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                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 2001

                                       OR

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

For the transition period from                     to
                               -----------------        -----------------
Commission file number 33-48887


                          HOLLYWOOD CASINO CORPORATION
                                HWCC-TUNICA, INC.
--------------------------------------------------------------------------------
           (Exact name of each registrant as specified in its charter)

                DELAWARE                                      75-2352412
                  TEXAS                                       75-2513808
----------------------------------------               -----------------------
    (States or other jurisdictions of                      (I.R.S. Employer
     incorporation or organization)                      Identification No.'s)

     Two Galleria Tower, Suite 2200
       13455 Noel Road, LB 48
              Dallas, Texas                                      75240
----------------------------------------               -----------------------
(Address of principal executive offices)                      (Zip Code)

(Registrant's telephone number, including area code): (972) 392-7777

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

                         Common Stock, $.0001 par Value
                         Preferred Stock Purchase Rights
--------------------------------------------------------------------------------
                              Title of each class

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

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

     The aggregate market value of the voting stock held by non-affiliates of
Hollywood Casino Corporation, based on the closing price of such stock on March
27, 2002, was $200,488,075. For the purposes of this computation, all officers,
directors and 5% beneficial owners of Hollywood Casino Corporation are deemed to
be affiliates. Such determination should not be deemed an admission that such
officer, directors and beneficial owners are in fact, affiliates of Hollywood
Casino Corporation. As of March 27, 2002, 25,361,025 shares of Class A Common
Stock, $.0001 par value per share, were outstanding.

     As of March 27, 2002, 1,000 shares of Common Stock of HWCC-Tunica, Inc.,
$.01 par value per share, were outstanding, all of which were held by an
affiliate of HWCC-Tunica, Inc.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the following documents are incorporated by reference into the
indicated part or parts of this report.

     (1)  Definitive proxy statement filed pursuant to Regulation 14A in
          connection with the Annual Meeting of Shareholders. - Part III.

     HWCC-Tunica, Inc. meets the conditions set forth in General Instruction
(I)(l)(a) and (b) of Form 10-K and is therefore filing this Form with the
reduced disclosure format.

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                                     PART I

ITEM 1. BUSINESS

General
-------

     Hollywood Casino Corporation ("HCC" or the "Company") develops, owns and
operates distinctively themed casino entertainment facilities under the service
mark Hollywood Casino(R). Through its subsidiaries, HCC currently owns and
operates a dockside casino and entertainment facility in Aurora, Illinois
approximately 35 miles west of downtown Chicago (the "Aurora Casino"); a casino,
hotel and entertainment complex in Tunica County, Mississippi located
approximately 30 miles south of Memphis, Tennessee (the "Tunica Casino") and a
destination gaming resort located in Shreveport, Louisiana, approximately 180
miles east of Dallas, Texas (the "Shreveport Casino"). Each of the Company's
facilities features its unique Hollywood theme, which incorporates the
excitement and glamour of the motion picture industry by utilizing designs
inspired by famous movies, displays of motion picture memorabilia and movie
themed gaming, entertainment and dining areas. Approximately 47% of HCC's
outstanding common shares are listed and traded on the American Stock Exchange
under the symbol "HWD". The remaining outstanding HCC common shares are owned by
Jack E. Pratt, Edward T. Pratt, Jr., William D. Pratt, Edward T. Pratt III and
by certain general partnerships and trusts controlled by the Pratts and by other
family members (collectively, the "Pratt Family").

     HCC owns all of the outstanding common stock of Hollywood Casino - Aurora,
Inc. ("HCA"), HWCC - Tunica, Inc. ("HCT"), HWCC - Louisiana, Inc. ("HCL") and
HWCC - Shreveport, Inc. ("Shreveport Management"). HCA is an Illinois
corporation organized by the Pratt Family during 1990 which owns and operates
the Aurora Casino. HCT is a Texas corporation formed by HCC during 1993 to
acquire and complete the Tunica Casino. HCL is a Louisiana corporation formed by
HCC in 1993 to pursue gaming opportunities in Louisiana. HCL owns the
partnership (the "Shreveport Partnership") which has an effective 100% ownership
interest in the Shreveport Casino. HCC's joint venture partner holds a residual
interest in the event that the Shreveport Casino is ever sold amounting to 10%
plus any capital contributions made by the joint venture partner to the
Shreveport Partnership or otherwise credited to their account. The joint venture
partner also receives an amount equal to 1% of "complex net revenues", as
defined, of the Shreveport Casino. The joint venture partner's interest is
included in minority interest on the accompanying consolidated balance sheets.
Shreveport Management is a Louisiana corporation formed by HCC in 1997 which
holds the management contract for the Shreveport Casino.

     During May 1999, HCC issued $310,000,000 of 11.25% Senior Secured Notes due
May 1, 2007 and $50,000,000 of floating rate Senior Secured Notes due May 1,
2006 (collectively, the "Senior Secured Notes"). The Senior Secured Notes are
unconditionally guaranteed on a senior secured basis by HCT, Shreveport
Management and by certain future subsidiaries of HCC. The Senior Secured Notes
are secured by, among other things, (1) substantially all of the assets of HCT,
(2) a limited lien on substantially all of the assets of HCA and (3) a pledge of
the capital stock of certain subsidiaries of HCC including HCA and HCT.
Accordingly, the financial statements of HCA and HCT are also included herein.
Shreveport Management's only source of revenues is management fees earned from
the Shreveport Casino and its only operating expense is a services fee paid to
HCC equal to 90% of the management fees it earns from the Shreveport Casino.
Shreveport Management has no significant operations, assets or liabilities;
accordingly, separate financial statements are not included herein because
management has determined that such information is not material to investors.
HCL has been designated an "Unrestricted Subsidiary" of HCC and the operations
of the Shreveport Casino, other than management fees paid to Shreveport
Management, do not provide credit support for the Senior Secured Notes.

                                       2

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     Proceeds of the debt offering were used to refinance previously outstanding
debt, to fund a portion of HCC's equity investment in the Shreveport Casino and,
during October 1999, to purchase and terminate the management and consulting
agreements on the Aurora Casino and Tunica Casino. The Company is also using
proceeds from the debt offering to expand the Aurora Casino's operating
facilities (see "Business-The Aurora Casino-The Aurora Casino Expansion" below).

     During August 1999, the Shreveport Partnership issued $150,000,000 of 13%
First Mortgage Notes, with contingent interest, which are non-recourse to HCC.
During June 2001, the Shreveport Partnership issued $39,000,000 of 13% Senior
Secured Notes, with contingent interest, which are also non-recourse to HCC.
Because the partnership is effectively owned and controlled by HCL, the
financial statements of the partnership, including its debt obligations, are
included in the accompanying consolidated financial statements of HCC.

     The Company's casinos use casino information technology developed by
Advanced Casino Systems Corporation ("ACSC") which, until March 2002, was a
wholly owned subsidiary of Greate Bay Casino Corporation ("Greate Bay"), an
entity approximately 35%-owned by the Pratt Family. ACSC's technology includes
table game and slot machine monitoring systems that enable the casinos to track
and rate patron play through the use of a casino player's card. These systems
provide management with the key characteristics of patron play as slot machines
and table games are connected with its data base monitoring system. When patrons
use the casino player's card at slot machines or table games, the information is
immediately available to management and allows management to implement marketing
programs to recognize and reward patrons during their visits to the casino. Such
promotions and complimentaries are generally provided through direct mail
programs and specialized invitations and include food, hotel accommodations,
special player events, retail merchandise, sweepstake giveaways and "cash-back"
programs based on slot machine patrons' gross wagering. Management believes that
its ability to reward customers on a same-visit basis is valuable in developing
a loyal base of higher value patrons. The casino system also enables the
Company's properties to capture and maintain patron information necessary in
implementing its casino player's card and other database marketing programs. In
addition, ACSC's systems allow management to monitor, analyze and control the
granting of gaming credit, promotional expenses and other marketing costs.

     Management uses the databases to focus marketing efforts on patrons who
have been identified as higher value patrons. Management believes that the
process of identifying higher value patrons, encouraging participation in its
casino player's card program and tailoring promotions and special events to
cater to this market segment enhances the profitability of the Company's
casinos.

     The Company also markets to the "mass" casino patron market segment through
various forms of advertising media as well as through group and bus tour
packages. Once new patrons are introduced to HCC's gaming facilities and the
casino player's card program, the database capabilities are used to direct
market to these patrons in an attempt to convert them into higher value patrons.

     During 1998, the Company adopted a strategic plan that consisted of: (1)
refinancing its outstanding public indebtedness, (2) maintaining strong market
positions in Aurora and Tunica, (3) expanding the Aurora Casino, (4) developing
the Shreveport Casino and (5) acquiring the management and consulting contracts
with respect to the Aurora Casino and Tunica Casino in order to terminate the
Company's obligation to pay fees to Greate Bay.

     HCC successfully completed the refinancing of its outstanding public
indebtedness in May 1999, acquired its management and consulting contracts from
Greate Bay in October 1999 and successfully completed and opened the Shreveport
Casino in December 2000. The Company's continuing efforts with respect to the
second and third points of the strategic plan are discussed below under the
captions "Aurora Casino"and "Tunica Casino". Management believes that its
successful completion of the first

                                       3

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and fifth points of the strategic plan have significantly simplified HCC's
organizational structure. The execution of the remainder of the plan is designed
to enhance HCC's operating performance. The opening of the Shreveport Casino
completed the fourth point of the strategic plan and management has partially
completed construction of the Aurora Casino expansion (see "Business - The
Aurora Casino" below). Accordingly, the maintenance of HCC's market positions in
Aurora, Tunica and now Shreveport, will constitute the final, ongoing effort
with respect to the strategic plan.

     The principal executive offices of HCC are located at Two Galleria Tower,
Suite 2200, 13455 Noel Road, Dallas, Texas 75240, telephone (972) 392-7777.

The Aurora Casino
-----------------

     The Aurora Casino commenced operations in June 1993. The Aurora Casino's
primary market is the affluent suburbs north and west of Chicago. Approximately
5.9 million adults live within a 50-mile radius and approximately 8.5 million
adults live within a 100-mile radius of Chicago. The facility is easily
accessible from major highways, can be reached by train from downtown Chicago in
approximately 50 minutes and is approximately 30 miles from both O'Hare
International and Midway airports.

     Prior to February 15, 2002, the Aurora Casino conducted its gaming
operations on two, four-level riverboats having a combined casino space of
approximately 32,000 square feet. In March 2001, the Aurora Casino began
construction of a major expansion, highlighted by the construction of a new
dockside facility to replace the Aurora Casino's two riverboats. The first half
of the dockside facility and a new casino entrance were completed and opened on
February 15, 2002. The second half of the dockside casino, together with a new
buffet and parking facility are expected to open in June 2002. The estimated
total project cost is approximately $78.2 million. Until the second half of the
dockside casino is completed, the Aurora Casino will continue to operate the
larger of its two existing riverboat casinos. The Aurora Casino currently has
approximately 38,000 square feet of gaming space with approximately 1,077 slot
machines and 41 table games. The completed dockside facility will have 53,000
square feet of gaming space on a single level. Food service, passenger waiting,
and various administrative functions are housed in an adjacent four-level
pavilion. The 64,000 square foot, land-based pavilion features a glass-domed,
four-story atrium with two upscale lounges, the award-winning Fairbanks(R)
gourmet steakhouse, the Hollywood Epic Buffet(R), a 1950's-style diner, a
high-end customer lounge and a private, intimate dinning room, called the "Gold
Room," for premium players. In March 2000, the Aurora Casino opened an
Asian-themed restaurant; the restaurant has been temporarily closed as part of
the Aurora expansion project and is slated for later reopening in a new
location. The Aurora Casino's two parking garages provide convenient access for
approximately 1,340 cars. The Aurora Casino also offers retail items at the
Hollywood Casino Studio Store(SM), a highly-themed shopping facility that
offers movies on video, soundtrack compact discs and logo merchandise from major
Hollywood studios.

     On June 25, 1999, the Governor of Illinois signed into law legislation
passed by the Illinois legislature allowing dockside gaming for existing
licensees. As a result of this legislation, the Aurora Casino's riverboats were
no longer required to cruise and began operating as dockside gaming facilities.
This change enabled the Aurora Casino's patrons to freely enter and exit the
docked riverboats during operating hours.

     The Aurora Casino was the first of HCC's properties to feature the
distinctive Hollywood theme. Management believes that the use of the Hollywood
theme throughout the Aurora Casino's gaming, dining and entertainment facilities
provides a uniquely entertaining atmosphere for patrons and encourages both
initial and repeat visits. The Aurora Casino also includes themed gaming areas
featuring slot machines with custom graphics and the use of movie star
look-alikes to entertain guests.

                                       4

<PAGE>

     The Aurora Casino is located near the Paramount Arts Center. This
1,900-seat, art deco-style theater was completely renovated by the City of
Aurora in 1992. The Aurora Casino uses the Paramount Theater to provide
headliner entertainment for customers. Entertainers booked at the Paramount have
included Tony Bennett, Tom Jones, Engelbert Humperdinck, Paul Anka and Bill
Cosby.

     The Chicago gaming market is the third largest gaming market in the United
States after Las Vegas and Atlantic City. Based on published reports for the
year 2001, the Aurora Casino generated 10.7% of total gaming revenues in the
Chicago gaming market with only 9.3% of the market's gaming positions, resulting
in the Aurora Casino capturing 115.2% of its "fair share" of the market's gaming
revenues. The casinos that operate in the Chicago gaming market include four
Illinois casinos, including the Aurora Casino, and five northern Indiana casinos
located within 50 miles of downtown Chicago. The Chicago gaming market continue
to experience significant increases in gaming revenues. In 2001, the Chicago
gaming market generated approximately $2.2 billion in gaming revenues, an
increase of approximately 7.7% over 2000.

     The Aurora Casino Expansion. The Aurora Casino previously operated two
     ---------------------------
riverboat casinos, City of Lights I and City of Lights II, with approximately
32,000 combined square feet of gaming space. Management believed that the
operating results of the Aurora Casino were limited by the size of City of
Lights II, which was significantly smaller than City of Lights I. As a result of
the 1999 dockside legislation, the Company commenced a major expansion of the
Aurora Casino, highlighted by the construction of a new dockside facility to
replace both City of Lights I and City of Lights II. The Company received
regulatory approval for the planned dockside casino from the Illinois Gaming
Board in April 2000 and construction began in March 2001. The new facility, when
completed, will feature a 53,000 square foot single level casino with high
ceilings and wide aisles for customer comfort. The new dockside casino has been
constructed in two halves, which will be connected to form a single dockside
casino. It was anticipated that this strategy would minimize disruption of the
Aurora Casino's operations during the construction period and allow for at least
a partial opening at a much earlier date. The first half of the dockside
facility and a new casino entrance were completed and opened on February 15,
2002. The second half of the dockside casino, together with a new buffet and
parking facility are expected to open in June 2002. The expansion of the Aurora
Casino will also include substantial improvements to the pavilion, including a
major expansion and renovation of the Hollywood Epic Buffet(R). Management
believes that the $40 million in proceeds from HCC's May 1999 issue of the
Senior Secured Notes (see "Properties - The Aurora Casino" below) designated for
the development of a the new dockside casino, together with cash on hand and
funds from operations, will be sufficient for the estimated $78.2 million cost
to complete the Aurora Casino expansion.

     The commencement of construction of the new dockside facility had
previously been delayed as a result of a complaint filed in late 1999 in an
Illinois state court concerning the constitutionality of a portion of the
legislation that enabled dockside gaming in Illinois. Although the
constitutional challenge centers on the relocation of one of the existing gaming
licenses, a finding that such portion of the legislation is unconstitutional
could result in a finding that all or a portion of the legislation, including
dockside gaming, is invalid. In January 2001, the presiding judge dismissed the
complaint because the plaintiffs lacked standing and failed to exhaust their
administrative remedies. The plaintiffs have filed an appeal of the ruling. If
an appellate court overturns the trial court's original ruling and the state
court rules that all or a portion of the legislation is invalid, management
believes that it may be able to continue to operate its existing riverboats on a
dockside basis pending a final resolution of the litigation. In the unlikely
event that the provisions in question are found to be unconstitutional after all
appeals, and the entire legislation is invalidated so that dockside gaming is
not permitted, the Company will be able to use its two riverboats to conduct
gaming.

     Casino Credit. Casino operations are conducted on both a credit and a cash
     -------------
basis. Gaming debts arising at the Aurora Casino in accordance with applicable
regulations are enforceable under Illinois law.

                                       5

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For the year ended December 31, 2001, gaming credit extended to customers
accounted for less than 2% of overall wagering. At December 31, 2001, gaming
receivables amounted to $2.1 million before allowances for uncollectible gaming
receivables which amounted to $849,000. Management of the Aurora Casino believes
that the allowances for uncollectible gaming receivables are adequate.

     Employees and Labor Relations. At December 31, 2001 there were
     -----------------------------
approximately 1,600 employees at the Aurora Casino, none of whom are represented
under collective bargaining agreements. Management considers its labor relations
to be good.

The Tunica Casino
-----------------

     The Tunica Casino commenced operations in August 1994. Tunica County is the
closest gaming jurisdiction to, and is easily accessible from, the Memphis
metropolitan area. Approximately 4.9 million adults live within a 200-mile
radius of Tunica County, approximately 900,000 of whom reside within 50 miles of
Memphis. In addition, Memphis hosts more than 8 million visitors each year. The
Tunica market has become a regional destination resort, attracting customers
from markets such as Nashville, Atlanta, St. Louis, Little Rock and Tulsa. The
Tunica Casino is accessible to its customers via Highway 61 and Interstate 55.

     The Tunica Casino features a 54,000 square foot, single level casino with
approximately 1,600 slot machines and approximately 40 table games. The Tunica
Casino's 505-room hotel and 123-space recreational vehicle park provide
overnight accommodations for its patrons. The casino includes the highly-themed
Adventure Slots(R) gaming area, featuring multimedia displays of memorabilia
from famous adventure motion pictures and over 200 slot machines. Additional
entertainment amenities include the award-winning Fairbanks gourmet steakhouse,
the Hollywood Epic Buffet, a 1950's-style diner (the Hollywood Diner(SM), an
entertainment lounge, a premium players' club, a themed bar facility, an indoor
pool and showroom, banquet and meeting facilities. In November 1998, the Tunica
Casino opened an 18-hole championship golf course adjacent to the facility
through a joint venture with Harrah's Entertainment, Inc. and Boyd Gaming
Corporation. The Tunica Casino also offers parking for 1,635 cars.

     Management has announced plans for a substantial capital expenditure
project at the Tunica property including the conversion of 22 hotel rooms into
11 new suites and the renovation of all other hotel rooms. The renovation is
expected to begin in 2002 and will cost approximately $8 million.

     The Company's Hollywood theme is utilized throughout the Tunica Casino,
which is designed to resemble a large motion picture sound stage complete with
catwalks and movie-set style lighting. In addition, numerous movie props and
pieces of motion picture memorabilia are displayed throughout the facility. In
1998, the Tunica Casino installed one of its largest and most dramatic
memorabilia pieces--a 28-foot long model ship used in the filming of the Academy
Award(R) winning movie Titanic, which is depicted sinking into the Atlantic
Ocean. The Tunica Casino also provides headliner entertainment for its
customers. Entertainers who have performed at the Tunica Casino include Louie
Anderson, Neil Sedaka and The Smothers Brothers.

     The Tunica Casino has historically been one of the leading operators in the
North River Region gaming market, which is comprised of ten casinos in north
Tunica County and one casino in Coahoma County. Based on published market
information for 2001, the Tunica Casino generated 9.3% of the total gaming
revenues in its gaming market with 9.4% of the market's gaming positions,
resulting in the Tunica Casino capturing approximately 99.2% of its "fair share"
of the market's gaming revenues. These results were achieved despite a hold
percentage for table games significantly below historical levels and intensified
competition. The North River Region market is now the seventh largest gaming
market in the United States after Las Vegas, Atlantic City, Chicago, the
Connecticut Native American

                                       6

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casinos, Detroit/Ontario and the Mississippi Gulf Coast, generating
approximately $1.1 billion in gaming revenues in 2001, relatively unchanged from
the prior year.

     The Tunica Casino is located in a cluster with gaming facilities operated
by Harrah's Entertainment, Inc., Boyd Gaming Corporation and Isle of Capri
Casinos, Inc. The casinos have named their cluster "Casino Strip" in order to
establish a marketing identity for the cluster. Three of the four properties
have conducted joint marketing activities including a billboard campaign and
radio advertising. Furthermore, the four properties conduct joint special events
to attract customers to the cluster.

     The Tunica Casino employs a marketing strategy designed to take advantage
of its proximity to the large population base of the greater Memphis
metropolitan area and other major markets by targeting the local day-trip market
and by utilizing its hotel rooms, recreational vehicle park and golf course to
expand its patron mix to include overnight visitors. Management also utilizes
its casino information systems to identify premium patrons; such information is
then used to encourage participation in its casino player's card program and
tailor promotions and special events to cater to this market segment.

     Management believes that the Tunica Casino's unique theme has broad patron
appeal and distinguishes the Tunica Casino from its competitors. Additionally,
the nature of the theming permits for periodic and cost effective updating which
management believes stimulates repeat visits.

     Casino Credit. Casino operations are conducted on both a credit and a cash
     -------------
basis. Gaming debts arising at the Tunica Casino in accordance with applicable
regulations are enforceable under Mississippi law. During the year ended
December 31, 2001, gaming credit extended to customers accounted for 1.4% of
overall wagering. At December 31, 2001, gaming receivables amounted to $3.7
million before allowances for uncollectible gaming receivables amounting to $2.2
million. Management believes that the allowances for uncollectible gaming
receivables are adequate.

     Employees and Labor Relations. At December 31, 2001, there were
     -----------------------------
approximately 1,250 employees at the Tunica Casino, none of whom are represented
under collective bargaining agreements. Management considers its labor relations
to be good.

The Shreveport Casino
---------------------

     The Shreveport Casino commenced operations on December 20, 2000. The
destination resort consists of a 403-room, all suite, art deco-style hotel, and
a three-level riverboat dockside casino. The casino contains approximately
59,000 square feet of space with approximately 1,434 slot machines and
approximately 66 table games. The riverboat casino floats in a concrete and
steel basin that raises the riverboat nearly 20 feet above the river. The basin
virtually eliminates variation in the water height and allows the boat to be
permanently moored to the land-based pavilion. The Shreveport Casino's
computerized pumping system is designed to regulate the water level of the basin
to a variance of no more than three inches.

     The centerpiece of the resort is an approximately 170,000 square foot
land-based pavilion housing numerous restaurants and entertainment amenities. An
85-foot wide seamless entrance connects the casino to the land-based pavilion on
all three levels resulting in the feel of a land-based casino. The pavilion
features a dramatic 60-foot high atrium enabling patrons to see the casino floor
from almost anywhere in the pavilion. Other amenities include the award-winning
Fairbanks(R) gourmet steakhouse, the Hollywood Epic Buffet(R), a 1950's-style
casual diner (the Hollywood Diner(SM), a premium players' club (the Hollywood
Director's Club(SM) and an entertainment show room (the Hollywood Celebrity
Lounge(SM). The pavilion also includes a deli and ice cream shop, VIP
check-in, a premium quality bar, meeting rooms and the Hollywood Casino Studio
Store(SM), a highly-themed shopping facility that offers

                                       7

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movies on video, soundtrack compact discs and logo merchandise. The Shreveport
Casino also features the Company's unique Hollywood theme throughout its gaming,
dining and entertainment facilities that has been successfully used at the
Aurora Casino and the Tunica Casino.

     The Shreveport Casino offers three parking facilities, including two
parking lots and an eight-story parking garage located directly across the
street and connected to the pavilion by an enclosed, movie-themed walkway. The
three parking facilities provide space for approximately 2,000 cars, including
valet parking for approximately 340 cars.

     The Shreveport Casino is located near the Shreveport Civic Theater. The
1,720-seat auditorium will be used by the Shreveport Casino to provide headliner
entertainment for customers. Entertainers that have performed at the theater
include Tony Bennett, Jay Leno, Natalie Cole, Patti LaBelle, Ray Charles, Travis
Tritt and Brooks and Dunn.

     The Shreveport Casino will also feature an extensive restaurant and
entertainment development that is designed to be a "New Orleans style" outdoor
walking promenade. As currently planned, the promenade will have approximately
42,000 square feet of dinning, live entertainment and retail space. The
restaurant and entertainment promenade is being developed by a third party
development group which includes the principal developer of Beale Street in
Memphis, Tennessee. The promenade is expected to be completed and opened during
2002. Given the difficult market conditions, the Shreveport Casino is currently
reviewing the economic feasibility of a previously planned championship golf
course.

     The Shreveport Casino was built next to an existing riverboat gaming and
hotel facility operated by Harrah's. The two casinos form the first and only
"cluster" in the Shreveport market, allowing patrons to park once and easily
walk between the two facilities. Harrah's opened a new 514-room hotel tower
during the first quarter of 2001. With the opening of the Shreveport Casino,
there are five casinos operating in the Shreveport market. In 2001, the
Shreveport market was the eighth largest gaming market in the United States and
the largest in Louisiana. The Shreveport market permits continuous dockside
gaming without cruising requirements or simulated cruising schedules, allowing
casinos to operate 24 hours a day with uninterrupted access. Based on
information published by the state of Louisiana, the five casino operators in
the Shreveport market generated approximately $805.8 million in gaming revenues
in 2001, an increase of approximately 17.4% over 2000. Exclusive of the
Shreveport Casino, which opened in December 2000, revenues for the four
operators open throughout both 2000 and 2001 decreased by 3.2%.

     The principal target markets for the Shreveport Casino are patrons from the
Dallas/Ft. Worth Metroplex and East Texas. There are approximately 7.2 million
adults who reside within 200 miles of Shreveport/Bossier City. The Shreveport
Casino is located approximately 180 miles east of Dallas and can be reached by
car in less than three hours. The Shreveport Regional Airport has 41 in-bound
flights per day, including 16 from Dallas and seven from Houston with flight
times of less than one hour.

     The Shreveport Casino employs a marketing strategy designed to take
advantage of its proximity to the large population base of the greater
Dallas/Ft. Worth metropolitan area and other major markets by targeting the
local day-trip market and by utilizing its hotel rooms to expand its patron mix
to include overnight visitors. The planned restaurant and entertainment
promenade are expected to further promote such overnight stays. Management also
utilizes sophisticated casino information technology used at other HCC-owned
facilities to identify premium patrons. Such information is then used to
encourage participation in its casino player's card program and tailor
promotions and special events to cater to this market segment. Management
believes that the location of HCC's executive offices in Dallas results in a
competitive advantage in attracting customers to the Shreveport Casino from its
target markets in Texas.

                                       8

<PAGE>

     The Shreveport Casino is owned by the Shreveport Partnership which, through
HCS I, Inc. and HCS II, Inc., is in turn owned by HCL. The Shreveport
Partnership operates the Shreveport Casino under a management agreement with
Shreveport Management. The management agreement provides that the Shreveport
Partnership pays a management fee of 2% of net revenues plus an increasing
percentage (5-10%) of the Shreveport Casino's annual earnings before interest,
taxes, depreciation and amortization ("EBITDA") above $25 million.

     Casino Credit. Casino operations are conducted on both a credit and a cash
     -------------
basis. Gaming debts arising at the Shreveport Casino in accordance with
applicable regulations are enforceable under Louisiana law. For the year-ended
December 31, 2001, gaming credit extended to customers accounted for less than
2.1% of overall wagering. At December 31, 2001, gaming receivables amounted to
$2.5 million before allowances for uncollectible gaming receivables which
amounted to $534,000. Management of the Shreveport Casino believes that the
allowances for uncollectible gaming receivables are adequate.

     Employees and Labor Relations. At December 31, 2001 there were
     -----------------------------
approximately 1,800 employees at the Shreveport Casino, none of whom are
represented under collective bargaining agreements. Management considers its
labor relations to be good.

Competition
-----------

     The gaming industry is highly fragmented and characterized by a high degree
of competition among a large number of participants, some of which have greater
financial and other resources than the Company. Competitive gaming activities
include land-based casinos, dockside casinos, riverboat casinos, video lottery
terminals and other forms of legalized gaming in the United States and other
jurisdictions. Legalized gambling is currently permitted in various forms
throughout the United States, in several Canadian provinces, as well as on
Native American reservations in certain states including Louisiana and
Mississippi. Other jurisdictions may legalize gaming in the near future through
the introduction of proposals to legalize gaming in their state legislatures. In
addition, established gaming jurisdictions could award additional gaming
licenses or permit the expansion of existing gaming operations. New or expanded
operations by other persons can be expected to increase competition for the
Company's present and proposed gaming operations and could have a material
adverse impact on the Company.

     The Aurora Casino

     The Illinois Riverboat Gambling Act (the "Riverboat Act") and the rules
promulgated by the Illinois Gaming Board under the Riverboat Act authorize only
ten owner's licenses for riverboat gaming operations in Illinois and permit a
maximum of 1,200 gaming positions at any time for each of the ten licensed
sites. All authorized owner's licenses have been granted and no additional
licenses or gaming positions can be permitted without further state legislation.
One licensed site ceased gaming operations in July 1997. Under the 1999
legislative changes that permitted dockside gaming, the holder of that license
was allowed to apply to the Illinois Gaming Board to relocate its license to
Rosemont, Illinois, which is within the Aurora Casino's principal market. In
January 2001, the Illinois Gaming Board denied that license holder's application
for renewal and relocation of its operations to the Rosemont site. The license
holder has filed an appeal of the ruling; management is currently unable to
estimate the time required to resolve the appeal or otherwise dispose of the
tenth license. Four riverboat sites, including the Aurora Casino, are currently
licensed in Illinois within 50 miles of downtown Chicago.Two of these riverboat
sites are in Joliet, approximately 40 miles southwest of downtown Chicago, and a
third is in Elgin, Illinois, approximately 20 miles from Aurora, 40 miles from
downtown Chicago and amid the affluent northern and western suburbs. In
addition, the Aurora Casino competes directly with five riverboat operations
opened since 1996 in northwestern Indiana within 50 miles of downtown Chicago.

                                       9

<PAGE>

Increased competition from casinos in Indiana has resulted in greater
competition for patrons from the downtown Chicago market and from the suburban
Chicago market. Legislation has been introduced in Indiana to permit dockside
gaming. The approval of such legislation would further increase competition in
the Chicago-area market.

     The next closest operating casinos are in Milwaukee, Wisconsin,
approximately 90 miles from downtown Chicago, and in Peoria, and Rock Island,
Illinois, approximately 160 miles from downtown Chicago. In addition, the three
casinos in operation in Detroit, Michigan generated just over $1 billion in
revenues during 2001, an increase of 71.5% over the prior year. Native American
tribes are seeking to open casino facilities in northwestern Indiana, Michigan
and Wisconsin under the Indian Gaming Regulatory Act. The opening of additional
casinos proximate to Chicago, including the potential casino in Rosemont
discussed above, could have a material adverse impact on the Aurora Casino.

     The Tunica Casino

     The Tunica Casino faces intense competition from the other ten casinos
operating in north Tunica County and Coahoma County. Within the Casino Strip
cluster, the Tunica Casino competes with Sam's Town, Harrah's Mardi Gras and
Isle of Capri; however, Isle of Capri recently announced plans to sell or
otherwise dispose of its Tunica property. A three casino cluster called "Casino
Center" consists of Binion's Horseshoe, Sheraton Casino and Goldstrike Casino
and is located north of the Casino Strip cluster and closer to the Memphis
market. Bally's operates a casino and hotel adjacent to, but not connected with,
the Casino Center. Fitzgeralds is located between Casino Center and the Casino
Strip cluster. In addition, Isle of Capri operates a casino in Coahoma County
which is located approximately 40 miles south of the Casino Strip cluster. A
shuttle service provides transportation between the various Tunica County
casinos.

     During July 1996, Grand Casinos opened a casino complex immediately north
of Casino Center with 140,000 square feet of gaming space including
approximately 2,464 slot machines and 107 table games. Three hotels with an
aggregate of 1,366 rooms, a conference center and a golf course are currently
available and other amenities are scheduled for later completion. The opening of
this casino space, the largest in Mississippi, increased casino capacity in
Tunica County by 24%.

     Management believes the shortage of hotel rooms in the Tunica market was a
restriction to growth in prior years. However, a number of casino operations
have completed and opened hotel facilities from 1996 through the present. During
1997 and early 1998, the Goldstrike Casino completed a 31-story, 1,200-room
hotel tower and Binion's opened a 300-room hotel tower. Sheraton Casino also
completed construction of 150 hotel rooms. The total current number of hotel
rooms in Tunica County has increased to approximately 5,700 rooms from 1,250 at
the end of 1995, an increase of more than 350%. The additional hotel capacity
has made the Casino Center increasingly competitive in attracting overnight
visitors.

     The Mississippi Gaming Control Act does not limit the number of licenses
that may be granted. Any significant increase in new capacity in Tunica County
could negatively impact the operations of the Tunica Casino.

     Although management does not believe that the Tunica Casino faces
significant competition from casinos outside of the Tunica gaming market,
legalized gaming operations are established in and around Mississippi, including
12 casinos on the Gulf Coast. Beau Rivage, a large casino complex, opened on the
Gulf Coast in March 1999 and potentially competes for customers with the casinos
in the Tunica gaming market. The Tunica Casino also competes to some extent with
a land-based casino complex being operated by the Mississippi Band of Choctaw
Indians in central Mississippi approximately 200 miles south and east of
Memphis. One hotel and casino is currently operating and a second is expected to
be

                                       10

<PAGE>

opened in the fall of 2002. The complex, when completed, is expected to have
90,000 square feet of gaming space with 3,100 slot machines and 100 table games,
over 1,000 hotel rooms, 30,000 square feet of convention space, a 36-hole
championship golf course, spa and health club. In addition, the Tunica Casino
may eventually face competition from the opening of gaming casinos closer to
Memphis, including DeSoto County, Mississippi, which is the only county between
Tunica County and the Tennessee border. DeSoto County has defeated gaming
proposals on three separate occasions, most recently in November 1996, and by
statute cannot vote on such issue again until 2004. Casino gaming is not
currently legalized in Tennessee or Arkansas. Although management does not
anticipate such legislation in the near term, the legalization of gaming in
either Tennessee or Arkansas could have a material adverse impact on the Tunica
Casino.

     The Shreveport Casino

     The Shreveport Casino competes directly with Binion's Horseshoe, Harrah's,
the Isle of Capri and Casino Magic in the Shreveport market. Some of these
competitors have higher profile brand names and greater financial resources than
the Shreveport Partnership. All of these competitor's have operated in the
Shreveport market for several years and have established customer bases. There
can be no assurance that the Shreveport Casino will be able to effectively
compete against these four established casinos, or that the Shreveport market is
large enough to allow more than four casinos to operate profitably. Furthermore,
one or more of the current operators in other parts of Louisiana could relocate
to the Shreveport market which would directly increase competition in the
market. The Horseshoe Casino recently announced plans, subject to board
approval, to begin construction of a $50 million, 300-room hotel expansion of
its Bossier City property as early as the summer of 2002. The opening of this
facility would further increase competition for overnight patrons.

     The Louisiana Riverboat Economic Development and Gaming Control Act
provides that the designated gaming area shall not exceed the lesser of 60%
percent of the total square footage of the passenger access area of the vessel
or 30,000 square feet at each casino. The facilities of three of the competitors
in the Shreveport market arguably contain less than the total amount of gaming
space permitted. If these competitors were to increase the size of their
facilities, they would be able to add more gaming positions, which would
directly increase competition in the Shreveport market. One of these
competitors, Casino Magic, has publicly stated that it intends, in the near
future, to undertake an expansion and improvement of its facility at an
estimated cost of $25 million.

     Also, there can be no assurance that the Shreveport Casino will be able to
effectively compete against any other future gaming operations that Louisiana or
other authorities may authorize in the gaming market in which it operates. For
example, in 1997, the Louisiana legislature adopted legislation permitting up to
15,000 square feet of slot machine gaming at pari-mutual wagering facilities
located in parishes in Louisiana that approve slot machine gaming in a
referendum election. Shortly thereafter, a referendum election was held that
approved slot machine gaming at Louisiana Downs, which is located in Bossier
City, approximately nine miles from the Shreveport Casino. In March 2002, an
investor group seeking to purchase Louisiana Downs received a preliminary
approval, subject to being found suitable as owners, for a $175 million expanded
entertainment facility to include approximately 1,500 slot machines, a 325-room
hotel with convention facilities, a 1,200 square foot ballroom and a 1,500-seat
theater. Additional plans call for an adjacent festival marketplace and a
10,000-seat amphitheater. Once approvals are received and construction begins,
the casino is expected to take eight to ten months and the hotel and other
facilities are expected to take 15 to 18 months to complete. The completion of
this facility would result in another source of competition for the Shreveport
Casino, which could have a material adverse affect on the Shreveport Casino.

     Casino gaming is currently prohibited in several jurisdictions adjacent to
Louisiana. As a result, management anticipates that a significant portion of the
Shreveport Casino customers will be residents of

                                       11

<PAGE>

these jurisdictions, primarily Texas. Although casino gaming is currently not
permitted in Texas and the Texas Attorney General has issued an opinion that
gaming in Texas would require an amendment to the Texas Constitution, the Texas
legislature has considered proposals to authorize casino gaming in the past. The
legislation of casino gaming in Texas, or in other nearby jurisdictions, would
have a material adverse effect on the business, financial condition and results
of operations of the Shreveport Partnership.

     The Shreveport Casino also faces competition from other forms of gaming,
such as state-sponsored lotteries and video lottery terminals, pari-mutual
betting on horse and dog racing and bingo parlors, as well as other forms of
entertainment in Louisiana and other places from where it draws its customers.

Casino Regulation
-----------------

     Illinois

     The Riverboat Act currently authorizes dockside riverboat gaming upon any
water within the State of Illinois or any water other than Lake Michigan which
constitutes a boundary of the State of Illinois. The Riverboat Act strictly
regulates the facilities, persons, associations and practices related to gaming
operations pursuant to the police powers of the State of Illinois, including
comprehensive law enforcement supervision. The Riverboat Act grants the Illinois
Gaming Board specific powers and duties, and all other powers necessary and
proper to fully and effectively execute the Riverboat Act for the purpose of
administering, regulating and enforcing the system of riverboat gaming. The
Illinois Gaming Board's jurisdiction extends to every person, association,
corporation, partnership and trust involved in riverboat gaming operations in
the State of Illinois.

     Owner's Licenses. The Riverboat Act requires the owner of a riverboat
     ----------------
gaming operation to hold an owner's license issued by the Illinois Gaming Board.
The Aurora Casino's owner's license was renewed in December 2000 for a period of
four years. The Illinois Gaming Board is authorized to issue ten owner's
licenses statewide. Each owner's license permits up to two boats as a part of
the riverboat gaming operation. In addition to the ten owner's licenses which
may be authorized under the Riverboat Act, the Illinois Gaming Board may issue
special event licenses allowing persons who are not otherwise licensed to
conduct riverboat gaming to conduct such gaming on a specified date or series of
dates. Riverboat gaming under such a license may take place on a riverboat not
normally used for riverboat gaming.

     An owner's license is issued for an initial period of three years and may
be renewed for successive periods of up to four years thereafter. An owner's
license is eligible for renewal upon payment of the applicable fee and a
determination by the Illinois Gaming Board that the licensee continues to meet
all of the requirements of the Riverboat Act, the Illinois Gaming Board's rules
and any conditions placed on a prior license renewal. The Illinois Gaming Board
also requires that officers, directors and employees of a gaming operation and
suppliers of gaming equipment, devices and supplies and certain other suppliers
be licensed. Licenses issued by the Illinois Gaming Board may not be transferred
to another person or entity. All licensed persons and entities must maintain
their suitability for licensure and have a continuing duty to disclose any
material changes in information provided to the Illinois Gaming Board.

     Applicants for and holders of an owner's license are required to obtain
formal prior approval from the Illinois Gaming Board for changes proposed in the
following areas; (1) key persons, (2) type of entity, (3) equity and debt
capitalization of the entity, (4) investors and/or debt holders, (5) source of
funds, (6) economic development plans or proposals, (7) riverboat capacity or
significant design change, (8) gaming positions, (9) anticipated economic
impact, or (10) agreements, oral or written, relating to the acquisition or
disposition of property (real or personal) of a value greater than $1 million.

                                       12

<PAGE>

     A holder of an owner's license is allowed to make distributions to its
partners, stockholders or itself only to the extent that such distribution would
not impair the financial viability of the gaming operation. Factors to be
considered by the licensee include, but are not limited to, the following: (1)
cash flow, casino cash and working capital requirements, (2) debt service
requirements and covenants associated with financial instruments, (3)
requirements for repairs, maintenance and capital improvements, (4) employment
or economic development requirements of the Riverboat Act and (5) a licensee's
financial projections.

     The Illinois Gaming Board will require a business entity or personal
disclosure form and approval as a key person for any business entity or
individual with an ownership interest or voting rights of more than 5% in a
licensee, the trustee of any trust holding such ownership interest or voting
rights, the directors of the licensee and its chief executive officer, president
and chief operating officer, as well as any other individual or entities deemed
by the board to hold a position or a level of ownership, control or influence
that is material to the regulatory concerns and obligations of the board. Each
key person must file, on an annual basis, a disclosure affidavit, updated
personal and background information, and updated tax and financial information.
Key persons are required to promptly disclose to the board any material changes
in status or information previously provided to the board and to maintain their
suitability as key persons. In order for the board to identify potential key
persons, each holder of an owner's license is required to file a table of
organization, ownership and control with the Illinois Gaming Board to identify
the individuals or entities that through direct or indirect means manage, own or
control the interests and assets of the licensee. Based upon findings from an
investigation into the character, reputation, experience, associations, business
probity and financial integrity of a key person, the Illinois Gaming Board may
enter an order upon the licensee to require economic disassociation of a key
person. Each licensee is required to provide a means for the economic
disassociation of a key person in the event such disassociation is required.

     An ownership interest in a holder of an owner's license may be transferred
or pledged as collateral only with the consent of the Illinois Gaming Board.

     Regulation of Gaming Operations. The Riverboat Act does not limit the
     -------------------------------
maximum bet or per patron loss and licensees may set any maximum or minimum bets
or other limits on wagering. No person under the age of 21 is permitted to
wager. Vessels must have the capacity to hold a minimum of 500 persons if
operating on the Mississippi River or the Illinois River south of Marshall
County, and a minimum of 400 persons on any other waterway. The number of gaming
positions is limited to a maximum of 1,200 per license. A licensee may conduct
riverboat gambling regardless of whether it conducts excursion cruises. A
licensee may permit the continuous ingress and egress of passengers for the
purpose of gambling.

     A $2 per person admission tax is imposed on the owner of a riverboat
operation. Such admission taxes for the Aurora Casino amounted to $4.6 million,
$5.3 million and $6.1 million, respectively, during 2001, 2000 and 1999.
Additionally, a wagering tax is imposed on the adjusted gross receipts, as
defined in the Riverboat Act, at graduated rates ranging from 15% to 35%. The
licensee is required to wire transfer all such gaming tax payments to the
Illinois Gaming Board. The wagering tax for the Aurora Casino amounted to $68.8
million, $63.6 million and $54.3 million, respectively, for the years 2001, 2000
and 1999.

