<PAGE>

                                                                  EXHIBIT 13

MANAGEMENT'S DISCUSSION AND ANALYSIS

FINANCIAL POLICY

A key part of the Company's financial policy is a focus on free cash flow, 
which represents true economic profit. Free cash flow is the cash remaining 
after all expenses, including ordinary (or maintenance) reinvestment in the 
business. Strong free cash flow provides the Company with financial 
flexibility and the opportunity to pursue a range of options, including 
sizeable reinvestment in the business, accelerated repayment of indebtedness 
or cash distributions to shareholders, such as share repurchases. Strong free 
cash flow also ensures ready access to capital markets at comparatively low 
rates. Circus has always been an extraordinary cash generator, producing more 
than $1.1 billion in free cash flow over the past five years. For fiscal 
1999, our free cash flow on a per share basis was $2.34, almost 2 1/2 times 
higher than our earnings per share (prior to nonrecurring items).

<TABLE>
<CAPTION>

FREE CASH FLOW ANALYSIS
Year ended January 31,
(in thousands)                        1999        1998        1997        1996        1995
-----------------------             --------    --------    --------   --------     --------
<S>                                 <C>         <C>         <C>        <C>          <C>
Income from operations*             $249,279    $247,152    $276,092   $301,753     $259,019
Add noncash expenses
  Depreciation and
   amortization                      142,141     129,729     103,717     98,380       82,753
  Joint venture depreciation          24,490      24,357      18,785      6,712           --
  Other                                  (65)        (65)        (65)       (65)         (65)
                                    --------    --------    --------   --------     --------
Cash generated from
 operations before income tax        415,845     401,173     398,529    406,780      341,707
Cash income taxes                    (18,770)    (37,395)    (48,043)   (55,995)     (52,500)
Interest, dividends and
 other income                          5,852      15,820      11,941     11,539        1,217
Proceeds from disposal of assets       5,788       8,160       3,056      1,353          415
                                    --------    --------    --------   --------     --------
Cash available for repayment
 of debt and reinvestment            408,715     387,758     365,483    363,677      290,839
Scheduled principal and
 interest payments                  (131,468)    (99,831)    (63,356)   (58,018)     (45,935)
Joint venture scheduled principal
 and interest payments               (16,087)    (25,417)    (22,261)    (7,076)          --
Ordinary capital expenditures        (40,035)    (50,979)    (50,117)   (31,936)     (29,856)
                                    --------    --------    --------   --------     --------
Free cash flow                      $221,125    $211,531    $229,749   $266,647     $215,048
                                    ========    ========    ========   ========     ========
</TABLE>

* Before nonrecurring items.

                                       25

<PAGE>

Furthermore, the Company estimates that its annual maintenance capital 
spending will be in the range of $40-$60 million over the next three years, 
well below its estimated annual depreciation expense of approximately $180 
million. This difference alone, before the impact of positive operating 
results, translates to as much as $1.00 per share in free cash flow.

Graph

Description: Depicts Circus Circus' free cash flow per share for the fiscal 
years ended January 31, 1999 and 1998 and an estimate for fiscal 2000.

                           Free Cash Flow
                             Per Share
                           --------------
         1998                  $2.23
         1999                  $2.34
         2000(e)               $3.08

The Company estimates that its cost of capital, blended for the amounts of 
debt and equity used to finance the business, is approximately 9%. Achieving 
rates of return on invested capital that trend above this cost is the 
Company's primary goal when it evaluates new projects or reinvests in its 
existing resorts. Traditionally, the Company has employed leverage as a 
technique for lowering its overall cost of capital and raising returns to 
shareholders (since debt is considerably cheaper than equity). While the 
Company's financial flexibility remains intact, it intends, over the next 
three years, to reduce leverage and increase cash flow coverage of total debt 
service, which should restore the strong credit ratings of its recent past. 
Currently, the Company has no significant mandatory principal repayments for 
three years and expects to refinance any then-maturing debt beyond those 
dates.

ROIC Graph

Description: Depicts Circus Circus' five-year average return on invested 
capital (ROIC) of 12% compared to our weighted average cost of capital of 9%. 
The difference between ROIC and our cost of capital is the value creation to 
our shareholders.

EBITDA

Companies frequently refer to operating cash flow, or EBITDA, as a benchmark 
of earning power. The following table shows the amounts of EBITDA (earnings 
before interest, taxes, depreciation and amortization) for the Company's 
wholly owned properties and its joint venture properties.

                                       26

<PAGE>

EBITDA by property (in millions):

<TABLE>
<CAPTION>
                                                    Year ended January 31,
                                                    ----------------------
                                                      1999           1998
                                                    -------        -------
<S>                                                 <C>            <C>
Luxor                                               $  97.6        $  89.4
Excalibur                                              74.2           80.0
Circus Circus-Las Vegas/Slots-A-Fun/Silver City        55.9           51.8
Colorado Belle/Edgewater                               29.1           26.8
Gold Strike-Tunica                                     26.0            9.0
Circus Circus-Reno                                     24.3           18.9
Gold Strike/Nevada Landing/Railroad Pass               19.2           17.2
Monte Carlo*                                           83.5           90.4
Grand Victoria*                                        76.9           96.8
Silver Legacy*                                         47.1           49.6

</TABLE>

(*) Amounts represent 100% of this joint venture property, of which the Company
is a 50% owner.

FISCAL 1999 COMPARED WITH FISCAL 1998

RESULTS OF OPERATIONS

For the year ended January 31, 1999, the Company reported net income of $85.2 
million, or $.90 per share, compared to $89.9 million, or $.95 per share, in 
the prior year. During fiscal 1999, the Company recorded a charge to 
corporate expense of $6.5 million for political campaign costs associated 
with Proposition 5 in California, while in the prior year, the Company 
recognized approximately $8.0 million in costs associated with the 
resignation of its chairman and $3.4 million in preopening expenses related 
to a new 1,100-room hotel at its remodeled Gold Strike Casino Resort in 
Tunica County, Mississippi. Also during fiscal 1998, the Company recognized a 
$6.0 million gain on the sale of a company airplane. Excluding the effect of 
these nonrecurring items, earnings per share for fiscal 1999 were $.94 versus 
$1.01 in the prior year. The decrease reflects higher net interest expense 
due to higher average borrowings, as well as lower interest income due to a 
$35.1 million note receivable from Silver Legacy which was redeemed in the 
prior year.

REVENUES

Revenues for fiscal 1999 increased $125.3 million, or 9%, from the prior 
year. All of the Company's wholly owned properties posted increases in 
revenues, with the exception of Excalibur, whose revenues declined less than 
one percent. The primary contributors to the increase were Gold 
Strike-Tunica, Luxor and Circus Circus-Las Vegas. At Gold Strike-Tunica, the 
completion of an 1,100-room hotel tower in the first quarter contributed to a 
$63.1 million, or 133%, revenue increase at that property. Luxor achieved a 
revenue increase of $45.2 million, or 15%; the property benefitted from a new 
national advertising campaign, an increase in the amount of high-budget play 
in the casino and the opening of a new 1,200-seat showroom in the third 
quarter of the prior year. Revenues at Circus Circus-Las Vegas rose $14.1 
million, or 6%, driven by increased contributions from the hotel department 
(rooms were being remodeled in the prior year) and the food and beverage 
department (due to selective price increases).

The above revenue increases were partially offset by reduced -- contributions 
from the Company's joint venture properties. The Company's share of the 
operating income of joint ventures -- which is recorded as revenue under 
Earnings of Unconsolidated Affiliates -- declined $15.0 million from fiscal 
1998. The decline was due primarily to Grand Victoria, a 50%-owned riverboat 
casino in Elgin, Illinois. A January 1998 hike in the maximum tax rate on 
casino revenues in Illinois to 35% from 20% was responsible for the $10.3 
million, or 23%, decrease in Grand Victoria's contribution.

                                       27

<PAGE>

Casino revenues increased $77.8 million, or 12%, during fiscal 1999. For the 
reasons mentioned above, Gold Strike-Tunica, with a 106% increase, and Luxor, 
with a 16% increase, were the primary drivers of the overall growth in casino 
revenues. Meanwhile, hotel revenues rose $25.0 million, or 8%, due to the 
addition of the 1,100-room tower at Gold Strike-Tunica and to higher room and 
occupancy rates at Luxor. Revenues in the Company's other revenue centers 
(principally food, beverage, amusements, retail and entertainment) rose $59.3 
million, or 17%, due to a combination of increased business and selective 
price increases, particularly for food and beverage.

INCOME FROM OPERATIONS (excluding nonrecurring items)

Income from operations for fiscal 1999 increased $2.1 million, or 1%, from 
the prior year. The Company's composite operating margin was 16.8%, compared 
to 18.2% in fiscal 1998. Income from operations for the first quarter 
decreased $21.6 million from the prior year; then, over the next three 
quarters, it rose $23.7 million, as the Company started to reap the benefits 
of its larger capacity, product advertising and player marketing efforts. A 
discussion of operating results by market follows.

Las Vegas

Overall, results at our Las Vegas properties were even with those for the 
prior year. Increases at Luxor and Circus Circus-Las Vegas, which occurred 
largely in the second half of the year, were offset by declines at Excalibur 
and Monte Carlo.

