<PAGE>
 
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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
                  For the Fiscal Year Ended December 31, 1996
 
                                      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 NO.: 333-643
 
                        TRUMP ATLANTIC CITY ASSOCIATES
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
             NEW JERSEY                              22-3213714
   (STATE OR OTHER JURISDICTION OF     (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
   INCORPORATION OR ORGANIZATION)
 
  2500 BOARDWALK ATLANTIC CITY, NEW
               JERSEY                                   08401
   (ADDRESS OF PRINCIPAL EXECUTIVE                    (ZIP CODE)
              OFFICES)
 
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
 
                         COMMISSION FILE NO.: 333-643
 
                       TRUMP ATLANTIC CITY FUNDING, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
             NEW JERSEY                              22-3418939
   (STATE OR OTHER JURISDICTION OF     (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
   INCORPORATION OR ORGANIZATION)
 
  2500 BOARDWALK ATLANTIC CITY, NEW
               JERSEY                                   08401
   (ADDRESS OF PRINCIPAL EXECUTIVE                    (ZIP CODE)
              OFFICES)
 
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
 
  Indicate by check mark whether the Registrants (1) have 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
Registrants were required to file such reports), and (2) have 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
                             ----
 
  The aggregate market value of the voting stock of Trump Atlantic City
Funding, Inc. held by non-affiliates as of March 21, 1997 was   $0.
                                                               ----

  Indicate by check mark whether the Registrants have filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes   X   No
                          ----     ----

  As of March 21, 1997, there were 100 shares of Trump Atlantic City Funding,
Inc.'s Common Stock outstanding.
 
  Documents Incorporated by Reference--Not applicable.
 
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<PAGE>
 
                                   FORM 10-K
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
 ITEM                                                                    PAGE
 ----                                                                    ----
 <C>         <S>                                                         <C>
 PART I
    ITEM 1.   BUSINESS.................................................    1
              General..................................................    1
              Trump Plaza..............................................    2
              The Taj Mahal............................................    7
              Trademark/Licensing......................................   12
              Certain Indebtedness.....................................   12
              Atlantic City Market.....................................   12
              Competition..............................................   14
              Gaming and Other Laws and Regulations....................   16
    ITEM 2.   PROPERTIES...............................................   23
              Trump Plaza..............................................   23
              Taj Mahal................................................   25
    ITEM 3.   LEGAL PROCEEDINGS........................................   26
    ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......   29
 PART II
    ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS......................................   30
    ITEM 6.   SELECTED FINANCIAL DATA..................................   31
    ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS......................   32
              Results of Operations for the Years Ended December 31,
              1996 and 1995............................................   32
              Results of Operations for the Years Ended December 31,
              1995 and 1994............................................   34
              Liquidity and Capital Resources..........................   35
              Seasonality..............................................   36
              Inflation................................................   36
    ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............   36
    ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE......................   36
 PART III
    ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......   37
    ITEM 11.  EXECUTIVE COMPENSATION...................................   41
              Employment Agreements ...................................   43
              Compensation of Directors................................   46
              Compensation Committee Interlocks and Insider
              Participation............................................   46
    ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT...............................................   48
    ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........   48
 PART IV
    ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
              AND REPORTS ON FORM 8-K..................................   50
 IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS...............  55
 SIGNATURES
    SIGNATURE--TRUMP ATLANTIC CITY ASSOCIATES...........................  56
    SIGNATURE--TRUMP ATLANTIC CITY FUNDING, INC.........................  57
</TABLE>
<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS.
 
GENERAL
 
  Trump Atlantic City Associates, a New Jersey general partnership ("Trump
AC"), was formed under the name of Trump Plaza Holding Associates on February
17, 1993. Trump Atlantic City Funding, Inc., a Delaware corporation ("Trump AC
Funding"), was formed on January 30, 1996. Each of the Registrants are wholly
owned subsidiaries of Trump Hotels & Casino Resorts, Inc. ("THCR") and Trump
Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"). THCR is the
exclusive vehicle through which Donald J. Trump ("Trump") engages in new
gaming activities in both emerging and established gaming jurisdictions. Trump
AC owns and operates the Trump Plaza Hotel and Casino ("Trump Plaza"), which
also includes Trump World's Fair, and the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), each located on The Boardwalk in Atlantic City, New Jersey.
 
  . TRUMP PLAZA. Trump AC has further enhanced Trump Plaza's gaming space and
    hotel capacity (the "Trump Plaza Expansion") while maintaining its
    commitment to first class customer service. This strategy was designed to
    capitalize on Trump Plaza's reputation for excellence, as well as to meet
    both existing and anticipated demand for the increased number of rooms
    and infrastructure improvements that are currently being implemented to
    enhance further the "vacation destination appeal" of Atlantic City. As
    part of the Trump Plaza Expansion, Trump AC has renovated and integrated
    into Trump Plaza a hotel adjacent to Trump Plaza's main tower ("Trump
    Plaza East") and has renovated and integrated into Trump Plaza the former
    Trump Regency Hotel, located on The Boardwalk adjacent to the existing
    Atlantic City Convention Center, which is next to Trump Plaza and known
    as Trump World's Fair. The renovations at Trump Plaza East were completed
    in February 1996 and at Trump World's Fair in May 1996. Trump Plaza has
    139,474 square feet of gaming space, housing a total of approximately
    4,223 slot machines and 141 table games, making Trump Plaza's casino the
    largest in Atlantic City (in terms of square footage). Trump Plaza's
    hotel capacity consists of 1,404 guest rooms, making Trump Plaza's guest
    room inventory one of the largest in Atlantic City.
 
  . TAJ MAHAL.  Management believes that the acquisition of the Taj Mahal on
    April 17, 1996 (the "Taj Acquisition") has strengthened Trump AC's
    position as a leader in the casino entertainment industry through its
    ownership of two successful land-based casino hotels on The Boardwalk.
    Furthermore, the Taj Acquisition has enhanced Trump AC's presence in the
    growing Atlantic City gaming market (the "Atlantic City Market"). After
    giving effect to the Taj Acquisition and the Trump Plaza Expansion, Trump
    AC had acquired approximately one-quarter of Atlantic City's casino
    square footage, slot machines, table games and hotel room inventory. The
    combination of the Taj Mahal with Trump Plaza's operations has provided
    opportunities for operational efficiencies, economies of scale and
    benefits from the talent, expertise and experience of management at the
    operating entities. Management has undertaken an expansion plan at the
    Taj Mahal (the "Taj Mahal Expansion"), which is currently expected to be
    funded principally out of cash from operations from Trump Taj Mahal
    Associates ("Taj Associates") and Trump Plaza Associates ("Plaza
    Associates"). The Taj Mahal Expansion is scheduled to be completed in
    phases by the end of the second quarter of 1997.
 
  . THE "TRUMP" NAME. Trump AC capitalizes on the widespread recognition of
    the "Trump" name and its association with high quality amenities and
    first class service. To this end, Trump AC provides a broadly diversified
    gaming and entertainment experience consistent with the "Trump" name and
    reputation for quality, tailored to the gaming patron in each market.
    Trump AC also benefits from the "Trump" name in connection with THCR's
    efforts to expand and to procure new gaming opportunities in the United
    States and abroad. THCR explores opportunities to establish additional
    gaming operations, particularly in jurisdictions where the legalization
    of casino gaming is relatively new or anticipated.
 
                                       1
<PAGE>
 
  The following table profiles Trump AC's current casino and hotel capacity:
 
<TABLE>
<CAPTION>
                                                          TRUMP    TAJ
                                                          PLAZA   MAHAL   TOTAL
                                                         ------- ------- -------
<S>                                                      <C>     <C>     <C>
Gaming square footage................................... 139,474 139,100 278,574
Slot machines...........................................   4,223   3,799   8,022
Table games (including poker)...........................     141     231     372
Hotel rooms.............................................   1,404   1,250   2,654
</TABLE>
 
  Trump Casino Services, L.L.C., a New Jersey limited liability company
("TCS"), was formed on June 27, 1996 for the purpose of realizing cost savings
and operational synergies by consolidating certain administrative functions
of, and providing certain services to, each of Plaza Associates and Taj
Associates, the owner and operator of Trump Plaza and the Taj Mahal,
respectively. Trump AC and Trump Atlantic City Corporation ("TACC"), a wholly
owned subsidiary of Trump AC, own a 99% and 1% interest, respectively, in TCS.
On July 8, 1996, TCS, Plaza Associates and Taj Associates entered into an
agreement (the "TCS Services Agreement") pursuant to which TCS provides to
each of Taj Associates and Plaza Associates certain management, financial and
other functions and services necessary and incidental to the respective
operation of each of their casino hotels. On October 23, 1996, TCS, Plaza
Associates, Taj Associates and Trump's Castle Associates, L.P. ("Castle
Associates"), the operator of Trump's Castle Casino Resort ("Trump's Castle"),
entered into an Amended and Restated Services Agreement pursuant to which TCS
will also provide those same functions and services to Castle Associates in
connection with the operation of Trump's Castle. Trump Communications, L.L.C.
("Trump Communications"), a New Jersey limited liability company and a
subsidiary of TCS, was formed on January 31, 1997 for the purpose of realizing
cost savings and operational synergies by consolidating advertising functions
of, and providing certain services to, each of Plaza Associates, Taj
Associates and Castle Associates.
 
  The Registrants operate in only one industry segment. See "Financial
Statements and Supplementary Data."
 
TRUMP PLAZA
 
  Management believes that Trump Plaza's "Four Star" Mobil Travel Guide rating
and "Four Diamond" American Automobile Association ("AAA") rating reflect the
high quality amenities and services that Trump Plaza provides to its casino
patrons and hotel guests. These amenities and services include a broad
selection of dining choices, headline entertainment, deluxe accommodations,
tennis courts and swimming and health spa facilities.
 
  The Trump Plaza Expansion. Management believes that as a result of the Trump
Plaza Expansion and Trump Plaza's strategic location, Trump Plaza is well
positioned to be one of the premier host properties in Atlantic City. The
Trump Plaza Expansion was completed in May 1996 and increased Trump Plaza's
prime central frontage on The Boardwalk to nearly a quarter of a mile.
Management believes that the construction of the new convention center and
tourist corridor linking the new convention center with The Boardwalk enhances
the desirability of Atlantic City generally and, as a result of Trump Plaza's
central location, benefits Trump Plaza in particular. In addition, management
has taken advantage of recent gaming regulatory changes that allow casino
space to be directly visible and accessible from The Boardwalk. Trump Plaza's
location on The Boardwalk at the end of the main highway into Atlantic City
makes it highly accessible for both "drive-in" and "walk-in" patrons.
 
  On February 16, 1996, Trump Plaza opened the Ocean View Casino and Bar and
249 rooms at Trump Plaza East. Management opened the remaining rooms and
suites at Trump Plaza East in March 1996. Trump Plaza East has approximately
15,000 square-feet of casino space and approximately 349 hotel rooms,
including nine super suites which opened in February 1997. Trump Plaza has
been reconfigured to provide a new entranceway to Trump Plaza directly off the
Atlantic City Expressway. Management believes the increased hotel capacity as
a result of the Trump Plaza Expansion enables Trump Plaza better to meet
demand and accommodate its casino guests, as well as to host additional and
larger conventions and corporate meetings.
 
                                       2
<PAGE>
 
  In May 1996, Trump AC completed the renovations and integration of Trump
World's Fair, located on The Boardwalk adjacent to the existing Atlantic City
Convention Center, into Trump Plaza. Trump World's Fair has added 49,193
square-feet of casino floor space, approximately 16,000 of which is accessible
from The Boardwalk, and 500 hotel rooms, connected to Trump Plaza's main tower
by an enclosed walkway overlooking The Boardwalk.
 
  The following table details Trump Plaza's current casino and hotel capacity:
 
<TABLE>
<CAPTION>
                                TRUMP PLAZA    TRUMP PLAZA TRUMP WORLD'S
                              MAIN FACILITY(a)   EAST(b)       FAIR       TOTAL
                              ---------------- ----------- ------------- -------
<S>                           <C>              <C>         <C>           <C>
Gaming square footage........      75,395        14,886       49,193     139,474
Slot machines................       2,358           405        1,460       4,223
Table games..................          97            12           32         141
Hotel rooms..................         555           349          500       1,404
</TABLE>
---------------------
(a) Includes the 2,000 square-foot area which connects the main facility with
    Trump Plaza East and the 75 slot machines included in this area.
(b) Includes nine super suites which opened in February 1997.
 
  Trump Plaza's management team has launched a variety of initiatives designed
to increase the level of casino gaming activity generally at its casino and to
attract casino patrons who tend to wager more frequently and in larger
denominations than the typical Atlantic City patron. These initiatives include
targeted marketing and advertising campaigns directed to select groups of
customers in the Boston-New York-Washington, D.C. corridor, the introduction
of new slot machines and table games and the addition of bill acceptors on
slot machines.
 
 ATLANTIC CITY MARKETING STRATEGY
 
  Trump Plaza. Trump Plaza East has been integrated into Trump Plaza and
together the two are operated as a single casino hotel facility. Trump Plaza
will continue the marketing strategies it has found successful in the past,
including targeting lucrative high-end drive-in slot customers. Management
believes the additional hotel rooms and gaming facilities at Trump Plaza East
will better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the
typical walk-in or bus patron.
 
  Trump World's Fair. Trump World's Fair is seeking to attract the "middle
market" segment (primarily bus customers and Boardwalk pedestrian traffic) by
offering high value food and entertainment attractions in a festive "World's
Fair" atmosphere. The first floor of Trump World's Fair features a Boardwalk
level casino offering walk-in customers direct access from The Boardwalk to
569 slot machines. In addition, Trump World's Fair constructed a new bus
terminal that has a dedicated escalator leading directly to a separate casino
entertainment area that contains a 500-seat buffet-style restaurant, an
Oriental Pavilion and a casino with approximately 538 slot machines. The new
bus terminal and dedicated casino facilities allow Trump World's Fair to serve
efficiently a high volume of bus customers. The second floor of Trump World's
Fair has approximately 383 slot machines and 32 table games along with
additional restaurants. Moreover, with its prime location adjoining the
current Atlantic City Convention Center and near the new Atlantic City
Convention Center and its newly refurbished room base of 500 rooms and
approximately 50,000 square-feet of total gaming space, management believes
that Trump World's Fair is ideally suited to attract convention visitor
traffic.
 
 TRUMP PLAZA BUSINESS STRATEGY
 
  General. A primary element of Trump Plaza's business strategy is to seek to
attract patrons who tend to wager more frequently and in larger denominations
than the typical Atlantic City gaming customer. Such high-end players
typically wager $5 or more per play in slots and $25 or more per play in table
games. In order to attract more high-end gaming patrons to Trump Plaza in a
cost-effective manner, Plaza Associates, the owner
 
                                       3
<PAGE>
 
and operator of Trump Plaza, has refocused its marketing efforts. Commencing
in 1991, Plaza Associates substantially curtailed costly "junket" marketing
operations which involved attracting groups of patrons to the facility on an
entirely complimentary basis (e.g., by providing free air fare, gifts and room
accommodations). In the fall of 1992, Plaza Associates decided to de-emphasize
marketing efforts directed at "high roller" patrons from the Far East, who
tend to wager $50,000 or more per play in table games. Plaza Associates
determined that the potential benefit derived from these patrons did not
outweigh the high costs associated with attracting such players and the
resultant volatility in the results of operations of Trump Plaza. Revenues
derived from high roller patrons have declined since 1992, although management
believes that such revenue loss has not had a significant impact on
profitability for the reasons discussed above. In addition, this shift in
marketing strategy has allowed Plaza Associates to focus its efforts on
attracting the high-end players.
 
  Although considered one property, Trump Plaza and Trump World's Fair possess
separate marketing identities. Trump Plaza caters to the mid to high level
segment while Trump World's Fair focuses on the mass market. Trump Plaza's
concentration of special events, entertainment, suites and variety of gourmet
restaurants define its presence and highly perceived image. The suite
renovation and high-end slot club expansion projects indicate Plaza
Associates' commitment to this segment of the market. While Trump Plaza
strives to accommodate the more lucrative drive-in patron, Trump World's Fair
offers a fun, relaxing experience which is extremely appealing to the bus
rider. A combination of lower slot denominations, including Atlantic City's
largest nickel lounge, lower table limits, sweepstakes, bus bingo programs,
on-floor tournaments and a premier buffet make this possible.
 
  "Comping" Strategy. In order to compete effectively with other Atlantic City
casino hotels, Plaza Associates offers complimentary drinks, meals, room
accommodations and/or travel arrangements to its patrons ("complimentaries" or
"comps"). Management monitors Trump Plaza's policy so as to provide
complimentaries primarily to patrons with a demonstrated propensity to wager
at Trump Plaza.
 
  Entertainment. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end and other patrons. Trump Plaza offers headline
entertainment weekly during the summer and monthly during the off- season, and
also features other entertainment and revue shows.
 
  Player Development/Casino Hosts. Plaza Associates currently employs gaming
representatives in New Jersey, New York and other states, as well as several
international representatives, to promote Trump Plaza to prospective gaming
patrons. Player development personnel host special events, offer incentives
and contact patrons directly in an effort to attract high-end table game
patrons from the United States, Canada and South America. Trump Plaza's casino
hosts assist patrons on the casino floor, make room and dinner reservations
and provide general assistance. They also solicit Trump Card (the frequent
player slot card) sign-ups in order to increase Plaza Associates' marketing
base.
 
  Promotional Activities. The Trump Card constitutes a key element in Trump
Plaza's direct marketing program. Slot machine players are encouraged to
register for and utilize their personalized Trump Card to earn various
complimentaries based upon their level of play. The Trump Card is inserted
during play into a card reader attached to the slot machine for use in
computerized rating systems. Plaza Associates' computer systems record data
about the cardholders, including playing preferences, frequency and
denomination of play and the amount of gaming revenues produced.
 
  Trump Plaza designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by
the Trump Card and on table game wagering by the casino game supervisors.
Promotional activities include the mailing of vouchers for complimentary slot
play. Trump Plaza also utilizes a special events calendar (e.g., birthday
parties, sweepstakes and special competitions) to promote its gaming
operations.
 
                                       4
<PAGE>
 
  Bus Program. Trump Plaza has a bus program, which transports approximately
2,400 gaming patrons per day during the week and 3,500 per day on the
weekends. Trump Plaza's bus program offers incentives and discounts to certain
scheduled and chartered bus customers. Trump Plaza's Transportation Facility
(as defined) contains 13 bus bays and is connected by an enclosed pedestrian
walkway to Trump Plaza. The Transportation Facility provides patrons with
immediate access to the casino, and contains a comfortable lounge area for
patrons waiting for return buses. Trump World's Fair has a newly constructed
bus terminal with a dedicated escalator leading directly to a casino
entertainment area complete with an international buffet. Trump World's Fair
bus terminal provides patrons with a spacious lounge area with a view of the
Atlantic Ocean and The Boardwalk. Trump World's Fair's bus program transports
approximately 1,200 gaming patrons per day during the week and 2,600 per day
on weekends.
 
  Credit Policy. Historically, Trump Plaza has extended credit to certain
qualified patrons. For the years ended December 31, 1994, 1995 and 1996,
credit play as a percentage of total dollars wagered was approximately 17%,
18% and 17%, respectively. As part of Trump Plaza's business strategy, Trump
Plaza has imposed stricter standards on applications for new or additional
credit.
 
 FACILITIES AND AMENITIES
 
  Trump Plaza. The casino in Trump Plaza's main tower currently offers 97
table games and 2,368 slot machines. In addition to the casino, Trump Plaza's
main tower consists of a 31-story tower with 555 guest rooms, including 62
suites. Trump Plaza's main tower also offers 10 restaurants, a 750-seat
cabaret theater, four cocktail lounges, 28,000 square-feet of convention,
ballroom and meeting room space, a swimming pool, tennis courts and a health
spa.
 
  The entry level of Trump Plaza's main tower includes a cocktail lounge, two
gift shops, a deli, a coffee shop, an ice cream parlor and a buffet. The
casino level houses the casino, a fast food restaurant, an exclusive slot
lounge for high-end patrons and an ocean view high-end slot area. An enclosed
walkway connects Trump Plaza at the casino level with the Atlantic City
Convention Center and with Trump World's Fair.
 
  On February 16, 1996, Trump Plaza opened the 15,000 square-foot Ocean View
Casino and Bar and 249 of its 349 hotel rooms at Trump Plaza East. Management
opened the remaining rooms and suites at Trump Plaza East in March 1996. The
Ocean View Casino and Bar is the first gaming room in Atlantic City to combine
a casino, bar and entertainment area, and features a 70-foot long bar with 27
bar-top slot machines, live entertainment and a 58 square-foot video wall,
complemented by six additional television sets along the bar. With its high
ceilings and windows overlooking the Atlantic Ocean and The Boardwalk, Trump
Plaza has created a new and exciting entertainment environment for its casino
patrons.
 
  Trump Plaza's guest rooms are located in two towers which afford most guest
rooms a view of the ocean. While rooms are of varying size, a typical guest
room consists of approximately 400 square feet. Trump Plaza's main tower also
features 16 one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites."
The Super Suites are located on the top two floors of Trump Plaza's main tower
and offer luxurious accommodations and 24-hour butler and maid service. The
Super Suites and certain other suites are located on the "Club Level" which
requires guests to use a special elevator key for access, and contains a
lounge area that offers food and bar facilities.
 
  Trump Plaza's main tower is connected by an enclosed pedestrian walkway to a
10-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and a waiting area
(the "Transportation Facility"). The Transportation Facility provides patrons
with immediate access to the casino, and is located directly off the Atlantic
City Expressway, the main highway into Atlantic City.
 
  In July 1994, Time Warner opened its second largest Warner Brothers Studio
Store occupying the entire first floor of retail space on The Boardwalk at
Trump Plaza East (approximately 17,000 square feet).
 
 
                                       5
<PAGE>
 
  Trump World's Fair. Trump World's Fair is connected to Trump Plaza's main
tower by an enclosed walkway overlooking The Boardwalk and adds an additional
500 hotel rooms to Trump Plaza. In addition, Trump World's Fair is outfitted
with approximately 50,000 square-feet of casino floor space housing 1,460 slot
machines and 32 table games. In addition to the casino, Trump World's Fair
features three restaurants, including a state-of-the-art buffet, a cocktail
lounge, convention, ballroom and meeting room space, a swimming pool and a
health spa. The enclosed walkway runs through a portion of the Atlantic City
Convention Center, which is located between Trump World's Fair and Trump
Plaza's main tower. Plaza Associates has acquired an easement with regard to
this walkway through the Atlantic City Convention Center.
 
 EMPLOYEES AND LABOR RELATIONS
 
  Plaza Associates has approximately 4,900 employees of whom approximately
1,700 are covered by collective bargaining agreements. The collective
bargaining agreement with Local No. 54 expires on September 15, 1999.
Management believes that its relationships with its employees are
satisfactory. Certain of Plaza Associates' employees must be licensed or
registered under the New Jersey Casino Control Act (the "Casino Control Act").
 
  In April 1993, the National Labor Relations Board (the "NLRB") found that
Plaza Associates had violated the National Labor Relations Act (the "NLRA") in
the context of a union organizing campaign by table game dealers of Plaza
Associates in association with the Sports Arena and Casino Employees Union
Local 137 ("Local 137"). In connection with such finding, Plaza Associates was
ordered to refrain from interfering with, restraining or coercing employees in
the exercise of the rights guaranteed them by Section 7 of the NLRA, to notify
its employees of such rights and to hold an election by secret ballot among
its employees regarding whether they desire to be represented for collective
bargaining by Local 137. The election was held on May 20 and 21, 1994 and the
vote, which has been certified by the NLRB, was in favor of management and
against representation by Local 137.
 
 HISTORICAL BACKGROUND
 
  The 1992 Plaza Restructuring. In 1991, Plaza Associates experienced
liquidity problems. Management believes that those liquidity problems were
attributable, in part, to an overall deterioration in the Atlantic City
Market, as indicated by reduced rates of casino revenue growth for the
industry for the two prior years, aggravated by an economic recession in the
Northeast. In addition, increased casino gaming capacity in Atlantic City, due
in part to the opening of the Taj Mahal in April 1990, may also have
contributed to Plaza Associates' liquidity problems.
 
  In order to alleviate its liquidity problem, Plaza Associates and Trump
Plaza Funding, Inc. ("Plaza Funding") restructured their indebtedness through
a prepackaged plan of reorganization under Chapter 11 of the Bankruptcy Code
(the "1992 Plaza Restructuring").
 
  The purpose of the 1992 Plaza Restructuring was to improve the amortization
schedule and extend the maturity of Plaza Associates' indebtedness by (i)
eliminating the sinking fund requirement on Plaza Funding's 12 7/8% Mortgage
Bonds due 1998 (the "Original Plaza Bonds"), (ii) extending the maturity of
such indebtedness from 1998 to 2002, (iii) lowering the interest rate from 12
7/8% per annum to 12% per annum, (iv) reducing the aggregate principal amount
of the indebtedness under the Original Plaza Bonds and certain other
indebtedness from $250 million to $225 million and (v) eliminating certain
other indebtedness by reconstituting such debt in part as new bonds (the
"Successor Plaza Bonds") and in part as Stock Units (as defined). The 1992
Plaza Restructuring was necessitated by the inability to either generate cash
flow or obtain additional financing sufficient to make the scheduled sinking
fund payment on the Original Plaza Bonds. In connection with the 1992 Plaza
Restructuring, each holder of $1,000 principal amount of Original Plaza Bonds
and such other indebtedness received (i) $900 principal amount of Successor
Plaza Bonds, (ii) 12 Stock Units, each representing one share of THCR's common
stock, par value $.01 per share ("THCR Common Stock") and one share of
Preferred Stock
 
                                       6
<PAGE>
 
of Plaza Funding (the "Stock Units") and (iii) cash payments of approximately
$58.65, reflecting accrued interest.
 
  On May 29, 1992, Plaza Funding, which theretofore had no interest in Plaza
Associates, received a 50% beneficial interest in TP/GP, Inc. ("Trump Plaza
GP"), and Plaza Funding and Trump Plaza GP were admitted as partners of Plaza
Associates. Plaza Funding also issued approximately three million Stock Units
to holders of the Original Plaza Bonds and certain other indebtedness.
Pursuant to the terms of the Plaza Associates partnership agreement, Plaza
Funding was issued a preferred partnership interest, which provided Plaza
Funding with partnership distributions designed to pay dividends on, and the
redemption price of, the Stock Units. Trump Plaza GP became the managing
general partner of Plaza Associates, and, through its Board of Directors,
managed the affairs of Plaza Associates. Trump Plaza GP was subsequently
merged with and into Plaza Funding, which became the managing general partner
of Plaza Associates.
 
  The 1993 Plaza Refinancing. The Successor Plaza Bonds and the Stock Units
were redeemed in 1993 out of the proceeds of a refinancing designed to enhance
Plaza Associates' liquidity and to position Plaza Associates for a subsequent
deleveraging transaction. The 1993 refinancing included (i) the sale by Plaza
Funding of $330 million in aggregate principal amount of 10 7/8% Mortgage
Notes due 2001 (the "Plaza Notes") and (ii) the sale by Trump AC (known prior
to April 17, 1996 as Trump Plaza Holding Associates) of $60 million aggregate
principal amount of 12 1/2% Pay-In-Kind Notes due 2003 (the "Plaza PIK Notes")
and warrants to acquire an aggregate of $12 million in principal amount of
additional Plaza PIK Notes (the "Plaza PIK Note Warrants"). Upon consummation
of the refinancing, Plaza Funding held a 1% equity interest in Plaza
Associates and Trump Atlantic City Holding, Inc., known prior to April 17,
1996 as Trump Plaza Holding, Inc. ("Trump AC Holding"), held a 99% equity
interest.
 
  The 1995 and 1996 Events. In connection with the initial public offering
(the "June 1995 Stock Offering") of 10 million shares of THCR Common Stock,
THCR Holdings repurchased and redeemed the Plaza PIK Notes and the Plaza PIK
Note Warrants. In addition, in connection with the June 1995 Stock Offering
and the offering by THCR Holdings and its wholly owned finance subsidiary,
Trump Hotels & Casino Resorts Funding, Inc., a Delaware corporation ("THCR
Funding"), of $155 million 15 1/2% Senior Secured Notes due 2005 (the "Senior
Notes") (the "June 1995 Note Offering" and, together with the June 1995 Stock
Offering, the "June 1995 Offerings"), Trump transferred, pursuant to a
contribution agreement, to THCR Holdings his ownership interests in Plaza
Funding and Trump AC. Upon the consummation of the June 1995 Offerings, THCR
Holdings owned Plaza Associates. In connection with the Taj Acquisition, Trump
AC became the owner of Plaza Associates and Taj Associates. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation--Taj
Acquisition."
 
THE TAJ MAHAL
 
  The Taj Mahal has ranked first among all Atlantic City casinos in terms of
total gaming revenues, table revenues and slot revenues since it commenced
operations in 1990. The Taj Mahal capitalizes on the widespread recognition
and marquee status of the "Trump" name and its association with high quality
amenities and first-class service as evidenced by its "Four Star" Mobil Travel
Guide rating. Management believes that the breadth and diversity of the Taj
Mahal's casino, entertainment and convention facilities and its status as a
"must see" attraction will enable the Taj Mahal to benefit from the expected
continued growth of the Atlantic City Market.
 
  In recent years, under the direction of Trump and the management team led by
Nicholas L. Ribis, its Chief Executive Officer, Taj Associates, the owner and
operator of the Taj Mahal, completed construction of the Taj Entertainment
Complex (as defined), reconfigured and expanded the casino floor to provide
race simulcasting, poker wagering and keno, opened an Asian themed table game
area, opened the Bengal Club for mid-level preferred players and increased the
number of poker tables and slot machines. The Taj Mahal's poker room is the
largest in Atlantic City, which management believes adds to its overall gaming
experience. Taj Associates continually monitors operations to adapt to and
anticipate industry trends. From 1994 to 1996, the Taj Mahal embarked on a
strategy to refurbish all of its hotel guest rooms and corridors and to
replace all of its existing slot machines with
 
                                       7
<PAGE>
 
new, more efficient machines with bill acceptors. Moreover, to further attract
high-end players, the Taj Mahal opened the Dragon Room, an Asian themed table
gaming area with 16 table games, and the Sultan's Palace, a separate 5,900
square-foot high-end slot lounge and private club. Moreover, to increase
entertainment opportunities for customers, the Hard Rock Cafe opened in
November 1996 and the All Star Cafe opened in March 1997. A Warner Brothers
Studio store is scheduled to open at the Taj Mahal in May 1997.
 
  The Taj Mahal Expansion. The Taj Mahal Expansion consists of the
construction of a new 15-bay bus terminal, which was completed in December
1996, a 2,400 space expansion of the existing self parking facilities which is
expected to be completed in May 1997, and an approximately 7,000 square-foot
casino expansion with approximately 250 slot machines with Boardwalk frontage
which is expected to be completed in June 1997. In conjunction with the Taj
Mahal Expansion, the Hard Rock Cafe opened in November 1996 and the All Star
Cafe opened in March 1997.
 
 THE TAJ MAHAL OPERATIONS
 
  General. The Taj Mahal currently has approximately 139,100 square-feet of
gaming space, 231 table games and 3,799 slot machines, which includes an
approximately 12,000 square-foot poker, keno and race simulcasting room with
64 poker tables, which was added in 1993 and expanded in 1994. The casino's
offerings include blackjack, progressive blackjack, craps, roulette, baccarat,
mini baccarat, red dog, sic-bo, pai gow, pai gow poker, Caribbean stud poker,
big six, mini big six, mini dice and let it ride poker. In December 1995, the
Taj Mahal opened an Asian themed table game area which offers 16 popular Asian
table games catering to the Taj Mahal's growing Asian clientele. In May 1996,
the Taj Mahal opened the Sultan's Palace, a high-end slot lounge. In August
1996, the Taj Mahal opened the relocated and expanded President's Club for
high-end slot players in conjunction with the Sultan's Palace.
 
