional theme
park attractions at Circus Circus-Las Vegas.

   Colorado Belle and Edgewater. The Colorado Belle and Edgewater together
contributed 7% of our revenues in the year ended January 31, 2001 (and 8% and
11%, respectively, in the years ended January 31, 2000 and 1999). These
properties offer quality rooms, food and entertainment at moderate prices. The
Colorado Belle offers a classic Mississippi riverboat theme, complete with a
60-foot paddle wheel. The Edgewater's southwestern motif provides a relaxing
atmosphere to enjoy that property's casino and other facilities. Connected by
a scenic walkway, the two resorts form an inviting shoreline along the
Colorado River.

                                       7
<PAGE>

   Gold Strike and Nevada Landing. Gold Strike and Nevada Landing together
contributed 3% of our revenues in the year ended January 31, 2001 (and 4% and
5%, respectively, in the years ended January 31, 2000 and 1999). These
properties are located on opposite sides of I-15, the primary thoroughfare
between Las Vegas and southern California, approximately 25 miles south of Las
Vegas and 12 miles north of the California-Nevada border. The properties are
conveniently located at the only highway interchange within 12 miles in either
direction and are strategically positioned to attract visitors from the large
number of people traveling to and from Las Vegas.

   Gold Strike-Tunica. Gold Strike-Tunica contributed 5% of our revenues in
the year ended January 31, 2001 (and 6% and 7%, respectively, in the years
ended January 31, 2000 and 1999). Gold Strike-Tunica, our first wholly owned
casino outside of Nevada, is part of an integrated three casino development
(Casino Center) that provides patrons with the opportunity to visit any of the
three casinos without driving, a unique experience in the Tunica County
market. In the first quarter of 1998, we completed the opening of a 31-story
hotel tower with 1,066 guest rooms at Gold Strike-Tunica, which previously had
no hotel rooms. This property's original circus-themed casino and other
facilities were also remodeled and rethemed into a more elegant resort.

   MotorCity Casino. MotorCity Casino, which opened December 14, 1999,
contributed 13% of our revenues in the year ended January 31, 2001 (and 2% in
the year ended January 31, 2000). MotorCity Casino is a temporary casino
facility and is one of only three licensees in Detroit, Michigan. Designed
with a classic automobile theme, MotorCity Casino offers its guests four
floors of gaming, dining and entertainment experiences.

   We maintain an active media advertising program through radio, television,
billboards and printed publications primarily in Nevada, California and
Arizona for our Nevada properties and in the Memphis area for our Gold Strike-
Tunica property. In addition, we advertise on and allow patrons to make room
reservations via the Internet, where we believe we are in the forefront of our
competition. We also offer complimentary hotel accommodations, meals and
drinks to selected customers.

Operations and Cost Controls

   The primary source of our revenues is casinos, although our hotels,
restaurants, bars, shops, midway games and other entertainment attractions and
other services are an important adjunct to the casinos.

   The following table sets forth the contribution to our net revenues on a
dollar and percentage basis of our major activities for each of our three most
recent fiscal years.

<TABLE>
<CAPTION>
                                        Year Ended January 31,
                          ----------------------------------------------------
                                2001              2000              1999
                          ----------------  ----------------  ----------------
                                        (Dollars in thousands)
<S>                       <C>        <C>    <C>        <C>    <C>        <C>
Revenues:(1)
  Casino(2).............. $1,250,035  49.5% $  951,492  46.4% $  709,909  48.0%
  Rooms(3)...............    611,352  24.2%    534,132  26.0%    355,635  24.0%
  Food and beverage(3)...    418,081  16.6%    346,647  16.9%    246,622  16.7%
  Other(3)...............    299,753  11.9%    251,509  12.3%    170,701  11.5%
  Earnings of
   unconsolidated
   affiliates............    114,645   4.5%     98,627   4.8%     83,967   5.7%
                          ---------- -----  ---------- -----  ---------- -----
                           2,693,866 106.7%  2,182,407 106.4%  1,566,834 105.9%
Less:
  Complimentary
   allowances(3).........    169,642   6.7%    131,509   6.4%     87,054   5.9%
                          ---------- -----  ---------- -----  ---------- -----
Net revenues............. $2,524,224 100.0% $2,050,898 100.0% $1,479,780 100.0%
                          ========== =====  ========== =====  ========== =====
</TABLE>
--------
(1)  Includes operations of Silver City to October 31, 1999, operations of
     Mandalay Bay from March 2, 1999 and MotorCity Casino from December 14,
     1999.

                                       8
<PAGE>

(2) Casino revenues are the net difference between the sums received as
    winnings and the sums paid as losses, as well as incentives provided to
    customers in the form of discounts.

(3) Rooms, Food and beverage and Other include the retail value of services
    which are provided to casino customers and others on a complimentary
    basis. Such amounts are then deducted as complimentary allowances to
    arrive at net revenue.

   We maintain stringent cost controls which historically have been
exemplified by a general policy of offering minimal credit to gaming customers
at our properties. Since its opening in March 1999, Mandalay Bay has extended
credit to gaming customers on a selective basis in an effort to appeal to a
broader segment of the gaming market. We had begun following this policy at
Luxor during fiscal 1998. As a result, while our other properties continue to
offer minimal credit, credit play now represents a more significant portion of
the volume of table games play at Mandalay Bay and, to a lesser extent, at
Luxor.

   We maintain strict controls over the issuance of credit and aggressively
pursue collection of customer debts. These collection efforts are similar to
those used by most large corporations, including the mailing of statements and
delinquency notices, personal and other contacts, the use of outside
collection agencies and civil litigation. Nevada gaming debts evidenced by
written credit instruments are enforceable under the laws of Nevada. All other
states are required to enforce a judgment on a gaming debt entered in Nevada
pursuant to the Full Faith and Credit Clause of the United States
Constitution. Gaming debts are not legally enforceable in some foreign
countries, but the United States assets of foreign debtors may be reached to
satisfy judgments entered in the United States. While the portion of our
accounts receivable that is owed by foreigners is not currently material, to
the extent we hold obligations of foreign debtors, the collectibility of those
debts may be affected by a number of factors, including changes in currency
exchange rates and economic conditions in the customers' home countries.

   Our current operations at each of our casinos are conducted 24 hours a day,
every day of the year, with the exception of Grand Victoria which operates 22
hours a day, every day of the year. We emphasize courteous and prompt service
to our customers and aspire to a high standard of excellence in all of our
operations.

   We do not consider our business to be highly seasonal, although our
operating income is typically somewhat lower in the fourth quarter, affected
by slower travel leading up to the holiday period. While our business is not
considered to be highly seasonal, our results from quarter-to-quarter are more
event driven than a lot of other businesses. Special events such as a
championship boxing match or a concert, or visits by high-budget players, or
the timing of holidays, or even bad weather can impact our results for the
respective periods during which such events occur.

   In connection with our gaming activities, we follow a policy of stringent
controls and cross checks on the recording of all receipts and disbursements.
The audit and cash controls we have developed and utilize include the
following:

  .  locked cash boxes;

  .  independent counters;

  .  checkers and observers to perform the daily cash and coin counts;

  .  floor observation of the gaming areas;

  .  closed-circuit television observation of certain areas;

  .  computer tabulation of receipts and disbursements for each of our slot
     machines, tables and other games; and

  .  the rapid analysis and resolution of discrepancies or deviations from
     normal performance.

                                       9
<PAGE>

Future Expansion Activities

   Consistent with past practice and the longstanding policy of making
substantial investments in our business at regular intervals, we continue to
actively pursue new projects, either by development or acquisition. New
investments may involve the expansion of existing facilities or the
development of new properties. Projects may be undertaken in Nevada, where all
but one of our wholly owned operating properties are currently located, or in
other jurisdictions within the United States or abroad where gaming has been
legalized. Our new investments may be in properties that are wholly owned and
operated by us, or may be in properties that are developed, owned and/or
operated through joint ventures with one or more other parties.

   Mandalay Mile. Our Mandalay Mile, which is the site of Mandalay Bay, our
most recently completed resort, as well as our Luxor and Excalibur properties,
includes approximately 60 acres of land which is yet to be developed. In late
April 2001, we announced a proposal to build a three-level, 1.8 million
square-foot convention center complex, subject to receipt of appropriate
permits and approvals. The facility will be located on 16.5 acres adjacent to
the existing Mandalay Bay Conference Center and will include more than 1
million square feet of exhibit space. Upon completion of the project, Mandalay
Bay will offer a total of almost 2 million gross square feet of conference and
exhibit space. The project is expected to break ground in June 2001 and open
in Summer 2002. Specific details regarding the cost of the proposed project
are not yet available. The long-term plan for completion of our Mandalay Mile
presently includes as many as two additional resorts and additional
entertainment facilities. At this time, we have not determined the timing,
scope or design of any additional future development on our Mandalay Mile.

   Detroit, Michigan. For information concerning the planned construction of a
hotel-casino in downtown Detroit, Michigan, see "Property Descriptions--
Detroit, Michigan."

   Mississippi Gulf Coast. Some time ago, we announced plans to develop a
casino resort on the Bay of St. Louis, along the Mississippi Gulf Coast. In
August 2000, the United States District Court for the District of Columbia
issued an opinion which had the effect of revoking one of the permits issued
for this project and requiring the Army Corps of Engineers to have an
environmental impact statement completed prior to issuing new permits for the
development of casinos in this area. In light of the estimated time to
complete the environmental impact statement and potential legal challenges
that may result from the environmental impact statement, we have decided not
to pursue this development along the Mississippi Gulf Coast at this time.

   Construction Risks. Any major construction project that we, or any joint
venture in which we own an interest, may undertake will involve many risks,
including potential shortages of materials and labor, work stoppages, labor
disputes, weather interference, unforeseen engineering, environmental or
geological problems and unanticipated cost increases, any of which could give
rise to delays or cost overruns. Construction, equipment or staffing
requirements or problems or difficulties in obtaining any of the requisite
licenses, permits, allocations or authorizations from regulatory authorities
could increase the cost or delay the construction or opening of the facilities
or otherwise affect the planned design and features. It is possible that any
budget and construction plans developed for a project may be changed for
competitive or other reasons. In addition, construction by our Detroit joint
venture of a proposed hotel-casino in downtown Detroit, Michigan is dependent
on the approval of the Detroit City Council to allow the permanent casino to
be built on the temporary casino site or the acquisition of a permanent site
at another location and the satisfactory resolution of pending litigation. See
"Detroit Litigation" in Item 3 of this report. Accordingly, there can be no
assurance as to the commencement or successful completion of any projects that
we, or any joint venture in which we are a participant, may undertake,
including the one contemplated by the Detroit joint venture.

                                      10
<PAGE>

Competition

 General

   The hotel and casino industry is very competitive and the level of
competition has increased as gaming has expanded dramatically in the United
States in recent years. Forms of gaming include:

  .  riverboats;

  .  dockside gaming facilities;

  .  Native American gaming ventures;

  .  land-based casinos;

  .  state-sponsored lotteries;

  .  off-track wagering;

  .  Internet gaming; and

  .  card parlors.

   Since 1990, when there were casinos in only three states (excluding casinos
on Native American lands), gaming has spread to a number of additional states.
In addition, other states are currently considering, or may in the future
consider, legalizing casino gaming in specific geographic areas within their
states. Many Native American tribes conduct casino gaming throughout the
United States and other Native American tribes are either in the process of
establishing or are considering establishing gaming at additional locations.
We believe the operation of Native American casinos in California and Arizona
has impacted our gaming operations in Nevada, particularly in Reno, Laughlin
and Jean. The competitive impact on Nevada gaming establishments, in general,
and our operations, in particular, from the continued growth of gaming in
jurisdictions outside Nevada cannot be determined at this time. We believe
that the continued growth of casino gaming in markets close to Nevada, such as
California and Arizona, and the expansion of the types of gaming permitted in
California under the amendment to the California constitution approved on
March 7, 2000, could have an adverse impact on our operations and, depending
on the nature, location and extent of those operations outside of Nevada, the
impact could be material.

 Las Vegas, Nevada

   Our hotel-casino operations in Las Vegas, which are conducted from
properties located along the Las Vegas Strip, compete with a large number of
other hotel-casinos in the Las Vegas area. Currently there are over 25 hotel-
casinos, including our own, that are located on or near the Las Vegas Strip.
Our Las Vegas operations also compete with a dozen major hotel-casinos located
in downtown Las Vegas, approximately five miles from the center of the Strip,
and other hotel-casinos elsewhere in the Las Vegas area, including our own
Railroad Pass in the suburb of Henderson. To a lesser extent, our Las Vegas
properties also compete with casino and hotel properties in other parts of
Nevada, including Laughlin, Reno and along I-15 (the principal highway between
Las Vegas and southern California) near the California-Nevada state line. As
discussed above, our Las Vegas casinos also compete with Native American
casinos in southern California (the principal source of business for Las Vegas
casinos, including our own) and central Arizona and, to a lesser extent with
casinos in other parts of the country.

   Casino and guest room capacity has increased significantly in the Las Vegas
market. During the period from October 1998 through August 2000, five major
hotel-casino resorts, including our own Mandalay Bay, opened on the Las Vegas
Strip. As a result of these openings, the number of guest rooms increased by
approximately 15,000, including the 3,700 at Mandalay Bay. Additional new
hotel-casinos and expansion projects at existing Las Vegas properties have
been proposed, and it is anticipated that others will be. The impact on our
future operations of Las Vegas' increased hotel and casino capacity and any
capacity subsequently opened in or around

                                      11
<PAGE>

Las Vegas will depend to a large extent on the ability of the newer
properties, including Mandalay Bay, to produce a significant and sustained
increase in the flow of visitors to the Las Vegas market.

 Reno, Nevada

   Circus Circus-Reno competes with approximately 11 other major hotel-
casinos, including Silver Legacy, a hotel-casino complex with 1,711 guest
rooms, which is 50% owned by one of our wholly owned subsidiaries. Circus
Circus-Reno and Silver Legacy also compete with numerous other smaller casinos
in the greater Reno area and, to a lesser extent, with casinos and hotels in
Lake Tahoe and other parts of Nevada and Native American casinos in northern
California and the Northwest. The Reno market has begun to encounter increased
competition from Native American casinos in northern California. Following the
passage of Proposition 5, these Native American casinos began adding more and
newer (i.e., more competitive) slot machines, which has had a negative impact
on our Reno area properties.

 Laughlin, Nevada

   In Laughlin, the Colorado Belle and the Edgewater, which together accounted
for approximately 25% of the rooms in Laughlin as of January 31, 2001, compete
with eight other Laughlin casinos. They also compete with the hotel-casinos in
Las Vegas and those on I-15 (the principal highway between Las Vegas and
southern California) near the California-Nevada state line, as well as a
growing number of Native American casinos in Laughlin's regional market. The
expansion of hotel and casino capacity in Las Vegas in recent years and the
growth of Native American casinos in central Arizona and southern California
have had a negative impact on Colorado Belle and Edgewater, by drawing
visitors from the Laughlin market. This has, in turn, resulted in increased
competition among Laughlin properties for a reduced number of visitors which
contributes to generally lower revenues and profit margins at Colorado Belle
and Edgewater.

 Jean, Nevada

   Our Jean, Nevada properties, Gold Strike and Nevada Landing, are located on
I-15 (the principal highway between Las Vegas and southern California),
approximately 25 miles south of Las Vegas and 12 miles north of the
California-Nevada border. These properties attract their customers almost
entirely from the people traveling between Las Vegas and southern California.
Accordingly, these properties compete with the large concentration of hotel,
casino and other entertainment options available in Las Vegas as well as three
hotel-casinos located at the California-Nevada border. They also compete with
the growing number of Native American casinos in southern California.

 Tunica County, Mississippi

   Gold Strike-Tunica competes with 10 other casinos in Tunica County,
Mississippi, including a hotel-casino which is closer to Memphis, the largest
city in Tunica County's principal market, than any of the other facilities
currently in operation in Tunica County. Gold Strike-Tunica's hotel tower,
which has 1,066 guest rooms, was completed in early 1998 and provides this
property with the second largest number of guest rooms in the Tunica County
market. Growth in this market appears to be slowing, creating heightened
competition for business.

 Elgin, Illinois

   Grand Victoria is a 50% owned riverboat casino and land-based entertainment
complex in Elgin, Illinois, a suburb approximately 40 miles northwest of
downtown Chicago. Grand Victoria is one of nine licensed gaming riverboats
currently operating in Illinois and is located approximately 20 miles and 40
miles, respectively, from its nearest competitors in Aurora, Illinois and
Joliet, Illinois. Recently passed legislation in Illinois would allow a casino
in Rosemont, approximately 16 miles from Grand Victoria. This legislation is
being challenged in court. Repeal of this legislation would also repeal
dockside gaming.

                                      12
<PAGE>

 Detroit, Michigan

   MotorCity Casino, a 53.5% owned temporary casino in Detroit, Michigan, is
one of three licensed casinos in Detroit. In addition to the other two Detroit
casinos, MotorCity Casino competes with a government-owned casino and a
racetrack which has an estimated 2,000 slot machines, each of which is located
in Windsor, Ontario, directly across the Detroit River from Detroit. A number
of Native American casinos are currently operating in central and northern
Michigan, but the nearest of these casinos is approximately 150 miles from
Detroit.

Regulation and Licensing

   Each of our casinos, including those owned and operated by the joint
ventures in which we participate, is subject to extensive regulation under
laws, rules and supervisory procedures primarily in the jurisdiction where
located or docked. Set forth below is a discussion of the applicable gaming
laws and regulations of each jurisdiction where gaming is conducted by us or by
a joint venture in which we participate.

 Nevada Gaming Laws

   The ownership and operation of casino gaming facilities in the State of
Nevada, such as the Nevada gaming facilities we and the joint ventures in which
we participate own and operate, are subject to the Nevada Gaming Control Act
and the regulations promulgated under this Act and various local regulations.
Our Nevada gaming operations and those of its Nevada joint ventures are subject
to the licensing and regulatory control of the Nevada Gaming Commission, the
Nevada State Gaming Control Board and, depending on the facility's location,
the Clark County Liquor and Gaming Licensing Board or the City of Reno, which
we refer to collectively as the "Nevada Gaming Authorities."

   The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things:

  . the prevention of unsavory or unsuitable persons from having a direct or
    indirect involvement with gaming at any time or in any capacity;

  . the establishment and maintenance of responsible accounting practices and
    procedures;

  . 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;

  . the prevention of cheating and fraudulent practices; and

  . providing a source of state and local revenues through taxation and
    licensing fees.

   Changes in these laws, regulations and procedures could have an adverse
affect on our gaming operations.

   Each of Mandalay's subsidiaries that currently operates a casino in Nevada
is required to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable.
Mandalay is required to be registered by the Nevada Gaming Commission as a
publicly traded corporation and as such, is required periodically to submit
detailed financial and operating reports to the Nevada Gaming Commission and
furnish any other information that the Nevada Gaming Commission may require. No
person may become a stockholder of, or receive any percentage of profits from,
a licensed casino without first obtaining licenses and approvals from the
Nevada Gaming Authorities. We have obtained from the Nevada Gaming Authorities
the various registrations, findings of suitability, approvals, permits and
licenses required in order to engage in gaming activities in Nevada.

   The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, Mandalay or any of its
licensed subsidiaries in order to determine whether the individual is suitable
or should be licensed as a business associate of a gaming licensee. Mandalay
and its

                                       13
<PAGE>

licensed subsidiaries' officers, directors and key employees must file
applications with the Nevada Gaming Authorities and may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming
Authorities may deny an application for licensing for any cause which they
deem reasonable. A finding of suitability is comparable to licensing, and both
require submission of detailed personal and financial information followed by
a thorough investigation. An applicant for licensing or an applicant for a
finding of suitability must pay for all the costs of the investigation.
Changes in licensed positions must be reported to the Nevada Gaming
Authorities and, in addition to their authority to deny an application for a
finding of suitability or licensing, the Nevada Gaming Authorities have the
jurisdiction to disapprove a change in a corporate position.

   If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with Mandalay or any licensed subsidiary, Mandalay and the
licensed subsidiary would have to sever all relationships with that person. In
addition, the Nevada Gaming Commission may require Mandalay or a licensed
subsidiary to terminate the employment of any person who refuses to file
appropriate applications. Determinations of suitability or questions
pertaining to licensing are not subject to judicial review in Nevada.

   Mandalay and all of its licensed subsidiaries are required to submit
detailed financial and operating reports to the Nevada Gaming Commission.
Substantially all of our or our licensed subsidiaries' material loans, leases,
sales of securities and similar financing transactions must be reported to, or
approved by, the Nevada Gaming Commission.

   If the Nevada Gaming Commission determined that Mandalay or a licensed
subsidiary violated the Nevada Gaming Control Act, it could limit, condition,
suspend or revoke our gaming licenses. In addition, Mandalay, the licensed
subsidiary, and the persons involved could be subject to substantial fines for
each separate violation of the Nevada Gaming Control Act at the discretion of
the Nevada Gaming Commission. Further, a supervisor could be appointed by the
Nevada Gaming Commission to operate a licensed subsidiary's gaming
establishment and, under specified circumstances, earnings generated during
the supervisor's appointment, except for the reasonable rental value of the
premises, could be forfeited to the State of Nevada. Limitation, conditioning
or suspension of any gaming license of a licensed subsidiary and the
appointment of a supervisor could, or revocation of any gaming license would,
have a material adverse effect on our gaming operations.

   Any beneficial holder of our common stock, or any of our other voting
securities, regardless of the number of shares owned, may be required to file
an application, be investigated and have that person's suitability as a
beneficial holder of our voting securities determined if the Nevada Gaming
Commission has reason to believe that the ownership would otherwise be
inconsistent with the declared policies of the State of Nevada. The applicant
must pay all costs of the investigation incurred by the Nevada Gaming
Authorities in conducting any investigation.

   The Nevada Gaming Control Act requires any person who acquires a beneficial
ownership of more than 5% of Mandalay's voting securities to report the
acquisition to the Nevada Gaming Commission. The Nevada Gaming Control Act
requires that beneficial owners of more than 10% of Mandalay's voting
securities apply to the Nevada Gaming Commission for a finding of suitability
within thirty days after the Chairman of the Nevada State Gaming Control Board
mails the written notice requiring such filing. An "institutional investor,"
as defined in the Nevada Act, which acquires beneficial ownership of more than
10%, but not more than 15%, of Mandalay's voting securities may apply to the
Nevada Gaming Commission for a waiver of a finding of suitability if the
institutional investor holds Mandalay's voting securities for investment
purposes only. An institutional investor will be deemed to hold Mandalay's
voting securities for investment purposes if it acquired and holds Mandalay's
voting securities 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 Mandalay's board of
    directors;

  . any change in Mandalay's corporate charter, bylaws, management, policies
    or operations, or any of its gaming affiliates; or

  . any other action which the Nevada Gaming Commission finds to be
    inconsistent with holding Mandalay's voting securities for investment
    purposes only.

                                      14
<PAGE>

   Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include:

  . voting on all matters voted on by stockholders;

  . 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

  . other activities as the Nevada Gaming Commission may determine to be
    consistent with investment intent.

   If the beneficial holder of Mandalay's voting securities who must be found
suitable is a corporation, partnership, limited partnership, limited liability
company or trust, it must submit detailed business and financial information
including a list of beneficial owners. The applicant is required to pay all
costs of investigation.

   Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Gaming
Commission or by the Chairman of the Nevada State Gaming Control 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 Mandalay's voting securities beyond the period of time as may be
prescribed by the Nevada Gaming Commission may be guilty of a criminal
offense. Mandalay will be 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 it or a licensed subsidiary, it:

  . pays that person any dividend or interest upon any of Mandalay's voting
    securities;

  . allows that person to exercise, directly or indirectly, any voting right
    conferred through securities held by that person;

  . pays remuneration in any form to that person for services rendered or
    otherwise; or

  . fails to pursue all lawful efforts to require the unsuitable person to
    relinquish the voting securities including, if necessary, the immediate
    purchase of the voting securities for cash at fair market value.

   Additionally, the Clark County Liquor and Gaming Licensing Board has the
authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming licensee.

   The Nevada Gaming Commission may, in its discretion, require the holder of
any debt security of a registered publicly traded corporation to file
applications, be investigated and be found suitable to own the debt security
of the registered corporation. If the Nevada Gaming Commission determines that
a person is unsuitable to own the security, then under the Nevada Gaming
Control Act, the registered publicly traded corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the
Nevada Gaming Commission, it:

  . pays to the unsuitable person any dividend, interest or any distribution
    whatsoever;

  . recognizes any voting right by the unsuitable person in connection with
    the securities;

  . pays the unsuitable person remuneration in any form; or

  . makes any payment to the unsuitable person by way of principal,
    redemption, conversion, exchange, liquidation or similar transaction.

   Mandalay is required to maintain a current stock ledger in Nevada which may
be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be
required to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make the disclosure may be grounds for finding the
record holder unsuitable. Mandalay is also required to render maximum
assistance in determining the identity of the beneficial owner of any of our
voting securities. The

                                      15
<PAGE>

Nevada Gaming Commission has the power to require our stock certificates to
bear a legend indicating that the securities are subject to the Nevada Gaming
Control Act. To date, the Nevada Gaming Commission has not imposed that
requirement on us.

   Mandalay may not make a public offering of its securities without the prior
approval of the Nevada Gaming Commission if it intends to use the securities
or the proceeds from the offering to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for those
purposes or for similar transactions. On January 25, 2001, the Nevada Gaming
Commission granted Mandalay prior approval to make public offerings for a
period of two years, subject to some conditions, which we refer to as the
"shelf approval." The shelf approval also applies to any company that Mandalay
wholly owns which is a publicly traded corporation or would become a publicly
traded corporation pursuant to a public offering. The shelf approval also
includes approval for our registered and licensed subsidiaries to guarantee
any security issued by, and to hypothecate their assets to secure the payment
or performance of any obligations evidenced by a security issued by, Mandalay
or an affiliate in a public offering under the shelf registration. The shelf
approval also includes approval to place restrictions upon the transfer of and
enter into agreements not to encumber the equity securities of the licensed
subsidiaries, which we refer to as "stock restrictions." The shelf approval,
however, may be rescinded for good cause without prior notice upon the
issuance of an interlocutory stop order by the Chairman of the Nevada State
Gaming Control Board. The shelf approval does not constitute a finding,
recommendation or approval of the Nevada Gaming Authorities as to the accuracy
or adequacy of the prospectus or other disclosure document by which securities
are offered or the investment merits of such securities.

   Mandalay must obtain prior approval of the Nevada Gaming Commission with
respect to a change in control through:

  . merger;

  . consolidation;

  . stock or asset acquisitions;

  . management or consulting agreements; or

  . any act or conduct by a person whereby the person obtains control of
    Mandalay.

   Entities seeking to acquire control of a registered publicly traded
corporation must satisfy the Nevada State Gaming Control Board and Nevada
Gaming Commission in a variety of stringent standards before assuming control
of the registered corporation. The Nevada Gaming Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.

   The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licenses, and registered publicly-traded
corporations that are affiliated with those operations, may be injurious to
stable and productive corporate gaming. The Nevada Gaming 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:

  . assure the financial stability of corporate gaming operators and their
    affiliates;

  . preserve the beneficial aspects of conducting business in the corporate
    form; and

  . promote a neutral environment for the orderly governance of corporate
    affairs.

   Approvals may be required from the Nevada Gaming Commission before Mandalay
can make exceptional repurchases of voting securities above their current
market price 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 our board of directors in response to a tender
offer made directly to its stockholders for the purpose of acquiring control
of Mandalay.

                                      16
<PAGE>

   License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the licensed subsidiaries respective operations
are conducted. Depending upon the particular fee or tax involved, these fees
and taxes are payable either monthly, quarterly or annually and are based upon
either:

  . a percentage of the gross revenues received;

  . the number of gaming devices operated; or

  . the number of table games operated.

   A casino entertainment tax is also paid by casino operations where
entertainment is furnished in connection with the selling or serving of food
or refreshments or the selling of merchandise. Nevada corporate licensees that
hold a license as an operator of a slot machine route, or a manufacturer's or
distributor's license, also pay fees and taxes to the State of Nevada. The
licensed subsidiaries currently pay monthly fees to the Nevada Gaming
Commission equal to a maximum of 6.25% of gross revenues.

   Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with those persons (collectively,
"licensees"), and who proposes to become involved in a gaming venture outside
of Nevada, is required to deposit with the Nevada State Gaming Control Board,
and thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada State Gaming Control Board of the
licensee's participation in such foreign gaming. The revolving fund is subject
to increase or decrease in the discretion of the Nevada Gaming Commission.
Thereafter, licensees are required to comply with the reporting requirements
imposed by the Nevada Gaming Control Act. A licensee is also subject to
disciplinary action by the Nevada Gaming Commission if it:

  . knowingly violates any laws of the foreign jurisdiction pertaining to the
    foreign gaming operation;

  . fails to conduct the foreign gaming operation in accordance with the
    standards of honesty and integrity required of Nevada gaming operations;

  . engages in activities or enters into associations that are harmful to the
    State of Nevada or its ability to collect gaming taxes and fees; or

  . employs, contracts with or associates with a person in the foreign
    operation who has been denied a license or finding of suitability in
    Nevada on the ground of personal unsuitability.

   The sale of alcoholic beverages at establishments operated by a licensed
subsidiary is subject to licensing, control and regulation by applicable local
regulatory agencies. All licenses are revocable and are not transferable. The
agencies involved have full power to limit, condition, suspend or revoke any
license, and any disciplinary action could, and revocation would, have a
material adverse affect upon the operations of the licensed subsidiary.

 Mississippi Gaming Laws

   Mandalay conducts its Mississippi gaming operations through a Mississippi
subsidiary, Circus Circus Mississippi, Inc. ("CCMI"), which owns and operates
the Gold Strike Casino Resort in Tunica County, Mississippi. The ownership and
operation of casino facilities in Mississippi are subject to extensive state
and local regulation, but primarily the licensing and regulatory control of
the Mississippi Gaming Commission and the Mississippi State Tax Commission.

   The Mississippi Gaming Control Act, which legalized dockside casino gaming
in Mississippi, was enacted on June 29, 1990. Although not identical, the
Mississippi Gaming Control Act is similar to the Nevada Gaming Control Act.
Effective October 29, 1991, the Mississippi Gaming Commission adopted
regulations in furtherance of the Mississippi Gaming Control Act (the
"regulations"), which are also similar in many respects to the Nevada gaming
regulations.

                                      17
<PAGE>

   The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to:

  . prevent unsavory or unsuitable persons from having any direct or indirect
    involvement with gaming at any time or in any capacity;

  . establish and maintain responsible accounting practices and procedures;

  . maintain effective control over the financial practices of licensees,
    including establishing minimum procedures for internal fiscal affairs and
    safeguarding of assets and revenues, providing reliable record keeping
    and making periodic reports to the Mississippi Gaming Commission;

  . prevent cheating and fraudulent practices;

  . provide a source of state and local revenues through taxation and
    licensing fees; and

  . ensure that gaming licensees, to the extent practicable, employ
    Mississippi residents.

   The regulations are subject to amendment and interpretation by the
Mississippi Gaming Commission. Changes in Mississippi law or the regulations
or the Mississippi Gaming Commission's interpretations thereof may limit or
otherwise materially affect the types of gaming that may be conducted, and
could have a material adverse affect on Mandalay and CCMI's Mississippi gaming
operations.