At Luxor, operating income increased $5.8 million, or 12%, mainly because of 
the aforementioned national advertising campaign and an increase in the 
amount of high-budget play in the casino. Operating income at Circus 
Circus-Las Vegas grew by $3.1 million, or 12%, due to higher contributions 
from the hotel department and the food department. In the hotel department, 
remodeling work carried out in fiscal 1998 led to a 6% increase in the number 
of rooms available in fiscal 1999. In the food department, prices were 
increased selectively without impacting the number of customers served.

While Luxor and Circus Circus-Las Vegas were able to achieve higher operating 
income in the extremely competitive Las Vegas market, Excalibur and Monte 
Carlo were unable to sustain the levels of the prior year. Operating income 
at Excalibur decreased $6.6 million, or 10%, while the Company's contribution 
from the 50%-owned Monte Carlo decreased $3.6 million, or 10%. Both 
properties incurred higher marketing and promotional expenses while revenues 
hovered near the prior year's levels.

Reno

In Reno, Circus Circus posted a $1.8 million, or 18%, increase in operating 
income over the prior year. Contributing to this strong year-to-year 
comparison was the fact that in fiscal 1998, the casino underwent remodeling 
during the middle of the year and business was affected by severe weather in 
the latter part of the year. Meanwhile, the Company's share of operating 
income from Silver Legacy declined by $0.9 million, or 4%, in fiscal 1999. 
Although the Company owns 50% of Silver Legacy, it currently receives 
approximately two-thirds of Silver Legacy's operating income as a priority 
return on its investment. The 4% decrease recorded by Circus occurred even 
though this priority allocation was in effect for all of fiscal 1999 versus 
nine months in fiscal 1998. Based upon current projections, the Company 
anticipates that this priority return will continue approximately two years 
beyond fiscal 1999, but will gradually decrease from the current two-thirds 
allocation to a 50% allocation.

                                       28

<PAGE>

Laughlin

The Company's two properties in Laughlin -- Colorado Belle and Edgewater 
--reported a combined increase in operating income of $1.6 million, or 9%, 
from the prior year. While the region continues to suffer from difficult 
competitive challenges, particularly the unregulated Native American casinos 
in Laughlin's prime central Arizona and southern California feeder markets, 
the two properties posted their first increase in operating income on a 
year-to-year basis since fiscal 1993. This improvement stemmed from a 
combination of casino marketing efforts and reduced costs.

Other Markets

At Gold Strike, in Tunica County, Mississippi, operating income more than 
quadrupled during fiscal 1999, to $12.1 million. The addition of an 
1,100-room hotel tower and a complete remodeling of the property into a 
resort, which were completed in early 1998, drove the increase in operating 
income.

As mentioned above, the results at the 50%-owned Grand Victoria were 
negatively affected by a substantial increase in the tax rate on casino 
revenues in Illinois.

Results for fiscal 1999 at the Company's other, smaller properties exceeded 
those for the prior year.

The lease for the Silver City Casino, which the Company operates in Las 
Vegas, expires at the end of October 1999. The Company does not plan to renew 
this lease and will thus cease operations at that property. Silver City 
generated a slight loss from operations in fiscal 1999.

DEPRECIATION AND AMORTIZATION

In fiscal 1999, depreciation and amortization expense rose $12.4 million, to 
$142.1 million. This increase derived primarily from the new hotel tower at 
Gold Strike-Tunica, and from a full year's depreciation on the improvements 
at Circus Circus-Reno. For fiscal 2000, Circus estimates that its 
depreciation expense will be approximately $180 million, the increase 
reflecting the addition of Mandalay Bay.

Depreciation expense by property (in millions):

<TABLE>
<CAPTION>
                                        Year ended January 31,
                                        ----------------------
                                           1999        1998
                                         -------     -------
            <S>                          <C>         <C>
            Luxor                        $  41.8     $  39.5
            Excalibur                       15.0        14.1
            Circus Circus-Las Vegas         23.4        22.7
            Colorado Belle/Edgewater         9.5         8.7
            Gold Strike-Tunica              14.0         6.2
            Circus Circus-Reno              12.0         8.5
            Other                           26.4        30.0
                                         -------     -------
                                         $ 142.1     $ 129.7
                                         =======     =======
</TABLE>

                                       29

<PAGE>

INTEREST EXPENSE

In fiscal 1999, interest incurred (excluding joint venture interest expense 
and before capitalized interest) rose $30.2 million to $141.1 million. The 
year saw higher average debt outstanding ($2.0 billion versus $1.6 billion in 
fiscal 1998) mainly related to the construction of Mandalay Bay. The increase 
in interest incurred was partially offset by higher capitalized interest 
($45.5 million versus $22.0 million in fiscal 1998), also largely associated 
with the construction of Mandalay Bay.

The Company recorded interest expense related to joint venture projects of 
approximately $12.3 million in fiscal 1999 versus $15.6 million in fiscal 
1998. These amounts represent the Company's 50% share of Silver Legacy's and 
Monte Carlo's interest expense.

TAXES

The Company's effective tax rates for the years ended January 31, 1999 and 
1998 were 39.5% and 39.2%. These rates reflect the federal statutory rate of 
35% plus the effect of various nondeductible expenses, primarily the 
amortization of goodwill associated with the June 1995 Gold Strike 
acquisition. For fiscal 2000, the Company estimates its effective tax rate 
will be approximately 39%.

FISCAL 1998 COMPARED WITH FISCAL 1997

RESULTS OF OPERATIONS

Excluding nonrecurring items and preopening expenses, earnings per share for 
fiscal 1998 were $1.01 compared to $1.33 in the previous year. During fiscal 
1998, the Company recognized approximately $8.0 million in costs associated 
with the resignation of its chairman and $3.4 million of preopening expenses 
related to a new 1,100-room hotel at its remodeled Gold Strike-Tunica. The 
Company also recognized a $6.0 million gain on the sale of a company 
airplane. During fiscal 1997, the Company took one-time asset write-offs 
totaling $48.3 million that were related to construction and remodeling at 
Luxor and Circus Circus-Las Vegas. In addition, it recognized $5.6 million in 
preopening expenses for Monte Carlo.

The decline in earnings in fiscal 1998 was due primarily to two factors. The 
first was lower operating income at Excalibur, which faced significant new 
competition from New York-New York, Monte Carlo and the expanded Luxor. The 
second factor was higher interest expense arising from borrowings in the 
prior year for the expansion projects at Luxor and Circus Circus-Las Vegas.

REVENUES

Revenues for fiscal 1998 increased $20.2 million, or 2%, from fiscal 1997. 
This increase was attributable primarily to Luxor, whose revenues grew 34% on 
the strength of 1,950 new rooms.

Circus Circus-Las Vegas posted an increase in revenues of 5% due to 1,000 new 
rooms, which opened late in fiscal 1997. Contributing to the positive fiscal 
1998 comparisons for both Luxor and Circus Circus-Las Vegas was the fact that 
in the prior year those properties' operations were significantly disrupted 
by construction. The Company also benefitted from a full year's contribution 
from Monte Carlo, which was open only seven months in the prior year. 
Meanwhile, the Company's 50% interest in Silver Legacy contributed $20.7 
million to the Company's revenues in fiscal 1998 versus $12.0 million in 
fiscal 1997. Effective May 1, 1997, the Company began receiving a priority 
return on its investment in Silver Legacy representing approximately 
two-thirds of the joint venture's operating income.

                                       30

<PAGE>


The above increases were offset by the closure of the Hacienda Hotel and 
Casino in December 1996, which produced $41.6 million in revenues in fiscal 
1997, and by lower results at Excalibur, whose revenues decreased $23.4 
million, or 8%, from their record level of the prior year.

INCOME FROM OPERATIONS (excluding nonrecurring items)

Income from operations for fiscal 1998 decreased $28.9 million, or 10%, from 
fiscal 1997. The principal factor behind this decline was depreciation 
expense, which was $26.0 million higher in fiscal 1998 due to the expansion 
projects at Luxor and Circus Circus-Las Vegas that were completed in fiscal 
1997. Operating income was also negatively affected by lower results at 
Excalibur, closure of the Hacienda and sale of the Company's interest in 
Windsor Casino Limited, which in fiscal 1997 had contributed $9.5 million of 
operating income to the Company's results.

DEPRECIATION AND AMORTIZATION

In fiscal 1998, depreciation and amortization expense rose $26.0 million, to 
$129.7 million. This increase stemmed primarily from a full year's 
depreciation on the expansion and remodeling projects at Luxor and Circus 
Circus-Las Vegas.

INTEREST EXPENSE

In fiscal 1998, interest incurred (excluding joint venture interest expense 
and before capitalized interest) rose $40.2 million to $110.9 million. This 
increase was due primarily to higher average debt outstanding ($1.6 billion 
versus $865 million in fiscal 1997) related to the completed expansion 
projects at Luxor and Circus Circus-Las Vegas; a share repurchase in fiscal 
1997; the completed expansion at Gold Strike-Tunica; and the ongoing 
construction of Mandalay Bay. The increase was partially offset by higher 
capitalized interest ($22.0 million versus $16.0 million in fiscal 1997) 
related primarily to the Gold Strike-Tunica and Mandalay Bay projects.

