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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 333-88679

                           HOLLYWOOD CASINO SHREVEPORT
                         SHREVEPORT CAPITAL CORPORATION
--------------------------------------------------------------------------------
          (Exact name of co-registrants as specified in their charters)

                LOUISIANA                               72-1225563
                LOUISIANA                               75-2830167
----------------------------------------   -------------------------------------
    (States or other jurisdictions of                (I.R.S. Employer
     incorporation or organization)                Identification No.'s)

         451 Clyde Fant Parkway
          Shreveport, Louisiana                            71135
----------------------------------------   -------------------------------------
(Address of principal executive offices)                (Zip Code)

(Registrant's telephone number, including area code): (318) 220-0711

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

<TABLE>
<S><C>
 $150,000,000 of 13% First Mortgage Notes with Contingent Interest due August 1, 2006
 $39,000,000 of 13% Senior Secured Notes with Contingent Interest due August 1, 2006
-------------------------------------------------------------------------------------
                               Title of each class
</TABLE>

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

                                      None
--------------------------------------------------------------------------------
                               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 the Registrants' 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]

     As of March 27, 2002, HCS I, Inc. holds an effective 99% partnership
interest and HCS II, Inc. holds an effective 1% partnership interest in
Hollywood Casino Shreveport. As of March 27, 2002, 1,000 shares of common stock
of Shreveport Capital Corporation, $.01 par value, are outstanding, all of which
are owned by Hollywood Casino Shreveport.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the following documents are incorporated by reference into the
indicated part or parts of this report: None

     The Registrants meet the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K and are therefore filing this Form with the
reduced disclosure format.

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                                     PART I

ITEM 1.  BUSINESS

General
-------

     Hollywood Casino Shreveport ("HCS") is a general partnership registered in
the state of Louisiana. The original partnership agreement was amended on
September 22, 1998 to include as partners in what is now referred to as HCS the
following companies: HWCC - Louisiana, Inc. ("HCL"), a Louisiana corporation
wholly owned by Hollywood Casino Corporation ("HCC"); Sodak Louisiana, L.L.C.
("Sodak"), a Louisiana limited liability company; and Shreveport Paddlewheels,
L.L.C. ("Paddlewheels"), a Louisiana limited liability company. The general
partnership was originally formed in May 1992 for the purpose of developing and
operating a riverboat casino in New Orleans, Louisiana. Originally named Queen
of New Orleans at the Hilton Joint Venture ("QNOV"), the partnership was
50%-owned by Hilton New Orleans Corporation ("Hilton") and 50%-owned by New
Orleans Paddlewheels, Inc. ("NOP"). Hilton and NOP are collectively referred to
herein as the "former partners." QNOV's riverboat operations in New Orleans
commenced in February 1994 and were discontinued in October 1997.

     During October 1996, QNOV received approval from state gaming authorities
to relocate its license to operate to the City of Shreveport, Louisiana,
approximately 180 miles east of Dallas, Texas. Subsequent to receiving approval
to relocate, QNOV made the decision in 1997 not to conduct gaming operations in
Shreveport. The former partners sought to transfer the license to operate in
Shreveport to another interested party. Under Louisiana gaming regulations, the
license to operate a riverboat gaming operation is not transferable; however,
the ownership of an entity licensed to operate is transferable, subject to the
approval of the Louisiana Gaming Control Board (the "LGCB"). Accordingly, the
transfer of the license to operate in Shreveport was structured as the
acquisition of the interests of the former partners in QNOV.

     Upon admission of the new partners, HCS proceeded with entirely new plans
to develop, own and operate a riverboat gaming complex to be constructed in
Shreveport (the "Shreveport Casino"). The Shreveport Casino was completed and
opened on December 20, 2000. Prior to opening, HCS had no operating activities
other than development, financing and construction activities with respect to
the Shreveport Casino. The Shreveport Casino consists of a three-level riverboat
casino with approximately 1,434 slot machines and 66 table games and a 403-room,
all suite, art deco style hotel. The project also includes approximately 42,000
square feet of restaurant and entertainment facilities being developed by a
third party.

     It was originally anticipated that HCS would develop the Shreveport Casino
with each of HCL and Sodak having a 50% interest in the development and
subsequent operations. Once operations commenced, Paddlewheels was to have a
residual interest in the event that the project was ever sold amounting to 10%
plus any capital contributions made by Paddlewheels to HCS or otherwise credited
to their account. On March 31, 1999, HCL entered into a definitive agreement
with Sodak's parent to acquire Sodak for the $2,500,000 Sodak had contributed to
HCS. The revised structure of the partnership was approved by the LGCB on April
20, 1999. As a result of the acquisition, HCL obtained an effective 100%
ownership interest in HCS with Paddlewheels retaining their residual interest.
During July 1999, Sodak was merged into HCL.

     Also during July 1999, HCL formed two new, wholly owned subsidiaries, HCS
I, Inc. and HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of
capital to each entity, along with 99% of its interest in HCS to HCS I, Inc. and
the remaining 1% to HCS II, Inc. In addition, the HCS joint venture agreement
was amended and restated on July 21, 1999, to reflect, among other things, the
admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and the withdrawal
of HCL as managing partner of HCS. As a result, HCS I, Inc. now has an effective
99% interest in HCS and has become its managing general partner. HCS II, Inc.
now has an effective 1% interest in HCS. Paddlewheels retained its 10% residual
interest in HCS and receives an amount equal to 1% of "complex net revenues," as
defined, of the Shreveport Casino.

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     Additionally, in July 1999, HCS formed a new, wholly owned subsidiary,
Shreveport Capital Corporation ("Shreveport Capital"), a Louisiana corporation.
HCS contributed $1,000 of capital to Shreveport Capital. Shreveport Capital was
formed for the sole purpose of being a co-issuer with respect to the First
Mortgage Notes, as defined below, and has not and has not and is not expected to
have any operating activities, acquire any assets or incur any other
liabilities. Accordingly, separate financial statements of Shreveport Capital
are not included herein because management has determined that such information
is not material to investors.

     Equity contributions from HCL and Paddlewheels provided the initial
$50,000,000 of funds necessary to construct the Shreveport Casino. During August
1999, HCS successfully completed the issuance of $150,000,000 of 13% First
Mortgage Notes with contingent interest (the "First Mortgage Notes") due 2006.
These sources of funds, together with $30,000,000 of furniture, fixture and
equipment financing, provided the initial funding for the project.

     The principal executive offices of HCS and Shreveport Capital are located
at 451 Clyde Fant Parkway, Shreveport, Louisiana 71135, telephone (318)
220-0711. The principal executive offices of HCL are located at Two Galleria
Tower, Suite 2200, 13455 Noel Road, Dallas, Texas 75240, telephone (972)
392-7777.

Operations
----------

     HCS owns the Shreveport Casino, a highly-themed hotel and casino
destination resort in Shreveport, Louisiana. The Shreveport Casino enjoys high
visibility and convenient access from Interstate 20, the major highway that
connects the Shreveport market with its feeder markets of Dallas/Ft. Worth and
East Texas. The Shreveport Casino is managed by a wholly-owned subsidiary of HCC
and utilizes the same theme and marketing and operating strategies that have
been successfully implemented at HCC's other properties.

     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 movies on video,
soundtrack compact discs and logo merchandise.

     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 features HCC's unique Hollywood theme throughout the
gaming, dining and entertainment facilities. Management believes that the use of
the Hollywood theme has broad patron appeal and distinguishes the Shreveport
Casino from its competitors. Additionally, the nature of

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the theming permits periodic and cost effective updating, which management
believes encourages both initial and repeat visits. The Hollywood theme has been
used successfully at other casino facilities owned and operated by HCC in
Aurora, Illinois and Tunica, Mississippi.

     The Shreveport Casino is located near the Shreveport Civic Theater. The
1,720-seat auditorium is 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 is 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.

     The Shreveport Casino is owned by HCS which, through HCS I, Inc. and HCS
II, Inc., is in turn owned by HCL. HCS operates Shreveport Casino under a
management agreement with HWCC- Shreveport, Inc. ("Shreveport Management"), a
wholly owned subsidiary of HCC. The management agreement provides that HCS 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

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$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 HCS. 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 HCS's
gaming operations and could have a material adverse impact on HCS.

     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
HCS. 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

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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 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 HCS.

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

     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 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-
Based Casino, which is referred 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

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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;

     .    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

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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.

     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 2001and 2000, respectively. Had the entire 3% gaming tax increase
been in effect during 2001 and 2000, the Shreveport Casino's operating expenses
would have increased by approximately $3.3 million and $243,000, respectively.

                                        8

<PAGE>

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

     HCS 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. HCS 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 its 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 riverboat operated by HCS must comply with U.S. Coast Guard
requirements as to boat design, on-board facilities, equipment, personnel and
safety. The riverboat 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.

     Shipboard employees of HCS, even those who have nothing to do with the
marine operations of the vessel (such as dealers, waiters, and security
personnel) may be subject to the Jones Act which, among other things, exempts
those employees from state limits on workers' compensation awards.

Trademarks
----------

     HCS uses the service mark "Hollywood Casino" under a trademark license
agreement with HCC. The service mark is registered by HCC with the United States
Patent and Trademark Office. HCS also licenses other "Hollywood-formative" marks
to promote its casino and related services. These marks have either been
registered by HCC or are the subject of pending registration applications with
the United States Patent and Trademark Office. HCC considers its rights to the
"Hollywood Casino" service mark to be well established and to have significant
competitive value. The loss of its right to use the "Hollywood Casino" service
mark or of HCC to prevent others from using the same or a deceptively similar
mark could have a material adverse effect on HCS and HCC.

ITEM 2. PROPERTIES

     The Shreveport Casino's facilities are described more fully under the
caption "Business- Operations."

     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
HCS 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

                                        9

<PAGE>

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 HCS during June 2001. 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 of HCS are
pledged as collateral for $150 million of 13% First Mortgage Notes with
contingent interest (the "First Mortgage Notes") issued by HCS 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.

ITEM 3. LEGAL PROCEEDINGS

     On April 23, 2000, the construction site for the Shreveport Casino suffered
tornado damage which contributed to the delay in the opening of 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 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, HCS
has withheld payment of approximately $2.6 million which the general contractor
is currently seeking. In addition, management is seeking to recover lost profits
and related claims under its business interruption insurance coverage. Both the
recovery of any amounts by HCS 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.

     HCS is or may become a party 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 HCS and its subsidiaries.

                                    PART II

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

     As of March 27, 2002, HCS I, Inc. holds an effective 99% partnership
interest and HCS II, Inc. holds an effective 1% partnership interest in HCS.

     As of March 27, 2002, 1,000 shares of common stock of Shreveport Capital
Corporation, $.01 par value, are outstanding, all of which are owned by HCS.

     HCS paid cash distributions pursuant to its tax sharing agreements and
"complex net revenues" agreement to its partners totaling $1,537,000 during
2001. Other distributions to its partners are restricted under the terms of the
indenture to the First Mortgage Notes as more fully described in Note 3 of
"Notes to Consolidated Financial Statements."

                                       10

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

Hollywood Casino Shreveport and HWCC-Louisiana, Inc.
----------------------------------------------------

     The following tables set forth selected financial information for HCS and
HCL and are qualified in their entirety by, and should be read in conjunction
with, HCS and HCL's 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 financial statements of HCS and HCL presented in Item 8. Selected
financial data for Shreveport Capital Corporation is not included because
management has determined that such information is not material to investors
since Shreveport Capital Corporation has not and is not expected to have any
operating activities, acquire any assets or incur any liabilities.

     The ownership of HCS was transferred on September 22, 1998. From that time
until December 20, 2000, HCS had no operating activities other than development,
financing and construction activities with respect to the Shreveport Casino. The
Shreveport Casino commenced operations on December 20, 2000. Under its previous
owners, HCS (then known as QNOV) operated a riverboat casino in New Orleans
until October 1997. From October 1997 until September 21, 1998, QNOV had no
operations and was seeking new owners.

     HCL was formed in April 1993 and its operations have related solely to
acquiring a gaming license to develop and own a riverboat casino in Louisiana.
HCL incurred costs associated with its unsuccessful efforts to obtain licenses
in Lake Charles and Bossier City, Louisiana. The majority of costs incurred by
HCL during 1998 and prior years related to its efforts in Bossier City. HCL's
current principal activity is to act as a holding company.

                                       11

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

Consolidated Statement of Operations Data:

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                        -----------------------------------------------------
                                                          2001        2000        1999     1998(1)    1997(1)
                                                        --------    --------    -------    -------    -------
                                                                             (in thousands)
<S>                                                     <C>         <C>         <C>        <C>        <C>
Net revenues ........................................   $143,868    $  7,754    $    --    $    89    $47,455
                                                        --------    --------    -------    -------    -------

Expenses:
Departmental ........................................    127,227       5,837         --        210     39,136
    General and administrative ......................     20,219         321         --        986      4,987
    Preopening and development ......................         --      14,794        991         90         --
    Depreciation and amortization ...................     15,866         506          2         --      1,547
                                                        --------    --------    -------    -------    -------

      Total expenses ................................    163,312      21,458        993      1,286     45,670
                                                        --------    --------    -------    -------    -------

(Loss) income from operations .......................    (19,444)    (13,704)      (993)    (1,197)     1,785
                                                        --------    --------    -------    -------    -------
Non-operating income (expense):
    Interest income .................................        652       5,795      3,644        296        583
    Interest expense (net of capitalized interest
       of $11,814 in 2000 and $1,052 in 1999 ........    (25,350)     (9,991)    (6,946)       (50)       (88)
    Loss on disposal of assets ......................        (26)         --         --         --         --
                                                        --------    --------    -------    -------    -------
      Total non-operating (expense)
         income,  net ...............................    (24,724)     (4,196)    (3,302)       246        495
                                                        --------    --------    -------    -------    -------

(Loss) income before extraordinary item .............    (44,168)    (17,900)    (4,295)      (951)     2,280
Extraordinary item-loss from early
    extinguishment of debt ..........................       (843)         --         --         --         --
                                                        --------    --------    -------    -------    -------

Net (loss) income ...................................   $(45,011)   $(17,900)   $(4,295)   $  (951)   $ 2,280
                                                        ========    ========    =======    =======    =======
</TABLE>

Consolidated Balance Sheet Data:

<TABLE>
<CAPTION>
                                                            December 31,
                                         ---------------------------------------------------
                                           2001        2000       1999      1998     1997(1)
                                         --------    --------   --------   ------    -------
                                                         (in thousands)
<S>                                      <C>         <C>        <C>        <C>       <C>
Total assets .........................   $212,034    $242,384   $209,480   $5,691    $ 6,438
Total debt, including capital lease
    obligations ......................    190,105     181,946    151,759       --         --
Partners' (deficiency) capital .......     (8,699)     29,174     38,171      (35)    (6,218)
</TABLE>

----------
(1)  The ownership of HCS was transferred on September 22, 1998. From that time
     until December 20, 2000, HCS had no operating activities other than
     development, financing and construction activities with respect to the
     Shreveport Casino. The Shreveport Casino commenced operations on December
     20, 2000. Under its previous owners, HCS (then known as QNOV) operated a
     riverboat casino in New Orleans until October 1997. From October 1997 until
     September 21, 1998, QNOV had no operations and was seeking new owners.