   In December 1996, the Taj Mahal opened a new bus terminal with 15 bays. In
November 1996, the Hard Rock Cafe opened at the Taj Mahal adjacent to the
casino and The Boardwalk. In March 1997, the All Star Cafe opened at the Taj
Mahal. Construction of a Warner Brothers Studio Store is in progress with a
scheduled opening in May 1997. Construction of an approximately 7,000 square-
foot casino expansion with 250 slot machines, with Boardwalk frontage, is
expected to be completed in June 1997. An additional simulcasting facility
featuring horse racing, catering to Asian clientele, also is expected to be
completed in June 1997. In addition, as a special bonus to high-end players,
the Taj Mahal offers three clubs for the exclusive use of select customers:
the Maharajah Club for table game players, the President's Club for high-end
slot players and the Bengal Club for other preferred slot players.
 
  The Taj Mahal currently consists of a 42-story hotel tower and contiguous
low-rise structure sited on approximately 17 acres of land. The Taj Mahal has
1,250 guest rooms (including 242 suites), 15 dining and 10 beverage locations,
parking for approximately 5,200 cars, a 15-bay bus terminal and approximately
65,000 square feet of ballroom, meeting room and pre-function area space. In
addition, the Taj Mahal features a 20,000 square-foot multi-purpose
entertainment complex known as the Xanadu Theater with seating capacity for
approximately 1,200 people which can be used as a theater, concert hall,
boxing arena or exhibition hall, and the Mark Etess Arena, which comprises an
approximately 63,000 square-foot exhibition hall and entertainment facility
(the "Taj Entertainment Complex"). The Xanadu Theater and Mark Etess Arena
have allowed the Taj Mahal to offer longer running, more established
productions that cater to the tastes of the Taj Mahal's high-end international
guests, and has afforded the Taj Mahal more flexibility in the use of its
facilities for sporting and other headline programs. The Taj Mahal regularly
engages well-known musicians and entertainment personalities and will continue
to emphasize weekend marquee events such as Broadway revues, high visibility
sporting events, international festivals and contemporary concerts to maximize
casino traffic and to maintain the highest level of glamour and excitement at
the Taj Mahal.
 
  Gaming Environment. The Taj Mahal's management continues to capitalize on
the Taj Mahal's status as one of the largest facilities in Atlantic City and a
"must see" attraction, while maintaining the attractiveness of the property
and providing a comfortable gaming experience. In 1994, the Taj Mahal
completed a major
 
                                       8
<PAGE>
 
redecoration of the hotel lobby, a casino floor expansion and a
reconfiguration, as well as the addition of a new mid-level player slot club.
The casino floor expansion and reconfiguration accommodated the addition of
keno, poker tables and slot machines. Approximately 3,300 new slot machines
were placed in service during 1994, 1995 and 1996 to replace older models. In
addition, in June 1993, the Taj Mahal completed a 10,000 square-foot poker and
simulcast area (which was subsequently enlarged to 12,000 square feet), which
features 64 poker tables in the largest poker room in Atlantic City. For the
year ended December 31, 1996, the Taj Mahal captured approximately 49.3% of
the total Atlantic City poker revenues.
 
  The Taj Mahal currently intends to reconfigure its casino floor, subject to
approval by the New Jersey Casino Control Commission (the "CCC") on an ongoing
basis to accommodate changes in patron demand. Management continuously
monitors the configuration of the casino floor and the games it offers to
patrons with a view towards making changes and improvements. For example, the
Taj Mahal's casino floor has clear, large signs for the convenience of
patrons. Additionally, as new games have been approved by the CCC, management
has integrated such games to the extent it deems appropriate. In 1994, the Taj
Mahal introduced the newly-approved games of keno and caribbean stud poker
and, in 1995, introduced the games of pai gow, pai gow poker and let it ride
poker. Progressive blackjack and mini dice were also added in 1996 and 1997,
respectively.
 
  "Comping" Strategy. In order to compete effectively with other casino
hotels, the Taj Mahal offers complimentaries. Currently, the policy at the Taj
Mahal is to focus promotional activities, including complimentaries, on middle
and upper middle market "drive in" patrons who visit Atlantic City frequently
and have proven to be the most profitable market segment. Additionally, as a
result of increased regulatory flexibility, the Taj Mahal has implemented a
cash comping policy to high-end players in order to compete with similar
practices in Las Vegas and to attract international business.
 
  Entertainment. The Taj Mahal believes headline entertainment, as well as
other entertainment and revue shows, is an effective means of attracting and
retaining gaming patrons. The Xanadu Theater allows the Taj Mahal to offer
longer running, more established productions that cater to the tastes of the
Taj Mahal's high-end international guests. The Xanadu Theater, together with
the Mark Etess Arena (an approximately 63,000 square-foot exhibition hall
facility), afford the Taj Mahal more flexibility in the use of its larger
entertainment arena for sporting and other headline programs. The Taj Mahal
regularly engages well-known musicians and entertainment personalities and
will continue to emphasize weekend "marquee" events such as Broadway revues,
high visibility sporting events, festivals and contemporary concerts to
maintain the highest level of glamour and excitement. Mid-week uses for the
facilities include convention events and casino marketing sweepstakes.
 
  Player Development. The Taj Mahal employs sales representatives as a means
of attracting high-end slot and table gaming patrons to the property. The Taj
Mahal currently employs numerous gaming representatives in New Jersey, New
York and other states, as well as several international representatives, to
host special events, offer incentives and contact patrons directly in the
United States, Canada and South America. In addition, targeted marketing to
international clientele will be continued and expanded through new sales
representatives in Latin America, Mexico, Europe, the Far East and the Middle
East.
 
  The casino hosts assist patrons on the casino floor, make room and dinner
reservations and provide general assistance. They also solicit Trump Card (the
frequent player card) sign-ups in order to increase the Taj Mahal's marketing
base.
 
  The Taj Mahal also plans to continue the development of its slot and coin
programs through direct mail and targeted marketing campaigns emphasizing the
high-end player. "Motorcoach Marketing," the Taj Mahal's customer bus-in
program, has been an important component of player development and will
continue to focus on tailoring its player base and maintaining a low-cost
package.
 
  Promotional Activities. The Trump Card, a player identification card,
constitutes a key element in the Taj Mahal's direct marketing program. Both
table and slot machine players are encouraged to register for and utilize
 
                                       9
<PAGE>
 
their personalized Trump Card to earn various complimentaries and incentives
based on their level of play. The Trump Card is inserted during play into a
card reader attached to the table or slot machine for use in computerized
rating systems. These computer systems record data about the cardholder,
including playing preferences, frequency and denomination of play and the
amount of gaming revenues produced. Sales and management personnel are able to
monitor the identity and location of the cardholder and the frequency and
denomination of such cardholder's play. They can also use this information to
provide attentive service to the cardholder while the patron is on the casino
floor.
 
  The Taj Mahal designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by
the Trump Card and on table game wagering by the casino games supervisor.
Promotional activities at the Taj Mahal include the mailing of vouchers for
complimentary slot play and utilization of a special events calendar (e.g.,
birthday parties, sweepstakes and special competitions) to promote its gaming
operations.
 
  The Taj Mahal conducts slot machine and table game tournaments in which cash
prizes are offered to a select group of players invited to participate in the
tournament based upon their tendency to play. Special events such as "Slot
Sweepstakes" and "bingo" are designed to increase mid-week business. Players
at these tournaments tend to play at their own expense during "off-hours" of
the tournament. At times, tournament players are also offered special dining
and entertainment privileges that encourage them to remain at the Taj Mahal.
 
  Credit Policy. Historically, the Taj Mahal has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1994, 1995 and 1996, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 22.8%, 24.5% and 29.7%, respectively.
 
 EMPLOYEES
 
  Taj Associates has approximately 5,800 employees for the operation of the
Taj Mahal, of whom approximately 1,980 employees are covered by collective
bargaining agreements. The collective bargaining agreement with Local No. 54
expires on September 15, 1999. Management believes that its relationships with
its employees are satisfactory and that its staffing levels are sufficient to
provide superior service. Certain of Taj Associates' employees must be
licensed or registered under the Casino Control Act.
 
 TAJ ACQUISITION
 
  On April 17, 1996, a subsidiary of THCR Holdings was merged (the "Taj
Merger") with and into THCR Holding Corp., known prior to April 17, 1996 as
Taj Mahal Holding Corp. ("THCR Holding Corp."). As a result of the Taj
Acquisition and the related transactions discussed below, THCR Holdings
acquired Taj Associates. The Taj Acquisition included, among other things:
 
    (a) the payment of an aggregate of approximately $31,181,240 in cash and
  the issuance of 323,423 shares of THCR Common Stock to the holders of THCR
  Holding Corp.'s Class A Common Stock, par value $.01 per share ("THCR
  Holding Corp. Class A Common Stock");
 
                                      10
<PAGE>
 
    (b) the contribution (i) by Trump to Trump AC of all of his direct and
  indirect ownership interests in Taj Associates, pursuant to the
  contribution agreement, dated as of April 17, 1996, among Trump, Trump
  Casinos, Inc. ("TCI"), TM/GP Corporation, known after the Taj Acquisition
  as THCR/LP Corporation ("THCR/LP") and THCR Holdings in exchange for a
  modification of Trump's limited partnership interest in THCR Holdings and
  (ii) by THCR to Trump AC of all of its direct ownership interests in Taj
  Associates acquired in the Taj Merger;
 
    (c) the public offerings by (i) THCR of 12,500,000 shares of THCR Common
  Stock (plus 750,000 shares of THCR issued in connection with the partial
  exercise of the underwriters' over-allotment option (together, the "Stock
  Offering")), and (ii) Trump AC and Trump AC Funding of the Trump AC
  Mortgage Notes (collectively with the Stock Offering, the "1996
  Offerings");
 
    (d) the redemption, immediately prior to the Taj Merger, of the
  outstanding shares of THCR Holding Corp. Class B Common Stock, par value
  $.01 per share ("THCR Holding Corp. Class B Common Stock"); in accordance
  with its terms, for $.50 per share;
 
    (e) the redemption of the outstanding 11.35% Mortgage Bonds, Series A,
  due 1999 of Trump Taj Mahal Funding, Inc. ("Taj Funding");
 
    (f) the retirement of the outstanding Plaza Notes;
 
    (g) the satisfaction of the indebtedness of Taj Associates under its loan
  agreement with National Westminster Bank USA ("NatWest");
 
    (h) the purchase of certain real property used in the operation of the
  Taj Mahal (the "Specified Parcels") that was leased from Taj Mahal Realty
  Corp. ("Realty Corp.");
 
    (i) the purchase of Trump Plaza East;
 
    (j) the payment to Bankers Trust Company ("Bankers Trust") to obtain
  releases of liens and guarantees that Bankers Trust had in connection with
  indebtedness owed by Trump to Bankers Trust; and
 
    (k) the issuance to Trump of warrants to purchase 1,800,000 shares of
  THCR Common Stock (the "Trump Warrants").
 
  As a result of the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of his direct and indirect ownership interests in
Taj Associates and the contribution by THCR to Trump AC (on behalf, and at the
direction, of THCR Holdings) of its indirect ownership interests in Taj
Associates acquired in the Taj Merger, together with THCR's contribution to
THCR Holdings of the proceeds from the Stock Offering, Trump's aggregate
beneficial equity interest in THCR Holdings decreased from approximately 40%
to approximately 25% and THCR's aggregate beneficial equity interest in THCR
Holdings increased from approximately 60% to approximately 75%. In addition,
Trump, THCR, TCI and THCR/LP entered into the Second Amended and Restated
Agreement of Limited Partnership of THCR Holdings (the "THCR Holdings
Partnership Agreement") which provided for, among other things, the admission
of TCI and THCR/LP as limited partners of THCR Holdings and the adjustments of
the respective partnership interests in THCR Holdings. In connection with the
Taj Acquisition, Trump and certain of his affiliates were released and
discharged from certain obligations and all of the outstanding shares of THCR
Holding Corp.'s Class C Common Stock, par value $.01 per share ("THCR Holding
Corp. Class C Common Stock"), all of which were held by Trump, were cancelled.
 
  In connection with the June 1995 Offerings, Trump and THCR had entered into
an exchange and registration rights agreement (the "Exchange and Registration
Rights Agreement") providing for the exchange of Trump's limited partnership
interest in THCR Holdings for THCR Common Stock and for registration rights
with respect to such shares of THCR Common Stock. In connection with the Taj
Acquisition, Trump, THCR and TCI entered into an amendment to the Exchange and
Registration Rights Agreement, which modified certain of the terms of the
Exchange and Registration Rights Agreement and provides for the exchange of
TCI's limited partnership interests in THCR Holdings for THCR Common Stock and
for registration rights with respect to such shares of THCR Common Stock.
 
                                      11
<PAGE>
 
TRADEMARK/LICENSING
 
  Subject to certain restrictions, THCR has the exclusive right to use the
"Trump" name and likeness in connection with gaming and related activities
pursuant to a trademark license agreement between Trump and THCR (the "License
Agreement"). Pursuant to the License Agreement, Trump granted to THCR the
world-wide right and license to use the names "Trump," "Donald Trump" and
"Donald J. Trump" (including variations thereon, the "Trump Names") and
related intellectual property rights (collectively, the "Marks") in connection
with casino and gaming activities and related services and products. The
license is exclusive, subject to existing licenses of the Marks to Castle
Associates, which expire on August 15, 1998. The License Agreement does not
restrict or restrain Trump from the right to use or further license the Trump
Names in connection with services and products other than casino services and
products.
 
  The license is for a term of the later of: (i) June 2015; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant
to an employment, management, consulting or similar services agreement with
THCR. Upon expiration of the term of the license, Trump will grant THCR a non-
exclusive license for a reasonable period of transition on terms to be
mutually agreed upon between Trump and THCR. Trump's obligations under the
License Agreement are secured by a security agreement, pursuant to which Trump
granted THCR a first priority security interest in the Marks for use in
connection with casino services, as well as related hotel, bar and restaurant
services.
 
CERTAIN INDEBTEDNESS
 
  Trump AC Mortgage Notes. As a part of the Taj Acquisition, Trump AC and
Trump AC Funding issued in an underwritten offering $1,200,000,000 aggregate
principal amount of Mortgage Notes which mature on May 1, 2006 (the "Trump AC
Mortgage Notes"). The Trump AC Mortgage Notes include restrictive covenants
prohibiting or limiting, among other things, the sale of assets, the making of
acquisitions and other investments, capital expenditures, the incurrence of
additional debt and liens and the payment of dividends and distributions. Non-
compliance could result in the acceleration of such indebtedness.
 
  Plaza Notes. $330 million of the Plaza Notes of Plaza Funding were retired
in connection with the Taj Acquisition. The Plaza Notes were issued by Plaza
Funding, with Plaza Associates providing a full and unconditional guaranty
thereof. The Plaza Notes were retired through repurchase and defeasance and
Plaza Funding and Plaza Associates were released from their obligations under
all financial and negative covenants and certain other provisions contained in
the indenture under which the Plaza Notes were issued (the "Plaza Note
Indenture"), and the Plaza Note Security (as defined in the Plaza Note
Indenture) was released against the deposit of cash or U.S. government
obligations in an amount sufficient to effect the redemption on June 15, 1998
of all of the Plaza Notes so defeased, at a redemption price of 105% of the
principal amount thereof, together with accrued and unpaid interest to such
date. Additionally, Plaza Funding irrevocably instructed the Plaza Note
Trustee (as defined in the Plaza Note Indenture) to provide notice of such
redemption not less than 30 or more than 60 days prior to June 15, 1998.
 
  Other Indebtedness. In addition to the foregoing, Trump AC's long-term
indebtedness includes approximately $17.2 million of indebtedness, including,
as of December 31, 1996, approximately $3.4 million due under outstanding
mortgage notes described above. Approximately $2.0 million of such
indebtedness will mature through December 31, 1997.
 
ATLANTIC CITY MARKET
 
  The Atlantic City Market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.81 billion in gaming
revenues in 1996, an approximately 1.7% increase over 1995 gaming revenues of
approximately $3.74 billion. From 1991 to 1996, total gaming revenues in
Atlantic City have increased approximately 29.2%, while hotel rooms increased
only slightly during that period. Although total visitor volume to Atlantic
City remained
 
                                      12
<PAGE>
 
relatively constant in 1996, the volume of bus customers dropped to 9.8
million in 1996, continuing a decline from 11.7 million in 1991. The volume of
customers traveling by other means to Atlantic City has grown from 20.1
million in 1991 to 34.0 million in 1996.
 
  Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
Management believes that this relatively slower growth is primarily
attributable to two key factors. First, there were no significant additions to
hotel capacity in Atlantic City until 1996. Las Vegas visitor volumes have
increased, in part, due to the continued addition of new hotel capacity. Both
markets have exhibited a strong correlation between hotel room inventory and
total casino revenues. Secondly, the regulatory environment and infrastructure
problems in Atlantic City have made it more difficult and costly to operate.
Total regulatory costs and tax levies in New Jersey have exceeded those in
Nevada since inception, and there is generally a higher level of regulatory
oversight in New Jersey than in Nevada. The infrastructure problems,
manifested by impaired accessibility of the casinos, downtown Atlantic City
congestion, and the condition of the areas surrounding the casinos have made
Atlantic City less attractive to the gaming customer.
 
  Total Atlantic City slot revenues increased 2.1% in 1996, continuing a trend
of increases over the past five years. From 1991 through 1996, slot revenue
growth in Atlantic City has averaged 7.4% per year. Total table revenue
increased 4.3% in 1996, while table game revenue from 1991 to 1996 has
decreased on average 0.4% per year. Management believes the slow growth in
table revenue is primarily attributable to two factors. First, the slot
product has been significantly improved over the last five years. Bill
acceptors, new slot machines, video poker and blackjack and other improvements
have increased the popularity of slot play among a wider universe of casino
patrons. Casino operators in Atlantic City have added slot machines in favor
of table games due to increased public acceptance of slot play and due to slot
machines' comparatively higher profitability as a result of lower labor and
support costs. Since 1991, the number of slot machines in Atlantic City has
increased 61%, while the number of table games has decreased by 5.9%. Slot
revenues increased from 58% of total casino revenues in 1991 to 69% in 1996.
The second reason for historic slow growth in table revenue is that table game
players are typically higher end players and are more likely to be interested
in overnight stays and other amenities. During peak season and weekends, room
availability in Atlantic City is currently inadequate to meet demand, making
it difficult for casino operators to aggressively promote table play.
 
  The regulatory environment in Atlantic City has improved recently. Most
significantly, 24-hour gaming has been approved, poker and keno have been
added and regulatory burdens have been reduced. In particular, comprehensive
amendments to New Jersey gaming laws were made in January 1995, which have
eliminated duplicative regulatory oversight and channeled operator's funds
from regulatory support into uses of the New Jersey Casino Reinvestment
Authority ("CRDA"). Administrative costs of regulation will be reduced while
increasing funds available for new development. In addition, on July 25, 1996,
legislation was enacted which eliminated the requirement that a casino consist
of a "single room" in a casino hotel. A casino may now consist of "one or more
locations or rooms" approved by the CCC for casino gaming.
 
  Atlantic City's new convention center, as currently planned, would hold
approximately 500,000 square feet of exhibit and pre-function space, 45
meeting rooms, food-service facilities and a 1,600-car underground parking
garage. When completed, the new convention center, which is estimated to cost
approximately $268 million, would be the largest exhibition space between New
York City and Washington, D.C. It will be located at the base of the Atlantic
City Expressway and is currently planned to open in May 1997. The old
convention center, built in the late 1920s and located on The Boardwalk, will
receive an approximately $50 million facelift following the opening of the new
convention center and will continue to be used for special events. The State
of New Jersey has commenced a long-term capital plan to upgrade and expand the
Atlantic City International Airport. To date, approximately $18 million have
been spent on renovation of the airport terminal and upgrades of the airport's
access roads and parking facilities.
 
  In addition to the planned casino expansions, major infrastructure
improvements have begun. The CRDA is currently overseeing the development of
the "tourist corridor" that will link the new convention center with
 
                                      13
<PAGE>
 
The Boardwalk. The tourist corridor is scheduled to be completed in
conjunction with the completion of the new convention center.
 
  Management believes that recent gaming regulatory reforms will serve to
permit future reductions in operating expenses of casinos in Atlantic City and
to increase the funds available for additional infrastructure development
through the CRDA. Due principally to an improved regulatory environment,
general improvement of economic conditions and high occupancy rates,
significant investment in the Atlantic City Market has been initiated and/or
announced. Management believes that these increases in hotel capacity,
together with infrastructure improvements, will be instrumental in stimulating
future revenue growth in the Atlantic City market. See "--Competition."
 
COMPETITION
 
  Atlantic City.  Competition in the Atlantic City casino hotel market is
intense. Trump Plaza and the Taj Mahal (the "Atlantic City Properties")
compete with other casino hotels located in Atlantic City and with each other,
including Trump's Castle which is wholly owned by THCR Holdings, the parent of
Trump AC. At present, there are 12 casino hotels located in Atlantic City,
including the Atlantic City Properties, all of which compete for patrons. The
Atlantic City Properties primarily compete with other Atlantic City casinos
by, among other things, providing superior products and facilities, premier
locations, name recognition and targeted marketing strategies. In addition,
there are several sites on The Boardwalk and in the Marina district of
Atlantic City (the "Marina") on which casino hotels could be built in the
future and various applications for casino licenses have been filed and
announcements with respect thereto made from time to time. Substantial new
expansion and development activity has recently been completed or has been
announced in Atlantic City, which may intensify competitive pressures in the
Atlantic City Market. While management believes that the addition of hotel
capacity would be beneficial to the Atlantic City Market generally, there can
be no assurance that such expansion would not be materially disadvantageous to
the Atlantic City Properties. There also can be no assurance that the Atlantic
City development projects which are planned or underway will be completed.
 
  The Atlantic City Properties also compete, or will compete, with facilities
in the northeastern and mid-Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, the Atlantic City Properties face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario (Windsor
and Niagara Falls), the Bahamas, Puerto Rico and other locations inside and
outside the United States, and from other forms of legalized gaming in New
Jersey and in its surrounding states such as lotteries, horse racing
(including off-track betting), jai alai, bingo and dog racing, and from
illegal wagering of various types. New or expanded operations by other persons
can be expected to increase competition and could result in the saturation of
certain gaming markets. In September 1995, New York introduced a keno lottery
game, which is played on video terminals that have been set up in
approximately 1,800 bars, restaurants and bowling alleys across the state. In
December 1996, Bay Cruises began operation of a gambling cruise ship where
patrons are taken from a pier in Sheepshead Bay in Brooklyn, New York to
international waters to gamble. The City of New York allowed the cruises to
continue after the operators agreed to pay city taxes and submit employees to
background checks. Similar gambling cruises are expected in the near future.
In Delaware, slot machines were installed at horse tracks in 1996, and track
owners in several other states are seeking to do the same. In December 1996,
Casino Niagara opened in Niagara Falls, Ontario. Ontario officials expect that
two-thirds of Casino Niagara's patrons will come from the United States,
predominantly from western New York.
 
  In addition to competing with other casino hotels in Atlantic City and
elsewhere, by virtue of their proximity to each other and the common aspects
of certain of their respective marketing efforts, including the common use of
the "Trump" name, the Atlantic City Properties compete directly with each
other and with Trump's Castle for gaming patrons.
 
                                      14
<PAGE>
 
  Other Competition. In addition, the Atlantic City Properties face
competition from casino facilities in a number of states operated by federally
recognized Native American tribes. Pursuant to the Indian Gaming Regulatory
Act ("IGRA"), which was passed by Congress in 1988, any state which permits
casino-style gaming (even if only for limited charity purposes) is required to
negotiate gaming compacts with federally recognized Native American tribes.
Under IGRA, Native American tribes enjoy comparative freedom from regulation
and taxation of gaming operations, which provides them with an advantage over
their competitors, including the Atlantic City Properties. In March 1996, the
United States Supreme Court struck down a provision of IGRA which allowed
Native American tribes to sue states in federal court for failing to negotiate
gaming compacts in good faith. Management cannot predict the impact of this
decision on the ability of Native American tribes to negotiate compacts with
states.
 
  In 1991, the Mashantucket Pequot Nation opened Foxwoods Casino Resort
("Foxwoods"), a casino facility in Ledyard, Connecticut, located in the far
eastern portion of such state, an approximately three-hour drive from New York
City and an approximately two and one-half hour drive from Boston, which
currently offers 24-hour gaming and contains over 4,000 slot machines. The
Mashantucket Pequot Nation has announced various expansion plans, including
its intention to build another casino in Ledyard together with hotels,
restaurants and a theme park. In addition, in October 1996, the Mohegan Nation
opened the Mohegan Sun Resort in Uncasville, Connecticut, located 10 miles
from Foxwoods. Developed by Sun Hotel International, Ltd., the Mohegan Sun
Resort has 75% of the gaming capacity of Foxwoods. In addition, the Eastern
Pequots are seeking formal recognition as a Native American tribe for the
purpose of opening a casino. There can be no assurance that any continued
expansion of gaming operations of the Mashantucket Pequot Nation, the gaming
operations of the Mohegan Nation or the commencement of gaming operations by
the Eastern Pequots would not have a materially adverse impact on the
operations of the Atlantic City Properties.
 
  A group in Cumberland County, New Jersey calling itself the "Nanticoke Lenni
Lenape" tribe has filed a notice of intent with the Bureau of Indian Affairs
seeking formal federal recognition as a Native American tribe. Also, it has
been reported that a Sussex County, New Jersey businessman has offered to
donate land he owns there to the Oklahoma-based Lenape/Delaware Indian Nation
which originated in New Jersey and already has federal recognition, but does
not have a reservation in New Jersey. The Lenape/Delaware Indian Nation has
signed an agreement with the town of Wildwood, New Jersey to open a casino;
however, the plan requires federal and state approval in order to proceed. In
July 1993, the Oneida Nation opened a casino featuring 24-hour table gaming
and electronic gaming systems, but without slot machines, near Syracuse, New
York, and has announced an intention to open expanded gaming facilities.
Representatives of the St. Regis Mohawk Nation signed a gaming compact with
New York State officials for the opening of a casino, without slot machines,
in the northern portion of the state close to the Canadian border. The St.
Regis Mohawks have also announced their intent to open a casino at the
Monticello Race Track in the Catskill Mountains region of New York; however,
any Native American gaming operation in the Catskills is subject to the
approval of the Governor of New York. The Narragansett Nation of Rhode Island,
which has federal recognition, is seeking to open a casino in Rhode Island.
The Gay Head Wampanoag Tribe is seeking to open a casino in New Bedford,
Massachusetts. Other Native American nations are seeking federal recognition,
land and negotiation of gaming compacts in New York, Pennsylvania, Connecticut
and other states near Atlantic City.
 
  State Legislation. Legislation permitting other forms of casino gaming has
been proposed, from time to time, in various states, including those bordering
New Jersey. Six states have presently legalized riverboat gambling while
others are considering its approval, including New York and Pennsylvania, and
New York City is considering a plan under which it would be the embarking
point for gambling cruises into international waters three miles offshore.
Several states are considering or have approved large scale land-based
casinos. Additionally, since 1993, the gaming space in Las Vegas has expanded
significantly, with additional capacity planned and currently under
construction. The operations of the Atlantic City Properties could be
adversely affected by such competition, particularly if casino gaming were
permitted in jurisdictions near or elsewhere in New Jersey or in other states
in the Northeast. In December 1993, the Rhode Island Lottery Commission
approved the addition of slot machine games on video terminals at Lincoln
Greyhound Park and Newport Jai
 
                                      15
<PAGE>
 
Alai, where poker and blackjack have been offered for over two years.
Currently, casino gaming, other than Native American gaming, is not allowed in
other areas of New Jersey or in Connecticut, New York or Pennsylvania. On
November 17, 1995, a proposal to allow casino gaming in Bridgeport,
Connecticut was voted down by that state's Senate. On January 28, 1997, the
New York State Senate rejected a constitutional amendment to legalize casino
gambling in certain areas of New York State, effectively postponing any new
gambling constitutional amendment until 1999. To the extent that legalized
gaming becomes more prevalent in New Jersey or other jurisdictions near
Atlantic City, competition would intensify. In particular, proposals have been
introduced to legalize gaming in other locations, including Philadelphia,
Pennsylvania. In addition, legislation has from time to time been introduced
in the New Jersey State Legislature relating to types of statewide legalized
gaming, such as video games with small wagers. To date, no such legislation,
which may require a state constitutional amendment, has been enacted.
Management is unable to predict whether any such legislation, in New Jersey,
Indiana, Illinois or elsewhere, will be enacted or whether, if passed, would
have a material adverse impact on Trump AC.
 
GAMING AND OTHER LAWS AND REGULATIONS
 
  The following is only a summary of the applicable provisions of the Casino
Control Act and certain other laws and regulations. It does not purport to be
a full description thereof and is qualified in its entirety by reference to
the Casino Control Act and such other laws and regulations. Unless otherwise
indicated, all references to "Trump Plaza" include (a) Trump Plaza's main
tower, including Trump Plaza East (which operates pursuant to a casino license
held by Plaza Associates) and (b) Trump World's Fair (which operates pursuant
to a separate casino license also issued to Plaza Associates).
 
  NEW JERSEY GAMING REGULATIONS
 
  In general, the Casino Control Act and its implementing regulations contain
detailed provisions concerning, among other things: the granting and renewal
of casino licenses; the suitability of the approved hotel facility, and the
amount of authorized casino space and gaming units permitted therein; the
qualification of natural persons and entities related to the casino licensee;
the licensing of certain employees and vendors of casino licensees; the rules
of the games; the selling and redeeming of gaming chips; the granting and
duration of credit and the enforceability of gaming debts; management control
procedures, accounting and cash control methods and reports to gaming
agencies; the security standards; the manufacture and distribution of gaming
equipment; the simulcasting of horse races by casino licensees; equal
employment opportunities for employees of casino operators, contractors of
casino facilities and others; and advertising, entertainment and alcoholic
beverages.
 
  Casino Control Commission. The ownership and operation of casino/hotel
facilities in Atlantic City are the subject of strict state regulation under
the Casino Control Act. The CCC is empowered to regulate a wide spectrum of
gaming and non-gaming related activities and to approve the form of ownership
and financial structure of not only a casino licensee, but also its entity
qualifiers and intermediary and holding companies and any other related entity
required to be qualified ("CCC Regulations").
 
  Operating Licenses. In June 1995, the CCC renewed Plaza Associates' license
to operate Trump Plaza through June 1999. In May 1996, the CCC granted Plaza
Associates a license to operate Trump World's Fair through May 1997. In June
1995, the CCC renewed Taj Associates' license to operate the Taj Mahal through
March 1999. In June 1996, the CCC also granted TCS a license through July
1997, which TCS is in the process of renewing. In June 1995, the CCC renewed
Castle Associates' casino license and approved Trump as a natural person
qualifier through May 1999. In December 1996, the CCC allowed Plaza Associates
to operate Trump Plaza and Trump World's Fair under one casino license through
May 1999. None of these licenses are transferable and their renewal will
include a financial review of the relevant operating entities. Upon
revocation, suspension for more than 120 days or failure to renew a casino
license, the Casino Control Act provides for the appointment of a conservator
to take possession of the hotel and casino's business and property, subject to
all valid liens, claims and encumbrances.
 
 
                                      16
<PAGE>
 
  Casino License. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion
with regard to the issuance, renewal, revocation and suspension of such
licenses and approvals, which are non-transferable. The qualification criteria
with respect to the holder of a casino license include its financial
stability, integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. The casino licenses currently held by Plaza Associates and
Taj Associates are renewable for periods of up to four years. The CCC may
reopen licensing hearings at any time, and must reopen a licensing hearing at
the request of the Division of Gaming Enforcement (the "Division").
 
