ENTERTAINMENT PROPERTIES TRUST, S-11, 1997-09-10

ENTERTAINMENT PROPERTIES TRUST
S-11, 1997-09-10

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997
NO. 333-
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ENTERTAINMENT PROPERTIES TRUST

(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
MARYLAND 6798 43-179877
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>

1221 BALTIMORE AVENUE
KANSAS CITY, MISSOURI 64105
(816) 480-4649

(Address of Principal Executive Offices)
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PETER C. BROWN
ENTERTAINMENT PROPERTIES TRUST
1221 BALTIMORE AVENUE
KANSAS CITY, MISSOURI 64105
(816) 480-4649

(Name and address of agent for service)

COPIES TO:

<TABLE>
<S> <C> <C>
ALISON S. RESSLER RAYMOND F. BEAGLE, JR. YAACOV M. GROSS
SULLIVAN & CROMWELL LATHROP & GAGE L.C. WILLKIE FARR AND GALLAGHER
444 SOUTH FLOWER STREET 2345 GRAND BOULEVARD, 24TH ONE CITICORP CENTER
LOS ANGELES, CA 90071 FLOOR 153 EAST 53RD STREET
KANSAS CITY, MO 64108 NEW YORK, NY 10022
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF CLASS OF AMOUNT TO AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C>
Common Shares of Beneficial Interest, $.01 par value per
share................................................... 15,737,000 Shares $330,477,000 $100,145
</TABLE>

(1) Includes 2,037,000 Shares that may be sold pursuant to the exercise of the
Underwriters' over-allotment option.

(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1997

13,700,000 SHARES

ENTERTAINMENT PROPERTIES TRUST

COMMON SHARES OF BENEFICIAL INTEREST
(PAR VALUE $.01 PER SHARE)
----------------

Entertainment Properties Trust, a Maryland real estate investment trust (the
"Company"), is being formed to capitalize on the opportunities created by the
development of destination entertainment and entertainment-related properties
including larger theatre complexes. The Company believes that entertainment is
emerging as an important and discrete sector of the retail real estate industry
and, as a result of its focus on properties in this sector, it will have a
competitive advantage in providing capital to operators of such properties. The
principal business strategy of the Company is to acquire and develop a
diversified portfolio of high-quality properties leased to entertainment and
entertainment-related business operators generally under long-term triple net
leases. The Company's initial portfolio will consist of twelve megaplex theatres
(the "Initial Properties") purchased from subsidiaries of AMC Entertainment Inc.
("AMCE"). The Company will also have options to acquire up to five additional
megaplex theatres (the "Option Properties"). The Properties are all
state-of-the-art theatres equipped with amenities that significantly enhance the
audio and visual experience for the patron. The Company will lease all of the
Initial Properties and, if acquired, the Option Properties to American
Multi-Cinema, Inc. ("AMC"), a wholly owned subsidiary of AMCE. In addition, the
Company will have certain rights to purchase additional megaplex theatre and
related entertainment properties owned (or ground-leased) by AMCE or its
subsidiaries in the future. The Company intends to pay regular quarterly
distributions, initially at a rate of $1.60 per share per annum, beginning with
a pro-rated dividend for the quarter ended December 31, 1997. See
"Distributions." Upon consummation of the Formation Transactions (as defined
herein), the Company will have no outstanding indebtedness and $200 million
available under a bank credit facility.

All of the common shares of beneficial interest, $0.01 par value per share
(the "Shares"), offered hereby (the "Offering") are being sold by the Company.
Concurrently with the Offering, certain executive officers will purchase 120,000
Shares from the Company at the initial public offering price. Prior to the
Offering, there has been no public market for the Shares. It is currently
estimated that the initial public offering price per Share will be between
$19.00 and $21.00. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price.

Application will be made to list the Shares on the New York Stock Exchange
under the symbol "EPR."

SEE "RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE SHARES.

The risk factors include:

- The dependence on AMC, as the lessee of the Initial Properties and, if
acquired, the Option Properties, and AMCE, as the guarantor of AMC's lease
obligations.

- Potential conflicts of interest between the Company and its affiliates and
AMCE and its affiliates, including the lack of arm's-length negotiations
with respect to the purchase price of the Initial Properties and the
Option Properties (the "Properties").

- The Company's lack of operating history, management's lack of experience
in operating a real estate investment trust and the availability of
suitable acquisition and development opportunities.

- Actual Cash Available for Distribution (as hereinafter defined) may be
insufficient to allow the Company to maintain its proposed initial
distribution rate.

- Operating risks inherent in the entertainment industry.

- Dependence on key personnel, particularly the Company's President, Chief
Financial Officer and Chairman of the Board of Trustees.

- General real estate investment risks.

- The taxation of the Company as a regular corporation if it fails to
qualify as a real estate investment trust.

- Restrictions on the ownership of outstanding Shares.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
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<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.......................................................... $ $ $
Total(3)........................................................... $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting estimated expenses of $2.0 million payable by the Company.

(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 2,037,000 Shares at the initial public offering price
per Share, less the underwriting discount, solely to cover over-allotments.
If such option is exercised in full, the total Initial Public Offering
Price, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
---------------------

The Shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the Shares will be ready for delivery in New York, New York on or about
, 1997, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
FURMAN SELZ

PRUDENTIAL SECURITIES INCORPORATED
------------

The date of this Prospectus is , 1997.
<PAGE>

(MAP) (FOLD-OUT) (PICTURE)

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SHARES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
TABLE OF CONTENTS

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PAGE
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AVAILABLE INFORMATION................................................................ 1
PROSPECTUS SUMMARY................................................................... 2
The Company........................................................................ 2
Business Objectives and Strategies................................................. 4
Growth Strategy.................................................................... 4
Operating Strategy................................................................. 4
Capitalization Strategy............................................................ 4
Business of the Company and its Properties......................................... 5
The Properties..................................................................... 5
The Initial Properties............................................................. 5
The Option Properties.............................................................. 6
Future AMCE Properties............................................................. 7
Planet Movies Properties........................................................... 7
Entertainment Themed Retail Centers................................................ 7
Summary Risk Factors............................................................... 8
Leases............................................................................. 9
Summary Selected Financial Information............................................. 10
AMC Entertainment Inc.............................................................. 12
Distributions...................................................................... 12
The Offering....................................................................... 13
Tax Status of the Company.......................................................... 13
RISK FACTORS......................................................................... 14
Dependence on AMC and AMCE......................................................... 14
Conflicts of Interest.............................................................. 14
Lack of Operating History.......................................................... 15
Initial Distribution Policy........................................................ 16
Operating Risks Inherent in the Entertainment Industry............................. 16
Dependence on Key Personnel........................................................ 16
General Real Estate Investment Risks............................................... 17
Taxation of the Company as a REIT.................................................. 19
Limitations on Size of Holdings of Shares and Change in Control.................... 19
Lack of Control over Day-to-Day Operations and Management of the Properties........ 20
Changes in Policies................................................................ 21
No Prior Market for Shares......................................................... 21
Effect of Market Interest Rates on Share Prices.................................... 21
Dilution........................................................................... 21
THE COMPANY.......................................................................... 22
General............................................................................ 22
Business Objectives and Operating Strategies....................................... 22
USE OF PROCEEDS...................................................................... 25
CAPITALIZATION....................................................................... 26
DISTRIBUTIONS........................................................................ 27
DILUTION............................................................................. 29
THE COMPANY'S SELECTED FINANCIAL INFORMATION......................................... 30
</TABLE>

ii
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PAGE
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THE COMPANY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS...................................................................... 32
Overview........................................................................... 32
Results of Operations.............................................................. 32
Pro Forma Results of Operations.................................................... 32
Liquidity and Capital Resources.................................................... 33
Funds from Operations.............................................................. 34
Inflation.......................................................................... 34
BUSINESS OF THE COMPANY AND ITS PROPERTIES........................................... 35
Overview........................................................................... 35
The Properties..................................................................... 35
Land Parcels....................................................................... 44
Future AMCE Properties............................................................. 45
Planet Movies Properties........................................................... 45
Theatrical Exhibition Industry and Megaplex Theatres............................... 46
Entertainment Themed Retail Centers................................................ 47
Governmental Regulations Affecting the Properties.................................. 48
Insurance Coverage................................................................. 48
Competition........................................................................ 49
Legal Proceedings.................................................................. 49
LEASES............................................................................... 49
MANAGEMENT........................................................................... 54
Trustees and Executive Officers of the Company..................................... 54
Classification of Trustees......................................................... 55
Committees of the Board............................................................ 55
Compensation of Trustees........................................................... 55
Executive Compensation............................................................. 56
Employment Agreements.............................................................. 56
Compensation Programs.............................................................. 57
Trustee Liability Limitation and Indemnification................................... 58
AMC ENTERTAINMENT INC................................................................ 60
Business of AMCE................................................................... 60
AMCE Properties.................................................................... 61
AMCE's Selected Consolidated Financial Information................................. 61
AMCE's Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... 64
Liquidity and Capital Resources.................................................... 72
Recently Issued Financial Accounting Pronouncements................................ 74
CERTAIN RELATIONSHIPS AND TRANSACTIONS............................................... 75
Purchase of Initial Properties..................................................... 75
Option Properties.................................................................. 75
Right to Purchase.................................................................. 75
Employment Agreements.............................................................. 75
Company Offices.................................................................... 75
Purchase of Shares by Executive Officers........................................... 75
</TABLE>

iii
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PAGE
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POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES........................... 76
Investment Objectives and Policies................................................. 76
Dispositions; AMC's Right of First Refusal......................................... 76
Financing.......................................................................... 76
Working Capital Reserves........................................................... 77
Conflict of Interest Policies...................................................... 77
Declaration of Trust and Bylaw Provisions.......................................... 77
Other Policies..................................................................... 78
CONFLICTS OF INTEREST................................................................ 78
General............................................................................ 78
Potential Conflicts of Interest.................................................... 78
Steps Taken by the Company to Address Potential Conflicts of Interest.............. 79
THE FORMATION TRANSACTIONS........................................................... 79
Benefits to the Company and its Officers and Trustees.............................. 80
Benefits to AMCE................................................................... 81
PRINCIPAL SHAREHOLDERS OF THE COMPANY................................................ 82
RELATIONSHIP BETWEEN AMCE AND THE COMPANY AFTER THE FORMATION TRANSACTIONS........... 83
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST......................................... 85
General............................................................................ 85
Common Shares...................................................................... 85
Preferred Shares................................................................... 86
Power to Issue Additional Shares and Preferred Shares.............................. 86
Restriction on Size of Holdings of Shares.......................................... 86
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S DECLARATION OF TRUST AND
BYLAWS............................................................................. 88
Classification and Removal of Trustees............................................. 88
Trustee Liability Limitation and Indemnification................................... 89
Business Combinations.............................................................. 90
Control Share Acquisitions......................................................... 90
Amendment to the Declaration of Trust.............................................. 91
Dissolution of the Company......................................................... 91
Advance Notice of Trustee Nominations and New Business............................. 91
Anti-takeover Effect of Certain Provisions of Maryland Law and of the Declaration
of Trust and Bylaws.............................................................. 91
Maryland Asset Requirements........................................................ 92
SHARES AVAILABLE FOR FUTURE SALE..................................................... 92
FEDERAL INCOME TAX CONSIDERATIONS.................................................... 92
Taxation of the Company as a REIT.................................................. 93
Taxation of Holders of Shares...................................................... 99
Other Tax Consequences............................................................. 103
UNDERWRITING......................................................................... 104
EXPERTS.............................................................................. 105
VALIDITY OF SHARES................................................................... 105
GLOSSARY............................................................................. 106
INDEX TO FINANCIAL STATEMENTS........................................................ F-1
</TABLE>

iv
<PAGE>
AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-11 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Shares offered
hereby (the "Registration Statement"). This Prospectus, which is part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Shares, reference is made to the Registration
Statement and such exhibits filed therewith. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.

For further information with respect to the Company and the Shares,
reference is made to the Registration Statement and such exhibits, copies of
which may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and will also be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511. The
Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
documents with the Commission, including the Company, and the address is
http://www.sec.gov. Moreover, application will be made to list the Shares on the
New York Stock Exchange (the "NYSE"). Accordingly, upon official notice of
issuance, periodic reports, proxy material, and other information concerning the
Company, when filed, may be inspected at the offices of the NYSE, Operations, 20
Broad Street, New York, New York 10005.

Following the closing of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and will, therefore, be required to file reports, proxy
and information statements and other information with the Commission pursuant to
the reporting requirements of Section 13(a) thereof, in addition to any other
legal or NYSE requirements. Such reports, statements and information can also be
inspected and copied at the Commission's offices and web site listed above.

The Company intends to furnish its shareholders with annual reports
containing consolidated financial statements audited by its independent
certified public accountants and with quarterly reports containing unaudited
condensed consolidated financial statements for each of the first three quarters
of each fiscal year.

1
<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, and the notes thereto, appearing elsewhere
in this Prospectus. Unless otherwise indicated, the information contained in
this Prospectus assumes (i) an initial public offering price per Share of $20.00
(the mid-point of the range of estimated initial public offering prices set
forth on the front cover of this Prospectus); (ii) the consummation of the
Formation Transactions; and (iii) no exercise of the Underwriters'
over-allotment option. AMC Entertainment Inc. ("AMCE") is not offering any
securities hereby and will not directly receive any of the proceeds of the
Offering. AMCE's consolidated financial statements have been included in this
Prospectus due to the Company's initial dependence on American Multi-Cinema,
Inc. ("AMC") as the sole lessee of the Properties and AMCE's guarantee of AMC's
obligations under the Leases. References to "AMCE" and "AMC" include their
consolidated subsidiaries unless the context otherwise requires. See "Glossary"
for the definitions of certain terms used in this Prospectus.

THE COMPANY

The Company is being formed to capitalize on the opportunities created by
the development of destination entertainment and entertainment-related
properties including larger theatre complexes. The Company believes that
entertainment is emerging as an important and discrete sector of the retail real
estate industry and, as a result of its focus on properties in this sector, it
will have a competitive advantage in providing capital to operators of such
properties. The principal business strategy of the Company is to acquire and
develop a diversified portfolio of high-quality properties leased to
entertainment and entertainment-related business operators generally under
long-term triple net leases. The Company will focus primarily on megaplex
theatres and entertainment themed retail centers. Megaplex theatres have at
least 14 screens with predominantly stadium-style seating (seating with an
elevation between rows to provide unobstructed viewing) and are generally
equipped with amenities that significantly enhance the audio and visual
experience for the patron. The Company believes that the development of megaplex
theatres has accelerated the obsolescence of many existing movie theatres by
setting new standards for moviegoers, who have demonstrated their preference for
the more attractive surroundings, wider variety of films, better customer
service and more comfortable seating typical of megaplex theatres. As a result
of the significant capital commitment involved in building such properties and
the experience and industry relationships of the Company's management, the
Company believes that it will have opportunities to provide capital to
businesses that seek to develop and operate such properties but would rather
lease than own their real estate properties. The Company's ability to finance
the acquisition of such properties will enable it to grow and diversify its
asset base.

The Company's initial portfolio will consist of the Initial Properties
purchased from subsidiaries of AMCE for an aggregate purchase price of
approximately $247.3 million. The Initial Properties consist of twelve megaplex
theatres with an aggregate of 282 screens and 54,840 seats, each of which is
located in a large metropolitan market and has been constructed since May 1995
or is currently under construction. Four of the Initial Properties are among the
twelve highest grossing theatres in the United States and each of the eight
operating Initial Properties is the highest grossing theatre in the local
geographic area in which it operates. The Company will also have options to
acquire any or all of the Option Properties for the cost to AMC of developing
and constructing such property (estimated to aggregate $136.8 million if all the
Option Properties are purchased). The Option Properties are megaplex theatres
that will have an aggregate of 134 screens and 27,380 seats and are currently
under construction, with the last theatre expected to be completed and opened by
July 1998. The Initial Properties and the Option Properties represent all of the
AMC-owned (or ground-leased) megaplex theatres with the exception of one
property that is not readily transferable to the Company. One of the Initial
Properties and three of the Option Properties have adjacent land parcels that,
if not under contract for sale or sold at the time of the related theatre
acquisition, may be purchased by the Company for an aggregate purchase price of

2
<PAGE>
$10.4 million. The related land parcels, if acquired, may be developed by the
Company and leased or sold to third parties for development as restaurant or
retail sites that complement the megaplex theatre entertainment experience.

In addition, the Company will have a right of first refusal and first offer
to purchase and lease back to AMC any megaplex theatre and related entertainment
property acquired or developed and owned (or ground-leased) by AMCE or its
subsidiaries for a period of five years following the closing of the Offering.
This right to purchase is intended to give the Company access to new projects
operated by subsidiaries of AMCE, thereby providing opportunities for future
growth, although AMCE will be free to develop properties with, and lease
properties from, third party developers other than the Company. The Company
believes that there will also be additional opportunities to develop and acquire
similar high-quality entertainment and entertainment-related properties for and
from other operators, including Planet Movies Company, L.P. ("Planet Movies"), a
joint venture between AMCE and Planet Hollywood International, Inc. ("Planet
Hollywood").

The Company will lease all of the Initial Properties and, if acquired, the
Option Properties to AMC, and AMC will continue to operate the Properties. The
Properties will be leased to AMC pursuant to long-term triple net leases (the
"Leases") that require AMC to pay substantially all expenses associated with the
operation of such Properties, such as taxes and other governmental charges,
insurance, utilities, service, maintenance and any ground lease payments. All of
the Leases will provide for base rent with certain annual escalations and
percentage rent on revenues in excess of a baseline amount and will have primary
terms ranging from 13 to 15 years that may be extended upon the same terms and
conditions for four additional five-year periods at the option of AMC. The
Initial Properties are expected to generate aggregate initial annual cash rent
of approximately $26.0 million, which represents a 10.5% lease rate based on the
purchase price for such Properties. The Company believes that the lease rate
represents a fair market rental rate based on comparable triple net lease
transactions. The Company will have general recourse to AMC under the Leases and
to AMCE under its guarantee of AMC's obligation under the Leases, but AMC's
payment obligations under such Leases and AMCE's obligations under its guarantee
will not be secured by any assets of AMC or AMCE. Certain obligations of AMC
under the Leases for the Properties are initially cross-defaulted to each of the
other Leases and the Leases also contain provisions for payment defaults and
certain other defaults. See "Leases."

Upon consummation of the Formation Transactions, the Company will have no
outstanding indebtedness. The Company is negotiating to obtain a $200 million
unsecured line of credit (the "Bank Credit Facility"), which will be used
primarily for the acquisition of additional entertainment and entertainment-
related properties, including the Option Properties and related land parcels,
and for general corporate purposes. The Company expects to close the Bank Credit
Facility as part of the Formation Transactions. The Company believes that its
lack of indebtedness, coupled with the available financing through the Bank
Credit Facility, will provide it with significant financial resources to pursue
acquisitions and expansion opportunities, including the Option Properties and
related land parcels. The Company intends to maintain a capital structure that
limits consolidated debt to less than 50% of its total market capitalization
(i.e., total debt of the Company as a percentage of equity market value plus
total debt). See "The Company's Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Liquidity and Capital Resources"
and "Policies and Objectives With Respect to Certain Activities-- Financing."

The Company expects to qualify as a real estate investment trust for federal
income tax purposes (a "REIT"). In order to qualify as a REIT, a specified
percentage of the Company's gross income must be
derived from certain sources, including rents from real property (and generally
excluding income from the operation of an entertainment or entertainment-related
property). See "Federal Income Tax Considerations--Taxation of the Company as a
REIT--Requirements for Qualification--Income Tests." Accordingly, the Company is
generally precluded from operating entertainment and entertainment-related
properties and, consequently, intends to lease such properties pursuant to
long-term triple net leases.

3
<PAGE>
BUSINESS OBJECTIVES AND STRATEGIES

The Company's business objectives are to achieve predictable and increasing
Funds from Operations (as hereinafter defined) per Share and enhance shareholder
value by acquiring and developing a diversified portfolio of high-quality
properties leased to entertainment and entertainment-related business operators
generally under long-term triple net leases. The Company intends to achieve such
objectives through the implementation of the following strategies:

GROWTH STRATEGY

- Acquire the Option Properties pursuant to the option agreements between
the Company and subsidiaries of AMCE and the current owner/lessor of
certain of the Option Properties (the "Option Agreements") and lease back
the Option Properties to AMC;

- Purchase additional AMC-operated properties pursuant to a right of first
refusal and first offer to purchase agreement between the Company and AMCE
(the "AMCE Right to Purchase Agreement");

- Develop or acquire additional megaplex theatres leased to other qualified
theatrical exhibitors and Planet Movies-operated properties to the extent
possible; and

- Develop or acquire entertainment themed retail centers ("ETRCs") and
single-tenant out-of-home location based entertainment and
entertainment-related properties.

OPERATING STRATEGY

- Purchase single-tenant properties supported by long-term leases or
multi-tenant properties that are substantially leased to minimize the
risks inherent in initial leasing;

- Structure leases, where possible, on a triple net or similar basis under
which the tenants bear the principal portion of the financial and
operational responsibility for the properties;

- Provide in the leases for contractual increases in rent and/or percentage
rent based upon a percentage of a tenant's gross sales over a
pre-determined level;

- Develop and maintain long-term working relationships with theatre,
restaurant, retail and other entertainment-related business operators; and

- Diversify the Company's asset base by property type and tenant.

CAPITALIZATION STRATEGY

- Employ moderate leverage, pursuant to the Bank Credit Facility or
otherwise, to fund additional acquisitions;

- Maintain a debt to total market capitalization ratio (i.e., total debt of
the Company as a percentage of equity market value plus total debt) of
less than 50%; and

- Pay regular distributions and periodically raise distributions as Funds
from Operations per Share increases.

4
<PAGE>
BUSINESS OF THE COMPANY AND ITS PROPERTIES

THE PROPERTIES

The Company will enter into a purchase agreement to acquire the Initial
Properties from subsidiaries of AMCE for an aggregate purchase price of
approximately $247.3 million, and option agreements to purchase any or all of
the Option Properties for an aggregate estimated purchase price of $136.8
million that may be exercised by the Company, with respect to each Property, at
any time during the 90-day period following the actual opening date of the
megaplex theatre on such Option Property, with up to an additional 90-day period
to close such acquisition. One of the Initial Properties and three of the Option
Properties have adjacent land parcels that, if not under contract for sale or
sold at the time of the related theatre acquisition, may be purchased by the
Company for an aggregate purchase price of $10.4 million. The Initial Properties
and the Option Properties represent all of the AMC-owned (or ground-leased)
megaplex theatres with the exception of one property that is not readily
transferrable to the Company. Each of the Properties is located in a large
metropolitan market and has been constructed since May 1995 or is currently
under construction. Four of the Initial Properties are among the twelve highest
grossing theatres in the United States and each of the eight operating Initial
Properties is the highest grossing theatre in the local geographic area in which
it operates. In addition, the Company will have a right of first refusal and
first offer to purchase any megaplex theatre and related entertainment property
acquired or developed and owned (or ground-leased) by AMCE or its subsidiaries
for a period of five years following the closing of the Offering. The Company
will acquire a 100% interest in each of the Properties (or related ground
leases, as applicable) purchased.

THE INITIAL PROPERTIES

Certain information regarding each of the Initial Properties is set forth
below:

<TABLE>
<CAPTION>
METROPOLITAN NO. OF NO. OF BUILDING OPENING
THEATRE NAME AREA SCREENS SEATS (SQ. FT.) DATE RANKING(1)
- -------------------------- ------------------- ------------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Grand 24.................. Dallas, TX 24 5,067 85,000 5/95 5

Mission Valley 20(2)...... San Diego, CA 20 4,361 76,334 12/95 4

Promenade 16(3)........... Los Angeles, CA 16 2,882 120,000 3/96 42

Ontario Mills 30.......... Los Angeles, CA 30 5,469 106,502 12/96 11

Lennox 24(2).............. Columbus, OH 24 4,412 80,300 12/96 12

West Olive 16............. St. Louis, MO 16 2,817 52,310 4/97 N/A

Studio 30................. Houston, TX 30 6,032 112,382 5/97 N/A

Huebner Oaks 24........... San Antonio, TX 24 4,400 81,780 6/97 N/A

Leawood Town Center 20.... Kansas City, MO/KS 20 2,994 62,122 12/97(4) N/A

First Colony 24(2)........ Houston, TX 24 5,098 89,290 12/97(4) N/A

Oak View 24(2)............ Omaha, NE 24 5,098 89,290 12/97(4) N/A

South Barrington 30(5).... Chicago, IL 30 6,210 109,468 2/98(4) N/A
--- --------- ---------
282 54,840 1,064,778
--- --------- ---------
--- --------- ---------
</TABLE>

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

(1) Among United States theatres based on ticket revenues for the period from
January 1 through August 14, 1997 according to Entertainment Data
Incorporated. No ranking is provided for those theatres that were not
operational during the entire period.

5
<PAGE>
(2) Third party ground leased property. Although the Company will become the
tenant under the ground leases and assume responsibility for performing the
obligations thereunder in the Formation Transactions, pursuant to the Leases
AMC will have responsibility for performing the Company's obligations under
such ground leases.

(3) The theatre occupies 60,000 square feet. See "Business of the Company and
its Properties--Initial Property Descriptions--Promenade 16."

(4) Anticipated opening date. The Company will pay the purchase price and AMC
will commence paying rent under the applicable Lease with the Company on the
date the property is acquired by the Company, which will occur on the
earlier of the actual opening date of the megaplex theatre and the first day
of the month following the anticipated opening date indicated.

(5) The Company will acquire one land parcel totaling approximately 1.5 acres
adjacent to this theatre if such parcel is not under contract for sale or
sold by AMC at the time of the Formation Transactions. See "Business of the
Company and its Properties--Land Parcels." The Company will not have the
right to acquire other land parcels adjacent to this theatre because of the
absence of sewer connections to such parcels.