                                       12

<PAGE>

                      HWCC-LOUISIANA, INC. AND SUBSIDIARIES

Consolidated Statement of Operations Data:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                 ------------------------------------------------
                                                   2001        2000      1999(1)    1998     1997
                                                 --------    --------    -------    ----    -----
                                                                 (in thousands)
<S>                                              <C>         <C>         <C>        <C>     <C>
Net revenues ................................    $143,868    $  7,754    $    --    $ --    $  --
                                                 --------    --------    -------    ----    -----

Expenses:
   Departmental .............................     127,227       5,837         --      --       --
   General and administrative ...............      20,414         587         10      --       --
   Preopening and development ...............          --      14,794      1,024      39      644
   Depreciation and amortization ............      15,866         506          2      --       --
                                                 --------    --------    -------    ----    -----

     Total expenses .........................     163,507      21,724      1,036      39      644
                                                 --------    --------    -------    ----    -----

Loss from operations ........................     (19,639)    (13,970)    (1,036)    (39)    (644)
                                                 --------    --------    -------    ----    -----

Non-operating income (expenses):
   Interest income ..........................         780       6,007      3,701      --       --
   Interest expense, net of capitalized
      interest of $11,814 in 2000 and
      $1,052 in 1999 ........................     (25,350)     (9,991)    (6,946)     --       --
   Loss on disposal of assets ...............         (26)         --         --      --       --
                                                 --------    --------    -------    ----    -----

     Total non-operating expense, net .......     (24,596)     (3,984)    (3,245)     --       --
                                                 --------    --------    -------    ----    -----

Loss before extraordinary and
   other  items .............................     (44,235)    (17,954)    (4,281)    (39)    (644)
Minority interest in
   Hollywood Casino Shreveport ..............      (1,438)        (78)        --      --       --
Pre-acquisition losses ......................          --          --         12      --       --
Equity in losses of Hollywood Casino
   Shreveport ...............................          --          --         --     (17)      --
                                                 --------    --------    -------    ----    -----

Loss before extraordinary item ..............     (45,673)    (18,032)    (4,269)    (56)    (644)
Extraordinary item-loss from
   early extinguishment of debt .............        (843)         --         --      --       --
                                                 --------    --------    -------    ----    -----

Net loss ....................................    $(46,516)   $(18,032)   $(4,269)   $(56)   $(644)
                                                 ========    ========    =======    ====    =====
</TABLE>

Consolidated Balance Sheet Data:

<TABLE>
<CAPTION>
                                                              December 31,
                                           --------------------------------------------------
                                            2001         2000      1999(1)    1998     1997
                                           --------    --------   --------   ------   -------
                                                                           (in thousands)
<S>                                        <C>         <C>        <C>        <C>      <C>
Total assets ...........................   $219,802    $252,017   $219,428   $2,705   $    42
Total debt, including capital lease
  obligations ..........................    190,105     184,445    151,759       --        --
Shareholder's (deficit) equity .........     (3,548)     34,293     46,000    1,369    (1,075)
</TABLE>

----------
(1)  Consolidated to include the results of operations and balance sheet of
     Hollywood Casino Shreveport. Losses of Sodak Louisiana, L.L.C. from its
     equity interest in Hollywood Casino Shreveport for the period prior to its
     acquisition by HWCC-Louisiana, Inc. on April 23, 1999 are presented as
     pre-acquisition losses and reduce the consolidated net loss of
     HWCC-Louisiana, Inc.

                                       13

<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, results of operations, cash flows, financial condition, impact
from the recent terrorist attacks and prospects of HCS and HCL. 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, tax regulations, state
regulations or legislation applicable to the gaming industry in general or HCS
and HCL in particular, decisions of courts and other risks indicated in their
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", "estimates", "expects", "anticipates" and similar
expressions as they relate to HCS and HCL or their management are intended to
identify forward-looking statements. Similarly, statements herein that describe
HCS and HCL's business strategy, outlook, earnings forecasts, objectives, plans,
intentions or goals are forward-looking statements.

     HCL has had no recent operating activities and currently serves as a
holding company. Prior to the opening of the Shreveport Casino on December 20,
2000, HCL incurred certain costs with respect to its development. In prior
years, HCL incurred costs in the effort to obtain a license and site for a
riverboat casino facility in Louisiana. Accordingly, management's discussion
that follows primarily addresses the results of operations and liquidity and
capital resources of HCS. Activities of HCL exclusive of HCS and its
subsidiaries will be separately noted where significant.

     The ownership of HCS was transferred on September 22, 1998 when the current
partners acquired their partnership interests from the former partners. HCS was
a development stage entity from September 22, 1998 until the Shreveport Casino
opened for business on December 20, 2000.

     Entertainment-related companies, already suffering from the general
economic downturn, experienced an additional setback from the tragic events of
September 11, 2001. While difficult to measure with any degree of precision,
management believes the Shreveport Casino's operating results for the third and
fourth quarters were negatively impacted by the difficult operating environment
triggered by the tragic September events. Management analyzed the operating
revenues and gaming activity for its facility relative to its internal budget
for the period from September 1 through September 10 and for the period from
September 11 through the end of the month. By comparing the operating trends for
these two periods, management has estimated that the Company's revenues for the
month of September were reduced by approximately $1.7 million (14.8%) as a
result of the terrorist attacks. Fourth quarter revenues continued to
underperform budgeted amounts at the Shreveport Casino. Although monthly
revenues have not yet returned to their pre-September 11 levels, January and
February 2002 revenues have exceeded those generated during the comparable
months of 2001.

     RESULTS OF OPERATIONS

     General

     The Shreveport Casino commenced operations on December 20, 2000; all
activities prior to that date relate to its development and construction.
Accordingly, 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

                                       14

<PAGE>

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.

                                                               Period from
                                       Year Ended          December 20, 2000
                                     December 31, 2001     to December 31, 2000
                                    --------------------   --------------------

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%
                                    ============   =====   ===========   =====

     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. HCS is continuing to fine-tune its marketing efforts to
maximize the effectiveness of its marketing programs while minimizing their
costs. To this end, HCS 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 positive earnings before interest, taxes, depreciation, amortization
and non-recurring items in every month 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

                                       15

<PAGE>

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.

     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

                                       16

<PAGE>

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.

     General and Administrative

     General and administrative expenses at the Shreveport Casino amounted to
$20.2 million during 2001 and $321,000 during the 2000 period subsequent to
opening. Prior to opening, administrative personnel and their associated
expenses were included in preopening and development costs. General and
administrative expenses include management fees payable to a subsidiary of HCC
which amounted to $2.9 million in 2001 compared to $156,000 in 2000 and property
taxes, which increased by $4.8 million during 2001 compared to 2000. Additional
general and administrative costs at HCL, consisting primarily of franchise
taxes, declined to $195,000 in 2001 from $266,000 in 2000.

     Depreciation and Amortization

     Depreciation and amortization expense increased to $15.9 million in 2001
compared to $506,000 in 2000. The increase results primarily from substantially
all of the Shreveport Casino's fixed assets being placed in service in December
2000.

     Preopening and Development Costs

     Preopening and development costs represent the start up costs associated
with the development of the Shreveport Casino which, in accordance with existing
accounting pronouncements, were required to be expensed as incurred. Such costs
included, 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
in 2000.

     Interest Income

     Interest income at HCS decreased $5.1 million (88.7%) during 2001 compared
to 2000 as unexpended proceeds from HCS's debt offering and from the initial $50
million in capital contributions were spent in developing and constructing the
Shreveport Casino and were no longer available for investment. Interest income
at HCS increased $2.2 million (59%) during 2000 compared to 1999 due to the
successful completion of its debt offering in August 1999.

     Additional interest income earned by HCL amounted to $128,000 in 2001,
$212,000 in 2000 and $57,000 in 1999. HCL had cash available for investment
purposes prior to its payment of $2.5 million to

                                       17

<PAGE>

Sodak Gaming, Inc. during June 2001 in connection with HCL's acquisition in 1999
of Sodak's partnership interest in the Shreveport Casino.

     Interest Expense

     Interest expense increased by $15.4 million during 2001 compared to 2000
and by $3 million during 2000 compared to 1999 due primarily to construction
period interest no longer being capitalized and to the increase in HCS's
long-term indebtedness. Interest capitalized on the First Mortgage Notes began
in August 1999 and amounted to $11.8 million during 2000 and $1.1 million during
1999. HCS also entered into a $30 million lease financing arrangement prior to
its opening. 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 Senior Secured Notes. The Senior Secured Notes also provided
additional working capital for the Shreveport Casino. The increase in overall
borrowings, coupled with a higher interest rate (an effective rate of 12.21% on
the Senior Secured Notes versus a floating rate on the lease financing of 8.9%
at the time of their retirement), also contributed to the additional interest
expense in 2001.

     Interest expense also includes the amortization of deferred financing costs
incurred in connection with the First Mortgage Notes, the Senior Secured Notes
and, for periods prior to June 15, 2001, the lease financing. Such amortization
amounted to $1.4 million, $998,000 and $293,000, respectively, during 2001, 2000
and 1999. Contingent interest incurred with respect to the First Mortgage Notes
and Senior Secured Notes amounted to $387,000 and $77,000 during 2001 and 2000,
respectively.

     Income Taxes

     HCS is a partnership and, accordingly, is not subject to federal income
taxes. Such taxes are the responsibility of its partners. HCL is included in the
consolidated federal income tax return of HCC. Pursuant to agreements between
HCL and HCC, HCL'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.
The consolidated financial statements of HCL include the federal tax provisions
of its subsidiaries which are partners in HCS. Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", requires that the tax benefit
of NOL's, 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 losses incurred to date and the lack of historical
operating activity upon which to estimate future taxable income, management has
provided valuation allowances to fully reserve the net deferred tax assets for
all periods presented.

     Minority Interest in Hollywood Casino Shreveport

     In accordance with the terms of its joint venture agreement, HCL'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 by HCL as a 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, respectively,
during 2001 and the post-opening period of 2000 and is reflected as a reduction
in arriving at net loss on the accompanying consolidated statements of
operations of HCL.

     Extraordinary Item - Loss on Early Extinguishment of Debt

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

                                       18

<PAGE>

     Market Risk

     Both the First Mortgage Notes issued to finance construction of the
Shreveport Casino and the 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 First Mortgage Notes and 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 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 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 First Mortgage Notes and 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 the cash flows of HCS and can only be paid if certain coverage ratios are
met, HCS's liquidity and capital resources 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 HCS'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 HCS's debt securities in the amount of approximately $6.2
million.

     Seasonality

     The Shreveport Casino has yet to establish an operating history. Management
anticipates that activity at the Shreveport Casino may be modestly seasonal,
with stronger results expected during the first and third fiscal quarters. In
addition, the Shreveport Casino's operations may fluctuate significantly due to
a number of factors including adverse weather conditions and chance.
Accordingly, the results of operations may fluctuate from quarter to quarter and
the results for any fiscal quarter may not be indicative of results for future
fiscal quarters.

LIQUIDITY AND CAPITAL RESOURCES

     Operating Activities

     The Shreveport Casino experienced negative cash flow from operations during
2001 amounting to $28.2 million. Cash on hand, together with (1) capital
contributions of $8.7 million, (2) $9.5 million of restricted cash available for
construction and interest payments and (3) proceeds from the issue of the Senior
Secured Notes, were sufficient to make up the shortfall in the Shreveport
Casino's operating cash needs as well as to retire its capital lease obligations
($27.5 million), make required principal payments under capital leases ($2.5
million) and other debt obligations ($2 million), pay for property additions of
$5 million and pay distributions amounting to $1.5 million to HCS I, Inc. and
HCS II, Inc. with respect to their obligations to make distributions to
Paddlewheels for its "complex net revenue" interest (see below) and to pay their
franchise taxes

     The operations of the Shreveport Casino are managed by Shreveport
Management under the terms of a management agreement. Under the terms of the
management agreement, HCS incurs basic and incentive management fees to
Shreveport Management for its services. The basic fee equals approximately 2% of
the Shreveport Casino's net revenues and the incentive fee equals the sum of (1)
5% of the Shreveport Casino's earnings before interest, taxes, depreciation and
amortization as defined in the agreement ("EBITDA") between $25 million and $35
million, (2) 7% of the Shreveport Casino's EBITDA between $35 million and $40
million, and (3) 10% of the Shreveport Casino's EBITDA over $40 million. Such
fees amounted to $2.9 million during 2001. In addition, HCS reimburses
Shreveport Management for expenses incurred in connection with services provided
under the management agreement. Under the indentures governing the First
Mortgage Notes and Senior Secured

                                       19

<PAGE>

Notes, management fees are subordinated to all payments under the First Mortgage
Notes and Senior Secured Notes and may not be paid to the extent that their
payment would result in certain financial coverage ratios not being met.

     HCS I, Inc. and HCS II, Inc. have assumed HCL's obligation to cause HCS to
pay Paddlewheels an amount equal to approximately 1% of the Shreveport Casino's
net revenues in exchange for the assignment by Paddlewheels of its joint venture
interest in HCS to HCL and Sodak in September 1998. For financial accounting
purposes, such allocations are treated as distributions to HCS I, Inc. and HCS
II, Inc. HCS is also obligated to pay Paddlewheels a $30,000 monthly fee for
marine services and to reimburse Paddlewheels for its direct expenses, if any,
incurred with respect to those services. The payments to Paddlewheels are to be
made for so long as they remain a joint venture partner in HCS. HCS paid or
accrued distributions totaling $1.4 million and incurred marine service fees of
$360,000 under these agreements in 2001.

     Financing Activities

     HCS used proceeds from its August 1999 issue of $150 million in First
Mortgage Notes, together with $50 million of capital contributions and $30
million in furniture, fixture and equipment financing (see below) to provide the
initial $230 million funding needed to develop, construct, equip and open the
Shreveport Casino. Such project costs included financing costs of $7.3 million
and a $5 million payment made in August 1999 to the City of New Orleans with
respect to moving QNOV's license to Shreveport. The $230 million also included a
reserve for the first three scheduled payments of fixed interest on the First
Mortgage Notes, including the interest payment made on February 1, 2001. HCC
subsequently made additional cash capital contributions of $5.9 million in
December 2000 and $8.7 million in May 2001.

     Fixed interest on the First Mortgage 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 subsequent to the opening
of the Shreveport Casino. The amount of contingent interest is equal to 5% of
the consolidated cash flow of HCS for the applicable period subject to a maximum
contingent interest of $5 million for any four consecutive fiscal quarters.
Contingent interest amounted to $309,000 during 2001, the 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 First Mortgage Notes amounted to
$386,000 at December 31, 2001.

     In June 2001, HCS issued $39 million of 13% Senior Secured Notes, with
contingent interest, due August 2006. The Senior Secured Notes were issued with
a premium to yield interest at an effective rate of 12.21% per annum. Fixed
interest on the 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 HCS 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, the 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 Senior Secured Notes were used,
in part, to retire HCS's capital lease obligations with the remainder available
for working capital purposes.