  Each casino license entitles the holder to operate one casino. Further, no
person may be the holder of a casino license if the holding of such license
will result in undue economic concentration in Atlantic City casino operations
by that person. On May 17, 1995, the CCC adopted a regulation defining the
criteria for determining undue economic concentration which codifies the
content of existing CCC precedent with respect to the subject. In April 1995,
Plaza Associates petitioned the CCC for certain approvals. In its May 18, 1995
declaratory rulings with respect to such petition, the CCC, among other
things, (i) determined that Trump World's Fair is an approved hotel permitted
to contain a maximum of 60,000 square-feet of casino space, that the 40,000
square-feet of casino space therein is a "single room" and that its operation
by Plaza Associates would not result in undue economic concentration in
Atlantic City casino operations; (ii) approved the operation of Trump World's
Fair by Plaza Associates under a separate casino license subject to an
application for and the issuance of such license and approved the proposed
easement agreements with respect to the proposed enclosed Atlantic City
Convention Center walkway; (iii) approved in concept the proposed physical
connection and integrated operation by Plaza Associates of Trump Plaza's main
tower, Trump Plaza East and Trump World's Fair; and (iv) determined that the
approved hotel comprised of the main tower and Trump Plaza East is permitted
to contain a maximum of 100,000 square feet of casino space. In addition, on
December 13, 1995, Plaza Associates received CCC authorization for 49,340
square-feet of casino space at Trump World's Fair. Plaza Associates' casino
license with respect to Trump World's Fair has a renewable term of one year
for each of its first three years and thereafter is renewable for periods of
up to four years. Subsequently, in December 1996, the CCC approved Plaza
Associates' license to operate Trump Plaza and Trump World's Fair under one
casino license through May 1999. Taj Associates will be required to obtain a
prior determination from the CCC that the operation of the additional casino
space created by the Taj Mahal Expansion will not constitute undue economic
concentration of Atlantic City casino operations.
 
  To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a
superior first-class facility; and to pay, exchange, refinance or extend debts
which will mature or become due and payable during the license term.
 
  In the event a licensee fails to demonstrate financial stability, the CCC
may take such action as it deems necessary to fulfill the purposes of the
Casino Control Act and protect the public interest, including: issuing
conditional licenses, approvals or determinations; establishing an appropriate
cure period; imposing reporting requirements; placing restrictions on the
transfer of cash or the assumption of liabilities; requiring reasonable
reserves or trust accounts; denying licensure; or appointing a conservator.
See "--Conservatorship."
 
  Management believes that it has adequate financial resources to meet the
financial stability requirements of the CCC for the foreseeable future.
 
  Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership
in the licensee, each person who in the opinion of the CCC has the ability to
control or elect a majority of the board of directors of the licensee (other
than a banking or other licensed lending institution which makes a loan or
holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains
 
                                      17
<PAGE>
 
and maintains qualification approval from the CCC. Qualification approval
means that such person must, but for residence, individually meet the
qualification requirements as a casino key employee. Pursuant to a condition
of its casino license, payments by Plaza Associates to or for the benefit of
any related entity or partner, with certain exceptions, are subject to prior
CCC approval; and, if Plaza Associates' or Taj Associates' cash position falls
below $5.0 million for three consecutive business days, such entity must
present to the CCC and the Division evidence as to why it should not obtain a
working capital facility in an appropriate amount.
 
  Control Persons. An entity qualifier or intermediary or holding company,
such as Trump AC, Trump AC Holding, Plaza Funding or TACC is required to
register with the CCC and meet the same basic standards for approval as a
casino licensee; provided, however, that the CCC, with the concurrence of the
Director of the Division, may waive compliance by a publicly-traded corporate
holding company with the requirement that an officer, director, lender,
underwriter, agent or employee thereof, or person directly or indirectly
holding a beneficial interest or ownership of the securities thereof,
individually qualify for approval under casino key employee standards so long
as the CCC and the Director of the Division are, and remain, satisfied that
such officer, director, lender, underwriter, agent or employee is not
significantly involved in the activities of the casino licensee, or that such
security holder does not have the ability to control the publicly-traded
corporate holding company or elect one or more of its directors. Persons
holding five percent or more of the equity securities of such holding company
are presumed to have the ability to control the company or elect one or more
of its directors and will, unless this presumption is rebutted, be required to
individually qualify. Equity securities are defined as any voting stock or any
security similar to or convertible into or carrying a right to acquire any
security having a direct or indirect participation in the profits of the
issuer.
 
  Financial Sources. The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bear any relation to any
casino project, including holders of publicly-traded securities of an entity
which holds a casino license or is an entity qualifier, subsidiary or holding
company of a casino licensee (a "Regulated Company"), to qualify as financial
sources. In the past, the CCC has waived the qualification requirement for
holders of less than 15% of a series of publicly-traded mortgage bonds so long
as the bonds remained widely distributed and freely traded in the public
market and the holder had no ability to control the casino licensee. The CCC
may require holders of less than 15% of a series of debt to qualify as
financial sources even if not active in the management of the issuer or casino
licensee.
 
  Institutional Investors. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended; any collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; any
closed end investment trust; any chartered or licensed life insurance company
or property and casualty insurance company; any banking and other chartered or
licensed lending institution; any investment advisor registered under the
Investment Advisers Act of 1940, as amended; and such other persons as the CCC
may determine for reasons consistent with the policies of the Casino Control
Act.
 
  An Institutional Investor may be granted a waiver by the CCC from financial
source or other qualification requirements applicable to a holder of publicly-
traded securities, in the absence of a prima facie showing by the Division
that there is any cause to believe that the holder may be found unqualified,
on the basis of CCC findings that: (i) its holdings were purchased for
investment purposes only and, upon request by the CCC, it files a certified
statement to the effect that it has no intention of influencing or affecting
the affairs of the issuer, the casino licensee or its holding or intermediary
companies; provided, however, that the Institutional Investor will be
permitted to vote on matters put to the vote of the outstanding security
holders; and (ii) if (x) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary company of
the casino licensee's holding or intermediary companies which is related in
any way to the financing of the casino licensee and represent either (A) 20%
or less of the total outstanding debt of the company or (B) 50% or less of any
issue of outstanding debt of the company, (y) the securities are equity
securities and represent less than 10% of the equity securities of a casino
licensee's holding or intermediary companies or (z) the securities so held
 
                                      18
<PAGE>
 
exceed such percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant such waiver
and, in any event, an Institutional Investor may be required to produce for
the CCC or the Antitrust Division of the Department of Justice upon request,
any document or information which bears any relation to such debt or equity
securities.
 
  Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
holder purchased the securities for investment purposes only and holds them in
the ordinary course of business; (iii) the holder has no involvement in the
business activities of and no intention of influencing or affecting, the
affairs of the issuer, the casino licensee or any affiliate; and (iv) if the
holder subsequently determines to influence or affect the affairs of the
issuer, the casino licensee or any affiliate, it shall provide not less than
30 days' prior notice of such intent and shall file with the CCC an
application for qualification before taking any such action. If an
Institutional Investor changes its investment intent, or if the CCC finds
reasonable cause to believe that it may be found unqualified, the
Institutional Investor may take no action with respect to the security
holdings, other than to divest itself of such holdings, until it has applied
for interim casino authorization and has executed a trust agreement pursuant
to such an application. See "--Interim Casino Authorization."
 
  Ownership and Transfer of Securities. The Casino Control Act imposes certain
restrictions upon the issuance, ownership and transfer of securities of a
Regulated Company and defines the term "security" to include instruments which
evidence a direct or indirect beneficial ownership or creditor interest in a
Regulated Company including, but not limited to, mortgages, debentures,
security agreements, notes and warrants. Currently, each of Plaza Funding,
Trump AC, Plaza Associates, Taj Associates, and TCS is deemed to be a
Regulated Company, and instruments evidencing a beneficial ownership or
creditor interest therein, including a partnership interest, are deemed to be
the securities of a Regulated Company.
 
  If the CCC finds that a holder of such securities is not qualified under the
Casino Control Act, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company which issued
the securities. If a holder is found unqualified, it is unlawful for the
holder (i) to exercise, directly or through any trustee or nominee, any right
conferred by such securities or (ii) to receive any dividends or interest upon
such securities or any remuneration, in any form, from its affiliated casino
licensee for services rendered or otherwise.
 
  With respect to non-publicly-traded securities, the Casino Control Act and
CCC regulations require that the corporate charter or partnership agreement of
a Regulated Company establish a right in the CCC of prior approval with regard
to transfers of securities, shares and other interests and an absolute right
in the Regulated Company to repurchase at the market price or the purchase
price, whichever is the lesser, any such security, share or other interest in
the event that the CCC disapproves a transfer. With respect to publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC,
such holder shall dispose of such securities.
 
  Under the terms of the indenture under which the Trump AC Mortgage Notes
were issued, if a holder of such securities does not qualify under the Casino
Control Act when required to do so, such holder must dispose of its interest
in such securities, and Trump AC and Trump AC Funding may redeem the
securities at the lesser of the outstanding amount or fair market value.
 
  Interim Casino Authorization.  Interim casino authorization is a process
which permits a person who enters into a contract to obtain property relating
to a casino operation or who obtains publicly-traded securities relating to a
casino licensee to close on the contract or own the securities until plenary
licensure or qualification. During the period of interim casino authorization,
the property relating to the casino operation or the securities is held in
trust.
 
                                      19
<PAGE>
 
  Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already
licensed or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed
trust agreement in a form approved by the CCC. If, after the report of the
Division and a hearing by the CCC, the CCC grants interim authorization, the
property will be subject to a trust. If the CCC denies interim authorization,
the contract may not close or settle until the CCC makes a determination on
the qualifications of the applicant. If the CCC denies qualification, the
contract will be terminated for all purposes and there will be no liability on
the part of the transferor.
 
  If, as the result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee, or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines that
qualification is required or declines to waive qualification. The application
must include a fully executed trust agreement in a form approved by the CCC
or, in the alternative, within 120 days after the CCC determines that
qualification is required, the person whose qualification is required must
divest such securities as the CCC may require in order to remove the need to
qualify.
 
  The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for
residency; and (iv) interim operation will best serve the interests of the
public.
 
  When the CCC finds the applicant qualified, the trust will terminate. If the
CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to
sell, assign, convey or otherwise dispose of the property subject to the trust
to such persons who are licensed or qualified or shall themselves obtain
interim casino authorization.
 
  Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities
to a trust in application for interim casino authorization and the CCC
thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the
casino hotel or receive any return on its investment or debt security
holdings; and (ii) after disposition, if any, of the securities by the
trustee, proceeds distributed to the unqualified holder may not exceed the
lower of their actual cost to the unqualified holder or their value calculated
as if the investment had been made on the date the trust became operative.
 
  Approved Hotel Facilities. The CCC may permit an existing licensee, such as
one of the Atlantic City Properties, to increase its casino space if the
licensee agrees to add a prescribed number of qualifying sleeping units within
two years after the commencement of gaming operations in the additional casino
space. However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed.
 
  Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
 
  Unless otherwise determined by the CCC, agreements to lease an approved
hotel building or the land under the building must be for a durational term
exceeding 30 years, must concern 100% of the entire approved hotel
 
                                      20
<PAGE>
 
building or the land upon which it is located and must include a buy-out
provision conferring upon the lessee the absolute right to purchase the
lessor's entire interest for a fixed sum in the event that the lessor is found
by the CCC to be unsuitable.
 
  Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10% of all the outstanding equity
securities of the casino licensee. Such an agreement shall: (i) provide for
the complete management of the casino; (ii) provide for the unrestricted power
to direct the casino operations; and (iii) provide for a term long enough to
ensure the reasonable continuity, stability and independence and management of
the casino.
 
  License Fees. The CCC is authorized to establish annual fees for the renewal
of casino licenses. The renewal fee is based upon the cost of maintaining
control and regulatory activities prescribed by the Casino Control Act, and
may not be less than $200,000 for a four-year casino license. Additionally,
casino licensees are subject to potential assessments to fund any annual
operating deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for use or in use
in any casino.
 
  Gross Revenue Tax. Each casino licensee is also required to pay an annual
tax of 8% on its gross casino revenues. For the years ended December 31, 1994,
1995 and 1996, Plaza Associates' gross revenue tax was approximately $21.0
million, $24.0 million and $29.8 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $4.2
million, $4.4 million and $6.0 million, respectively. For the years ended
December 31, 1994, 1995 and 1996, Taj Associates' gross revenue tax was
approximately $36.7 million, $40.2 million and $40.7 million, respectively,
and its license, investigation and other fees and assessments totaled
approximately $5.2 million, $5.2 million and $5.0 million, respectively.
 
  Investment Alternative Tax Obligations. An investment alternative tax
imposed on the gross casino revenues of each licensee in the amount of 2.5% is
due and payable on the last day of April following the end of the calendar
year. A licensee is obligated to pay the investment alternative tax for a
period of 30 years. Estimated payments of the investment alternative tax
obligation must be made quarterly in an amount equal to 1.25% of estimated
gross revenues for the preceding three-month period. Investment tax credits
may be obtained by making qualified investments or by the purchase of bonds
issued by the CRDA (the "CRDA Bonds"). CRDA Bonds may have terms as long as 50
years and bear interest at below market rates, resulting in a value lower than
the face value of such CRDA Bonds.
 
  For the first ten years of its tax obligation, the licensee is entitled to
an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of the CRDA Bonds issued to the licensee.
Thereafter, the licensee (i) is entitled to an investment tax credit in an
amount equal to twice the purchase price of such CRDA Bonds or twice the
amount of its investments authorized in lieu of such bond investments or made
in projects designated as eligible by the CRDA and (ii) has the option of
entering into a contract with the CRDA to have its tax credit comprised of
direct investments in approved eligible projects which may not comprise more
than 50% of its eligible tax credit in any one year.
 
  From the monies made available to the CRDA, the CRDA is required to set
aside $100 million for investment in hotel development projects in Atlantic
City undertaken by a licensee which result in the construction or
rehabilitation of at least 200 hotel rooms. These monies will be held to fund
up to 35% of the cost to casino licensees of expanding their hotel facilities
to provide additional hotel rooms, a portion of which will be required to be
available upon the opening of the new Atlantic City Convention Center and
dedicated to convention events. The CRDA has determined at this time that
eligible casino licensees will receive up to 27% of the cost of additional
hotel rooms out of these monies set aside and may, in the future, increase the
percentage to no greater than 35%.
 
  Minimum Casino Parking Charges. As of July 1, 1993, each casino licensee was
required to pay the New Jersey State Treasurer a $1.50 charge for every use of
a parking space for the purpose of parking motor vehicles
 
                                      21
<PAGE>
 
in a parking facility owned or leased by a casino licensee or by any person on
behalf of a casino licensee. This amount is paid into a special fund
established and held by the New Jersey State Treasurer for the exclusive use
of the CRDA. Plaza Associates and Taj Associates currently charge their
parking patrons $2.00 in order to make their required payments to the New
Jersey State Treasurer and cover related expenses. Amounts in the special fund
will be expended by the CRDA for eligible projects in the corridor region of
Atlantic City related to improving the highways, roads, infrastructure,
traffic regulation and public safety of Atlantic City or otherwise necessary
or useful to the economic development and redevelopment of Atlantic City in
this regard.
 
  Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and
known as the Atlantic City Fund, its proportional share of an amount related
to the amount by which annual operating expenses of the CCC and the Division
are less than a certain fixed sum. Additionally, a portion of the investment
alternative tax obligation of each casino licensee for the years 1994 through
1998 allocated for projects in northern New Jersey shall be paid into and
credited to the Atlantic City Fund. Amounts in the Atlantic City Fund will be
expended by the CRDA for economic development projects of a revenue producing
nature that foster the redevelopment of Atlantic City other than the
construction and renovation of casino hotels.
 
  Conservatorship. If, at any time, it is determined that Plaza Associates,
Plaza Funding, Trump AC, Taj Associates, TCS or any other entity qualifier has
violated the Casino Control Act or that any of such entities cannot meet the
qualification requirements of the Casino Control Act, such entity could be
subject to fines or the suspension or revocation of its license or
qualification. If a casino license is suspended for a period in excess of 120
days or is revoked, or if the CCC fails or refuses to renew such casino
license, the CCC could appoint a conservator to operate and dispose of such
licensee's casino hotel facilities. A conservator would be vested with title
to all property of such licensee relating to the casino and the approved hotel
subject to valid liens and/or encumbrances. The conservator would be required
to act under the direct supervision of the CCC and would be charged with the
duty of conserving, preserving and, if permitted, continuing the operation of
the casino hotel. During the period of the conservatorship, a former or
suspended casino licensee is entitled to a fair rate of return out of net
earnings, if any, on the property retained by the conservator. The CCC may
also discontinue any conservatorship action and direct the conservator to take
such steps as are necessary to effect an orderly transfer of the property of a
former or suspended casino licensee.
 
  Qualification of Employees. Certain employees of Plaza Associates and Taj
Associates must be licensed by or registered with the CCC, depending on the
nature of the position held. Casino employees are subject to more stringent
requirements than non-casino employees and must meet applicable standards
pertaining to financial stability, integrity and responsibility, good
character, honesty and integrity, business ability and casino experience and
New Jersey residency. These requirements have resulted in significant
competition among Atlantic City casino operators for the services of qualified
employees.
 
  Gaming Credit. Plaza Associates' and Taj Associates' casino games are
conducted on a credit as well as cash basis. Gaming debts arising in Atlantic
City in accordance with applicable regulations are enforceable in the courts
of the State of New Jersey. The extension of gaming credit is subject to
regulations that detail procedures which casinos must follow when granting
gaming credit and recording counter checks which have been exchanged, redeemed
or consolidated.
 
  Control Procedures. Gaming at the Atlantic City Properties is conducted by
trained and supervised personnel. Plaza Associates and Taj Associates employ
extensive security and internal controls. Security checks are made to
determine, among other matters, that job applicants for key positions have had
no criminal history or associations. Security controls utilized by the
surveillance department include closed circuit video camera to monitor the
casino floor and money counting areas. The count of moneys from gaming also is
observed daily by representatives of the CCC.
 
                                      22
<PAGE>
 
  OTHER LAWS AND REGULATIONS
 
  The United States Department of the Treasury (the "Treasury") has adopted
regulations pursuant to which a casino is required to file a report of each
deposit, withdrawal, exchange of currency, gambling tokens or chips, or other
payments or transfers by, through or to such casino which involves a
transaction in currency of more than $10,000 per patron, per gaming day (a
"Currency Transaction Report"). Such reports are required to be made on forms
prescribed by the Secretary of the Treasury and are filed with the
Commissioner of the Internal Revenue Service (the "Service"). In addition,
Plaza Associates and Taj Associates are required to maintain detailed records
(including the names, addresses, social security numbers and other information
with respect to its gaming customers) dealing with, among other items, the
deposit and withdrawal of funds and the maintenance of a line of credit.
 
  In the past, the Service had taken the position that gaming winnings from
table games by nonresident aliens were subject to a 30% withholding tax. The
Service, however, subsequently adopted a practice of not collecting such tax.
Recently enacted legislation exempts from withholding tax table game winnings
by nonresident aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively feasible.
 
  As the result of an audit conducted by the Treasury's Office of Financial
Enforcement in 1995, Plaza Associates was alleged to have failed to timely
file the Currency Transaction Report in connection with 65 individual currency
transactions in excess of $10,000 during the period from October 31, 1986 to
December 10, 1988. Plaza Associates paid a fine of $292,500 in connection with
these violations. Plaza Associates has revised its internal control procedures
to ensure continued compliance with these regulations. From 1992 through 1995,
the Service conducted an audit of Currency Transaction Reports filed by Taj
Associates for the period from April 2, 1990 through December 31, 1991. The
Treasury has received a report detailing the audit as well as the response of
Taj Associates. Recently, as a result of Taj Associates' audit, the Treasury
has notified Taj Associates that it failed to timely file the Currency
Transaction Report in connection with 193 individual currency transactions.
The Treasury has indicated in its notification that the matter can be resolved
by the payment of a penalty which is significantly lower than the maximum
penalty allowed by law. Management believes that any such amounts will not be
material to Trump AC.
 
  Trump AC is subject to other federal, state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages in the State of New Jersey as well as in
other jurisdictions. Management believes all required licenses and permits
necessary to conduct the business of Trump AC has been obtained for operations
in New Jersey.
 
ITEM 2. PROPERTIES.
 
TRUMP PLAZA
 
  Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is currently subject to the liens
of the mortgages associated with the Trump AC Mortgage Notes (collectively,
the "Plaza Mortgages") and certain other liens.
 
  Plaza Casino Parcel. Trump Plaza's main tower is located on The Boardwalk in
Atlantic City, New Jersey, next to the existing Atlantic City Convention
Center. It occupies the entire city block (approximately 2.38 acres) bounded
by The Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the
"Plaza Casino Parcel").
 
  The Plaza Casino Parcel consists of four tracts of land, three of which are
currently owned by Plaza Associates and one of which is leased by Plaza Hotel
Management Company ("PHMC") to Plaza Associates pursuant to a non-renewable
ground lease, which expires on December 31, 2078 (the "PHMC Lease"). The land
which is subject to the PHMC Lease is referred to as the "Plaza Leasehold
Tract". Seashore Four Associates ("Seashore Four")
 
                                      23
<PAGE>
 
and Trump Seashore Associates ("Trump Seashore") had leased to Plaza
Associates two of the tracts which are now owned by Plaza Associates. Trump
Seashore and Seashore Four are 100% beneficially owned by Trump and are,
therefore, affiliates of THCR. Plaza Associates purchased the tract from
Seashore Four in January 1997 and the tract from Trump Seashore in September
1996 for $10 million and $14.5 million, respectively.
 
  The PHMC Lease is a "net lease" pursuant to which Plaza Associates, in
addition to the payment of fixed rent, is responsible for all costs and
expenses with respect to the use, operation and ownership of the Plaza
Leasehold Tract and the improvements now, or which may in the future be,
located thereon, including, but not limited to, all maintenance and repair
costs, insurance premiums, real estate taxes, assessments and utility charges.
The improvements located on the Plaza Leasehold Tract are owned by Plaza
Associates during the term of the PHMC Lease, and upon the expiration of the
term of the PHMC Lease (for whatever reason), ownership of such improvements
will vest in PHMC. The PHMC Lease also contains an option pursuant to which
Plaza Associates may purchase the Plaza Leasehold Tract at certain times
during the term of such Plaza Ground Lease under certain circumstances.
 
  Parking Parcels. Plaza Associates owns a parcel of land (the "Plaza Garage
Parcel") located across the street from the Plaza Casino Parcel and along
Pacific Avenue in a portion of the block bound by Pacific Avenue, Mississippi
Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has constructed
the Transportation Facility on the Plaza Garage Parcel. An enclosed pedestrian
walkway from the parking garage accesses Trump Plaza at the casino level.
Parking at the parking garage is available to Trump Plaza's guests, as well as
to the general public.
 
  Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square-feet ("Additional Parcel 1")
and owns another parcel on Mississippi Avenue adjacent to Additional Parcel 1
consisting of approximately 5,750 square-feet.
 
  Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square-feet, and subleases one parcel consisting of approximately 3,125
square-feet. All of such parcels are contiguous and are located along Atlantic
Avenue, in the same block as the Plaza Garage Parcel. They are used for
signage and surface parking and are not encumbered by any mortgage liens other
than that of the Plaza Mortgages.
 
  Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey, containing approximately 64,000
square-feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1996, of approximately $1.5 million and is encumbered by the
Plaza Mortgage. This facility is currently being utilized by TCS.
 
  Trump Plaza East. In connection with the Taj Acquisition, Plaza Associates
exercised its option to purchase the fee and leasehold interests comprising
Trump Plaza East (the "Trump Plaza East Purchase Option") for a purchase price
of $28.0 million. During the years ended December 31, 1994, 1995 and 1996,
Plaza Associates incurred approximately $4.9 million, $3.8 million and $1.1
million, respectively, in expenses associated with its lease of Trump Plaza
East. As of December 31, 1996, Plaza Associates had capitalized approximately
$43.6 million in construction costs related to Trump Plaza East.
 
  In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into a sublease (the "Time
Warner Sublease") with Time Warner pursuant to which Time Warner subleased the
entire first floor of retail space for a new Warner Brothers Studio Store
which opened in July 1994. The Time Warner Sublease provides for a ten-year
term which expires on the last day of the month immediately preceding the
tenth anniversary of the commencement date and contains two five-year renewal
options exercisable by Time Warner. Time Warner renovated the premises in
connection with opening the studio store.
 
                                      24
<PAGE>
 
Time Warner may terminate the Time Warner Sublease at any time after July 1996
in the event that gross sales for the store do not meet certain threshold
amounts or at any time if Plaza Associates fails to operate a first-class
hotel at Trump Plaza East.
 
  Trump World's Fair. Pursuant to the option to purchase Trump World's Fair
(the "Trump World's Fair Purchase Option"), on June 12, 1995, using proceeds
from the June 1995 Offerings, Plaza Associates acquired title to Trump World's
Fair. Further, pursuant to an easement agreement with The New Jersey Sports
and Exposition Authority ("NJSEA"), Plaza Associates has an exclusive easement
over, in and through the portions of the Atlantic City Convention Center used
as the pedestrian walkway connecting Trump Plaza's main tower and Trump
World's Fair. The easement is for a 25-year term and may be renewed at the
option of Plaza Associates for one additional 25-year period. In consideration
of the granting of the easement, Plaza Associates must pay to NJSEA the sum of
$2.0 million annually, such annual payment to be adjusted every five years to
reflect changes in the consumer price index. Plaza Associates will have the
right to terminate the easement agreement at any time upon six months' notice
to NJSEA in consideration of a termination payment of $1,000,000. See
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation-- Certain Related Party Transactions--Plaza Associates" and
"Business--Gaming and Other Laws and Regulations--New Jersey Gaming
Regulations--Approved Hotel Facilities."
 
  Superior Mortgages. The liens securing the indebtedness on the Plaza Garage
Parcel and the Egg Harbor Parcel (all of such liens are collectively called
the "Existing Senior Plaza Mortgages") are each senior to the liens of the
Plaza Mortgages. The principal amount currently secured by such Existing
Senior Plaza Mortgages as of December 31, 1996 was, in the aggregate,
approximately $3.4 million.
 
  Plaza Associates has financed or leased and from time to time will finance
or lease its acquisition of furniture, fixtures and equipment. The lien in
favor of any such lender or lessor may be superior to the liens of the Plaza
Mortgages.
 
TAJ MAHAL
 
  Taj Associates currently owns the parcels of land which are used in
connection with the operation of the Taj Mahal. Each of these parcels is
encumbered by the mortgage securing the Trump AC Mortgage Notes.
 
  The Casino Parcel. The land comprising the site upon which the Taj Mahal is
located consists of approximately 17 acres, which is bound by The Boardwalk to
the south, Maryland Avenue to the east, Pennsylvania Avenue to the west and
which extends to the north towards Pacific Avenue for approximately three-
quarters of a city block on the western portion of the site and two-thirds of
a city block on the eastern portion of the site. Construction was
substantially completed and the Taj Mahal was opened to the public on April 2,
1990.
 
  Taj Entertainment Complex. In connection with the Taj Acquisition, Taj
Associates purchased the Taj Entertainment Complex from Realty Corp. The Taj
Entertainment Complex is a 20,000-square-foot multi-purpose entertainment
complex known as the Xanadu Theater with seating capacity for approximately
1,200 people, which can be used as a theater, concert hall, boxing arena or
exhibition hall.
 
  Steel Pier. In connection with the Taj Acquisition, Taj Associates purchased
the pier located across The Boardwalk from the Taj Mahal (the "Steel Pier")
from Realty Corp. Taj Associates initially proposed a concept to improve the
Steel Pier, the estimated cost of which improvements was $30 million. Such
concept was approved by the New Jersey Department of Environment Protection
("NJDEP"), the agency which administers the Coastal Area Facilities Review Act
("CAFRA"). A condition imposed on Taj Associates' CAFRA permit (which, in
turn, is a condition of Taj Associates' casino license) initially required
that Taj Associates begin construction of certain improvements on the Steel
Pier by October 1992, which improvements were to be completed within 18 months
of commencement. In March 1993, Taj Associates obtained a modification of its
CAFRA permit providing for the extensions of the required commencement and
completion dates of the improvements to the Steel Pier for one year based upon
an interim use of the Steel Pier for an amusement park.
 
                                      25
<PAGE>
 
Taj Associates received additional one-year extensions of the required
commencement and completion dates of the improvements of the Steel Pier based
upon the same interim use of the Steel Pier as an amusement park pursuant to a
sublease ("Pier Sublease") with an amusement park operator. The Pier Sublease
terminates on December 31, 1997.
 
  Office and Warehouse Space. Taj Associates owns an office building located
on South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Castle Associates which are presently leased to commercial
tenants and used for office space and vehicle maintenance facilities. In
connection with the Taj Acquisition, Taj Associates purchased from Realty
Corp. a warehouse complex of approximately 34,500 square-feet.
 
  Taj Associates has entered into a lease with Trump-Equitable Company for the
lease of office space in Trump Tower in New York City, which Taj Associates
uses as a marketing office. The monthly payments under the lease had been
$1,000, and the premises were leased at such rent for four months in 1992, the
full twelve months in 1993 and 1994 and eight months in 1995. On September 1,
1995, the lease was renewed for a term of five years with an option for Taj
Associates to cancel the lease on September 1 of each year, upon six months'
notice and payment of six months' rent. Under the renewed lease, the monthly
payments are $2,184.
 
  Parking. The Taj Mahal provides parking for approximately 5,200 cars of
which 4,500 spaces are located in indoor parking garages and 700 surface
spaces are located on land purchased from Realty Corp. in connection with the
Taj Acquisition. In addition, Taj Associates entered into a lease agreement
with Castle Associates to share its employee parking facilities. In connection
with the Taj Mahal Expansion, Taj Associates intends to expand its self-
parking facilities by approximately 2,400 spaces.
 
  Themed Restaurants. Hard Rock Cafe International (N.J.), Inc. ("Hard Rock")
has entered into a fifteen-year lease (the "Hard Rock Cafe Lease") with Taj
Associates for the lease of space at the Taj Mahal for a Hard Rock Cafe. The
basic rent under the Hard Rock Cafe Lease is $750,000 per year, paid in equal
monthly installments, for the first 10 years of the lease term, and will be
$825,000 per year, paid in equal monthly installments, for the remaining 5
years of the lease term. In addition, Hard Rock will pay percentage rent in an
amount equal to 10% of Hard Rock's annual gross sales in excess of
$10,000,000. Hard Rock has the right to terminate the Hard Rock Cafe Lease on
the tenth anniversary thereof and also has the option to extend the term of
the lease for an additional five year period at an annual basic rent of
$907,500 during such renewal term. The Hard Rock Cafe opened in November 1996.
 
  All Star Cafe, Inc. ("All Star") has entered into a twenty-year lease (the
"All Star Cafe Lease") with Taj Associates for the lease of space at the Taj
Mahal for an All Star Cafe. The basic rent under the All Star Cafe Lease is
$1.0 million per year, paid in equal monthly installments. In addition, All
Star will pay percentage rent in an amount equal to the difference, if any,
between (i) 8% of All Star's gross sales made during each calendar month
during the first lease year, 9% of All Star's gross sales made during each
calendar month during the second lease year and 10% of All Star's gross sales
made during each calendar month during the third through the twentieth lease
years, and (ii) one-twelfth of the annual basic rent. The All Star Cafe opened
in March 1997.
 
ITEM 3. LEGAL PROCEEDINGS.
 
  General. Trump AC, its partners, certain members of its former executive
committee, and certain of its employees, have been involved in various legal
proceedings. Such persons and entities are vigorously defending the
allegations against them and intend to contest vigorously any future
proceedings. In general, Trump AC has agreed to indemnify such persons against
any and all losses, claims, damages, expenses (including reasonable costs,
disbursements and counsel fees) and liabilities (including amounts paid or
incurred in satisfaction of settlements, judgments, fines and penalties)
incurred by them in said legal proceedings.
 