THE OPTION PROPERTIES

Certain information regarding each of the Option Properties, including the
purchase price payable by the Company therefor, is set forth below:

<TABLE>
<CAPTION>
ANTICIPATED ESTIMATED
METROPOLITAN NO. OF NO. OF BUILDING OPENING PURCHASE PRICE
THEATRE NAME AREA SCREENS SEATS (SQ. FT.) DATE(1) (IN THOUSANDS)(2)
- ----------------------- ------------ ------------- --------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Gulf Pointe 30(3)(4)... Houston, TX 30 6,008 108,935 12/97 $ 27,200

Mesquite 30(3)(4)...... Dallas, TX 30 6,008 108,935 3/98 22,600

Cantera 30(4).......... Chicago, IL 30 6,210 109,468 3/98 34,000

Hampton Town Center
24(3)................ Norfolk, VA 24 5,098 89,290 4/98 26,000

Livonia 20............. Detroit, MI 20 4,056 72,297 7/98 27,000
--- --------- ----------- -----------------
134 27,380 488,925 $ 136,800
--- --------- ----------- -----------------
--- --------- ----------- -----------------
</TABLE>

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

(1) If the Company acquires an Option Property, the Company will pay the
purchase price and AMC will commence paying rent under the applicable Lease
with the Company on the date such Option Property is acquired by the
Company, which will not occur prior to the actual opening date of the
megaplex theatre.

(2) Purchase prices are estimated but are not expected to materially change. The
actual purchase price for each Option Property will equal the cost to AMC of
developing and constructing such Property at the time of acquisition by the
Company.

(3) AMC currently leases such Properties from a third party owner/lessor. The
Company will have an option to acquire such Properties from the
owner/lessor.

(4) The Company will have the option to acquire the land parcels adjacent to
this theatre if such land parcels are not under contract for sale or sold at
the time of the related theatre acquisition. See "Business of the Company
and its Properties--Land Parcels."

6
<PAGE>
The Company will lease to AMC the Option Properties, if acquired, pursuant
to Leases on substantially the same terms and conditions as the Leases for the
Initial Properties, including annual rent escalations and percentage rent on
revenues in excess of a baseline amount. See "Leases." The initial annual rental
rate for each Option Property will be equal to 10.5% of the purchase price.
Using the 10.5% lease rate calculation and the estimated purchase prices, the
Company believes that the initial annual cash rent for each Option Property, if
acquired, will be: (a) Gulf Pointe 30--$2.9 million; (b) Mesquite 30--$2.4
million; (c) Cantera 30--$3.6 million;(d) Hampton Town Center 24--$2.7 million;
and (e) Livonia 20-- $2.8 million. Total initial annual cash rent for the Option
Properties, if acquired, will be approximately $14.4 million.

FUTURE AMCE PROPERTIES

PLANET MOVIES PROPERTIES

In July 1997, AMCE and Planet Hollywood announced the formation of a joint
venture to develop and operate unique, integrated movie-going, dining and retail
shopping complexes to be branded "Planet Movies by AMC" that the Company
believes will typically aggregate 200,000 square feet. The Company anticipates
working closely with Planet Movies in evaluating potential Planet Movies
locations, including the acquisition and development of property by the Company
and the leasing of such property to Planet Movies, although neither party is
obligated to do so. The development and rental terms of any such properties will
be negotiated between the Company and Planet Movies at the time that such
transaction occurs. In addition, certain of the Properties may be operated by
AMC under the "Planet Movies by AMC" name in the future.

ENTERTAINMENT THEMED RETAIL CENTERS

ETRCs are generally large multi-tenant retail developments that incorporate
elements such as restaurants, book or music superstores, high-tech attractions,
interactive game centers, live entertainment venues and other specialty retail
that is oriented to entertainment or leisure time activities. The Company
believes that the most important component of an ETRC is a megaplex theatre due
to its ability to generate substantial customer traffic to the site. Such
centers typically attempt to provide a family entertainment experience by
creating an atmosphere of fun and excitement. The Company believes that ETRCs
broaden the traditional retail shopping concept and attract a greater number of
customers to spend more time and money at a single location. The Company also
believes that access to capital in this developing market is generally limited
for operators other than the largest entertainment companies. As a result of the
significant capital commitment involved in building such properties and the
experience and relationships of the Company's management, the Company believes
that it will have opportunities to provide capital to businesses that seek to
develop and operate such properties but would rather lease than own their real
estate properties. The Company's ability to finance the acquisition and
development of such properties will enable it to grow and diversify its asset
base. See "The Company--Business Objectives and Operating Strategies" and
"Business of the Company and its Properties--Entertainment Industry and
Properties."

7
<PAGE>
SUMMARY RISK FACTORS

Prospective investors should carefully consider, among other factors, the
matters discussed under "Risk Factors" in this Prospectus prior to making an
investment decision regarding the Shares offered hereby. Such risk factors
include:

- The dependence on AMC, as the lessee of the Initial Properties and, if
acquired, the Option Properties, and AMCE, as the guarantor of AMC's
obligations under the Leases, for the Company's initial revenues and
ability to make distributions to its shareholders;

- Potential conflicts of interests between the Company and its affiliates
and AMCE and its affiliates, including the lack of arm's-length
negotiations with respect to the purchase price of the Properties and
related land parcels;

- The Company's lack of operating history, management's lack of experience
in operating in accordance with the requirements for maintaining its
qualification as a REIT and the availability of suitable acquisition and
development opportunities;

- Actual Cash Available for Distribution (defined generally as net earnings
(loss) (computed in accordance with generally accepted accounting
principles ("GAAP")) of the Company plus depreciation, adjusted for
straight-lined rent and amortization and minus capital expenditures and
principal payments on indebtedness) may be insufficient to allow the
Company to maintain its proposed initial distribution rate;

- The Company's properties are subject to operating risks inherent in the
entertainment industry;

- The dependence on certain key personnel, particularly Messrs. Robert L.
Harris, David M. Brain and Peter C. Brown;

- Certain real estate investment risks that may affect the value of the
Shares and the Company's ability to make expected distributions to
shareholders, including, without limitation, (i) the general economic
climate; (ii) government regulations on the environment, zoning, public
access and taxes; (iii) interest rates and the availability of debt
financing; and (iv) the possibility that a property could sustain an
uninsured loss;

- The taxation of the Company as a regular corporation if it fails to
qualify as a REIT;

- Anti-takeover effect of limiting actual or constructive ownership of
Shares of the Company by a single person to 9.8% of the outstanding
shares, subject to certain specified exceptions, to ensure compliance with
certain requirements related to qualification of the Company as a REIT and
certain other provisions contained in the organizational documents of the
Company, any of which may have the effect of delaying, deferring or
preventing a transaction or change in control of the Company that might
involve a premium price for the Shares or otherwise be in the best
interests of the Company's shareholders;

- The Company's lack of control over the day-to-day operations and
management of the Properties;

- The ability of the Company to make changes in its investment and financing
policies without the approval of its shareholders;

- The lack of a prior market for the Shares and the potential impact of
market interest rate increases and other factors on the trading prices of
the Shares; and

- The immediate dilution in the net tangible book value per share of the
Shares purchased in the Offering.

8
<PAGE>
For a discussion of the Company's transactions with related parties and the
compensation therefor, see "Certain Relationships and Transactions."

LEASES

Concurrently with the Company's acquisition of the Initial Properties and,
if acquired, the Option Properties, the Company will lease each such Property to
AMC pursuant to a Lease. AMCE will guarantee AMC's obligations under each Lease.
The Leases will have initial terms ranging from 13 to 15 years (the "Fixed
Term") and may be extended upon the same terms and conditions for four
additional five-year terms (the "Extended Term") at the option of AMC. The
Leases will be triple net leases that require AMC to pay substantially all
expenses associated with the operation of the Properties, such as taxes and
other governmental charges, insurance, utilities, service, maintenance and any
ground lease payments. Each Lease will require that, for a specified period, AMC
operate the leased Property only as a movie theatre and for activities
incidental thereto.

The rent schedules under the Leases are expected to provide for a relatively
stable source of cash flow and opportunities to participate in future growth in
revenues experienced by AMCE and its subsidiaries. The rent for the first year
for each Property under the Leases will be initially set at a fixed amount and
will be increased each year by 2% of the base rent applicable to that Property
for the preceding year (the "Base Rent Escalation"). In addition, AMC will pay
percentage rent on revenues in excess of a baseline amount ("Annual Percentage
Rent"). However, the Company does not expect to receive any percentage rent for
at least five years.

During each Fixed Term, certain obligations, including payment obligations,
of AMC under each Lease will be cross-defaulted to each of the other Leases
until AMCE's senior debt obligations or corporate credit rating becomes rated
investment grade or AMC's rent payments to the Company represent less than 50%
of the Company's rental income for any fiscal quarter. The Company will have
general recourse to AMC under the Leases and to AMCE under its guarantee of
AMC's obligations under the Leases, but AMC's payment obligations under such
Leases and AMCE's obligations under its guarantee will not be secured by any
assets of AMC or AMCE.

Neither the Leases nor any of the other agreements entered into in
connection with the Formation Transactions prohibits or otherwise restricts the
ability of the Company to purchase properties from, or lease properties to,
parties other than AMCE, AMC or any of their affiliates or the ability of AMCE,
AMC or any of their affiliates to lease properties from parties (domestic or
foreign) other than the Company. Pursuant to the Leases, AMC will have a right
of first refusal and first offer to acquire any Property or any interest in an
entertainment or entertainment-related property acquired or developed by the
Company and operated by AMC. See "Leases" for a more detailed discussion of the
terms and conditions of the Leases.

9
<PAGE>
SUMMARY SELECTED FINANCIAL INFORMATION

The following table sets forth summary selected historical and pro forma
financial information for the Company. The pro forma operating information is
presented as if the Formation Transactions had occurred as of the beginning of
the period indicated and therefore incorporates certain assumptions that are
included in the Company's Condensed Pro Forma Financial Statements. The pro
forma balance sheet information is presented as if the Formation Transactions
had occurred on June 30, 1997. The pro forma information does not purport to
represent what the Company's financial position or results of operations
actually would have been had the Formation Transactions, in fact, occurred on
such date or at the beginning of the period indicated, or to project the
Company's financial position or results of operations at any future date or for
any future period. The historical and pro forma financial information set forth
below should be read in conjunction with "The Company's Management's Discussion
and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
PRO FORMA SIX
MONTHS ENDED JUNE PRO FORMA YEAR ENDED
30, 1997 DECEMBER 31, 1996
------------------- --------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Rental income(1)......................................... $ 14,814 $ 29,628
General and administrative expenses(2)................... 1,105 2,209
Depreciation(3).......................................... 2,677 5,354
Interest expense, net.................................... 332 664
-------- --------
Net earnings............................................. $ 10,700 $ 21,401
-------- --------
-------- --------
Net earnings per Share................................... $ 0.78 $ 1.56
-------- --------
-------- --------
Distributions declared and paid.......................... $ 11,008 $ 22,016
Distributions declared and paid per Share................ $ 0.80 $ 1.60
Weighted average Shares outstanding(4)................... 13,760 13,760
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA JUNE HISTORICAL AUGUST
30, 1997 29, 1997
-------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Real estate owned, at cost......................... $ 248,356 $ --
Total assets....................................... 250,422 2
Debt outstanding under the Bank Credit Facility.... -- --
Total shareholders' equity......................... 250,422 2
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA SIX PRO FORMA YEAR
MONTHS ENDED JUNE ENDED DECEMBER 31,
30, 1997 1996
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
OTHER FINANCIAL DATA:
Net earnings..................................... $ 10,700 $ 21,401
Add: Depreciation................................ 2,677 5,354
-------- --------
Funds from Operations(5)......................... 13,377 26,755
Adjusted for: Straight-lined rent and
amortization................................... 1,561 3,123
-------- --------
Cash Available for Distribution(6)............... $ 11,816 $ 23,632
-------- --------
-------- --------
</TABLE>

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

(1) Represents rental income from AMC recorded in accordance with the terms of
the Leases as if all Initial Properties had been in operation for the entire
period. The Company will lease the Initial Properties to AMC under the
Leases, which are guaranteed by AMCE.

10
<PAGE>
(2) Represents management's estimates of general and administrative expenses.

(3) Represents depreciation of the Initial Properties over a 40-year period.

(4) Weighted average Shares outstanding include Shares sold in the Offering and
restricted Shares granted pursuant to the Company's Restricted Share Program
as if such Shares were outstanding for the entire period.

(5) The Company believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows
from operating activities, investing activities and financing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. Funds from Operations
is calculated as net earnings (loss) (computed in accordance with GAAP),
excluding significant non-recurring items, gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company computes Funds from Operations in accordance
with standards established by the White Paper on Funds from Operations
approved by the National Association of Real Estate Investment Trusts
("NAREIT") Board of Governors in March 1995, which may differ from the
methodology for calculating Funds from Operations utilized by other equity
REITs, and, accordingly, the Company's Funds from Operations may not be
comparable to the Funds from Operations of such other REITs. See "The
Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations--Funds from Operations." Funds from Operations should
not be considered as an alternative to net earnings (computed in accordance
with GAAP) as an indication of the Company's financial performance or to
cash flows from operating activities (computed in accordance with GAAP) as a
measure of the Company's liquidity, nor is it indicative of funds available
to fund the Company's cash needs, including its ability to make
distributions.

(6) Cash Available for Distribution means Funds from Operations adjusted for
straight-lined rent and amortization and minus capital expenditures and
principal payments on indebtedness. No capital expenditures or principal
payments on indebtedness are included for the periods indicated.

11
<PAGE>
AMC ENTERTAINMENT INC.

AMCE is one of the leading theatrical exhibition companies in North America
measured by revenues. In the fiscal year ended April 3, 1997, AMCE's
consolidated revenues were $749,597,000. As of July 3, 1997, AMCE operated 230
theatres with an aggregate of 2,031 screens located in 22 states, the District
of Columbia, Portugal and Japan. Approximately 62% of the screens operated by
AMCE are located in Florida, California, Texas, Missouri and Michigan and
approximately 74% of AMCE's domestic screens are located in areas among the 20
largest "Areas of Dominant Influence" (television market areas as defined by
Arbitron Company). AMCE is an industry leader in the development and operation
of megaplex and multiplex theatres, primarily in large metropolitan markets.

AMCE and its predecessor have operated movie theatres since 1920. AMCE
currently operates one of the largest motion picture exhibition circuits in
North America and continually upgrades its theatre circuit by opening new
theatres (primarily megaplex theatres) and adding new screens to existing
theatres. Since April 1995, AMCE has opened 29 new theatres with 504 screens,
representing 24.8% of its current number of screens, and has added 52 screens to
existing theatres.

As of July 3, 1997, without giving effect to the Formation Transactions,
AMCE owns, or ground leases, 8 megaplex and 21 other theatres, leases or manages
13 megaplex and 188 other theatres and has under construction 6 owned (or
ground-leased) and 20 leased megaplex theatres. The Company is acquiring as
Initial Properties all of the AMCE-owned megaplex theatres and is acquiring or
has the option to acquire as Initial Properties or Option Properties all of the
AMCE-owned (or ground-leased) megaplex theatres under construction with the
exception of one property that is not readily transferrable. See "AMC
Entertainment Inc.--AMCE Properties."

Certain financial information regarding AMCE is contained under "AMC
Entertainment Inc." and AMCE's Consolidated Financial Statements included
elsewhere in this Prospectus. AMCE owns 50% of Planet Movies and does not own
any Shares of the Company.

AMCE is a Delaware corporation and AMC is a Missouri corporation with their
principal executive offices located at 106 West 14th Street, Kansas City,
Missouri 64105. Their telephone number at such address is (816) 221-4000.

DISTRIBUTIONS

The Company intends to pay regular quarterly distributions to its
shareholders. The Board of Trustees (the "Board") of the Company, in its sole
discretion, will determine the actual distribution rate based on the Company's
actual results of operations, economic conditions, tax considerations (including
those related to REITs) and other factors. The first distribution, for the
period ending December 31, 1997, is expected to equal a pro rata share of the
anticipated initial quarterly distribution of $0.40 per Share. On an annualized
basis, the anticipated distribution is $1.60 per Share, or approximately 7.6% to
8.4% of the estimated range of the initial public offering price per Share. The
Company does not expect to change its estimated initial distribution per Share
if the Underwriters' over-allotment option is exercised. See "The Formation
Transactions."

The Company has established the initial annual distribution rate using its
estimate of Cash Available for Distribution based on the Company's pro forma
Funds from Operations for the year ended December 31, 1996. Funds from
Operations does not represent cash generated from operating activities
(determined in accordance with GAAP) and should not be considered an alternative
to net income as an indication of the Company's performance or to cash flows
from operating activities as a measure of liquidity or ability to make
distributions. The expected distribution represents approximately 93.2% of the
estimated Cash Available for Distribution for the year ended December 31, 1996.
The Company's estimate of Cash Available for Distribution does not include any
revenues or expenses related to the purchase of the Option Properties, land
parcels or additional properties. The Company intends to

12
<PAGE>
maintain its approximate initial distribution amount for at least 12 months
following the closing of the Offering unless actual results of operations,
economic conditions or other factors differ from the assumptions used in
calculating the estimate. The Company estimates that approximately 15% to 20% of
the anticipated initial annual distribution to shareholders will represent a
return of capital for federal income tax purposes and that the Company would
generally have been required to distribute $16.9 million or $1.22 per Share
during the year ended December 31, 1996 in order to maintain its status as a
REIT. If actual Funds from Operations or taxable income vary from the estimated
amounts, the percentage of the anticipated initial annual distribution
representing a return of capital may vary substantially. See "Distributions" for
the calculation of estimated Cash Available for Distribution and related
assumptions.

THE OFFERING

<TABLE>
<CAPTION>
Shares offered hereby........................ 13,580,000(1)

<S> <C>
Shares to be outstanding after the 13,760,100(2)
Offering....................................

Use of proceeds.............................. Approximately $247.3 million of the net
proceeds of the Offering will be used by the
Company to purchase the Initial Properties
from subsidiaries of AMCE. The remaining net
proceeds and any net proceeds from the
exercise of the Underwriters' over-allotment
option will be used by the Company to pay
expenses of the Formation Transactions, to
make loans pursuant to the Share Purchase
Program, to acquire the land parcel related
to an Initial Property, for the future
acquisition of additional properties or for
general business purposes. See "Use of
Proceeds."

Proposed NYSE Symbol......................... EPR
</TABLE>

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

(1) Excludes 80,000 Shares that will be purchased by Robert L. Harris and 40,000
Shares that will be purchased by David M. Brain, each at the initial public
offering price, pursuant to the Company's Share Purchase Program. See
"Management--Compensation Programs."

(2) Includes 60,000 restricted Shares granted pursuant to the Company's
Restricted Share Program and excludes options to purchase 80,000 Shares
granted pursuant to the Company's Share Option Program. See
"Management--Compensation Programs."

TAX STATUS OF THE COMPANY

The Company plans to make an election to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with its
taxable year ending December 31, 1997. As a REIT, the Company generally will not
be taxed on income it currently distributes to its shareholders so long as it
distributes at least 95% of its taxable income currently. REITs are subject to a
number of organizational and operational requirements. Even if the Company
continues to qualify for taxation as a REIT, the Company may be subject to
certain federal income taxes and to certain state and local taxes on its income
and property. See "Risk Factors--Taxation of the Company as a REIT" and "Federal
Income Tax Considerations."

13
<PAGE>
RISK FACTORS

Prospective investors should carefully consider, among other factors, the
matters described below prior to making an investment decision regarding the
Shares offered hereby. Each of these factors could adversely affect the ability
of the Company to make expected distributions to shareholders.

DEPENDENCE ON AMC AND AMCE

AMC will be the lessee of all the Initial Properties and, if acquired, the
Option Properties. The Company's initial revenues, and its ability to make
distributions to its shareholders, will depend on rental payments by AMC under
the Leases and by AMCE under the guarantees of AMC's obligations under the
Leases. The Company believes that AMC and AMCE have sufficient assets and income
to enable it to satisfy their obligations under the Leases and guarantees at
this time; however, there can be no assurance that AMC or AMCE will have such
assets or income in the future.

Due to the Company's initial dependence on AMC's rental payments as the
principal source of the Company's revenues, the Company may be limited in its
ability to fully enforce its rights under the Leases or to terminate the Leases.
Failure by AMC to materially comply with the terms of a Lease could require the
Company to find another lessee to lease such Property since, as a REIT, the
Company is generally precluded from operating its properties. In the event of a
default by AMC, AMCE or another lessee, there could be a decrease or cessation
of rental payments or, in the case of ground-leased Properties, the Company
would be required to make the ground lease payments or lose the applicable
Property. Moreover, there can be no assurance that AMC will elect to renew a
lease upon expiration of its initial term, which would also force the Company to
find a suitable replacement lessee. In either circumstance, the Company may be
unable to locate a suitable lessee at similar rental rates, which would have the
effect of reducing the Company's Cash Available for Distribution. See "Leases,"
"AMC Entertainment Inc." and "Conflicts of Interest."

As of July 3, 1997, AMCE had $404.5 million of bank and other indebtedness
and $57.8 million in capital lease obligations. The net proceeds to be received
by AMCE as the purchase price for the Initial Properties will be available to
AMCE to reduce outstanding indebtedness under AMCE's $425 million credit
facility (the "AMCE Credit Facility"), which was amended and restated as of
April 10, 1997. To the extent net proceeds are applied to reduce indebtedness
under the AMCE Credit Facility, the amount available for borrowing by AMCE under
the AMCE Credit Facility will be increased and available to AMCE for future
expansion. AMCE also has significant rental obligations under operating leases.
See Note 8 of the Notes to AMCE's Consolidated Financial Statements. AMCE
anticipates that it will require financing in addition to the unused commitment
under the AMCE Credit Facility, as its current expansion program involves
planned capital expenditures which equal or exceed those made over the past few
years. In order to satisfy AMCE's obligations under its outstanding indebtedness
and its leases, including the Leases, AMCE will be required to generate
substantial operating cash flow. The ability of AMCE to meet debt service,
rental and other obligations will depend on the future performance of AMCE,
which will be subject to prevailing economic conditions and to financial,
business and other factors beyond the control of AMCE. As with other exhibitors,
AMC's smaller multiplex theatres are subject to being rendered obsolete through
the introduction of new, competing megaplex theatres. See "AMC Entertainment
Inc."

CONFLICTS OF INTEREST

Several conflicts of interest exist on the part of the Company and its
trustees and officers and AMCE and its directors and officers. The following
descriptions set forth the principal conflicts of interest, including the
relationships through which they arise, and the policies and procedures
implemented by the Company to address those conflicts.

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AFFILIATED TRUSTEES. Peter C. Brown is the Chairman of the Board of the
Company and President, Chief Financial Officer and Director of AMCE. As of
August 22, 1997, Mr. Brown owned options to purchase 159,000 shares of AMCE
common stock. Prior to the consummation of the Formation Transactions, Robert L.
Harris, the President and Chief Development Officer of the Company, expects to
exercise and sell the shares of AMCE common stock subject to options that are
owned by him and currently exercisable and cancel his remaining options. The
Company's Bylaws provide that any transactions between the Company and any of
its trustees or any other entity in which a trustee has a material financial
interest is subject to the interested director transaction provision of the
Maryland General Corporation Law (the "MGCL"). Under such provision, contracts
or transactions with AMCE and Planet Movies generally must be approved by a
majority of the disinterested trustees or be fair and reasonable to the Company.
Accordingly, it is expected that no trustee will vote on contracts or
transactions between the Company and other entities affiliated with such
trustee. See "Management," "Policies and Objectives with Respect to Certain
Activities--Declaration of Trust and Bylaw Provisions" and "Relationship Between
AMCE and the Company after the Formation Transactions."

PURCHASE PRICE OF THE PROPERTIES. The purchase price of each Property was
determined by management of both AMCE and the Company as the cost of developing
and constructing such Property. The purchase price of the land parcels
associated with certain of the Properties was determined by management of both
AMCE and the Company based on an estimated market value for such parcels less
estimated marketing and selling costs. It is possible that if such valuations
had been determined on an arm's-length basis, or had been the subject of
independent valuations or appraisals, the sum of the values of the Properties
and the related land parcels might have been greater or lower than the sum of
the values determined by the management of AMCE and of the Company.

TERMS OF LEASES. The Lease payment obligations with respect to the
Properties were determined by management of AMCE and management of the Company
and were not negotiated on an arm's-length basis. However, the lease payments
that AMC is obligated to make are based on an initial lease rate of 10.5%, which
the Company believes reflects the fair market rental value of the Properties to
the Company.

POTENTIAL FOR FUTURE CONFLICTS. After the Offering, AMCE and the Company
may be in situations where they have differing interests resulting from the
significant ongoing relationship between the companies. Such situations include
the fact that after the Offering (i) AMC will lease, pursuant to the Leases
guaranteed by AMCE, the Initial Properties, which will be owned by the Company;
(ii) the Company will have options to acquire the Option Properties and related
land parcels that are owned by AMC and a right of first refusal and first offer
to purchase any megaplex theatre and related entertainment properties acquired
or developed and owned (or ground-leased) by AMCE or its subsidiaries for a
period of five years following the closing of the Offering; (iii) AMC will
lease, pursuant to Leases guaranteed by AMCE, any acquired Option Property from
the Company; and (iv) AMC will have a right of first refusal and first offer to
acquire any Property or any interest in an entertainment or entertainment-
related property acquired or developed by the Company and operated by AMC.
Accordingly, the potential exists for disagreements as to the compliance with
these agreements. Additionally, the possible need by the Company, from time to
time, to finance, refinance or effect a sale of any of the properties operated
by AMC may result in a need to modify the lease with AMC with respect to such
property. Any such modification will require the consent of AMC, and the lack of
consent from AMC could adversely affect the Company's ability to consummate such
financings or sales. Because of the relationships described above, there exists
the risk that the Company will not achieve the same results in its dealings with
AMCE or from its operations that it might achieve if such relationships did not
exist. Similar potential for future conflicts exist with respect to Planet
Movies as a result of AMCE's participation in such joint venture or otherwise.

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LACK OF OPERATING HISTORY

The Company has been recently organized and has no operating history. There
can be no assurance that the Company will be able to generate sufficient revenue
from operations to make anticipated distributions. The Company also will be
subject to the risks generally associated with the formation of any new
business. The Company's management has no experience operating in accordance
with the requirements for maintaining its qualification as a REIT.