     Under the terms of certain intercreditor collateral agreements, the 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 First Mortgage Notes.

     HCS 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 HCS for up to an additional 40 years. Base rental payments under

                                       20

<PAGE>

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, HCS
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.

     HCS agreed to contingently reimburse one of QNOV's partners $2 million
payable in monthly installments of $200,000, without interest, commencing with
the opening of the Shreveport Casino. The obligation was repaid in October 2001.

     It was originally anticipated that HCS would develop the Shreveport Casino
with each of HCL and Sodak 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 HCS, with $1,000 paid at closing and the remainder paid six
months after the opening of the Shreveport Casino. Such obligation was paid by
HCL in June 2001.

     There are no significant scheduled maturities of long-term debt prior to
2006 at which time both the First Mortgage Notes and Senior Secured Notes become
due.

     Commitments under noncancellable operating leases, exclusive of the ground
lease previously discussed, decrease steadily from $825,000 in 2002 to $154,000
in 2006 and amount to approximately $3.9 million in the aggregate.

     Capital Expenditures and Other Investing Activities

     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. For this and other reasons,
HCS has withheld payment of approximately $2.6 million which the general
contractor is currently seeking. Both the recovery of any amounts by HCS from
either its insurance companies or the contractors and the need to pay the
general contractor the amounts being withheld are currently subject to
litigation and management is unable to determine the amounts, if any, that will
ultimately be received or paid.

     HCS entered into an agreement with a third party during 2000 providing for
the joint construction and ownership of a golf course. Contributions by HCS to
the limited liability corporation formed to develop and operate the golf course
through 2001 amounted to $313,000 (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 this golf course. If the partners

                                       21

<PAGE>

do proceed, HCS will be required to make approximately $2.3 million in
additional capital contributions to complete construction.

     HCS 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, 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.

     Conclusion

     HCC has the ability under its existing loan agreements to make
approximately $3 million in additional capital contributions to HCS. To the
extent HCC desires to make additional contributions to HCS in excess of the $3
million amount, HCC would currently be required to obtain a waiver from a
majority of the holders of its $360 million in outstanding Senior Secured Notes.
Management of HCC also anticipates receiving between $11 million and $13 million
in payments on its outstanding receivables from Greate Bay Casino Corporation
("Greate Bay", an entity which has certain directors and principal stockholders
in common with HCC) which would provide HCC with additional flexibility to make
future capital contributions to HCS. HCC recently entered into definitive
agreements with Greate Bay to realize value on the significant indebtedness
Greate Bay owes HCC. Other than trade payables, HCC is Greate Bay's sole
creditor. As part of a pre-packaged bankruptcy reorganization of Greate Bay,
Greate Bay has 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 HCC's loan agreements and therefore would be
available for any corporate purpose, including making additional capital
contributions to HCS. Greate Bay filed its petition for reorganization and plan
with the United States Bankruptcy Court for the District of Delaware on December
28, 2001and 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 believes that existing cash from HCC's $8.7 million capital
contribution in May 2001 and from proceeds of the Senior Secured Notes, together
with cash from operations and additional HCC contributions as described above,
will be sufficient to meet HCS's liquidity and capital resource needs for the
next 24 months. Under the indenture to the Senior Secured Notes, HCS will also
be able to borrow, if needed, up to an additional $6 million to finance the
purchase of furniture, fixtures and equipment.

                                       22

<PAGE>

ITEM 8. INDEX TO FINANCIAL STATEMENTS

                                                                          Page
                                                                          ----
Hollywood Casino Shreveport and Subsidiaries:

   Independent Auditors' Report........................................... 24

   Consolidated Balance Sheets as of December 31, 2001 and 2000........... 25

   Consolidated Statements of Operations for the Years
     Ended December 31, 2001, 2000 and 1999............................... 27

   Consolidated Statement of Changes in Partners' Capital (Deficiency)
     for the Three Years Ended December 31, 2001.......................... 28

   Consolidated Statements of Cash Flows for the Years
     Ended December 31, 2001, 2000 and 1999............................... 29

   Notes to Consolidated Financial Statements............................. 30

HWCC-Louisiana, Inc. and Subsidiaries

   Independent Auditors' Report........................................... 46

   Consolidated Balance Sheets as of December 31, 2001 and 2000........... 47

   Consolidated Statements of Operations for the Years
     Ended December 31, 2001, 2000 and 1999............................... 49

   Consolidated Statement of Changes in Shareholder's Equity (Deficit)
     for the Three Years Ended December 31, 2001.......................... 50

   Consolidated Statements of Cash Flows for the Years Ended
     December 31, 2001, 2000 and 1999 .................................... 51

   Notes to Consolidated Financial Statements............................. 52

                                       23

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Hollywood Casino Shreveport:

We have audited the accompanying consolidated balance sheets of Hollywood Casino
Shreveport (a Louisiana general partnership and formerly known as QNOV) and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of operations, changes in partners' capital (deficiency) and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Partnership'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 Shreveport 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

                                       24

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS (NOTE 1)

                                                December 31,    December 31,
                                                   2001             2000
                                                ------------   -------------
Assets
Current Assets:
  Cash and cash equivalents                     $ 26,463,000   $ 37,352,000
   Accounts receivable, net of allowances
     of $534,000 and $90,000, respectively         2,110,000        851,000
   Inventories                                     1,934,000      1,826,000
   Interest receivable                                    --        231,000
   Prepaid expenses and other current assets         854,000      1,394,000
                                                ------------   ------------

     Total current assets                         31,361,000     41,654,000
                                                ------------   ------------

Property and Equipment:
   Land improvements                               1,665,000      1,619,000
   Buildings and improvements                     95,839,000     93,825,000
   Riverboat                                      44,947,000     44,520,000
   Furniture and equipment                        46,891,000     42,561,000
   Construction in progress                          762,000      2,621,000
                                                ------------   ------------

                                                 190,104,000    185,146,000
   Less - accumulated depreciation               (16,365,000)      (508,000)
                                                ------------   ------------

                                                 173,739,000    184,638,000
                                                ------------   ------------

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

Other Assets:
   Deferred financing costs, net                   6,069,000      5,978,000
   Other                                             865,000        584,000
                                                ------------   ------------

     Total other assets                            6,934,000      6,562,000
                                                ------------   ------------
                                                $212,034,000   $242,384,000
                                                ============   ============

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

                                       25

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS (NOTE 1)

                                                 December 31,   December 31,
                                                     2001           2000
                                                 ------------   ------------
Liabilities and Partners'(Deficiency) Capital
Current Liabilities:
   Current maturities of long-term debt
    and capital lease obligations                $      6,000   $ 11,919,000
   Accounts payable                                 6,654,000     17,720,000
   Accrued liabilities -
     Salaries and wages                             2,469,000      2,745,000
     Interest                                      10,702,000      8,229,000
     Gaming and other taxes                           998,000        128,000
     Insurance                                      1,894,000         86,000
     Other                                          2,624,000        662,000
   Due to affiliates                                3,859,000        950,000
   Other current liabilities                        1,273,000        731,000
                                                 ------------   ------------

     Total current liabilities                     30,479,000     43,170,000
                                                 ------------   ------------

Long-Term Debt                                    190,099,000    150,027,000
                                                 ------------   ------------

Capital Lease Obligations                                  --     20,000,000
                                                 ------------   ------------

Other Noncurrent Liabilities                          155,000         13,000
                                                 ------------   ------------

Commitments and Contingencies (Note 7)

Partners'(Deficiency) Capital                     (8,699,000)    29,174,000
                                                 ------------   ------------
                                                 $212,034,000   $242,384,000
                                                 ============   ============

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

                                       26

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)

<TABLE>
<CAPTION>
                                               Year Ended December 31,
                                          -----------------------------------------
                                              2001           2000          1999
                                          ------------   ------------   -----------
<S>                                       <C>            <C>            <C>
Revenues:
 Casino                                   $144,334,000   $  7,194,000   $        --
 Rooms                                       9,803,000        302,000            --
 Food and beverage                          25,521,000      1,330,000            --
 Other                                       3,412,000         74,000            --
                                          ------------   ------------   -----------

                                           183,070,000      8,900,000            --
   Less - promotional allowances           (39,202,000)    (1,146,000)           --
                                          ------------   ------------   -----------

   Net revenues                            143,868,000      7,754,000            --
                                          ------------   ------------   -----------

Expenses:
 Casino                                    113,367,000      5,193,000            --
 Rooms                                       2,091,000         88,000            --
 Food and beverage                           8,455,000        413,000            --
 Other                                       3,314,000        143,000            --
 General and administrative                 20,219,000        321,000            --
 Preopening and development                         --     14,794,000       991,000
 Depreciation and amortization              15,866,000        506,000         2,000
                                          ------------   ------------   -----------

     Total expenses                        163,312,000     21,458,000       993,000
                                          ------------   ------------   -----------

Loss from operations                       (19,444,000)   (13,704,000)     (993,000)
                                          ------------   ------------   -----------

Non-operating income (expense):
 Interest income                               652,000      5,795,000     3,644,000
 Interest expense, net of capitalized
   interest of $11,814,000 in 2000
   and $1,052,000 in 1999                  (25,350,000)    (9,991,000)   (6,946,000)
 Loss on disposal of assets                    (26,000)            --            --
                                          ------------   ------------   -----------

     Total non-operating expense           (24,724,000)    (4,196,000)   (3,302,000)
                                          ------------   ------------   -----------

Loss before extraordinary item             (44,168,000)   (17,900,000)   (4,295,000)
Extraordinary item - loss on early
 extinguishment of debt                       (843,000)            --            --
                                          ------------   ------------   -----------
Net loss                                  $(45,011,000)  $(17,900,000)  $(4,295,000)
                                          ============   ============   ===========
</TABLE>

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

                                       27

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS'
                          CAPITAL (DEFICIENCY) (NOTE 1)

                   For the Three Years Ended December 31, 2001

<TABLE>
<CAPTION>
                                                                                                Shreveport
                                                   HWCC-        Sodak                             Paddle-
                                    Former       Louisiana,   Louisiana,    HCS I,    HCS II,     wheels,
                                 Partners(1)        Inc.       L.L.C.(2)    Inc        Inc.        L.L.C.     Totals
                                 -----------     ----------   ----------   --------   -------   ----------   --------
                                                             (amounts in thousands)
<S>                                <C>            <C>          <C>         <C>         <C>        <C>        <C>
Balances, January 1, 1999          $(5,000)       $ 2,483      $ 2,482     $     --    $  --      $   --     $    (35)
Adjust recorded value of
 Sodak Louisiana, L.L.C.'s
 investment (2)                         --             --       (2,499)          --       --          --       (2,499)
Merger of Sodak Louisiana,
 L.L.C. (2)                             --            (29)          29           --       --          --           --
Contribution of interest (3)            --         (2,441)          --        2,417       24          --           --
Capital contributions                   --             --           --       43,560      440       1,000       45,000
Assignment of interest                  --             --           --         (990)     (10)      1,000           --
Net loss                                --            (13)         (12)      (4,227)     (43)         --       (4,295)
                                   -------        -------      -------     --------    -----      ------     --------

Balances, December 31, 1999         (5,000)            --           --       40,760      411       2,000       38,171
Capital contributions                   --             --           --        9,176       93          --        9,269
Partnership distributions               --             --           --         (364)      (2)         --         (366)
Net loss                                --             --           --      (17,721)    (179)         --      (17,900)
                                   -------        -------      -------     --------    -----      ------     --------

Balances, December 31, 2000         (5,000)            --           --       31,851      323       2,000       29,174
Capital contributions                   --             --           --        8,588       87          --        8,675
Partnership distributions               --             --           --       (1,522)     (15)         --       (1,537)
Net loss                                --             --           --      (44,561)    (450)         --      (45,011)
                                   -------        -------      -------     --------    -----      ------     --------
Balances, December 31, 2001        $(5,000)       $    --      $    --     $ (5,644)   $ (55)     $2,000     $ (8,699)
                                   =======        =======      =======     ========    =====      ======     ========
</TABLE>

---------
(1)  Hilton New Orleans Corporation and New Orleans Paddlewheels, Inc. withdrew
     as partners and transferred their interests to HWCC- Louisiana, Inc., Sodak
     Louisiana, L.L.C. and Shreveport Paddlewheels, L.L.C. during September
     1998. At the time of such transfer, all assets and liabilities of the joint
     venture had been distributed to the withdrawing partners with the exception
     of a $5,000,000 obligation to the City of New Orleans (see Note 1).
(2)  Sodak Louisiana L.L.C. became a wholly owned subsidiary of HWCC-Louisiana,
     Inc. on April 23, 1999 and was merged into HWCC- Louisiana, Inc. on July 9,
     1999. The adjustment to the recorded value is a purchase adjustment (see
     Note 1).
(3)  On July 21, 1999, HWCC-Louisiana, Inc. contributed its ownership interest
     in Hollywood Casino Shreveport to its wholly owned subsidiaries, HCS I,
     Inc. and HCS II, Inc.

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

                                       28

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                     ----------------------------------------------
                                                                         2001             2000             1999
                                                                     ------------    -------------    -------------
<S>                                                                  <C>             <C>              <C>
OPERATING ACTIVITIES:
 Net loss                                                            $(45,011,000)   $ (17,900,000)   $  (4,295,000)
 Adjustments to reconcile net loss to net
   cash (used in) provided by operating activities:
   Depreciation and amortization, including
     accretion of discount and amortization of premium                 17,223,000        1,658,000          362,000
   Extraordinary item                                                     843,000               --               --
   Loss on disposal of assets                                              26,000               --               --
   Provision for doubtful accounts                                      1,021,000           90,000               --
   Increase in accounts receivable                                     (2,280,000)        (941,000)              --
   (Decrease) increase in accounts payable and accrued liabilities     (4,229,000)      10,250,000       13,594,000
   Net change in affiliate balances                                     2,876,000        1,067,000          230,000
   Net change in other current assets and liabilities                   1,205,000         (668,000)      (2,052,000)
   Net change in other noncurrent assets and liabilities                  126,000         (523,000)              --
                                                                     ------------    -------------    -------------

Net cash (used in) provided by operating activities                   (28,200,000)      (6,967,000)       7,839,000
                                                                     ------------    -------------    -------------

INVESTING ACTIVITIES:
 Purchases of property and equipment                                   (4,993,000)    (116,117,000)     (35,028,000)
 Investment in unconsolidated affiliate                                  (265,000)         (48,000)              --
 Net change in cash restricted for construction project                 9,530,000      137,780,000     (147,310,000)
                                                                     ------------    -------------    -------------

Net cash provided by (used in) investing activities                     4,272,000       21,615,000     (182,338,000)
                                                                     ------------    -------------    -------------

FINANCING ACTIVITIES:
 Proceeds from issuance of long-term debt                              40,170,000           35,000      150,000,000
 Capital contributions                                                  8,675,000        5,900,000       45,000,000
 Repayments of long-term debt                                          (2,006,000)          (2,000)              --
 Payments on capital lease obligations                                (30,000,000)              --               --
 Deferred financing costs                                              (2,296,000)      (1,955,000)      (5,221,000)
 Partner distributions                                                 (1,504,000)        (288,000)              --
                                                                     ------------    -------------    -------------

 Net cash provided by financing activities                             13,039,000        3,690,000      189,779,000
                                                                     ------------    -------------    -------------

 Net (decrease) increase in cash and cash equivalents                 (10,889,000)      18,338,000       15,280,000

 Cash and cash equivalents at beginning of year                        37,352,000       19,014,000        3,734,000
                                                                     ------------    -------------    -------------
 Cash and cash equivalents at end of year                            $ 26,463,000    $  37,352,000    $  19,014,000
                                                                     ============    =============    =============
</TABLE>

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

                                       29

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1)  Organization, History, Business and Basis of Presentation

     Hollywood Casino Shreveport ("HCS") is a general partnership registered in
the state of Louisiana. The original partnership agreement was amended on
September 22, 1998 to include as partners in what is now referred to as HCS the
following companies: HWCC - Louisiana, Inc. ("HCL"), a Louisiana corporation
wholly owned by Hollywood Casino Corporation ("HCC"); Sodak Louisiana, L.L.C.
("Sodak"), a Louisiana limited liability company; and Shreveport Paddlewheels,
L.L.C. ("Paddlewheels"), a Louisiana limited liability company. The general
partnership was originally formed in May 1992 for the purpose of developing and
operating a riverboat casino in New Orleans, Louisiana. Originally named Queen
of New Orleans at the Hilton Joint Venture ("QNOV"), the partnership was
50%-owned by Hilton New Orleans Corporation ("Hilton") and 50%-owned by New
Orleans Paddlewheels, Inc. ("NOP"). Hilton and NOP are collectively referred to
herein as the "former partners." QNOV's riverboat operations in New Orleans
commenced in February 1994 and were discontinued in October 1997.