     The Illinois Gaming Board is authorized to conduct investigations into the
conduct of gaming employees and into alleged violations of the Riverboat Act and
to take such disciplinary and enforcement action as it may deem necessary and
proper. Employees and agents of the Illinois Gaming Board have access to and may
inspect any facilities relating to the riverboat gaming operations at all times.

                                       13

<PAGE>

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

     The Illinois Gaming Board may waive any licensing requirement or procedure
provided by rule if it determines that such waiver is in the best interests of
the public and the gaming industry.

     Mississippi

     The ownership and operation of casino gaming facilities in Mississippi are
subject to extensive state and local regulations including the Mississippi
Gaming Control Act (the "Mississippi Act"). Gaming in Mississippi can be legally
conducted only on vessels of a certain minimum size in navigable waters of
counties bordering the Mississippi River or in waters of the State of
Mississippi which lie adjacent to the coastline of the three counties bordering
the Gulf of Mexico and counties in which gaming has been approved by the voters.

     Mississippi's gaming operations are subject to the licensing and regulatory
control of the Mississippi Gaming Commission (the "Mississippi Commission") and
various federal, state and county regulatory agencies. The Mississippi Act does
not restrict the amount or percentage of space on a vessel that may be utilized
for gaming nor does it limit the number of licenses that the Mississippi
Commission can grant for a particular area.

     Each of HCT's directors, officers and certain key employees who are
actively and directly engaged in the administration or supervision of gaming in
Mississippi, or who have any other significant involvement with the gaming
activities of the Tunica Casino, must be found suitable therefor and may be
required to be licensed by the Mississippi Commission. All personnel responsible
for the direction and management of the Tunica Casino have been found suitable
by the Mississippi Commission. The finding of suitability is comparable to
licensing, and both require submission of detailed personal financial
information followed by a thorough investigation. An application for licensing
may be denied for any cause deemed reasonable by the issuing agency. Changes in
licensed positions must be reported to the issuing agency and the Mississippi
Commission has jurisdiction to disapprove a change in licensed positions. If the
Mississippi Commission were to find a director, officer or key employee
unsuitable for licensing or unsuitable to continue having a relationship with
HCT, HCT would have to suspend, dismiss and sever all relationships with such
person or lose its license. HCT would have similar obligations with regard to
any person who refuses to file appropriate applications. Each gaming employee
must obtain a work permit.

                                       14

<PAGE>

     The licenses obtained by HCT are not transferable and need to be renewed
periodically. The ownership license for the Tunica Casino has been renewed
through October 20, 2004. Presently, the policy of the Mississippi Commission is
to award casino licenses for two-year periods, subject to renewal. The
Mississippi Commission has the power to deny, limit, condition, revoke and
suspend any license, finding of suitability or registration, and to fine any
person as it deems reasonable and in the public interest, subject to an
opportunity for a hearing.

     Any individual who is found to have a material relationship to, or material
involvement with, HCT may be required to be investigated in order to be found
suitable or to be licensed as a business associate of HCT. Key employees,
controlling persons or others who exercise significant influence upon the
management or affairs of HCT may also be deemed to have such a relationship or
involvement. Additionally, certain beneficial owners, lenders and landlords of
HCT may be required to be licensed. The landlord under the ground lease for the
Tunica Casino has been found suitable by the Mississippi Commission.

     The statutes and regulations give the Mississippi Commission the discretion
to require a suitability finding with respect to anyone who acquires any debt or
equity security of HCT regardless of the percentage of ownership. In addition,
the Mississippi Commission has discretionary authority to require a holder of
any debt to file an application, to be investigated and to be found suitable.
While the Mississippi Commission generally does not require the individual
holders of obligations to be investigated and found suitable, the Mississippi
Commission retains the discretion to do so for any reason, including but not
limited to a default or where the holder of a debt instrument exercises a
material influence over the gaming operations of the entity in question. The
applicant is required to pay all costs of investigation.

     Any owner of debt or equity securities found unsuitable and who holds,
directly or indirectly, any beneficial ownership of debt or equity interests in
HCT beyond such period of time as may be prescribed by the Mississippi
Commission may be guilty of a misdemeanor. Any person who fails or refuses to
apply for a finding of suitability or a license within 30 days after being
ordered to do so by the Mississippi Commission may be found unsuitable. HCT is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be an owner of its debt or equity securities or to have any other
relationship with it, HCT (1) pays the unsuitable person any distributions or
interest upon any securities of HCT or any payments or distribution of any kind
whatsoever, (2) recognizes the exercise, directly or indirectly, of any voting
rights in its securities by the unsuitable person, or (3) pays the unsuitable
person any remuneration in any form for services rendered or otherwise, except
in certain limited and specific circumstances. In addition, if the Mississippi
Commission finds any owner unsuitable, such owner must immediately offer all of
such owner's securities in HCT for purchase, and HCT shall, in turn, purchase
the securities so offered, for cash at fair market value, within ten days of the
date of such offer.

     The Mississippi Commission has the power to impose additional restrictions
on the holders of HCT's securities at any time through its power to regulate
licensees.

     Mississippi gaming regulations provide that a change in control of HCT may
not occur without the prior approval of the Mississippi Commission. Mississippi
law prohibits HCT from making a public offering of its securities without the
approval of the Mississippi Commission if any part of the proceeds of the
offering is to be used to finance the construction, acquisition or operation of
gaming facilities in Mississippi, or to retire or extend obligations incurred
for one or more of such purposes.

     Because HCT is licensed to conduct gaming in Mississippi, neither HCT nor
any affiliates may engage in gaming activities outside of Mississippi without
the prior approval of the Mississippi Commission. The Mississippi Commission has
adopted regulations related to foreign gaming approval,

                                       15

<PAGE>

and HCT and its affiliates have been approved by the Mississippi Commission
under its regulations to engage in gaming activities in certain jurisdictions
outside of Mississippi.

     License fees and taxes are based on a percentage of the gross gaming
revenues received by a casino operation and on the number of slot machines and
table games operated by such casino. In particular, gaming licensees must pay an
annual $5,000 license fee and an additional fee based on the number of gaming
devices. A state gross revenues fee of 8% is due on adjusted gross gaming
revenues. Several local governments have been authorized to impose additional
gross fees on adjusted gross gaming revenues of up to 4% and annual license fees
based on the number of gaming devices on board. Tunica County imposes a fee of
4% on adjusted gross gaming revenues. Gaming taxes for the Tunica Casino
amounted to $13 million, $13.1 million and $12.2 million during 2001, 2000 and
1999, respectively. Gross gaming taxes paid to the state are allowed as a credit
against Mississippi state income taxes.

     During January 1999, the Mississippi Commission adopted a regulation
requiring that new casino applicants invest a minimum of 100% of the higher of
the appraised value of their casino or the construction cost of their casino in
land-based facilities. These facilities shall include any of the following: the
construction of a minimum of 250 hotel rooms for each casino, a theme park, golf
courses, marinas, a tennis complex, entertainment facilities or any other
facility approved by the Mississippi Commission. The regulation will apply to
all new casino projects.

     Louisiana

     The ownership and operation of a riverboat gaming vessel is subject to the
Louisiana Riverboat Economic Development and Gaming Control Act (the "Louisiana
Act"). As of May 1, 1996, gaming activities are regulated by the Louisiana
Gaming Control Board (the "LGCB"). The LGCB is responsible for issuing gaming
licenses and enforcing the laws, rules and regulations relative to riverboat
gaming activities. The LGCB is empowered to issue up to 15 licenses to conduct
gaming activities on a riverboat of new construction in accordance with
applicable law. However, no more than six licenses may be granted to riverboats
operating from any one parish. An initial license to conduct gaming operations
is valid for a term of five years. The Louisiana Act provides for successive
five-year renewals after the initial five-year term.

     The laws and regulations of Louisiana seek to:

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

     .    establish and maintain responsible accounting practices and
          procedures;

     .    maintain effective control over the financial practices of licensees,
          including establishing procedures for reliable record keeping and
          making periodic reports to the LGCB;

     .    prevent cheating and fraudulent practices;

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

     .    ensure that gaming licensees, to the extent practicable, employ and
          contract with Louisiana residents, women and minorities.

     The Louisiana Act specifies certain restrictions and conditions relating to
the operation of riverboat gaming as subsequently modified and, including but
not limited to the following: (1) in parishes, including the site for the
Shreveport Casino, other than the parish (currently Orleans Parish) of the
Land-

                                       16

<PAGE>

Based Casino, which we refer to as the "Official Gaming Establishment," gaming
may only be conducted while a riverboat is docked and no cruises or excursions
may be conducted; however, in the parish of the Official Gaming Establishment,
gaming is not permitted while a riverboat is docked, other than for forty-five
minutes between excursions, unless dangerous weather or water conditions exist
as certified by the riverboat's master; (2) each round trip riverboat cruise may
not be less than three nor more than eight hours in duration, subject to
specified exceptions; (3) agents of the LGCB are permitted on board at any time
during gaming operations; (4) gaming devices, equipment and supplies may be
purchased or leased only from permitted suppliers; (5) gaming may only take
place in the designated gaming area while the riverboat is upon a designated
river or waterway; (6) gaming equipment may not be possessed, maintained, or
exhibited by any person on a riverboat except in the specifically designated
gaming area, or a secure area used for inspection, repair, or storage of such
equipment; (7) wagers may be received only from a person present on a licensed
riverboat; (8) persons under 21 are not permitted on gaming vessels; (9) except
for slot machine play, wagers may be made only with tokens, chips, or electronic
cards purchased from the licensee aboard a riverboat; (10) licensees may only
use dockside facilities and routes for which they are licensed and may only
board and discharge passengers at the riverboat's licensed berth; (11) licensees
must have adequate protection and indemnity insurance; (12) licensees must have
all necessary federal and state licenses, certificates and other regulatory
approvals prior to operating a riverboat; and (13) gaming may only be conducted
in accordance with the terms of the license, the Louisiana Act and the rules and
regulations adopted by the LGCB.

     Any person who has or controls directly or indirectly 5% or more ownership,
income, profit or economic interest in the Shreveport Casino, or who receives 5%
or more revenue interest in the form of a commission, finder's fee, loan
repayment, or any other business expense related to the Shreveport Casino, or
who has the ability, in the opinion of the LGCB, to exercise a significant
influence over the Shreveport Casino or Shreveport Management, must meet all
suitability requirements under the Louisiana Act. A gaming license is deemed to
be a privilege under Louisiana law and as such may be denied, revoked,
suspended, conditioned or limited at any time by the LGCB. In issuing a license,
an applicant must demonstrate by clear and convincing evidence that he is a
person of good character, honesty and integrity; that the applicant is a person
whose prior activities, criminal record, if any, reputation, habits and
associations do not pose a threat to the public interest of the State of
Louisiana or to the effective regulation and control of gaming, or create or
enhance the dangers of unsuitable, unfair or illegal practices, methods, and
activities in the conduct of gaming or the carrying on of business and financial
arrangements incidental thereto; and is capable of and likely to conduct the
activities for which the applicant is licensed under the provisions of the
Louisiana Act. The LGCB will not grant any licenses unless it finds that:

     .    the applicant is capable of conducting gaming operations, which means
          that the applicant can demonstrate the capability, either through
          training, education, business experience, or a combination of the
          above, to operate a gaming casino;

     .    the proposed financing of the riverboat and the gaming operations is
          adequate for the nature of the proposed operation and from a source
          suitable and acceptable to the LGCB;

     .    the applicant demonstrates a proven ability to operate a vessel of
          comparable size, capacity and complexity to a riverboat in its
          application for a license so as to ensure the safety of its
          passengers;

     .    the applicant designates the docking facilities to be used by the
          riverboat;

     .    the applicant shows adequate financial ability to construct and
          maintain a riverboat;

     .    the applicant submits a detailed plan of design of the riverboat in
          its application for a license;

                                       17

<PAGE>

     .    the applicant has a good faith plan to recruit, train and upgrade
          minorities in all employment classifications; and

     .    the applicant is of good moral character.

     The LGCB may not award a license to any applicant who has been convicted or
pled guilty or nolo contendere to any offense punishable by imprisonment of more
than one year, theft or attempted theft, illegal possession of stolen things or
any offense or attempt involving the misappropriation of property or funds, any
offense involving fraud or attempted fraud, false statement or declarations,
gambling as defined by the laws or ordinances or any municipality, any parish or
county, any state, or of the United States, or a crime of violence (each a
"Material Offense"); who is currently being prosecuted or regarding whom charges
are pending in any jurisdiction for a Material Offense; who is not current in
filing applicable tax returns and in the payment of all taxes, penalties and
interest owed to the State of Louisiana, any political subdivision of Louisiana
or the Internal Revenue Service, excluding items under formal appeal; or who has
failed to provide information and documentation to reveal any fact material to a
suitability determination, or has provided information which is untrue or
misleading as to a material fact pertaining to the suitability criteria.

     The transfer of a license is prohibited. The sale, assignment, transfer,
pledge, or disposition of securities which represent 5% or more of the total
outstanding shares issued by a holder of a license is subject to prior LGCB
approval. A security issued by a holder of a license must generally disclose
these restrictions.

     Section 2501 of the regulations enacted by the Louisiana State Police
Riverboat Gaming Division pursuant to the Louisiana Act requires prior written
approval by the LGCB of all persons involved in the sale, purchase, assignment,
lease, grant or foreclosure of a security interest, hypothecation, transfer,
conveyance or acquisition of an ownership interest (other than a corporation) or
economic interest of 5% or more in any licensee.

     Section 2523 of the regulations under the Louisiana Act requires
notification to an prior approval from the LGCB of (1) the application for,
receipt, acceptance or modification of a loan, (2) the use of any cash,
property, credit, loan or line of credit, or (3) the guarantee or granting of
other forms of security for a loan by a licensee or person acting on a
licensee's behalf. Exceptions to prior written approval include, without
limitation, any transaction for less than $2.5 million in which all of the
lending institutions are federally regulated, any transaction modifying the
terms of an existing, previously approved loan transaction, or any transaction
involving publicly registered debt and other securities sold pursuant to a firm
underwriting agreement.

     The failure of a licensee to comply with the requirements set forth above
may result in the suspension or revocation of that licensee's gaming license.
Additionally, if the LGCB finds that the individual owner or holder of a
security of a corporate licensee or intermediary company or any person with an
economic interest in a licensee is not qualified under the Louisiana Act, the
LGCB may require, under penalty of suspension or revocation of the license, that
the person not receive dividends or interest on securities of the corporation;
exercise directly or indirectly a right conferred by securities of the
corporation; receive remuneration or economic benefit from the licensee; or
continue in an ownership or economic interest in the licensee.

     A licensee must periodically report the following information to the LGCB,
which is not confidential and is to be available for public inspection: the
licensee's net gaming proceeds from all authorized games; the amount of net
gaming proceeds tax paid; and all quarterly and annual financial statements
presenting historical data that are submitted to the LGCB, including annual
financial statements that have been audited by an independent certified public
accountant.

                                       18

<PAGE>

     The LGCB has adopted rules governing the method for approval of the area of
operations and the rules and odds of authorized games and devices permitted, and
prescribing grounds and procedures for the revocation, limitation or suspension
of licenses and permits.

     The Louisiana Act imposes franchise and license fees of $50,000 per
riverboat for the first year and $100,000 for subsequent years together with a
gaming tax based on a percentage of the net gaming proceeds. In March 2001, the
Louisiana legislature approved an increase in the gaming tax on riverboat
casinos to 21.5% of net gaming proceeds from the previous rate of 18.5% and
eliminated the cruising requirement for those boats previously required to
cruise. The tax increase is being phased in over a 25-month period for all
riverboats in the Shreveport/Bossier City area, which were not subject to the
cruising requirements. Accordingly, the gaming tax imposed on the Shreveport
Casino was increased to 19.5% effective April 1, 2001 with additional 1%
increases scheduled on April 1, 2002 and April 1, 2003. Several local
governments have been authorized to impose additional fees on adjusted gross
gaming revenues and/or other fees. The Shreveport Casino is required to make
certain payments to the City of Shreveport under its ground lease agreement in
lieu of boarding fees. Franchise and license fees and payments in lieu of
boarding fees for the Shreveport Casino amounted to $34.4 million and $1.9
million during 2001 and 2000, respectively. Had the entire 3% gaming tax
increase been in effect during 2001and 2000, the Shreveport Casino's operating
expenses would have increased by approximately $3.3 million and $243,000,
respectively.

     On April 19, 1996, the Louisiana legislature adopted legislation requiring
statewide local elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit licensed riverboat gaming, licensed video poker
gaming, and licensed land-based gaming in Louisiana parishes. The applicable
local election took place on November 5, 1996, and the voters in the parishes in
which riverboats are currently located voted to continue licensed riverboat
gaming. However, it is noteworthy that the current legislation does not provide
for any moratorium on future elections on gaming.

Non-Gaming Regulation
---------------------

     The Company is subject to certain federal, state and local safety and
health laws, regulations and ordinances that apply to non-gaming businesses
generally, such as the Clean Air Act, Clean Water Act, Occupational Safety and
Health Act, Resource Conservation Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act. The Company has not
made, and does not anticipate making, material expenditures with respect to such
environmental laws and regulations. However, the coverage and attendant
compliance costs associated with such laws, regulations and ordinances may
result in future additional costs to the Company's operations. For example, in
1990 the U.S. Congress enacted the Oil Pollution Act to consolidate and
rationalize mechanisms under various oil spill response laws. The Department of
Transportation has proposed regulations requiring owners and operators of
certain vessels to establish through the U.S. Coast Guard evidence of financial
responsibility in the amount of $5.5 million for clean-up of oil pollution. This
requirement would be satisfied by either proof of adequate insurance, including
self-insurance, or the posting of a surety bond or guaranty.

     The riverboats operated by the Company must comply with U.S. Coast Guard
requirements as to boat design, on-board facilities, equipment, personnel and
safety. Each of them must hold a Certificate of Seaworthiness or must be
approved by the American Bureau of Shipping ("ABS") for stabilization and
flotation, and may also be subject to local zoning and building codes. The U.S.
Coast Guard requirements establish design standards, set limits on the operation
of the vessels and require individual licensing of all personnel involved with
the operation of the vessels. Loss of a vessel's Certificate of Seaworthiness or
ABS approval would preclude its use as a floating casino.

     Marine operation employees of the Company may be subject to the Jones Act
which, among other things, exempts those employees from state limits on workers'
compensation awards.

                                       19

<PAGE>

Trademarks
----------

     The Company uses the service mark "Hollywood Casino" which is registered
with the United States Patent and Trademark Office. The Company considers its
rights to the "Hollywood Casino" service mark to be well established and to have
significant competitive value to the Company's business. The loss of its right
to use the "Hollywood Casino" service mark and to prevent others from using the
same or a deceptively similar mark could have a material adverse effect on the
Company.

     The Company also uses other "Hollywood-formative" marks to promote its
casino and related services. These marks are either registered or are the
subject of pending registration applications with the United States Patent and
Trademark Office.

Development Activities
----------------------

     Management maintains a proactive business development strategy in order to
enhance the Company's long-term growth. The Company is currently pursuing
various development opportunities, including those in jurisdictions which are
considering legalizing gaming.

ITEM 2. PROPERTIES

The Aurora Casino
-----------------

     The Aurora Casino currently operates on a dockside barge structure which
wraps half-way around a four-story, 64,000 square foot land based pavilion and
on a four-level riverboat, City of Lights I. The combined facilities have
approximately 38,000 square feet of casino space and approximately 1,200 gaming
positions. A second four-level riverboat, City of Lights II, was taken out of
service in February 2002 when the first half of the dockside barge was completed
and opened. The complex also includes two parking garages under capital lease
agreements.

     The first parking garage contains approximately 840 parking spaces and
31,000 square feet of office space, of which approximately 22,600 square feet
are currently being used for administrative offices. HCA leases the parking
garage, including the office space, from the City of Aurora under a 30-year
lease ending June 2023, with HCA having the right to extend the term under
renewal options for an additional 67 years. The second garage, completed in
1996, has approximately 500 parking spaces and includes approximately 1,500
square feet of retail space. The facility is owned by a governmental agency and
operated by HCA pursuant to a lease with an initial term expiring in 2026 with
the right to extend the lease for up to 20 additional years.

     The Aurora Casino is currently pledged as collateral to the extent of
approximately $81 million (subject to future borrowings on HCA's intercompany
note to HCC up to a maximum of $108 million) with respect to the Senior Secured
Notes in the face amount of $360 million issued by HCC on May 19, 1999. The
Senior Secured Notes consist of $310 million of 11.25% notes due May 1, 2007 and
$50 million of floating rate notes due May 1, 2006. The current interest rate on
the floating rate notes is 8.45% per annum and is reset semiannually.

                                       20

<PAGE>

The Tunica Casino
-----------------

     The Tunica Casino consists of a 60,000 square foot, single level casino
with 54,000 square feet of gaming space, 505 hotel rooms and suites and support
facilities that include two restaurants, a buffet, an arcade and a gift shop,
banquet space, an enclosed pool and atrium, a showroom and administrative
offices. The Tunica Casino also includes a 123-space recreational vehicle park
and surface lots with 1,635 parking spaces.

     The ground lease for the Tunica Casino has an initial term of five years
from the date gaming operations commenced with options to extend the lease for
nine successive five-year terms. Rent during the initial term is equal to the
greater of 4% of Gross Revenues (as defined in the lease) or $1.1 million per
year. Because the ground lease for the Tunica Casino covers approximately 70
acres, there is sufficient land for future expansion should circumstances
warrant an expansion.

     Substantially all of the assets of the Tunica Casino are pledged as
collateral for HCC's Senior Secured Notes discussed above.

The Shreveport Casino
---------------------

     The Shreveport Casino consists of a 403-room, all suite, art deco-style
hotel, and a three-level riverboat dockside casino. The riverboat casino
contains approximately 59,000 square feet of space with approximately 1,434 slot
machines and approximately 66 table games. The complex also offers three parking
facilities, including two parking lots and an eight-story parking garage located
directly across the street and connected to the pavilion by a covered,
movie-themed walkway. The three parking facilities provide space for
approximately 2,000 cars, including valet parking for approximately 340 cars.

     The ground lease for the Shreveport Casino has an initial term ending on
the tenth anniversary of the opening of the Shreveport Casino with options for
the Shreveport Partnership to renew on the same terms for up to an additional 40
years and with further renewals available at prevailing rates and terms.
Beginning with the opening of the Shreveport Casino, base rental payments under
the lease are $450,000 per year during the initial ten-year lease term. In
addition to base rent, the Shreveport Casino pays monthly percentage rent of not
less than $500,000 per year equal to 1% of monthly adjusted gross revenues and
the amount, if any, by which monthly parking facilities net income exceeds the
parking income credit, as all such terms are defined in the ground lease.

     Up to $30 million in furniture, fixtures and equipment is pledged as
collateral for $39 million of 13% Senior Secured Notes with contingent interest
(the "Senior Secured Notes") issued by the Shreveport Partnership during June
2001 and guaranteed by HCL. The Senior Secured Notes are nonrecourse to HCC.
Contingent interest on the Senior Secured Notes is equal to 1.3% of the
Shreveport Casino's cash flow, as defined, for the applicable period subject to
a maximum contingent interest of $1.3 million for any four consecutive fiscal
quarters. Substantially all other assets are pledged as collateral for $150
million of 13% First Mortgage Notes with contingent interest (the "First
Mortgage Notes") issued by the Shreveport Partnership during August 1999 and
guaranteed by HCL. The First Mortgage Notes are nonrecourse to HCC. Contingent
interest on the First Mortgage Notes is equal to 5% of the Shreveport Casino's
cash flow, as defined, for the applicable period subject to a maximum contingent
interest of $5 million for any four consecutive fiscal quarters. Payment of
contingent interest on both the Senior Secured Notes and First Mortgage Notes
may be deferred to the extent that payment would result in certain financial
coverage ratios not being met.

                                       21

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

     In February 2002, the Company filed an action in state court in Dallas
County, Texas alleging that one of its former executive officers breached his
fiduciary duties to the Company's stockholders by using Company funds and
property for personal reasons and concealing his and his immediate family's
interests in entities doing business with the Company. The Company seeks
multiple remedies in the lawsuit, including restitution for such improper
actions, as well as a declaratory judgement that the Company be relieved of any
further financial obligations under the former executive's employment agreement
with the Company. The lawsuit also seeks to terminate the ability to exercise
outstanding stock options previously granted to the former executive.

     In addition to the above action, the Company also filed a lawsuit in
February 2002 in U.S. District Court in Texas against a number of individuals
and their affiliates, including two of the Company's former executive officers,
alleging violations of the federal securities laws. Such allegations include the
failure to properly report that the defendants and their affiliates have been
acting in concert as a group in connection with a planned proxy contest at the
next annual shareholders' meeting and that certain affiliates have acquired
common stock of the Company while in possession of material non-public
information regarding the Company. The Company seeks multiple remedies,
including requiring the defendants to truthfully and accurately report their
activities, as well as seeking an order to enjoin the defendants from further
purchases of stock and from voting their shares of stock.

     On April 23, 2000, the construction site for the Shreveport Casino suffered
tornado damage which contributed to the delay in opening the facility.
Management filed damage claims and received reimbursements from its insurance
carrier during 2000 in the amount of approximately $1.7 million to cover
substantially all of the cost of repairing the damage incurred. Management is
also pursuing delayed opening claims with its carriers. To the extent the delay
in the facility's opening was the responsibility of contractors, management is
also seeking to recover damages from those entities. These matters are the
subject of a lawsuit pending in U. S. District Court in Louisiana. For this and
other reasons, the Shreveport Partnership has withheld payment of approximately
$2.6 million which the general contractor is currently seeking and which is
included in accounts payable on the accompanying consolidated balance sheet at
December 31, 2001. Both the recovery of any amounts by the Shreveport
Partnership from either its insurance companies or the contractors and the need
to pay the general contractor the amounts being withheld are currently subject
to the results of the litigation and management is unable to determine the
amounts, if any, that will ultimately be received or paid.

     HCC and its subsidiaries are also parties in various other legal
proceedings with respect to the conduct of casino and hotel operations. Although
a possible range of loss cannot be estimated, in the opinion of management,
based upon the advice of counsel, settlement or resolution of these proceedings
should not have a material adverse impact on the consolidated financial position
or results of operations of HCC and its subsidiaries.

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

     During the fourth quarter of 2001, the Company did not submit any matters
to a vote of security holders through the solicitation of proxies or otherwise.

                                       22

<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS

     HCC's Class A common stock, 50,000,000 shares at $.0001 par value per
share, is HCC's sole voting security. HCC's common stock trades on the American
Stock Exchange under the Symbol HWD. The prices set forth in the following table
represent actual transactions.

                                     2001                   2000
                              -----------------      -----------------
   Period                      High        Low        High        Low
   ------                     ------      -----      ------      -----

First Quarter                 $10.73      $7.38      $ 4.50      $3.00
Second Quarter                 11.70       6.42        8.00       3.13
Third Quarter                   7.85       5.50        9.50       5.88
Fourth Quarter                 11.35       5.95       11.25       7.38

     As of March 27, 2002, there were approximately 500 holders of record of
HCC's voting common stock.

     HCC has not paid cash dividends on its common stock in the past and has no
plans to pay cash dividends on its common stock in the foreseeable future. See
Note 3 of "Notes to Consolidated Financial Statements" for a description of
certain agreements that impose specified restrictions on the transfer of funds
between certain subsidiaries.

     HCT's common stock, 1,000 shares with par value of $.01 per share, is its
sole voting security; all of the 1,000 shares outstanding are owned by HCC.HCT
did not pay any dividends during 2001; any such dividends would be payable to
HCC.

                                       23

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

Hollywood Casino Corporation and Subsidiaries
---------------------------------------------

     The following tables present selected financial data for HCC and its
subsidiaries and are qualified in their entirety by the consolidated financial
statements and accompanying footnotes appearing elsewhere in this Form 10-K. The
data as of December 31, 2001 and 2000, and for the years ended December 31,
2001, 2000 and 1999 have been derived from the audited consolidated financial
statements of HCC presented in Item 8.

<TABLE>
<CAPTION>
Statement of Operations Data:                                            Year Ended December 31,
                                                      --------------------------------------------------------
                                                        2001        2000        1999        1998        1997
                                                      --------    --------    --------    --------    --------
                                                                (in thousands, except per share amounts)
<S>                                                   <C>         <C>         <C>         <C>         <C>
Net revenues ......................................   $458,056    $311,455    $277,132    $245,222    $246,809
                                                      --------    --------    --------    --------    --------
Expenses:
   Departmental ...................................    341,545     214,855     191,728     174,298     164,805
   General and administrative .....................     38,753      20,368      19,235      17,778      16,790
   Management and consulting fees .................         --          --         939       1,200       3,927
   Depreciation and amortization ..................     50,495      13,647      14,163      15,610      17,563
   Development and preopening .....................        603      15,852       1,787         779       1,480
   Executive compensation accrual .................      2,848          --          --          --          --
   Recoveries on affiliate obligations ............    (10,828)         --          --          --          --
   Termination of management and consulting
     agreements ...................................         --          --      40,389          --          --
   Write down of assets ...........................         --          --      13,322          --      19,678
                                                      --------    --------    --------    --------    --------
     Total expenses ...............................    423,416     264,722     281,563     209,665     224,243
                                                      --------    --------    --------    --------    --------
Income (loss) from operations .....................     34,640      46,733      (4,431)     35,557      22,566
                                                      --------    --------    --------    --------    --------
Non-operating income (expenses):
  Interest income .................................      4,873      11,349       7,868       2,844       1,896
  Interest expense, net of capitalized interest ...    (67,781)    (55,191)    (47,050)    (31,212)    (31,775)
  Gain on settlement of litigation, net ...........         --       7,220          --          --          --
  Tax settlement costs ............................         --          --          --      (1,087)         --
  Equity in losses of unconsolidated affiliate ....       (183)        (55)       (141)         --          --
  (Loss) gain on disposal of assets ...............       (105)        190        (567)        (61)        552
                                                      --------    --------    --------    --------    --------
    Total non-operating expenses, net .............    (63,196)    (36,487)    (39,890)    (29,516)    (29,327)
                                                      --------    --------    --------    --------    --------
  (Loss) income before income taxes, extraordinary
   and other items ................................    (28,556)     10,246     (44,321)      6,041      (6,761)
Income tax benefit (provision) ....................      2,087      (1,873)     (1,196)       (816)     (5,359)
                                                      --------    --------    --------    --------    --------
(Loss) income before extraordinary and other
   items ..........................................    (26,469)      8,373     (45,517)      5,225     (12,120)
Minority interest in Hollywood Casino Shreveport...     (1,438)        (78)         --          --          --
Minority interest in earnings of Limited
   Partnership ....................................         --          --      (5,801)     (6,494)     (5,012)
                                                      --------    --------    --------    --------    --------
(Loss) income before extraordinary item ...........    (27,907)      8,295     (51,318)     (1,269)    (17,132)
Extraordinary item:
  Early extinguishment of debt,
    net of related tax benefits (1) ...............       (843)         --     (30,353)       (336)       (215)
                                                      --------    --------    --------    --------    --------
Net (loss) income .................................   $(28,750)   $  8,295    $(81,671)   $ (1,605)   $(17,347)
                                                      ========    ========    ========    ========    ========
Basic (loss) income per common share:
  (Loss) income before extraordinary item .........   $  (1.12)   $    .33    $  (2.05)   $   (.05)   $   (.69)
  Extraordinary item ..............................      (0.03)         --       (1.22)       (.01)       (.01)
                                                      --------    --------    --------    --------    --------
     Net (loss) income ............................   $  (1.15)   $    .33    $  (3.27)   $   (.06)   $   (.70)
                                                      ========    ========    ========    ========    ========

Diluted (loss) income per common share:
   (Loss) income before extraordinary item ........   $  (1.12)   $    .31    $  (2.05)   $   (.05)   $   (.69)
   Extraordinary item .............................      (0.03)         --       (1.22)       (.01)       (.01)
                                                      --------    --------    --------    --------    --------
     Net (loss) income ............................   $  (1.15)   $    .31    $  (3.27)   $   (.06)   $   (.70)
                                                      ========    ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
Balance Sheet Data:                                                        December 31,
                                                      --------------------------------------------------------
                                                        2001        2000        1999        1998        1997
                                                      --------    --------    --------    --------    --------
                                                                         (in thousands)
<S>                                                   <C>         <C>         <C>         <C>         <C>
Total assets ......................................   $533,397    $577,900    $525,817    $270,740    $276,218
Total debt, including capital
  lease obligations ...............................    569,560     567,721     538,458     227,529     226,922
Shareholders' (deficit) equity.....................    (93,812)    (65,760)    (74,157)      7,512       9,117
</TABLE>

----------
(1)  Includes the following items: (i) for 2001, costs associated with the June
     2001 issuance of the Hollywood Casino Shreveport Senior Secured Notes and
     (ii) for 1999, costs associated with the May 1999 issuance of the HCC
     Senior Secured Notes and (iii) for 1998 and 1997, costs associated with
     HCC's mandatory redemption of outstanding debt, net of related tax benefit.

                                       24

<PAGE>

Hollywood Casino-Aurora, Inc. and HWCC-Tunica, Inc. and Subsidiary
------------------------------------------------------------------

     The following tables set forth selected financial information for HCA and
for HCT and its subsidiary and are qualified in their entirety by, and should be
read in conjunction with, HCA's Financial Statements and HCT's Consolidated
Financial Statements and accompanying footnotes appearing elsewhere in this Form
10-K. HCA and HCT commenced operations on June 17, 1993 and August 8, 1994,
respectively. The data as of December 31, 2001 and 2000 and for the years ended
December 31, 2001, 2000 and 1999 have been derived from the audited financial
statements of HCA and HCT presented in Item 8.

                          HOLLYWOOD CASINO-AURORA, INC.

Statement of Operations Data:

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                      ------------------------------------------------------------
                                                        2001         2000         1999         1998         1997
                                                      --------     --------     --------     --------     --------
                                                                             (in thousands)
<S>                                                   <C>          <C>          <C>          <C>          <C>
Net revenues ......................................   $215,985     $203,832     $180,488     $152,633     $151,647
                                                      --------     --------     --------     --------     --------
Expenses:
      Departmental ................................    138,464      133,363      120,324      108,145       99,993
      General and administrative ..................      5,182        5,319       12,758       14,136       14,673
      Depreciation and amortization ...............     28,583        7,107        7,050        7,350        7,491
      Termination of management contract ..........         --           --       37,000           --           --
                                                      --------     --------     --------     --------     --------
        Total expenses ............................    172,229      145,789      177,132      129,631      122,157
                                                      --------     --------     --------     --------     --------
Income from operations ............................     43,756       58,043        3,356       23,002       29,490
                                                      --------     --------     --------     --------     --------
Non-operating income (expense):
      Interest income .............................        986        1,124          533          112          156
      Interest expense, net of capitalized interest     (8,001)      (9,034)      (6,145)      (6,046)      (6,847)
      (Loss) gain on disposal of assets ...........        (65)          (6)        (510)           4          134
                                                      --------     --------     --------     --------     --------
        Total non-operating expense, net ..........     (7,080)      (7,916)      (6,122)      (5,930)      (6,557)
                                                      --------     --------     --------     --------     --------

Income (loss) before income taxes .................     36,676       50,127       (2,766)      17,072       22,933
Income tax provision ..............................    (12,486)     (18,422)        (367)      (6,559)      (8,419)
                                                      --------     --------     --------     --------     --------
Net income (loss) .................................   $ 24,190     $ 31,705     $ (3,133)    $ 10,513     $ 14,514
                                                      ========     ========     ========     ========     ========
</TABLE>

Balance Sheet Data:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                      ------------------------------------------------------------
                                                        2001         2000         1999         1998         1997
                                                      --------     --------     --------     --------     --------
                                                                              (in thousands)
<S>                                                   <C>          <C>          <C>          <C>          <C>
Total assets ......................................   $129,950     $110,782     $111,759     $100,310     $104,071
Total debt, including capital lease
  obligations .....................................     99,267       86,113       87,907       54,248       58,972
Shareholder's equity ..............................      6,610        6,190        6,047       28,720       28,948
</TABLE>

                                       25

<PAGE>

                        HWCC-TUNICA, INC. AND SUBSIDIARY

Statement of Operations Data:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                        ----------------------------------------------------
                                          2001       2000      1999       1998       1997
                                        -------    -------    -------    -------    --------
                                                          (in thousands)
<S>                                     <C>        <C>        <C>        <C>        <C>
Net revenues ........................   $98,203    $99,869    $96,644    $92,549    $ 94,975
                                        -------    -------    -------    -------    --------

Expenses:
   Departmental .....................    75,854     75,655     71,404     66,104      64,770
   General and administrative .......     5,567      5,173      5,679      5,813       5,769
   Depreciation and amortization ....     5,823      5,841      7,066      8,123       9,916
   Termination of consulting
     agreement ......................        --         --      3,329         --          --
                                        -------    -------    -------    -------    --------
     Total expenses .................    87,244     86,669     87,478     80,040      80,455
                                        -------    -------    -------    -------    --------
Income from operations ..............    10,959     13,200      9,166     12,509      14,520
                                        -------    -------    -------    -------    --------

Non-operating income (expenses):
   Interest income ..................       299        280        340        587         281
   Interest expense .................    (9,933)   (10,019)   (10,308)   (10,937)    (10,980)
   Equity in losses of unconsolidated
     affiliate ......................      (183)       (55)      (141)        --          --
   Gain (loss) on disposal of assets         27          5        (57)       (65)          6
                                        -------    -------    -------    -------    --------
     Total non-operating expenses,
      net ...........................    (9,790)    (9,789)   (10,166)   (10,415)    (10,693)
                                        -------    -------    -------    -------    --------

Income (loss) before income taxes ...     1,169      3,411     (1,000)     2,094       3,827
Income tax (provision) benefit ......    (3,216)      (375)       323       (689)        845
                                        -------    -------    -------    -------    --------
Net (loss) income ...................   $(2,047)   $ 3,036    $  (677)   $ 1,405     $ 4,672
                                        =======    =======    =======    =======    ========
</TABLE>

Balance Sheet Data:

<TABLE>
<CAPTION>
                                                          December 31,
                                        ----------------------------------------------------
                                          2001       2000       1999       1998       1997
                                        --------   --------   --------   --------   --------
                                                           (in thousands)
<S>                                     <C>        <C>        <C>        <C>        <C>
Total assets ........................   $115,073   $116,106   $112,398   $120,461   $118,727
Total debt, including capital lease
  obligations .......................     88,569     88,651     90,140     85,798     85,683
Shareholder's equity ................     13,599     15,646     12,610     25,287     23,882
</TABLE>

                                       26

<PAGE>

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

     This Annual Report on Form 10-K contains forward-looking statements about
the business, operating results, cash flows, financial condition, construction
and development activities, expansion projects, strategies and prospects of the
Company. The actual results could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties including,
among other things, changes in competition, economic conditions, the ability to
maintain existing management, weather conditions, tax regulations, state or
local regulations or legislation applicable to the gaming industry in general or
the Company in particular, decisions of courts, the ability to obtain required
bankruptcy court and regulatory approvals and other risks indicated in the
Company's filings with the Securities and Exchange Commission. Such risks and
uncertainties are beyond management's ability to control and, in many cases, can
not be predicted by management. When used in this Annual Report on Form 10-K,
the words "believes", "expects", "estimates", "anticipates" and similar
expressions as they relate to the Company or its management are intended to
identify forward-looking statements. Similarly, statements herein that describe
the Company's business strategy, outlook, objectives, plans, intentions or goals
are also forward-looking statements.

RESULTS OF OPERATIONS

     The following table summarizes HCC's consolidated income from operations
reflecting departmental operations at each of its casino properties.
Departmental operations include, as applicable, casino, rooms, food and beverage
and other. Accordingly, departmental profit, as used in the discussion which
follows, consists of departmental revenues less departmental expenses and
represents income from operations before general and administrative expenses,
depreciation and amortization.

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                              -------------------------------------------
                                                  2001            2000           1999
                                              -------------   ------------   ------------
<S>                                           <C>             <C>            <C>
Net Revenues:
   Aurora Casino                              $ 215,985,000   $203,832,000   $180,488,000
   Tunica Casino                                 98,203,000     99,869,000     96,644,000
   Shreveport Casino                            143,868,000      7,754,000             --
                                              -------------   ------------   ------------
     Net revenues                               458,056,000    311,455,000    277,132,000
                                              -------------   ------------   ------------

Departmental Expenses:
   Aurora Casino                                138,464,000    133,363,000    120,324,000
   Tunica Casino                                 75,854,000     75,655,000     71,404,000
   Shreveport Casino                            127,227,000      5,837,000             --
                                              -------------   ------------   ------------
     Total departmental expenses                341,545,000    214,855,000    191,728,000
                                              -------------   ------------   ------------

     Departmental profit                        116,511,000     96,600,000     85,404,000
                                              -------------   ------------   ------------

Other Operating Expenses:
   General and administrative                    38,753,000     20,368,000     20,174,000
   Depreciation and amortization                 50,495,000     13,647,000     14,163,000
   Development                                      603,000      1,058,000        946,000
   Preopening                                            --     14,794,000        841,000
   Executive compensation accrual                 2,848,000             --             --
   Recoveries on affiliate obligations          (10,828,000)            --             --
   Termination of management and consulting
     agreements                                          --             --     40,389,000
   Write down of assets                                  --             --     13,322,000
                                              -------------   ------------   ------------
     Total other operating expenses              81,871,000     49,867,000     89,835,000
                                              -------------   ------------   ------------
Income (loss) from operations                 $  34,640,000   $ 46,733,000   $ (4,431,000)
                                              =============   ============   ============
</TABLE>

                                       27

<PAGE>

     Management's discussion and analysis of the results of operations is
organized using the format presented above. Departmental profit for each
operating property will be discussed separately, to be followed by comments
addressing other items on a consolidated basis. The discussion will continue
with consolidated non-operating income and expenses, taxes and extraordinary
items as presented in the consolidated financial statements of HCC.

Aurora Casino
-------------

     Departmental profit from operations at the Aurora Casino is summarized in
the following table:

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                        ----------------------------------------------
                                            2001             2000            1999
                                        ------------     ------------     ------------

<S>                                     <C>              <C>              <C>
Departmental Revenues:
        Casino                          $231,832,000     $217,704,000     $190,608,000
        Food and beverage                 14,529,000       15,787,000       14,560,000
        Other                              3,211,000        3,356,000        3,272,000
        Promotional allowances           (33,587,000)     (33,015,000)     (27,952,000)
                                        ------------     ------------     ------------
          Net revenues                   215,985,000      203,832,000      180,488,000
                                        ------------     ------------     ------------

     Departmental Expenses:
        Casino                           132,005,000      127,263,000      114,381,000
        Food and beverage                  5,498,000        5,021,000        4,829,000
        Other                                961,000        1,079,000        1,114,000
                                        ------------     ------------     ------------
          Total departmental expenses    138,464,000      133,363,000      120,324,000
                                        ------------     ------------     ------------

     Departmental profit                $ 77,521,000     $ 70,469,000     $ 60,164,000
                                        ============     ============     ============

     Departmental profit margin                 35.9%            34.6%            33.3%
</TABLE>

     Revenues

     Total gross wagering at the Aurora Casino, as measured by the total value
of chips purchased for table games ("drop") and the total amount of coins
wagered in slot machines ("handle"), increased by 2.2% and 17.5%, respectively,
during 2001 compared to 2000 and during 2000 compared to 1999. The significant
increase in gross wagering during 2000 was primarily attributable to the advent
of dockside gaming on June 26, 1999. Subsequent increases in revenues reflect
management's use of both new and proven marketing programs designed to enhance
the Aurora Casino's position in the Chicago marketplace. Casino revenues consist
of the portion of gross wagering retained by the casino and, as a percentage of
gross wagering, is referred to as the "hold percentage." During the latter part
of 2000, the Aurora Casino reconfigured its gaming mix to remove ten table
games, which are more labor intensive, and replace them with 61 slot machines.
Despite this reduction of nearly 20% in the number of table games, table drop
grew slightly (2.2%) during 2001 compared to 2000. Slot machine handle also grew
by 2.2% during 2001 compared to the prior year. The 14.2% increase in 2000
casino revenues compared to the prior year period reflects the 17.5% increase in
gross wagering noted above, partially offset by a decline in the table games
hold percentage. Poker revenues also increased during 2000 compared to the prior
year primarily due to the expansion of the poker room's operating hours
beginning in the fourth quarter of 1999. As a result of the closing of a
competitor's poker room in August 2000, the Aurora Casino is now the sole
Illinois provider of poker in Chicago-area casinos.