  Plaza Associates. From monies made available to it, the CRDA is required to
set aside $100 million for investment in hotel development projects in
Atlantic City undertaken by casino licensees which result in the construction
or rehabilitation of at least 200 hotel rooms by December 31, 1996. These
investments are to fund
 
                                      26
<PAGE>
 
up to 35% of the cost to casino licensees of such projects. See "Business--
Gaming and Other Laws and Regulations--New Jersey Gaming Regulations--
Investment Alternative Tax Obligations." Plaza Associates made application for
such funding to the CRDA with respect to its proposed construction and
rehabilitation of the Trump Plaza East hotel rooms and related Boardwalk and
second level facilities, proposed demolition of an existing hotel expansion
structure attached thereto and development of an appurtenant public park,
roadway and parking area on the site thereof and proposed acquisition of the
entire project site.
 
  The CRDA, in rulings through January 10, 1995, approved the hotel
development project and, with respect to same, reserved to Plaza Associates
the right to take investment tax credits in an amount equal to 27% ($14.1
million) of $52.4 million of eligible estimated project development costs. In
October 1994, following a September 1994 CCC ruling authorizing the same,
Plaza Associates advised the CRDA of its intention to, without affecting
either the project development costs or the tax credits, locate approximately
15,000 square feet of casino space on the second floor of Trump Plaza East and
was advised by the CRDA that its proposed use of such space would not affect
the approval of the hotel development project.
 
  As part of its approval and on the basis of its powers of eminent domain,
the CRDA, during 1994, initiated five condemnation proceedings in the Superior
Court of New Jersey, Atlantic County, to acquire certain small parcels of land
within the project site. The defendants in three of those matters, with
respect to parcels which impact only the public park and parking areas, Casino
Reinvestment Development Authority v. Banin, et al., Docket No. ATL-L-2676-94,
Casino Reinvestment Development Authority v. Sabatini, et al., Docket No.
ATL-L-2976-94, and Casino Reinvestment Development Authority v. Coking, et
al., Docket No. ATL-L-2974-94, asserted numerous defenses to the condemnation
complaints and filed counterclaims against CRDA and third-party complaints
against Plaza Associates alleging, inter alia, an improper exercise of CRDA
power for private purposes and conspiracy between the CRDA and Plaza
Associates. After the filing of briefs and a hearing, a New Jersey Superior
Court judge issued an opinion that the Trump Plaza East acquisition and
renovation was not eligible for CRDA funding and, as a result, the CRDA could
not exercise its power of eminent domain because the project included casino
floor space. The court, by order dated April 18, 1995, dismissed the
condemnation complaints with prejudice. On April 17, the same judge dismissed
the counter claims and third-party complaints without prejudice. Notices of
appeal were filed with the New Jersey Superior Court, Appellate Division, on
April 21, 1995 by the CRDA and on April 24, 1995 by Plaza Associates. On May
1, 1995, the Casino Association of New Jersey on behalf of its members, 11 of
the 12 Atlantic City casino hotels, filed a motion to intervene or, in the
alternative, for leave to appear as an amicus curiae. Briefs were filed by all
parties and the oral arguments occurred in April 1996. In November 1996, the
Appellate Division unanimously held that the acquisition and renovation of
Trump Plaza East were eligible for CRDA funding and remanded the matter to the
trial court to conduct the condemnation proceedings. The defendants have
petitioned the New Jersey Supreme Court for certification, which petition is
currently pending.
 
  Plaza Associates believes it has been successful in establishing, based in
part on the March 29, 1995 opinion of the New Jersey Office of Legislative
Services, which serves as legal counsel to the New Jersey State Legislature,
that N.J.S.A. 5:12-173.8 empowered the CRDA to approve and fund projects such
as Trump Plaza East and, in part, on the fact that Section 173.8 expressly
exempts hotel development projects from the statutory limitation with respect
to any CRDA investment or project which directly and exclusively benefits the
casino hotel or related facility.
 
  In a related matter, Vera Coking, et al. v. Atlantic City Planning Board and
Trump Plaza Associates, Docket No. ATL-L-339-94, the Atlantic City Planning
Board's approval of the Trump Plaza East renovation was challenged on various
grounds. In July 1994, a New Jersey Superior Court judge upheld the Atlantic
City Planning Board approvals with respect to the hotel renovation component
of Trump Plaza East and the new roadway but invalidated the approval of the
valet parking lot and the public park because Plaza Associates lacked site
control with respect to the small parcels of land CRDA sought to condemn.
Plaintiff appealed the court's decision upholding the approval of the hotel
renovation and new roadway and Plaza Associates cross-appealed the court's
decision invalidating the approval of the public park and valet parking area.
Plaza Associates withdrew its cross-appeal and received land-use approval for
and has constructed the valet parking area after
 
                                      27
<PAGE>
 
deletion of one of the small parcels. In June 1996, the Superior Court of New
Jersey, Appellate Division, affirmed the trial court's ruling upholding the
approvals for the hotel renovation and the new roadway.
 
  In another related matter, Josef Banin and Vera Coking v. Atlantic City
Planning Board and Trump Plaza Associates, Docket No. L-2188-95, the land-use
approval for this area has been challenged on various grounds. Plaza
Associates filed its answer to the complaint denying the allegations of the
complaint. The land-use approval involves certain minor amendments to the
previously granted site plan approvals for the hotel renovation component of
Trump Plaza East and the new roadway. The amendments included certain design
changes with respect to the Trump Plaza East and certain design changes to the
roadway. The amendments did not require any variance relief and the amendments
fully complied with the Land Use Ordinance of the City of Atlantic City. The
plaintiffs allege the Atlantic City Planning Board acted in an arbitrary and
capricious manner in approving the amendments and further argue that the
chairperson of the Atlantic City Planning Board had a conflict of interest in
hearing the matter because of her status as an employee of the CRDA, the
entity that had approved certain funding for the project. On January 26, 1996,
the New Jersey Superior Court upheld the approval of the amendment by the
Atlantic City Planning Board and rejected the plaintiffs' claim with respect
to the chairwoman's conflict of interest. The plaintiffs' time to appeal this
decision expired in June 1996.
 
  On April 3, 1989, BPHC Acquisition, Inc. and BPHC Parking Corp.
(collectively, "BPHC") filed a third-party complaint (the "Complaint") against
Plaza Associates and Trump. The Complaint arose in connection with the action
entitled Boardwalk Properties, Inc. and Penthouse International Ltd. v. BPHC
Acquisition, Inc. and BPHC Parking Corp., which was instituted on March 20,
1989 in the New Jersey Superior Court, Chancery Division, Atlantic County.
 
  The suit arose in connection with the conditional sale by Boardwalk
Properties, Inc. ("BPI") (or, with respect to certain of the property, BPI's
agreement to sell) to Trump of BPI's fee and leasehold interests in (i) Trump
Plaza East, (ii) an approximately 4.2-acre parcel of land located on Atlantic
Avenue, diagonally across from Trump Plaza's parking garage (the "Columbus
Plaza Site") which was then owned by an entity in which 50% of the interests
were each owned by BPHC and BPI and (iii) an additional 1,462 square-foot
parcel of land located within the area of Trump Plaza East (the "Bongiovanni
Site"). Prior to BPI entering into its agreement with Trump, BPI had entered
into agreements with BPHC which provided, among other things, for the sale to
BPHC of Trump Plaza East, as well as BPI's interest in the Columbus Plaza
Site, assuming that certain contingencies were satisfied by a certain date.
Additionally, by agreement between BPHC and BPI, in the event BPHC failed to
close on Trump Plaza East, BPHC would convey to BPI the Bongiovanni Site. Upon
BPHC's failure to close on Trump Plaza East, BPI entered into its agreement
with Trump pursuant to which it sold Trump Plaza East to Trump and instituted
a lawsuit against BPHC for specific performance to compel BPHC to transfer to
BPI, BPHC's interest in the Columbus Plaza Site and Bongiovanni Site, as
provided for in the various agreements between BPHC and BPI and in the
agreement between BPI and Trump.
 
  The Complaint alleged that Plaza Associates and/or Trump engaged in the
following activities: civil conspiracy, violations of the New Jersey Antitrust
Act, violations of the New Jersey RICO statute, malicious interference with
contractual relations, malicious interference with prospective economic
advantage, inducement to breach a fiduciary duty and malicious abuse of
process. The relief sought in the Complaint included, among other things,
compensatory damages, punitive damages, treble damages, injunctive relief, the
revocation of all of Plaza Associates' and Trump's casino licenses, the
revocation of Plaza Associates' current Certificate of Partnership, the
revocation of any other licenses or permits issued to Plaza Associates and
Trump by the State of New Jersey, and a declaration voiding the conveyance by
BPI to Trump of BPI's interest in Trump Plaza East, as well as BPI's and/or
Trump's rights to obtain title to the Columbus Plaza Site.
 
  On October 13, 1993, a final judgment as to Trump and Plaza Associates was
filed. That judgment dismissed each and every claim against Trump and Plaza
Associates. The case remained open as to final resolution of all claims
between BPI and BPHC. Following the entry of a subsequent judgment as to those
claims, BPHC and BPI have settled all claims between them. BPHC is pursuing
its appeal as to Trump and Plaza Associates but only as to its money damages
claims of interference with contract and prospective economic advantage and of
 
                                      28
<PAGE>
 
inducing BPI to breach its fiduciary duty to BPHC. All other claims raised in
the Complaint as to Trump and Plaza Associates and dismissed by the October
13, 1993 judgment have been finally determined in favor of Trump and Plaza
Associates. All briefs due in connection with BPHC's appeal were filed and the
appeal was argued in March 1997. A decision is expected in the near future.
 
  Taj Associates. On March 29, 1990, Taj Associates entered into a Lease
Agreement (the "Taj Lease Agreement") with the City of Atlantic City for a
term of seven years, subject to the explicit prior approval of the NJDEP to
continue to use the land beyond April 2, 1992, pursuant to which Taj
Associates leased a parcel of land containing approximately 1,300 spaces for
employee intercept parking at a cost of approximately $1.0 million per year.
In addition, Taj Associates has expended in excess of $1.4 million in
improving the site. The permit under which the lease is operated was issued by
NJDEP on December 20, 1989 for five years and contains several conditions, one
of which required Taj Associates to find another location "off-island" for
employee parking by April 2, 1992. NJDEP extended this condition for two
successive one-year periods through April 2, 1994. On November 14, 1994, as a
result of the non-renewal of the permit, Taj Associates notified Atlantic City
that the Taj Lease Agreement had become inoperative and was therefore being
canceled as of December 20, 1994. Taj Associates subsequently obtained "off-
island" parking with Trump's Castle Associates sufficient to meet its employee
parking requirements. Atlantic City has indicated in a letter to Taj
Associates that it contests the cancellation of the Taj Lease Agreement and
claims certain extensions to the permit apply, to which Taj Associates does
not agree. No legal proceedings have been commenced by Atlantic City to date.
 
  Taj Associates was also a party to an administrative proceeding involving
allegations that it had violated certain provisions of the Casino Control Act.
In June 1996, Taj Associates entered into a stipulation and settlement with
the Division. The final outcome of this proceeding did not have a material
adverse effect on Taj Associates or on its ability to otherwise retain or
renew any casino or other licenses required under the Casino Control Act for
the operation of the Taj Mahal.
 
  Other Litigation. On March 13, 1997, THCR filed a lawsuit in the United
States District Court, District of New Jersey, against Mirage Resorts
Incorporated, the State of New Jersey, the New Jersey Department of
Transportation, the South Jersey Transportation Authority, the CRDA, the New
Jersey Transportation Trust Fund Authority and others. THCR is seeking
declaratory and injunctive relief to recognize and prevent violations by the
defendants of the casino clause of the New Jersey State Constitution and
various federal securities and environmental laws relating to proposed
infrastructure improvements in the Marina. The outcome of this action may
affect management's decision to pursue and complete the Taj Mahal Expansion.
 
  Various legal proceedings are now pending against Trump AC. Trump AC
considers all such proceedings to be ordinary litigation incident to the
character of its business. Trump AC believes that the resolution of these
claims, to the extent not covered by insurance, will not, individually or in
the aggregate, have a material adverse effect on the financial condition or
results of operations of Trump AC.
 
  From time to time, Plaza Associates and Taj Associates may be involved in
routine administrative proceedings involving alleged violations of certain
provisions of the Casino Control Act. However, management believes that the
final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on Plaza Associates or Taj
Associates or on the ability of Plaza Associates or Taj Associates to
otherwise retain or renew any casino or other licenses required under the
Casino Control Act for the operation of Trump Plaza and the Taj Mahal.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
  No matters were submitted by the Registrants to their security holders for a
vote during the fourth quarter of 1996.
 
                                      29
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
  Trump AC. THCR Holdings has owned 100% of the partnership interests in Trump
AC since June 12, 1995.
 
  Trump AC Funding. Trump AC has beneficially owned 100% of the common stock
of Trump AC Funding since its formation on January 30, 1996. There is no
established trading market for Trump AC Funding's common stock.
 
                                      30
<PAGE>
 
ITEM 6. SELECTED FINANCIAL DATA.
 
  The following table sets forth certain historical consolidated financial
information of Trump AC for each of the five years ended December 31, 1992
through 1996 (see Note 1 below).
 
  All financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the consolidated and condensed financial statements and the related notes
thereto included elsewhere in this Form 10-K.
 
<TABLE>
<CAPTION>
                                       YEARS ENDED DECEMBER 31,
                            --------------------------------------------------
                              1992      1993      1994      1995       1996
                            --------  --------  --------  --------  ----------
                                        (DOLLARS IN THOUSANDS)
<S>                         <C>       <C>       <C>       <C>       <C>
STATEMENT OF OPERATIONS
 DATA:
 Revenues:
   Gaming.................  $265,448  $264,081  $261,451  $298,073  $  752,228
   Other..................    73,270    69,203    66,869    74,182     190,995
   Trump World's Fair
    (formerly Trump Regency
    Hotel)................     9,465       --        --        --          --
                            --------  --------  --------  --------  ----------
      Gross revenues......   348,183   333,284   328,320   372,255     943,223
   Promotional allowances.    34,865    32,793    33,257    38,934     104,400
                            --------  --------  --------  --------  ----------
      Net revenues........   313,318   300,491   295,063   333,321     838,823
                            --------  --------  --------  --------  ----------
 Costs and expenses:
   Gaming.................   146,328   136,895   139,540   164,839     453,863
   Other..................    23,670    24,778    23,380    23,932      56,052
   General and
    administrative........    75,459    71,624    73,075    68,550     155,346
   Depreciation and
    amortization..........    15,842    17,554    15,653    16,213      60,870
   Preopening.............       --        --        --        --        4,145
   Restructuring charges..     5,177       --        --        --          --
   Trump World's Fair
    (formerly Trump Regency
    Hotel)................    11,839       --        --        --          --
                            --------  --------  --------  --------  ----------
      Total costs and
       expenses...........   278,315   250,851   251,648   273,534     730,276
                            --------  --------  --------  --------  ----------
 Income from operations...    35,003    49,640    43,415    59,787     108,547
 Interest expense, net....   (31,356)  (39,889)  (48,219)  (43,261)   (112,122)
 Other non-operating
  income (expense)(a).....    (1,462)   (3,873)   (4,931)   (5,743)     14,194
 Extraordinary (loss)
  gain(b).................   (38,205)    4,120       --     (9,250)    (59,132)
 (Provision) benefit for
  income taxes............       233      (660)      865       --          --
                            --------  --------  --------  --------  ----------
 Net income (loss)........  $(35,787) $  9,338  $ (8,870) $  1,533  $  (48,513)
                            ========  ========  ========  ========  ==========
BALANCE SHEET DATA (AT END
 OF PERIOD):
 Cash and cash
  equivalents.............  $ 18,802  $ 14,393  $ 11,144  $ 15,937  $   71,320
 Property and equipment,
  net.....................   300,266   293,141   298,354   395,942   1,456,267
 Total assets.............   370,349   374,498   375,643   480,024   1,659,006
 Total long-term debt, net
  of current maturities...   249,723   395,948   403,214   332,721   1,207,795
 Preferred partnership
  interest................    58,092       --        --        --          --
 Total capital (deficit)..    11,362   (54,710)  (63,580)  110,812     331,858
</TABLE>
--------
Note 1: On April 17, 1996, a subsidiary of THCR was merged with and into THCR
   Holding Corp., which represented 50% of the economic interest in Taj
   Associates. Trump held the remaining 50% interest in Taj Associates and
   contributed such interest in Taj Associates to Trump AC in exchange for
   limited partnership interests in THCR Holdings. All of the outstanding
   shares of THCR Holding Corp. Class C Common Stock held by Trump were
   canceled and all of the outstanding shares of THCR Holding Corp. Class B
   Common Stock were redeemed in connection with the Taj Acquisition. In
   connection with the Taj Acquisition, Taj Associates became a wholly owned
   subsidiary of Trump AC. Therefore, the financial data as of December 31,
   1996 and for the year ended December 31, 1996 reflect the operations of
   THCR and Plaza Associates for the full year and Taj Associates for the
   period from April 17, 1996 to December 31, 1996.
 
(a) Other non-operating (income) expense for 1992 includes $1.5 million of
    costs associated with certain litigation. Other non-operating (income)
    expense for the years ended December 31, 1993, 1994 and 1995 includes $3.9
    million, $4.9 million and $3.7 million, respectively, of real estate taxes
    and leasing costs associated with Trump Plaza East. Other non-operating
    (income) expense for the year ended December 31, 1995 also includes $2.0
    million in costs associated with Trump World's Fair. Other non-operating
    (income) expense for the year ended December 31, 1996 includes $15.0
    million license fee revenue.
(b) The extraordinary loss for the year ended December 31, 1992 consists of
    the effect of stating Plaza Funding's Preferred Stock issued at fair value
    as compared to the carrying value of these securities and the write off of
    certain deferred financing charges and costs. The excess of the carrying
    value of a note obligation over the amount of the settlement payment net
    of related prepaid expenses in the amount of $4,120,000 has been reported
    as an extraordinary gain for the year ended December 31, 1993. The
    extraordinary loss of $9,250,000 for the period from January 1, 1995
    through June 12, 1995 relates to the redemption of the Plaza PIK Notes and
    Plaza PIK Note Warrants and the write off of related unamortized deferred
    financing costs. The extraordinary loss for the year ended December 31,
    1996 of $59.1 million relates to the redemption of the Plaza Notes and the
    Plaza PIK Note Warrants and the write-off of unamortized deferred
    financing costs.
 
                                      31
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.
 
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
 
  The financial information presented below reflects the results of operations
of Trump AC. Because Trump AC has no business operations other than its
interest in Plaza Associates and Taj Associates at December 31, 1996, its
results of operations are not discussed below. Taj Associates was acquired on
April 17, 1996.
 
  The following table includes selected data of Plaza Associates and Taj
Associates (since date of acquisition) for the year ended December 31, 1996
and of Plaza Associates for the year ended December 31, 1995:
 
<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,
                                      -----------------------------------------
                                         1995       1996       1996      1996
                                        PLAZA      PLAZA       TAJ      TOTAL
                                      ASSOCIATES ASSOCIATES ASSOCIATES TRUMP AC
                                      ---------- ---------- ---------- --------
                                                    (IN MILLIONS)
<S>                                   <C>        <C>        <C>        <C>
Revenues:
  Gaming.............................   $298.1     $368.9     $383.3   $ 752.2
  Other..............................     74.2      105.7       85.3     191.0
                                        ------     ------     ------   -------
  Gross Revenues.....................    372.3      474.6      468.6     943.2
Less: Promotional Allowances.........     39.0       56.3       48.1     104.4
                                        ------     ------     ------   -------
  Net Revenues.......................    333.3      418.3      420.5     838.8
                                        ------     ------     ------   -------
Costs & Expenses:
  Gaming.............................    164.8      223.9      230.0     453.9
  Pre-opening........................      --         4.1        --        4.1
  General & Administrative...........     71.9       91.1       64.2     155.3
  Depreciation & Amortization........     16.2       23.0       37.8      60.9
  Other..............................     20.6       29.9       26.2      56.1
                                        ------     ------     ------   -------
  Total Costs and Expenses...........    273.5      372.0      358.2     730.3
                                        ------     ------     ------   -------
Income from Operations...............     59.8       46.3       62.3     108.5
                                        ------     ------     ------   -------
  Non-Operating Income (Expense).....     (4.7)       4.9       10.7      16.6
  Interest Expense...................    (44.3)     (47.1)     (67.4)   (114.5)
                                        ------     ------     ------   -------
  Total Non-Operating Income
   (Expense).........................    (49.0)     (42.2)     (56.7)    (97.9)
                                        ------     ------     ------   -------
  Extraordinary Loss.................     (9.3)     (59.1)       --      (59.1)
  Provision for Income Taxes.........      0.0        0.0        --        0.0
                                        ------     ------     ------   -------
Net Income (Loss)....................   $  1.5     $(55.0)    $  5.6   $ (48.5)
                                        ======     ======     ======   =======
</TABLE>
 
  Gaming revenues were $752.2 million for the year ended December 31, 1996, an
increase of $454.1 million or 152.3% from gaming revenues of $298.1 million
for 1995. This increase in gaming revenues consists of $383.3 million from Taj
Associates since the date of acquisition in addition to an increase in Plaza
Associates table games and slot revenues. Management believes that Plaza
Associates' 23.8% increase in gaming revenues is primarily due to the May 1996
opening of Trump World's Fair, the February 1996 opening of Trump Plaza East,
the availability of additional hotel rooms at both Trump World's Fair and
Trump Plaza East, as well as management's marketing initiatives.
 
  Slot revenues were $471.0 million for the year ended December 31, 1996, an
increase of $269.3 million or 133.5% from slot revenues of $201.7 million for
1995. This increase is directly attributable to the acquisition of Taj
Associates which contributed $206.2 million in slot revenues. Plaza Associates
slot revenues were $264.8 million for the year ended December 31, 1996, an
increase of $63.1 million or 31.3% from slot revenues of $201.7 million for
the year ended December 31, 1995. Plaza Associates' increase is due to the
addition of 1,865 slot machines at Trump World's Fair and Trump Plaza East, as
well as management's marketing programs.
 
                                      32
<PAGE>
 
  Table games revenues were $266.0 million for the year ended December 31,
1996, an increase of $169.6 million or 175.9% from $96.4 million for 1995.
This increase is attributable to the acquisition of Taj Associates which
contributed $161.9 million in table games revenues with a corresponding $942.5
million of table games drop (i.e., the dollar value of chips purchased). Plaza
Associates' table games revenue of $104.1 million for the year ended December
31, 1996 increased by $7.7 million or 8.0% from 1995. Plaza Associates'
increase is primarily due to an increase in table games drop by 9.6% for the
year ended December 31, 1996.
 
  During the year ended December 31, 1996, gaming credit extended to customers
was approximately 25.8% of overall table play. This reflects Taj Associates'
gaming credit which was approximately 30.7% of overall table play since its
date of acquisition in addition to Plaza Associates, gaming credit which
accounted for 17.4% of Plaza Associates, overall table play. At December 31,
1996, Plaza Associates' gaming receivables amounted to approximately $11.7
million, a decrease of approximately $2.1 million from 1995, with allowances
for doubtful gaming receivables of approximately $5.9 million, a decrease of
$2.0 million from 1995. The increase over the prior year directly reflects Taj
Associates, $41.0 million of gaming receivables at December 31, 1996, with an
allowance for doubtful gaming receivables of $10.9 million.
 
  In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/keno operations generated approximately $13.1 million in poker
revenue, $1.0 million in race simulcasting revenue, and $1.1 million in keno
revenue since its acquisition date.
 
  Other revenues were $191.0 million for the year ended December 31, 1996, an
increase of $116.8 million or 157.4% from other revenues of $74.2 million for
1995. Other revenues include revenues from rooms, food and beverage and
miscellaneous items. The increase primarily is attributable to the acquisition
of Taj Associates which generated $85.3 million of other revenue since its
acquisition date. Plaza Associates' other revenue was $105.7 million for the
year ended December 31, 1996, an increase of $31.5 million or 42.5% from 1995.
Plaza Associates' increase reflects the additional rooms at Trump Plaza East
and Trump World's Fair as well as increases in rooms, food and beverage
revenues attendant to increased levels of gaming activity due in part to
increased promotional activities.
 
  Promotional allowances were $104.4 million for the year ended December 31,
1996, an increase of $65.4 million or 167.7% from promotional allowances of
$39.0 million for the year ended December 31, 1995. Taj Associates generated
$48.1 million in promotional allowances since its acquisition date. Plaza
Associates experienced an increase in promotional allowances to $56.3 million
or 44.4% from promotional allowances of $39.0 million in 1995. Plaza
Associates' increase is attributable primarily to the additional rooms at
Trump World's Fair and Trump Plaza East as well as the addition of three
restaurants at Trump World's Fair, and increases in marketing initiatives
during the year ended December 31, 1996.
 
  Gaming costs and expenses were $453.9 million for the year ended December
31, 1996, an increase of $289.1 million or 175.4% from $164.8 million for
1995. This increase was primarily attributable to Taj Associates' gaming costs
and expenses of $230.0 million since its acquisition. Gaming costs and
expenses for Plaza Associates were $223.9 million, an increase of $59.1
million or 35.9% from $164.8 million for 1995. Plaza Associates' increase is
primarily due to increased promotional and operating expenses as well as taxes
associated with increased levels of gaming revenues from 1995.
 
  General and administrative expenses were $155.3 million for the year ended
December 31, 1996, an increase of $83.4 million or 116.0% from general and
administrative expenses of $71.9 million for 1995. This increase is primarily
due to the acquisition of Taj Associates which recorded $64.2 million in
general and administrative expenses since its acquisition. Plaza Associates'
increase of $19.2 million over 1995 is due in part to expenses associated with
the Trump Plaza East and Trump World's Fair.
 
  Pre-opening expenses of $4.1 million were incurred by Plaza Associates and
reflect the costs associated with the opening Trump World's Fair in 1996.
 
 
                                      33
<PAGE>
 
  Other expenses were $56.1 million for the year ended December 31, 1996, an
increase of $35.5 million or 172.3% from 1995. Other expenses include costs
associated with operating Trump Plaza, Trump World's Fair and the Taj Mahal
hotels. The increase over the prior year reflects Taj Associates' $26.2
million of other expenses since its date of acquisition. Plaza Associates'
other expenses increased by $9.3 million or 45.1% from 1995. This increase is
due to operating Trump World's Fair and Trump Plaza East, both with opening
dates in 1996.
 
  Income from operations was $108.5 million for year ended December 31, 1996,
an increase of $48.7 million or 81.4% from income from operations of $59.8
million for 1995. Taj Associates contributed $62.3 million of income from
operations since its acquisition. Plaza Associates contributed $46.3 million
during the year ended December 31, 1996, a decrease of $13.5 million or 22.6%
from the comparable period in 1995.
 
  Interest expense was $114.5 million for the year ended December 31, 1996, an
increase of $70.2 million or 158.5% from interest expense of $44.3 million for
1995. This increase is attributable to the acquisition of Taj Associates with
an interest expense of $67.4 million at December 31, 1996. Plaza Associates
reflects $47.1 million interest expense at December 31, 1996, compared to
$44.3 million for 1995.
 
  Other non-operating income was $16.6 million for the year ended December 31,
1996, an increase of $21.3 million from 1995. Non-operating income includes
$15.0 million of non-refundable licensing fee agreements entered into with
Atlantic Jersey Thermal Services, Inc. by Plaza Associates and Taj Associates
and $1.5 million of interest income.
 
  The extraordinary loss of $59.1 million for the year ended December 31, 1996
relates to the redemption of the Plaza Notes and the write-off of unamortized
deferred financing costs on April 17, 1996. The extraordinary loss of $9.3
million for the year ended December 31, 1995 relates to the redemption and
write-off of unamortized deferred financing costs relating to the redemption
of Plaza PIK Notes and Plaza PIK Note Warrants on June 12, 1995.
 
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
 
  The financial information presented below reflects the results of operations
of Plaza Associates. Because Trump AC had no business operations other than
its interest in Plaza Associates at December 31, 1995, its results of
operations are not discussed below.
 
  Gaming revenues were $298.1 million for the year ended December 31, 1995, an
increase of $36.6 million or 14.0% from gaming revenues of $261.5 million in
1994. This increase in gaming revenues consisted of an increase in both table
games and slot revenues. While 1994 was adversely affected by unfavorable
winter weather, construction and management turnover, management believes that
the increase in gaming revenues in 1995 is also due to an increased level of
demand evident in the Atlantic City Market generally, as well as to
management's marketing and other initiatives, including the introduction of
new slot machines and table games, the addition of bill acceptors on slot
machines, an increase in casino floor square footage and an increase in
promotional allowances.
 
  Slot revenues were $201.7 million for the year ended December 31, 1995, an
increase of $33.0 million or 19.6% from $168.7 million in 1994. This increase
was primarily due to certain factors mentioned in the foregoing paragraph
including the implementation of an aggressive slot marketing program.
 
  Table games revenues were $96.4 million for the year ended December 31,
1995, an increase of $3.6 million or 3.9% from table games revenues of $92.8
million in 1994. This was primarily due to an increase in table games drop
(i.e., the dollar value of chips purchased) by $27.0 million or 4.5% for the
year ended December 31, 1995 from 1994.
 
  During the year ended December 31, 1995, gaming credit extended to customers
was approximately 17.7% of overall table play, an increase of approximately
0.7% from 1994. At December 31, 1995, gaming receivables
 
                                      34
<PAGE>
 
amounted to approximately $13.8 million, an increase of approximately $0.1
million from 1994, with allowances for doubtful gaming receivables of
approximately $7.9 million, a decrease of approximately $0.6 million from
1994.
 
  Other revenues were $74.2 million for the year ended December 31, 1995, an
increase of $7.3 million or 10.9% from other revenues of $66.9 million in
1994. Other revenues include revenues from rooms, food and beverage and
miscellaneous items. This increase primarily reflects increases in food and
beverage revenues attendant to higher levels of gaming activity and
promotional allowances and expenses.
 
  Promotional allowances were $39.0 million for the year ended December 31,
1995, an increase of $5.7 million or 17.1% from $33.3 million in 1994. This
increase is primarily attributable to an increase in gaming activity.
 
  Gaming costs and expenses were $164.8 million for the year ended December
31, 1995, an increase of $25.3 million or 18.1% from gaming costs and expenses
of $139.5 million in 1994. This increase is primarily due to increased
promotional and operating expense and taxes associated with increased levels
of gaming revenues from 1994.
 
  General and administrative expenses were $71.9 million for the year ended
December 31, 1995, a decrease of $4.8 million or 6.3% from general and
administrative expenses of $76.7 million in 1994. This decrease is primarily
the result of cost containment measures.
 
  Income from operations was $59.8 million for the year ended December 31,
1995, an increase of $16.4 million or 37.8% from income from operations of
$43.4 million in 1994.
 
  Net interest expense was $43.3 million for the year ended December 31, 1995,
a decrease of $4.9 million or 10.2% from net interest expense of $48.2 million
in 1994. This decrease is attributable to the retirement of the Plaza PIK
Notes in June 1995 partly offset by the increased interest expense associated
with equipment financing and capital leases incurred during 1995.
 
  Other non-operating expense was $5.7 million for the year ended December 31,
1995, an increase of $0.8 million or 16.3% from non-operating expense of $4.9
million in 1994. This increase is primarily attributable to costs associated
with Trump World's Fair.
 
  The extraordinary loss of $9.3 million for the year ended December 31, 1995
relates to the redemption and write-off of unamortized deferred financing
costs relating to the repurchase and redemption on June 12, 1995 of all of the
Plaza PIK Notes and related Plaza PIK Note Warrants.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  Cash flows from operating activities are Trump AC's principal source of
liquidity. With proceeds from the 1996 Offerings, Trump AC, among other
things, retired the outstanding Taj Bonds, retired the outstanding Plaza
Notes, satisfied the indebtedness of Taj Associates under its loan agreement
with NatWest, purchased certain real property used in the operation of Trump
Plaza and the Taj Mahal, and paid Bankers Trust to release certain liens and
guarantees.
 
