MAJESTIC STAR CASINO LLC, 10-K, 1999-03-30

MAJESTIC STAR CASINO LLC
10-K, 1999-03-30
AMUSEMENT & RECREATION SERVICES

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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, 1998

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

Commission file number: 333-06489

THE MAJESTIC STAR CASINO, LLC
(Exact name of registrant as specified in its charter)

Indiana 43-1664986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

One Buffington Harbor Drive
Gary, Indiana 46406-3000
(219) 977-7823
(Registrant's address and telephone number, including area code)

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant: Not Applicable. The Company has no publicly traded equity
securities.

The number of shares of Common Stock issued and outstanding: Not
Applicable.

DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE> THE MAJESTIC STAR CASINO, LLC
1998 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . .7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . .7

PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . . .7
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . .8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . .9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . . 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . 19

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT . . . . . . . . . 19
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . 19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . 22

PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
<PAGE> 1 PART I

ITEM 1. BUSINESS

GENERAL

The Majestic Star Casino, LLC (the "Company" or the "Registrant"),
operates the Majestic Star Casino, a riverboat gaming facility located at
Buffington Harbor in Gary, Indiana, pursuant to a five year riverboat
owner's license granted to it by the Indiana Gaming Commission (the "IGC")
on June 3, 1996.

The Majestic Star Casino commenced operations on June 7, 1996. On
October 27, 1997, the Company replaced a leased vessel (the "Chartered
Vessel") with a new vessel owned by the Company (the "Permanent Vessel").
The Company to date has expended approximately $52.2 million, excluding
capitalized interest, on the Permanent Vessel. The Permanent Vessel
contains approximately 43,000 square feet of casino space, 1,499 slot
machines and 69 table games, including 8 poker tables, on three decks. The
Majestic Star Casino is part of a gaming complex (the "Gaming Complex")
which has been developed at Buffington Harbor, and is owned by Buffington
Harbor Riverboats, L.L.C. (the "BHR Joint Venture"), a joint venture which
is owned equally by the Company and Trump Indiana, Inc. (the "Joint Venture
Partner"). The Company and the Joint Venture Partner, the holder of a
second gaming license to operate from the City, formed the BHR Joint Venture
to own and operate certain common facilities of the Gaming Complex such as
the guest pavilion, vessel berths, parking lots and other infrastructure.
The Company and the Joint Venture Partner each have a fifty-percent
ownership interest in the BHR Joint Venture. The Company and its joint
venture partner each operate its own riverboat casino at the Gaming Complex
on a staggered cruise schedule which reduces waiting times to board a
riverboat casino.

The Company was formed in December 1993 as an Indiana limited
liability company. The executive offices of the Company are located at One
Buffington Harbor Drive, Gary, Indiana 46406-3000, and the Company's
telephone number is (219) 977-7823.

OPERATING STRATEGY

The Company's operating strategy is characterized by several
principal elements including those described below.

Targeted Customer Base

The Company focuses primarily on middle income customers which it
believes constitutes the largest segment of potential gaming customers. The
Company utilizes high-volume marketing techniques to attract middle income
customers, whom it is then able to qualify and target for direct marketing
activities. To assist the Company with its direct marketing activities, the
Company has established the Club M-Star Slot Club (the "Club M-Star").

Club M-Star enables the Company to maintain a comprehensive database
of information about its customers, including their gaming levels, duration
of play and preferences, and to utilize such information to tailor marketing
programs to encourage frequent visits by these customers. The Company also
has an established strategy for recruiting and retaining higher activity
casino customers through the reward of certain promotional allowances, such
as complimentary food, beverage and entertainment when gaming play warrants.
Promotional allowances granted are a relatively small percentage of the
potential casino revenue obtainable from these tracked high limit customers.
Management believes that its continued marketing efforts combined with the
amenities offered by the Permanent Vessel, including an expanded VIP Lounge
to be constructed during the first half of 1999 and the extension of credit
to customers, will allow the Company to increase its share of the middle and
higher income market in the greater Chicago metropolitan area.
<PAGE> 2
Emphasis on Slot Play

The Company emphasizes slot machine wagering, which it believes is
the fastest growing and most profitable segment of the casino entertainment
business. With the introduction of the Permanent Vessel, the Company
continues to enhance and modify its mix of slot machines. During 1998, the
Company introduced nickel slot machines, triple play poker video and
participation games, including Wheel of Fortune and Jeopardy. The Company
believes that it is advantageous to maintain a variety of slot machines to
meet the demand of its customers. Minimum payout percentages for slot
machines in Indiana are set by the IGC. The Company attempts to maintain
payout percentages that are competitive to attract and retain customers.

Customer Service

As part of its commitment to providing a quality casino
entertainment experience for its patrons, the Company is dedicated to
ensuring a high level of customer satisfaction and loyalty by providing
attentive customer service in a friendly atmosphere. During the first
quarter of 1999, the Company created a full time player development
department and concierge service to further assist in providing onboard
customer service. Management recognizes that consistent quality and a
comfortable atmosphere stem from the collective care and friendliness of
each team member. Toward this end, management takes a hands-on approach
through active and direct involvement with team members at all levels. In
particular, management conducts ongoing orientation and training sessions
with all team members at which it stresses the importance of customer
contact and encourages team members to look at, smile at, and wish each
customer good luck with whom they interact. The Company offers attractive
team member benefit programs to recruit and retain friendly, professional
team members.

Emphasis on Attributes of Buffington Harbor

The Company emphasizes the attributes of the Buffington Harbor
Gaming Complex, including the ability to park once and play twice (at two
casinos), direct highway access and abundant surface parking. The Company
also intends to conduct a billboard marketing campaign with its joint
venture partner during 1999 whereby both entities will jointly advertise the
attributes of the Buffington Harbor Gaming Complex.

GROWTH STRATEGY

The Company's expansion strategy has focused on increasing the
overall size of its riverboat gaming facility located at Buffington Harbor
in Gary, Indiana. On October 27, 1997, the Company placed into service the
Permanent Vessel which replaced the Chartered Vessel. The Permanent Vessel
contains approximately 43,000 square feet of casino space, which represents
an increase of approximately 65.4% compared to the Chartered Vessel. The
floor configuration contains approximately 1,499 slot machines and 69 table
games including 8 poker tables. The Permanent Vessel also substantially
increased the Company's capacity from 1,700 to 3,000 passengers per cruise.

COMPETITION

The Majestic Star Casino is dependent primarily on adults residing
within 150 miles of the Buffington Harbor Gaming Complex, which includes the
Chicago metropolitan area. The Chicago metropolitan area contains over 6
million adults. In addition, according to the 1990 Bureau of Census
estimates, the per capita income for the Chicago metropolitan area is high
by comparison to other Midwestern gaming jurisdictions. Illinois and
Indiana state laws limit the total number of licenses issuable in the
Chicago metropolitan area to nine. All licenses are currently in operation
and the number of licenses cannot be increased without legislative action.
The Company also expects to compete to a lesser extent with six additional
riverboats authorized to operate in southern Indiana, of which four are
currently operational.

<PAGE> 3
There can be no assurance that Indiana or Illinois will not
authorize additional gaming licenses in the future. Legislation has been
introduced on numerous occasions in recent years in Illinois to provide for
land-based casinos in Chicago and to expand riverboat gaming in Illinois,
including authorization of additional operators or the authorization of
existing operators to move to new sites or otherwise to modify existing
regulations to decrease or eliminate certain restrictions including
limitations on the number of gaming positions, to remain dockside or the
elimination of credit play. During the first quarter of 1999, legislation
was introduced in Indiana to allow certain organizations (primarily VFW
posts) to possess a limited number of electronic gaming devices. To date,
no such legislation has been enacted. The Company is unable to predict
whether any such legislation, in Illinois, Indiana or elsewhere, will be
enacted or whether, if passed, it would have a material adverse impact on
the results of operations or financial condition of the Company.

The Company competes, and expects to compete, with various gaming
operations on Native American lands, including those located, or to be
located, in Michigan, Wisconsin and possibly northern Indiana. The Saginaw
Chippewa Tribe is currently operating one of the largest Native American
gaming complexes in the U. S. in Mt. Pleasant, Michigan, approximately 250
miles northeast of Gary, Indiana. In December 1998, the Michigan Senate and
House of Representatives approved four additional Indian compacts which have
been signed by the Governor of Michigan that would allow land-based casinos
in Michigan, including southwest Michigan. The opening of land-based
casinos, which generally have a competitive advantage over cruising casinos
in close proximity to the Company, could have an adverse effect on the
Company.

With respect to the State of Michigan, the Company also expects
future competition from three land-based casinos to be developed in Detroit,
Michigan, pursuant to a November 1996 voter initiative. It is anticipated
that the three casinos may operate from temporary facilities as early as
mid-1999, while their permanent facilities are being developed.

The Company anticipates that competition will increase with the
recent purchase and pending sale of two area casinos to larger and stronger
competitors. Harrah's Entertainment, Inc., has purchased Showboat, Inc.,
including the Showboat Mardi Gras Casino, located in East Chicago, Indiana.
It is expected that Harrah's will rename the East Chicago property to take
advantage of the Harrah's brand name. Harrah's has also announced that it
intends to expand the Showboat East Chicago facility and will invest
approximately $30.0 million in various land-based developments during the
coming year. Also, Horseshoe Gaming, LLC, has agreed to acquire Empress
Entertainment. Empress Entertainment owns two area riverboat gaming
operations: one in Hammond, Indiana, and one in Joliet, Illinois. The
Horseshoe Gaming agreement must be approved by both the Illinois Gaming
Board and the Indiana Gaming Commission.

Many of the Company's competitors have greater gaming industry
management experience, financial resources and, in the case of Showboat
Marina and Empress Hammond, enclosed parking garages. The Company's joint
venture partner also constructed a 300-room hotel for their own use located
at the Gaming Complex which opened in the fourth quarter of 1998.

The Company believes that its ability to compete successfully in the
riverboat gaming industry will be primarily based on the quality and
location of its gaming facilities, the effectiveness of its marketing
efforts, and overall levels of customer service and satisfaction. Although
management believes that the location and amenities of the Majestic Star
Casino will enable the Company to compete effectively with other casinos in
the immediate area, the Company expects intense competition to continue in
its market area.

<PAGE> 4
EMPLOYEES

At December 31, 1998, the Company employed approximately 1,030
persons and the BHR Joint Venture employed approximately 294 persons. The
Company and the BHR Joint Venture have collective bargaining agreements with
Local 1 of the Hotel Employees and Restaurant Employees International Union,
covering approximately 86 employees of the Company and 88 employees of the
BHR Joint Venture in food and beverage service positions. The agreements
expire in 2001. The Company and the BHR Joint Venture also have collective
bargaining agreements with the Operating Engineers Union, covering
approximately 5 employees of the Company's marine operations department and
15 employees of the BHR Joint Venture. The agreement with the Company
expires in 2002 and the agreement with the BHR Joint Venture expires in
2001. The Company also has a collective bargaining agreement with the
Seafarers International Union which covers approximately 42 employees in the
marine operations department. The agreement expires in 2003.

The BHR Joint Venture is currently negotiating a collective
bargaining agreement with Local 1 of the Hotel Employees and Restaurant
Employees International Union. This agreement would cover approximately 100
employees in general facilities and housekeeping positions.

In recruiting personnel, the Company is obligated, under the terms
of an agreement with the City of Gary, to use its best efforts to have an
employee base which is comprised of 70% from racially minority groups, and
52% females, 67% residents of the City of Gary and 90% residents of Lake
County, Indiana.

SEASONALITY

Because of the climate in the Chicago metropolitan area, the
Company's operations are expected to be seasonal with stronger results
expected during the period from May through September. Accordingly, the
Company's results of operations are expected to fluctuate from quarter to
quarter and the results for any fiscal quarter may not be indicative of
results for future fiscal quarters.

GOVERNMENTAL REGULATION

The ownership and operation of the Majestic Star Casino is subject
to regulation by the State of Indiana. The following is a summary of the
applicable provisions of the Riverboat Gambling Act of the State of Indiana
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
Riverboat Gambling Act and such other laws and regulations.

In 1993, the State of Indiana passed the Riverboat Gambling Act
which created the Indiana Gaming Commission (the "IGC"). The IGC is given
extensive powers and duties for the purposes of administering, regulating
and enforcing riverboat gaming in Indiana and was authorized to award up to
eleven gaming licenses to operate riverboat casinos in the State of Indiana,
including five to counties contiguous to Lake Michigan in northern Indiana,
five to counties contiguous to the Ohio River in southern Indiana and one to
a county contiguous to Patoka Lake in southern Indiana.

Referenda required by the Riverboat Gambling Act to authorize the
five licenses to be issued for counties contiguous to Lake Michigan have
been conducted and gaming has been authorized for the cities of Hammond,
East Chicago, and Gary in Lake County, Indiana, and for Michigan City in
LaPorte County, to the east of Lake County.

<PAGE> 5
The IGC has jurisdiction and supervision over all riverboat gaming
operations in Indiana and all persons on riverboats where gaming operations
are conducted. These powers and duties include authority to (i) investigate
all applicants for riverboat gaming licenses, (ii) select licensees from
competing applicants, (iii) establish fees for licensees and (iv) prescribe
all forms used by applicants. The IGC is authorized to adopt rules for
administering the gaming statute and the conditions under which riverboat
gaming in Indiana may be conducted. The IGC may suspend or revoke the
license of a licensee or impose civil penalties, in some cases without
notice or hearing, for any act in violation of the Riverboat Gambling Act or
for any other fraudulent act.

The Riverboat Gambling Act requires an extensive disclosure of
records and other information concerning an applicant, including disclosure
of all directors, officers and persons holding a five percent or more direct
or indirect beneficial interest in an applicant.

In determining whether to grant an owner's license to an applicant,
the IGC considers a number of factors, including (i) the character,
reputation, experience and financial integrity of the applicant, (ii) the
facilities or proposed facilities for the conduct of riverboat gaming, (iii)
the prospective revenue to be collected by the state from the conduct of
riverboat gaming, (iv) the good faith affirmative action plan to recruit,
train and upgrade minorities in all employment classifications, (v) the
financial ability of the applicant to purchase and maintain adequate
liability and casualty insurance, (vi) whether the applicant has adequate
capitalization to provide and maintain the riverboat for the duration of the
license and (vii) the extent to which the applicant meets or exceeds other
standards adopted by the IGC. The IGC may also give favorable consideration
to applicants for economically depressed areas and applicants who provide
for significant development of a large geographic area. A person or entity
holding an owner's gaming license issued by the IGC may not own more than a
ten percent interest in another such license. An owner's license expires
five years after the effective date of the license (unless earlier
terminated or revoked) and may be renewed for one year periods by the IGC
upon satisfaction of certain statutory and regulatory requirements. A
gaming license is a revocable privilege and is not a property right pursuant
to the Riverboat Gambling Act. On June 3, 1996, the Majestic Star Casino
obtained a gaming license from the IGC.

Under IGC regulations, minimum and maximum wagers on games are left
to the discretion of the licensee. Wagering is required to be conducted
with tokens, chips or electronic cards instead of cash or coins. Each
riverboat gaming excursion is limited to a maximum duration of four hours
unless a longer excursion is expressly approved by the IGC.

Effective November 1996, riverboat casinos operating on Lake
Michigan were granted an exemption to the Johnson Act, a federal statute
which prohibits casino gambling on federal waterways. Prior to this time
the riverboat casinos operating on Lake Michigan, including the Majestic
Star Casino, remained dockside and simulated cruising. No gaming may be
conducted while the boat is docked except (i) for 30-minute time periods at
the beginning and end of a cruise while the passengers are embarking and
disembarking, (ii) if the master of the riverboat reasonably determines that
specific weather or water conditions present a danger to the riverboat, its
passengers or crew, or other vessels on the water, (iii) if either the
vessel or the docking facility is undergoing mechanical or structural
repair, (iv) if water traffic conditions present a danger to the riverboat,
its passengers or crew, or other vessels on the water, or (v) if the master
has been notified that a condition exists that would cause a violation of
federal law if the riverboat were to cruise.