The Company's business objectives and operating strategies include the
acquisition and development of additional entertainment and
entertainment-related properties. Apart from the Initial Properties (which will
be purchased using the net proceeds from the Offering concurrently with or
within a short time following the closing of the Offering), the Company has not
completed any acquisitions or dispositions. Although the Company has options and
rights to purchase the Option Properties, related land parcels and additional
AMCE properties, there can be no assurance that the Company will be successful
in consummating the acquisition of any such properties. The Company has no
options or rights to purchase any properties from Planet Movies, and there can
be no assurances that the Company will work closely with Planet Movies in
developing properties for lease by Planet Movies. Furthermore, there can be no
assurances that additional acquisition and development opportunities on terms
that meet the Company's investment criteria will be available to the Company or
that the Company will be successful in capitalizing on such opportunities.

INITIAL DISTRIBUTION POLICY

The Company initially plans to pay regular quarterly distributions to its
shareholders of, on an annualized basis, approximately 7.6% to 8.4% of the
estimated range of the initial public offering price per Share. If actual Cash
Available for Distribution falls short of estimates, the Company may be unable
to maintain its proposed initial distribution rate. The Company's ability to pay
future distributions depends on a number of factors, including factors relating
to the future operations of the Company. These factors include, among other
things, the continued lease payments by AMC and the Company's ability to
acquire, finance and lease additional properties at attractive rates. Some of
the factors are beyond the control of the Company, and a change in any such
factor could affect the Company's ability to pay future distributions. Hence, no
assurance can be given as to the Company's ability to pay future distributions.
See "Distributions."

OPERATING RISKS INHERENT IN THE ENTERTAINMENT INDUSTRY

Upon consummation of the Formation Transactions, the Company will own
properties in the theatrical exhibition segment of the entertainment industry.
The ability of its initial lessee, AMC, to operate successfully in this segment
depends on a number of factors, the most important of which are the availability
and popularity of motion pictures, the performance of such pictures in AMC's
markets, the allocation of popular motion pictures to AMC as a result of AMC's
relationships with motion picture distributors and the terms upon which motion
pictures are licensed to AMC. Poor performance of, or disruption in the
production of or access to, motion pictures, or a deterioration in AMC's
relationships with motion picture distributors or the terms upon which AMC
licenses such motion pictures, can adversely affect AMC's business, and neither
the Company nor AMC has any control over the operations of the distributors of
motion pictures. In addition, a megaplex theatre may compete for the licensing
of commercially popular motion pictures with other theatres located in the same
local geographic area as such property. See "--Competition."

The entertainment industry trend towards megaplex theatres is relatively
recent. In addition, such megaplex theatres require greater capital expenditures
than the previous generation of multiplex theatres, special construction and
limited use designs by developers of such properties. The ability of the Company
to recoup its investment in such properties in the event of a default by AMC
under the Leases

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or upon the expiration of such Leases is therefore uncertain. Furthermore, both
in the theatrical exhibition segment and other segments of the entertainment
industry, such as theme restaurants, live production theatres and arcades, the
success of operators of such properties depends on general economic conditions
and the willingness of consumers to allocate their expenditures toward such
entertainment activities. To the extent such activities become less popular or
consumers spend less on entertainment activities, the Company's operations could
be adversely affected.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a large extent upon the experience and
abilities of its executives, Robert L. Harris, who will serve as the Company's
President and Chief Development Officer, and David M. Brain, who will serve as
the Company's Chief Financial Officer, and its Chairman of the Board of
Trustees, Peter C. Brown. See "Management--Trustees and Executive Officers of
the Company." The loss of the services of any of these individuals could have a
material adverse effect on the Company, its operations and its business
prospects. See "Certain Relationships and Transactions--Employment Agreements."
The Company's success also depends upon its ability to attract and maintain
qualified personnel, including its anticipated hiring of a Treasurer following
the Formation Transactions.

GENERAL REAL ESTATE INVESTMENT RISKS

GENERAL. Real property investments are subject to varying degrees of risk.
Real estate cash flows and values of the Company's properties will be affected
by a number of factors, including changes in the general economic climate, local
conditions (such as an oversupply of entertainment or entertainment-related
properties or a reduction in rental demand in an area), competition from other
available entertainment or entertainment-related properties and the ability of
the operator to provide adequate maintenance and insurance and to control
operating costs. Real estate cash flows and values are also affected by such
factors as government regulations, including, without limitation, environmental,
public access, zoning and tax laws, interest rate levels and the availability of
financing.

Equity real estate investments are relatively illiquid and therefore may
tend to limit the ability of the Company to react promptly to changes in
economic or other conditions. In addition, certain significant expenditures
associated with equity real estate investments (such as interest payments, real
estate taxes and maintenance costs) are generally not reduced when circumstances
cause a reduction in income from the investments.

INTEREST RATES AND DEBT FINANCING. The Company expects to borrow under the
Bank Credit Facility to acquire the Option Properties and may require additional
financing to the extent it does not have borrowing availability under the Bank
Credit Facility following the acquisitions of the Option Properties. To the
extent it incurs debt, the Company will be subject to the risks associated with
interest rates and debt financing, including the risks that the Company's cash
flow from operations will be insufficient to meet required payments of principal
and interest, that the Company will be unable to refinance the Bank Credit
Facility or future mortgage indebtedness on its properties, that the terms of
such refinancings will not be as favorable as the terms of existing indebtedness
and that the Company will be unable to make necessary capital expenditures for
such purposes as renovations and releasing properties due to lack of available
funds. The Company's borrowings under the Bank Credit Facility will bear
interest at variable rates. If a property is mortgaged to secure payment of
indebtedness and the Company is unable to meet mortgage payments, the property
could be transferred to the mortgagee with a consequent loss of income and asset
value to the Company.

GOVERNMENT REGULATIONS. Governmental authorities at the federal, state and
local levels are actively involved in the promulgation and enforcement of laws
and regulations relating to the environment, public access, land use, zoning
restrictions and taxes. Under the Leases, AMC will be required to

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pay substantially all expenses associated with operation of the Properties,
including all taxes, assessments and levies, excises, fees and all other
governmental charges with respect to each Property. To the extent AMC is not
required to pay any expenses associated with compliance with such government
regulations, the Company may incur additional costs.

Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic substances
at, on, under or in its property. The costs of such removal or remediation could
be substantial. In addition, the Properties and any newly developed or acquired
properties must comply with Title III of the Americans with Disabilities Act of
1990 (the "ADA") to the extent that such properties are "public accommodations"
and/or "commercial facilities" as defined by the ADA. Although the Company
believes the Properties are in substantial compliance with applicable
environmental laws and the ADA, no assurance can be given that any investigation
of the Properties did or will reveal all potential environmental liabilities,
that no prior owner or operator or other person created any material
environmental condition not known to the Company or that future uses, conditions
or legal requirements (including, without limitation, those that may result from
future acts or omissions or changes in applicable laws and regulations) will not
result in the imposition of environmental liabilities or non-compliance with the
ADA. See "Business of the Company and its Properties-- Environmental Laws" and
"--Americans with Disabilities Act of 1990."

UNINSURED LOSS. The Leases will require AMC to maintain insurance on each
Property, with such coverages and in such amounts as are or shall customarily be
insured against with respect to properties similar to the Properties, for fire,
vandalism and malicious mischief, extended coverage perils, all physical loss
perils, commercial general liability, flood (when the Property is located in
whole or in material part in a designated flood plain area) and workers'
compensation insurance. There are, however, certain types of losses (such as
from hurricanes, floods, earthquakes or wars) that may be either uninsurable or
not economically insurable. Should an uninsured loss occur, the Company could
lose both its capital invested in and anticipated profits from one or more
properties. See "Leases."

COMPETITION. There are numerous commercial developers, real estate
companies and other owners of real estate, including those that operate in the
regions in which the Company's properties are located, that will compete with
the Company in seeking properties for acquisition and disposition, land for
development and tenants for properties. All of the Properties are located in
developed areas that include other entertainment and entertainment-related
properties, including in many instances one or more other multiplex or megaplex
theatres operated by AMC or another exhibition company. The number of
competitive entertainment and entertainment-related properties in a particular
area could have a material adverse effect on the Company's ability to lease
entertainment space in future properties it may acquire or develop and renew
leases on the Properties and on the rents charged. In addition, AMC, Planet
Movies and other entertainment business operators may lease entertainment and
entertainment-related properties from owners other than the Company.

RISKS OF REAL ESTATE DEVELOPMENT. The Company's strategy includes the
development of ETRCs and other out-of-home location based entertainment and
entertainment-related properties. Although the Company's officers have
experience developing properties and the Company intends to increase its
capacity to develop properties, the Company is not likely to have significant
in-house development capabilities in the near future. Accordingly, the Company
initially will be dependent on AMCE and other developers for the development of
properties, including completion of those Properties that are currently under
construction by AMCE. There can be no assurance that AMCE will successfully
develop new properties or successfully complete construction of those Properties
that are currently under construction. In addition, there can be no assurance
that there will not be cost overruns on any such developments, including the
Properties under construction. To the extent the Company develops properties in
the future, it will be subject to the risks inherent in the real estate
development process.

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There is significant competition in the United States for site locations
from both theatre companies and other businesses and significant competition
among theatre companies for theatre acquisition opportunities. It typically
takes AMCE 18 to 24 months to open a theatre on a site from the time the site is
identified. Until such properties are developed and leased, they will not
generate any cash flow to the developer, lessor or operator. Moreover, the
availability of attractive site locations can be adversely affected by changes
in the national, regional and local economic climate, local conditions such as
scarcity of space or an increase in demand for real estate in the area,
demographic changes, competition from other available space and changes in real
estate, zoning and tax laws. As a result of the foregoing, there can be no
assurance that the Company or AMCE will be able to acquire attractive site
locations or existing theatres on terms it considers acceptable, that the
Company or AMCE will be able to acquire financing for such theatres on
acceptable terms or that the Company's strategy will result in improvements to
the business, financial condition or profitability of the Company.

RISKS OF INVESTMENTS IN MORTGAGES. Although the Company emphasizes equity
real estate investments, the Company may invest in mortgages in connection with
the construction and development of new entertainment and entertainment-related
properties for the Company by third parties. See "Policies and Objectives With
Respect to Certain Activities--Financing." Mortgage investments are subject to
certain risks, including that borrowers may not be able to make debt service
payments or pay principal when due, that the value of mortgaged property may be
less than the amounts owed, and that interest rates payable on the mortgages may
be lower than the Company's cost of funds. If the Company invested in mortgages
and if any of the above occurred, cash flows could be materially adversely
affected.

EFFECT OF BANKRUPTCY ON LEASES. To the extent that any of the tenants of
the Company's properties, including AMCE and AMC, were to become a debtor in a
bankruptcy proceeding under the United States Bankruptcy Code (the "Bankruptcy
Code"), such guarantor, lessee or its bankruptcy trustee could reject the lease.
If a lease were rejected, rental payments thereunder would terminate as to the
related property, thereby leaving the Company without regular rent payments as
to such property and with a claim for damages as a source of payment of amounts
due under such lease under section 502(b)(6) of the Bankruptcy Code. A claim by
a lessor for damages resulting from the rejection by a debtor of a lease of real
property (or rejection of a guarantee of a lease upon the bankruptcy of the
guarantor) is limited to an amount equal to the rent reserved under the lease,
without acceleration, for the greater of one year or 15 percent (but not more
than three years) of the remaining term of the lease, plus rent already due but
unpaid. There can be no assurance that any such claim for damages would be
sufficient to provide for the repayment of amounts then due under the lease.

TAXATION OF THE COMPANY AS A REIT

TAX LIABILITIES AS A CONSEQUENCE OF THE FAILURE TO QUALIFY AS A REIT. The
Company plans to make an election to be taxed as a REIT under the Code,
commencing with its taxable year ending December 31, 1997. A qualified REIT
generally is not taxed on income it distributes to its shareholders as long as
it distributes at least 95% of its taxable income currently. No assurance can be
given that the Company will qualify as a REIT or be able to remain so qualified.
No assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not significantly change the rules
applicable to the Company with respect to qualification as a REIT or the federal
income tax consequences of such qualification.

If the Company fails to continue to qualify as a REIT, it will be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company will be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. The additional tax could significantly reduce cash flows.

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OTHER TAX CONSEQUENCES. Even if the Company qualifies as a REIT, it may be
subject to certain federal income taxes and to certain state and local taxes on
its income and property. See "Federal Income Tax Considerations--Other Tax
Consequences."

LIMITATIONS ON SIZE OF HOLDINGS OF SHARES AND CHANGE IN CONTROL

OWNERSHIP LIMIT. Generally, in order to maintain its qualification as a
REIT, not more than 50% in value of the Company's outstanding Shares may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of any taxable year
following the Company's first taxable year. The Company's 9.8% share ownership
limit for shareholders, as well as the ability of the Company to issue
additional Shares or other classes or series of shares (which may have rights
and preferences senior to the Shares), may have the effect of delaying,
deferring or preventing a change in control of the Company without the consent
of the Board even if a change in control were in the shareholders' interests and
may also (i) deter tender offers for the Shares, which offers may be
advantageous to shareholders, and (ii) limit the opportunity for shareholders to
receive a premium for their Shares that might otherwise exist if an investor
were attempting to acquire in excess of 9.8% of the Company's outstanding Shares
or otherwise effect a change in control of the Company. See "Description of
Shares of Beneficial Interest--Restriction on Size of Holdings of Shares" for
additional information regarding the ownership limit.

CLASSIFIED BOARD. The Board has been divided into three classes of
trustees. The terms of the classes will expire in 1998, 1999 and 2000,
respectively. Beginning in 1998, as the term of a class expires, trustees in
that class will be elected for a three-year term and the trustees in the other
two classes will continue in office.

SHARES AND PREFERRED SHARES. The Company's Declaration of Trust authorizes
the Board to issue additional Shares or Preferred Shares or classify any
unissued Shares or Preferred Shares and to reclassify any previously classified
but unissued Shares or Preferred Shares of any series from time to time. See
"Description of Shares of Beneficial Interest--General" and "--Preferred
Shares." No such Shares or Preferred Shares have been so classified or
reclassified to date.

ADVANCE NOTICE PROVISIONS. For nominations or other business to be properly
brought before an annual meeting of shareholders by a shareholder, the Company's
Bylaws require such shareholder to deliver a notice to the Secretary, absent
specified circumstances, not less than 60 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting setting forth: (i)
as to each person whom the shareholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for the election of
directors pursuant to Regulation 14A of the Exchange Act; (ii) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the shareholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such shareholder as it appears on the
Company's books and of such beneficial owner and (y) the number of Shares which
are owned beneficially and of record by such shareholder and such beneficial
owner, if any.

The classified Board, the issuance or reclassification of Shares or
Preferred Shares and the advance notice provisions discussed in the preceding
paragraphs each could have the effect of delaying, deferring or preventing a
change in control of the Company even if a change in control were in the
shareholders' interests.

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LACK OF CONTROL OVER DAY-TO-DAY OPERATIONS AND MANAGEMENT OF THE PROPERTIES

To qualify as a REIT for federal income tax purposes, the Company generally
may not operate, or participate in decisions affecting the operations of, the
Initial Properties and, if acquired, the Option Properties. AMC will control the
operations of the Properties under the Leases, each of which will have initial
terms ranging from 13 to 15 years and four renewal terms of five years each,
exercisable at the option of AMC. The Leases will generally require that AMC
operate the Properties in an efficient and professional manner and maintain each
Property in good order, repair and appearance. During the terms of the Leases,
the Company will not have the authority to require AMC to operate the Properties
in a particular manner or to govern any particular aspect of their operation
except as set forth in the Leases. Thus, even if the Company believes AMC is
operating the Properties inefficiently or in a manner adverse to the Company's
interests, the Company will not be able to require AMC to change its method of
operation. The Company is limited to seeking redress only if AMC violates the
terms of a Lease, in which case the Company's primary remedy is to terminate the
Lease or, in certain circumstances, all of the Leases, and seek to recover
damages from AMC and/or AMCE. If a Lease is terminated, the Company will be
required to find another suitable lessee or risk losing its ability to elect or
maintain REIT status, as applicable.

CHANGES IN POLICIES

The major policies of the Company, including its policies with respect to
investments, financing, growth, debt capitalization, REIT qualification and
distributions, are determined by the Board. Although it has no present intention
to do so, the Board may amend or revise these and other policies from time to
time without a vote of the shareholders of the Company. See "Policies and
Objectives With Respect to Certain Activities." Accordingly, shareholders will
have limited control over changes in policies of the Company.

NO PRIOR MARKET FOR SHARES

Prior to the Offering, there has been no public market for the Shares.
Although the Shares will be applied for listing on the NYSE, there can be no
assurance that an active trading market will develop or that the Shares will be
so listed. The initial public offering price will be determined through
negotiations between the Company and the Underwriters and may not be indicative
of the market price of the Shares after the Offering. See "Underwriting."

EFFECT OF MARKET INTEREST RATES ON SHARE PRICES

One of the factors that may influence the price of the Shares in public
markets will be the annual yield on the price paid for Shares from distributions
by the Company. Thus, an increase in market interest rates may lead purchasers
of Shares to demand a higher annual yield, which could adversely affect the
market price of the Shares.

DILUTION

The pro forma net tangible book value per Share after the Offering will be
lower than the initial public offering price per Share in the Offering.
Accordingly, persons acquiring Shares in the Offering will experience immediate
dilution of $1.87 per Share in the net tangible book value of Shares acquired in
the Offering. See "Dilution."

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THE COMPANY

GENERAL

The Company's initial portfolio will consist of the Initial Properties
purchased from subsidiaries of AMCE for an aggregate purchase price of
approximately $247.3 million. The Company will also have options for a period of
90 days following the actual opening date of the megaplex theatre on each Option
Property to acquire such Option Property from AMC or the current owner/lessor
thereof for the cost to AMC of developing and constructing such property
(estimated to aggregate $136.8 million if all the Option Properties are
purchased). The Option Properties are currently under construction, with the
last theatre expected to be completed and opened by July 1998. The Company will
lease all of the Initial Properties and, if acquired, the Option Properties to
AMC. One of the Initial Properties and three of the Option Properties have
adjacent land parcels that, if not under contract for sale or sold at the time
of the related theatre acquisition, may be purchased by the Company for an
aggregate purchase price of $10.4 million. In addition, the Company will have a
right of first refusal and first offer to purchase any megaplex theatre and
related entertainment property acquired or developed and owned (or ground-
leased) by AMCE or its subsidiaries for a period of five years following the
closing of the Offering. As a result of these and other transactions, the
Company and AMCE will have several ongoing relationships after the Formation
Transactions, some of which could give rise to possible conflicts of interest.
See "Conflicts of Interest" and "Relationship Between AMCE and the Company after
the Formation Transactions." The Company will also pursue opportunities to
acquire and develop entertainment and entertainment-related properties and lease
them to Planet Movies and other operators other than AMC. Likewise, AMC and
Planet Movies may lease entertainment and entertainment-related properties from
owners other than the Company.

The Company's executive offices are located at 1221 Baltimore Avenue, Kansas
City, Missouri 64105, and its telephone number is (816) 480-4649. The Company is
a Maryland real estate investment trust formed in August 1997.

BUSINESS OBJECTIVES AND OPERATING STRATEGIES

The Company's business objectives are to achieve predictable and increasing
Funds from Operations per Share and enhance shareholder value by acquiring and
developing a diversified portfolio of high-quality properties leased to
entertainment and entertainment-related business operators generally under
long-term triple net leases.

GROWTH STRATEGY

In addition to internal growth through increasing rental payments under the
Leases for the Initial Properties, the Company intends to implement each of the
growth strategies outlined below:

OPTION PROPERTIES. The Company will have options to acquire up to five
additional megaplex theatres currently under construction by AMC for an
aggregate estimated purchase price of $136.8 million. The Option Properties are
expected to be completed on dates between December 1997 and July 1998. The
acquisition of such Option Properties and any related land parcels will be
funded by any

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remaining net proceeds of the Offering and the Bank Credit Facility. The Company
will also achieve additional growth through leasing the Option Properties to AMC
pursuant to Leases that provide for year over year Base Rent Escalation and, if
revenues exceed the baseline amounts, Annual Percentage Rent.

FUTURE AMCE PROPERTIES. The Company will have the right of first refusal
and first offer to acquire and lease back to AMC any megaplex theatre and
related entertainment property acquired or developed and owned (or
ground-leased) by AMCE or its subsidiaries for a period of five years following
the closing of the Offering pursuant to the AMCE Right to Purchase Agreement.
The Company expects that AMCE and its subsidiaries will continue to acquire
and/or develop and own such properties, although AMCE may lease entertainment
and entertainment-related properties from owners other than the Company.

ADDITIONAL MEGAPLEX THEATRE AND PLANET MOVIES PROPERTIES. The Company
believes that movie theatre operators other than AMC will develop megaplex
theatres. The Company expects to pursue opportunities to acquire high-quality
properties associated with such developments from operators with a strong market
presence. The Company believes that it will have opportunities to purchase
megaplex theatres that are being developed by other operators because of the
significant capital commitment involved in building such properties. The Company
also anticipates working closely with Planet Movies in evaluating potential
Planet Movies locations, including the acquisition and development of property
by the Company and the leasing of such property to Planet Movies, although
neither party is obligated to do so. The Company expects that Planet Movies will
be active in developing such properties, although Planet Movies may lease
entertainment and entertainment-related properties from owners other than the
Company.

ENTERTAINMENT THEMED RETAIL CENTERS. The Company intends to focus on
opportunities to acquire ETRCs, which are generally large multi-tenant retail
developments that incorporate elements such as megaplex theatres, restaurants,
book or music superstores, high-tech attractions, interactive game centers, live
entertainment venues and other specialty retail that is oriented to
entertainment or leisure-time activities. The Company believes that not only do
significant opportunities exist today, but also that the consumer demand for
entertainment will lead to ETRCs as a rapid growth category of the retail real
estate industry. Further, the Company believes the newness of the concept may
make traditional real estate credit sources less available to ETRCs and create
significant opportunities for the Company. As a result of the significant
capital commitment involved in building such properties and the experience and
relationships of the Company's management, the Company believes that it will
have opportunities to provide capital for the development of such properties.
The Company's ability to finance the acquisition and development of such
properties will enable it to grow and diversify its asset base. Additionally,
the Company believes that as a result of its involvement with multi-tenant
ETRCs, it will develop relationships with entertainment business operators that
would rather lease than own their real estate and therefore have opportunities
for single-tenant out-of-home location based property developments other than
megaplex theatres with such operators.

OPERATING STRATEGY

As the Company pursues its growth strategy involving the acquisition and
development of additional properties, the Company intends to implement the
following operating strategy:

LEASE RISK MINIMIZATION. To avoid initial lease-up risks and produce a
predictable income stream, the Company intends to acquire single-tenant
properties that are leased under long-term leases or multi-tenant properties
that are substantially leased. The Initial Properties and, if acquired, the
Option Properties, will be leased to AMC with initial terms ranging from 13 to
15 years. The Company's willingness to make long-term investments in properties
offers tenants financial flexibility and allows tenants to allocate capital to
their core businesses.

23
<PAGE>
LEASE STRUCTURE. The Company also intends to structure leases, where
possible, on a triple-net or similar basis under which the tenants bear the
principal portion of the financial and operational responsibility for the
properties. During each lease term and any renewal periods, the Company intends
to provide for contractual increases in rent and/or percentage rent based upon a
percentage of a tenant's gross sales over a pre-determined level.

TENANT RELATIONSHIPS. The Company will seek to develop and maintain
long-term working relationships with theatre, restaurant and other
entertainment-related business operators, such as AMC and Planet Movies, by
providing capital for multiple properties on a national basis, thereby adding
additional efficiency and value to such operators and the Company. The Company
will target tenants whose competitive position and financial strength should
enable them to meet their obligations throughout the leases' terms. The Company
believes that the contacts and experience of its management and its financing
strategy will enable it to develop and maintain such relationships.

PORTFOLIO DIVERSIFICATION. The Company expects to diversify its asset base
by property type and tenant. In pursuing its diversification strategy, the
Company will target theatre, restaurant and other entertainment-related business
operators that management views as leaders in their market segments and that
have the financial strength to compete effectively. As ETRCs include an
increasing number of diverse tenants, the Company expects that it will be able
to serve the widening demands of this market and that its portfolio will reflect
these additional complementary businesses.

CAPITALIZATION STRATEGY

Upon consummation of the Formation Transactions, the Company will have no
outstanding indebtedness. In order to implement its growth and operational
strategies, the Company intends to follow the following capitalization strategy:

MODERATE USE OF LEVERAGE. The Company will seek to enhance shareholder
return through the moderate use of leverage. The Company intends to use the $200
million Bank Credit Facility to fund the acquisition of the Option Properties,
related land parcels and additional acquisitions of properties consistent with
the Company's investment policies. In addition, the Company may refinance such
debt with long-term debt or equity as circumstances warrant. The Company expects
to maintain a debt to total market capitalization ratio (i.e., total debt of the
Company as a percentage of equity market value plus total debt) of less than
50%.

PAYMENT OF REGULAR DISTRIBUTIONS. The Company intends to pay quarterly
distributions to its shareholders. Among the factors that the Board will
consider in setting the distribution rate will be the Company's results of
operations, including Funds from Operations per Share. Accordingly, the Company
expects to periodically raise distributions as Funds from Operations per Share
increases and other considerations and factors warrant. See "Distributions."

The Company believes it will have opportunities to provide capital to
businesses that seek to develop or operate entertainment and
entertainment-related properties due to its strong capital base of shareholders'
equity, the funds available under its Bank Credit Facility and its access to the
capital markets. The Company also will be in a position to acquire new
properties for cash, shares or a combination thereof creating the opportunity
for tax-deferred transactions for the seller (through a subsidiary partnership
or otherwise) and thereby potentially reducing the price that would be paid in
all cash transactions.