     During 2001, the Aurora Casino conducted its gaming operations on two
riverboats connected by a link barge. The smaller of the two riverboats
contained slightly more than one-third of the total gaming positions, but
generated less than 25% of total gaming revenues. As more fully described under
"Liquidity and Capital Resources -- Capital Expenditures and Other Investing
Activities," the Aurora Casino began a major expansion in 2001. In order to take
better advantage of dockside gaming legislation passed in 1999 and improve its
gaming amenities, the Aurora Casino began construction of a new dockside
facility to replace the Aurora Casino's two existing riverboats. Management
believes the

                                       28

<PAGE>

new dockside facility will significantly increase passenger capacity and provide
a premier gaming and entertainment facility for the Aurora Casino's patrons. The
first half of the dockside facility and a new casino entrance were completed and
opened on February 15, 2002. The second half of the dockside casino, together
with a new buffet and parking facility are expected to open in June 2002. The
expansion is projected to cost approximately $78.2 million.

     The decrease in food and beverage revenues during 2001 compared to the
prior year period is primarily due to a reduction in the amount of complimentary
food revenues. The estimated value of such complimentaries is reflected as
revenues with a corresponding amount deducted as promotional allowances. The
increase in food and beverage revenues during 2000 compared to the prior year
reflects the increased patron volume resulting from dockside gaming and the
opening of a new food outlet in April 2000.

     Other revenues decreased during 2001 compared to the prior year primarily
due to reductions in theater revenues and retail store sales. Other revenues did
not change significantly during 2000 compared to 1999.

     Promotional allowances include the estimated value of goods and services
provided free of charge to casino customers under various marketing programs,
the cost of certain cash incentive programs and the estimated cost of the "cash
back" award feature of the casino's customer loyalty program. The increase
during 2001 compared to 2000 reflects increases in both cash incentive programs
and customer loyalty programs. Most of these increases were offset by the
aforementioned reductions in food complimentaries. The 2000 increase over the
prior year period reflects increases in promotional activities, primarily in
food complimentaries, as part of the Aurora Casino's marketing efforts.

     Departmental Expenses

     Casino expense increases during 2001 and 2000 compared to the prior year
periods resulted primarily from additional gaming taxes due to higher casino
revenues. Gaming and admission taxes increased by $4.5 million and $8.4 million,
respectively, in 2001 and 2000 compared to the prior year periods. Casino
expenses also increased in 2000 compared to 1999 as a result of $5.5 million of
additional marketing expenses.

     Food and beverage expenses increased during 2001 compared to 2000
reflecting higher food costs due to, among other things, efforts to upgrade the
food quality. Other expenses decreased during 2001 compared to 2000, consistent
with the decrease in related revenues. Food and beverage and other expenses did
not change significantly during 2000 compared to 1999. Increases in food and
beverage costs resulting from increased volume, higher food costs and the
opening of a new restaurant in April 2000 were offset by increased allocations
to the casino department as part of various marketing programs.

                                       29

<PAGE>

Tunica Casino
-------------

     Departmental profit from operations at the Tunica Casino is summarized in
the following table:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                        ----------------------------------------------
                                            2001             2000             1999
                                        ------------     ------------     ------------
<S>                                     <C>              <C>              <C>
Departmental Revenues:
        Casino                          $107,191,000     $108,529,000     $102,312,000
        Rooms                             12,506,000       10,690,000       10,457,000
        Food and beverage                 16,802,000       16,656,000       15,274,000
        Other                              1,762,000        1,462,000        1,542,000
        Promotional allowances           (40,058,000)     (37,468,000)     (32,941,000)
                                        ------------     ------------     ------------
          Net revenues                    98,203,000       99,869,000       96,644,000
                                        ------------     ------------     ------------

     Departmental Expenses:
        Casino                            70,594,000       69,865,000       65,402,000
        Rooms                                908,000        1,102,000        1,161,000
        Food and beverage                  3,488,000        3,897,000        3,704,000
        Other                                864,000          791,000        1,137,000
                                        ------------     ------------     ------------
          Total departmental expenses     75,854,000       75,655,000       71,404,000
                                        ------------     ------------     ------------

     Departmental profit                $ 22,349,000     $ 24,214,000     $ 25,240,000
                                        ============     ============     ============

     Departmental profit margin                 22.8%            24.2%            26.1%
</TABLE>

     Revenues

     Total gross wagering at the Tunica Casino as measured by table game drop
and slot machine handle decreased slightly (1%) during 2001 following an
increase of 8.2% in 2000, in each case compared to the prior year period.
Management believes the decrease in gross wagering during 2001 reflects a
softening in the Tunica gaming market attributable to the economic downturn. The
2000 increase in gross wagering compared to 1999 resulted from management's
refinement of its core marketing programs as well its emphasis on customer
service. Such marketing efforts included branded television advertising that
focused on quality service and the message of "winning". Other direct marketing
programs were designed to reward existing high value customers as well as to
attract new customers to the facility. Although patron volume declined slightly
during 2000 compared to 1999, gross wagering continued to increase, indicating
that the Tunica Casino was successful in attracting higher value patrons.

     Casino revenues consist of the portion of gross wagering retained by the
casino and, as a percentage of gross wagering, is referred to as the "hold
percentage." The decrease in 2001 casino revenues compared to 2000 reflects the
aforementioned decline in gross wagering combined with a decline in the table
games hold percentage. The 8.2% increase in gross wagering was the primary cause
of the 2000 increase in casino revenues compared to the prior year. The 6.1%
increase in such revenues was somewhat less than the increase in gross wagering
due to a decrease in the slot machine hold percentage.

     Room revenues increased during 2001 and 2000 compared to the prior year
periods. Hotel occupancy rates increased to 87.6% in 2001 from 84% in 2000 and
85.5% in 1999. Average daily room rates increased to $74 in 2001 from $66 in
2000 and $64 in 1999.

     Food and beverage revenues did not change significantly in 2001 compared to
2000. Such revenues increased by 9% during 2000 compared to the prior year
period as a result of increased marketing efforts and increases in food and
beverage prices.

                                       30

<PAGE>

     Other revenues increased in 2001 compared to 2000 due to increases in
retail promotional activities. The estimated value of retail items provided to
customers without charge is included in other revenues and a corresponding
amount is deducted as a promotional allowance (see below). Other revenues
decreased 5.2% during 2000 compared to 1999. The 2000 decrease was a result of
the decline in patron volume discussed above.

     Promotional allowances include the estimated value of goods and services
provided free of charge to casino customers under various marketing programs,
the cost of certain cash incentive programs and the estimated cost of the "cash
back" award feature of the casino's customer loyalty program. The increase in
promotional allowances in 2001 compared to 2000 reflects additional goods and
services provided to patrons without charge. Such complimentaries increased as a
percentage of the associated revenues to 78.2% in 2001 from 74% during 2000.
Such increases reflect the expansion of the Tunica Casino's marketing programs,
primarily in food and beverage complimentaries, in order to compete for
overnight guests. Such increases were partially offset by decreases in cash
incentive and customer loyalty program awards during 2001 compared to the prior
year. The 2000 increase in promotional allowances compared to 1999 reflects
increases in both customer loyalty programs and in the use of complimentaries.

     Departmental Expenses

     Casino expenses increased slightly during 2001 compared to 2000 after
increasing by $4.5 million (6.8%) during 2000 compared to 1999. The 2001
increase results from an increase in the allocation of rooms expense to the
casino department as part of the Tunica Casino's marketing programs. The
increases in the use of these complimentaries were partially offset by
reductions in other advertising and promotional costs. The 2000 increase in
casino expenses was also primarily due to increased marketing efforts, including
the allocation of additional costs from other operating departments to the
casino department. Marketing efforts have been increased in response to a highly
competitive Tunica gaming market environment.

     Rooms expense decreased 17.6% and 5.1% during 2001 and 2000 compared to the
respective prior year periods reflecting the increase in room complimentaries
previously discussed which result in additional allocations of room department
expenses to the casino department.

     The 10.5% decrease in food and beverage expenses during 2001 compared to
2000 reflects increased allocations to the casino department as a result of the
Tunica Casino's marketing efforts. The 5.2% increase in food and beverage
expenses during 2000 compared to 1999 results from increases in volume and from
higher food and beverage costs. Such increases were partially offset by
increased allocations to the casino department as a result of the Tunica
Casino's marketing efforts.

     The increase in other departmental expenses during the 2001 period compared
to 2000 reflects higher costs in the retail sales department. The decreases in
other departmental expenses during 2000 compared to the prior year period is due
to increased allocations to the casino department.

                                       31

<PAGE>

Shreveport Casino
-----------------

     The Shreveport Casino commenced operations on December 20, 2000; all
activities prior to that date relate to its development and construction. The
discussion of departmental operations which follows will, of necessity, be based
on comparisons between the full year of operations in 2001 and the twelve day
period of operations during 2000. The following table presents departmental
operating results for such periods together with the percentages of departmental
revenues to total revenues and of departmental expenses as a percentage of the
associated revenues.

<TABLE>
<CAPTION>
                                                                        Period from
                                              Year Ended             December 20, 2000
                                           December 31, 2001       to December 31, 2000
                                        -----------------------   ----------------------
<S>                                     <C>               <C>     <C>              <C>
     Revenues:
          Casino                        $144,334,000      100.3%  $ 7,194,000       92.8%
          Rooms                            9,803,000        6.8       302,000        3.9
          Food and beverage               25,521,000       17.7     1,330,000       17.2
          Other                            3,412,000        2.4        74,000         .9
          Promotional allowances         (39,202,000)     (27.2)   (1,146,000)     (14.8)
                                        ------------      -----   -----------      -----
          Net revenues                   143,868,000      100.0     7,754,000      100.0
                                        ------------      -----   -----------      -----

     Departmental Expenses:
          Casino                         113,367,000       78.8     5,193,000       67.0
          Rooms                            2,091,000        1.4        88,000        1.1
          Food and beverage                8,455,000        5.9       413,000        5.3
          Other                            3,314,000        2.3       143,000        1.9
                                        ------------      -----   -----------      -----
          Total departmental expenses    127,227,000       88.4     5,837,000       75.3
                                        ------------      -----   -----------      -----

     Departmental profit                $ 16,641,000       11.6%  $ 1,917,000       24.7%
                                        ============      =====   ===========      =====
</TABLE>

     The Shreveport Casino recognized a loss from operations of $19.4 million in
2001 compared to losses of $13.7 million in 2000 and $993,000 in 1999. Excluding
preopening and development costs, the Shreveport Casino earned income from
operations of $1.1 million in 2000 and had virtually no loss in 1999. As
previously noted, the Shreveport Casino opened on December 20, 2000 and all
activities prior to that date related to its development and construction
activities.

     The Shreveport Casino experienced the typical operating inefficiencies
associated with the opening of a new, major resort. In addition, management
sought to open the Shreveport Casino during December 2000 in order to capitalize
on one of the busiest times of the year. Construction delays resulted in a
severe reduction in the time available to finalize preparations to open the
facility and to train personnel. This lack of adequate preparation and training
time, combined with a difficult labor market in Shreveport and the large volume
of business generated by the property during its first 12 days of operations in
2000, exacerbated the operating inefficiencies. As a result, management
concentrated its efforts in January and early February 2001 on fully
implementing operating and training programs to ensure that customers were
provided with a superior level of service. With these programs completed, the
Shreveport Casino launched major marketing programs in late February and March.
Delays in commencing its marketing efforts, together with inclement weather and
increased competitive pressures in the Shreveport market, resulted in lower
gaming activity at the Shreveport Casino in January and February 2001 than
originally anticipated by management. With the implementation of its marketing
programs, the Shreveport Casino experienced a favorable trend in its gaming
revenues with significant increases in February and March compared to the prior
month periods. Revenues continued to show improvement in April and May; however,
these increases remained below management expectations, primarily due to the
economic slowdown. The Shreveport Partnership is continuing to fine-tune its
marketing efforts to maximize the effectiveness of its marketing programs while
minimizing their costs. To this end, the Shreveport Partnership terminated
certain marketing programs that targeted less profitable market segments which
resulted in a reduction of the Shreveport Casino's gaming revenues in June.
However, as a result of the elimination of the marketing programs and other cost
cutting efforts, the Shreveport Casino has generated

                                       32

<PAGE>

positive earnings before interest, taxes, depreciation, amortization and
non-recurring items in every month from since June 2001.

     The opening of the Shreveport Casino increased gaming capacity in the
Shreveport/Bossier City market by approximately 32%. However, the market has not
yet been able to fully absorb the increase in capacity, growing by only 17.4%
during 2001 compared to 2000. The revenue growth experienced in the market
during 2001 also reflects heavy promotional activity associated with the opening
of the Shreveport Casino and the opening of a competitor's hotel; accordingly,
management believes that the real market growth has been somewhat less than the
calculated 17.4%. In addition, management believes the lack of market growth
reflects the current economic slowdown which has negatively affected the
Shreveport market during 2001.

     Gaming Operations

     Total gross wagering at the Shreveport Casino as measured by table game
drop (the total value of chips purchased for table games) and slot machine
handle (the total value of coins wagered in slot machines) amounted to $1,769
million and $76 million, respectively, during 2001 and 2000. These amounts
represent average daily volumes of $4.8 million in 2001 and $6.3 million during
the twelve days of operations in 2000. As noted previously, the 2000 opening was
timed to take advantage of a busy holiday season and the gross wagering for that
period reflects tremendous volumes associated with the Shreveport Casino's grand
opening activities. Total gross wagering during the comparable twelve day period
of 2001 was $69.8 million ($5.8 million per day), a decrease from the 2000
opening period of 8.1%.

     Revenues

     Casino revenue consists of the portion of gross wagering retained by the
casino and, as a percentage of gross wagering, is referred to as the "hold
percentage". Casino revenues at the Shreveport Casino totaled $144.3 million and
$7.2 million, respectively, during 2001 and during the period from opening
through December 31, 2000. Revenues during the comparable twelve day period of
2001 were $5.6 million, a decrease of 22.8%. This decline reflects the 8.1%
reduction in gross wagering combined with lower hold percentages during the 2001
period. During 2001, slot machine and table game revenues accounted for 73.2%
and 26.8%, respectively, of total casino revenues. During the 2000 period, slot
machine and table game revenues accounted for 81.3% and 18.7%, respectively, of
total casino revenues.

     Room revenues amounted to $9.8 million during 2001 with a hotel occupancy
rate of 86.6% and an average daily room rate of $80. Room revenues amounted to
$302,000 during 2000 with a hotel occupancy rate of 71.4% and an average daily
rate of $108. Room rates have been lowered to meet competitive pressures in the
Shreveport/Bossier City marketplace; however, such reductions have been offset
by the improvement in hotel occupancy.

     Food and beverage revenues amounted to $25.5 million and $1.3 million,
respectively, in 2001 and 2000. Other revenues amounted to $3.4 million and
$74,000, respectively, in 2001 and 2000. Food and beverage and other revenues
have increased as a percentage of net revenues during 2001 as such ancillary
services are being more widely used than during the grand opening period.

     Promotional allowances represent the estimated value of goods and services
provided free of charge to casino customers under various marketing programs,
the cost of certain cash incentive programs and the estimated cost of the "cash
back" award feature of the casino's customer loyalty programs. Goods and
services provided to patrons without charge increased slightly as a percentage
of the associated room, food and beverage and other revenues to 67.2% during
2001 from 65.7% during the 2000 operating period. These percentages are
consistent with the historical experience of other HCC-owned gaming operations.
The cost of other cash incentive and customer loyalty programs as a percentage
of casino revenues has increased significantly during 2001 as such programs have
expanded and developed.

                                       33

<PAGE>

     Departmental Expenses

     The Shreveport Casino was designed to be a major destination resort.
Accordingly, its cost structure is based on the facility generating a
significant level of gaming revenues. As noted previously, management
concentrated its efforts in January and early February 2001 on fully
implementing operating and training programs to ensure that customers were
provided with a superior level of service. Because the Shreveport Casino was in
a longer start up phase, departmental expense ratios during the first half of
2001 were higher than those experienced by other HCC operated gaming facilities
during their initial periods. During the summer of 2001, management initiated a
new business plan for the Shreveport Casino in response to the difficult
operating conditions experienced by the property. Due to the economic recession
and the impact of the events of September 11th, the Shreveport market grew much
more slowly in 2001 than anticipated and experienced a significant increase in
marketing and promotional activity. Over the second six months of 2001,
management made significant progress in achieving the principal elements of its
new business plan. Specifically, departmental expenditures have been
significantly reduced while maintaining the Shreveport Casino's level of
service. Management has reduced the property's average monthly operating costs
in the second half of 2001 by approximately $3.5 million per month, or 25%, as
compared to the first half of the year. As cost savings initiatives implemented
by management are continued and the volume of business grows, management
anticipates cost ratios and departmental profit should continue to improve.

     In March 2001, the Louisiana legislature approved an increase in the gaming
tax on riverboat casinos to 21.5% of net gaming proceeds from 18.5%. The tax
increase is being phased in over a 25-month period for all riverboats in the
Shreveport/Bossier City area; accordingly, the gaming tax imposed on the
Shreveport Casino increased to 19.5% effective April 1, 2001, with additional 1%
increases scheduled for April 1, 2002 and April 1, 2003. Had the entire 3%
gaming tax increase been in effect during 2001, the Shreveport Casino's
operating expenses would have increased by approximately $3.3 million.

Other Consolidated Items
------------------------

     Other operating expenses of HCC and its subsidiaries, exclusive of casino
departmental expenses, consist primarily of general and administrative expenses,
depreciation and amortization, preopening costs associated with the Shreveport
Casino and development expenses incurred in connection with the pursuit of
additional gaming venues. These and other nonrecurring operating expenses are
discussed below.

     General and Administrative

     General and administrative expenses increased by 90.3% during 2001 and by
less than 1% during 2000, in each case compared to the prior year period.
Excluding management fees incurred of $939,000 in 1999, general and
administrative expenses increased by $1.1 million (5.9%) in 2000 compared to
1999. Such expenses at the Aurora Casino decreased slightly during 2001
following an increase of 5.8% during 2000 compared to the prior year periods.
The 2000 increase was primarily a result of additional overhead costs being
charged to the Aurora Casino which, prior to October 1999, were charged to its
management company. The Tunica Casino experienced increases in general and
administrative expenses of 7.6% and 9.1%, respectively, during 2001 and 2000
compared to the prior year periods, exclusive of management fees during 1999,
due primarily to increases in personnel costs, professional fees, utilities and
insurance costs. The Shreveport Casino incurred general and administrative
expenses, exclusive of management fees payable to an HCC subsidiary, amounting
to $17.3 million and $165,000, respectively, during 2001 and the 2000 period
subsequent to opening. Such expenses were included in preopening costs prior to
December 20, 2000. The remaining increases in corporate general and
administrative expenses of 9.8% and 2.6%, respectively, in 2001 and 2000
compared to the prior year periods result from increases in corporate overhead
costs consisting primarily of legal fees, franchise taxes and personnel costs.

                                       34

<PAGE>

     Depreciation and Amortization

     Depreciation and amortization expense increased $36.8 million and decreased
$516,000, respectively, during 2001 and 2000 compared to the prior year periods.
Substantially all of the 2001 increase results from (1) the Shreveport Casino's
fixed assets being placed in service in December 2000 resulting in depreciation
expense of $15.9 million and $506,000 during 2001 and 2000, respectively and (2)
additional depreciation expense recorded by the Aurora Casino of $21.5 million
in 2001 due to its expansion project and the resulting accelerated depreciation
of its assets being replaced (see "Liquidity and Capital Resources - Capital
Expenditures and Investing Activities - Aurora Casino" below). The 2000 decrease
in depreciation and amortization is primarily due to certain operating equipment
at the Tunica Casino becoming fully depreciated during the latter part of 1999.

     Development Expenses

     Development expenses represent costs incurred in connection with HCC's
pursuit of potential gaming opportunities in jurisdictions where gaming has not
been legalized. Such costs decreased by 43% during 2001 compared to the prior
year period due to fewer potential jurisdictions contemplating the legalization
of gaming. Such costs increased by 11.8% during 2000 compared to the prior year
period due to additional costs incurred with respect to potential gaming
opportunities in Mexico and in states contemplating the legalization of gaming.

     Preopening Costs

     Preopening costs represent the start up costs associated with the
development of the Shreveport Casino which, in accordance with existing
accounting pronouncements, are required to be expensed as incurred. Such costs
include, among other things, organizational costs, marketing and promotional
costs, hiring and training of new employees and other operating costs incurred
prior to the opening of the project. Preopening costs amounted to $14.8 million
and $841,000, respectively, during 2000 and 1999.

     Executive Compensation Accrual

     The executive compensation charge of $2.9 million represents the
contractual salary and consulting payments remaining to three former executives
of the Company under the terms of their employment agreements. In February 2002,
the Company filed an action in state court in Dallas County, Texas alleging that
one of the former executive officers breached his fiduciary duties to the
Company's stockholders by using Company funds and property for personal reasons
and concealing his and his immediate family's interests in entities doing
business with the Company. The Company seeks multiple remedies in the lawsuit,
including restitution for such improper actions, as well as a declaratory
judgement that the Company be relieved of any further financial obligations
under the former executive's employment agreement with the Company. As of
December 31, 2001, the total of such salary, consulting and pension obligation
to the former executive amounted to approximately $4 million.

     Recoveries on Affiliate Obligations

     During December 2001, HCC and Greate Bay reached an agreement to
restructure obligations existing between the two companies. Greate Bay is
insolvent and, together with certain of its subsidiaries, filed voluntary
petitions for protection under Chapter 11 of the United States Bankruptcy Code
on December 28, 2001. As part of its pre-packaged bankruptcy reorganization,
Greate Bay sold its primary asset, with the net proceeds from the sale and
Greate Bay's other remaining cash to be distributed to an unrestricted
subsidiary of HCC. Greate Bay paid $2 million in December 2001 to the
unrestricted subsidiary and agreed to offset $2.4 million owed by HCC against a
like amount owed to HCC. The sale of Greate Bay's primary asset was approved by
the bankruptcy court on March 6, 2002 and was completed on March 19, 2002.
Management currently anticipates that the plan of reorganization will be
confirmed in May 2002. As a result of the agreement, HCC has adjusted the
carrying value of the notes and interest due from Greate Bay at December 31,
2001 to $12.9 million (net of reserves of $46.5 million), management's estimate
of the net proceeds yet to be received, subject to confirmation by the

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bankruptcy court. As a result of this adjustment to carrying value, together
with the proceeds received in December 2001 and the offset of obligations, HCC
recognized a recovery on its affiliate obligations amounting to $10.8 million
during the year ended December 31, 2001. A significant portion of these
obligations had previously been reserved (see "Write Down of Assets" below).

     Termination of Management and Consulting Agreements

     In October 1999, HCC terminated its outstanding management agreement for
the Aurora Casino and its consulting agreement for the Tunica Casino by
acquiring a wholly owned subsidiary of Greate Bay. As part of its strategic
plan, HCC sought to terminate these agreements in order to eliminate fees paid
to Greate Bay, enhance future operating performance and simplify its
organizational structure. The acquisition of the agreements required that HCC
satisfy certain obligations of the Greate Bay subsidiary amounting to $40.3
million. As no asset value was attributed to the management and consulting
agreements for financial reporting purposes when acquired and terminated, the
$40.3 million payment, together with net expenses from the acquisition amounting
to $60,000, were charged to expense in 1999. Expenses incurred under the
management and consulting agreements amounted to $6.7 million during 1999 (prior
to the October termination date).

     Write Down of Assets

     The $12.3 million write down of assets during 1999 served to fully reserve
the remaining estimated net realizable balance of certain notes issued by Greate
Bay. The termination of the Aurora Casino management contract and the Tunica
Casino consulting agreement ended what had been a significant source of funds to
Greate Bay. In addition, ACSC, which was Greate Bay's only remaining operating
subsidiary, experienced a loss from operations in 1999, further reducing its
cash flows available for repayment. For the same reasons, HCC wrote down the
interest receivable balance associated with certain demand notes from Greate Bay
by nearly $1 million during 1999. The estimated recovery on these affiliate
obligations changed during 2001 as a result of agreements reached between HCC
and Greate Bay (see "Recoveries on Affiliate Obligations" above).

Non-operating Income (Expenses)
-------------------------------

     Interest Income

     Interest income decreased 57.1% during 2001 compared to the prior year
period as unexpended cash proceeds of HCC's issue of Senior Secured Notes on May
19, 1999 and Hollywood Casino Shreveport's debt issue on August 10, 1999 (see
"Liquidity and Capital Resources - Financing Activities") were spent in
connection with the construction of the Shreveport Casino. Interest income
increased 44.2% during 2000 compared to the prior year period reflecting
interest earned on the unexpended cash proceeds from the same debt issues.

     Interest Expense

     Interest expense increased by 22.8% and 17.3%, respectively, during 2001
and 2000 compared to the prior year periods due primarily to significant
reductions in the amount of construction period interest being capitalized and
to increases in HCC's long-term indebtedness. Interest capitalized with respect
to the Aurora Casino expansion project amounted to $1.2 million during 2001
compared to interest capitalized on the construction of the Shreveport Casino
amounting to $11.8 million during 2000 and $1.1 million during 1999. During
2000, the Shreveport Casino entered into a $30 million lease financing
arrangement. In June 2001, the $27.5 million outstanding principal amount of the
lease financing was retired with a portion of the proceeds from the issue of $39
million of Shreveport Senior Secured Notes, which also provided the Shreveport
Casino with additional working capital. The increase in overall borrowings,
coupled with a higher interest rate (an effective rate of 12.21% on the
Shreveport Senior Secured Notes versus a floating rate on the lease financing of
8.9% at the time of their retirement), also contributed to additional interest
expense during 2001. The 2001 increase in interest expense was

                                       36

<PAGE>

partially offset by a third quarter adjustment in the amount of $953,000 to the
accrual of interest on federal income taxes payable.

     (Loss) Gain on Disposal of Assets

     The loss of $105,000 on disposal of assets in 2001 results primarily from
sales of gaming equipment and memorabilia. The gain of $190,000 recognized
during 2000 results from the sale of a parcel of land acquired in Texas as a
potential gaming development site. During 1999, the Aurora Casino wrote off
costs associated with its planned construction of a new, larger boat to replace
its smaller boat. The advent of dockside gaming in June 1999 resulted in new
plans to construct a dockside casino facility (see "Liquidity and Capital
Resources - Capital Expenditures and Other Investing Activities").

     Income Taxes

     Management believes that it is more likely than not that future
consolidated taxable income of HCC will be sufficient to utilize at least a
portion of the NOL's, tax credits and other deferred tax assets resulting from
temporary differences. Accordingly, under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", the
consolidated balance sheet reflects a net deferred tax asset of $6 million as of
December 31, 2001.

     The Company recognized a benefit for income taxes during 2001 resulting
from (1) an adjustment in the amount of $1.7 million to the estimated federal
taxes payable with respect to an examination by the Internal Revenue Service and
(2) an adjustment to the effective state tax rate utilized by the Aurora Casino,
which prepares its Illinois tax return on a unitary basis.

     On March 9, 2002, new tax legislation was enacted which extends the
carryback period for NOL's from two to five years for NOL's originating in tax
years ending in either 2001 or 2002. As a result of this change, the Company
anticipates that it will be able to utilize NOL's originating in 2001 to request
a refund of taxes previously paid in the amount of approximately $3 million.
Under generally accepted accounting principals, the impact on the financial
statements resulting from this change will be reported in the first quarter of
2002, the period in which the new legislation was enacted.

     Sales by HCC or existing stockholders of common stock, or securities
convertible into common stock, can cause a "change of control", as defined in
Section 382 of the Internal Revenue Code of 1986, as amended, which would limit
the ability of HCC or its subsidiaries to utilize these loss carryforwards in
later tax periods. Should such a change of control occur, the amount of loss
carryforwards available for use in any one year would most likely be
substantially reduced. Future treasury regulations, administrative rulings or
court decisions may also effect HCC's future utilization of its loss
carryforwards.

     Gain on Settlement of Litigation

     On October 8, 1998, the Company filed a complaint against its former
accountants and tax advisors in the District Court of Dallas County, Texas. On
September 8, 2000, a mutually acceptable agreement was reached concluding the
dispute and resulting in the dismissal of the lawsuit. Terms of the settlement
are confidential; however, the Company recognized a pretax gain on the
settlement, net of related legal fees and other expenses, amounting to $7.2
million.

     Minority Interest in Hollywood Casino Shreveport

     In accordance with the terms of its joint venture agreement, HCC's joint
venture partner is to receive, among other things, an amount equal to 1% of
"complex net revenues" , as defined, earned by the Shreveport Casino. The
allocation of this interest is reflected as minority interest in Hollywood
Casino Shreveport. Such interest, which commenced upon the opening of the
Shreveport Casino, amounted to $1.4 million and $78,000 during 2001 and 2000,
respectively.

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     Minority Interest in Earnings of Limited Partnership

     The minority interest in the earnings of the limited partnership which held
the management contract for the Aurora Casino amounted to $5.8 million during
1999. This minority interest ended with the acquisition and termination of the
management contract on October 13, 1999.

     Extraordinary Item

     During June 2001, the Shreveport Partnership retired its outstanding
capital lease financing with a portion of the proceeds from the Shreveport
Senior Secured Notes. The extraordinary loss from early retirement of debt
consists of the write off of unamortized deferred finance costs associated with
the lease financing.

     During May 1999, HCC completed the refinancing of its outstanding 12.75%
Senior Secured Notes. The extraordinary loss from early retirement of debt
includes the premium paid and redemption fees associated with the debt retired
together with the write off of related unamortized financing costs.

Other Items
-----------

     Inflation

     Management believes that in the near term, modest inflation, together with
increased competition within the gaming industry for qualified and experienced
personnel, will continue to cause increases in operating expenses, particularly
labor and employee benefits costs.

     Market Risk

     The Company has $50 million of floating rate Senior Secured Notes
outstanding (see "Liquidity and Capital Resources - Financing Activities"
below). Interest on the floating rate notes is at the LIBOR rate plus 6.28% and
is reset semiannually. Accordingly, an increase in the LIBOR rate of 1% would
increase interest expense by $500,000 per year.

     The floating rate loan was entered into for non-trading purposes as sources
of funding for the Company and management believes that this financing has no
other material market risks other than interest rate risk. Such interest rate
risk is beyond management's control; however, the obligation could be prepaid
should increases in the underlying interest rate result in an excessive
financing cost; however, prepayment of the floating rate notes would require a
premium in the amount of 3% as of May 1, 2001, decreasing by 1% each subsequent
May 1.

     Both the Shreveport First Mortgage Notes issued to finance construction of
the Shreveport Casino and the Shreveport Senior Secured Notes issued to retire
lease financing and provide working capital include interest at the rate of 13%
payable semiannually as well as contingent interest. Contingent interest under
the indentures to the Shreveport First Mortgage Notes and the Shreveport Senior
Secured Notes is equal to 5% and 1.3%, respectively, of consolidated cash flow
for the applicable period subject to maximum contingent interest of $5 million
and $1.3 million, respectively, for any four consecutive fiscal quarters.
Accordingly, the maximum potential interest with respect to the Shreveport First
Mortgage Notes for a fiscal year could be $24.5 million, resulting in an
effective annual interest rate of 16.33% and the maximum potential interest with
respect to the Shreveport Senior Secured Notes for a fiscal year could be $6.4
million, resulting in an effective annual interest rate of 15.5%. These maximums
would assume an annual consolidated cash flow for the Shreveport Casino of at
least $100 million. The contingent component of interest under the Shreveport
First Mortgage Notes and the Shreveport Senior Secured Notes was negotiated with
the lenders as part of determining the fixed rate component of interest.
Management believes that because the contingent interest component is determined
by cash flows and can only be paid if certain coverage ratios are met, liquidity
and capital

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<PAGE>

resources of the Shreveport Partnership will not be compromised by the payment,
if any, of contingent interest.

     Changes in the market interest rate would also impact the fair market value
of the Company's outstanding fixed rate debt instruments. Management estimates
that an increase of 1% in the market interest rate would result in a decrease in
the fair market value of HCC's debt securities of approximately $22.5 million.

     Seasonality and Other Fluctuations

     Historically, the Aurora Casino's operations have experienced some
seasonality due to severe winter weather. Consequently, the results of HCC's
operations for the first and fourth quarters have traditionally been less
profitable than the other quarters of the fiscal year. Furthermore, management
believes that seasonality may also cause fluctuations in reported results at the
Tunica Casino and the Shreveport Casino. In addition, the operations of HCC's
casinos may fluctuate significantly due to a number of factors, including
chance. Such seasonality and fluctuations may materially affect HCC's casino
revenues and overall profitability.

LIQUIDITY AND CAPITAL RESOURCES

     Operating Activities

     During 2001, HCC generated cash flow from operations of $20.1 million. The
operations of the Aurora Casino and Tunica Casino continue to be HCC's primary
sources of liquidity and capital resources. The Aurora Casino contributed
approximately $57.5 million of cash flow from operations during 2001 while the
Tunica Casino provided $8.1 million of cash from operations. The Shreveport
Casino experienced negative cash flow from operations of $28.2 million during
2001. Management believes that the Shreveport Casino will, in time, become a
positive source of operating cash flow. HCC's other primary source of funds
consists of interest income earned on temporary investments ($2.9 million). In
addition to operating expenses at its three casino facilities, uses of operating
cash by HCC during 2001 included corporate overhead costs ($10.7 million) and
costs to pursue development opportunities ($603,000).

     Financing Activities

     Senior Secured Notes -

     During May 1999, HCC completed the refinancing of its outstanding 12.75%
Senior Secured Notes through a debt offering of $310 million of 11.25% Senior
Secured Notes due May 1, 2007 and $50 million of floating rate Senior Secured
Notes due May 1, 2006 (collectively, the "Senior Secured Notes"). Interest on
the floating rate notes is equal to the six-month LIBOR rate plus 6.28% and is
reset semiannually. Effective November 1, 2001, the interest is 8.45%. In
addition to refinancing existing debt, the Company used proceeds from the debt
offering to fund a portion of the Company's equity investment in the Shreveport
Casino and, during October 1999, to acquire the management and consulting
contracts on the Aurora Casino and Tunica Casino. The Company is also using
proceeds from the debt offering to finance construction of its new, dockside
gaming facility at the Aurora Casino (see "Liquidity and Capital Resources -
Capital Expenditures and Other Investing Activities"). Interest on the Senior
Secured Notes is payable semiannually each May 1 and November 1. The Senior
Secured Notes are unconditionally guaranteed on a senior secured basis by HCT
and Shreveport Management and may be guaranteed by certain future subsidiaries
of HCC. Neither HCA nor HCL are guarantors. The Senior Secured Notes and related
guarantees are secured by, among other things, (1) substantially all of the
assets of HCT and future guarantors, (2) a lien not to exceed approximately $108
million on substantially all of the assets of HCA, (3) a pledge of the capital
stock of certain subsidiaries of HCC, including HCA and HCT, and (4) the
collateral assignment of the management contract for the Shreveport Casino. The
current amount of the lien described in (2) above is approximately $81 million.

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<PAGE>

     The fixed rate Senior Secured Notes are redeemable at the option of HCC any
time on or after May 1, 2003 at 107% of the then outstanding principal amount,
decreasing to 104.666%, 102.333% and 100%, respectively, on May 1, 2004, 2005
and 2006. The Company may also redeem up to 35% of the fixed rate Senior Secured
Notes at a redemption price of 111.25% plus accrued interest at any time prior
to May 1, 2002 with the proceeds from an offering of HCC's common stock if net
proceeds to the Company from any such offering are at least $20 million.

     The floating rate Senior Secured Notes may be redeemed at the option of HCC
at any time at an initial redemption price of 105% plus accrued interest with
the redemption premium decreasing by 1% on May 1 of each year beginning May 1,
2000.

     The indenture for the Senior Secured Notes contains various provisions
limiting the ability of HCC and certain defined subsidiaries to, among other
things, pay dividends or make other restricted payments; incur additional
indebtedness or issue preferred stock, create liens, create dividend or other
payment restrictions affecting certain defined subsidiaries; enter into mergers
or consolidations or make sales of all or substantially all assets of HCC, HCT,
Shreveport Management or any future guarantor; or enter into certain
transactions with affiliates.

     Shreveport Debt Obligations -

     On August 10, 1999 the Shreveport Partnership issued $150 million of 13%
First Mortgage Notes, with contingent interest, due 2006 (the "Shreveport First
Mortgage Notes"), which are guaranteed by HCL, but are non-recourse to HCC.
Fixed interest on the Shreveport First Mortgage Notes is payable semiannually on
each February 1 and August 1. In addition, contingent interest accrues and is
payable on each interest payment date after the Shreveport Casino begins
operations. The amount of the contingent interest is equal to 5% of the
Shreveport Casino's cash flow, as defined, for the applicable period subject to
a maximum of $5 million for any four consecutive fiscal quarters. Contingent
interest amounted to $309,000 during 2001, payment of which has been deferred.
Payment of contingent interest may be deferred to the extent that payment would
result in certain financial coverage ratios not being met. Total accrued
contingent interest with respect to the Shreveport First Mortgage Notes amounted
to $386,000 at December 31, 2001. The notes are collateralized by a first
priority security interest in substantially all of the Shreveport Partnership's
existing and future assets other than assets secured by the Shreveport Senior
Secured Notes (see below) and up to $6 million in assets that may be acquired
with future equipment financing as well as by a pledge of the common stock of
the HCC subsidiaries which hold the partnership interests.

     In June 2001, the Shreveport Partnership issued $39 million of 13% Senior
Secured Notes, with contingent interest, due August 2006 (the "Shreveport Senior
Secured Notes"). The Shreveport Senior Secured Notes were issued with a premium
to yield interest at an effective annual rate of 12.21% per annum. Fixed
interest on the Shreveport Senior Secured Notes at an annual rate of 13% is
payable on each February 1 and August 1. In addition, contingent interest
accrues and is payable on each interest payment date. The amount of contingent
interest is equal to 1.3% of the consolidated cash flow of the Shreveport
Partnership for the applicable period subject to a maximum contingent interest
of $1.3 million for any four consecutive fiscal quarters. Contingent interest
amounted to $78,000 during 2001, payment of which has been deferred. Payment of
contingent interest may be deferred to the extent that payment would result in
certain financial coverage ratios not being met. Proceeds from the Shreveport
Senior Secured Notes were used, in part, to retire the Shreveport Partnership's
capital lease obligations with the remainder available for working capital
purposes.

     Under the terms of certain intercreditor collateral agreements, the
Shreveport Senior Secured Notes are secured by, among other things, (1) a
security interest in certain furniture, fixtures and equipment acquired prior to
the opening of the Shreveport Casino for $30 million and (2) a security interest
on an equal basis in up to $10 million of the collateral which secures the
Shreveport First Mortgage Notes.

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<PAGE>

     The Shreveport First Mortgage Notes and Shreveport Senior Secured Notes are
redeemable at the option of the Shreveport Partnership at any time on or after
August 1, 2003 at 106.5% of the then outstanding principal amount, decreasing to
103.25% on August 1, 2004 and 100% on or after August 1, 2005. Up to 35% of the
original aggregate amount of the Shreveport First Mortgage Notes and Shreveport
Senior Secured Notes may also be redeemed at a price of 113% plus accrued
interest at any time prior to August 1, 2002 with proceeds of contributions to
the Shreveport Partnership made by HCC from certain offerings of equity
securities by HCC.

     The indentures of the Shreveport First Mortgage Notes and the Shreveport
Senior Secured Notes contain various provisions limiting the ability of the
Shreveport Partnership to borrow money, pay dividends, make investments, pledge
or sell its assets or enter into mergers or consolidations. The indenture to the
Shreveport First Mortgage Notes also limit the ability of certain HCC
subsidiaries which guarantee the debt to acquire additional assets, become
liable for additional obligations or engage in any business activities other
than holding the partnership interests or acting as managing general partner of
the Shreveport Partnership.

     Ground Leases -

     HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease was for an initial term of five
years from the opening date of the facility and, at HCT's option, may be renewed
for nine additional five-year periods. The lease is currently in its first
five-year renewal term. Obligations under the ground lease include both minimum
monthly fixed payments and percentage rent, which in the aggregate will be the
greater of 4% of Gross Revenues, as defined, or $1.1 million per year. HCT is
responsible for all operating and other expenses of the property in accordance
with the lease terms. HCT expensed $4.4 million during the year ended December
31, 2001 in connection with the ground lease.

     The Shreveport Partnership entered into a ground lease with the city of
Shreveport for the land on which the Shreveport Casino was built. The lease has
an initial term of ten years from the date the Shreveport Casino opened with
subsequent renewals available to the Shreveport Partnership for up to an
additional 40 years. Base rental payments under the lease began when
construction commenced and were $10,000 per month during the construction
period. The base rental amount increased to $450,000 per year upon opening and
continues at that amount for the remainder of the initial ten-year lease term.
During the first five-year renewal term, the base annual rental will be
$402,500. The annual base rental payment will be $462,875 for the second
five-year renewal term, $532,306 for the third five-year renewal term, $612,152
for the fourth five-year renewal term and $703,975 for the fifth five year
renewal term with no further increases. In addition to the base rent, the
Shreveport Partnership pays monthly percentage rent equal to the greater of (1)
$500,000 per year or (2) the sum of 1% of adjusted gross revenues of the
Shreveport Casino and the amount by which 50% of the net income from the parking
facilities exceeds a specified parking income credit. Ground lease rentals
amounted to $2 million during 2001, including percentage rentals amounting to
$1.4 million. In addition, the ground lease agreement calls for payments in lieu
of admission fees to the City of Shreveport and payments to the local school
board amounting to 3.225% and .5375% of Net Gaming Proceeds (as defined in the
agreement), respectively. These additional charges amounted to $5.6 million
during 2001.

     Other -

     During December 2001, HCC and Greate Bay reached an agreement to
restructure obligations existing between the two companies. Obligations owed by
Greate Bay to HCC consisted of (1) demand notes from Greate Bay with a carrying
value of $5.7 million and interest thereon with a carrying value of $781,000 and
(2) deferred interest notes (the "PPI Funding Notes") issued by a subsidiary of
Greate Bay which had a final maturity value of $47.6 million and which were
fully reserved by HCC. The notes and interest were carried at management's
estimate of the value of the underlying collateral of the obligations. Because
the loans were considered to be impaired and management believed that the
recorded amount of the obligations reflected its best estimate of ultimate
recovery, no interest income

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<PAGE>

was recognized on a cash-basis method with respect to either of the obligations
from Greate Bay. HCC owed remaining principal of $1.9 million and interest of
$498,000 to a subsidiary of Greate Bay with respect to HCC's acquisition in 1997
of the general partnership interest in the entity which held the management
contract for the Aurora Casino. Payments under the obligation to the Greate Bay
subsidiary had been suspended since March 1, 2000 while negotiations to
restructure the intercompany obligations continued.