<PAGE> 6
An Indiana admission tax of $3.00 for each person admitted to each
gaming excursion is imposed upon the license owner. Legislation has been
introduced that would increase the admission tax to $4.00 per person, but to
date, no such legislation has been enacted. The Company is unable to
predict if this legislation will be reintroduced or if any other legislation
introduced in Indiana relative to riverboat casinos will be enacted. If
legislation is enacted to increase the admission tax, the effect of such an
increase could have a material impact on the results of operations of the
Company. A 20% tax is imposed on the "adjusted gross receipts" received
from gaming operations, which is defined under the Riverboat Gambling Act as
the total of all cash and property received (including checks received by
the licensee, whether or not collected), less the total of all cash paid out
as winnings to patrons and uncollected gaming receivables (not to exceed
2%). The gaming license owner must remit the admission and wagering taxes
before the close of business on the day following the day on which the taxes
were incurred. Indiana laws also permit the imposition of real property
taxes on Indiana riverboats at rates to be determined by local taxing
authorities of the jurisdiction in which a riverboat operates.

The IGC is authorized to license suppliers and certain occupations
related to riverboat gaming. Gaming equipment and supplies customarily used
in conducting riverboat gaming may be purchased or leased only from licensed
suppliers.

The Riverboat Gambling Act places special emphasis upon minority and
women business enterprise participation in the riverboat industry. Any
person issued an owner's gaming license must establish goals of expending
at least 10% of the total dollar value of the licensee's contracts for goods
and services with minority business enterprises and 5% of the total dollar
value of the licensee's contracts for goods and services with women's
business enterprises. The IGC may suspend, limit or revoke an owner's
gaming license or impose a fine for failure to comply with these statutory
requirements.

ITEM 2. PROPERTIES

The Company operates the Majestic Star Casino, a riverboat gaming
facility located at Buffington Harbor in Gary, Indiana, approximately 23
miles southeast of downtown Chicago. Buffington Harbor is located at the
interchange of U.S. 12 and Indiana State Highway 912, a divided freeway
which connects Interstate Highways 90 and 80/94.

The Majestic Star Casino operates from the Gaming Complex, which was
developed, and is owned and operated, by the BHR Joint Venture. The Gaming
Complex is situated on approximately 100 acres contains approximately 2,935
surface parking spaces and a 90,000 square foot land based pavilion which
has a 352 seat buffet, a 110 seat steakhouse, a cocktail lounge, a gift
shop, a ticketing area for each casino and administrative offices. The
Company's joint venture partner has also constructed a 300-room hotel
facility at the Gaming Complex for use of its customers. The hotel opened
during the fourth quarter of 1998.

Through October 19, 1997, the Company conducted all gaming on the
Chartered Vessel. The Chartered Vessel contained approximately 26,000
square feet of gaming space on four levels, with approximately 932 slot
machines and 50 table games. The Chartered Vessel accommodated 1,700
passengers and 200 employees and also contained food, beverage and bar
facilities.

In September 1996, the Company entered into various agreements for
the design, engineering and construction of a vessel (the "Permanent
Vessel") to replace the Chartered Vessel. The Permanent Vessel is owned by
the Company and was placed into service on October 27, 1997. The Permanent
Vessel contains approximately 43,000 square feet of casino space on three
decks, 1,499 slot machines and 61 table games, including 8 poker tables.
The Permanent Vessel has an atrium and escalators in addition to elevators
and stair towers to move passengers more freely between the various levels.
<PAGE> 7
The Company to date has expended approximately $52.2 million, excluding
capitalized interest, on the Permanent Vessel. With the Permanent Vessel
in service, the Company believes that its facility should meet its
operating needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

Various legal proceedings are pending against the Company.
Management considers all such pending proceedings, primarily personal injury
and equal employment opportunity (EEO) claims, to be ordinary litigation
incidental to the character of the Company's business. Management believes
that the resolution of these proceedings will not, individually or in the
aggregate, have a material effect on the Company's financial condition or
results of operations.

On March 27, 1998, a complaint was filed in the Lake County Superior
Court in East Chicago, Indiana, against BHR, the Joint Venture Partner and
the Company. The plaintiff, a former employee of the Company, claims to
have been assaulted in the BHR parking lot on June 25, 1997, and is
requesting compensatory and punitive damages totaling approximately $11
million. The suit alleges that the Joint Venture Partner and the Company
failed to provide adequate security to prevent assaults. The Company
intends to vigorously defend against such suit. However, the case is in the
discovery phase and it is too early to predict its outcome or the effect, if
any, on the Company's financial position or its results of operations.

From time to time, the Company may be involved in routine
administrative proceedings involving alleged violations of certain
provisions of the Riverboat Gambling Act. Management believes that the
outcome of any such proceedings will not, either individually or in the
aggregate, have a material adverse effect on the Company or its ability to
retain and/or renew any license required under the Riverboat Gambling Act
for the Company's operations. In March 1998, the Company agreed to settle
two such proceedings with the payment of $120,000 to the IGC. No such
proceedings are pending at this time.

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

Not applicable

PART II

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

The Company is a privately owned Indiana limited liability company
and, as such, there is no public market for the registrant's equity
securities.

The Company has not paid any cash dividends to its members. The
ability of the Company to pay dividends is restricted by the Indenture (the
"Indenture") dated May 22, 1996 by and between the Company and IBJ Schroder,
as Trustee, which governs the Company's 12.75% Senior Secured Notes due
2003, with contingent interest (the "Senior Secured Notes").
<PAGE> 8
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1998 1997 1996
---- ---- ----
(dollars in thousands)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenues (1) (2) $114,263 $94,543 $54,221
Pre-opening costs -- 1,254 4,587
Operating income (loss) (3) (4) (5) 13,685 607 (48)
Interest expense, net 14,991 11,046 6,399
Net income (loss) (4,473) (13,887) (8,887)
Ratio of earnings to fixed charges (6) -- -- --
OTHER DATA
Adjusted EBITDA: (7) 23,219 12,701 10,738

At December 31,
------------------------------------------------
1998 1997 1996
---- ---- ----
BALANCE SHEET DATA:
Cash and cash equivalents $17,295 $8,084 $8,936
Restricted cash -- 11,905 1,689
Investment in BHR, net 40,749 43,542 44,947
Total assets 125,261 134,762 142,384
Current liabilities 11,109 11, 699 8,141
Long-term debt 108,390 110,829 108,121
Total liabilities 128,081 133,286 127,021
Members' equity (2,998) 1,476 15,363
</TABLE>
- -----
NOTES:
(1) The Majestic Star Casino commenced operations June 7, 1996.
(2) Includes a lump sum payment in first and fourth quarter of 1998 of
approximately $314,000 and $190,000, respectively, from the Company's Joint
Venture Partner to compensate the Company for the loss of certain parking
spaces to be utilized by the Joint Venture Partner for the construction of a
hotel facility.
(3) Includes approximately $755,000 during the three months ended March 31,
1998 in expenses associated with the lease and subsequent termination of the
charter vessel lease agreement effective March 1, 1998.
(4) Includes losses on disposal of assets previously utilized on the
Chartered Vessel totaling $755,000 in 1998 and $1.6 million in 1997.
(5) Includes losses on disposal of slot machines of approximately $204,000
replaced in 1998.
(6) The ratio is less than one-to-one coverage. The Company's earnings are
inadequate to cover fixed charges and the amount of coverage deficiency was
$4,473,323, $16,204,192 and $9,099,604 in 1998, 1997 and 1996, respectively.
However, this has not resulted in any violations of debt covenants.
(7) Adjusted EBITDA, or "earnings before interest, income taxes,
depreciation, amortization and chartered vessel lease payments", is a
supplemental financial measurement used by the Company in the evaluation of
its gaming business and by many gaming industry analysts. Adjusted EBITDA
should only be read in conjunction with all of the Company's financial data
summarized above and its financial statements prepared in accordance with
generally accepted accounting principles ("GAAP") appearing elsewhere
herein, and should not be construed as an alternative either to income from
operations (as determined in accordance with GAAP) as an indication of the
Company's operating performance or to cash flows from operating activities
(as determined in accordance with GAAP) as a measure of liquidity. Adjusted
EBITDA excludes pre-opening expenses associated with the start-up of the
Permanent Vessel and the Chartered Vessel of $1,253,758 and $4,586,879 in
1997 and 1996, respectively.

<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Statement on Forward-Looking Information

The discussions regarding proposed developments and operations of
the Company included in this item contain "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, which
represent the Company's expectations or beliefs concerning future events.
Statements containing expressions such as "believes", "anticipates" or
"expects" used in the Company's press releases and reports filed with the
Securities and Exchange Commission (including periodic reports on Form 10-K
and Form 10-Q) are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties. Although the
Company believes its expectations are based upon reasonable assumptions
within the bounds of its knowledge of its business and operations, there can
be no assurances that actual results will not materially differ from
expected results. The Company cautions that these and similar statements
included in this report and in previously filed periodic reports are further
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. Such factors
include, without limitation, the following: the purchase of real estate for,
and the design and construction of, a covered parking facility located at
the Company's gaming complex; the ability to fund planned development needs
and to service debt from existing operations and from new financing;
increased competition in existing markets or the opening of new gaming
jurisdictions; a decline in the public acceptance of gaming; the limitation,
conditioning or suspension of the Company's gaming license; increases in or
new taxes imposed on gaming revenues or gaming devices; a finding of
unsuitability by regulatory authorities with respect to the Company's
officers or key employees; loss and/or retirement of key executives;
significant increase in fuel or transportation prices; adverse economic
conditions in the Company's markets; and severe and unusual weather in the
Company's markets.

Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date thereof. The Company undertakes
no obligation to publicly release any revisions to such forward-looking
statements to reflect events or circumstances after the date hereof.

The following discussions should be read in conjunction with, and is
qualified in its entirety by, the Company's financial statements, including
the notes thereto, appearing elsewhere herein.

Results of Operations

The discussion of results of operations contained herein provides a
comparison of the year ended December 31, 1998 with the year ended December
31, 1997. Due to the fact that the Company commenced operations on June 7,
1996, the Company has limited operating history and lacks a comparable
period for prior years with respect to the twelve month period ended
December 31, 1997. Nonetheless, the discussion of results of operations
contained herein also provides a comparison of the full twelve month period
ended December 31, 1997 with the 205 days of operations in 1996.

The following table contains information from the statements of income, as
well as information relative to EBITDA, expressed as a percentage of gross
revenues.

<PAGE> 10
Statements of Income and EBITDA, as a Percentage of Gross Revenues

For the Year Ended December 31,
-------------------------------
1998 1997 1996
---- ---- ----
Revenues:
Casino 97.3% 97.5% 97.4%
Food and beverage 1.4 1.6 1.5
Other (4) 1.3 0.9 1.1
----- ----- -----
Gross Revenues 100.0 100.0 100.0
less promotional allowances (0.3) (0.2) 0.0
----- ----- -----
Net Revenues 99.7 99.8 100.0

Costs and Expenses:
Casino 16.5 17.7 17.1
Gaming and admission taxes 28.6 28.5 28.7
Food and beverage 2.1 2.0 2.1
Advertising and promotion 8.9 13.4 8.4
General and administrative 21.1 23.5 22.7
Economic incentive-City of Gary 3.0 2.9 2.9
Depreciation and amortization 6.8 8.1 9.8
Loss on disposition of assets (6) (7) 0.8 1.7 0.0
Pre-opening costs (3) -- 1.3 8.5
----- ----- -----
Total costs and expenses 87.8 99.1 100.2
----- ----- -----
Operating Income (Loss): (5) 11.9 0.7 (0.2)

Other Income (Expense):
Loss on investment in BHR (2.8) (3.6) (4.5)
Interest income 0.8 1.9 4.1
Interest expense (13.4) (12.9) (15.2)
Interest expense to affiliate (0.5) (0.7) (0.6)
----- ----- -----
Total (15.9) (15.3) (16.2)
----- ----- -----
Net Income (Loss): (4.0) (14.6) (16.4)
===== ===== =====
EBITDA: (2) 20.3 13.4 19.8
- -----
NOTES:
1. The Company commenced operations on June 7, 1996.
2. EBITDA (defined as earnings before interest, income taxes, depreciation
and amortization and, for purposes hereof, does not include Chartered Vessel
lease payments) is presented solely as a supplemental disclosure to assist
in the evaluation of the Company's ability to generate cash flow. In
particular, the Company believes that an analysis of EBITDA enhances the
understanding of the financial performance of companies with substantial
depreciation and amortization. EBITDA also excludes approximately $1.3
million and $4.6 million of pre-opening costs for the year ended December
31, 1997 and the year ended December 31, 1996, respectively.
3. Includes approximately $1.3 million and $4.6 million of pre-opening
expenses associated with the start-up of the Permanent Vessel and Chartered
Vessel, for the year ended December 31, 1997 and the year ended December 31,
1996, respectively.
4. Includes a lump sum payment in first and fourth quarter of 1998 of
approximately $314,000 and $190,000, respectively, from the Company's Joint
Venture Partner to compensate the Company for the loss of certain parking
spaces to be utilized by the Joint Venture Partner for the construction of a
hotel facility.
5. Includes approximately $755,000 in 1998 in expenses associated with the
lease and subsequent termination of the charter vessel lease agreement
effective March 1, 1998.
6. Includes losses on disposal of assets previously utilized on the
Chartered Vessel totaling $755,000 in 1998 and $1.6 million in 1997.
7. Includes losses on disposal of slot machines of approximately $204,000
that were replaced in 1998.

<PAGE> 11
Future operating results will be subject to significant business,
economic, regulatory and competitive uncertainties and contingencies,
including future and existing casino operations, many of which are beyond
the control of the Company. While the Company believes that the Majestic
Star Casino will be able to attract a sufficient number of customers and
generate a sufficient amount of revenue to meet its debt obligations as they
become due, there can be no assurance with respect thereto.

1998 Compared to 1997

Gross revenues for the year ended December 31, 1998, amounted to
approximately $114,601,000, an increase of approximately $19,889,000 or
21.0% from gross revenues recorded in the year ended December 31, 1997. The
increase was attributable to the increased capacity associated with the
Permanent Vessel combined with an aggressive marketing strategy designed to
increase the total number of passengers.

Casino revenues during the year ended December 31, 1998 totaled
approximately $111,481,000 of which slot machines accounted for
approximately $85,176,000 (76.4%) and table games accounted for
approximately $26,305,000 (23.6%). The average number of slot machines in
operation increased to 1,521 during the year ended December 31, 1998 from
924 during the year ended December 31, 1997. The average win per slot
machine per day decreased to $155 for the year ended December 31, 1998 from
approximately $187 during the year ended December 31, 1997. During the year
ended December 31, 1998, slot machine capacity and coin-in increased by 64%
and 25%, respectively, compared to the year ended December 31, 1997,
resulting in a lower win per slot machine per day. The average number of
table games in operation during the year ended December 31, 1998, increased
to 61 from 50 during the year ended December 31, 1997. The average win per
table game per day during the year ended December 31, 1998, declined to
approximately $1,113 versus $1,247 in the year ended December 31, 1997, due
primarily to a 22% increase in table unit capacity and a 0.6% decrease in
the table game hold percentage. The average daily win per state passenger
count was $32 and the average daily win per patron was $57 during the year
ended December 31, 1998, a decrease of less than 1% and an increase of less
than 1%, respectively, compared to the year ended December 31, 1997.

Food and beverage revenue for the year ended December 31, 1998,
totaled approximately $1,643,000, or 1.4% of gross revenues, compared to
approximately $1,559,000, or 1.6% of gross revenues, for the year ended
December 31, 1997. Other revenue, consisting primarily of commission income
and lump sum payments totaling $504,000 from the Company's Joint Venture
Partner to compensate the Company for the loss of certain parking spaces,
totaled approximately $1,477,000, or 1.3% of gross revenues, for the year
ended December 31, 1998, compared to approximately $849,000, or 0.9% of
gross revenues for the year ended December 31, 1997. The dollar increase in
food and beverage revenue, as well as other revenue, was principally
attributable to the increased capacity associated with the Permanent Vessel.