  The indenture under which the Trump AC Mortgage Notes were issued (the
"Trump AC Mortgage Note Indenture") restricts the ability of Trump AC and its
subsidiaries to make distributions or pay dividends, as the case may be,
unless certain financial ratios are achieved. In addition, the ability of
Plaza Associates and Taj Associates to make payments of dividends or
distributions (except for payment of interest) through Trump AC to THCR
Holdings may be restricted by the CCC.
 
  With proceeds from the June 1995 Offerings, THCR Holdings made a capital
contribution of $172.9 million to Trump AC and Plaza Associates. This
contribution was used to repurchase and redeem the Plaza PIK Notes and Plaza
PIK Note Warrants (together with related accrued interest), exercise the Trump
World's Fair Purchase
 
                                      35
<PAGE>
 
Option and purchase Trump World's Fair and fund construction costs incurred in
the renovation and integration of Trump Plaza East. During the year ended
December 31, 1996, THCR Holdings made additional capital contributions of $50
million to Plaza Associates to fund such construction costs. The renovations
of Trump Plaza East were completed in February 1996, and Trump World's Fair in
May 1996. Capital expenditures attributable to Trump Plaza East were
approximately $36.8 million, including $28.0 million for the purchase of Trump
Plaza East, and $24.9 million for the year ended December 31, 1996 and 1995.
Capital expenditures attributable to Trump World's Fair were approximately
$61.6 million and $73.7 million for the year ended December 31, 1996 and 1995,
respectively. Capital expenditures for the purchase of property previously
leased upon which a portion of the Trump Plaza is located amounted to
approximately $14.5 million. Capital expenditures for improvements to Trump
Plaza's existing facilities were $10.9 million and $11.2 million for the years
ended December 31, 1996 and 1995. In January 1997, $10.0 million was expended
for the purchase of another parcel of property previously leased, upon which a
portion of Trump Plaza is located.
 
  Capital expenditures attributable to the Taj Mahal were $90.9 million for
the period April 17, 1996 through December 31, 1996. Capital expenditures for
improvements to existing facilities were approximately $15.6 million for the
period April 17, 1996 through December 31, 1996. Capital expenditures for the
purchase of property previously leased upon which a portion of the casino
hotel complex is situated and the Taj Acquisition and closing costs amounted
to approximately $61.8 million. Capital expenditures attributable to the Taj
Mahal Expansion were approximately $13.5 million for the period April 17, 1996
through December 31, 1996.
 
  The Taj Mahal Expansion consists of the construction of a new 15-bay bus
terminal, which was completed in December 1996, a 2,400 space expansion of the
existing self parking facilities, which is expected to be completed in May
1997 and an approximate 7,000 square-foot casino expansion with 250 slot
machines expected to be completed in June 1997. It is expected that the budget
for the Taj Mahal Expansion of approximately $41.7 million will be funded
principally out of cash from operations of Taj Associates and Plaza
Associates.
 
  At December 31, 1996, Trump AC had combined working capital of $27.2
million. The combined working capital included a current receivable from the
CRDA of approximately $3.2 million for reimbursable improvements made to Trump
Plaza East. On March 14, 1997, $2.3 million was received from the CRDA.
 
SEASONALITY
 
  The gaming industry in Atlantic City is seasonal, with the heaviest activity
occurring during the period from May through September. Consequently, Trump
AC's operating results during the two quarters ending in March and December
would not likely be as profitable as the two quarters ending in June and
September.
 
INFLATION
 
  There was no significant impact on operations as a result of inflation
during 1996, 1995 or 1994.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
  An index to financial statements and required financial statement schedules
is set forth in Item 14.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
  None.
 
                                      36
<PAGE>
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  MANAGEMENT OF TRUMP AC AND TRUMP AC FUNDING
 
  THCR is the general partner of THCR Holdings. As the sole general partner of
THCR Holdings, THCR generally has the exclusive rights, responsibilities and
discretion in the management and control of THCR Holdings. THCR Holdings owns
100% of Trump AC, directly and through its ownership of Trump AC Holding and
Trump AC Funding. Trump AC and TACC are the general partners of Plaza
Associates and Taj Associates. The Board of Directors of Trump AC Funding
consists of Messrs. Trump, Nicholas L. Ribis, Robert M. Pickus, Wallace B.
Askins and Don M. Thomas. The Indenture to which the Trump AC Mortgage Notes
were issued (the "Trump AC Mortgage Note Indenture") requires that two
directors of Trump AC Funding be persons who would qualify as "Independent
Directors" as such term is defined by the rules of the American Stock
Exchange, Inc. ("Amex") (the "Independent Directors"). The Amex rules define
"independent directors" as those who are not officers of the company, are
neither related to its officers nor represent concentrated family holdings of
its shares and who, in view of the company's board of directors, are free of
any relationship that would interfere with the exercise of independent
judgment.
 
  Set forth below are the names, ages, positions and offices held with Trump
AC and Trump AC Funding and a brief account of the business experience during
the past five years of each member of the board of directors of Trump AC
Funding and of the executive officers of Trump AC and Trump AC Funding.
 
  Donald J. Trump--Trump, 50 years old, has been Chairman of the Board of THCR
and THCR Funding since their formation in 1995. Trump was a 50% shareholder,
Chairman of the Board of Directors, President and Treasurer of Trump Plaza GP
and the managing general partner of Plaza Associates prior to June 1993. Trump
was Chairman of the Executive Committee and President of Plaza Associates from
May 1986 to May 1992 and was a general partner of Plaza Associates until June
1993. Trump has been a director and President of Trump AC Holding since
February 1993 and was a partner in Trump AC from February 1993 until June
1995. Trump has been Chairman of the Board of Directors of Trump AC Funding
since its formation in January 1996. Trump has been Chairman of the Board of
Directors of THCR Holding Corp. and THCR/LP since October 1991; President and
Treasurer of THCR Holding Corp. since March 4, 1991; Chairman of the Board of
Directors, President and Treasurer of TCI since June 1988; sole director,
President and Treasurer of TACC since March 1991; Chairman of the Executive
Committee of Taj Associates from June 1988 to October 1991; and President and
sole Director of Realty Corp. since May 1986. Trump has been the sole director
of Trump Indiana since its formation. Trump has been Chairman of the Board of
Partner Representatives of Castle Associates, the partnership that owns
Trump's Castle, since May 1992; and was Chairman of the Executive Committee of
Castle Associates from June 1985 to May 1992. Trump is the Chairman of the
Board of Directors, President and Treasurer of Trump's Castle Funding, Inc.
("Castle Funding"). Trump is the Chairman of the Board and Treasurer of
Trump's Castle Hotel & Casino, Inc. ("TCHI"). Trump is the President,
Treasurer, sole director and sole shareholder of Trump Casinos II, Inc. ("TCI-
II"). Trump has been a Director of THCR Enterprises, Inc., a Delaware
corporation ("THCR Enterprises"), since its formation in January 1997. Trump
is also the President of The Trump Organization, which has been in the
business, through its affiliates and subsidiaries, of acquiring, developing
and managing real estate properties for more than the past five years. Trump
was a member of the Board of Directors of Alexander's Inc. from 1987 to March
1992.
 
  Nicholas L. Ribis--Mr. Ribis, 52 years old, has been President, Chief
Executive Officer, Chief Financial Officer, and a director of THCR and THCR
Funding and Chief Executive Officer of THCR Holdings since their formation in
1995. Mr. Ribis has been the Chief Executive Officer of Plaza Associates since
February 1991, was President from April 1994 to February 1995, was a member of
the Executive Committee of Plaza Associates from April 1991 to May 29, 1992
and was a director and Vice President of Trump Plaza GP from May 1992 until
June 1993. Mr. Ribis has been Vice President of Trump AC Holding since
February 1995. Mr. Ribis has served as a director of Trump AC Holding since
June 1993. Mr. Ribis has been Chief Executive Officer,
 
                                      37
<PAGE>
 
President and director of Trump AC Funding since its formation in January
1996. Mr. Ribis is the Vice President of TACC. Mr. Ribis has been the
President and Chief Executive Officer of Trump Indiana since its formation.
Mr. Ribis has been a Director of THCR/LP and THCR Holding Corp. since October
1991 and was Vice President of THCR/LP and THCR Holding Corp. until June 1995;
Chief Executive Officer of Taj Associates since February 1991; Vice President
of TCI since February 1991 and Secretary of TCI since September 1991; Director
of Realty Corp. since October 1991; and a member of the Executive Committee of
Taj Associates from April 1991 to October 1991. He has also been Chief
Executive Officer of Castle Associates since March 1991; member of the
Executive Committee of Castle Associates from April 1991 to May 1992; member
of the Board of Partner Representatives of Castle Associates since May 1992;
and has served as the Vice President and Assistant Secretary of TCHI since
December 1993 and January 1991, respectively. Mr. Ribis is now a director of
TCHI. Mr. Ribis has served as Vice President of TCI-II since December 1993 and
had served as Secretary of TCI-II from November 1991 to May 1992. Mr. Ribis
has been Vice President of Trump Corp. since September 1991. Mr. Ribis has
been the President and a director of THCR Enterprises since January 1997. From
January 1993 to January 1995 Mr. Ribis served as the Chairman of the Casino
Association of New Jersey and has been a member of the Board of Trustees of
the CRDA since October 1993. From January 1980 to January 1991, Mr. Ribis was
Senior Partner in, and from February 1991 to December 1995, was Counsel to the
law firm of Ribis, Graham & Curtin (now practicing as Graham, Curtin &
Sheridan, A Professional Association), which serves as New Jersey legal
counsel to all of the above-named companies and certain of their affiliated
entities.
 
  Robert M. Pickus--Mr. Pickus, 42 years old, has been Executive Vice
President and Secretary of THCR since its formation in 1995. He has also been
the Executive Vice President of Corporate and Legal Affairs of Plaza
Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates
and, since April 1994, he has been the Assistant Secretary of Trump AC
Holding. Mr. Pickus has been Secretary and director of Trump AC Funding since
its formation in January 1996. Mr. Pickus has been the Executive Vice
President and Secretary of Trump Indiana since its inception. Mr. Pickus has
been the Executive Vice President of Corporate and Legal Affairs of Taj
Associates since February 1995, and a Director of THCR Holding Corp. and
THCR/LP since November 1995. He was the Senior Vice President and Secretary of
Castle Funding from June 1988 to December 1993 and General Counsel of Castle
Associates from June 1985 to December 1993. Mr. Pickus is the Assistant
Secretary of TACC. Mr. Pickus was also Secretary of TCHI from October 1991
until December 1993. Mr. Pickus is a director of TCHI. Mr. Pickus has been the
Executive Vice President of Corporate and Legal Affairs of Castle Associates
since February 1995, Secretary of Castle Associates since February 1996 and a
member of the Board of Partner Representatives of Castle Associates since
October 1995. Mr. Pickus is currently the Secretary of THCR Holding Corp., has
been the Vice President, Secretary and Director of THCR Enterprises since
January 1997 and has been Executive Vice President of TCS since its inception.
 
  John P. Burke--Mr. Burke, 49 years old, has been Senior Vice President of
Corporate Finance of THCR, THCR Holdings and THCR Funding since January 1996,
and has been the Corporate Treasurer of THCR, THCR Holdings and THCR Funding
since their formation in 1995. He has also been Corporate Treasurer of Plaza
Associates and Taj Associates since October 1991. Mr. Burke has been the
Treasurer of Trump Indiana since its formation. Mr. Burke has been Treasurer
of Trump AC since its formation in January 1996. Mr. Burke was a Director of
THCR/LP and THCR Holding Corp. from October 1991 to April 1996 and was Vice
President of THCR/LP until June 1995. Mr. Burke has been the Corporate
Treasurer of Castle Associates since October 1991, the Vice President of
Castle Associates, Castle Funding, TCI-II and TCHI since December 1993 a
member of the Board of Partner Representatives of Castle Associates since
March 1997 and the Vice President-Finance of The Trump Organization since
September 1990. Mr. Burke was an Executive Vice President and Chief
Administrative Officer of Imperial Corporation of America from April 1989
through September 1990. Mr. Burke has been the Vice President and Secretary of
THCR Enterprises since January 1997.
 
  Wallace B. Askins--Mr. Askins, 66 years old, has been a director of THCR and
THCR Funding since June 1995. He has also been a director of Trump AC Holding
since April 11, 1994, and was a partner representative of the Board of Partner
Representatives of Castle Associates from May 1992 to June 1995. Mr. Askins
served as
 
                                      38
<PAGE>
 
a director of TCI-II from May 1992 to December 1993. From June 1984 to
November 1992, Mr. Askins served as Executive Vice President, Chief Financial
Officer and as a director of Armco Inc. Mr. Askins also serves as a director
of EnviroSource, Inc.
 
  Don M. Thomas--Mr. Thomas, 66 years old, has been a director of THCR and
THCR Funding since June 1995. He has also been the Senior Vice President of
Corporate Affairs of the Pepsi-Cola Bottling Co. of New York since January
1985. Mr. Thomas was the Acting Chairman, and a Commissioner, of the CRDA from
1985 through 1987, and a Commissioner of the CCC from 1980 through 1984. Mr.
Thomas was a director of Trump Plaza GP until June 1993 and has been a
director of Trump AC Holding since June 1993. Mr. Thomas is an attorney
licensed to practice law in the State of New York.
 
  All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
 
  Trump and Nicholas L. Ribis served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties
filed their petition for reorganization under Chapter 11 of the Bankruptcy
Code on July 17, 1991. The Second Amended Joint Plan of Reorganization of such
parties was confirmed on August 28, 1991, and was declared effective on
October 4, 1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus
also served as Executive Committee members, officers and/or directors of
Castle Associates and its affiliated entities at the time such parties filed a
petition for reorganization under Chapter 11 of the Bankruptcy Code on March
9, 1992. The First Amended Joint Plan of Reorganization of such parties was
confirmed on May 5, 1992, and was declared effective on May 29, 1992. Trump,
Nicholas L. Ribis and John P. Burke served as either executive officers and/or
directors of Plaza Associates and its affiliated entities when such parties
filed their petition for reorganization under Chapter 11 of the Bankruptcy
Code in March 1992. The First Amended Joint Plan of Reorganization of such
parties was confirmed on April 30, 1992, and was declared effective on May 29,
1992. Trump was a partner of Plaza Operating Partners Ltd. when it filed a
petition for reorganization under Chapter 11 of the Bankruptcy Code on
November 2, 1992. The plan of reorganization for Plaza Operating Partners Ltd.
was confirmed on December 11, 1992 and declared effective in January 1993.
 
  MANAGEMENT OF TRUMP PLAZA
 
  Trump AC is the managing general partner of Plaza Associates. Trump AC
Holding is the managing general partner of Trump AC. The Board of Directors of
Trump AC Holding consists of Messrs. Trump, Ribis, Wallace B. Askins and Don
M. Thomas.
 
  Set forth below are the names, ages, positions and offices held with Plaza
Associates and a brief account of the business experience during the past five
years of each of the executive officers of Plaza Associates other than those
who are also directors or executive officers of Trump AC or Trump AC Funding.
 
  Barry J. Cregan--Mr. Cregan, 42 years old, has been Chief Operating Officer
of Plaza Associates since September 19, 1994 and President since March 1995.
Since February 21, 1995, Mr. Cregan has been Vice President of Trump AC
Holding. Prior to accepting these positions at Trump Plaza, Mr. Cregan was
President of The Plaza Hotel in New York for approximately three years. Prior
to joining The Plaza Hotel, he was Vice President of Hotel Operations at
Trump's Castle. In addition, Mr. Cregan has worked for Hilton and Hyatt in
executive capacities as well as working in Las Vegas and Atlantic City in
executive capacities.
 
  Fred A. Buro--Mr. Buro, 40 years old, has been the Executive Vice President
of Marketing of Plaza Associates since May 1994. Mr. Buro previously served as
the President of Casino Resources, Inc., a casino marketing, management and
development organization from 1991 through 1994. Prior to that, Mr. Buro
served from 1984 through 1991 as the President of a professional services
consulting firm.
 
  James A. Rigot--Mr. Rigot, 45 years old, has been Executive Vice President
of Casino Operations of Plaza Associates since November 1994. Mr. Rigot served
as Vice President of Casino Operations of Tropicana Casino
 
                                      39
<PAGE>
 
and Entertainment Resort from July 1989 through November 1994. From January
1989 through July 1989, Mr. Rigot was Assistant Casino Manager of Resorts
Casino Hotel.
 
  Steven C. Hann--Mr. Hann, 40 years old, has been the Executive Vice
President of Casino Sales and Marketing of Plaza Associates since May 1995.
Prior to joining Trump Plaza, Mr. Hann served in various marketing positions
at the Sands Hotel and Casino since 1989, most recently Vice President of
Casino Marketing and previously as Director of Casino Credit for Greate Bay
Hotel and Casino.
 
  All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
 
  MANAGEMENT OF THE TAJ MAHAL
 
  Set forth below are the names, ages, positions and offices held with Taj
Associates and a brief account of the business experience during the past five
years of each of the executive officers and certain key employees of Taj
Associates other than those who are also directors or executive officers of
Trump AC or Trump AC Funding.
 
  Rodolfo E. Prieto--Mr. Prieto, 53 years old, has been Chief Operating
Officer of Taj Associates since October 1996. From December 1995 to October
1996, Mr. Prieto was the Executive Vice President, Operations of Taj
Associates. Prior to joining the Taj Mahal, Mr. Prieto was Executive Vice
President and Chief Operating Officer for Elsinore Corporation from May 1995
to November 1995; Executive Vice President in charge of the development of the
Mojave Valley Resort for Elsinore Corporation from December 1994 to April 1995
and Executive Vice President and Assistant General Manager for the Tropicana
Resort and Casino from September 1986 to November 1994.
 
  Larry W. Clark--Mr. Clark, 52 years old, has been Executive Vice President,
Casino Operations of Taj Associates since November 1991, Senior Vice
President, Casino Operations of Taj Associates from May 1991 to November 1991,
and Vice President, Casino Administration of Taj Associates from April 1991 to
May 1991 and from January 1990 to November 1990. Prior to joining the Taj
Mahal, Mr. Clark was Vice President, Casino Operations of the Dunes Hotel &
Country Club from November 1990 to April 1991 and Director of Casino Marketing
and Vice President, Casino Operations of the Showboat Hotel & Casino from
November 1988 to January 1990.
 
  Walter Kohlross--Mr. Kohlross, 55 years old, has been Senior Vice President,
Food & Beverages of Taj Associates since June 1992, Vice President
International Marketing of Taj Associates from June 1993 through October 1995,
Vice President, Hotel Operations of Taj Associates from June 1991 to June
1992, and was Vice President, Food & Beverage of Taj Associates from 1988 to
June 1991.
 
  Nicholas J. Niglio--Mr. Niglio, 50 years old, has been Executive Vice
President, International Marketing of Taj Associates since May 1996. From
November 1995 to May 1996, Mr. Niglio was Senior Vice President, Casino
Marketing of Taj Associates. From February 1995 to October 1995, Mr. Niglio
was Vice President, International Marketing of Taj Associates. Prior to
joining Taj Associates, Mr. Niglio was Executive Vice President of
International Marketing/Player Development for Castle Associates from 1993
until 1995. Prior to that, Mr. Niglio served as Senior Vice President,
Marketing of Caesar's World Marketing Corporation from 1991 until 1993.
 
  Patrick J. O'Malley--Mr. O'Malley, 42 years old, has been the Executive Vice
President of Finance of Taj Associates since October 1996. Prior to joining
the Taj Mahal, Mr. O'Malley was the Executive Vice President of Hotel
Operations of Plaza Associates from September 1995 to October 1996. Prior to
joining Trump Plaza, from September 1994 until September 1995, Mr. O'Malley
was President of The Plaza Hotel in New York City. From December 1989 until
September 1994, Mr. O'Malley was the Vice President of Finance of The Plaza
Hotel in New York City. Prior to joining The Plaza Hotel in New York City,
from 1986 to 1989, Mr. O'Malley was a Regional Financial Controller for the
Four Seasons Hotel and Resorts, Ltd. From 1979 to 1986, Mr. O'Malley worked in
the Middle East and Europe as Hotel Controller for Marriott International
Hotels.
 
 
                                      40
<PAGE>
 
  Loretta I. Viscount--Ms. Viscount, 37 years old, has been Vice President of
Legal Affairs of Taj Associates since January 1997, Executive Director of
Legal Affairs for Taj Associates from May 1996 to January 1997; and Executive
Director of Legal Affairs for Castle Associates from September 1987 to May
1996. Prior to that, Ms. Viscount served as in-house counsel to the Claridge
Hotel and Casino and had been engaged in the private practice of law since
1982.
 
  All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
 
  Larry W. Clark and Walter Kohlross served as either executive officers
and/or directors of Taj Associates and its affiliated entities when such
parties filed their petition for reorganization under Chapter 11 of the
Bankruptcy Code on July 17, 1991. The Second Amended Joint Plan of
Reorganization of such parties was confirmed on August 28, 1991, and was
declared effective on October 4, 1991. Rodolfo E. Prieto was an Executive Vice
President and the Chief Operating Officer for Elsinore Corporation when it
filed a petition for reorganization under Chapter 11 of the Bankruptcy Code on
October 31, 1995. Elsinore Corporation filed a plan of reorganization on
February 28, 1996, which became effective on February 28, 1997.
 
MANAGEMENT OF TCS
 
  Set forth below are the names, ages, positions and offices held with TCS and
a brief account of the business experience during the past five years of each
of the executive officers of TCS, other than those who are directors and
officers of Trump AC or Trump AC Funding.
 
  Joseph A. Fusco--Mr. Fusco, 52 years old, has been Executive Vice-President
for Government Relations & Regulatory Affairs of THCR since June 1996. From
August 1985 to June 1996, he practiced law as a partner in various Atlantic
City law firms specializing in New Jersey casino regulatory, commercial and
administrative law matters, most recently from January 1994 to June 1996 as a
partner in the law firm of Sterns & Weinroth. Mr. Fusco previously served as
Atlantic County Prosecutor, a Gubernatorial appointment, from April 1981 to
July 1985 and as Special Counsel for Licensing for the CCC from the inception
of that agency in September 1977 to March 1981. He has been admitted to
practice law in the State of New Jersey since 1969.
 
  Francis X. McCarthy, Jr.--Mr. McCarthy, 44 years old, has been the Executive
Vice President of Finance of TCS since October 1996. Mr. McCarthy was Vice
President of Finance and Accounting of Trump Plaza GP from October 1992 until
June 1993, Senior Vice President of Finance and Administration of Plaza
Associates from August 1990 to June 1994 and Executive Vice President of
Finance and Administration of Plaza Associates from June 1994 to October 1996.
Mr. McCarthy previously served in a variety of financial positions for Greate
Bay Hotel and Casino, Inc. from June 1980 through August 1990.
 
  Kevin S. Smith--Mr. Smith, 40 years old, has been the Vice President of
Corporate Litigation of TCS since October 1996. Mr. Smith was the Vice
President, General Counsel of Plaza Associates from February 1995 to October
1996. Mr. Smith was previously associated with Cooper Perskie April Niedelman
Wagenheim & Levenson, an Atlantic City law firm specializing in trial
litigation. From 1989 until February 1992, Mr. Smith handled criminal trial
litigation for the State of New Jersey, Department of Public Defender,
assigned to the Cape May and Atlantic County Conflict Unit.
 
  Francis X. McCarthy, Jr. served as an executive officer of Plaza Associates
and its affiliated entities when such parties filed their petition for
reorganization under Chapter 11 of the Bankruptcy Code in March 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
April 30, 1992, and was declared effective on May 29, 1992.
 
ITEM 11. EXECUTIVE COMPENSATION
 
  Plaza Associates and Taj Associates do not offer their executive officers
stock option or stock appreciation right plans, long-term incentive plans or
defined benefit pension plans.
 
 
                                      41
<PAGE>
 
  The following table sets forth compensation paid or accrued during the years
ended December 31, 1996, 1995 and 1994 to the Chairman of the Board of Trump
AC Holding, the Chief Executive Officer of Plaza Associates and Taj
Associates, each of the four most highly compensated executive officers of
Plaza Associates and Taj Associates whose salary and bonuses exceeded $100,000
for the year ended December 31, 1996 and one additional individual who would
have been among the four most highly paid executive officers but for he was
not employed on December 31, 1996 by Plaza Associates or Taj Associates.
 
                          SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                     ANNUAL COMPENSATION
                          ------------------------------------------
        NAME AND                                     OTHER ANNUAL     ALL OTHER
   PRINCIPAL POSITION     YEAR   SALARY    BONUS    COMPENSATION(1)  COMPENSATION
   ------------------     ---- ---------- -------- ----------------- ------------
<S>                       <C>  <C>        <C>      <C>               <C>
Donald J. Trump.........  1996 $      --  $    --      $    --        $1,031,000(2)
 Chairman of the Board,   1995        --       --           --         2,743,000(2)
 President & Treasurer    1994        --       --           --         2,353,000(2)(3)
 of Trump AC Holding
Nicholas L. Ribis.......  1996 $  998,250 $    --      $    --        $    1,188(4)
 Chief Executive Officer  1995  1,075,881      --           --             1,294(4)
 of Plaza Associates and  1994  1,195,000  250,000      280,407            1,540(4)
 Taj Associates
Barry J. Cregan(5)......  1996 $  739,200 $ 28,500     $    --        $   10,350(4)
 President and Chief      1995    637,000  284,800          --             4,576(4)
 Operating Officer        1994    153,945      --           --               -- 
 of Plaza Associates      
Rodolfo Prieto(6).......  1996 $  313,404 $    --      $    --        $    6,502(4)
 Chief Operating Officer  1995     17,673      --           --               --
 Casino Operations of     1994        --       --           --               --
 Taj Associates
Larry Clark.............  1996 $  306,525 $109,700     $    --        $    6,675(4)
 Executive V.P. Casino    1995    270,689  124,200          --             9,618(4)
 Operations of Taj        1994    254,380   97,500          --            11,794(4)
 Associates               
Nicholas L. Niglio(7)...  1996 $  276,356 $186,916     $    --        $    6,428(4)  
 Senior V.P. Casino       1995    223,458  100,236          --             9,030(4)
 Marketing of Taj         1994        --       --           --               -- 
 Associates               
R. Bruce McKee(8).......  1996 $  264,640 $    --      $    --        $    6,027(4)
                          1995    183,799  292,758          --             6,630(4)
                          1994    168,250   94,500          --             7,703(4)
</TABLE>
---------------------
(1) Represents the dollar value of annual compensation not properly
    categorized as salary or bonus, including amounts reimbursed for income
    taxes and directors' fees. Following Commission rules, perquisites and
    other personal benefits are not included in this table if the aggregate
    amount of that compensation is the lesser of either $50,000 or 10% of the
    total of salary and bonus for that officer.
(2) The amounts listed represent (i) amounts paid by Plaza Associates to Trump
    Plaza Management Corp. ("TPM"), a corporation beneficially owned by Trump,
    for services provided under a services agreement (the "TPM Services
    Agreement") and (ii) amounts paid pursuant to the Taj Services Agreement
    (as defined). In addition, Trump was reimbursed $483,000, $549,000 and
    $471,000 in 1996, 1995 and 1994, respectively, for expenses incurred
    pursuant to the TPM Services Agreement and the Taj Services Agreement.
    Trump is not an employee of Plaza Associates or Taj Associates.
(3) In addition to the payment under the TPM Services Agreement, during 1994,
    Plaza Associates paid to Trump an aggregate of $1,572,000 under a
    construction service agreement and as a commission to secure a retail
    lease at Trump Plaza.
(4) Represents vested and unvested contributions made by Plaza Associates, Taj
    Associates and/or TCS under the Trump Plaza Hotel and Casino Retirement
    Savings Plan, the Trump Taj Mahal Retirement Savings Plan and Trump Casino
    Services Retirement Savings Plan, respectively. Funds accumulated for an
    employee under these plans consisting of a certain percentage of the
    employee's compensation plus the employer matching contributions equalling
    50% of the participant's contributions, are retained until termination
    of employment, attainment of age 59 1/2 or financial hardship, at which
    time the employee may withdraw his or her vested funds.
(5) Mr. Cregan commenced employment with Plaza Associates in September 1994.
(6) Mr. Prieto commenced employment with Taj Associates in December 1995.
(7) Mr. Niglio commenced employment with Taj Associates in February 1995.
(8) Former Acting Chief Operating Officer, Chief Financial Officer and Senior
    V.P. of Finance of Taj Associates. In October 1996, Mr. McKee became the
    Chief Operating Officer of Trump's Castle.
 
                                      42
<PAGE>
 
EMPLOYMENT AGREEMENTS
 
  As a result of the June 1995 Offerings, THCR and THCR Holdings entered into
a revised employment agreement with Mr. Ribis (the "Ribis THCR Agreement") to
replace the Ribis Plaza Agreement, pursuant to which he agreed to serve as
President and Chief Executive Officer of THCR and Chief Executive Officer of
THCR Holdings. The term of the Ribis THCR Agreement is five years. Under the
Ribis THCR Agreement, Mr. Ribis's annual salary is $1,996,500. Mr. Ribis's
annual salary is paid in equal parts by THCR, Plaza Associates, Taj Associates
and Castle Associates. In the event Mr. Ribis's employment is terminated by
THCR other than for "cause" or if he incurs a "constructive termination
without cause," Mr. Ribis will receive a severance payment equal to one year's
base salary, and the phantom stock units and options will become fully vested.
The Ribis THCR Agreement defines (a) "cause" as Mr. Ribis's (i) conviction of
certain crimes, (ii) gross negligence or willful misconduct in carrying out
his duties, (iii) revocation of his casino key employee license or (iv)
material breach of the agreement, and (b) "constructive termination without
cause" as the termination of Mr. Ribis's employment at his initiative
following the occurrence of certain events, including (i) a reduction in
compensation, (ii) failure to elect Mr. Ribis as Chief Executive Officer of
THCR, (iii) failure to elect Mr. Ribis a director of THCR or (iv) a material
diminution of his duties. The phantom stock units will also automatically vest
upon the death or disability of Mr. Ribis. The Ribis THCR Agreement also
provides for up to an aggregate of $2.0 million of loans to Mr. Ribis to be
used by him to pay his income tax liability in connection with stock options,
phantom stock units and stock bonus awards, which loans will be forgiven,
including both principal and interest, in the event of a "change of control."
The Ribis THCR Agreement defines "change of control" as the occurrence of any
of the following events: (i) any person (other than THCR Holdings, Trump or an
affiliate of either) becomes a beneficial owner of 50% or more of the voting
stock of THCR, (ii) the majority of the Board of Directors of THCR consists of
individuals that were not directors on June 12, 1995 (the "June 12
Directors"), provided, however, that any person who becomes a director
subsequent to June 12, 1995, shall be considered a June 12 Director if his
election or nomination was supported by three-quarters of the June 12
Directors, (iii) THCR adopts and implements a plan of liquidation or (iv) all
or substantially all of the assets or business of THCR are disposed of in a
sale or business combination in which shareholders of THCR would not
beneficially own the same proportion of voting stock of the successor entity.
The Ribis THCR Agreement also provides certain demand and piggyback
registration rights for THCR Common Stock issued pursuant to the foregoing.
Pursuant to the Ribis THCR Agreement, Mr. Ribis has agreed that upon
termination of his employment other than for "cause" or following a "change of
control," he would not engage in any activity competitive with THCR for a
period of up to one year.
 
  Mr. Ribis had an employment agreement with Taj Associates pursuant to which
Mr. Ribis acted as Chief Executive Officer of Taj Associates. This agreement
has been terminated in connection with the Taj Acquisition and the Castle
Acquisition and now Mr. Ribis is compensated for his services to Taj
Associates under the Ribis THCR Agreement.
 