   The Mississippi Gaming Control Act provides for legalized dockside gaming
at the discretion of the 14 counties that either border the Gulf Coast or the
Mississippi River, but only if the voters in these counties have not voted to
prohibit gaming in that county. As of April 1, 2001, dockside gaming was
permissible in nine of the 14 eligible counties in the state and gaming
operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren
and Washington counties. Under Mississippi law, gaming vessels must be located
on the Mississippi River or on navigable waters in eligible counties along the
Mississippi River, or in the waters of the State of Mississippi lying south of
the state in eligible counties along the Mississippi Gulf Coast. The law
permits unlimited stakes gaming on permanently moored vessels on a 24-hour
basis and does not restrict the percentage of space which may be utilized for
gaming. There are no limitations on the number of gaming licenses which may be
issued in Mississippi. The legal age for gaming in Mississippi is 21.

   Mandalay and its Mississippi licensee subsidiary CCMI are subject to the
licensing and regulatory control of the Mississippi Gaming Commission.
Mandalay is registered under the Mississippi Gaming Control Act as a publicly-
traded holding company of CCMI and is required to periodically submit detailed
financial, operating and other reports to the Mississippi Gaming Commission
and furnish any other information which the Mississippi Gaming Commission may
require. If we are unable to satisfy the registration requirements of the
Mississippi Gaming Control Act, Mandalay and CCMI cannot own or operate gaming
facilities in Mississippi. CCMI must maintain a gaming license from the
Mississippi Gaming Commission to operate a casino in Mississippi. The
Mississippi Gaming Commission issues the licenses. CCMI also is required to
periodically submit detailed financial, operating and other reports to the
Mississippi Gaming Commission and the Mississippi State Tax Commission and to
furnish any other information required thereby.

   Gaming licenses require the periodic payment of fees and taxes and are not
transferable. Gaming licenses are issued for a maximum term of three years and
must be renewed periodically thereafter. CCMI received its Mississippi gaming
license on August 18, 1994 and renewals on August 19, 1996, August 20, 1998
and August 21, 2000. No person may become a stockholder of or receive any
percentage of profits from a licensed subsidiary of a holding company without
first obtaining licenses and approvals from the Mississippi Gaming Commission.

   Certain of Mandalay's officers, directors and employees and the officers,
directors and key employees of CCMI who are actively and directly engaged in
the administration or supervision of gaming in Mississippi must be found
suitable or be licensed by the Mississippi Gaming Commission. Mandalay
believes it and CCMI have applied for all necessary findings of suitability
with respect to these persons, although the Mississippi Gaming

                                      18
<PAGE>

Commission, in its discretion, may require additional persons to file
applications for findings of suitability. In addition, any person having a
material relationship or involvement with Mandalay or CCMI may be required to
be found suitable, in which case those persons must pay the costs and fees
associated with the investigation. A finding of suitability requires
submission of detailed personal and financial information followed by a
thorough investigation. There can be no assurance that a person who is subject
to a finding of suitability will be found suitable by the Mississippi Gaming
Commission. The Mississippi Gaming Commission may deny an application for a
finding of suitability for any cause that it deems reasonable. Findings of
suitability must be periodically renewed.

   Changes in certain licensed positions must be reported to the Mississippi
Gaming Commission. In addition to its authority to deny an application for a
finding of suitability, the Mississippi Gaming Commission has jurisdiction to
disapprove a change in a licensed position. The Mississippi Gaming Commission
has the power to require Mandalay and CCMI to suspend or dismiss officers,
directors and other key employees or sever relationships with other persons
who refuse to file appropriate applications or whom the authorities find
unsuitable to act in their capacities.

   Employees associated with gaming must obtain work permits that are subject
to immediate suspension. The Mississippi Gaming Commission will refuse to
issue a work permit to a person convicted of a felony and it may refuse to
issue a work permit to a gaming employee if the employee has committed various
misdemeanors or knowingly violated the Mississippi Gaming Control Act or for
any other reasonable cause.

   At any time, the Mississippi Gaming Commission has the power to investigate
and require a finding of suitability of any of Mandalay's record or beneficial
stockholders, regardless of the percentage of ownership. Mississippi law
requires any person who acquires more than 5% of the common stock of a
publicly-traded corporation registered with the Mississippi Gaming Commission
to report the acquisition to the Mississippi Gaming Commission, and that
person may be required to be found suitable. Also, any person who becomes a
beneficial owner of more than 10% of the common stock of such a company, as
reported to the Mississippi Gaming Commission, must apply for a finding of
suitability by the Commission and must pay the costs and fees that the
Mississippi Gaming Commission incurs in conducting the investigation. The
Mississippi Gaming Commission has generally exercised its discretion to
require a finding of suitability of any beneficial owner of more than 5% of a
registered public company's common stock. However, the Mississippi Gaming
Commission has adopted a policy that may permit institutional investors to own
beneficially up to 15% of a registered public company's common stock without a
finding of suitability.

   Under certain circumstances, an "institutional investor," as defined by the
Mississippi Gaming Commission's Policy on Findings of Suitability of
Institutional Shareholders (adopted January 20, 2000), which acquires more
than 10% but not more than 15% of a registered public company's voting
securities, may apply to the Executive Director of the Mississippi Gaming
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 registered public company, any change
in the registered public company's corporate charter, bylaws, management,
policies or operations of the registered public company or any of its gaming
affiliates, or any other action which the Mississippi Gaming Commission finds
to be inconsistent with holding the registered public 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:

  . voting, directly or indirectly through the delivery of a proxy furnished
    by the board of directors, on all matters voted upon by the holders of
    such voting securities;

  . serving as a member of any committee of creditors or security holders;

  . nominating any candidate for election or appointment to the board of
    directors in connection with a debt restructuring;

                                      19
<PAGE>

  . accepting appointment or election (or having a representative accept
    appointment or election) as a member of the board of directors in
    connection with a debt restructuring and serving in that capacity until
    the conclusion of the member's term;

  . 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

  . such other activities as the Mississippi Gaming Commission may determine
    to be consistent with such investment intent.

   If a stockholder 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 Mississippi Gaming Commission may at any time
dissolve, suspend, condition, limit or restrict a finding of suitability to
own Mandalay's equity interests for any cause it deems reasonable.

   Mandalay may be required to disclose to the Mississippi Gaming Commission
upon request the identities of the holders of any debt or other securities. In
addition, under the Mississippi Gaming Control Act the Mississippi Gaming
Commission may, in its discretion:

  . require holders of debt securities of registered corporations to file
    applications;

  . investigate the holders; and

  . require the holders to be found suitable to own the debt securities.

   Although the Mississippi Gaming Commission generally does not require the
individual holders of obligations such as notes to be investigated and found
suitable, the Mississippi Gaming Commission retains the discretion to do so
for any reason, including but not limited to a default, or where the holder of
the debt instrument exercises a material influence over the gaming operations
of the entity in question. Any holder of debt or equity securities required to
apply for a finding of suitability must pay all investigative fees and costs
of the Mississippi Gaming Commission in connection with the investigation.

   Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi Gaming
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of Mandalay's securities
beyond the time that the Mississippi Gaming Commission prescribes, may be
guilty of a misdemeanor. Mandalay is subject to disciplinary action if, after
receiving notice that a person is unsuitable to be a stockholder, a holder of
debt securities or to have any other relationship with Mandalay or CCMI,
Mandalay:

  . pays the unsuitable person any dividend, interest or other distribution
    upon its voting securities;

  . recognizes the exercise, directly or indirectly, of any voting rights
    conferred through such securities held by the unsuitable person;

  . pays the unsuitable person any remuneration in any form for services
    rendered or otherwise, except in limited and specific circumstances; or

  . fails to pursue all lawful efforts to require the unsuitable person to
    divest himself of the securities, including, if necessary, the immediate
    purchase of the securities for cash at a fair market value.

   CCMI must maintain in Mississippi a current ledger with respect to the
ownership of its equity securities and Mandalay must maintain in Mississippi a
current list of its stockholders which must reflect the record ownership of
each outstanding share of any equity security issued by Mandalay. The ledger
and stockholder lists must be available for inspection by the Mississippi
Gaming Commission at any time. If any of Mandalay's 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 Mississippi Gaming
Commission. A failure to make that disclosure may be grounds for finding the
record holder unsuitable. Mandalay must also render maximum assistance in
determining the identity of the beneficial owner.

                                      20
<PAGE>

   The Mississippi Gaming Control Act requires that the certificates
representing securities of a registered publicly-traded corporation bear a
legend to the general effect that the securities are subject to the
Mississippi Gaming Control Act and the regulations of the Mississippi Gaming
Commission. The Mississippi Gaming Commission has granted Mandalay a waiver of
this legend requirement. The Mississippi Gaming Commission has the power to
impose additional restrictions on Mandalay and the holders of its securities
at any time.

   Substantially all loans, leases, sales of securities and similar financing
transactions by a licensed gaming subsidiary must be reported to or approved
by the Mississippi Gaming Commission. A licensed gaming subsidiary may not
make a public offering of its securities, but may pledge or mortgage casino
facilities if it obtains the prior approval of the Mississippi Gaming
Commission. Mandalay may not make a public offering of its securities without
the prior approval of the Mississippi Gaming Commission if any part of the
proceeds of the offering is to be used to finance the construction,
acquisition or operation of gaming facilities in Mississippi or to retire or
extend obligations incurred for those purposes. The approval, if given, does
not constitute a recommendation or approval of the accuracy or adequacy of the
prospectus or the investment merits of the securities subject to the offering.
On February 17, 2000, the Mississippi Gaming Commission granted Mandalay a
waiver of the prior approval requirement for its securities offerings for a
period of two years, subject to certain conditions. The waiver may be
rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Executive Director of the Mississippi Gaming
Commission.

   Under the regulations of the Mississippi Gaming Commission, CCMI may not
guarantee a security issued by Mandalay pursuant to a public offering, or
pledge its assets to secure payment or performance of the obligations
evidenced by the security issued by Mandalay, without the prior approval of
the Mississippi Gaming Commission. Similarly, Mandalay may not pledge the
stock or other ownership interests of CCMI, nor may the pledgee of these
ownership interests foreclose on the pledge, without the prior approval of the
Mississippi Gaming Commission. Moreover, restrictions on the transfer of an
equity security issued by CCMI and agreements not to encumber these securities
are ineffective without the prior approval of the Mississippi Gaming
Commission. The waiver of the prior approval requirement for Mandalay's
securities offerings received from the Mississippi Gaming Commission on
February 17, 2000 includes a waiver of the prior approval requirement for such
guarantees, pledges and restrictions of CCMI, subject to certain conditions.

   Mandalay cannot change its control through merger, consolidation,
acquisition of assets, management or consulting agreements or any form of
takeover without the prior approval of the Mississippi Gaming Commission. The
Mississippi Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the transaction.

   The Mississippi Legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other corporate
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly-traded that are affiliated with those
licensees, may be injurious to stable and productive corporate gaming. The
Mississippi Gaming Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Mississippi's gaming industry and to further Mississippi's policy to:

  . assure the financial stability of corporate gaming operators and their
    affiliates;

  . preserve the beneficial aspects of conducting business in the corporate
    form; and

  . promote a neutral environment for the orderly governance of corporate
    affairs.

   Mandalay may be required to obtain approval from the Mississippi Gaming
Commission before it may make exceptional repurchases of voting securities in
excess of the current market price of its common stock (commonly called
"greenmail") or before it may consummate a corporate acquisition opposed by
management. The regulations will also require prior approval by the
Mississippi Gaming Commission if Mandalay adopts a plan of recapitalization
proposed by its board of directors opposing a tender offer made directly to
the stockholders for the purpose of acquiring control of Mandalay.

                                      21
<PAGE>

   Neither Mandalay nor CCMI may engage in gaming activities in Mississippi
while Mandalay, CCMI and/or persons found suitable to be associated with the
gaming license of CCMI conduct gaming operations outside of Mississippi
without approval of the Mississippi Gaming Commission. The Mississippi Gaming
Commission may require means for it to have access to information concerning
Mandalay's and Mandalay's affiliates' out-of-state gaming operations. Mandalay
received waivers of foreign gaming approval from the Mississippi Gaming
Commission for the conduct of gaming operations in Nevada, Indiana, Louisiana,
Illinois, New Jersey, Michigan and Ontario, Canada, but may be required to
obtain the approval or a waiver of such approval from the Mississippi Gaming
Commission before engaging in any additional future gaming operations outside
of Mississippi.

   If the Mississippi Gaming Commission decides that a licensed gaming
subsidiary violated a gaming law or regulation, the Mississippi Gaming
Commission could limit, condition, suspend or revoke the license of the
subsidiary. In addition, we, the licensed subsidiary and the persons involved
could be subject to substantial fines for each separate violation. A violation
under any of Mandalay's other operating subsidiaries' gaming licenses may be
deemed a violation of CCMI's gaming license. Because of a violation, the
Mississippi Gaming Commission could attempt to appoint a supervisor to operate
the casino facilities. Limitation, conditioning or suspension of CCMI's gaming
license or Mandalay's registration as a publicly-traded holding company of
CCMI, or the appointment of a supervisor could, and revocation of any gaming
license or registration would, materially adversely affect Mandalay's
Mississippi gaming operations.

   A licensed gaming subsidiary must pay license fees and taxes, computed in
various ways depending on the type of gaming involved, to the State of
Mississippi and to the county or city in which the licensed gaming subsidiary
conducts operations. Depending upon the particular fee or tax involved, these
fees and taxes are payable either monthly, quarterly or annually and are based
upon:

  . a percentage of the gross gaming revenues received by the casino
    operation;

  . the number of slot machines operated by the casino; and

  . the number of table games operated by the casino.

   The license fee payable to the State of Mississippi is based upon "gaming
receipts," generally defined as gross receipts less payouts to customers as
winnings, and equals:

  . 4% of gaming receipts of $50,000 or less per month;

  . 6% of gaming receipts over $50,000 and less than $134,000 per month; and

  . 8% of gaming receipts over $134,000 per month.

   These license fees are allowed as a credit against our Mississippi income
tax liability for the year paid. The gross revenue fee imposed by the
Mississippi cities and counties in which casino operations are located is in
addition to the fees payable to the State of Mississippi and equals
approximately 4% of the gaming receipts.

   The Mississippi Gaming Commission adopted a regulation in 1994 requiring as
a condition of licensure or license renewal that a gaming establishment's plan
include a 500-car parking facility in close proximity to the casino complex
and infrastructure facilities which will amount to at least 25% of the casino
cost. Infrastructure facilities are defined in the regulation to include a
hotel with at least 250 rooms, theme park, golf course and other similar
facilities. With the opening of its resort hotel and other amenities, CCMI is
in compliance with this requirement. On January 21, 1999, the Mississippi
Gaming Commission adopted an amendment to this regulation which increased the
infrastructure requirement to 100% from the existing 25%; however, the
regulation grandfathers existing licensees and applies only to new casino
projects and casinos that are not operating at the time of acquisition or
purchase, and would therefore not apply to CCMI.

   Both the local jurisdiction and the Alcoholic Beverage Control Division of
the Mississippi State Tax Commission license, control and regulate the sale of
alcoholic beverages by CCMI. The Gold Strike Casino

                                      22
<PAGE>

Resort owned and operated by CCMI is in an area designated as a special resort
area, which allows casinos located therein to serve alcoholic beverages on a
24-hour basis. The Alcohol Beverage Control Division has the full power to
limit, condition, suspend or revoke any license for the service of alcoholic
beverages or to place a licensee on probation with or without conditions. Any
disciplinary action could, and revocation would, have a material adverse
affect upon the casino's operations. Mandalay's and CCMI's key officers and
managers must be investigated by the Alcoholic Beverage Control Division in
connection with its liquor permits and changes in key positions must be
approved by the Alcoholic Beverage Control Division.

 Illinois Gaming Laws

   We are subject to the jurisdiction of the Illinois gaming authorities as a
result of our 50% interest in Grand Victoria Riverboat Casino based in Elgin,
Illinois.

   In February 1990, the State of Illinois legalized riverboat gambling. The
Illinois Riverboat Gambling Act (the "Illinois Act") authorizes the five-
member Illinois Gaming Board (the "Illinois Board") to issue up to ten
riverboat gaming owners' licenses on navigable streams within or forming a
boundary of the State of Illinois except for Lake Michigan and any waterway in
Cook County, which includes Chicago. Pursuant to the initial Illinois Act, a
licensed owner who holds greater than a 10% interest in one riverboat
operation, could hold no more than a 10% interest in any other riverboat
operation. In addition, the initial Illinois Act restricted the location of
certain of the ten owners' licenses. Four of the licenses were to be located
on the Mississippi River, one license was to be at a location on the Illinois
River south of Marshall County and one license had to be located on the Des
Plaines River in Will County. The remaining licenses were not restricted as to
location. Currently, nine owner's licenses are in operation in Alton, Aurora,
East Peoria, East St. Louis, Elgin, Metropolis, Rock Island and two licenses
in Joliet. The tenth license, which was initially granted to an operator in
East Dubuque, was not renewed by the Illinois Board and has been the subject
of on-going litigation.

   Furthermore, under the initial Illinois Act, no gambling could be conducted
while a riverboat was docked. A gambling excursion could last no more than
four hours, and a gaming excursion was deemed to have started when the first
passenger boarded a riverboat. Gaming could continue during passenger boarding
for a period of up to 30 minutes. Gaming was also allowed for a period of up
to 30 minutes after the gangplank or its equivalent was lowered, thereby
allowing passengers to exit the riverboat. During the 30-minute exit time
period, new passengers were not allowed to board the riverboat. Although
riverboats were mandated to cruise, there were certain exceptions. If a
riverboat captain reasonably determined that either it was unsafe to transport
passengers on the waterway due to inclement weather or the riverboat had been
rendered temporarily inoperable by unforeseeable mechanical or structural
difficulties or river icing, the riverboat could remain dockside or return to
the dock. In those situations, a gaming excursion could begin or continue
while the gangplank or its equivalent was raised and remained raised, in which
event the riverboat was not considered docked. If a gaming excursion had to
begin or continue with the gangplank or its equivalent raised, and the
riverboat did not leave the dock, entry of new patrons on to the riverboat was
prohibited until the completion of the excursion.

   In June of 1999, amendments to the Illinois Act were passed by the
legislature and signed into law by the Governor. The amended Illinois Act
redefined the conduct of gaming in the state. Pursuant to the amended Illinois
Act, riverboats can conduct gambling without cruising and passengers can enter
and leave a riverboat at any time. In addition, riverboats may now be located
upon any water within Illinois and not just navigable waterways. There is no
longer any prohibition of a riverboat being located in Cook County. Riverboats
are now defined as self-propelled excursion boats or permanently moored
barges. The amended Illinois Act requires that only three, rather than four
owner's licenses, be located on the Mississippi River. The 10% ownership
prohibition has also been removed. Therefore, subject to certain Illinois
Board rules, individuals or entities could own more than one riverboat
operation.

   The amended Illinois Act also allows for the relocation of a riverboat home
dock. A licensee that was not conducting riverboat gambling on January 1,
1998, may apply to the Illinois Board for renewal and approval of relocation
to a new home dock and the Illinois Board shall grant the application and
approval of the new home

                                      23
<PAGE>

dock upon the licensee providing to the Illinois Board authorization from the
new dockside community. Pursuant to the amended Illinois Act, the former owner
and operator of the East Dubuque riverboat has applied for renewal of its
license and to relocate its operation to Rosemont, Illinois. The Illinois
Board recently voted to deny this renewal application. Pursuant to Illinois
Board rules, this entity filed a Request for Hearing, thereby challenging the
Illinois Board's action. Therefore, this license may be the subject of on-
going litigation. Any licensee that relocates in accordance with the
provisions of the amended Illinois Act, must attain a level of at least 20%
minority ownership of such a gaming operation.

   The constitutionality of the amended Illinois Act was challenged. The
lawsuit was dismissed because the court determined that the plaintiff lacked
standing to challenge the amended act. It is still unknown whether the
plaintiff can or will timely appeal the circuit court decision. There is no
assurance that the circuit court decision will be affirmed on appeal. If there
is on-going litigation, there is no assurance that the amended Illinois Act
will be upheld as constitutional. If the amended Illinois Act is deemed
unconstitutional, all of the new provisions would no longer be in effect.
Specifically, in that situation, riverboats would have to return to cruising
in order to conduct gaming.

   The Illinois Act strictly regulates the facilities, persons, associations
and practices related to gaming operations. The Illinois Act grants the
Illinois Board specific powers and duties, and all other powers necessary and
proper to fully and effectively execute the Illinois Act for the purpose of
administering, regulating and enforcing the system of riverboat gaming. The
Illinois Board has authority over every person, association, corporation,
partnership and trust involved in riverboat gaming operations in the State of
Illinois.

   The Illinois Act requires the owner of a riverboat gaming operation to hold
an owner's license issued by the Illinois Board. Each owner's license permits
the holder to own up to two riverboats, however, gaming participants are
limited to 1,200 for any owner's license. The number of gaming participants
will be determined by the number of gaming positions available. Gaming
positions are counted as follows:

  .  electronic gaming devices positions will be determined as 90% of the
     total number of devices available for play;

  .  craps tables will be counted as having ten gaming positions; and

  .  games utilizing live gaming devices, except for craps, will be counted
     as having five gaming positions.

   Each owner's license initially runs for a period of three years.
Thereafter, the license must be renewed annually. Under the amended Illinois
Act, the Board may renew an owner's license for up to four years. An owner
licensee is eligible for renewal upon payment of the applicable fee and a
determination by the Illinois Board that the licensee continues to meet all of
the requirements of the Illinois Act and Illinois Board rules. The owner's
license for Grand Victoria Riverboat Casino was issued in October 1994 and was
valid for three years. Since that time, the license has been renewed annually,
and in October 2000, the license was renewed for four years. An ownership
interest in an owner's license may not be transferred or pledged as collateral
without the prior approval of the Illinois Board.

   Pursuant to the amended Illinois Act, which lifted the 10% ownership
prohibition, the Illinois Board established certain rules to effectuate this
statutory change. In deciding whether to approve direct or indirect ownership
or control of an owner's license, the Illinois Board shall consider the impact
of any economic concentration of the ownership or control. No direct or
indirect ownership or control may be approved which will result in undue
economic concentration of the ownership of a riverboat gambling operation in
Illinois. Undue economic concentration means that a person or entity would
have actual or potential domination of riverboat gambling in Illinois
sufficient to:

  .  substantially impede or suppress competition among holders of owner's
     licenses;

  .  adversely impact the economic stability of the riverboat casino industry
     in Illinois; or

  .  negatively impact the purposes of the Illinois Act, including tourism,
     economic development, benefits to local communities and state and local
     revenues.

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<PAGE>

   The Illinois Board will consider the following criteria in determining
whether the approval of the issuance, transfer or holding of a license will
create undue economic concentration:

  .  percentage share of the market presently owned or controlled by the
     person or entity;

  .  estimated increase in the market share if the person or entity is
     approved to hold the owner's license;

  .  relative position of other persons or entities that own or control
     owner's licenses in Illinois;

  .  current and projected financial condition of the riverboat gaming
     industry;

  .  current market conditions, including proximity and level of competition,
     consumer demand, market concentration and any other relevant
     characteristics of the market;

  .  whether the license to be approved has separate organizational
     structures or other independent obligations;

  .  potential impact on the projected future growth and development of the
     riverboat gambling industry, the local communities in which licenses are
     located and the State of Illinois;

  .  barriers to entry into the riverboat gambling industry and if the
     approval of the license will operate as a barrier to new companies and
     individuals desiring to enter the market;

  .  whether the approval of the license is likely to result in enhancing the
     quality and customer appeal of products and services offered by
     riverboat casinos in order to maintain or increase their respective
     market shares;

  .  whether a restriction on the approval of the additional license is
     necessary in order to encourage and preserve competition in casino
     operations; and

  .  any other relevant information.

   The Illinois Act does not limit the maximum bet or per patron loss. Minimum
and maximum wagers on games are set by the owner licensee. Wagering may not be
conducted with money or other negotiable currency. No person under the age of
21 is permitted to wager and wagers may only be received from a person present
on the riverboat. With respect to electronic gaming devices, the payout
percentage may not be less than 80% nor more than 100%.

   An admission tax is imposed on the owner of a riverboat operation. Under the
amended Illinois Act, a $2.00 admission tax is imposed for each admission to a
riverboat casino. Additionally, a wagering tax is imposed on the adjusted gross
receipts, as defined in the Illinois Act, of a riverboat operation. As of
January 1, 1998, the wagering tax is as follows:

  .  15% of adjusted gross receipts up to and including $25,000,000;

  .  20% of adjusted gross receipts in excess of $25,000,000 but not
     exceeding $50,000,000;

  .  25% of adjusted gross receipts in excess of $50,000,000 but not
     exceeding $75,000,000;

  .  30% of adjusted gross receipts in excess of $75,000,000 but not
     exceeding $100,000,000; and

  .  35% of adjusted gross receipts in excess of $100,000,000.

   The owner licensee is required, on a daily basis, to wire the wagering tax
payment to the Illinois Board.

   In addition to owner's licenses, the Illinois Board also requires licensing
for all vendors of gaming supplies and equipment and for all employees of a
riverboat gaming operation. The Illinois Board is authorized to conduct
investigations into the conduct of gaming and into alleged violations of the
Illinois Act and the Illinois Board rules. Employees and agents of the Illinois
Board have access to and may inspect any facilities relating to the riverboat
gaming operation.

                                       25
<PAGE>

   A holder of any license is subject to imposition of fines, suspension or
revocation of such license, or other action for any act or failure to act by
himself or his agents or employees, that is injurious to the public health,
safety, morals, good order and general welfare of the people of the State of
Illinois, or that would discredit or tend to discredit the Illinois gaming
industry or the State of Illinois. Any riverboat operations not conducted in
compliance with the Illinois Act may constitute an illegal gaming place and
consequently may be subject to criminal penalties, including possible seizure,
confiscation and destruction of illegal gaming devices and seizure and sale of
riverboats and dock facilities to pay any unsatisfied judgment that may be
recovered and any unsatisfied fine that may be levied. The Illinois Act also
provides for civil penalties, equal to the amount of gross receipts derived
from wagering on the gaming, whether unauthorized or authorized, conducted on
the day of any violation. The Illinois Board may revoke or suspend licenses,
as the Illinois Board may see fit and in compliance with applicable laws of
the State of Illinois regarding administrative procedures and may suspend an
owner's license, without notice or hearing, upon a determination that the
safety or health of patrons or employees is jeopardized by continuing a
riverboat's operation. The suspension may remain in effect until the Illinois
Board determines that the cause for suspension has been abated and it may
revoke the owner's license upon a determination that the owner has not made
satisfactory progress toward abating the hazard.

   If the Illinois Board has suspended, revoked or refused to renew the
license of an owner or if a riverboat gambling operation is closing and the
owner is voluntarily surrendering its owner's license, the Illinois Board may
petition the local circuit court in which the riverboat is situated for
appointment of a receiver. The circuit court shall have sole jurisdiction over
any and all issues pertaining to the appointment of a receiver. The Illinois
Board shall specify the specific powers, duties and limitations for the
receiver, including but not limited to the authority to:

  .  hire, fire, promote and discipline personnel and retain outside
     employees or consultants;

  .  take possession of any and all property, including but not limited to
     its books, records, papers;

  .  preserve and/or dispose of any and all property;

  .  continue and direct the gaming operations under the monitoring of the
     Board;

  .  discontinue and dissolve the operation;

  .  enter into and cancel contracts;

  .  borrow money and pledge, mortgage or otherwise encumber the property;

  .  pay all secured and unsecured obligations;

  .  institute or define actions by or on behalf of the holder of an Owner's
     license; and

  .  distribute earnings derived from gaming operations in the same manner as
     admission wagering taxes are distributed under Sections 12, 13 of the
     Riverboat Gambling Act.

   The Illinois Board shall submit at least three nominees to the court. The
nominees may be individuals or entities selected from an Illinois Board
approved list of pre-qualified receivers who meet the same criteria for a
finding of preliminary suitability for licensure under Illinois Board Rules,
Sections 3000.230(c)(2)(B) and (C). In the event that the Illinois Board seeks
the appointment of a receiver on a emergency basis, the Illinois Board shall
issue a Temporary Operating Permit to the receiver appointed by the court. A
receiver, upon appointment by the court, shall before assuming his or her
duties, execute and post the same bond as an owner's licensee pursuant to
Section 10 of the Illinois Act.

   The receiver shall function as an independent contractor, subject to the
direction of the court. However, the receiver shall also provide to the
Illinois Board regular reports and provide any information deemed necessary
for the Illinois Board to ascertain the receiver's compliance with all
applicable rules and laws. From time to time, the Illinois Board may, at its
sole discretion, report to the court on the receiver's level of compliance and
any other information deemed appropriate for disclosure to the court. The term
and compensation of the receiver

                                      26
<PAGE>

shall be set by the court. The receiver shall provide to the court and the
Illinois Board at least 30 days written notice of any intent to withdraw from
the appointment or to seek modification of the appointment. Except as
otherwise provided by action to the Illinois Board the gaming operation shall
be deemed a licensed operation subject to all rules of the Illinois Board
during the tenure of any receivership.

   The Illinois Board requires that a "Key Person" of an owner licensee submit
a Personal Disclosure or Business Entity Form and be investigated and approved
by the Illinois Board. The Illinois Board shall certify for each applicant for
or holder of an owner's license each position, individual or Business Entity
that is to be approved by the Board and maintain suitability as a Key Person.

   With respect to an applicant for or the holder of an owner's license, a Key
Person shall include:

  .  any Business Entity and any individual with an ownership interest or
     voting rights of more than 5% in the licensee or applicant and the
     trustee of any trust holding such ownership interest or voting rights;

  .  the directors of the licensee or applicant and its chief executive
     officer, president and chief operating officer or their functional
     equivalents; and

  .  all other individuals or Business Entities that, upon review of the
     applicant's or licensees Table of Organization, Ownership and Control
     the Board determines hold a position or a level of ownership, control or
     influence that is material to the regulatory concerns and obligations of
     the Illinois Board for the specified licensee or applicant.

   In order to assist the Illinois Board in its determination of Key Persons,
applicants for or holders of an owner's license must provide to the Illinois
Board a Table of Organization, Ownership and Control (the "Table"). The Table
must identify in sufficient detail the hierarchy of individuals and Business
Entities that, through direct or indirect means, manage, own or control the
interest and assets of the applicant or licensee holder. If a Business Entity
identified in the Table is a publicly traded company, the following
information must be provided in the Table:

  .  the name and percentage of ownership interest of each individual or
     Business Entity with ownership of more than 5% of the voting shares of
     the entity, to the extent this information is known or contained in
     Schedule 13D or 13G SEC filings;

  .  to the extent known, the names and percentage of interest of ownership
     of persons who are relatives of one another and who together (as
     individuals or through trusts) exercise control over or own more than
     10% of the voting shares of the entity; and

  .  any trust holding more than 5% ownership or voting interest in Mandalay,
     to the extent this information is known or contained in Schedule 13D or
     13G SEC filings.

   The Table may be disclosed under the Freedom of Information Act.