The Company also recorded interest expense related to joint venture projects 
of approximately $15.6 million in both fiscal 1998 and fiscal 1997. This 
represents the Company's 50% share of Silver Legacy's and Monte Carlo's 
interest expense.

FINANCIAL POSITION AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $81.4 million at January 31, 
1999, reflecting normal daily operating requirements. The Company's pretax 
cash flow from operations (before nonrecurring items) was $415.8 million in 
fiscal 1999 compared to $401.2 million in fiscal 1998 and $398.5 million in 
fiscal 1997. Pretax cash flow from operations is defined as the Company's 
income from operations (before nonrecurring items) plus noncash operating 
expenses (primarily depreciation and amortization). See "Free Cash Flow 
Analysis" on page 25.

The Company used its fiscal 1999 cash flow (in combination with borrowings) 
primarily to fund the construction of Mandalay Bay and other core components 
of Masterplan Mile (a convention center, arena, monorail and aquarium 
exhibit); the renovation of hotel rooms at Excalibur; the completion of the 
hotel tower at Gold Strike-Tunica; the repurchase of 4.5 million shares of 
its common stock; and other miscellaneous construction projects. During 
fiscal 1998, the Company used its cash flow (in combination with borrowings) 
to fund the construction of Mandalay Bay, the construction of the new hotel 
tower at Gold Strike- Tunica, and other miscellaneous construction projects.

                                       31

<PAGE>

CAPITAL SPENDING

Capital expenditures in fiscal 1999 were $671.5 million compared with $663.3 
million in fiscal 1998 and $585.8 million in fiscal 1997. The majority of 
capital expenditures in fiscal 1999 related to the construction of Mandalay 
Bay ($431.8 million), the construction of the other core components of 
Masterplan Mile ($92.0 million), the renovation of the hotel rooms at 
Excalibur ($12.3 million) and the completion of construction and remodeling 
at Gold Strike-Tunica ($18.8 million).

The majority of the capital expenditures in fiscal 1998 related to 
construction at Mandalay Bay ($264.9 million), the construction and 
remodeling at Gold Strike-Tunica ($119.8 million), completion of the 
remaining elements of the Luxor expansion ($116.5 million), remodeling of the 
tower rooms and completion of the expansion at Circus Circus-Las Vegas ($35.2 
million), remodeling of the casino at Circus Circus-Reno ($25.6 million), 
various renovation projects at Excalibur ($25.1 million), and the addition of 
a microbrewery and other improvements at the Colorado Belle ($9.8 million).

LONG-TERM DEBT

In May 1997, the Company amended its unsecured credit facility with its bank 
group, increasing the size of the facility from $1.5 billion to $2.0 billion 
at more favorable terms and pricing (see Note 3 of Notes to Consolidated 
Financial Statements). In order to allow for increased borrowing capacity 
during the construction of Mandalay Bay, the credit facility was further 
amended in May 1998 to provide a more liberal test for total indebtedness 
during such period and a new leverage test for senior debt. The Company also 
has a commercial paper program, pursuant to which it may utilize up to $1 
billion of its borrowing capacity under the credit facility to issue 
commercial paper. As of January 31, 1999, the Company had aggregate 
borrowings of $1.1 billion outstanding under the credit facility and an 
additional $50 million outstanding under its corporate debt program.

On October 30, 1998, the Company entered into an operating lease with a group 
of financial institutions (the "Lease Facility") pursuant to which it may 
lease up to $200 million of equipment. The lease term consists of an interim 
term commencing on the delivery date and ending June 30, 1999, plus a base 
term of two years. On January 28, 1999, the Company leased $100 million of 
equipment at Mandalay Bay pursuant to the Lease Facility and permanently 
reduced the commitment under its bank credit facility by the amount of the 
lease financing, thus reducing the commitment under the credit facility to 
$1.9 billion at January 31, 1999. An additional $75 million was drawn under 
the Lease Facility in April 1999, thus further reducing the commitment under 
the bank credit facility to $1.825 billion.

In August 1998, the Company filed a shelf registration statement relating to 
$550 million of securities that may be issued from time to time in the form 
of additional debt securities of the Company. Securities may also be issued 
in the form of preferred securities of Delaware business trusts formed for 
the purpose of issuing their trust securities and investing the proceeds in 
debt securities of the Company.

In November 1998, pursuant to the shelf registration statement, the Company 
issued $275 million principal amount of 9 1/4% Senior Subordinated Notes due 
December 1, 2005. Proceeds from this offering were used to repay outstanding 
borrowings under the credit facility.

                                       32

<PAGE>

JOINT VENTURES

In July 1995, Silver Legacy, a 50/50 joint venture with the Eldorado 
Hotel/Casino, opened in downtown Reno, Nevada. As a condition of the joint 
venture's $230 million bank credit agreement, the Company 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).

NEW PROJECTS

On March 2, 1999, the Company opened Mandalay Bay, a 43-story, hotel/casino
resort in Las Vegas, Nevada. The resort includes approximately 3,700 rooms and
135,000 square feet of gaming space and is situated on approximately 60 acres of
land just south of Luxor. Mandalay Bay's attractions include an 11-acre tropical
lagoon featuring a sand-and-surf beach, a three-quarter-mile lazy river ride, a
30,000-square-foot spa and other entertainment attractions. Inside, Mandalay Bay
offers internationally renowned restaurants; a House of Blues nightclub and
restaurant, including its signature Foundation Room sited on Mandalay Bay's
rooftop; and 100 "music-themed" hotel rooms in Mandalay Bay's tower.

Four Seasons operates approximately 400 rooms at Mandalay Bay, providing Las 
Vegas visitors with a luxury "five-star" hospitality experience. The Four 
Seasons Hotel, which is owned by the Company and managed by Four Seasons, 
represents the first step in the Company's cooperative effort with Four 
Seasons to identify strategic opportunities for development of hotel and 
casino properties worldwide. The total cost of Mandalay Bay, including the 
Four Seasons Hotel and including leased equipment, but excluding land, 
capitalized interest and preopening expenses, was approximately $900 million; 
as of January 31, 1999, $784.8 million of this cost had been incurred.

During construction, Mandalay Bay's hotel tower experienced settling in 
excess of the level contemplated in the building's original design. The 
settling was greater in some portions of the structure than others. The 
Company retained geotechnical, structural engineering and foundation 
consultants who evaluated the situation and recommended remedial measures, 
which have been completed. These remedial measures will be evaluated over a 
period of time to determine if any further measures will be required.

Mandalay Bay is the latest phase of the Company's development of more than 
230 acres of land it owns at the south end of the Las Vegas Strip. This 
parcel of land runs from Tropicana Avenue south approximately one mile to 
Russell Road ("Masterplan Mile"). As part of its development plan for 
Masterplan Mile, the Company has completed construction of a 
125,000-square-foot convention facility, which opened March 12, and a 
12,000-seat arena, which opened April 10. These properties, which represent 
core components of Masterplan Mile, will be cross-marketed to guests at the 
Company's existing and future hotel/casinos within Masterplan Mile. The total 
estimated cost of the convention facility and arena, excluding land, 
capitalized interest and preopening expenses, was approximately $115 million; 
as of January 31, 1999, $73.9 million in costs had been incurred for these 
facilities.

The Company has also completed construction of a monorail system, which links
the Company's resorts on Masterplan Mile. Furthermore, the Company is planning a
Sea of Predators aquarium exhibit, which is expected to open early in the year
2000. The cost of these additional Masterplan Mile core components, excluding
land, capitalized interest and preopening expenses, is estimated at
approximately $75 million, of which $19.9 million had been incurred as of
January 31, 1999. The Company may add other core components to its development
plan for Masterplan Mile in the future.

                                       33

<PAGE>

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. The Company
will own a 45% equity interest in the proposed project and receive a management
fee. The joint venture is one of three groups which negotiated development
agreements with the city. These agreements were approved by the city council on
April 9, 1998. The joint venture's ability to proceed with the proposed project
is contingent upon the receipt of all necessary gaming approvals and
satisfaction of other conditions. The joint venture is planning a $600 million
project. The Company is expected to contribute 20% of this amount in the form of
equity, and will seek project-specific financing for the balance. The
development agreement provides that the Company will guarantee completion of the
project and will enter into a keep-well guarantee with the city, pursuant to
which the Company could be required to contribute additional funds, if and as
needed, to continue operation of the project for a period of two years.

The Detroit joint venture has commenced construction of a temporary casino
property in downtown Detroit. The property will contain approximately 75,000
square feet of gaming space, including approximately 2,600 slot machines and 130
table games, plus 5 restaurants and a 3,000-space parking facility. Construction
is expected to be completed in September 1999. The cost of the temporary casino,
including land and capitalized interest, is approximately $140 million. The
joint venture will shortly complete a $150 million credit facility secured by
the assets associated with the Detroit temporary casino. The Company will
guaranty the credit facility subject to the release of the guaranty if certain
performance measures are reached. The joint venture's ability to proceed with
the temporary casino facility is contingent upon the receipt of all necessary
gaming approvals and satisfaction of other customary conditions.