24
<PAGE>
USE OF PROCEEDS

The proceeds to the Company from the sale of the Shares offered hereby, net
of the estimated underwriting discount and expenses of the Offering, are
expected to be approximately $252.8 million ($290.7 if the Underwriters'
over-allotment option is exercised in full), assuming an initial public offering
price per share of $20.00. Approximately $247.3 million of the net proceeds of
the Offering will be used by the Company to purchase the Initial Properties from
subsidiaries of AMCE. The purchase of the Initial Properties will close
concurrently with or within a short period following the closing of the
Offering. See "The Formation Transactions." The remaining net proceeds and any
net proceeds from the exercise of the Underwriters' over-allotment option, and
funds available from the $200 million Bank Credit Facility, will be used by the
Company to pay expenses of the Formation Transactions, to make loans pursuant to
the Share Purchase Program, to acquire the land parcel related to the South
Barrington 30 Initial Property, for the future acquisition of additional
properties consistent with the Company's investment policies, including the
Option Properties and related land parcels, or for general business purposes.
While the Company may engage from time to time in discussions regarding
potential acquisitions, other than with respect to the Option Agreements and the
AMCE Right to Purchase Agreement, it has not entered into any agreement as of
the date of this Prospectus to make any such acquisition. Pending the described
uses, any remaining net proceeds will be invested in short-term investment grade
instruments, interest-bearing bank accounts, certificates of deposit, money
market securities, U.S. government securities or mortgage-backed securities
guaranteed by Federal agencies.

25
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
August 29, 1997, the date of its formation, and as adjusted to give effect to
the Formation Transactions. The table should be read in conjunction with the
historical and pro forma financial information of the Company included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL JUNE 30,
AUGUST 29, 1997 1997
--------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt outstanding under the Bank Credit Facility................. $ -- $ --

Shareholders' Equity:
Common Shares, par value $.01 per Share; 50,000,000 Shares -- 138
authorized; 100 Shares issued historical; 13,760,100 Shares
issued pro forma(1).........................................
Additional paid-in capital.................................... 2 250,284
------ -----------
Total shareholders' equity.................................. 2 250,422
------ -----------
Total capitalization........................................ $ 2 $ 250,422
------ -----------
------ -----------
</TABLE>

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

(1) Does not include options to purchase 80,000 Shares granted pursuant to the
Company's Share Option Program. See "Management--Compensation Programs."

26
<PAGE>
DISTRIBUTIONS

The Company intends to pay regular quarterly distributions to its
shareholders. The Board of Trustees, in its sole discretion, will determine the
actual distribution rate based on the Company's actual results of operations,
economic conditions, tax considerations (including those related to REITs) and
other factors. The first distribution, for the period ending December 31, 1997,
is expected to equal a pro rata share of the anticipated initial quarterly
distribution of $0.40 per Share. On an annualized basis, the anticipated
distribution is $1.60 per Share, or approximately 7.6% to 8.4% of the estimated
range of the initial public offering price. The Company does not expect to
change its estimated initial distribution per Share if the Underwriters'
over-allotment option is exercised. See "The Formation Transactions."

The distribution described above represents approximately 93.2% of the
Company's estimated Cash Available for Distribution for the year ended December
31, 1996. The Company's estimate of the Cash Available for Distribution is based
upon pro forma Funds from Operations, with certain adjustments based on the
items described below. The estimate of Cash Available for Distribution is being
made solely for the purpose of setting the initial distribution and is not
intended to be a projection or forecast of the Company's results of operations
or its liquidity, nor is the methodology upon which such adjustments were made
necessarily intended to be a basis for determining future distributions.

The following table describes the calculation of pro forma Funds from
Operations for the year ended December 31, 1996 and the six months ended June
30, 1997 and the adjustments made to pro forma Funds from Operations in order to
calculate initial estimated distributions.

<TABLE>
<CAPTION>
PRO FORMA
--------------------------------
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
--------------- ---------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)

<S> <C> <C>
Pro forma net earnings.................................... $ 10,700 $ 21,401

Plus: Pro forma depreciation.............................. 2,677 5,354
--------------- ---------------

Pro forma Funds from Operations(1)........................ 13,377 26,755

Adjusted for: Pro forma straight-lined rent and
amortization............................................. 1,561 3,123
--------------- ---------------

Estimated Cash Available for Distribution(2).............. $ 11,816 $ 23,632

Expected initial distribution(3).......................... $ 11,008 $ 22,016

Expected initial distribution per Share................... $ 0.80 $ 1.60

Expected initial payout ratio based on estimated Cash
Available for Distribution(4)............................ 93.2% 93.2%
</TABLE>

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

(1) Funds from Operations does not represent cash generated from operating
activities (determined in accordance with GAAP) and should not be considered
as an alternative to net earnings (loss) (computed in accordance with GAAP)
as an indication of the Company's financial performance or to cash flows
from operating activities (computed in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions.
Management believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows
from operating activities, investing activities and financing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures.

27
<PAGE>
"Funds from Operations" as defined by NAREIT means net earnings (loss)
(computed in accordance with GAAP) excluding significant non-recurring
items, gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization on real estate assets, and after adjustments
for unconsolidated partnerships and joint ventures. The Company's Funds from
Operations are not comparable to Funds from Operations reported by other
REITs that do not define the term using the current NAREIT definition or
that interpret the current NAREIT definition differently than does the
Company. The Company believes that in order to facilitate a clear
understanding of the operating results of the Company, Funds from Operations
should be examined in conjunction with net earnings as presented in the Pro
Forma Financial Statements included elsewhere in this Prospectus.

(2) Cash Available for Distribution means Funds from Operations adjusted for
straight-lined rent and amortization and minus capital expenditures and
principal payments on indebtedness. No capital expenditures or principal
payments on indebtedness are included for the periods indicated. The
estimate of Cash Available for Distribution is being made solely for the
purpose of setting the initial distribution and is not intended to be a
projection or forecast of the Company's results of operations or its
liquidity, nor is the methodology upon which such adjustments were made
necessarily intended to be a basis for determining future distributions.

(3) Represents expected initial distribution per Share multiplied by the
13,760,100 Shares to be outstanding upon completion of the Formation
Transactions.

(4) Represents the anticipated initial aggregate distribution divided by
estimated Cash Available for Distribution.

The Company believes that its estimated Cash Available for Distribution
constitutes a reasonable basis for setting the initial distribution rate on the
Shares and intends to maintain its initial distribution rate for the 12 months
following the closing of the Offering unless actual results from operations,
economic conditions or other factors differ from the assumptions used in its
estimate. The actual return that the Company will realize and the amount
available for distributions to shareholders will be affected by a number of
factors, including the revenues received from the Initial Properties, the
operating expenses of the Company, the interest expense incurred on its
borrowings and unanticipated capital expenditures. No assurance can be given
that the Company's estimate will prove accurate. In addition, pro forma results
of operations do not purport to represent the actual results that can be
expected for future periods. See "The Company's Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The Company anticipates that Funds from Operations will exceed "earnings and
profits" as computed for federal income tax purposes due to non-cash expenses,
primarily depreciation and amortization, expected to be incurred by the Company.
Distributions by the Company to the extent of its current or accumulated
earnings and profits for federal income tax purposes will be taxable to
shareholders as ordinary dividend income. Distributions in excess of earnings
and profits generally will be treated as a non-taxable reduction of the
shareholder's basis in the Shares to the extent thereof, and thereafter as
capital gain. Distributions treated as a non-taxable reduction in basis will
have the effect of deferring taxation until the sale of a shareholder's Shares.
The Company does not intend to reduce the expected initial distribution per
Share if the Underwriters' over-allotment option is exercised. The Company
estimates that approximately 15% to 20% of the anticipated initial annual
distribution to shareholders will represent a return of capital for federal
income tax purposes and that the Company would generally have been required on a
pro forma basis to distribute $16.9 million, or $1.22 per Share, during the year
ended December 31, 1996 in order to maintain its status as a REIT. If actual
Funds from Operations or taxable income vary from the estimated amounts, the
percentage of distributions that will represent a return of capital may vary
substantially in future years. For a discussion of the tax treatment of
distributions to holders of Shares, see "Federal Income Tax Considerations--
Taxation of Holders of Shares." In order to

28
<PAGE>
qualify to be taxed as a REIT, the Company must make annual distributions to
shareholders of at least 95% of its REIT taxable income (determined by excluding
any net capital gain), which the Company anticipates initially will be less than
adjusted Funds from Operations. Under certain circumstances, the Company may be
required to make distributions in excess of Cash Available for Distribution in
order to meet such distribution requirements. In such a case, the Company may
find it necessary to arrange for short-term (or possible long-term) borrowings
or to raise funds through the issuance of additional Shares or Preferred Shares
(as defined).

Future distributions by the Company will be at the discretion of the Board
of Trustees and will depend on the actual Funds from Operations of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code (see "Federal Income Tax
Considerations--Taxation of the Company as a REIT--Requirements for
Qualification"), and such other factors as the Board of Trustees deems relevant.
See "Risk Factors--Changes in Policies."

DILUTION

The initial public offering price per Share will exceed the net tangible
book value per Share. Therefore, purchasers of Shares sold in the Offering will
realize an immediate dilution in the net tangible book value of their Shares.
Net tangible book value per Share is determined by subtracting total liabilities
from total tangible assets and dividing the remainder by the number of Shares
that will be outstanding after the Offering. The following table illustrates the
dilution to purchasers of Shares sold in the Offering based on the assumed
initial public offering price and assuming no exercise of the Underwriters'
over-allotment option.

<TABLE>
<S> <C> <C>
Assumed initial public offering price(1)................................... $20.00

Net tangible book value per Share(2)....................................... $ 0.00

Increase in net pro forma tangible book value per Share attributable to
payments by purchasers of Shares sold in the Offering..................... 18.13

Net pro forma tangible book value per Share after the Offering(3).......... 18.13
------

Dilution per Share sold in the Offering.................................... $ 1.87
------
------
</TABLE>

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

(1) Before deducting estimated expenses of the Offering.

(2) Determined by dividing total tangible assets of the Company as of August 29,
1997 by the total number of Shares to be outstanding following the Formation
Transactions.

(3) Determined by dividing total tangible assets of the Company on a pro forma
basis as of June 30, 1997 by the total number of Shares to be outstanding
following the Formation Transactions.

29
<PAGE>
THE COMPANY'S SELECTED FINANCIAL INFORMATION

The following table sets forth selected historical and pro forma financial
information for the Company as of June 30, 1997 and August 29, 1997 and for the
six months ended June 30, 1997 and the year ended December 31, 1996. The pro
forma operating information is presented as if the Formation Transactions had
occurred as of the beginning of the period indicated and therefore incorporates
certain assumptions that are included in the Company's Condensed Pro Forma
Financial Statements. The pro forma balance sheet information is presented as if
the Formation Transactions had occurred on June 30, 1997. The pro forma
information does not purport to represent what the Company's financial position
or results of operations actually would have been had the Formation
Transactions, in fact, occurred on such date or at the beginning of the period
indicated, or to project the Company's financial position or results of
operations at any future date or for any future period. The historical financial
information set forth below is qualified in its entirety by reference to the
Company's Financial Statements and the Notes thereto included elsewhere in this
Prospectus. The historical and pro forma information set forth below should be
read in conjunction with "The Company's Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------- -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Rental income(1)................................. $ 14,814 $ 29,628
General and administrative expenses(2)........... 1,105 2,209
Depreciation(3).................................. 2,677 5,354
Interest expense, net............................ 332 664
-------- --------
Net earnings..................................... $ 10,700 $ 21,401
-------- --------
-------- --------
Net earnings per Share........................... $ 0.78 $ 1.56
-------- --------
-------- --------
Distributions declared and paid.................. $ 11,018 $ 22,016
Distributions declared and paid per Share........ $ 0.80 $ 1.60
Weighted average Shares outstanding(4)........... 13,760 13,760

PRO FORMA HISTORICAL
JUNE 30, 1997 AUGUST 29, 1997
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Real estate owned, at cost....................... $ 248,356 $ --
Total assets..................................... 250,422 2
Debt outstanding under the Bank Credit
Facility....................................... -- --
Total shareholders' equity....................... 250,422 2
</TABLE>

30
<PAGE>

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
OTHER FINANCIAL DATA:
Net earnings..................................... $ 10,700 $ 21,401
Add: Depreciation................................ 2,677 5,354
-------- --------
Funds from Operations(5)......................... 13,377 26,755
Adjusted for: Straight-lined rent and
amortization................................... 1,561 3,123
-------- --------
Cash Available for Distribution(6)............... $ 11,816 $ 23,632
-------- --------
-------- --------
</TABLE>

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

(2) Represents management's estimates of general and administrative expenses.

(3) Represents depreciation of the Initial Properties over a 40-year period.

(5) The Company believes that Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows
from operating activities, investing activities and financing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. Funds from Operations
is calculated as net earnings (loss) (computed in accordance with GAAP),
excluding significant non-recurring items, gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company computes Funds from Operations in accordance
with standards established by the White Paper on Funds from Operations
approved by the NAREIT Board of Governors in March 1995, which may differ
from the methodology for calculating Funds from Operations utilized by other
equity REITs, and, accordingly, the Company's Funds from Operations may not
be comparable to the Funds from Operations of such other REITs. See "The
Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations--Funds from Operations." Funds from Operations should
not be considered as an alternative to net earnings (computed in accordance
with GAAP) as an indication of the Company's financial performance or to
cash flows from operating activities (computed in accordance with GAAP) as a
measure of the Company's liquidity, nor is it indicative of funds available
to fund the Company's cash needs, including its ability to make
distributions.

31
<PAGE>
THE COMPANY'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company was organized as a Maryland real estate investment trust on
August 22, 1997, and intends to make an election to qualify under the Code as a
REIT commencing with its taxable year ending December 31, 1997. Substantially
all of the Company's initial revenues are expected to be derived from: (i) rents
received under long-term triple net leases of entertainment and entertainment-
related properties, initially megaplex theatres leased to AMC under operating
leases guaranteed by AMCE; and (ii) interest earned from the temporary
investment of funds in short-term investments. The rent for the first year for
each Property under the Leases is initially set at a fixed amount and will be
increased each year by the Base Rent Escalation. Although the Company is
entitled to Annual Percentage Rent under the Leases, it does not anticipate
receiving any such payments for at least five years following the Formation
Transactions.

The Company will incur operating and administrative expenses including,
principally, compensation expense for its executive officers and other
employees, office rental and related occupancy costs and various expenses
incurred in the process of acquiring additional properties. The Company will be
self-administered and managed by its executive officers and staff, and will not
engage a separate advisor or pay an advisory fee for administrative or
investment services, although the Company will engage legal, accounting, tax and
financial advisors from time to time.

The primary non-cash expense of the Company will be the depreciation of its
entertainment and entertainment-related properties. The Company expects to
depreciate buildings and improvements over a 39- and 40-year period for tax and
financial reporting purposes, respectively. The Company will not own or lease
any personal property, furniture or equipment at any Property following the
Formation Transactions.

The Company also expects to employ moderate leverage, pursuant to the Bank
Credit Facility or otherwise, to fund additional investments and will incur long
and short-term indebtedness, and related interest expense, from time to time.
See "Risk Factors--General Real Estate Investment Risks--Interest Rates and Debt
Financing."

The Company intends to make distributions to its shareholders in amounts not
less than the amounts required to maintain REIT status under the Code and, in
general, in amounts exceeding taxable income. The Company's ability to make
distributions will depend upon its Cash Available for Distribution.

RESULTS OF OPERATIONS

The Company has had no operations prior to August 22, 1997 (the date of
organization), or through the date of this Prospectus. The Company's future
results of operations will depend upon the acquisition of the Initial Properties
and other properties, including the Option Properties, and the terms of any
subsequent investments the Company may make.

PRO FORMA RESULTS OF OPERATIONS

The Company estimates that after giving effect to the Offering and the
acquisition of the Initial Properties, rental income would have been $29.6
million for the year ended December 31, 1996 and $14.8 million for the six
months ended June 30, 1997. Net earnings would have been $21.4 million or $1.56
per Share for the year ended December 31, 1996, and $10.7 million or $0.78 per
Share for the six months ended June 30, 1997. Depreciation would have been $5.4
million for the year ended December 31, 1996 and $2.7 million for the six months
ended June 30, 1997, respectively. Pro forma rental income is recorded in
accordance with the terms of the Leases as if all Initial Properties had been in
operation for the entire period. See "The Company's Selected Financial
Information."

32
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The Company anticipates that its initial working capital and cash from
operations, together with the Bank Credit Facility anticipated to be available
to the Company, will provide adequate liquidity to conduct its operations, fund
administrative and operating costs, interest payments and acquisitions, and
allow distributions to the Company's shareholders in accordance with the Code's
requirements for qualification as a REIT and to avoid any corporate level
federal income or excise tax.

In order to qualify as a REIT for federal income tax purposes, the Company
will be required to make substantial distributions to its shareholders. The
following factors, among others, will affect Funds from Operations and will
influence the decisions of the Board of Trustees regarding distributions: (i)
scheduled increases in base rent under the Leases with respect to the
Properties; (ii) receipt of percentage rents; and (iii) returns from short-term
investments pending application of the net proceeds of the Offering. Although
the Company will receive most of its rental payments on a monthly basis, it
intends to make distributions quarterly. Amounts accumulated for distribution
will be invested by the Company in short-term investments.

Under the terms of the Leases, AMC is responsible for substantially all
expenses associated with the operation of the Properties, such as taxes and
other governmental charges, insurance, utilities, service, maintenance and any
ground lease payments. See "Business of the Company and its Properties--The
Properties" and "Leases." As a result of these arrangements, the Company does
not believe it will be responsible for any major expenses in connection with the
Properties during the terms of the respective Leases. The Company anticipates
entering into similar leases with respect to additional properties, including
the Option Properties. After the terms of the respective leases expire, or in
the event a lessee is unable to meet its obligations, the Company anticipates
that any expenditures it might become responsible for in maintaining the
properties will be funded by cash from operations and, in the case of major
expenditures, possibly by borrowings. To the extent that unanticipated
expenditures or significant borrowings are required, the Company's Funds from
Operations and liquidity may be adversely affected.

The Company is negotiating to obtain a $200 million Bank Credit Facility
that will be used to primarily finance the acquisition of additional properties,
including the Option Properties and related land parcels, and for other general
operating purposes and working capital, as necessary. It is expected that the
Bank Credit Facility will have a maturity of three years following the Formation
Transactions and will bear interest at variable rates based on a spread over the
London Interbank Rate. It is also expected that the Bank Credit Facility will
contain affirmative and negative covenants customary and standard for a REIT,
including a requirement that the Company repay amounts in excess of the total
commitment amount, as adjusted to reflect mandatory reductions.

Other than the $247.3 million purchase of the Initial Properties using the
net proceeds from the Offering and the purchase of a related land parcel, the
Company has no commitments with respect to other capital expenditures. However,
the Company has options exercisable at any time during the 90-day period
following the actual opening date of the megaplex theatre on any Option Property
to purchase such Option Property for the cost to AMC of developing and
constructing such property (estimated to aggregate $136.8 million if all the
Option Properties are purchased). One of the Initial Properties and three of the
Option Properties have adjacent land parcels that, if not under contract for
sale or sold at the time of the related theatre acquisition, may be purchased by
the Company for an aggregate purchase price of $10.4 million. If acquired, the
Company may be required to make additional expenditures to develop such land
parcels. In addition, the Company has a right of first refusal and first offer
to purchase any megaplex theatre and related entertainment property acquired or
developed and owned (or ground-leased) by AMCE or its subsidiaries for a period
of five years following the closing of the Offering. The Company may raise
additional long-term capital by issuing, in public or private transactions,
equity or debt securities, but the availability and terms of any such issuance
will depend

33
<PAGE>
upon the market and other conditions. The Company anticipates that as a result
of its initially low debt to total capitalization ratio and its intention to
maintain a debt to total market capitalization ratio of less than 50%, it will
be able to obtain financing for its long-term capital needs. However, there can
be no assurance that such additional financing or capital will be available on
terms acceptable to the Company. The Company expects to borrow under the Bank
Credit Facility to acquire the Option Properties and related land parcels and
may, under certain circumstances, borrow additional amounts in connection with
the acquisition of additional properties, the renovation or expansion of
Properties, or, as necessary, to meet certain distribution requirements imposed
on REITs under the Code. See "Policies and Objectives with Respect to Certain
Activities--Investment Objectives and Policies."

Acquisitions will be made subject to the investment objectives and policies
to maximize both current income and long-term growth in income described
elsewhere in this Prospectus. The Company's liquidity requirements with respect
to future acquisitions may be reduced to the extent the Company uses Shares as
consideration for such purchases.

FUNDS FROM OPERATIONS

The Company believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows from
operating activities, investing activities and financing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. Funds from Operations is calculated
as net earnings (loss) (computed in accordance with GAAP), excluding significant
non-recurring items, gains (or losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. The Company
computes Funds from Operations in accordance with standards established by the
White Paper on Funds from Operations approved by the NAREIT Board of Governors
in March 1995, which may differ from the methodology for calculating Funds from
Operations utilized by other equity REITs, and, accordingly, the Company's Funds
from Operations may not be comparable to the Funds from Operations of such other
REITs. Further, Funds from Operations does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, or other commitments and uncertainties. The
Company believes that in order to facilitate a clear understanding of the pro
forma operating results of the Initial Properties and the Company, Funds from
Operations should be examined in conjunction with the Company's Condensed Pro
Forma Financial Statements included elsewhere in this Prospectus. Funds from
Operations should not be considered as an alternative to net earnings (computed
in accordance with GAAP) as an indication of the Company's financial performance
or to cash flows from operating activities (computed in accordance with GAAP) as
a measure of the Company's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including its ability to make distributions.

INFLATION

All of the Leases will be triple net leases requiring AMC to pay for
substantially all expenses associated with the operation of the Properties, such
as taxes and other governmental charges, insurance, utilities, service,
maintenance and any ground lease payments, thereby minimizing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
Because the Bank Credit Facility is expected to provide for a variable interest
rate, inflation could have a material adverse effect on the Company's interest
expense if interest rates increase substantially during any year. Accordingly,
when deemed appropriate, based on the then current interest rates, the Company
may seek to replace the Bank Credit Facility with a credit facility that
provides for a fixed interest rate.

34
<PAGE>
BUSINESS OF THE COMPANY AND ITS PROPERTIES

OVERVIEW

The Company will enter into a purchase agreement to acquire the Initial
Properties from subsidiaries of AMCE for an aggregate purchase price of
approximately $247.3 million, and option agreements to purchase any or all of
the Option Properties from subsidiaries of AMCE or the current owner/lessor
thereof for an aggregate estimated purchase price of $136.8 million that may be
exercised by the Company, with respect to each Property, at any time during the
90-day period following the actual opening date of the megaplex theatre on such
Option Property, with up to an additional 90-day period to close such
acquisition. One of the Initial Properties and three of the Option Properties
have adjacent land parcels that, if not under contract for sale or sold at the
time of the related theatre acquisition, may be purchased by the Company for an
aggregate purchase price of $10.4 million. The Initial Properties and the Option
Properties represent all of the AMC-owned (or ground-leased) megaplex theatres
with the exception of one property that is not readily transferrable to the
Company. Each of the Properties is located in a large metropolitan market and
has been constructed since May 1995 or is currently under construction. AMCE
generally selected the theatre sites on the bases of retail concentration,
access to surface transportation and favorable demographic trends identified by
reference to census figures and other statistical sources. Four of the Initial
Properties are among the twelve highest grossing theatres in the United States
and each of the eight operating Initial Properties is the highest grossing
theatre in the local geographic area in which it operates. In addition, the
Company will have a right of first refusal and first offer to purchase any
megaplex theatre and related entertainment property acquired or developed and
owned (or ground-leased) by AMCE or its subsidiaries for a period of five years
following the closing of the Offering. The Company will acquire a 100% interest
in each of the Properties (or related ground leases, as applicable) purchased.

THE PROPERTIES

The Properties are all state-of-the-art megaplex theatres with predominantly
stadium-style seating (seating with an elevation between rows to provide
unobstructed viewing). Most are equipped with SONY Dynamic Digital Sound -TM-
(SDDS-TM-) and AMC LoveSeat-TM- style seating (plush, high-backed seats with
retractable armrests). Other amenities may include auditoriums with TORUS-TM-
Compound Curved Screens and High Impact Theatre Systems-TM- (HITS-TM-), which
enhance picture and sound quality, respectively. All of such equipment and
amenities will be owned, or leased from third parties, by AMC following the
Formation Transactions.

35
<PAGE>
THE INITIAL PROPERTIES

Certain information regarding each of the Initial Properties is set forth
below:

<TABLE>
<CAPTION>
ANTICIPATED
METROPOLITAN NO. OF NO. OF BUILDING OPENING LEASE
THEATRE NAME AREA SCREENS SEATS (SQ. FT.) DATE RANKING (1) EXPIRATION
- --------------------- ------------------- ------------- --------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Grand 24............. Dallas, TX 24 5,067 85,000 5/95 5 12/2010
Mission Valley
20(2).............. San Diego, CA 20 4,361 76,334 12/95 4 12/2010
Promenade 16(3)...... Los Angeles, CA 16 2,882 120,000 3/96 42 12/2010
Ontario Mills 30..... Los Angeles, CA 30 5,469 106,502 12/96 11 12/2010
Lennox 24(2)......... Columbus, OH 24 4,412 80,300 12/96 12 12/2011
West Olive 16........ St. Louis, MO 16 2,817 52,310 4/97 N/A 12/2011
Studio 30............ Houston, TX 30 6,032 112,382 5/97 N/A 12/2011
Huebner Oaks 24...... San Antonio, TX 24 4,400 81,780 6/97 N/A 12/2011
Leawood Town Center
20................. Kansas City, MO/KS 20 2,994 62,122 12/97(4) N/A 12/2012
First Colony 24(2)... Houston, TX 24 5,098 89,290 12/97(4) N/A 12/2012
Oak View 24(2)....... Omaha, NE 24 5,098 89,290 12/97(4) N/A 12/2012
South Barrington
30(5).............. Chicago, IL 30 6,210 109,468 2/98(4) N/A 2/2013
--- --------- ---------
282 54,840 1,064,778
--- --------- ---------
--- --------- ---------
</TABLE>

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

(2) Third party ground leased property. Although the Company will become the
tenant under the ground leases and assume responsibility for performing the
obligations thereunder in the Formation Transactions, pursuant to the Leases
AMC will have responsibility for performing the Company's obligations under
such ground leases.