   Each owner licensee must provide a means for the economic disassociation of
a Key Person in the event such economic disassociation is required by an order
of the Illinois Board. Based upon findings from an investigation into the
character, reputation, experience, associations, business probity and
financial integrity of a Key Person, the Illinois Board may enter an order
upon the licensee or require the economic disassociation of the Key Person.

   Furthermore, each applicant or owner licensee must disclose the identity of
every person, association, trust or corporation having a greater than 1%
direct or indirect pecuniary interest in an owner licensee or in the riverboat
gaming operation with respect to which the license is sought. The Illinois
Board may also require an applicant or owner licensee to disclose any other
principal or investor and require the investigation and approval of these
individuals.

   The Illinois Board (unless the investor qualifies as an institutional
investor) requires a Personal Disclosure Form or a Business Entity Form from
any person or entity who or which, individually or in association with

                                      27
<PAGE>

others, acquires directly or indirectly, beneficial ownership of more than 5%
of any class of voting securities or non-voting securities convertible into
voting securities of a publicly-traded corporation which holds an ownership
interest in the holder of an owner's license. If the Illinois Board denies an
application for such a transfer and if no hearing is requested, the applicant
for the transfer of ownership interest must promptly divest those shares in
the publicly-traded parent corporation. The holder of an owner's license would
not be able to distribute profits to a publicly-traded parent corporation
until such shares have been divested. If a hearing is requested, the shares
need not be divested and profits may be distributed to a publicly-held parent
corporation pending the issuance of a final order from the Illinois Board.

   An institutional investor that individually or jointly with others,
cumulatively acquires, directly or indirectly, 5% or more of any class of
voting securities of a publicly-traded licensee or a licensee's publicly-
traded parent corporation shall, within no less than ten days after acquiring
these securities, notify the Administrator of the Board of such ownership and
shall provide any additional information as may be required. If an
institutional investor (as specified above) acquires 10% or more of any class
of voting securities of a publicly-traded licensee or a licensee's publicly-
traded parent corporation it shall file an Institutional Investor Disclosure
Form within 45 days after acquiring this level of ownership interest. The
owner licensee shall notify the Administrator as soon as possible after it
becomes aware that it or its parent is involved in an ownership acquisition by
an institutional investor. The institutional investor also has an obligation
to notify the Administrator of its ownership interest.

   In addition to Institutional Investor Disclosure Forms, certain other forms
may be required to be submitted to the Illinois Board. An owner-licensee must
submit a Marketing Agent Form to the Illinois Board for each Marketing Agent
with whom it intends to do business. A Marketing Agent is a person or entity,
other than a junketeer or an employee of a riverboat gaming operation, who is
compensated by the riverboat gaming operation in excess of $100 per patron per
trip for identifying and recruiting patrons. Key Persons of owner-licensees
must submit Trust Identification Forms for trusts, excluding land trusts, for
which they are a grantor, trustee or beneficiary each time such a trust
relationship is established, amended or terminated.

   Applicants for and holders of an owner's license are required to obtain
formal approval from the Illinois Board for changes in the following areas:

  . Key Persons;

  . type of entity;

  . equity and debt capitalization of the entity;

  . investors and/or debt holders;

  . source of funds;

  . applicant's economic development plan;

  . riverboat capacity or significant design change;

  . gaming positions;

  . anticipated economic impact; or

  . agreements, oral or written, relating to the acquisition or disposition
    of property (real or personal) of a value greater than $1 million.

   A holder of an owner's license is allowed to make distributions to its
stockholders only to the extent that the distribution would not impair the
financial viability of the gaming operation. Factors to be considered by the
licensee will include but not be limited to the following:

  . cash flow, casino cash and working capital requirements;

  . debt service requirements, obligations and covenants associated with
    financial instruments;

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<PAGE>

  . requirements for repairs and maintenance and capital improvements;

  . employment or economic development requirements of the Act; and

  . a licensee's financial projections.

   The Illinois Board may waive any licensing requirement or procedure
provided by rule if it determines that the waiver is in the best interests of
the public and the gaming industry. Also, the Illinois Board may, from time to
time, amend or change its rules.

   From time to time, various proposals have been introduced in the Illinois
legislature that, if enacted, would affect the taxation, regulation, operation
or other aspects of the gaming industry or Mandalay. Some of this legislation,
if enacted, could adversely affect the gaming industry or Mandalay. No
assurance can be given whether such or similar legislation will be enacted.

   Uncertainty exists regarding the Illinois gambling regulatory environment
due to limited experience in interpreting the Illinois Act.

 Michigan Gaming Laws

   Mandalay is subject to regulation by the Michigan Gaming Control Board
("Michigan Board") pursuant to the Michigan Gaming Control and Revenue Act
("Michigan Act") as a result of ownership of 53.5% of Detroit Entertainment,
L.L.C., a Michigan limited liability company, which operates MotorCity Casino.

   The qualification standards established by the Michigan Act and Rules are
very comprehensive. A burden of proof by "clear and convincing evidence" is
placed upon the applicant. The focus of these standards is suitability as to:

  . character;

  . reputation;

  . integrity;

  . business probity;

  . experience;

  . ability;

  . financial ability and responsibility; and

  . any other criteria considered appropriate by the Michigan Board.

   MotorCity Casino's casino license is a one-year license. The license will
be renewed by the Michigan Board on an annual basis if the Michigan Board
determines that MotorCity Casino continues to meet all requirements
established by the Michigan Act and Rules. MotorCity Casino has timely filed
its Casino License Annual Renewal Report with the Michigan Board. Action on
the license renewal is currently pending before the Michigan Board. The
Michigan Board staff has advised MotorCity Casino that its casino license
remains in effect while the Michigan Board completes its normal and customary
processing procedures for a casino license renewal. No assurances can be given
regarding when the Michigan Board will act on the license renewal or what
action the Michigan Board will take in connection with the license renewal.

   The Michigan Act permits the licensing and operation of up to three casinos
in any Michigan city that meets certain requirements. At the present time, the
only city in Michigan that meets these requirements is Detroit. To date, three
casino licenses have been issued.

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<PAGE>

   The Michigan Board is composed of five persons. It has the authority to:

  . enforce the provisions of the Michigan Act;

  . license casinos in accordance with the provisions of the Michigan Act;
    and

  . regulate all aspects of the operation of casinos licensed by the Michigan
    Board.

   The Michigan Board's jurisdiction extends to every person and business
entity involved in casino gaming operations governed by the Michigan Act and
Rules. The Michigan Act and Rules strictly regulate all aspects of the
ownership and operation of casinos licensed under the Michigan Act. This
includes regulation of:

  . all related buildings, facilities, bars, restaurants, hotels, cocktail
    lounges, retail establishments, arenas and rooms functionally or
    physically connected to the casino; and

  . any other facility located in the city of Detroit that is under the
    control of the casino licensee or an affiliated company.

   Collectively, the Michigan Act calls all of these buildings, facilities and
other amenities the "Casino Enterprise."

   The Michigan Board, the Michigan Attorney General and the Michigan State
Police have been assigned to investigate and inspect the casinos licensed
under the Michigan Act. These employees have the right to inspect all
facilities relating to the Casino Enterprise.

   The Michigan Act and Rules require that "Key Persons" meet the requirements
set forth in the Michigan Act and Rules. Key Persons include:

  . officers, directors, trustees, partners and proprietors of a casino
    licensee or an affiliate or holding company of a casino licensee that has
    control of a casino licensee;

  . a person that holds a combined direct, indirect or attributed debt or
    equity interest of more than 5% in a person that holds a casino license;

  . a person that holds a combined direct, indirect or attributed equity
    interest of more than 5% in a person that holds a casino license;

  . a managerial employee of an affiliate or holding company that has control
    of a person that holds a casino license; and

  . various management level employees of the casino licensee.

   The Michigan Act defines "control" of a casino licensee as having greater
than 15% direct or indirect pecuniary interest in the casino licensee.
Mandalay has control of MotorCity Casino.

   Key Persons are required to timely file and update qualification
information with the Michigan Board and then be approved by the Michigan
Board.

   The Michigan Act and Rules require compliance with qualification standards
for obtaining and retaining a direct or indirect ownership interest in a
casino and for transferring an ownership interest in a casino. Owners are
required to timely file and update information required to be submitted to the
Michigan Board.

   The Michigan Board can require compliance with the qualification and
approval standards whenever the Michigan Board determines that it is in the
best interests of the Michigan casino regulatory process to do so regardless
of the amount of direct or indirect beneficial ownership interest involved or
the nature of the ownership interest.

   The Michigan Act and Rules distinguish between shareholders of a privately
owned company and shareholders of a publicly traded company for qualification
purposes. Shareholders of a privately owned

                                      30
<PAGE>

company who directly or indirectly beneficially own 1% or more of a casino
licensee or casino license applicant must submit qualification information to
the Michigan Board and be approved by the Michigan Board. Shareholders that
own more than 5% of a publicly traded company that owns 1% or more of one of
the Detroit casinos must submit and update qualification information to the
Michigan Board. Mandalay owns more than 1% of MotorCity Casino and, therefore,
each shareholder that owns more than 5% of the shares of Mandalay is subject
to the qualification requirements established by the Michigan Act and Rules.

   There are special rules for an "institutional investor" that has invested
in a publicly traded company that owns 1% or more of a Detroit casino or a
Michigan casino license applicant.

   The Michigan Board is currently taking the position that an institutional
investor that individually or, in association with others, directly or
indirectly holds or acquires beneficial ownership of more than 5% of Mandalay
must notify the Michigan Board of its interest in Mandalay within 10 business
days after the institutional investor acquires more than a 5% interest in
Mandalay or files a Form 13-D or 13-G with the SEC. The institutional investor
may be required by the Michigan Board to supply additional information to the
Michigan Board. The Michigan Board may require the institutional investor to
be found suitable.

   An institutional investor that individually or, in association with others,
directly or indirectly holds or acquires beneficial ownership of more than a
5% interest but less than a 10% interest in Mandalay may request from the
Michigan Board a waiver of the eligibility and suitability requirements if the
institutional investor purchased the interest in Mandalay for investment
purposes only and not for the purpose of influencing or affecting the affairs
of Mandalay, MotorCity Casino or its affiliates. In order to obtain the
waiver, the institutional investor must complete and file with the Michigan
Board a Michigan Institutional Investor Waiver Form 206C.

   An institutional investor that individually or, in association with others,
directly or indirectly holds or acquires beneficial ownership of more than a
10% interest but not more than a 15% interest in Mandalay may request from the
Michigan Board a waiver of the eligibility and suitability requirements if the
institutional investor purchased the interest in Mandalay for investment
purposes only and not for the purpose of influencing or affecting the affairs
of Mandalay, MotorCity Casino or its affiliates. In order to obtain the
waiver, the institutional investor must complete and file with the Michigan
Board a Michigan Institutional Investor Waiver Form NON 206C. The Michigan
Rules require that an institutional investor within these ownership parameters
must disclose detailed information concerning the institutional investor.

   An institutional investor that individually or, in association with others,
directly or indirectly holds or acquires beneficial ownership of more than a
15% interest in Mandalay is required to file qualification information with
the Michigan Board within 45 days after acquiring the interest and is required
to meet qualification and approval standards.

   The Michigan Act and Rules regulate an institutional investor owning debt
securities of a casino licensee's affiliates. An institutional investor may be
required to meet the Michigan Act's qualification standards if the
institutional investor:

  . owns or acquires beneficial ownership of 10% or more of debt securities
    of a casino licensee's affiliate or affiliated company which are related
    in any way to the financing of the casino licensee; or

  . owns or acquires beneficial ownership of more than 50% of any issue of
    the outstanding debt of the casino licensee's affiliate or affiliated
    company.

   An institutional investor that owns or acquires beneficial ownership of
more than 5% but less than 10% of debt securities of a casino licensee's
affiliate or affiliated company which are in any way related to the financing
of the casino licensee may be granted a waiver of the eligibility and
suitability requirements of the Michigan Act and Michigan Rules if:

  . the debt securities do not represent more than 20% of the outstanding
    debt of the casino licensee's affiliate or affiliated company; or

                                      31
<PAGE>

  . the debt securities represent not more than 50% of any issue of the
    outstanding debt of the casino licensee's affiliate or affiliated
    company; and

  . the debt securities are those of a publicly traded corporation and were
    purchased for investment purposes only.

   The Michigan Act and Rules regulate the transfer of a direct or indirect
interest in a casino licensee. The Michigan Board must be notified in advance
of any proposed transfer of a direct or indirect interest. If the proposed
transfer involves more than a 1% direct or indirect interest, the proposed
transfer may not be consummated until the transfer has been approved by the
Michigan Board. In all events, the parties proposing to engage in the transfer
action should determine the applicable requirements of the Michigan Act and
Rules before completing the transfer transaction.

   Formal notice of certain events must be given to and approval obtained from
the Michigan Board by the casino licensee or applicant and any of their
affiliates or holding companies whenever any of the following events occur:

  . change of a Key Person;

  . a change in entity;

  . a change in equity or debt capitalization of the entity;

  . a change in investors subject to the Michigan Act and Michigan Rules;

  . a change in debt holders subject to the Michigan Act and Michigan Rules;

  . a change in source of funds; or

  . related party transactions exceeding $250,000 in a 12-month period.

   The Michigan Act declares that a person or entity that is required to meet
the Michigan Act's suitability standards will not be eligible if any of the
following circumstances exist:

  . the applicant has been convicted of a felony anywhere in the United
    States;

  . the applicant has been convicted of a misdemeanor involving gambling,
    theft, fraud or dishonesty;

  . the applicant has submitted an application that contains false
    information;

  . the applicant or affiliate owns more than a 10% ownership interest in any
    entity holding a casino license issued under the Michigan Act;

  . the applicant holds any elective office in the United States (with
    certain minor exceptions), is an employee of any gaming regulatory body
    in the United States or is employed by a governmental unit of the State
    of Michigan;

  . the Michigan Board concludes that the applicant lacks the requisite
    suitability as to integrity, moral character and reputation, personal and
    business probity, financial ability and experience, responsibility or
    means to develop, construct, operate or maintain the casino; or

  . the applicant fails to meet other criteria considered appropriate by the
    Michigan Board that are not arbitrary, capricious or contrary to the
    provisions of the Michigan Act.

   The Michigan Act prohibits casino licensees and applicants and certain
related persons from making contributions to candidates for state or local
office in the State of Michigan and to committees supporting any such
candidates during various periods, including periods prior to licensure. The
political contribution restriction applies to casino license applicants,
casino licensees and all of the following persons and entities:

  . any person or entity that holds at least a 1% interest in the casino
    licensee or Casino Enterprise;

  . any person who is an officer or managerial employee of the casino
    licensee or Casino Enterprise;

                                      32
<PAGE>

  . any person who is an officer of the person who holds at least a 1%
    interest in the casino licensee or Casino Enterprise; and

  . any person that is an independent committee of the casino licensee or
    Casino Enterprise.

   The Michigan Act also applies this restriction to spouses, parents,
children and spouses of children of persons holding an interest in the casino
licensee or Casino Enterprise. However, the portion of the political
contribution restriction relating to spouses, parents, children and spouses of
children has been declared unconstitutional by Attorney General Frank Kelley
in Attorney General Opinion No. 7002 issued on December 17, 1998 in those
instances where the contribution is not a willful attempt to evade the
political contribution restrictions contained in the Michigan Act.

   The penalties for violation of the political contribution restriction
includes fines, imprisonment or both.

   If a shareholder who is required to submit qualification information to the
Michigan Board is not approved by the Michigan Board, the shareholder must
promptly dispose of all ownership interest in the shares.

   If a person who seeks to acquire shares is a person who is required to
submit qualification information to the Michigan Board and the person does not
obtain approval for the acquisition from the Michigan Board, the person may
not acquire the shares and must promptly dispose of all interest in the
shares.

   If a Key Person who is required to submit qualification information to the
Michigan Board is not approved by the Michigan Board, the Key Person must
promptly cease all involvement in the Michigan Casino Enterprise.

   As required under the Michigan Act, MotorCity Casino has a Development
Agreement with the City of Detroit. The Development Agreement is currently in
effect.

   MotorCity Casino has constructed a temporary casino in accordance with the
terms of the Development Agreement. This temporary casino opened on December
14, 1999. Under a plan agreed to by the City of Detroit development
authorities but not yet approved by the Detroit City Council, we would expand
our temporary facility into a permanent facility by adding approximately 800
hotel rooms, expanding our gaming areas, adding additional restaurants, retail
space, convention space and other amenities. The estimated cost of these
additional facilities is under review. There can be no assurance that the
Detroit City Council will approve the proposed plan, in which event the
existing agreement to build a permanent casino at a different location would
remain in effect.

   The Development Agreement entered into between the City of Detroit and
Detroit Entertainment, L.L.C. has numerous terms and conditions relating to
the following:

  . the construction of the temporary and permanent casino;

  . the employment of Detroit residents, minorities and women to staff the
    operation of the temporary and permanent casinos; and

  . the use of Detroit based, minority and woman owned vendors and suppliers.

   MotorCity Casino has agreed to exercise its reasonable best efforts to
comply with vendor and supplier use and hiring goals. Failure to comply with
the terms of the Development Agreement could adversely affect its casino
license.

                                      33
<PAGE>

   Michigan law requires that any person who holds a "Casino Interest" must
file a registration form with the Michigan Secretary of State not later than 5
days after obtaining the Casino Interest. A person who violates this
registration requirement for more than 30 days is subject to being charged
with a misdemeanor and a fine of not more than $1,000. The Casino Interest
registration requirement is completely separate and apart from the eligibility
and qualification requirements established by the Michigan Act and Michigan
Rules. A person holding a Casino Interest includes:

  . a person who holds at least a 1% interest in a casino licensee or a
    Casino Enterprise;

  . a person who is a partner, officer or key or managerial employee of the
    casino licensee or Casino Enterprise; and

  . a person who is an officer of the person who holds at least a 1% interest
    in the casino licensee or Casino Enterprise.

   A "person" includes any individual and legal entity.

   Michigan law also applies the "Casino Interest" registration requirement to
the spouse and children of persons holding a Casino Interest. However, the
Michigan Secretary of State has ruled that the "Casino Interest" registration
requirement does not apply to spouses and children based upon Michigan
Attorney General Opinion No. 7053 issued on May 3, 2000. Michigan Attorney
General Opinion No. 7053 was issued based upon Michigan Attorney General
Opinion No. 7002 issued on December 17, 1998, which declared the portion of
the Michigan Act's political contribution restrictions unconstitutional as to
spouses and children (among others) where the political contribution is not a
willful attempt to evade the political contribution restrictions contained in
the Michigan Act.

   The Casino Interest Registration Form may be obtained from the Michigan
Secretary of State in Lansing, Michigan.

   The Michigan Act and Rules establish extensive requirements and procedures
relating to all of the following:

  . operation of casino games;

  . ownership records;

  . reporting of transactions;

  . handling of money;

  . extending credit;

  . accounting and editing;

  . internal control systems; and

  . compliance reporting.

   The Michigan Act and Rules do not limit the maximum bet or per person loss.
No person under the age of 21 years is permitted to wager in a casino licensed
under the Michigan Act. MotorCity Casino may operate 24 hours a day, 7 days a
week. MotorCity Casino is subject to regulation by the Michigan Liquor Control
Commission. The Michigan Act subjects MotorCity Casino to five forms of gaming
taxes and fees:

  . a nonrefundable license application fee of $50,000;

  . a $25,000 casino license fee, which is payable annually;

  . a wagering tax equal to 18% of adjusted gross receipts;

                                      34
<PAGE>

  . a municipal services fee in an amount equal to the greater of 1.25% of
    adjusted gross receipts or $4,000,000; and

  . the payment of all regulatory and enforcement costs, including compulsive
    gaming programs, casino related programs and activities, casino related
    services provided by the Michigan Attorney General and casino related
    expenses of the Michigan State Police up to a combined total annual
    maximum charge of $25,000,000 in the first year of casino operations for
    all casinos licensed under the Michigan Act. This maximum amount is
    adjusted annually by the Detroit Consumer Price Index.

   No casino licensed under the Michigan Act is liable for the payment of more
than 1/3 of the total annual assessment. This fee is placed into a services
fee fund. This service fee fund is prohibited from exceeding $65,000,000. If
this service fee fund exceeds $65,000,000, any amount in excess of $65,000,000
must be credited towards the annual payments the casinos licensed under the
Michigan Act are required to make to the service fee fund.

   The five forms of fees and taxes listed above are in addition to the taxes,
fees and assessments customarily paid by business entities in the State of
Michigan and the City of Detroit.

   The holder of a casino license issued under the Michigan Act is subject to
a variety of penalties for violation of the Michigan Act or Rules. The
penalties include, but are not necessarily limited to, the following:

  . monetary fines;

  . suspension of the casino license;

  . revocation of the casino license;

  . civil penalties of up to $10,000 or the amount of daily gross receipts
    derived from wagering on gaming on the day of the violation, whichever is
    greater;

  . criminal penalties;

  . seizure and/or destruction of gaming equipment;

  . seizure and/or sale of gaming operations;

  . imposition of a conservatorship; and

  . imposition of restrictions or conditions on gaming operations by the
    Michigan Board.

   The Michigan Board is required to comply with the Michigan Act, the
Michigan Rules, the Michigan Administrative Procedures Act and other
applicable laws and regulations. The Michigan Board may suspend a casino
operator's license, without notice or hearing, upon a determination that:

  . the safety or health of patrons or employees would be threatened by the
    continued operation of the casino; or

  . the action is necessary for the immediate preservation of the integrity
    of casino gaming, public peace, health, safety, morals, good order or
    general welfare.

   The Michigan Board may waive any licensing requirement or procedures
provided by the Michigan Rules provided that the waiver does not violate the
Michigan Act. Any such waiver must be based upon a determination by the
Michigan Board that the waiver is in the best interests of the public and the
gaming industry.

   The Michigan Board may amend or change the Michigan Rules provided that the
amendment or change complies with the Michigan Act and other applicable
Michigan law.

   Uncertainty exists regarding the Michigan gaming regulatory environment due
to the limited experience in interpreting the Michigan Act and the Michigan
Rules. The Michigan Act and Michigan Rules are evolving

                                      35
<PAGE>

pursuant to an ongoing regulatory, legislative and judicial process.
Therefore, the Michigan Act and Michigan Rules are subject to and, in all
probability will, change with the maturation of casino gaming regulated by the
Michigan Act.

   Various regulatory proposals have been and, in all likelihood, will
continue to be discussed by the Detroit City Council concerning the regulation
of casinos in the City of Detroit. Legislation proposed to or by the Detroit
City Council, if enacted, could adversely affect the gaming industry, Detroit
Entertainment, L.L.C. or Mandalay. No assurance can be given whether
additional ordinances will be enacted and what effect such ordinances could
have on the operation of casinos in the City of Detroit.

   From time to time various proposals have been introduced in the Michigan
legislature which relate to casino gaming in Detroit. Some of the proposals,
if enacted, would affect the taxation, regulation, operation or other aspects
of the gaming industry, Detroit Entertainment, L.L.C. or Mandalay. No
assurance can be given whether additional legislation will be enacted and what
effect such legislation could have on the operation of casinos in the City of
Detroit.

   The constitutionality of the Detroit Casino Competitive Selection Process
Ordinance and the Michigan Act has been challenged in federal court
proceedings initiated by the Lac Vieux Band of Lake Superior Chippewa Indians.
If it is subsequently determined that either the Detroit Casino Competitive
Selection Process Ordinance or the Michigan Act is defective and this
determination is upheld, this may impact the validity of the Development
Agreement entered into between Detroit Entertainment, L.L.C. and the City of
Detroit or the casino license issued to Detroit Entertainment, L.L.C., which
could have an adverse impact upon us. No assurance can be given regarding the
probable result of either proceeding.

   If it is ultimately determined that either the Michigan Act or the Detroit
ordinance is defective, this could result in the termination of the license to
operate our temporary casino or otherwise adversely impact our ability to
continue to operate that facility and could prevent or otherwise adversely
impact our ability to construct, open or operate our proposed permanent hotel-
casino in downtown Detroit. This may have an impact upon the validity of the
Development Agreement entered into between the City of Detroit and Detroit
Entertainment, L.L.C., and the casino license issued to Detroit Entertainment,
L.L.C.

   Litigation challenging the condemnation of real property by the City of
Detroit for the permanent casino construction site near the Detroit Riverfront
has been initiated. As a result of this litigation, 47 pending land
condemnations initiated by the City of Detroit have been dismissed. The
litigation surrounding the condemnation of land near the Detroit Riverfront
for use in construction of the permanent casinos in the City of Detroit could
substantially delay the construction of the permanent casino by Detroit
Entertainment, L.L.C. The Mayor of Detroit has entered into negotiations with
the three casino licensees, including MotorCity Casino, regarding placement of
the permanent casinos. The Mayor of Detroit has proposed that MotorCity Casino
be permitted to develop its permanent casino at or near the site of MotorCity
Casino's temporary casino. This proposal is currently pending before the
Detroit City Council. No assurance can be given regarding what action, if any,
the Detroit City Council will take regarding the Mayor of Detroit's proposal.
In addition, no assurance can be given regarding the location of the MotorCity
Casino permanent casino, the final cost for construction of the MotorCity
Casino permanent casino or when the MotorCity Casino permanent casino will
constructed.

 Other Gaming Jurisdictions

   We may expand our operations in the future to include gaming operations in
jurisdictions other than those in which our activities and those of the joint
ventures in which we participate are currently conducted. As a result, we
and/or one or more joint ventures in which we participate may become subject
to comprehensive gaming and other regulations in additional jurisdictions.
Such regulations may be similar to, and could be more restrictive than, those
currently applicable to us, our joint ventures and our officers, directors,
employees and persons associated with us.

                                      36
<PAGE>

 Other Laws And Regulations

   Each of the casino hotels and the riverboat and dockside casinos described
in this report is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. We believe that we and the joint
ventures in which we participate have obtained all required licenses and
permits and our businesses, including those of our joint ventures, are
conducted in substantial compliance with applicable laws.

 The National Gambling Impact Study Commission's Recommendations

   A National Gambling Impact Study Commission was established by the United
States Congress to conduct a comprehensive study of the social and economic
impact of gaming in the United States. On April 28, 1999, the National
Commission voted to recommend that the expansion of gambling be curtailed. In
June 1999, the National Commission issued a final report of its findings and
conclusions, together with recommendations for legislative and administrative
actions. Below are highlights of some of those recommendations:

  . Legal gaming should be restricted to those at least 21 years of age;

  . Betting on college and amateur sports should be banned;

  . The introduction of casino-style gambling at pari-mutual racing
    facilities for the primary purpose of saving the pari-mutual facility
    financially should be prohibited;

  . Internet gaming should be banned within the United States;

  . The types of gaming activities allowed by Indian tribes within a given
    state should not be inconsistent with the gaming activities allowed to
    other persons in that state; and

  . State, local and tribal governments should recognize that casino gaming
    provides economic development, particularly for economically depressed
    areas. The National Commission differentiated casino gaming from stand-
    alone slot machines (e.g., in convenience stores), Internet gaming and
    lotteries which the commission stated do not provide the same economic
    development.

   Any additional regulation of the gaming industry which may result from the
National Commission's report may have an adverse affect on the gaming
industry, including Mandalay.

 Internal Revenue Service Regulations

   The Internal Revenue Service requires operators of casinos located in the
United States to file information returns for U.S. citizens, including names
and addresses of winners, for keno and slot machine winnings in excess of
stipulated amounts. The Internal Revenue Service also requires operators to
withhold taxes on some keno, bingo and slot machine winnings of nonresident
aliens. We are unable to predict the extent, to which these requirements, if
extended, might impede or otherwise adversely affect operations of, and/or
income from, the other games.

   Regulations adopted by the Financial Crimes Enforcement Network of the
Treasury Department and the gaming regulatory authorities in some of the
jurisdictions in which we operate casinos, or in which we may apply for
licensing to operate a casino, require the reporting of currency transactions
in excess of $10,000 occurring within a gaming day, including identification
of the patron by name and social security number. This reporting obligation
began in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States which are exempt from the ambit of
these regulations.

Employees and Labor Relations

   At March 31, 2001, we and the joint ventures in which we participate
employed approximately 35,000 persons. Approximately 41% of our employees at
January 31, 2001 were employed pursuant to the terms

                                      37
<PAGE>

of collective bargaining agreements. We currently have contracts with our
major unions that have remaining terms ranging from one to four years. We
consider our labor relations to be satisfactory. A work stoppage has not been
experienced at a property we or a joint venture in which we participate own
since an industry-wide strike in 1975.

   Certain states in which gaming has been legalized have established
community commitment and similar laws or requirements which require that a
specified percentage of employees of gaming ventures be residents of the
community or state in which the gaming venture is located or meet certain
other criteria. These laws could affect our ability to attract and retain
qualified employees for gaming operations we or joint ventures in which we
participate conduct outside Nevada.

Factors that May Affect Our Future Results

 (Cautionary Statements Under the Private Securities Litigation Reform Act of
 1995)

   Certain information included in this report and other materials filed or to
be filed by Mandalay with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to
be made by us, including our 2001 Annual Report to Stockholders) contains or
may contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements can be identified by the
fact that they do not relate strictly to historical or current facts. We have
based these forward-looking statements on our current expectations about
future events. These forward-looking statements include statements with
respect to our beliefs, plans, objectives, goals, expectations, anticipations,
intentions, financial condition, results of operations, future performance and
business, including:

  .  statements relating to our business strategy;

  .  our current and future development plans; and

  .  statements that include the words "may," "could," "should," "would,"
     "believe," "expect," "anticipate," "estimate," "intend," "plan" or
     similar expressions.

   Such statements include information relating to plans for future expansion
and other business development activities as well as capital spending,
financing sources and the effects of regulation (including gaming and tax
regulation) and competition. From time to time, oral or written forward-
looking statements are also included in Mandalay's periodic reports on Forms
10-Q and 8-K, press releases and other materials released to the public.

   Any or all of the forward-looking statements in this report, in Mandalay's
Annual Report to Stockholders for fiscal 2001 and in any other public
statements we make may turn out to be wrong. This can occur as a result of
inaccurate assumptions or as a consequence of known or unknown risks and
uncertainties. Many factors discussed in this report, such as government
regulation and the competitive environment, will be important in determining
our future performance. Consequently, actual results may differ materially
from those that might be anticipated from forward-looking statements.

   We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise. However, any further disclosures made on related subjects in
Mandalay's subsequent reports to the Securities and Exchange Commission on
Forms 10-K, 10-Q and 8-K should be consulted. The following discussion of
risks, uncertainties and possible inaccurate assumptions relevant to our
business includes factors we believe could cause our actual results to differ
materially from expected and historical results. Other factors beyond those
listed below could also adversely affect us. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.

  .  As described under "Competition," we and the joint ventures in which we
     participate operate in a very competitive environment, particularly in
     Las Vegas. To the extent that hotel and/or casino capacity is expanded
     by others in a market where we or one of our joint ventures operate,
     competition will increase

                                      38
<PAGE>

    and the increased competition could adversely impact our future operations.
    The growth in the number of guest rooms and casino capacity in Las Vegas,
    which increased sharply in recent years, and the spread of legalized gaming
    in other states and countries may negatively affect our operating results.
    Legalization of gaming in any additional jurisdiction located near Detroit,
    Michigan or Elgin, Illinois, or the establishment of new large-scale gaming
    operations on nearby Native American reservations, could adversely affect
    the operations of our joint venture properties in Detroit or Elgin.