Promotional allowances (complimentaries) included in the Company's
1998 and 1997 gross food revenues were approximately $337,000 and $169,000,
respectively. Promotional allowances provided to the Company's gaming
patrons at facilities located in, and/or owned by the BHR Joint Venture,
totaled approximately $567,000 in 1998 and $646,000 in 1997, and are
characterized in the financial statements as an expense to the casino. The
BHR Joint Venture invoices the Company monthly for these promotional
allowances at cost, which approximates the retail value of these promotional
allowances. Overall, promotional allowances increased slightly in the
aggregate as a result of increased capacity. The Company was able to more
effectively utilize facilities on board the vessel as opposed to those
operated by the BHR Joint Venture, thus altering the ratio of
complimentaries provided by the Company compared to those provided by the
BHR Joint Venture.

<PAGE> 12
Casino operating expenses for the year ended December 31, 1998
totaled approximately $18,853,000, or 16.5% and 16.9% of gross revenues and
casino revenues, respectively, compared to approximately $16,758,000, or
17.7% and 18.2%, respectively, for the year ended December 31, 1997. These
expenses were primarily comprised of salaries, wages and benefits, and
operating and promotional expenses of the casino. The increase of
approximately $2,095,000 or 12.5% in casino operating expenses is primarily
attributed to an increase in payroll expenses of which table games accounted
for approximately $1.0 million and slots accounted for approximately
$320,000. Also, approximately $800,000 is associated with general expenses
related to operating the larger Permanent Vessel, including approximately
$300,000 for gaming equipment rental.

Gaming and admissions taxes totaled approximately $32,722,000 for
the year ended December 31, 1998, compared to approximately $26,956,000 in
the year ended December 31, 1997. These taxes are levied on adjusted gross
receipts, as defined by Indiana Gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. An additional $3,456,000 was paid
during the year ended December 31, 1998 compared to approximately $2,789,000
in the year ended December 31, 1997, to the City under an agreement whereby
the Company pays 3% of the adjusted gross receipts directly to the City.

Advertising and promotion expenses for the year ended December 31,
1998, totaled approximately $10,156,000, or 8.9% of gross revenues, compared
to approximately $12,709,000, or 13.4% of gross revenues, during the year
ended December 31, 1997. Advertising and promotion expenses included
salaries, wages and benefits of the marketing and casino service departments
as well as promotions, advertising and special events. The $2,553,000, or
20.1%, decrease in advertising and promotion expenses as a percentage of
gross revenues during the year ended December 31, 1998 compared to the year
ended December 31, 1997, was primarily the result of the Company redirecting
its marketing dollars. During the first half of 1998 the Company focused its
marketing dollars on mass marketing to build the customer database. Also,
beginning late third quarter and all of the fourth quarter, the Company
redirected its marketing dollars to target or direct marketing and also
significantly reduced the amount of chartered bus passengers from
approximately 10.0% to approximately 3.0% of total passengers.

General and administrative expenses for the year ended December 31,
1998, were approximately $24,222,000, or 21.1% of gross revenues, compared
to $22,230,000, or 23.5% of gross revenues, for the year ended December 31,
1997. These expenses included approximately $7,101,000 for berthing fees
paid to the BHR Joint Venture, $6,035,000 for marine operations and
$1,915,000 for security and surveillance operations. The $1,992,000 or
9.0% increase in these expenses is primarily attributed to an increase of
approximately $1,249,000 in property taxes and approximately $686,000 in
berthing fees paid to the BHR Joint Venture.

Depreciation and amortization for the year ended December 31, 1998,
was approximately $7,820,000, or 6.8% of gross revenues, compared to
approximately $7,700,000, or 8.1% of gross revenues, during the year ended
December 31, 1997. The $120,000 or 1.6% increase is attributed to
approximately $51,000 in depreciation expense associated with the
acquisition of additional slot machines in mid 1998 and the write off of
organization costs with a net book value of approximately $69,000 in the
fourth quarter of 1998.

Operating income for the year ended December 31, 1998, was
approximately $13,685,000, or 11.9% of gross revenues, compared to
approximately $607,000, or 0.6% of gross revenues, in the year ended
December 31, 1997. The results included approximately $755,000 in expenses
associated with the lease and subsequent termination of the Chartered Vessel
lease agreement effective March 1, 1998, losses on disposal of assets
previously utilized on the Chartered Vessel of approximately $755,000 in
1998 and $1,603,000 in 1997, losses on disposal of slot machines of
approximately $204,000 replaced in 1998, and approximately $1,254,000 in
preopening costs associated with the development of the Permanent Vessel in
1997. The increase in operating income is principally attributable to the
increase in vessel capacity, which allowed the Company to achieve higher
gross revenues in 1998 based upon increased passenger counts.<PAGE>
<PAGE> 13
Net interest expense for the year ended December 31, 1998 was
approximately $14,991,000, or 13.1% of gross revenues, compared to
approximately $11,046,000, or 11.7% of gross revenues, for the year ended
December 31, 1997. The increase in net interest expense is attributed to
the increase in contingent interest associated with increased income and the
additional interest expense associated with the financing of additional slot
machine equipment in late 1997 for use on the Permanent Vessel. Also,
approximately $2,317,000 of interest was capitalized in 1997. The Senior
Secured Notes carry a coupon interest rate of 12.75%, plus contingent
interest equal to 5% of the Company's Consolidated Cash Flow, as defined
(not to exceed $3 million annually), both payable semi-annually. The
payment of contingent interest can be deferred under certain conditions.
The contingent interest ordinarily payable on May 15, 1998, and November 15,
1998, was deferred, as allowed under the Indenture. As of December 31, 1998
and 1997, the Company had accrued contingent interest of approximately
$2,444,000 and $1,253,000, respectively. To date, no contingent interest
has been paid.

The Company's loss in its investment in the BHR Joint Venture for
the year ended December 31, 1998 was approximately $3,167,000. The loss
represents the Company's 50% share of BHR's non-cash net loss (primarily
depreciation and amortization).

As a result of the foregoing, the Company experienced net losses of
approximately $4,473,000 and $13,887,000 during the years ended December 31,
1998 and 1997, respectively.

1997 Compared to 1996

Gross revenues for the year ended December 31, 1997, amounted to
approximately $94,712,000, an increase of approximately $40,480,000 from
gross revenues recorded in the year ended December 31, 1996. The increase
was attributable to the Company operating the entire twelve months ended
December 31, 1997, compared to 205 days of operations in the year ended
December 31, 1996.

Casino revenues during the year ended December 31, 1997, totaled
approximately $92,305,000, of which slot machines accounted for
approximately $69,081,000 (74.8%) and table games accounted for
approximately $23,224,000 (25.2%). The average number of slot machines in
operation increased to 1,038 during the year ended December 31, 1997, from
924 during the year ended December 31, 1996. The average win per slot
machine per day decreased to $187 for the year ended December 31, 1997, from
approximately $198 during the year ended December 31, 1996. The average
number of table games in operation during the year ended December 31, 1997,
increased to 52 from 50 during the year ended December 31, 1996. The
average win per table game per day during the year ended December 31, 1997,
declined to approximately $1,247 compared to $1,496 in the year ended
December 31, 1996, due primarily to a 1.7% decrease in the table game hold
percentage. The average daily win per state passenger count was $33 and the
average daily win per patron was $56 during the year ended December 31,
1997, an increase of 3% and 5%, respectively, compared to the year ended
December 31, 1996.

Food and beverage revenue for the year ended December 31, 1997,
totaled approximately $1,559,000, or 1.6% of gross revenues, compared to
approximately $809,000 or 1.5% of gross revenues for the year ended December
31, 1996. Other revenue, consisting primarily of commission income, totaled
approximately $849,000, or 0.9% of gross revenues, compared to approximately
$636,000 or 1.1% of gross revenues for the year ended December 31, 1996.
The dollar increase in food and beverage revenue as well as other revenue is
the result of the Company operating the entire twelve months ended December
31, 1997, compared to 205 days of operations in the year ended December 31,
1996.

<PAGE> 14
Promotional allowances (complimentaries) included in the Company's
1997 and 1996 gross food revenues were approximately $169,000 and $12,000,
respectively. The increase in promotional allowances is the result of the
Company operating the entire twelve months ended December 31, 1997 compared
to 205 days of operations in the year ended December 31, 1996. Promotional
allowances provided to the Company's gaming patrons at facilities located
in, and/or owned by the BHR Joint Venture, totaled approximately $646,000
and $288,000 in 1997 and 1996, respectively, and are characterized in the
financial statements as an expense to the casino. The BHR Joint Venture
invoices the Company monthly for these promotional allowances at cost, which
approximates the retail value of these promotional allowances.

Casino operating expenses for the year ended December 31, 1997,
totaled approximately $16,758,000, or 17.7% and 18.2% of gross revenues and
casino revenues, respectively, compared to approximately $9,257,000, or
17.1% and 17.5% gross revenues and casino revenues, respectively, for the
year ended December 31, 1996. These expenses were primarily comprised of
salaries, wages and benefits, and operating and promotional expenses of the
casino. Both the dollar increase in casino operating expenses of $7,501,000
and the slight increase of 0.6% as a percentage of gross revenues and casino
revenues were primarily the result of an increase in payroll expenses
combined with the Company operating the entire twelve months ended December
31, 1997 compared to 205 days of operations in the year ended December 31,
1996.

Gaming and admissions taxes totaled approximately $26,956,000 for
the year ended December 31, 1997, compared to approximately $15,538,000 in
the year ended December 31, 1996. These taxes are levied on adjusted gross
receipts, as defined by Indiana Gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. An additional $2,789,000 was paid
during the year ended December 31, 1997, compared to approximately
$1,586,000 in the year ended December 31, 1996 to the City under an
agreement whereby the Company pays 3% of the adjusted gross receipts
directly to the City.

Advertising and promotion expenses for the year ended December 31,
1997, totaled approximately $12,709,000, or 13.4% of gross revenues,
compared to approximately $4,563,000, or 8.4% of gross revenues, during the
year ended December 31, 1996. Advertising and promotion expenses included
salaries, wages and benefits of the marketing and casino service departments
as well as promotions, advertising and special events. The 5.0% increase in
advertising and promotion expenses as a percentage of gross revenues during
the year ended December 31, 1997, compared to the 205 days of operation in
the year ended December 31, 1996, was primarily the result of increased
expenditures associated with direct mail (i.e., promotions and rebates
offered to customers using the slot machines) bus subsidies (i.e.,
promotions and discounts for customers traveling by bus to the Company's
gaming complex), and an increase in general media including billboards,
print and radio to heighten the Company's overall presence within the
marketplace in light of additional competition as well as increased
advertising associated with the opening of the Permanent Vessel on October
27, 1997.

General and administrative expenses for the year ended December 31,
1997, were approximately $22,230,000, or 23.5% of gross revenues, compared
to $12,289,000, or 22.7% of gross revenues for the year ended December 31,
1996. These expenses included approximately $6,415,000 for berthing fees
paid to the BHR Joint Venture, $6,811,000 for marine operations and
$1,852,000 for security and surveillance operations. The dollar increase
in these expenses is primarily attributed to operating a full twelve months
for the year ended December 31, 1997, compared to the 205 days for the year
ended December 31, 1996.

<PAGE> 15
Depreciation and amortization for the year ended December 31, 1997,
was approximately $7,700,000, or 8.1% of gross revenues, compared to
approximately $5,320,000, or 9.8% of gross revenues, during the year ended
December 31, 1996. The dollar increase in these expenses is attributed to
operating a full twelve months for the year ended December 31, 1997,
compared to the 205 days for the year ended December 31,1996. The amount of
depreciation and amortization, in terms of dollars is anticipated to
slightly increase now that the Permanent Vessel is completed and has been
placed into service as the site for the Company's gaming operations.

On October 27, 1997, the Chartered Vessel was replaced with the
Permanent Vessel. The Company wrote-off approximately $1,603,000 of
unamortized leasehold improvements made to the Chartered Vessel. Assets
used on the Chartered Vessel with a net book value of approximately $713,000
at December 31, 1997 are in the process of being disposed of.

Operating income for the year ended December 31, 1997, approximated
$607,000, or 0.6% of gross revenues, compared to an operating loss in the
year ended December 31, 1996, of $48,000, or (0.1%) of gross revenues. The
results for the years ended 1997 and 1996, included pre-opening costs
associated with the start-up of the Permanent Vessel and the Chartered
Vessel, were approximately $1,254,000 and $4,587,000, respectively.

Net interest expense for the year ended December 31, 1997, was
approximately $11,046,000, or 11.7% of gross revenues, compared to
approximately $6,399,000, or 11.7% of gross revenues, for the year ended
December 31, 1996. The dollar increase is attributed to operating a full
twelve months for the period ended December 31, 1997 compared to the 205
days for the year ended December 31, 1996. $2,317,000 and $213,000 of
interest were capitalized in 1997 and 1996, respectively. The Senior Secured
Notes carry a coupon interest rate of 12.75%, plus contingent interest equal
to 5% of the Company's Consolidated Cash Flow, as defined, (not to exceed $3
million annually), both payable semi-annually. The contingent interest
ordinarily payable on May 15, 1997, and November 15, 1997, was deferred, as
allowed under the Indenture.

The Company's loss in its investment in the BHR Joint Venture for
the year ended December 31, 1997, was approximately $3,448,000. The loss
represents the Company's 50% share of BHR's non-cash net loss.

As a result of the foregoing, the Company experienced net losses of
approximately $13,887,000 and $8,887,000 during the years ended December 31,
1997, and 1996, respectively.

Earnings Before Interest, Income Taxes, Depreciation and Amortization
("EBITDA")

EBITDA is presented solely as a supplemental disclosure and is used
by the Company to assist in the evaluation of the cash generating ability of
its gaming business.

EBITDA (excluding loss on disposal of assets of approximately
$958,000 and Chartered Vessel lease and termination payments of
approximately $755,000) in 1998 was approximately $23,219,000, or 20.3% of
gross revenues, during the year ended December 31, 1998, compared to
approximately $12,701,000, or 13.4% of gross revenues, during the year ended
December 31, 1997. EBITDA increased approximately $10,518,000 or 82.8%
during 1998, compared to 1997. EBITDA during the fourth quarter of 1998
increased approximately 207.9% to $7,023,000 from $2,281,000 during the
fourth quarter of 1997. EBITDA during the fourth quarter of 1998
represented 30% of the Company's EBITDA for 1998, compared to 18.1% during
the fourth quarter of 1997. The percentage and dollar increase in EBITDA
during the year and the fourth quarter ended December 31, 1998, is primarily
the result of increased capacity associated with the Permanent Vessel
combined with an aggressive marketing strategy and strong operating margins.

<PAGE> 16
EBITDA (excluding Chartered Vessel lease payments of approximately
$1,537,000) in 1997 was approximately $12,701,000, or 13.4% of gross
revenues, compared to approximately $10,714,000, or 19.8% of gross revenues,
during 1996. The percentage decrease in EBITDA was primarily due to a 5.0%
increase in Advertising and Promotion costs.

EBITDA should be viewed only in conjunction with all of the
Company's financial data and statements, and should not be construed as an
alternative either to income from operations (as an indicator of the
Company's operating performance) or to cash flows from operating activities
as a measure of liquidity.

Liquidity and Capital Resources

At December 31, 1998, the Company had cash and cash equivalents of
approximately $17.3 million. During 1998, the Company spent approximately
$2.1 million for property and equipment, including approximately $869,000 to
equip the Permanent Vessel and approximately $1.0 million for additional
nickel slot machines. The Company originally committed to spend
approximately $50 million, excluding capitalized interest, on the Permanent
Vessel. To date, the Company has invested approximately $52.2 million for
the construction, design, engineering, and equipping of the Permanent
Vessel, which amount excludes approximately $2.5 million of capitalized
interest. In 1998, the Company also contributed in 1998 approximately
$374,000 from working capital to the BHR Joint Venture for general
enhancements.

The Company, to date, has met its capital requirements through net
cash from operations, capital contributions and loans. For 1998, net cash
provided from operations totaled approximately $7.0 million. Net cash
provided bay investment activities was approximately $6.9 million for 1998.
Consolidated cash flow, as defined in the Indenture governing the Company's
Senior Secured Notes, was approximately $23.3 million during 1998, with
$10.2 million in the first half of the year and $13.1 million in the second.