     During October 1996, QNOV received approval from state gaming authorities
to relocate its license to operate to the City of Shreveport, Louisiana,
approximately 180 miles east of Dallas, Texas. Subsequent to receiving approval
to relocate, QNOV made the decision in 1997 not to conduct gaming operations in
Shreveport. The former partners sought to transfer the license to operate in
Shreveport to another interested party. Under Louisiana gaming regulations, the
license to operate a riverboat gaming operation is not transferable; however,
the ownership of an entity licensed to operate is transferable, subject to the
approval of the Louisiana Gaming Control Board (the "LGCB"). Accordingly, the
transfer of the license to operate in Shreveport was structured as the
acquisition of the interests of the former partners in QNOV. The former partners
disposed of QNOV's assets other than its license to operate and satisfied all
but one of its obligations so that when the former partners withdrew on
September 22, 1998, QNOV's only asset was its license to operate in Shreveport
(which had no recorded value) and its only liability was a $5,000,000 obligation
to the City of New Orleans. The $5,000,000 obligation was paid by HCS in August
1999 upon the issuance of $150,000,000 of 13% First Mortgage Notes with
contingent interest due 2006 (the "First Mortgage Notes") (see Note 3(a)).

     Upon admission of the new partners, HCS proceeded with entirely new plans
to develop, own and operate a riverboat gaming complex to be constructed in
Shreveport (the "Shreveport Casino"). The Shreveport Casino was completed and
opened on December 20, 2000. Prior to opening, HCS had no operating activities
other than development, financing and construction activities with respect to
the Shreveport Casino. The Shreveport Casino consists of a three-level riverboat
dockside casino with approximately 1,434 slot machines and 66 table games and a
403-room, all suite, art deco style hotel. The project also includes
approximately 42,000 square feet of restaurant and entertainment facilities
being developed by a third party lessee (see Note 7).

     Riverboat gaming operations in Louisiana are subject to regulatory control
by the LGCB. HCS's current license to operate the Shreveport Casino expires on
October 15, 2004.

     It was originally anticipated that HCS would develop the Shreveport Casino
with each of HCL and Sodak having a 50% interest in the development and
subsequent operations. Once operations commenced, Paddlewheels was to have a
residual interest in the event that the project was ever sold amounting to 10%
plus any capital contributions made by Paddlewheels to HCS or otherwise credited
to their account. On March 31, 1999, HCL entered into a definitive agreement
with Sodak's parent to acquire Sodak for the $2,500,000 Sodak had contributed to
HCS, with $1,000 paid at closing and the

                                       30

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

remainder paid by HCL in June 2001. The revised structure of the partnership was
approved by the LGCB on April 20, 1999. As a result of the acquisition, HCL
obtained an effective 100% ownership interest in HCS with Paddlewheels retaining
their residual interest. During July 1999, Sodak was merged into HCL.

     Also during July 1999, HCL formed two new, wholly owned subsidiaries, HCS
I, Inc. and HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of
capital to each entity, along with 99% of its interest in HCS to HCS I, Inc. and
the remaining 1% to HCS II, Inc. In addition, the HCS joint venture agreement
was amended and restated on July 21, 1999, to reflect, among other things, the
admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and the withdrawal
of HCL as managing partner of HCS. As a result, HCS I, Inc. now has an effective
99% interest in HCS and has become its managing general partner. HCS II, Inc.
now has an effective 1% interest in HCS. Paddlewheels retained its 10% residual
interest in HCS. The revised partnership structure was approved by the LGCB on
July 20, 1999. HCL contributed an additional $300,000 to HCS through HCS I, Inc.
and HCS II, Inc. in July 1999. Once HCS secured financing for the Shreveport
Casino (see Note 3(a)), HCL contributed an additional $43,700,000 to HCS through
HCS I, Inc. and HCS II, Inc. HCL also loaned $1,000,000 to Paddlewheels which
Paddlewheels contributed to HCS. HCL made additional capital contributions to
HCS through HCS I, Inc. and HCS II, Inc. of $8,675,000 in May 2001 and
$5,900,000 in December 2000. Capital contributions from HCC, HCL's parent, were
used by HCL to make the capital contributions to its subsidiaries and the loan
to Paddlewheels.

     Additionally, in July 1999, HCS formed a new, wholly owned subsidiary,
Shreveport Capital Corporation ("Shreveport Capital"), a Louisiana corporation.
HCS contributed $1,000 of capital to Shreveport Capital. Shreveport Capital was
formed for the sole purpose of being a co-issuer with respect to the First
Mortgage Notes and the 13% Senior Secured Notes issued in June 2001. Shreveport
Capital has not and is not expected to have any operating activities, acquire
any assets or incur any other liabilities. Accordingly, separate financial
statements of Shreveport Capital are not included herein because management has
determined that such information is not material to investors.

     The accompanying consolidated financial statements include the accounts of
HCS and its wholly owned subsidiaries, Shreveport Capital and HCS - Golf Course,
LLC ("Golf"). All significant intercompany balances have been eliminated in
consolidation. Golf, a Delaware corporation, was formed in 2000 to own an
initial 49% interest in Shreveport Golf Company, a joint venture formed to
develop and operate a golf course to be used by patrons of the Shreveport
Casino. Golf's current 50% ownership interest in Shreveport Golf Company is
accounted for under the equity method. As of December 31, 2001 and 2000, capital
contributions amounting to $313,000 and $48,000, respectively, have been made to
Shreveport Golf Company and are included in other noncurrent assets on the
accompanying consolidated balance sheets.

     HCS estimates that a significant amount of the Shreveport Casino's revenues
are derived from patrons living in the Dallas/Ft. Worth and east Texas areas.
The Shreveport Casino faces intense competition from other riverboat gaming
operations in Shreveport and Bossier City, Louisiana 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

                                       31

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

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 Shreveport 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 and certain other
slot machine jackpots and certain progressive table game payouts. Such
anticipated jackpots and payouts are included in 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 loss from operations or consolidated net loss. Promotional
allowances for the years ended December 31, 2001and 2000 consist of the
following:

                                      2001          2000
                                   -----------   ----------
Complimentaries:
    Room                           $ 5,635,000   $   98,000
    Food and beverage               19,026,000    1,005,000
    Other                            1,375,000       18,000
Customer loyalty programs           13,166,000       25,000
                                   -----------   ----------
                                   $39,202,000   $1,146,000
                                   ===========   ==========

       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 and 2000 are as
follows:

                                       2001         2000
                                   -----------   ----------

Rooms                              $ 2,631,000   $   42,000
Food and beverage                   22,217,000    1,276,000
Other                                3,227,000       49,000
                                   -----------   ----------
                                   $28,075,000   $1,367,000
                                   ===========   ==========

                                       32

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

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.

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 First Mortgage Notes (see Note 3(a)) as required by the
indenture for the 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 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 $1,021,000 and $90,000 were made during the years ended December
31, 2001 and 2000, respectively. No provisions were required prior to opening.

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
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

     A portion of the interest incurred on construction financing was
capitalized during the construction period. Such capitalized costs have been
allocated to the individual components of property and equipment and other
assets and, since opening, are being amortized over the useful lives of the
related assets.

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 amounted to $1,362,000, $998,000 and
$293,000, respectively, during the years ended December 31, 2001, 2000 and 1999
and is included in interest

                                       33

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

expense on the accompanying consolidated statements of operations. Deferred
financing costs, net of accumulated amortization, of $843,000 was written off
during 2001 in connection with the reacquisition of outstanding obligations.

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. HCS does not believe that any such events or changes have occurred.

Accrued insurance -

     HCS 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, HCS's ultimate liability may
differ from the amounts accrued.

Preopening and development costs -

     Preopening and development costs include, among other things,
organizational costs, marketing and promotional costs, hiring and training of
new employees and other operating costs incurred prior to opening the project.
Preopening 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.

Employee stock options -

     HCS 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. HCL, as managing general partner of HCS, has elected to account
for employee-based compensation under Opinion 25 with the requisite additional
disclosures included in Note 5.

Income taxes -

     HCS is a partnership and its tax attributes, including income and expense
items, are passed through to its partners. Accordingly, the accompanying
consolidated financial statements do not reflect state or federal income taxes.

                                       34

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

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. HCS 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. HCS 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

     Long-term debt at December 31, 2001 and 2000 consists of the following:

     <TABLE>
     <CAPTION>
                                                           December 31,    December 31,
                                                               2001            2000
                                                           ------------    ------------
     <S>                                                   <C>             <C>
     13% First Mortgage Notes, with contingent
       interest, due 2006(a)                               $150,000,000    $150,000,000
     13% Senior Secured Notes, with contingent interest,
       due 2006, including premium of $1,078,000 (b)         40,078,000              --
     Note payable, net of discount of $87,000 at
        December 31, 2000(c)                                         --       1,913,000
     Other                                                       27,000          33,000
                                                           ------------    ------------

     Total indebtedness                                     190,105,000     151,946,000

     Less-current maturities                                     (6,000)     (1,919,000)
                                                           ------------    ------------
       Total long-term debt                                $190,099,000    $150,027,000
                                                           ============    ============
     </TABLE>

----------

                                       35

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(a)  In August 1999, HCS and Shreveport Capital issued the First Mortgage Notes.
     Fixed interest on the First Mortgage 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 subsequent to the
     opening of the Shreveport Casino. The amount of contingent interest is
     equal to 5% of the consolidated cash flow of HCS for the applicable period
     subject to a maximum contingent interest 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 First Mortgage Notes are secured by, among other things, (1) a first
     priority security interest in substantially all of the assets that comprise
     the Shreveport Casino other than assets secured by the Senior Secured Notes
     (see 3(b)) and up to $6,000,000 in assets that may be acquired with future
     equipment financing (2) a collateral assignment of the Shreveport Casino's
     interest in the principal agreements under which it was constructed, and is
     currently operated and managed; and (3) a collateral assignment of certain
     licenses and permits with respect to the operation and management of the
     Shreveport Casino. In addition, the First Mortgage Notes are guaranteed on
     a senior secured basis by HCL, HCS I, Inc. and HCS II, Inc. (collectively,
     the "Guarantors"). Such guarantees are secured by a first priority secured
     interest in substantially all of the Guarantors' assets, including a pledge
     of the capital stock of HCS I, Inc. and HCS II, Inc. and their partnership
     interests in HCS.

     The First Mortgage Notes may be redeemed at any time on or after August 1,
     2003 at 106.5% of the then outstanding principal amount, decreasing to
     103.25% and 100% on August 1, 2004 and 2005, respectively. HCS may also
     redeem up to 35% of the First Mortgage Notes at a redemption price of 113%
     plus accrued interest at any time prior to August 1, 2002 with the net cash
     proceeds of an equity offering by HCC resulting in at least $20,000,000,
     but only to the extent that such proceeds are contributed by HCC as equity
     to HCS.

     The indenture to the First Mortgage Notes contains various provisions
     limiting the ability of HCS to borrow money, pay distributions on its
     equity interests or prepay debt, make investments, create liens, sell its
     assets or enter into mergers or consolidations. In addition, the indenture
     restricts the ability of the Guarantors and Shreveport Capital to acquire
     additional assets, become liable for additional obligations or engage in
     any significant business activities.

(b)  In June 2001, HCS and Shreveport Capital issued $39,000,000 of 13% Senior
     Secured Notes, with contingent interest, due August 2006 (the "Senior
     Secured Notes"). The Senior Secured Notes were issued at an initial premium
     of $1,170,000 to yield interest at an effective rate of 12.21% per annum.
     Fixed interest on the 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 HCS
     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 on the accompanying consolidated balance sheet 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 Senior Secured

                                       36

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Notes were used, in part, to retire HCS's capital lease obligation (see
     Note 4) with the remainder available for working capital purposes.

     Under the terms of certain intercreditor collateral agreements, the 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 First
     Mortgage Notes (see 3(a)). 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 Senior Secured Notes.

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

(c)  The partners of HCS agreed that HCS would contingently reimburse Hilton for
     $2,000,000 it paid in connection with the relocation of the license to
     Shreveport (see Note 1); such repayment was 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 related adjustment to the recorded value of project
     costs were recorded upon the issuance of the First Mortgage Notes in August
     1999. The obligation was repaid in October 2001.

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

     2002                  $      6,000
     2003                         7,000
     2004                         8,000
     2005                         6,000
     2006                   189,000,000
                           ------------
                           $189,027,000
                           ============

(4)  Leases

     Capital Lease -

     HCS entered into a financing lease agreement with third party lessors
during 2000 for $30,000,000 to acquire furniture, fixtures and equipment for the
Shreveport Casino. During the construction period, HCS 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 Senior Secured Notes (see Note
3(b)).

     The $30,000,000 original cost of the assets acquired under the capital
lease agreement was included in furniture and equipment on the accompanying
consolidated balance sheet at December 31,

                                       37

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

2000. Amortization expense with respect to these assets amounted to $2,438,000
during the 2001 year to date period through the June 15 termination date of the
capital lease obligation. 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.

     Operating Leases -

     In May 1999, HCS 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 opened. HCS 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 HCS under the lease. HCS 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 base annual 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, HCS 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
during 2001 and 2000, respectively. 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.

     HCS also leases office, parking and warehouse space and certain equipment
under lease agreements accounted for as operating leases. The lease agreements
expire at various dates through 2015. Many of the lease agreements are
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 a specified level of use; such
contingent rental payments have not been significant. Total rental expense for
such leases amounted to $2,845,000, $326,000 and $9,000, respectively, during
the years ended December 31, 2001, 2000 and 1999.