  . On March 7, 2000, California voters approved an amendment to the California
    constitution that gave Native American tribes in California the right to
    conduct gaming operations offering a limited number of slot machines and a
    range of house-banked card games. At this time, we cannot determine the
    impact Native American gaming in California will have on our Nevada
    operations and those of our Nevada joint ventures.

  . As discussed under "Regulation and Licensing," our gaming operations and
    the gaming operations of the joint ventures in which we participate are
    highly regulated by governmental authorities in Nevada, Mississippi,
    Illinois and Michigan. We will also become subject to regulation in any
    other jurisdiction where we or any joint venture in which we participate
    conduct gaming in the future. Any regulation in other jurisdictions may or
    may not be similar to that in Nevada, Mississippi, Illinois and Michigan.

  . In Mississippi, in three separate instances, referenda were proposed which,
    if approved, would have amended the Mississippi constitution to ban gaming
    in Mississippi and would have required all currently legal gaming entities
    to cease operations within two years of the ban. All three of the proposed
    referenda have been ruled illegal by Mississippi state trial court judges.
    The proponents of the most recent referendum filed a notice of appeal of
    the trial court ruling with the Mississippi Supreme Court. The Mississippi
    Supreme Court affirmed the trial court ruling. Any such referendum must be
    approved by the Mississippi Secretary of State and signatures of
    approximately 91,700 registered voters must be gathered and certified in
    order for such a proposal to be included on a statewide ballot for
    consideration by the voters. An affirmative vote representing both a
    majority of the votes cast with respect to the initiative and at least 40%
    of the voters casting votes on any matter in the election is required to
    pass any Mississippi initiative. The next election for which the proponents
    could attempt to place such a proposal on the ballot would be in November
    2002. While it is too early in the process for us to make any predictions
    with respect to whether such a referendum will appear on a ballot or the
    likelihood of such a referendum being approved by the voters, if such a
    referendum were passed and gaming were prohibited in Mississippi, it would
    have a material adverse effect on our Mississippi gaming operations.

  . Changes in applicable laws or regulations could have a significant effect
    on our operations and those of the gaming joint ventures in which we
    participate. As a result of federal legislation passed in 1996, the
    National Gambling Impact Study Commission conducted a two-year study of the
    gaming industry in the United States and reported its findings and
    recommendations to Congress in June 1999. It is possible that this report
    may result in additional regulation and taxation of the gaming industry.

  . Our operations and those of the joint ventures in which we participate are
    affected by changes in local and national general economic and market
    conditions in the locations where those operations are conducted and where
    customers live.

  . Our Nevada properties and those of the two Nevada joint ventures in which
    we participate are affected by economic conditions in California. Our
    operations at Mandalay Bay may also be susceptible to the effects of
    economic conditions in the Far East, from where a majority of our high-end
    players originate.

  . During the past year, utility costs in California and Nevada have risen
    significantly and areas of California have experienced mandated periods
    without electrical power, commonly referred to as "blackouts," necessitated
    by power shortages. Elimination of the power shortages which have caused
    the recent rate increases and blackouts require longer-term solutions which
    will be complicated by continued population growth in the southwestern
    United States, including California and Nevada. Further rate increases
    and/or blackouts, should they occur in California and/or Nevada, could have
    a material negative effect on our operations and the operations of the
    Nevada joint ventures in which we participate.

                                      39
<PAGE>

  .  We and the joint ventures in which we participate are large consumers of
     electricity and other energy. Accordingly, the substantial increases in
     energy costs which have recently occurred at our Nevada properties and that
     we expect to continue will have a negative impact on our operating results.
     Additionally, higher energy and gasoline prices which affect our customers
     may adversely impact the number of customers who visit our properties and
     those of our joint ventures and adversely impact our revenues.

  .  The interstate highway between southern California, where a large number of
     our customers reside, and Las Vegas has experienced long traffic delays
     during peak periods. Such delays may affect the number of customers who
     visit our properties in southern Nevada.

  .  Any future construction, including the proposed permanent facility in
     Detroit and the planned convention center adjacent to Mandalay Bay, can be
     affected by a number of factors, including time delays in obtaining
     necessary governmental permits and approvals and legal challenges. Changes
     may be made in the scope of a project, budgets and schedules for
     competitive, aesthetic or other reasons, and these changes may also result
     from circumstances beyond our control. These circumstances include weather
     interference, shortages of materials and labor, work stoppages, labor
     disputes, unforeseen engineering, environmental or geological problems and
     unanticipated cost increases. Any of these circumstances could give rise to
     delays in the completion of any project we or any joint venture in which we
     participate may undertake and/or cost overruns.

  .  The gaming industry represents a significant source of tax revenues to
     the state, county and local jurisdictions in which gaming is conducted.
     From time to time, various state and federal legislators and officials
     have proposed changes in tax laws, or in the administration of the laws,
     affecting the gaming industry. Proposals in recent years that have not
     been enacted included a federal gaming tax and increases in state or
     local taxes.

  .  We believe that our recorded tax balances are adequate. However, it is
     not possible to determine with certainty the likelihood of possible
     changes in the tax laws or their administration. These changes, if
     adopted, could have a material negative effect on our operating results
     and the operating results of joint ventures in which we participate.

  .  Our debt has increased in the past several years. The interest rate on a
     portion of our long-term debt is subject to fluctuation based on changes
     in short-term interest rates and the ratings which national rating
     agencies assign to outstanding debt securities. Interest expense could
     increase as a result of these factors.

  .  Claims have been brought against us in various legal proceedings, and
     additional legal and tax claims may arise from time to time. While we
     believe that the ultimate disposition of current matters will not have a
     material impact on our financial condition or results of operations, it
     is possible that our cash flows and results of operations could be
     affected from time to time by the resolution of one or more of these
     contingencies. See the further discussion under "Legal Proceedings" in
     Item 3 of this report.

  .  There is intense competition to attract and retain management and key
     employees in the gaming industry. Our business or the business of the
     joint ventures in which we participate could be adversely affected in
     the event of the inability to recruit or retain key personnel.

  .  While Mandalay from time to time communicates with securities analysts,
     it is against our policy to disclose to them any material non-public
     information or other confidential business information. It should not be
     assumed that we agree with any statement or report issued by any
     analyst, irrespective of the content of the statement or report.
     Furthermore, we have a policy against publicly issuing financial
     forecasts or projections or confirming forecasts or projections issued
     by others. Hence, to the extent that reports issued by securities
     analysts contain any projections, forecasts or opinions, those reports
     are not our responsibility.

                                      40
<PAGE>

ITEM 2. PROPERTIES.

   Mandalay Bay. We own approximately 60 acres of land, with approximately
1,300 feet of frontage, on the Las Vegas Strip and Mandalay Bay which is
situated on the site. For additional information concerning Mandalay Bay, see
"Overview" and "Property Descriptions--Las Vegas, Nevada--Mandalay Bay" in
Item 1 of this report.

   Luxor and Excalibur. We own a 117-acre parcel on the southwest corner of
the intersection of the Las Vegas Strip and Tropicana Avenue, with
approximately 2,400 feet of frontage on the Las Vegas Strip, that includes,
Excalibur, which is situated on the northern portion of the parcel, and Luxor,
which is situated on such site to the south of Excalibur. For additional
information concerning Luxor and Excalibur, see "Overview" and "Property
Descriptions--Las Vegas, Nevada--Luxor" and --Excalibur" in Item 1 of this
report.

   Circus Circus-Las Vegas. We own approximately 69 acres of land, with
approximately 375 feet of frontage on the Las Vegas Strip, and Circus Circus-
Las Vegas which is situated on the site. For additional information concerning
Circus Circus-Las Vegas, see "Overview" and "Property Descriptions--Las Vegas,
Nevada--Circus Circus-Las Vegas" in Item 1 of this report.

   Circus Circus-Reno. Circus Circus-Reno is situated on a three-block area in
downtown Reno, of which approximately 90% is owned by us and the remainder is
held under two separate leases, which expire in 2032 and 2033, respectively.
For additional information concerning Circus Circus-Reno, see "Overview" and
"Property Descriptions--Reno, Nevada--Circus Circus-Reno" in Item 1 of this
report.

   Colorado Belle. We own approximately 22 acres on the bank of the Colorado
River in Laughlin, Nevada and the Colorado Belle which is situated on the
site. For additional information concerning the Colorado Belle Hotel and
Casino, see "Overview" and "Property Descriptions--Laughlin, Nevada--Colorado
Belle" in Item 1 of this report.

   Edgewater. Adjacent to the site of the Colorado Belle, we own approximately
16 acres on the bank of the Colorado River in Laughlin, Nevada, and the
Edgewater Hotel and Casino which is situated on the site. For additional
information concerning the Edgewater Hotel and Casino, see "Overview" and
"Property Descriptions--Laughlin, Nevada--Edgewater" in Item 1 of this report.

   Gold Strike. We own approximately 51 acres and the Gold Strike Hotel &
Gambling Hall, which is situated on the site, located on the east side of I-15
in Jean, Nevada, approximately 12 miles from the California/Nevada border and
25 miles from Las Vegas. For additional information concerning Gold Strike,
see "Overview" and "Property Descriptions--Jean, Nevada--Gold Strike-Jean" in
Item 1 of this report.

   Nevada Landing. We own approximately 55 acres and the Nevada Landing Hotel
& Casino, which is situated on the site, located on the west side of I-15 in
Jean, Nevada. For additional information concerning Nevada Landing, see
"Overview" and "Property Descriptions--Jean, Nevada--Nevada Landing" in Item 1
of this report.

   Railroad Pass. We own approximately 56 acres and the Railroad Pass Hotel &
Casino, which is situated on the site, located on US-93 in Henderson, Nevada.
For additional information concerning Railroad Pass, see "Overview" and
"Property Descriptions--Henderson, Nevada--Railroad Pass" in Item 1 of this
report.

   Gold Strike-Tunica. We own approximately 24 acres in Tunica County,
Mississippi and Gold Strike-Tunica, which is situated on the site. We also own
an undivided 50% interest in an additional 388-acre site which is owned
jointly with another unaffiliated gaming company. For additional information
concerning Gold Strike-Tunica, see "Overview" and "Property Descriptions--
Tunica County, Mississippi--Gold Strike-Tunica" in Item 1 of this report.

   Other Real Property. Slots-A-Fun is situated on a 30,000-square-foot parcel
that we own and has approximately 100 feet of frontage on the Las Vegas Strip.

                                      41
<PAGE>

   We own approximately 60 acres of unimproved land located immediately south
of Mandalay Bay and approximately 15 acres of land on the Las Vegas Strip
across from Luxor.

   We own 60 acres of land in Jean, Nevada to the north of Gold Strike and
approximately 89 acres of land in Sloan, Nevada off of I-15. Sloan is located
between Jean and Las Vegas.

   We also own or lease, or have options and/or agreements to purchase or
lease, certain other improved and unimproved properties which are not deemed
to be material to us.

   As of January 31, 2001, none of the aforementioned properties we own was
subject to any encumbrance securing the repayment of indebtedness.

   Joint Venture Interests. Mandalay, either directly or through wholly owned
subsidiaries, owns:

  . a 50% interest in the Elgin joint venture entity which owns and operates
    Grand Victoria, a riverboat casino and land-based entertainment complex
    in Elgin, Illinois;

  . a 50% interest in the joint venture entity which owns and operates Monte
    Carlo, a hotel-casino complex on the Las Vegas Strip;

  . a 50% interest in the joint venture entity which owns and operates Silver
    Legacy, a hotel-casino in Reno, Nevada; and

  . a 53.5% interest in the joint venture entity which owns and operates
    MotorCity Casino, a temporary casino in Detroit, Michigan.

   Reference is made to the information concerning these joint venture
properties appearing under the captions "Overview" and "Property Descriptions"
in Item 1 of this report, which information is hereby incorporated in this
Item 2 by this reference.

   The following table set forth for each of our joint venture properties the
principal amount of indebtedness secured by encumbrances on that property as
of January 31, 2001.

<TABLE>
<CAPTION>
     Property                                                         Amount
     --------                                                      -------------
                                                                   (in millions)
     <S>                                                           <C>
     Silver Legacy................................................    $161.5
     MotorCity Casino.............................................     127.0
     Monte Carlo..................................................      87.0
     Grand Victoria...............................................       --
</TABLE>

ITEM 3. LEGAL PROCEEDINGS.

 Slot Machine Litigation

   On April 26, 1994, William H. Poulos brought a class action in the U.S.
District Court for the Middle District of Florida, Orlando Division captioned
William H. Poulos, et al. v. Caesars World, Inc. et al., against
41 manufacturers, distributors and casino operators of video poker and
electronic slot machines, including Mandalay. On May 10, 1994, another
plaintiff filed a class action complaint in the United States District Court
for the Middle District of Florida in William Ahearn, et al. v. Caesars World,
Inc. et al. alleging substantially the same allegations against 48 defendants,
including Mandalay. On September 26, 1995, a third action was filed against 45
defendants, including Mandalay, in the U.S. District Court for the District of
Nevada in Larry Schreier, et al. v. Caesars World, Inc. et al. The court
consolidated the three cases in the U.S. District Court for the District of
Nevada under the case captioned William H. Poulos, et al. v. Caesars World,
Inc. et al.

   The consolidated complaints allege that the defendants are involved in a
scheme to induce people to play electronic video poker and slot machines based
on false beliefs regarding how such machines operate and the

                                      42
<PAGE>

extent to which a player is likely to win on any given play. The actions
included claims under the Federal Racketeering Influenced and Corrupt
Organizations Act, as well as claims of common law fraud, unjust enrichment
and negligent misrepresentation, and seek unspecified compensatory and
punitive damages. A motion for class certification was filed in March 1998.
The plaintiffs have filed supplemental authorities in support of the motion
for class certification and defendants have responded to those authorities.
Plaintiffs are scheduled to file their reply supplemental authorities on or
before April 13, 2001. Thereafter, the parties anticipate that the court will
rule on the motion for class certification. Discovery on the merits has been
stayed pending a ruling on the motion for class certification.

 Detroit Litigation

   In Lac Vieux Desert Band of Lake Superior Chippewa Indians v. The Michigan
Gaming Control Board et al., the Lac Vieux Band of Lake Superior Chippewa
Indians has sought to challenge the validity of the Michigan Gaming Control
and Revenue Act (the "Michigan Act") and the City of Detroit's Casino
Development Competitive Selection Process ordinance (the "Detroit ordinance").
On October 31, 1997, the United States District Court for the Western District
of Michigan issued an opinion holding that the Lac Vieux Band lacked standing
to challenge the Michigan Act and the Detroit ordinance on First Amendment and
Equal Protection grounds. In a decision issued on April 12, 1999, the United
States Court of Appeals for the Sixth Circuit affirmed the District Court's
determination that the Lac Vieux Band lacked standing to challenge the
Michigan Act. However, the Sixth Circuit reversed the District Court's
determination that (i) the Lac Vieux Band lacked standing to challenge the
Detroit ordinance, (ii) the First Amendment is not implicated in the Detroit
ordinance, and (iii) a rational basis review rather than a strict scrutiny
review should be applied in determining the merits of the Lac Vieux equal
protection claim regarding the Detroit ordinance. The Sixth Circuit remanded
the case to the District Court for further proceedings consistent with the
Sixth Circuit's decision. No assurance can be given regarding the probable
result of this litigation. On July 17, 2000, the District Court found in favor
of the Defendants as to all matters remanded by the Sixth Circuit Court of
Appeals. The Lac Vieux Band appealed the District Court's decision to the
United States Court of Appeals for the Sixth District, where the case is
currently pending.

   We are defendants in various other pending lawsuits. In management's
opinion, the ultimate outcome of such lawsuits will not have a material
adverse effect on our results of operations or our financial position.

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

   No matter was submitted to a vote of Mandalay's security holders during the
fourth quarter of the fiscal year ended January 31, 2001.

                                      43
<PAGE>

                                    PART II

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

   Price Range of Common Stock. Mandalay's common stock is listed on the New
York Stock Exchange and on the Pacific Exchange and traded under the symbol
MBG. The following table sets forth, for the fiscal quarters shown, the low
and high sale prices for the common stock on the New York Stock Exchange
Composite Tape.

<TABLE>
<CAPTION>
   Fiscal 2001                                                      Low    High
   -----------                                                     ------ ------
   <S>                                                             <C>    <C>
   First Quarter.................................................. $12.88 $19.44
   Second Quarter................................................. $18.50 $24.94
   Third Quarter.................................................. $19.00 $28.38
   Fourth Quarter................................................. $18.00 $22.44
</TABLE>

<TABLE>
<CAPTION>
   Fiscal 2000                                                      Low    High
   -----------                                                     ------ ------
   <S>                                                             <C>    <C>
   First Quarter.................................................. $12.69 $21.88
   Second Quarter................................................. $16.38 $26.31
   Third Quarter.................................................. $16.75 $24.00
   Fourth Quarter................................................. $15.00 $24.38
</TABLE>

   On April 20, 2001 there were 3,200 holders of record of Mandalay's common
stock.

   Dividend Policy. Mandalay does not currently pay a cash dividend, nor is
one contemplated in the foreseeable future. We believe that currently our
stockholders are best served by reinvestment in new, high-return projects
and/or share repurchase. Mandalay has a policy of periodic share repurchase,
as cash flows, borrowing capacity and market conditions warrant. For
information concerning our recent share repurchase activity and our current
share repurchase authorization, reference is made to "Liquidity" in Item 7 of
this report.

ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
                                          Year ended January 31,
                          ------------------------------------------------------
                             2001       2000       1999       1998       1997
                          ---------- ---------- ---------- ---------- ----------
                             (amounts in thousands, except per share amounts)
<S>                       <C>        <C>        <C>        <C>        <C>
Operating Results:(1)
Net revenues............  $2,524,224 $2,050,898 $1,479,780 $1,354,487 $1,334,250
Income from operations..     431,534    273,736    242,779    236,500    222,169
Pretax income...........     194,392    103,116    140,815    147,922    163,863
Net income..............     119,700     42,163     85,198     89,908    100,733
Basic earnings per
 share..................  $     1.53 $      .47 $      .90 $      .95 $      .99
Diluted earnings per
 share..................  $     1.50 $      .46 $      .90 $      .94 $      .97

Balance Sheet Data:
Total assets............  $4,248,266 $4,329,476 $3,869,707 $3,263,548 $2,729,111
Long-term debt..........   2,623,597  2,691,292  2,259,149  1,788,818  1,405,897
Stockholders' equity....   1,068,940  1,187,780  1,157,628  1,123,749    971,791
</TABLE>
--------
(1) The Hacienda was closed on December 1, 1996. Mandalay Bay opened on March
    2, 1999 and MotorCity Casino opened on December 14, 1999. Silver City, a
    small casino on the Las Vegas Strip, was operated under a lease which
    expired October 31, 1999.

                                      44
<PAGE>

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

Fiscal 2001 Compared With Fiscal 2000

Results of Operations

   For the year ended January 31, 2001, we reported net income of $119.7
million, or $1.50 per diluted share, versus $42.2 million, or $.46 per diluted
share, for the year ended January 31, 2000.

   The increase in earnings was due mostly to strong operating performances at
our Las Vegas Strip properties and at Grand Victoria in Elgin, Illinois.
MotorCity Casino, our 53.5%-owned joint venture in Detroit, Michigan, was also
a factor, comparing a full year of operations in fiscal 2001 against less than
two months of operations in fiscal 2000, when it opened December 14, 1999.
Higher interest expense, stemming from higher average debt outstanding and
higher average interest rates, offset some of the operating gains. See the
discussion under "Interest Expense" for additional details. Share repurchase
also benefitted earnings per share comparisons, as average diluted shares
outstanding decreased to 79.7 million from 91.9 million in the prior year.

   NOTE: Results for fiscal 2001 include preopening expenses of $1.8 million
($.01 per diluted share) related to our new saltwater aquarium attraction, the
Shark Reef at Mandalay Bay, which opened June 20, 2000. Results for fiscal
2001 also include $3.6 million ($.03 per diluted share) in income related to
reducing a liability assumed when the Mandalay Bay site was acquired in 1995.
Results for the year ended January 31, 2000 include preopening expenses of
$83.0 million ($.58 per diluted share) related primarily to Mandalay Bay and
MotorCity Casino (including the write-off of $33.8 million of previously
capitalized preopening costs) and the write-off of $5.4 million ($.04 per
diluted share) related to a timeshare project we decided not to pursue.

Revenues

   Revenues for fiscal 2001 increased $473.3 million, or 23%, from the prior
year. The increase was attributable primarily to MotorCity Casino, which
generated revenues of $337.1 million in fiscal 2001 versus $39.0 million in
fiscal 2000. Mandalay Bay, which was open an additional month in fiscal 2001,
also contributed in a significant fashion, with its revenues rising $99.3
million, or 22%.

 Casino Revenues

   Casino revenues rose $298.5 million, or 31%, during fiscal 2001 due
primarily to a full year of operations at MotorCity Casino. Casino revenues at
that property rose to $315.9 million from $36.1 million last year. Meanwhile,
casino revenues at our Las Vegas Strip properties rose a combined 4%, led by
Mandalay Bay whose casino revenues grew $19.7 million, or 11%, driven by the
additional month of operations and increases in high-budget play.

                                      45
<PAGE>

 Hotel Revenues

   Hotel revenues in fiscal 2001 rose $77.2 million, or 14%. The growth came
principally from our Las Vegas Strip properties, whose revenue per available
room ("REVPAR") increased $9 over the prior year. Mandalay Bay again led the
way, with an average room rate of $154 compared to $128 in the prior year. The
growth in REVPAR was driven by increased demand stemming from a continued rise
in the number of visitors to Las Vegas (up 6% for calendar year 2000). The
following table compares average room rates, occupancy and REVPAR at our major
wholly owned properties:

<TABLE>
<CAPTION>
                                             FYE 1/31/2001     FYE 1/31/2000
                                           ----------------- -----------------
                                           Avg.              Avg.
                                           Rate Occ.% REVPAR Rate Occ.% REVPAR
                                           ---- ----- ------ ---- ----- ------
<S>                                        <C>  <C>   <C>    <C>  <C>   <C>
Mandalay Bay.............................. $154  86%   $133  $128  84%   $108
Luxor..................................... $ 98  93%   $ 92  $ 90  92%   $ 82
Excalibur................................. $ 70  94%   $ 66  $ 67  92%   $ 62
Circus Circus-Las Vegas................... $ 57  95%   $ 54  $ 56  96%   $ 54
Circus Circus-Reno........................ $ 53  82%   $ 43  $ 49  84%   $ 41
Colorado Belle............................ $ 30  84%   $ 25  $ 29  85%   $ 24
Edgewater................................. $ 27  85%   $ 23  $ 27  83%   $ 23
Gold Strike-Tunica........................ $ 69  76%   $ 52  $ 69  72%   $ 50

Weighted average all wholly owned
 properties............................... $ 79  89%   $ 70  $ 71  88%   $ 63
Weighted average wholly owned Las Vegas
 Strip properties......................... $ 93  92%   $ 85  $ 83  91%   $ 76
</TABLE>

 Food and Beverage Revenues

   Food and beverage revenues increased $71.4 million, or 21%, from the
previous year. This increase was driven largely by a full year of operations
at MotorCity Casino, where food and beverage revenues increased $41.5 million
over the prior year. Also stimulating food and beverage revenues were
selective price increases at our Las Vegas Strip properties.

 Other Revenues

   Other revenues rose $48.2 million, or 19%, in fiscal 2001. Other revenues
come principally from amusements, retail stores and entertainment. Most of the
increase was attributable to Luxor, where these revenues rose $19.6 million
due primarily to the success of Blue Man Group, our unique off-Broadway
production which debuted in March 2000. The Shark Reef at Mandalay Bay,
another instant success, opened June 2000 and contributed to a $14.4 million
increase in other revenues at the property.

 Earnings of Unconsolidated Affiliates

   We record our share of the operating income of our unconsolidated joint
ventures (Grand Victoria, Monte Carlo and Silver Legacy) as revenue under
"Earnings of Unconsolidated Affiliates." (Results of MotorCity Casino are
consolidated for financial reporting purposes.) Earnings of unconsolidated
affiliates increased $16.0 million in fiscal 2001, with most of the increase
attributable to the 50%-owned Grand Victoria. The contribution from this
property increased $10.7 million, or 23%, from fiscal 2000. This property
benefitted from more profitable dockside gaming operations throughout all of
fiscal 2001, whereas it was limited to cruising operations in the first half
of fiscal 2000.

                                      46
<PAGE>

Income from Operations

   For the year ended January 31, 2001, income from operations rose $157.8
million, or 58%, from the previous year. The composite operating margin was
17.1% versus 13.3% in fiscal 2000. Our Las Vegas Strip properties, along with
MotorCity Casino and Grand Victoria, were the principal drivers of this
growth. The table below summarizes operating results by property and is
followed by a discussion of operating results by market.

<TABLE>
<CAPTION>
                                  FYE 1/31/2001                    FYE 1/31/2000
                         -------------------------------- --------------------------------
                         Operating                        Operating
                         Income(1) Depreciation EBITDA(2) Income(1) Depreciation EBITDA(2)
                         --------- ------------ --------- --------- ------------ ---------
                                                   (in millions)
<S>                      <C>       <C>          <C>       <C>       <C>          <C>
Mandalay Bay............  $ 38.4      $ 40.8     $ 79.2    $ (4.7)     $ 33.9     $ 29.2
Luxor...................    85.9        37.3      123.2      67.3        36.8      104.1
Excalibur...............    79.0        16.9       95.9      67.2        16.6       83.8
Circus Circus-Las
 Vegas(3)...............    47.7        23.6       71.3      38.7        24.0       62.7
Gold Strike-Tunica......    19.4        12.8       32.2      21.2        13.4       34.6
Colorado
 Belle/Edgewater........    13.6        11.3       24.9      18.7        10.7       29.4
Circus Circus-Reno......    18.9         9.8       28.7      14.9        10.8       25.7
Gold Strike
 properties(4)..........     7.7        10.4       18.1      12.2        10.4       22.6
MotorCity Casino(5).....    49.3        37.5       86.8       1.8         5.9        7.7
Unconsolidated joint
 ventures(6)............   108.5         6.5      115.0      92.5         6.5       99.0
Other...................    (4.9)        0.2       (4.7)    (24.6)        0.2      (24.4)
                          ------      ------     ------    ------      ------     ------
  Subtotal..............   463.5       207.1      670.6     305.2       169.2      474.4
Corporate expense.......   (32.0)       10.9      (21.1)    (31.5)        9.1      (22.4)
                          ------      ------     ------    ------      ------     ------
  Total.................  $431.5      $218.0     $649.5    $273.7      $178.3     $452.0
                          ======      ======     ======    ======      ======     ======
</TABLE>
--------
(1) Operating income was negatively affected by preopening expenses of $1.8
    million in fiscal 2001 (related to the Shark Reef at Mandalay Bay) and
    $49.1 million in fiscal 2000 (of which $31.1 million related to Mandalay
    Bay, $16.4 million related to MotorCity Casino and $1.6 million related to
    other). Fiscal 2000 operating income was also negatively affected by the
    write-off of $5.4 million of costs associated with our abandoned timeshare
    project.

(2) Earnings before interest, taxes, depreciation and amortization ("EBITDA").
    EBITDA is not an accepted measure of performance under Generally Accepted
    Accounting Principles ("GAAP") and should not be considered an alternative
    to GAAP measures of performance.

(3) Includes Circus Circus-Las Vegas, Slots-A-Fun and Silver City Casino
    (which ceased operations October 31, 1999).

(4) Includes Gold Strike, Nevada Landing and Railroad Pass.

(5) MotorCity Casino is 53.5% owned and its operations are consolidated for
    financial reporting purposes.

(6) Includes Monte Carlo, Grand Victoria and Silver Legacy, each of which is
    50%-owned.

                                      47
<PAGE>

 Las Vegas

   Our Las Vegas properties (including our 50% share of Monte Carlo) posted an
overall increase in operating income of $90.3 million, or 46%, during fiscal
2001. This increase was driven by an uptrend in the number of visitors to the
Las Vegas Strip, as discussed previously. At Mandalay Bay, operating income
rose $43.1 million in fiscal 2001 versus the prior year. Mandalay Bay
benefitted from an extra month of operations in fiscal 2001 compared to the
prior year (when it opened March 2, 1999). Mandalay Bay's fiscal 2000
operating income was also affected by preopening expenses (see note below). At
Luxor, operating income rose $18.6 million, or 28%. Meanwhile, operating
income at Excalibur rose $11.8 million, or 17%; while at Circus Circus-Las
Vegas it rose $9.0 million, or 23%. The contribution from Monte Carlo also
rose, up $7.8 million, or 26%, compared with the prior year.

   NOTE: Operating income at our Las Vegas properties was negatively affected
by preopening expenses of $1.8 million in fiscal 2001 (related to the Shark
Reef at Mandalay Bay) and $31.1 million in fiscal 2000 (related to Mandalay
Bay).

 Reno

   Circus Circus posted an increase in operating income of $4.0 million, or
27%. Meanwhile, our share of operating income from Silver Legacy declined $2.5
million from a year ago (see note below). Fiscal 2001 results were boosted by
a national bowling tournament which Reno hosts two out of every three years.
The city hosted the women's national tournament from March through July 2000,
but did not host any tournament in the prior year. This contributed to modest
increases in casino revenues and REVPAR at both properties. However, in the
fourth quarter of fiscal 2001, casino revenues decreased 3% at Circus Circus
and 6% at Silver Legacy. We believe the Reno market has begun to encounter
increased competition from Native American casinos in northern California. In
the latter half of fiscal 2001, following the passage of Proposition 5, these
Native American casinos began adding more and newer (i.e., more competitive)
slot machines. We anticipate these competitive challenges to continue, which
will pressure results in Nevada's drive-in, ancillary markets such as Reno and
Laughlin.

   NOTE: In fiscal 2000, we recorded approximately two-thirds of Silver
Legacy's operating income as a priority return on our investment. In fiscal
2001, we recorded our normal 50% share of Silver Legacy's operating income.
Had we recorded 50% of Silver Legacy's operating income in fiscal 2000 instead
of two-thirds, our share of operating income from Silver Legacy would have
increased by $2.0 million instead of declining by $2.5 million.

 Laughlin

   Our two Laughlin properties, Colorado Belle and Edgewater, together posted
a decrease in operating income of $5.1 million, or 27%, for fiscal 2001. While
REVPAR was essentially flat for the year, casino revenues were down 2%. Like
the Reno market, Laughlin is facing better competition from Native American
casinos in its primary feeder markets in Arizona and southern California.
Furthermore, a lack of health care options in this small community contributed
to a 20% rise in health care costs. We have recently made changes to our
health care plan which we hope will alleviate this situation in the future.

 Other Markets

   In Detroit, Michigan, MotorCity Casino delivered operating income of $49.3
million in fiscal 2001 compared to $1.8 million in fiscal 2000. This
comparison reflects a full twelve months of operation in fiscal 2001 as
against one and one-half months in fiscal 2000. See "Financial Position and
Capital Resources" for additional details regarding our Detroit operation.

   In Tunica County, Mississippi, operating income at Gold Strike decreased
$1.8 million, or 9%, during fiscal 2001. Growth in this market appears to be
slowing, which has led to a flattening of results, as competition for business
heightens.