As of December 31, 1998, loans included: (i) $105 million principal
amount of 12.75% Senior Secured Notes due 2003, with additional contingent
interest equal to 5% of the Company's consolidated cash flow (as defined in
the underlying Indenture); (ii) approximately $8.8 million borrowed from
Barden Development, Inc. ("BDI"), the manager and a member of the Company;
and (iii) approximately $5.3 million of equipment financing including
related use taxes.

During January 1998, approximately $10.8 million of the proceeds
from the Senior Secured Notes, together with interest of $1.1 million earned
thereon, were reclassified from restricted cash to operating cash as the
proceeds were not required to complete the Permanent Vessel.

During September 1998, $2.0 million was repaid to BDI. This note
resulted from the conversion of this member's contributions into debt on
March 31, 1996. There is no set term for repayment of the remaining balance
which was approximately $8.8 million as of December 31, 1998.

The Senior Secured Notes mature on May 15, 2003. The Senior Secured
Notes are redeemable at the option of the Company, in whole or part, at any
time on or after May 15, 2000, at various premiums. Holders of the Senior
Secured Notes have the right to require that the Company repurchase the
notes at a premium under certain conditions including a change in control of
the Company.

The Senior Secured Notes carry a coupon interest rate of 12.75%,
plus contingent interest equal to 5% of the Company's Consolidated Cash
Flow, as defined (not to exceed $3 million annually), both payable semi-
annually. The payment of contingent interest can be deferred under certain
conditions. All contingent interest ordinarily payable on the Senior
Secured Notes since their time of issuance has been deferred, as allowed
under the terms of the Indenture. As of December 31, 1998, the Company had
accrued contingent interest payable of approximately $2,444,000. The Senior
Secured Notes are collateralized by essentially all the assets of the
Company.
<PAGE> 17
The Indenture contains financial and other covenants, which, among
other things, limits the Company's ability to (1) issue indebtedness, (2)
make investments, (3) make distributions and equity repurchases, (4) enter
into merger, consolidation and asset sale transactions, (5) create liens and
(6) enter into transactions with affiliates. These restrictions are subject
to a number of qualifications and exceptions as described in the Indenture.

If the Company is determined to be in default under the Indenture,
the Senior Secured Notes may be accelerated, which would materially
adversely affect the Company.

Under the terms of its development agreement with the City, the
Company committed, among other things, to make development expenditures for
its casino and associated infrastructure in the City over the next five
years. The Company has met or accrued a significant portion of these
commitments. The two principal components of the remaining portion of these
commitments are (1) $10 million for off-site development in the City by
1998 or 1999, with the particular projects to be agreed to by the City; and
(2) $12 million (which amount has been invested as of December 31, 1998,
with the exact allocation between projects to be agreed upon by the City and
the Company) for enhancements to the Company's operations at Buffington
Harbor and/or the BHR Joint Venture's facilities.

In May 1996, the Company arranged for a $12.5 million five year
surety bond (the "Bond") to be issued to the IGC. The Bond's primary
purpose was to provide collateral for completion of the Company's off-site
development obligations under the Development Agreement. In 1996 to support
the Company's obligations to the bonding company, the Company obtained a
$3.5 million letter of credit from a bank to benefit the bonding company.
In May 1998, the Company deposited $3.6 million with the bank to guarantee
the letter of credit to benefit the bonding company.

The Company anticipates that additional capital contributions to
BHR, including capital for an emergency back-up generator and upgrade of
food service areas are currently estimated not to exceed approximately
$500,000, may be required for the BHR facilities. The Company and the Joint
Venture Partner continue to review the feasibility of purchasing additional
property for the construction of a covered parking facility at the Gaming
Complex. The timing and cost of purchasing the additional property and of
constructing a covered parking facility at the Gaming Complex is
undetermined at this time. The Company expects to fund such further
investments from operations and/or from the funds previously designated for
the repayment of the note due to BDI, provided that the proceeds from the
note due to BDI have not been utilized and are available. There can be no
assurance that such facility will be constructed or that sufficient funds
will be available for such construction.

Under a lease agreement with Lehigh Portland Cement Company ("Lehigh
Cement"), BHR has leased certain property which is integral to the gaming
operations of the Company and its Joint Venture Partner. The lease places
certain restrictions on the use of the harbor by the Company and its Joint
Venture Partner and requires the reimbursement of certain costs which may be
incurred by Lehigh Cement. The lease was rent free through December 29,
1997 and, subject to certain conditions, such as progress towards permits
for a new harbor, has been extended to the earlier of December 21, 2005 or
to such time as BHR has obtained requisite regulatory permits and completed
construction of its permanent harbor, with a monthly payment of $125,000.

BHR anticipates filing the requisite regulatory permits during
1999. If the regulatory permits are obtained, the BHR Joint Venture may be
required to construct a new harbor, berthing and guest facilities. The
level of expenditures required for such new facilities cannot be accurately
estimated at this time.

<PAGE> 18
Through October 19, 1997, the Company conducted its gaming
operations on the Chartered Vessel. On March 30, 1998, the Company executed
an amendment to the August 17, 1995 Charter Agreement whereby New Yorker
Acquisition Corporation, the lessor, accepted re-delivery of the Chartered
Vessel effective March 1, 1998, "as-is, where-Is" at Erie, Pennsylvania from
the Company. The Company also agreed to release to New Yorker Acquisition
Corporation a $500,000 escrow account with accrued interest thereon, free
and clear of any claims in lieu of restoring the Chartered Vessel back to
its original condition. During 1998, the Company wrote-off assets
previously utilized on the Chartered Vessel that had a net book value of
approximately $755,000. As of March 1, 1998, all obligations of the Company
and New Yorker Acquisition Corporation have been fully satisfied and the
parties have no further obligations under the original charter agreement.

Although BDI initially contributed approximately $24 million to the
Company, the Members' Equity Account became negative during the first
quarter of 1998 and continues to be negative as of December 31, 1998. The
decline in the Members' Equity Account is primarily attributed to start-up
costs, operating losses and the disposition of assets previously utilized on
the Chartered Vessel.

Based upon the Company's anticipated future operations on board the
Permanent Vessel and capital expenditures, the management believes that the
available cash flow from the casino's future operations and certain
equipment financing, together with the proceeds from the Senior Secured
Notes and the note due to BDI, will be adequate to meet the Company's
anticipated future requirements for working capital, the remaining
development obligations to the City, capital expenditures and scheduled
payments of interest and principal on the Senior Secured Notes and other
permitted indebtedness for 1999. No assurance can be given, however, that
operating cash flow from the Permanent Vessel in light of increased
competition within the marketplace and such other proceeds will be
sufficient for such purposes. Also there is no guaranty that the Note due
to BDI will not be repaid in 1999. The Company will seek, if necessary and
to the extent permitted under the Indenture, additional financing through
borrowings and debt or equity financing. There can be no assurance that
additional financing, if needed, will be available to the Company, or that,
if available, the financing will be on terms favorable to the Company. In
addition, there is no assurance that the Company's estimate of its
reasonably anticipated liquidity needs is accurate or that unforeseen events
will not occur, resulting in the need to raise additional funds.

Year 2000 Readiness

The approach of the year 2000 has become a potential problem for
businesses utilizing computers in their operations since many computer
programs are date sensitive and will only recognize the last two digits of
the year, thereby recognizing the year 2000 as the year 1900 or not at all
(the "Year 2000 Issue"). Management has undertaken a comprehensive
assessment of the Company's exposure to the Year 2000 Issue and what will be
required to ensure that the Company is year 2000 compliant. The primary
computer programs utilized in the Company's operations and financial
reporting systems have been acquired from independent software vendors. The
Company has contacted these vendors to determine whether their systems are
year 2000 compliant, and, if not, establish timelines as to when the Company
will receive the required upgrades that assure that these systems will be
year 2000 compliant. As of December 31, 1998 approximately 65% of the
computer programs utilized in the Company's operations have been upgraded,
and the software vendors have represented that such programs are year 2000
compliant. Maintenance or modification costs estimated to be approximately
$300,000 to $350,000 associated with the Year 2000 Issue will be expensed as
incurred, while the costs of any new software will be capitalized and
amortized over the software's useful life. The Company does not expect to
incur costs in connection with the Year 2000 Issue that would have a
material impact on operations. Although the Company presently believes that
all of its software programs will be year 2000 compliant, there can be no
assurances that the Company will not be adversely affected by the Year 2000
Issue.
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 14 of this Report on Form 10-K.

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

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The following table sets forth certain information with respect to
the executive officers of the Company as of December 31, 1998. The Company
does not have directors since it is a limited liability company.

Name and Age Position(s) Held
------------ ----------------
Don H. Barden, 55 Chairman, President, and
Chief Executive Officer

Michael E. Kelly, 37 Vice President, Chief
Operating and Financial
Officer

DON H. BARDEN is the Chairman, President, and Chief Executive
Officer of the Company and President of BDI, with responsibility for key
policy functions. Mr. Barden is also the President and Chief Executive
Officer of a group of companies which he owns and operates. Over the past
30 years, Mr. Barden has successfully developed, owned and operated many
business enterprises in various industries, including real estate
development, casino gambling, broadcasting, cable television and
international trade.

MICHAEL E. KELLY is the Vice President, Chief Operating and
Financial Officer of the Company since January 1, 1999, with overall
responsibility for the daily operations. From April 1996 through December
31, 1998, Mr. Kelly was the Vice President and Chief Financial Officer of
the Company with overall responsibility for the Company's financial
reporting and investor relations functions. Mr. Kelly also assumed
initially on an interim basis the responsibility for management of daily
operations and related activities of the Company effective October 17, 1998.
Mr. Kelly is a Vice President of BDI. From June 1994 to April 1996, Mr.
Kelly held various positions with Fitzgeralds Gaming Corporation including
Vice President of Finance. Mr. Kelly also was the Senior Director of
Operations and Chief Financial Officer of Fitzgeralds Tunica where he was
responsible for operations, finance, regulatory affairs, legal and strategic
planning and involved in the design and development of a new dockside gaming
facility in Robinsonville, Mississippi. From September 1991 to June 1994,
Mr. Kelly was Vice President and Chief Financial Officer of Empress River
Casino Corporation and its affiliates, with responsibility for finance,
legal, regulatory affairs, investor relations and administration. Mr. Kelly
also participated in the design and development of riverboat casino
operations at both Joliet, Illinois, and Hammond, Indiana, while employed by
the Empress River Casino Corporation. From 1982 to 1991, Mr. Kelly was
employed in various senior finance and administrative functions by Harrah's
Hotel & Casino in New Jersey and Nevada, and the Fitzgeralds Group in Reno
and Las Vegas, Nevada.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation earned for services
performed for the Company during the three fiscal years in the period ended
December 31, 1998, by the Company's Chief Executive Officer and each of its
other executive officers (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

Fiscal Annual Compensation (1)
----------------------- All Other
Name and Position Year Salary($) Bonus($) Compensation($)(2)
- ----------------- ------ ------ ----- ----------------
<S> <C> <C> <C> <C>
Don H. Barden (3) 1998 275,000 -- --
President & Chief Executive Officer 1997 275,000 -- --
1996 180,865 -- --

Thomas C. Bonner (4) 1998 187,048 169,500 17,181
Executive Vice President 1997 198,500 169,500 31,149
1996 198,086 169,500 12,919

Paul W. Sykes (5) 1998 176,000 72,000 53,731
Vice President and Chief 1997 175,000 72,000 12,216
Operating Officer 1996 174,580 99,500 6,859

Michael E. Kelly (6) 1998 180,000 45,000 12,344
Vice President, Chief Operating and 1997 180,000 45,000 41,522
Financial Officer 1996 117,586 -- 42,341

</TABLE>
- -----
NOTES:
(1) The incremental cost to the Company of providing perquisites and other
personal benefits during the past three fiscal years did not exceed, as to
any "Named Executive Officer", the lesser of $50,000 or 10% of the total
salary and bonus paid to such executive officer for any such year and,
accordingly, is omitted from the table.
(2) Amounts represent contractual payments under individual employment
agreements. In fiscal 1998, the Company contributed 401K match of $12,675,
$8,138, and $7,313, respectively, to Messrs. Bonner, Sykes, and Kelly.
Messrs. Bonner, Sykes, and Kelly were also reimbursed $4,506, $3,279, and
$1,402 for non-deductible medical plan expenditures. Mr. Kelly also received
$3,629 for non-deductible medical plan expenditures related to 1997, paid in
1998. During 1998, Mr Sykes received $6,731 for unused vacation time in
1996 and 1997. Mr. Sykes received $15,000 for reimbursable relocation
expenses upon his departure from the Company in 1998. Mr. Sykes received
severance pay in the amount of $20,583 in December 1998 and $20,583 in
January 1999. In fiscal 1997, the Company contributed 401K match of
$11,040, $7,410, and $6,750, respectively, to Messrs. Bonner, Sykes, and
Kelly. Messrs. Bonner, Sykes, and Kelly were also reimbursed $5,109,
$4,806, and $1,417 for non-deductible medical plan expenditures. Mr. Kelly
also received $1,740 in lieu of not having established a 401(K) plan in
1996, $7,615 for unused vacation time, and $24,000 for non-vested stock
options related to a previous employer. Mr. Bonner received $15,000 for
reimbursable relocation expenses upon his reassignment within the Company.
In fiscal 1996, the Company paid $8,050 and $5,403, respectively, to Messrs.
Bonner, and Sykes in lieu of not having established a 401(K) Plan. Messrs
Bonner and Sykes also were reimbursed $4,869 and $1,456 respectively, for
non-deductible medical plan expenditures. Mr. Kelly received $18,341 for
reimbursable relocation expenses and $24,000 for non-vested stock options
related to a previous employer.
(3) Mr. Barden became a paid employee of the Company in April 1996.
(4) Mr. Bonner joined the Company as Executive Vice President in December
1995. In April 1997, Mr. Bonner was transferred to Executive Vice President
of Special Projects. Mr. Bonner's 1998, 1997 and 1996 contractual bonuses
and other payments aggregating $169,500 in 1998, 1997 and 1996 were
voluntarily deferred until calendar year 1999, 1998 and 1997, respectively.
Mr. Bonner's employment agreement expired in December 1998 and was not
renewed.
(5) Mr. Sykes joined the Company as Vice President and COO in December
1995. Mr. Sykes employment agreement expired in December 1998 and was not
renewed.
<PAGE> 21
(6) Mr. Kelly joined the Company as Vice President and CFO in April 1996.
Mr. Kelly assumed on an interim basis the duties of Messrs. Bonner and Sykes
effective October 17, 1998. Effective January 1, 1999 Mr. Kelly is employed
as Vice President, Chief Operating and Financial Officer.

Employment Agreements

Mr. Barden serves as Chairman and President of BDI and will receive
annual compensation of $275,000 as an employee of the Company, pursuant to a
letter agreement dated as of April 25, 1996.

Mr. Bonner served as Executive Vice President pursuant to an
employment agreement with the Company, effective as of December 4, 1995.
Mr. Bonner's employment agreement expired on or about December 4, 1998 and
was not renewed. Under the terms of his employment agreement, Mr. Bonner
received base compensation of $348,700 per year and housing, car and meal
allowances aggregating $19,300 per year. Mr. Bonner also was eligible to
receive incentive compensation based on his performance and the performance
of the Company. The employment agreement was for a term of three years
unless earlier terminated because of Mr. Bonner's death, permanent
disability, inability to obtain or maintain the licenses required for the
performance of his duties, or "for cause" (as defined therein). The
employment agreement also included a non-competition provision which
generally provides that during the term of the employment agreement and for
18 months thereafter, Mr. Bonner cannot directly or indirectly recruit or
solicit the Company's employees to work for another company or to compete
with the Company in specified portions of Illinois and Indiana (the "Non-
Competition Provision").

Mr. Sykes entered into an employment agreement with the Company,
effective as of December 4, 1995, pursuant to which he agreed to serve as
Vice President and General Manager of Operations for a three year term. Mr.
Sykes employment agreement expired on or about December 4, 1998 and was not
renewed. Mr. Sykes received base compensation of $247,000 per year and
also was eligible to receive incentive compensation based upon his
performance and the performance of the Company. Mr. Sykes' employment
agreement contained terms substantially similar to that of Mr. Bonner's,
including the Non-Competition Provision.