                                       38

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Future minimum lease payments as of December 31, 2001 under operating lease
obligations (other than the ground lease) having an initial or remaining
noncancellable term in excess of one year are as follows:

     2002                        $  825,000
     2003                           761,000
     2004                           517,000
     2005                           385,000
     2006                           154,000
     Thereafter                   1,247,000
                                 ----------
                                 $3,889,000
                                 ==========

(5)  Stock Option Plan

     Certain HCS 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 25,000 shares
remain outstanding to employees of HCS at an exercise price of $8.75 per share.
Such options outstanding have a remaining contractual life of 119 months.

                                       39

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The following table sets forth the activity of the 1996 Plan with respect
to HCS 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             50,000    $2.50      50,000     $2.50         --     $  --
        Options cancelled            (25,000)    2.50          --        --         --        --
        Options granted               25,000     8.75          --        --     50,000      2.50
        Options exercised            (25,000)    2.50          --        --         --        --
                                     -------    -----     -------     -----     ------     -----
     Outstanding options
        at end of year                25,000    $8.75      50,000     $2.50     50,000     $2.50
                                     =======    =====     =======     =====     ======     ======
     Exercisable options
        at end of year                    --    $  --      12,500     $2.50         --     $  --
     </TABLE>

     HCS 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, the net loss for the years ended December 31, 2001,
2000 and for the period from the initial grant date (September 16, 1999) through
December 31, 1999 would have increased by approximately $19,000, $26,000 and
$8,000, respectively.

     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 during the year ended December 31, 2000. The assumptions applied are
set forth below:

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

Risk free interest rate                        5.5%        4.8%
Dividend yield                                  --          --
Expected life                              5 years     4 years
Volatility                                    58.6%       54.8%
Weighted average fair value               $   3.66    $   1.25

                                       40

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(6)  Transactions with Affiliates

     The operations of the Shreveport Casino are managed by HWCC - Shreveport,
Inc. ("Shreveport Management"), a wholly owned subsidiary of HCC, under the
terms of a management agreement. The management agreement became effective when
the LGCB approved the development of the Shreveport Casino and will remain in
effect as long as HCS holds its license, unless sooner terminated in accordance
with its terms. Under the terms of the management agreement, HCS incurs basic
and incentive management fees to Shreveport Management for its services. The
basic fee is equal to 2% of gross revenues, as defined in the agreement, from
the operations of the Shreveport Casino. The incentive fee is equal to the sum
of (1) 5% of earnings before interest, taxes, depreciation and amortization
("EBITDA"), as defined in the agreement, in excess of $25,000,000 and up to
$35,000,000; (2) 7% of EBITDA in excess of $35,000,000 and up to $40,000,000;
and (3) 10% of EBITDA over $40,000,000. In addition, HCS reimburses Shreveport
Management for expenses incurred in connection with services provided under the
management agreement. Total management fees incurred amounted to $2,878,000 and
$156,000, respectively, for the years ended December 31, 2001 and 2000 and are
included in general and administrative expenses on the accompanying consolidated
statements of operations. Management fees payable at December 31, 2001 and 2000
amounting to $3,034,000 and $156,000, respectively, are included in due to
affiliates on the accompanying consolidated balance sheets at December 31, 2001
and 2000. Under the indentures governing the First Mortgage Notes and Senior
Secured Notes (Note 3), management fees are subordinated to all payments under
the First Mortgage Notes and Senior Secured Notes and may not be paid to the
extent that their payment would result in certain financial coverage ratios not
being met.

     HCS also entered into a Technical Services Agreement with Shreveport
Management to provide certain construction and project supervision services
prior to the opening of the Shreveport Casino. HCS reimbursed Shreveport
Management for expenses incurred in connection with services provided under the
Technical Services Agreement. Such costs amounted to $888,000 and $291,000,
respectively, for the years ended December 31, 2000 and 1999. Amounts payable
under the agreement amounting to $105,000 are included in due to affiliates on
the accompanying consolidated balance sheet at December 31, 2000.

     The Shreveport Casino's casino system software was provided and installed
by Advanced Casino Systems Corporation ("ACSC"). ACSC is a wholly owned
subsidiary of Greate Bay Casino Corporation ("Greate Bay") which has certain
officers, directors and principal shareholders in common with HCC. Costs
incurred in connection with the installation of the software system amounting to
$2,626,000 are included in operating equipment on the accompanying consolidated
balance sheets at both December 31, 2001 and 2000. The Shreveport Casino also
has a maintenance and support agreement with ACSC effective as of October 12,
2000 which provides for a monthly fee of $11,000 (subject to change upon 60 days
written notice) commencing 90 days after installation of ACSC's casino system
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. HCS incurred charges and fees to ACSC amounting
to $401,000 for the year ended December 31, 2001. Unpaid charges of $12,000 and
$156,000, respectively, are included in due to affiliates on the accompanying
consolidated balance sheets at December 31, 2001 and 2000.

     HCS has also entered into a Marine Services Agreement with Paddlewheels to
provide certain marine services for so long as Paddlewheels remains a joint
venture partner in HCS. The Marine Services Agreement became effective on
September 22, 1998 and, in addition to the reimbursement to

                                       41

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

Paddlewheels for its direct expenses incurred, if any, HCS pays a monthly fee of
$30,000 effective with the opening of the Shreveport Casino. HCS expensed
$360,000 and $12,000, respectively, under the agreement during the years ended
December 31, 2001 and 2000. Unpaid charges of $30,000 and $12,000 are included
in due to affiliates on the accompanying consolidated balance sheets at December
31, 2001 and 2000, respectively.

(7)  Commitments and Contingencies

     For so long as it remains a joint venture partner in HCS, Paddlewheels
receives, among other things, an amount equal to 1% of "complex net revenues",
as defined, of the Shreveport Casino, which approximates net revenues, in
exchange for the assignment by Paddlewheels and its affiliates of their joint
venture interest in HCS to HCL and Sodak. Allocations to Paddlewheels of such
amounts are reflected as partnership distributions to HCS I, Inc. and HCS II,
Inc. Such interest amounted to $1,438,000 and $78,000, respectively, during 2001
and 2000. Unpaid distributions of $111,000 and $78,000, respectively, are
included in due to affiliates on the accompanying consolidated balance sheets at
December 31, 2001 and 2000.

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

     During November 2000, HCS 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 are available
for a period of one year. No amounts were borrowed under the credit facilities
and they were cancelled during 2001.

     On April 23, 2000, the construction site for the Shreveport Casino suffered
tornado damage which contributed to the delay in the opening of 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 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, HCS
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. In addition,
management is seeking to recover lost profits and related claims under its
business interruption insurance coverage. Both the recovery of any amounts by
HCS 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.

                                       42

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     HCS is or may become a party 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 HCS and its subsidiaries.

(8)  Louisiana Regulatory Matters

     Riverboat gaming operations in Louisiana are subject to regulatory control
by the LGCB. Louisiana law requires that HCS maintain its Owners' License in
order to operate. HCS's Owner's License was renewed by the LGCB through October
15, 2004. If it were determined that gaming laws were violated by a licensee,
the gaming license held by the licensee could be limited, conditioned,
suspended, or revoked. In addition, the licensee 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 consolidated operations of HCS.

(9)  Employee Retirement Savings Plan

     HCS 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. HCS 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 and 2000, HCS expensed $30,000 and $6,000, respectively, as company
contributions to the plan.

(10) Supplemental Cash Flow Information

     HCS paid interest, net of amounts capitalized, totaling $21,520,000 and
$8,170,000, respectively, during the years ended December 31, 2001 and 2000; no
interest was paid during the year ended December 31, 1999. HCS paid no income
taxes during any of the years ended December 31, 2001, 2000 or 1999.

     During 2000, HCS I, Inc. and HCS II, Inc. made non-cash capital
contributions to HCS consisting of (1) certain project related costs incurred by
HCL in prior years ($445,000) and (2) the assumption of certain liabilities
($425,000).

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

     During June 2000, HCS I, Inc. and HCS II, Inc. made a non-cash capital
contribution in the amount of $2,499,000 to HCS consisting of project costs
incurred by Sodak which were acquired by HCL and contributed to HCS I, Inc. and
HCS II, Inc.

                                       43

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(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.

     Interest receivable and interest payable - The carrying amounts of interest
     ----------------------------------------
receivable and payable approximate fair value because of the short maturity of
the obligation.

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

     Note payable - The carrying amount approximates fair value because of the
     ------------
short maturity of these instruments.

     Long-term debt - The fair value of HCS'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 HCS
for debt of similar remaining maturities.

     The estimated carrying amounts and fair values of HCS'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              $ 26,463,000   $ 26,463,000   $ 37,352,000   $ 37,352,000
  Interest receivable                  --             --        231,000        231,000
  Cash restricted for
    construction project               --             --      9,530,000      9,530,000

Financial Liabilities:
  Interest payable             10,702,000     10,702,000   $  8,229,000   $  8,229,000
  13% First Mortgage Note     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
  Other notes                      27,000         29,000         33,000         33,000
</TABLE>

                                       44

<PAGE>

                  HOLLYWOOD CASINO SHREVEPORT AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(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                     $ 37,747,000   $ 35,992,000   $37,176,000   $ 32,953,000
                                    ============   ============   ===========   ============

   Loss before extraordinary item   $(15,348,000)  $(14,794,000)  $(7,446,000)  $ (6,580,000)
                                    ============   ============   ===========   ============

   Net loss                         $(15,348,000)  $(15,637,000)  $(7,446,000)  $ (6,580,000)
                                    ============   ============   ===========   ============

Year Ended December 31, 2000:

   Net revenues                     $         --   $         --   $        --   $  7,754,000
                                    ============   ============   ===========   ============

   Net loss                         $ (2,115,000)  $ (2,118,000)  $(3,608,000)  $(10,059,000)
                                    ============   ============   ===========   ============
</TABLE>

                                       45

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of HWCC -
Louisiana, Inc. (the "Company") and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of operations, changes in
shareholder's equity (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 HWCC - Louisiana, Inc. 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

                                       46

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)

                      CONSOLIDATED BALANCE SHEETS (NOTE 1)

                                               December 31,   December 31,
                                                   2001           2000
                                               ------------   ------------
Assets
Current Assets:
   Cash and cash equivalents                   $ 26,609,000   $ 39,956,000
   Accounts receivable, net of allowances
     of $534,000 and $90,000, respectively        2,110,000        876,000
   Inventories                                    1,934,000      1,826,000
   Interest receivable                                   --        234,000
   Deferred income taxes                            617,000             --
   Prepaid expenses and other current assets        859,000      1,394,000
                                               ------------   ------------

     Total current assets                        32,129,000     44,286,000
                                               ------------   ------------
Property and Equipment:
   Land improvements                              1,665,000      1,619,000
   Buildings and improvements                   101,839,000     99,825,000
   Riverboat                                     44,947,000     44,520,000
   Furniture and equipment                       46,891,000     42,562,000
   Construction in progress                         762,000      2,621,000
                                               ------------   ------------

                                                196,104,000    191,147,000
   Less - accumulated depreciation              (16,365,000)      (508,000)
                                               ------------   ------------

                                                179,739,000    190,639,000
                                               ------------   ------------

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

Other Assets:
   Deferred financing costs, net                  6,069,000      5,978,000
   Note receivable                                1,000,000      1,000,000
   Other                                            865,000        584,000
                                               ------------   ------------

     Total other assets                           7,934,000      7,562,000
                                               ------------   ------------
                                               $219,802,000   $252,017,000
                                               ============   ============

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

                                       47

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)

                      CONSOLIDATED BALANCE SHEETS (NOTE 1)

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

Liabilities and Shareholder's (Deficit) Equity
Current Liabilities:
   Current maturities of long-term debt
      and capital lease obligations                 $      6,000   $ 11,919,000
   Payable to Sodak Gaming, Inc.                              --      2,499,000
   Accounts payable                                    6,654,000     17,735,000
   Accrued liabilities -
     Salaries and wages                                2,469,000      2,745,000
     Interest                                         10,702,000      8,229,000
     Gaming and other taxes                              998,000        128,000
     Insurance                                         1,894,000         86,000
     Other                                             2,624,000        662,000
   Due to affiliates                                   3,748,000        872,000
   Other current liabilities                           1,273,000        731,000
                                                    ------------   ------------

     Total current liabilities                        30,368,000     45,606,000
                                                    ------------   ------------

Long-Term Debt                                       190,099,000    150,027,000
                                                    ------------   ------------

Capital Lease Obligations                                     --     20,000,000
                                                    ------------   ------------

Deferred Income Taxes                                    617,000             --
                                                    ------------   ------------

Other Noncurrent Liabilities                             155,000         13,000
                                                    ------------   ------------

Commitments and Contingencies (Note 9)

Minority Interest (Note 9)                             2,111,000      2,078,000
                                                    ------------   ------------

Shareholder's (Deficit) Equity:
   Common stock, $1 par value per share, 1,000,000
     shares authorized, 1,000 shares issued and
     outstanding                                           1,000          1,000
   Additional paid-in capital                         66,400,000     57,725,000
   Accumulated deficit                               (69,949,000)   (23,433,000)
                                                    ------------   ------------

   Total shareholder's (deficit) equity               (3,548,000)    34,293,000
                                                    ------------   ------------
                                                    $219,802,000   $252,017,000
                                                    ============   ============

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

                                       48

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)

                 CONSOLIDATED STATEMENTS OF OPERATIONS (NOTE 1)

<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                          -----------------------------------------
                                              2001           2000          1999
                                          ------------   ------------   -----------
<S>                                       <C>            <C>            <C>
Revenues:
   Casino                                 $144,334,000   $  7,194,000   $        --
   Rooms                                     9,803,000        302,000            --
   Food and beverage                        25,521,000      1,330,000            --
   Other                                     3,412,000         74,000            --
                                          ------------   ------------   -----------

                                           183,070,000      8,900,000            --
   Less - promotional allowances           (39,202,000)    (1,146,000)           --
                                          ------------   ------------   -----------

   Net revenues                            143,868,000      7,754,000            --
                                          ------------   ------------   -----------

Expenses:
   Casino                                  113,367,000      5,193,000            --
   Rooms                                     2,091,000         88,000            --
   Food and beverage                         8,455,000        413,000            --
   Other                                     3,314,000        143,000            --
   General and administrative               20,414,000        587,000        10,000
   Preopening and development                       --     14,794,000     1,024,000
   Depreciation and amortization            15,866,000        506,000         2,000
                                          ------------   ------------   -----------

     Total expenses                        163,507,000     21,724,000     1,036,000
                                          ------------   ------------   -----------

Loss from operations                       (19,639,000)   (13,970,000)   (1,036,000)
                                          ------------   ------------   -----------

Non-operating income (expense):
   Interest income                             780,000      6,007,000     3,701,000
   Interest expense, net of capitalized
      interest of $11,814,000 in 2000
      and $1,052,000  in 1999              (25,350,000)    (9,991,000)   (6,946,000)
   Loss on disposal of assets                  (26,000)            --            --
                                          ------------   ------------   -----------