                                      48
<PAGE>

   Our share of income from operations at Grand Victoria (a 50%-owned
riverboat casino in Elgin, Illinois) exhibited a decided increase of $10.7
million, or 25%. This property benefitted from more profitable dockside gaming
operations throughout all of fiscal 2001, whereas it was limited to cruising
operations in the first half of fiscal 2000.

 Depreciation and Amortization

   In fiscal 2001, depreciation and amortization expense rose $39.7 million,
to $218.0 million. This increase derived primarily from the addition of
MotorCity Casino. For fiscal 2002, we estimate that our depreciation and
amortization expense will be approximately $225 million, including $40 million
in depreciation from MotorCity (consolidated for financial reporting purposes)
and $12 million of goodwill amortization.

 Interest Expense

   In fiscal 2001, interest expense (excluding interest expense of
unconsolidated joint ventures and without reduction for capitalized interest)
climbed $47.5 million. The increase was due partially to higher average
borrowings (approximately $2.8 billion in fiscal 2001 against approximately
$2.5 billion last year), in part related to the purchase of approximately 14.5
million shares of our common stock during fiscal 2001. Average borrowings also
increased due to borrowings associated with MotorCity Casino. Interest expense
also reflected higher interest rates on our credit line borrowings, as well as
the effect of the issuance of $500 million principal amount of 10 1/4% Senior
Subordinated Notes in July 2000 and the issuance of $200 million principal
amount of 9 1/2% Senior Notes in August 2000. The proceeds from these two
offerings were used to pay down borrowings outstanding under our credit
facility.

   At January 31, 2001, long-term debt (including current portion) stood at
$2.7 billion (including $127.0 million of debt related to MotorCity Casino)
compared to $2.7 billion at January 31, 2000 (including $150.0 million of debt
related to MotorCity Casino). Capitalized interest was $1.6 million in fiscal
2001 compared to $11.0 million in fiscal 2000. Capitalized interest was higher
in the prior year due to one month of capitalized interest on Mandalay Bay,
which opened March 2, 1999.

   We also recorded interest expense related to unconsolidated joint ventures
of $11.3 million in fiscal 2001 compared with $11.1 million in the previous
year. These amounts reflect our 50% share of the interest expense of Silver
Legacy and Monte Carlo.

 Income Taxes

   The effective tax rates for fiscal 2001 and fiscal 2000 were 38.4% and
39.1%. These rates reflect the corporate statutory rate of 35% plus the effect
of various nondeductible expenses, primarily the amortization of goodwill. For
fiscal 2002, we estimate our effective tax rate will be approximately 37%.

Fiscal 2000 Compared With Fiscal 1999

 Results of Operations

   For the year ended January 31, 2000, we reported net income of $42.2
million, or $.46 per diluted share, compared to $85.2 million, or $.90 per
diluted share, in the prior year.

   The decrease in earnings was due primarily to the impact of preopening
expenses related to Mandalay Bay and MotorCity Casino, as discussed more fully
in the note below. Ignoring preopening expenses, earnings increased due to the
openings of Mandalay Bay and MotorCity Casino, as well as significantly
improved results at Grand Victoria.

   NOTE: Results for fiscal 2000 include $83.0 million ($.58 per diluted
share) in preopening expenses associated with Mandalay Bay, which opened March
2, 1999, and MotorCity Casino, which opened

                                      49
<PAGE>

December 14, 1999. Fiscal 2000 results also include $5.4 million ($.04 per
diluted share) in write-offs related to a proposed timeshare resort in Las
Vegas which we decided not to pursue. Fiscal 1999 results include $6.5 million
($.04 per diluted share) of political campaign costs associated with
Proposition 5, a voter initiative to approve gaming on Native American lands
in California.

Revenues

   Revenues for fiscal 2000 increased $571.1 million, or 39%, from the prior
year. All of our wholly owned and joint venture properties posted increases in
revenues, with the overall increase attributable primarily to Mandalay Bay.
This property produced revenues of $456.2 million in its first 11 months of
operation. MotorCity Casino was another significant contributor, generating
revenues of $39.0 million in its initial one and a half months of operation.
At Gold Strike Casino Resort in Tunica County, Mississippi, revenues rose
$20.6 million, or 19%, due to the addition of 1,100 hotel rooms in early 1998.
Grand Victoria generated an increase of $13.4 million, or 40%, in its
contribution to our revenues. Legislation permitting dockside gaming was
passed in June 1999 and was a significant factor in this increase. Meanwhile,
revenues at Excalibur rose $10.9 million, or 4%, driven by higher room and
occupancy rates.

   Casino revenues increased $241.6 million, or 34%, during fiscal 2000, due
principally to the openings of Mandalay Bay and MotorCity Casino. Hotel
revenues rose $178.5 million, or 50%, due to the opening of Mandalay Bay
combined with higher room and occupancy rates at our other Las Vegas
properties. Revenues in our other revenue centers (principally food, beverage,
amusements, retail and entertainment) rose $180.8 million, or 43%. This
increase was due primarily to Mandalay Bay and to increased visitor counts at
our other properties.

   NOTE: On October 31, 1999, the lease pursuant to which Mandalay operated
the Silver City Casino expired and we ceased operation of that facility. Total
revenues for Silver City for the nine months it was open in fiscal 2000
accounted for less than one-half of one percent of our consolidated revenues
for that period.

Income from Operations

   Income from operations for fiscal 2000 increased $31.0 million, or 13%,
from the prior year. The composite operating margin was 13.3%, compared to
16.4% in fiscal 1999. With the exception of Edgewater, all of our wholly owned
properties reported double-digit increases in operating income for the year.
Mandalay Bay posted a slight operating loss in its initial 11 months of
operation; however, this was after deducting one-time preopening expenses of
$31.1 million.

   At Luxor, operating income increased $11.5 million, or 21%, while it rose
$8.1 million, or 14%, at Excalibur. Both properties benefitted from higher
room and occupancy rates. Luxor also benefitted from lower advertising and
marketing expenses. At Gold Strike, in Tunica County, Mississippi, operating
income rose $9.1 million, or 76%, during fiscal 2000. The increase was the
result of the addition of an 1,100-room hotel tower and extensive remodeling
of the property completed during the first quarter of fiscal 1999. Meanwhile,
the 50%-owned Grand Victoria's contribution to operating income grew by $13.8
million in fiscal 2000 due to the introduction of dockside gaming in June
1999.

   NOTE: Income from operations in fiscal 2000 was negatively affected by
preopening expenses of $49.1 million and the write-off of $5.4 million of
costs associated with the abandoned timeshare project. In fiscal 1999, income
from operations was negatively impacted by $6.5 million of political campaign
costs associated with Proposition 5, a voter initiative to approve gaming on
Native American lands in California.

Depreciation and Amortization

   In fiscal 2000, depreciation and amortization expense rose $36.2 million,
to $178.3 million. This increase derived primarily from the addition of
Mandalay Bay and MotorCity Casino.

                                      50
<PAGE>

Interest Expense

   In fiscal 2000, interest expense (excluding interest expense of
unconsolidated joint ventures and without reduction for capitalized interest)
rose $35.6 million to $176.7 million. We had higher average debt outstanding
($2.5 billion versus $2.0 billion in fiscal 1999) that was related principally
to the completion of construction of Mandalay Bay and the core components of
Mandalay Mile. See discussion under "New Projects" for further details
regarding Mandalay Mile. Capitalized interest was $11.0 million in fiscal 2000
versus $45.5 million in the prior year, with the decrease attributable to the
completion of Mandalay Bay. We recorded interest expense from unconsolidated
affiliates of $11.1 million in fiscal 2000 versus $12.3 million in fiscal
1999. These amounts represent our 50% share of Silver Legacy's and Monte
Carlo's interest expense.

Financial Position and Capital Resources

Operating Activities

   Net cash provided by operating activities was $435.6 million in fiscal 2001
versus $225.0 million in fiscal 2000. The increase was driven primarily by
improved operating results, as discussed previously. Mandalay had cash and
cash equivalents of $105.9 million at January 31, 2001, sufficient for normal
daily operating requirements.

   EBITDA was $649.5 million for fiscal 2001 compared with $452.0 million for
the prior year. EBITDA is included because, as in other entertainment
industries, many investors consider it a key benchmark, since it factors out
the impact of depreciation and goodwill amortization, the principal noncash
expenses affecting our income. EBITDA is not an accepted measure of
performance under Generally Accepted Accounting Principles and should not be
considered an alternative to GAAP measures of performance.

   NOTE: EBITDA for fiscal 2001 was reduced by preopening expenses of $1.8
million. EBITDA for fiscal 2000 was reduced by preopening expenses of $49.1
million and the write-off of $5.4 million in costs related to the abandoned
timeshare project.

Investing Activities

   Net cash used in investing activities was $153.8 million in fiscal 2001
compared with $464.6 million in fiscal 2000. Capital spending accounted for
the majority of these amounts. Capital expenditures for fiscal 2001 were
$110.2 million, of which $24.7 million related to the Shark Reef at Mandalay
Bay, our new saltwater aquarium attraction which opened June 20, 2000 and
$15.6 million related to the renovation of a portion of the pyramid rooms at
Luxor. For fiscal 2000, capital expenditures were $352.1 million, of which
$213.5 million related to completion of construction of Mandalay Bay and other
core components of Mandalay Mile, and $23.6 million related to the Shark Reef.

Financing Activities

   For fiscal 2001, financing activities used net cash of $292.4 million,
related primarily to the purchase of 14.5 million shares of our common stock
at a cost of $247.1 million. See "Liquidity" for further discussion of our
share repurchase activity. For fiscal 2000, financing activities provided net
cash of $274.9 million, stemming from an increase in net borrowings.

   On July 24, 2000, the Company issued $500 million principal amount of 10
1/4% Senior Subordinated Notes due August 2007. On August 16, 2000, the
Company issued $200 million principal amount of 9 1/2% Senior Notes due August
2008. These notes are not subject to any sinking fund requirements. The net
proceeds from these offerings were used to repay a portion of the borrowings
under our credit facility.

                                      51
<PAGE>

New Projects

 Shark Reef at Mandalay Bay

   On March 2, 1999, we opened Mandalay Bay, a 43-story hotel/casino resort in
Las Vegas, Nevada. Mandalay Bay is part of Mandalay Mile, our development
property with approximately one mile of frontage on the Las Vegas Strip. This
property is also the site of our Luxor and Excalibur resorts. Our development
plan for Mandalay Mile includes various core components conceived for cross-
marketing to guests at our existing and future gaming resorts within this
linked complex. These core components include an aquarium exhibit, the Shark
Reef at Mandalay Bay, which opened June 20, 2000. The cost of the aquarium
(excluding land, capitalized interest and preopening expenses) was
approximately $50 million. We intend to add other core components to Mandalay
Mile in the future.

 Mandalay Bay Convention Center

   In late April 2001, we announced a proposal to build a three-level, 1.8
million square-foot convention center complex, subject to receipt of
appropriate permits and approvals. The facility will be located on 16.5 acres
adjacent to the existing Mandalay Bay Conference Center and will include more
than 1 million square feet of exhibit space. Upon completion of the project,
Mandalay Bay will offer a total of almost 2 million gross square feet of
conference and exhibit space. The project is expected to break ground in June
2001 and open in Summer 2002. Specific details regarding the cost of the
proposed project are not yet available.

 Detroit

   We have formed a joint venture with the Detroit-based Atwater Casino Group
to build, own and operate a hotel/casino in Detroit, Michigan. This joint
venture is one of three groups which negotiated development agreements with
the city. We had an initial 45% ownership interest in the joint venture. In
December 1999, we acquired an additional 8.5% interest at a cost of $38.4
million, thus increasing our total ownership interest to 53.5%.

   Pending the development of a permanent hotel/casino, the joint venture
constructed a temporary casino (MotorCity Casino) in downtown Detroit, which
opened December 14, 1999. The cost of the temporary casino, including land and
capitalized interest but excluding preopening expenses, was approximately $150
million. This cost was financed pursuant to the joint venture's $150 million
credit facility, which is secured by the assets associated with the temporary
casino. Mandalay has guaranteed this credit facility. The joint venture's
operation of the temporary casino is subject to ongoing regulatory oversight,
and its ability to proceed with a permanent resort project is contingent upon
the receipt of all necessary gaming approvals and satisfaction of other
conditions.

   Under a plan agreed to by the City of Detroit development authorities, but
not yet approved by the Detroit City Council, we would expand our temporary
facility into a permanent facility by adding approximately 800 hotel rooms,
expanded casino space, convention space, retail space and additional dining
and entertainment facilities. We have committed to contribute 20% of the cost
of the permanent facility in the form of equity, and the joint venture will
seek project-specific funding for the balance of the cost. The permanent
facility's cost is being evaluated in light of the decision to utilize the
site of the temporary casino for the permanent facility. The development
agreement provides that we will guarantee completion of the permanent facility
and will enter into a keep-well guarantee with the city, pursuant to which we
could be required to contribute additional funds, if and as needed, to
continue operation of the project for a period of two years. This keep-well
agreement also applies to the temporary casino. Mandalay has issued letters of
credit totaling $50 million for the benefit of Bank of America in order to
back letters of credit issued by Bank of America for the same total amount.
The Bank of America letters of credit were issued to secure payments of
principal and interest on bonds issued by the Economic Development Corporation
of the City of Detroit. The proceeds of the bonds are to be used to finance
costs associated with activities (including acquisition) relating to land
located along the Detroit Riverfront (including the site where our permanent
facility originally was to be located).

                                      52
<PAGE>

   Various lawsuits have been filed in the state and federal courts
challenging the constitutionality of the Detroit Casino Competitive Selection
Process and the Michigan Gaming Control and Revenue Act, and seeking to appeal
the issuance of a certificate of suitability to MotorCity Casino. No assurance
can be given regarding the timing and outcome of these proceedings. An adverse
ruling in any of these lawsuits could adversely impact our joint venture's
operation of the temporary facility, as well as its ability to obtain a
certificate of suitability and a casino license for its permanent facility.

 Mississippi Gulf Coast

   Some time ago, we announced plans to develop a casino resort on the Bay of
St. Louis, along the Mississippi Gulf Coast. In August 2000, the United States
District Court for the District of Columbia issued an opinion which had the
effect of revoking one of the permits issued for this project and requiring
the Army Corps of Engineers to have an environmental impact statement
completed prior to issuing new permits for the development of casinos in this
area. In light of the estimated time to complete the environmental impact
statement and the potential legal challenges that may result therefrom, we
have decided not to pursue this development along the Mississippi Gulf Coast
at this time.

Liquidity

   Based on our operating cash flows, credit facility and ability to raise
additional funds through debt or equity markets, we believe we have sufficient
capital resources to meet all of our existing cash obligations, fund our
capital commitments on projects under- way and strategically purchase shares
of our common stock. As of January 31, 2001, under our most restrictive loan
covenant, we could issue additional debt of approximately $490 million. Our
borrowing capacity under this covenant can fluctuate substantially from
quarter to quarter depending upon our operating cash flow.

   In May 2000, our Board of Directors authorized the purchase of up to 15%
(or approximately 11.7 million) of our then outstanding shares of common
stock, as market conditions and other factors warrant. As of January 31, 2001,
we had purchased 1.8 million shares pursuant to this authorization at a cost
of $39.1 million. To facilitate our purchase of shares pursuant to this
authorization, we entered into agreements with Bank of America providing for
the purchase, in accordance with the volume and other limitations of Rule 10b-
18 under the Securities Exchange Act of 1934, of up to $100 million of our
outstanding common stock by Bank of America. In March 2001, we amended these
agreements to provide for the acquisition of an additional $25 million of our
common stock, up to a total of $125 million. The agreements provide that on
March 29, 2002, we will purchase from Bank of America, at cost (plus accrued
fees), the shares acquired pursuant to the agreements. At our option, we may
acquire all or a portion of the shares at an earlier date, or we may become
obligated to acquire all or a portion of the shares at an earlier date under
certain circumstances specified in the agreements, including the obligation to
settle with respect to a minimum of $25 million of our obligation on September
17, 2001, unless Bank of America agrees this early settlement is not required
and we pay an additional facility fee. Although our current intention is to
purchase the shares in accordance with the terms of the agreements, we could
elect to net settle our obligation in cash or shares (i.e., pay cash or
deliver additional shares or receive cash or shares). As of January 31, 2001,
Bank of America had purchased 4.9 million shares pursuant to the agreements at
a cost of $100 million, excluding commissions. Subsequent to that date, Bank
of America purchased an additional 1.2 million shares at a cost of $25
million, thus fully utilizing the capacity under these agreements. Any shares
we purchase from Bank of America pursuant to these agreements will reduce, by
that number, the shares we may purchase pursuant to the May 2000 share
purchase authorization.

Market Risk and Derivative Financial Instruments

   Mandalay is exposed to market risk in the form of fluctuations in interest
rates and their potential impact upon our variable-rate debt. We manage this
market risk by utilizing derivative financial instruments in accordance with
established policies and procedures. We evaluate our exposure to market risk
by monitoring interest rates in the marketplace. We do not utilize derivative
financial instruments for trading purposes. There

                                      53
<PAGE>

were no material quantitative changes in our market risk exposure, or in how
such risks were managed, during fiscal 2001.

   Our derivative financial instruments consist exclusively of interest rate
swap agreements. Interest differentials resulting from these agreements are
recorded on an accrual basis as an adjustment to interest expense. Interest
rate swaps related to debt are matched either with specific fixed-rate debt
obligations or with levels of variable-rate borrowings.

   To manage our exposure to counterparty credit risk in interest rate swaps,
we enter into agreements with highly rated institutions that can be expected
to fully perform under the terms of such agreements. Frequently, these
institutions are also members of the bank group providing our credit facility,
which management believes further minimizes the risk of nonperformance.

   The following table provides information about our financial instruments
(both interest rate swaps and debt obligations) that are sensitive to changes
in interest rates. For debt obligations, the table presents principal cash
flows and related weighted-average interest rates by expected maturity dates.
For interest rate swaps, the table presents notional amounts and weighted-
average interest rates by contractual maturity dates. Notional amounts are
used to calculate the contractual cash flows to be exchanged under the
contract. Weighted-average variable rates are based on implied forward rates
in the yield curve. Implied forward rates should not be considered a predictor
of actual future interest rates.

<TABLE>
<CAPTION>
                                       Year ending January 31,
                         --------------------------------------------------------
                         2002    2003    2004   2005   2006   Thereafter  Total
                         -----  ------  ------  ----  ------  ---------- --------
                                            (in millions)
<S>                      <C>    <C>     <C>     <C>   <C>     <C>        <C>
Long-term debt
 (including
 current portion)
  Fixed-rate............ $ 0.3  $  0.3  $150.3  $0.3  $275.3   $1,352.4  $1,778.9
  Average interest
   rate.................   6.6%    6.7%    6.7%  6.7%    9.2%       8.5%      8.5%
  Variable-rate......... $42.0  $820.0  $ 25.0    --     --         --   $  887.0
  Average interest
   rate.................   4.7%    5.1%    5.6%   --     --         --        5.1%
Interest rate swaps
  Pay fixed.............   --   $350.0  $200.0    --     --         --   $  550.0
  Average payable rate..   --      6.4%    6.4%   --     --         --        6.4%
  Average receivable
   rate.................   --      5.3%    5.7%   --     --         --        5.4%
</TABLE>

 Forward-Looking Statements

   This report includes forward-looking statements which we have based on our
current expectations about future events. They include statements with respect
to our beliefs, plans, objectives, goals, expectations, anticipations,
intentions, financial condition, results of operations, future performance and
business, including statements relating to our business strategy, our current
and future development plans, and statements that include the words "may,"
"could," "should," "would," "believe," "expect," "anticipate," "estimate,"
"intend," "plan" or similar expressions. These forward-looking statements are
subject to risks, uncertainties, and assumptions about us and our operations
that are subject to change based on various important factors, some of which
are beyond our control. Factors that could cause our financial performance to
differ materially from the goals, plans, objectives, intentions and
expectations expressed in our forward-looking statements, include the
following: (i) our development and construction activities and those of the
joint ventures in which we participate, (ii) competition, (iii) leverage and
debt service (including sensitivity to fluctuations in interest rates and
ratings which national rating agencies assign to our outstanding debt
securities), (iv) domestic and global economic, credit and capital market
conditions, (v) changes in federal or state tax laws or the administration of
those laws, (vi) changes in gaming laws or regulations (including the
legalization or expansion of gaming in certain jurisdictions), (vii)
applications for licenses and approvals under applicable laws and regulations
(including gaming laws and regulations), and (viii) regulatory or judicial
proceedings. Additional information concerning

                                      54
<PAGE>

potential factors that we think could cause our actual results to differ
materially from expected and historical results is included under the caption
"Factors that May Affect Our Future Results" in Item 1 of our Annual Report on
Form 10-K for the fiscal year ended January 31, 2001. If one or more of the
assumptions underlying our forward-looking statements proves incorrect, then
our actual results, performance or achievements could differ materially from
those expressed in, or implied by, the forward-looking statements contained in
this report. Therefore, we caution you not to place undue reliance on our
forward-looking statements. This statement is provided as permitted by the
Private Securities Litigation Reform Act of 1995.

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

   The information in Item 7 of this report under the caption "Market Risk and
Derivative Financial Instruments" is incorporated herein by this reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                         Page
                                                                         -----
<S>                                                                      <C>
Consolidated Balance Sheets as of January 31, 2001 and 2000.............    56
Consolidated Statements of Income for the three years ended January 31,
 2001...................................................................    57
Consolidated Statements of Cash Flows for the three years ended January
 31, 2001...............................................................    58
Consolidated Statements of Stockholders' Equity for the three years
 ended January 31, 2001.................................................    59
Notes to Consolidated Financial Statements.............................. 60-75
Report of Independent Public Accountants................................    76
</TABLE>

                                      55
<PAGE>

                     MANDALAY RESORT GROUP AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             January 31,
                                                        ----------------------
                                                           2001        2000
                                                        ----------  ----------
                                                           (in thousands,
                                                         except share data)
                        ASSETS
                        ------
<S>                                                     <C>         <C>
Current assets:
 Cash and cash equivalents............................. $  105,941  $  116,617
 Accounts receivable...................................     78,359      53,071
 Income tax receivable.................................        --        9,096
 Inventories...........................................     31,180      28,499
 Prepaid expenses......................................     40,986      47,807
 Deferred income tax...................................     30,164      26,449
                                                        ----------  ----------
   Total current assets................................    286,630     281,539
                                                        ----------  ----------
Property, equipment and leasehold interests, at cost,
 net...................................................  3,236,824   3,335,071
                                                        ----------  ----------
Other assets:
 Excess of purchase price over fair market value of
  net assets acquired, net.............................    384,261     396,433
 Notes receivable......................................      1,750       1,605
 Investments in unconsolidated affiliates..............    242,504     264,995
 Deferred charges and other assets.....................     96,297      49,833
                                                        ----------  ----------
   Total other assets..................................    724,812     712,866
                                                        ----------  ----------
   Total assets........................................ $4,248,266  $4,329,476
                                                        ==========  ==========
<CAPTION>
         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------
<S>                                                     <C>         <C>
Current liabilities:
 Current portion of long-term debt..................... $   42,262  $   13,022

Accounts and contracts payable:
 Trade.................................................     37,275      40,395
 Construction..........................................      3,920      33,415

Accrued liabilities:
 Salaries, wages and vacations.........................     51,866      46,897
 Progressive jackpots..................................     11,334      11,417
 Advance room deposits.................................     14,069      11,005
 Interest..............................................     53,122      19,395
 Other.................................................     82,827      69,073
                                                        ----------  ----------
   Total current liabilities...........................    296,675     244,619
                                                        ----------  ----------
Long-term debt, net of current portion.................  2,623,597   2,691,292
                                                        ----------  ----------
Other liabilities:
 Deferred income tax...................................    235,763     210,689
 Other long-term liabilities...........................     41,966      20,192
                                                        ----------  ----------
   Total other liabilities.............................    277,729     230,881
                                                        ----------  ----------
   Total liabilities...................................  3,198,001   3,166,792
                                                        ----------  ----------
Commitments and contingent liabilities
                                                        ----------  ----------
Minority interest......................................    (18,675)    (25,096)
                                                        ----------  ----------
Stockholders' equity:
 Common stock $.01 2/3 par value Authorized--
  450,000,000 shares
  Issued--113,634,013 shares...........................      1,894       1,894
 Preferred stock $.01 par value Authorized--75,000,000
  shares...............................................        --          --
 Additional paid-in capital............................    569,802     565,925
 Retained earnings.....................................  1,321,332   1,201,632
 Accumulated other comprehensive loss..................     (6,804)        --
 Treasury stock (37,357,777 and 23,764,216 shares), at
  cost.................................................   (817,284)   (581,671)
                                                        ----------  ----------
   Total stockholders' equity..........................  1,068,940   1,187,780
                                                        ----------  ----------
   Total liabilities and stockholders' equity.......... $4,248,266  $4,329,476
                                                        ==========  ==========
</TABLE>

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

                                       56
<PAGE>

                     MANDALAY RESORT GROUP AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                 Year ended January 31,
                                            ----------------------------------
                                               2001        2000        1999
                                            ----------  ----------  ----------
                                              (in thousands, except share
                                                         data)
<S>                                         <C>         <C>         <C>
Revenues:
  Casino................................... $1,250,035  $  951,492  $  709,909
  Rooms....................................    611,352     534,132     355,635
  Food and beverage........................    418,081     346,647     246,622
  Other....................................    299,753     251,509     170,701
  Earnings of unconsolidated affiliates....    114,645      98,627      83,967
                                            ----------  ----------  ----------
                                             2,693,866   2,182,407   1,566,834
  Less-complimentary allowances............   (169,642)   (131,509)    (87,054)
                                            ----------  ----------  ----------
                                             2,524,224   2,050,898   1,479,780
                                            ----------  ----------  ----------
Costs and expenses:
  Casino...................................    688,868     510,794     367,449
  Rooms....................................    203,352     189,419     128,622
  Food and beverage........................    299,726     276,261     207,663
  Other....................................    210,051     179,907     113,864
  General and administrative...............    409,603     339,455     253,138
  Corporate general and administrative.....     31,990      31,539      32,464
  Depreciation and amortization............    207,147     169,226     133,801
  Operating lease rent.....................     40,121      25,994         --
  Preopening expenses......................      1,832      49,134         --
  Abandonment loss.........................        --        5,433         --
                                            ----------  ----------  ----------
                                             2,092,690   1,777,162   1,237,001
                                            ----------  ----------  ----------
Income from operations.....................    431,534     273,736     242,779
                                            ----------  ----------  ----------
Other income (expense):
  Interest, dividends and other income.....     10,889       3,652       2,730
  Interest income and guarantee fees from
   unconsolidated affiliate................      2,498       2,775       3,122
  Interest expense.........................   (222,490)   (165,670)    (95,541)
  Interest expense from unconsolidated
   affiliates..............................    (11,293)    (11,085)    (12,275)
                                            ----------  ----------  ----------
                                              (220,396)   (170,328)   (101,964)
                                            ----------  ----------  ----------
Minority interest..........................    (16,746)       (292)        --
                                            ----------  ----------  ----------
Income before provision for income taxes...    194,392     103,116     140,815
Provision for income taxes.................     74,692      38,959      55,617
                                            ----------  ----------  ----------
Income before cumulative effect of change
 in accounting principle...................    119,700      64,157      85,198
Cumulative effect of change in accounting
 for preopening expenses, net of tax
 benefit of $11,843........................        --      (21,994)        --
                                            ----------  ----------  ----------
Net income................................. $  119,700  $   42,163  $   85,198
                                            ==========  ==========  ==========
Basic earnings per share:
  Income before cumulative effect of change
   in accounting principle................. $     1.53  $      .71  $      .90
  Cumulative effect of change in accounting
   principle...............................        --         (.24)        --
                                            ----------  ----------  ----------
  Net income............................... $     1.53  $      .47  $      .90
                                            ==========  ==========  ==========
Diluted earnings per share:
  Income before cumulative effect of change
   in accounting principle................. $     1.50  $      .70  $      .90
  Cumulative effect of change in accounting
   principle...............................        --         (.24)        --
                                            ----------  ----------  ----------
  Net income............................... $     1.50  $      .46  $      .90
                                            ==========  ==========  ==========
</TABLE>

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

                                       57
<PAGE>

                     MANDALAY RESORT GROUP AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                  Year ended January 31,
                                               -------------------------------
                                                 2001       2000       1999
                                               ---------  ---------  ---------
                                                      (in thousands)
<S>                                            <C>        <C>        <C>
Increase (decrease) in cash and cash
 equivalents
Cash flows from operating activities:
 Net income................................... $ 119,700  $  42,163  $  85,198
                                               ---------  ---------  ---------
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization..............   217,984    178,301    142,141
   Increase (decrease) in deferred income
    tax.......................................    25,023     (8,104)    24,281
   Increase in allowance for doubtful
    accounts..................................   (19,514)    (7,765)    (2,491)
   Increase (decrease) in interest payable....    33,727     (8,372)     9,939
   Increase in accrued pension cost...........     4,363      2,888        --
   (Gain) loss on sale of fixed assets........       290      2,903     (1,641)
   (Increase) decrease in other current
    assets....................................     7,462    (46,032)     6,995
   Increase in other current liabilities......    18,584     42,930     19,906
   (Increase) decrease in other noncurrent
    assets....................................      (551)    32,556    (28,707)
   Decrease in other noncurrent liabilities...       --         (49)       (65)
   Unconsolidated affiliates' distributions in
    excess of earnings (earnings in excess of
    distributions)............................    22,077     (6,419)   (10,863)
   Minority interest in earnings, net of
    distributions.............................     6,421        --         --
                                               ---------  ---------  ---------
     Total adjustments........................   315,866    182,837    159,495
                                               ---------  ---------  ---------
     Net cash provided by operating
      activities..............................   435,566    225,000    244,693
                                               ---------  ---------  ---------
Cash flows from investing activities:
 Capital expenditures.........................  (110,220)  (352,133)  (671,547)
 Increase (decrease) in construction
  payable.....................................   (29,495)   (63,474)    34,360
 Increase in investments......................   (16,755)   (10,267)       --
 (Increase) decrease in investments in
  unconsolidated affiliates...................       --      10,728     (5,865)
 Net cash paid for additional ownership
  interest in joint venture...................       --     (25,225)       --
 Increase in notes receivable.................      (145)   (24,952)    (9,820)
 Proceeds from sale of equipment and other
  assets......................................     2,408        697      5,788
 Other........................................       370        --         --
                                               ---------  ---------  ---------
     Net cash used in investing activities....  (153,837)  (464,626)  (647,084)
                                               ---------  ---------  ---------
Cash flows from financing activities:
 Proceeds from issuance of senior and senior
  subordinated notes..........................   700,000        --     275,000
 Net effect on cash of issuances and payments
  of debt with initial maturities of three
  months or less..............................  (715,576)   294,990    502,528
 Issuance of debt with initial maturities in
  excess of three months......................       --         --     337,334
 Principal payments of debt with initial
  maturities in excess of three months........   (23,000)    (3,425)  (644,241)
 Debt issuance costs..........................   (16,325)    (1,072)    (7,110)
 Exercise of stock options....................    17,797     17,616        310
 Purchases of treasury stock..................  (247,128)   (29,627)   (51,634)
 Other........................................    (8,173)    (3,628)    12,962
                                               ---------  ---------  ---------
 Net cash provided by (used in) financing
  activities..................................  (292,405)   274,854    425,149
                                               ---------  ---------  ---------
Net increase (decrease) in cash and cash
 equivalents..................................   (10,676)    35,228     22,758
Cash and cash equivalents at beginning of
 year.........................................   116,617     81,389     58,631
                                               ---------  ---------  ---------
Cash and cash equivalents at end of year...... $ 105,941  $ 116,617  $  81,389
                                               =========  =========  =========
Supplemental cash flow disclosures:
 Cash paid for interest (net of amount
  capitalized)................................ $ 183,638  $ 170,272  $  82,879
 Cash paid for income taxes................... $  38,731  $  42,551  $  18,770
</TABLE>

<TABLE>
<S>                                                        <C>   <C>       <C>
 Acquisition of additional ownership interest in joint
  venture:
   Cash paid.............................................. $ --  $(38,386) $--
   Current assets, other than cash........................   --   (13,462)  --
   Property and equipment.................................   --  (152,037)  --
   Other assets...........................................   --   (14,092)  --
   Current liabilities....................................   --    33,693   --
   Long-term debt.........................................   --   179,180   --
   Stockholders' equity...................................   --   (20,121)  --
                                                           ----- --------  ----
     Net cash paid for acquisition........................ $ --  $(25,225) $--
                                                           ===== ========  ====
</TABLE>

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

                                       58
<PAGE>

                     MANDALAY RESORT GROUP AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                             Common                            Accumulated
                          Stock Issued  Additional                Other                    Total
                         --------------  Paid-in    Retained  Comprehensive Treasury   Stockholders'
                         Shares  Amount  Capital    Earnings      Loss        Stock       Equity
                         ------- ------ ---------- ---------- ------------- ---------  -------------
                                                       (in thousands)

<S>                      <C>     <C>    <C>        <C>        <C>           <C>        <C>
Balance, January 31,
 1998................... 113,609 $1,893  $558,658  $1,074,271    $   --     $(511,073)  $1,123,749
  Net income............     --     --        --       85,198        --           --        85,198
  Exercise of stock
   options..............      14      1       272         --         --            37          310
  Treasury stock
   acquired (4,466
   shares), at cost.....     --     --        --          --         --       (51,634)     (51,634)
  Other.................     --     --          5         --         --           --             5
                         ------- ------  --------  ----------    -------    ---------   ----------
Balance, January 31,
 1999................... 113,623  1,894   558,935   1,159,469        --      (562,670)   1,157,628
  Net income............     --     --        --       42,163        --           --        42,163
  Exercise of stock
   options..............      11    --      6,990         --         --        10,626       17,616
  Treasury stock
   acquired (1,672
   shares), at cost.....     --     --        --          --         --       (29,627)     (29,627)
                         ------- ------  --------  ----------    -------    ---------   ----------
Balance, January 31,
 2000................... 113,634  1,894   565,925   1,201,632        --      (581,671)   1,187,780
  Net income............     --     --        --      119,700        --           --       119,700
  Minimum pension
   liability
   adjustment...........     --     --        --          --      (6,804)         --        (6,804)
                                                                                        ----------
   Total comprehensive
    income..............                                                                   112,896
  Exercise of stock
   options..............     --     --      6,282         --         --        11,515       17,797
  Treasury stock
   acquired (14,534
   shares), at cost.....     --     --        --          --         --      (247,128)    (247,128)
  Other.................     --     --     (2,405)        --         --           --        (2,405)
                         ------- ------  --------  ----------    -------    ---------   ----------
Balance, January 31,
 2001................... 113,634 $1,894  $569,802  $1,321,332    $(6,804)   $(817,284)  $1,068,940
                         ======= ======  ========  ==========    =======    =========   ==========
</TABLE>



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

                                       59
<PAGE>

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

 Principles of Consolidation and Basis of Presentation

   Mandalay Resort Group (the "Company"), which changed its name from Circus
Circus Enterprises, Inc. effective June 18, 1999, was incorporated February
27, 1974. The Company owns and operates hotel and casino facilities in Las
Vegas, Reno, Laughlin, Jean and Henderson, Nevada and a hotel and dockside
casino in Tunica County, Mississippi. In Detroit, Michigan, the Company is the
majority investor in a temporary casino which opened December 14, 1999. It is
also an investor in several unconsolidated affiliates, with operations that
include a riverboat casino in Elgin, Illinois, a hotel/casino in Reno, Nevada
and a hotel/casino on the Las Vegas Strip. (See Note 10--Investments in
Unconsolidated Affiliates.)