Mr. Kelly serves as Vice President, Chief Operating and Financial
Officer pursuant to a two-year employment agreement with the Company,
effective as of January 1, 1999. Mr. Kelly's employment agreement replaces
a previous two year agreement that had mutually been extended to December
31, 1998. Mr. Kelly effective January 1, 1999 will receive base
compensation of $275,000 per year and can also earn annual incentive
compensation based upon his performance and the performance of the Company.
In addition to such compensation, Mr. Kelly is entitled to term life
insurance in an amount equal to $1.1 million and certain other employee
benefits. Mr. Kelly is also entitled to additional compensation (as defined
in the agreement) upon a change in control. Mr. Kelly's employment
agreement contains other terms substantially similar to that of Mr.
Bonner's, including a Non-Competition Provision with a duration of 12
months.
<PAGE> 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of March 15,
1999, with regard to the beneficial ownership of the membership interests in
the Company.

Name and Address of Beneficial Owner % Ownership
------------------------------------ -----------
Don H. Barden 100.0% (1)
400 Renaissance Center, Suite 2400
Detroit, Michigan 48243
_____
NOTE:
(1) Includes membership interests in the Company beneficially
owned directly by BDI and indirectly by BDI and Barden
Management, Inc. ("BMI") through Gary Riverboat Gaming, LLC
("GRG"). Mr. Barden is the beneficial owner of 100% of BDI,
BMI and GRG.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Note to and Advances from Principal Member

By December 31, 1995, the Company had been capitalized by its
members with $35.0 million of capital contributions, including interest
earned thereon. Effective March 31, 1996, $10.8 million of the
contributions of BDI was reclassified as indebtedness payable to BDI,
evidenced by the Note to Principal Member. The Note to Principal Member is
a demand note which bears interest at a rate equal to the applicable short-
term federal rate, as set forth in Section 1274(d) of the Internal Revenue
Code, adjusted on the first day of each month that the Note to Principal
Member is outstanding.

The net proceeds from the Senior Note Offering that have been
designated to repay the Note to Principal Member had been deposited in a
completion reserve escrow account for the completion of the Permanent Vessel
and Gaming Complex. During January 1998, the proceeds designated to repay
the Note were released from the completion reserve escrow account because
the funds were not required to complete the Permanent Vessel. During
September 1998, $2.0 million of the Note to Principal Member was repaid. The
Company does not know whether or when BDI will request repayment of any or
all the remaining note balance, which was approximately $8.8 million in at
December 31, 1998.

BDI has also loaned the Company additional amounts required to fund
the ongoing costs of completing the Majestic Star Casino and the Gaming
Complex pursuant to an additional promissory note. These loans totaled
$18,097,299 at their largest principal amount and were repaid with interest
at 5% per annum with proceeds from the sale of the Company's Senior Secured
Notes in May 1996.

PART IV

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

(a) 1. Financial Statements of the Company. The following financial
statements are attached:

Report of Independent Accountants F-1
Balance Sheets as of December 31, 1998 and 1997 F-2
Statements of Income for the years ended December 31, 1998, 1997,
and 1996 F-3
Statements of Members' Equity for the years ended December 31, 1998,
1997, and 1996 F-4
Statements of Cash Flows for the years ended December 31, 1998,
1997, and 1996 F-5
Notes to the Financial Statements F-6

<PAGE> 23
Financial Statements of the BHR Joint Venture. The following
financial statements are attached:

Report of Independent Accountants F-15
Balance Sheets at December 31, 1998 and 1997 F-16
Statements of Operations for the years ended December 31, 1998,
1997, and 1996 F-17
Statements of Members' Capital for the years ended December 31,
1998, 1997, and 1996 F-18
Statements of Cash Flows for the years ended December 31, 1998,
1997, and 1996 F-19
Notes to the Financial Statements F-20

2. Financial Statement Schedule for the years ended December 31, 1998,
1997, and 1996:
Report of Independent Accountants F-22
Schedule II - Valuation and Qualifying Accounts F-23

3. Exhibits

Exhibit No. Description
- ----------- ----------
3.1 Amended and Restated Articles of Organization of The Majestic
Star Casino, LLC (filed as Exhibit 3.1 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

3.2 Third Amended and Restated Operating Agreement of The Majestic
Star Casino, LLC dated as of March 29, 1996 (filed as Exhibit
3.2 to the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

4.1 Purchase Agreement, dated as of May 22, 1996, by and between The
Majestic Star Casino, LLC and Wasserstein Perella Securities,
Inc. (filed as Exhibit 4.1 to the Company's Registration
Statement, No. 333-06489, and incorporated herein by reference)

4.2 Indenture, dated as of May 22, 1996, by and between The Majestic
Star Casino, LLC, IBJ Schroder Bank & Trust Company, as Trustee,
with respect to the Senior Secured Notes due 2003 with
Contingent Interest (the "Senior Notes") and the holder of
Senior Exchange Secured Notes due May 15, 2003 with Contingent
Interest (the "Senior Exchange Notes")(filed as Exhibit 4.2 to
the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

4.3 Form of Senior Note and Senior Exchange Note (included in
Exhibit 4.2)(filed as Exhibit 4.3 to the Company's Registration
Statement, No. 333-06489, and incorporated herein by reference)

4.4 Security Agreement, dated as of May 22, 1996, from The Majestic
Star Casino, LLC, in favor of the holders of Senior Notes and
the Senior Exchange Notes(filed as Exhibit 4.4 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

4.5 Pledge Agreement, dated as of May 22, 1996, from Barden
Development, Inc. In favor of the holders of Senior Notes and
the Senior Exchange Notes(filed as Exhibit 4.5 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

4.6 Pledge Agreement, dated as of May 22, 1996, from the Company in
favor of the holders of Senior Notes and the Senior Exchange
Notes(filed as Exhibit 4.6 to the Company's Registration
Statement, No. 333-06489, and incorporated herein by reference)<PAGE>
<PAGE> 24
4.7 Trademark Security Agreement, dated as of May 22, 1996, from
the Company in favor of the holders of the Senior Notes and
the Senior Exchange Notes (filed as Exhibit 4.7 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

4.8 Cash Collateral Agreement, dated as of May 22, 1996, by and
among the Company, the Trustee and NBD Bank (filed as Exhibit
4.8 to the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.1 * Employment Letter Agreement dated as of April 25, 1996 by and
between the Company and Don H. Barden (filed as Exhibit 10.1 to
the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.2 * Employment Letter Agreement effective as of December 4, 1995 by
and between the Company, and Thomas C. Bonner (filed as Exhibit
10.2 to the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.3 * Employment Letter Agreement effective as of December 4, 1995 by
and between the Company, and Paul W. Sykes (filed as Exhibit
10.3 to the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.4 * Employment Letter Agreement effective as of April 22, 1996 by
and between the Company and Michael E. Kelly (filed as Exhibit
10.4 to the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.5 Berthing Agreement, dated as of April 23, 1996, between the
Company and Buffington Harbor Riverboats, LLC (filed as Exhibit
10.5 to the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.6 First Amended and Restated Operating Agreement of Buffington
Harbor Riverboats, LLC, made as of October 31, 1995, by and
between Trump Indiana, Inc. and the Company, as amended to date
(filed as Exhibit 10.6 to the Company's Registration Statement,
No. 333-06489, and incorporated herein by reference)

10.7 Charter Agreement, dated August 17, 1995, by and among New
Yorker Acquisition Corporation, the Company and President
Casinos, Inc., as amended to date (filed as Exhibit 10.7 to the
Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.8 Development Agreement, dated March 26, 1996, by and between the
Company and the City of Gary, Indiana (filed as Exhibit 10.8 to
the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.9 Harbor Lease Agreement, dated June 29, 1995, by and between
Trump Indiana, Inc. and Lehigh Portland Cement Company, as
assigned by Trump Indiana, Inc. to Buffington Harbor Riverboats,
LLC pursuant to the Assignment Agreement dated as of October 31,
1995, by and between Trump Indiana, Inc. and Buffington Harbor
Riverboats, L.L.C. (filed as Exhibit 10.9 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

10.10 Equipment Financing Agreement dated April 5, 1996 by and between
the Company and International Gaming Technology (filed as
Exhibit 10.10 to the Company's Registration Statement, No. 333-
06489, and incorporated herein by reference)
<PAGE> 25
10.10 Equipment Financing Agreement dated May 5, 1996 by and between
the Company and International Gaming Technology (filed as
Exhibit 10.10 to the Company's Registration Statement, No. 333-
06489, and incorporated herein by reference)

10.11 Master Surety Agreement by and between the Company and United
States Fidelity and Guaranty Company (filed as Exhibit 10.11 to
the Company's Registration Statement, No. 333-06489, and
incorporated herein by reference)

10.12 Standby Letter of Credit Application and Reimbursement and
Security Agreement (filed as Exhibit 10.12 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

10.13 Promissory Note dated March 31, 1996 from the Company to Barden
Development, Inc. (filed as Exhibit 10.13 to the Company's
Registration Statement, No. 333-06489, and incorporated herein
by reference)

10.14 Vessel Construction Contract between Majestic Star and Atlantic
Marine, Inc. dated as of September 27, 1996 (filed as Exhibit
10.14 to the Company's Report on Form 10-Q for the period ended
September 30, 1996 is incorporated herein by reference)

10.15 Equipment Financing Agreement dated September 15, 1997 by and
between the Company and PDS Financial Corporation (filed as
Exhibit 10.15 to the Company's Report on Form 10-K for the
period ended December 31, 1997)

10.16 Equipment Financing Agreement dated October 27, 1997 by and
between the Company and PDS Financial Corporation (filed as
Exhibit 10.16 to the Company's Report on Form 10-K for the
period ended December 31, 1997)

10.17 * Employment Letter Agreement effective as of January 1, 1999 by
and between the Company and Michael E. Kelly (filed herewith)

11 Computation of Ratio of Earnings to Fixed Charges for the years
ended December 31, 1998, 1997 and 1996 (filed herewith)

27 Financial Data Schedule (EDGAR Version Only)(filed herewith)
- ----------
* Denotes a management compensation arrangement.

(b) Reports on Form 8-K

A Form 8-K was filed on November 5, 1998 to report a change in
executive officers.
<PAGE> 26
EXHIBIT INDEX

Exhibit No. Description
- ---------- -----------
10.17 Employment Letter Agreement effective as of January 1, 1999 by
and between the Company and Michael E. Kelly
11 Computation of Ratio of Earnings to Fixed Charges for the years
ended
December 31, 1998, 1997 and 1996.
27 Financial Data Schedule (EDGAR Version Only).

<PAGE> F-1
REPORT OF INDEPENDENT ACCOUNTANTS

To the Members of
The Majestic Star Casino, LLC:

In our opinion, the accompanying balance sheets and the related statements
of income, changes in members' equity, and cash flows present fairly, in all
material respects, the financial position of The Majestic Star Casino, LLC
(the "Company") at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP

Chicago, Illinois
February 22, 1999
<PAGE> F-2
THE MAJESTIC STAR CASINO, LLC
BALANCE SHEETS

<TABLE>
<CAPTION>
As of December 31,
1998 1997
---------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $17,295,401 $8,083,594
Accounts receivable, less allowance for doubtful accounts
of $148,608 and $370,000, respectively 850,086 879,887
Inventories 41,948 33,717
Prepaid expenses 984,512 995,887
------- -------
Total current assets 19,171,947 9,993,085
---------- ----------
Property, equipment, and vessel improvements, net 55,953,220 61,206,890
Other Assets:
Deferred financing costs, less accumulated amortization
of $1,544,086 and $947,941, respectively 2,657,129 3,150,149
Deferred costs, less accumulated amortization
of $2,889,062 and $1,802,683, respectively 2,762,967 3,990,587
Investment in Buffington Harbor Riverboats, L.L.C. 40,748,887 43,541,985
Other assets and deposits 3,966,710 974,551
Restricted cash -- 11,904,716
---------- ----------
Total other assets 50,135,693 63,561,988
---------- ----------
Total Assets $125,260,860 $134,761,963
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $1,945,724 $1,889,427
Short-term debt -- 100,696
Accounts payable 428,070 1,519,235
Other accrued liabilities:
Payroll and related 1,073,801 1,453,789
Interest 4,216,422 3,076,512
Other accrued liabilities 3,039,970 2,939,877
Due to Buffington Harbor Riverboats, L.L.C. 405,010 719,058
--------- ---------
Total current liabilities 11,108,997 11,698,594

Long-term debt, net of current maturities 108,390,332 110,828,515
Note to member 8,759,355 10,759,355
Commitments and contingencies -- --
----------- -----------
Total long-term liabilities 117,149,687 121,587,870
----------- -----------
Total Liabilities 128,258,684 133,286,464
----------- -----------
Members' Equity:
Members' contributions 24,000,000 24,000,000
Retained earnings (accumulated deficit) (26,997,824) (22,524,501)
---------- ----------
Total members' equity (2,997,824) 1,475,499
--------- ---------
Total Liabilities and Members' Equity $125,260,860 $134,761,963
=========== ===========

The accompanying notes are an integral part of these financial statements

</TABLE>
<PAGE> F-3
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF INCOME
<TABLE>
<CAPTION>

For the Year Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Casino $111,480,624 $92,304,580 $52,788,009
Food and beverage 1,643,470 1,559,071 808,567
Other 1,476,549 848,604 636,071
----------- ---------- ---------
Gross Revenues 114,600,643 94,712,255 54,232,647
----------- ---------- ----------
less promotional allowances (337,410) (169,306) (12,088)
---------- --------- --------
Net Revenues 114,263,233 94,542,949 54,220,559

Costs and Expenses:
Casino 18,853,387 16,758,049 9,256,597
Gaming and admission taxes 32,722,100 26,956,027 15,537,905
Food and beverage 2,390,282 1,937,290 1,128,868
Advertising and promotion 10,155,661 12,708,722 4,563,096
General and administrative 24,222,202 22,229,511 12,289,291
Economic incentive - City of Gary 3,455,705 2,789,461 1,586,351
Depreciation and amortization 7,820,276 7,700,345 5,319,682
Loss on disposition of assets 958,425 1,602,815 --
Pre-opening costs -- 1,253,758 4,586,879
---------- ---------- ----------
Total costs and expenses 100,578,038 93,935,978 54,268,669
----------- ---------- ----------
Operating income (loss) 13,685,195 606,971 (48,110)

Other Income (Expense):
Loss on investment in Buffington
Harbor Riverboats, L.L.C. (3,167,459) (3,447,944) (2,439,581)
Interest income 860,240 1,831,187 2,198,929
Interest expense (15,325,869) (12,260,715) (8,246,565)
Interest expense to affiliate (525,430) (616,691) (351,277)
---------- ---------- ----------
Total other income (expense) (18,158,518) (14,494,163) (8,838,494)
---------- ---------- ---------
Net Income (Loss) $(4,473,323) $(13,887,192) $(8,886,604)
========= ========== =========

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

</TABLE>
<PAGE> F-4
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
For the Years Ended December 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Retained
Earnings Total
Capital (Accumulated Members'
Contributions Deficit) Equity
------------- ----------- --------
<S> <C> <C> <C>
Balance, December 31, 1995 $34,759,355 $249,295 $35,008,650
Conversion of capital contribution
to debt (10,759,355) -- (10,759,355)
Net loss -- (8,886,604) (8,886,604)
---------- --------- ----------
Balance, December 31, 1996 24,000,000 (8,637,309) 15,362,691
Net loss -- (13,887,192) (13,887,192)
---------- ---------- ----------
Balance, December 31, 1997 24,000,000 (22,524,501) 1,475,499
Net loss -- (4,473,323) (4,473,323)
---------- ---------- ---------
Balance, December 31, 1998 $24,000,000 $(26,997,824) $(2,997,824)
========== ========== =========