The City of Detroit's Casino Development Competitive Selection Process ordinance
has been challenged in a lawsuit brought by the Lac Vieux Band of Lake Superior
Chippewa Indians. No assurance can be given regarding the timing and outcome of
proceedings in this litigation. If the court determines that the Detroit
ordinance is defective and that determination is upheld, this may have an impact
upon the validity of the development agreement entered into between the joint
venture and the City of Detroit which, in turn, could have an impact on the
issuance of a certificate of suitability and a casino license to the joint
venture.

The Company has announced that it plans to develop a hotel/casino resort on 
the Mississippi Gulf Coast at the north end of the Bay of St. Louis, near the 
DeLisle exit on Interstate 10. It is currently anticipated that the resort 
will include approximately 1,500 rooms and will involve an investment of 
approximately $225 million. The Company has received all necessary approvals 
to commence development. However, these approvals have been challenged in 
federal court, and the Company anticipates that the design and construction 
of this project will begin only after satisfactory resolution of all legal 
actions. Present plans call for Circus to own 90% of the resort, with a 
partner contributing land (up to 500 acres) in exchange for the remaining 10% 
interest.

Although the Company had previously entered into an agreement with Mirage
Resorts to participate in the development of a site located in the Marina
District of Atlantic City, New Jersey, the agreement was subject to litigation,
which was subsequently settled. The Company has no current plans for development
in Atlantic City.

LIQUIDITY

The Company believes that -- through the combination of its operating cash
flows, credit facility and ability to raise additional funds through debt or
equity markets -- it has sufficient capital resources to meet all of its
existing cash obligations, fund its capital commitments on the projects under
way and strategically repurchase shares of the Company's common stock. As of
January 31, 1999, under its most restrictive loan covenant, the Company could
issue additional debt of approximately $43 million.

                                       34

<PAGE>

The calculation of additional debt capacity is based on either the most 
recent quarter times four, or a rolling four-quarter total, whichever is 
better. With the opening of Mandalay Bay on March 2, 1999, the Company 
anticipates that its capacity to incur additional debt will increase as of 
April 30, 1999.

MARKET RISK AND DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to market risk in the form of fluctuations in interest
rates and their potential impact upon the Company's variable-rate debt. The
Company manages this market risk by utilizing derivative financial instruments
in accordance with established policies and procedures. The Company evaluates
its exposure to market risk by monitoring interest rates in the marketplace. The
Company does not utilize derivative financial instruments for trading purposes.
There have been no material quantitative changes in market risk exposure, or how
such risks are managed, in the current fiscal year when compared to the prior
fiscal year.

The Company's 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 its exposure to counterparty credit risk in interest rate swaps, the
Company enters 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 the Company's credit
facility, which management believes further minimizes the risk of
nonperformance.

The following table provides information about the Company's 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,
                                             ----------------------------------------------------
(in millions)                                  2000       2001       2002       2003       2004     Thereafter      Total
                                             --------   --------   --------   --------   --------   ----------    --------
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>           <C>
Long-term debt (including current portion)
  Fixed rate                                 $   3.5    $   0.5    $   0.3    $    0.3   $ 150.2    $  927.8      $1,082.6
  Average interest
   rate                                          5.3%       5.6%       6.7%        6.7%      6.8%       7.6%           7.5%

  Variable rate                                   --         --         --    $1,180.0        --         --       $1,180.0
  Average interest
   rate                                           --         --         --         6.0%       --         --            6.0%

Interest rate swaps
  Pay fixed                                  $  25.0         --         --          --        --    $  150.0      $  175.0
  Average payable
   rate                                          8.1%        --         --          --        --         5.9%          6.2%
  Average receivable
   rate                                          5.6%        --         --          --        --         6.8%          6.6%

  Pay floating                                    --         --    $  30.0          --        --         --       $   30.0
  Average payable
   rate                                           --         --        5.9%         --        --         --            5.9%
  Average receivable
   rate                                           --         --        8.2%         --        --         --            8.2%

</TABLE>

                                       35

<PAGE>

YEAR 2000 READINESS DISCLOSURE

BACKGROUND

In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, information
technology ("IT"), such as date-sensitive computer software, as well as non-IT
systems (such as equipment containing microcontrollers or other embedded
technology) may recognize a date using "00" as the year 1900 rather than the
year 2000. This is generally referred to as the Year 2000 issue. If the year is
recognized incorrectly, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.

RISK FACTORS

Date-sensitive IT and non-IT systems and equipment are utilized throughout the
Company's wholly owned properties and its joint venture properties.
Consequently, the Company is exposed to the risk that Year 2000 problems could
disrupt operations at the affected properties and have a material adverse impact
upon the Company's operating results.

The Company is also exposed to the risk of possible failure of IT and non-IT
systems external to the Company's operations ("external risk factors"). These
external risk factors arise from the fact that the Company's operations, like
those of most businesses, are dependent upon numerous other private and public
entities. While such risk factors are not the responsibility of the Company and
their remediation is beyond the Company's control, we are attempting to monitor
these risks and form contingency plans as warranted. As a result of the external
risk factors, the Company may be materially and adversely impacted even if its
own IT and non-IT systems and equipment are Year 2000-compliant. The most
significant of these factors are as follows:

-One or more of the Company's suppliers or its joint ventures' suppliers could
experience Year 2000 problems that impact their ability to provide goods and
services. The Company believes that such a disruption would have a limited
impact due to the availability of alternative suppliers.

-One or more of the Company's utility providers (of electric, natural gas,
water, sewer, garbage collection and similar services) could experience Year
2000 problems that impact their ability to provide their services. Furthermore,
the Company could be adversely impacted if utility services were significantly
disrupted in any of its key customer markets (e.g., southern California), as
this could alter the customary flow of visitors from the affected market.

-Airline service to and from the principal markets in which the Company operates
could be disrupted by Year 2000 problems, which would limit the ability of
potential customers to visit our properties.

-The possible disruption of banking services due to Year 2000 problems could
impair the Company's daily financial transactions, including the deposit of
monies and processing of checks. Furthermore, credit card processing and
customers' access to cash via automated teller machines could also be disrupted.

The Company is developing contingency plans to address the identified risks.
However, given the nature of many of the external risk factors, the Company does
not believe viable alternatives would be available. For example, the Company
cannot develop a meaningful contingency plan to address a disruption in airline
service. Consequently, the occurrence of any of the aforementioned disruptions
could, depending upon their severity and duration, have a material adverse
impact on operating results.

                                       36

<PAGE>

APPROACH

The Company has established a task force to coordinate its response to the Year
2000. This task force, which reports to the Audit Committee of the Board of
Directors, includes the Company's Chief Accounting Officer, the Chief Internal
Auditor, the Director of Information Services, as well as support staff.
Previously, the Company engaged an outside consultant who helped establish a
program for dealing with the Year 2000 issue. The Company is now implementing
this program at its wholly owned properties and at its joint venture properties.
The program consists of the following phases:

          Phase 1     Compile an inventory of IT and non-IT systems that may be
                      sensitive to the Year 2000 problem.

          Phase 2     Identify which of these systems are critical, and 
                      prioritize them; identify third parties with whom the
                      Company does significant business (e.g., vendors) and
                      inquire as to the state of their Year 2000 readiness.

          Phase 3     Analyze critical systems to determine which ones
                      are not Year 2000-compliant, and evaluate the costs to
                      repair or replace them.

          Phase 4     Repair or replace noncompliant systems; test those
                      systems for which information about Year 2000 compliance 
                      has not been received or for which information has been
                      received but not confirmed.

STATUS

Phases 1 and 2 are substantially complete, though the Company has not received
all responses from significant third parties about their Year 2000 readiness.
Phases 3 and 4 are ongoing and will continue through the first half of calendar
1999. It is the Company's goal to have this project substantially completed by
mid-1999. Based upon the analysis conducted to date, the Company believes that
all of the critical systems at its wholly owned and joint venture properties are
currently compliant or will be compliant by mid-1999. To date, the most
significant Year 2000 requirement that has been identified is the need to
replace older personal computers whose systems are not Year 2000 compatible.

COSTS

The Company currently estimates that the total cost to the Company of making 
its systems and those of its joint venture properties Year 2000 compliant 
will be in the range of $5 to $10 million, of which approximately $3.6 
million had been incurred as of January 31, 1999. Most of this cost relates 
to the acquisition of new computer hardware to replace noncompliant personal 
computers and the purchase of new software to replace noncompliant software. 
These costs are being capitalized and the equipment and software depreciated 
over their expected useful lives. To the extent existing hardware or software 
is replaced, the Company will recognize a loss currently for the 
undepreciated balance. This loss is included in the above cost estimate. 
Furthermore, all costs related to software modification, as well as all costs 
associated with the Company's administration of its Year 2000 project, are 
being expensed as incurred and are likewise included in the cost estimate 
above.