(3) The theatre occupies 60,000 square feet. See "--Initial Property
Descriptions--Promenade 16."

(5) The Company will acquire one land parcel totaling approximately 1.5 acres
adjacent to this theatre if such parcel is not under contract for sale or
sold by AMC at the time of the Formation Transactions. See "--Land Parcels."
The Company will not have the right to acquire other land parcels adjacent
to this theatre because of the absence of sewer connections to such parcels.

The Initial Properties will be purchased from subsidiaries of AMCE for an
aggregate purchase price of approximately $247.3 million in cash. The Company
will lease the Initial Properties to AMC pursuant to the Leases with initial
terms ranging from 13 to 15 years with aggregate initial annual cash rents of
approximately $26.0 million. Throughout the terms of the Leases, annual rents
will escalate by the Base Rent Escalation, and Annual Percentage Rent on
revenues in excess of a baseline amount will be payable by AMC. The Leases may
be extended upon the same terms for four additional periods of five years at the
option of AMC.

The purchase price for each Initial Property will equal the cost to AMC of
developing and constructing such Property. See "Risk Factors--Conflicts of
Interest--Purchase Price of the Properties." It is

36
<PAGE>
possible that if the Company were to have obtained independent valuations or
appraisals, the sum of the values of the Initial Properties might have been
greater or lower than the sum of the values determined by the management of AMCE
and of the Company.

INITIAL PROPERTY DESCRIPTIONS

Set forth below are descriptions of the Initial Properties.

GRAND 24. The Grand 24 was the first megaplex theatre opened by AMC in May
1995. It is a free-standing theatre located on a 21.2 acre site at 10110
Technology Boulevard East (in the Stemmons Crossroads development, at the
intersection of I-35 and Northwest Highway) in Dallas, Texas. The theatre has
85,000 square feet and 5,067 seats. The theatre site includes a 2,600-space free
parking area and tram service is provided to the theatre. Its box office has 12
stations, and there are three concessions stands with 21 total stations. Theatre
amenities include stadium AMC LoveSeat-TM- style seating, 46-inch spacing
between rows, SDDS-TM-, TORUS-TM- Compound Curved Screens, HITS-TM- and advance
ticket purchase by TeleTicket-TM-. Eight restaurants and clubs are located near
the theatre site. From January 1 through August 14, 1997, the Grand 24 was the
fifth highest grossing theatre in the United States.

According to the 1990 U.S. Census, there are approximately 460,000 people
residing within seven miles of the Grand 24. The Grand 24 site is subject to
standard and customary utility and other easements, certain covenants and
restrictions and certain reciprocal easements regarding access and the
construction of a pedestrian bridge linking the Grand 24 site to adjoining
properties.

MISSION VALLEY 20. The Mission Valley 20 opened in December 1995. It is
located in the Mission Valley Center shopping complex, on Interstate 8 at the
Mission Center Road exit in San Diego, California. The ground lease is for
77,000 square feet, and the theatre has 76,334 square feet and 4,361 seats. Free
parking for patrons is available throughout the shopping complex, including
under the theatre and on the south side of the shopping center. The theatre box
office has 15 stations, and there are two concessions stands with 34 total
stations. Other amenities include stadium AMC LoveSeat-TM- style seating,
46-inch spacing between rows, SDDS-TM-, advance ticket purchase by
TeleTicket-TM-, TORUS-TM- Compound Curved Screens and HITS-TM-. From January 1
through August 14, 1997, the Mission Valley 20 was the fourth highest grossing
theatre in the United States. The Company believes that this theatre may be
operated by AMC under the "Planet Movies by AMC" name in the future.

The Mission Valley Center is a one-level outdoor mall with 1.3 million
square feet on 48.13 acres. The Mission Valley Center opened in 1961 with 100
shops, including the May Company and Montgomery Wards Department Store. In 1975,
the Mission Valley Center expanded by adding Bullock's and 44,000 square feet of
specialty shops. In 1983, the Mission Valley Center also added Saks Fifth Avenue
and 50 more specialty shops. According to the 1990 U.S. Census, there are
approximately 500,000 people residing within five miles of the Mission Valley
20. The ground-leased parcel for the Mission Valley 20 site is subject to
various reciprocal easements, restrictions, covenants and other agreements for
the operation of the Mission Valley Center.

The Mission Valley 20 ground lease was entered into in 1994 and has a
30-year initial term expiring in March 2024, with two, ten-year extension
options exercisable by the tenant. Minimum rent is $10 per square foot ($764,850
per annum) through year 11 of the lease, increasing by an amount equal to $2 per
square foot in year 12 and each five-year period thereafter to $18 per square
foot in year 27 of the ground lease. Minimum rent in the first option period is
$20 per square foot, and increases by an amount equal to $2 per square foot at
the commencement of each successive option period. The ground lease also
requires percentage rent, commencing in year seven (2001), of 10% of gross sales
over specified breakpoints. During the first ten years of the ground lease, the
property may only operate as a theatre; thereafter, with the consent of the
landlord and the major tenants of the shopping center, up to 25,000 square feet
of the property may be used to operate up to two retail businesses. Such ground
lease will be

37
<PAGE>
assigned to the Company as part of the Formation Transactions, and the Company
will assume responsibility for performing the obligations thereunder. Pursuant
to the Leases, all of the Company's obligations under the ground lease,
including rent payment obligations, will be the responsibility of AMC.

PROMENADE 16. The Promenade 16 opened in March 1996. It is located on a 6.2
acre site in The Promenade at Woodland Hills shopping complex, at the
intersection of 101 Freeway and Topanga Canyon Boulevard in Woodland Hills,
California. The building has 120,000 square feet, including the theatre that has
60,000 square feet and 2,882 seats. Free parking is available in the shopping
complex parking lots located around the theatre and the mall. The theatre box
office has eight stations; in addition, there are four self-service box offices
outside the box office where purchasers may purchase ticket or pick up
"will-call" tickets. The theatre has three concessions stands with 26 total
stations. Some concessions stations include pass-through concessions service.
Amenities include stadium AMC LoveSeat-TM- style seating, 46-inch spacing
between rows, SDDS-TM-, advance ticket purchase by TeleTicket-TM-, TORUS-TM-
Compound Curved Screens and HITS-TM-. From January 1 through August 14, 1997,
the Promenade 16 was the 42nd highest grossing theatre in the United States. The
Company believes that this theatre may be operated by AMC under the "Planet
Movies by AMC" name in the future.

The Promenade at Woodland Hills shopping complex is a two-level, enclosed
mall having 600,000 square feet of gross leaseable area on 34 acres. The
shopping complex opened in 1973 and was fully renovated in 1992. In addition to
the AMC Promenade 16 theatre, the Promenade at Woodland Hills shopping complex
is anchored by a Macy's and Macy's Men's and Children's stores and features 80
specialty shops and restaurants. According to the 1990 U.S. Census, there are
approximately 447,000 people residing within seven miles of the Promenade 16.
The Promenade 16 site is subject to various reciprocal easements, restrictions,
covenants and other agreements for operation of the Promenade shopping complex.
Under one such agreement, the developer of the complex has an option to purchase
the Promenade 16 if AMC ceases to operate a multi-screen movie theatre on a
designated level of the complex. AMC is currently negotiating a renewal of its
expired temporary certificate of occupancy for this Property. The Promenade 16
site includes a 20,000 square foot food court, which includes 5,000 square feet
available for lease of which 3,700 square feet currently is leased to six
tenants. There is also 40,000 square feet of retail space below the theatre that
is currently vacant. AMC will lease the entire site from the Company.

ONTARIO MILLS 30. The Ontario Mills 30 opened in December 1996. It is
located on a 14.65 acre site at the intersection of 4th Street and Milliken
Avenue in the Ontario Mills Mall in Ontario, California. The theatre has 106,502
square feet and 5,469 seats. Free parking is available to patrons in the
7,500-space Ontario Mills parking lots around the theatre and the mall. The
theatre has three box offices with a total of 15 stations, as well as two
automated ticket dispensers for pick up of TeleTicket-TM- purchases. There are
three concessions stands with a total of 42 stations, all of which feature
pass-through concessions service. Amenities include stadium AMC LoveSeat-TM-
style seating, 46-inch spacing between rows, SDDS-TM-, TORUS-TM- Compound Curved
Screens, HITS-TM-, advance ticket purchase by TeleTicket-TM-, an Image Video
Entertainment Wall which plays continuous digitized images of coming attractions
and current releases, two arcade areas and a private room for party rentals and
events. From January 1 through August 14, 1997, the Ontario Mills 30 was the
11th highest grossing theatre in the United States. The Company believes that
this theatre may be operated by AMC under the "Planet Movies by AMC" name in the
future.

The Ontario Mills Mall is a 1.7 million square foot mall located on the
northwest corner of the intersection of the Interstate 10 and Interstate 15
freeways and is one of California's largest outlet malls. The Ontario Mills 30
is the Ontario Mills Mall's key entertainment anchor of a total of 13 anchors
including Clearinghouse by Saks Fifth Avenue, J.C. Penney Outlet, Sports
Authority, Marshall's, Burlington Coat Factory and Bed, Bath and Beyond. Other
entertainment stores and attractions include Sega Gameworks, Wolfgang Puck Cafe,
Virgin Megastore and the Warner Bros. Studio Store Outlet. According to the 1990
U.S. Census, there are approximately 362,000 people residing within seven miles
of the

38
<PAGE>
Ontario Mills 30. The Ontario Mills 30 site is subject to standard and customary
utility and other easements and certain reciprocal easements, covenants,
conditions and restrictions regarding access, parking, passage, signs and
utility lines over, and the construction of the common areas of the Ontario
Mills Mall which, for a term of 40 years, entitles the developer of the Ontario
Mills Mall to purchase the Ontario Mills 30 if it is no longer used as a
theatre.

LENNOX 24. The Lennox 24 opened in December 1996. It is located on a 10.6
acre ground leased site in the Lennox Town Center shopping complex on Olentangy
River Road and Route 315 in Columbus, Ohio. The theatre has 80,300 square feet
and 4,412 seats. Approximately 800 parking spaces are allocated specifically for
AMC's patrons, and an additional 662 spaces are available within the Lennox Town
Center; 1,000 additional spaces will be available when the Lennox Town Center is
completely finished. Theatre box offices feature a total of 14 stations, and
there are two "will-call" stations for advance ticket sales and pickups. A guest
services kiosk allows patrons to make special arrangements, as well as purchase
gift certificates and offers other services to moviegoers. The theatre has three
concessions stands with 38 total stations, some of which feature pass-through
concessions service. Amenities include stadium AMC LoveSeat-TM- style seating,
46-inch spacing between rows, SDDS-TM-, advance ticket purchase by
TeleTicket-TM-, TORUS-TM- Compound Curved Screens and HITS-TM-. From January 1
through August 14, 1997, the Lennox 24 was the 12th highest grossing theatre in
the United States.

The Lennox Town Center is a regional shopping center with 320,000 square
feet of leaseable area on 37.5 acres. It is located approximately four miles
northeast of downtown Columbus, and is near Ohio State University which is just
across the Olentangy River to the east. Lennox Town Center's anchor tenants
include Target and Barnes and Noble. According to the 1990 U.S. Census, there
are approximately 559,000 people residing within seven miles of the Lennox 24.
The Lennox 24 is subject to standard and customary utility and other easements.

The Lennox 24 ground lease was entered into in 1995 and has a 25-year
initial term ending in the year 2020, with ten, five-year renewal options
exercisable by the tenant. Annual minimum rent is $537,578 through year five of
the ground lease, increasing by $50,000 per annum in year six, $55,000 per annum
in year 11, $61,000 per annum in year 16 and $66,000 per annum in year 21.
Annual rentals during the option periods commence at $805,860 during the first
period and increase to $1,900,000 per annum in the tenth option period. During
the initial term, there is also percentage rent due in an amount per annum equal
to two percent of gross sales over a specified breakpoint in each lease year.
The property must be operated as a theatre through year five of the ground
lease, but thereafter may be operated for any lawful retail, service or
entertainment use (subject to rights of exclusivity granted other tenants). Such
ground lease will be assigned to the Company as part of the Formation
Transactions, and the Company will assume responsibility for performing the
obligations thereunder. Pursuant to the Leases, all of the Company's obligations
under the ground lease, including rent payment obligations, will be the
responsibility of AMC.

WEST OLIVE 16. The West Olive 16 opened in April 1997. It is a
free-standing theatre located on an 8.02 acre site in a multi-use development at
the intersection of Olive and Interstate 270 in St. Louis, Missouri. The theatre
has 52,310 square feet and 2,817 seats. Free parking is available around the
theatre in 1,850 spaces. The theatre has two box offices with a total of eight
stations and two concessions stands with a total of 24 stations. Some
concessions stations include pass-through concessions service. Other amenities
include stadium AMC LoveSeat-TM- style seating, 46-inch spacing between rows,
SDDS-TM-, TORUS-TM- Compound Curved Screens and HITS-TM-. For the 19 weeks
through August 14, 1997 that the West Olive 16 has been open, it was the 97th
highest grossing theatre in the United States. According to the 1990 U.S.
Census, there are approximately 342,000 people residing within seven miles of
the West Olive 16. The West Olive 16 is subject to standard and customary
utility and other easements.

39
<PAGE>
STUDIO 30. The Studio 30 opened in May 1997. It is a free-standing theatre
located on a 21.56 acre site adjacent to a Wal-Mart and a Sam's Club store
located on the southeast corner of Westheimer and Dunvale in Houston, Texas. The
theatre has 112,382 square feet and 6,032 seats. Free parking is available to
patrons on the project site in 1,900 spaces around the theatre. The theatre has
three box offices with a total of 15 stations and three concessions stands with
a total of 45 stations. All of the concessions stands include pass-through
concessions service. Other amenities include stadium AMC LoveSeat-TM- style
seating, 46-inch spacing between rows, SDDS-TM-, TORUS-TM- Compound Curved
Screens and HITS-TM-. For the twelve weeks through August 14, 1997 that the
Studio 30 has been open, it was the 104th highest grossing theatre in the United
States. The Company believes that this theatre may be operated by AMC under the
"Planet Movies by AMC" name in the future. According to the 1990 U.S. Census,
there are approximately 734,000 people residing within seven miles of the Studio
30. The Studio 30 site is subject to standard utility easements and City of
Houston general ordinances with respect to platting and building set-back lines.

HUEBNER OAKS 24. The Huebner Oaks 24 opened in June 1997. It is a
free-standing theatre on a 13.56 acre site and serves as an anchor in a strip
shopping center having other national tenants including Bed, Bath and Beyond,
Old Navy, Pier 1 Imports and Borders Books. The site is located at the
intersection of Huebner Road and Interstate 10 in San Antonio, Texas. The
theatre has 81,780 square feet and 4,400 seats. Parking for patrons is available
in over 2,000 spaces located around the theatre building. The theatre has three
box offices with a total of 15 stations and three concessions stands with a
total of 43 stations. All of the concessions stands include pass-through
concessions service. Other theatre amenities include stadium AMC LoveSeat-TM-
style seating, 46-inch spacing between rows, SDDS-TM-, TORUS-TM- Compound Curved
Screens and HITS-TM-. For the eight weeks through August 14, 1997 that the
Huebner Oaks 24 has been open, it was the 126th highest grossing theatre in the
United States. According to the 1990 U.S. Census, there are approximately
356,000 people residing within seven miles of the Huebner Oaks 24. The Huebner
Oaks 24 is subject to standard and customary utility and other easements.

LEAWOOD TOWN CENTER 20. The Leawood Town Center 20 is expected to open in
December 1997. The free-standing theatre will be located on an 8.4 acre site in
the Leawood Town Center Plaza shopping center in a Kansas suburb of Kansas City,
Missouri. The theatre will have 62,122 square feet and 2,994 seats. Parking will
be available in 3,300 parking spaces in lots around the mall and on-site. The
theatre will have one box office with a total of 12 stations as well as two
automated ticket dispensers for pick-up of TeleTicket-TM- purchases. There will
be three concessions stands with a total of 32 stations, all of which will
feature pass-through concessions service. Other amenities will include stadium
AMC LoveSeat-TM- style seating, 46-inch spacing between rows, SDDS-TM-,
TORUS-TM- Compound Curved Screens and HITS-TM-.

The Leawood Town Center Plaza shopping center is located at 119th Street and
Roe in Leawood, Kansas and is anchored by a Jacobson's department store, a
Galyans sporting goods store and the AMC theatre. It also features other
retailers such as Williams Sonoma, Pottery Barn, The Gap, Gap Kids and The
Limited. There are also 10 restaurants, including On The Border and Houlihan's,
located at the shopping center. According to the 1990 U.S. Census, there are
approximately 286,000 people residing within seven miles of the Leawood Town
Center 20. The Leawood Town Center 20 will be subject to standard and customary
utility and other easements.

FIRST COLONY 24. The First Colony 24 is expected to open in December 1997.
The free-standing theatre will be located on a 26.5 acre ground-leased site
across the ring road from the First Colony Mall in Sugerland, Texas, a suburb of
Houston. The theatre will have 89,290 square feet and 5,098 seats. The site will
include 2,200 parking spaces. The theatre will have two box offices with a total
of 16 stations. There will be three concessions stands with a total of 40
stations, all of which will feature pass-through concessions service. Other
amenities will include stadium AMC LoveSeat-TM- style seating, 46-inch spacing
between rows, SDDS-TM-, TORUS-TM- Compound Curved Screens and HITS-TM-.

40
<PAGE>
The First Colony Mall is a regional mall with more than one million square
feet of retail space located at the Southwest (US 59) and South Beltway 6
freeways. The mall is anchored by Foley's, Dillard's, J.C. Penney and Mervyn's.
According to the 1990 U.S. Census, there are approximately 221,000 people
residing within seven miles of the First Colony 24. The First Colony 24 will be
subject to standard and customary utility and other easements.

The First Colony 24 ground lease was entered into in 1996 and has a 20-year
initial term expiring in 2016, with six, five-year renewal options exercisable
by the tenant. Annual minimum rent is $501,870 through year 10 of the ground
lease, $552,057 for years 11 through 15 of the ground lease and $607,263 for
years 16 through 20 of the ground lease. Annual minimum rent for each of the
six, five-year renewal options is $667,989, $734,788, $808,267, $889,094,
$978,003 and $1,075,803, respectively. In addition, there is also percentage
rent due in an amount per annum equal to three percent of gross receipts over a
specified breakpoint in each lease year. The property must be operated as a
theatre through year 10 of the ground lease, but thereafter may be operated for
any retail or entertainment use (subject to limited exceptions). Such ground
lease will be assigned to the Company as part of the Formation Transactions and
the Company will assume responsibility for performing the obligations
thereunder. Pursuant to the Leases, all of the Company's obligations under the
ground lease, including rent payment obligations, will be the responsibility of
AMC.

OAK VIEW 24. The Oak View 24 is anticipated to open in December 1997. It
will be a free-standing facility located on a 20.4 acre ground-leased parcel in
the Oak View Plaza shopping center at 144th and West Center Road, in Omaha,
Nebraska. The theatre will have 89,290 square feet and 5,098 seats. Free parking
will be available in 1,350 shopping center spaces. The theatre will have three
box offices with a total of 14 stations and three concessions stands with a
total of 40 stations. Some concessions stations will include pass-through
concessions service. Other theatre amenities will include stadium AMC
LoveSeat-TM- style seating, 46-inch spacing between rows and SDDS-TM-. Some
auditoriums will feature TORUS-TM- Compound Curved Screens and HITS-TM-.

Oak View Plaza is a regional shopping complex located across the street from
Oak View Mall. Oak View Plaza's anchor tenants include Kohl's, Barnes & Noble
and Home Express. Oak View Mall's anchor tenants include Yonkers, DiIlard's,
J.C. Penney and Sears. According to the 1990 U.S. Census, there are
approximately 225,000 people residing within seven miles of the Oak View 24.
AMC's interest under its ground lease in the Oak View 24 property is subject to
standard and customary utility and other easements.

The Oak View 24 ground lease was entered into in 1996 and has a 20-year
initial term expiring in October 2016, with six, five-year renewal options
exercisable by the tenant. Fixed rental under the lease is $425,000 annually
through the third year, increasing to $525,000 per annum in years four and five,
then increasing in increments of $50,000 per annum in years six, 11 and 16. Rent
during the option periods is $675,000 per annum, adjusted by changes in the
consumer price index over the prior term. There is no percentage rent. The
premises may be used for a theatre or any other lawful purpose. The tenant under
the ground lease has an option to purchase the land commencing in year four of
the ground lease at a price of $5,000,000, which purchase price increases in
increments of $500,000 in years six, 11 and 16 of the ground lease. Such ground
lease will be assigned to the Company as part of the Formation Transactions and
the Company will assume responsibility for performing the obligations under the
ground lease. Pursuant to the Leases, all of the Company's obligations under the
ground lease, including rent payment obligations, will be the responsibility of
AMC.

SOUTH BARRINGTON 30. The South Barrington 30 is expected to open in
February 1998. It will be a free-standing theatre located on a 33 acre site at
the intersection of Interstate 90 and Barrington Road in South Barrington,
Illinois, a suburb of Chicago. The theatre will have 109,468 square feet and
6,210 seats. The site will include 2,800 parking spaces. The theatre will have
two box offices with a total of 18 stations. There will be three concessions
stands with a total of 44 stations, all of which will feature pass-

41
<PAGE>
through concessions service. Other amenities will include stadium AMC
LoveSeat-TM- style seating, 46-inch spacing between rows, SDDS-TM-, TORUS-TM-
Compound Curved Screens and HITS-TM-. According to the 1990 U.S. Census, there
are approximately 345,000 people residing within seven miles of the South
Barrington 30. The South Barrington 30 will be subject to standard and customary
utility and other easements.

THE OPTION PROPERTIES

Certain information regarding each of the Option Properties, including the
purchase price payable by the Company therefor, is set forth below:

<TABLE>
<CAPTION>
ESTIMATED
ANTICIPATED PURCHASE PRICE
METROPOLITAN NO. OF NO. OF BUILDING OPENING (IN
THEATRE NAME AREA SCREENS SEATS (SQ. FT.) DATE(1) THOUSANDS)(2)
- -------------------------------- ------------ ------------- --------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>

Gulf Pointe 30(3)(4)............ Houston, TX 30 6,008 108,935 12/97 $ 27,200

Mesquite 30(3)(4)............... Dallas, TX 30 6,008 108,935 3/98 22,600

Cantera 30 (4).................. Chicago, IL 30 6,210 109,468 3/98 34,000

Hampton Town Center 24(3)....... Norfolk, VA 24 5,098 89,290 4/98 26,000

Livonia 20...................... Detroit, MI 20 4,056 72,297 7/98 27,000
--- --------- ----------- --------------
134 27,380 488,925 $ 136,800
--- --------- ----------- --------------
--- --------- ----------- --------------
</TABLE>

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

(3) AMC currently leases such Properties from a third party owner/lessor. The
Company will have an option to acquire such Properties from the
owner/lessor.

The Company will have options to purchase each Option Property that may be
exercised at any time during the 90-day period following the actual opening date
of the megaplex theatre on such Option Property. After exercise of the option,
the Company is required to close the acquisition within the following 90 days.
The purchase price of each Option Property will be equal to the cost to AMC of
developing and constructing such Property. The Company will lease to AMC the
Option Properties, if acquired, pursuant to Leases on substantially the same
terms and conditions as the Leases for the Initial Properties, including the
Base Rent Escalation and the Annual Percentage Rent. The initial annual rental
rate for each Option Property will be equal to 10.5% of the purchase price.
Using the 10.5% lease rate calculation and the estimated purchase prices, the
Company believes that the initial annual cash rent for each Option Property, if
acquired, will be: (a) Gulf Pointe 30--$2.9 million; (b) Mesquite 30--$2.4
million; (c) Cantera 30--$3.6 million;(d) Hampton Town Center 24--$2.7 million;
and (e) Livonia 20--$2.8 million. Total initial annual cash rent for the Option
Properties, if acquired, will be approximately $14.4 million.

42
<PAGE>
Because the Option Properties are currently under construction by AMC, the
cash consideration to be paid by the Company for each of the Option Properties
will equal the cost to AMC of developing and constructing such Property.
Independent valuations were not obtained to determine the purchase price of the
Option Properties. See "Risk Factors--Conflicts of Interest--Purchase Price of
the Properties."

OPTION PROPERTY DESCRIPTIONS

Set forth below are descriptions of the Option Properties.

GULF POINTE 30. The Gulf Pointe 30 is expected to open in December 1997. It
will be a free-standing theatre located on a 34 acre site at the Interstate 45
and South Beltway 8 freeways in Houston, Texas. The theatre will have 108,935
square feet and 6,008 seats. The site will include 2,000 parking spaces. The
theatre will have two box offices with a total of 18 stations. There will be
three concessions stands with a total of 44 stations, all of which will feature
pass-through concessions service. Other amenities will include stadium AMC
LoveSeat-TM- style seating, 46-inch spacing between rows, SDDS-TM-, TORUS-TM-
Compound Curved Screens and HITS-TM-.

AMC currently leases the Gulf Pointe 30 from a third party owner/lessor. The
Company's option to acquire such property will be with the owner/lessor.
According to the 1990 U.S. Census, there are approximately 345,000 people
residing within seven miles of the Gulf Pointe 30. The Gulf Pointe 30 will be
subject to standard and customary utility and other easements.

MESQUITE 30. The Mesquite 30 is expected to open in March 1998. It will be
a free-standing theatre located on a 26.2 acre site at the intersection of
Interstate 635 and US 80 freeways in Mesquite, Texas, a suburb of Dallas. The
theatre will have 108,935 square feet and 6,008 seats. The site will include
2,000 parking spaces. The theatre will have two box offices with a total of 18
stations. There will be three concessions stands with a total of 44 stations,
all of which will feature pass-through concessions service. Other amenities will
include stadium AMC LoveSeat-TM- style seating, 46-inch spacing between rows,
SDDS-TM-, TORUS-TM- Compound Curved Screens and HITS-TM-.