  Plaza Associates has an employment agreement with Barry J. Cregan (the
"Cregan Agreement") pursuant to which Mr. Cregan acts as President and Chief
Operating Officer of Plaza Associates. The Cregan Agreement, which will expire
on September 18, 1997, provides for a current annual base salary of $750,000.
Pursuant to the Cregan Agreement, Mr. Cregan devotes all of his professional
time to Plaza Associates. In the event that Plaza Funding or Plaza Associates
terminates Mr. Cregan's employment for Cause (defined as the revocation of Mr.
Cregan's casino key employee license, his conviction of certain crimes, death,
disability or the breach of his duty of trust to Plaza Associates), Plaza
Associates shall pay Mr. Cregan all compensation earned to the date of such
termination. In the event Mr. Cregan terminates the Cregan Agreement for Good
Cause, Plaza Associates is required to pay Mr. Cregan all compensation,
reimbursements and benefits provided for under the Cregan Agreement (a) due as
of the date of such termination and (b) payable from such date of termination
through the expiration date of the Cregan Agreement. "Good Cause" is defined
in the Cregan Agreement as (i) the assignment to Mr. Cregan, without his
consent, of any duties inconsistent with the position of Chief Operating
Officer, a demotion or change in Mr. Cregan's title or office, any removal
from his position or a change in control of Plaza Associates, except in
connection with the termination of Mr. Cregan's employment upon revocation of
his casino key employee license, death or disability, (ii) the filing of a
bankruptcy petition under Chapter 7 of
 
                                      43
<PAGE>
 
the Bankruptcy Code by Plaza Associates, Plaza Funding or its respective
creditors, (iii) revocation by the CCC or its refusal to renew Plaza
Associates' casino license or the appointment of a conservator in connection
with Trump Plaza, (iv) the failure by Plaza Associates to pay Mr. Cregan the
compensation due under the Cregan Agreement on the dates and at such times
such compensation is due, (v) a sale or long term lease of Trump Plaza or
substantially all of its assets except to an entity wholly owned by Plaza
Associates or Trump or (vi) Nicholas L. Ribis no longer acting as the Chief
Executive Officer of THCR; provided that, Mr. Cregan shall not be entitled to
compensation described in (b) of the prior sentence following the occurrence
of an event described in (v) or (vi) of this sentence. Until the Expiration
Date or the earlier termination of the Cregan Agreement as provided therein
and provided Mr. Cregan is being paid the compensation, reimbursement and
benefits set forth in the Cregan Agreement on the dates and at the times such
compensation, reimbursement and benefits are due to be paid, Mr. Cregan shall
not accept employment, either as an employee, consultant or independent
contractor, for or on behalf of any other casino hotel located within a 300
mile radius of Atlantic City, New Jersey.
 
  Plaza Associates has an employment agreement with James A. Rigot (the "Rigot
Agreement") pursuant to which Mr. Rigot acts as Executive Vice President of
Casino Operations of Plaza Associates. The Rigot Agreement, which expires on
November 30, 1997, provides for a bonus of $100,000 upon commencement of
employment, an annual base salary of $250,000, with any bonus and increases in
salary provided in Plaza Associates' sole and absolute discretion, however, at
no time shall such salary be less than $250,000. Pursuant to the Rigot
Agreement, Mr. Rigot devotes all of his professional time to Plaza Associates.
In the event that Plaza Associates terminates the Rigot Agreement (i) because
Mr. Rigot's CCC license is terminated or (ii) because Mr. Rigot has committed
an act constituting Cause (defined as a breach by Mr. Rigot of any provision
of the Rigot Agreement or any employee conduct rules, an act of dishonesty,
the deliberate and intentional refusal by Mr. Rigot to perform his duties
under the Rigot Agreement, certain disabilities or death), Plaza Associates
shall pay to Mr. Rigot all compensation earned to the date of such
termination. In the event that Plaza Associates terminates the Rigot Agreement
for any other reason, Plaza Associates shall offer to pay Mr. Rigot an amount
equal to twelve months of Mr. Rigot's then current salary, which offer, if
accepted, will constitute complete satisfaction of all obligations and
liabilities arising out of the Rigot Agreement. So long as Plaza Associates
continues to pay Mr. Rigot's salary pursuant to the Rigot Agreement, Mr. Rigot
shall not accept employment, either as an employee, consultant or independent
contractor, for or on behalf of any other casino hotel located in Atlantic
City, New Jersey.
 
  Plaza Associates has an employment agreement with Steven C. Hann (the "Hann
Agreement") pursuant to which Mr. Hann acts as Executive Vice President of
Casino Sales and Marketing of Plaza Associates. The Hann Agreement, which
expires in May 1998, provides for an annual base salary of $240,000, with any
bonus and increases in salary provided in Plaza Associates' sole and absolute
discretion, however, at no time shall such salary be less than $240,000.
Pursuant to the Hann Agreement, Mr. Hann devotes all of his professional time
to Plaza Associates. In the event that Plaza Associates terminates the Hann
Agreement (i) because Mr. Hann's CCC license is terminated or (ii) because Mr.
Hann is convicted of a disqualifying crime as defined in the Casino Control
Act, Plaza Associates shall pay to Mr. Hann all compensation earned to the
date of such termination. In the event that Plaza Associates terminates the
Hann Agreement for any other reason, Plaza Associates shall pay Mr. Hann his
entire salary for the entire term of the Hann Agreement.
 
  The Cregan Agreement, the Rigot Agreement and the Hann Agreement provide for
discretionary bonuses. Factors considered by Plaza Associates in the awarding
of all discretionary bonuses generally are the attainment by Plaza Associates
of budgeted or forecasted goals and the individual's perceived contribution to
the attainment of such goals.
 
  Plaza Associates had an employment agreement with Kevin S. Smith, Esq. (the
"Smith Agreement") pursuant to which Mr. Smith acted as the Vice
President/General Counsel of Plaza Associates. The Smith Agreement, which
expired on February 9, 1998, provided for an annual base salary of $110,000,
with any bonus and increases in salary provided in Plaza Associates' sole and
absolute discretion. Pursuant to the Smith Agreement, Mr. Smith devotes all of
his professional time to Plaza Associates. In the event that Plaza Associates
terminated the Smith Agreement due to the fact that Mr. Smith no longer held
his CCC license, Mr. Smith would
 
                                      44
<PAGE>
 
be entitled to no further compensation. In the event that the Smith Agreement
was terminated for any other reason, Mr. Smith would be entitled to
compensation in the amount of one year's salary (plus salary for the remainder
of the month in which the Smith Agreement was terminated), including benefits.
In October 1996 Mr. Smith became the Vice President of Corporate Litigation of
TCS, and, in connection therewith, TCS agreed to assume all the obligations of
Plaza Associates under the Smith Agreement.
 
  Taj Associates has an employment agreement with Rodolfo E. Prieto (the
"Prieto Agreement") pursuant to which he serves as Chief Operating Officer of
Taj Associates. The Prieto Agreement, which expires November 30, 1998,
provides for an annual salary of $275,000 and an annual bonus at the sole
discretion of Taj Associates. Pursuant to the Prieto Agreement, Mr. Prieto has
agreed that in the event the agreement is terminated by him, he would not
solicit or contact, directly or through any other casino in Atlantic City, any
customers whom he developed during his employment with Taj Associates for a
period of one year.
 
  Taj Associates has an agreement with Patrick O'Malley (the "O'Malley
Agreement") pursuant to which Mr. O'Malley serves as Executive Vice President
of Finance and Accounting of Taj Associates. The O'Malley Agreement, which
expires on October 13, 1999, provides for an annual base salary of $250,000
per year and an annual bonus at the sole discretion of Taj Associates. In the
event Taj Associates terminates the O'Malley Agreement because Mr. O'Malley's
casino license is revoked, terminated and/or suspended for more than 30 days
or for Cause (defined as a breach by Mr. O'Malley of the material provisions
of the O'Malley Agreement or an act of dishonesty), Taj Associates is required
to pay Mr. O'Malley an amount equal to his salary earned to the date of such
termination. In the event Mr. O'Malley terminates the O'Malley Agreement for
Good Cause (defined as the assignment to Mr. O'Malley, without his consent, of
any duties inconsistent with the position of Executive Vice President of
Finance and Accounting, a demotion or change in Mr. O'Malley's title or
office, any removal from his position or a change in control of Taj
Associates, except in connection with the termination of Mr. O'Malley's
employment upon revocation of his casino key employee license, death or
disability), or if Taj Associates terminates the O'Malley Agreement without
Cause, Taj Associates shall pay Mr. O'Malley all compensation, reimbursements
and benefits provided for under the O'Malley Agreement (i) due on the date of
such termination and (ii) payable from such date of termination through the
expiration date of the O'Malley Agreement, which amount shall not be less than
one year annual base salary then payable, and any bonuses accrued to such date
of termination. Upon termination of the O'Malley Agreement, Mr. O'Malley will
not accept employment, either as an employee, consultant or independent
contractor, for or on behalf of any other casino hotel located within a 300-
mile radius of Atlantic City, New Jersey.
 
  Taj Associates has an employment agreement with Larry W. Clark (the "Clark
Agreement") pursuant to which he serves as Executive Vice President, Casino
Operations of Taj Associates. The Clark Agreement, which expires on November
30, 1997, provides for an annual salary of $300,000 and, in addition, a
minimum guaranteed bonus of at least $124,200 per annum. Pursuant to the Clark
Agreement, Mr. Clark has agreed that in the event the agreement is terminated
by him for any reason or by Taj Associates for cause, he would not engage in
employment for or on behalf of any other casino hotel located in Atlantic City
for a period of one year.
 
  Taj Associates has an employment agreement with Nicholas J. Niglio (the
"Niglio Agreement") pursuant to which he serves as Executive Vice President,
International Marketing of Taj Associates. The Niglio Agreement, which expires
on January 1, 2000, provides for an annual salary of $285,000 and an annual
bonus at the sole discretion of management of Taj Associates. Pursuant to the
Niglio Agreement, Mr. Niglio has agreed that upon termination of his
employment he would not solicit or contact, directly or through any other
casino in Atlantic City, any customers whom he had developed during his
employment with Taj Associates for a period of one year.
 
  Taj Associates may terminate the employment agreements of Messrs. Clark,
Prieto and Niglio in its sole discretion, without cause. If Mr. Clark's
employment agreement is terminated without cause, Taj Associates would be
obligated to pay Mr. Clark the greater of one year's salary or his salary for
the number of months remaining in the agreement, each at his then current
salary. If Mr. Prieto's agreement is terminated without cause, Taj Associates
would be obligated to pay Mr. Prieto for the number of months remaining in the
agreement plus
 
                                      45
<PAGE>
 
expenses to move to Nevada. If Mr. Niglio's employment agreement is terminated
without cause, Taj Associates would be obligated to pay Mr. Niglio the lesser
of twelve month's salary or his salary for the number of months remaining in
the agreement, each at his then current salary. Taj Associates may also
terminate the Clark Agreement, the Prieto Agreement and the Niglio Agreement
(a) in the event that the CCC license of Mr. Clark, Mr. Prieto or Mr. Niglio,
respectively, is revoked or terminated or (b) for "cause," which is defined in
each of the agreements as (i) a material breach of the agreement or of any
employee conduct rules, (ii) dishonesty, (iii) intentional refusal to perform
duties or to properly perform them upon notice, (iv) alcohol or drug abuse or
(v) disability or death.
 
  The Prieto Agreement and the O'Malley Agreement provide for discretionary
bonuses. Factors considered by Taj Associates in the awarding of all
discretionary bonuses generally are the attainment by Taj Associates of
budgeted or forecasted goals and the individual's perceived contribution to
the attainment of such goals.
 
COMPENSATION OF DIRECTORS
 
  All of the directors of Trump AC Funding currently serve on the Board of
Directors of THCR and receive no additional compensation for their service
with Trump AC Funding. Directors of THCR who are also employees or consultants
of THCR and its affiliates receive no directors' fees. Non-employee directors
are paid an annual directors' fee of $50,000, plus $2,000 per meeting attended
plus reasonable out-of-pocket expenses incurred in attending these meetings.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
  In general, the compensation of executive officers of Plaza Associates and
Taj Associates is determined by Trump AC's managing general partner, Trump AC
Holding. No officer or employee of Trump AC Holding, other than Messrs. Trump
and Ribis who serve on the Board of Directors of Trump AC Holding,
participated in the deliberations concerning executive compensation.
 
  Taj Acquisition. On April 17, 1996, a subsidiary of THCR was merged with and
into THCR Holding Corp. and each outstanding share of THCR Holding Corp. Class
A Common Stock, which in the aggregate represented 50% of the economic
interest in Taj Associates, was converted into the right to receive, at each
holder's election, either (a) $30 in cash or (b) that number of shares of THCR
Common Stock having a market value equal to $30. Trump held the remaining 50%
interest in Taj Associates and contributed such interest in Taj Associates to
Trump AC in exchange for limited partnership interests in THCR Holdings. The
outstanding shares of THCR Holding Corp. Class C Common Stock all of which
were held by Trump, were canceled in connection with the Taj Acquisition. In
addition, Trump received the Trump Warrants. See "Business--The Taj Mahal--Taj
Acquisition."
 
  Certain Related Party Transactions--Plaza Associates. Seashore Four was the
fee owner of a parcel of land constituting a portion of the Plaza Casino
Parcel, which it leased to Plaza Associates. Plaza Associates recorded rental
expenses of approximately $1.0 million in 1996 concerning rent owed to
Seashore Four. In January 1997, Plaza Associates exercised the option to
purchase the land under the lease with Seashore Four for $10 million.
 
  Trump Seashore was the fee owner of a parcel of land constituting a portion
of the Plaza Casino Parcel, which it leased to Plaza Associates. Plaza
Associates made rental payments to Trump Seashore of approximately $1.0
million in 1996. In September 1996, Plaza Associates exercised the option to
purchase the land under the lease with Trump Seashore for $14.5 million.
 
  On June 24, 1993, in connection with the 1993 refinancing of Trump Plaza,
(i) Trump transferred title to Trump Plaza East to Missouri Boardwalk, Inc.
("MBI"), a wholly owned subsidiary of Midlantic National Bank ("Midlantic"),
in exchange for a reduction in indebtedness to Midlantic, (ii) MBI leased
Trump Plaza East to Trump (the "Trump Plaza East Lease") for a term of five
years, which would have expired on June 30, 1998,
 
                                      46
<PAGE>
 
during which time Trump would have been obligated to pay MBI $260,000 per
month in lease payments and (iii) Plaza Associates acquired the Trump Plaza
East Purchase Option. In October 1993, Plaza Associates assumed the Trump
Plaza East Lease and related expenses. On April 17, 1996, in connection with
the Taj Acquisition, Plaza Associates purchased Trump Plaza East and the Trump
Plaza East Lease, and related obligations were terminated.
 
  Certain Related Party Transactions--Taj Associates. Taj Associates has a
lease with Trump-Equitable Company, for the lease of office space in The Trump
Tower in New York City, which Taj Associates uses as a marketing office. On
September 1, 1995, the lease was renewed for a term of five years with an
option for Taj Associates to cancel the lease on September 1 of each year,
upon six months' notice and payment of six months' rent. Under the renewed
lease, the monthly payments are $2,184.
 
  From October 4, 1991 until April 17, 1996, Taj Associates leased the
Specified Parcels from Realty Corp., consisting of land adjacent to the site
of the Taj Mahal, which is used primarily for a bus terminal, surface parking
and the Taj Entertainment Complex, as well as the Steel Pier and a warehouse
complex. During 1993, 1994 and 1995, lease obligations to Realty Corp. for
these facilities were approximately $3.3 million per year. On April 17, 1996,
in connection with the Taj Acquisition, Taj Associates purchased the Specified
Parcels from Realty Corp and the lease and related obligations were
terminated.
 
  On October 4, 1991, Taj Associates entered into a guarantee with First
Fidelity Bank, National Association (now known as First Union National Bank)
("First Fidelity") of the performance by Realty Corp. of its obligations under
a loan of approximately $78 million owing to First Fidelity (the "First
Fidelity Loan"), which loan was secured by a mortgage on the Specified
Parcels. Such guarantee was limited to any deficiency in the amount owed under
the First Fidelity Loan when due, up to a maximum of $30 million. In
connection with the purchase of the Specified Parcels, Realty Corp.'s
obligations to First Fidelity under the First Fidelity Loan were satisfied and
First Fidelity, among other things, released Taj Associates from the
guarantee.
 
  Taj Associates and Trump were parties to an agreement, which became
effective in April 1991, and which provided that Trump would render to Taj
Associates marketing, advertising, promotional and related services with
respect to the business operations of Taj Associates through December 31, 1999
(the "Taj Services Agreement"). In consideration for the services to be
rendered, Taj Associates paid an annual fee (the "Annual Fee") equal to 1% of
Taj Associates' earnings before interest, taxes and depreciation less capital
expenditures for such year, with a minimum base fee of $500,000 per annum.
During the year 1995, and the period from January 1, 1996 to April 17, 1996,
Trump earned approximately $1.7 million and $0.4 million, respectively, in
respect of the Annual Fee, including amounts paid to a third party pursuant to
an assignment agreement. In addition, during the year 1995, and the period
from January 1, 1996 to April 17, 1996, Taj Associates reimbursed Trump
$261,000 and $148,000, respectively, for expenses pursuant to the Taj Services
Agreement. Taj Associates agreed to indemnify Trump from and against any
licensing fees arising out of his performance of the Taj Services Agreement,
and against any liability arising out of his performance of the Taj Services
Agreement, other than that due to his gross negligence or willful misconduct.
The Taj Services Agreement was terminated upon consummation of the Taj
Acquisition on April 17, 1996.
 
  On April 1, 1991, in connection with the Taj Services Agreement, Taj
Associates and Trump entered into an Amended and Restated License Agreement
(the "Taj License Agreement") which amended and restated an earlier license
agreement between the parties. Pursuant to the Taj License Agreement, Taj
Associates had the non-exclusive right to use the name and likeness of Trump,
and the exclusive right to use the name and related marks and designs of the
Taj Mahal (collectively, the "Taj Marks"), in its advertising, marketing and
promotional activities through December 31, 1999. Upon consummation of the Taj
Acquisition, the Taj License Agreement was terminated and the Taj Marks were
licensed to THCR under the License Agreement.
 
  Other Relationships. The Commission requires registrants to disclose the
existence of any other corporation in which both (i) an executive officer of
the registrant serves on the board of directors and/or compensation committee,
and (ii) a director of the registrant serves as an executive officer. Messrs.
Ribis, Pickus
 
                                      47
<PAGE>
 
and Burke, executive officers of THCR, have served on the boards of directors
of other entities in which members of the Board of Directors of THCR (namely,
Messrs. Trump and Ribis) served and continue to serve as executive officers.
Management believes that such relationships have not affected the compensation
decisions made by the Board of Directors of THCR in the last fiscal year.
 
  Trump serves on the Board of Directors of TACC, a general partner of Plaza
Associates, of which Messrs. Trump, Ribis and Pickus are executive officers.
Messrs. Trump and Ribis also serve on the Board of Directors of Trump AC
Holding, of which Messrs. Trump, Ribis and Burke are also executive officers.
Mr. Trump is the sole director of TACC, of which Messrs. Trump, Ribis and
Pickus are executive officers. Trump is not compensated by such entities for
serving as an executive officer, however, he has entered into a personal
services agreement with Plaza Associates and THCR. Messrs. Ribis and Burke are
not compensated by the foregoing entities, however, they are compensated by
Plaza Associates for their service as executive officers.
 
  Messrs. Ribis, Pickus, and Burke serve on the Board of Directors of THCR
Holding Corp., which held, prior to April 17, 1996, an indirect equity
interest in Taj Associates, of which Mr. Trump is an executive officer. Such
persons also serve on the Board of Directors of THCR/LP, the former managing
general partner of Taj Associates, of which Messrs. Trump and Ribis are
executive officers. Mr. Ribis is compensated by Taj Associates for his
services as its Chief Executive Officer. See "--Employment Agreements."
 
  Mr. Ribis also serves on the Board of Directors of Realty Corp., which,
prior to the Taj Acquisition, leased certain real property to Taj Associates,
of which Trump is an executive officer. Trump, however, does not receive any
compensation for serving as an executive officer of Realty Corp.
 
  Messrs. Ribis, Pickus and Burke are members of the Board of Partner
Representatives of Castle Associates and members of the Board of Directors of
TCHI, the general partner of Castle Associates of which Messrs Ribis, Pickus
and Burke are executive officers. In addition, Trump is the sole director and
an officer of Castle Funding. Messrs Ribis, Pickus and Burke received no
compensation from these entities other than from Castle Associates for their
services as executive officers. Trump is not compensated by these entities
other than pursuant to the Castle Services Agreement.
 
  Messrs. Trump and Ribis serve on the Board of Directors of THCR, of which
Trump is Chairman of the Board. Messrs. Ribis, Pickus and Burke are executive
officers of THCR and are compensated for their services by THCR.
 
  John Barry, Trump's brother-in-law, is a partner of Barry & McMoran, a New
Jersey law firm which provides, from time to time, legal services to Plaza
Associates and Taj Associates.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
  Trump AC Funding. Through its ownership of 100% of Trump AC and Trump AC
Holding, THCR Holdings has owned 100% of Trump AC Funding's common stock since
its formation on January 30, 1996.
 
  Trump AC. Through its ownership of 100% of Trump AC Holding, THCR Holdings
currently beneficially owns 100% of Trump AC.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
  Affiliate party transactions are governed by the provisions of the Trump AC
Mortgage Note Indenture, which provisions generally require that such
transactions be on terms as favorable as would be obtainable from an
unaffiliated party, and require the approval of a majority of the independent
directors of Trump AC Funding.
 
  Trump, Ribis and certain affiliates have engaged in certain related party
transactions with respect to THCR and its subsidiaries. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions--THCR" "--Plaza Associates," "--Taj
Associates" and""--Other Relationships."
 
 
                                      48
<PAGE>
 
  Plaza Associates and Taj Associates have joint insurance coverage with
Castle Associates and other entities affiliated with Trump, for which the
annual premiums paid by Plaza Associates and Taj Associates were approximately
$3.1 million for the year ended December 31, 1996.
 
  Plaza Associates leased portions of its Egg Harbor Parcel to Castle
Associates. Lease payments by Castle Associates to Plaza Associates totaled
$5,000 in 1996.
 
  Indemnification Agreements.  In addition to the indemnification provisions
in THCR's and its subsidiaries' employment agreements (see "Executive
Compensation--Employment Agreements"), certain former and current directors of
Plaza Funding entered into separate indemnification agreements in May 1992
with Plaza Associates pursuant to which such persons are afforded the full
benefits of the indemnification provisions of the partnership agreement
governing Plaza Associates. Plaza Associates also entered into an
Indemnification Trust Agreement in November 1992 with Midlantic (the
"Indemnification Trustee") pursuant to which the sum of $100,000 was deposited
by Plaza Associates with the Indemnification Trustee for the benefit of the
directors of Plaza Funding and certain former directors of Trump Plaza GP to
provide a source for indemnification for such persons if Plaza Associates,
Plaza Funding or Trump Plaza GP, as the case may be, fails to immediately
honor a demand for indemnification by such persons. The indemnification
agreements with the directors of Plaza Funding and directors of Trump Plaza GP
were amended in June 1993 to provide, among other things, that Plaza
Associates would maintain directors' and officers' insurance covering such
persons during the ten-year term (subject to extension) of the indemnification
agreements; provided, however, that if such insurance would not be available
on a commercially practicable basis, Plaza Associates could, in lieu of
obtaining such insurance, annually deposit an amount in a trust fund equal to
$500,000 for the benefit of such directors; provided further that deposits
relating to the failure to obtain such insurance shall not exceed $2.5
million. Such directors are covered by directors' and officers' insurance
maintained by Plaza Associates.
 
  In connection with the Taj Acquisition, Trump AC has agreed to provide to
the former officers and Directors of THCR Holding Corp. and THCR/LP (the "Taj
Indemnified Parties"), including Messrs. Ribis, Pickus and Burke,
indemnification as provided in the THCR's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws until April 17, 2002. In
addition, THCR agreed, and agreed to cause THCR Holding Corp. and THCR/LP to
agree, that until April 17, 2002, unless otherwise required by law, the
Certificate of Incorporation and By-Laws of THCR Holding Corp. and THCR/LP
shall not be amended, repealed or modified to reduce or limit the rights of
indemnity afforded to the former directors, officers and employees of THCR
Holding Corp. and THCR/LP or the ability of THCR Holding Corp. or THCR/LP to
indemnify such persons, nor to hinder, delay or make more difficult the
exercise of such rights of indemnity or the ability to indemnify. In addition,
Trump AC has also agreed to purchase and maintain in effect, until April 17,
2002, directors' and officers' liability insurance policies covering the Taj
Indemnified Parties on terms no less favorable than the terms of the then
current insurance policies' coverage or, if such directors' and officers'
liability insurance is unavailable for an amount no greater than 150% of the
premium paid by THCR Holding Corp. (on an annualized basis) for directors' and
officers' liability insurance during the period from January 1, 1996, to April
17, 1996, Trump AC has agreed to obtain as much insurance as can be obtained
for a premium not in excess (on an annualized basis) of such amount.
 
                                      49
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
  (A) FINANCIAL STATEMENTS. See the index immediately following the signature
page.
 
  (B) REPORTS ON FORM 8-K.
 
    The Registrants did not file any reports on Form 8-K during the quarter
    ended December 31, 1996.
 
  (C) EXHIBITS
 
<TABLE>
<CAPTION>
   EXHIBIT NO.                      DESCRIPTION OF EXHIBIT
   -----------                      ----------------------
   <C>         <S>
    1.1(19)    Form of Underwriting Agreement among Trump Atlantic City
               Associates, Trump Atlantic City Funding, Inc., Trump Plaza
               Associates, Donaldson, Lufkin & Jenrette Securities Corporation,
               BT Securities Corporation and Salomon Brothers Inc.
    2.1.1(16)  Agreement and Plan of Merger, dated January 8, 1996, between
               Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and
               THCR Merger Corp.
    2.1.2(17)  Amendment to Agreement and Plan of Merger, dated January 31,
               1996, by and among Trump Hotels & Casino Resorts, Inc., Taj
               Mahal Holding Corp. and THCR Merger Corp.
    3.1.1(19)  Certificate of Incorporation of Trump Atlantic City Funding,
               Inc. (formerly THCR Atlantic City Funding, Inc.).
    3.1.2(19)  Certificate of Amendment of Certificate of Incorporation of
               Trump Atlantic City Funding, Inc. (formerly THCR Atlantic City
               Funding, Inc.).
    3.2(19)    By-Laws of Trump Atlantic City Funding, Inc. (formerly THCR
               Atlantic City Funding, Inc.).
    3.3-3.6    Intentionally omitted.
    3.8.1(5)   Partnership Agreement of Trump Atlantic City Associates
               (formerly Trump Plaza Holding Associates).
    3.8.2(5)   Amendment No. 1 to the Partnership Agreement of Trump Atlantic
               City Associates (formerly Trump Plaza Holding Associates.)
    3.8.3(12)  Amendment No. 2 to the Partnership Agreement of Trump Atlantic
               City Associates (formerly Trump Plaza Holding Associates.)
    3.8.4(20)  Amended and Restated Partnership Agreement of Trump Atlantic
               City Associates.
    3.9.1(4)   Agreement and Plan of Merger between TP/GP Corp. and Trump Plaza
               Funding, Inc.
    3.9.2(19)  Form of Second Amended and Restated Agreement of Limited
               Partnership of Trump Hotels & Casino Resorts Holdings, L.P.
    4.1(5)     Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
               issuer, Trump Plaza Associates, as guarantor, and First Bank
               National Association, as trustee.
    4.2(5)     Indenture of Mortgage, between Trump Plaza Associates, as
               mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
    4.3(5)     Assignment Agreement between Trump Plaza Funding, Inc., and
               First Bank National Association, as trustee.
    4.4(5)     Assignment of Operating Assets from Trump Plaza Associates to
               Trump Plaza Funding, Inc.
    4.5(5)     Assignment of Leases and Rents from Trump Plaza Associates to
               Trump Plaza Funding, Inc.
</TABLE>
 
 
                                       50
<PAGE>
 
<TABLE>
<CAPTION>
   EXHIBIT NO.                      DESCRIPTION OF EXHIBIT
   -----------                      ----------------------
   <C>         <S>
    4.6(5)     Indenture of Mortgage between Trump Plaza Associates and First
               Bank National Association, as trustee.
    4.7(5)     Assignment of Leases and Rents from Trump Plaza Associates to
               First Bank National Association, as trustee.
    4.8(5)     Assignment of Operating Assets from Trump Plaza Associates to
               First Bank National Association, as trustee.
    4.9(5)     Trump Plaza Associates Note to Trump Plaza Funding, Inc.
    4.10(5)    Mortgage Note Certificate (included in Exhibit 4.1).
    4.11(5)    Pledge Agreement of Trump Plaza Funding, Inc., in favor and for
               the benefit of First Bank National Association, as trustee.
    4.12-4.18  Intentionally omitted.
    4.19.6(20) Pledge Agreement, dated April 17, 1996, from Trump Atlantic City
               Associates, as pledgor, to First Bank National Association, as
               Senior Note Trustee.
    4.26.1(20) Indenture, among Trump Atlantic City Associates and Trump
               Atlantic City Funding, Inc., as issuers, Trump Plaza Associates,
               Trump Taj Mahal Associates and The Trump Taj Mahal Corporation,
               as guarantors, and First Bank National Association, as trustee.
    4.27.1(20) First Mortgage Note Certificate (included in Exhibit 4.26.1).
    4.28.1(20) Indenture of Mortgage and Security Agreement, among Trump Taj
               Mahal Associates, as mortgagor, and First Bank National
               Association, as collateral agent, as mortgagee.
    4.28.2(20) Indenture of Mortgage and Security Agreement, among Trump Plaza
               Associates, as mortgagor, and First Bank National Association,
               as collateral agent, as mortgagee.
    4.29.1(20) Assignment of Leases and Rents, among Trump Taj Mahal
               Associates, as assignor, and First Bank National Association, as
               collateral agent, as mortgagee.
    4.29.2(20) Assignment of Leases and Rents, among Trump Plaza Associates, as
               assignor, and First Bank National Association, as collateral
               agent, as mortgagee.
    4.30.1(20) Collateral Agency Agreement, among First Bank National
               Association, as collateral agent, and First Bank National
               Association, as trustee, Trump Atlantic City Associates, Trump
               Atlantic City Funding, Inc., the other secured parties signatory
               thereto and the guarantors under the First Mortgage Note
               Indenture.
   10.1-10.6   Intentionally omitted.
   10.7(7)     Employment Agreement between Trump Plaza Associates and Barry
               Cregan.
   10.8-10.27  Intentionally omitted.
   10.28(2)    Option Agreement, dated as of February 2, 1993, between Donald
               J. Trump and Trump Plaza Associates.
   10.29       Intentionally omitted.
   10.30(3)    Amended and Restated Services Agreement between Trump Plaza
               Associates and Trump Plaza Management Corp.
   10.31-10.32 Intentionally omitted.
   10.33(4)    Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg
               and Robert Rothenberg, dated October 3, 1983.
   10.34(4)    Mortgage made by Harrah's Associates to Adeline Bordonaro, dated
               January 28, 1986.
</TABLE>
 