                                       37

<PAGE>

CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                           January 31,
                                                   ----------------------------
                                                       1999             1998
                                                   -----------      -----------
                                                (in thousands, except share data)
<S>                                                <C>              <C>
ASSETS
Current assets
  Cash and cash equivalents                        $    81,389      $    58,631
  Accounts receivable                                   26,136           21,714
  Income tax receivable                                   --             11,926
  Inventories                                           24,270           22,440
  Prepaid expenses                                      21,451           20,281
  Deferred income tax                                    8,032            7,871
                                                   -----------      -----------
     Total current assets                              161,278          142,863
                                                   -----------      -----------
Property, equipment and leasehold interests,
    at cost, net                                     3,000,822        2,466,848
                                                   -----------      -----------
Other assets
  Excess of purchase price over fair
    market value of net assets acquired, net           367,076          375,375
  Notes receivable                                      10,895            1,075
  Investments in unconsolidated affiliates             271,707          255,392
  Deferred charges and other assets                     57,929           21,995
                                                   -----------      -----------
     Total other assets                                707,607          653,837
                                                   -----------      -----------
     Total assets                                   $3,869,707       $3,263,548
                                                   ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Current portion of long-term debt                $     3,481      $     3,071
  Accounts and contracts payable
    Trade                                               23,745           22,103
    Construction                                        75,030           40,670
  Accrued liabilities
    Salaries, wages and vacations                       40,006           36,107
    Progressive jackpots                                 8,889            7,511
    Advance room deposits                                8,195            6,217
    Interest payable                                    27,767           17,828
    Other                                               44,460           33,451
                                                   -----------      -----------
     Total current liabilities                         231,573          166,958
                                                   -----------      -----------
Long-term debt                                       2,259,149        1,788,818
                                                   -----------      -----------
Other liabilities
  Deferred income tax                                  200,376          175,934
  Other long-term liabilities                           20,981            8,089
                                                   -----------      -----------
     Total other liabilities                           221,357          184,023
                                                   -----------      -----------
     Total liabilities                               2,712,079        2,139,799
                                                   -----------      -----------

Commitments and contingent liabilities             -----------      -----------

Stockholders' equity
  Common stock $.01-2/3 par value
  Authorized -- 450,000,000 shares
  Issued -- 113,622,508 and 113,609,008 shares           1,894            1,893

  Preferred stock $.01 par value
  Authorized -- 75,000,000 shares                         --               --
  Additional paid-in capital                           558,935          558,658
  Retained earnings                                  1,159,469        1,074,271
  Treasury stock (22,959,425 and 18,496,125
  shares), at cost                                    (562,670)        (511,073)
                                                   -----------      -----------
   Total stockholders' equity                        1,157,628        1,123,749
                                                   -----------      -----------
   Total liabilities and stockholders' equity       $3,869,707       $3,263,548
                                                   ===========      ===========
</TABLE>

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

                                       38

<PAGE>

CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

Year ended January 31,
(in thousands, except share data)
                                          1999       1998        1997
                                       ---------  ---------   ---------
<S>                                    <C>        <C>         <C>
Revenues
  Casino                               $ 709,909  $ 632,122   $ 655,902
  Rooms                                  355,635    330,644     294,241
  Food and beverage                      246,622    215,584     210,384
  Other                                  170,701    142,407     146,554
  Earnings of unconsolidated affiliates   83,967     98,977      86,646
                                        --------  ---------   ---------
                                       1,566,834  1,419,734   1,393,727
  Less-complimentary allowances          (87,054)   (65,247)    (59,477)
                                       ---------  ---------   ---------
                                       1,479,780  1,354,487   1,334,250
                                       ---------  ---------   ---------
Costs and expenses
  Casino                                 367,449    316,902     302,096
  Rooms                                  128,622    122,934     116,508
  Food and beverage                      207,663    199,955     200,722
  Other operating expenses               102,910     90,187      90,601
  General and administrative             264,092    232,536     227,348
  Depreciation and amortization          133,801    117,474      95,414
  Preopening expense                          --      3,447          --
  Abandonment losses                          --         --      48,309
                                       ---------  ---------   ---------
                                       1,204,537  1,083,435   1,080,998
                                       ---------  ---------   ---------
Operating profit before
   corporate expense                     275,243    271,052     253,252
Corporate expense                         32,464     34,552      31,083
                                       ---------  ---------   ---------
Income from operations                   242,779    236,500     222,169
                                       ---------  ---------   ---------
Other income (expense)
  Interest, dividends and
     other income                          2,730      9,779       5,077
  Interest income and guarantee fees
     from unconsolidated affiliate         3,122      6,041       6,865
  Interest expense                       (95,541)   (88,847)    (54,681)
  Interest expense from unconsolidated
         affiliates                      (12,275)   (15,551)    (15,567)
                                       ---------  ---------   ---------
                                        (101,964)   (88,578)    (58,306)
                                       ---------  ---------   ---------

Income before provision for income tax   140,815    147,922     163,863
Provision for income tax                  55,617     58,014      63,130
                                       ---------  ---------   ---------

Net income                              $ 85,198   $ 89,908    $100,733
                                       =========  =========   =========

Basic earnings per share                   $0.90      $0.95       $0.99
                                       =========  =========   =========

Diluted earnings per share                 $0.90      $0.94       $0.97
                                       =========  =========   =========
</TABLE>

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

                                       39

<PAGE>

CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                          Year ended January 31,
                                                 ---------      ---------      ---------
                                                    1999           1998           1997 
                                                 ---------      ---------      ---------
<S>                                              <C>            <C>            <C>
Increase (decrease) in cash
 and cash equivalents (in thousands)

Cash flows from operating activities
  Net income                                     $  85,198      $  89,908      $ 100,733
                                                 ---------      ---------      ---------
  Adjustments to reconcile net income to
   net cash provided by operating activities
      Depreciation and amortization                142,141        129,729        103,717
      Increase in deferred income tax               24,281         24,005          3,234
      Increase in interest payable                   9,939          8,824          5,835
      (Gain) loss on sale of fixed assets           (1,641)        (6,519)        47,301
      (Increase) decrease in other current
        assets                                       4,504         (2,605)       (17,742)
      Increase in other current liabilities         19,906          6,148          7,741
      Increase in other noncurrent assets          (35,817)          (785)        (3,406)
      Decrease in other noncurrent
            liabilities                                (65)           (65)           (65)
      Unconsolidated affiliates' earnings
        in excess of distributions                 (10,863)       (33,330)       (21,984)
                                                 ---------      ---------      ---------

        Total adjustments                          152,385        125,402        124,631
                                                 ---------      ---------      ---------
      Net cash provided by operating
            activities                             237,583        215,310        225,364
                                                 ---------      ---------      ---------
Cash flows from investing activities
  Capital expenditures                            (671,547)      (663,270)      (585,835)
  Increase in construction payables                 34,360         19,526         21,144
  Increase in investments in unconsolidated
    affiliates                                      (5,865)        (8,353)       (19,204)
  (Increase) decrease in notes receivable           (9,820)        35,368         (8,934)
  Proceeds from sale of equipment and other
    assets                                           5,788          8,160          3,056
  Other                                               --             --           (1,270)
                                                 ---------      ---------      ---------
      Net cash used in investing activities       (647,084)      (608,569)      (591,043)
                                                 ---------      ---------      ---------
Cash flows from financing activities
  Proceeds from issuance of senior notes
    and debentures                                 275,000           --          499,066
  Net effect on cash of issuances and
    payments of debt with initial maturities
    of three months or less                        502,528        474,355         43,850
  Issuance of debt with initial maturities
    in excess of three months                      337,334        201,843        292,533
  Principal payments of debt with initial
    maturities in excess of three months          (644,241)      (290,712)      (145,392)
  Exercise of stock options and warrants               310          7,889         28,400
  Purchase of stock warrants                          --           (2,000)          --
  Purchase of subsidiary preferred stock              --             --           (1,346)
  Purchases of treasury stock                      (51,634)        (1,300)      (341,837)
  Other                                             12,962         (7,701)        (2,783)
                                                 ---------      ---------      ---------

Net cash provided by financing activities          432,259        382,374        372,491
                                                 ---------      ---------      ---------

Net increase (decrease) in cash and cash
   equivalents                                      22,758        (10,885)         6,812

Cash and cash equivalents at beginning
  of year                                           58,631         69,516         62,704
                                                 ---------      ---------      ---------
Cash and cash equivalents at end of year          $ 81,389       $ 58,631       $ 69,516
                                                 =========      =========      =========

Supplemental cash flow disclosures

Cash paid during the year for
  Interest (net of amount capitalized)            $ 82,879       $ 77,426       $ 46,498
  Income tax                                      $ 18,770       $ 37,395       $ 48,043