     Greate Bay is insolvent and, together with certain of its subsidiaries,
filed voluntary petitions for protection under Chapter 11 of the United States
Bankruptcy Code on December 28, 2001. As part of its pre-packaged bankruptcy
reorganization, Greate Bay sold its primary asset, with the net proceeds from
the sale and Greate Bay's other remaining cash to be distributed to an
unrestricted subsidiary of HCC. Greate Bay paid $2 million in December 2001 to
the unrestricted subsidiary and agreed to offset the $2.4 million owed by HCC
(see (2) above) against a like amount owed to HCC. The sale of Greate Bay's
primary asset was approved by the bankruptcy court on March 6, 2002 and
completed on March 19, 2002. Management currently anticipates that the plan of
reorganization will be confirmed in May 2002. As a result of the agreement, HCC
has adjusted the carrying value of the notes and interest due from Greate Bay at
December 31, 2001 to $12.9 million (net of reserves of $46.5 million),
management's estimate of the net proceeds yet to be received, subject to
confirmation by the bankruptcy court.

     In June 2001 HCT entered into a bank credit facility in the amount of $3
million available through June 30, 2002. Borrowings under the line of credit are
payable over a 36 month period and accrue interest at the bank's prime lending
rate plus .75% per annum, on either a fixed or floating rate basis. During June
2001, HCT borrowed $731,000 under the credit facility at an interest rate of
7.5% per annum. HCT made additional borrowings of $130,000 at the rate of 7.5%
per annum in July 2001 and $220,000 at the rate of 7.5% per annum in August
2001.

     It was originally anticipated that the Shreveport Partnership would develop
the Shreveport Casino with each of HCL and Sodak Louisiana, L.L.C. ("Sodak"), a
former partner, having a 50% interest in the development and subsequent
operations. On March 31, 1999, HCL entered into a definitive agreement with
Sodak's parent to acquire Sodak for the $2.5 million Sodak had contributed to
the Shreveport Partnership, with $1,000 to be paid at closing and the remainder
paid by HCL in June 2001. The revised structure of the joint venture received
approval by the LGCB on April 20, 1999. As a result, effective as of April 23,
1999, HCL has an effective 100% ownership interest in the Shreveport Casino with
the remaining joint venture partner holding a 10% residual interest in the event
the project is sold.

     When HCL acquired its interest in the Shreveport Partnership, it agreed to
contingently reimburse $2 million to one of the Shreveport Partnership's former
partners. The reimbursement was payable in monthly installments of $200,000
without interest, commencing with the opening of the Shreveport Casino and was
repaid in October 2001.

     HCC Consolidated Commitments -

     After giving effect to the early repayment of HCA's bank loan, HCC's
remaining maturities of long-term debt are $990,000 during 2002, decreasing to
$380,000 in 2003 and $244,000 in 2004. During 2006, the floating rate Senior
Secured Notes, Shreveport First Mortgage Notes and Shreveport Senior Secured
Notes become due aggregating $239 million. In 2007, the $310 million 11.25%
Senior Secured Notes become due.

     Commitments under noncancellable operating leases, exclusive of the ground
leases in Shreveport and Tunica previously discussed, decrease steadily from
$1.4 million in 2002 to $274,000 in 2006 and amount to approximately $5.3
million in the aggregate.

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     Capital Expenditures and Other Investing Activities

     Aurora Casino -

     Capital expenditures at the Aurora Casino during 2001 (exclusive of barge
costs - see below) were $2 million; management anticipates spending $4 million
during 2002 toward its ongoing capital improvements program. Significant
projects planned for 2002 include new slot machines, renovations to restaurants
and other departmental expenditures.

     Prior to February 15, 2002, the Aurora Casino conducted its gaming
operations on two, four-level riverboats having a combined casino space of
approximately 32,000 square feet. In March 2001, the Aurora Casino began
construction of a major expansion, highlighted by the construction of a new
dockside facility to replace the Aurora Casino's two riverboats. The first half
of the dockside facility and a new casino entrance were completed and opened on
February 15, 2002. The second half of the dockside casino, together with a new
buffet and parking facility are expected to open in June 2002. Management
believes the new dockside facility, which will have 53,000 square feet of gaming
space on a single level, will significantly increase passenger capacity and
provide a premier gaming and entertainment facility for the Aurora Casino's
patrons. The estimated total project cost is approximately $78.2 million. Until
the second half of the dockside casino is completed, the Aurora Casino will
continue to operate the larger of its two existing riverboat casinos. Up to $40
million of the estimated project costs for the Aurora Casino expansion are being
provided from HCC's debt offering completed in May 1999 with the remainder to
come from cash on hand and cash available from operations. Costs incurred during
2001 with respect to the expansion project have totaled approximately $44.6
million.

     The commencement of construction of the new dockside facility had
previously been delayed as a result of a complaint filed in late 1999 in an
Illinois state court concerning the constitutionality of a portion of the
legislation that enabled dockside gaming in Illinois. Although the
constitutional challenge centers on the relocation of one of the existing gaming
licenses, a finding that such portion of the legislation is unconstitutional
could result in a finding that all or a portion of the legislation, including
dockside gaming, is invalid. In January 2001, the presiding judge dismissed the
complaint because the plaintiffs lacked standing and failed to exhaust their
administrative remedies. The plaintiffs have filed an appeal of the ruling. If
an appellate court overturns the trial court's original ruling and the state
court rules that all or a portion of the legislation is invalid, management
believes that it may be able to continue to operate its existing riverboats on a
dockside basis pending a final resolution of the litigation. In the unlikely
event that the provisions in question are found to be unconstitutional after all
appeals, and the entire legislation is invalidated so that dockside gaming is
not permitted, the Company will be able to use its two riverboats to conduct
gaming.

     The Company is building the new dockside casino in two halves, which will
be connected to form a single dockside casino. This strategy was developed in
order to minimize disruption of the Aurora Casino's operations during the
construction period and allow for at least a partial opening at a much earlier
date. The Aurora Casino prospectively adjusted the remaining useful lives of its
riverboats and other fixed assets being replaced to reduce the recorded net book
value of such assets (approximately $10.7 million at December 31, 2001) to their
estimated net realizable value at the time they are removed from service.
Consequently, depreciation expense during 2001 increased by $21.5 million; such
additional depreciation is expected to amount to $10.7 million during 2002.

     Tunica Casino -

     Capital expenditures at the Tunica Casino during 2001 amounted to $4
million; management also anticipates spending $4 million during 2002 for its
on-going capital improvements program. During 2001, expenditures consisted
primarily of updating slot machines, replacing the casino carpeting and other
departmental expenditures. The Company is also planning a substantial capital
expenditure project at the Tunica property including the conversion of 22 hotel
rooms into 11 new suites and the renovation

                                       43

<PAGE>

of all other hotel rooms. As currently planned, the renovation will cost an
estimated $8 million and is expected to begin in 2002 with a scheduled
completion in early 2003.

     HCT entered into an agreement with two other casino operators during 1996
providing for the joint construction and ownership of a golf course.
Contributions by HCT to the limited liability corporation formed to develop and
operate the golf course, which opened in November 1998, have totalled
approximately $2.3 million.

     Shreveport Casino -

     Funding for the Shreveport Casino's construction and preopening costs was
provided by the Shreveport First Mortgage Notes which are non-recourse to HCC
(see "Liquidity and Capital Resources - Financing Activities"), by approximately
$56.3 million of equity investments ($55.3 million by HCC and $1 million by its
joint venture partner made with the proceeds of a loan from HCL) and by $30
million of furniture, fixture and equipment financing. During May 2001, HCC made
an additional capital contribution of $8.7 million to the Shreveport
Partnership.

     Capital expenditures at the Shreveport Casino during 2001 amounted to $5
million, primarily for the completion of certain hotel suites and a health spa
facility. Management anticipates expenditures of approximately $1.5 million in
2002 with respect to the Shreveport Casino's program of ongoing capital
improvements.

     On April 23, 2000, the construction site for the Shreveport Casino suffered
tornado damage which contributed to the delay in opening the facility.
Management filed damage claims and received reimbursements from its insurance
carrier during 2000 in the amount of approximately $1.7 million to cover
substantially all of the cost of repairing the damage incurred. Management is
also pursuing delayed opening claims with its carriers. To the extent the delay
in the facility's opening was the responsibility of contractors, management is
also seeking to recover damages from those entities. These matters are the
subject of a lawsuit pending in U. S. District Court in Louisiana. For this and
other reasons, the Shreveport Partnership has withheld payment of approximately
$2.6 million which the general contractor is currently seeking. Both the
recovery of any amounts by the Shreveport Partnership from either its insurance
companies or the contractors and the need to pay the general contractor the
amounts being withheld are currently subject to the results of the litigation
and management is unable to determine the amounts, if any, that will ultimately
be received or paid.

     The Shreveport Partnership entered into an agreement with a third party
during 2000 providing for the joint construction and ownership of a golf course.
Contributions by the Shreveport Partnership to the limited liability corporation
formed to develop and operate the golf course through 2001amounted to $316,000
(including $265,000 during 2001). Given the difficult market conditions, the
partners in the golf course are currently reviewing the economic feasibility of
proceeding with the golf course at this time. In addition, the partners are
awaiting certain material permits and approvals required to initiate
construction of the golf course. If the partners do proceed, the Shreveport
Partnership will be required to make approximately $2.4 million in additional
capital contributions to complete construction.

     The Shreveport Partnership has agreed to reimburse approximately $600,000
of construction finish out costs to be incurred by an outside lessee with
respect to approximately 42,000 square feet of restaurant and entertainment
facilities to be operated on property leased from the Shreveport Casino. Once
the rental period commences, the Shreveport Casino is to receive $6 per square
foot annually, payable on a monthly basis, together with percentage rentals as
specified in the lease agreement. The lessee is a limited liability company in
which certain relatives of a principal stockholder and director of HCC hold
directly or indirectly a 22.5% interest. These relatives also hold directly or
indirectly an interest in certain sublessees of the lessee that will be
operating tenants in the space. These relatives, as well as certain other
associates of the principal stockholder, also hold directly or indirectly
interests in certain sublessees of the lessee that will be operating tenants in
the space.

                                       44

<PAGE>

     Development -

     HCC continues to pursue several additional potential gaming opportunities.
HCC intends to finance any future ventures with cash flow from operations,
together with third party financing, including non-recourse project financing.

     Conclusion

     The Company has the ability under its existing loan agreements to make
approximately $3 million in additional capital contributions to the Shreveport
Partnership. To the extent the Company desires to make additional contributions
to the Shreveport Partnership in excess of the $3 million amount, the Company
would currently be required to obtain a waiver from a majority of the holders of
its $360 million in outstanding Senior Secured Notes. Management also
anticipates receiving between $11 million and $13 million in payments on the
Company's outstanding receivables from Greate Bay which would provide the
Company with additional flexibility to make future capital contributions to the
Shreveport Partnership. The Company recently entered into definitive agreements
with Greate Bay to realize value on the significant indebtedness Greate Bay owes
the Company. Other than trade payables, the Company is Greate Bay's sole
creditor. As part of a pre-packaged bankruptcy reorganization of Greate Bay,
Greate Bay sold its primary asset and the net proceeds from the sale, as well as
Greate Bay's other cash, are to be distributed to an unrestricted subsidiary of
HCC. Proceeds received by the HCC subsidiary from Greate Bay will not be
restricted by the terms of the Company's loan agreements and, therefore, would
be available for any corporate purpose, including making additional capital
contributions to the Shreveport Partnership. Greate Bay filed its petition for
reorganization and plan with the United States Bankruptcy Court for the District
of Delaware on December 28, 2001 and the sale of Greate Bay's primary asset was
approved on March 6, 2002. The sale of the asset was completed on March 19,
2002. Management currently anticipates that the restructuring will be confirmed
in May 2002.

     Management anticipates that HCC's funding requirements for its operating
activities will continue to be satisfied by existing cash and cash generated by
the Aurora Casino and the Tunica Casino. Management believes that the Shreveport
Casino's existing cash together with cash from its operations and additional
capital contributions from HCC as described above, will be sufficient to meets
its liquidity and capital resource needs for the next 24 months. Under the
indenture to the Senior Secured Notes, the Shreveport Partnership will also be
able to borrow, if needed, up to an additional $6 million to finance the
purchase of furniture, fixtures and equipment.

                                       45

<PAGE>

ITEM 8. INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                             ----
<S>                                                                                                          <C>
Hollywood Casino Corporation and Subsidiaries:

 Independent Auditors' Report.....................................................................            47

 Consolidated Balance Sheets as of December 31, 2001
  and 2000........................................................................................            48

 Consolidated Statements of Operations for the Years
  Ended December 31, 2001, 2000 and 1999..........................................................            50

 Consolidated Statement of Changes in Shareholders'
  Deficit for the Three Years Ended December 31, 2001.............................................            51

 Consolidated Statements of Cash Flows for the Years
  Ended December 31, 2001, 2000 and 1999..........................................................            52

 Notes to Consolidated Financial Statements.......................................................            53

Hollywood Casino-Aurora, Inc.

 Independent Auditors' Report.....................................................................            84

 Balance Sheets as of December 31, 2001 and 2000..................................................            85

 Statements of Operations for the Years Ended
  December 31, 2001, 2000 and 1999................................................................            87

 Statement of Changes in Shareholder's Equity for the Three Years
  Ended December 31, 2001.........................................................................            88

 Statements of Cash Flows for the Years Ended December 31, 2001, 2000
  and 1999........................................................................................            89

 Notes to Financial Statements....................................................................            90

HWCC-Tunica, Inc.

 Independent Auditors' Report.....................................................................           103

 Consolidated Balance Sheets as of December 31, 2001 and 2000.....................................           104

 Consolidated Statements of Operations for the Years
  Ended December 31, 2001, 2000 and 1999..........................................................           106

 Consolidated Statement of Changes in Shareholder's Equity for the Three Years
  Ended December 31, 2001.........................................................................           107

 Consolidated Statements of Cash Flows for the Years Ended
  December 31, 2001, 2000 and 1999 ...............................................................           108

 Notes to Consolidated Financial Statements.......................................................           109
</TABLE>

                                       46

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
   Hollywood Casino Corporation:

We have audited the accompanying consolidated balance sheets of Hollywood Casino
Corporation (the Company and a Delaware corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, changes in shareholders' deficit and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Hollywood Casino Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.

Deloitte & Touche LLP
Dallas, Texas
March 19, 2002

                                       47

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS
                                                               December 31,
                                                      ------------------------------
                                                          2001             2000
                                                      -------------    -------------
<S>                                                   <C>              <C>
Current Assets:
 Cash and cash equivalents                            $ 131,849,000    $ 155,570,000
 Receivables, net of allowances of $3,571,000
   $2,668,000, respectively                               5,232,000        5,552,000
 Inventories                                              3,305,000        3,603,000
 Deferred income taxes                                    2,233,000        3,054,000
 Refundable deposits and other
   current assets                                         3,525,000        4,153,000
 Due from affiliates, net of valuation allowances        12,962,000        6,661,000
                                                      -------------    -------------

   Total current assets                                 159,106,000      178,593,000
                                                      -------------    -------------

Property and Equipment:
 Land and improvements                                    9,640,000        9,594,000
 Buildings and improvements                             224,897,000      222,637,000
 Riverboats and barges                                   89,836,000       89,421,000
 Operating equipment                                    142,224,000      134,362,000
 Construction in progress                                47,904,000        4,849,000
                                                      -------------    -------------

                                                        514,501,000      460,863,000
 Less - accumulated depreciation
   and amortization                                    (153,769,000)    (105,406,000)
                                                      -------------    -------------

   Net property and equipment                           360,732,000      355,457,000
                                                      -------------    -------------

Cash restricted for construction projects                        --        9,530,000
                                                      -------------    -------------

Other Assets:
 Deferred financing costs                                13,535,000       14,875,000
 Land rights                                              6,639,000        6,843,000
 Other assets                                            13,385,000       12,602,000
                                                      -------------    -------------

   Total other assets                                    33,559,000       34,320,000
                                                      -------------    -------------

                                                      $ 553,397,000    $ 577,900,000
                                                      =============    =============
</TABLE>

        The accompanying notes to consolidated financialstatements are an
              integral part of these consolidated balance sheets.

                                       48

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                           ------------------------------
                                                                                2001            2000
                                                                           -------------    -------------
<S>                                                                        <C>              <C>
Current Liabilities:
 Current maturities of long-term debt
   and capital lease obligations                                           $   2,056,000    $  16,493,000
 Note payable                                                                         --        2,499,000
 Accounts payable                                                             19,520,000       22,177,000
 Accrued liabilities -
  Salaries and wages                                                           9,913,000        9,657,000
  Interest                                                                    17,570,000       18,067,000
  Gaming and other taxes                                                       3,587,000        3,229,000
  Insurance                                                                    4,588,000        2,816,000
  Other                                                                        8,409,000        5,398,000
 Federal income taxes payable                                                    157,000        3,299,000
 Other current liabilities                                                     4,414,000        3,560,000
                                                                           -------------    -------------

  Total current liabilities                                                   70,214,000       87,195,000
                                                                           -------------    -------------

Long-Term Debt                                                               550,950,000      510,868,000
                                                                           -------------    -------------

Capital Lease Obligations                                                     16,554,000       37,861,000
                                                                           -------------    -------------

Other Noncurrent Liabilities                                                   7,380,000        5,658,000
                                                                           -------------    -------------

Commitments and Contingencies

Minority Interest (Note 7)                                                     2,111,000        2,078,000
                                                                           -------------    -------------

Shareholders' Deficit:
 Common Stock -
  Class A common stock, $.0001 par value per share;
   50,000,000 shares authorized; 25,334,000 and 24,997,000
   shares issued and outstanding, respectively, net of
   44,000 treasury shares at par in 2001                                           3,000            2,000
  Class B, non-voting, $.0001 par value per share;
   10,000,000 shares authorized; no shares issued                                     --               --
 Additional paid-in capital                                                  217,727,000      217,030,000
 Accumulated deficit                                                        (311,542,000)    (282,792,000)
                                                                           -------------    -------------

   Total shareholders' deficit                                               (93,812,000)     (65,760,000)
                                                                           -------------    -------------

                                                                           $ 553,397,000    $ 577,900,000
                                                                           =============    =============
</TABLE>

        The accompanying notes to consolidated financialstatements are an
              integral part of these consolidated balance sheets.

                                       49

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                                ----------------------------------------------
                                                                    2001             2000            1999
                                                                -------------    ------------    -------------
<S>                                                             <C>              <C>             <C>
Revenues:
  Casino                                                        $ 483,357,000    $333,427,000    $ 292,920,000
  Rooms                                                            22,309,000      10,992,000       10,457,000
  Food and beverage                                                56,852,000      33,773,000       29,834,000
  Other                                                             8,385,000       4,892,000        4,814,000
                                                                -------------    ------------    -------------
                                                                  570,903,000     383,084,000      338,025,000
  Less - promotional allowances                                  (112,847,000)    (71,629,000)     (60,893,000)
                                                                -------------    ------------    -------------
   Net revenues                                                   458,056,000     311,455,000      277,132,000
                                                                -------------    ------------    -------------
Expenses:
  Casino                                                          315,966,000     202,321,000      179,783,000
  Rooms                                                             2,999,000       1,190,000        1,161,000
  Food and beverage                                                17,441,000       9,331,000        8,533,000
  Other                                                             5,139,000       2,013,000        2,251,000
  General and administrative                                       38,753,000      20,368,000       20,174,000
  Depreciation and amortization                                    50,495,000      13,647,000       14,163,000
  Development                                                         603,000       1,058,000          946,000
  Preopening                                                               --      14,794,000          841,000
  Executive compensation accrual                                    2,848,000              --               --
  Recoveries on affiliate obligations                             (10,828,000)             --               --
  Termination of management and consulting agreements                      --              --       40,389,000
  Write down of assets                                                     --              --       13,322,000
                                                                -------------    ------------    -------------
     Total expenses                                               423,416,000     264,722,000      281,563,000
                                                                -------------    ------------    -------------

Income (loss) from operations                                      34,640,000      46,733,000       (4,431,000)
                                                                -------------    ------------    -------------
Non-operating income (expenses):
  Interest income                                                   4,873,000      11,349,000        7,868,000
  Interest expense, net of capitalized interest of
    $1,203,000, $11,814,000, and $1,052,000, respectively         (67,781,000)    (55,191,000)     (47,050,000)
  Gain on settlement of litigation, net                                    --       7,220,000               --
  Equity in losses of unconsolidated affiliate                       (183,000)        (55,000)        (141,000)
  (Loss) gain on disposal of assets                                  (105,000)        190,000         (567,000)
                                                                -------------    ------------    -------------
   Total non-operating expenses, net                              (63,196,000)    (36,487,000)     (39,890,000)
                                                                -------------    ------------    -------------

(Loss) income before income taxes, extraordinary
  and other items                                                 (28,556,000)     10,246,000      (44,321,000)
Income tax benefit (provision)                                      2,087,000      (1,873,000)      (1,196,000)
                                                                -------------    ------------    -------------

(Loss) income before extraordinary and other items                (26,469,000)      8,373,000      (45,517,000)
Minority interest in Hollywood Casino Shreveport (Note 7)          (1,438,000)        (78,000)              --
Minority interest in earnings of Limited Partnership (Note 1)              --              --       (5,801,000)
                                                                -------------    ------------    -------------

(Loss) income before extraordinary item                           (27,907,000)      8,295,000      (51,318,000)
Extraordinary item:
 Loss on early extinguishment of debt                                (843,000)             --      (30,353,000)
                                                                -------------    ------------    -------------

Net (loss) income                                               $ (28,750,000)   $  8,295,000    $ (81,671,000)
                                                                =============    ============    =============

Basic net (loss) income per common share:
 (Loss) income before extraordinary item                        $       (1.12)   $        .33    $       (2.05)
 Extraordinary item                                                      (.03)             --            (1.22)
                                                                -------------    ------------    -------------
 Net (loss) income                                              $       (1.15)   $        .33    $       (3.27)
                                                                =============    ============    =============

Diluted net (loss) income per common share:
  (Loss) income before extraordinary item                       $       (1.12)   $        .31    $       (2.05)
  Extraordinary item                                                     (.03)             --            (1.22)
                                                                -------------    ------------    -------------
 Net (loss) income                                              $       (1.15)   $        .31    $       (3.27)
                                                                =============    ============    =============
</TABLE>

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

                                       50

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
                   For the Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                           Class A
                                         Common Stock        Additional
                                      -------------------     Paid-in       Accumulated
                                        Shares     Amount     Capital         Deficit
                                      ----------   ------   ------------   -------------
<S>                                   <C>          <C>      <C>            <C>
BALANCES, January 1, 1999             24,950,000   $2,000   $216,926,000   $(209,416,000)
   Grant of stock options to non-
     employee directors                       --       --          2,000              --
   Net loss                                   --       --             --     (81,671,000)
                                      ----------   ------   ------------   -------------

BALANCES, December 31, 1999           24,950,000    2,000    216,928,000    (291,087,000)

   Grant of stock options to non-
     employee directors                       --       --         15,000              --
   Exercise of stock options              47,000       --         87,000              --
   Net income                                 --       --             --       8,295,000
                                      ----------   ------   ------------   -------------

BALANCES, December 31, 2000           24,997,000    2,000    217,030,000    (282,792,000)
   Exercise of stock options             381,000    1,000      1,166,000              --
   Treasury shares acquired through
     exercise of stock options           (44,000)      --       (469,000)             --
   Net loss                                   --       --             --     (28,750,000)
                                      ----------   ------   ------------   -------------
BALANCES, December 31, 2001           25,334,000   $3,000   $217,727,000   $(311,542,000)
                                      ==========   ======   ============   =============
</TABLE>

                The accompanying notes to consolidated financial
                     statements are an integral part of this
                             consolidated statement.

                                       51

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                           --------------------------------------------
                                                                              2001             2000            1999
                                                                           ------------   -------------   -------------
<S>                                                                        <C>            <C>             <C>
OPERATING ACTIVITIES:
   Net (loss) income                                                       $(28,750,000)  $   8,295,000   $ (81,671,000)
   Adjustments to reconcile net (loss) income to net cash provided by
     operating activities:
     Depreciation and amortization, including accretion of debt discount
       and amortization of premium                                           53,283,000      16,166,000      16,135,000
     Extraordinary item                                                         843,000              --      30,353,000
     Recoveries on affiliate obligations                                    (10,828,000)             --              --
     Write down of assets                                                            --              --      13,322,000
     Loss on disposal of assets                                                 105,000        (190,000)        567,000
     Minority interest in Hollywood Casino Shreveport                         1,438,000          78,000              --
     Minority interest in earnings of Limited Partnership                            --              --       5,801,000
     Grant of stock options                                                          --          15,000           2,000
     Equity in losses of unconsolidated affiliate                               183,000          55,000         141,000
     Provision for doubtful accounts                                          2,718,000       1,461,000         804,000
     Deferred income tax benefit                                               (480,000)       (286,000)     (3,403,000)
     Increase in receivables                                                 (2,398,000)     (3,003,000)     (1,103,000)
     Increase in accounts payable and accrued expenses                        2,741,000      13,503,000      23,871,000
     (Decrease) increase in federal taxes payable                            (3,142,000)         65,000       3,234,000
     Net change in other current assets and liabilities                       1,700,000      (1,250,000)     (4,280,000)
     Net change in other noncurrent assets and liabilities                    2,660,000      (1,714,000)       (342,000)
                                                                           ------------   -------------   -------------

       Net cash provided by operating activities                             20,073,000      33,195,000       3,431,000
                                                                           ------------   -------------   -------------

INVESTING ACTIVITIES:
   Purchases of property and equipment                                      (55,710,000)   (128,842,000)    (49,758,000)
   Collections on notes receivable                                            2,000,000         900,000              --
   Proceeds from sale of assets                                                  77,000       2,492,000       3,959,000
   Increase in cash from acquisition                                                 --              --       1,525,000
   Loan to joint venture partner                                                     --              --      (1,000,000)
   Short-term investments                                                            --              --       3,905,000
   Investments in unconsolidated affiliates                                    (425,000)        (48,000)        (45,000)
   Net change in cash restricted for construction projects                    9,530,000     137,780,000    (147,310,000)
                                                                           ------------   -------------   -------------

     Net cash (used in) provided by investing activities                    (44,528,000)     12,282,000    (188,724,000)
                                                                           ------------   -------------   -------------

FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                                  41,251,000         139,000     493,474,000
   Deferred financing costs                                                  (2,296,000)     (1,955,000)    (17,134,000)
   Payments to Sodak Gaming                                                  (2,499,000)             --              --
   Repayments of long-term debt                                              (3,916,000)     (2,542,000)   (210,006,000)
   Payments on capital lease obligations                                    (31,099,000)       (987,000)       (893,000)
   Issuance of common stock                                                     698,000          87,000              --
   Investment by joint venture partner                                               --              --       1,000,000
   Limited partnership distributions                                         (1,405,000)             --      (7,915,000)
                                                                           ------------   -------------   -------------

     Net cash provided by (used in) financing activities                        734,000      (5,258,000)    258,526,000
                                                                           ------------   -------------   -------------
     Net (decrease) increase in cash and cash equivalents                   (23,721,000)     40,219,000      73,233,000
       Cash and cash equivalents at beginning of year                       155,570,000     115,351,000      42,118,000
                                                                           ------------   -------------   -------------

       Cash and cash equivalents at end of year                            $131,849,000   $ 155,570,000   $ 115,351,000
                                                                           ============   =============   =============
</TABLE>

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

                                       52

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Organization and Business

     Hollywood Casino Corporation ("HCC" or the "Company"), is a Delaware
corporation which was organized and incorporated on November 5, 1990.
Approximately 53% of the issued and outstanding stock of HCC is owned by Jack E.
Pratt, Edward T. Pratt, Jr., William D. Pratt, Edward T. Pratt, III and by
certain general partnerships and trusts controlled by the Pratts and by other
family members (collectively, the "Pratt Family"). The Pratt Family also owns
approximately 35% of the outstanding common stock of Greate Bay Casino
Corporation ("Greate Bay"), a Delaware corporation, which previously held
management and consulting contracts with casino properties owned by HCC.

     HCC owns all of the outstanding common stock of Hollywood Casino - Aurora,
Inc. ("HCA"), HWCC - Tunica, Inc. ("HCT"), HWCC-Louisiana, Inc. ("HCL") and
HWCC-Shreveport, Inc. ("Shreveport Management"). HCA is an Illinois corporation
organized during 1990 which owns and until February 2002 operated an
approximately 32,000 square foot riverboat gaming operation together with
docking and other entertainment facilities under the service mark Hollywood
Casino(R) in Aurora, Illinois approximately 35 miles west of downtown Chicago
(the "Aurora Casino"). In March 2001, the Aurora Casino began construction of a
major expansion, highlighted by the construction of a new dockside facility to
replace the Aurora Casino's two riverboats. The first half of the dockside
facility and a new casino entrance were completed and opened on February 15,
2002. The second half of the dockside casino, together with a new buffet and
parking facility are expected to open in June 2002. The estimated total project
cost is approximately $78,200,000. Until the second half of the dockside casino
is completed, the Aurora Casino will continue to operate the larger of its two
existing riverboat casinos. The combined dockside facility will have 53,000
square feet of gaming space on a single level. HCT is a Texas corporation formed
by HCC during 1993 which owns and operates a 54,000 square foot gaming facility,
adjacent support facilities and a 505-room hotel complex under the service mark
Hollywood Casino(R) in northern Tunica County, Mississippi approximately 30
miles south of Memphis, Tennessee (the "Tunica Casino"). HCL is a Louisiana
corporation formed by HCC in 1993 which owns and operates a 59,000 square foot
dockside gaming facility, adjacent support facilities, and a 403-room, all
suite, art deco style hotel in Shreveport, Louisiana approximately 180 miles
east of Dallas, Texas (the "Shreveport Casino"). Shreveport Management is a
Louisiana corporation formed by HCC in 1997 which holds the management contract
for the Shreveport Casino. The Aurora Casino, the Tunica Casino and the
Shreveport Casino commenced operations in June 1993, August 1994 and December
2000, respectively.

     The Company believes that its three gaming facilities derive a significant
amount of their gaming revenues from patrons living in the surrounding areas.
Competition within the Company's gaming markets is intense and management
believes that this competition will continue or intensify in the future.

     Prior to October 14, 1999, HCC was the general partner in Pratt Management
L.P. ("PML"), having acquired such interest in April 1997 from PPI Corporation,
a wholly owned subsidiary of Greate Bay. PML held the management contract on and
earned management fees from the Aurora Casino and incurred operating and other
expenses with respect to its management thereof. As general partner, HCC
received 99% of the first $84,000 of net income earned by PML each month
together with 1% of any income earned above such amount. The remaining limited
partnership interest was held by Pratt Casino Corporation ("PCC") which, until
its acquisition by HCC in October 1999, was a wholly owned subsidiary of Greate
Bay. While owned by Greate Bay, PCC's limited partnership interest was reflected
on the accompanying consolidated financial statements as a minority interest.
PCC also had a consulting contract with the Tunica Casino (see Note 7).

                                       53

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     HCC acquired all of the capital stock of PCC from Greate Bay in October
1999. When acquired by HCC, PCC's assets consisted of its management contract
for the Aurora Casino and its consulting agreement with the Tunica Casino and
its liabilities consisted of a $40.3 million obligation payable in satisfaction
of certain notes issued by a subsidiary of PCC and guaranteed by PCC. The
payment of the $40.3 million obligation by HCC in October 1999 resulted in the
termination of the management contract and consulting agreement and was
reflected as a charge to expense by the affected entities.

     In September 1998, a joint venture in which HCL was a partner (the
"Shreveport Partnership") received approval to develop, own and operate the
Shreveport Casino. HCL originally planned to develop the Shreveport Casino with
two partners in a joint venture in which it would have had an interest of
approximately 50%. On March 31, 1999, HCL entered into a definitive agreement
with one of the joint venture partners to acquire its interest in the Shreveport
Partnership. As a result, HCL obtained an effective 100% ownership interest in
the Shreveport Casino with the remaining joint venture partner holding a
residual interest in the event the project is ever sold amounting to 10% plus
any capital contributions made by the joint venture partner to the Shreveport
Partnership or otherwise credited to their account. Accordingly, the Shreveport
Partnership is included in the consolidated financial statements of HCC. The
remaining joint venture partner's interest is reflected as minority interest on
the accompanying consolidated balance sheets at December 31, 2001 and 2000 (see
Note 7 with respect to other transactions with the joint venture partner).

     The accompanying consolidated financial statements also reflect HCT's
one-third investment in Tunica Golf Course LLC and the Shreveport Casino's 50%
interest in Shreveport Golf Company under the equity method of accounting.
Tunica Golf Course LLC was organized in 1996 to develop and operate a golf
course to be used by patrons of the Tunica Casino and other participating
casino/hotel properties. The golf course was completed and opened for play in
November 1998. Shreveport Golf Company was organized in 2000 to develop and
operate a golf course to be used by patrons of the Shreveport Casino. The
investments are included in other noncurrent assets on the accompanying
consolidated balance sheets at December 31, 2001 and 2000.

     The Board of Directors approved the adoption in May 1993 of a Rights
Agreement providing that stockholders of HCC receive rights to acquire Series A
Junior Participating Preferred Stock of HCC at an initial price of $60 per one
one-hundredth of a share, subject to adjustment, for each share of HCC Common
Stock owned. The rights become exercisable if a person (other than the Pratt
Family) acquires 20% or more, or announces a tender offer for 20% or more, of
the Company's Common Stock. If the Company is acquired in a merger or other
business combination, each right will enable the holder to exercise such right
for Common Stock of the acquiring company at a 50% discount. The rights, which
expire on May 7, 2003, may be redeemed by the Company at its option at a price
of $.0001 per right at any time prior to the earlier of 10 days following the
date after which a person has acquired at least 20% of the Company's outstanding
shares or May 7, 2003. Until such time as it becomes likely that the rights will
be exercised, the calculation of basic and diluted earnings per share does not
reflect the retroactive adjustment for the bonus element of the Rights
Agreement.

                                       54

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2)  Summary of Significant Accounting Policies

     The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Principles of consolidation -

     The consolidated financial statements include the accounts of HCC and its
wholly owned subsidiaries and, for periods subsequent to April 23, 1999, the
accounts of the Shreveport Partnership. All significant intercompany balances
and transactions have been eliminated. Investments in unconsolidated affiliates
including joint ventures that were 50% or less owned are accounted for by the
equity method.

Casino revenues, promotional allowances and departmental expenses -

     HCC recognizes the net win from gaming activities (the difference between
gaming wins and losses) as casino revenues. Casino revenues are net of accruals
for anticipated payouts of progressive and certain other slot machine jackpots
and certain progressive table game payouts. Such anticipated jackpots and
payouts are reflected as other accrued liabilities on the accompanying
consolidated balance sheets.

     Promotional allowances consist of (1) the estimated value of rooms, food
and beverage and other items provided to customers without charge and (2) the
"cash back" feature of customer loyalty programs. The estimated value of
complimentaries has been included in revenues on the accompanying consolidated
statements of operations and a corresponding amount has been deducted as
promotional allowances. During 2001, the Emerging Issues Task Force ("EITF") of
the Financial Accounting Standards Board reached consensuses requiring that the
"cash-back" feature of customer loyalty programs also be reported as a reduction
to revenues rather than as an operating expense. Accordingly, all such costs for
the current and prior year periods have been reported on the accompanying
consolidated statements of operations as promotional allowances instead of
casino expenses as previously reported. This change results only in a
reclassification within the consolidated statements of operations and does not
affect consolidated income from operations or consolidated net (loss) income.
Promotional allowances for the years ended December 31, 2001, 2000 and 1999
consist of the following:

                                2001          2000           1999
                            ------------   -----------   ------------
Complimentaries:
     Room                   $ 15,578,000   $ 7,646,000   $ 7,139,000
     Food and beverage        41,751,000    24,767,000    21,328,000
     Other                     4,074,000     2,489,000     2,186,000
Customer loyalty programs     51,444,000    36,727,000    30,240,000
                            ------------   -----------   -----------

                            $112,847,000   $71,629,000   $60,893,000
                            ============   ===========   ===========

                                       55

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

     The costs of complimentaries have been included as casino expenses on the
accompanying consolidated statements of operations. Costs of complimentaries
allocated from the rooms, food and beverage and other operating departments to
the casino department during the years ended December 31, 2001, 2000 and 1999
are as follows:

                               2001           2000         1999
                            -----------   -----------   -----------
Rooms                       $ 6,168,000   $ 3,230,000   $ 2,742,000
Food and beverage            47,148,000    26,338,000    22,613,000
Other                         4,937,000     1,701,000     1,394,000
                            -----------   -----------   -----------

                            $58,253,000   $31,269,000   $26,749,000
                            ===========   ===========   ===========

Cash and cash equivalents -

     Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as commercial paper,
certificates of deposit and fixed repurchase agreements.

Cash restricted for construction project -

     Cash restricted for construction project consisted of investments in
government securities used for specified purposes and purchased with net
proceeds from the Shreveport First Mortgage Notes (see Note 3(e)) as required by
the indenture for the Shreveport First Mortgage Notes. Restricted cash at
December 31, 2000 was comprised of an account with the remaining funds set aside
to make interest payments with respect to the Shreveport First Mortgage Notes;
the restrictions on such account were removed on the February 1, 2001 interest
payment date. Interest earned, but not yet received, on restricted cash
investments was included in interest receivable on the accompanying consolidated
balance sheet at December 31, 2000.

Allowance for doubtful accounts -

     The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful accounts
amounting to $2,718,000, $1,461,000 and $804,000 were made during the years
ended December 31, 2001, 2000 and 1999, respectively.

Inventories -

     Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market.

                                       56

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Property and equipment -

     Property and equipment have been recorded at cost and are being
depreciated, except as noted below, utilizing the straight-line method over the
estimated useful lives of the assets as follows:

     Buildings and improvements                                10-40 years
     Riverboats and barges                                     25-40 years
     Operating equipment                                        3-15 years

     Upon committing to proceed with the Aurora Casino expansion project (see
Note 1) management conducted a review of its long-lived assets for possible
impairment. Based on the undiscounted cash flows anticipated to be earned during
the construction period, management concluded that no impairment of the Aurora
Casino's assets existed and no write down of its assets was required. The Aurora
Casino prospectively adjusted the remaining useful lives of its existing
riverboats and other fixed assets being replaced to reduce the recorded net book
value of such assets (approximately $10.7 million at December 31, 2001) to their
estimated net realizable value at the time they are removed from service.
Consequently, depreciation expense during 2001 subsequent to the announcement of
the expansion project increased by $21,543,000. Such additional depreciation
expense is expected to amount to approximately $10.7 million during 2002.

Deferred financing costs -

     The costs of issuing long-term debt, including all underwriting, licensing,
legal and accounting fees, have been deferred and are being amortized over the
term of the related debt issues using either the effective interest method or,
where appropriate, the straight-line method approximating the effective interest
method. Amortization of such costs was $2,793,000, $2,429,000 and $1,510,000 for
the years ended December 31, 2001, 2000 and 1999, respectively, and is included
in interest expense on the accompanying consolidated statements of operations.
Deferred financing costs, net of accumulated amortization, amounting to $843,000
and $4,182,000, respectively, were written off during 2001 and 1999 in
connection with the reacquisition of outstanding obligations. An additional
$978,000 of deferred financing costs were written off in 1999 in connection with
the acquisition of PCC.

Long-lived assets -

     Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. HCC
does not believe that any such events or changes occurred during the year ended
December 31, 2001 except as noted above under the caption "Property and
Equipment".

Accrued insurance -

     HCC is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of such
accrued liabilities based on an evaluation of the merits of individual claims
and historical claims experience; accordingly, HCC's ultimate liability may
differ from the amounts accrued.

                                       57

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Income taxes -

     HCC accounts for income taxes using the liability method which results in
the determination of deferred taxes based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities.

Preopening costs -

     Preopening costs include, among other things, organizational costs,
marketing and promotional costs, hiring and training of new employees and other
operating costs which were incurred prior to opening the Shreveport Casino. Such
costs are accounted for under the provisions of Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities," issued by the American
Institute of Certified Public Accountants which requires that such costs be
expensed as incurred.

Interest expense -

     Interest expense includes the accretion of debt discount amounting to
$87,000, $154,000 and $491,000 during the years ended December 31, 2001, 2000
and 1999, respectively. Interest expense also includes the amortization of
premium on long-term debt amounting to $92,000 during 2001.

     A portion of the interest incurred on construction financing is capitalized
during the construction period. Capitalized interest amounted to $1,203,000,
$11,814,000 and $1,052,000, respectively, during the years ended December 31,
2001, 2000 and 1999. Such capitalized costs are allocated to the individual
components of property and equipment and other assets and, once placed in
service, are amortized over the useful lives of the related assets.

Land rights -

     Land rights are being amortized on a straight-line basis over the estimated
useful life of the Tunica facility, which is less than the term of the ground
lease including renewals (see Note 4); such amortization commenced with the
opening of the Tunica Casino. Management presently intends to renew the ground
lease at least through the estimated 40-year useful life of the facility.
Accumulated amortization of such land rights amounted to $1,806,000 and
$1,602,000, respectively, at December 31, 2001 and 2000.

Employee Stock Options -

     HCC has adopted the disclosure provisions of statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 allows an entity to continue to measure compensation cost for
employee stock-based compensation plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion 25"). Entities electing to
remain with the accounting under Opinion 25 are required to make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting under SFAS 123 had been applied. HCC has elected to
continue to account for employee stock-based compensation under Opinion 25 with
the requisite additional disclosures included in Note 6.

                                       58

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

Earnings per common share -

     Basic earnings per common share is calculated by dividing the net (loss)
income by the weighted average number of shares of common stock outstanding.
Diluted earnings per common share is calculated for periods in which income from
continuing operations was earned by dividing the components of net (loss) income
by the weighted average number of shares of common stock and potential common
shares outstanding. All potential common shares are excluded from the
calculation of diluted net loss per share for periods during which a loss was
incurred because the effect of their inclusion would be antidilutive.

     The weighted average number of shares of common stock and potential common
shares outstanding used for the calculation of earnings per share is as follows:

                                            Year Ended December 31,
                                     ------------------------------------
                                        2001         2000         1999
                                     ----------   ----------   ----------
Shares used in the calculation of:
     Basic net income per share      25,017,186   24,965,804   24,949,976
     Diluted net income per share    25,017,186   26,753,440   24,949,976

     No potential common shares or options are included in the calculation of
diluted earnings per share for the years ended December 31, 2001 and 1999 as the
inclusion of such shares would be antidilutive due to the net losses incurred
during the period. The number of shares used in the calculation of diluted
earnings per share for the year ended December 31, 2000 has been adjusted to
include potential common shares arising from stock options held by certain
employees and directors. The calculation of diluted earnings per share for each
of the three years ended December 31, 2001 excludes certain options to purchase
common stock which would be antidilutive to the diluted earnings per share
calculation. The weighted average number of options excluded was 2,743,929 for
2001, 2,675 for 2000 and 2,056,806 for 1999.