     Total non-operating expense           (24,596,000)    (3,984,000)   (3,245,000)
                                          ------------   ------------   -----------

Loss before extraordinary and
   other items                             (44,235,000)   (17,954,000)   (4,281,000)
Minority interest in Hollywood
   Casino Shreveport (Note 9)               (1,438,000)       (78,000)           --
Pre-acquisition losses (Note 1)                     --             --        12,000
                                          ------------   ------------   -----------

Loss before extraordinary item             (45,673,000)   (18,032,000)   (4,269,000)
Extraordinary item - loss on early
   extinguishment of debt                     (843,000)            --            --
                                          ------------   ------------   -----------
Net loss                                  $(46,516,000)  $(18,032,000)  $(4,269,000)
                                          ============   ============   ===========
</TABLE>

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

                                       49

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)

                      CONSOLIDATED STATEMENT OF CHANGES IN
                     SHAREHOLDER'S EQUITY (DEFICIT) (NOTE 1)
                   For the Three Years Ended December 31, 2001

                                    Common Stock     Additional
                                   ---------------     Paid-in     Accumulated
                                   Shares   Amount     Capital       Deficit
                                   ------   ------   -----------   ------------

BALANCES, January 1, 1999           1,000   $1,000   $ 2,500,000   $ (1,132,000)
   Capital contributions               --       --    48,900,000             --
   Net loss                            --       --            --     (4,269,000)
                                    -----   ------   -----------   ------------

BALANCES, December 31, 1999         1,000    1,000    51,400,000     (5,401,000)
   Capital contributions               --       --     6,325,000             --
   Net loss                            --       --            --    (18,032,000)
                                    -----   ------   -----------   ------------

BALANCES, December 31, 2000         1,000    1,000    57,725,000    (23,433,000)
   Capital contributions               --       --     8,675,000             --
   Net loss                            --       --            --    (46,516,000)
                                    -----   ------   -----------   ------------

BALANCES, December 31, 2001         1,000   $1,000   $66,400,000   $(69,949,000)
                                    =====   ======   ===========   ============

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

                                       50

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)

                 CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 1)

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                             --------------------------------------------
                                                                2001             2000           1999
                                                             ------------   -------------   -------------
<S>                                                          <C>            <C>             <C>
OPERATING ACTIVITIES:
   Net loss                                                  $(46,516,000)  $ (18,032,000)  $  (4,269,000)
   Adjustments to reconcile net loss to net
     cash (used in) provided by operating activities:
     Depreciation and amortization, including accretion
       of discount and amortization of premium                 17,224,000       1,594,000         333,000
     Extraordinary item                                           843,000              --              --
     Loss on disposal of assets                                    26,000              --              --
     Minority interest in Hollywood Casino Shreveport           1,438,000          78,000              --
     Pre-acquisition losses                                            --              --          12,000
     Provision for doubtful accounts                            1,021,000          90,000              --
     Increase in accounts receivable                           (2,255,000)       (966,000)             --
     (Decrease) increase in accounts payable and
       accrued liabilities                                     (4,244,000)     10,250,000      18,818,000
     Net change in affiliate balances                           2,876,000         963,000        (987,000)
     Net change in other current assets and liabilities         1,203,000        (671,000)     (2,081,000)
     Net change in other noncurrent assets and liabilities        126,000        (523,000)             --
                                                             ------------   -------------   -------------

   Net cash (used in) provided by operating activities        (28,258,000)     (7,217,000)     11,826,000
                                                             ------------   -------------   -------------

INVESTING ACTIVITIES:
   Purchases of property and equipment                         (4,993,000)   (116,117,000)    (38,157,000)
   Net change in cash restricted for construction project       9,530,000     137,780,000    (147,310,000)
   Investment in unconsolidated affiliate                        (265,000)        (48,000)             --
   Increase in cash from acquisition (Note 1)                          --              --       1,474,000
   Loan to joint venture partner                                       --              --      (1,000,000)
                                                             ------------   -------------   -------------

   Net cash provided by (used in) investing activities          4,272,000      21,615,000    (184,993,000)
                                                             ------------   -------------   -------------

FINANCING ACTIVITIES:
   Proceeds from issuance of long-term debt                    40,170,000          35,000     150,000,000
   Capital contributions                                        8,675,000       5,900,000      48,900,000
   Repayments of long-term debt                                (2,006,000)         (2,000)             --
   Payments on capital lease obligations                      (30,000,000)             --              --
   Payment to Sodak Gaming, Inc.                               (2,499,000)             --              --
   Limited partner distributions                               (1,405,000)             --              --
   Deferred financing costs                                    (2,296,000)     (1,955,000)     (5,221,000)
   Investment by joint venture partner                                 --              --       1,000,000
                                                             ------------   -------------   -------------

   Net cash provided by financing activities                   10,639,000       3,978,000     194,679,000
                                                             ------------   -------------   -------------

   Net (decrease) increase in cash and cash equivalents       (13,347,000)     18,376,000      21,512,000
   Cash and cash equivalents at beginning of year              39,956,000      21,580,000          68,000
                                                             ------------   -------------   -------------
   Cash and cash equivalents at end of year                  $ 26,609,000   $  39,956,000   $  21,580,000
                                                             ============   =============   =============
</TABLE>

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

                                       51

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

(1)  Organization, History, Business and Basis of Presentation

     HWCC - Louisiana, Inc. ("HCL") is a Louisiana corporation and wholly owned
subsidiary of Hollywood Casino Corporation ("HCC"). HCL was formed in April 1993
for the purpose of obtaining a license to develop and own a riverboat casino in
Louisiana. HCL's initial efforts to obtain sites in Lake Charles and Bossier
City, Louisiana proved unsuccessful. In September 1998, HCL, Sodak Louisiana,
L.L.C. ("Sodak") and Shreveport Paddlewheels, L.L.C. ("Paddlewheels") acquired
the interests of Queen of New Orleans at the Hilton Joint Venture ("QNOV"). QNOV
was a general partnership which owned and operated a riverboat gaming facility
in New Orleans, Louisiana. QNOV ceased operating the riverboat casino in October
1997 having requested and obtained approval from the Louisiana Gaming Control
Board (the "LGCB") to move their licensed site to the city of Shreveport,
approximately 180 miles east of Dallas, Texas. Subsequent to receiving approval
to relocate the license, QNOV made the decision not to conduct gaming operations
in Shreveport. The partners of QNOV sought to transfer the license to operate in
Shreveport to another interested party. Under Louisiana gaming regulations, the
license to operate a riverboat gaming operation is not transferable; however,
the ownership of an entity licensed to operate is transferable, subject to the
approval of the LGCB. Accordingly, the acquisition by HCL, Sodak and
Paddlewheels of the license to operate in Shreveport was structured as an
acquisition of the interests of QNOV's partners. The former partners disposed of
QNOV's assets other than its license to operate and satisfied all but one of its
obligations so that when the former partners withdrew on September 22, 1998
transferring their interests to HCL, Sodak and Paddlewheels, QNOV's only asset
was its license to operate in Shreveport (which had no recorded value) and its
only liability was a $5,000,000 obligation to the City of New Orleans (see
below). HCL, Sodak and Paddlewheels obtained the necessary approvals from the
LGCB to proceed with the project in Shreveport. In June 1999, HCL obtained
approval to change the name of the partnership to Hollywood Casino Shreveport
("HCS").

     Upon admission of the new partners, HCS proceeded with entirely new plans
to develop, own and operate a riverboat gaming complex to be constructed in
Shreveport (the "Shreveport Casino"). The Shreveport Casino was completed and
opened on December 20, 2000. Prior to opening, HCS had no operating activities
other than development, financing and construction activities with respect to
the Shreveport Casino. The Shreveport Casino consists of a three-level riverboat
dockside casino with approximately 1,434 slot machines and 66 table games and a
403-room, all suite, art deco style hotel. The project also includes
approximately 42,000 square feet of restaurant and entertainment facilities
being developed by a third party lessee (see Note 9).

     Riverboat gaming operations in Louisiana are subject to regulatory control
by the LGCB. HCS's current license to operate the Shreveport Casino expires on
October 15, 2004.

     When the former partners of QNOV proposed moving to Shreveport, they
negotiated a settlement with the City of New Orleans to pay $10,000,000 with
respect to claims asserted by the City in connection with the relocation. During
September 1998, HCS, the former partners of QNOV and the City of New Orleans
entered into a Compromise Agreement under which one of QNOV's former partners
agreed to pay $5,000,000 to the City and QNOV was released from any further
relocation claims. The remaining $5,000,000 obligation continued to be reflected
as a liability by HCS until it was paid in August 1999 upon the issuance of
$150,000,000 of 13% First Mortgage Notes with contingent interest due 2006 (the
"First Mortgage Notes") (see Note 4(a)). HCL has treated this $5,000,000 as part
of the cost of acquiring their interest in HCS and has included the cost in
property and equipment on the accompanying consolidated balance sheets.

                                       52

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     It was originally anticipated that HCS would develop the Shreveport Casino
with each of HCL and Sodak having a 50% interest in the development and
subsequent operations. Once operations commenced, Paddlewheels was to have a
residual interest in the event that the project was ever sold amounting to 10%
plus any capital contributions made by Paddlewheels to HCS or otherwise credited
to their account (see Note 9). On March 31, 1999, HCL entered into a definitive
agreement with Sodak's parent to acquire Sodak for the $2,500,000 Sodak had
contributed to HCS, with $1,000 paid at closing and the remainder paid by HCL in
June 2001 (see Note 3). The revised structure of the partnership was approved by
the LGCB on April 20, 1999. As a result, HCL obtained an effective 100%
ownership interest in HCS with Paddlewheels retaining their 10% residual
interest. During July 1999, Sodak was merged into HCL.

     In July 1999, HCL formed two new, wholly owned subsidiaries, HCS I, Inc.
and HCS II, Inc., both Louisiana corporations. HCL contributed $1,000 of capital
to each entity along with 99% of its interest in HCS to HCS I, Inc. and the
remaining 1% of its interest to HCS II, Inc. In addition, the HCS joint venture
agreement was amended and restated on July 21, 1999, to reflect, among other
things, the admission of HCS I, Inc. and HCS II, Inc. as partners of HCS and the
withdrawal of HCL as managing partner of HCS. As a result, HCS I, Inc. now has
an effective 99% interest in HCS, and has become its managing general partner.
HCS II, Inc. now has an effective 1% interest in HCS. HCS I, Inc. and HCS II,
Inc. currently have no other operating activities or assets other than their
ownership interests in HCS. Paddlewheels retained its 10% residual interest in
HCS. The revised partnership structure was approved by the LGCB on July 20,
1999.

     Additionally, in July 1999, HCS formed a new, wholly owned subsidiary,
Shreveport Capital Corporation ("Shreveport Capital"), a Louisiana corporation.
HCS contributed $1,000 of capital to Shreveport Capital. Shreveport Capital was
formed for the sole purpose of being a co-issuer with respect to the First
Mortgage Notes and the 13% Senior Secured Notes issued in June 2001. Shreveport
Capital has not and is not expected to have any operating activities, acquire
any assets or incur any other liabilities. Accordingly, separate financial
statements of Shreveport Capital are not included herein because management has
determined that such information is not material to investors.

     The accompanying consolidated financial statements include the accounts of
HCS - Golf Course, LLC ("Golf") as a wholly owned subsidiary of HCS. Golf, a
Delaware corporation, was formed in 2000 to own an initial 49% interest in
Shreveport Golf Company, a joint venture formed to develop and operate a golf
course to be used by patrons of the Shreveport Casino. Golf's current 50%
ownership interest in Shreveport Golf Company is accounted for under the equity
method. As of December 31, 2001 and 2000, capital contributions amounting to
$313,000 and $48,000, respectively, have been made to Shreveport Golf Company
and are included in other noncurrent assets on the accompanying consolidated
balance sheets. All intercompany balances and transactions have been eliminated
in consolidation.

     HCL estimates that a significant amount of the Shreveport Casino's revenues
are derived from patrons living in the Dallas/Ft. Worth and east Texas areas.
The Shreveport Casino faces intense competition from other riverboat gaming
operations in Shreveport and Bossier City, Louisiana and management believes
that this competition will continue in the future.

                                       53

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   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.

Casino revenues, promotional allowances and departmental expenses -

     The Shreveport 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 and certain other
slot machine jackpots and certain progressive table game payouts. Such
anticipated jackpots and payouts are included in 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 loss from operations or consolidated net loss. Promotional
allowances for the years ended December 31, 2001and 2000 consist of the
following:

                                         2001           2000
                                      -----------    ----------

Complimentaries:
       Room                           $ 5,635,000    $   98,000
       Food and beverage               19,026,000     1,005,000
       Other                            1,375,000        18,000
Customer loyalty programs              13,166,000        25,000
                                      -----------    ----------
                                      $39,202,000    $1,146,000
                                      ===========    ==========

                                       54

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     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 and 2000 are as
follows:

                                         2001           2000
                                      -----------    ----------

Rooms                                 $ 2,631,000    $   42,000
Food and beverage                      22,217,000     1,276,000
Other                                   3,227,000        49,000
                                      -----------    ----------
                                      $28,075,000    $1,367,000
                                      ===========    ==========

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.

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 First Mortgage Notes (see Note 4(a)) as required by the
indenture for the 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 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 $1,021,000 and $90,000 were made during the years ended December
31,2001 and 2000, respectively. No provisions were required prior to opening.

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
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

                                       55

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     A portion of the interest incurred on construction financing was
capitalized during the construction period. Such capitalized costs have been
allocated to the individual components of property and equipment and other
assets and, since opening, are being amortized over the useful lives of the
related assets.

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 amounted to $1,362,000, $998,000 and
$293,000, respectively, during the years ended December 31, 2001, 2000 and 1999
and is included in interest expense on the accompanying consolidated statements
of operations. Deferred financing costs, net of accumulated amortization, of
$843,000 was written off during 2001 in connection with the reacquisition of
outstanding obligations.

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. HCS does not believe that any such events or changes have occurred.

Accrued insurance -

     HCS 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, HCS's ultimate liability may
differ from the amounts accrued.

Preopening and development costs -

     Preopening and development costs include, among other things,
organizational costs, marketing and promotional costs, hiring and training of
new employees and other operating costs incurred prior to opening the project.
Preopening 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.

Employee stock options -

     HCL 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

                                       56

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

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. HCL has
elected to account for employee-based compensation under Opinion 25 with the
requisite additional disclosures included in Note 7.

Income taxes -

     HCL is included in the consolidated federal income tax return of HCC.
Pursuant to agreements between HCL and HCC, HCL's provision for taxes is based
on the amount of tax that would be provided if a separate federal income tax
return were to be filed.

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. HCL 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. HCL 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)  Acquisition of Sodak Louisiana, L.L.C.