   The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and the Detroit joint venture, which is required
to be consolidated. Material intercompany accounts and transactions have been
eliminated. Investments in 50% or less owned affiliated companies are
accounted for under the equity method.

 Cash Equivalents

   At January 31, 2001 and 2000, cash equivalents (consisting principally of
money market funds and instruments with initial maturities of three months or
less) had a cost approximately equal to market value.

 Accounts Receivable

   Accounts receivable consists primarily of casino and hotel receivables.
Casino receivables represent credit extended to approved casino customers.
Hotel receivables represent charges for hotel guests and receivables related
to conventions and other group business. Accounts receivable for the years
ended January 31, 2001 and 2000 are shown net of an allowance for doubtful
accounts of $33.3 million and $13.8 million, respectively, related primarily
to casino receivables.

 Inventories

   Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out and the average cost methods.

 Depreciation and Amortization

   Depreciation and amortization of property, equipment and leasehold
interests are provided using the straight-line method over the following
estimated useful lives:

<TABLE>
     <S>                                                           <C>
     Buildings and improvements...................................  15-45 years
     Equipment, furniture and fixtures............................   3-15 years
     Leasehold interests and improvements.........................   5-16 years
</TABLE>

   Accumulated amortization of the excess of the purchase price over the fair
market value of the net assets of businesses acquired was $63.5 million and
$51.7 million, as of January 31, 2001 and 2000, respectively.

 Capitalized Interest

   The Company capitalizes interest costs associated with debt incurred in
connection with major construction projects. When debt is not specifically
identified as being incurred in connection with a construction project, the
Company capitalizes interest on amounts expended on the project at the
Company's average cost of borrowed

                                      60
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

money. The amounts capitalized during the years ended January 31, 2001, 2000
and 1999, were $1.6 million, $11.0 million and $45.5 million, respectively.

 Goodwill

   On December 14, 1999, the Company purchased an additional ownership
interest in a joint venture which operates MotorCity Casino, a temporary
casino in Detroit, Michigan, bringing its total ownership interest to 53.5%.
On June 1, 1995, the Company completed its acquisition of Gold Strike Resorts,
in which it acquired two hotel/casino facilities in Jean, Nevada, one in
Henderson, Nevada, a 50% interest in a joint venture which owns Grand
Victoria, a riverboat casino and land-based entertainment complex in Elgin,
Illinois, and a 50% interest in a joint venture which owns the Monte Carlo, a
major hotel/casino on the Las Vegas Strip. On February 1, 1983, the Company
purchased the Edgewater Hotel and Casino in Laughlin, Nevada and on November
1, 1979, the Company purchased the Slots-A-Fun Casino in Las Vegas. The excess
of the purchase price over the fair market value of the net assets acquired
amounted to $38.4 million for the purchase of the additional ownership
interest in MotorCity Casino, $394.5 million for the purchase of Gold Strike
Resorts, $9.7 million for the purchase of the Edgewater and $4.2 million for
the purchase of Slots-A-Fun, and each is being amortized over a period of 40
years with the exception of the MotorCity Casino interest which is being
amortized over a period of 25 years.

 Long-lived Assets

   Long-lived assets are comprised of intangible assets and property, plant
and equipment. Long-lived assets, including certain identifiable intangibles
and goodwill related to those assets to be held and used, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. An estimate of
undiscounted future cash flows produced by the asset, or the appropriate
grouping of assets, is compared to the carrying value to determine whether an
impairment exists, pursuant to the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." If an asset is determined
to be impaired based on expected future cash flows, a loss, measured using a
fair-value based model, is recognized in the consolidated statements of
income.

 Interest Rate Swaps

   The Company, from time to time, uses interest rate swaps and similar
financial instruments to assist in managing interest incurred on its long-term
debt. The difference between amounts received and amounts paid under such
agreements, as well as any costs or fees, is recorded as a reduction of, or
addition to, interest expense as incurred over the life of the swap or similar
financial instrument.

 Revenues and Expenses

   Casino revenues are the net difference between the sums received as
winnings and the sums paid as losses. Incentives, such as discounts to induce
casino play, are deducted from gross revenues. Revenues include the retail
value of rooms, food and beverage furnished gratuitously to customers. Such
amounts are then deducted as complimentary allowances. The costs of such
rooms, food and beverage were included as casino expenses as follows: $102.1
million, $86.5 million and $63.2 million for the fiscal years ended January
31, 2001, 2000 and 1999, respectively. For the three years, approximately 75-
85% of such costs were for food and beverage with the balance for rooms.

                                      61
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Preopening Expenses

   Preopening expenses consist principally of direct incremental personnel
costs and advertising and marketing expenses. In accordance with the American
Institute of Certified Public Accountants' Statement of Position 98-5,
preopening expenses incurred prior to January 31, 1999 ($33.8 million), on
projects opening after that date, are reflected, net of income tax benefit of
$11.8 million, as a cumulative effect of a change in accounting principle for
preopening expenses in the consolidated statements of income. Preopening
expenses incurred after January 31, 1999 are expensed as incurred. Previously,
these costs were capitalized prior to the opening of the specific project and
were charged to expense at the commencement of operations.

   For the year ended January 31, 2001, preopening expenses of $1.8 million
relate to the Shark Reef at Mandalay Bay, which opened June 20, 2000. For the
year ended January 31, 2000, preopening expenses of $83.0 million (including
the write-off of $33.8 million of previously capitalized preopening expenses)
related primarily to Mandalay Bay, the Four Seasons at Mandalay Bay, and the
Company's joint venture in Detroit.

 Abandonment Loss

   During fiscal 2000, the Company wrote off $5.4 million related to a
proposed timeshare resort in Las Vegas which the Company decided not to
pursue.

 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
affect the disclosure of contingent assets and liabilities at the date of the
financial statements. These estimates and assumptions also affect the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.

 Reclassifications

   The financial statements for prior years reflect certain reclassifications,
which have no effect on net income, to conform with classifications adopted in
the current year.

                                      62
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 2. Property, Equipment and Leasehold Interests

   Property, equipment and leasehold interests are stated at cost. Additions,
including maintenance projects which extend the life of an asset, are
capitalized. Normal repairs and maintenance are expensed as incurred.

<TABLE>
<CAPTION>
                                                             January 31,
                                                        -----------------------
                                                           2001         2000
                                                        -----------  ----------
                                                            (in thousands)
<S>                                                     <C>          <C>
Land and land leases................................... $   382,793  $  364,781
Buildings and improvements.............................   3,088,717   2,872,900
Equipment, furniture and fixtures......................     809,616     896,435
Leasehold interests and improvements...................       8,664      11,305
                                                        -----------  ----------
                                                          4,289,790   4,145,421
Less--accumulated depreciation and amortization........  (1,077,322)   (893,776)
                                                        -----------  ----------
                                                          3,212,468   3,251,645
Construction in progress...............................      24,356      83,426
                                                        -----------  ----------
                                                        $ 3,236,824  $3,335,071
                                                        ===========  ==========
</TABLE>

Note 3. Long-term Debt

   Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                           January 31,
                                                      ----------------------
                                                         2001        2000
                                                      ----------  ----------
                                                         (in thousands)
<S>                                                   <C>         <C>
Amounts due under bank credit agreements at floating
 interest rates, weighted average of 6.9% and 6.8%..  $  760,000  $1,425,000
Amounts due under corporate debt program at floating
 interest rates, weighted average of 6.2%...........         --       50,000
Amounts due under majority-owned joint venture
 revolving credit facility at floating interest
 rates, weighted average of 7.1%....................     127,000     150,000
6 3/4% Senior Subordinated Notes due 2003 (net of
 unamortized discount of $39 and $55)...............     149,961     149,945
9 1/4% Senior Subordinated Notes due 2005...........     275,000     275,000
6.45% Senior Notes due 2006 (net of unamortized
 discount of $220 and $264).........................     199,780     199,736
10 1/4% Senior Subordinated Notes due 2007..........     500,000         --
9 1/2% Senior Notes due 2008........................     200,000         --
7 5/8% Senior Subordinated Debentures due 2013......     150,000     150,000
7.0% Debentures due 2036 (net of unamortized
 discount of $106 and $119).........................     149,894     149,881
6.70% Debentures due 2096 (net of unamortized
 discount of $135 and $183).........................     149,865     149,817
Other notes.........................................       4,359       4,935
                                                      ----------  ----------
                                                       2,665,859   2,704,314
Less--current portion...............................     (42,262)   (13,022)
                                                      ----------  ----------
                                                      $2,623,597  $2,691,292
                                                      ==========  ==========
</TABLE>

                                      63
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Company has established a corporate debt program whereby it can issue
commercial paper or similar forms of short-term debt. Although the debt
instruments issued under this program are short term in tenor, they are
classified as long-term debt because (i) they are backed by long-term debt
facilities (see below) and (ii) it is management's intention to continue to
replace such borrowings on a rolling basis as various instruments come due and
to have such borrowings outstanding for longer than one year. To the extent
that the Company incurs debt under this program, it maintains an equivalent
amount of credit available under its bank credit facility, discussed more
fully below.

   The Company maintains a $1.8 billion unsecured credit facility which
matures on July 31, 2002 (the "Facility"). See Note 4--Leasing Arrangements,
for permanent reductions in the availability under the credit facility due to
certain operating lease transactions. The maturity date may be extended for an
unlimited number of one-year periods with the consent of the bank group. The
Facility contains financial covenants regarding total debt and investments.
The Facility is for general corporate purposes. The Company incurs commitment
fees (currently 25.0 basis points) on the unused portion of the Facility. The
fair value of the debt issued under the Facility and the corporate debt
program approximates the carrying amount of the debt due to the short-term
maturities of the individual components of the debt.

   On December 14, 1999, the Company acquired an additional 8.5% ownership
interest in the joint venture that owns and operates MotorCity Casino in
Detroit, Michigan bringing the total ownership interest to 53.5%. Therefore,
long-term debt of that joint venture is reflected as an obligation of the
Company. In June 1999, the joint venture entered into a $150 million reducing
revolving credit facility (the "Detroit Facility") which matures on June 30,
2003. The Detroit Facility reduces by fixed amounts quarterly, which began on
December 31, 2000, and contains financial covenants regarding total debt,
capital expenditures and investments. The Detroit Facility was used primarily
to develop and construct the temporary casino facility. The Detroit Facility
is guaranteed by the Company. The fair value of the debt issued under the
Detroit Facility approximates the carrying amount of the debt.

   On July 24, 2000, the Company issued $500 million principal amount of 10
1/4% Senior Subordinated Notes due August 2007 (the "10 1/4% Notes"), with
interest payable each February and August. The 10 1/4% Notes are redeemable
prior to maturity at the option of the Company, in whole, at 100% of the
principal amount plus a make-whole premium. A portion of the 10 1/4% Notes are
also redeemable at the option of the Company prior to August 1, 2003 with the
proceeds of a public offering of equity securities. The 10 1/4% Notes are not
subject to any sinking fund requirements. The net proceeds from this offering
were used to repay borrowings under the Company's credit facility. As of
January 31, 2001, the estimated fair value of the 10 1/4% Notes was
$513.1 million, based on their trading price.

   On August 16, 2000, the Company issued $200 million principal amount of 9
1/2% Senior Notes due August 2008 (the "9 1/2% Notes"), with interest payable
each February and August. The 9 1/2% Notes are redeemable prior to maturity at
the option of the Company, in whole, at 100% of the principal amount plus a
make-whole premium. The 9 1/2% Notes are not subject to any sinking fund
requirements. The net proceeds from this offering were used to repay
borrowings under the Company's credit facility. As of January 31, 2001, the
estimated fair value of the 9 1/2% Notes was $207.0 million, based on their
trading price.

   In November 1998, the Company issued $275 million principal amount of 9
1/4% Senior Subordinated Notes due December 2005 (the "9 1/4% Notes"), with
interest payable each June and December. The 9 1/4% Notes are redeemable at
the option of the Company, in whole, at 100% of the principal amount plus a
make-whole premium at any time prior to December 1, 2002. The 9 1/4% Notes are
also redeemable at the option of the Company, in whole or in part, beginning
December 1, 2002 at prices declining annually to 100% on or after December 1,
2004. The Company may also use the net proceeds of a public offering of equity
securities to redeem up to 35%

                                      64
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

of the 9 1/4% Notes prior to December 1, 2001. The 9 1/4% Notes are not
subject to any sinking fund requirements. As of January 31, 2001, the
estimated fair value of the 9 1/4% Notes was $276.0 million, based on their
trading price.

   In November 1996, the Company issued $150 million principal amount of 7.0%
Debentures due November 2036 (the "7.0% Debentures"). The 7.0% Debentures may
be redeemed at the option of the holder in November 2008. Also, in November
1996, the Company issued $150 million principal amount of 6.70% Debentures due
November 2096 (the "6.70% Debentures"). The 6.70% Debentures may be redeemed
at the option of the holder in November 2003. Both the 7.0% Debentures, which
were discounted to $149.8 million, and the 6.70% Debentures, which were
discounted to $149.7 million, have interest payable each May and November, are
not redeemable by the Company prior to maturity and are not subject to any
sinking fund requirements. As of January 31, 2001, the estimated fair value of
the 7.0% Debentures was $133.5 million and the estimated fair value of the
6.70% Debentures was $142.5 million, based on their trading prices.

   In February 1996, the Company issued $200 million principal amount of 6.45%
Senior Notes due February 1, 2006 (the "6.45% Notes"), with interest payable
each February and August. The 6.45% Notes, which were discounted to $199.6
million, are not redeemable prior to maturity and are not subject to any
sinking fund requirements. As of January 31, 2001, the estimated fair value of
the 6.45% Notes was $181.5 million, based on their trading price.

   In July 1993, the Company issued $150 million principal amount of 6 3/4%
Senior Subordinated Notes (the "6 3/4% Notes") due July 2003 and $150 million
principal amount of 7 5/8% Senior Subordinated Debentures (the "7 5/8%
Debentures") due July 2013, with interest payable each July and January. The 6
3/4% Notes, which were discounted to $149.8 million, and the 7 5/8% Debentures
are not redeemable prior to maturity and are not subject to any sinking fund
requirements. As of January 31, 2001, the estimated fair value of the 6 3/4%
Notes was $142.9 million and the estimated fair value of the 7 5/8% Debentures
was $121.5 million, based on their trading prices.

   The Company has a policy aimed at managing interest rate risk associated
with its current and anticipated future borrowings. This policy enables the
Company to use any combination of interest rate swaps, futures, options, caps
and similar instruments. To the extent the Company employs such financial
instruments pursuant to this policy, and the instruments qualify for hedge
accounting, they are accounted for as hedging instruments. In order to qualify
for hedge accounting, the underlying hedged item must expose the Company to
risks associated with market fluctuations and the financial instrument used
must be designated as a hedge and must reduce the Company's exposure to market
fluctuation throughout the hedge period. If these criteria are not met, a
change in the market value of the financial instrument is recognized as a gain
or loss in the period of change. Otherwise, gains and losses are not
recognized except to the extent that the financial instrument is disposed of
prior to maturity. Net interest paid or received pursuant to the financial
instrument is included as interest expense in the period.

   The Company has entered into various interest rate swaps, principally with
its bank group, to manage interest expense, which is subject to fluctuation
due to the variable-rate nature of the debt under the Company's corporate debt
program. The Company has interest rate swap agreements under which it pays a
fixed interest rate (weighted average of approximately 6.4%) and receives a
variable interest rate (weighted average of approximately 6.5% at January 31,
2001) on $550 million notional amount of "initial" swaps. The net effect of
all such swaps resulted in a reduction of interest expense of $1.2 million for
the year. Three of the swaps with a combined notional amount of $350 million
terminate in fiscal 2003. The remaining swap of $200 million notional amount
terminates in fiscal 2004.

                                      65
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap agreements. However, the Company
considers the risk of nonperformance by the counterparties to be minimal
because the parties to the swaps are predominantly members of the Company's
bank group. If the Company had terminated all swaps as of January 31, 2001,
the Company would have had to pay a net amount of $14.3 million based on
quoted market values from the various financial institutions holding the
swaps.

   As of January 31, 2001, under the Company's most restrictive loan covenant,
the Company was restricted from issuing additional debt in excess of
approximately $490 million.

   Required annual principal payments as of January 31, 2001 are as follows:

<TABLE>
<CAPTION>
   Year Ending                                                     January 31,
   -----------                                                    --------------
                                                                  (in thousands)
   <S>                                                            <C>
    2002.........................................................   $   42,262
    2003.........................................................      820,313
    2004.........................................................      175,274
    2005.........................................................          312
    2006.........................................................      275,312
      Thereafter.................................................    1,352,386
                                                                    ----------
                                                                    $2,665,859
                                                                    ==========
</TABLE>

Note 4. Leasing Arrangements

   On October 30, 1998, the Company entered into an operating lease agreement
with a group of financial institutions (the "Lease Facility") to permit the
Company to lease up to $200 million of equipment. As of June 30, 1999, the
Company had utilized the entire $200 million Lease Facility to lease equipment
at Mandalay Bay and, pursuant to the terms of the lease, the commitment under
the Company's bank credit facility was permanently reduced to $1.8 billion.
The base term of the lease expires June 30, 2001. The lease agreement provides
that the lease term will automatically renew for an additional one-year term
(with a maximum of two successive one-year renewal terms) unless the Company
makes prior election to terminate the lease. As of January 31, 2001, the lease
term had been automatically extended to June 30, 2002. The rent expense
related to this lease facility is reported separately on the consolidated
statements of income as operating lease rent.

   The Company also leases various storage facilities and equipment and has
various air space under operating leases expiring individually through 2032. A
portion of the Circus Circus facility in Reno is built on leased land with
various operating leases expiring through 2033. The following is a schedule of
future minimum rental payments required as of January 31, 2001 under those
operating leases that have lease terms in excess of one year:

<TABLE>
<CAPTION>
   Year ending                                                     January 31,
   -----------                                                    --------------
                                                                  (in thousands)
   <S>                                                            <C>
    2002.........................................................    $35,573
    2003.........................................................     13,837
    2004.........................................................      1,488
    2005.........................................................        644
    2006.........................................................        623
      Thereafter.................................................      5,823
                                                                     -------
                                                                     $57,988
                                                                     =======
</TABLE>


                                      66
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   Rent expense for all leases accounted for as operating leases was as
follows:

<TABLE>
<CAPTION>
                                                         Year ended January 31,
                                                         ----------------------
                                                          2001    2000    1999
                                                         ------- ------- ------
                                                             (in thousands)
<S>                                                      <C>     <C>     <C>
Operating rent expense.................................. $43,222 $27,988 $3,454
                                                         ======= ======= ======
</TABLE>

Note 5. Income Taxes

   The Company accounts for income taxes according to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires the recognition of deferred tax assets, net of applicable
reserves, related to net operating loss carryforwards and certain temporary
differences. The standard requires recognition of a future tax benefit to the
extent that realization of such benefit is more likely than not. Otherwise, a
valuation allowance is applied. At January 31, 2001, the Company believes that
its deferred tax assets are fully realizable because of the future reversal of
existing taxable temporary differences and future projected taxable income.
Accordingly, there is no valuation allowance at January 31, 2001.

   The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                        Year ended January 31,
                                                       -------------------------
                                                        2001     2000     1999
                                                       ------- --------  -------
                                                            (in thousands)
<S>                                                    <C>     <C>       <C>
Current
  Federal............................................. $53,588 $ 38,069  $34,810
  State...............................................   1,545      734      510
                                                       ------- --------  -------
                                                        55,133   38,803   35,320
                                                       ------- --------  -------
Deferred (see below)
  Federal.............................................  19,559  (11,687)  20,297
                                                       ------- --------  -------
                                                       $74,692 $ 27,116  $55,617
                                                       ======= ========  =======
</TABLE>

   The Company has recognized a tax benefit of $2.7 million, $1.7 million and
$38,000 related to the exercise of stock options for the fiscal years ended
January 31, 2001, 2000 and 1999, respectively. Such amounts reduce the current
portion of taxes payable.

   The components of deferred income tax expense are as follows:

<TABLE>
<CAPTION>
                                                    Year ended January 31,
                                                   ---------------------------
                                                    2001      2000      1999
                                                   -------  ---------  -------
                                                        (in thousands)
<S>                                                <C>      <C>        <C>
Additional depreciation resulting from the use of
 accelerated methods for tax purposes............. $20,956  $  10,723  $11,811
Effect of writing off preopening expenses for
 financial statement purposes and amortizing over
 five years for tax purposes......................   4,409    (16,932)   1,062
Book reserve for bad debts not currently
 deductible for tax purposes......................  (6,643)    (2,715)    (872)
Difference between book and tax basis of
 investments in unconsolidated affiliates.........  (1,822)    (2,294)   3,392
Capitalized interest..............................     101        431    2,993
Other, net........................................   2,558       (900)   1,911
                                                   -------  ---------  -------
                                                   $19,559  $(11,687)  $20,297
                                                   =======  =========  =======
</TABLE>

                                      67
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The reconciliation of the difference between the federal statutory tax rate
and the Company's effective tax rate is as follows:

<TABLE>
<CAPTION>
                                                                 Year ended
                                                                January 31,
                                                               ----------------
                                                               2001  2000  1999
                                                               ----  ----  ----
<S>                                                            <C>   <C>   <C>
Federal statutory tax rate.................................... 35.0% 35.0% 35.0%
Nondeductible goodwill........................................  1.8   5.3   2.5
Nondeductible political contributions.........................   .2    .8   2.0
Other, net....................................................  1.4  (2.0)  --
                                                               ----  ----  ----
Effective tax rate............................................ 38.4% 39.1% 39.5%
                                                               ====  ====  ====
</TABLE>

   The income tax effects of temporary differences between financial and
income tax reporting that gave rise to deferred income tax assets and
liabilities at January 31, 2001 and 2000, are as follows:

<TABLE>
<CAPTION>
                                                            Year ended January
                                                                    31,
                                                           ---------------------
                                                             2001     2000
                                                           -------- --------
                                                              (in thousands)
<S>                                                        <C>      <C>      <C>
Deferred tax liabilities
  Property and equipment.................................. $218,456 $192,898
  Investments in unconsolidated affiliates................   12,873   17,310
  Other...................................................   15,376    9,647
                                                           -------- --------
    Gross deferred tax liabilities........................  246,705  219,855
                                                           -------- --------
Deferred tax assets
  Accrued vacation benefits...............................    7,259    6,471
  Bad debt reserve........................................   11,475    4,832
  Preopening expenses, net of amortization................   13,276   17,451
  Other...................................................    9,096    6,861
                                                           -------- --------
    Gross deferred tax assets.............................   41,106   35,615
                                                           -------- --------
    Net deferred tax liabilities.......................... $205,599 $184,240
                                                           ======== ========
</TABLE>

Note 6. Employee Retirement Plans

   Approximately 41% of the Company's employees are covered by union-
sponsored, collectively bargained, multi-employer defined benefit pension
plans. The Company contributed $13.2 million, $12.8 million and $10.2 million
during the years ended January 31, 2001, 2000 and 1999, respectively, for such
plans. These contributions are determined in accordance with the provisions of
negotiated labor contracts and generally are based on the number of hours
worked.

   The Company also has a profit sharing and investment plan covering
primarily nonunion employees who are at least 21 years of age and have at
least one year of service. The plan is a voluntary defined contribution plan
and is subject to the provisions of the Employee Retirement Income Security
Act of 1974. The plan allows for investments in the Company's common stock as
one of the investment alternatives. The Company's contributions to this plan
are determined based on employees' years of service and matching of employees'
contributions, and were approximately $5.4 million, $4.7 million and $4.5
million in the years ended January 31, 2001, 2000 and 1999. Contributions are
funded with cash.

                                      68
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   On June 18, 1998, the Company adopted a Supplemental Executive Retirement
Plan ("SERP"). The SERP is a defined benefit plan pursuant to which the
Company will pay supplemental pension benefits to certain key employees upon
retirement based upon the employees' years of service, compensation and SERP
tier.

   The following information summarizes activity in the SERP:

<TABLE>
<CAPTION>
                                                               Year ended
                                                               January 31,
                                                            ------------------
                                                              2001      2000
                                                            --------  --------
                                                             (in thousands)
<S>                                                         <C>       <C>
Changes in Projected Benefit Obligation:
  Projected benefit obligation at beginning of year........ $ 20,763  $ 12,978
  Service cost.............................................    1,783     1,395
  Interest cost............................................    1,713     1,070
  New participant liability................................    1,100       --
  Actuarial losses.........................................    6,436     5,330
  Benefits paid............................................     (247)      (10)
                                                            --------  --------
  Projected benefit obligation at end of year.............. $ 31,548  $ 20,763
                                                            ========  ========
Fair Value of Plan Assets(1)............................... $    --   $    --
                                                            ========  ========
Reconciliation of Funded Status:
  Funded status(1)......................................... $(31,548) $(20,763)
  Unrecognized actuarial loss..............................   11,585     5,330
  Unrecognized prior service cost..........................   12,712    12,545
                                                            --------  --------
  Accrued net periodic pension cost........................ $ (7,251) $ (2,888)
                                                            ========  ========
Amounts Recognized in the Consolidated Balance Sheets:
  Accrued net periodic pension cost........................ $ (7,251) $ (2,888)
  Additional minimum liability.............................  (23,179)      --
  Intangible asset.........................................   12,712       --
  Accumulated other comprehensive loss(2)..................   10,467       --
                                                            --------  --------
  Net amount recognized.................................... $ (7,251) $ (2,888)
                                                            ========  ========
Components of Net Periodic Pension Cost:
  Current period service cost.............................. $  1,783  $  1,395
  Interest cost............................................    1,713     1,070
  Amortization of prior service cost.......................      933       433
  Recognized net actuarial loss............................      181       --
                                                            --------  --------
  Net expense(3)........................................... $  4,610  $  2,898
                                                            ========  ========
Weighted Average Assumptions:
  Discount rate............................................      8.0%      8.0%
  Rate of compensation increase............................      3.0%      3.0%
</TABLE>
--------
(1) While the SERP is an unfunded plan, the Company is informally funding the
    plan through life insurance contracts on the participants. The life
    insurance contracts had cash surrender values of $20.9 million and $10.3
    million at January 31, 2001 and 2000.

(2) Amount recorded in the Consolidated Statement of Stockholders' Equity is
    net of income tax of $3.7 million.

(3) The periodic pension expense is included in departmental expenses.

                                      69
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 7. Stock Options

   The Company has various stock option plans for executive, managerial and
supervisory personnel as well as the Company's outside directors and
consultants. The plans permit grants of options, performance shares and
restricted stock awards relating to the Company's common stock. The stock
options are generally exercisable in one or more installments beginning not
less than six months after the grant date.