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

</TABLE>
<PAGE> F-5
THE MAJESTIC STAR CASINO, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $(4,473,323) $(13,887,192) $(8,886,604)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation 5,949,639 5,764,612 2,815,104
Amortization 1,870,637 1,935,733 2,504,578
Deferred expenses -- -- 234,796
Loss on investment in Buffington Harbor Riverboats, L.L.C. 3,167,459 3,447,944 2,439,581
Loss on disposal of chartered vessel improvements 958,425 1,602,815 --
(Increase) decrease in accounts receivable, net 29,801 (322,071) (557,816)
Increase in inventories (8,231) (9,066) (24,651)
(Increase) decrease in prepaid expenses 11,375 173,981 (1,169,868)
(Increase) decrease in other assets 36,683 (224,128) (310,722)
Increase (decrease) in accounts payable (1,091,165) 975,081 424,581
Increase (decrease) in accrued payroll and other expenses (379,988) 860,297 593,492
Increase in accrued interest 1,139,910 607,814 2,468,698
Increase (decrease) in other accrued liabilities (249,589) 1,270,264 2,323,270
--------- --------- ---------
Net cash provided by operating activities 6,961,633 2,196,084 2,854,439
--------- --------- ---------
Cash Flows From Investing Activities:
Acquisition of property, equipment and vessel improvements (2,099,921) (39,641,158) (20,241,855)
Sale of slot equipment 427,050 -- --
Sale of telephone equipment 16,000 -- --
Licensing and local initiative expenditures -- -- (2,747,000)
(Increase) decrease in Chartered Vessel deposit 609,274 1,108,264 (1,717,538)
Decrease in letter of credit deposit (3,600,000) -- --
Investment in Buffington Harbor Riverboats, L.L.C. (374,363) (2,043,076) (25,563,415)
(Increase) decrease in restricted cash 11,904,716 39,784,138 (51,688,854)
---------- ---------- ----------
Net cash (used) provided by investment activities 6,882,756 (791,832) (101,958,662)
--------- ------- -----------
Cash Flows From Financing Activities
Proceeds of loan from Member -- -- 18,097,299
Proceeds from issuance of 12.75% Senior Secured Notes -- -- 105,000,000
Cash paid to reduce short-term debt (100,696) (108,336) (18,097,299)
Cash paid to reduce long-term debt (1,954,836) (2,148,321) (1,290,860)
Reduction of notes payable (427,050) -- --
Payment of loan to member (2,000,000) -- --
Cash paid for financing charges (150,000) -- --
Payment of Senior Secured Notes issuance costs -- -- (4,115,307)
--------- --------- ---------
Net cash (used) provided by financing activities (4,632,582) (2,256,657) 99,593,833
---------- --------- ----------
Net increase (decrease) in cash and cash equivalents 9,211,807 (852,405) 489,610
Cash and cash equivalents, beginning of period 8,083,594 8,935,999 8,446,389
--------- --------- ---------
Cash and cash equivalents, end of period $17,295,401 $8,083,594 $8,935,999
========== ========= =========
Interest paid:
Principal Member $525,429 $616,691 $351,277
Equipment Debt $747,060 $577,386 $382,231
Senior Secured Notes $13,387,500 $13,387,500 $6,433,438

Supplemental noncash operating and financing activities of the Company include the following: During 1997, the
Company refinanced existing equipment debt of $3,805,070, and obtained additional financing of $4,275,750 for
additional equipment. On March 31, 1996, contributions totaling $10,759,355 were converted from Members' Equity to
long-term debt. During 1996 the Company obtained financing of $6,623,205.

The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> F-6
THE MAJESTIC STAR CASINO, LLC
NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 1998, 1997 and 1996

1. Basis of Presentation:

The Majestic Star Casino, LLC (the "Company") was formed on December
8, 1993, as an Indiana limited liability company ("LLC"), to provide gaming
and related entertainment to the public. The Company commenced gaming
operations in the City of Gary (the "City") at Buffington Harbor, located
in Lake County, in the State of Indiana on June 7, 1996.

2. Summary of Significant Accounting Policies:

Cash and Cash Equivalents

The Company considers cash equivalents to include short-term
investments with original maturities of ninety days or less. At December
31, 1998 and 1997, the Company had bank deposits in excess of federally
insured limits by approximately $11,683,000 and $3,076,000, respectively.

Inventories

Inventories, which consist of food, beverage, and promotional items
are recorded at the lower of cost or market, cost being determined
principally on a first in, first out basis. The estimated cost of normal
operating quantities (base stock) of uniforms has been recorded as an asset
and is not being depreciated. Costs of base stock replacements are expensed
as incurred. Other assets in the accompanying balance sheets include
$366,710 and $365,281 of base stock inventories at December 31, 1998 and
1997, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation and
amortization are computed utilizing the straight line method over the
estimated useful lives of the assets. Costs of major improvements are
capitalized; costs of normal repairs and maintenance are charged to expense
as incurred. Gains or losses on disposal are recognized when incurred.

On October 27, 1997 the Chartered Vessel was replaced with the
Permanent Vessel. The Company wrote-off approximately $755,000 and
$1,600,000 of assets previously utilized on the Chartered Vessel, in 1998
and 1997, respectively. The Company also wrote off approximately $204,000
of slot machines disposed of in 1998.

Capitalized Interest

The Company capitalizes interest costs associated with debt incurred
in connection with major construction projects. When no debt is
specifically identified as being incurred in connection with such
construction projects, the Company capitalizes interest on amounts expended
on the project at the Company's average cost of borrowed money.

Interest expense capitalized for the construction of the new
riverboat casino (the "Permanent Vessel") was $2,530,000, of this amount,
$2,317,000 and $213,000 was capitalized during 1997 and 1996, respectively.

<PAGE> F-7
Deferred Financing Costs

Deferred financing costs represent agent's commission, closing costs
and professional fees incurred in connection with the Senior Secured Notes.
Such costs are being amortized over the seven year term of the notes.

Deferred Costs and Preopening Costs

Development obligation payments to the City and licensing costs
represent direct costs associated with the development of the riverboat
casino, and were deferred until operations commenced on June 7, 1996. These
costs are currently being amortized over five years, the life of the gaming
license. Costs of approximately $1,254,000 associated with the transition
from the Chartered Vessel to the Permanent Vessel in October 1997 and pre-
opening costs of approximately $4,587,000 in 1996 were charged to operations
in the years ended 1997 and 1996, respectively.

Investment in Buffington Harbor Riverboats, L.L.C.

The Company accounts for its 50 percent interest in Buffington
Harbor Riverboats, L.L.C. ("BHR") under the equity method, whereby the
initial investments are recorded at cost and then adjusted for the Company's
share of BHR's net income or loss on distributions.

Restricted Cash

Cash and investments of approximately $11,905,000 at December 31,
1997 represent amounts designated as a completion reserve in 1997 for the
construction of the Permanent Vessel. The funds were invested primarily in
securities of the U.S. Government and its agencies, with original maturities
less than 180 days and were held in collateral accounts pursuant to
disbursement agreements of the Senior Secured Notes.

At December 31, 1998 no cash and investments were designated for
future cash requirements.

Casino Revenue

Casino revenue is the net win from gaming activities, which is the
difference between gaming wins and losses.

Promotional Allowances

Operating revenues include the retail value of food and other
services, which were provided to customers without charge. The
corresponding charges have been deducted from revenue in the accompanying
statements of income as promotional allowances in the determination of net
operating revenues. The estimated costs of providing the complimentary
services are charged to the casino department and are as follows:

1998 1997 1996
---- ---- ----
Food $292,904 $160,293 $12,088
Retail $44,506 $9,013 $ --

Federal Income Taxes

The Company has elected status as a partnership under the Internal
Revenue Code. Under this election, income of the Company is taxed directly
to the members and, accordingly, there is no provision for federal income
taxes.
<PAGE> F-8
Long-Lived Assets

The Company, in 1995, adopted the provisions of Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets" ("SFAS No. 121"). SFAS No. 121 requires, among other
things, that an entity review its long-lived 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 operation are less than the
carrying value of these assets. As a result of its review, the Company does
not believe that any impairment exists in the recoverability of its long-
lived assets.

Fair Value of Financial Instruments

The Company believes, based upon current information, that the
carrying value of the Company's cash and cash equivalents, restricted cash,
accounts receivable and accounts payable approximates fair value because of
the short term maturity of those instruments. The Company estimates the
fair value of its long-term debt and notes payable approximates their
carrying value based on quotations received from investment bankers or
because interest rates on the debt approximate market rates.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.

Reclassifications

Certain reclassifications have been made to the prior year balance
sheet to conform with the current year presentation.

Prospective Accounting Pronouncements

In June 1998 the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15,
1999 (fiscal 2000 for the Company). FAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are recorded in current period earnings or
other comprehensive income, depending on whether a derivative is designated
as part of a hedge transaction and, if it is, the type of hedge transaction.
The ineffective portion of all hedges will be recognized in current period
earnings. The Company does not believe that FAS 133 will have a significant
effect on the Company's results of operations or financial position.

In April 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-
5"), "Reporting on the Costs of Start-Up Activities". This SOP provides
guidance on the financial reporting of start-up and organization costs. It
requires such costs to be expensed as incurred and is effective for the
Company's 1999 fiscal year. As a result of adopting SOP 98-5, the Company
wrote off the remaining balance of organization costs of $69,000 during the
fourth quarter of 1998.

3. Certificate of Suitability

On December 9, 1994, the Indiana Gaming Commission (the
"Commission") awarded the Company one of two certificates (the
"Certificate") for a riverboat owner's license for a riverboat casino to be
docked in the City. Having complied with certain statutory and regulatory
requirements and other conditions of the Commission, the Company received a
five year riverboat owner's license on June 3, 1996.
<PAGE> F-9
The second certificate was issued to Trump Indiana, Inc. ("Trump").
The Company and Trump jointly developed and operate a docking location from
which the entities are conducting their respective riverboat gaming
operations in the City.

4. City of Gary, Indiana Development Obligation

On September 7, 1995, the Company and the City entered into an
agreement for the purpose of summarizing procedures regarding the
acquisition of a certain parcel of land in accordance with the Certificate.
The Company paid the city $250,000 under the terms of this agreement.

On September 29, 1995, the Company, Trump and the City entered into
an agreement. In accordance with this agreement, the Company paid the City
$5,000,000. As of December 31, 1996, $5,250,000 of deferred costs
represents the Company's development obligation to the City, which is being
amortized over 5 years, the life of the gaming license.

As of March 26, 1996, the City and the Company entered into a
development agreement which supersedes the September 7, 1995 agreement
between the City and the Company. The development agreement ("Development
Agreement") requires the Company, among other things, (1) to invest $116
million in various on-site improvements over the next five years, (2) pay
the City an economic incentive equal to 3% of the Company's adjusted gross
receipts, as defined by the Riverboat Gambling Act and (3) pay a default
payment in the amount of damages for failure to complete certain on-site
developments, which amount is capped at $12 million.

The Company has met or accrued a significant portion of these
commitments. The two principal components of the remaining portion of the
Company's commitment are as follows: (1) $10 million for off-site
development in the City by 1998/1999 with the particular project(s) to be
agreed to by the City; and (2) $12 million (all of which has been expended
through December 31, 1998, with the exact amount to be agreed upon by the
City and the Company) to be expended over the five years following the June
1996 opening of the casino for enhancements to the Company's operations at
Buffington Harbor and/or BHR's facilities.

5. Property and Equipment

Property and equipment at December 31, 1998 and 1997 consist of the
following:

Estimated
Service
Life
1998 1997 (Years)
Vessel $43,312,617 $43,409,051 30
Buildings and improvements 63,407 49,507 5
Furniture, fixtures and equipment 22,683,450 22,691,072 5
---------- ----------
Total Property and equipment 66,059,474 66,149,630
Less accumulated depreciation
and amortization (10,106,254) (4,942,740)
---------- ----------
Total Property and equipment, net $55,953,220 $61,206,890
========== ==========

Substantially all property and equipment are pledged as collateral on long-
term debt. See Note 8.

<PAGE> F-10
6. Investment in Buffington Harbor Riverboats, L.L.C.

On October 31, 1995, the Company and Trump entered into the First
Amended and Restated Operating Agreement of BHR for the purpose of
acquiring and developing certain facilities for the gaming operations in the
City ("BHR Property"). BHR is responsible for the management, development
and operation of the BHR Property. The Company and Trump have each entered
into an agreement with BHR (the "Berthing Agreement") to use BHR Property
for their respective gaming operations and have committed to pay cash
operating losses of BHR as additional berthing fees. The Company and BHR
share equally in the operating expenses relating to the BHR Property, except
for costs associated with food and beverage, and valet operations, which are
allocated on a percentage of use by the casino customers of the Company and
the joint venture partner.

The following represents selected financial information of BHR:

BALANCE SHEET
December 31, 1998 December 31, 1997
----------------- ----------------
Cash and cash equivalents $177,685 $129,509
Current assets 1,947,456 2,246,364
Property, equipment, and construction
in progress, net 84,507,760 89,946,185
Other assets 267,717 509,279
Total assets $86,722,933 $92,701,828

Current liabilities 2,725,170 2,760,693
Total liabilities 5,225,159 5,617,858

Member's equity
The Majestic Star Casino, LLC 40,748,887 43,541,985
Total members' equity 81,497,774 87,083,970

STATEMENTS OF INCOME
For the Year Ended December 31,
1998 1997
---- ----
Gross revenue $18,647,686 $19,685,841
Operating income (loss) (6,352,146) (6,931,944)
Net income (loss) (6,334,926) (6,913,682)

Promotional allowances provided to the Company's gaming patrons at
BHR facilities totaled approximately $567,000 in 1998 and $646,000 in 1997,
and are characterized in the Company's financial statements as an expense of
the casino. BHR invoices the Company monthly for these promotional
allowances at cost which approximates the retail value of the promotional
allowances.

At December 31, 1998, 1997, and 1996, the Company's income
statements reflect approximately $7,668,000, $8,753,000, and $4,314,000 in
vessel berthing fee's and promotional allowances payable to BHR of which
$7,982,000, $8,860,000, and $3,487,000 was paid in 1998, 1997, and 1996,
respectively.

7. Charter Agreement

On August 17, 1995, the Company entered into a Charter Agreement
("Agreement") with New Yorker Acquisition Corporation ("Owner") and
President Casino, Inc. for the purpose of leasing the Owner's casino gaming
vessel together, with all improvements, furniture, fixtures and equipment.

<PAGE> F-11
The Agreement became effective on May 3, 1996 and expired on May 10,
1998. The terms of the Agreement, required the Company to pay the Owner
$125,000 plus 5% use tax monthly for the first 24 months. The Company was
also required to pay the cost of any repairs which are necessary to bring
the Chartered Vessel into the condition required on redelivery under the
lease agreement. As required by the Agreement, the Company in 1995 placed a
security deposit in escrow with a financial institution. The amount in
escrow including accrued interest was approximately $609,000 and $1,700,000
as of December 31, 1997 and 1996, respectively. The security deposit was
refundable pursuant to the terms of the escrow agreement.

On March 30, 1998, the Company executed an amendment to the August
17, 1995 Charter Agreement whereby New Yorker Acquisition Corporation, the
lessor, accepted re-delivery of the Chartered Vessel effective March 1,
1998, "as-is, where-is" at Erie, Pennsylvania from the Company. The Company
agreed to release to New Yorker Acquisition Corporation a $500,000 escrow
account with accrued interest thereon, free and clear of any claims in lieu
of restoring the Chartered Vessel back to its original condition. The
Company during the year ended December 31, 1998 wrote-off assets previously
utilized on the Chartered Vessel that had a net book value of approximately
$755,000. As of March 1, 1998, all obligations of the Company and New
Yorker Acquisition Corporation have been fully satisfied and the parties
have no further obligations under the original charter agreement. The total
amount of expenses associated with the lease and subsequent termination of
the charter vessel lease agreement included in the Company's Statements of
Income was approximately $755,000, $1,537,000 and $879,000 for 1998, 1997
and 1996, respectively.