AMC currently leases the Mesquite 30 from a third party owner/lessor. The
Company's option to acquire such property will be with the owner/lessor.
According to the 1990 U.S. Census, there are approximately 390,000 people
residing within seven miles of the Mesquite 30. The Mesquite 30 will be subject
to standard and customary utility and other easements.

CANTERA 30. The Cantera 30 is expected to open in March 1998. It will be a
free-standing theatre located on a 42.3 acre site in Warrenville, Illinois, a
suburb of Chicago. The theatre will have 109,468 square feet and 6,210 seats.
The site will include 3,000 parking spaces. The theatre will have two box
offices with a total of 18 stations. There will be three concessions stands with
a total of 44 stations, all of which will feature pass-through concessions
service. Other amenities will include stadium AMC LoveSeat-TM- style seating,
46-inch spacing between rows, SDDS-TM-, TORUS-TM- Compound Curved Screens and
HITS-TM-.

The Cantera 30 will be part of a larger multi-use development that will
eventually consist of 4.7 million square feet of office space, 3 million square
feet of light industrial space, 500 multi-family residential units, retail,
hotel and recreational areas. According to the 1990 U.S. Census, there are
approximately 489,000 people residing within seven miles of the Cantera 30. The
Cantera 30 will be subject to standard and customary utility and other
easements.

HAMPTON TOWN CENTER 24. The Hampton Town Center 24 is expected to open in
April 1998. It will be a free-standing theatre located on a 25 acre site in a
shopping center at Interstate 64 East, Big Bethel Road and Hampton Roads Center
Parkway in Hampton, Virginia, a suburb of Norfolk. The theatre will have 89,290
square feet and 5,098 seats. The site will include 2,400 parking spaces. The
theatre will have two box offices with a total of 16 stations. There will be
three concessions stands with a total of 40 stations, all of which will feature
pass-through concessions service. Other amenities will include stadium AMC
LoveSeat-TM- style seating, 46-inch spacing between rows, SDDS-TM-, TORUS-TM-
Compound Curved Screens and HITS-TM-.

AMC currently leases the Hampton Town Center 24 from a third party
owner/lessor. The Company's option to acquire such property will be with the
owner/lessor. The shopping center adjacent to the Hampton Town Center 24 will
have a grocery store and large local retailer as well as several restaurant and
retail pads. According to the 1990 U.S. Census, there are approximately 227,000
people residing within seven miles of the Hampton Town Center 24. The Hampton
Town Center 24 will be subject to standard and customary utility and other
easements.

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<PAGE>
LIVONIA 20. The Livonia 20 is expected to open in July 1998. It will be a
free-standing theatre located on a 35.3 acre condominium subdivision developed
as a shopping center in Livonia, Michigan, a suburb of Detroit. The theatre will
have 72,297 square feet and 4,056 seats. The site will include 2,200 parking
spaces. The theatre will have one box office with a total of 12 stations as well
as two automated ticket dispensers for pick-up of TeleTicket-TM- purchases.
There will be three concessions stands with a total of 28 stations, all of which
will feature pass-through concessions service. Other amenities will include
stadium AMC LoveSeat-TM- style seating, 46-inch spacing between rows, SDDS-TM-,
TORUS-TM- Compound Curved Screens and HITS-TM-.

The shopping center will have three other anchor retailers plus several
restaurant/retail pads. It will be located at Haggerty Road and Seven Mile Road,
just off of Interstate 275/96. According to the 1990 U.S. Census, there are
approximately 331,000 people residing within seven miles of the Livonia 20. The
Livonia 20 will be subject to standard and customary utility and other
easements.

LAND PARCELS

Certain information regarding the land parcels adjacent to certain of the
Properties, including the purchase price payable by the Company therefor, is set
forth below:

<TABLE>
<CAPTION>
LAND PURCHASE PRICE
THEATRE NAME PAD (SQ. FT.) (IN THOUSANDS)
- --------------------------------------------- ----- --------- --------------
<S> <C> <C> <C>

South Barrington 30(1)....................... A 65,000 $ 1,056
Gulf Pointe 30(2)(3)......................... A 54,000 511
B 47,000 511
C 54,000 511

Mesquite 30(2)............................... A 87,000 809
B 87,000 674
C-1 87,000 790
C-2 75,000 651

Cantera 30(2)................................ A 43,000 968
B 43,000 1,012
C 43,000 968
D 65,000 1,012
E 87,000 968
--------- --------------
837,000 $10,441
--------- --------------
--------- --------------
</TABLE>

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

(1) Indicated land parcel is adjcent to this Initial Property.

(2) Indicated land parcels are adjacent to this Option Property.

(3) AMC is under contract to sell an additional land parcel to Outback
Steakhouse. If such land parcel is no longer under contract at the time of
the exercise by the Company of its option to purchase the Gulf Pointe 30,
the Company will have the option to purchase such land parcel for
approximately $0.5 million.

At the time the Company acquires the South Barrington 30 and exercises its
option to acquire an Option Property, it will have the option to acquire not
less than all of the land parcels adjacent to the theatre at such Property that
are not under contract for sale or sold for the purchase prices indicated in the
table above. The purchase price for each land parcel was determined by
management of both AMCE and the Company based on an estimated market value for
such parcel less estimated marketing and selling costs. Independent valuations
were not obtained to determine the purchase price of the land parcels. See "Risk
Factors--Conflicts of Interest--Purchase Price of the Properties." The Company's
initial focus with respect to the land parcels will be ground lease or
build-to-suit opportunities with entertainment and entertainment-related
operators that have significant market presence (primarily

44
<PAGE>
restaurants). The Company does not anticipate leasing any of the land parcels,
if acquired, to AMCE or any of its subsidiaries or to Planet Movies. AMC may
market and negotiate to sell any or all of the land parcels relating to the
Option Properties prior to the exercise by the Company of its options to
purchase the Option Properties.

SOUTH BARRINGTON 30 LAND PARCEL. There is one adjacent land parcel
northeast of the South Barrington 30 totaling approximately 1.5 acres that, if
acquired, may be developed and leased by the Company or sold to third parties
for development as a restaurant or retail site. The site plan includes a
pedestrian pathway linking the restaurant or retail store and the megaplex
theatre. There are additional land parcels adjacent to this theatre that the
Company will not have the right to acquire because of the absence of sewer
connections to such parcels.

GULF POINTE 30 LAND PARCELS. There are three adjacent land parcels east of
the proposed site for the Gulf Pointe 30 totaling approximately 3.5 acres that,
if acquired, may be developed and leased by the Company or sold to third parties
for development as restaurant or retail sites. AMC has entered into a contract
to sell an additional land parcel located at the proposed site, with a pad of
9,200 square feet and 67 parking spaces, to Outback Steakhouse. The land parcels
will be subject to customary reciprocal easements for ingress, egress and
parking between each of the land parcels and between the land parcels and the
theatre parcel, and restrictions relating to certain uses.

MESQUITE 30 LAND PARCELS. There are four adjacent land parcels south of the
proposed site for the Mesquite 30 totaling approximately 7.7 acres that may be
developed and leased by the Company or sold to third parties for development as
restaurant or retail sites. The land parcels will be subject to customary
reciprocal easements for ingress, egress and parking between each of the land
parcels and between the land parcels and the theatre parcel, and restrictions
relating to certain uses.

CANTERA 30 LAND PARCELS. There are five adjacent land parcels south of the
proposed site for the Cantera 30 totaling approximately 6.5 acres that may be
developed and leased by the Company or sold to third parties for development as
restaurant or retail sites. The land parcels will be subject to customary
reciprocal easements for ingress, egress and parking between each of the land
parcels and between the land parcels and the theatre parcel, and restrictions
relating to certain uses.

FUTURE AMCE PROPERTIES

It is anticipated that AMCE or its subsidiaries will acquire or develop
additional entertainment or entertainment-related properties in the future. The
Company and AMCE will enter into the AMCE Right to Purchase Agreement whereby
the Company will have the right of first refusal and first offer to acquire and
lease back to AMC any megaplex theatre and related entertainment property
acquired or developed and owned (or ground-leased) by AMCE or its subsidiaries
following the Formation Transactions (each a "Future AMCE Property") for a
period of five years following the closing of the Offering. The right of first
refusal provides that if AMCE or any of its subsidiaries obtains an acceptable
third party offer to acquire any interest in a Future AMCE Property, prior to
selling any interest in such property, AMCE must first offer to sell the Future
AMCE Property to the Company on the same terms and conditions contained in such
third party offer. Such right of first refusal must be exercised at least 5 days
prior to the date the offer by the potential third-party purchaser expires, but
not less than 10 business days after AMCE notifies the Company of the terms of
such potential sale. If the Company declines to purchase such Future AMCE
Property on such terms and conditions, AMCE will be free to sell such Future
AMCE Property for a specified period of time at a price at least equal to the
price offered to the Company and on terms and conditions substantially
consistent with those offered to the Company. The right of first offer provides
that if AMCE or any of its subsidiaries desires to sell any interest in a Future
AMCE Property, AMCE must notify the Company and the Company will have the right
to make an offer to acquire such property within a specified period of time. If
the Company declines to make an offer, AMCE will be free to sell such property
for a specified period of time. If the Company makes an offer but AMCE declines
to sell such Future AMCE Property to the Company on the terms and conditions
contained in such offer, AMCE will

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<PAGE>
be restricted from selling such Future AMCE Property for a specified period of
time except upon terms and conditions and at a price more favorable to AMCE than
those offered by the Company.

PLANET MOVIES PROPERTIES

In July 1997, AMCE and Planet Hollywood announced the formation of a joint
venture to develop and operate unique, integrated movie-going, dining and retail
shopping complexes to be branded "Planet Movies by AMC." The Company believes
that each complex will typically aggregate 200,000 square feet and include one
megaplex theatre, two theme restaurants and additional entertainment-related
retailers. The Company believes that Planet Movies expects to open 8 to 10
complexes over the next 12 to 24 months. Over the longer term, the Company also
believes that Planet Movies expects to open an additional 5 to 10 complexes per
year. The Company anticipates working closely with Planet Movies in evaluating
potential Planet Movies locations, including the acquisition and development of
property by the Company and the leasing of such property to Planet Movies,
although neither party is obligated to do so. The development and rental terms
of any such properties will be negotiated between the Company and Planet Movies
at the time that such transaction occurs. In addition, certain of the Properties
may be operated by AMC under the "Planet Movies by AMC" name in the future.

THEATRICAL EXHIBITION INDUSTRY AND MEGAPLEX THEATRES

The Initial Properties and the Option Properties are all megaplex theatres
that operate in the theatrical exhibition industry. Motion picture theatres are
the primary initial distribution channel for new motion picture releases, and
the Company believes that the theatrical success of the motion picture is often
the most important factor in establishing its value in the cable television,
videocassette and other ancillary markets. The Company further believes that the
emergence of new motion picture distribution channels has not adversely affected
attendance at theatres and that these distribution channels do not provide an
experience comparable to that of viewing a movie in a theatre. Annual domestic
theatre attendance has averaged approximately one billion persons since the
early 1960s. In 1996, estimated domestic attendance was 1.34 billion.
Fluctuations and variances in year-to-year attendance are primarily related to
the overall popularity and supply of motion pictures. During the period from
January 1, 1990 to December 31, 1995, the annual number of first-run motion
pictures released by distributors in the United States ranged from a low of 382
in 1995 to a high of 440 in 1993, according to the Motion Picture Association of
America.

The theatrical exhibition industry in North America is comprised of over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the listing of exhibitors in the National Association of Theatre Owners (NATO)
1996-97 Encyclopedia of Exhibition, as of May 1, 1996, the 10 largest exhibitors
(in terms of number of screens), which includes AMCE, operated approximately 56%
of the total screens, with no one exhibitor operating more than ten percent of
the total screens.

The shortage of quality screens in the United States has caused theatrical
exhibitors to build new screens or renovate old screens. The Company believes
that the introduction of megaplex theatres by AMCE has created a new replacement
cycle for the industry and prompted the current theatrical exhibition industry
trend in the United States and Canada toward the development of larger theatre
complexes. This trend has accelerated the obsolescence of many existing movie
theatres by setting new standards for moviegoers, who have demonstrated their
preference for the more attractive surroundings, wider variety of films, better
customer service and more comfortable seating typical of megaplex theatres. The
Company believes that consumers will increasingly choose theatres based on the
quality of the movie-going experience rather than the location of the theatre.
As a result, the Company believes that older, smaller theatres will become
obsolete as the megaplex theatre concept matures.

The Company defines megaplex theatres as theatres having at least 14 screens
with predominantly stadium-style seating (seating with an elevation between rows
to provide unobstructed viewing). Megaplex theatres enable theatre operators to
exhibit concurrently a variety of motion pictures attractive to different
segments of the movie-going public. Megaplex theatres also allow theatre
operators to match a particular motion picture's attendance patterns to the
appropriate auditorium size (ranging from

46
<PAGE>
approximately 90 to 450 seats), thereby extending the run of a motion picture
and achieving superior theatre economics. The Company believes that megaplex
theatres enhance the ability of operators to license commercially popular motion
pictures.

According to the Motion Picture Association of America, the number of indoor
screens in the United States has increased from 24,233 at the end of 1992 to
28,864 at the end of 1996, or approximately 19.1%, and the Company believes the
number of screens located in theatres with at least 14 screens has increased
from fewer than 100 at the end of 1992 to approximately 2,300 at the end of
1996.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
1992 1995
<S> <C> <C>
Total U.S. indoor screens 24,133 26,564
Theatres with more than 14 screens 100 2,300
</TABLE>

Source: NATO Encyclopedia of Exhibition and AMCE

There are currently approximately 2,700 screens in theatres with at least 14
screens operating in the United States, with the first megaplex theatre having
been opened by AMC in May 1995. From January 1 through August 14, 1997, 34
theatres with at least 14 screens ranked in the top 50 highest grossing theatres
in the United States, including 12 of AMCE's 15 megaplex theatres that were
operating during the entire period.

AMCE is an industry leader in the development and operation of megaplex
theatres, primarily in large metropolitan markets, and 26 of its 28 theatres
under construction as of July 3, 1997 are megaplex theatres. AMCE's megaplex
theatres have consistently ranked among its top grossing properties on a per
screen basis. The following chart depicts a comparison of attendance per screen,
total revenue per patron, operating cash flow before rent as a percentage of
total revenue and return on assets for AMCE's megaplex theatres and multiplex
theatres for the fiscal year ended April 3, 1997.

<TABLE>
<CAPTION>
DIFFERENCE
MEGAPLEX MULTIPLEX ------------------------
THEATRES THEATRES AMOUNT PERCENT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Attendance per screen (patrons)... 88,200 63,800 24,400 38.2%
Total revenue per patron.......... $ 6.54 $ 5.95 $ 0.59 9.9%
Operating cash flow before rent as
a percentage of total
revenue(1)...................... 37.2% 33.1% 4.1% 12.4%
Return on assets(2)............... 24.5% 17.2% 7.3% 42.4%
</TABLE>

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

(1) Operating cash flow is operating income plus depreciation and amortization.

(2) Operating cash flow divided by AMC's property assets, calculated as its
initial investment plus any rent capitalized at 12%.

47
<PAGE>
ENTERTAINMENT THEMED RETAIL CENTERS

ETRCs are generally large multi-tenant retail developments that incorporate
elements such as restaurants, book or music superstores, high-tech attractions,
interactive game centers, live entertainment venues and other specialty retail
that is oriented to entertainment or leisure-time activities. The Company
believes that the most important component of an ETRC is a megaplex theatre due
to its ability to generate substantial customer traffic to the site. Such
centers typically attempt to provide a family entertainment experience by
creating an atmosphere of fun and excitement. The Company believes that ETRCs
broaden the traditional retail shopping concept and attract a greater number of
customers to spend more time and money at a single location. ETRCs may be
free-standing or attached to regional malls. The recently announced Planet
Movies joint venture is an example of two entertainment based retailers that
expect to capitalize on what the Company believes to be a growing destination
entertainment trend. See "--Planet Movies Properties." The Company believes that
not only do significant opportunities exist today but also that the consumer
demand for entertainment will lead to ETRCs as a rapid growth category of the
retail real estate industry.

GOVERNMENTAL REGULATIONS AFFECTING THE PROPERTIES

ENVIRONMENTAL LAWS. Under various federal, state and local laws, ordinances
and regulations, a current or previous owner, developer or operator of real
estate may be liable for the costs of removal or remediation of certain
hazardous or toxic substances at, on, under or in its property. The costs of
such removal or remediation could be substantial. Such laws often impose such
liability without regard to whether the owner or operator knew of, or was
responsible for, the release or presence of such hazardous or toxic substances.
The presence of such substances may adversely affect the owner's ability to sell
or rent such real estate or to borrow using such real estate as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances also may be liable for the costs of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is owned or operated by such person.

Each of the Properties has undergone a Phase I environmental assessment
(which does not involve invasive procedures such as soil sampling or ground
water analysis) by independent consultants within the last two years. While some
of these assessments have led to further investigation and sampling, none of the
environmental assessments has revealed, nor is the Company aware of, any
environmental liability that the Company believes would have a material adverse
effect on the Company's business, financial condition or results of operations.
No assurance can be given, however, that these assessments and investigations
reveal all potential environmental liabilities, that no prior owner or operator
or other person created any material environmental condition not known to the
Company or the independent consultants or that future uses, conditions or legal
requirements (including, without limitation, those that may result from future
acts or omissions or changes in applicable environmental laws and regulations)
will not result in the imposition of environmental liabilities. See "Risk
Factors--General Real Estate Investment Risks--Government Regulations."
Subsidiaries of AMCE have made certain representations in the Purchase Agreement
regarding the absence of known environmental liabilities and will indemnify the
Company for any breaches of such representations. Should environmental
liabilities arise, however, there can be no assurance that such indemnification
will be available or uncontested.

AMERICANS WITH DISABILITIES ACT OF 1990. The Properties and any newly
developed or acquired entertainment or entertainment-related properties must
comply with Title III of the ADA to the extent that such properties are "public
accommodations" and/or "commercial facilities" as defined by the ADA. Compliance
with the ADA requires that public accommodations "reasonably accommodate"
individuals with disabilities and that new construction or alterations made to
"commercial facilities" conform to accessibility guidelines unless "structurally
impracticable" for new construction, or is technically infeasible for
alterations. The Company believes that the Properties substantially comply with
all present requirements under the ADA and applicable state laws. Under the
Leases, AMC is responsible for all

48
<PAGE>
costs associated with compliance with the ADA. However, noncompliance with the
ADA could result in the imposition of injunctive relief, fines, an award of
damages to private litigants or additional capital expenditures to remedy such
noncompliance.

INSURANCE COVERAGE

The Company believes that all of the Properties will be adequately insured
by AMC under the terms of the Leases; however, an uninsured loss could result in
loss of capital investment and anticipated profits. See "Risk Factors--General
Real Estate Investment Risks--Uninsured Loss."

COMPETITION

There are numerous commercial developers, real estate companies and other
owners of real estate, including those that operate in the regions in which the
Properties are located, that will compete with the Company in seeking properties
for acquisition and disposition, land for development and tenants for
properties. All of the Properties are located in developed areas that include
other entertainment and entertainment-related properties, including in many
instances one or more other multiplex or megaplex theatres operated by AMC or
another exhibition company. The number of competitive properties in a particular
area could have a material adverse effect on the Company's ability to lease
space in, or renew leases for, future properties and on the rents charged. In
addition, AMC, Planet Movies and other entertainment business operators may
lease entertainment and entertainment-related properties from owners other than
the Company. See "Risk Factors--General Real Estate Investment Risks--
Competition."

AMCE's theatres are subject to varying degrees of competition in the
geographic areas in which they operate. Competition is often intense with
respect to licensing motion pictures, attracting patrons and finding new theatre
sites. Theatres operated by national and regional circuits and by smaller
independent exhibitors compete aggressively with AMCE's theatres, often within
the local geographic area as AMCE's theatres. AMCE believes that the principal
competitive factors with respect to film licensing include licensing terms,
seating capacity and location and condition of an exhibitor's theatres. The
competition for patrons is dependent upon factors such as the availability of
popular motion pictures, the location and number of theatres and screens in a
market, the comfort and quality of the theatres and pricing. The theatrical
exhibition industry also faces competition from other distribution channels for
filmed entertainment, such as cable television, pay per view and home video
systems, as well as from all other forms of entertainment. See "Risk
Factors--Operating Risks Inherent in the Entertainment Industry."

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings. Pursuant to the Leases,
AMC will indemnify the Company from and against all liabilities, costs and
expenses imposed upon or asserted against the Company as owner of the applicable
Property on account of certain matters relating to the operation of the
Properties by AMC and, where appropriate, the ownership of the Properties prior
to their acquisition by the Company. See "Leases--Indemnification Generally."

LEASES

The following summary of the Leases between the Company and AMC does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Leases, a form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Concurrently with
the conveyance by subsidiaries of AMCE of the Initial Properties to the Company,
the Company will lease each such property to AMC pursuant to a Lease. The
Company will lease to AMC the Option Properties, if acquired, pursuant to Leases
on substantially the same terms and conditions as the Leases for the

49
<PAGE>
Initial Properties, including the Base Rent Escalation and the Annual Percentage
Rent. The land parcels related to the Properties, if acquired, and any
additional properties acquired (other than the Initial Properties and, if
acquired, the Option Properties) would be leased pursuant to such terms and
conditions as may be agreed upon between the Company and a lessee at the time of
such acquisitions, and such terms and conditions may vary from the terms and
conditions of the Leases described herein.

The Company's interest in each Property includes the land, buildings and
improvements, related easements and rights and fixtures thereon. The Company
will not own or lease any personal property, furniture or equipment at any
Property following the Formation Transactions, all of which will be owned, or
leased from third parties, by AMC.

AMCE will guarantee AMC's obligations under each Lease. The Company will
have general recourse to AMC under the Leases and to AMCE under its guarantee of
AMC's obligations under the Leases, but AMC's payment obligations under such
Leases and AMCE's obligations under its guarantee will not be secured by any
assets of AMC or AMCE other than as described under "--Assignment and
Subletting."

LEASE TERM. Each Property will be leased to AMC under a Lease that will
have a Fixed Term ranging from 13 to 15 years. In addition, AMC will have
options to extend the term of each Lease for four five-year Extended Terms.

USE OF THE PROPERTIES. Each Lease generally will require the Property to be
continuously operated, until the 10th anniversary of the commencement of the
Lease, only as a theatre and auditorium for presentation of motion pictures,
telecasts and other audio-visual presentations, and for meetings and other
public presentations and entertainment and other activities customarily
associated with or incidental to the operation of a movie theatre, including
operation of games and other amusement devices, sale or rental of
entertainment-related merchandise and sale of food, beverages and other goods
and wares. Following the 10th anniversary of the commencement of the Lease, AMC
or any permitted assignee will be permitted to operate each Property for any
lawful purpose, provided that AMC or such assignee will receive the Company's
prior approval if such use would have the effect of causing all or a portion of
the amount received or accrued by the Company from such Property to be treated
as other than "rents from real property" within the meaning of Section 856(d) of
the Code. The Leases will generally require that AMC or any permitted assignee
operate the Properties in an efficient and professional manner.

AMOUNTS PAYABLE UNDER THE LEASES; NET PROVISIONS. During the Fixed Term and
the Extended Terms, AMC will pay annual base rent ("Annual Base Rent"), which
will be payable in monthly installments. Annual Base Rent for each Property will
be increased each year by 2% of the Annual Base Rent applicable to that Property
for the preceding year. In addition, AMC will pay percentage rent equal to the
sum of 6% (the "Annual Percentage Rate") of Gross Receipts in excess of a
baseline amount ("Annual Percentage Rent"). "Gross Receipts" with respect to a
particular Property generally means the receipts from the sale of theatre
admission tickets and concessions received by AMC in or from the Property during
each lease year, with certain deductions and exceptions. The baseline amount is
generally an amount equal to the quotient obtained by dividing the Annual Base
Rent payable for a lease year by the Annual Percentage Rate. The Company does
not anticipate receiving any Annual Percentage Rent under the Leases for at
least five years following the Formation Transactions.

Each Lease is what is commonly referred to as a "triple net" lease, under
which AMC is required to pay thereunder Annual Base Rent, Annual Percentage Rent
and substantially all expenses associated with operation of the Properties. Such
expenses include all taxes, assessments and levies, excises, fees, and all other
governmental charges with respect to each Property, and all charges for
insurance, utilities, service and maintenance, including, without limitation,
electricity, telephone, trash disposal, gas, oil, water, sewer, communication
and all other utilities used in each Property, and any ground lease payments.
AMC will generally be obligated to comply with all laws, contracts, covenants
and restrictions

50
<PAGE>
affecting a Property and to perform all of the Company's obligations under any
ground lease affecting a Property.

AMC'S RIGHT OF FIRST REFUSAL AND FIRST OFFER. Pursuant to each Lease, AMC
will have a right of first refusal in the event the Company obtains an
acceptable third party offer to acquire any interest in any Property or in any
entertainment or entertainment-related property acquired or developed by the
Company and operated by AMC following the Formation Transactions (each a "Future
Property"). Pursuant to such right, prior to selling any interest in any
Property or Future Property, the Company must first offer to sell such Property
or Future Property to AMC on the same terms and conditions contained in such
third party offer. Such right of first refusal must be exercised at least 5 days
prior to the date the offer by the potential third party purchaser expires, but
not less than 10 business days after the Company notifies AMC of the terms of
such potential sale. If AMC declines to purchase such Property or Future
Property on such terms and conditions, the Company will be free to sell such
Property or Future Property for a specified period of time at a price at least
equal to the price offered to AMC and on terms and conditions substantially
consistent with those offered to AMC. Pursuant to each Lease, AMC will also have
a right of first offer, which provides that if the Company desires to sell any
interest in any Property, the Company must notify AMC and AMC will have the
right to make an offer to acquire such property within a specified period of
time. If AMC declines to make an offer, the Company will be free to sell such
Property for a specified period of time. If AMC makes an offer but the Company
declines to sell such Property to AMC on the terms and conditions contained in
such offer, the Company will be restricted from selling such Property for a
specified period of time except upon terms and conditions and at a price more
favorable to the Company than those offered by AMC.