</TABLE>

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

                                       40

<PAGE>

CIRCUS CIRCUS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                Common Stock Issued  Additional                                 Total
                                                -------------------   Paid-in     Retained      Treasury     Stockholders'
                                                Shares      Amount    Capital     Earnings        Stock         Equity
                                                --------   --------  ----------  ----------   ------------   -------------
<S>                                             <C>        <C>       <C>         <C>          <C>            <C>
(in thousands)
Balance, January 31, 1996                        112,795   $ 1,880   $ 527,205   $  883,630   $  (185,903)   $ 1,226,812
  Net income                                        --         --          --       100,733          --          100,733
  Exercise of stock options and warrants              13       --       14,005         --          14,395         28,400
  Treasury stock acquired (10,096 shares),
   at cost                                          --         --          --          --        (341,837)      (341,837)
  Purchase of subsidiary preferred stock            --         --         (447)        --            --             (447)
  Sale/purchase of puts and calls                   --         --      (44,950)        --            --          (44,950)
  Amortization of deferred compensation             --         --        3,080         --            --            3,080
                                                --------   --------  ----------  ----------   -----------    -----------
Balance, January 31, 1997                        112,808     1,880     498,893      984,363      (513,345)       971,791
  Net income                                        --         --          --        89,908          --           89,908
  Exercise of stock options                           46       --        4,317         --           3,572          7,889
  Treasury stock acquired (38 shares),
   at cost                                          --         --          --          --          (1,300)        (1,300)
  Conversion of subsidiary preferred stock           755        13      17,618         --            --           17,631
  Sale/purchase of puts and calls                   --         --       35,536         --            --           35,536
  Amortization of deferred compensation             --         --        4,294         --            --            4,294
  Purchase of warrants                              --         --       (2,000)        --            --           (2,000)
                                                --------   --------  ----------  ----------   -----------    -----------
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   $  1,159,4   $  (562,670)   $ 1,157,628
                                                ========   =======   =========   ==========   ===========    ===========
</TABLE>

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

                                       41

<PAGE>

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Summary of Significant Accounting Policies

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

Circus Circus Enterprises, Inc. (the "Company") was incorporated February 27, 
1974. The Company owns and operates hotel and casino facilities in Las Vegas, 
Reno, Laughlin, Jean and Henderson, Nevada and in Tunica County, Mississippi. 
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 
and its wholly owned subsidiaries. Material intercompany accounts and 
transactions have been eliminated. Investments in 50% or less owned 
affiliated companies are accounted for under the equity method.

    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 
l, 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 $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.

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 money. The amounts capitalized during the 
years ended January 31, 1999, 1998 and 1997, were $45.5 million, $22.0 
million and $16.0 million, respectively.

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.

CASH EQUIVALENTS

At January 31, 1999 and 1998, 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.

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.

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 $41.3 million 
and $31.1 million, as of January 31, 1999 and 1998, respectively.

                                       42
<PAGE>

REVENUES AND EXPENSES

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: $58.7 million, $45.9 million and $37.9 million 
for the fiscal years ended January 31, 1999, 1998 and 1997, respectively. For 
the three years, approximately 80%-90% of such costs were for food and 
beverage with the balance for rooms. Casino revenues are the net difference 
between the sums received as winnings and the sums paid as losses.

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.

PREOPENING EXPENSES

Preopening expenses consist principally of direct incremental personnel costs 
and advertising and marketing expenses. These costs are capitalized prior to 
the opening of the specific project and are charged to expense at the 
commencement of operations. For the year ended January 31, 1998, preopening 
expenses amounted to $3.4 million related to the opening of a hotel tower at 
Gold Strike Casino Resort in Tunica County, Mississippi.

In accordance with a recent accounting pronouncement, preopening expenses 
incurred prior to January 31, 1999 ($33.8 million), on projects opening after 
that date, will be reflected as a cumulative effect of a change in accounting 
principle in the first quarter ending April 30, 1999. Preopening expenses 
incurred after January 31, 1999 on those projects will be expensed as 
incurred.

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.

Note 2.  Property, Equipment and Leasehold Interests

Property, equipment and leasehold interests consist of the following:
<TABLE>
<CAPTION>
January 31, (in thousands)                      1999          1998
------------------------------------------------------------------------------
      <S>                                     <C>          <C>
      Land and land leases                    $  362,661   $  343,556
      Buildings and improvements               1,851,511    1,798,417
      Equipment, furniture and fixtures          653,058      618,011
      Leasehold interests and improvements        11,192       10,803
------------------------------------------------------------------------------
                                               2,878,422    2,770,787
      Less - accumulated depreciation
       and amortization                         (733,967)    (624,205)
------------------------------------------------------------------------------
                                               2,144,455    2,146,582
      Construction in progress                   856,367      320,266
------------------------------------------------------------------------------
                                              $3,000,822   $2,466,848
                                              ==========   ==========
</TABLE>
                                       43

<PAGE>

Note 3.  Long-term Debt

Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 31, (in thousands)                                 1999         1998 
------------------------------------------------------------------------------
<S>                                                    <C>            <C>
Amounts due under bank credit agreements
  at floating interest rates, weighted
  average of 6.0%                                      $ 1,130,000    $      --
Amounts due under corporate debt program
  at floating interest rates, weighted
  average of 5.7% and 5.8%                                  50,000        981,310
9-1/4% Senior Subordinated Notes due 2005                  275,000           --
6.45% Senior Notes due 2006 (net of
   unamortized discount of $308 and $352)                  199,692        199,648
7-5/8% Senior Subordinated Debentures
     due 2013                                              150,000        150,000
6-3/4% Senior Subordinated Notes due 2003
  (net of unamortized discount of $71
  and $87)                                                 149,929        149,913
7.0% Debentures due 2036 (net of
  unamortized discount of $133 and $146)                   149,867        149,854
6.70% Debentures due 2096 (net of
  unamortized discount of $231 and $279)                   149,769        149,721
Other notes                                                  8,373         11,443
                                                        ----------     ----------
                                                         2,262,630      1,791,889

Less - current portion                                      (3,481)        (3,071)
                                                        -----------    -----------
                                                         $2,259,149     $1,788,818
                                                        ===========    ===========
</TABLE>

     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.

     In May 1997, the Company renegotiated its $1.5 billion unsecured credit 
facility, dated January 29, 1996. This agreement was replaced by a new $2 
billion unsecured credit facility which matures on July 31, 2002 (the 
"Facility"). See Note 4 - Leasing Arrangements, for 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 senior and total debt and new venture capital 
expenditures and investments. The Facility is for general corporate purposes. 
The Company incurs commitment fees (currently 17.5 basis points) on the 
unused portion of the Facility. As of January 31, 1999, the Company had $1.1 
billion of borrowings under the Facility. At such date, the Company also had 
$50 million issued under the corporate debt program thus reducing, by that 
amount, the credit available under the Facility for purposes other than 
repayment of such indebtedness. 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.

     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% of the 9-1/4% Notes prior 
to December 1, 2001. The 9-1/4% 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, 1999, the 
estimated fair value of the 9-1/4% Notes was $277.1 million, based on their 
trading price.

                                       44
<PAGE>

     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. The net proceeds from 
these offerings were used primarily to repay borrowings under the Company's 
corporate debt program. As of January 31, 1999, the estimated fair value of 
the 7.0% Debentures was $139.9 million and the estimated fair value of the 
6.70% Debentures was $143.4 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. The net proceeds from this offering were used 
primarily to repay borrowings under the Company's corporate debt program. As 
of January 31, 1999, the estimated fair value of the 6.45% Notes was $184.5 
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. The net proceeds from these offerings were used 
primarily to repay borrowings under the Company's corporate debt program. As 
of January 31, 1999, the estimated fair value of the 6-3/4% Notes was $142.1 
million and the estimated fair value of the 7-5/8% Debentures was $133.5 
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, 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 6.2%) 
and receives a variable interest rate (weighted average of approximately 5.3% 
at January 31, 1999) on $175 million notional amount of "initial" swaps, and 
pays a variable interest rate of approximately 5.6% at January 31, 1999, and 
receives a fixed interest rate of approximately 8.2% on $30 million notional 
amount of a "reversing" swap. The net effect of all such swaps resulted in 
additional interest expense due to an interest rate differential which, at 
January 31, 1999, was approximately 0.4% on the total notional amount of the 
swaps. Two of the initial swaps with a combined notional amount of $150 
million provide that the swaps will terminate two business days after any 
date on which three-month LIBOR is set at or above 9.0% on or after October 
15, 2000 for $100 million notional amount and on or after January 15, 2001 
for $50 million notional amount. These swaps otherwise terminate in fiscal 
2008. The remaining initial swap of $25 million terminates in fiscal 2000, 
while the reversing swap expires in fiscal 2002.

                                       45
<PAGE>

     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 and the reverse swap are predominantly 
members of the Company's bank group. If the Company had terminated all swaps 
as of January 31, 1999, it would have had to pay a net amount of 
approximately $8.8 million based on quoted market values from the various 
financial institutions holding the swaps.

    In June 1998, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 133 - Accounting for Derivative 
Instruments and Hedging Activities ("SFAS 133"). 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 valued 
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 as either balance sheet or income statement events. SFAS 133 is 
effective for fiscal years beginning after June 15, 1999. The Company does 
not expect the adoption of this pronouncement to materially impact its 
results of operations or financial position.

    As of January 31, 1999, under the Company's most restrictive loan 
covenants, the Company was restricted as to the purchase of its own capital 
stock in excess of approximately $495 million and was restricted from issuing 
additional debt in excess of approximately $43 million.