 
                                       51
<PAGE>
 
<TABLE>
<CAPTION>
   EXHIBIT NO.                      DESCRIPTION OF EXHIBIT
   -----------                      ----------------------
   <C>         <S>
   10.35.1(4)  Mortgage from Trump Plaza Associates to The Mutual Benefit Life
               Insurance Company, dated October 5, 1990.
   10.35.2(4)  Collateral Assignment of Leases from Trump Plaza Associates to
               The Mutual Benefit Life Insurance Company, dated October 5,
               1990.
   10.36-10.37 Intentionally omitted.
   10.38(11)   Employment Agreement between Trump Hotels & Casino Resorts
               Holdings, L.P. and Nicholas L. Ribis (with exhibits).
   10.39.2(6)  Severance Agreement between Trump Plaza Associates and Robert M.
               Pickus.
   10.39.4(18) Employment Agreement between Robert M. Pickus and Trump Hotels
               and Casino Resorts, Inc.
   10.40(9)    Employment Contract, dated as of February 7, 1995, between Trump
               Plaza Associates and Kevin S. Smith.
   10.41(9)    Employment Agreement between Trump Plaza Associates and James A.
               Rigot.
   10.42(9)    Option and Right of First Offer Agreement between Trump Plaza
               Associates and Missouri Boardwalk Inc., dated June 24, 1993.
   10.43(9)    Lease between Donald J. Trump and Missouri Boardwalk Inc., dated
               June 24, 1993.
   10.44(9)    Sublease between Donald J. Trump and Missouri Boardwalk Inc.,
               dated June 24, 1993.
   10.45(8)    Employment Agreement, dated August 1, 1994, between R. Bruce
               McKee and Trump Taj Mahal Associates.
   10.46(11)   Executive Agreement among Donald J. Trump, Trump Hotels & Casino
               Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
   10.47-10.49 Intentionally omitted.
   10.50(10)   Acquisition Agreement, dated April 27, 1995, between Trump
               Oceanview, Inc. and The New Jersey Sports and Exposition
               Authority.
   10.51-10.55 Intentionally omitted.
   10.56(10)   Agreement of Sublease between Donald J. Trump and Time Warner
               Entertainment Company, L.P., as amended.
   10.57-10.62 Intentionally omitted.
   10.63.2(20) Third Amended and Restated Partnership Agreement of Trump Plaza
               Associates.
   10.65.1(21) Services Agreement, dated as of July 8, 1996, among Trump Plaza
               Associates, Trump Taj Mahal Associates and Trump Casino
               Services, L.L.C.
   10.65.2(22) Amended and Restated Service Agreement, dated as of October 23,
               1996, by and among Trump Plaza Associates, Trump Taj Mahal
               Associates, Trump's Castle Associates, L.P. and Trump Casino
               Services, L.L.C.
   10.66(21)   Thermal Energy Service Agreement, dated as of June 30, 1996, by
               and between Atlantic Jersey Thermal Systems, Inc. and Trump Taj
               Mahal Associates.
   10.67(22)   Thermal Energy Service Agreement, dated as of September 26,
               1996, by and between Atlantic Jersey Thermal Systems, Inc. and
               Trump Plaza Associates.
   10.68(8)    Employment Agreement, dated December 10, 1993, between Larry W.
               Clark and Trump Taj Mahal Associates.
   10.69(8)    Employment Agreement, dated August 1, 1994, between Walter F.
               Kohlross and Trump Taj Mahal Associates.
</TABLE>
 
                                       52
<PAGE>
 
<TABLE>
<CAPTION>
   EXHIBIT NO.                      DESCRIPTION OF EXHIBIT
   -----------                      ----------------------
   <C>         <S>
   10.70(10)   Lease Agreement between Trump Castle Associates and Trump Taj
               Mahal Associates, dated as of December 16, 1994.
   10.71(13)   Employment Agreement, extended and modified, dated October 10,
               1995, between Larry W. Clark and Trump Taj Mahal Associates.
   10.72(15)   Employment Agreement, dated October 25, 1995, between Rodolfo E.
               Prieto and Trump Taj Mahal Associates.
   10.73       Employment Agreement, dated October 14, 1996, between Trump Taj
               Mahal Associates and Patrick J. O'Malley.
   10.74       Employment Agreement, dated May 3, 1996, between Trump Taj Mahal
               Associates and Loretta I. Viscount.
   10.75       Employment Agreement, dated April 17, 1995 between Trump Plaza
               Associates and Steven C. Hann.
   21          List of Subsidiaries of Trump Atlantic City Associates.
   25(14)      Statement of Eligibility Under the Trust Indenture Act of 1939
               of First Bank National Association, the First Mortgage Note
               Trustee.
   27.1        Financial Data Schedule of Trump Atlantic City Funding, Inc.
   27.2        Financial Data Schedule of Trump Atlantic City Associates.
</TABLE>
---------------------
 (1) Incorporated herein by reference to the identically numbered Exhibit to
     the Quarterly Report on Form 10-Q of Trump Plaza Funding, Inc., Trump
     Plaza Associates and Trump Plaza Holding Associates for the quarter ended
     September 30, 1992.
 (2) Incorporated herein by reference to the identically numbered Exhibit in
     the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
     ended December 31, 1992.
 (3) Previously filed in the Registration Statement on Form S-1, Registration
     No. 33-58608, of Trump Atlantic City Associates (formerly Trump Plaza
     Holding Associates).
 (4) Incorporated herein by reference to the identically numbered Exhibit in
     the Registration Statement on Form S-1, Registration No. 33-58602, of
     Trump Plaza Funding, Inc. and Trump Plaza Associates.
 (5) Incorporated herein by reference to the identically numbered Exhibit in
     the Registration Statement on Form S-1, Registration No. 33-58608, of
     Trump Atlantic City Associates (formerly Trump Plaza Holding Associates).
 (6) Incorporated herein by reference to the identically numbered Exhibit in
     the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
     Atlantic City Associates (formerly Trump Plaza Holding Associates) for
     the year ended December 31, 1993.
 (7) Incorporated herein by reference to the identically numbered Exhibit in
     the Quarterly Report on Form 1O-Q of Trump Plaza Funding, Inc. and Trump
     Atlantic City Associates (formerly Trump Plaza Holding Associates) for
     the quarter ended September 30, 1994.
 (8) Incorporated herein by reference to the Exhibit in the Quarterly Report
     on Form 10-Q of Trump Taj Mahal Funding, Inc. and Trump Taj Mahal
     Associates for the quarter ended September 30, 1994.
 (9) Incorporated herein by reference to the identically numbered Exhibit in
     the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
     Atlantic City Associates (formerly Trump Plaza Holding Associates) for
     the year ended December 31, 1994.
(10) Incorporated herein by reference to the Exhibit in the Quarterly Report
     on Form 10-Q of Trump Taj Mahal Funding, Inc. and Trump Taj Mahal
     Associates for the quarter ended December 31, 1994.
(11) Incorporated herein by reference to the identically numbered Exhibit in
     the Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc.,
     Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
     Resorts Funding, Inc. for the quarter ended June 30, 1995.
(12) Incorporated herein by reference to the identically numbered Exhibit to
     the Quarterly Report on Form 10-Q of Trump Plaza Funding, Inc., Trump
     Plaza Associates and Trump Atlantic City Associates (formerly Trump Plaza
     Holding Associates) for the quarter ended June 30, 1995.
 
                                      53
<PAGE>
 
(13) Incorporated herein by reference to the Exhibit in the Quarterly Report
     on Form 10-Q of Trump Taj Mahal Funding, Inc. for the quarter ended
     September 30, 1995.
(14) Incorporated herein by reference to the identically numbered Exhibit in
     the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
     Plaza Associates for the year ended December 31, 1995.
(15) Incorporated herein by reference to the Exhibit in the Annual Report on
     Form 10-K of Taj Mahal Holding Corp. for the year ended December 31,
     1995.
(16) Incorporated herein by reference to the identically numbered Exhibit in
     the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
     dated January 10, 1996.
(17) Incorporated herein by reference to the identically numbered Exhibit on
     the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
     dated February 1, 1996.
(18) Incorporated herein by reference to the identically numbered Exhibit to
     the Registration Statement on Form S-4, Registration No. 333-153, of
     Trump Hotels & Casino Resorts, Inc.
(19) Previously filed in Registration Statement on Form S-1, Registration No.
     333-643, of Trump Atlantic City Associates, Trump Atlantic City Funding,
     Inc. and Trump Plaza Associates.
(20) Incorporated herein by reference to the identically numbered Exhibit to
     the Quarterly Report on Form 10-Q of Trump Atlantic City Associates and
     Trump Atlantic City Funding, Inc. for the quarter ended March 31, 1996.
(21) Incorporated herein by reference to the identically numbered Exhibit to
     the Quarterly Report on Form 10-Q of Trump Atlantic City Associates and
     Trump Atlantic City Funding, Inc. for the quarter ended June 30, 1996.
(22) Incorporated herein by reference to the identically numbered Exhibit to
     the Quarterly Report on Form 10-Q of Trump Atlantic City Associates and
     Trump Atlantic City Funding, Inc. for the quarter ended September 30,
     1996.
 
  (d) Financial Statement Schedules.
    See "Financial Statements and Supplementary Data--Index to Financial
    Statements and Financial Statement Schedule" for a list of the financial
    statement schedule included in this Annual Report.
 
                                      54
<PAGE>
 
IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS
 
  The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. In connection with
certain forward-looking statements contained in this Annual Report on Form 10-
K and those that may be made in the future by or on behalf of the Registrants,
the Registrants note that there are various factors that could cause actual
results to differ materially from those set forth in any such forward-looking
statements. The forward-looking statements contained in this Annual Report
were prepared by management and are qualified by, and subject to, significant
business, economic, competitive, regulatory and other uncertainties and
contingencies, all of which are difficult or impossible to predict and many of
which are beyond the control of the Registrants. Accordingly, there can be no
assurance that the forward-looking statements contained in this Annual Report
will be realized or that actual results will not be significantly higher or
lower. The statements have not been audited by, examined by, compiled by or
subjected to agreed-upon procedures by independent accountants, and no third-
party has independently verified or reviewed such statements. Readers of this
Annual Report should consider these facts in evaluating the information
contained herein. In addition, the business and operations of the Registrants
are subject to substantial risks which increase the uncertainty inherent in
the forward-looking statements contained in this Annual Report. The inclusion
of the forward-looking statements contained in this Annual Report should not
be regarded as a representation by the Registrants or any other person that
the forward-looking statements contained in this Annual Report will be
achieved. In light of the foregoing, readers of this Annual Report are
cautioned not to place undue reliance on the forward-looking statements
contained herein.
 
 
                                      55
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
 
                                          Trump Atlantic City Associates
                                          BY: TRUMP ATLANTIC CITY HOLDING,
                                            INC.,ITS GENERAL PARTNER
 
                                          /s/ Donald J. Trump
                                          -------------------------------------
                                          BY:DONALD J. TRUMP
                                          TITLE: PRESIDENT
                                          DATE: MARCH 28, 1997
 
                                          Trump Atlantic City Funding, Inc.
 
                                          /s/ Nicholas L. Ribis
                                          -------------------------------------
                                          BY:NICHOLAS L. RIBIS
                                          TITLE: CHIEF EXECUTIVE OFFICER AND
                                          PRESIDENT
                                          DATE: MARCH 28, 1997
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
 
             SIGNATURES                        TITLE                 DATE
             ----------                        -----                 ----
 
Trump Atlantic City Associates
By: Trump Atlantic City Holding, Inc.,
    its managing general partner
 
By:      /s/ Donald J. Trump           President and            March 28, 1997
-------------------------------------   Chairman of the
           DONALD J. TRUMP              Board of Directors
                                        (Principal
                                        Executive,
                                        Financial and
                                        Accounting Officer)
 
By:     /s/ Nicholas L. Ribis          Director                 March 28, 1997
-------------------------------------
          NICHOLAS L. RIBIS
 
By:     /s/ Wallace B. Askins          Director                 March 28, 1997
-------------------------------------
          WALLACE B. ASKINS
 
                                       Director                 March 28, 1997
By:       /s/ Don M. Thomas
-------------------------------------
            DON M. THOMAS
 
                                      56

<PAGE>
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
 
TRUMP ATLANTIC CITY FUNDING, INC.
 
             SIGNATURES                         TITLE                DATE
             ----------                         -----                ----
 
         /s/ Donald J. Trump            Chairman of the         March 28, 1997
-------------------------------------    Board of Directors
           DONALD J. TRUMP
 
        /s/ Nicholas L. Ribis           (Principal Executive    March 28, 1997
-------------------------------------    Officer) Chief
          NICHOLAS L. RIBIS              Executive Officer,
                                         President and
                                         Director
 
          /s/ John P. Burke             Chief Financial         March 28, 1997
-------------------------------------    Officer (Principal
            JOHN P. BURKE                Financial and
                                         Accounting Officer)
 
        /s/ Robert M. Pickus            Secretary and           March 28, 1997
-------------------------------------    Director
          ROBERT M. PICKUS
 
        /s/ Wallace B. Askins           Director                March 28, 1997
-------------------------------------
          WALLACE B. ASKINS
 
          /s/ Don M. Thomas             Director                March 28, 1997
-------------------------------------
            DON M. THOMAS
 
                                       57

<PAGE>
 
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT
 
  The Registrants have not sent (and do not intend to send) an annual report to
security holders covering the Registrants' last fiscal year and have not sent
(and do not intend to send) a proxy statement, form of proxy or other proxy
soliciting materials to security holders.
 
                                       58
<PAGE>
 
         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 
<TABLE>
<CAPTION>
                                                                           PAGE
<S>                                                                        <C>
Trump Atlantic City Associates and Subsidiaries
  Report of Independent Public Accountants................................ F-2
  Consolidated Balance Sheets as of December 31, 1995 and 1996............ F-3
  Consolidated Statements of Operations for the years ended December 31,
   1994, 1995
   and 1996............................................................... F-4
  Consolidated Statements of Capital for the years ended December 31,
   1994, 1995
   and 1996............................................................... F-5
  Consolidated Statements of Cash Flows for the years ended December 31,
   1994, 1995
   and 1996............................................................... F-6
  Notes to Consolidated Financial Statements.............................. F-7
Financial Statement Schedule
  Report of Independent Public Accountants................................ S-1
  Schedule II--Valuation and Qualifying Accounts for the Years Ended
   December 31, 1996, 1995 and 1994....................................... S-2
</TABLE>
 
                                      F-1
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Trump Atlantic City Associates and
 Subsidiaries:
 
  We have audited the accompanying consolidated balance sheets of Trump
Atlantic City Associates and Subsidiaries (a New Jersey general partnership)
as of December 31, 1995 and 1996, and the related consolidated statements of
operations, capital and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the management of Trump Atlantic City Associates and
Subsidiaries. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Trump Atlantic City
Associates and Subsidiaries as of December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles.
 
 
                                          Arthur Andersen LLP
 
Roseland, New Jersey
February 7, 1997
 
                                      F-2
<PAGE>
 
                TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1995 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                            1995        1996
                                                          ---------  ----------
                                     ASSETS
<S>                                                       <C>        <C>
CURRENT ASSETS:
 Cash and cash equivalents..............................  $  15,937  $   71,320
 Trade receivables, net of allowances for doubtful
  accounts of $8,077 and $17,355, respectively (Note
  2)....................................................      7,494      39,087
 Accounts receivable, other (Note 5)....................      6,564       6,144
 Inventories............................................      2,609       9,393
 Prepaid expenses and other current assets..............      5,045       6,495
 Due from affiliates, net (Note 7)......................      1,298       5,237
                                                          ---------  ----------
 Total current assets...................................     38,947     137,676
                                                          ---------  ----------
PROPERTY AND EQUIPMENT (Notes 2, 5 and 7):
 Land and land improvements.............................     48,308     159,390
 Buildings and building improvements....................    379,686   1,280,947
 Furniture, fixtures and equipment......................     90,965     194,050
 Leasehold improvements.................................      2,404       2,404
 Construction in progress...............................     51,183      23,067
                                                          ---------  ----------
                                                            572,546   1,659,858
 Less--Accumulated depreciation and amortization........   (147,284)   (203,591)
                                                          ---------  ----------
 Net property and equipment.............................    425,262   1,456,267
                                                          ---------  ----------
OTHER ASSETS:
 Deferred bond issuance costs, net of accumulated
  amortization of $7,525 and $5,052, respectively
  (Note 3)..............................................      9,866      39,153
 Other Assets...........................................      5,949      25,910
                                                          ---------  ----------
    Total other assets..................................     15,815      65,063
                                                          ---------  ----------
    Total assets........................................  $ 480,024  $1,659,006
                                                          =========  ==========
 
                            LIABILITIES AND CAPITAL
 
CURRENT LIABILITIES:
 Current maturities of long-term debt (Note 3)..........  $   2,901  $    9,410
 Accounts payable.......................................      8,290      22,598
 Accrued payroll........................................      6,815      16,653
 Self-insurance reserves (Note 5).......................      3,750       9,911
 Accrued interest payable (Note 3)......................      1,497      23,160
 Other accrued expenses.................................      6,822      25,202
 Other current liabilities..............................      2,235       3,578
                                                          ---------  ----------
    Total current liabilities...........................     32,310     110,512
                                                          ---------  ----------
NON-CURRENT LIABILITIES:
 Long-term debt, net of current maturities (Note 3).....    332,721   1,207,795
 Distribution payable to Trump Plaza Funding, Inc. .....      3,822       3,822
 Deferred state income taxes (Note 2)...................        359         450
 Other long-term liabilities............................        --        4,569
                                                          ---------  ----------
    Total non-current liabilities.......................    336,902   1,216,636
                                                          ---------  ----------
    Total liabilities...................................    369,212   1,327,148
                                                          ---------  ----------
COMMITMENTS AND CONTINGENCIES (Note 5):
CAPITAL:
 Partners' Capital......................................     94,087     363,646
 Retained Earnings (Accumulated Deficit)................     16,725     (31,788)
                                                          ---------  ----------
    Total Capital.......................................    110,812     331,858
                                                          ---------  ----------
    Total liabilities and capital.......................  $ 480,024  $1,659,006
                                                          =========  ==========
</TABLE>
 
  The accompanying notes to financial statements are an integral part of these
                       consolidated financial statements.
 
                                      F-3
<PAGE>
 
                TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                   1994      1995      1996
                                                 --------  --------  --------
<S>                                              <C>       <C>       <C>
REVENUES:
  Gaming........................................ $261,451  $298,073  $752,228
  Rooms.........................................   18,312    19,986    68,214
  Food and Beverage.............................   40,149    44,602    98,635
  Other.........................................    8,408     9,594    24,146
                                                 --------  --------  --------
    Gross Revenues..............................  328,320   372,255   943,223
  Less-Promotional allowances...................   33,257    38,934   104,400
                                                 --------  --------  --------
    Net Revenues................................  295,063   333,321   838,823
                                                 --------  --------  --------
COSTS AND EXPENSES:
  Gaming........................................  139,540   164,839   453,863
  Rooms.........................................    2,715     2,263    14,827
  Food and Beverage.............................   17,050    18,306    41,225
  General and Administrative....................   76,690    71,913   155,346
  Depreciation and Amortization.................   15,653    16,213    60,870
  Preopening....................................      --        --      4,145
                                                 --------  --------  --------
                                                  251,648   273,534   730,276
                                                 --------  --------  --------
    Income from operations......................   43,415    59,787   108,547
                                                 --------  --------  --------
NON-OPERATING INCOME (EXPENSE):
  Interest income...............................      842     1,003     2,339
  Interest expense (Note 3).....................  (49,061)  (44,264) (114,461)
  Non-operating income (expense) (Note 4).......   (4,931)   (5,743)   14,194
                                                 --------  --------  --------
    Non-operating expense, net..................  (53,150)  (49,004)  (97,928)
                                                 --------  --------  --------
Income (loss) before state income taxes and
 extraordinary items............................   (9,735)   10,783    10,619
BENEFIT FROM STATE INCOME TAXES.................     (865)      --        --
                                                 --------  --------  --------
Income (loss) before extraordinary items........   (8,870)   10,783    10,619
Extraordinary loss (Note 3).....................      --     (9,250)  (59,132)
                                                 --------  --------  --------
Net income (loss)............................... $ (8,870) $  1,533  $(48,513)
                                                 ========  ========  ========
</TABLE>
 
 
  The accompanying notes to financial statements are an integral part of these
                       consolidated financial statements.
 
                                      F-4
<PAGE>
 
                TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF CAPITAL
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                          RETAINED
                                                          EARNINGS/
                                              PARTNERS'  (ACCUMULATED
                                               CAPITAL     DEFICIT)    TOTAL
                                              ---------  ------------ --------
<S>                                           <C>        <C>          <C>
Balance, December 31, 1993..................  $(78,772)    $ 24,062   $(54,710)
Net Loss....................................       --        (8,870)    (8,870)
                                              --------     --------   --------
Balance, December 31, 1994..................   (78,772)      15,192    (63,580)
Capital Contributed by Trump Hotels & Casino
 Resorts Holdings, L.P......................   172,859          --     172,859
Net Income..................................       --         1,533      1,533
                                              --------     --------   --------
Balance, December 31, 1995..................    94,087       16,725    110,812
Capital Contributed by Trump Hotels & Casino
 Resorts Holdings, L.P......................   269,559          --     269,559
Net Loss....................................       --       (48,513)   (48,513)
                                              --------     --------   --------
Balance, December 31, 1996..................  $363,646     $(31,788)  $331,858
                                              ========     ========   ========
</TABLE>
 
 
 
  The accompanying notes to financial statements are an integral part of these
                       consolidated financial statements.
 
                                      F-5

<PAGE>
 
                TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                     (IN THOUSANDS, EXCEPT FOR SHARE DATA)
 
<TABLE>
<CAPTION>
                                                  1994      1995        1996
                                                --------  ---------  ----------
<S>                                              <C>       <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)............................  $ (8,870) $   1,533  $  (48,513)
 Adjustments to reconcile net income (loss) to   
  net cash flows provided by operating           
  activities:                                    
   Noncash charges:                              
    Extraordinary loss........................       --       9,250      59,132  
    Depreciation and amortizatioN.............    15,653     16,213      60,870  
    Accretion of discount on indebtedness.....     1,916      1,130         132  
    Amortization of deferred loan                                              
    offering costs............................     1,791      1,791       5,588  
    Provision for losses on receivables.......       396      1,057       8,599  
    Utilization of CRDA credits                                                
      and donations...........................     1,062        388         --   
    Valuation allowance of CRDA investments          394     (1,098)      3,013  
                                                --------  ---------  ----------  
                                                  12,342     30,264      88,821  
                                                                               
    Increase in receivables...................      (236)    (8,318)    (20,296) 
    Decrease (increase) in inventories........       (91)       371          47  
    Decrease (increase) in prepaid                                             
    expenses and other current assets.........    (1,385)      (765)      1,495  
    Decrease (increase) in other assets.......      (287)     6,283      (2,309) 
    Increase (decrease) in amounts due to                                      
    (from) affiliates.........................       109     (1,504)     (3,668) 
    Increase (decrease) in accounts payable,                                   
     accrued expenses and other current                                        
     liabilities..............................    10,464        592     (16,153) 
    Decrease in distribution payable to                                        
    Trump Plaza Funding, Inc. ................      (101)       --          --   
    Decrease in other long-term                                              
     liabilities..............................      (865)       --       (1,430) 
                                                --------  ---------    --------  
       Net cash flows provided                                               
        by operating activities...............  $ 19,950  $  26,923  $   46,507  
                                                --------  ---------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of property and equipment..........  $(20,489) $(109,756) $ (193,000)
 Purchases of CRDA investments................    (2,525)    (3,178)     (6,725)
 Cash refund of CRDA deposits.................     1,323        --          --
 Purchase of Taj Holding, net cash received...       --         --       46,714
                                                --------  ---------  ----------
       Net cash flows used in 
        investing activities..................   (21,691)  (112,934)   (153,011)
                                                --------  ---------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Cost of issuing debt.........................       --         --      (41,042)
 Issuance of Trump AC Mortgage Notes..........       --         --    1,200,000
 Retirement of long-term debt.................       --         --   (1,156,836)
 Retirement of NatWest Loan...................       --         --      (36,500)
 Additional Borrowings........................       375      4,218       6,170
 Payments and current maturities of long-term
  debt........................................    (1,883)    (4,527)    (14,690)
 Redemption of PIK Notes......................       --     (81,746)        --
 Contributed Capital by Trump Hotel and Casino
  Resorts Holdings, L.P. .....................       --     172,859     204,785
                                                --------  ---------  ----------
       Net cash flows provided by 
        (used in) financing 
        activities............................    (1,508)    90,804     161,887
                                                --------  ---------  ----------
NET INCREASE (DECREASE) IN CASH AND CASH
 EQUIVALENTS..................................    (3,249)     4,793      55,383
CASH AND CASH EQUIVALENTS AT BEGINNING OF
 YEAR.........................................    14,393     11,144      15,937
                                                --------  ---------  ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR......  $ 11,144  $  15,937  $   71,320
                                                ========  =========  ==========
Supplemental Disclosures of Cash Flow Informa-
 tion:
 . During 1996, THCR Holdings purchased cer-
   tain parcels of land amounting to $14,455
   and contributed the parcels to Trump AC.
 . Equipment purchase under capital leases....  $    375  $   3,317  $       10
 . Cash paid during the year for interest.....  $ 36,538  $  36,936  $  138,128
                                                ========  =========  ==========
</TABLE>
<TABLE>
<S>                                                                 <C>
Supplemental Disclosure of Noncash Activities:
 . During 1996, THCR purchased all of the capital stock of Taj
   Holding for $31,181 in cash and 323,423 shares of its common
   stock valued at $9,319. In addition, the contribution by Trump
   of his 50% interest in Taj Associates amounting to $40,500, net
   of the $10,000 payment to Bankers Trust, was recorded as minor-
   ity interest. In conjunction with the acquisition, the accumu-
   lated deficit amounting to $108,574 was recorded as an increase
   to Property, Plant & Equipment.
 . This transaction has been recorded by Trump AC.
    Fair Value of net assets acquired................................ $1,005,816
    Cash paid for the capital stock and payment to Bankers Trust.....    (41,181)
    Minority interest of Trump.......................................    (30,500)
                                                                      ----------
      Liabilities assumed............................................ $  934,135
                                                                      ==========
 . In connection with the purchase of the Specified Parcels, in
   1996 THCR issued 500,000 shares of its common stock valued at
   $10,500, and contributed the Specified Parcels to Trump AC.
</TABLE>
 The accompanying notes to financial statements are an integral part of these
                      consolidated financial statements.
 
                                      F-6
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) ORGANIZATION
 
  The accompanying consolidated financial statements include those of Trump
Atlantic City Associates ("Trump AC"), a New Jersey general partnership
(formerly Trump Plaza Holding Associates), and its 99% owned subsidiaries,
Trump Plaza Associates ("Plaza Associates"), and Trump Taj Mahal Associates
("Taj Associates"). Plaza Associates is a New Jersey general partnership which
owns and operates Trump Plaza Hotel and Casino ("Trump Plaza") located in
Atlantic City, New Jersey. Taj Associates is a New Jersey general partnership
which owns and operates the Trump Taj Mahal Casino Resort (the "Taj Mahal"),
located in Atlantic City, New Jersey. Trump Atlantic City Corporation
("TACC"), a New Jersey corporation, owns the remaining 1% interest in Plaza
Associates and Taj Associates. Trump AC's sole source of liquidity is
distributions in respect of its interests in Plaza Associates and Taj
Associates. Trump AC and TACC are owned by Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings").
 
  All significant intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements. The minority interests
in Plaza Associates and Taj Associates have not been separately reflected in
the consolidated financial statements of Trump AC since they are not material.
 
  Trump AC was formed in February, 1993 for the purpose of raising funds for
Plaza Associates. On June 25, 1993, Trump AC completed the sale of 12,000
Units (the "Units"), each Unit consisting of $5,000 principal amount of 12
1/2% Pay-In-Kind Notes, due 2003 (the "PIK Notes"), and one PIK Note Warrant
(the "PIK Note Warrants") to acquire $1,000 principal amount of PIK Notes.
Trump AC has no other assets or business other than its 99% equity interest in
Plaza Associates.
 
  On June 12, 1995, Trump Hotels & Casino Resorts, Inc., ("THCR"), completed a
public offering of 10,000,000 shares of common stock (the "Common Stock"), at
$14.00 per share (the "Stock Offering") for gross proceeds of $140,000,000.
Concurrently with the Stock Offering, Trump Hotels & Casino Resorts Holdings,
L.P. ("THCR Holdings"), a then 60% subsidiary of THCR, issued 15 1/2% Senior
Secured Notes (the "Senior Secured Notes") for gross proceeds of $155,000,000
(the "Note Offering" and, together with the Stock Offerings, the "1995
Offerings"). From the proceeds from the Stock Offering, THCR contributed
$126,848,000 to THCR Holdings. THCR Holdings subsequently contributed
$172,859,000 to Trump AC.
 
  Prior to the 1995 Offerings, Donald J.Trump (Trump) was the sole stockholder
of THCR and sole beneficial owner of THCR Holdings. Concurrent with the 1995
Offerings, Trump contributed to THCR Holdings all of his beneficial interest
in Plaza Associates. Trump also contributed to THCR Holdings all of his
existing interest and rights to new gaming activities in both emerging and
established gaming jurisdictions, including Trump Indiana but excluding his
interests in the Trump Taj Mahal Casino Resort (the "Taj Mahal") and Trump's
Castle Casino Resort.
 
  On April 17, 1996, pursuant to the Agreement and Plan of Merger, as amended
(the "Taj Merger Agreement"), between THCR and Taj Mahal Holding Corp. ("Taj
Holding"), each outstanding share of Class A Common Stock of Taj Holding (the
"Taj Holding Class A Common Stock"), which in the aggregate represented 50% of
the economic interest in Taj Associates, was converted into the right to
receive, at each holder's election, either (a) $30 in cash or (b) that number
of shares of Common Stock having a market value equal to $30. Trump held the
remaining 50% interest in Taj Associates and contributed such interest in Taj
Associates to Trump AC in exchange for limited partnership interests in THCR
Holdings. In addition, the outstanding shares of Taj Holding's Class C Common
Stock, all of which were held by Trump, were canceled in connection with the
Taj Merger. The following transactions occurred in connection with the Taj
Merger (collectively referred to as the "Taj Merger Transaction"):
 
 
                                      F-7
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
    (a) the payment of an aggregate of $31,181,000 in cash and the issuance
  of 323,423 shares of THCR Common Stock to the holders of Taj Holding Class
  A Common Stock pursuant to the Taj Merger Agreement;
 
    (b) the contribution by Trump to Trump AC of all of his direct and
  indirect ownership interests in Taj Associates, and the contribution by
  THCR to Trump AC of all of its indirect ownership interests in Taj
  Associates acquired in the Taj Merger Transaction;
 
    (c) the public offerings by (i) THCR of 12,500,000 shares of Common Stock
  (plus 750,000 shares of Common Stock issued in connection with the partial
  exercise of the underwriters' over-allotment option) (the "1996 Stock
  Offering") for net proceeds of $386,062,000 and (ii) Trump AC and Trump
  Atlantic City Funding, Inc. ("Trump AC Funding"), Trump AC's wholly owned
  finance subsidiary, of $1,200,000,000 aggregate principal amount of 11 1/4%
  First Mortgage Notes due 2006 (the "Trump AC Mortgage Notes") (the "1996
  Notes Offering" and together with the 1996 Stock Offering, the "1996
  Offerings");
 
    (d) the redemption of the outstanding shares of Taj Holding's Class B
  Common Stock, par value $.01 per share, immediately prior to the Taj Merger
  Transaction for $.50 per share in accordance with its terms;
 
    (e) the redemption of the outstanding 11.35% Mortgage Bonds, Series A,
  due 1999 of Trump Taj Mahal Funding, Inc. (the "Taj Bonds");
 
    (f) the retirement of the outstanding 10 7/8% Mortgage Notes due 2001 of
  Trump Plaza Funding, Inc.;
 
    (g) the satisfaction of the indebtedness of Taj Associates under its loan
  agreement with National Westminster Bank USA;
 
    (h) the purchase of certain real property used in the operation of the
  Taj Mahal that was leased from a corporation wholly owned by Trump (the
  "Specified Parcels");
 
    (i) the purchase of certain real property used in the operation of Trump
  Plaza that was leased from an unaffiliated third party;
 
    (j) the payment to Bankers Trust Company ("Bankers Trust") to obtain
  releases of liens and guarantees that Bankers Trust had in connection with
  indebtedness owed by Trump to Bankers Trust; and
 
    (k) the issuance to Trump of warrants (the "Trump Warrants") to purchase
  an aggregate of 1.8 million shares of Common Stock, (i) 600,000 shares of
  which may be purchased on or prior to April 17, 1999, at $30 per share,
  (ii) 600,000 shares of which may be purchased on or prior to April 17,
  2000, at $35 per share, and (iii) 600,000 shares of which may be purchased
  on or prior to April 17, 2001, at $40 per share.
 