MAINTENANCE, MODIFICATION AND CAPITAL ADDITIONS. AMC will, at its sole cost
and expense, maintain each Property in good order, repair and appearance and
will make structural and non-structural, interior and exterior, foreseen and
unforeseen, and ordinary and extraordinary repairs which may be necessary and
appropriate to keep such Property in good order, repair and appearance
(excluding ordinary wear and tear). The Company will not be required to build or
rebuild any improvements to any Property, or to make any repairs, replacements,
alterations, restorations or renewals to any Property. In the event that the
Company elects to make capital improvements on a Property, the Company will
generally condition such election on an increase in Annual Base Rent under the
Lease with respect to such Property to reflect such expenditures.

AMC, at its sole cost and expense, may make alterations, additions, changes
and/or improvements to each Property with the prior written consent of the
Company, provided that the value and primary intended use of such Property
(determined in the Company's reasonable judgment) is not impaired. All
machinery, equipment, furniture, furnishings and other personal property
installed at the expense of AMC on any Property, will remain the property of AMC
and may be removed by AMC at the expiration or earlier termination of the Lease.

INSURANCE. Each Lease provides that AMC will maintain insurance on each
Property under AMC's insurance policies providing for the following coverages in
such amounts as are or shall customarily be insured against with respect to
properties similar to the Properties, including: (i) fire, vandalism and
malicious mischief, extended coverage perils and all physical loss perils, (ii)
commercial general public liability (including personal injury and property
damage), (iii) flood (when the Property is located in whole or in material part
in a designated flood plain area), earthquake and other similar hazards as may
be customary for comparable properties in the area, (iv) worker's compensation
and (v) such other insurance as the Company or any holder of a mortgage, deed of
trust or other security agreement on such Property (a "Company Mortgagee") may
reasonably require, which at the time is usual and commonly obtained on
commercially reasonable terms in connection with properties similar in type of
building size and use to the Property and located in the geographic area where
the Property is located. The foregoing insurance policies will name the Company
and any Company Mortgagee as additional insureds or loss

51
<PAGE>
payees, as applicable. The deductibles for such insurance will be in such
amounts as are common to properties similar to the Properties. The amount of
such insurance with respect to any Property that is self-retained by AMC will
not exceed 1% of AMCE's consolidated net worth.

ASSIGNMENT AND SUBLETTING. The Leases provide that AMC may, without the
prior written consent of the Company, assign any Lease or sublease any Property
in whole or in part; provided that each sublease or assignment shall expressly
be made subject and subordinate to the provisions of such Lease; and, provided
that, such assignee or sublessee assumes all of AMC's obligations under the
Lease; and, provided further that, no assignment or sublease shall impose any
obligations on the Company, or modify or limit any right or power of the Company
under the Lease. The Leases further provide that no assignment will in any way
impair the continuing primary liability of AMC under, or AMCE as guarantor of
AMC's obligations under, the Leases. Notwithstanding the previous sentence, AMC
will be released of its primary liability under, and AMCE will be released as
the guarantor of AMC's obligations under, a particular Lease if (i) the Company
so consents or (ii) following the fifth anniversary of the commencement of such
Lease, the assignee of a Lease has a minimum net book value of at least $100
million and other specified conditions are met, including the requirement that
the assignee assumes all of AMC's obligations under the Lease.

AMC will, without the Company's prior approval, be permitted to sublease
portions of any Property to concessionaires or licensees to: (i) operate games
or other amusement devices; (ii) sell food, beverages and refreshments; (iii)
sell or rent video cassettes and discs; (iv) sell records, compact discs, books,
magazines, toys and novelties sold in connection with a particular presentation;
and (v) sell other goods, wares, merchandise and services customarily associated
with or incidental to the operation of each Property. Each sublease will be
subject and subordinate to the provisions of the Lease relating to the subject
Property. The sublease will not affect or reduce any of the obligations of AMC
under, or AMCE as guarantor of AMC's obligations under, the relevant Lease, nor
will the sublease impose any additional obligations on the Company. AMC will,
within 10 days after the execution and delivery of any sublease, deliver a
duplicate original thereof to the Company. AMC will need the Company's prior
approval before entering into any sublease, license agreement or other
arrangement which would have the effect of causing all or a portion of the
amount received or accrued by the Company under the Leases to be treated as
other than "rents from real property" within the meaning of Section 856(d) of
the Code.

As security for performance of its obligations under each Lease, AMC grants,
conveys and assigns to the Company all right, title and interest of AMC in and
to all subleases entered into for any or all of any Property, and all
extensions, modifications and renewals thereof and all rents, issues and profits
therefrom. The Company grants AMC a license to collect and enjoy all rents and
other sums of money payable under any such sublease; PROVIDED, HOWEVER, that the
Company will have the absolute right at any time after the occurrence of an
Event of Default (as hereinafter defined) upon notice to AMC and any subtenants
to revoke said sublease or license and to collect such rents and sums of money
and to retain the same.

DAMAGE TO, OR CONDEMNATION OF, A PROPERTY. In the event of any insurable
damage or destruction to any Property, AMC has the obligation fully to repair or
restore the same at AMC's expense, with the Annual Base Rent, real estate taxes
and other impositions on the particular Property being proportionately abated
during the time of restoration, but only to the extent of any rental
interruption insurance proceeds actually received by the Company. If any
Property is damaged by an insurable event to such an extent that the cost of
restoration would exceed 50% of the cost to completely replace the theatre
building on such Property at the time of such damage, and if AMC has fully
complied with the insurance obligations with respect to such Property (including
maintaining insurance against loss of rents), AMC may terminate the Lease of
that Property. With respect to an insurable event, AMC will be obligated to turn
over all insurance proceeds to the Company with respect to such Property,
together with an amount equal to the difference, if any, between the amount of
such insurance proceeds and the net book value of the damaged property, as
reflected on the Company's financial statements on the date of damage.

52
<PAGE>
In the event of a condemnation or taking of a material part of any Property
(meaning any part of the theatre building or 10% or more of the parking spaces
available to such Property), AMC shall have the option of terminating the Lease
with respect to such Property if exercised within a specified time period
following such taking. In such event, the total condemnation award shall be
payable to the Company, except that AMC may recover the value of its fixtures,
if taken, so long as the amount of the award paid to the Company is equal to the
net book value of the Property, as reflected on the Company's financial
statements on the date of the condemnation. In the event of a condemnation or
taking of any Property that does not constitute a material part of such
Property, the Lease will terminate as to the portion of the Property taken, and
AMC will be obligated to repair the portion not taken, if the same does not
render the Property unsuitable for AMC's then use and occupancy, but only to the
extent of the condemnation award.

INDEMNIFICATION GENERALLY. Under each Lease, AMC indemnifies, and is
obligated to save harmless, the Company generally from and against liabilities,
costs and expenses (including reasonable attorneys' fees and expenses) and
actual or consequential damages imposed upon or asserted against the Company as
owner of the applicable Property on account of, among other things, (i)
accident, injury to or death of a person or loss of or damage to property on or
about the Property, (ii) use, misuse, non-use, condition, maintenance or repair
by or on behalf of AMC of the Property, (iii) impositions (which are the
obligations of AMC to pay pursuant to the applicable provisions of such Lease or
any sublease), (iv) failure on the part of AMC to perform or comply with any of
the terms of the Lease or any sublease, (v) liability the Company may incur or
suffer as a result of any permitted contest by AMC under any Lease and (vi)
failure by AMC to comply with any laws (including the ADA) affecting the
Property. Under each Lease, the Company indemnifies, and is obligated to save
harmless, AMC generally from and against liabilities, costs and expenses
(including reasonable attorneys' fees) imposed upon or asserted against AMC as a
result of the Company's negligence or willful misconduct.

ENVIRONMENTAL MATTERS. Each Lease provides for various representations and
warranties by AMC relating to environmental matters with respect to each
Property. Each Lease also requires AMC to indemnify and hold harmless the
Company and any holder of a mortgage, deed of trust or other security agreement
on a Property from and against all liabilities, costs and expenses imposed upon
or asserted against the Company or the Property on account of, among other
things, any federal, state or local law, ordinance, regulation, order or decree
relating to the protection of human health or the environment in respect of the
Property which liability arises as a result of any event or occurrence during
the period when AMC or any of its affiliates was an owner of the Property or a
tenant pursuant to a ground lease or is an obligor under the Lease and which
does not arise as a result of the actions or negligence of the Company or its
agents or invitees.

EVENTS OF DEFAULT. An "Event of Default" will be deemed to have occurred
under a Lease if AMC fails to perform any non-monetary covenant and does not
diligently undertake to cure the same after 30 days' notice from the Company; if
the interest of AMC in any Property is levied upon or attached and such levy or
attachment is not discharged in a specified period of time; or if any
representation or warranty of AMC is materially incorrect. An "Event of Default"
also will be deemed to have occurred under any of the Leases and, prior to the
Cross-Default Termination Date, all of the Leases if AMC fails to pay any rent
within 15 days after written notice of non-payment from the Company, if any
bankruptcy or insolvency proceedings are instituted by or against AMCE or AMC
and, if against AMCE or AMC, they are not dismissed within 90 days or if AMC
fails to continuously operate a Property for a permitted use. "Cross-Default
Termination Date" means the earlier to occur of (i) the date AMCE's senior
long-term debt obligations are rated, or AMCE's corporate credit rating is,
investment grade by either Standard & Poor's Corporation or Moody's Investors
Service, Inc., (ii) AMC's rent payments represent less than 50% of the Company's
rental income for any fiscal quarter or (iii) the expiration of a Fixed Term
with respect to a Lease.

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<PAGE>
In the event of any Event of Default referable to a specific Property, the
Company may evict AMC from such Property and either terminate the Lease or
re-let the Property. In either event, AMC shall remain responsible for the rents
for such Property for the remainder period of the term in excess of rents
received by the Company from any successor occupant. In addition, the Company
may exercise any other rights that it may have under law or under the leases.

TERMINATION BY AMC. The Leases grant to AMC certain limited rights to
terminate the Lease with respect to a particular Property or Properties upon a
determination by AMC, reasonably exercised, that such Property has become
economically obsolete due to competition or circumstances relating to the
property adjacent to such Property. Upon such termination, AMC will be obligated
to pay the Company the greater of its net book value and its appraised value
based on the capitalized value of AMC's remaining rental payments under the
Leases, assuming the Leases remained in place during the applicable Fixed Term
or Extended Term. The appraised value of such Property shall be determined by an
independent appraiser selected by AMC and the Company as more fully described in
the Lease.

Each Lease will be governed by and construed in accordance with the law of
the state in which the related Property is situated (but not including such
state's conflict of laws rules). None of the agreements entered into by AMC in
connection with the Formation Transactions prohibits or otherwise restricts the
Company's ability to lease properties to parties (domestic or foreign) other
than AMC.

54
<PAGE>
MANAGEMENT

TRUSTEES AND EXECUTIVE OFFICERS OF THE COMPANY

<TABLE>
<CAPTION>
YEAR TRUSTEE
NAME AGE TITLE TERM EXPIRES
- ------------------------ ----------- --------------------------------------------- -----------------
<S> <C> <C> <C>
Peter C. Brown.......... 39 Chairman of the Board of Trustees 2000
President, Chief Development Officer and
Robert L. Harris........ 38 Trustee 1999
David M. Brain.......... 41 Chief Financial Officer
Robert J. Druten........ 50 Trustee 1999
Scott Ward.............. 40 Trustee 1998
</TABLE>

PETER C. BROWN has served as Chairman of the Board of Trustees of the
Company since August 1997 and as a Director of AMCE and AMC since November 12,
1992. Mr. Brown was appointed President of AMCE on January 10, 1997. Mr. Brown
served as Executive Vice President of AMCE from August 3, 1994 to January 10,
1997. Mr. Brown has served as Executive Vice President of AMC since August 3,
1994, and as Chief Financial Officer of AMCE and AMC since November 14, 1991.
Mr. Brown served as Senior Vice President of AMCE and AMC from November 14, 1991
until his appointment as Executive Vice President in August 1994. Mr. Brown
served as Treasurer of AMCE and AMC from September 28, 1992 through September
19, 1994. Prior to November 14, 1991, Mr. Brown served as a consultant to AMCE
from October 1990 to October 1991. Prior to serving as a consultant to AMCE, Mr.
Brown was a Vice President at DJS Inverness, Inc., an investment banking firm
located in New York City. Mr. Brown is a graduate of the University of Kansas.

ROBERT L. HARRIS has served as President, Chief Development Officer and
Trustee of the Company since August 1997. From 1992 until joining the Company,
he was employed by AMCE, most recently serving as a Senior Vice President of AMC
in charge of its international efforts. From 1980 to 1992, Mr. Harris was
employed by Carlton Browne & Company, a California-based real estate developer,
serving as its President from 1985 to 1992. During such employment, Mr. Harris
was in charge of development projects totaling in excess of 3.0 million square
feet, including more than 900,000 square feet of commercial/retail development.
Mr. Harris is a director of Imperial Bancorp's Financial Group and serves on the
Board of Pepperdine University's George L. Graziadio School of Business and
Management. Mr. Harris is an alumnus of the University of Southern California.
Mr. Harris is a member of the International Council of Shopping Centers (ICSC)
and was a speaker at the last two regional conferences on ETRCs.

DAVID M. BRAIN has served as Chief Financial Officer of the Company since
August 1997 and has acted as a consultant to AMCE regarding the formation of the
Company since July 1997. From 1996 until that time he was a Senior Vice
President in the investment banking and corporate finance department of George
K. Baum & Company ("GKB"), an investment banking firm headquartered in Kansas
City, Missouri. Mr. Brain's responsibilities at GKB included client advisory
assignments involving the establishment of real estate joint ventures and the
placement of debt and equity for real estate acquisitions and developments.
Before joining GKB, Mr. Brain was in the Kansas City office of KPMG Peat Marwick
LLP as Managing Director of the Corporate Finance group, a practice unit that he
organized and managed for over 12 years. Besides his corporate finance
experience Mr. Brain has appeared numerous times as an expert witness in federal
and state courts regarding valuation matters. He received a Bachelor of Arts
degree in Economics from Tulane University with honors, as well as Phi Beta
Kappa and Tulane Scholar designations, and a Masters of Business Administration
from the A.B. Freeman Graduate Business School at Tulane University, where he
was awarded an academic fellowship. Mr. Brain serves as a director for Capital
for Entrepreneurs, Inc., a venture capital fund, the Center for Business
Innovation, Inc., a not-for-profit small business incubator located on the
campus of the University of Missouri at Kansas City, Weather Protection Systems,
Inc., a tension fabric structure vendor, and the Council for Entrepreneurship at
the University of Missouri at Kansas City.

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<PAGE>
Mr. Robert J. Druten is expected to serve as a trustee of the Company. He is
currently Vice President-Administration, Chief Financial Officer and a Corporate
Officer of Hallmark Cards Incorporated. From 1991 to 1994, Mr. Druten served as
Executive Vice President and Chief Financial Officer of Crown Media, Inc., a
cable communications subsidiary of Hallmark Cards, Inc. From 1989 to 1991, Mr.
Druten served as Vice President of Corporate Development and as a Corporate
Officer of Hallmark Cards Incorporated. Mr. Druten is a member of the Hallmark
United Kingdom Holdings board of directors and is a member of the Hallmark
Entertainment board of directors. Mr. Druten received a Bachelor of Arts in
economics from Kansas University and a Masters of Business Administration from
Rockhurst College.

Mr. Scott Ward is expected to serve as a trustee of the Company. He has
served as Co-President of Russell Stover Candies, Inc. and Whitman's Candies,
Inc. since 1993 and as a Vice President of Castle Mountain Ranch, Inc. since
1981. From March 1993 to January 1997 he additionally served as the Chief
Financial Officer of Russell Stover Candies, Inc. and Whitman's Candies, Inc.
From 1981 to 1993 he served as a Vice President of Russell Stover Candies, Inc.
Mr. Ward received a Bachelor of Arts and a Masters of Business Administration
from the University of Texas.

The Company is currently in discussions with prospective individuals for the
position of Treasurer and additional development support staff. The Company
intends to fill these positions following the Formation Transactions. See "The
Company--Business Objectives and Operating Strategies."

CLASSIFICATION OF TRUSTEES

Pursuant to the terms of the Company's Declaration of Trust, the trustees
are divided into three classes. One class (consisting of Mr. Ward) will hold
office for a term expiring at the annual meeting of shareholders to be held in
1998, a second class (consisting of Mr. Harris and Mr. Druten) will hold office
for a term expiring at the annual meeting of shareholders to be held in 1999 and
a third class (consisting of Mr. Brown) will hold office for a term expiring at
the annual meeting of shareholders to be held in 2000. Each trustee will hold
office for the term to which he or she is elected and until his or her successor
is duly elected and qualified. At each annual meeting of shareholders of the
Company, the successors to the class of trustees whose terms expire at such
meeting will be elected to hold office for a term expiring at the annual meeting
of shareholders held in the third year following the year of their election. See
"Certain Provisions of Maryland Law and of the Company's Declaration of Trust
and Bylaws."

COMMITTEES OF THE BOARD

The Board expects to establish an Audit Committee consisting of Mr. Druten
and Mr. Ward. The Audit Committee will be responsible for making recommendations
concerning the engagement of independent public accountants, reviewing the plans
and results of the audit engagement with the independent public accountants,
approving professional services provided by the independent public accountants,
reviewing the independence of the independent public accountants, considering
the range of audit and non-audit fees and reviewing the adequacy of the
Company's internal accounting controls.

The Board expects to establish a Compensation Committee consisting of Mr.
Druten and Mr. Ward. The Compensation Committee will be responsible for
reviewing the performance of executive officers and changes in officers'
compensation and benefits.

The Company may from time to time form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated by
the Board of Trustees.

COMPENSATION OF TRUSTEES

The Company will pay an annual retainer of $18,000 to each of its trustees
(other than the Chairman of the Board of Trustees) who is not an officer or
employee of the Company or any of its affiliates. The annual retainer will be
paid 50% in cash and 50% in Shares. A trustee may elect to receive all of the
retainer in Shares and may also elect to defer payment of his annual retainer
under the Company's

56
<PAGE>
Deferred Compensation Plan for Trustees. Such trustees will also receive $1,000
for each Board meeting attended, which will also be paid in cash. Non-employee
chairpersons of Board committees will receive $1,250 payable in cash for each
committee meeting attended and non-employee members of the Board committees will
receive $750 payable in cash for each committee meeting attended. Employees of
the Company or its affiliates who are trustees will not be paid any trustee
fees. Trustees will be reimbursed for any out-of-town travel expenses incurred
in connection with attendance at Board meetings.

In addition, pursuant to the Share Option Program, each trustee who is not
an employee of the Company or any of its affiliates will be entitled to receive
an option to purchase 10,000 Shares on the effective date of the Registration
Statement relating to the Offering and will automatically receive an option to
purchase 3,333 Shares on the date of each subsequent annual meeting of
shareholders at a price per Share equal to the closing price of one Share on
such annual meeting date. See "-- Compensation Programs--Share Option Program."

The Company's Chairman of the Board of Trustees will not receive any
compensation or options pursuant to the plans described above.

EXECUTIVE COMPENSATION

Prior to the Offering, the Company will not pay any compensation to its
executive officers. The following table sets forth the annual base salary rates
and other compensation expected to be paid by the Company in 1997 to the most
highly compensated executive officers of the Company (i.e., those whose cash
compensation from the Company in 1997 on an annualized basis is expected to
exceed $100,000) (the "Named Executive Officers").

57
<PAGE>
SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
AWARDS
---------------------------------
ANNUAL COMPENSATION SECURITIES
RESTRICTED UNDERLYING
------------------------ SHARE AWARDS OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS ($)(2) SARS(#)(3)
- ------------------------------- --------- ----------- ----------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Robert L. Harris ..............
President and Chief
Development Officer 1997 $ 225,000 (4) $ 800,000 40,000
David M. Brain ................
Chief Financial Officer 1997 $ 175,000 (4) $ 400,000 20,000
</TABLE>

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

(1) Amounts given are annualized salaries effective for the year ended December
31, 1997.

(2) These Shares are entitled to receive distributions to the extent paid by the
Company.

(3) All options will vest in 20% increments at the end of each of the first five
years following the Offering, and will be exercisable at a price per Share
equal to the initial public offering price per Share.

(4) Amount of bonus is contingent on performance measures. See "Compensation
Programs--Annual Incentive Program."

EMPLOYMENT AGREEMENTS

The Company will enter into employment agreements with Robert L. Harris and
David M. Brain, pursuant to which Mr. Harris will serve as the President and
Chief Development Officer and Mr. Brain will serve as the Chief Financial
Officer of the Company, each for a period of two years (extendable at the option
of the Company) at an initial annual compensation of $225,000 and $175,000,
respectively, subject to any increases in base compensation approved by the
Compensation Committee. Upon consummation of the Formation Transactions, Mr.
Harris and Mr. Brain will receive a signing bonus of $40,000 and $30,000,
respectively. Such agreements are expected to contain customary non-compete and
termination provisions.

COMPENSATION PROGRAMS

The Company has implemented various compensation programs (the "Compensation
Programs") to attract and retain trustees, executive officers and other key
employees of the Company, to provide incentives to such persons to maximize the
Company's Funds from Operations and to enable trustees, executive officers and
other key employees of the Company to participate in the ownership of the
Company. The Annual Incentive Program provides for the payment of certain
incentive payments based
on performance. The Share Purchase Program provides executive officers the
opportunity to purchase Shares. The Restricted Share Program provides for the
grant of restricted Shares. The Share Option Program provides for the award to
executive officers and other key employees of the Company of nonqualified
options and incentive options to purchase Shares.

The Compensation Programs will be administered by the Compensation
Committee, which is authorized to select from among the eligible employees of
the Company individuals to whom incentive and other Share-based awards are to be
granted and to determine the number of Shares to be subject thereto and the
terms and conditions thereof. The Compensation Committee is also authorized to
adopt, amend and rescind rules relating to the administration of any such
compensation programs. No member of the Compensation Committee is eligible to
participate in any Compensation Program other than non-employee trustees of the
Company.

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<PAGE>
ANNUAL INCENTIVE PROGRAM. The Annual Incentive Program provides for
incentive payments based on Funds from Operations performance measured against a
target or the achievement of certain strategic objectives. Maximum, target and
threshold levels will be set for each participant at the time of grant. Such
levels will be 60%, 40%, and 20% of base salary for Mr. Harris and 40%, 20% and
10% of base salary for Mr. Brain. All or part of the incentive payments may be
paid in unrestricted Shares at the participant's option.

SHARE PURCHASE PROGRAM. Pursuant to the Share Purchase Program, the Company
may provide participants the opportunity to purchase Shares. The Company can
make or arrange for full recourse loans for such purchases with interest payable
at not less than the federal rate.

RESTRICTED SHARE PROGRAM. For every two Shares purchased by an executive
officer pursuant to the Share Purchase Program, such officer will be granted one
restricted Share. The Company may also grant restricted Shares from time to time
to other employees of the Company. Restricted Shares vest five years after the
grant date, although vesting can be accelerated, at the rate of 20% per year
beginning after one year, based on the achievement of annual or multi-year
performance goals, or fully upon a change of control of the Company. Restricted
Shares may also be sold to participants at various prices (or issued without
monetary consideration) and may be made subject to such restrictions as may be
determined by the Compensation Committee. Restricted Shares typically may be
purchased by the Company at the original purchase price if the conditions or
restrictions are not met. In general, restricted Shares may not be sold, or
otherwise transferred or hypothecated, until restrictions are removed by the
Company or expire. Purchasers of restricted Shares, unlike recipients of Share
options, will have voting rights and will receive dividends and distributions
prior to the time such restrictions lapse.

SHARE OPTION PROGRAM. Executive officers may choose to participate in both
the Restricted Share and Share Option Programs or to participate only in the
Share Option Program. For every two Shares purchased pursuant to the Share
Purchase Program by an executive officer who participates in both the Restricted
Share and Share Option Programs, such officer will be granted an option to
purchase one Share. For every Share purchased pursuant to the Share Purchase
Program by an executive officer who participates only in the Share Option
Program, such participant will be granted an option to purchase two Shares. The
Company may also grant options to purchase Shares from time to time to other
employees of the Company. In addition, each trustee (except the Chairman of the
Board of Trustees) who is not an employee of the Company or its affiliates will
be entitled to receive an option to purchase 10,000 Shares on the effective date
of the Registration Statement relating to the Offering and will automatically
receive an option to purchase 3,333 Shares on the date of each subsequent
meeting of shareholders at a price per Share equal to the closing price of one
Share on such annual meeting date. Options may be either nonqualified options or
incentive options (for employees only) and may also be issued to participants at
various prices (or issued without monetary consideration) and may be made
subject to such restrictions as may be determined by the Compensation Committee.

NONQUALIFIED OPTIONS, if granted, will provide for the right to purchase
Shares at a specific price that may be less than the fair market value of Shares
on the grant date and usually will become exercisable in installments after the
grant date. Nonqualified options may be granted for any reasonable term and may
be transferrable in certain limited circumstances.

INCENTIVE OPTIONS, if granted, will be designed to comply with the
"incentive stock option" provisions of the Code and will be subject to
restrictions contained therein, including that the exercise price must generally
equal at least 100% of the fair market value of Shares on the grant date and
that the term generally must not exceed ten years. Incentive options may be
modified after the grant date to disqualify them from treatment as "incentive
stock options."

SHARES SUBJECT TO THE COMPENSATION PROGRAMS. A maximum of 1,500,000 Shares
(including the 260,000 Shares awarded or reserved pursuant to the awards made
prior to the consummation of the Offering) will be reserved for issuance under
the Compensation Programs. The limit on the number of

59
<PAGE>
awards granted to any one individual is 750,000 shares so long as the grant does
not violate the Ownership Limit or cause the Company to fail to qualify as a
REIT for federal income tax purposes. See "Description of Shares of Beneficial
Interest--Restriction on Size of Holdings of Shares."

AWARDS MADE UNDER THE COMPENSATION PROGRAMS. Prior to the consummation of
the Offering, the Company will lend approximately $1.6 million to Robert L.
Harris to purchase 80,000 Shares at the initial public offering price pursuant
to the Share Purchase Program. In addition, Mr. Harris will be granted (i)
40,000 restricted Shares pursuant to the Restricted Share Program and (ii)
options to purchase 40,000 Shares pursuant to the Share Option Program.