   Summarized information for stock option plans is as follows:

<TABLE>
<CAPTION>
                                            Year ended January 31,
                          ----------------------------------------------------------
                                 2001               2000                1999
                          ------------------ ------------------ --------------------
                                    Weighted           Weighted             Weighted
                                    Average            Average              Average
                                    Exercise           Exercise             Exercise
                           Options   Price    Options   Price     Options    Price
                          --------- -------- --------- -------- ----------- --------
<S>                       <C>       <C>      <C>       <C>      <C>         <C>
Outstanding at beginning
 of year................  6,029,959  $13.70  3,872,674  $14.72    5,143,505  $23.94
Granted.................    655,500   15.99  3,377,166   14.20    3,188,335   12.51
Exercised...............  (940,061)   16.06  (878,914)   18.08     (16,500)   13.29
Canceled................  (128,458)   18.36  (340,967)   19.05  (4,442,666)   23.81
                          ---------          ---------          -----------
Outstanding at end of
 year...................  5,616,940  $13.46  6,029,959  $13.70    3,872,674  $14.72
                          =========          =========          ===========
Options exercisable at
 end of year............  2,422,600  $12.52  1,937,662  $13.71    1,314,005  $21.19
Options available for
 grant at end of year...  4,884,990          1,912,032            3,973,231
</TABLE>

   The following table summarizes information about stock options outstanding
at January 31, 2001:

<TABLE>
<CAPTION>
                    Options Outstanding                     Options Exercisable
----------------------------------------------------------- --------------------
                                        Weighted
                                         Average   Weighted             Weighted
                                        Remaining  Average              Average
                             Number    Contractual Exercise   Number    Exercise
Range of Exercise Prices   Outstanding Life (yrs)   Price   Exercisable  Price
------------------------   ----------- ----------- -------- ----------- --------
<S>                        <C>         <C>         <C>      <C>         <C>
 $11.25 to $11.25.........  1,638,440     4.79      $11.25   1,322,404   $11.25
  13.00 to  13.00.........  3,228,167     8.16       13.00     927,497    13.00
  14.50 to  25.94.........    750,333     8.48       20.29     172,699    19.65
                            ---------     ----      ------   ---------   ------
                            5,616,940     7.22      $13.46   2,422,600   $12.52
                            =========     ====      ======   =========   ======
</TABLE>

   In December 1998, replacement options to purchase an aggregate of
approximately 2.6 million shares of the Company's common stock were awarded at
an exercise price of $11.25 per share, subject to the surrender for
cancellation of 3.9 million options with an average exercise price of $24.29.

   Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123") provides, among other things, that companies
may elect to account for employee stock options using a fair value method or
continue to apply the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25 ("APB 25").

   Under SFAS 123, all employee stock option grants are considered
compensatory. Compensation cost is measured at the date of grant based on the
estimated fair value of the options determined using an option pricing model.
The model takes into account the stock price at the grant date, the exercise
price, the expected life of the option, the volatility of the stock, expected
dividends on the stock and the risk-free interest rate over the expected life
of the option. Under APB 25, generally only stock options that have an
intrinsic value at the date of grant

                                      70
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

are considered compensatory. Intrinsic value represents the excess, if any, of
the market price of the stock at the grant date over the exercise price of the
options. Under both methods, compensation cost is charged to earnings over the
period the options become exercisable.

   The Company has elected to continue to account for employee stock options
under APB 25. Accordingly, no compensation cost has been recognized.

   The following table discloses the Company's pro forma net income and net
income per share assuming compensation cost for employee stock options had
been determined consistent with SFAS 123. The table also discloses the
weighted average assumptions used in estimating the fair value of each option
grant on the date of grant using the Black-Scholes option pricing model, and
the estimated weighted average fair value of the options granted. The model
assumes no expected future dividend payments on the Company's common stock.

<TABLE>
<CAPTION>
                                                      Year ended January 31,
                                                     --------------------------
                                                       2001     2000     1999
                                                     --------  -------  -------
                                                      (in thousands, except
                                                           share data)
   <S>                                               <C>       <C>      <C>
   Net income:
     As reported.................................... $119,700  $42,163  $85,198
     Pro forma......................................  114,480   31,527   79,722

   Net income per share (basic):
     As reported.................................... $   1.53  $   .47  $   .90
     Pro forma......................................     1.46      .35      .84

   Net income per share (diluted):
     As reported.................................... $   1.50  $   .46  $   .90
     Pro forma......................................     1.44      .34      .84

   Weighted average assumptions:
     Expected stock price volatility................     45.1%    45.1%    43.6%
     Risk-free interest rate........................      4.6%     6.4%     5.0%
     Expected option lives (years)..................      3.0      2.7      2.1
     Estimated fair value of options granted........ $   5.79  $  4.79  $  3.50
</TABLE>

Note 8. Stock Related Matters

   On July 14, 1994, the Company declared a dividend of one common stock
purchase right (the "Rights") for each share of common stock outstanding at
the close of business on August 15, 1994. Each Right entitles the holder to
purchase from the Company one share of common stock at an exercise price of
$125, subject to certain antidilution adjustments. The Rights become
exercisable ten days after the earlier of an announcement that an individual
or group has acquired 15% or more of the Company's outstanding common stock or
the announcement of commencement of a tender offer for 15% or more of the
Company's common stock.

   In the event the Rights become exercisable, each Right (except the Rights
beneficially owned by the acquiring individual or group, which become void)
would entitle the holder to purchase, for the exercise price, a number of
shares of the Company's common stock having an aggregate current market value
equal to two times the exercise price. The Rights expire August 15, 2004, and
may be redeemed by the Company at a price of $.01 per Right any time prior to
their expiration or the acquisition of 15% or more of the Company's common
stock. The Rights should not interfere with any merger or other business
combination approved by the Company's Board of Directors and are intended to
cause substantial dilution to a person or group that attempts to acquire
control of the Company on terms not approved by the Board of Directors.

                                      71
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   During the year ended January 31, 2001, the Company repurchased 14.5
million shares of its common stock at a cost of $247.1 million. In the fiscal
years ended 2000 and 1999, the Company repurchased 1.7 million shares of its
common stock at a cost of $29.6 million and 4.5 million shares of its common
stock at a cost of $51.6 million, respectively. See also Note 11--Commitments
and Contingent Liabilities for information regarding the Company's agreement
to purchase shares from Bank of America.

   The Company is authorized to issue up to 75 million shares of $.01 par
value preferred stock in one or more series having such respective terms,
rights and preferences as are designated by the Board of Directors. No
preferred stock has yet been issued.

Note 9. Earnings Per Share

   Earnings per share is computed and presented in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." Basic
earnings per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period, while diluted earnings
per share reflects the impact of additional dilution for all potentially
dilutive securities, such as stock options.

   The table below reconciles weighted average shares outstanding used to
calculate basic earnings per share with the weighted average shares
outstanding used to calculate diluted earnings per share. There were no
reconciling items for net income.

<TABLE>
<CAPTION>
                                                        Year ended January 31,
                                                       ------------------------
                                                         2001    2000    1999
                                                       -------- ------- -------
                                                            (in thousands,
                                                        except per share data)
<S>                                                    <C>      <C>     <C>
Net income...........................................  $119,700 $42,163 $85,198
                                                       ======== ======= =======
Weighted average shares outstanding (basic earnings
 per share)..........................................    78,335  90,607  94,601
Stock options........................................     1,366   1,289      70
                                                       -------- ------- -------
Weighted average shares outstanding (diluted earnings
 per share)..........................................    79,701  91,896  94,671
                                                       ======== ======= =======
Basic earnings per share.............................  $   1.53 $   .47 $   .90
                                                       ======== ======= =======
Diluted earnings per share...........................  $   1.50 $   .46 $   .90
                                                       ======== ======= =======
</TABLE>

                                      72
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 10. Investments in Unconsolidated Affiliates

   The Company has investments in unconsolidated affiliates that are accounted
for under the equity method. Under the equity method, original investments are
recorded at cost and adjusted by the Company's share of earnings, losses and
distributions of these companies. The investment balance also includes
interest capitalized during construction. Investments in unconsolidated
affiliates consist of the following:

<TABLE>
<CAPTION>
                                                                 January 31,
                                                              -----------------
                                                                2001     2000
                                                              -------- --------
                                                               (in thousands)
   <S>                                                        <C>      <C>
   Circus and Eldorado Joint Venture (50%)................... $ 72,222 $ 87,150
    (Silver Legacy, Reno, Nevada)

   Elgin Riverboat Resort (50%)..............................   39,156   40,780
    (Grand Victoria, Elgin, Illinois)

   Victoria Partners (50%)...................................  131,126  137,065
    (Monte Carlo, Las Vegas, Nevada)
                                                              -------- --------
                                                              $242,504 $264,995
                                                              ======== ========
</TABLE>

   The Company's unconsolidated affiliates operate with fiscal years ending on
December 31. Summarized balance sheet information of the unconsolidated
affiliates as of December 31, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                2000     1999
                                                              -------- --------
                                                               (in thousands)
   <S>                                                        <C>      <C>
   Current assets............................................ $108,868 $ 95,602
   Property and other assets, net............................  670,347  698,982
   Current liabilities.......................................   94,131   71,712
   Long-term debt and other liabilities......................  244,006  261,006
   Equity....................................................  441,078  461,866
</TABLE>

   Summarized results of operations of the unconsolidated affiliates for the
years ended December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                 2000     1999
                                                               -------- --------
                                                                (in thousands)
   <S>                                                         <C>      <C>
   Revenues................................................... $852,654 $764,664
   Expenses...................................................  620,987  577,193
   Operating income...........................................  231,667  187,471
   Net income.................................................  211,712  166,816
</TABLE>

Note 11. Commitments and Contingent Liabilities

   In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado
Hotel/Casino, opened in downtown Reno, Nevada. As a condition to the joint
venture's $230 million bank credit agreement, Mandalay is obligated under a
make-well agreement to make additional contributions to the joint venture as
may be necessary to maintain a minimum coverage ratio (as defined).

   The Company has formed a joint venture with the Detroit-based Atwater
Casino Group to build, own and operate a hotel/casino in Detroit, Michigan.
This joint venture is one of three groups which negotiated development
agreements with the city. Mandalay had an initial 45% ownership interest in
the joint venture.

                                      73
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Effective December 14, 1999, the Company acquired an additional 8.5% interest
at a cost of $38.4 million, thus increasing its total ownership interest to
53.5%.

   Pending the development of a permanent hotel/casino, the joint venture
constructed a temporary casino (MotorCity Casino) in downtown Detroit, which
opened December 14, 1999. The cost of the temporary casino, including land and
capitalized interest but excluding preopening expenses, was approximately $150
million. This cost was financed pursuant to the joint venture's $150 million
credit facility, which is secured by the assets associated with the temporary
casino. Mandalay has guaranteed this credit facility. The joint venture's
operation of the temporary casino is subject to ongoing regulatory oversight,
and its ability to proceed with a permanent hotel/casino facility is
contingent upon the receipt of all necessary gaming approvals and satisfaction
of other conditions.

   Under a plan agreed to by the City of Detroit development authorities, but
not yet approved by the Detroit City Council, the Company would expand its
temporary facility into a permanent facility by adding approximately 800 hotel
rooms, expanded casino space, convention space, retail space and additional
dining and entertainment facilities. The Company has committed to contribute
20% of the cost of the permanent facility in the form of equity, and the joint
venture will seek project-specific funding for the balance of the cost. The
permanent facility's cost is being evaluated in light of the decision to
utilize the site of the temporary casino for the permanent facility. The
development agreement provides that the Company will guarantee completion of
the permanent facility and will enter into a keep-well guarantee with the
city, pursuant to which it could be required to contribute additional funds,
if and as needed, to continue operation of the project for a period of two
years. This keep-well agreement also applies to the temporary casino. Mandalay
has issued letters of credit totaling $50 million for the benefit of Bank of
America in order to back letters of credit issued by Bank of America for the
same total amount. The Bank of America letters of credit were issued to secure
payments of principal and interest on bonds issued by the Economic Development
Corporation of the City of Detroit. The proceeds of the bonds are to be used
to finance costs associated with activities (including acquisition) relating
to land located along the Detroit Riverfront (including the site where the
joint venture's permanent facility originally was to be located).

   Various lawsuits have been filed in the state and federal courts
challenging the constitutionality of the Detroit Casino Competitive Selection
Process and the Michigan Gaming Control and Revenue Act, and seeking to appeal
the issuance of a certificate of suitability to MotorCity Casino. No assurance
can be given regarding the timing and outcome of these proceedings. An adverse
ruling in any of these lawsuits could adversely impact the status of the joint
venture's operation of the temporary facility, as well as its ability to
obtain a certificate of suitability and a casino license for its permanent
facility.

   In May 2000, the Company's Board of Directors authorized the purchase of up
to 15% (or approximately 11.7 million) of the then outstanding shares of
common stock, as market conditions and other factors warrant. As of January
31, 2001, the Company had purchased 1.8 million shares pursuant to this
authorization at a cost of $39.1 million. To facilitate the Company's purchase
of shares pursuant to this authorization, the Company entered into agreements
with Bank of America providing for the purchase, in accordance with the volume
and other limitations of Rule 10b-18 under the Securities Exchange Act of
1934, of up to $100 million of the Company's outstanding common stock by Bank
of America. The agreements provide that the Company will purchase from Bank of
America at its cost (plus accrued fees) the shares acquired pursuant to the
agreements one year following completion of Bank of America's acquisition of
the stock. At the Company's option, it may acquire all or a portion of the
shares at an earlier date, or it may become obligated to acquire all or a
portion of the shares at an earlier date under certain circumstances specified
in the agreements. Although the Company's current intention is to purchase the
shares in accordance with the terms of the agreements, the Company may elect
to net settle the obligation in cash or shares (i.e., pay cash or deliver
additional shares or receive cash or shares). As of January 31, 2001, Bank of
America had purchased 4.9 million shares pursuant to this agreement at a cost
of

                                      74
<PAGE>

                             MANDALAY RESORT GROUP

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

$100 million, excluding commissions. Any shares the Company purchases from
Bank of America pursuant to these agreements will reduce, by that number, the
shares the Company may purchase pursuant to the May 2000 share purchase
authorization.

   The Company is a defendant in various pending litigation. In management's
opinion, the ultimate outcome of such litigation will not have a material
effect on the results of operations or the financial position of the Company.

Note 12. Recently Issued Accounting Standards

   In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), which the Company
will adopt in the first quarter of fiscal 2002. This statement establishes
accounting and reporting standards for derivative financial instruments. The
provisions of SFAS 133 require that a company recognize derivatives as either
assets or liabilities on its balance sheet and that the instrument be recorded
at its fair value. The statement also defines the criteria and conditions
which govern the recognition of subsequent changes in the fair value of the
instrument. The Company will recognize the value of its interest rate swaps
($14.3 million expense at January 31, 2001) as a cumulative effect of a change
in accounting principle.

   In November 2000, the Emerging Issues Task Force ("EITF") of the FASB
reached a consensus on EITF 00-14, "Accounting for Certain Sales Incentives."
EITF 00-14 requires that discounts which result in a reduction in or refund of
the selling price of a product or service in a single exchange transaction be
recorded as a reduction of revenues. The Company's accounting policy related
to free or discounted rooms, food and beverage and other services already
complies with EITF 00-14, and those free or discounted services are deducted
from gross revenues as "complimentary allowances." The Company's accounting
policy related to discounts to induce casino play also complies with EITF 00-
14, as such incentives are netted against gross casino revenues.

   In February 2001, the EITF reached a partial consensus on EITF 00-22,
"Accounting for "Points' and Certain Other Time-Based or Volume-Based Sales
Incentive Offers, and Offers for Free Products or Services to be Delivered in
the Future." The consensus requires that vendors recognize the cash rebate or
refund obligation associated with time- or volume-based cash rebates as a
reduction of revenue. The liability for such obligations should be based on
the estimated amount of rebates or refunds to be ultimately earned, including
an estimation of "breakage" if it can be reasonably estimated. The consensus
is applicable beginning in the first quarter of fiscal 2002.

   The Company's players' clubs allow customers to earn certain complimentary
services and/or cash rebates based on the volume of the customers' gaming
activity. The Company accounts for its players' clubs in accordance with EITF
00-22, except that it records the charge for progress towards the
complimentary services/cash rebates as a casino department expense instead of
a reduction of revenue. The Company will change the classification for these
charges in the first quarter of fiscal 2002, including reclassifying prior
period amounts.

                                      75
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Mandalay Resort Group:

   We have audited the accompanying consolidated balance sheets of Mandalay
Resort Group (a Nevada corporation) and subsidiaries as of January 31, 2001
and 2000 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended January
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

   In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Mandalay Resort Group and
subsidiaries as of January 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in the period
ended January 31, 2001, in conformity with accounting principles generally
accepted in the United States.

Arthur Andersen LLP

Las Vegas, Nevada
February 28, 2001

                                      76
<PAGE>

                  MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS

   The Company is responsible for preparing the consolidated financial
statements and related information appearing in this report. Management
believes that the financial statements present fairly the Company's financial
position, results of operations and cash flows in conformity with Generally
Accepted Accounting Principles. In preparing its financial statements, the
Company is required to include amounts based on estimates and judgments which
management believes are reasonable under the circumstances.

   The Company maintains accounting and other control systems designed to
provide reasonable assurance that financial records are reliable for purposes
of preparing financial statements and that assets are properly accounted for
and safeguarded. Compliance with these systems and controls is reviewed
through a program of audits by an internal audit staff.

   The Board of Directors fulfills its responsibility for the Company's
financial statements through its audit committee, which is composed solely of
directors who are not Company officers or employees. The audit committee meets
from time to time with the independent public accountants, management and the
internal auditors. The independent public accountants have direct access to
the audit committee, with or without the presence of management
representatives.

                                      77
<PAGE>

              SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                     Year Ended January 31, 2001
                                 -----------------------------------
                                   1st      2nd      3rd      4th
                                 Quarter  Quarter  Quarter  Quarter    Total
                                 -------- -------- -------- -------- ----------
                                    (in thousands, except per share amounts)
<S>                              <C>      <C>      <C>      <C>      <C>
Revenue......................... $639,616 $647,400 $638,457 $598,751 $2,524,224
Income from operations..........  130,915  119,950  114,081   66,588    431,534
Income before income tax........   78,245   60,801   47,231    8,115    194,392
Net income......................   48,858   38,052   29,371    3,419    119,700
Basic earnings per share........ $    .58 $    .49 $    .39 $    .04 $     1.53
Diluted earnings per share...... $    .58 $    .48 $    .38 $    .04 $     1.50
</TABLE>

<TABLE>
<CAPTION>
                                  Year Ended January 31, 2000
                              ------------------------------------
                                1st       2nd      3rd      4th
                              Quarter   Quarter  Quarter  Quarter     Total
                              --------  -------- -------- --------  ----------
                                 (in thousands, except per share amounts)
<S>                           <C>       <C>      <C>      <C>       <C>
Revenue...................... $471,259  $516,181 $545,202 $518,256  $2,050,898
Income from operations.......   62,499    79,130   89,856   42,251     273,736
Income (loss) before income
 tax.........................   27,427    36,261   46,171   (6,743)    103,116
Net income (loss)............   (4,855)   23,631   28,757   (5,370)     42,163
Basic earnings (loss) per
 share....................... $   (.05) $    .26 $    .32 $   (.06) $      .47
Diluted earnings (loss) per
 share....................... $   (.05) $    .26 $    .31 $   (.06) $      .46
</TABLE>

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

   Not applicable.

                                       78
<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

   The information beginning with the question "What is the background of this
year's nominees?" under the caption "Item I--Election of Directors and Nominee
Biographies" to, but not including, the caption "Compensation of Directors" in
the proxy statement to be filed by Mandalay Resort Group with the Securities
and Exchange Commission within 120 days after the close of the fiscal year
ended January 31, 2001 and forwarded to stockholders prior to the 2001 Annual
Meeting of Stockholders (the "2001 Proxy Statement"), is incorporated herein
by this reference.

ITEM 11. EXECUTIVE COMPENSATION.

   The information in the 2001 Proxy Statement beginning immediately following
the caption "Compensation of Directors" to, but not including, the caption
"Board Committees and Meeting Attendance" and the additional information in
the 2001 Proxy Statement beginning immediately following the caption
"Executive Compensation" to, but not including, the caption "Certain
Transactions" is incorporated herein by this reference.

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

   The information in the 2001 Proxy Statement beginning immediately following
the caption "Stock Ownership of Certain Beneficial Owners and Management" to,
but not including, the caption "General" is incorporated herein by this
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   The information in the 2001 Proxy Statement beginning immediately following
the caption "Certain Transactions" to, but not including, the caption "Report
of the Board of Directors and the Compensation Committee on Executive
Compensation" is incorporated herein by this reference.

                                      79
<PAGE>

                                    PART IV

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

   (a)(1) Consolidated Financial Statements:

                     MANDALAY RESORT GROUP AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                         Page
                                                                         -----
<S>                                                                      <C>
Consolidated Balance Sheets as of January 31, 2001 and 2000.............    56

Consolidated Statements of Income for the three years ended January 31,
 2001...................................................................    57

Consolidated Statements of Cash Flows for the three years ended January
 31, 2001...............................................................    58

Consolidated Statements of Stockholders' Equity for the three years
 ended January 31, 2001.................................................    59

Notes to Consolidated Financial Statements.............................. 60-75

Report of Independent Public Accountants................................    76
</TABLE>

   (a)(2) Supplemental Financial Statement Schedules:

   None.

   (a)(3) Exhibits:

   The following exhibits are filed as a part of this report or incorporated
herein by reference:

<TABLE>
 <C>      <S>
 3(i)(a). Restated Articles of Incorporation of the Registrant as of July 15,
           1988 and Certificate of Amendment thereto, dated June 29, 1989.
           (Incorporated by reference to Exhibit 3(a) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1991.)

 3(i)(b). Certificate of Division of Shares into Smaller Denominations, dated
           June 20, 1991. (Incorporated by reference to Exhibit 3(b) to the
           Registrant's Annual Report on Form 10-K for the fiscal year ended
           January 31, 1992.)

 3(i)(c). Certificate of Division of Shares into Smaller Denominations, dated
           June 22, 1993. (Incorporated by reference to Exhibit 3(i) to the
           Registrant's Current Report on Form 8-K dated July 21, 1993.)

 3(i)(d). Certificate of Amendment of Restated Articles of Incorporation of the
           Registrant, filed with the Office of the Secretary of State of
           Nevada on June 18, 1999. (Incorporated by reference to Exhibit 3(i)
           to the Registrant's Current Report on Form 8-K dated June 18, 1999.)

 3(ii).   Restated Bylaws of the Registrant dated April 30, 1999. (Incorporated
           by reference to Exhibit 3(ii) to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended January 31, 1999.)

 4(a).    Rights Agreement dated as of July 14, 1994, between the Registrant
           and First Chicago Trust Company of New York. (Incorporated by
           reference to Exhibit 4 to the Registrant's Current Report on
           Form 8-K dated August 15, 1994.)

 4(b).    Amendment to Rights Agreement effective as of April 16, 1996, between
           the Registrant and First Chicago Trust Company of New York.
           (Incorporated by reference to Exhibit 4(a) to the Registrant's
           Quarterly Report on Form 10-Q for the quarterly period ended July
           31, 1996.)

 4(c).    Amended and Restated Loan Agreement, dated as of May 23, 1997, by and
           among the Registrant, the Banks named therein and Bank of America,
           N.A., as administrative agent for the Banks, and the related
           Subsidiary Guarantee dated May 23, 1997, of the Registrant's
           subsidiaries named therein. (Incorporated by reference to Exhibit
           4(a) to the Registrant's Quarterly Report on Form 10-Q for the
           quarterly period ended April 30, 1997.)
</TABLE>

                                       80
<PAGE>

<TABLE>
 <C>   <S>
 4(d). Amendment No. 1 to Amended and Restated Loan Agreement, by and among the
        Registrant, the Banks named therein and Bank of America, N.A., as
        administrative agent for the Banks. (Incorporated by reference to
        Exhibit 4(a) to the Registrant's Quarterly Report for the quarterly
        period ended October 31, 1997.)

 4(e). Amendment No. 2 to the Loan Agreement, by and among the Registrant, the
        Banks named therein and Bank of America N.A., as administrative agent
        for the Banks. (Incorporated by reference to Exhibit 4(a) to the
        Registrant's Quarterly Report on Form 10-Q for the quarterly period
        ended April 30, 1998.)

 4(f). Amendment No. 3, dated as of June 22, 1999, to the Amended and Restated
        Loan Agreement dated as of May 23, 1997, by and among the Registrant,
        the Banks named therein and Bank of America N.A., as administrative
        agent for the Banks. (Incorporated by reference to Exhibit 4(a) to the
        Registrant's Quarterly Report on Form 10-Q for the quarterly period
        ended July 31, 1999.)

 4(g). Rate Swap Master Agreement, dated as of October 24, 1986, and Rate Swap
        Supplements One through Four, by and between the Registrant and Bank of
        America, N.A. (Incorporated by reference to Exhibit 4(j) to the
        Registrant's Current Report on Form 8-K dated December 29, 1986.)

 4(h). Interest Rate Swap Agreement, dated as of September 27, 1999, by and
        between the Registrant and Bank of America, N.A. (Incorporated by
        reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form
        10-Q for the quarterly period ended October 31, 1999.)

 4(i). Interest Rate Swap Agreement, dated as of September 27, 1999, by and
        between the Registrant and Bank of America, N.A. (Incorporated by
        reference to Exhibit 4(b) to the Registrant's Quarterly Report on Form
        10-Q for the quarterly period ended October 31, 1999.)

 4(j). Interest Rate Swap Agreement, dated as of October 13, 1999, by and
        between the Registrant and Bank of America, N.A. (Incorporated by
        reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form
        10-Q for the quarterly period ended October 31, 1999.)

 4(k). Interest Rate Cap Agreement, dated October 20, 1997, between the
        Registrant and Morgan Guaranty Trust Company of New York. (Incorporated
        by reference to Exhibit 4(f) to the Registrant's Quarterly Report for
        the quarterly period ended October 31, 1997.)

 4(l). Interest Rate Cap Agreement, dated January 13, 1998, between the
        Registrant and Morgan Guaranty Trust Company of New York. (Incorporated
        by reference to Exhibit 4(h) to the Registrant's Annual Report on Form
        10-K for the fiscal year ended January 31, 1998.)

 4(m). Interest Rate Cap Agreement dated June 14, 2000, between the Registrant
        and Morgan Guaranty Trust Company of New York. (Incorporated by
        reference to Exhibit 4(e) to the Registrant's Quarterly Report on Form
        10-Q for the quarterly period ended July 31, 2000.)

 4(n). Interest Rate Cap Agreement dated June 29, 2000, between the Registrant
        and Morgan Guaranty Trust Company of New York. (Incorporated by
        reference to Exhibit 4(f) to the Registrant's Quarterly Report on Form
        10-Q for the quarterly period ended July 31, 2000.)

 4(o). Grid Promissory Note, dated October 17, 1997, between the Registrant and
        Lyon Short Term Funding Corp. (Incorporated by reference to Exhibit
        4(g) to the Registrant's Quarterly Report for the quarterly period
        ended October 31, 1997.)

 4(p). Commercial Paper Dealer Agreement, dated October 9, 1997, between the
        Registrant and Merrill Lynch Money Markets Inc. (Incorporated by
        reference to Exhibit 4(b) to the Registrant's Quarterly Report for the
        quarterly period ended October 31, 1997.)

 4(q). Commercial Paper Dealer Agreement, dated October 9, 1997, between the
        Registrant and BancAmerica Robertson Stephens. (Incorporated by
        reference to Exhibit 4(c) to the Registrant's Quarterly Report for the
        quarterly period ended October 31, 1997.)

 4(r). Commercial Paper Dealer Agreement, dated October 9, 1997, between the
        Registrant and Credit Suisse First Boston Corporation. (Incorporated by
        reference to Exhibit 4(d) to the Registrant's Quarterly Report for the
        quarterly period ended October 31, 1997.)
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 4(s).  Issuing and Paying Agency Agreement, dated October 9, 1997, between the
         Registrant and The Chase Manhattan Bank. (Incorporated by reference to
         Exhibit 4(e) to the Registrant's Quarterly Report for the quarterly
         period ended October 31, 1997.)

 4(t).  Indenture by and between the Registrant and First Interstate Bank of
         Nevada, N.A., as Trustee with respect to the Registrant's 6 3/4%
         Senior Subordinated Notes due 2003 and its 7 5/8% Senior Subordinated
         Debentures due 2013. (Incorporated by reference to Exhibit 4(a) to the
         Registrant's Current Report on Form 8-K dated July 21, 1993.)

 4(u).  Indenture, dated February 1, 1996, by and between the Registrant and
         First Interstate Bank of Nevada, N.A., as Trustee. (Incorporated by
         reference to Exhibit 4(b) to the Registrant's Current Report on Form
         8-K dated January 29, 1996.)

 4(v).  Supplemental Indenture, dated February 1, 1996, by and between the
         Registrant and First Interstate Bank of Nevada, N.A., as Trustee, with
         respect to the Registrant's 6.45% Senior Notes due February 1, 2006.
         (Incorporated by reference to Exhibit 4(c) to the Registrant's Current
         Report on Form 8-K dated January 29, 1996.)

 4(w).  6.45% Senior Notes due February 1, 2006 in the principal amount of
         $200,000,000. (Incorporated by reference to Exhibit 4(d) to the
         Registrant's Current Report on Form 8-K dated January 29, 1996.)

 4(x).  Supplemental Indenture, dated as of November 15, 1996, to an indenture
         dated February 1, 1996, by and between the Registrant and Wells Fargo
         Bank (Colorado), N.A., as Trustee, with respect to the Registrant's
         6.70% Senior Notes due November 15, 2096. (Incorporated by reference
         to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for
         the quarterly period ended October 31, 1996.)

 4(y).  6.70% Senior Notes due February 15, 2096 in the principal amount of
         $150,000,000. (Incorporated by reference to Exhibit 4(d) to the
         Registrant's Quarterly Report on Form 10-Q for the quarterly period
         ended October 31, 1996.)

 4(z).  Indenture, dated November 15, 1996, by and between the Registrant and
         Wells Fargo Bank (Colorado), N.A., as Trustee. (Incorporated by
         reference to Exhibit 4(e) to the Registrant's Quarterly Report on Form
         10-Q for the quarterly period ended October 31, 1996.)

 4(aa). Supplemental Indenture, dated as of November 15, 1996, to an indenture
         dated November 15, 1996, by and between the Registrant and Wells Fargo
         Bank (Colorado), N.A., as Trustee, with respect to the Registrant's
         7.0% Senior Notes due November 15, 2036. (Incorporated by reference to
         Exhibit 4(f) to the Registrant's Quarterly Report on Form 10-Q for the
         quarterly period ended October 31, 1996.)

 4(bb). 7.0% Senior Notes due February 15, 2036, in the principal amount of
         $150,000,000. (Incorporated by reference to Exhibit 4(g) to the
         Registrant's Quarterly Report on Form 10-Q for the quarterly period
         ended October 31, 1996.)

 4(cc). Instrument of Joinder, dated May 31, 1998, by Mandalay Corp., pursuant
         to the Subsidiary Guaranty dated as of May 23, 1997, with respect to
         the Amended and Restated Loan Agreement, in favor of Bank of America,
         N.A., as administrative agent for the Banks. (Incorporated by
         reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form
         10-Q for the quarterly period ended July 31, 1998.)