  As a result of the contribution by Trump to Trump AC of his direct and
indirect ownership interests in Taj Associates and the contribution by THCR to
Trump AC of its indirect ownership interests in Taj Associates acquired in the
Taj Merger Transaction, together with THCR's contribution to THCR Holdings of
the proceeds from the 1996 Stock Offering. Trump's aggregate beneficial equity
interest in THCR Holdings decreased from approximately 40% to approximately
25%, and THCR's aggregate beneficial equity interest in THCR Holdings
increased from approximately 60% to approximately 75%. Trump's limited
partnership interest in THCR Holdings represents his economic interest in the
assets and operations of THCR Holdings.
 
  The Taj Merger Transaction has been accounted for as a "purchase" for
accounting and reporting purposes and the results of Taj Associates have been
included in the accompanying financial statements since the date of
acquisition. Accordingly, the excess of the purchase price over the fair value
of the net assets acquired ($200,782,000), which was allocated to land
($7,979,000) and building ($192,803,000) based on an appraisal on a pro rata
basis, consists of the following:
 
    (a) $40,500,000 representing the payment of $30.00 for each of the
  1,350,000 shares of Taj Holding Class A Common Stock. Holders of 298,739
  shares of Taj Holding Class A Common Stock elected to
 
                                      F-8
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
  receive 323,423 shares of THCR Common Stock and holders of 1,051,261 shares
  of Taj Holding Class A Common Stock elected to receive $31,181,000 in cash;
 
    (b) $40,500,000, representing the contribution by Trump to Trump AC (on
  behalf, and at the direction, of THCR Holdings) of all direct and indirect
  ownership interest in 50% of Taj Associates;
 
    (c) $9,900,000 of fees and expenses associated with the Taj Merger
  Transaction;
 
    (d) $108,574,000, representing the negative book value of Taj Associates
  at the date of the Taj Merger Transaction; and
 
    (e) $1,308,000 of closing costs associated with the purchase of the
  Specified Parcels.
 
  In connection with the Taj Merger Transaction, THCR purchased the Specified
Parcels from Trump Taj Mahal Realty Corp., a corporation owned by Trump, and
Taj Associates was released from its guarantee to First Union National Bank
(the "Guarantee"). The aggregate cost of acquiring the Specified Parcels was
$50,600,000 in cash and 500,000 shares of THCR Common Stock valued at
$10,500,000 (an average value of $21.00 per share based on the price of the
THCR Common Stock several days before and after the date of the amended Taj
Merger Agreement). The obligation of Taj Associates which had been accrued
with respect to the Guarantee ($17,923,000) was eliminated. In addition, THCR
exercised the option to purchase a tower adjacent to Trump Plaza's main tower
("Trump Plaza East") for $28,084,000, which amount has been included in land
and building.
 
  Unaudited pro forma information, assuming that the Taj Merger had occurred
on January 1, 1996, is as follows:
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED
                                                                  DECEMBER 31,
                                                                      1996
                                                                  ------------
<S>                                                               <C>
Net revenues..................................................... $984,789,000
                                                                  ------------
Income from operations...........................................  115,504,000
                                                                  ============
Loss before extraordinary loss...................................  (11,906,000)
                                                                  ============
Extraordinary loss...............................................  (59,132,000)
                                                                  ============
Net income (loss)................................................ $(71,038,000)
                                                                  ============
</TABLE>
 
  The pro forma information is presented for informational purposes only and
does not purport to present what the results of operations would have been had
the Taj Merger Transaction, in fact, occurred on January 1, 1996 or to project
the results of operations for any future period.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization and Basis of Presentation
 
  Trump AC has no operations, except for its ownership of Plaza Associates and
Taj Associates. Through these entities, Trump AC operates luxury casino
hotels, located on The Boardwalk in Atlantic City which provide high quality
amenities and services to its casino patrons and hotel guests. A substantial
portion of Trump AC's revenues are derived from its gaming operations and in
the past Trump AC has targeted the higher-end drive-in slot customer.
Competition in the Atlantic City casino market is intense and management
believes that this competition will continue as more casinos are opened and
new entrants into the gaming industry become operational.
 
 
                                      F-9
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Revenue Recognition
 
  Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. Revenue from
hotel and other services are recognized at the time the related service is
performed.
 
  Trump AC provides an allowance for doubtful accounts arising from casino,
hotel and other services, which is based upon a specific review of certain
outstanding receivables as well as historical collection information. In
determining the amount of the allowance, management is required to make
certain estimates and assumptions regarding the timing and amount of
collection. Actual results could differ from those estimates and assumptions.
 
 Promotional Allowances
 
  The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenue and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in gaming costs and expenses as follows:
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                             -----------------------------------
                                                1994        1995        1996
                                             ----------- ----------- -----------
   <S>                                       <C>         <C>         <C>
   Rooms.................................... $ 4,311,000 $ 4,836,000 $14,882,000
   Food and Beverage........................  15,373,000  17,167,000  45,452,000
   Other....................................   4,169,000   4,076,000  10,245,000
                                             ----------- ----------- -----------
                                             $23,853,000 $26,079,000 $70,579,000
                                             =========== =========== ===========
</TABLE>
 
  During 1994, certain Progressive Slot Jackpot Programs were discontinued
which resulted in $585,000 of related accruals being taken into income.
 
 Inventories
 
  Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
 
 Property and Equipment
 
  Property and equipment is carried at cost and is depreciated on the
straight-line method using rates based on the following estimated useful
lives:
 
<TABLE>
     <S>                                                             <C>
     Buildings and building improvements............................    40 years
     Furniture, fixtures and equipment..............................  3-10 years
     Leasehold improvements......................................... 10-40 years
</TABLE>
 
 Long-Lived Assets
 
  During 1995, Trump AC adopted the provisions of Statement of Financial
Accounting Standard No. 121 "Accounting for the Impairment of Long-Lived
Assets" ("SFAS No. 121"). SFAS 121 requires, among other
 
                                     F-10
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
things, that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. Impairment of long-
lived assets exists if, at a minimum, the future expected cash flows
(undiscounted and without interest charges) from an entity's operations are
less than the carrying value of these assets. As a result of its review, Trump
AC does not believe that any impairment exists in the recoverability of its
long-lived assets.
 
 Income Taxes
 
  State income taxes are recorded in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
SFAS No. 109 requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and the tax basis of assets and liabilities using enacted
tax rates.
 
  The accompanying consolidated financial statements do not include a
provision for federal income taxes since any income or losses are allocated to
the partners and are reportable for federal income tax purposes by the
partners.
 
  Under the New Jersey Casino Control Act (the "Casino Control Act"), both
Plaza Associates and Taj Associates are required to file a New Jersey
corporation business tax return. Accordingly, a benefit from state income
taxes has been reflected in the accompanying consolidated financial statements
of Trump AC. For state income tax purposes, available net operating loss
carryforwards have been utilized to offset 1995 and 1996 taxable income. As of
December 31, 1996, Plaza Associates and Taj Associates had a net operating
loss carry-forward of approximately $85,000,000 and $210,000,000,
respectively, for New Jersey State Income Tax purposes. No tax benefit has
been reflected in the accompanying financial statements for those losses as
utilization of such carryforwards are not considered more likely than not.
 
  Deferred state income taxes primarily relates to differences in the timing
of reporting depreciation for tax and financial statement purposes.
 
 Statements of Cash Flows
 
  For purposes of the statements of cash flows, cash and cash equivalents
include hotel and casino funds, funds on deposit with banks and temporary
investments purchased with a maturity of three months or less.
 
 Reclassifications
 
  Certain reclassifications have been made to prior year financial statements
to conform to the current year presentation.
 
                                     F-11
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(3) LONG-TERM DEBT
 
  Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,  DECEMBER 31,
                                                        1995          1996
                                                    ------------ --------------
<S>                                                 <C>          <C>
Plaza Associates and Plaza Funding Note (10 7/8%
 Mortgage Notes, due 2001), net of unamortized
 discount of $3,348,000 (a)........................ $326,652,000 $          --
Trump AC Mortgage Notes (11 1/4% First Mortgage
 Notes, due 2006) (c)..............................          --   1,200,000,000
Mortgage notes payable (d).........................    2,953,000      3,407,000
Other notes payable (e)............................    6,017,000     13,798,000
                                                    ------------ --------------
                                                     335,622,000  1,217,205,000
Less--current maturities...........................    2,901,000      9,410,000
                                                    ------------ --------------
                                                    $332,721,000 $1,207,795,000
                                                    ============ ==============
</TABLE>
 
  (a) On June 25, 1993, Plaza Funding issued $330,000,000 principal amount of
      10 7/8% Mortgage Notes, due 2001 (the "Plaza Notes"), net of discount
      of $4,313,000, representing an effective interest rate of approximately
      11.12%. Net proceeds of the offering were used to redeem all of Plaza
      Funding's outstanding $225,000,000 principal amount 12% Mortgage Bonds,
      due 2002 and together with other funds (see (b)), to redeem all of
      Plaza Funding's stock units, comprised of $75,000,000 redeemable
      Preferred Stock with associated shares of Common Stock, to repay
      $17,500,000 principal amount 9.14% Regency Note due 2003, to make a
      portion of a distribution to Trump to pay certain personal
      indebtedness, and to pay transaction expenses.
 
    On April 17, 1996, the Plaza Notes were redeemed at a premium with the
    proceeds from the 1996 Offerings (see note 2). The early redemption of
    the Plaza Notes resulted in an extraordinary loss of approximately
    $59,132,000.
 
  (b) On June 25, 1993, Trump AC issued $60,000,000 principal amount of 12
      1/2% Pay-in-Kind Notes, due 2003 (the "PIK Notes"), together with PIK
      Note Warrants to acquire an additional $12,000,000 of PIK Notes at no
      additional cost. The PIK Note Warrants were exercised prior to June 12,
      1995. The PIK Notes and the PIK Note Warrants were subsequently
      redeemed with a portion of the proceeds contributed to Trump AC by THCR
      Holdings (See Note 1). Such redemption resulted in the recognition of
      an extraordinary loss of $9,250,000, including the write-off of related
      unamortized deferred financing costs.
 
  (c) On April 17, 1996, Trump AC together with Trump AC Funding, a wholly
      owned subsidiary of Trump AC, issued the Trump AC Mortgage Notes in an
      aggregate principal amount of $1,200,000,000 which bear interest at
      11.25% and are due May 1, 2006. Interest on the Trump AC Mortgage Notes
      is due semi-annually on each May 1 and November 1, commencing on
      November 1, 1996. The Trump AC Mortgage Notes are guaranteed as to
      payment of principal and interest jointly and severally by Taj
      Associates, Plaza Associates, Trump AC and all future subsidiaries of
      Trump AC (other than Trump AC Funding). The Trump AC Mortgage Notes are
      jointly and severally secured by mortgages representing a first lien
      and security interest on substantially all of the assets of Taj
      Associates and Plaza Associates.
 
    The indenture pursuant to which the Trump AC Mortgage Notes were issued
    restricts the ability of Trump AC and its subsidiaries to make
    distributions or to pay dividends, as the case may be, unless certain
    financial ratios are achieved. In addition, the ability of Plaza
    Associates and Taj Associates to
 
                                     F-12
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
    make payments of dividends or distributions (except for payment of
    interest) through Trump AC to THCR Holdings may be restricted by the
    CCC.
 
    Underwriting costs, legal and accounting fees, printing costs and other
    expenses of $44,200,000 associated with the issuance of the Trump AC
    Mortgage Notes are being amortized using the effective interest method
    over the term of the Trump AC Mortgage Notes. Amortization is included
    in interest expense in the accompanying statements of operations and
    totaled $5,052,000 from the date of issuance through December 31, 1996.
 
  (d) Interest on these notes is payable with interest rates ranging from
      10.0% to 10.5%. The notes are due at various dates between 1997 and
      1998 and are secured by real property.
 
  (e) Interest on these leases are payable with interest rate ranging from
      7.9% to 13.5%. The leases are due at various dates between 1997 and
      2001 and are secured by equipment.
 
    The aggregate maturities of long-term debt as of December 31, 1996 are
    as follows:
 
<TABLE>
       <S>                                                        <C>
       1997...................................................... $    9,410,000
       1998......................................................      5,844,000
       1999......................................................      1,731,000
       2000......................................................        220,000
       2001......................................................              0
       Thereafter................................................  1,200,000,000
                                                                  --------------
                                                                  $1,217,205,000
                                                                  ==============
</TABLE>
 
    The ability of Trump AC to repay its long-term debt when due will
    depend on the ability of Plaza Associates and Taj Associates to
    generate cash from operations sufficient for such purposes or on the
    ability of Trump AC to refinance such indebtedness. Management does not
    currently anticipate that cash flow will be sufficient and that
    repayment will likely depend upon the ability to refinance such
    indebtedness. The future operating performance and the ability to
    refinance such indebtedness will be subject to the then prevailing
    economic conditions, industry conditions and numerous other financial,
    business and other factors, many of which are beyond the control of
    Trump AC. There can be no assurance that the future operating
    performance of Plaza Associates and Taj Associates will be sufficient
    to meet these repayment obligations or that the general state of the
    economy, the status of the capital markets generally or the
    receptiveness of the capital markets to the gaming industry will be
    conducive to refinancing or other attempts to raise capital.
 
(4) NON-OPERATING INCOME (EXPENSE)
 
  Non-operating income (expense) in 1994, 1995 and 1996 included $4,931,000,
$3,939,000 and $806,000, respectively, of costs associated with Trump Plaza
East and Trump World's Fair (see Note 5), net of miscellaneous non-operating
credits.
 
  During 1996, Plaza Associates and Taj Associates each entered into an
agreement with Atlantic Thermal Systems, Inc. ("Atlantic Thermal") pursuant to
which Atlantic Thermal was granted an exclusive license to use, operate and
maintain certain steam and chilled water production facilities located at
Plaza Associates and Taj Associates. In consideration for the license,
Atlantic Thermal paid Plaza Associates and Taj Associates a $15,000,000 non-
refundable license fee. This amount has been included in other non-operating
income in the accompanying financial statements.
 
                                     F-13
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(5) COMMITMENTS AND CONTINGENCIES
 
 Leases and Employment Agreements
 
  Pursuant to the acquisition of Trump World's Fair described in Note 7, Plaza
Associates entered into an easement agreement with the New Jersey Sports and
Exposition Authority ("NJSEA"). Under the terms of the agreement, Plaza
Associates has an exclusive easement over, in and through portions of the
Atlantic City Convention Center. The easement is for a 25-year term with
annual payments of $2,000,000, adjusted every five years for changes in the
Consumer Price Index.
 
  Trump AC has entered into employment agreements with certain key employees
and leases certain property (primarily land), office, warehouse space, certain
parking space, and various equipment under operating leases. Rent expense for
the years ended December 31, 1994, 1995, and 1996 was $3,613,000, $3,609,000
and $7,200,000, respectively, of which $1,900,000, $2,127,000 and $1,981,000,
respectively, relates to affiliates. As of December 31, 1996, Trump AC had
approximately $5,370,000 of commitments under employee agreements. These
commitments mature at various dates through 1999.
 
  Future minimum lease payments under the noncancelable operating leases are
as follows:
 
<TABLE>
<CAPTION>
                                                                       TOTAL
                                                                    ------------
     <S>                                                            <C>
     1997.......................................................... $  9,885,000
     1998..........................................................    5,393,000
     1999..........................................................    3,978,000
     2000..........................................................    3,018,000
     2001..........................................................    3,000,000
     Thereafter....................................................  113,000,000
                                                                    ------------
                                                                    $138,274,000
                                                                    ============
</TABLE>
 
  Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms.
 
  Taj Associates received a permit under the Coastal Area Facilities Review
Act ("CAFRA") (which included a condition of Taj Associates' casino license)
that initially required Taj Associates begin construction of certain
improvements on the Steel Pier by October 1992, which improvements were to be
completed within 18 months of commencement. Taj Associates initially proposed
a concept to improve the Steel Pier, the estimated cost of which was
$30,000,000. Such concept was approved by the New Jersey Department of
Environmental Protection, the agency which administers CAFRA. In March 1993,
Taj Associates obtained a modification of its CAFRA permit providing for the
extension of the required commencement and completion dates of the
improvements to the Steel Pier for one year, which has been renewed annually
based upon an interim use of the Steel Pier for an amusement park. Taj
Associates has received an additional one-year extension most recently through
March 29, 1998 of the required commencement and completion dates of the
improvements of the Steel Pier based upon the same interim use of the Steel
Pier as an amusement park.
 
 Casino License Renewal
 
  The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the
Casino Control Act, Plaza Associates and Taj Associates are required to
maintain certain licenses. Casino licenses must be renewed periodically, are
not transferable, are dependent on the financial stability of the licensee and
can be revoked at any time.
 
  In June 1995, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates' and Taj Associates' licenses to operate Trump Plaza and the Taj
Mahal. The CCC renewed Plaza Associates' and Taj Associates' casino licenses
for a period of four years through 1999. Upon revocation, suspension for more
than 120 days, or failure to renew the casino license, the Casino Control Act
provides for the mandatory appointment
 
                                     F-14
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of a conservator to take possession of the hotel and casino's business and
property, subject to all valid liens, claims and encumbrances.
 
 Legal Proceedings
 
  Plaza Associates, Taj Associates, its Partners, certain members of its
former Executive Committee, and certain of its employees, have been involved
in various legal proceedings. In general, Plaza Associates and Taj Associates
have agreed to indemnify such persons against any and all losses, claims,
damages, expenses (including reasonable costs, disbursements and counsel fees)
and liabilities (including amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties) incurred by them in said legal
proceedings.
 
  Various legal proceedings are now pending against Plaza Associates and Taj
Associates. Plaza Associates and Taj Associates consider all such proceedings
to be ordinary litigation incident to the character of their business. Plaza
Associates and Taj Associates believe that the resolution of these claims will
not, individually or in the aggregate, have a material adverse effect on their
financial condition or results of operations.
 
  Plaza Associates and Taj Associates are also a party to various
administrative proceedings involving allegations that they have violated
certain provisions of the Casino Control Act. Plaza Associates and Taj
Associates believe that the final outcome of these proceedings will not,
either individually or in the aggregate, have a material adverse effect on
their financial condition, results of operations or on the ability of Plaza
Associates or Taj Associates to otherwise retain or renew any casino or other
licenses required under the Casino Control Act for the operation of the
respective properties.
 
 Self-Insurance Reserves
 
  Self-insurance reserves represent the estimated amounts of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the normal course of business. These
reserves are established by management based upon specific review of open
claims, with consideration of incurred but not reported claims as of the
balance sheet date. Actual results may differ from these reserve amounts.
 
 Federal Income Tax Examination
 
  Taj Associates is currently involved in an examination with the Internal
Revenue Service ("IRS") concerning Taj Associates' federal partnership income
tax returns for the tax years 1992 and 1993. While any adjustment which
results from this examination could affect Taj Associates' state income tax
return, Taj Associates does not believe that adjustments, if any, will have a
material adverse effect on its financial condition or results of operations.
 
 Casino Reinvestment Development Authority Obligations
 
  Pursuant to the provisions of the Casino Control Act, Plaza Associates and
Taj Associates, must either obtain investment tax credits (as defined in the
Casino Control Act), in an amount equivalent to 1.25% of its gross casino
revenues, or pay an alternative tax of 2.5% of its gross casino revenues (as
defined in the Casino Control Act). Investment tax credits may be obtained by
making qualified investments or by the purchase of bonds at below market
interest rates from the Casino Reinvestment Development Authority ("CRDA").
Plaza Associates and Taj Associates intend on satisfying their obligations
primarily by depositing funds and donations of funds deposited. Plaza
Associates and Taj Associates are required to make quarterly deposits with the
CRDA based on 1.25% of its gross revenue. For the years ended December 31,
1994, 1995 and 1996, Trump AC
 
                                     F-15
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
charged to operations $838,000, $1,141,000, and $3,477,000, respectively, to
give effect to the below market interest rates associated with CRDA bonds that
have either been issued or are expected to be issued from funds deposited.
Additionally, for the years ended December 31, 1995 and 1996, Plaza Associates
credited operations for $2,239,000 and $464,000, respectively, resulting from
the recapture of the valuation allowance on CRDA receivable.
 
  In connection with Trump Plaza East (see below), the CRDA has approved the
use of up to $14,135,000 in deposits made by Plaza Associates for site
improvements. At December 31, 1996, Plaza Associates had recorded a receivable
from the CRDA of $7,413,000. While the receivable is fully realizable by Plaza
Associates, the amount of actual reimbursements Plaza Associates will receive
in any one year is limited to 75% and 50%, respectively, of the amount of
funds Plaza Associates has deposited with the CRDA to cover its Atlantic City
non-housing and South Jersey obligations. Accordingly, Plaza Associates has
recorded $3,150,000 as a current receivable and $4,263,000 as other assets in
the accompanying financial statements.
 
 Concentrations of Credit Risks
 
  In accordance with casino industry practice, Plaza Associates and Taj
Associates extend credit to a limited number of casino patrons, after
extensive background checks and investigations of credit worthiness. At
December 31, 1996, approximately 47.7% of Plaza Associates and Taj Associates
casino receivables (before allowances) were from customers whose primary
residence is outside the United States.
 
(6) EMPLOYEE BENEFIT PLANS
 
  Plaza Associates and Taj Associates have a retirement savings plan (the
"Plan") for its nonunion employees under Section 401(k) of the Internal
Revenue Code. Employees are eligible to contribute up to 15% of their earnings
to the Plan and Plaza Associates and Taj Associates will match 50% of the
first 5% and 4%, respectively, of an eligible employee's contributions. Trump
AC recorded charges of $848,000, $886,000 and $1,882,000 for matching
contributions for the years ended December 31, 1994, 1995 and 1996,
respectively.
 
  Plaza Associates and Taj Associates make payments to various trusteed multi-
employer pension plans under industry-wide union agreements. The payments are
based on the hours worked by or gross wages paid to covered employees. Under
the Employee Retirement Income Security Act, Plaza Associates and Taj
Associates may be liable for their share of the plan's unfunded liabilities,
if any, if the plans are terminated. Based upon the most recent information,
the combined withdrawal liability of Plaza Associates and Taj Associates
related to one of the plan's unfunded status approximates $3,071,000. Pension
expense for the years ended December 31, 1994, 1995 and 1996 were $651,000
$423,000 and $1,077,000 respectively.
 
  Plaza Associates and Taj Associates provide no other material post-
retirement or post-employment benefits.
 
                                     F-16
<PAGE>
 
                         TRUMP ATLANTIC CITY ASSOCIATES
                                AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
(7) TRANSACTIONS WITH AFFILIATES
 
  Trump AC has engaged in certain transactions with Trump and entities that are
wholly or partially owned by Trump. Amounts receivable from (owed to) at
December 31 are as follows:
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                      ------------------------
                                                         1995         1996
                                                      -----------  -----------
   <S>                                                <C>          <C>
   Seashore Four Associates(a)....................... $  (571,000) $  (571,000)
   Trump Seashore Associates(a)......................     756,000          --
   Taj Associates(b).................................     167,000          --
   Castle Associates(b)..............................    (694,000)   1,689,000
   Trump Casino Services, L.L.C.(b)..................         --           --
   Trump Organization(b).............................      64,000      184,000
   THCR Holdings(b)..................................   1,576,000    3,935,000
                                                      -----------  -----------
                                                      $ 1,298,000  $ 5,237,000
                                                      ===========  ===========
</TABLE>
 
  (a) Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates ("Seashore Four") and Trump Seashore Associates
("Seashore Associates"). In 1994, 1995 and 1996, Plaza Associates paid
$900,000, $950,000 and $1,000,000, respectively, to Seashore Four, and paid
$1,000,000, $1,195,000 and $981,000 in 1994, 1995 and 1996, respectively, to
Seashore Associates. Plaza Associates purchased the tract from Seashore Four in
January 1997 and the tract from Seashore Associates in September 1996 for
$10,000,000 and $14,500,000, respectively.
 
  (b) Plaza Associates engages in various transactions with the other Atlantic
City hotel/casinos and related casino entities owned by Trump. These
transactions are charged at cost or normal selling price in the case of retail
items and include utilization of fleet maintenance and limousine services,
certain shared professional fees, insurance, and payroll costs as well as
complimentary services offered to customers.
 
  Trump Casino Services, L.L.C. ("TCS"), a New Jersey limited liability
company, was formed on June 27, 1996 for the purpose of realizing cost savings
and operational synergies by consolidating certain administrative functions of,
and providing certain services to, Plaza Associates, Castle Associates and Taj
Associates.
 
 Services Agreement
 
  Pursuant to the terms of a Services Agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Trump, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of
$1,000,000 in equal monthly installments, and reimburses TPM on a monthly basis
for all reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under such services agreement, up to certain amounts. Under such
services agreement, approximately $1,300,000, $1,300,000 and $1,000,000 was
charged to expense for the years ended December 31, 1994, 1995 and 1996.
 
 Trump World's Fair
 
  Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel) and (ii) certain
promissory notes made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate assets
located in New York, unrelated to Plaza Associates. In connection with such
Option Agreement, Trump assigned his rights to Plaza Associates. On June 12,
1995, the option to purchase the Trump World's Fair was exercised. The option
price of $60,000,000 was
 
                                      F-17
<PAGE>
 
                        TRUMP ATLANTIC CITY ASSOCIATES
                               AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
funded with $58,150,000 from the capital contributed by THCR Holdings (See
Note 1), and $1,850,000 of option payments made by Plaza Associates.
 
 Other Payments to Donald J. Trump
 
  During 1994, Plaza Associates paid to Trump $1,000,000 under a Construction
Management Service Agreement. The payment was made for construction management
services rendered by Trump with respect to Trump Plaza East. This payment was
capitalized as part of the cost of the building.
 
  During 1994, Plaza Associates also paid Trump a commission of approximately
$572,000 for securing a retail lease at Trump Plaza. The commission has been
capitalized and is being amortized to expense over the 10-year term of the
lease.
 
 Trump Plaza East
 
  Under an agreement with Midlantic National Bank, Trump had (i) an option to
acquire Trump Plaza East and (ii) had a lease agreement for Trump Plaza East
which would expire on June 30, 1998 requiring $260,000 per month in lease
payments. In October 1993, Plaza Associates assumed the option and the lease
agreement from Trump.
 
  Until such time as the Trump Plaza East Purchase Option was exercised or
expired, Plaza Associates was obligated, from and after the date it entered
into the Trump Plaza East Purchase Option, to pay the net expenses associated
with Trump Plaza East. During 1995 and for part of 1996, Plaza Associates
incurred approximately $2,340,000 and $1,100,000, respectively, of such
expenses of which $2,045,000 and $348,000, respectively, are included in non-
operating expenses in the accompanying consolidated financial statements.
 
  In connection with the Taj Merger Transaction described in Note 1, Plaza
Associates exercised its option to acquire Trump Plaza East. The purchase
price of $28,084,000 has been included in land and building in the
accompanying financial statements.
 
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The carrying amount of the following financial instruments approximates fair
value, as follows: (a) cash and cash equivalents, accrued interest receivables
and payables are based on the short term nature of these financial instruments
and (b) CRDA bonds and deposits are based on the allowances to give effect to
the below market interest rates.
 
  The estimated fair values of other financial instruments are as follows:
 
<TABLE>
<CAPTION>
                                                        DECEMBER 31, 1996
                                                  ------------------------------
                                                  CARRYING AMOUNT   FAIR VALUE
                                                  --------------- --------------
     <S>                                          <C>             <C>
     Trump AC Mortgage Notes..................... $1,200,000,000  $1,188,000,000
</TABLE>
 
  The fair values of the Trump AC Mortgage Notes are based on quoted market
prices as of December 31, 1996.
 
  There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
 
 
                                     F-18
<PAGE>
 
                         TRUMP ATLANTIC CITY ASSOCIATES
                                AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) FINANCIAL INFORMATION--TRUMP AC FUNDING
 
  Financial information relating to Trump AC Funding as of December 31, 1996
and for the period from April 17, 1996 to December 31, 1996 is as follows:
 
<TABLE>
     <S>                                                         <C>
     Total Assets (including First Mortgage Note receivable of
      $1,200,000,000 and related interest receivable)........... $1,222,500,000
                                                                 ==============
     Total Liabilities and Capital (including AC Notes payable
      of $1,200,000,000 and related interest payable)........... $1,222,500,000
                                                                 ==============
     Interest Income............................................ $   95,250,000
                                                                 ==============
     Interest Expense........................................... $   95,250,000
                                                                 ==============
     Net Income................................................. $          --
                                                                 ==============
</TABLE>
 
                                      F-19
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Trump Atlantic City Associates and  Subsidiaries:
 
  We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Trump Atlantic City Associates and
Subsidiaries (Partnerships) included in this Form 10-K and have issued our
report thereon dated February 7, 1997. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
accompanying schedule is the responsibility of the Partnerships' management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
 
                                          ARTHUR ANDERSEN LLP
 
Roseland, New Jersey
February 7, 1997
 
                                      S-1
<PAGE>
 
                                                                    SCHEDULE II
 
                      TRUMP ATLANTIC CITY ASSOCIATES AND
                                 SUBSIDIARIES
 
                       VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
<TABLE>
<CAPTION>
                             BALANCE AT  CHARGED TO    OTHER         BALANCE AT
                              BEGINNING  COSTS AND    CHANGES          END OF
                              OF PERIOD   EXPENSES  (DEDUCTIONS)       PERIOD
                             ----------- ---------- ------------     -----------
<S>                          <C>         <C>        <C>              <C>
YEAR ENDED DECEMBER 31,
 1996:
  Allowance for doubtful ac-
   counts................... $ 8,077,000 $8,598,000 $   680,000 (C)  $17,355,000
                             =========== ========== ===========      ===========
  Valuation allowance for
   interest differential on
   CRDA bonds............... $ 1,077,000 $3,477,000 $ 7,907,000 (D)  $12,461,000
                             =========== ========== ===========      ===========
YEAR ENDED DECEMBER 31,
 1995:
  Allowance for doubtful ac-
   counts................... $ 8,493,000 $1,057,000 $(1,473,000)(A)  $ 8,077,000
                             =========== ========== ===========      ===========
  Valuation allowance for
   interest differential on
   CRDA bonds............... $ 2,174,000 $1,141,000 $(2,238,000)(B)  $ 1,077,000
                             =========== ========== ===========      ===========
YEAR ENDED DECEMBER 31,
 1994:
  Allowance for doubtful ac-
   counts................... $10,616,000 $  323,000 $(2,446,000)(A)  $ 8,493,000
                             =========== ========== ===========      ===========
  Valuation allowance for
   interest differential on
   CRDA bonds............... $ 2,981,000 $  838,000 $(1,645,000)(B)  $ 2,174,000
                             =========== ========== ===========      ===========
</TABLE>
---------------------
(A) Write-off of uncollectible accounts.
(B) Adjustment of allowance applicable to contribution of CRDA deposits.
(C) Includes $(6,916,000) representing the write-off of uncollectible amounts
    and $7,596,000 which represents Taj Associates' beginning balance as of
    April 17, 1996.
(D) Includes $(464,000) representing the adjustment of allowance applicable to
    CRDA contributions and $8,371,000 which represents Taj Associates'
    beginning balance as of April 17, 1996.
 
                                      S-2
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
   EXHIBIT
     NO.                        DESCRIPTION OF EXHIBIT
   -------                      ----------------------
   <C>     <S>
   10.73   Employment Agreement, dated October 14, 1996, between Trump Taj
            Mahal Associates and Patrick J. O'Malley.
   10.74   Employment Agreement, dated May 3, 1996, between Trump Taj Mahal
            Associates and Loretta I. Viscount.
   10.75   Employment Agreement, dated April 17, 1995, between Trump Plaza
            Associates and Steven C. Hann.
   21      List of Subsidiaries of Trump Atlantic City Associates.
   27.1    Financial Data Schedule of Trump Atlantic City Funding, Inc.
   27.2    Financial Data Schedule of Trump Atlantic City Associates.
</TABLE>