    Required annual principal payments as of January 31, 1999 are as follows:
<TABLE>
<CAPTION>
      Year ending January 31, (in thousands)
      ----------------------------------------------------------------
      <S>                                                   <C>
      2000                                                  $    3,481
      2001                                                         488
      2002                                                         262
      2003                                                   1,180,274
      2004                                                     150,216
      Thereafter                                               927,909
      ----------------------------------------------------------------
                                                            $2,262,630
                                                            ==========
</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") pursuant to 
which it may lease up to $200 million of equipment. The lease term consists 
of an interim term commencing on the delivery date and ending June 30, 1999, 
plus a base term of two years. On January 28, 1999, the Company leased $100 
million of equipment at Mandalay Bay pursuant to the Lease Facility. The 
lease payment is variable in nature. Based upon the current lease rate, the 
quarterly lease payment during the interim term is approximately $1.5 
million, while the quarterly lease payment during the base term is 
approximately $4.6 million.

     The Company permanently reduced the commitment under its bank credit 
facility by the amount of the lease financing, thus reducing the commitment 
under the credit facility to $1.9 billion at January 31, 1999.

     Effective November 1, 1981, the Company entered into an 18-year lease 
for the premises on which the Silver City Casino in Las Vegas operates. This 
lease is accounted for as an operating lease. The current monthly base rent 
of $129,982 is subject to annual increases, calculated using a specified 
index with a cap based on a specified percentage of annual revenues. The 
lease also provides for profit participation. The profit participation is the 
amount by which 50% of defined net income exceeds the adjusted base rent. 
There was no profit participation rent due for the three years ended January 
31, 1999. The lease terminates October 31, 1999.

                                       46
<PAGE>


     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, 1999 under those 
operating leases that have lease terms in excess of one year:
<TABLE>
<CAPTION>
      Year ending January 31, (in thousands)
      ----------------------------------------------------------------
      <S>                                                      <C>
      2000                                                     $16,284
      2001                                                      20,120
      2002                                                       9,053
      2003                                                       1,321
      2004                                                       1,014
      Thereafter                                                 6,732
      ----------------------------------------------------------------
                                                               $54,524
                                                               =======
</TABLE>

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

<TABLE>
<CAPTION>
      Year ended January 31,
      (in thousands)                         1999      1998       1997
      -----------------------------------------------------------------
      <S>                                   <C>       <C>        <C>
      Operating rent expense                $3,454    $3,211     $3,869
                                            ======    ======     ======
</TABLE>

Note 5. Income Tax

The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
      Year ended January 31,
      (in thousands)                       1999      1998      1997
      --------------------------------------------------------------
      <S>                                <C>       <C>       <C>
      Current
       Federal                           $34,810   $36,980   $52,695
       State                                 510       491       670
                                         -------   -------   -------
                                          35,320    37,471    53,365
                                         -------   -------   -------
      Deferred
        Federal                           20,297    20,543     5,838
        Foreign                                -         -     3,927
                                         -------   -------   -------
                                          20,297    20,543     9,765
                                         -------   -------   -------
          Total                          $55,617   $58,014   $63,130
                                         =======   =======   =======
</TABLE>

    The Company has recognized a tax benefit of $38,000, $0.9 million and 
$8.0 million related to the exercise of stock options and warrants for the 
fiscal years ended January 31, 1999, 1998 and 1997, respectively. Such 
amounts reduce the current portion of taxes payable.

                                       47

<PAGE>

     The cumulative balance of the deferred tax liability is due 
predominantly to temporary book/tax depreciation differences. The components 
of deferred income tax expense are as follows:
<TABLE>
<CAPTION>
      Year ended January 31,
      (in thousands)                            1999     1998     1997
      ----------------------------------------------------------------
      <S>                                     <C>      <C>      <C>
      Additional depreciation
       resulting from the use of
       accelerated methods for tax
       purposes and the straight-line
       method for financial statement
       purposes                               $11,811  $14,089  $7,493
      Effect of writing off preopening
       expenses for financial statement
       purposes and amortizing over five
       years for tax purposes                   1,062    1,281   1,253
      Difference between book and
       tax basis of assets written off            497      327  (8,341)
      Difference between book and tax
       basis of investments in uncon-
       solidated affiliates                     3,392    5,730   4,028
      Foreign tax credits                          --       --   5,075
      Outstanding chips and tokens              1,501     (150)  1,083
      Capitalized interest                      2,993    1,432      --
      Other, net                                 (959)  (2,166)   (826)
                                              -------  ------- -------
                                              $20,297  $20,543 $ 9,765 
                                              =======  ======= =======
</TABLE>

     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,                    1999      1998      1997 
     ------------------------------------------------------------------
     <S>                                       <C>       <C>       <C>
     Federal statutory tax rate                35.0%     35.0%     35.0%
     Nondeductible goodwill                     2.5       2.4       2.2
     Nondeductible political contributions      2.0        .3        .5
     Nondeductible compensation                  --       2.2        --
     Other, net                                  --       (.7)       .8
                                               ----      ----      ----
     Effective tax rate                        39.5%     39.2%     38.5%
                                               ====      ====      ====
</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, 1999 and 1998, under the provisions of Statement 
of Financial Accounting Standards No. 109, are as follows:
<TABLE>
<CAPTION>
      Year ended January 31,
      (in thousands)                             1999             1998
      ----------------------------------------------------------------
      <S>                                    <C>              <C>
      Deferred tax liabilities
      Property and equipment                 $176,592         $152,069
      Investments in unconsolidated
       affiliates                              18,697           19,766
      Other                                    13,205           12,632
                                             --------         --------
        Gross deferred tax liabilities        208,494          184,467
                                             --------         --------
      Deferred tax assets
      Accrued vacation                          5,045            5,107
      Outstanding chips and tokens                558            2,060
      Preopening expense, net of amortization     520              838
      Other                                    10,027            8,399
                                             --------         --------
        Gross deferred tax assets              16,150           16,404
                                             --------         --------
        Net deferred tax liabilities         $192,344         $168,063
                                             ========         ========
</TABLE>
                                       48
<PAGE>

Note 6.  Employee Retirement Plans

Approximately 37% of the Company's employees are covered by union-sponsored,
collectively bargained, multi-employer, defined benefit pension plans. The
Company contributed $10.2 million, $9.9 million and $9.3 million during the
years ended January 31, 1999, 1998 and 1997, 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 $4.5 million, $4.2 million and $4.0 million in the years ended
January 31, 1999, 1998 and 1997. Contributions are funded with cash.

     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 based upon the
employees' years of service, compensation and SERP tier. As of January 31, 1999,
no employees were enrolled in the SERP, and no benefits were accrued or funded.
While the plan does not require formal funding, it is intended that the SERP
will be funded through life insurance contracts on the key employees.

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,
                       -----------------------------------------------------
                              1999              1998              1997
                       ----------------   ----------------  ----------------
<S>                    <C>                <C>               <C>
                       Weighted           Weighted          Weighted
                       Average            Average           Average
                       Exercise           Exercise          Exercise
                       Options    Price   Options    Price  Options    Price
                       --------   -----   --------   -----  --------   -----
Outstanding at
 beginning of year... 5,143,505 $23.94  7,183,560 $25.43  8,129,015  $23.88
Granted.............. 3,188,335  12.51    575,000  23.52    365,000   33.48
Exercised............   (16,500) 13.29   (341,005) 20.75 (1,188,105)  17.24
Canceled.............(4,418,666) 23.80 (2,274,050) 29.01   (122,350)  26.13
                      ---------         ---------         ---------
Outstanding at end
  of year............ 3,896,674 $14.78  5,143,505 $23.94  7,183,560  $25.43
                      =========         =========         =========
Options exercisable
  at end of year..... 1,324,005 $21.21  3,340,498 $22.54  3,459,067  $23.52
Options available for
  grant at end of
  year............... 3,949,231         2,026,900         2,327,850

</TABLE>

                                       49
<PAGE>

The following table summarizes information about stock options outstanding at
January 31, 1999:

<TABLE>
<CAPTION>
                Options Outstanding                       Options
                -------------------                       --------
Exercisable
-----------
                                 Weighted
                                  Average    Weighted
Weighted
    Range of                     Remaining    Average
Average
    Exercise          Number    Contractual  Exercise     Number
     Prices       Outstanding   Life (yrs)   Price     Exercisable     Price
----------------  ------------  ----------   --------  -----------   ---------
<S>               <C>           <C>          <C>       <C>           <C>
$11.25 to $11.25     2,506,669      6.78      $11.25            -       $    -
 11.75 to  17.48        51,505      7.31       16.20       11,505        11.75
 21.25 to  21.25     1,290,000      4.60       21.25    1,290,000        21.25
 23.08 to  25.88        48,500      8.15       23.57       22,500        23.89
                     ---------                          ---------
                     3,896,674      6.08      $14.78    1,324,005       $21.21
                     =========                          =========
</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.

     In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123-Accounting for
Stock-Based Compensation ("SFAS 123"). SFAS 123 is effective for fiscal
years beginning after December 15, 1995 and 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 intrinsic value at the date of grant 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.