Recent Accounting Pronouncements -

     In June 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" ("SFAS 141") and Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). SFAS 141 requires the use of the purchase
method of accounting for all business combinations initiated after June 30,
2001. SFAS 142 establishes new standards for goodwill acquired in a business
combination and requires that goodwill and other intangible assets be
periodically reviewed for impairment rather than being amortized. SFAS 142 is
effective for fiscal years beginning after December 15, 2001 with earlier
application permitted. The Company does not expect the adoption to have a
material effect on its consolidated financial statements.

     The Financial Accounting Standards Board issued Statement No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS 143") in June 2001 and
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144") in August 2001. SFAS 143 addresses reporting for
obligations associated with the retirement of tangible long-lived assets and the
related asset retirement costs. SFAS 143 is effective for fiscal years beginning
after June 15, 2002 with earlier application permitted. SFAS 144 supercedes
earlier guidance with respect to such accounting and is

                                       59

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

effective for fiscal years beginning after December 15, 2001. The Company does
not expect the adoption of SFAS 143 and SFAS 144 to have a material effect on
its consolidated financial statements.

Reclassifications -

     Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 2001 consolidated financial statement
presentation.

(3)  Long-Term Debt and Pledge of Assets

     Substantially all of HCC's assets are pledged in connection with its
long-term indebtedness. The obligations of HCL and its subsidiaries are
non-recourse to HCC.

<TABLE>
<CAPTION>
                                                               December 31,   December 31,
                                                                  2001            2000
                                                               ------------   ------------
<S>                                                            <C>            <C>
Indebtedness of HCC:
   11.25% Senior Secured Notes, due 2007 (a)                   $310,000,000   $310,000,000
   Floating rate Senior Secured Notes, due 2006 (a)              50,000,000     50,000,000
   Promissory note due to affiliate (Note 7)                             --      1,893,000
                                                               ------------   ------------
                                                                360,000,000    361,893,000
                                                               ------------   ------------
Indebtedness of HCA:
   Promissory note to bank (b)                                      398,000      1,145,000
                                                               ------------   ------------

Indebtedness of HCT :
   Equipment loans (c)                                              245,000      1,188,000
   Bank credit facility (d)                                         950,000         89,000
                                                               ------------   ------------
                                                                  1,195,000      1,277,000
                                                               ------------   ------------
Indebtedness of HCL which is non-recourse to HCC:
   13% Shreveport First Mortgage Notes, with contingent
      interest, due 2006 (e)                                    150,000,000    150,000,000
   13% Shreveport Senior Secured Notes, with contingent
     interest, due 2006, including premium of $1,078,000 (f)     40,078,000             --
   Note payable, net of discount of $87,000 (g)                          --      1,913,000
   Other                                                             27,000         33,000
                                                               ------------   ------------
                                                                190,105,000    151,946,000
                                                               ------------   ------------

   Total indebtedness                                           551,698,000    516,261,000
     Less - current maturities                                     (748,000)    (5,393,000)
                                                               ------------   ------------

       Total long-term debt                                    $550,950,000   $510,868,000
                                                               ============   ============
</TABLE>

----------
(a)  During May 1999, HCC refinanced its outstanding 12.75% senior secured notes
     through a debt offering of $310,000,000 of 11.25% Senior Secured Notes due
     May 1, 2007 and $50,000,000 of floating rate Senior Secured Notes due May
     1, 2006 (collectively, the "Senior Secured Notes"). Interest on the
     floating rate notes is equal to the six-month LIBOR rate plus 6.28% and is
     reset semiannually. Interest on the floating rate notes has been adjusted
     from an initial rate of 11.36% to 12.41% per annum effective November 1,
     1999, to 12.89% effective May 1, 2000, to 13% effective November 1, 2000,
     to 10.51% effective May 1, 2001 and to 8.45% effective November 1, 2001. In
     addition to refinancing existing debt, the Company used proceeds from the
     debt offering to fund a portion of its equity investment in the Shreveport
     Casino and, during October

                                       60

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

     1999, to acquire the management and consulting contracts on the Aurora
     Casino and Tunica Casino (see Note 1). The Company also plans to use
     proceeds from the debt offering to partially finance construction of a new,
     dockside gaming facility at the Aurora Casino (see Note 1). Interest on the
     Senior Secured Notes is payable each May 1 and November 1. The Senior
     Secured Notes are unconditionally guaranteed on a senior secured basis by
     HCT and Shreveport Management and may be guaranteed by certain future
     subsidiaries of HCC. Neither HCA nor HCL are guarantors. The Senior Secured
     Notes and related guarantees are secured by, among other things, (1)
     substantially all of the assets of HCT and future guarantors, (2) a lien
     not to exceed approximately $108,000,000 on substantially all of the assets
     of HCA, (3) a pledge of the capital stock of certain subsidiaries of HCC,
     including HCA and HCT, and (4) the collateral assignment of the management
     contract for the Shreveport Casino. The limitation on the lien described in
     (2) above is currently $81,007,000.

     The fixed rate Senior Secured Notes are redeemable at the option of HCC any
     time on or after May 1, 2003 at 107% of the then outstanding principal
     amount, decreasing to 104.666%, 102.333% and 100%, respectively, on May 1,
     2004, 2005 and 2006. The Company may also redeem up to 35% of the fixed
     rate Senior Secured Notes at a redemption price of 111.25% plus accrued
     interest at any time prior to May 1, 2002 with the proceeds from an
     offering of HCC's common stock if net proceeds to the Company from any such
     offering are at least $20,000,000.

     The floating rate Senior Secured Notes may be redeemed at the option of HCC
     at any time at an initial redemption price of 105% plus accrued interest
     with the redemption premium decreasing by 1% on May 1 of each year
     beginning May 1, 2000.

     The indenture for the Senior Secured Notes contains various provisions
     limiting the ability of HCC and certain defined subsidiaries to, among
     other things, pay dividends or make other restricted payments; incur
     additional indebtedness or issue preferred stock, create liens, create
     dividend or other payment restrictions affecting certain defined
     subsidiaries; enter into mergers or consolidations or make sales of all or
     substantially all assets of HCC, HCT, Shreveport Management or any future
     guarantor; or enter into certain transactions with affiliates. The
     indenture also requires certain financial reporting information (see Note
     13).

(b)  During September 1998, HCA entered into a bank loan agreement to borrow up
     to $2,000,000 on an unsecured basis. Borrowings under the agreement were
     payable in 36 monthly installments of $62,000 including interest at the
     rate of 7.5% per annum. The outstanding borrowings were repaid in 2001.

     During May 1999, HCA borrowed an additional $750,000 from the bank on an
     unsecured basis. The loan is payable in 60 monthly installments of $15,000
     including interest at the rate of 7.5% per annum. The outstanding borrowing
     was repaid in March 2002.

(c)  The equipment loans are payable monthly including interest at effective
     rates ranging from 8.5% to 9% per annum and mature at various dates in 2002
     and 2003.

(d)  HCT had a bank credit facility in the amount of $1,300,000 available to
     borrow against through September 30, 1998. HCT borrowed $541,000 under the
     credit facility during 1998 at the rate of 8.875% per annum. Borrowings
     under the credit facility were collateralized by equipment

                                       61

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     purchased with the loan proceeds and were repaid in 2001. The credit
     facility was not renewed by HCT.

     In June 2001, HCT entered into a bank credit facility in the amount of
     $3,000,000 available through June 30, 2002. Borrowings under the line of
     credit are payable over a 36 month period and accrue interest at the bank's
     prime lending rate plus .75% per annum on either a fixed or floating rate
     basis. Borrowings under the line of credit are collateralized by equipment
     purchased with the loan proceeds. The line of credit agreement requires the
     provision of certain financial reports. During June 2001, HCT borrowed
     $731,000 under the credit facility at an interest rate of 7.5% per annum.
     HCT made additional borrowings of $130,000 at the rate of 7.5% per annum in
     July 2001 and $220,000 at the rate of 7.25% per annum in August 2001.

(e)  During August 1999, the Shreveport Partnership issued $150,000,000 of 13%
     First Mortgage Notes, with contingent interest (the "Shreveport First
     Mortgage Notes"), which are non-recourse to HCC.

     Fixed interest on the Shreveport First Mortgage Notes is payable on each
     February 1 and August 1. In addition, contingent interest accrues and is
     payable on each interest payment date subsequent to the opening of the
     Shreveport Casino. The amount of the contingent interest is equal to 5% of
     the Shreveport Partnership's cash flow, as defined, for the applicable
     period subject to a maximum of $5,000,000 for any four consecutive fiscal
     quarters. Contingent interest amounting to $309,000 and $77,000 was
     incurred during the years ended December 31, 2001 and 2000, respectively.
     Accrued contingent interest amounted to $386,000 and $77,000 at December
     31, 2001 and 2000, respectively. Payment of contingent interest may be
     deferred to the extent that payment would result in certain financial
     coverage ratios not being met. The notes are collateralized by a first
     priority secured interest in substantially all of the Shreveport
     Partnership's existing and future assets other than assets secured by the
     Shreveport Senior Secured Notes (see 3(f)) and up to $6,000,000 in assets
     that may be acquired with future equipment financing as well as by a pledge
     of the common stock of the HCC subsidiaries which hold the partnership
     interests.

     The Shreveport First Mortgage Notes may be redeemed at any time on or after
     August 1, 2003 by the Shreveport Partnership at 106.5% of the then
     outstanding principal amount, decreasing to 103.25% on August 1, 2004 and
     100% on or after August 1, 2005. Up to 35% of the original aggregate amount
     of the Shreveport First Mortgage Notes may also be redeemed at a price of
     113% plus accrued interest at any time prior to August 1, 2002 with
     proceeds of contributions to the Shreveport Partnership made by HCC from
     certain offerings of equity securities by HCC.

     The indenture for the Shreveport First Mortgage Notes contains various
     provisions limiting the ability of the Shreveport Partnership to borrow
     money, pay dividends, make investments, pledge or sell its assets or enter
     into mergers or consolidations. The indenture also limits the ability of
     certain HCC subsidiaries which guarantee the debt to acquire additional
     assets, become liable for additional obligations or engage in any business
     activities other than holding partnership interests or acting as managing
     general partner.

(f)  In June 2001, the Shreveport Partnership issued $39,000,000 of 13% Senior
     Secured Notes, with contingent interest, due August 2006 (the "Shreveport
     Senior Secured Notes"). The Shreveport Senior Secured Notes were issued at
     an initial premium of $1,170,000 to yield interest at an

                                       62

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     effective rate of 12.21% per annum. Fixed interest on the Shreveport Senior
     Secured Notes at the annual rate of 13% is payable on each February 1 and
     August 1. In addition, contingent interest accrues and is payable on each
     interest payment date. The amount of contingent interest is equal to 1.3%
     of the consolidated cash flow of the Shreveport Partnership for the
     applicable period subject to a maximum contingent interest of $1,300,000
     for any four consecutive fiscal quarters. Contingent interest amounting to
     $78,000 was incurred during 2001 and is included in accrued interest
     payable at December 31, 2001. Payment of contingent interest may be
     deferred to the extent that payment would result in certain financial
     coverage ratios not being met. Proceeds from the Shreveport Senior Secured
     Notes were used, in part, to retire the Shreveport Partnership's capital
     lease obligation (see Note 4) with the remainder available for working
     capital purposes.

     Under the terms of certain intercreditor collateral agreements, the
     Shreveport Senior Secured Notes are secured by, among other things, (1) a
     security interest in certain furniture, fixtures and equipment acquired
     prior to the opening of the Shreveport Casino for $30,000,000 and (2) a
     security interest on an equal basis in up to $10,000,000 of the collateral
     which secures the Shreveport First Mortgage Notes (see (3e)). The
     furniture, fixtures and equipment in (1) above were obtained with the
     proceeds from the capital lease obligation retired with a portion of the
     proceeds from the Shreveport Senior Secured Notes.

     The Shreveport Senior Secured Notes may be redeemed on the same terms and
     conditions as the Shreveport First Mortgage Notes (see (3e)). The indenture
     to the Shreveport Senior Secured Notes also carries substantially the same
     limitations, covenants and restrictions as those included in the indenture
     to the Shreveport First Mortgage Notes (see (3e)).

(g)  In September 1998, HCC and its partners acquired their interests in the
     Shreveport Partnership from its former partners who, prior to October 1997,
     conducted riverboat gaming operations in New Orleans. In connection with
     moving the licensed site to Shreveport, the current and former partners
     negotiated a settlement with the City of New Orleans which, among other
     things, required that one of the former partners pay $5,000,000 to the
     City. The current partners agreed that the Shreveport Casino would pay the
     City an additional $5,000,000 upon securing financing for construction of
     the project (i.e. the Shreveport Casino); such payment was made in August
     1999. In addition, the current partners agreed that the Shreveport Casino
     would, contingent on securing financing, reimburse the former partner
     $2,000,000 of the amount it paid to the City; such repayment was to be made
     in monthly installments of $200,000, without interest, commencing with the
     opening of the Shreveport Casino. The $2,000,000 liability, net of a
     discount in the original amount of $308,000, and the associated project
     costs were recorded upon the issuance of the Shreveport First Mortgage
     Notes in August 1999. The obligation was repaid in October 2001.

                                       63

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Scheduled payments of long-term debt as of December 31, 2001 are set forth
below:

2002                                  $    748,000
2003                                       548,000
2004                                       318,000
2005                                         6,000
2006                                   239,000,000
Thereafter                             310,000,000
                                      ------------

   Total                              $550,620,000
                                      ============

     Interest paid, net of amounts capitalized, amounted to $64,992,000,
$51,252,000 and $33,991,000, respectively, during the years ended December 31,
2001, 2000 and 1999.

(4)  Leases

     Capital leases -

     HCA leases two parking garages under capital lease agreements. The first
lease has an initial 30-year term ending in June 2023 with the right to extend
the term under renewal options for an additional 67 years. Rental payments
through June 2012 equal the City of Aurora's financing costs related to its
general obligation bond issue used to finance the construction of the parking
garage. The general obligation bond issue includes interest at rates between 7%
and 7.625% per annum. The second lease has an initial term ending in September
2026 with the right to extend the lease for up to 20 additional years. Rental
payments during the first 15 years equal the lessor's debt service costs related
to the industrial revenue bond issue used to finance a portion of the
construction costs of the parking garage. The remaining construction costs were
funded by HCA. In addition, HCA pays base rent equal to $15,000 per month,
subject to a credit of $10,000 per month which expired in October 2001, for
improvements made to the lessor's North Island Center banquet and meeting
facilities. HCA is also responsible for additional rent, consisting of costs
such as maintenance costs, insurance premiums and utilities arising out of its
operation of both parking garages.

     The Tunica Casino and Aurora Casino previously leased certain gaming and
other equipment under capital lease agreements which have expired. No future
payment obligations exist with respect to these capital leases although the
equipment remains in use.

     The Shreveport Partnership entered into a financing lease agreement with
third party lessors for $30,000,000 to acquire furniture, fixtures and equipment
for the Shreveport Casino. During the construction period, the Shreveport
Partnership paid only interest on outstanding borrowings together with a fee of
..5% per annum on the undrawn portion of the $30,000,000. Effective with the
opening of the Shreveport Casino, the outstanding borrowings became payable in
equal quarterly installments plus interest at LIBOR plus 4%. The lease was
treated as a capital lease for financial reporting purposes. Borrowings under
the lease were collateralized by the furniture, fixture and equipment purchased.
The lease was retired in June 2001 with a portion of the proceeds from the
Shreveport Senior Secured Notes (see Note (3f)).

                                       64

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The $30,000,000 original cost of the assets acquired under the capital
lease agreement by the Shreveport Partnership was included in furniture and
equipment on the accompanying consolidated balance sheet at December 31, 2000.
Accumulated amortization at December 31, 2000 with respect to these assets
amounted to $172,000. No revisions were made to the carrying value or the
estimated useful lives of the assets as a result of the satisfaction and
discharge of the capital lease obligation; however, operating equipment under
capital leases of $30,000,000 and the accumulated amortization thereon of
$2,610,000 as of the June 15, 2001 lease termination date have been removed from
the table below.

     Assets under capital leases and the related accumulated amortization are
included on the accompanying consolidated balance sheets as follows:

                                                 December 31,       December 31,
                                                    2001                2000
                                                ------------       ------------

Buildings                                       $ 27,358,000       $ 27,358,000
Operating equipment                                6,219,000         36,219,000
                                                ------------       ------------

                                                  33,577,000         63,577,000
Less - accumulated amortization                  (12,316,000)       (11,579,000)
                                                ------------       ------------

                                                $ 21,261,000       $ 51,998,000
                                                ============       ============

     Amortization expense with respect to assets under capital leases amounted
to $3,347,000 during the year ended December 31, 2001 (including $2,438,000 for
the Shreveport Casino's leased assets prior to the June 15, 2001 lease
termination date) and $1,081,000 and $909,000, respectively, for the years ended
December 31, 2000 and 1999.

     Future minimum lease payments under capital lease obligations as of
December 31, 2001 are as follows:

2002                                                        $ 2,643,000
2003                                                          2,660,000
2004                                                          2,677,000
2005                                                          2,710,000
2006                                                          2,712,000
Thereafter                                                   13,318,000
                                                            -----------

Total minimum lease payments                                 26,720,000
Less amount representing interest                            (8,858,000)
                                                            -----------
Present value of future
  minimum lease payments                                     17,862,000
Current capital lease obligation                             (1,308,000)
                                                            -----------

Long-term capital lease obligation                          $16,554,000
                                                            ===========

                                       65

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Ground Leases -

     HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease was for an initial term of five
years from the opening date of the facility and, at HCT's option, may be renewed
for nine additional five-year periods. The lease is currently in its first
five-year renewal term. Obligations under the ground lease include both minimum
monthly fixed payments and percentage rent, which in the aggregate will be the
greater of 4% of Gross Revenues, as defined, or $1,100,000 per year. HCT is
responsible for all operating and other expenses of the property in accordance
with the lease terms. HCT expensed $4,354,000, $4,367,000 and $4,138,000,
respectively, during the years ended December 31, 2001, 2000 and 1999 in
connection with the ground lease.

     In May 1999, the Shreveport Partnership entered into a ground lease with
the City of Shreveport for the land on which the Shreveport Casino was built.
The term of the lease began when construction commenced and will end on the
tenth anniversary of the date the Shreveport Casino opens. The Shreveport
Partnership has options to renew the lease on the same terms for up to an
additional forty years. The lease may be further renewed after that time at
prevailing rates and terms for similar leases. The City of Shreveport may
terminate the lease as a result of, among other things, a default by the
Shreveport Partnership under the lease. The Shreveport Partnership may terminate
the lease at any time if the operation of the Shreveport Casino becomes
uneconomic. Base rental payments under the lease were $10,000 per month during
the construction period. The base rental amount increased to $450,000 per year
upon opening and continue at that amount for the remainder of the initial
ten-year lease term. During the first five-year renewal term, the annual base
rental will be $402,500. Subsequent renewal period base rental payments will
increase by 15% during each of the next four five-year renewal terms with no
further increases. In addition to the base rent, the Shreveport Partnership pays
monthly percentage rent of not less than $500,000 per year equal to 1% of
monthly adjusted gross revenues and the amount, if any, by which monthly parking
facilities net income exceeds the parking income credit, as all such terms are
defined in the lease agreement. Ground lease rentals amounted to $2,011,000,
$213,000 and $56,000, respectively, for the years ended December 31, 2001, 2000
and 1999, including percentage rentals amounting to $1,438,000 and $78,000,
respectively, during 2001 and 2000. Costs incurred under the ground lease during
the construction period were capitalized. In addition, the ground lease
agreement also calls for payments in lieu of admission fees to the City of
Shreveport and payments to the local school board amounting to 3.225% and .5375%
of Net Gaming Proceeds (as defined in the agreement), respectively. These
additional charges amounted to $5,603,000 and $304,000 during 2001 and 2000,
respectively.

     Operating Leases -

     Other than the ground leases for the Tunica Casino and Shreveport Casino
discussed above, HCC and its subsidiaries also lease office, parking and
warehouse space and certain operating equipment under various lease agreements
accounted for as operating leases. Although most of the operating lease
agreements are either cancellable or have initial terms of one year or less,
certain other lease agreements expire at various dates through the year 2015 and
several contain automatic renewals unless notice of termination is given. Some
of the operating leases also include contingent rental payments based on

                                       66

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

levels of use; such contingent rentals have not been significant. Exclusive of
the ground leases, total rental expense amounted to $6,573,000, $3,306,000 and
$2,502,000, respectively, during the years ended December 31, 2001, 2000 and
1999.

     Future minimum lease payments as of December 31, 2001 under operating
leases having an initial or remaining noncancelable lease term in excess of one
year are as follows:

 2002                                                  $1,397,000
 2003                                                     989,000
 2004                                                     651,000
 2005                                                     511,000
 2006                                                     274,000
 Thereafter                                             1,486,000
                                                       ----------

                                                       $5,308,000
                                                       ==========

(5)  Income Taxes

     Components of HCC's benefit (provision) for income taxes consist of the
following:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                           ------------------------------------------
                                               2001           2000            1999
                                           ------------    -----------    -----------
<S>                                        <C>             <C>            <C>
Current income tax benefit (provision):
  Federal                                  $  1,825,000    $  (200,000)   $(3,359,000)
  State                                        (219,000)    (1,959,000)    (1,240,000)
Deferred income tax benefit (provision):
  Federal                                     7,206,000     (1,630,000)    10,948,000
  State                                       4,041,000        (85,000)        44,000
Change in valuation allowance               (10,766,000)     2,001,000     (7,589,000)
                                           ------------    -----------    -----------

                                           $  2,087,000    $(1,873,000)   $(1,196,000)
                                           ============    ===========    ===========
</TABLE>

     Total federal income tax payments of $1,374,000, $335,000 and $338,000,
respectively, were made during the years ended December 31, 2001, 2000 and 1999.
State tax payments of $19,000, $2,503,000 and $900,000, respectively, were made
during the years ended December 31, 2001, 2000 and 1999.

                                       67

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     A reconciliation between the calculated tax benefit (provision) on income
based on the statutory rates in effect and the effective tax rates follows:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                  ------------------------------------------
                                                      2001            2000          1999
                                                  ------------    -----------   ------------
<S>                                               <C>             <C>           <C>
Calculated income tax benefit (provision)         $ 10,793,000    $(3,457,000)  $ 27,362,000
Valuation allowance change                         (10,766,000)     2,001,000     (7,589,000)
Acquisition of management contracts                         --             --    (13,712,000)
Lobbying costs                                        (103,000)       (94,000)      (121,000)
Disallowance of meals and
   entertainment                                      (140,000)      (158,000)       (86,000)
State income taxes, net of federal benefit           2,484,000     (1,350,000)      (789,000)
Utilization of net operating loss carryforwards
 and other                                            (181,000)     1,185,000     (6,261,000)
                                                  ------------    -----------   ------------
Tax benefit (provision) as shown on
   consolidated statements of operations          $  2,087,000    $(1,873,000)  $ (1,196,000)
                                                  ============    ===========   ============
</TABLE>

     At December 31, 2001, HCC and its subsidiaries have net operating loss
carryforwards ("NOL's") for federal income tax purposes totaling approximately
$67,142,000, none of which begin to expire until the year 2019. Additionally,
HCC and its subsidiaries have alternative minimum and other tax credits
available totaling $1,272,000 and $931,000, respectively. Alternative minimum
tax credits do not expire and none of the other tax credits begin to expire
until the year 2010. Existing accounting pronouncements require that the tax
benefit of such NOL's and credit carryforwards, together with the tax benefit of
deferred tax assets resulting from temporary differences, be recorded as an
asset and, to the extent that management can not assess that the utilization of
all or a portion of such NOL's and deferred tax assets is more likely than not,
a valuation allowance should be recorded. Management believes that it is more
likely than not that future consolidated taxable income of HCC will be
sufficient to utilize a portion of the net deferred tax assets. Accordingly,
valuation allowances have been established which result in net deferred tax
assets of $6,012,000 and $5,532,000 at December 31, 2001 and 2000, respectively.

                                       68

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The components of the net deferred tax asset and classification on the
accompanying consolidated balance sheets are as follows:

                                                          December 31,
                                                  ----------------------------
                                                      2001            2000
                                                  ------------    ------------
Deferred tax assets:
   Net operating loss carryforwards               $ 28,383,000    $ 16,958,000
   Valuation and other allowances                    1,254,000         937,000
   Alternative minimum tax credit                    1,272,000       5,018,000
   Tax credits                                         931,000         741,000
   Preopening                                        4,722,000       6,272,000
   Other liabilities and accruals                    5,175,000       2,882,000
   Benefits and deferred compensation accrual        2,635,000       1,688,000
   Other                                               977,000       1,065,000
                                                  ------------    ------------

     Total deferred tax assets                      45,349,000      35,561,000
                                                  ------------    ------------

Deferred tax liabilities:
   Depreciation and amortization                    (8,786,000)    (11,277,000)
   Recoveries on affiliate obligations              (1,033,000)             --
                                                  ------------    ------------

   Total deferred tax liabilities                   (9,819,000)    (11,277,000)
                                                  ------------    ------------

Net deferred tax asset                              35,530,000      24,284,000
Valuation allowance                                (29,518,000)    (18,752,000)
                                                  ------------    ------------

                                                  $  6,012,000    $  5,532,000
                                                  ============    ============
Classified as:
   Current deferred income tax asset              $  2,233,000    $  3,054,000
   Other assets                                      3,904,000       3,159,000
   Other noncurrent liabilities                       (125,000)       (681,000)

     Sales by HCC or existing shareholders of common stock can cause a "change
of control", as defined in Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), which would limit the ability of HCC or its subsidiaries
to utilize these loss carryforwards in later tax periods. Should such a change
of control occur, the amount of loss carryforwards available for use in any one
year would most likely be substantially reduced. Future treasury regulations,
administrative rulings or court decisions may also effect HCC's utilization of
its loss carryforwards.

     The Internal Revenue Service has completed its examination of the
consolidated federal income tax returns of HCC for the years 1993 through1998.
Adjustments resulting from such examination are included in the income tax
benefit (provision) on the accompanying consolidated statements of operations.
HCC's consolidated net deferred tax asset has also been adjusted to reflect the
results of the tax audit.

                                       69

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6)  Stock Option and Compensation Plans

Hollywood Casino Corporation Stock Option Plans -

     HCC currently has two employee stock option plans in effect: the Hollywood
Casino Corporation 1996 Long-Term Incentive Plan (the "1996 Plan") and the
Hollywood Casino Corporation 1992 Stock Option Plan (the "1992 Plan"). The 1996
Plan and the 1992 Plan provide for the granting of nonqualified stock options
and incentive stock options that are intended to qualify for the special tax
treatment under the Internal Revenue Code; the 1996 Plan also provides for the
granting of restricted stock. The shares to be offered under the 1996 Plan and
the 1992 Plan consist of shares of Class A Common Stock. The 1996 Plan and the
1992 Plan provide for the granting of 3,000,000 and 1,197,000 shares,
respectively, of Class A Common Stock of which 261,480 and 653,000,
respectively, remain available for future grant as of December 31, 2001.

     The 1996 Plan and the 1992 Plan are administered by committees of HCC's
Board of Directors. Options granted under the 1996 Plan become vested at the
discretion of the Committee of the Board of Directors (however, vesting for
employees who are executive officers, directors or 10% or greater shareholders
of the company may not be less than six months) and may be exercised for a
period of not more than ten years (five years in the case of incentive stock
options) from the date of grant. No more than 500,000 shares may be awarded to
any individual during any fiscal year and incentive stock options are subject to
a $100,000 calendar year limitation. Options granted under the 1992 Plan become
vested over a three year period, are exercisable for a term ending not more than
seven years (five years in the case of incentive stock options) from the date of
the grant and incentive stock options are subject to limitations on the quantity
exercised in a calendar year. All options granted through December 31, 2001
under both the 1996 Plan and the 1992 Plan have been granted at an exercise
price equal to the fair market value as of the date of the grant. As of December
31, 2001, options to purchase 2,337,700 shares remain outstanding under the 1996
Plan, of which approximately 49% are at an exercise price of $1.25 per share. An
additional 33% have exercise prices ranging from $1.75 per share to $2.81 per
share; 14% have an exercise price of $5.06 per share; and the remaining 4% have
exercise prices ranging from $7.00 per share to $11.00 per share. Options
outstanding under the 1996 plan have a weighted average exercise price of $2.41
and a weighted average remaining contractual life of 47 months. As of December
31, 2001, no options are outstanding under the 1992 Plan.

                                       70

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The following table sets forth the combined activity of the 1996 Plan and
the 1992 Plan:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                               ------------------------------------------------------------------
                                        2001                  2000                   1999
                               --------------------   --------------------   --------------------
                                           Weighted               Weighted               Weighted
                                            Average                Average                Average
                                           Exercise               Exercise               Exercise
                                Options      Price     Options      Price     Options     Price
                               ---------   --------   ---------   --------   ---------   --------
<S>                            <C>           <C>      <C>           <C>      <C>           <C>
Outstanding options at
   beginning of year           2,690,800     $2.36    2,347,000     $1.86    1,090,000     $2.51
   Options cancelled             (33,480)     2.75       (7,500)     1.25      (27,000)     1.25
   Options granted                59,500      8.91      373,000      5.40    1,284,000      1.30
   Options exercised            (379,120)     3.05      (21,700)     1.25           --        --
                               ---------     -----    ---------     -----    ---------     -----
Outstanding options
   at end of year              2,337,700     $2.41    2,690,800     $2.36    2,347,000     $1.86
                               =========     =====    =========     =====    =========     =====
Exercisable options
   at end of year              1,843,540     $1.80    2,046,180     $1.91    1,956,400     $1.91
</TABLE>

     During 1996, HCC also adopted the Hollywood Casino Corporation 1996
Non-Employee Director Stock Plan (the "Directors' Plan") providing for the grant
of non-qualified stock options of Class A common stock of HCC. The Directors'
Plan was amended during 2000 to provide for the granting of 200,000 shares of
Class A common stock of which 120,000 remain available for future grant as of
December 31, 2001. An initial option grant of 10,000 shares was made to the two
non-employee directors upon adoption of the plan; additional outside directors
receive an option grant of 10,000 shares upon election to the Board of
Directors. The 2000 amendment to the Directors' Plan increased the yearly grant
to each outside director to 5,000 shares from 2,500 shares. All such grants are
at an exercise price equal to the fair market value as of the date of the grant,
vest either immediately or six months after grant and expire no later than ten
years from the date of grant. The Directors' Plan is administered by a Committee
of the Board of Directors. As of December 31, 2001, 52,500 shares remain
outstanding, of which approximately 57% are at an exercise price between $1.19
and $1.75 per share; 5% are at an exercise price of $4.13 per share and 38% are
at an exercise price between $7.00 and $7.88 per share. Options outstanding have
a weighted average exercise price of $4.07 per share and a weighted average
contractual life of 83 months.

                                       71

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The following table lists the activity of the Directors' Plan:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                               ------------------------------------------------------------------
                                        2001                  2000                   1999
                               --------------------   --------------------   --------------------
                                           Weighted               Weighted               Weighted
                                            Average                Average                Average
                                           Exercise               Exercise               Exercise
                                Options      Price     Options      Price     Options     Price
                               ---------   --------   ---------   --------   ---------   --------
<S>                              <C>         <C>       <C>          <C>        <C>         <C>
Outstanding options at
   beginning of year             40,000      $2.64      50,000      $1.64      42,500      $1.72
   Options granted               15,000       7.88      15,000       5.56       7,500       1.19
   Options exercised             (2,500)      4.13     (25,000)      2.38          --         --
                                -------      -----     -------      -----      ------      -----
Outstanding options at
 end of year                     52,500      $4.07      40,000      $2.64      50,000      $1.64
                                 ------      -----     =======      =====      ======      =====
Exercisable options at
   end of year                   52,500      $4.07      40,000      $2.64      50,000      $1.64
</TABLE>

     The Company has elected to apply Opinion 25 with respect to accounting for
options. Based on such election, no compensation expense has been recognized in
the accompanying consolidated financial statements as a result of the granting
of stock options. Had compensation expense been determined consistent with SFAS
123, net loss (net of income taxes) for the years ended December 31, 2001 and
1999 would have increased by approximately $264,000 and $213,000, respectively,
increasing both basic and diluted net loss per common share for each year by
$.01. Had compensation expense been determined consistent with SFAS 123, net
income (net of income taxes) for the year ended December 31, 2000 would have
decreased by approximately $254,000, decreasing both basic and diluted net loss
per common share by $.01.

     The fair value of each option grant was estimated on the date of grant
using a method approximating the Black-Scholes option pricing model. The
assumptions applied are set forth below:

                                       Year Ended December 31,
                                ------------------------------------
                                   2001         2000         1999
                                ----------   ----------   ----------

Risk free interest rate                5.5%         6.8%         4.8%
Dividend yield                          --           --           --
Expected life                    1-5 years    1-5 years    1-5 years
Volatility                            58.6%        69.9%        54.8%
Weighted average fair value     $     3.73   $     2.62   $      .33

Compensation Plan -

     During 2001, three executive officers of the Company were not re-elected to
their positions. These individuals continue to serve on the Company's Board of
Directors and are all subject to employment agreements. The Compensation
Committee of the Board annually reviews and sets compensation for these
individuals. Under the terms of the agreements, (1) the employment period
(terminating

                                       72

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2002 for two executives and December 31, 2003 for the
third) will be followed immediately by a four-year period consulting
arrangement, (2) upon expiration of the consulting arrangement, each individual
will receive a lifetime pension benefit and (3) upon the death of any of the
former executives, their designated beneficiary will receive an annual death
benefit for a period of ten years. Aggregate annual compensation during the
employment periods is currently $823,000 for 2002 and $350,000 for 2003. All
these employment agreements contain non-compete clauses.

     As a result of the changes in executive responsibilities, the Company has
accrued all remaining salary obligations under the employment agreements,
together with the contractually required present value obligations under the
consulting agreements. Such accrual has resulted in a charge to operations
amounting to $2,848,000 for the year ended December 31, 2001. Adjustments to the
funding obligation with respect to the pension and death benefits have resulted
in net increases (reductions) to the obligation of $110,000, ($93,000) and
$25,000, respectively, during the years ended December 31, 2001, 2000 and 1999.
The total obligation accrued under these agreements at December 31, 2001 and
2000 amounted to $7,923,000 and $4,965,000, respectively. The current salary
portion of the obligation of $823,000 at December 31, 2001 is included in
accrued salaries and wages on the accompanying consolidated balance sheet; the
remainder of the obligation is included in other noncurrent liabilities.

     The individuals may, at their option, seek to enforce provisions of their
agreements that provide for termination of their respective employment
agreements. Under the terms of their employment agreements, such a termination
would accelerate the salary and consulting fee components of the obligation and,
as of December 31, 2001, $2,025,000 of the noncurrent obligation could become
payable currently.

     In February 2002, the Company filed an action in state court in Dallas
County, Texas alleging that one of the former executive officers breached his
fiduciary duties to the Company's stockholders by using Company funds and
property for personal reasons and concealing his and his immediate family's
interests in entities doing business with the Company. The Company seeks
multiple remedies in the lawsuit, including restitution for such improper
actions, as well as a declaratory judgement that the Company be relieved of any
further financial obligations under the former executive's employment agreement
with the Company. As of December 31, 2001, the total of such obligations to the
former executive included on the accompanying consolidated balance sheet
amounted to $3,969,000. The lawsuit also seeks to terminate the ability to
exercise outstanding stock options previously granted to the former executive.

Employee Retirement Savings Plan -

     The Company has a retirement savings plan under Section 401(k) of the
Internal Revenue Code covering all of its employees who meet certain eligibility
requirements as to age and period of employment. The plan allows employees to
contribute up to 15% of their salary on a pre-tax basis (subject to statutory
limitations) and invest such monies in a choice of mutual funds on a
tax-deferred basis. The Company matches a portion of the participating
employees' contributions to the plan and may, from time to time, make additional
discretionary contributions. For the years ended December 31,

                                       73

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2001, 2000 and 1999, HCC expensed $743,000, $582,000 and $652,000, respectively,
as company contributions to the plan.

(7)  Transactions with Related Parties

     Greate Bay and its Subsidiaries

     During December 2001, HCC and Greate Bay reached an agreement to
restructure obligations existing between the two companies. Obligations owed by
Greate Bay to HCC consisted of (1) demand notes from Greate Bay with a carrying
value of $5,704,000 and interest thereon with a carrying value of $781,000 and
(2) deferred interest notes (the "PPI Funding Notes") issued by a subsidiary of
Greate Bay which had a final maturity value of $47,603,000 and which were fully
reserved by HCC. The notes and interest were carried at management's estimate of
the value of the underlying collateral of the obligations. Because the loans
were considered to be impaired and management believed that the recorded amount
of the obligations reflected its best estimate of ultimate recovery, no interest
income was recognized on a cash-basis method with respect to either of the
obligations from Greate Bay. HCC owed remaining principal of $1,893,000 and
interest of $498,000 to a subsidiary of Greate Bay with respect to HCC's
acquisition in 1997 of the general partnership interest in the entity which held
the management contract for the Aurora Casino. Payments under the obligation to
the Greate Bay subsidiary had been suspended since March 1, 2000 while
negotiations to restructure the obligations continued.

     Greate Bay is insolvent and, together with certain of its subsidiaries,
filed voluntary petitions for protection under Chapter 11 of the United States
Bankruptcy Code on December 28, 2001. As part of its pre-packaged bankruptcy
reorganization, Greate Bay sold its primary asset, with the net proceeds from
the sale and Greate Bay's other remaining cash to be distributed to an
unrestricted subsidiary of HCC (see Note 13). Greate Bay paid $2,000,000 in
December 2001 to the unrestricted subsidiary and agreed to offset the $2,391,000
owed by HCC (see (2) above) against a like amount owed to HCC (see Note 11). The
sale of Greate Bay's primary asset was approved by the bankruptcy court on March
6, 2002 and completed on March 19, 2002. Management currently anticipates that
the plan of reorganization will be confirmed in May 2002. As a result of the
agreement, HCC has adjusted the carrying value of the notes and interest due
from Greate Bay at December 31, 2001 to $12,922,000 (net of reserves of
$46,503,000), management's estimate of the net proceeds yet to be received,
subject to confirmation by the bankruptcy court. As a result of this adjustment
to carrying value, together with the proceeds received in December 2001 and the
offset of obligations, HCC recognized a recovery on its affiliate obligations
amounting to $10,828,000 on the accompanying consolidated statement of
operations for the year ended December 31, 2001. The remaining net receivable
balance is included in current due from affiliates on the accompanying
consolidated balance sheet at December 31, 2001 in anticipation of the May 2002
confirmation of Greate Bay's plan of reorganization.

     HCT incurred a monthly consulting fee of $100,000 with PCC pursuant to a
consulting agreement prior to its termination on October 12, 1999. Such fees
amounted to $939,000 during 1999.

     Advanced Casino Systems Corporation ("ACSC") which, prior to March 2002,
was a subsidiary of Greate Bay, provides computer, marketing and other
administrative services to HCC and its subsidiaries.

                                       74

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Computer services provided include hardware, software and operator support and,
for the most part, such services are billed by ACSC at its direct costs plus
expenses incurred. ACSC and HCT entered into a Computer Services Agreement
renewed through December 31, 1999 to provide such services and to license or
sublicense to HCT computer software necessary to operate HCT's casino, hotel and
related facilities and business operations. HCT paid ACSC for such equipment and
licensed such software at amounts and on terms and conditions that ACSC provided
to unrelated third parties. HCT also paid ACSC a fixed license fee of $33,600
per month through December 31, 1999. ACSC also provided services to HCA through
HCA's management agreement with PML. The service agreements with PML and HCT
terminated on October 13 and December 31, 1999, respectively. ACSC continued to
provide services to HCA on an as needed basis at third party consulting rates.
HCT and HCA entered into new maintenance and support agreements with ACSC
effective as of January 1, 2000 which provide for an aggregate monthly fee of
$26,000 (subject to change upon 60 days written notice) plus additional services
at rates charged by ACSC to third parties. The agreements have an initial term
of one year with automatic annual renewals unless notice of termination is
given. The Shreveport Partnership entered into a similar maintenance and support
agreement with ACSC effective as of October 12, 2000 at a monthly fee of $11,000
commencing 90 days after installation of ACSC's systems (see below). ACSC's
billings to HCC and its subsidiaries for such products and services during the
years ended December 31, 2001, 2000 and 1999 amounted to $1,900,000, $950,000
and $1,315,000, respectively. At December 31, 2001 and 2000, unpaid charges of
$168,000 and $109,000, respectively, are included in due to affiliates on the
accompanying consolidated balance sheets.

     The Shreveport Casino's casino system software was provided and installed
by ACSC. Total costs incurred in connection with the installation of the
software system amounting to $2,626,000 are included in operating equipment on
both the accompanying consolidated balance sheets at December 31, 2001 and 2000.
Unpaid charges of $156,000 with respect to the installation are included in due
to affiliates on the accompanying consolidated balance sheet at December 31,
2000.

     HCC allocates certain general and administrative costs to Greate Bay and
its subsidiaries pursuant to services agreements. Such allocated costs and fees
amounted to $307,000, $307,000 and $604,000, respectively, during the years
ended December 31, 2001, 2000 and 1999. Receivables from Greate Bay and its
subsidiaries in the amount of $6,000 and $19,000 are included in due from
affiliates on the accompanying consolidated balance sheets at December 31, 2001
and 2000, respectively.

     Shreveport Partnership -

     In accordance with the amended and restated partnership agreement, HCL
loaned $1,000,000 to its joint venture partner which it used to make a
$1,000,000 capital contribution to the Shreveport Partnership. The loan accrues
interest at the rate of prime payable monthly commencing with the opening of the
Shreveport Casino. Principal on the loan is payable on December 20, 2010. The
loan is included in other noncurrent assets on the accompanying consolidated
balance sheets. The joint venture partner was also given credit for an
additional $1,000,000 capital contribution upon the closing of the Shreveport
First Mortgage Notes and payment of the $5,000,000 obligation as discussed in
Note 3(g). The credit was in recognition of guarantees provided by an affiliate
of the joint venture partner which were necessary for the Shreveport Partnership
to obtain approval of its development plans. The

                                       75

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$2,000,000 equity interest of the joint venture partner is included in minority
interest on the accompanying consolidated balance sheets of HCC at December 31,
2001 and 2000.

     For so long as it remains a joint venture partner, HCL's joint venture
partner will receive, among other things, an amount equal to 1% of "complex net
revenues" of the Shreveport Casino, as defined, which approximates net revenues.
Such payment is in exchange for the assignment by the partner of its interest in
the partnership to HCL. Allocations to the joint venture partner amounted to
$1,438,000 and $78,000, respectively, during 2001 and 2000 and are reflected as
minority interest in Hollywood Casino Shreveport on the accompanying
consolidated statements of operations for the years ended December 31, 2001 and
2000.

     The Shreveport Partnership has also entered into an agreement with HCL's
joint venture partner to provide certain marine services for so long as it
remains a joint venture partner. The Marine Services Agreement became effective
on September 22, 1998 and, in addition to the reimbursement to the partner for
its direct expenses incurred, if any, the Shreveport Casino pays a monthly fee
of $30,000 effective with its opening. Fees incurred during 2001 and 2000
amounted to $360,000 and $12,000, respectively, under the agreement. Unpaid
charges of $30,000 and $12,000, respectively, are included in due to affiliates
on the accompanying consolidated balance sheets at December 31, 2001 and 2000.