8. Long-Term Debt

Long-term debt at December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Senior secured notes payable; collateralized by a first
priority lien on substantially all of the assets of the
Company, due in semi-annual installments of interest at
12.75% together with contingent interest payable on May
15 and November 15; with a final payment of principal
and interest due on May 15, 2003. (See Note 10). $105,000,000 $105,000,000

Contracts payable including related use taxes; collateralized
by gaming equipment; due in aggregate monthly installments
(principal and interest) of approximately $220,000, with
varying maturity dates through September 2001. (1) 5,336,056 7,717,942
----------- -----------
Total long-term debt 110,336,056 112,717,942
Less current portion (1) (1,945,724) (1,889,427)
----------- -----------
Long-term portion $108,390,332 $110,828,515
=========== ===========

</TABLE>
The scheduled maturities of long-term debt are as follows:

Year Ending December 31, Maturities
------------------------ ----------
1999 $1,945,724
2000 2,412,618
2001 977,714
2002 --
Thereafter 105,000,000
-----------
Total $110,336,056
===========
<PAGE> F-12
(1) At December 31, 1998 long term and current portion of equipment debt
includes accrued use taxes payable of approximately $110,083 and
approximately $65,408, respectively. At December 31, 1997, deferred long
term and current portion of equipment debt includes accrued use taxes
payable of approximately $175,492 and approximately $65,408, respectively.

Senior Secured Notes

On May 22, 1996, the Company completed a private offering of
$105,000,000 of Senior Secured Notes due May 15, 2003. These notes were
exchanged in November, 1996 by the Senior Exchange Secured Notes, which are
registered under the Securities Exchange Act of 1933, but which notes are
otherwise substantially identical in all material respects to the privately
placed notes.

The Senior Secured Notes bear interest at a fixed rate of 12.75%
per annum payable May 15 and November 15 each year, commencing November
15, 1996. Contingent interest is payable on the Senior Secured Notes, on
each such interest payment date, in an aggregate amount equal to 5.0% of the
Company's Consolidated Cash Flow, as defined in the Indenture between the
Company and IBJ Schroder Bank & Trust Company, as Trustee, dated May 22,
1996 (the "Indenture"), for the six month period ending on March 31 or
September 30 (each, a "Semiannual Period") most recently completed prior to
such interest payment date, based on maximum of $60.0 million of the
Company's Consolidated Cash Flow during any two consecutive Semiannual
Periods; provided that no contingent interest shall be payable with respect
to any period prior to the first day of the operation of the Majestic Star
Casino, as defined in the Indenture. Deferral of contingent interest is
allowed under the Indenture if adjusted fixed charge coverage ratio for the
four consecutive quarters is less than 2.0 to 1 after giving effect to the
assumed payment of the contingent interest. The Company, at its option,
deferred payment of contingent interest. At December 31, 1998 and 1997,
accrued contingent interest payable was approximately $2,444,000 and
$1,253,000, respectively.

The Senior Secured Notes are collateralized by, among other things
(i) a pledge of the Company's 50% membership interest in BHR, (ii) a
collateral assignment of the Company's interest in the Berthing Agreement,
(iii) a pledge of all funds in the collateral accounts into which the
proceeds from the Senior Secured Notes were deposited pending their use and
(iv) upon delivery of the Permanent Vessel to the Company, a duly perfected
first preferred ship mortgage on such Permanent Vessel.

The Senior Secured Notes mature on May 15, 2003. The Senior Secured
Notes are redeemable at the option of the Company, in whole or in part, at
any time on or after May 15, 2000, at various premiums. Holders of the
Senior Secured Notes have the right to require that the Company repurchase
the notes at a premium under certain conditions including a change in
control of the Company.

The Indenture contains covenants, which among other things, restrict
the Company's ability to (i) make certain distributions and payments, (ii)
incur additional indebtedness, (iii) enter into transactions withaffiliates,
(iv) sell assets or stock, and (v) merge, consolidate or transfer
substantially all of its assets.

Equipment Financing

At December 31, 1998 and 1997, approximately $5.2 million and $7.5
million, respectively, of equipment financing, excluding accrued use taxes
of approximately $175,000 and $241,000, was outstanding of which $1.9
million represents current maturities of long-term debt. At December 31,
1998, $2.6 million of this debt carries an interest rate of 11.5%, $2.0
million carries an interest rate of 10.75%, and $607,000 carries an interest
rate of 10.93%. The debt is collateralized by certain gaming equipment and
the remaining balance will be repaid in varying monthly principal and
interest payments of approximately $220,000.
<PAGE> F-13
9. Note to Member

At December 31, 1998 and 1997, approximately $8.8 million and $10.8
million was owed to a member of the Company. This note carries a floating
interest rate equal to the applicable federal short term note, as set forth
in Section 1274(d) of the Internal Revenue Code of 1986 (4.2%, 5.5% and
5.6%, at December 31, 1998, 1997 and 1996, respectively) and could not be
repaid, under the Indenture, until the completion of the Permanent Vessel in
October 1997. This note resulted from the conversion of members'
contributions into debt on March 31, 1996. During January 1998, the
proceeds from the Senior Secured Notes reserved to repay the note were
reclassified from restricted cash to operating cash as the funds held in
escrow were not required to complete the Permanent Vessel. During September
1998, $2.0 million was repaid to a member of the Company, BDI. The note is
a demand note and there is no guaranty that the note due to BDI will be
repaid in 1999.

10. Profit Sharing Plan

The Company contributes to a defined contribution plan which
provides for contributions in accordance with the plan document. The plan
is available to all employees with at least one year of service. The
Company contributes a matching contribution up to a maximum of 3% of an
employee's salary limited to a specified dollar amount as stated in the
plan document. The Company's contributions to the plan amounted to $272,000
and $288,000 during 1998 and 1997, respectively.

11. Commitments and Contingencies

Letter of Credit/Surety Bond

In May 1996, the Company arranged for a $12.5 million five year
surety bond (the "Bond") to be issued to the Commission. The Bond's primary
purpose is to provide collateral for completion of the Company's off-site
development obligations under the Development Agreement. In 1996 to support
the Company's obligations to the bonding company, the Company obtained a
$3.5 million letter of credit from a bank to benefit the bonding company.
The letter of credit was renewed in both 1997 and 1998. The beneficial owner
of the Company (the "Owner") guaranteed the Company's obligations to the
bonding company under the Bond and to the bank under the $3.5 million letter
of credit. During May 1998, the Company replaced the Owner's financial
guarantee by depositing $3.6 million with the bank to guarantee the letter
of credit to benefit the bonding company. If the Owner is required to make
payments to the bonding company as a result of the guaranty, the Company
will be obligated to reimburse the Owner for any such payments.

12. Commitments and Contingencies (Continued)

Legal Proceedings

On January 15, 1998, the Company filed a petition for "Correction of
an Error" and on January 20, 1998, filed an appeal to the March 1, 1997,
property tax assessment of the Chartered Vessel. The Company believes it
was not given proper notice of the 1997 property tax assessment in
accordance with the general assessment provisions of the property tax law
and the Company further believes the assessment of approximately $1.2
million was incorrectly calculated. The tax is payable in semiannual
installments due in May and November 1998. Both semiannual installments
totaling approximately $560,000 in the aggregate have been paid. The amount
paid was based upon an estimate provided to the Company by legal counsel.
<PAGE> F-14
On March 27, 1998, a complaint was filed in the Lake County Superior
Court in East Chicago, Indiana, against BHR, the Joint Venture Partner and
the Company. The plaintiff, a former employee of the Company, claims to
have been assaulted in the BHR parking lot on June 25, 1997 and is
requesting compensatory and punitive damages totaling approximately $11
million. The suit alleges that the Joint Venture Partner and the Company
failed to provide adequate security to prevent assaults. The Company
intends to vigorously defend against such suit. However, it is too early to
determine the outcome of such suit and the effect, if any on the Company's
financial position and results of operations.

Harbor Lease

Under a lease agreement assumed by BHR, from the Joint Venture
Partner with Lehigh Portland Cement Company ("Lehigh Cement"), BHR has
leased certain property which is integral to the gaming operations of the
Joint Venture Partner and the Company. The lease places certain
restrictions on the use of the harbor by the joint venture partners,
requires the reimbursement of certain costs which may be incurred by Lehigh
Cement and requires BHR to pursue permitting of and building of a new
harbor. The lease was rent free through December 29, 1997 and subject to
certain conditions, primarily continuing progress toward permitting of and
then building of a new harbor, the lease will extend beyond December 29,
1997 until the earlier of December 31, 2005 or the completion of a new
harbor. The BHR Joint Venture is required to pay $125,000 per month
beginning January 1998. A new harbor may require new guest facilities. The
level of expenditures required for such new facilities cannot be accurately
estimated at this time.

Indiana Gaming Regulations

The ownership and operation of riverboat gaming operations in
Indiana are subject to strict state regulation under the Riverboat Gambling
Act ("Act") and the administrative rules promulgated thereunder. The
Indiana Gaming Commission ("IGC") is empowered to administer, regulate and
enforce the system of riverboat gaming established under the Act and has
jurisdiction and supervision over all riverboat gaming operations in
Indiana, as well as all persons on riverboats where gaming operations are
conducted. The IGC is empowered to regulate a wide variety of gaming and
nongaming related activities, including the licensing of supplies to, and
employees at, riverboat gaming operations and to approve the form of entity
qualifiers and intermediary and holding companies. Indiana is a new
jurisdiction and the emerging regulatory framework is not yet complete. The
IGC has adopted certain final rules and has published others in proposed or
draft form which are proceeding through the review and final adoption
process. The IGC has broad rulemaking power, and it is impossible to
predict what effect, if any, the amendment of existing rules or the
finalization of currently new rules might have on the operations.<PAGE>
<PAGE> F-15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Members of
Buffington Harbor Riverboats, L.L.C.:

We have audited the accompanying balance sheets of Buffington Harbor
Riverboats, L.L.C. (a Delaware limited liability company) as of December
31, 1998 and 1997, and the related statements of operations, members'
capital and cash flows for the years December 31, 1998, 1997, and 1996.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Buffington Harbor
Riverboats, L.L.C. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years ended December 31, 1998, 1997,
and 1996 in conformity with generally accepted accounting principles.

/S/ ARTHUR ANDERSEN LLP
Arther Andersen LLP

Rossland, New Jersey
January 29, 1999 <PAGE>
<PAGE> F-16
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
BALANCE SHEETS

December 31,
1998 1997
---- ----
ASSETS
CURRENT ASSETS:
Cash $177,685 $129,509
Trade receivables 67,730 11,119
Due from members' (Note 2) 1,361,375 1,666,509
Inventory 261,750 339,066
Prepaid expenses and other
current assets 78,916 100,161
--------- ---------
Total current assets 1,947,456 2,246,364

PROPERTY, PLANT AND EQUIPMENT, NET
(Notes 2 and 3) 84,507,760 89,946,185

OTHER ASSETS 267,717 509,279
---------- ----------
Total assets $86,722,933 $92,701,828
========== ==========
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $1,263,411 $2,095,812
Accrued expense 1,461,759 664,881
--------- ---------
Total current liabilities 2,725,170 2,760,693
DEFERRED RENT (Note 4) 2,499,989 2,857,165
COMMITMENTS AND CONTINGENCIES (Note 4) -- --
MEMBERS' CAPITAL 81,497,774 87,083,970
---------- ----------
Total liabilities and member's capital $86,722,933 $92,701,828
========== ==========

The accompanying notes to financial statements are an integral part of these
financial statements.
<PAGE> F-17
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Food and beverage $4,076,256 $5,541,672 $3,576,492
Other (Note 2) 14,571,430 14,144,169 9,187,968
---------- ---------- ----------
Net revenues 18,647,686 19,685,841 12,764,460
---------- ---------- ----------
COSTS AND EXPENSES
Food and beverage 3,532,120 4,553,964 2,894,437
General and administrative 15,331,318 15,776,782 9,768,871
Depreciation 5,945,672 5,821,765 3,039,708
Other 190,722 465,274 328,046
Preopening expenses -- -- 1,871,590
---------- ---------- ----------
Total costs and expenses 24,999,832 26,617,785 17,902,652
---------- ---------- ----------
Loss from operations (6,352,146) (6,931,944) (5,138,192)
INTEREST INCOME, net 17,220 18,262 203,047
---------- --------- ---------
Net loss $(6,334,926) $(6,913,682) $(4,935,145)
=========== =========== ===========

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

</TABLE>
<PAGE> F-18
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Retained
Member Earnings
Contributions (Deficit) Total
<S> <C> <C> <C>
Balance, December 31, 1995 $43,646,036 $73,781 $43,719,817

Capital contribution made by Trump Indiana, Inc. 25,563,415 -- 25,563,415
Capital contribution made by The Majestic Star Casino, LLC 25,563,415 -- 25,563,415
Net loss -- (4,935,145) (4,935,145)
---------- --------- ----------
Balance, December 31, 1996 94,772,866 (4,861,364) 89,911,502

Capital contribution made by Trump Indiana, Inc. 2,043,075 -- 2,043,075
Capital contribution made by The Majestic Star Casino, LLC 2,043,075 -- 2,043,075
Net loss -- (6,913,682) (6,913,682)
---------- --------- ---------
Balance, December 31, 1997 98,859,016 (11,775,046) 87,083,970

Capital contribution made by Trump Indiana, Inc. 374,365 -- 374,365
Capital contribution made by The Majestic Star Casino, LLC 374,365 -- 374,365
Net loss -- (6,334,926) (6,334,926)
---------- ---------- ----------
Balance, December 31, 1998 $99,607,746 $(18,109,972) $81,497,774
========== ========== ==========

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

</TABLE>
<PAGE> F-19
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,334,926) $(6,913,682) $(4,935,145)
Adjustment to reconcile net loss to net cash flows
provided by (used in) operating activities
Depreciation 5,945,672 5,821,765 3,039,708
Deferred rent (357,176) 1,142,856 1,714,309
Deferred income -- (400,000) 400,000
Changes in operating assets and liabilities -- -- --
Decrease (increase) in accounts receivable (56,611) 4,145 (15,264)
Decrease (increase) in due from members 305,134 261,881 (1,928,390)
Decrease (increase) in inventory 77,316 14,900 (353,966)
Increase in prepaid expenses and other current assets 21,245 (8,599) (91,562)
Increase in other assets 241,562 (253,898) (255,381)
Increase (decrease) in accounts payable (832,401) 1,014,495 (1,859,328)
Increase in accrued expenses 796,878 204,739 460,142
--------- --------- ---------
Net cash flows provided by (used in) operating activities (193,307) 888,602 (3,824,877)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (507,247) (4,913,623) (61,290,442)
-------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital 748,730 4,086,150 51,126,830
------- --------- ----------
Net increase (decrease) in cash 48,176 61,129 (13,988,489)
CASH BEGINNING OF PERIOD 129,509 68,380 14,056,869
------- ------- ----------
CASH END OF PERIOD $177,685 $129,509 $68,380
======= ======= ======

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

</TABLE>
<PAGE> F-20
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 1998

1. ORGANIZATION AND OPERATIONS:

Trump Indiana, Inc. ("Trump Indiana") and The Majestic Star Casino,
LLC ("Barden"), the two holders of certificates of suitability for the Gary,
Indiana riverboat casinos, formed Buffington Harbor Riverboats, L.L.C.
("BHR") on September 27, 1995 and have entered into an agreement (the "BHR
Agreement") relating to the joint ownership, development and operation of
all common land based and waterside operations in support of the Trump
Indiana and Barden riverboat casinos. Under the BHR Agreement, BHR acquired
property and constructed common roadways, utilities and other infrastructure
improvements on BHR's property.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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

Under the terms of the BHR Agreement, all expenditures requiring a
cash outlay by BHR are billed to Trump Indiana and Barden at cost.
Accordingly, BHR records as expenses the cost of providing such services and
records as other revenues the amounts billed to Trump Indiana and Barden.

Property, Plant and Equipment

Property, plant and equipment is carried at cost. Property and
equipment is depreciated on the straight-line method using rates based on
the following useful lives:

Land improvements 15 years
Buildings 40 years
Building improvements 5 - 10 years
Harbor improvements 10 - 15 years
Furniture, fixtures and equipment 5 years

Income Taxes

BHR makes no provision (benefit) for income taxes since taxable income
(loss) is allocated to the members for inclusion in their respective income
tax returns.