                                       50

<PAGE>

<TABLE>
<CAPTION>

                                           Year ended January 31,
                                           ----------------------
(dollars in thousands, except share data)    1999          1998  
                                           --------      --------
<S>                                        <C>           <C>
Net income -
 As reported.............................  $ 85,198      $ 89,908
 Pro forma...............................    79,722        82,334

Net income per share (basic) -
 As reported.............................  $   0.90      $   0.95
 Pro forma...............................      0.84          0.87

Net income per share (diluted) -
 As reported.............................  $   0.90      $   0.94
 Pro forma...............................      0.84          0.86

Weighted average assumptions -
 Expected stock price volatility.........      43.6%         37.7%
 Risk-free interest rate.................       5.0%          5.7%
 Expected option lives (years)...........       2.1           3.5
 Estimated fair value of options granted.  $   3.50      $   8.06

</TABLE>

     Because the accounting method prescribed by SFAS 123 has not been applied
to options granted prior to January 1, 1995, the compensation cost reflected in
the pro forma amounts shown above may not be representative of that to be
expected in future years.

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.

     During the year ended January 31, 1999, the Company repurchased 4.5 million
shares of its common stock at a cost of $51.6 million. In fiscal 1998, the
Company repurchased 38,486 shares of its common stock at a cost of $1.3 million.

     During the year ended January 31, 1998, the Company elected to settle, for
cash, outstanding put options on 2.0 million shares of its common stock and call
options on 600,000 shares of common stock. The net cost to the Company was $9.4
million. The put and call options were entered into as a complement to the
Company's overall share repurchase program.

     In connection with the acquisition of Gold Strike Resorts, New Way, Inc., a
wholly owned subsidiary of the Company, issued 1,069,926 shares of $10.00
Cumulative Preferred Stock. Of the preferred shares issued, 866,640 were issued
to another wholly owned subsidiary of the Company. During the year ended January
31, 1997, the Company purchased 9,864 shares of the preferred stock for $1.3
million. The price paid by the Company was based on the trading price of the
Company's common stock prior to the transaction. On February 26, 1997, New Way,
Inc. merged into another subsidiary of the Company and, therefore, the remaining
preferred stock was converted into 754,666 shares of common stock.

                                       51

<PAGE>

     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

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 - Earnings Per Share ("SFAS 128"). SFAS
128 is effective for periods ending after December 15, 1997 and replaces
earnings per share as previously reported with "basic", or undiluted earnings
per share, and "diluted" 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
additional dilution for all potentially dilutive securities, such as stock
options.

     The Company adopted the provisions of SFAS 128 for its fiscal year ended
January 31, 1998, and all previously reported earnings per share amounts have
been restated. 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,
                                         ----------------------
(in thousands, except per share data)    1999      1998    1997
---------------------------------------------------------------
<S>                                    <C>      <C>      <C>
Net income                             $85,198  $89,908  $100,733
                                       =======  =======  ========
Weighted average shares out-
 standing used in computation
 of basic earnings per share            94,601   94,943   101,896
Stock options                               70      309     1,405
Subsidiary preferred stock                   -        -       783
                                       -------  -------  --------
Weighted average shares out-
 standing used in computation
 of diluted earnings per share          94,671   95,252   104,084
                                       =======  =======  ========
Basic earnings per share                 $0.90    $0.95     $0.99
                                       =======  =======  ========
Diluted earnings per share               $0.90    $0.94     $0.97
                                       =======  =======  ========
</TABLE>

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, (in thousands)                     1999         1998  
------------------------------------------------------------------
<S>                                          <C>          <C>
Circus and Eldorado Joint Venture (50%)
 (Silver Legacy, Reno, Nevada)              $ 74,871      $ 64,407
Elgin Riverboat Resort (50%)
 (Grand Victoria, Elgin, Illinois)            42,461        44,759
Victoria Partners (50%)
 (Monte Carlo, Las Vegas, Nevada)            141,658       139,958
Detroit Entertainment (45%)
 (Proposed Hotel/Casino, Detroit, Michigan)   12,717         6,268
                                            --------      --------
                                            $271,707      $255,392
                                            ========      ========
</TABLE>

                                       52

<PAGE>

     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, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>

(in thousands)                                 1998          1997
-----------------------------------------------------------------
<S>                                        <C>           <C>
Current assets                             $ 81,539      $ 85,437
Property and other assets, net              747,790       763,479
Current liabilities                          74,177        76,496
Long-term debt and other liabilities        283,006       329,275
Equity                                      472,146       443,145

</TABLE>

     Summarized results of operations of the unconsolidated affiliates for the
years ended December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>

(in thousands)                               1998           1997
----------------------------------------------------------------
<S>                                      <C>            <C>
Revenues                                 $676,268       $661,884
Expenses                                  518,169        473,357
Operating income                          158,099        188,527
Net income                                134,405        157,872

</TABLE>

Note 11.  Abandonment Losses

During fiscal 1997, the Company wrote off $48.3 million of various assets. 
These write-offs included the special-effects films at Luxor ($12.0 million) 
which were replaced by IMAX special-format filmed attractions, structural 
elements being demolished as part of Luxor's remodeling ($12.1 million) and 
fixtures and equipment at Circus Circus-Las Vegas, Excalibur and Gold 
Strike-Tunica being replaced in the course of upgrading and expanding those 
properties ($16.0 million). The Company also wrote off $8.2 million of costs 
associated with the demolition of a people mover at Circus Circus-Las Vegas 
and the removal of the Nile River at Luxor.

Note 12.  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 Circus 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's latest resort, Mandalay Bay, is a 43-story, hotel/casino 
resort in Las Vegas, Nevada that includes approximately 3,700 rooms and 
135,000 square feet of gaming space and is situated on approximately 60 acres 
of land just south of Luxor. Mandalay Bay's attractions include an 11-acre 
tropical lagoon featuring a sand-and-surf beach, a three-quarter-mile lazy 
river ride, a 30,000-square-foot spa and other entertainment attractions. 
Inside, Mandalay Bay offers internationally renowned restaurants; a House of 
Blues nightclub and restaurant, including its signature Foundation Room sited 
on Mandalay Bay's rooftop; and 100 "music-themed" hotel rooms in Mandalay 
Bay's tower.

     Four Seasons operates approximately 400 rooms at Mandalay Bay, providing 
Las Vegas visitors with a luxury "five star" hospitality experience. The Four 
Seasons Hotel, which is owned by the Company and managed by Four Seasons, 
represents the first step pursuant to the Company's cooperative effort with 
Four Seasons to identify strategic opportunities for development of hotel and 
casino properties worldwide. The total cost of Mandalay Bay, including the 
Four Seasons Hotel and including leased equipment, but excluding land, 
capitalized interest and preopening expenses, was approximately $900 million; 
as of January 31, 1999, $784.8 million of these costs had been incurred.

     During construction, Mandalay Bay's hotel tower experienced settling in 
excess of the level contemplated in the building's original design. The 
settling was greater in some portions of the structure than others. The 
Company retained geotechnical, structural engineering and foundation 
consultants who evaluated the situation and recommended remedial measures, 
which have been completed. These remedial measures will be evaluated over a 
period of time to determine if any further measures will be required.

                                       53

<PAGE>

     Mandalay Bay is the latest phase of the Company's development of more 
than 230 acres of land it owns at the south end of the Las Vegas Strip. This 
parcel of land runs from Tropicana Avenue south approximately one mile to 
Russell Road ("Masterplan Mile"). As part of its development plan for 
Masterplan Mile, the Company has completed construction of a 
125,000-square-foot convention facility, which opened March 12, and a 
12,000-seat arena, which opened April 10. These properties, which represent 
core components of Masterplan Mile, will be cross-marketed to guests at the 
Company's existing and future hotel-casinos within Masterplan Mile. The total 
estimated cost of the convention facility and arena, excluding land, 
capitalized interest and preopening expenses, is approximately $115 million 
and as of January 31, 1999, $73.9 million in costs had been incurred for 
these facilities.

     The Company is nearing completion of a monorail system which will link 
the Company's resorts on Masterplan Mile. Furthermore, the Company is 
planning a "Sea of Predators" aquarium exhibit, which will likewise represent 
a core component of Masterplan Mile. The Sea of Predators exhibit is expected 
to open in early 2000. The cost of these additional Masterplan Mile core 
components, excluding land, capitalized interest and preopening expenses, is 
estimated at approximately $75 million, of which $19.9 million had been 
incurred as of January 31, 1999. The Company may add other core components to 
its development plan for Masterplan Mile in the future.

     The Company has funded the above projects from internal cash flows, 
project-specific financing or its credit facility, and anticipates that 
future funding for such projects will be from these sources.

     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.

                                       54

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Circus Circus
Enterprises, Inc.:

We have audited the accompanying consolidated balance sheets of Circus Circus 
Enterprises, Inc. (a Nevada corporation) and subsidiaries as of January 31, 
1999 and 1998 and the related consolidated statements of income, 
stockholders' equity and cash flows for each of the three years in the period 
ended January 31, 1999. These financial statements are the responsibility of 
the Company's management. Our responsibility is to express an opinion on 
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Circus Circus Enterprises, 
Inc. and subsidiaries as of January 31, 1999 and 1998 and the results of 
their operations and their cash flows for each of the three years in the 
period ended January 31, 1999, in conformity with generally accepted 
accounting principles.

                                                           ARTHUR ANDERSEN LLP

Las Vegas, Nevada
February 22, 1999

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 its 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.

                                       55