(8)  State Gaming Regulations

     Riverboat gaming operations in Illinois are subject to regulatory control
by the Illinois Gaming Board. Illinois law requires that HCA maintain its
Owners' License in order to operate. HCA's Owners' License was renewed by the
Illinois Gaming Board in December 2000 for a period of four years to December
2004. Gaming operations in Mississippi are subject to regulatory control by the
Mississippi Gaming Commission. Under the provisions of the Mississippi gaming
regulations, HCT is required to maintain all necessary licenses. The ownership
license for the Tunica Casino has been renewed until October 2004. HCL and the
Shreveport Partnership are subject to regulatory control by the LGCB and must
maintain all required licenses. The ownership license for the Shreveport Casino
was renewed in October 1999 for a period of five years.

     If it were determined that gaming laws were violated by a licensee, the
gaming licenses held by each licensee could be limited, conditioned, suspended
or revoked. In addition, the licensees and other persons involved could be
subject to substantial fines.

(9)  Litigation

     In addition to the action filed against one of its former executive
officers (see Note 6), the Company also filed a lawsuit in February 2002 in U.S.
District Court in Texas against a number of individuals and their affiliates,
including two of the Company's former executive officers, alleging violations of
the federal securities laws. Such allegations include the failure to properly
report that the defendants and their affiliates have been acting in concert as a
group in connection with a planned proxy contest at the next annual
shareholders' meeting and that certain affiliates have acquired common stock of
the Company while in possession of material non-public information regarding the
Company.The

                                       76

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company seeks multiple remedies, including requiring the defendants to
truthfully and accurately report their activities, as well as seeking an order
to enjoin the defendants from further purchases of stock and from voting their
shares of stock.

     On April 23, 2000, the construction site for the Shreveport Casino suffered
tornado damage which contributed to the delay in opening the facility.
Management filed damage claims and received reimbursements from its insurance
carrier during 2000 in the amount of approximately $1,700,000 to cover
substantially all of the cost of repairing the damage incurred. Management is
also pursuing delayed opening claims with its carriers. To the extent the delay
in the facility's opening was the responsibility of contractors, management is
also seeking to recover damages from those entities. These matters are the
subject of a lawsuit pending in U. S. District Court in Louisiana. For this and
other reasons, the Shreveport Partnership has withheld payment of approximately
$2.6 million which the general contractor is currently seeking and which is
included in accounts payable on the accompanying consolidated balance sheet at
December 31, 2001. Both the recovery of any amounts by the Shreveport
Partnership from either its insurance companies or the contractors and the need
to pay the general contractor the amounts being withheld are currently subject
to the results of the litigation and management is unable to determine the
amounts, if any, that will ultimately be received or paid.

     On October 8, 1998, the Company filed a complaint against its former
independent accountants and tax advisors in the District Court of Dallas County,
Texas. On September 8, 2000, a mutually acceptable agreement was reached
concluding the dispute and resulting in the dismissal of the lawsuit. Terms of
the settlement are confidential; however, the Company recognized a pre-tax gain
on the settlement, net of related legal fees and other expenses, amounting to
$7,220,000, which is included in other non-operating income on the accompanying
consolidated statement of operations for the year ended December 31, 2000.

     HCC and its subsidiaries are parties in various legal proceedings with
respect to the conduct of casino and hotel operations. Although a possible range
of loss cannot be estimated, in the opinion of management, based upon the advice
of counsel, settlement or resolution of these proceedings should not have a
material adverse impact on the consolidated financial position or results of
operations of HCC and its subsidiaries.

(10) Commitments and Contingencies

     The Shreveport Partnership has agreed to reimburse approximately $600,000
of construction finish out costs to be incurred by an outside lessee with
respect to approximately 42,000 square feet of restaurant and entertainment
facilities to be operated on property leased from the Shreveport Casino. No
liability for such reimbursement has been reflected on the accompanying
consolidated balance sheets at December 31, 2001 and 2000 as the underlying
construction work has not been performed. Once the rental period commences, the
Shreveport Casino is to receive $6 per square foot annually, payable on a
monthly basis, together with percentage rentals as specified in the lease
agreement. The lessee is a limited liability company in which certain relatives
of a principal stockholder and director of HCC hold directly or indirectly a
22.5% interest. These relatives, as well as certain other associates of the
principal

                                       77

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

stockholder, also hold directly or indirectly interests in certain sublessees of
the lessee that will be operating tenants in the space.

     During November 2000, the Shreveport Partnership entered into bank
revolving credit facilities of $2,000,000 for working capital needs and
$4,000,000 to meet liquidity requirements under Louisiana gaming regulations.
The facilities were available for a period of one year. No amounts were borrowed
under the credit facilities and they were cancelled during 2001.

(11) Supplemental Cash Flow Information

     During 2001, HCC offset $2,391,000 of PPI Funding Notes against its
outstanding obligations to a Greate Bay subsidiary consisting of note payable
with a principal balance of $1,893,000 together with $498,000 of accrued
interest thereon (see Note 7). The offset has been excluded from the
accompanying consolidated statement of cash flows as a noncash transaction.

     During 2001, HCT converted $216,000 of receivables from Tunica Golf Course
LLC, its equity investment, to an additional investment in the limited liability
company. The contribution has been excluded from the accompanying consolidated
statement of cash flows as a noncash transaction.

     During 2000 the Shreveport Partnership obtained proceeds under capital
lease obligations amounting to $30,000,000 used to purchase fixed assets during
the construction period (Note 4).

     During 2000, HCC offset $146,000 of the outstanding principal balance of
certain demand notes due from Greate Bay against certain payables HCC owed to
Greate Bay (Note 7). This offset has been excluded from the accompanying
consolidated statement of cash flows as a noncash transaction.

     The issuance of a note to a former partner of the Shreveport Partnership's
predecessor at a discounted face amount of $1,692,000 (see Note 3(g)) and the
associated project costs have been excluded from the accompanying consolidated
statement of cash flows for the year ended December 31, 1999 as a non-cash
transaction.

     The additional $1,000,000 credit given to HCL's remaining joint venture
partner as an additional contribution to the Shreveport Partnership (see Note 7)
and the corresponding addition to construction in progress have been excluded
from the accompanying consolidated statement of cash flows for the year ended
December 31, 1999 as a non-cash transaction.

                                       78

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     As a result of the acquisition of a joint venture partner's interest in the
Shreveport Partnership during April 1999 (see Note 1), the joint venture became
a consolidated subsidiary of HCC. The acquisition of the joint venture interest
and consolidation of the joint venture resulted in the assumption of liabilities
as follows:

Fair value of non-cash assets acquired                              $ 1,465,000
Cash acquired                                                         1,525,000
Contingent liability for purchase                                    (2,499,000)
Preacquisition losses attributable to joint venture
  partner                                                                12,000
Cash paid for capital stock                                              (1,000)
                                                                    -----------

    Liabilities assumed                                             $   502,000
                                                                    ===========

     The contingent liability of $2,499,000 shown above was converted to a note
payable during 2000. The note is payable on June 20, 2000 and is included in
notes payable on the accompanying consolidated balance sheet at December 31,
2000. The recording of the note is excluded from the accompanying consolidated
statement of cash flows for the year ended December 31, 2000 as a non-cash
transaction.

(12) Disclosures about Fair Value of Financial Instruments

     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

     Cash and cash equivalents - The carrying amounts approximate fair value
     -------------------------
because of the short maturity of these instruments.

     Cash restricted for construction project - The carrying amount approximates
     ----------------------------------------
fair value because of the short maturity of these instruments.

     Note receivable - The carrying amount approximates fair value because the
     ---------------
note has a floating interest rate; accordingly the discounted cash flow of
future payments equals the carrying amount.

     Notes receivable - affiliate - The fair value of notes receivable is
     ----------------------------
calculated based on the estimated realizable value.

     Interest payable - The carrying amount of interest payable approximates
     ----------------
fair value because of the short maturity of the obligation.

     Long-term debt - The fair value of HCC's long-term debt is estimated based
     --------------
on either the quoted market price of the underlying debt issue or on the
discounted cash flow of future payments utilizing current rates available to HCC
for debt of similar remaining maturities. Debt obligations with a short
remaining maturity are valued at the carrying amount.

                                       79

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The estimated carrying amounts and fair values of HCC's financial
instruments are as follows:

<TABLE>
<CAPTION>
                                           December 31, 2001             December 31, 2000
                                      ---------------------------   ---------------------------
                                        Carrying                      Carrying
                                         Amount       Fair Value       Amount       Fair Value
                                      ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>
Financial Assets:
   Cash and cash equivalents          $131,849,000   $131,849,000   $155,570,000   $155,570,000
   Cash restricted for construction
      project                                   --             --      9,530,000      9,530,000
   Note receivable                       1,000,000      1,000,000      1,000,000      1,000,000
   Notes receivable - affiliates        12,922,000     12,922,000      5,704,000      5,704,000

Financial Liabilities:
   Interest payable                   $ 17,570,000   $ 17,570,000   $ 18,067,000   $ 18,067,000
   Note payable to Sodak                        --             --      2,499,000      2,499,000
   11.25% Senior Secured Notes         310,000,000    337,900,000    310,000,000    319,300,000
   Floating rate Senior Secured
      Notes                             50,000,000     51,000,000     50,000,000     51,375,000
   13% Shreveport First Mortgage
      Notes                            150,000,000    142,500,000    150,000,000    159,375,000
   13% Senior Secured Notes             40,078,000     36,075,000             --             --
   Note payable                                 --             --      1,913,000      1,913,000
   Equipment loans                         245,000        244,000      1,188,000      1,188,000
   Bank debt                               398,000        403,000      1,145,000      1,123,000
   Bank credit facility                    950,000        953,000         89,000         88,000
   Note payable - affiliate                     --             --      1,893,000      1,893,000
   Other debt                               27,000         29,000         33,000         33,000
</TABLE>

(13) Unrestricted Subsidiaries (Unaudited)

     Under the terms of the indenture to the Senior Secured Notes (see Note
3(a)), certain subsidiaries and investees of HCC have been designated as
"Unrestricted Subsidiaries." Unrestricted Subsidiaries generally do not provide
credit support for the Senior Secured Notes and obligations of Unrestricted
Subsidiaries are non-recourse to HCC. Unrestricted Subsidiaries of HCC during
2001 consisted of HCL and its subsidiaries; HWCC-Holdings, Inc.; and HWCC-Golf
Course Partners, Inc. The following presentation summarizes the financial
position and results of operations of the Company reflecting its

                                       80

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unrestricted Subsidiaries under the equity method of accounting. Such
information is not intended to be a presentation in conformity with generally
accepted accounting principles and is included for purposes of complying with
certain reporting requirements as contained in the indenture to the Senior
Secured Notes.

                             Condensed Balance Sheet
                                December 31, 2001
                             (amounts in thousands)

<TABLE>
<S>                                         <C>        <C>                              <C>
Current Assets:                                           Current Liabilities:
Cash and cash items                         $102,419   Current maturities of long-
Accounts receivable, net of allowance                    term debt and capital leases   $   2,050
  of $3,037                                    3,122   Accounts payable and accrued
Inventories                                    1,371     liabilities                       38,473
Prepaid expenses and other current assets      4,774   Other current liabilities            3,141
                                                                                        ---------
Due from affiliates                               40                                       43,664
                                            --------                                    ---------

                                             111,726   Long-term debt                     360,851
                                            --------                                    ---------

                                                       Capital lease obligations           16,554
Investment in and advances to                                                           ---------
  Unrestricted Subsidiaries                   18,245   Other noncurrent liabilities         7,100
                                            --------                                    ---------
Property and equipment, net of
  accumulated depreciation and                         Shareholders' deficit:
  amortization of $137,397                   180,865   Common stock                             3
                                            --------
                                                       Additional paid-in capital         217,727
Other Assets:                                          Accumulated deficit               (311,542)
                                                                                        ---------
Deferred finance costs                         7,466
Other assets                                  16,055                                      (93,812)
                                            --------                                    ---------
                                              23,521
                                            --------

                                            $334,357                                    $ 334,357
                                            ========                                    =========
</TABLE>

                                       81

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        Condensed Statement of Operations
                          Year Ended December 31, 2001
                             (amounts in thousands)

Net revenues                                               $317,066
                                                           --------
Expenses:
 Departmental expenses                                      214,318
 General and administrative                                  21,210
 Depreciation and amortization                               34,626
 Development                                                    603
 Executive compensation accrual                               2,848
 Recoveries on affiliate obligations                         (2,391)
                                                           --------

    Total expenses                                          271,214
                                                           --------

Income from operations                                       45,852
Non-operating expense, net                                  (38,446)
                                                           --------

Income before taxes and other item                            7,406
Income tax benefit                                            2,087
                                                           --------

Income before other item                                      9,493
Equity in losses of unrestricted subsidiaries               (38,243)
                                                           --------

Net loss                                                   $(28,750)
                                                           ========

                                       82

<PAGE>

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(14) Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                                    Quarter
                                           ---------------------------------------------------------
                                              First          Second         Third          Fourth
                                           ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>
Year ended December 31, 2001:

Net revenues                               $116,290,000   $113,534,000   $116,511,000   $111,721,000
                                           ============   ============   ============   ============

(Loss) income before extraordinary item    $(11,705,000)  $(15,152,000)  $ (2,912,000)  $  1,862,000
                                           ============   ============   ============   ============

Net (loss) income                          $(11,705,000)  $(15,995,000)  $ (2,912,000)  $  1,862,000
                                           ============   ============   ============   ============

Basic and diluted (loss) income before
  extraordinary item per common share (1)  $       (.47)  $       (.61)  $       (.12)  $        .07
                                           ============   ============   ============   ============

Basic and diluted net (loss) income
  per common share (1)                     $       (.47)  $       (.64)  $       (.12)  $        .07
                                           ============   ============   ============   ============

Year ended December 31, 2000:

Net revenues                               $ 75,452,000   $ 76,084,000   $ 79,144,000   $ 80,775,000
                                           ============   ============   ============   ============

Net income (loss)                          $  2,812,000   $  2,233,000   $ 10,515,000   $ (7,265,000)
                                           ============   ============   ============   ============

Basic net income (loss) per
  common share (1)                         $        .11   $        .09   $        .42   $       (.29)
                                           ============   ============   ============   ============

Diluted net income (loss) per common
  share (1)                                $        .11   $        .08   $        .39   $       (.29)
                                           ============   ============   ============   ============
</TABLE>

----------
(1)  Earnings per share is calculated separately for each quarter and the full
     year. Accordingly, annual earnings per share will not necessarily equal the
     total of the interim periods.

                                       83

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
     Hollywood Casino - Aurora, Inc.:

We have audited the accompanying balance sheets of Hollywood Casino - Aurora,
Inc. (the Company and an Illinois corporation) as of December 31, 2001 and 2000,
and the related statements of operations, changes in shareholder's equity and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 present fairly, in all material
respects, the financial position of Hollywood Casino - Aurora, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP
Dallas, Texas
March 19, 2002

                                       84

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                                 BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                               December 31,
                                                      ----------------------------
                                                          2001            2000
                                                      ------------    ------------
<S>                                                   <C>             <C>
Current Assets:
   Cash and cash equivalents                          $ 21,443,000    $ 21,164,000
   Accounts receivable, net of allowances
     of $849,000 and $942,000, respectively              1,202,000       1,188,000
   Inventories                                             803,000         997,000
   Deferred income taxes                                 1,995,000       1,958,000
   Due from affiliates                                     147,000         129,000
   Prepaid expenses and other current assets             1,327,000       1,033,000
                                                      ------------    ------------

     Total current assets                               26,917,000      26,469,000
                                                      ------------    ------------

Property and Equipment:
   Land improvements                                     3,167,000       3,167,000
   Buildings and improvements                           46,205,000      46,205,000
   Riverboats                                           42,365,000      42,377,000
   Operating equipment                                  43,999,000      42,996,000
   Construction in progress                             46,668,000       2,137,000
                                                      ------------    ------------

                                                       182,404,000     136,882,000
   Less - accumulated depreciation and amortization    (82,392,000)    (54,782,000)
                                                      ------------    ------------

     Net property and equipment                        100,012,000      82,100,000
                                                      ------------    ------------
Other Assets:
   Deferred income taxes                                   731,000              --
   Other assets                                          2,290,000       2,213,000
                                                      ------------    ------------

     Total other assets                                  3,021,000       2,213,000
                                                      ------------    ------------

                                                      $129,950,000    $110,782,000
                                                      ============    ============
</TABLE>

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

                                       85

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                                 BALANCE SHEETS
                      LIABILITIES AND SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
                                                                    December 31,
                                                             ----------------------------
                                                                 2001            2000
                                                             ------------    ------------
<S>                                                          <C>             <C>
Current Liabilities:
   Current maturities of long-term debt
     and capital lease obligations                           $  1,464,000    $  1,847,000
   Accounts payable                                            11,125,000       1,659,000
   Accrued liabilities -
     Salaries and wages                                         3,515,000       2,819,000
     Interest                                                   2,041,000       1,756,000
     Gaming and other taxes                                     1,260,000       1,573,000
     Insurance                                                    501,000         746,000
     Other                                                      2,873,000       1,865,000
   Due to affiliates                                            1,532,000         482,000
   Other current liabilities                                    1,226,000       1,361,000
                                                             ------------    ------------

     Total current liabilities                                 25,537,000      14,108,000
                                                             ------------    ------------

Long-Term Debt                                                 81,249,000      66,405,000
                                                             ------------    ------------

Capital Lease Obligations                                      16,554,000      17,861,000
                                                             ------------    ------------

Deferred Income Taxes                                                  --       6,218,000
                                                             ------------    ------------

Commitments and Contingencies

Shareholder's Equity:
   Common stock, $.01 par value per share;
     2,000,000 shares authorized; 1,501,000
     shares issued and outstanding                                 15,000          15,000
   Additional paid-in capital                                  25,541,000      25,541,000
   Accumulated deficit                                        (18,946,000)    (19,366,000)
                                                             ------------    ------------

     Total shareholder's equity                                 6,610,000       6,190,000
                                                             ------------    ------------

                                                             $129,950,000    $110,782,000
                                                             ============    ============
</TABLE>

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

                                       86

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                          --------------------------------------------
                                              2001            2000            1999
                                          ------------    ------------    ------------
<S>                                       <C>             <C>             <C>
Revenues:
   Casino                                 $231,832,000    $217,704,000    $190,608,000
   Food and beverage                        14,529,000      15,787,000      14,560,000
   Other                                     3,211,000       3,356,000       3,272,000
                                          ------------    ------------    ------------

                                           249,572,000     236,847,000     208,440,000
   Less - promotional allowances           (33,587,000)    (33,015,000)    (27,952,000)
                                          ------------    ------------    ------------

   Net revenues                            215,985,000     203,832,000     180,488,000
                                          ------------    ------------    ------------

Expenses:
   Casino                                  132,005,000     127,263,000     114,381,000
   Food and beverage                         5,498,000       5,021,000       4,829,000
   Other                                       961,000       1,079,000       1,114,000
   General and administrative                5,182,000       5,319,000      12,758,000
   Termination of management contract               --              --      37,000,000
   Depreciation and amortization            28,583,000       7,107,000       7,050,000
                                          ------------    ------------    ------------

     Total expenses                        172,229,000     145,789,000     177,132,000
                                          ------------    ------------    ------------

Income from operations                      43,756,000      58,043,000       3,356,000
                                          ------------    ------------    ------------

Non-operating income (expense):
   Interest income                             986,000       1,124,000         533,000
   Interest expense, net of capitalized
     interest of $1,203,000 in 2001         (8,001,000)     (9,034,000)     (6,145,000)
   Loss on disposal of assets                  (65,000)         (6,000)       (510,000)
                                          ------------    ------------    ------------

     Total non-operating expense, net       (7,080,000)     (7,916,000)     (6,122,000)
                                          ------------    ------------    ------------

Income (loss) before income taxes           36,676,000      50,127,000      (2,766,000)

Income tax provision                       (12,486,000)    (18,422,000)       (367,000)
                                          ------------    ------------    ------------

Net income (loss)                         $ 24,190,000    $ 31,705,000    $ (3,133,000)
                                          ============    ============    ============
</TABLE>

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

                                       87

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                  STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
                   For the Three Years Ended December 31, 2001

                                                                     Retained
                                   Common Stock      Additional      Earnings
                               -------------------     Paid-in     (Accumulated
                                Shares      Amount     Capital        Deficit)
                               ---------   -------   -----------   -------------
BALANCES, January 1, 1999      1,501,000   $15,000   $25,541,000   $  3,164,000

   Net loss                           --        --            --     (3,133,000)
   Dividends                          --        --            --    (19,540,000)
                               ---------   -------   -----------   ------------

BALANCES, December 31, 1999    1,501,000    15,000    25,541,000    (19,509,000)

  Net income                          --        --            --     31,705,000
  Dividends                           --        --            --    (31,562,000)
                               ---------   -------   -----------   ------------

BALANCES, December 31, 2000    1,501,000    15,000    25,541,000    (19,366,000)

  Net income                          --        --            --     24,190,000
  Dividends                           --        --            --    (23,770,000)
                               ---------   -------   -----------   ------------

BALANCES, December 31, 2001    1,501,000   $15,000   $25,541,000   $(18,946,000)
                               =========   =======   ===========   ============

              The accompanying notes to financial statements are an
                        integral part of this statement.

                                       88

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                       --------------------------------------------
                                                                           2001            2000            1999
                                                                       ------------    ------------    ------------
<S>                                                                    <C>             <C>             <C>
OPERATING ACTIVITIES:
   Net income (loss)                                                   $ 24,190,000    $ 31,705,000    $ (3,133,000)
   Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
     Depreciation and amortization                                       28,583,000       7,107,000       7,050,000
     Provision for doubtful accounts                                        180,000         165,000         300,000
     Loss on disposal of assets                                              65,000           6,000         510,000
     Deferred income tax (benefit) provision                             (6,986,000)        640,000        (203,000)
     Increase in accounts receivable                                       (194,000)       (361,000)       (169,000)
     Increase (decrease) in accounts payable and accrued liabilities     10,897,000        (261,000)      2,020,000
     Net change in affiliate balances                                     1,032,000       2,091,000      (3,419,000)
     Net change in other current assets and liabilities                    (235,000)       (545,000)        504,000
     Net change in other noncurrent assets and liabilities                  (77,000)         17,000         (57,000)
                                                                       ------------    ------------    ------------

   Net cash provided by operating activities                             57,455,000      40,564,000       3,403,000
                                                                       ------------    ------------    ------------

INVESTING ACTIVITIES:
   Purchases of property and equipment                                  (46,610,000)     (8,200,000)     (5,109,000)
   Proceeds from sale of assets                                              50,000           8,000          17,000
                                                                       ------------    ------------    ------------

   Net cash used in investing activities                                (46,560,000)     (8,192,000)     (5,092,000)
                                                                       ------------    ------------    ------------

FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                              15,000,000              --      66,757,000
   Repayments of long-term debt                                            (747,000)       (807,000)    (32,205,000)
   Payments on capital lease obligations                                 (1,099,000)       (987,000)       (893,000)
   Dividends                                                            (23,770,000)    (31,562,000)    (19,540,000)
                                                                       ------------    ------------    ------------

   Net cash (used in) provided by financing activities                  (10,616,000)    (33,356,000)     14,119,000
                                                                       ------------    ------------    ------------

   Net increase (decrease) in cash and cash equivalents                     279,000        (984,000)     12,430,000

   Cash and cash equivalents at beginning of year                        21,164,000      22,148,000       9,718,000
                                                                       ------------    ------------    ------------

   Cash and cash equivalents at end of year                            $ 21,443,000    $ 21,164,000    $ 22,148,000
                                                                       ============    ============    ============
</TABLE>

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

                                       89

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                          NOTES TO FINANCIAL STATEMENTS

(1)  Organization and Business

     Hollywood Casino - Aurora, Inc. ("HCA") is an Illinois corporation and a
wholly owned subsidiary of Hollywood Casino Corporation ("HCC"), a Delaware
corporation. HCA was organized and incorporated during December 1990 for the
purpose of developing and holding the ownership interest in a riverboat gaming
operation located in Aurora, Illinois (the "Aurora Casino") and was acquired by
HCC in May 1992 through the issuance of HCC stock.

     Prior to February 15, 2002, the Aurora Casino conducted its gaming
operations on two, four-level riverboats having a combined casino space of
approximately 32,000 square feet. In March 2001, the Aurora Casino began
construction of a major expansion, highlighted by the construction of a new
dockside facility to replace the Aurora Casino's two riverboats. The first half
of the dockside facility and a new casino entrance were completed and opened on
February 15, 2002. The second half of the dockside casino, together with a new
buffet and parking facility are expected to open in June 2002. The estimated
total project cost is approximately $78,200,000, of which approximately $44.6
million has been spent through December 31, 2001. Until the second half of the
dockside casino is completed, the Aurora Casino will continue to operate the
larger of its two existing riverboat casinos. The combined dockside facility
will have 53,000 square feet of gaming space on a single level. Ticketing, food
service, passenger waiting, and various administrative functions are housed in
an adjacent four-level pavilion. The Aurora Casino also currently includes two
parking structures with approximately 1,340 parking spaces. HCA was responsible
for the design and construction of the parking garages; however, it leases the
facilities under long-term lease agreements. The leases are treated as capital
leases for financial reporting purposes (see Note 4).

     The Aurora Casino commenced operations on June 17, 1993. HCA's current
Owner's License was renewed by the Illinois Gaming Board in December 2000 for a
period of four years to December 2004. Gaming taxes imposed by the state of
Illinois are determined using a graduated tax rate applied to the licensee's
gaming revenues. HCA expenses such gaming taxes based on its anticipated annual
effective tax rate.

     HCA estimates that a significant amount of the Aurora Casino's revenues are
derived from patrons living in the Chicago area and surrounding northern and
western suburbs. The Aurora Casino faces intense competition from other
riverboat gaming operations in Illinois and Indiana which serve the Chicago area
and management believes that this competition will continue in the future.

(2)  Summary of Significant Accounting Policies

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

                                       90

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

Casino revenues, promotional allowances and departmental expenses -

     HCA recognizes the net win from gaming activities (the difference between
gaming wins and losses) as casino revenues. Casino revenues are net of accruals
for anticipated payouts of progressive jackpots. Such anticipated jackpot
payouts are reflected as other accrued liabilities on the accompanying balance
sheets.

     Promotional allowances consist of (1) the estimated value of food and
beverage and other items provided to customers without charge and (2) the "cash
back" feature of customer loyalty programs. The estimated value of
complimentaries has been included in revenues on the accompanying statements of
operations and a corresponding amount has been deducted as promotional
allowances. During 2001, the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board reached consensuses requiring that the
"cash-back" feature of customer loyalty programs also be reported as a reduction
to revenues rather than as an operating expense. Accordingly, all such costs for
the current and prior year periods have been reported on the accompanying
statements of operations as promotional allowances instead of casino expenses as
previously reported. This change results only in a reclassification within the
statements of operations and does not affect income from operations or net
income (loss). Promotional allowances for the years ended December 31, 2001,
2000 and 1999 consist of the following:

                                        2001            2000            1999
                                     -----------     -----------     -----------
Complimentaries:
    Food and beverage                $ 9,214,000     $10,535,000     $ 9,448,000
    Other                              1,866,000       1,936,000       1,742,000
Customer loyalty programs             22,507,000      20,544,000      16,762,000
                                     -----------     -----------     -----------

                                     $33,587,000     $33,015,000     $27,952,000
                                     ===========     ===========     ===========

     The costs of complimentaries have been included as casino expenses on the
accompanying statements of operations. Costs of complimentaries allocated from
the food and beverage and other operating departments to the casino department
during the years ended December 31, 2001, 2000 and 1999 are as follows:

                                        2001            2000            1999
                                     -----------     -----------     -----------

    Food and beverage                $10,622,000     $11,244,000     $ 9,903,000
    Other                                949,000       1,062,000         956,000
                                     -----------     -----------     -----------

                                     $11,571,000     $12,306,000     $10,859,000
                                     ===========     ===========     ===========

Cash and cash equivalents -

     Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as treasury bills and
fixed repurchase agreements.

                                       91

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

Allowance for doubtful accounts -

     The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful accounts
amounting to $180,000, $165,000 and $300,000, respectively, were made during the
years ended December 31, 2001, 2000 and 1999.

Inventories -

     Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market.

Property and equipment -

     Property and equipment have been recorded at cost and are being
depreciated, except as noted below, utilizing the straight-line method over the
estimated useful lives of the assets as follows:

Land improvements                                         20 years
Buildings, riverboats and improvements                 25-40 years
Operating equipment                                      3-7 years

     Upon committing to proceed with the Aurora Casino expansion project (see
Note 1), management conducted a review of its long-lived assets for possible
impairment. Based on the undiscounted cash flows anticipated to be earned during
the construction period, management concluded that no impairment of the Aurora
Casino's assets existed and no write down of its assets was required. The Aurora
Casino prospectively adjusted the remaining useful lives of its existing
riverboats and other fixed assets being replaced to reduce the recorded net book
value of such assets ($10.7 million at December 31, 2001) to their estimated net
realizable value at the time they will be removed from service. Consequently,
depreciation expense during the year ended December 31, 2001 subsequent to the
commencement of the expansion project increased by $21,543,000; such additional
depreciation is expected to amount to approximately $10.7 million during 2002.

Long-lived assets -

     Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. HCA does not believe that any such events or changes occurred
during the year ended December 31, 2001 except as noted above under the caption
"Property and Equipment".

Accrued insurance -

     HCA is self insured for a portion of its general liability and other
liability exposures. Accrued insurance includes estimates of such accrued
liabilities based on an evaluation of the merits of individual claims and
historical claims experience; accordingly, HCA's ultimate liability may differ
from the amounts accrued.

                                       92

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

Employee stock options -

     HCA has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 allows an entity to continue to measure compensation cost for
employee stock-based compensation using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("Opinion 25"). Entities electing to remain with
the accounting under Opinion 25 are required to make pro forma disclosures of
net income as if the fair value based method of accounting under SFAS 123 had
been applied. HCA has elected to account for employee-based compensation under
Opinion 25 with the requisite additional disclosures included in Note 10.

Income taxes -

     HCA is included in HCC's consolidated federal income tax return. Pursuant
to agreements between HCC and HCA, HCA's provision for federal income taxes is
based on the amount of tax which would be provided if a separate federal income
tax return were filed. HCA paid $18,088,000, $13,982,000 and $1,182,000 to HCC
in connection with its current federal tax provisions for the years ended
December 31, 2001, 2000 and 1999, respectively. For the years ended December 31,
2001, 2000 and 1999, HCA paid state income taxes of $9,000, $2,503,000 and
$878,000, respectively.

Recent Accounting Pronouncements -

     In June 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" ("SFAS 141") and Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). SFAS 141 requires the use of the purchase
method of accounting for all business combinations initiated after June 30,
2001. SFAS 142 establishes new standards for goodwill acquired in a business
combination and requires that goodwill and other intangible assets be
periodically reviewed for impairment rather than being amortized. SFAS 142 is
effective for fiscal years beginning after December 15, 2001 with earlier
application permitted. HCA does not expect the adoption to have a material
effect on its financial statements.

     The Financial Accounting Standards Board issued Statement No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS 143") in June 2001 and
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144") in August 2001. SFAS 143 addresses reporting for
obligations associated with the retirement of tangible long-lived assets and the
related asset retirement costs. SFAS 143 is effective for fiscal years beginning
after June 15, 2002 with earlier application permitted. SFAS 144 supercedes
earlier guidance with respect to such accounting and is effective for fiscal
years beginning after December 15, 2001. HCA does not expect the adoption of
SFAS 143 and SFAS 144 to have a material effect on its financial statements.

Reclassifications -

     Certain reclassifications have been made to the prior years' financial
statements to conform to the 2001 financial statement presentation.

                                       93

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

(3)  Long-Term Debt and Pledge of Assets

     HCA's long-term indebtedness consists of the following:

                                                   December 31,     December 31,
                                                      2001              2000
                                                   ------------     ------------

11.25% Promissory note to HCC, due on
  May 1, 2007 (a)                                  $81,007,000      $66,007,000
Promissory notes to bank (b)                           398,000        1,145,000
                                                   -----------      -----------

Total indebtedness                                  81,405,000       67,152,000
Less - current maturities                             (156,000)        (747,000)
                                                   -----------      -----------

Total long-term debt                               $81,249,000      $66,405,000
                                                   ===========      ===========
----------
(a)  The intercompany note was issued as of May 19, 1999 and accrues interest at
     the rate of 11.25% per annum. The initial borrowing on the note in the
     amount of $29,007,000 replaced a previous intercompany note with HCC which
     accrued interest at the rate of 12.75% per annum. During October 1999, HCA
     borrowed an additional $37,000,000 from HCC under the note agreement to
     acquire and terminate its management contract (see Note 6). During 2001,
     HCA borrowed an additional $15,000,000 from HCC under the note agreement in
     connection with the Aurora Casino expansion project (see Note 1). HCA may
     borrow up to a total of $108,000,000 under the intercompany note agreement.
     Interest on advances is payable each October 15 and April 15. The
     intercompany note is pledged as security with respect to HCC's $360,000,000
     Senior Secured Notes due in 2006 and 2007. HCA is not a guarantor of HCC's
     indebtedness; however, the indebtedness is secured, in part, by a lien on
     substantially all of the assets of HCA and by a pledge of the capital stock
     of HCA. The lien is limited to the outstanding principal amount on the
     intercompany note to HCC.

(b)  During September 1998, HCA entered into a bank loan agreement to borrow up
     to $2,000,000 on an unsecured basis. Borrowings under the agreement were
     payable in 36 monthly installments of $62,000 including interest at the
     rate of 7.5% per annum. The outstanding borrowings were repaid in 2001.

     During May 1999, HCA borrowed an additional $750,000 from the bank on an
     unsecured basis. The loan is payable in 60 monthly installments of $15,000
     including interest at the rate of 7.5% per annum. The outstanding borrowing
     was repaid in March 2002.

                                       94

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

     As of December 31, 2001, future maturities of long-term debt are as
follows:

2002                                             $   156,000
2003                                                 168,000
2004                                                  74,000
2005                                                      --
2006                                                      --
Thereafter                                        81,007,000
                                                 -----------

                                                 $81,405,000
                                                 ===========

     Interest paid, net of amounts capitalized in 2001, for the years ended
December 31, 2001, 2000 and 1999 amounted to $7,716,000, $9,047,000 and
$5,434,000, respectively.

(4)  Leases

     Capital Leases -

     HCA leases two parking garages under capital lease agreements. The first
lease has an initial 30-year term ending in June 2023 with the right to extend
the term under renewal options for an additional 67 years. Rental payments
through June 2012 equal the City of Aurora's financing costs related to its
general obligation bond issue used to finance the construction of the parking
garage. The general obligation bond issue includes interest at rates between 7%
and 7.625% per annum. The second lease has an initial term ending in September
2026 with the right to extend the lease for up to 20 additional years. Rental
payments during the first 15 years equal the lessor's debt service costs related
to the industrial revenue bond issue used to finance a portion of the
construction costs of the parking garage. The remaining construction costs were
funded by HCA. In addition, HCA pays base rent equal to $15,000 per month,
subject to a credit of $10,000 per month which expired in October 2001, for
improvements made to the lessor's North Island Center banquet and meeting
facilities. HCA is also responsible for additional rent, consisting of costs
such as maintenance costs, insurance premiums and utilities, arising out of its
operation of both parking garages.

     The original cost of HCA's parking garages is included in buildings and
improvements on the accompanying balance sheets at both December 31, 2001 and
2000 in the amount of $27,358,000. Amortization expense with respect to these
assets amounted to $909,000 during each of the years ended December 31, 2001,
2000 and 1999. Accumulated amortization at December 31, 2001 and 2000 with
respect to these assets amounted to $8,543,000 and $7,634,000, respectively.

                                       95

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

     Future minimum lease payments under capital lease obligations as of
December 31, 2001 are as follows:

2002                                                         $ 2,643,000
2003                                                           2,660,000
2004                                                           2,677,000
2005                                                           2,710,000
2006                                                           2,712,000
Thereafter                                                    13,318,000
                                                             -----------

Total minimum lease payments                                  26,720,000
Less - amount representing interest                           (8,858,000)
                                                             -----------

Present value of future minimum lease payments                17,862,000
Current capital lease obligation                              (1,308,000)
                                                             -----------

Long-term capital lease obligation                           $16,554,000
                                                             ===========

Operating Leases -

     HCA also leases property and operating equipment under various lease
agreements accounted for as operating leases. Although most of the lease
agreements are either cancellable or have initial terms of one year or less,
certain other lease agreements expire at various dates through the year 2008 and
several contain automatic renewals unless notice of termination is given. Some
of the operating leases also include contingent rental payments based on levels
of use; such contingent rentals have not been significant. Total rental expense
amounted to $1,994,000, $1,526,000 and $1,084,000, respectively, during the
years ended December 31, 2001, 2000 and 1999.

     Future minimum lease payments as of December 31, 2001 under operating
leases having an initial or remaining noncancelable lease term in excess of one
year are as follows:

2002                                                          $159,000
2003                                                           134,000
2004                                                           125,000
2005                                                           120,000
2006                                                           120,000
Thereafter                                                     239,000
                                                              --------

                                                              $897,000
                                                              ========

                                       96

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

(5)  Income Taxes

     HCA's provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                          Year Ended December 31,
                                -------------------------------------------
                                    2001            2000           1999
                                ------------    ------------    -----------
<S>                             <C>             <C>             <C>
Current (provision) benefit:
 Federal                        $(19,273,000)   $(15,830,000)   $   659,000
 State                              (199,000)     (1,952,000)    (1,229,000)
Deferred benefit (provision):
 Federal                           6,506,000        (556,000)       158,000
 State                               480,000         (84,000)        45,000
                                ------------    ------------    -----------

                                $(12,486,000)   $(18,422,000)   $  (367,000)
                                ============    ============    ===========
</TABLE>

     A reconciliation between the calculated tax provision on income based on
the statutory rates in effect and the effective tax rates for the years ended
December 31, 2001, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                             -----------------------------------------
                                                 2001            2000          1999
                                             ------------    ------------    ---------
<S>                                          <C>             <C>             <C>
Calculated income tax (provision)
 benefit at statutory rate                   $(12,837,000)   $(17,043,000)   $ 940,000
State income taxes, net of federal benefit        183,000      (1,344,000)    (781,000)
Political contributions and lobbying costs        (42,000)        (47,000)     (53,000)
Adjustments to prior years                        213,000              --     (430,000)
Other                                              (3,000)         12,000      (43,000)
                                             ------------    ------------    ---------
Tax provision as shown on statements
  of operations                              $(12,486,000)   $(18,422,000)   $(367,000)
                                             ============    ============    =========
</TABLE>

     Deferred taxes are computed based on the expected future tax consequences
of temporary differences between the carrying amounts and tax bases of assets
and liabilities, using enacted tax rates. Deferred income taxes result primarily
from the use of the allowance method rather than the direct write-off method for
doubtful accounts, the use of accelerated methods of depreciation for federal
income tax purposes and differences in the timing of deductions taken between
tax and financial reporting purposes for other accruals.

                                       97

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

     The components of HCA's net deferred tax liability are as follows:

                                                  December 31,
                                            -------------------------
                                               2001          2000
                                            ----------    -----------
Deferred tax assets:
  Allowance for doubtful accounts           $  298,000    $   345,000
  Other liabilities and reserves             1,697,000      1,613,000
  Depreciation and amortization                634,000             --
  Other                                         97,000        134,000
                                            ----------    -----------

    Total deferred tax assets                2,726,000      2,092,000
                                            ----------    -----------

Deferred tax liabilities:
  Depreciation and amortization                     --     (6,352,000)
                                            ----------    -----------

Net deferred tax asset (liability)          $2,726,000    $(4,260,000)
                                            ==========    ===========

     Receivables and payables to HCC in connection with the aforementioned tax
allocation agreements at December 31, 2001 and 2000 are as follows:

                                                 December 31,
                                        -----------------------------
                                           2001              2000
                                        -----------       -----------
Deferred tax assets                     $ 1,986,000       $ 1,745,000
Other noncurrent assets                     727,000                --
Due from affiliates                              --            95,000
Due to affiliates                        (1,090,000)               --
Deferred tax liabilities                         --        (5,538,000)

     The Internal Revenue Service recently completed its examination of the
consolidated federal income tax returns of HCC for the years 1993 through 1998
in which HCA was included. The intercompany tax obligation under the tax sharing
agreement and the net deferred tax asset (liability) have been adjusted to
reflect the results of such examination.

(6)  Transactions with Related Parties

     Pursuant to a management services agreement which was terminated in October
1999 (see below), HCA paid base management and incentive fees to Pratt
Management, L.P. ("PML"), a limited partnership. HCC was the general partner of
PML; the limited partner of PML was a wholly owned subsidiary of Greate Bay
Casino Corporation ("Greate Bay"), a Delaware corporation which is approximately
36%-owned by the Pratt Family. The base management fee was equal to 5% of
operating revenues (as defined in the agreement) subject to a maximum of
$5,500,000 in any consecutive twelve

                                       98

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

month period. The incentive fee was equal to 10% of gross operating profit (as
defined in the agreement to generally include all revenues less expenses other
than depreciation, interest, amortization and income taxes). HCA incurred such
fees totaling $7,730,000 during the period from January 1, 1999 through the
October 13, 1999 termination date.

     During October 1999, HCC acquired the Greate Bay subsidiary which held the
limited partnership interest in PML. HCA borrowed an additional $37,000,000
under its intercompany note with HCC (see Note 3) to acquire and terminate the
management contract. Accordingly, as of October 13, 1999, HCA no longer paid a
management fee. HCA reflected the $37,000,000 payment to terminate the
management contract as an expense during 1999.

     HCA incurred interest with respect to its promissory note payable to HCC
(see Note 3) amounting to $7,548,000, $7,426,000 and $4,424,000, respectively,
for the years ended December 31, 2001, 2000 and 1999. Interest payable to HCC on
such note amounted to $1,690,000 and $1,568,000, respectively, at December 31,
2001 and 2000 and is included in accrued interest payable on the accompanying
balance sheets.

     HCA has acquired computer software and hardware from an entity which, prior
to March 2002, was a subsidiary of Greate Bay. HCA entered into a new
maintenance and support agreement with the Greate Bay subsidiary effective as of
January 1, 2000 which provides for a monthly fee of $13,000 (subject to change
upon 60 days written notice) plus additional services at rates charged by the
Greate Bay subsidiary to third parties. The agreement has an initial term of one
year with automatic annual renewals unless notice of termination is given. In
addition, HCA has been allocated certain other expenses from HCC and Greate Bay
and is reimbursed by HCC and Greate Bay for certain administrative and other
services it performs on their behalf. Such transactions resulted in net charges
to HCA during the years ended December 31, 2001, 2000 and 1999 totaling
$1,451,000, $776,000 and $504,000, respectively. At December 31, 2001 and 2000,
HCA had net payables of $335,000 and $89,000, respectively, in connection with
such charges.