Long-Lived Assets

BHR accounts for long-lived assets under the provisions of Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets" ("SAS No. 121"). SAS No. 121 requires, among other
things, that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that
the carrying amount of an asset may not be fully recoverable. BHR does not
believe that any such changes have occurred.

Reclassifications

Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.

3. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment is comprised of the following:
<PAGE> F-21 1998 1997
---- ----
Land and land improvements $35,353,824 $35,091,770
Building and building improvements 40,224,143 40,199,358
Harbor improvements 17,076,591 16,921,393
Furniture, fixtures and equipment 6,660,348 6,595,138
---------- ----------
99,314,906 98,807,659
Less: Accumulated depreciation (14,807,146) (8,861,474)
---------- ----------
Total property, plant and equipment, net $84,507,760 $89,946,185
========== ==========

4. COMMITMENTS AND CONTINGENCIES:

Indiana Gaming Regulations

The ownership and operation of riverboat gaming operations in
Indiana are subject to state regulation under the Riverboat Gambling Act
("Act") and the administrative rules promulgated thereunder. The Indiana
Gaming Commission ("IGC") is empowered to administer, regulate and enforce
the system of riverboat gaming established under the Act and has
jurisdiction and supervision over all riverboat gaming operations in
Indiana, as well as all persons on riverboats where gaming operations are
conducted. The IGC is empowered to regulate a wide variety of gaming and
nongaming related activities, including the licensing of supplies to, and
employees at, riverboat gaming operations and to approve the form of entity
qualifiers and intermediary and holding companies. Indiana is a new
jurisdiction and the emerging regulatory framework is not yet complete. The
IGC has adopted certain final rules and has published others in proposed or
draft form which are proceeding through the review and final adoption
process. The IGC has broad rulemaking power, and it is impossible to
predict what effect, if any, the amendment of existing rules or the
finalization of currently new rules might have on the operations of BHR,
Trump Indiana and Barden.

Leases

Under a lease agreement assumed by BHR from Trump Indiana with Lehigh
Portland Cement Co. ("Lehigh Cement"), BHR has leased certain property,
which is integral to the gaming operations of Trump Indiana and Barden. The
lease places certain restrictions on the use of the harbor by riverboats of
Barden and Trump Indiana, requires the reimbursement of certain costs which
may be incurred by Lehigh Cement, and requires BHR to pursue the permitting
and construction of a new harbor. The lease was rent free through December
29, 1997 and subject to certain conditions, primarily continuing progress
toward permitting and construction of a new harbor, the lease will extend
beyond December 29, 1997 until the earlier of December 31, 2005 or the
completion of a new harbor. Subsequent to the original 30-month term and
beginning January, 1998 BHR is required to make payments of $125,000 per
month for the remainder of the lease term. As of December 31, 1998 and
1997, BHR has recorded deferred rent expense of $2,499,989 and $2,857,165,
respectively. The level of expenditures necessary to construct a new harbor
cannot be accurately estimated at this time. BHR also has office equipment
and vehicle leases. Rental expense for noncancellable operating leases was
$1,481,194 and $1,502,239 for 1998 and 1997, respectively.

Minimum rental commitments under noncancelable operating leases are
as follows:
Years ended December 31-
1999 $1,813,942
2000 1,804,476
2001 1,662,646
2002 1,500,000
2003 1,500,000
Thereafter 3,000,000
---------
$11,281,604
==========

<PAGE> F-22
REPORT OF INDEPENDENT ACCOUNTANTS

To the Members of
The Majestic Star Casino, LLC:

Our report on the financial statements of The Majestic Star Casino, LLC (the
"Company") is included in Part IV, Item 14 to this Form 10-K. In connection
with our audits of such financial statements, we have also audited the
related financial statement schedule listed in Part IV of Form 10-K, Item
14(a)2 as of and for the years ended December 31, 1998, 1997, and 1996.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP

Chicago, Illinois
February 19, 1999
<PAGE> F-23
SCHEDULE II

THE MAJESTIC STAR CASINO, LLC
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning costs and Cash end
Description of year expenses Recoveries Deductions of year
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts:

Year ended December
31, 1996 $ -- $190,000 $ -- $ -- $190,000

Year ended December
31, 1997 $190,000 $180,000 $ -- $ -- $370,000

Year ended December
31, 1998 $370,000 $221,392 $ -- $ -- $148,608

</TABLE>

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, on
March 29, 1999.

THE MAJESTIC STAR CASINO, LLC

By: Barden Development Inc., Manager

By: /S/ DON H. BARDEN
Don H. Barden, President and Chief Executive Officer

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 date indicated.

Signature Title Date

/S/ DON H. BARDEN President and Chief Executive Officer March 29, 1999
Don H. Barden of the Manager and the Company
(Principal Executive Officer)

/S/ MICHAEL E. KELLY Vice President,Chief Operating and March 29, 1999

Michael E. Kelly Financial Officer
(Principal Financial and Accounting
Officer of the Company)

EXHIBIT 10.17

February 2, 1999

Mr. Michael E. Kelly
300 N. Sheridan Road, 14f
Chicago, Illinois 60657

Dear Mr. Kelly:

This letter constitutes an employment agreement ("Agreement") between the
Majestic Star Casino, LLC (or its successor Company) ("Majestic") and you
("Employee") with respect to Majestic's operation of a casino gaming vessel
and related facilities at Buffington Harbor in Gary, Indiana (the "Casino").
This Agreement supersedes the April 12, 1996 agreement previously entered
into and mutually extended to January 1, 1999 by and amongst Majestic and
yourself.

1. Term. The initial term of this Agreement is two (2) years
(the"Period of Employment") commencing January 1, 1999. The Period
of Employment may be extended on terms and conditions agreed to by
Majestic and Employee.

2. Base Salary. Majestic agrees to pay you a base salary of $275,000
annually, payable in substantially equal payments with usual and
customary payroll deductions.

3. Incentive Compensation. Employee is eligible to participate in
Majestic's Managerial Bonus Program (the "Plan") which provides
incentive compensation based upon Employee's personal performance
and Majestic's performance. For purposes of the Plan employee is
designated level 1.

4. Title and Responsibilities. You will initially be employed to serve
in an executive capacity and to perform those duties generally
associated with the duties of Vice President, Chief Operating and
Financial Officer. Your duties and title may be changed from time-
to-time by Majestic, but any new responsibilities or title shall be
consistent with your experience, knowledge and skills. Majestic
reserves the right, in its sole discretion to hire or place someone
in a position superior to you at the Casino. Majestic agrees to
reimburse to you all reasonable expenses incurred by you in the
performance of your duties of employment incurred in accordance with
Company policies. You will not be assigned responsibilities that
will require you to maintain a residence outside of the Chicago area
without your consent.

5. Termination of Employment. Majestic shall be permitted to terminate
this Agreement and your employment only upon occurrence of any of
the following:

(a) your death;

(b) your permanent disability (defined as continuous disability)
and inability to perform the duties and functions of your
position for sixty (60) continuous days;

(d) upon a Change in Control (as defined under section g); or

(e) cause, which shall mean (i) Employee's willful misconduct
which directly, materially and adversely affects Majestic or
personal dishonesty; (ii) breach of fiduciary duty to
Majestic resulting in Employee's personal profit; (iii)
criminal conviction for violation (after a trial and final
non-appealable judgement) of any law, rule or regulation
(other than traffic violations or other minor offenses); or
(iv) Employee repeatedly and intentionally fails to
reasonably perform his stated duties and fails to cure such
non-performance within 30 days after his receipt of written
notice from Majestic specifically identifying the manner in
which Employee has failed to reasonably per-form such stated
duties.

(f) upon termination of the Period of Employment by reason of
the Employee's disability, Majestic shall continue to pay
Employee the entire compensation (via insurance or directly)
otherwise payable to him under Section 2 and 3 hereof, for
the lesser of one year or the remaining Period of
Employment. Upon termination of the Period of Employment by
a reason of Change in Control, Majestic will pay Employee
all payments Majestic would have been obligated to make
pursuant to Section 2, and 3 hereof, based upon a
termination date that is 12 months after the date on which
the Period of Employment would have expired but for such
termination by reason of a Change in Control.

(g) for purposes of this Agreement, "Change in Control" shall be
deemed to have occurred if (i) any "person" (as defined in
Sections 3 (a)(9) and 13 (d)(3) of the Securities Exchange
Act of 1934, as amended), other than (y) a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company acting in such capacity, or (z) a corporation
partnership or limited liability company owned, directly or
indirectly, by the members of the Company in substantially
the same proportions as their ownership of membership
interests and voting power of the Company, is or becomes the
beneficial owner (as defined in Rule 13d-3 under said Act),
directly or indirectly, of membership interests of the
Company represented 51% or more of the total members share
Company's then outstanding; (ii) there shall occur a change
in the composition of a majority of the members of the
Company within a two-year period, which change shall not
have been approved by a majority of the persons then holding
membership interests who were also members immediately prior
to the commencement of such period; (iii) the members of the
Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of
the Company (membership interests) outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of
the surviving entity) at least 51% of the total voting power
represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger
or consolidation; or (iv) the members of the Company approve
a plan of complete, liquidation of the Company or an
agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or
substantially all of the Company's assets. For purposes of
this Section 5 the term "Voting Securities" shall mean any
type of share, securities or membership interest having the
right under normal circumstances to vote in an election of
the board of directors or members. For purposes hereof the
term shareholder and member are interchangeable.
(h) If the Agreement is not to be renewed by the Company at the
conclusion of Period of Employment, employee will receive
written notice of such intent (90) ninety days prior to the
expiration of the Period of Employment. Second, at the
conclusion of the Period of Employment employee will also be
entitled to receive a lump sum relocation allowance of
$20,000.

6. Benefits. Majestic will provide you with benefits. These benefits
shall include, at a minimum:

(a) health and disability (short and long, term) insurance
covering you and your dependents, including medical, dental,
and prescription coverage. The Company also agrees to
provide a sum of $5,000 from which you will be reimbursed
for health related expenses incurred by you for you and your
dependents not otherwise compensible by the Company's
insurance plans.

(b) continued access to a 401 (k) plan, or similar retirement
plan, to which Majestic will make annual matching
contributions equal to three (3%) percent of your base and
cash bonus compensation.

(c) life insurance equal to four times your annual base salary,
which shall automatically be adjusted upward annually in the
event of increases to your base salary.

(d) three (3) weeks of paid vacation annually.

7. Non-Competition. You, as consideration for your employment and the
information you will obtain as an employee of Majestic agree that
during the term of this Agreement and for a period of 12 months
thereafter, you will not, directly or indirectly, individually or as
an employee, partner, officer, or director in any other capacity
whatsoever of any person, :firm, partnership or corporation, (i)
recruit, hire, assist otherwise in recruiting or hiring, discuss
employment with, or refer to others concerning employment, any
person who is, or within the preceding twelve (12) months was, an
employee of Majestic, or any parent, subsidiary, or affiliated
company, (ii) compete with Majestic or any parent, subsidiary, or
affiliated company in any location in Kane, Will and Cook County,
Illinois, including Harrah's, Empress Joliet, & Grand Victoria
Elgin, Lake County and LaPorte County Indiana including Empress
Casino Hammond, Showboat East Chicago, Trump Indiana Gary, Blue Chip
Casino Michigan City or any of their subsequent purchasers, assigns,
executors, trustees, or (iii) use in competition with Majestic or
any parent, or affiliated company any of the methods, information,
or systems developed by Majestic or any parent, or subsidiary, or
affiliated company.

8. Confidentiality. Except as your assigned duties may require or as
Majestic may otherwise consent in writing, you will not disclose at
any time either during or subsequent to your employment, any
information, knowledge or data of Majestic which you may develop or
receive during the course of your employment relating to financial
data, writings, computer software, policies, plans designs, business
processes, methods, data, trade secrets, know-how, plans and
programs, or any other knowledge of Majestic which is of a
proprietary or confidential nature, and upon termination of your
employment with Majestic for any reason, you agree to immediately
deliver to Majestic all physical property, plans, designs, computer
programs for software, customer lists, prospect lists, manuals,
letters, notes, reports and any other materials relating to Majestic
in your possession or under your control.

9. Arbitration. Any differences, claims, or matters in dispute arising
between Majestic and Employee out of or connected with this
Agreement, shall be submitted by them to be settled exclusively by
arbitration in Chicago, Illinois, in accordance with voluntary labor
arbitration rules of the American Arbitration Association, or its
successor, then in effect. The arbitrator's sole authority-shall be
to interpret or apply the provisions of this agreement. The
arbitrator shall not change, add to or subtract from any of the
provisions of this agreement. The arbitrator shall have the power
to compel attendance of witnesses at any hearing.

The arbitration award shall be final and binding and shall be the
sole remedy for any claimed breach of this agreement except for
claims that the arbitrator has exceeded his jurisdiction and except
for any alleged violation by Employee of the nondisclosure of
confidential information provisions of this agreement. The expense
of any arbitration shall be borne equally by Employee and Majestic.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction, but neither party may otherwise resort to any
court or administrative agency with respect to any dispute that is
arbitrable under this section except for claims that the arbitrator
has exceeded his jurisdiction.

10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving
effect to the choice of law or conflicts of laws, rules and laws of
such jurisdiction.

11. Attorney Fees. In the event that any action is filed to interpret
or enforce the provisions of this Agreement, in addition to all sums
that either party may be called upon to pay, the prevailing party
shall be entitled to reasonable attorneys fees and costs.

12. Severability. The invalidity of any portion of this Agreement shall
not be deemed to affect the validity of any other provision. In the
event that any provision of this Agreement is held to be invalid the
parties agree that the remaining provisions shall be deemed to be in
full force and effect as if they had been executed by both parties
subsequent to the expungment of the invalid portion.

13. Entire Agreement. You agree that this letter supersedes any and all
prior agreements and understandings between you and Majestic. No
representations have been made by Majestic concerning the terms and
conditions of employment other than those representations contained
in this letter. This letter may be modified only by a written
document signed by both you and a duly authorized officer of
Majestic.

14. Acknowledgment. You have read this letter before signing it and
acknowledge receipt of a copy.

15. Effective Date. This agreement shall take effect on January 1,
1999.

If this letter accurately sets forth the terms of our agreement, sign and
return the enclosed copy.

Very truly yours,

THE MAJESTIC STAR CASINO, L.L.C.

By: /S/ DON H. BARDEN
Don H. Barden

Agreed to and accepted on this 2nd day of February, 1999

/S/ MICHAEL E. KELLY
Michael E. Kelly

EXHIBIT 11

THE MAJESTIC STAR CASINO, LLC
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)

Year Ended December 31,
1998 1997 1996
---- ---- ----
Available earnings:
Net income (loss) $(4,473) $(13,887) $(8,887)
Add interest expense 15,850 12,877 8,598
------ ------ -----
Available earnings (loss) $11,377 $(1,010) $(289)

Fixed Charges:
Interest expense $15,850 $12,877 $8,598
Capitalized interest 0 2,317 213
------ ------ -----
Total Fixed Charges $15,850 $15,194 $8,811
_____
NOTES:
(1) The ratio of earnings to fixed charges for the years ended December 31,
1998, 1997, and 1996 was less than one to one. The approximate dollar
amount necessary to cover the deficiency in these periods were: 1998 --
$4,473, 1997 -- $16,204 and 1996 -- $9,099.

<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 17,295,401
<SECURITIES> 0
<RECEIVABLES> 998,694
<ALLOWANCES> 148,608
<INVENTORY> 41,948
<CURRENT-ASSETS> 19,171,947
<PP&E> 66,059,474
<DEPRECIATION> 10,106,254
<TOTAL-ASSETS> 125,260,860
<CURRENT-LIABILITIES> 11,108,997
<BONDS> 105,000,000
<COMMON> 0
0
0
<OTHER-SE> (2,997,824)
<TOTAL-LIABILITY-AND-EQUITY> 125,260,860
<SALES> 114,600,643
<TOTAL-REVENUES> 114,600,643
<CGS> 0
<TOTAL-COSTS> 100,578,038
<OTHER-EXPENSES> 3,167,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,991,059
<INCOME-PRETAX> (4,473,323)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,473,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,473,323)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>