 4(dd). Indenture dated November 20, 1998, by and between the Registrant and
         The Bank of New York, as Trustee. (Incorporated by reference to
         Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the
         quarterly period ended October 31, 1998.)

 4(ee). Supplemental Indenture, dated November 20, 1998, by and between the
         Registrant and The Bank of New York, as Trustee, with respect to the
         Registrant's 9 1/4% Senior Subordinated Notes due December 1, 2005.
         (Incorporated by reference to Exhibit 4(b) to the Registrant's
         Quarterly Report on Form 10-Q for the quarterly period ended October
         31, 1998.)
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 4(ff).  9 1/4% Senior Subordinated Notes due December 1, 2005 in the principal
          amount of $275,000,000. (Incorporated by reference to Exhibit 4(c) to
          the Registrant's Quarterly Report on Form 10-Q for the quarterly
          period ended October 31, 1998.)

 4(gg).  Indenture dated as of July 24, 2000 by and between the Company and The
          Bank of New York with respect to $500 million aggregate principal
          amount of 10 1/4% Senior Subordinated Notes due 2007. (Incorporated
          by reference to Exhibit 4.1 to the Registrant's Form S-4 Registration
          Statement No. 333-44216.)

 4(hh).  Indenture dated as of August 16, 2000 by and between the Company and
          The Bank of New York, with respect to $200 million aggregate
          principal amount of 9 1/2% Senior Notes due 2008. (Incorporated by
          reference to Exhibit 4.1 to the Company's Form S-4 Registration
          Statement No. 333-44838.)

 4(ii).  Registration Rights Agreement dated as of July 24, 2000 by and among
          the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
          Smith Incorporated, Banc of America Securities LLC, Donaldson, Lufkin
          & Jenrette Securities Corporation, Deutsche Bank Securities Inc.,
          Commerzbank Capital Markets Corporation, Credit Suisse First Boston
          Corporation, Wasserstein Perella Securities, Inc., FleetBoston
          Robertson Stephens Inc., and SG Cowen Securities Corporation.
          (Incorporated by reference to Exhibit 4.2 to the Company's Form S-4
          Registration Statement No. 333-44216.)

 4(jj).  Registration Rights Agreement dated as of August 16, 2000 by and among
          the Company and Banc of America Securities LLC, Merrill Lynch,
          Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc.,
          Salomon Smith Barney Inc., Credit Lyonnais Securities (USA) Inc.,
          J.P. Morgan Securities Inc. and Commerzbank Capital Markets
          Corporation. (Incorporated by reference to Exhibit 4.2 to the
          Company's Form S-4 Registration Statement No. 333-44838.)

 10(a).* Amended and Restated 1989 Stock Option Plan of the Registrant.
          (Incorporated by reference to Exhibit 10 to the Post Effective
          Amendment No. 4 to the Registrant's Registration Statement (No. 33-
          39215) on Form S-8.)

 10(b).* Amended and Restated 1991 Stock Incentive Plan of the Registrant.
          (Incorporated by reference to Exhibit 10 to the Post Effective
          Amendment No. 3 to the Registrant's Registration Statement (No. 33-
          56420) on Form S-8.)

 10(c).* Amended and Restated 1993 Stock Option Plan of the Registrant.
          (Incorporated by reference to Exhibit 10 to the Post Effective
          Amendment No. 2 to the Registrant's Registration Statement (No. 33-
          53303) on Form S-8.)

 10(d).* 1998 Stock Option Plan. (Incorporated by reference to Exhibit 4(g) to
          the Registrant's Registration Statement (No.333-51073) on Form S-8.)

 10(e).  1999 Non-Employee Directors Stock Option Plan. (Incorporated by
          reference to Exhibit 10(i) to the Registrant's Annual Report on Form
          10-K for the fiscal year ended January 31, 1999.)

 10(f).* 2000 Stock Incentive Plan. (Incorporated by reference to Appendix B to
          the Registrant's definitive proxy statement dated April 28, 2000
          relating to the 2000 Annual Meeting of Registrant's Stockholders.)

 10(g).* Executive Compensation Insurance Plan. (Incorporated by reference to
          Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the
          fiscal year ended January 31, 1992.)

 10(h).  Lease, dated August 3, 1977, by and between B&D Properties, Inc., as
          lessor, and the Registrant, as lessee; Amendment of Lease, dated May
          6, 1983. (Incorporated by reference to Exhibit 10(h) to the
          Registrant's Registration Statement (No. 2-85794) on Form S-1.)

 10(i).  Thirteenth Amendment and Restatement of the Registrant's Employees'
          Profit Sharing and Investment Plan. (Incorporated by reference to
          Exhibit 4(d) to Post Effective Amendment No. 11 to the Registrant's
          Registration Statement (No. 33-18278 on Form S-8.)

 10(j)   Fourteenth Amendment, dated November 21, 2000, of the Registrant's
          Employees' Profit Sharing and Investment Plan.
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 10(k). Ninth Amendment and Restatement to the Registrant's Employees' Profit
         Sharing and Investment Trust. (Incorporated by reference to Exhibit
         4(e) to Post Effective Amendment No. 11 to the Registrant's
         Registration Statement (No. 33-18278) on Form S-8.)

 10(l). Group Annuity Contract No. GA70867 between Philadelphia Life (formerly
         Bankers Life Company) and Trustees of the Registrant's Employees'
         Profit Sharing and Investment Plan. (Incorporated by reference to
         Exhibit 4(c) to the Registrant's Registration Statement (No. 33-1459)
         on Form S-8.)

 10(m). Lease by and between Robert Lewis Uccelli, guardian, as lessor, and
         Nevada Greens, a limited partnership, William N. Pennington, as
         trustee, and William G. Bennett, as trustee, and related Assignment of
         Lease. (Incorporated by reference to Exhibit 10(p) to the Registrant's
         Registration Statement (No. 33-4475) on Form S-1.)

 10(n). Agreement of Purchase, dated March 15, 1985, by and between Denio
         Brothers Trucking Company, as seller, and the Registrant, as buyer,
         and related lease by and between Denio Brothers Trucking Co., as
         lessor, and Nevada Greens, a limited partnership, William N.
         Pennington, as trustee, and William G. Bennett, as trustee, and
         related Assignment of Lease. (Incorporated by reference to Exhibit
         10(q) to the Registrant's Registration Statement (No. 33-4475) on Form
         S-1.)

 10(o). Agreement of Joint Venture, dated as of March 1, 1994, by and among
         Eldorado Limited Liability Company, Galleon, Inc., and the Registrant.
         (Incorporated by reference to Exhibit 10(y) to the Registrant's Annual
         Report on Form 10-K for the fiscal year ended January 31, 1994.)

 10(p). Amended and Restated Credit Agreement, dated November 24, 1997, by and
         among Circus and Eldorado Joint Venture, the Banks named therein and
         Bank of America National Trust and Savings Association as
         administrative agent, and the related Note, Amended and Restated Make-
         Well Agreement and Amended and Restated Deed of Trust. (Incorporated
         by reference to Exhibit 4(h) to the Registrant's Quarterly Report for
         the quarterly period ended October 31, 1997.)

 10(q). Amendment No. 1 to the Amended and Restated Credit Agreement, by and
         among Circus and Eldorado Joint Venture, the Banks named therein and
         Bank of America, N.A., as administrative agent. (Incorporated by
         reference to Exhibit 10(w) to the Registrant's Annual Report on Form
         10-K for the fiscal year ended January 31, 2000.)

 10(r). Agreement and Plan of Merger, dated March 19, 1995, by and among the
         Registrant and M.S.E. Investments, Incorporated, Last Chance
         Investments, Incorporated, Gold Strike Investments, Incorporated,
         Diamond Gold, Inc., Gold Strike Aviation, Incorporated, Gold Strike
         Finance Company, Inc., Oasis Development Company, Inc., Michael S.
         Ensign, William A. Richardson, David R. Belding, Peter A. Simon II and
         Robert J. Verchota. (Incorporated by reference to Exhibit 10(ee) to
         the Registrant's Annual Report on Form 10-K for the fiscal year ended
         January 31, 1995.)

 10(s). First Amendment to Agreement and Plan of Merger, dated May 30, 1995, by
         and among the Registrant and M.S.E. Investments, Incorporated, Last
         Chance Investments, Incorporated, Goldstrike Investments,
         Incorporated, Diamond Gold, Inc., Gold Strike Aviation, Incorporated,
         Goldstrike Finance Company, Inc., Oasis Development Company, Inc.,
         Michael S. Ensign, William A. Richardson, David R. Belding, Peter A.
         Simon II and Robert J. Verchota. (Incorporated by reference to Exhibit
         99.2 of the Schedule 13D of Michael S. Ensign relating to the
         Registrant's Common Stock, filed on June 12, 1995.)

 10(t). Exchange Agreement, dated March 19, 1995, by and among the Registrant
         and New Way, Inc., a wholly owned subsidiary of the Registrant, Glenn
         W. Schaeffer, Gregg H. Solomon, Antonio C. Alamo, Anthony Korfman and
         William Ensign. (Incorporated by reference to Exhibit 10(ff) to the
         Registrant's Annual Report on Form 10-K for the fiscal year ended
         January 31, 1995.)

 10(u). First Amendment to Exchange Agreement, dated May 30, 1995, by and among
         the Registrant and New Way, Inc., a wholly owned subsidiary of the
         Registrant, Glenn W. Schaeffer, Gregg H. Solomon, Antonio C. Alamo,
         Anthony Korfman and William Ensign. (Incorporated by reference to
         Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated
         June 1, 1995.)
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 10(v).   Registration Rights Agreement, dated as of June 1, 1995, by and among
           the Registrant and Michael S. Ensign, William A. Richardson, David
           R. Belding, Peter A. Simon II, Glenn W. Schaeffer, Gregg H. Solomon,
           Antonio C. Alamo, Anthony Korfman, William Ensign and Robert J.
           Verchota. (Incorporated by reference to Exhibit 99.5 of the Schedule
           13D of Michael S. Ensign, relating to the Registrant's Common Stock,
           filed on June 12, 1995.)

 10(w).   Standstill Agreement, dated as of June 1, 1995, by and among the
           Registrant and Michael S. Ensign, William A. Richardson, David R.
           Belding, Peter A. Simon II and Glenn W. Schaeffer. (Incorporated by
           reference to Exhibit 99.4 of the Schedule 13D of Michael S. Ensign,
           relating to the Registrant's Common Stock, filed on June 12, 1995.)

 10(x).   Amendment No. 1 to Standstill Agreement, effective April 16, 1996, by
           and among the Registrant and Michael S. Ensign, William A.
           Richardson, David R. Belding, Peter A. Simon II and Glenn W.
           Schaeffer. (Incorporated by reference to Exhibit 99.7 of Amendment
           No. 2 to the Schedule 13D of Michael S. Ensign, relating to the
           Registrant's Common Stock, filed on September 5, 1996.)

 10(y).*  2000 Executive Officers' Bonus Plan. (Incorporated by reference to
           Appendix A to the Registrant's definitive proxy statement dated
           April 28, 2000 relating to its 2000 Annual Meeting of Stockholders.)

 10(z).*  Amendment and Restatement of Employment Agreement dated November 1,
           1997, by and between the Registrant and Clyde Turner. (Incorporated
           by reference to Exhibit 10(ee) to the Registrant's Annual Report on
           Form 10-K for the fiscal year ended January 31, 1998.)

 10(aa).* Agreement and Release dated January 17, 1998, by and between the
           Registrant and Clyde Turner. (Incorporated by reference to Exhibit
           10(ff) to the Registrant's Annual Report on Form 10-K for the fiscal
           year ended January 31, 1998.)

 10(bb).* Amendment and Restatement of Employment Agreement dated November 1,
           1997, by and between the Registrant and Michael S. Ensign.
           (Incorporated by reference to Exhibit 10(gg) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1998.)

 10(cc).* Amendment and Restatement of Employment Agreement dated November 1,
           1997, by and between the Registrant and Glenn W. Schaeffer.
           (Incorporated by reference to Exhibit 10(hh) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1998.)

 10(dd).* Amendment and Restatement of Employment Agreement dated November 1,
           1997, by and between the Registrant and William A. Richardson.
           (Incorporated by reference to Exhibit 10(ii) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1998.)

 10(ee).* Amendment and Restatement of Employment Agreement dated November 1,
           1997, by and between the Registrant and Antonio C. Alamo.
           (Incorporated by reference to Exhibit 10(kk) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1998.)

 10(ff).* Amendment and Restatement of Employment Agreement dated November 1,
           1997, by and between the Registrant and Gregg H. Solomon.
           (Incorporated by reference to Exhibit 10(ll) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1998.)

 10(gg).  Joint Venture Agreement, dated as of December 18, 1992, between
           Nevada Landing Partnership and RBG, L.P. (Incorporated by reference
           to Exhibit 10(g) to the Registrant's Quarterly Report on Form 10-Q
           for the quarterly period ended July 31, 1995.)

 10(hh).  Amendment dated July 15, 1993 to the Joint Venture Agreement between
           Nevada Landing Partnership and RBG, L.P. (Incorporated by reference
           to Exhibit 10(h) to the Registrant's Quarterly Report on Form 10-Q
           for the quarterly period ended July 31, 1995.)

 10(ii).  Amendment dated October 6, 1994 to the Joint Venture Agreement
           between Nevada Landing Partnership and RBG, L.P. (Incorporated by
           reference to Exhibit 10(i) to the Registrant's Quarterly Report on
           Form 10-Q for the quarterly period ended July 31, 1995.)
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<TABLE>
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 10(jj). Amendment dated June 1, 1995 to the Joint Venture Agreement between
          Nevada Landing Partnership and RBG, L.P. (Incorporated by reference
          to Exhibit 10(j) to the Registrant's Quarterly Report on Form 10-Q
          for the quarterly period ended July 31, 1995.)

 10(kk). Amendment dated February 28, 1996 to the Joint Venture Agreement
          between Nevada Landing Partnership and RBG, L.P. (Incorporated by
          reference to Exhibit 10(ww) to the Registrant's Annual Report on Form
          10-K for the fiscal year ended January 31, 1996.)

 10(ll). Reducing Revolving Loan Agreement, dated as of December 21, 1994,
          among Victoria Partners, each bank party thereto, The Long-Term
          Credit Bank of Japan, Ltd., Los Angeles Agency, and Societe Generale,
          as Co-agents, and Bank of America N.A., as administrative agent
          (without Schedules or Exhibits) (the "Victoria Partners Loan
          Agreement"). (Incorporated by reference to Exhibit 99.2 to Amendment
          No. 1 on Form 8-K/A to the Current Report on Form 8-K dated December
          9, 1994 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)

 10(mm). Amendment No. 1 to the Victoria Partners Loan Agreement, dated as of
          January 31, 1995. (Incorporated by reference to Exhibit 10(uu) to the
          Annual Report on Form 10-K for the year ended December 31, 1994 of
          Mirage Resorts, Incorporated. Commission File No. 1-6697.)

 10(nn). Amendment No. 2 to the Victoria Partners Loan Agreement, dated as of
          June 30, 1995. (Incorporated by reference to Exhibit 10.1 to the
          Quarterly Report on Form 10-Q for the quarterly period ended June 30,
          1995 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)

 10(oo). Amendment No. 3 to the Victoria Partners Loan Agreement, dated as of
          July 28, 1995. (Incorporated by reference to Exhibit 10.3 to the
          Quarterly Report on Form 10-Q for the quarterly period ended June 30,
          1995 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)

 10(pp). Amendment No. 4 to the Victoria Partners Loan Agreement, dated as of
          October 16, 1995. (Incorporated by reference to Exhibit 10(a) to the
          Registrant's Quarterly Report on Form 10-Q for the quarterly period
          ended October 31, 1995.)

 10(qq). Amendment No. 5 to the Victoria Partners Loan Agreement dated as of
          August 1, 1996. (Incorporated by reference to Exhibit 10(a) to the
          Registrant's Quarterly Report on Form 10-Q for the quarterly period
          ended July 31, 1996.)

 10(rr). Amendment No. 6 to the Victoria Partners Loan Agreement, dated as of
          April 12, 1997. (Incorporated by reference to Exhibit 10(ccc) to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          January 31, 1997.)

 10(ss). Amendment No. 7 to the Victoria Partners Loan Agreement, dated as of
          January 12, 1998. (Incorporated by reference to Exhibit 10.2 to the
          Quarterly Report on Form 10-Q for the quarterly period ended March
          31, 1998 of Mirage Resorts, Incorporated. Commission File No. 1-
          6697.)

 10(tt). Joint Venture Agreement, dated as of December 9, 1994, between MRGS
          Corp. and Gold Strike L.V. (without Exhibit) (the "Victoria Partners
          Venture Agreement"). (Incorporated by reference to Exhibit 99.1 to
          the Current Report on Form 8-K dated December 9, 1994 of Mirage
          Resorts, Incorporated. Commission File No. 1-6697.)

 10(uu). Amendment No. 1 to the Victoria Partners Venture Agreement dated as of
          April 17, 1995. (Incorporated by reference to Exhibit 10(c) to the
          Quarterly Report on Form 10-Q for the quarterly period ended March
          31, 1995 of Mirage Resorts, Incorporated. Commission File
          No. 1-6697.)

 10(vv). Amendment No. 2 to the Victoria Partners Venture Agreement dated as of
          September 25, 1995. (Incorporated by reference to Exhibit 10.4 to the
          Quarterly Report on Form 10-Q for the quarterly period ended
          September 30, 1995 of Mirage Resorts, Incorporated. Commission File
          No. 1-6697.)

 10(ww). Amendment No. 3 to the Victoria Partners Venture Agreement dated as of
          February 28, 1996. (Incorporated by reference to Exhibit 10(fff) to
          the Registrant's Annual Report on Form 10-K for the fiscal year ended
          January 31, 1996.)
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<TABLE>
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 10(xx).  Amendment No. 4 to the Victoria Partners Venture Agreement dated as
           of May 29, 1996. (Incorporated by reference to Exhibit 10(b) to the
           Registrant's Quarterly Report on Form 10-Q for the quarterly period
           ended April 30, 1996.)

 10(yy).  Consulting Agreement, dated June 1, 1995, between Circus Circus
           Casinos, Inc. (a subsidiary of the Registrant) and Lakeview Company.
           (Incorporated by reference to Exhibit 10(ggg) to the Registrant's
           Annual Report on Form 10-K for the fiscal year ended January 31,
           1996.)

 10(zz).  Operating Agreement, dated October 7, 1997, by and between Circus
           Circus Michigan, Inc. and Atwater Casino Group, L.L.C. (Incorporated
           by reference to Exhibit 10(a) to the Registrant's Quarterly Report
           for the quarterly period ended October 31, 1997.)

 10(aaa). First Amendment to Operating Agreement, dated October 7, 1997, by and
           between Circus Circus Michigan, Inc. and Atwater Casino Group,
           L.L.C. (Incorporated by reference to Exhibit 10(hhh) to the
           Registrant's Annual Report on Form 10-K for the fiscal year ended
           January 31, 2000.)

 10(bbb). Amended First Amendment to Operating Agreement, dated October 7,
           1997, by and between Circus Circus Michigan, Inc. and Atwater Casino
           Group, L.L.C. (Incorporated by reference to Exhibit 10(iii) to the
           Registrant's Annual Report on Form 10-K for the fiscal year ended
           January 31, 2000.)

 10(ccc). Second Amendment to Operating Agreement, dated October 7, 1997, by
           and between Circus Circus Michigan, Inc. and Atwater Casino Group,
           L.L.C. (Incorporated by reference to Exhibit 10(jjj) to the
           Registrant's Annual Report on Form 10-K for the fiscal year ended
           January 31, 2000.)

 10(ddd). Third Amendment, dated January 21, 2001 to Operating Agreement, dated
           October 7, 1997, by and between Circus Circus Michigan, Inc. and
           Atwater Casino Group, L.L.C.

 10(eee). Amended and Restated Development Agreement, dated as of April 9,
           1998, by and among Detroit Entertainment, L.L.C., the City of
           Detroit and the Economic Development Corporation of the City of
           Detroit for the City of Detroit Casino Development Project.
           (Incorporated by reference to Exhibit 10(a) to the Registrant's
           Quarterly Report on Form 10-Q for the quarterly period ended
           July 31, 1998.)

 10(fff). First Amendment to the Amended and Restated Development Agreement,
           dated as of April 9, 1998, by and among Detroit Entertainment,
           L.L.C., the City of Detroit and the Economic Development Corporation
           of the City of Detroit for the City of Detroit Casino Development
           Project. (Incorporated by reference to Exhibit 10(b) to the
           Registrant's Quarterly Report on Form 10-Q for the quarterly period
           ended July 31, 1998.)

 10(ggg). Second Amendment, dated December 1999, to the Amended and Restated
           Development Agreement, dated April 9, 1998, by and among Detroit
           Entertainment, L.L.C., the City of Detroit and the Economic
           Development Corporation of the City of Detroit for the City of
           Detroit Casino Development Project. (Incorporated by reference to
           Exhibit 10(mmm) to the Registrant's Annual Report on Form 10-K for
           the fiscal year ended January 31, 2000.)

 10(hhh). Third Amendment, dated November 2000, to the Amended and Restated
           Development Agreement, dated April 9, 1998, by and among Detroit
           Entertainment, L.L.C., the City of Detroit and the Economic
           Development Corporation of the City of Detroit for the City of
           Detroit Casino Development Project.

 10(iii). Conveyance Agreement, dated April 29, 1999, by and among the City of
           Detroit, the Economic Development Corporation of the City of Detroit
           and Detroit Entertainment, L.L.C. (Incorporated by reference to
           Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for
           the quarterly period ended April 30, 1999.)

 10(jjj). Loan Agreement, dated as of June 30, 1999 among Detroit
           Entertainment, L.L.C., the Banks named therein and Bank of America
           National Trust and Savings Association, as administrative agent for
           the Banks. (Incorporated by reference to Exhibit 10(a) to the
           Registrant's Quarterly Report on Form 10-Q for the quarterly period
           ended July 31, 1999.)
</TABLE>

                                       87
<PAGE>

<TABLE>
 <C>       <S>
 10(kkk).  Amendment No. 1 to the Loan Agreement, dated June 30, 1999 among
            Detroit Entertainment, L.L.C., the Banks named therein and Bank of
            America, N.A., as administrative agent for the Banks. (Incorporated
            by reference to Exhibit 10(d) to the Registrant's Quarterly Report
            on Form 10-Q for the quarterly period ended July 31, 2000.)

 10(lll).  Amendment No. 2, dated January 31, 2001, to the Loan Agreement,
            dated June 30, 1999, among Detroit Entertainment, L.L.C., the Banks
            named therein and Bank of America, N.A., as administrative agent
            for the Banks.

 10(mmm).  Subordination Agreement, dated January 31, 2001, by and between
            Circus Circus Michigan, Inc. and Detroit Entertainment, L.L.C.,
            with respect to the Loan Agreement, dated June 30, 1999, in favor
            of Bank of America, N.A., as administrative agent for the lending
            banks.

 10(nnn).  Hotel Pre-opening Services Agreement, dated as of January 1, 1997,
            by and among the Registrant and Four Seasons Hotels Limited.
            (Incorporated by reference to Exhibit 10(kkk) to the Registrant's
            Annual Report on Form 10-K for the fiscal year ended January 31,
            1998.)

 10(ooo).  Hotel Management Agreement, dated as of March 10, 1998, by and among
            the Registrant, Mandalay Corp. and Four Seasons Hotel Limited.
            (Incorporated by reference to Exhibit 10(lll) to the Registrant's
            Annual Report on Form 10-K for the fiscal year ended January 31,
            1998.)

 10(ppp).  Hotel License Agreement, dated as of March 10, 1998, by and among
            Mandalay Corp. and Four Seasons Hotel Limited. (Incorporated by
            reference to Exhibit 10(mmm) to the Registrant's Annual Report on
            Form 10-K for the fiscal year ended January 31, 1998.)

 10(qqq).  Lease Intended As Security, dated October 30, 1998, among Circus
            Circus Leasing, Inc., as lessee; the Registrant, as guarantor;
            First Security Bank, National Association, as Trustee, the Banks
            named therein and Bank of America, N.A., as administrative agent
            for the Banks. (Incorporated by reference to Exhibit 10(a) to the
            Registrant's Quarterly Report on Form 10-Q for the quarterly period
            ended October 31, 1998.)

 10(rrr).  Amendment No. 1, dated January 28, 1999, to Lease Intended As
            Security, dated October 30, 1998, among Circus Circus Leasing,
            Inc., as lessee; the Registrant, as guarantor; First Security Bank,
            National Association, as Trustee, the Banks named therein and Bank
            of America, N.A., as administrative agent for the Banks.

 10(sss).  Guaranty, dated October 30, 1998, by the Registrant in favor of
            First Security Bank, National Association, as Trustee, and the
            Banks named therein. (Incorporated by reference to Exhibit 10(b) to
            the Registrant's Quarterly Report on Form 10-Q for the quarterly
            period ended October 31, 1998.)

 10(ttt).* Supplemental Executive Retirement Plan. (Incorporated by reference
            to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q
            for the quarterly period ended October 31, 1998.)

 10(uuu).  Amendment No. 1 to Supplemental Executive Retirement Plan.

 10(vvv).  Stock Purchase Agreement, dated as of September 8, 2000, among the
            Registrant, Bank of America, N.A. and MBG Trust. (Incorporated by
            reference to Exhibit 10(a) to the Registrant's Quarterly Report on
            Form 10-Q for the quarterly period ended July 31, 2000.)

 10(www).  First Amendment, dated as of January 2, 2001, to Stock Purchase
            Agreement, dated as of September 8, 2000, among the Registrant,
            Bank of America, N.A., and MBG Trust.

 10(xxx).  Second Amendment, dated as of March 21, 2001, to Stock Purchase
            Agreement, dated as of September 8, 2000, among the Registrant,
            Bank of America, N.A., and MBG Trust.

 10(yyy).  Collateral Agreement dated as of September 8, 2000 among the
            Registrant, Bank of America, N.A., MBG Trust and Banc of America
            Securities LLC. (Incorporated by reference to Exhibit 10(b) to the
            Registrant's Quarterly Report on Form 10-Q for the quarterly period
            ended July 31, 2000.)

 10(zzz).  Amended and Restated Trust Agreement dated as of September 8, 2000
            between NMS Services (Cayman), Inc. and Wilmington Trust Company.
            (Incorporated by reference to Exhibit 10(c) to the Registrant's
            Quarterly Report on Form 10-Q for the quarterly period ended July
            31, 2000.)
</TABLE>

                                       88
<PAGE>

<TABLE>
 <C> <S>
 21. Subsidiaries of the Registrant.

 23. Consent of Arthur Andersen LLP.
</TABLE>
--------
 * This exhibit is a management contract or compensatory plan or arrangement
   required to be filed as an exhibit to this Report.

   Certain instruments with respect to long-term debt have not been filed
hereunder or incorporated by reference herein where the total amount of such
debt thereunder does not exceed 10% of our consolidated total assets. Copies
of such instruments will be furnished to the Securities and Exchange
Commission upon request.

   (b) During the fourth quarter of the fiscal year ended January 31, 2001,
Mandalay filed no Current Report on Form 8-K.

   (c) The exhibits required by Item 601 of Regulation S-K filed as part of
this report or incorporated herein by reference are listed in Item 14(a)(3)
above, and the exhibits filed herewith are listed on the Index to Exhibits
which accompanies this report.

   (d) See Item 14(a)(2) of this report.

                                      89
<PAGE>

                                  SIGNATURES

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

                                          MANDALAY RESORT GROUP

Dated: April 30, 2001
                                                 /s/ Michael S. Ensign
                                          By: _________________________________
                                                     Michael S. Ensign,
                                                   Chairman of the Board

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

<TABLE>
<CAPTION>
             Signature                           Title                  Date
             ---------                           -----                  ----

<S>                                  <C>                           <C>
      /s/ Michael S. Ensign          Chairman of the Board, Chief  April 30, 2001
____________________________________  Executive Officer and Chief
         Michael S. Ensign            Operating Officer
                                      (Principal Executive
                                      Officer)

    /s/ William A. Richardson        Vice Chairman of the Board    April 30, 2001
____________________________________
       William A. Richardson


       /s/ Glenn Schaeffer           President, Chief Financial    April 30, 2001
____________________________________  Officer, Treasurer and
          Glenn Schaeffer             Director (Principal
                                      Financial Officer)

          /s/ Les Martin             Vice President and Chief      April 30, 2001
____________________________________  Accounting Officer
             Les Martin               (Principal Accounting
                                      Officer)

      /s/ William E. Bannen          Director                      April 30, 2001
____________________________________
         William E. Bannen


       /s/ Arthur H. Bilger          Director                      April 30, 2001
____________________________________
          Arthur H. Bilger


     /s/ Rose McKinney-James         Director                      April 30, 2001
____________________________________
        Rose McKinney-James


       /s/ Michael D. McKee          Director                      April 30, 2001
____________________________________
          Michael D. McKee


        /s/ Donna B. More            Director                      April 30, 2001
____________________________________
           Donna B. More
</TABLE>

                                      90
<PAGE>

                               INDEX TO EXHIBITS

                                   FORM 10-K
                               Fiscal Year Ended
                                January 31, 2001

<TABLE>
<CAPTION>
 Exhibit
 Number
 -------
 <C>      <S>
 10(j).   Fourteenth Amendment, dated November 21, 2000, of the Registrant's
           Employees' Profit Sharing and Investment Plan.

 10(ddd). Third Amendment, dated January 21, 2001 to Operating Agreement, dated
           October 7, 1997, by and between Circus Circus Michigan, Inc. and
           Atwater Casino Group, L.L.C.

 10(hhh). Third Amendment, dated November 2000, to the Amended and Restated
           Development Agreement, dated April 9, 1998, by and among Detroit
           Entertainment, L.L.C., the City of Detroit and the Economic
           Development Corporation of the City of Detroit for the City of
           Detroit Casino Development Project.

 10(lll). Amendment No. 2, dated January 31, 2001, to the Loan Agreement, dated
           June 30, 1999, among Detroit Entertainment, L.L.C., the Banks named
           therein and Bank of America, N.A., as administrative agent for the
           Banks.

 10(mmm). Subordination Agreement, dated January 31, 2001, by and between
           Circus Circus Michigan, Inc. and Detroit Entertainment, L.L.C., with
           respect to the Loan Agreement, dated June 30, 1999, in favor of Bank
           of America, N.A., as administrative agent for the lending banks.

 10(rrr). Amendment No. 1, dated January 28, 1999, to Lease Intended As
           Security, dated October 30, 1998, among Circus Circus Leasing, Inc.,
           as lessee; the Registrant, as guarantor; First Security Bank,
           National Association, as Trustee, the Banks named therein and Bank
           of America, N.A., as administrative agent for the Banks.

 10(uuu). Amendment No. 1 to Supplemental Executive Retirement Plan.

 10(www). First Amendment, dated as of January 2, 2001, to Stock Purchase
           Agreement, dated as of September 8, 2000, among the Registrant, Bank
           of America, N.A., and MBG Trust.

 10(xxx). Second Amendment, dated as of March 21, 2001, to Stock Purchase
           Agreement, dated as of September 8, 2000, among the Registrant, Bank
           of America, N.A., and MBG Trust.

 21.      Subsidiaries of the Registrant.

 23.      Consent of Arthur Andersen LLP.
</TABLE>