(7)  Illinois Regulatory Matters

     Riverboat gaming operations in Illinois are subject to regulatory control
by the Illinois Gaming Board. Illinois law requires that HCA maintain its
Owners' License in order to operate. HCA's Owner's License was renewed in
December 2000 for a period of four years. If it were determined that gaming laws
were violated by a licensee, the gaming licenses held by each licensee could be
limited, conditioned, suspended, or revoked. In addition, the licensees and
other persons involved could be subject to substantial fines. Limitation or
conditioning or suspension of any gaming license could, and revocation would,
have a materially adverse affect on the operations of HCA.

(8)  Commitments and Contingencies

     HCA is a party in various legal proceedings with respect to the conduct of
casino operations. Although a possible range of loss can not be estimated, in
the opinion of management, based upon the advice of counsel, settlement or
resolution of the proceedings should not have a material adverse impact on the
financial position or results of operations of HCA.

                                       99

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

(9)  Employee Retirement Savings Plan

     HCA participates in a retirement savings plan under Section 401(k) of the
Internal Revenue Code sponsored by HCC which covers all of its employees who
meet certain eligibility requirements as to age and period of employment. The
plan allows employees to contribute up to 15% of their salary on a pre-tax basis
(subject to statutory limitations) and invest such monies in a choice of mutual
funds on a tax-deferred basis. HCA matches a portion of the participating
employees' contributions to the plan and may, from time to time, make additional
discretionary contributions. For the years ended December 31, 2001, 2000 and
1999, HCA expensed $417,000, $304,000 and $397,000, respectively, as company
contributions to the plan.

(10) Stock Option Plan

     Certain HCA employees have been granted stock options to acquire common
stock of HCC under the Hollywood Casino Corporation 1996 Long-Term Incentive
Plan (the "1996 Plan"). The 1996 Plan provides for the granting of nonqualified
stock options and incentive stock options that are intended to qualify for the
special tax treatment under the Internal Revenue Code and also provides for the
granting of restricted stock. The 1996 Plan provides for the granting of
3,000,000 shares of Class A Common Stock of which 261,480 remain available for
future grant as of December 31, 2001.

     The 1996 Plan is administered by a committee of HCC's Board of Directors.
Options granted under the 1996 Plan become vested at the discretion of the
Committee of the Board of Directors (however, vesting for employees who are
executive officers, directors or 10% or greater shareholders of the company may
not be less than six months) and may be exercised for a period of not more than
ten years (five years in the case of incentive stock options) from the date of
grant. No more than 500,000 shares may be awarded to any individual during any
fiscal year and incentive stock options are subject to a $100,000 calendar year
limitation. All options granted through December 31, 2001 under the 1996 Plan
have been granted at an exercise price equal to the fair market value as of the
date of the grant. As of December 31, 2001, options to purchase 62,000 shares
remain outstanding to employees of HCA, of which approximately 52% are at an
exercise price of $1.25 per share; 28% are at exercise prices of between $7.00
and $9.03 per share and 20% are at an exercise price of $11.00 per share. Such
options outstanding have a weighted average exercise price of $5.33 per share a
remaining weighted average contractual life of 97 months.

                                       100

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

     The following table sets forth the activity of the 1996 Plan with respect
to HCA employees:

<TABLE>
<CAPTION>
                                            Year Ended December 31,
                         ------------------------------------------------------------
                                2001                 2000                 1999
                         ------------------   ------------------   ------------------
                                   Weighted             Weighted             Weighted
                                   Average              Average              Average
                                   Exercise             Exercise             Exercise
                         Options    Price     Options    Price     Options    Price
                         -------   --------   -------   --------   -------   --------
<S>                      <C>        <C>       <C>        <C>       <C>        <C>
Outstanding options at
   beginning of year     52,000     $3.87     47,500     $ 1.25         --    $  --
   Options cancelled         --        --     (7,500)      1.25    (20,000)    1.25
   Options granted       15,000      9.03     15,000      10.33     67,500     1.25
   Options exercised     (5,000)     1.25     (3,000)      1.25         --       --
                         ------     -----     ------     ------    -------    -----
Outstanding options
   at end of year        62,000     $5.33     52,000     $ 3.87     47,500    $1.25
                         ======     =====     ======     ======    =======    =====
Exercisable options
   at end of year        19,000     $2.68     13,000     $ 1.25      9,500    $1.25
</TABLE>

     HCA has elected to apply Opinion 25 with respect to accounting for options
to its employees. Based on such election, no compensation expense has been
recognized in the accompanying consolidated financial statements as a result of
the granting of stock options. Had compensation expense been determined
consistent with SFAS 123, net income (net of income taxes) for the years ended
December 31, 2001 and 2000 would have decreased by approximately $31,000 and
$7,000, respectively, and net loss (net of income taxes) for the year ended
December 31, 1999 would have increased by approximately $4,000.

     The fair value of each option grant was estimated on the date of grant
using a method approximating the Black-Scholes option pricing model. The
assumptions applied are set forth below:

                                                  Year Ended December 31,
                                               ------------------------------
                                                 2001       2000      1999
                                               --------   --------   --------
Risk free interest rate                             5.5%       6.8%       4.8%
Dividend yield                                       --         --         --
Expected life                                   5 years    5 years    5 years
Volatility                                         58.6%      69.9%      54.8%
Weighted average fair value                    $   3.78   $   4.93   $    .48

(11) Disclosures About Fair Value of Financial Instruments

     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

     Cash and cash equivalents - The carrying amounts approximate fair value
     -------------------------
because of the short maturity of these instruments.

                                       101

<PAGE>

                         HOLLYWOOD CASINO - AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                    NOTES TO FINANCIAL STATEMENTS (Continued)

     Interest payable - The carrying amount of interest payable approximates
     ----------------
fair value because of the short maturity of the obligation.

     Long-term debt - The fair value of HCA's long-term debt is estimated based
     --------------
on either the quoted market price of the underlying debt issue or on the
discounted cash flow of future payments utilizing current interest rates
available to HCA for debt of similar remaining maturities.

     The estimated carrying amounts and fair values of HCA's financial
instruments are as follows:

<TABLE>
<CAPTION>
                                 December 31, 2001           December 31, 2000
                             -------------------------   -------------------------
                              Carrying                    Carrying
                               Amount      Fair Value       Amount     Fair Value
                             -----------   -----------   -----------   -----------
<S>                          <C>           <C>           <C>           <C>
Financial Assets:
  Cash and cash
    equivalents              $21,443,000   $21,443,000   $21,164,000   $21,164,000

Financial Liabilities:
  Interest payable           $ 2,041,000   $ 2,041,000   $ 1,756,000   $ 1,756,000
  11.25% promissory note      81,007,000    87,510,000    66,007,000    67,964,000
  Promissory notes to bank       398,000       403,000     1,145,000     1,123,000
</TABLE>

(12) Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                     Quarter
                               -----------------------------------------------------
                                  First        Second         Third        Fourth
                               -----------   -----------   -----------   -----------
<S>                            <C>           <C>           <C>           <C>
Year Ended December 31, 2001
   Net revenues                $53,355,000   $52,522,000   $54,300,000   $55,808,000
                               ===========   ===========   ===========   ===========

   Net income                  $ 7,552,000   $ 4,663,000   $ 5,578,000   $ 6,397,000
                               ===========   ===========   ===========   ===========
Year Ended December 31, 2000
   Net revenues                $50,647,000   $51,564,000   $52,796,000   $48,825,000
                               ===========   ===========   ===========   ===========

   Net income                  $ 8,229,000   $ 7,796,000   $ 8,687,000   $ 6,993,000
                               ===========   ===========   ===========   ===========
</TABLE>

                                       102

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
  HWCC - Tunica, Inc.:

We have audited the accompanying consolidated balance sheets of HWCC - Tunica,
Inc. (the Company and a Texas Corporation) and subsidiary as of December 31,
2001 and 2000, and the related consolidated statements of operations, changes in
shareholder's equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 present fairly, in all material
respects, the consolidated financial position of HWCC - Tunica, Inc. and
subsidiary as of December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America.

Deloitte & Touche LLP
Dallas, Texas
March 19, 2002

                                       103

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                 December 31,
                                                         ---------------------------
                                                             2001           2000
                                                         ------------   ------------
<S>                                                      <C>            <C>
Current Assets:
   Cash and cash equivalents                             $ 19,922,000   $ 16,038,000
   Accounts receivable, net of allowances of
      $2,188,000 and $1,636,000, respectively               1,822,000      3,295,000
   Inventories                                                568,000        780,000
   Deferred income taxes                                      679,000      1,403,000
   Prepaid expenses and other current assets                1,052,000      1,182,000
   Due from affiliates                                         58,000        163,000
                                                         ------------   ------------

      Total current assets                                 24,101,000     22,861,000
                                                         ------------   ------------

Property and Equipment:
   Land and improvements                                    4,808,000      4,808,000
   Buildings                                               76,946,000     76,701,000
   Barges                                                   2,524,000      2,524,000
   Operating equipment                                     49,554,000     47,019,000
   Construction in progress                                   474,000         91,000
                                                         ------------   ------------

                                                          134,306,000    131,143,000
      Less - accumulated depreciation and amortization    (54,168,000)   (49,408,000)
                                                         ------------   ------------

   Net property and equipment                              80,138,000     81,735,000
                                                         ------------   ------------

Other Assets:
   Land rights                                              6,639,000      6,843,000
   Other assets                                             4,195,000      4,667,000
                                                         ------------   ------------

     Total other assets                                    10,834,000     11,510,000
                                                         ------------   ------------

                                                         $115,073,000   $116,106,000
                                                         ============   ============
</TABLE>

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

                                       104

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
                                                      December 31,
                                              ----------------------------
                                                   2001           2000
                                              -------------   ------------
<S>                                           <C>             <C>
Current Liabilities:
   Current maturities of long-term debt       $     586,000   $  1,032,000
   Accounts payable                                 911,000      1,829,000
   Accrued liabilities -
      Salaries and wages                          1,988,000      1,792,000
      Interest                                      437,000        437,000
      Gaming and other taxes                      1,282,000      1,473,000
      Insurance                                   2,194,000      1,986,000
      Other                                       2,907,000      2,856,000
   Due to affiliates                                695,000         61,000
   Other current liabilities                      1,812,000      1,375,000
                                              -------------   ------------

   Total current liabilities                     12,812,000     12,841,000
                                              -------------   ------------

Long-Term Debt                                   87,983,000     87,619,000
                                              -------------   ------------

Deferred Income Taxes                               679,000             --
                                              -------------   ------------
Commitments and Contingencies

Shareholder's Equity:
   Common stock, $.01 par value
      per share; 100,000 shares authorized;
      1,000 shares issued and outstanding                --             --
   Additional paid-in capital                    22,637,000     22,637,000
   Accumulated deficit                           (9,038,000)    (6,991,000)
                                              -------------   ------------

      Total shareholder's equity                 13,599,000     15,646,000
                                              -------------   ------------

                                              $ 115,073,000   $116,106,000
                                              =============   ============
</TABLE>

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

                                       105

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                          --------------------------------------------
                                              2001            2000            1999
                                          ------------    ------------    ------------
<S>                                       <C>             <C>             <C>
Revenues:
   Casino                                 $107,191,000    $108,529,000    $102,312,000
   Rooms                                    12,506,000      10,690,000      10,457,000
   Food and beverage                        16,802,000      16,656,000      15,274,000
   Other                                     1,762,000       1,462,000       1,542,000
                                          ------------    ------------    ------------

                                           138,261,000     137,337,000     129,585,000
   Less - promotional allowances           (40,058,000)    (37,468,000)    (32,941,000)
                                          ------------    ------------    ------------

      Net revenues                          98,203,000      99,869,000      96,644,000
                                          ------------    ------------    ------------

Expenses:
   Casino                                   70,594,000      69,865,000      65,402,000
   Rooms                                       908,000       1,102,000       1,161,000
   Food and beverage                         3,488,000       3,897,000       3,704,000
   Other                                       864,000         791,000       1,137,000
   General and administrative                5,567,000       5,173,000       5,679,000
   Termination of consulting agreement              --              --       3,329,000
   Depreciation and amortization             5,823,000       5,841,000       7,066,000
                                          ------------    ------------    ------------

      Total expenses                        87,244,000      86,669,000      87,478,000
                                          ------------    ------------    ------------

Income from operations                      10,959,000      13,200,000       9,166,000
                                          ------------    ------------    ------------

Non-operating income (expenses):
   Interest income                             299,000         280,000         340,000
   Interest expense                         (9,933,000)    (10,019,000)    (10,308,000)
   Equity in losses of unconsolidated
      affiliate                               (183,000)        (55,000)       (141,000)
   Gain (loss) on disposal of assets            27,000           5,000         (57,000)
                                          ------------    ------------    ------------

      Total non-operating expenses, net     (9,790,000)     (9,789,000)    (10,166,000)
                                          ------------    ------------    ------------

Income (loss) before income taxes            1,169,000       3,411,000      (1,000,000)
Income tax (provision) benefit              (3,216,000)       (375,000)        323,000
                                          ------------    ------------    ------------

Net (loss) income                         $ (2,047,000)   $  3,036,000    $   (677,000)
                                          ============    ============    ============
</TABLE>

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

                                       106

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
                   For the Three Years Ended December 31, 2001

                                Common Stock     Additional
                              ---------------     Paid-in       Accumulated
                              Shares   Amount     Capital         Deficit
                              ------   ------   ------------    ------------
BALANCES, January 1, 1999      1,000     $--    $ 34,637,000    $ (9,350,000)

   Net loss                       --      --              --        (677,000)
   Dividends                      --      --     (12,000,000)             --
                               -----     ---    ------------    ------------

BALANCES, December 31, 1999    1,000      --      22,637,000     (10,027,000)

   Net income                     --      --              --       3,036,000
                               -----     ---    ------------    ------------

BALANCES, December 31, 2000    1,000      --      22,637,000      (6,991,000)

   Net loss                       --      --              --      (2,047,000)
                               -----     ---    ------------    ------------

BALANCES, December 31, 2001    1,000     $--    $ 22,637,000    $ (9,038,000)
                               =====     ===    ============    ============

   The accompanying notes to consolidated financial statements are an integral
                      part of this consolidated statement.

                                       107

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                      -----------------------------------------
                                                         2001           2000            1999
                                                      -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
OPERATING ACTIVITIES:
    Net (loss) income                                 $(2,047,000)   $ 3,036,000    $  (677,000)
    Adjustments to reconcile net (loss) income to
       net cash provided by operating activities:
       Depreciation and amortization                    5,823,000      5,841,000      7,066,000
       (Gain) loss on disposal of assets                  (27,000)        (5,000)        57,000
       Provision for doubtful accounts                  1,517,000      1,206,000        504,000
    Equity in losses of unconsolidated affiliate          183,000         55,000        141,000
       Deferred income tax provision (benefit)          2,125,000             --       (133,000)
       Increase in accounts receivable                    (44,000)    (1,779,000)    (2,625,000)
       (Decrease) increase in accounts payable and
          accrued expenses                               (654,000)     1,954,000        387,000
       Net change in other current assets and
          liabilities                                   1,303,000        560,000       (562,000)
       Net change in other noncurrent assets
          and liabilities                                 (60,000)        (5,000)        14,000
                                                      -----------    -----------    -----------

          Net cash provided by operating activities     8,119,000     10,863,000      4,172,000
                                                      -----------    -----------    -----------

INVESTING ACTIVITIES:
    Purchases of property and equipment                (4,020,000)    (3,682,000)    (6,415,000)
    Short-term investments                                     --             --      3,905,000
    Investment in unconsolidated affiliate               (160,000)            --        (45,000)
    Proceeds from sale of assets                           27,000          7,000         55,000
                                                      -----------    -----------    -----------

       Net cash used in investing activities           (4,153,000)    (3,675,000)    (2,500,000)
                                                      -----------    -----------    -----------

FINANCING ACTIVITIES:
    Proceeds from issuance of long-term debt            1,081,000        104,000     89,680,000
    Repayments of long-term debt                       (1,163,000)    (1,593,000)   (85,338,000)
    Dividends                                                  --             --    (12,000,000)
                                                      -----------    -----------    -----------

       Net cash used in financing activities              (82,000)    (1,489,000)    (7,658,000)
                                                      -----------    -----------    -----------

       Net increase (decrease) in cash and
          cash equivalents                              3,884,000      5,699,000     (5,986,000)
       Cash and cash equivalents at
          beginning of year                            16,038,000     10,339,000     16,325,000
                                                      -----------    -----------    -----------

       Cash and cash equivalents at end of year       $19,922,000    $16,038,000    $10,339,000
                                                      ===========    ===========    ===========
</TABLE>

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

                                       108

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Organization, Business and Basis of Presentation

     HWCC - Tunica, Inc. ("HCT") is a Texas corporation and a wholly owned
subsidiary of Hollywood Casino Corporation ("HCC"), a Delaware corporation. HCT
was incorporated in December 1993 for the purpose of acquiring and completing a
gaming facility in northern Tunica County, Mississippi approximately 30 miles
southwest of Memphis, Tennessee. The facility (the "Tunica Casino") was
completed and commenced operations on August 8, 1994 under the service mark
Hollywood Casino(R). The Tunica Casino currently includes a casino with 54,000
square feet of gaming space, 505 hotel rooms and suites, a 123-space
recreational vehicle park and related amenities. HCT's gaming license has been
renewed by the Mississippi Gaming Commission through October 20, 2004.

     The accompanying consolidated financial statements include the accounts of
HCT and its wholly owned subsidiary, HWCC-Golf Course Partners, Inc. ("Golf").
All significant intercompany balances have been eliminated in consolidation.
Golf, a Delaware corporation, was formed in 1996 to own an initial one-third
interest in Tunica Golf Course LLC, a limited liability company organized to
develop and operate a golf course to be used by patrons of the Tunica Casino and
other participating casino/hotel properties. The golf course opened for business
in November 1998. Golf's investment in Tunica Golf Course, LLC is accounted for
under the equity method of accounting and is included in other noncurrent assets
on the accompanying consolidated balance sheets at December 31, 2001 and 2000.

     HCT estimates that a significant amount of the Tunica Casino's revenues are
derived from patrons living in the Memphis, Tennessee area, northern Mississippi
and Arkansas. The Tunica Casino faces intense competition from other casinos
operating in northern Tunica County and management believes that this
competition will continue in the future.

(2)  Summary of Significant Accounting Policies

     The significant accounting policies followed in the preparation of the
accompanying consolidated financial statements are discussed below. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Casino revenues, promotional allowances and departmental expenses -

     The Tunica Casino recognizes the net win from gaming activities (the
difference between gaming wins and losses) as casino revenues. Casino revenues
are net of accruals for anticipated payouts of progressive slot machine jackpots
and certain progressive table game payouts. Such anticipated jackpots and
payouts are reflected as current liabilities on the accompanying consolidated
balance sheets.

     Promotional allowances consist of (1) the estimated value of rooms, food
and beverage and other items provided to customers without charge and (2) the
"cash back" feature of customer loyalty programs. The estimated value of
complimentaries has been included in revenues on the accompanying consolidated
statements of operations and a corresponding amount has been deducted as
promotional allowances. During 2001, the Emerging Issues Task Force ("EITF") of
the Financial Accounting Standards Board reached consensuses requiring that the
"cash-back" feature of customer loyalty programs also be reported as a reduction
to revenues rather than as an operating expense. Accordingly, all such costs for
the current and prior year periods have been reported on the accompanying

                                       109

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

consolidated statements of operations as promotional allowances instead of
casino expenses as previously reported. This change results only in a
reclassification within the consolidated statements of operations and does not
affect consolidated income from operations or consolidated net (loss) income.
Promotional allowances for the years ended December 31, 2001, 2000 and 1999
consist of the following:

                               2001           2000         1999
                            -----------   -----------   -----------
Complimentaries:
       Room                 $ 9,943,000   $ 7,548,000   $ 7,139,000
       Food and beverage     13,511,000    13,227,000    11,880,000
       Other                    833,000       535,000       444,000
Customer loyalty programs    15,771,000    16,158,000    13,478,000
                            -----------   -----------   -----------

                            $40,058,000   $37,468,000   $32,941,000
                            ===========   ===========   ===========

     The costs of complimentaries have been included as casino expenses on the
accompanying consolidated statements of operations. Costs of complimentaries
allocated from the rooms, food and beverage and other operating departments to
the casino department during the years ended December 31, 2001, 2000 and 1999
are as follows:

                                2001         2000           1999
                            -----------   -----------   -----------

Rooms                       $ 3,537,000   $ 3,188,000   $ 2,742,000
Food and beverage            14,309,000    13,818,000    12,710,000
Other                           761,000       590,000       438,000
                            -----------   -----------   -----------

                            $18,607,000   $17,596,000   $15,890,000
                            ===========   ===========   ===========

Cash and cash equivalents -

     Cash and cash equivalents are generally comprised of cash and investments
with original maturities of three months or less, such as commercial paper,
certificates of deposit and fixed repurchase agreements.

Allowance for doubtful accounts -

     The allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. Provisions for doubtful accounts
amounting to $1,517,000, $1,206,000 and $504,000, respectively, were made during
the years ended December 31, 2001, 2000 and 1999.

Inventories -

     Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market.

                                       110

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property and equipment -

     Property and equipment have been recorded at cost and are being depreciated
utilizing the straight-line method over the estimated useful lives of the assets
as follows:

     Hotel, dockside facilities and improvements   25-40 years
     Barges                                           40 years
     Operating equipment                           3 - 7 years

Land rights -

     Land rights are being amortized on a straight-line basis over the estimated
useful life of the facility, which is less than the term of the ground lease
including renewals (see Note 4); such amortization commenced with the opening of
the Tunica Casino. Management presently intends to renew the ground lease at
least through the estimated 40-year useful life of the facility. Accumulated
amortization of such land rights amounted to $1,806,000 and $1,602,000,
respectively, at December 31, 2001 and 2000.

Long-lived assets -

     Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
requires, among other things, that an entity review its long-lived assets and
certain related intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. HCT does not believe that any such events or changes have occurred.

Accrued insurance -

     HCT is self insured for a portion of its general liability, certain health
care and other liability exposures. Accrued insurance includes estimates of such
accrued liabilities based on an evaluation of the merits of individual claims
and historical claims experience; accordingly, HCT's ultimate liability may
differ from the amounts accrued.

                                      111

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee stock options -

     HCT has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 allows an entity to continue to measure compensation cost for
employee stock-based compensation using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("Opinion 25"). Entities electing to remain with
the accounting under Opinion 25 are required to make pro forma disclosures of
net income as if the fair value based method of accounting under SFAS 123 had
been applied. HCT has elected to account for employee-based compensation under
Opinion 25 with the requisite additional disclosures included in Note 10.

Income taxes -

     HCT is included in HCC's consolidated federal income tax return. HCT's
provision for federal income taxes is based on the amount of tax which would be
provided if a separate federal income tax return were filed. HCT made payments
to HCC in lieu of federal income taxes amounting to $319,000, $33,000 and
$288,000 during the years ended December 31, 2001, 2000 and 1999, respectively.
HCT paid no state income taxes during 2001, 2000 or 1999.

Recent Accounting Pronouncements -

     In June 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" ("SFAS 141") and Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142"). SFAS 141 requires the use of the purchase
method of accounting for all business combinations initiated after June 30,
2001. SFAS 142 establishes new standards for goodwill acquired in a business
combination and requires that goodwill and other intangible assets be
periodically reviewed for impairment rather than being amortized. SFAS 142 is
effective for fiscal years beginning after December 15, 2001 with earlier
application permitted. HCT does not expect the adoption to have a material
effect on its consolidated financial statements.

     The Financial Accounting Standards Board issued Statement No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS 143") in June 2001 and
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144") in August 2001. SFAS 143 addresses reporting for
obligations associated with the retirement of tangible long-lived assets and the
related asset retirement costs. SFAS 143 is effective for fiscal years beginning
after June 15, 2002 with earlier application permitted. SFAS 144 supercedes
earlier guidance with respect to such accounting and is effective for fiscal
years beginning after December 15, 2001. HCT does not expect the adoption of
SFAS 143 and SFAS 144 to have a material effect on its consolidated financial
statements.

Reclassifications -

     Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the 2001 consolidated financial statement
presentation.

                                      112

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3)  Long-Term Debt and Pledge of Assets

     Substantially all of HCT's assets are pledged in connection with its
long-term indebtedness. Long-term debt consists of the following:

                                                    December 31,   December 31,
                                                       2001            2000
                                                    ------------   ------------

11.25% Promissory note to HCC due May 1, 2007 (a)    $87,045,000    $87,045,000
Note payable to HCC (a)                                  329,000        329,000
Equipment loans (b)                                      245,000      1,188,000
Bank credit facility (c)                                 950,000         89,000
                                                     -----------    -----------

    Total indebtedness                                88,569,000     88,651,000
  Less - current maturities                             (586,000)    (1,032,000)
                                                     -----------    -----------

    Total long-term debt                             $87,983,000    $87,619,000
                                                     ===========    ===========

----------
(a)  The intercompany note was issued as of May 19, 1999 and accrues interest at
     the rate of 11.25% per annum. The initial borrowing on the note in the
     amount of $84,045,000 replaced previous intercompany notes with HCC which
     accrued interest at the rate of 12.75% per annum. During October 1999, HCT
     borrowed an additional $3,000,000 available under the intercompany note
     with HCC as well as an additional $329,000 under a new note agreement with
     HCC to acquire and terminate its consulting agreement (see Note 6).
     Interest on advances is payable each April 15 and October 15. The
     intercompany note is pledged as security with respect to HCC's $360,000,000
     Senior Secured Notes due in 2006 and 2007 which are unconditionally
     guaranteed on a senior secured basis by HCT and by certain other current
     and future subsidiaries of HCC. HCC's Senior Secured Notes and related
     guarantees are secured by, among other things, (1) substantially all of the
     assets of HCT and other future guarantors, (2) a limited lien on
     substantially all of the assets of another gaming facility operated by a
     wholly owned subsidiary of HCC, (3) a pledge of the capital stock of HCT
     and certain other subsidiaries of HCC and (4) the collateral assignment of
     any future management contracts entered into by HCC. The limitation on the
     lien described in (2) above is currently $81,007,000 and may be increased
     as a result of additional borrowings up to a maximum of $108,000,000.

     The indenture for HCC's Senior Secured Notes contains various provisions
     limiting the ability of HCC, HCT and certain defined subsidiaries to, among
     other things, pay dividends or make other restricted payments; incur
     additional indebtedness or issue preferred stock; create liens; create
     dividend or other payment restrictions affecting certain defined
     subsidiaries; enter into mergers or consolidations or make sales of all or
     substantially all assets of HCC, HCT or any future guarantor; or enter into
     certain transactions with affiliates. Dividend payments by HCT to HCC are
     not restricted under the terms of the indenture.

(b)  The equipment loans are payable monthly including interest at effective
     rates ranging from 8.5% to 9% per annum and mature at various dates in 2002
     and 2003.

                                      113

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(c)  HCT had a bank credit facility in the amount of $1,300,000 available to
     borrow against until September 30, 1998. HCT borrowed $541,000 under the
     credit facility during 1998 at the rate of 8.875% per annum. Borrowings
     under the credit facility were collateralized by equipment purchased with
     the loan proceeds and were repaid in 2001. The credit facility was not
     renewed by HCT.

     In June 2001, HCT entered into a bank credit facility in the amount of
     $3,000,000 available through June 30, 2002. Borrowings under the line of
     credit are payable over a 36 month period and accrue interest at the bank's
     prime lending rate plus .75% per annum on either a fixed or floating rate
     basis. Borrowings under the line of credit are collateralized by equipment
     purchased with the loan proceeds. The line of credit agreement requires the
     provision of certain financial reports. During June 2001, HCT borrowed
     $731,000 under the credit facility at an interest rate of 7.5% per annum.
     HCT made additional borrowings of $130,000 at the rate of 7.5% per annum in
     July 2001 and $220,000 at the rate of 7.25% per annum in August 2001.

     Scheduled payments of long-term debt as of December 31, 2001 are set forth
below:

2002                               $   586,000
2003                                   373,000
2004                                   236,000
2005                                        --
2006                                        --
Thereafter                          87,374,000
                                   -----------

  Total                            $88,569,000
                                   ===========

     Interest paid amounted to $9,933,000, $10,019,000 and $10,347,000,
respectively, during the years ended December 31, 2001, 2000 and 1999.

(4)  Operating Leases -

     HCT entered into a ground lease covering 70 acres of land on which the
Tunica Casino was constructed. The ground lease was for an initial term of five
years from the opening date of the facility and, at HCT's option, may be renewed
for nine additional five-year periods. The lease is currently in its first
five-year renewal term. Obligations under the ground lease include both minimum
monthly fixed payments and percentage rent, which in the aggregate will be the
greater of 4% of Gross Revenues, as defined, or $1,100,000 per year. HCT is
responsible for all operating and other expenses of the property in accordance
with the lease terms. During 2001, 2000 and 1999, HCT expensed $4,354,000,
$4,367,000 and $4,138,000, respectively, in connection with the ground lease.

     HCT leases property and operating equipment under various lease agreements
accounted for as operating leases. Except for the ground lease discussed above,
virtually all of the lease agreements are either cancellable or have initial
terms of one year or less. A number of the leases contain automatic renewal
options unless notice of termination is given and some include contingent rental
payments based on levels of use; such contingent rentals have not been
significant. Total rental expense amounted to $1,126,000, $951,000 and $905,000,
respectively, during the years ended December 31, 2001, 2000 and

                                      114

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1999. Future minimum lease payments as of December 31, 2001 for such operating
leases having an initial or remaining noncancelable lease term in excess of one
year are $80,000 in 2002 and $40,000 in 2003.

(5)  Income Taxes

     HCT's (provision) benefit for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                  ------------------------------------
                                                      2001          2000        1999
                                                  -----------    ---------    --------
<S>                                               <C>            <C>          <C>
Federal income tax (provision) benefit:
   Current                                        $(1,091,000)   $(375,000)   $190,000
   Deferred                                           (55,000)    (868,000)     54,000
Change in valuation allowance                      (2,070,000)     868,000      79,000
                                                  -----------    ---------    --------

                                                  $(3,216,000)   $(375,000)   $323,000
                                                  ===========    =========    ========
</TABLE>

     State income taxes have not been provided for since a credit for state
gaming taxes based on gross revenues is allowed to offset income taxes incurred.
The credit is the lesser of total gaming taxes paid or the state income tax,
with no credit carryforward permitted.

     A reconciliation between the calculated tax (provision) benefit based on
the statutory rates in effect and the effective tax rates for the years ended
December 31, 2001, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                --------------------------------------
                                                    2001           2000         1999
                                                -----------    -----------    --------
<S>                                             <C>            <C>            <C>
Calculated income tax (provision) benefit       $  (397,000)   $(1,160,000)   $340,000
Valuation allowance change                       (2,070,000)       868,000      79,000
Adjustments to prior years                         (685,000)            --     (32,000)
Disallowance of meals and entertainment             (61,000)       (50,000)    (38,000)
Other                                                (3,000)       (33,000)    (26,000)
                                                -----------    -----------    --------
Tax (provision) benefit as shown on statement
  of operations                                 $(3,216,000)   $  (375,000)   $323,000
                                                ===========    ===========    ========
</TABLE>

     Deferred income taxes result primarily from the use of the allowance method
rather than the direct write-off method for doubtful accounts, the use of
accelerated methods of depreciation for federal income tax purposes and
differences in the timing of deductions taken between tax and financial
reporting purposes for other accruals.

                                       115

<PAGE>

                      HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     At December 31, 2001, HCT has net operating loss carryforwards ("NOL's")
totaling approximately $2,900,000, which do not begin to expire until the year
2010. Additionally, HCT has alternative minimum and other tax credits available
totaling $1,439,000 and $402,000, respectively. Alternative minimum tax credits
do not expire and none of the other tax credits begin to expire before the year
2009. Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", requires that the tax benefit of such NOL's and credit
carryforwards, together with the tax benefit of deferred tax assets resulting
from temporary differences, be recorded as an asset and, to the extent that
management can not assess that the utilization of all or a portion of such
deferred tax assets is more likely than not, a valuation allowance should be
recorded. Based on the near-term expectation of taxable losses, management has
provided a valuation allowance to fully reserve the net deferred tax asset at
December 31, 2001. Based on the taxable income earned by HCT during 2000 and
1999 (before non-recurring items), management believed that it was more likely
than not that a portion of the NOL's and deferred tax assets would be utilized.
Accordingly, a valuation allowance was established which resulted in the
recording of a net deferred tax asset of $2,125,000 at December 31, 2000.

     The components of HCT's net deferred tax asset are as follows:

<TABLE>
<CAPTION>
                                              December 31,
                                       --------------------------
                                          2001           2000
                                       -----------    -----------
<S>                                         <C>            <C>
Deferred tax assets:
    Net operating loss carryforwards   $   974,000    $ 1,251,000
    Alternative minimum tax credit
       carryforward                      1,439,000        985,000
    Tax credit carryforwards               402,000        326,000
    Allowance for doubtful accounts        744,000        556,000
    Other liabilities and accruals       1,570,000      1,546,000
                                       -----------    -----------

        Total deferred tax assets        5,129,000      4,664,000

Deferred tax liabilities:
    Depreciation and amortization       (1,506,000)      (986,000)
                                       -----------    -----------

Net deferred tax asset                   3,623,000      3,678,000
Valuation allowance                     (3,623,000)    (1,553,000)
                                       -----------    -----------

                                       $        --    $ 2,125,000
                                       ===========    ===========
</TABLE>

     Receivables from (payables to) HCC in connection with HCT's federal income
taxes are included in the accompanying consolidated financial statements as
follows:

                                             December 31,
                                       ------------------------
                                         2001            2000
                                       ---------     ----------
Due from affiliates                    $      --     $  136,000
Deferred income taxes                    679,000      1,403,000
Other noncurrent assets                       --        722,000
Due to affiliates                       (637,000)            --
Noncurrent liabilities                  (679,000)            --

                                       116

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The Internal Revenue Service recently completed its examination of the
consolidated federal income tax returns of HCC for the years 1993 through 1998
in which HCT was included. The intercompany tax receivable (payable) under the
tax sharing agreement and the net deferred tax asset have been adjusted to
reflect the results of such examination.

(6)  Transactions with Related Parties

     Pursuant to a consulting agreement which was terminated during October
1999, HCT incurred a monthly consulting fee of $100,000 to Pratt Casino
Corporation ("PCC"), an affiliated company. During October 1999, HCC acquired
all of the common stock of PCC. HCT borrowed an additional $3,329,000 from HCC
(see Note 3) to acquire and terminate the consulting agreement. Accordingly, as
of October 13, 1999, HCT no longer paid a consulting fee; such fee amounted to
$939,000 during 1999 prior to the termination date. HCT reflected the $3,329,000
payment to terminate the consulting agreement as an expense during 1999.

     HCT entered into a Computer Services Agreement with Advanced Casino Systems
Corporation ("ACSC") which was renewed through December 31, 1999. Prior to March
2002, ACSC was an affiliated with HCT through common officers and directors. The
agreement provided, among other things, that ACSC sell HCT computer hardware and
information systems equipment and license or sublicense to HCT computer software
necessary to operate HCT's casino, hotel and related facilities and business
operations. HCT paid ACSC for such equipment and licensed such software at
amounts and on terms and conditions that ACSC provided to unrelated third
parties. HCT also paid ACSC a fixed license fee of $33,600 per month and
reimbursed ACSC for its direct costs and expenses incurred under the agreement.
HCT entered into a new maintenance and support agreement with ACSC effective as
of January 1, 2000 which provides for a monthly fee of $14,000 (subject to
change upon 60 days written notice) plus additional services at rates charged by
ACSC to third parties. The agreement has an initial term of one year with
automatic annual renewals unless notice of termination is given. ACSC also
performs and bills HCT for certain administrative and marketing services. Total
charges incurred by HCT amounted to $849,000, $390,000 and $776,000,
respectively, for the years ended December 31, 2001, 2000 and 1999. At December
31, 2001 and 2000, HCT had payables of $18,000 and $42,000, respectively,
included in due to affiliates on the accompanying consolidated balance sheets
with respect to such charges.

     HCT is charged for certain legal, accounting, and other expenses incurred
by HCC and its subsidiaries that relate to HCT's business. HCT also bills HCC
and its subsidiaries for services provided to those companies. For the years
ended December 31, 2001, 2000 and 1999, such transactions resulted in net
charges to HCT totaling $178,000, $137,000 and $158,000, respectively. At
December 31, 2001 and 2000, intercompany balances with respect to such charges
were not significant.

(7)  Mississippi Regulatory Matters

     Gaming operations in Mississippi are subject to regulatory control by the
Mississippi Gaming Commission. Under the provisions of the Mississippi gaming
regulations, HCT is required to maintain all necessary licenses. The ownership
license for the Tunica Casino has been renewed through

                                       117

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 20, 2004. If it were determined that gaming laws were violated by a
licensee, the gaming licenses held by each licensee could be limited,
conditioned, suspended or revoked. In addition, the licensees and other persons
involved could be subject to substantial fines.

(8)  Commitments and Contingencies

     HCT is a party in various legal proceedings with respect to the conduct of
casino and hotel operations. Although a possible range of loss can not be
estimated, in the opinion of management, based upon the advice of counsel,
settlement or resolution of the proceedings should not have a material adverse
impact on the consolidated financial position or results of operations of HCT.

(9)  Employee Retirement Savings Plan -

     HCT participates in a retirement savings plan under Section 401(k) of the
Internal Revenue Code sponsored by HCC which covers all of its employees who
meet certain eligibility requirements as to age and period of employment. The
plan allows employees to contribute up to 15% of their salary on a pre-tax basis
(subject to statutory limitations) and invest such monies in a choice of mutual
funds on a tax-deferred basis. HCT matches a portion of the participating
employees' contributions to the plan and may, from time to time, make additional
discretionary contributions. For the years ended December 31, 2001, 2000 and
1999, HCT expensed $203,000, $187,000 and $176,000, respectively, as company
contributions to the plan

(10) Stock Option Plan

     Certain HCT employees have been granted stock options to acquire common
stock of HCC under the Hollywood Casino Corporation 1996 Long-Term Incentive
Plan (the "1996 Plan"). The 1996 Plan provides for the granting of nonqualified
stock options and incentive stock options that are intended to qualify for the
special tax treatment under the Internal Revenue Code and also provides for the
granting of restricted stock. The 1996 Plan provides for the granting of
3,000,000 shares of Class A Common Stock of which 261,480 remain available for
future grant as of December 31, 2001.

     The 1996 Plan is administered by a committee of HCC's Board of Directors.
Options granted under the 1996 Plan become vested at the discretion of the
Committee of the Board of Directors (however, vesting for employees who are
executive officers, directors or 10% or greater shareholders of the company may
not be less than six months) and may be exercised for a period of not more than
ten years (five years in the case of incentive stock options) from the date of
grant. No more than 500,000 shares may be awarded to any individual during any
fiscal year and incentive stock options are subject to a $100,000 calendar year
limitation. All options granted through December 31, 2001 under the 1996 Plan
have been granted at an exercise price equal to the fair market value as of the
date of the grant. As of December 31, 2001, options to purchase 38,200 shares
remain outstanding to employees of HCT, of which approximately 79% are at an
exercise price of $1.25 per share; 14% are at an exercise price of $7.00 per
share and 7% are at an exercise price of $11.00 per share. Such options
outstanding have a weighted average exercise price of $2.75 per share and a
remaining weighted average contractual life of 91 months.

                                       118

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The following table sets forth the activity of the 1996 Plan with respect
to HCT employees:

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                              ------------------------------------------------------------
                                    2001                  2000                1999
                              ------------------   ------------------   ------------------
                                        Weighted             Weighted             Weighted
                                         Average              Average             Average
                                        Exercise             Exercise             Exercise
                              Options     Price    Options     Price    Options    Price
                              -------   --------   -------   --------   -------   --------
<S>                           <C>        <C>       <C>        <C>        <C>       <C>
Outstanding options at
   beginning of year          42,000     $2.61     34,000     $1.25          --    $  --
   Options cancelled          (1,680)     1.25         --        --      (4,000)    1.25
   Options granted                --        --      8,000      8.40      38,000     1.25
   Options exercised          (2,120)     1.25         --        --          --       --
                              ------     -----     ------     -----      ------    -----
Outstanding options
   at end of year             38,200     $2.75     42,000     $2.61      34,000    $1.25
                              ======     =====     ======     =====      ======    =====
Exercisable options
   at end of year             21,960     $2.32     15,680     $2.01       6,800    $1.25
</TABLE>

     HCT has elected to apply Opinion 25 with respect to accounting for options
to its employees. Based on such election, no compensation expense has been
recognized in the accompanying consolidated financial statements as a result of
the granting of stock options. Had compensation expense been determined
consistent with SFAS 123, net loss for the years ended December 31, 2001 and
1999 would have increased by approximately $18,000 and $5,000, respectively, and
net income for the year ended December 31, 2000 would have decreased by
approximately $10,000.

     The fair value of each option grant was estimated on the date of grant
using a method approximating the Black-Scholes option pricing model. There were
no grants made during the year ended December 31, 2001. The assumptions applied
are set forth below:

                                                  Year Ended December 31,
                                                  ----------------------
                                                     2000         1999
                                                  ----------    --------

Risk free interest rate                                  6.8%        4.8%
Dividend yield                                            --          --
Expected life                                      4-5 years       5 years
Volatility                                              69.9%       54.8%
Weighted average fair value                       $     4.10    $    .48

(11) Supplemental Cash Flow Information

     During 2001, HCT converted $216,000 of receivables from Tunica Golf Course
LLC, its equity investment, to an additional investment in the limited liability
company. The contribution has been excluded from the accompanying consolidated
statement of cash flows as a noncash transaction.

                                       119

<PAGE>

                       HWCC - TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(12) Disclosures about Fair Value of Financial Instruments

     The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

     Cash and cash equivalents - The carrying amounts approximate fair value
     -------------------------
because of the short maturity of these instruments.

     Interest payable - The carrying amount of interest payable approximates
     ----------------
fair value because of the short maturity of the obligation.

     Long-term debt - The fair value of HCT's long-term debt is estimated based
     --------------
on either the quoted market price of the underlying debt issue or on the
discounted cash flow of future payments utilizing current rates available to HCT
for debt of similar remaining maturities. Debt obligations with a short
remaining maturity are valued at the carrying amount.

     The estimated carrying amounts and fair values of HCT's financial
instruments are as follows:

<TABLE>
<CAPTION>
                                        December 31, 2001           December 31, 2000
                                   -------------------------   -------------------------
                                    Carrying                    Carrying
                                     Amount      Fair Value      Amount      Fair Value
                                   -----------   -----------   -----------   -----------
<S>                                <C>           <C>           <C>           <C>
Financial Assets
   Cash and cash equivalents       $19,922,000   $19,922,000   $16,038,000   $16,038,000

Financial Liabilities
   Interest payable                $   437,000   $   437,000   $   437,000   $   437,000
   11.25% Promissory Note to HCC    87,045,000    94,033,000    87,045,000    89,626,000
   Note payable to HCC                 329,000       356,000       329,000       338,000
   Equipment loans                     245,000       244,000     1,188,000     1,188,000
   Bank credit facility                950,000       953,000        89,000        88,000
</TABLE>

(13) Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                         Quarter
                                   -----------------------------------------------------
                                     First         Second         Third         Fourth
                                   -----------   -----------   -----------   -----------
<S>                                <C>           <C>           <C>           <C>
Year Ended December 31, 2001:
   Net revenues                    $25,188,000   $25,020,000   $25,035,000   $22,960,000
                                   ===========   ===========   ===========   ===========
   Net income (loss)               $   330,000   $   161,000   $   118,000   $(2,656,000)
                                   ===========   ===========   ===========   ===========

Year Ended December 31, 2000:
   Net revenues                    $24,805,000   $24,520,000   $26,348,000   $24,196,000
                                   ===========   ===========   ===========   ===========
   Net income                      $ 1,127,000   $   385,000   $ 1,330,000   $   194,000
                                   ===========   ===========   ===========   ===========
</TABLE>

                                       120

<PAGE>

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

     HCC and HCT had no disagreements with their independent accountants to
report under this item.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information called for by this item is incorporated herein by reference
from HCC's definitive proxy statement to be filed with the Securities and
Exchange Commission relating to its Annual Meeting of Shareholders to be held in
2002 (the "Definitive Proxy Statement") under the captions "Election of
Directors" and "Management."