     As discussed in Note 1, HCL acquired Sodak on April 23, 1999 for a cash
payment of $1,000 and contingent consideration of $2,499,000 to be paid six
months after the opening of the Shreveport Casino. At December 31, 1999, the
$2,499,000 difference between Sodak's basis in the assets acquired and the
$1,000 paid by HCL was treated as an adjustment to reduce the recorded amount of
project costs to the amount paid with respect to such costs in accordance with
Accounting Principles Board Statement Number 16, "Business Combinations." Sodak
had no operating activities prior to the acquisition date other than equity from
its investment in HCS and its only asset was its investment in HCS. During the
second quarter of 2000, the contingent consideration was recorded by HCL and
project costs were increased to reflect this additional cost incurred by HCL
(see Note 12). The obligation is reflected on the accompanying consolidated
balance sheet at December 31, 2000 as payable to Sodak Gaming, Inc.

                                       57

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

(4)  Long-term Debt

     Long-term debt at December 31, 2001 and 2000 consists of the following:

     <TABLE>
     <CAPTION>
                                                            December 31,   December 31,
                                                                2001           2000
                                                            ------------   ------------
     <S>                                                    <C>            <C>
     13% First Mortgage Notes, with contingent
       interest, due 2006(a)                                $150,000,000   $150,000,000
     13% Senior Secured Notes, with contingent interest,
       due 2006, including premium of $1,078,000 (b)          40,078,000             --
     Note payable, net of discount of $87,000 at
        December 31, 2000 (c)                                         --      1,913,000
     Other                                                        27,000         33,000
                                                            ------------   ------------

     Total indebtedness                                      190,105,000    151,946,000

     Less-current maturities                                      (6,000)    (1,919,000)
                                                            ------------   ------------

       Total long-term debt                                 $190,099,000   $150,027,000
                                                            ============   ============
     </TABLE>

----------
(a)  In August 1999, HCS and Shreveport Capital issued the First Mortgage Notes.
     Fixed interest on the First Mortgage 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 subsequent to the
     opening of the Shreveport Casino. The amount of contingent interest is
     equal to 5% of the consolidated cash flow of HCS for the applicable period
     subject to a maximum contingent interest 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 First Mortgage Notes are secured by, among other things, (1) a first
     priority security interest in substantially all of the assets that comprise
     the Shreveport Casino other than assets secured by the Senior Secured Notes
     (see 4(b)) and up to $6,000,000 in assets that may be acquired with future
     equipment financing (2) a collateral assignment of the Shreveport Casino's
     interest in the principal agreements under which it was constructed and is
     currently, operated and managed; and (3) a collateral assignment of certain
     licenses and permits with respect to the operation and management of the
     Shreveport Casino. In addition, the First Mortgage Notes are guaranteed on
     a senior secured basis by HCL, HCS I, Inc. and HCS II, Inc. (collectively,
     the "Guarantors"). Such guarantees are secured by a first priority secured
     interest in substantially all of the Guarantors' assets, including a pledge
     of the capital stock of HCS I, Inc. and HCS II, Inc. and their partnership
     interests in HCS.

                                       58

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     The First Mortgage Notes may be redeemed at any time on or after August 1,
     2003 at 106.5% of the then outstanding principal amount, decreasing to
     103.25% and 100% on August 1, 2004 and 2005, respectively. HCS may also
     redeem up to 35% of the First Mortgage Notes at a redemption price of 113%
     plus accrued interest at any time prior to August 1, 2002 with the net cash
     proceeds of an equity offering by HCC resulting in at least $20,000,000,
     but only to the extent that such proceeds are contributed by HCC as equity
     to HCS.

     The indenture to the First Mortgage Notes contains various provisions
     limiting the ability of HCS to borrow money, pay distributions on its
     equity interests or prepay debt, make investments, create liens, sell its
     assets or enter into mergers or consolidations. In addition, the indenture
     restricts the ability of the Guarantors and Shreveport Capital to acquire
     additional assets, become liable for additional obligations or engage in
     any significant business activities.

(b)  In June 2001, HCS and Shreveport Capital issued $39,000,000 of 13% Senior
     Secured Notes, with contingent interest, due August 2006 (the "Senior
     Secured Notes"). The Senior Secured Notes were issued at an initial premium
     of $1,170,000 to yield interest at an effective rate of 12.21% per annum.
     Fixed interest on the 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 HCS
     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 on the accompanying consolidated balance sheet 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 Senior Secured Notes were used, in part, to retire HCS's
     capital lease obligations (see Note 5) with the remainder available for
     working capital purposes.

     Under the terms of certain intercreditor collateral agreements, the 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 First
     Mortgage Notes (see 4(a)). 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 Senior Secured Notes.

     The Senior Secured Notes may be redeemed on the same terms and conditions
     as the First Mortgage Notes (see 4(a)). The indenture to the Senior Secured
     Notes also carries substantially the same limitations, covenants and
     restrictions as those included in the indenture to the First Mortgage Notes
     (see 4(a)).

(c)  The partners of HCS agreed that HCS would contingently reimburse Hilton for
     $2,000,000 it paid in connection with the relocation of the license to
     Shreveport (see Note 1); such repayment was 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 related adjustment to the recorded value of project
     costs were recorded upon the issuance of the First Mortgage Notes in August
     1999. The obligation was repaid in October 2001.

                                       59

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

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

2002                $      6,000
2003                       7,000
2004                       8,000
2005                       6,000
2006                 189,000,000
                    ------------
                    $189,027,000

(5)  Leases

     Capital Lease -

     HCS entered into a financing lease agreement with third party lessors
during 2000 for $30,000,000 to acquire furniture, fixtures and equipment for the
Shreveport Casino. During the construction period, HCS 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 Senior Secured Notes (see Note
4(b)).

     The $30,000,000 original cost of the assets acquired under the capital
lease agreement was included in furniture and equipment on the accompanying
consolidated balance sheet at December 31, 2000. Amortization expense with
respect to the assets amounted to $2,438,000 during the 2001 year to date period
through the June 15 termination date of the capital lease obligation.
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.

     Operating Leases -

     In May 1999, HCS 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 opened. HCS 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 HCS under the lease. HCS 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 base annual 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, HCS 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

                                       60

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

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 during 2001 and
2000, respectively. 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.

     HCS also leases office, parking and warehouse space and certain equipment
under lease agreements accounted for as operating leases. The lease agreements
expire at various dates through 2015. Many of the lease agreements are
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 a specified level of use; such
contingent rental payments have not been significant. Total rental expense for
such leases amounted to $2,845,000, $326,000 and $9,000, respectively, during
the years ended December 31, 2001, 2000 and 1999.

     Future minimum lease payments as of December 31, 2001 under operating lease
obligations (other than the ground lease) having an initial or remaining
noncancellable term in excess of one year are as follows:

2002                   $  825,000
2003                      761,000
2004                      517,000
2005                      385,000
2006                      154,000
Thereafter              1,247,000
                       ----------
                       $3,889,000
                       ==========

(6)  Income Taxes

     HCL's benefit for income taxes consists of the following:

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

     Deferred benefit:
        Federal                        $ 13,986,000   $ 5,623,000   $ 1,362,000
        State                             3,561,000     1,442,000       338,000
     Change in valuation allowance      (17,547,000)   (7,065,000)   (1,700,000)
                                       ------------   -----------   -----------
                                       $         --   $        --   $        --
                                       ============   ===========   ===========

                                       61

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     A reconciliation between the calculated tax benefit on losses 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 benefit                    $ 15,754,000    $ 6,131,000   $ 1,451,000
Valuation allowance change                        (17,547,000)    (7,065,000)   (1,700,000)
State income taxes, net of federal provision        2,315,000        952,000       223,000
Other                                                (522,000)       (18,000)       26,000
                                                 ------------    -----------   -----------
     Tax benefit as shown on statement
  of operations                                  $         --    $        --   $        --
                                                 ============    ===========   ===========
</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 the amortization of preopening costs, the capitalization
of interest and other accruals.

     At December 31, 2001, HCL has net operating loss carryforwards ("NOL's")
for federal income tax purposes totaling approximately $69,441,000 which do not
begin to expire until the year 2012. Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", requires that the tax benefit of such
NOL's, 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 losses incurred to date and the lack of historical
operating activity upon which to estimate future taxable income, management has
provided valuation allowances to fully reserve the net deferred tax assets for
all periods presented.

                                       62

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     The components of HCL's net deferred tax asset are as follows:

                                                   December 31,
                                            --------------------------
                                               2001           2000
                                            ------------   -----------
     Deferred tax assets:
         Net operating loss carryforwards   $ 27,276,000   $ 6,407,000
         Preopening expenses                   4,722,000     6,271,000
         Allowance for doubtful accounts         221,000        35,000
         Other liabilities and accruals        2,219,000       269,000
         Other                                    67,000            --
                                            ------------   -----------

             Total deferred tax assets        34,505,000    12,982,000

     Deferred tax liabilities:
         Depreciation and amortization        (7,801,000)   (3,825,000)
                                            ------------   -----------

     Net deferred tax asset                   26,704,000     9,157,000
     Valuation allowance                     (26,704,000)   (9,157,000)
                                            ------------   -----------

                                            $         --   $        --
                                            ============   ===========

(7)  Stock Option Plan

     Certain HCS 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 25,000 shares
remain outstanding to employees of HCS at an exercise price of $8.75 per share.
Such options outstanding have a remaining contractual life of 119 months.

                                       63

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     The following table sets forth the activity of the 1996 Plan with respect
to HCS 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      50,000    $2.50      50,000     $2.50         --    $  --
   Options cancelled     (25,000)    2.50          --        --         --       --
   Options granted        25,000     8.75          --        --     50,000     2.50
   Options exercised     (25,000)    2.50          --        --         --       --
                         -------    -----      ------     -----     ------    -----
Outstanding options
   at end of year         25,000    $8.75      50,000     $2.50     50,000    $2.50
                         =======    =====      ======     =====     ======    =====
Exercisable options
   at end of year             --    $  --      12,500     $ 2.50        --    $  --
</TABLE>

     HCL has elected to apply Opinion 25 with respect to accounting for options
to employees of HCS. 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, the net loss for the years ended December 31, 2001,
2000 and for the period from the initial grant date (September 16, 1999) through
December 31, 1999 would have increased by approximately $19,000, $26,000 and
$8,000, respectively.

     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, 2000. The assumptions applied
are set forth below:

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

Risk free interest rate             5.5%        4.8%
Dividend yield                       --         --
Expected life                   5 years    4 years
Volatility                         58.6%       54.8%
Weighted average fair value    $   3.66   $   1.25

(8)  Transactions with Affiliates

     The operations of the Shreveport Casino are managed by HWCC - Shreveport,
Inc. ("Shreveport Management"), a wholly owned subsidiary of HCC, under the
terms of a management agreement. The management agreement became effective when
the LGCB approved the development of the Shreveport Casino and will remain in
effect as long as HCS holds its license, unless sooner terminated in accordance
with its terms. Under the terms of the management agreement, HCS incurs basic
and incentive management fees to Shreveport Management for its services. The
basic fee is equal to 2% of gross revenues, as defined in the agreement, from
the operations of the Shreveport Casino. The incentive

                                       64

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

fee is equal to the sum of (1) 5% of earnings before interest, taxes,
depreciation and amortization ("EBITDA"), as defined in the agreement, in excess
of $25,000,000 and up to $35,000,000; (2) 7% of EBITDA in excess of $35,000,000
and up to $40,000,000; and (3) 10% of EBITDA over $40,000,000. In addition, HCS
reimburses Shreveport Management for expenses incurred in connection with
services provided under the management agreement. Total management fees incurred
amounted to $2,878,000 and $156,000 for the years ended December 31, 2001 and
2000, respectively, and are included in general and administrative expenses on
the accompanying consolidated statements of operations. Management fees payable
of $3,034,000 and $156,000, respectively, are included in due to affiliates on
the accompanying consolidated balance sheets at December 31, 2001 and 2000.
Under the indentures governing the First Mortgage Notes and Senior Secured Notes
(Note 4), management fees are subordinated to all payments under the First
Mortgage Notes and Senior Secured Notes and may not be paid to the extent that
their payment would result in certain financial coverage ratios not being met.

     HCS also entered into a Technical Services Agreement with Shreveport
Management to provide certain construction and project supervision services
prior to the opening of the Shreveport Casino. HCS reimbursed Shreveport
Management for expenses incurred in connection with services provided under the
Technical Services Agreement. Such costs amounted to $888,000 and $291,000,
respectively, for the years ended December 31, 2000 and 1999. Amounts payable
under the agreement amounting to $105,000 and $56,000 are included in due to
affiliates on the accompanying consolidated balance sheets at December 31, 2000
and 1999, respectively.

     Prior to 2000, HCL was billed by subsidiaries of HCC for certain
administrative and other service performed by their employees on behalf of HCL.
Such charges amounted to $170,000 for the year ended December 31, 1999. During
April 1999, HCC made a capital contribution to HCL of $1,400,000, the proceeds
from which were used to repay HCC and its subsidiaries with respect to such
charges and to reimburse HCC for its payment of other third party billings.

     The Shreveport Casino's casino system software was provided and installed
by Advanced Casino Systems Corporation ("ACSC"). ACSC is a wholly owned
subsidiary of Greate Bay Casino Corporation ("Greate Bay") which has certain
officers, directors and principal shareholders in common with HCC. Costs
incurred in connection with the installation of the software system amounting to
$2,626,000 are included in operating equipment on the accompanying consolidated
balance sheets at both December 31, 2001 and 2000. The Shreveport Casino also
has a maintenance and support agreement with ACSC effective as of October 12,
2000 which provides for a monthly fee of $11,000 (subject to change upon 60 days
written notice) commencing 90 days after installation of ACSC's casino system
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. HCS incurred charges and fees to ACSC amounting
to $401,000 for the year ended December 31, 2001. Unpaid charges of $12,000 and
$156,000, respectively, are included in due to affiliates on the accompanying
consolidated balance sheets as of December 31, 2001 and 2000.

     HCS has also entered into a Marine Services Agreement with Paddlewheels to
provide certain marine services for so long as Paddlewheels remains a joint
venture partner in HCS. The Marine Services Agreement became effective on
September 22, 1998 and, in addition to the reimbursement to Paddlewheels for its
direct expenses incurred, if any, HCS pays a monthly fee of $30,000 effective
with

                                       65

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

the opening of the Shreveport Casino. HCS expensed $360,000 and $12,000,
respectively, under the agreement during the years ended December 31, 2001 and
2000 . Unpaid charges of $30,000 and $12,000 are included in due to affiliates
on the accompanying consolidated balance sheets at December 31, 2001 and 2000,
respectively.

(9)  Commitments and Contingencies

     HCL agreed that upon obtaining construction financing for the Shreveport
Casino, it would loan $1,000,000 to Paddlewheels which Paddlewheels would use to
make a $1,000,000 capital contribution to HCS. HCL loaned the $1,000,000 to
Paddlewheels and Paddlewheels made its capital contribution to HCS in August
1999; the $1,000,000 is included in minority interest on the accompanying
consolidated balance sheets of HCL at both December 31, 2001 and 2000. The loan
to Paddlewheels earns interest at the rate of prime commencing with the opening
of the Shreveport Casino and is payable monthly. Because the loan had no stated
interest prior to completion of the Shreveport Casino, HCL recorded a discount
on the note which was accreted during the construction period resulting in a
note receivable balance of $1,000,000 at the opening date. Principle on the loan
is due to be repaid on December 20, 2010.