ITEM 11. EXECUTIVE COMPENSATION

     The information called for by this item is incorporated herein by reference
from HCC's Definitive Proxy Statement under the caption "Remuneration of
Directors and Executive Officers."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information called for by this item is incorporated herein by reference
from the HCC's Definitive Proxy Statement under the caption "Voting Rights and
Principal Stockholders".

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this item is incorporated herein by reference
from HCC's Definitive Proxy Statement under the caption "Transactions with
Management."

                                       121

<PAGE>

                                     PART IV

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

(a)  The following documents are filed as a part of this report:

     1.   Financial Statements

          The financial statements filed as part of this report are listed on
     the Index to Financial Statements on page 46.

     2.   Financial Statement Schedules

     Hollywood Casino Corporation and Subsidiaries
     ---------------------------------------------

     .    Independent Auditors' Report
     .    Schedule I; Condensed Financial Information of Registrant, Hollywood
          Casino Corporation (Parent Company):
          . Balance Sheets
          . Statements of Operations
          . Statements of Cash Flows
          . Notes to Parent Company Financial Statements
     .    Schedule II; Valuation and Qualifying Accounts

     Hollywood Casino - Aurora, Inc.
     -------------------------------

     .    Independent Auditors' Report
     .    Schedule II; Valuation and Qualifying Accounts

     HWCC-Tunica, Inc.
     -----------------

     .    Independent Auditors' Report
     .    Schedule II; Valuation and Qualifying Accounts

     All other schedules for which provision is made in the applicable
     accounting regulations of the Securities and Exchange Commission are not
     required under the related instructions or are inapplicable and therefore
     have been omitted.

     3.   Exhibits

<TABLE>
<S>            <C>
    **2.1--    Agreement of Merger dated as of May 15, 1992, between PBC, Inc. and HCC and Certificate of Correction
               of Agreement of Merger dated as of June 16, 1992.  (Exhibit 2.1)
   ###2.2--    Membership Interest Purchase Agreement dated as of March 31, 1999 by and among HWCC-Louisiana, Inc.,
               Sodak Gaming, Inc. and Sodak Louisiana, L.L.C.  (Exhibit 10.32)
   @@@3.1--    Certificate of Incorporation of HCC, as amended.  (Exhibit 3.1)
   @@@3.2--    Amended Bylaws of HCC.  (Exhibit 3.2)
    ##3.3--    Second Amended and Restated Bylaws of HCC.  (Exhibit 3.3)
    @@3.4--    Articles of Incorporation of HCT. (Exhibit 3.1).
    @@3.5--    Bylaws of HCT. (Exhibit 3.2)
   +++3.6--    Third Amended and Restated Joint Venture Agreement of Hollywood Casino Shreveport by and among
               Shreveport Paddlewheels, L.L.C., HCS I, Inc. and HCS II, Inc., dated as of July 21, 1999. (Exhibit 3.1)
   +++3.7--    August 1999 Amendment to Third Amended and Restated Joint Venture Agreement between Shreveport
               Paddlewheels, L.L.C., HCS I, Inc. and HCS II, Inc. (Exhibit 3.2)
   +++4.1--    Indenture among HCC as Issuer, and HWCC-Shreveport, Inc. and HCT as Guarantors, and State Street Bank
               and Trust Company, as Trustee, dated as of May 19, 1999. (Exhibit 4.1)
</TABLE>

                                       122

<PAGE>

<TABLE>
<S>            <C>
   +++4.2--    Security Agreement made by HCC, as Debtor, to State Street Bank and Trust Company, as Trustee and
               Secured Party, dated as of May 19, 1999. (Exhibit 4.2)
   +++4.3--    Stock Pledge Agreement made by HCC, as Pledgor, in favor of State Street Bank and Trust Company,
               as Trustee and Secured Party, dated as of May 19, 1999. (Exhibit 4.3)
   +++4.4--    Trademark Security Agreement made by HCC, as Grantor, to State Street Bank and Trust Company,
               as Trustee and Secured Party, dated as of May 19, 1999. (Exhibit 4.4)
   +++4.5--    Escrow and Control Agreement by and among HCC and State Street Bank and Trust Company, as Trustee and
               Escrow Agent, dated as of May 19, 1999.  (Exhibit 4.5)
   +++4.6--    Control Agreement dated as of May 19, 1999 by and among HCC and State Street Bank and Trust Company, as
               Trustee.  (Exhibit 4.6)
   +++4.7--    Security Agreement made by HCT, as Debtor, to State Street Bank and Trust Company, as Trustee and
               Secured Party, dated as of May 19, 1999.  (Exhibit 4.7)
   +++4.8--    First Leasehold Deed of Trust, Security Agreement, Assignment of Leases and Rents, Fixture Filing,
               and Financing Statement made by HCT in favor of Phillip A. Poitevin, as Trustee for the benefit of State
               Street Bank and Trust Company, as Indenture Trustee, dated as of May 19, 1999. (Exhibit 4.8)
   +++4.9--    First Preferred Ship Mortgage made and given by HCT, as Mortgagor, in favor of State Street
               Bank and Trust Company, as Trustee and Mortgagee (relating to Vessel No. 534006), dated as of
               May 19, 1999. (Exhibit 4.9)
  +++4.10--    Intercompany Security Agreement made by HCT, as Debtor, to HCC, as Secured Party, and collaterally
               assigned to State Street Bank and Trust Company, as Trustee, dated as of May 19, 1999.
               (Exhibit 4.11)
  +++4.11--    Second Leasehold Deed of Trust, Security Agreement, Fixture Filing, and Financing Statement from
               HCT, as Grantor, in favor of Jim B. Tobhill, Trustee, for the benefit of HCC, dated as of May 19,
               1999.  (Exhibit 4.12)
  +++4.12--    Collateral Assignment of Second Leasehold Deed of Trust, Security Agreement, Assignment of Leases
               and Rents, Fixture Filing and Financing Statement made by HCC, as Mortgagee and Assignor, in favor
               of State Street Bank and Trust Company, as Trustee and Assignee, dated as of May 19, 1999. (Exhibit 4.13)
  +++4.13--    Assignment of Second Preferred Fleet Mortgage by HCC, as Mortgagee and Assignor (relating to
               Vessel No. 534006) in favor of State Street Bank and Trust Company, as Trustee and Assignee, dated as
               of May 19, 1999.  (Exhibit 4.15)
  +++4.14--    Intercompany Security Agreement dated as of May 19, 1999 made by HCA, as Debtor, to HCC, as
               Secured Party, and collaterally assigned to State Street Bank and Trust Company, as Trustee.  (Exhibit
               4.17)
  +++4.15--    Collateral Assignment of Mortgage, Leasehold Mortgage, Security Agreement, Assignment of Leases and
               Rents, Fixture Filing and Financing Statement made by HCC, as Mortgagee and Assignor, in favor
               of State Street Bank and Trust Company, as Trustee and Assignee, dated as of May 19, 1999. (Exhibit 4.19)
  +++4.16--    Assignment of First Preferred Fleet Mortgage by HCC, as Mortgagee and Assignor (relating to
               Vessel Nos. 993836, 993837 and 1029229) in favor of State Street Bank and Trust Company, as Trustee and
               Assignee, dated as of May 19, 1999.  (Exhibit 4.21)
  +++4.17--    Security Agreement made by HWCC-Shreveport, Inc. as Debtor, to State Street Bank and Trust
               Company, as Trustee and Secured Party, dated as of May 19, 1999.  (Exhibit 4.22)
    +4.18--    Indenture among Hollywood Casino Shreveport and Shreveport Capital Corporation ("SCC") as Co-Issuers,
               and HWCC-Louisiana, Inc. ("HCL"), HCS I, Inc. and HCS II, Inc., as Guarantors, and State Street Bank
               and Trust Company, as Trustee, dated as of August 10, 1999.  (Exhibit 4.1)
    +4.19--    Registration Rights Agreement, dated as of August 10, 1999, by and among Hollywood Casino Shreveport,
               SCC, the Guarantors named therein and the Initial Purchasers. (Exhibit 4.2)
    +4.20--    Collateral Assignment of Contracts and Documents dated August 10, 1999 between Hollywood Casino
               Shreveport and State Street Bank and Trust Company, as Trustee.  (Exhibit 4.3)
    +4.21--    Security Agreement dated August 10, 1999 between Hollywood Casino Shreveport and State Street Bank and
               Trust Company, as Trustee.  (Exhibit 4.4)
    +4.22--    Partnership Interest Pledge Agreement dated August 10, 1999 made by HCS I, Inc. in favor of
</TABLE>

                                       123

<PAGE>

<TABLE>
<S>            <C>
               State Street Bank and Trust Company, as Trustee and Secured Party.  (Exhibit 4.5)
    +4.23--    Cash Collateral and Disbursement Agreement dated August 10, 1999 between Hollywood Casino
               Shreveport, SCC, First American Title Insurance Company, as Disbursement Agent and State Street Bank and
               Trust Company, as Trustee. (Exhibit 4.6)
   ##4.24--    First Amendment to Cash Collateral and Disbursement Agreement dated January 1, 2000 between Hollywood
               Casino Shreveport, SCC, First American Title Insurance Company and State Street Bank and Trust
               Company.  (Exhibit 4.24)
    +4.25--    Stock Pledge Agreement dated August 10, 1999 made by HCL in favor of State Street Bank and Trust
               Company, as Trustee.  (Exhibit 4.7)
    +4.26--    Security Agreement dated August 10, 1999 made by SCC, HCL, HCS I, Inc. and HCS II, Inc. to State Street
               Bank and Trust Company, as Trustee and Secured Party.  (Exhibit 4.8)
    +4.27--    Security Agreement - Vessel Construction dated August 10, 1999 between Hollywood Casino Shreveport and
               State Street Bank and Trust Company, as Trustee.  (Exhibit 4.9)
    +4.28--    Mortgage, Leasehold Mortgage and Assignment of Leases and Rents made by Hollywood Casino Shreveport in
               favor of State Street Bank and Trust Company, as Mortgagee, dated August 10, 1999.  (Exhibit 4.10)
    +4.29--    Partnership Interest Pledge Agreement dated August 10, 1999 made by HCS II, Inc. in favor of State
               Street Bank and Trust Company, as Trustee and Secured Party.  (Exhibit 4.11)
    +4.30--    First Amendment to Security Agreement dated August 10, 1999 between HWCC-Shreveport, Inc. and State
               Street Bank and Trust Company, as Trustee.  (Exhibit 4.12)
 ****4.31--    Indenture among Hollywood Casino Shreveport and Shreveport Capital Corporation ("SCC") as Issuers
               and State Street Bank and Trust Company, as Trustee, dated as of June 15, 2001.  (Exhibit 4.1)
 ****4.32--    Registration Rights Agreement, dated as of June 15, 2001, by and among Hollywood Casino
               Shreveport and SCC and the Initial Purchasers.  (Exhibit 4.2)
 ****4.33--    Collateral Assignment of Contracts and Documents dated June 15, 2001 between Hollywood Casino
               Shreveport and State Street Bank and Trust Company, as Trustee.  (Exhibit 4.3)
 ****4.34--    Security Agreement dated June 15, 2001 between Hollywood Casino Shreveport and State Street Bank
               and Trust Company, as Trustee.  (Exhibit 4.4)
 ****4.35--    Security Agreement dated June 15, 2001 made by SCC to State Street Bank and Trust Company, as
               Trustee.  (Exhibit 4.5)
 ****4.36--    Preferred Ship Mortgage made by Hollywood Casino Shreveport in favor of State Street Bank and
               Trust Company, as Trustee, on Hollywood Dreams Official No. 1099497 dated as of June 15, 2001.
               (Exhibit 4.6)
 ****4.37--    Mortgage, Leasehold Mortgage and Assignments of Leases and Rents made by Hollywood Casino
               Shreveport in favor of State Street Bank and Trust Company, as Trustee, dated as of June 15, 2001.
               (Exhibit 4.7)
   ###9.1--    Voting Trust Agreement dated as of December 29, 1998 by and among Jill Pratt LaFerney, formerly Jill A.
               Pratt, and John R. Pratt and Jack E. Pratt, Sr.  (Exhibit 9.1)
   ###9.2--    Voting Trust Agreement dated as of December 29, 1998 by and among Shawn Denise Bradshaw and Michael
               Shannon Pratt and William D. Pratt, Sr.  (Exhibit 9.2)
   ###9.3--    Voting Trust Agreement dated as of December 29, 1998 by and among Carolyn S. Hickey, Diana Pratt-Wyatt,
               formerly Diana L. Heisler, and Sharon A. Naftel, formerly Sharon R. Nash, and Edward T. Pratt III.
               (Exhibit 9.3)
    ##9.4--    Voting Trust Agreement dated as of December 17, 1999 by and between Jack E. Pratt, Jr. as Trustee of
               the J.E. Pratt Gift Trust and Jack E. Pratt, Sr. (Exhibit 9.4)
  ++++9.5--    Voting Trust Agreement dated as of May 17, 2000 by and among William D. Pratt, Sr., Linda M.
               Pratt, William D. Pratt, Jr., Shawn Denise Bradshaw and Michael Shannan Pratt and William D. Pratt,
               Sr., Michael Shannon Pratt and Jack E. Pratt, Sr. as amended by the First Amendment to Hollywood Casino
               Corporation Voting Trust Agreement (Exhibit 9).
      9.6--    First Amendment to Voting Trust Agreement dated as of November 1, 2001 by and among Jill Pratt LaFerney
               and John R. Pratt and Jack E. Pratt, Sr.
      9.7--    First Amendment to Voting Trust Agreement dated as of December 30, 2001 by and among Carolyn S.
               Hickey, Diana Pratt-Wyatt, formerly Diana L. Heisler, and Sharon A. Naftel, formerly Sharon R. Nash, and
               Edward T. Pratt III.
  ***10.1--    Seventh Amendment to Employment Agreement dated January 1, 2000, between HCC and Jack E. Pratt.
               (Exhibit 10.1)
</TABLE>

                                       124

<PAGE>

<TABLE>
<S>            <C>
  ***10.2--    Seventh Amendment to Employment Agreement dated January 1, 2000, between HCC and Edward T. Pratt,
               Jr.  (Exhibit 10.2)
  ***10.3--    Seventh Amendment to Employment Agreement dated January 1, 2000, between HCC and William D.
               Pratt. (Exhibit 10.3)
   ##10.4--    Employment Agreement dated January 1, 2000, between HCC and Edward T. Pratt III. (Exhibit 10.4)
    *10.5--    Development Agreement dated as of June 4, 1991, between the City of Aurora, Illinois and HCA.
               (Exhibit 10.33)
    *10.6--    Parking lease Agreement June 4, 1991, between the City of Aurora, Illinois and HCA. (Exhibit 10.39)
    *10.7--    Purchase and Sale Agreement dated June 4, 1991, between the City of Aurora, Illinois and HCA.
               (Exhibit 10.40)
    @10.8--    Rights Agreement, dated as of May 7, 1993 between HCC and Continental Stock Transfer & Trust Company,
               as Rights Agent.  (Exhibit 10.45)
  @@@10.9--    Hollywood Casino Corporation Stock Option Plan.  (Exhibit 10.46)
  @@10.10--    Ground Lease dated as of October 11, 1993 between R.M. Leatherman and Hugh M. Mageveney, III, as
               Landlord, and SRCT, as Tenant.  (Exhibit 10.4)
  @@10.11--    Letter Agreement dated as of October 11, 1993 between R.M. Leatherman and Hugh M. Mageveney, III,
               as Landlord, and SRCT, as Tenant (relating to Ground Lease).  (Exhibit 10.5)
  @@10.12--    Blanket Conveyance, Bill of Sale and Assignment and Assumption Agreement dated as of May 31, 1994
               between SRCT and STP.  (Exhibit 10.6)
  @@10.13--    Assignment of Lease and Assumption Agreement dated as of May 31, 1994 between SRCT and STP
               (relating to Ground Lease).  (Exhibit 10.7)
@@@@10.14--    North Island Center Expansion and Redevelopment Agreement dated June 12, 1995 between HCA,
               the Aurora Metropolitan Exposition, Auditorium and Office Building Authority and the City of Aurora.
               (Exhibit 10.36)
   #10.15--    Hollywood Casino Corporation 1996 Long-Term Incentive Plan, as amended.  (Exhibit 10.28)
   #10.16--    Hollywood Casino Corporation 1996 Non-Employee Director Stock Plan.  (Exhibit 10.29)
  ##10.17--    Employment Agreement dated as of January 1, 2000 by and between HCC and Paul C. Yates.  (Exhibit
               10.20)
 ###10.18--    Management and Administrative Services Agreement dated as of October 1, 1998 by and between HCC
               and Greate Bay Casino Corporation.  (Exhibit 10.31)
   +10.19--    Amended and Restated Federal Income Tax Sharing Agreement dated August 10, 1999 by and among HCC, HWCC
               Development Corporation, Hollywood Management, Inc., HCT, Golf, HCA, HWCC-Shreveport, Inc.,
               HWCC-Argentina, Inc., HCL, HWCC Holdings, Inc., HWCC-Aurora Management, Inc., HWCC-Transportation,
               Inc., HCS I, Inc. and HCS II, Inc.  (Exhibit 10.16)
  ++10.20--    Manager Subordination Agreement, dated as of August 10, 1999, by and among State Street Bank and
               Trust Company, as Trustee, HWCC-Shreveport, Inc. and Hollywood Casino Shreveport.  (Exhibit 10.3)
   +10.21--    Technical Services Agreement, dated as of September 22, 1998, by and between QNOV and HWCC-Shreveport,
               Inc. (Exhibit 10.4)
   +10.22--    Compromise Agreement, dated September 15, 1998, by and among Hilton New Orleans Corporation, New
               Orleans Paddlewheels, Inc., Queen of New Orleans at the Hilton Joint Venture and the City of New
               Orleans.  (Exhibit 10.7)
   +10.23--    Loan and Settlement Agreement, dated January 16, 1998, by and among New Orleans Paddlewheels, Inc.,
               Shreveport Paddlewheels, L.L.C., HCL, Sodak Louisiana L.L.C. and Hilton New Orleans Corporation.
               (Exhibit 10.11)
   +10.24--    Retail Space Lease, executed as of June 3, 1999 by and between QNOV and Red River Entertainment
               Company, L.L.C. (Exhibit 10.12)
   +10.25--    Ground Lease, dated May 19, 1999, by and between the City of Shreveport, Louisiana and QNOV.  (Exhibit
               10.13)
   +10.26--    Marine Services Agreement dated September 22, 1998 between QNOV and Shreveport Paddlewheels, L.L.C.
               (Exhibit 10.17)
   +10.27--    Side Agreement dated January 16, 1998 between Queen of New Orleans at the Hilton Joint Venture, HCL,
               and Sodak, L.L.C. (Exhibit 10.18)
</TABLE>

                                       125

<PAGE>

<TABLE>
<S>            <C>
   +10.28--    Loan Agreement dated August 10, 1999 between Shreveport Paddlewheels, L.L.C. and HCL.  (Exhibit 10.19)
   +10.29--    Promissory note dated August 10, 1999 in the original principal amount of $1,000,000 made by Shreveport
               Paddlewheels, L.L.C., as Borrower to HCL, as Lender.  (Exhibit 10.20)
   +10.30--    Security Agreement dated August 10, 1999 made by Shreveport Paddlehwheels, L.L.C., as Debtor, in favor
               of HCL, as Secured Party.  (Exhibit 10.21)
   +10.31--    Guaranty Agreement dated August 10, 1999 made by New Orleans Paddlewheels, L.L.C. in favor of HCL.
               (Exhibit 10.22)
   +10.32--    Contribution and Assumption Agreement dated July 21, 1999 among HCL, HCS I, Inc., HCS II, Inc. and
               Shreveport Paddlewheels, L.L.C. (Exhibit 10.24)
****10.33--    Manager Subordination Agreement, dated as of June 15, 2001, by and among State Street Bank and
               Trust Company, as Trustee, HWCC-Shreveport, Inc. and Hollywood Casino Shreveport.  (Exhibit 4.l8)
++++10.34--    First Amendment to Employment Agreement dated as of May 1, 2001 between Hollywood Casino -
               Aurora, Inc. and George Patt Medchill.
   &10.35--    Employment Agreement by and between Hollywood Casino Shreveport and Gary A. Gregg.  (Exhibit 10.20).
    10.36--    Amended and Restated Employment Agreement dated February 5, 2002, by and between HCC and Edward T.
               Pratt III.
    10.37--    Amended and Restated Employment Agreement dated as of February 5, 2002, by and between HCC and Paul C.
               Yates.
    10.38--    Amended and Restated Employment Agreement dated as of February 5, 2002, by and between HCC and Walter
               E. Evans.
    10.39--    Employment Agreement dated as of February 5, 2002, by and between HCC and Donald A. Shapiro.
     21.1--    Subsidiaries of HCC.
</TABLE>

----------
*    Incorporated by reference from the exhibit shown in parenthesis to that
     Registration Statement on Form 10 filed with the SEC on May 28, 1992 by PRT
     Corporation (now known as HCC).

**   Incorporated by reference from the exhibit shown in parenthesis to that
     Registration Statement on Form 10, as amended, filed with the SEC on August
     13, 1992 by HCC.

***  Incorporated by reference from the exhibit shown in parenthesis filed in
     HCC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.

**** Incorporated by reference from the correspondingly numbered exhibit filed
     in Hollywood Casino Shreveport and Shreveport Capital Corporation's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

@    Incorporated by reference from the exhibit shown in parenthesis to Form S-1
     Registration Statement (Registration No. 33-77502) for HCC as filed with
     the SEC on April 8, 1994.

@@   Incorporated by reference from the exhibit shown in parenthesis to Form S-1
     Registration Statement (Registration No. 33-82182) for HWCC - Tunica, Inc.
     as filed with the SEC on September 29, 1994.

@@@  Incorporated by reference from the exhibit shown in parenthesis to Form S-1
     Registration Statement (Registration 33-58732) for HCC as filed with the
     SEC on May 27, 1993.

@@@@ Incorporated by reference from the exhibit shown in parenthesis filed in
     HCC's Annual Report on Form 10-K for the fiscal year ended December 31,
     1995.

#    Incorporated by reference from the exhibit shown in parenthesis filed in
     HCC's Annual Report on Form 10-K for the fiscal year ended December 31,
     1996.

                                       126

<PAGE>

##   Incorporated by reference from the exhibit shown in parenthesis filed in
     HCC's Annual Report on Form 10-K for the fiscal year ended December 31,
     1999.

###  Incorporated by reference from the exhibit shown in parenthesis filed in
     HCC's Annual Report on Form 10-K for the fiscal year ended December 31,
     1998.

#### Incorporated by reference from the exhibit shown in parenthesis filed in
     Amendment No. 1 to Form S-4 Registration Statement No. 333-68380 of
     Hollywood Casino Shreveport and Shreveport Capital Corporation on October
     1, 2001.

+    Incorporated by reference to the exhibit shown in parenthesis included in
     Form S-4 Registration Statement of Hollywood Casino Shreveport and
     Shreveport Capital Corporation as filed with the SEC on October 8, 1999.

++   Incorporated by reference to the exhibit shown in parenthesis included in
     Form S-4 Registration Statement of Hollywood Casino Corporation as filed
     with the SEC on August 13, 1999.

+++  Incorporated by reference to the exhibit shown in parenthesis included in
     Form S-4 Registration Statement of Hollywood Casino Corporation as filed
     with the SEC on July 16, 1999.

++++ Incorporated by reference to the exhibit shown in parenthesis included in
     HCC's Quarterly Report on Form 10-Q for the quarter ended September 30,
     2001 as filed with the SEC on November 14, 2001.

&    Incorporated by reference to the exhibit shown in parenthesis filed in
     Amendment No. 1 to Form S-4 Registration Statement No. 333-68380 of
     Hollywood Casino Shreveport and Shreveport Capital Corporation on October
     1, 2001.

(b)  Reports on Form 8-K.

     The Registrants filed a Report on Form 8-K on October 22, 2001 to report a
change in Hollywood Casino Corporation's Board of Directors.

     The Registrants filed a Report on Form 8-K on February 19, 2002 to announce
the filing by Hollywood Casino Corporation of two lawsuits in connection with
the activities of two of its directors and former officers.

     The Registrants filed a Report on Form 8-K on March 7, 2002 to announce the
bankruptcy court's approval of Greate Bay Casino Corporation's sale of Advanced
Casino Systems Corporation and the Registrant's expectation of proceeds from
such sale.

     The Registrants filed a Report on Form 8-K on March 20, 2002 to announce
the closing of Greate Bay Casino Corporation's sale of Advanced Casino Systems
Corporation and the Registrant's expectation of proceeds from such sale.

                                       127

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas on March 27, 2002.

                                                HOLLYWOOD CASINO CORPORATION


                                                By:/s/  Edward T. Pratt III
                                                   -----------------------------
                                                        Edward T. Pratt III
                                                      Chief Executive Officer

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

        Signature                        Title                       Date
        ---------                        -----                       ----

/s/  Edward T. Pratt III       Chief Executive Officer,         March 27, 2002
---------------------------     President, Chairman of the
     Edward T. Pratt III        Board of Directors


/s/  Paul C. Yates             Executive Vice President,        March 27, 2002
---------------------------     Chief Financial Officer
     Paul C. Yates              and Treasurer


/s/  Walter E. Evans           Executive Vice President,        March 27, 2002
---------------------------     Secretary and General
     Walter E. Evans            Counsel


/s/  Charles F. LaFrano III    Vice President - Finance and     March 27, 2002
---------------------------     Principal Accounting Officer
     Charles F. LaFrano III


/s/  James A. Colquitt         Director                         March 27, 2002
---------------------------
     James A. Colquitt


/s/  Theodore H. Strauss       Director                         March 27, 2002
---------------------------
     Theodore H. Strauss


                               Director                         March 27, 2002
---------------------------
     Oliver B. Revell III


                               Director                         March 27, 2002
---------------------------
     Jack E. Pratt


/s/  Edward T. Pratt, Jr.      Director                         March 27, 2002
---------------------------
     Edward T. Pratt, Jr.


                               Director                         March 27, 2002
---------------------------
     William D. Pratt

                                       128

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas on March 27, 2002.

                                                      HWCC - TUNICA, INC.

                                                By: /s/ Edward T. Pratt III
                                                   -----------------------------
                                                        Edward T. Pratt III
                                                      Chief Executive Officer

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

        Signature                        Title                       Date
        ---------                        -----                       ----

/s/  Edward T. Pratt III       Chairman of the Board,           March 27, 2002
---------------------------     Chief Executive Officer and
     Edward T. Pratt III        President


/s/  Paul C. Yates             Executive Vice President,        March 27, 2002
---------------------------     Chief Financial Officer,
     Paul C. Yates              Assistant Secretary and
                                Director


/s/  Walter E. Evans           Executive Vice President,        March 27, 2002
---------------------------     General Counsel, Secretary
     Walter E. Evans            and Director


/s/  Charles F. LaFrano III    Vice President and Assistant     March 27, 2002
---------------------------     Secretary
     Charles F. LaFrano III

/s/  Jon Johnson               Vice President of Finance        March 27, 2002
---------------------------     and Administration and
     Jon Johnson                Assistant Secretary


/s/  Cassandra Price-Perry     Vice President, Chief            March 27, 2002
---------------------------     Accountant and
     Cassandra Price-Perry      Assistant Secretary

                                       129

<PAGE>

                     INDEX TO FINANCIAL STATEMENT SCHEDULES

Hollywood Casino Corporation and Subsidiaries

     .   Independent Auditors' Report

     .   Schedule I; Condensed Financial Information of Registrant:

          .   Balance Sheets
          .   Statements of Operations
          .   Statements of Cash Flows
          .   Notes to Parent Company Financial Statements

     .   Schedule II; Valuation and Qualifying Accounts

Hollywood Casino-Aurora, Inc.

     .   Independent Auditors' Report

     .   Schedule II; Valuation and Qualifying Accounts

HWCC-Tunica, Inc.

     .   Independent Auditors' Report

     .   Schedule II; Valuation and Qualifying Accounts

                                       130

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
        Hollywood Casino Corporation:

We have audited the consolidated financial statements of Hollywood Casino
Corporation and subsidiaries as of, and for each of the three years in the
period ended December 31, 2001, and have issued our report thereon dated March
19, 2002; such report is included elsewhere in this Form 10-K. Our audits also
include the financial statement schedules of Hollywood Casino Corporation listed
in Item 14. These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.

Deloitte & Touche LLP
Dallas, Texas
March 19, 2002

                                       131

<PAGE>

                                                                      SCHEDULE I
                                                                       Page 1

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES
                  Condensed Financial Information of Registrant
                          Hollywood Casino Corporation
                                (Parent Company)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   December 31,
                                                           -----------------------------
                                                               2001            2000
                                                           -------------   -------------
<S>                                                        <C>             <C>
                                     ASSETS

Cash and cash equivalents                                  $  60,659,000   $  77,500,000
Accounts receivable                                               98,000         190,000
Due from affiliates, net of valuation allowance
   of $2,855,000 in 2000                                       5,442,000       8,700,000
Deferred federal income taxes                                  2,098,000       2,840,000
Other current assets                                             246,000         270,000
                                                           -------------   -------------

   Total current assets                                       68,543,000      89,500,000
                                                           -------------   -------------

Investment in and advances to affiliates                      33,435,000      60,173,000
Property and equipment, net                                      804,000         921,000
Due from affiliates, net of valuation allowance
   of $47,603,000 in 2000                                    168,381,000     153,383,000
Other assets                                                  11,469,000      12,321,000
                                                           -------------   -------------

                                                           $ 282,632,000   $ 316,298,000
                                                           =============   =============

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

Current maturities of long-term debt                       $          --   $   1,695,000
Accounts payable and accrued liabilities                       2,567,000       2,148,000
Accrued interest payable                                       6,517,000       9,650,000
Federal income taxes payable                                     157,000       3,299,000
                                                           -------------   -------------

   Total current liabilities                                   9,241,000      16,792,000
                                                           -------------   -------------

Long-term debt                                               360,000,000     360,198,000
                                                           -------------   -------------

Other noncurrent liabilities                                   7,100,000       4,965,000
                                                           -------------   -------------

Shareholders' deficit:
   Class A common stock, $.0001 par
     value per share, 50,000,000
     shares authorized, 25,334,000 and 24,950,000 shares
     issued and outstanding, respectively, net of
     44,000 treasury shares at par in 2001                         3,000           2,000
   Class B common stock, non-voting, $.0001
     par value per share; 10,000,000 authorized;
     no shares issued                                                 --              --
   Additional paid-in capital                                 43,746,000      43,049,000
   Accumulated deficit                                      (137,458,000)   (108,708,000)
                                                           -------------   -------------

     Total shareholders' deficit                             (93,709,000)    (65,657,000)
                                                           -------------   -------------

                                                           $ 282,632,000   $ 316,298,000
                                                           =============   =============
</TABLE>

          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       132

<PAGE>

                                                                      SCHEDULE I
                                                                       Page 2

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                  Condensed Financial Information of Registrant
                          Hollywood Casino Corporation
                                (Parent Company)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                      Year Ended December 31,
                                            ------------------------------------------
                                                2001           2000           1999
                                            ------------   ------------   ------------
<S>                                         <C>            <C>            <C>
Revenues:
   Interest income                          $ 20,156,000   $ 21,152,000   $ 17,670,000
   Gain on settlement of litigation, net              --      7,220,000             --
   Gain on disposal of assets                         --        191,000             --
                                            ------------   ------------   ------------

                                              20,156,000     28,563,000     17,670,000
                                            ------------   ------------   ------------

Expenses:
   General and administrative                  6,643,000      8,104,000      7,984,000
   Interest                                   41,875,000     43,402,000     37,809,000
   Depreciation and amortization                 192,000        153,000        101,000
   Executive compensation accrual              2,848,000             --             --
   Write down of assets                               --             --     13,322,000
   Recoveries on affiliate obligations        (2,391,000)            --             --
                                            ------------   ------------   ------------

     Total expenses                           49,167,000     51,659,000     59,216,000
                                            ------------   ------------   ------------

Loss before income taxes, extraordinary
   and other items                           (29,011,000)   (23,096,000)   (41,546,000)
Income tax benefit                             1,825,000        172,000             --
                                            ------------   ------------   ------------

   Loss before extraordinary
     and other items                         (27,186,000)   (22,924,000)   (41,546,000)

Extraordinary item:
   Loss on early extinguishment of debt               --             --    (30,353,000)
                                            ------------   ------------   ------------

   Loss before other item                    (27,186,000)   (22,924,000)   (71,899,000)
Equity in (losses) income of consolidated
   subsidiaries                               (1,564,000)    31,219,000     (9,772,000)
                                            ------------   ------------   ------------

Net (loss) income                           $(28,750,000)  $  8,295,000   $(81,671,000)
                                            ============   ============   ============
</TABLE>

          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       133

<PAGE>

                                                                      SCHEDULE I
                                                                       Page 3

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                  Condensed Financial Information of Registrant
                          Hollywood Casino Corporation
                                (Parent Company)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                   -------------------------------------------
                                                       2001           2000          1999
                                                   ------------   -----------   -------------

<S>                                                <C>            <C>           <C>
NET CASH PROVIDED BY
  OPERATING ACTIVITIES                             $  8,056,000   $23,798,000   $   9,997,000
                                                   ------------   -----------   -------------

INVESTING ACTIVITIES:
   Net property and equipment additions                 (75,000)     (841,000)       (217,000)
   Proceeds from sale of assets                              --     2,492,000       3,887,000
   Collections on notes receivable                           --       900,000              --
   Investments in consolidated affiliates           (10,520,000)   (9,108,000)    (51,478,000)
   Net advances to affiliates                       (15,000,000)           --     (37,829,000)
                                                   ------------   -----------   -------------

      Net cash used in investing activities         (25,595,000)   (6,557,000)    (85,637,000)
                                                   ------------   -----------   -------------

FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                  --            --     340,419,000
   Repayments of long-term debt                              --      (140,000)   (207,339,000)
   Issuance of common stock                             698,000        87,000              --
   Deferred financing costs                                  --            --     (11,913,000)
                                                   ------------   -----------   -------------

      Net cash provided by (used in)
         financing activities                           698,000       (53,000)    121,167,000
                                                   ------------   -----------   -------------

      Net (decrease) increase in cash and
         cash equivalents                           (16,841,000)   17,188,000      45,527,000
        Cash and cash equivalents at
           beginning of year                         77,500,000    60,312,000      14,785,000
                                                   ------------   -----------   -------------

        Cash and cash equivalents at end of year   $ 60,659,000   $77,500,000   $  60,312,000
                                                   ============   ===========   =============
</TABLE>

          The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       134

<PAGE>

                                                                      SCHEDULE I
                                                                      Page 4

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                  Condensed Financial Information of Registrant
                          Hollywood Casino Corporation
                                (Parent Company)

                  NOTES TO PARENT COMPANY FINANCIAL STATEMENTS

(1)  Guarantees of Registrant

     As of December 31, 2001, Hollywood Casino Corporation ("HCC") had not
guaranteed any obligations of its subsidiaries or unconsolidated affiliates.

(2)  Scheduled Payments of Long-Term Debt of the Registrant

     Scheduled payments of long-term debt outstanding at December 31, 2001 are
$50,000,000 in 2006 and $310,000,000 in 2007.

(3)  Dividends and Distributions

     HCC received dividends from its consolidated subsidiaries amounting to
$23,770,000, $31,562,000 and $31,540,000, respectively, during the years ended
December 31, 2001, 2000 and 1999.

(4)  Supplemental Cash Flow Information

     During 2001, HCC offset $2,391,000 of the outstanding principal balance of
certain notes due from an affiliate against HCC's principal balance of
$1,893,000 and $498,000 of accrued interest thereon owed to the affiliate's
parent company. The offset has been excluded from the accompanying parent
company statement of cash flows as a noncash transaction. Because the note
receivable had been fully reserved, HCC recognized a gain of $2,391,000 during
2001 on the accompanying parent company statement of operations.

     During 2001, HCC contributed certain notes receivable and the accrued
interest thereon with a carrying value of $6,485,000 (net of valuation
allowances of $54,683,000) to one of its wholly owned subsidiaries. This
contribution has been excluded from the accompanying parent company statement of
cash flows as a noncash transaction.

     During 2000, HCC offset $146,000 of the outstanding principal balance of
certain demand notes due from an affiliate against certain payables HCC owed the
affiliate. This offset has been excluded from the accompanying parent company
statement of cash flows as a noncash transaction.

     During the fourth quarter of 1999, HCC assumed the $2,160,000 note payable
balance of one of its subsidiaries to an unconsolidated affiliate. The
assumption of the note and adjustment to HCC's investment in the subsidiary is
excluded from the accompanying parent company statement of cash flows as a
noncash transaction.

(5)  Reclassifications

     Certain reclassifications have been made to the prior years' parent company
financial statements to conform to the 2001 parent company financial statement
presentation.

           The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       135

<PAGE>

                                                                     SCHEDULE II

                  HOLLYWOOD CASINO CORPORATION AND SUBSIDIARIES

                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                                   Amounts
                                    Balance at    Charged to                                           Balance
                                    Beginning     Costs and                          Other             at End
                                    of Period      Expenses     Deductions          Charges           of Period
                                   -----------   -----------   ------------       ------------       -----------
<S>                                <C>           <C>           <C>                <C>                <C>
Year Ended December 31, 2001:
   Allowance for doubtful
      accounts receivable          $ 2,668,000   $ 2,718,000   $ (1,815,000)(1)   $         --       $ 3,571,000
   Allowance for affiliate
      receivables                   49,541,000    14,275,000     (4,391,000)(2)    (12,922,000)(3)    46,503,000
                                   -----------   -----------   ------------       ------------       -----------
                                   $52,209,000   $16,993,000   $ (6,206,000)      $(12,922,000)      $50,074,000
                                   ===========   ===========   ============       ============       ===========
Year Ended December 31, 2000:
   Allowance for doubtful
      accounts receivable          $ 1,826,000   $ 1,461,000   $   (619,000)(1)   $         --       $ 2,668,000
   Allowance for affiliate
      receivable                    42,563,000     7,177,000       (199,000)(1)             --        49,541,000
   Allowance for properties held
      for sale                       3,084,000            --     (3,084,000)                --                --
                                   -----------   -----------   ------------       ------------       -----------
                                   $47,473,000   $ 8,638,000   $ (3,902,000)      $         --       $52,209,000
                                   ===========   ===========   ============       ============       ===========
Year Ended December 31, 1999:
   Allowance for doubtful
      accounts receivable          $ 1,468,000   $   804,000   $   (446,000)(1)   $         --       $ 1,826,000
   Allowance for affiliate
      receivables                   22,808,000     6,433,000             --         13,322,000 (4)    42,563,000
   Allowance for properties held
      for sale                       3,432,000            --       (348,000)(5)             --         3,084,000
                                   -----------   -----------   ------------       ------------       -----------
                                   $27,708,000   $ 7,237,000   $   (794,000)      $ 13,322,000       $47,473,000
                                   ===========   ===========   ============       ============       ===========
</TABLE>

----------
(1)  Represents net write-offs of uncollectible accounts.

(2)  Represents collections on and offsets against liabilities with respect to
     affiliate receivables.

(3)  Represents estimated recoveries on affiliate receivables based on their
     estimated net realizable value.

(4)  Represents write down of affiliate receivables to their estimated net
     realizable value.

(5)  Represents utilization of allowance in connection with partial sale of
     land.

           The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       136

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
     Hollywood Casino - Aurora, Inc.:

We have audited the financial statements of Hollywood Casino - Aurora, Inc. as
of, and for each of the three years in the period ended December 31, 2001, and
have issued our report thereon dated March 19, 2002; such report is included
elsewhere in this Form 10-K. Our audits also include the financial statement
schedule of Hollywood Casino - Aurora, Inc. listed in Item 14. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Deloitte & Touche LLP
Dallas, Texas
March 19, 2002

                                       137

<PAGE>

                                                                     SCHEDULE II

                          HOLLYWOOD CASINO-AURORA, INC.
                 (wholly owned by Hollywood Casino Corporation)

                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                              Amounts
                                Balance at   Charged to                     Balance
                                Beginning    Costs and                      at End
                                of Period     Expenses    Deductions        of Period
                                ----------   ----------   ----------       ----------
<S>                              <C>          <C>         <C>               <C>
Year Ended December 31, 2001:
   Allowance for doubtful
      accounts receivable        $942,000     $180,000    $(273,000)(1)     $849,000
                                 ========     ========    =========         ========

Year Ended December 31, 2000:
   Allowance for doubtful
      accounts receivable        $836,000     $165,000    $ (59,000)(1)     $942,000
                                 ========     ========    =========         ========

Year Ended December 31, 1999:
   Allowance for doubtful
      accounts receivable        $655,000     $300,000    $(119,000)(1)     $836,000
                                 ========     ========    =========         ========
</TABLE>

----------
(1)  Represents net write-offs of uncollectible accounts.

           The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       138

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
     HWCC - Tunica, Inc.:

We have audited the consolidated financial statements of HWCC-Tunica, Inc. and
subsidiary as of, and for each of the three years in the period ended December
31, 2001, and have issued our report thereon dated March 19, 2002; such report
is included elsewhere in this Form 10-K. Our audits also include the financial
statement schedule of HWCC-Tunica, Inc. listed in Item 14. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Deloitte & Touche LLP
Dallas, Texas
March 19, 2002

                                       139

<PAGE>

                                                                     SCHEDULE II

                        HWCC-TUNICA, INC. AND SUBSIDIARY
                 (wholly owned by Hollywood Casino Corporation)

                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                              Amounts
                                Balance at   Charged to                     Balance
                                Beginning    Costs and                      at End
                                of Period     Expenses    Deductions       of Period
                                ----------   ----------   ----------       ----------
<S>                             <C>          <C>          <C>              <C>
Year Ended December 31, 2001:
   Allowance for doubtful
      accounts receivable       $1,636,000   $1,517,000   $(965,000)(1)    $2,188,000
                                ==========   ==========   =========        ==========

Year Ended December 31, 2000:
   Allowance for doubtful
      accounts receivable       $  990,000   $1,206,000   $(560,000)(1)    $1,636,000
                                ==========   ==========   =========        ==========

Year Ended December 31, 1999:
   Allowance for doubtful
      accounts receivable       $  813,000   $  504,000   $(327,000)(1)    $  990,000
                                ==========   ==========   =========        ==========
</TABLE>

----------
(1)  Represents net write-offs of uncollectible accounts.

           The accompanying notes to consolidated financial statements
                     are an integral part of this schedule.

                                       140