     Paddlewheels was also given credit for an additional $1,000,000 capital
contribution at the time construction financing was obtained and the $5,000,000
liability described in Note 1 was paid. Such credit was in recognition of
guarantees provided by an affiliate of Paddlewheels necessary to obtain LGCB
approval for the Shreveport Casino. The additional $1,000,000 credit to
Paddlewheels's capital account results in an additional $1,000,000 minority
interest on HCL's consolidated balance sheets and has been treated as an
additional project cost.

     For so long as it remains a joint venture partner in HCS, Paddlewheels will
receive, among other things, an amount equal to 1% of "complex net revenues", as
defined, of the Shreveport Casino, which approximates net revenues, in exchange
for the assignment by Paddlewheels and its affiliates of their joint venture
interest in HCS to HCL and Sodak. Allocations to Paddlewheels are reflected as
minority interest in Hollywood Casino Shreveport on the accompanying
consolidated statement of operations in the amounts of $1,438,000 and $78,000,
respectively, for the years ended December 31, 2001 and 2000. Unpaid
distributions amounting to $111,000 and $78,000, respectively, are included in
minority interest on the accompanying consolidated balance sheets at December
31, 2001 and 2000.

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

                                       66

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     During November 2000, HCS 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.

     On April 23, 2000, the construction site for the Shreveport Casino suffered
tornado damage which contributed to the delay in the opening of 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 costs 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, HCS 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 balance sheet at December 31, 2001. Both the
recovery of any amounts by HCS from either its insurance company or its
contractors or the need to pay the general contractor for 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.

     HCS is or may become a party 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 HCS and its subsidiaries.

(10) Louisiana Regulatory Matters

     Riverboat gaming operations in Louisiana are subject to regulatory control
by the LGCB. Louisiana law requires that HCS maintain its Owners' License in
order to operate. HCS's Owner's License was renewed by the LGCB through October
15, 2004. If it were determined that gaming laws were violated by a licensee,
the gaming license held by the licensee could be limited, conditioned,
suspended, or revoked. In addition, the licensee 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 consolidated operations of HCS.

(11) Employee Retirement Savings Plan

     HCS 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. HCS 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 and 2000, HCS expensed $30,000 and $6,000, respectively, as company
contributions to the plan.

                                       67

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

(12) Supplemental Cash Flow Information

     HCL paid interest, net of amounts capitalized, totaling $21,520,000 and
$8,170,000, respectively, during the years ended December 31, 2001 and 2000; no
interest was paid during the year ended December 31, 1999. HCS paid no income
taxes during any of the years ended December 31, 2001, 2000 or 1999.

     During 2000, HCC made non-cash capital contributions to HCL in the amount
of $425,000 consisting of the assumption of certain liabilities.

     During 2000, HCS obtained proceeds under capital lease obligations
amounting to $30,000,000 used to purchase fixed assets during the construction
period (Note 5).

     The additional $1,000,000 credit given to HCL's joint venture partner as an
additional contribution to the HCS (see Note 9) 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.

     In connection with the acquisition of Sodak, HCL assumed the following
liabilities:

Fair value of non-cash assets acquired         $ 1,465,000
Cash acquired                                    1,525,000
Contingent liability for purchase               (2,499,000)
Pre-acquisition 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 and described in Note 3
was recorded as a non- cash transaction during 2000.

(13) 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 receivable and interest payable - The carrying amounts of interest
     ----------------------------------------
receivable and payable approximate fair value because of the short maturity of
the obligation.

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

                                       68

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

     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.

     Payable to Sodak Gaming, Inc. and note payable - The carrying amounts
     ----------------------------------------------
approximate fair value because of the short maturity of these instruments.

     Long-term debt - The fair value of HCS'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 HCS
for debt of similar remaining maturities.

     The estimated carrying amounts and fair values of HCL'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              $ 26,609,000   $ 26,609,000   $ 39,956,000   $ 39,956,000
  Interest receivable                  --             --        234,000        234,000
  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

Financial Liabilities:
  Payable to Sodak
     Gaming, Inc.            $         --   $         --   $  2,499,000   $  2,499,000
  Interest payable             10,702,000     10,702,000      8,229,000      8,229,000
  13% First Mortgage Note     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
  Other notes                      27,000         29,000         33,000         33,000
</TABLE>

                                       69

<PAGE>

                     HWCC - LOUISIANA, INC. AND SUBSIDIARIES
                 (wholly owned by Hollywood Casino Corporation)
                   Notes to Consolidated Financial Statements

(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                     $ 37,747,000    $ 35,992,000    $37,176,000    $ 32,953,000
                                    ============    ============    ===========    ============

   Loss before extraordinary item   $(15,728,000)   $(15,159,000)   $(7,838,000)   $ (6,948,000)
                                    ============    ============    ===========    ============

   Net loss                         $(15,728,000)   $(16,002,000)   $(7,838,000)   $ (6,948,000)
                                    ============    ============    ===========    ============

Year Ended December 31, 2000:

   Net revenues                     $         --    $         --    $        --    $  7,754,000
                                    ============    ============    ===========    ============
   Net loss                         $ (2,136,000)   $ (2,139,000)   $(3,626,000)   $(10,131,000)
                                    ============    ============    ===========    ============
</TABLE>

                                       70

<PAGE>

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

     HCS and HCL had no disagreements with their independent accountants to
report under this item.

                                     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 23.

     2.   Financial Statement Schedules

     Hollywood Casino Shreveport
     ---------------------------

     .    Independent Auditors' Report
     .    Schedule II; Valuation and Qualifying Accounts

     HWCC-Louisiana, 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      --    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     --    Amended and Restated Joint Venture Agreement by and among Shreveport Paddlewheels,
                 L.L.C., Sodak Louisiana, L.L.C. and HWCC-Louisiana, Inc. dated July 31, 1998.
                 (Exhibit 10.1)
###3.2     --    September 1998 Amendment to the July Amended and Restated Joint Venture Agreement.
                 (Exhibit 10.2)
+++3.3     --    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)
+++3.4     --    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)
+++3.5     --    Articles of incorporation of Shreveport Capital Corporation. (Exhibit 3.3)
+++3.6     --    Bylaws of Shreveport Capital Corporation. (Exhibit 3.4)
+++3.7     --    Articles of incorporation of HWCC-Louisiana, Inc. (Exhibit 3.5)
+++3.8     --    Bylaws of Hollywood Casino - Lake Charles, Inc. (now known as HWCC-Louisiana, Inc.
                 (Exhibit 3.6)
+++3.9     --    Articles of incorporation of HCS I, Inc. (Exhibit 3.7)
+++3.10    --    Bylaws of HCS I, Inc. (Exhibit 3.8)
+++3.11    --    Articles of incorporation of HCS II, Inc. (Exhibit 3.9)
+++3.12    --    Bylaws of HCS II, Inc. (Exhibit 3.10)
  +4.1     --    Indenture among Hollywood Casino Shreveport and Shreveport Capital Corporation ("SCC")
</TABLE>

                                       71

<PAGE>

<TABLE>
<S>              <C>
                 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)
 +4.2      --    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)
 +4.3      --    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)
 +4.4      --    Security Agreement dated August 10, 1999 between Hollywood Casino Shreveport and State
                 Street Bank and Trust Company, as Trustee.  (Exhibit 4.4)
 +4.5      --    Partnership Interest Pledge Agreement dated August 10, 1999 made by HCS I, Inc. in favor of
                 State Street Bank and Trust Company, as Trustee and Secured Party.  (Exhibit 4.5)
 +4.6      --    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)
 #4.7      --    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)
 +4.8      --    Stock Pledge Agreement dated August 10, 1999 made by HCL in favor of State Street Bank
                 and Trust Company, as Trustee.  (Exhibit 4.7)
 +4.9      --    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)
+4.10      --    Security Agreement - Vessel Construction dated August 10, 1999 between Hollywood Casino
                 Shreveport and State Street Bank and Trust Company, as Trustee.  (Exhibit 4.9)
+4.11      --    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)
+4.12      --    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)
+4.13      --    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)
++++4.14   --    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)
++++4.15   --    Registration Rights Agreement, dated as of June 15, 2001, by and
                 among Hollywood Casino Shreveport and SCC and the Initial Purchasers.
                 (Exhibit 4.2)
++++4.16   --    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)
++++4.17   --    Security Agreement dated June 15, 2001 between Hollywood Casino Shreveport and State
                 Street Bank and Trust Company, as Trustee.  (Exhibit 4.4)
++++4.18   --    Security Agreement dated June 15, 2001 made by SCC to State Street
                 Bank and Trust Company, as Trustee. (Exhibit 4.5)
++++4.19   --    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)
++++4.20   --    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)
+10.1      --    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)
++10.2     --    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)
+10.3      --    Technical Services Agreement, dated as of September 22, 1998, by and between QNOV and
                 HWCC-Shreveport, Inc. (Exhibit 10.4)
</TABLE>

                                       72

<PAGE>

<TABLE>
<S>              <C>
+10.4      --    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)
+10.5      --    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)
+10.6      --    Retail Space Lease, executed as of June 3, 1999 by and between QNOV and Red River
                 Entertainment Company, L.L.C. (Exhibit 10.12)
+10.7      --    Ground Lease, dated May 19, 1999, by and between the City of Shreveport, Louisiana and
                 QNOV.  (Exhibit 10.13)
+10.8      --    Marine Services Agreement dated September 22, 1998 between QNOV and Shreveport
                 Paddlewheels, L.L.C.  (Exhibit 10.17)
+10.9      --    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)
+10.10     --    Loan Agreement dated August 10, 1999 between Shreveport Paddlewheels, L.L.C. and HCL.
                 (Exhibit 10.19)
+10.11     --    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)
+10.12     --    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)
+10.13     --    Guaranty Agreement dated August 10, 1999 made by New Orleans Paddlewheels, L.L.C. in
                 favor of HCL.  (Exhibit 10.22)
+10.14     --    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)
++++10.15  --    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 10.1)
@10.16     --    Management Services Agreement dated September 22, 1998 by and between QNOV and
                 HWCC-Shreveport, Inc. (Exhibit 10.1)
@10.17     --    Amendment to Management Services Agreement dated August 2, 1999 by and between
                 Hollywood Casino Shreveport (formerly QNOV) and HWCC-Shreveport, Inc. (Exhibit 10.2)
@@10.18    --    Employment Agreement by and between Hollywood Casino Shreveport and Gary A. Gregg.
                 (Exhibit 10.20)
</TABLE>

-----------------------
     #    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 to the exhibit shown in parenthesis filed in
          HCC's Quarterly Report on Form 10-Q for the quarter ended September
          30, 1998 as filed with the SEC on November 13, 1998.

     +    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 HCS's Quarterly Report on Form 10-Q for the quarter ended June 30,
          2001 as filed with the SEC on August 10, 2001.

                                       73

<PAGE>

     @    Incorporated by reference to the exhibit shown in parenthesis filed in
          HCC's Quarterly Report on Form 10-Q for the quarter ended June 30,
          1999 as filed with the SEC on August 16, 1999.

    @@    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.

     (b)  Reports on Form 8-K

          The Registrants did not file any Reports on Form 8-K during the
          quarter ended December 31, 2001.

                                       74

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Co-Registrants have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas on March 27, 2002.

                                               HOLLYWOOD CASINO SHREVEPORT
                                            SHREVEPORT CAPITAL CORPORATION

                                   By: HCS I, 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 Co-Registrants
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,   -------------------
      Edward T. Pratt III         President and Director


/s/      Paul C. Yates          Executive Vice President,     March 27, 2002
-----------------------------     Chief Financial Officer,   -------------------
         Paul C. Yates            Treasurer, Assistant
                                  Secretary and Director


/s/     Walter E. Evans         Executive Vice President,     March 27, 2002
-----------------------------     General Counsel,           -------------------
        Walter E. Evans           Secretary and Director


/s/ Charles F. LaFrano III      Vice President and            March 27, 2002
-----------------------------     Assistant Secretary        -------------------
      Charles F. LaFrano III

                                       75

<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 - LOUISIANA, 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,   -------------------
       Edward T. Pratt III        President and Director


/s/       Paul C. Yates         Executive Vice President,     March 27, 2002
-----------------------------     Chief Financial Officer,   -------------------
          Paul C. Yates           Treasurer, Assistant
                                  Secretary and Director


/s/      Walter E. Evans        Executive Vice President,     March 27, 2002
-----------------------------     General Counsel,           -------------------
         Walter E. Evans          Secretary and Director


/s/  Charles F. LaFrano III     Vice President and             March 27, 2002
-----------------------------     Assistant Secretary        -------------------
      Charles F. LaFrano III

                                       76

<PAGE>

                     INDEX TO FINANCIAL STATEMENT SCHEDULES

Hollywood Casino Shreveport and Subsidiaries

          .    Independent Auditors' Report

          .    Schedule II; Valuation and Qualifying Accounts

HWCC-Louisiana, Inc. and Subsidiaries

          .    Independent Auditors' Report

          .    Schedule II; Valuation and Qualifying Accounts

                                       77

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Hollywood Casino Shreveport:

We have audited the consolidated financial statements of Hollywood Casino
Shreveport 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 schedule of Hollywood Casino Shreveport listed
in Item 14. This financial statement schedule is the responsibility of the
Partnership'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

                                       78

<PAGE>

                                                                     SCHEDULE II

                           HOLLYWOOD CASINO SHREVEPORT

                        Valuation and Qualifying Accounts

                                             Amounts
                                Balance at   Charged to                 Balance
                                Beginning    Costs and                  at End
                                of Period    Expenses     Deductions   of Period
                                ----------   ----------   ----------   ---------
Year Ended December 31, 2001:
   Allowance for doubtful
     accounts receivable          $90,000    $1,021,000    $(577,000)   $534,000
                                  =======    ==========    =========   =========

Year Ended December 31, 2000:
   Allowance for doubtful
     accounts receivable          $    --    $   90,000    $      --    $ 90,000
                                  =======    ==========    =========   =========

           The accompanying notes to consolidated financial statements
                      are an integral partof this schedule.

                                       79

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated financial statements of HWCC-Louisiana, Inc.
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 schedule of HWCC-Louisiana, 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

                                       80

<PAGE>

                                                                     SCHEDULE II

                           HOLLYWOOD CASINO SHREVEPORT
                 (wholly owned by Hollywood Casino Corporation)

                        Valuation and Qualifying Accounts

                                              Amounts
                                Balance at   Charged to                 Balance
                                Beginning    Costs and                  at End
                                of Period    Expenses     Deductions   of Period
                                ----------   ----------   ----------   ---------
Year Ended December 31, 2001:
   Allowance for doubtful
     accounts receivable          $90,000    $1,021,000   $ (577,000)   $534,000
                                  =======    ==========   ==========   =========

Year Ended December 31, 2000:
   Allowance for doubtful
     accounts receivable          $    --    $   90,000   $       --    $ 90,000
                                  =======    ==========   ==========   =========

           The accompanying notes to consolidated financial statements
                      are an integral partof this schedule.

                                       81