Prior to the consummation of the Offering, the Company will lend
approximately $800,000 to David M. Brain to purchase 40,000 Shares at the
initial public offering price pursuant to the Share Purchase Program. In
addition, Mr. Brain will be granted (i) 20,000 restricted Shares pursuant to the
Restricted Share Program and (ii) options to purchase 20,000 Shares pursuant to
the Share Option Program.

The term of the options granted to Mr. Harris and Mr. Brain will be ten
years from the date of grant. Each such option will vest in 20% increments at
the end of each of five years following the Offering, and will be exercisable at
a price per Share equal to the initial public offering price per Share. Unvested
options and restricted Shares will be forfeited if the executive officer sells
the Shares purchased pursuant to the Share Purchase Program during the five-year
period subsequent to grant. Dividends on the restricted Shares may be used to
pay accrued interest on the loans pursuant to which such executive officers
purchased Shares under the Share Purchase Program. The Shares purchased by Mr.
Harris and Mr. Brain pursuant to the Share Purchase Program may not be sold for
two years following the consumation of the Formation Transactions without the
prior written consent of the Company.

TRUSTEE LIABILITY LIMITATION AND INDEMNIFICATION

Maryland law permits a Maryland real estate investment trust to include in
its declaration of trust a provision limiting the liability of its trustees and
officers to the trust and its shareholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. The Company's
Declaration of Trust contains such a provision which eliminates such liability
to the maximum extent permitted by Maryland law.

The Company's Declaration of Trust provides that the Company will, to the
maximum extent permitted by Maryland law in effect from time to time, indemnify
and pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former trustee or officer
of the Company or (b) any individual who, while a trustee of the Company and at
the request of the Company, serves or has served another real estate investment
trust, corporation, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, shareholder, partner or trustee of
such real estate investment trust, corporation, partnership, joint venture,
employee benefit plan or other enterprise. The Company has the power, with the
approval of the Board of Trustees, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the Company in
any of the capacities described in (a) or (b) above and to any employee or agent
of the Company or its predecessors.

60
<PAGE>
unless it is established that (a) the act or omission of the director or officer
was material to the matter giving rise to the proceeding and (i) was committed
in bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, the director
or officer had reasonable cause to believe that the act or omission was
unlawful. However, under the MGCL, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation or for a
judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (a) a
written affirmation by the director or officer of his or her good faith belief
that he or she has met the standard of conduct necessary for indemnification by
the corporation and (b) a written undertaking by or on his or her behalf to
repay the amount paid or reimbursed by the corporation if it shall ultimately be
determined that the standard of conduct was not met.

Additionally, the Company has entered into indemnity agreements with each of
its officers and trustees which provide for reimbursement of all expenses and
liabilities of such officer or trustee, arising out of any lawsuit or claim
against such officer or trustee due to the fact that he or she was or is serving
as an officer or trustee, except for such liabilities and expenses (a) the
payment of which is judicially determined to be unlawful, (b) relating to claims
under Section 16(b) of the Exchange Act or (c) relating to judicially determined
criminal violations.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

61
<PAGE>
AMC ENTERTAINMENT INC.

BUSINESS OF AMCE

AMC, the lessee of the Initial Properties and, if acquired by the Company,
the Option Properties, is a wholly-owned subsidiary of AMCE, the guarantor of
AMC's obligations under the Leases and one of the leading theatrical exhibition
companies in North America measured by revenues. In the fiscal year ended April
3, 1997, AMCE's consolidated revenues were $749,597,000. As of July 3, 1997,
AMCE, through its subsidiaries, operated 230 theatres with an aggregate of 2,031
screens located in 22 states, the District of Columbia, Portugal and Japan.
Approximately 62% of the screens operated by AMCE are located in Florida,
California, Texas, Missouri and Michigan and approximately 74% of AMCE's
domestic screens are located in areas among the 20 largest "Areas of Dominant
Influence" (television market areas as defined by Arbitron Company). AMCE is an
industry leader in the development and operation of megaplex and multiplex
theatres, primarily in large metropolitan markets.

AMCE and its predecessor have operated movie theatres since 1920. AMCE
currently operates one of the largest motion picture exhibition circuits in
North America and continually upgrades its theatre circuit by opening new
theatres (primarily megaplex theatres), and adding new screens to existing
theatres. Since April 1995, AMCE has opened 29 new theatres with 504 screens,
representing 24.8% of its current number of screens, and has added 52 screens to
existing theatres.

Revenues for AMCE are generated primarily from box office admissions and
theatre concessions sales, which accounted for 66% and 30%, respectively, of
fiscal 1997 revenues. The balance of AMCE's revenues are generated primarily by
AMCE's on-screen advertising business, video games located in theatre lobbies
and the rental of theatre auditoriums.

AMCE is a holding company with no significant operations of its own, and it
has three direct wholly-owned subsidiaries, AMC, AMC Entertainment
International, Inc. and National Cinema Network, Inc. All of AMCE's domestic
theatrical exhibition business is conducted through AMC and its subsidiaries.
AMCE is developing theatres in international markets through AMC Entertainment
International, Inc. and its subsidiaries. AMCE engages in the on-screen
advertising business through National Cinema Network, Inc.

AMCE predominantly licenses "first-run" motion pictures on a film-by-film
and theatre-by-theatre basis. AMCE obtains these licenses either by negotiations
directly with, or by submitting bids to, distributors. Negotiations with
distributors are based on several factors, including theatre location,
competition, season of the year and motion picture content. Licenses entered
into through both negotiated and bid processes typically state that rental fees
shall be based on the higher of a gross receipts formula or a theatre admissions
revenue sharing formula. Under a gross receipts formula, the distributor
receives a specified percentage of box office receipts, with the percentages
declining over the term of the run. First-run motion picture rental fees are
generally the greater of (i) 70% of box office admissions, gradually declining
to as low as 30% over a period of four to seven weeks, and (ii) a specified
percentage (i.e., 90%) of the excess of box office receipts over a negotiated
allowance for theatre expenses (commonly known as a "90/10" clause). Second-run
motion picture rental fees typically begin at 35% of box office admissions and
often decline to 30% after the first week. The theatrical exhibition industry is
seasonal in nature, with the highest attendance and revenue occurring during the
summer months and the holiday seasons.

62
<PAGE>
AMCE PROPERTIES

As of July 3, 1997, AMCE's theatres are as set forth below:

<TABLE>
<CAPTION>
POST-FORMATION TRANSACTIONS(1)
PRE-FORMATION TRANSACTIONS
------------------------------------- -------------------------------------
OPERATING UNDER CONSTRUCTION(2) OPERATING UNDER CONSTRUCTION(2)
-------------- --------------------- -------------- ---------------------
<S> <C> <C> <C> <C>
Owns(3):
Megaplex....................... 8 6 -- 1(4)
Other(5)....................... 21 -- 21 --
Leases or manages:
Megaplex....................... 13 20(6) 21 25
Other.......................... 188 2 188 2
-- --
--- ---
230(7) 28 230(7) 28
-- --
-- --
--- ---
--- ---
</TABLE>

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

(1) Assumes exercise of options to acquire all of the Option Properties.
Excludes Livonia 20 for which construction had not commenced as of July 3,
1997.
(2) Only includes theatres for which construction has commenced. Excludes
Livonia 20 for which construction had not commenced as of July 3, 1997.

(3) Includes ground leased properties.

(4) The one megaplex theatre that the Company is not acquiring is Pleasure
Island 24 located at Walt Disney World in Orlando, Florida. The Company is
not acquiring this property because its ground lease is not readily
transferable to the Company.

(5) The Company is not acquiring the 21 other theatres owned by AMCE because
they do not meet the Company's investment criteria and objectives.

(6) Includes the three Option Properties that are currently leased by AMC from a
third party owner/ lessor.

(7) Of the 230 operating theatres, 225 were owned or leased by AMC or one of its
subsidiaries, two were leased by AMC Entertainment International, Inc. or
one of its subsidiaries and three were operated by AMC but owned by third
parties.

63
<PAGE>
AMCE'S SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected consolidated data regarding AMCE's
five most recent fiscal years ended April 3, 1997 and the interim periods ended
July 3, 1997 and June 27, 1996. Operating results for the period ended July 3,
1997 are not necessarily indicative of the results that may be expected for the
entire fiscal year ending April 2, 1998. The historical financial information
for each of the fiscal periods specified below has been derived from AMCE's
consolidated financial statements for such periods. The unaudited pro forma
financial information of AMCE as of and for the fiscal year ended April 3, 1997
and for the interim period ended July 3, 1997 has been adjusted to give effect
to the Formation Transactions as set forth in the Notes to AMCE's Condensed Pro
Forma Financial Statements included elsewhere in this Prospectus. Such pro forma
information does not purport to represent what AMCE's results of operations
would have been had the Formation Transactions occurred on the dates presented
or to project AMCE's financial position or results of operations for any future
period. The historical financial data set forth below is qualified in its
entirety by reference to AMCE's Consolidated Financial Statements and the Notes
thereto included elsewhere in this Prospectus. The historical and pro forma
financial data set forth below should be read in conjunction with "--AMCE's
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and AMCE's Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------------------
JULY 3, 1997 JULY 3, 1997 JUNE 27, 1996
PRO FORMA ACTUAL ACTUAL
(1)(2)(5) (1)(2) (1)(2)
------------ ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND STATISTICAL DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................................ $ 194,462 $ 194,462 $ 161,927
Total cost of operations...................... 163,588 159,670 132,821
General and administrative.................... 14,755 14,755 13,025
Depreciation and amortization................. 15,440 16,367 11,674
------------ ------------ --------------
Operating income.............................. 679 3,670 4,407
Interest expense.............................. 6,159 8,245 4,909
Investment income............................. 172 172 182
Gain on disposition of assets................. 1,178 1,178 18
------------ ------------ --------------
Earnings (loss) before income taxes........... (4,130) (3,225) (302)
Income tax provision.......................... (1,775) (1,386) (125)
------------ ------------ --------------
Net loss...................................... $ (2,355) $ (1,839) $ (177)
------------ ------------ --------------
------------ ------------ --------------
Preferred dividends........................... 1,369 1,369 1,546
------------ ------------ --------------
Net loss for common shares.................... $ (3,724) $ (3,208) $ (1,723)
------------ ------------ --------------
------------ ------------ --------------
Loss per share:
Primary..................................... $ (.21) $ (.18) $ (.10)
Fully diluted............................... $ (.21) $ (.18) $ (.10)
Common dividends per share.................... -- -- --
Weighted average number of shares outstanding:
Primary..................................... 18,006 18,006 16,817
Fully diluted............................... 18,006 18,006 16,817
BALANCE SHEET DATA (AT PERIOD END):
Cash, equivalents and investments............. $ 24,245 $ 24,245 $ 10,262
Total assets.................................. 684,874 832,729 522,724
Total debt (including capital lease
obligations)................................ 308,163 462,227 222,569
Stockholders' equity.......................... 166,537 166,537 157,251
STATISTICAL DATA (AT PERIOD END):
Number of theatres operated................... 230 230 231
Number of screens operated.................... 2,031 2,031 1,803
Screens per theatre........................... 8.8 8.8 7.8
</TABLE>

64
<PAGE>

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------------------------------------
APRIL 3, APRIL 3, MARCH 28, MARCH 30, MARCH 31,
1997 1997 1996 1995 1994 APRIL 1,
PRO FORMA ACTUAL ACTUAL ACTUAL ACTUAL 1993
(1)(2)(5) (1)(2) (1)(2) (1)(2) (1)(2) ACTUAL (2)
--------- --------- ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues......................... $ 749,597 $ 749,597 $ 655,972 $ 563,344 $ 586,300 $ 403,775
Total cost of operations............... 588,654 580,002 491,358 432,763 446,957 308,848
General and administrative............. 56,647 56,647 52,059 41,639 40,559 37,582
Depreciation and amortization.......... 57,507 59,803 43,886 37,913 38,048 28,175
Estimated loss on future disposition of
assets............................... -- -- -- -- -- 2,500
--------- --------- ------------ ------------ ------------ ------------
Operating income....................... 46,789 53,145 68,669 51,029 60,736 26,670
Interest expense....................... 17,424 22,022 28,828 35,908 36,375 31,401
Investment income...................... 856 856 7,052 10,013 1,156 8,239
Minority interest...................... -- -- -- -- 1,599 --
Gain (loss) on disposition of assets... (84) (84) (222) (156) 296 9,638
--------- --------- ------------ ------------ ------------ ------------
Earnings before income taxes and
extraordinary item................... 30,137 31,895 46,671 24,978 27,412 13,146
Income tax provision................... 12,190 12,900 19,300 (9,000) 12,100 5,400
--------- --------- ------------ ------------ ------------ ------------
Earnings before extraordinary item..... 17,947 18,995 27,371 33,978 15,312 7,746
Extraordinary item..................... -- -- (19,350) -- -- (6,483)
--------- --------- ------------ ------------ ------------ ------------
Net earnings........................... $ 17,947 $ 18,995 $ 8,021 $ 33,978 $ 15,312 $ 1,263
--------- --------- ------------ ------------ ------------ ------------
--------- --------- ------------ ------------ ------------ ------------
Preferred dividends.................... 5,907 5,907 7,000 7,000 538 256
--------- --------- ------------ ------------ ------------ ------------
Net earnings for common shares......... $ 12,040 $ 13,088 $ 1,021 $ 26,978 $ 14,774 $ 1,007
--------- --------- ------------ ------------ ------------ ------------
--------- --------- ------------ ------------ ------------ ------------
Earnings per share before extraordinary
item:
Primary.............................. $ .68 $ .74 $ 1.21 $ 1.63 $ .89 $ .46
Fully diluted........................ $ .67 $ .73 $ 1.20 $ 1.45 $ .89 $ .46
Earnings per share:
Primary.............................. $ .68 $ .74 $ .06(4) $ 1.63 $ .89 $ .06(3)
Fully diluted........................ $ .67 $ .73 $ .06(4) $ 1.45 $ .89 $ .06(3)
Common dividends per share............. -- -- -- -- -- $ 1.14
Weighted average number of shares
outstanding:
Primary.............................. 17,726 17,726 16,795 16,593 16,521 16,217
Fully diluted........................ 17,940 17,940 17,031 23,509 16,550 16,217

BALANCE SHEET DATA (AT PERIOD END):
Cash, equivalents and investments...... N/A $ 24,715 $ 10,795 $ 140,377 $ 151,469 $ 50,106
Total assets........................... N/A 718,213 483,458 522,154 501,276 374,102
Total debt (including capital lease
obligations)......................... N/A 373,724 188,172 267,504 268,188 255,302
Stockholders' equity................... N/A 170,012 158,918 157,388 130,404 18,171
STATISTICAL DATA (AT PERIOD END):
Number of theatres operated............ 228 228 226 232 236 243
Number of screens operated............. 1,957 1,957 1,719 1,630 1,603 1,617
Screens per theatre.................... 8.6 8.6 7.6 7.0 6.8 6.7
</TABLE>

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

(1) Fiscal 1998, 1997, 1996, 1995 and 1994 include the effects from the
acquisition of Exhibition Enterprises Partnership on May 28, 1993.

(2) Fiscal 1997 consists of 53 weeks. All other years have 52 weeks.

(3) Fiscal 1993 includes a $6,483,000 extraordinary loss equal to $.40 per
common share.

(4) Fiscal 1996 includes a $19,350,000 extraordinary loss equal to $1.15 per
common share.

(5) See AMCE's Condensed Pro Forma Financial Statements and the Notes thereto
included elsewhere in this Prospectus.

65
<PAGE>
AMCE'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following financial analysis should be read in conjunction with the
above financial information concerning AMCE.

The forward-looking statements included in this section, which reflect
AMCE's management's best judgment based on factors currently known, involve
risks and uncertainties. Actual results could differ materially from those
anticipated in the forward-looking statements included herein as a result of a
number of factors, including but not limited to AMCE's ability to enter into
various financing programs, competition from other companies, changes in
economic climate, increase in demand for real estate, demographic changes,
changes in real estate, zoning and tax laws, the ability to open new theatres
and screens as currently planned, the performance of films licensed by AMCE and
other risks and uncertainties.

OPERATING RESULTS

THIRTEEN WEEKS ENDED JULY 3, 1997 AND JUNE 27, 1996

Set forth in the table below is a summary of revenues, cost of operations,
general and administrative expenses and depreciation and amortization
attributable to AMCE's domestic and international theatrical exhibition
operations and AMCE's on-screen advertising business for the thirteen weeks
ended July 3, 1997 and June 27, 1996.

<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
JULY 3, JUNE 27,
1997 1996 % CHANGE
--------- --------- ---------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
REVENUES
Domestic
Admissions.............................................................................. $ 121,312 $ 105,089 15.4%
Concessions............................................................................. 58,086 49,684 16.9
Other................................................................................... 3,434 2,861 20.0
--------- --------- -----
182,832 157,634 16.0
International
Admissions.............................................................................. 4,686 1,196 *
Concessions............................................................................. 986 147 *
Other................................................................................... 47 -- --
--------- --------- -----
5,719 1,343 *
On-screen advertising and other........................................................... 5,911 2,950 *
--------- --------- -----
Total revenues........................................................................ $ 194,462 $ 161,927 20.1%
--------- --------- -----
--------- --------- -----
COST OF OPERATIONS
Domestic
Film exhibition costs................................................................... $ 68,660 $ 55,565 23.6%
Concession costs........................................................................ 9,642 8,481 13.7
Rent.................................................................................... 20,980 17,566 19.4
Other................................................................................... 50,125 46,427 8.0
--------- --------- -----
149,407 128,039 16.7
International
Film exhibition costs................................................................... 2,482 574 *
Concession costs........................................................................ 414 44 *
Rent.................................................................................... 1,474 661 *
Other................................................................................... 1,504 856 75.7
--------- --------- -----
5,874 2,135 *
On-screen advertising and other........................................................... 4,389 2,647 65.8
--------- --------- -----
Total cost of operations.............................................................. $ 159,670 $ 132,821 20.2%
--------- --------- -----
--------- --------- -----
GENERAL AND ADMINISTRATIVE
Corporate and domestic.................................................................... $ 11,626 $ 10,486 10.9%
International............................................................................. 1,478 1,490 (0.8)
On-screen advertising and other........................................................... 1,651 1,049 57.4
--------- --------- -----
Total general and administrative...................................................... $ 14,755 $ 13,025 13.3%
--------- --------- -----
--------- --------- -----
DEPRECIATION AND AMORTIZATION
Corporation and domestic.................................................................. $ 15,146 $ 11,102 36.4%
International............................................................................. 616 169 *
On-screen advertising and other........................................................... 605 403 50.1%
--------- --------- -----
Total depreciation and amortization................................................... $ 16,367 $ 11,674 40.2%
--------- --------- -----
--------- --------- -----
</TABLE>

- --------------
* Percentage change in excess of 100%

66
<PAGE>
REVENUES. Total revenues increased 20.1%, or $32,535,000, during the
thirteen weeks ended July 3, 1997 compared to the thirteen weeks ended June 27,
1996.

Total domestic revenues increased 16.0%, or $25,198,000, from the prior
year. Admissions revenues increased 15.4%, or $16,223,000, due to a 9.9%
increase in attendance, which contributed $10,411,000 of the increase, and a
5.0% increase in average ticket prices, which contributed $5,812,000 of the
increase. The increase in attendance was due primarily to AMCE's megaplex
theatres (theatres having at least 14 screens with predominately stadium-style
seating). Attendance at megaplex theatres increased during the quarter as a
result of the addition of 12 new megaplex theatres with 266 screens since June
27, 1996 and a 7.5% increase in attendance at comparable megaplex theatres,
theatres opened before the first quarter of the prior fiscal year. The increase
in attendance from megaplex theatres was partially offset by a 5.4% decrease in
attendance at comparable multiplex theatres (theatres generally without
stadium-style seating and having less than 14 screens) and the closure or sale
of 16 theatres with 82 screens since the first quarter of fiscal 1997. The
decline in attendance at comparable multiplex theatres was due primarily to
competition from megaplex theatres in areas where AMCE's multiplex theatres
operate, a trend which AMCE anticipates will continue, and the overall
performance of film product. The increase in average ticket prices was due to
price increases and the growing number of megaplexes in AMCE's circuit, which
yield higher average ticket prices than multiplexes. Concessions revenues at
domestic theatres increased by 16.9%, or $8,402,000, due to the increase in
total attendance, which contributed $4,922,000 of the increase, and a 6.4%
increase in average concessions per patron, which contributed $3,480,000 of the
increase. The increase in average concessions per patron was attributable to the
increasing number of megaplexes in AMCE's circuit, where concession spending per
patron is higher than in multiplex theatres.

Total international revenues increased $4,376,000 from the prior year.
Admissions revenues increased $3,490,000 due to an increase in attendance, which
contributed $8,551,000 of the increase, offset by a decrease in average ticket
prices which reduced revenues by $5,061,000. Attendance increased as a result of
the opening of AMCE's second international theatre, the Arrabida 20 in Portugal,
during the third quarter of fiscal 1997. Concessions revenues increased by
$839,000 due to the increase in total attendance, which contributed $1,051,000
of the increase, offset by a decrease in average concessions per patron, which
reduced revenues by $212,000. The decrease in average ticket prices and
concessions per patron was due to the lower ticket and concessions prices at the
theatre in Portugal compared to the theatre in Japan.

On-screen advertising and other revenues increased $2,961,000 due to a
change in the number of periods included in the results of operations of AMCE's
on-screen advertising business and an increase in the number of screens served,
a result of its expansion program.

COST OF OPERATIONS. Total cost of operations increased 20.2%, or
$26,849,000, during the thirteen weeks ended July 3, 1997 compared to the
thirteen weeks ended June 27, 1996.

Total domestic cost of operations increased 16.7%, or $21,368,000, from the
prior year. Film exhibition costs increased 23.6%, or $13,095,000, due to higher
attendance, which contributed $8,200,000 of the increase, and an increase in the
percentage of admissions paid to film distributors, which caused an increase of
$4,895,000. As a percentage of admissions revenues, film exhibition costs
increased to 56.6% in the current year as compared with 52.9% in the prior year.
This increase was due to a change in attendance patterns and the popularity of
films released during the period which had higher film exhibition terms.
Attendance was more concentrated in the early weeks for the films released
during the current period, which typically results in higher film exhibition
costs. The 13.7%, or $1,161,000, increase in concession costs is attributable to
the increase in concessions revenues. As a percentage of concessions revenues,
concession costs decreased from 17.1% to 16.6%. Rent expense increased 19.4%, or
$3,414,000, due to the higher number of screens in operation. Other cost of
operations increased 8.0%, or $3,698,000. As a percentage of total revenues,
other cost of operations decreased

67
<PAGE>
from 29.5% in the prior year to 27.4% in the current year, primarily as a result
of more effective staffing at AMCE's theatres.

Total international cost of operations increased $3,739,000 from the prior
year. Film exhibition costs increased $1,908,000 due primarily to higher
attendance. The $370,000 increase in concession costs was primarily attributable
to the increase in concessions revenues. Rent expense increased $813,000 and
other cost of operations increased $648,000 from the prior year due to the
opening of the Arrabida 20 during the third quarter of fiscal 1997.

On-screen advertising and other cost of operations increased $1,742,000 as a
result of a change in the number of periods included in the results of
operations of AMCE's on-screen advertising business and the higher number of
screens served.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
13.3%, or $1,730,000, during the thirteen weeks ended July 3, 1997.

Corporate and domestic general and administrative expenses increased 10.9%,
or $1,140,000, due primarily to increases in salaries, costs associated with
modification of computer applications for the "Year 2000" and beyond and costs
associated with AMCE's development of theatres.

General and administrative expenses associated with on-screen advertising
and other increased 57.4%, or $602,000, due to a change in the number of periods
included in the results of operations of AMCE's on-screen advertising business
and an increase in payroll and related costs to support its expansion program.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
40.2%, or $4,693,000, during the thirteen weeks ended July 3, 1997. This
increase was caused by an increase in employed theatre assets resulting from
AMCE's expansion plan.

OPERATING INCOME. Operating income decreased 16.7%, or $737,000, during the
thirteen weeks ended July 3, 1997. The decrease in operating income was
primarily attributable to the attendance and revenue decline at multiplex
theatres, an increase in film exhibition costs as a percentage of admissions
revenues and the increases in depreciation and amortization and general and
administrative expenses, the effects of which were partially offset by an
increase in attendance and revenues at megaplex theatres.

INTEREST EXPENSE. Interest expense increased 68.0%, or $3,336,000, during
the thirteen weeks ended July 3, 1997 compared to the prior year. The increase
in interest expense resulted primarily from an increase in average outstanding
borrowings.

GAIN ON DISPOSITION OF ASSETS. Gain on disposition of assets increased
$1,160,000 during the thirteen weeks ended July 3, 1997 from the sale of one of
AMCE's multiplex theatres during the current year.

INCOME TAX PROVISION. The provision for income taxes decreased $1,261,000
to a benefit of $1,386,000 during the current year from a benefit of $125,000 in
the prior year. The effective tax rate was 43.0% during the current year
compared to 41.4% in the prior year.

NET LOSS. Net loss increased $1,662,000 during the thirteen weeks ended
July 3, 1997 to $1,839,000 from $177,000 in the prior year. Net loss per common
share, after deducting preferred dividends, was $.18 compared to $.10 for the
prior year.

68
<PAGE>
YEARS (53/52 WEEKS) ENDED APRIL 3, 1997 AND MARCH 28, 1996

Set forth in the table below is a summary of revenues, cost of operations,
general and administrative expenses and depreciation and amortization
attributable to AMCE's domestic and international theatrical exhibition
operations and AMCE's on-screen advertising business for the year (53 weeks)
ended April 3, 1997 and the year (52 weeks) ended March 28, 1996.

<TABLE>
<CAPTION>
53 WEEKS 52 WEEKS
ENDED ENDED
APRIL 3, MARCH 28,
1997 1996 % CHANGE
------------ ------------ -----------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
REVENUES
Domestic
Admissions........................................................ $ 479,629 $ 431,361 11.2%
Concessions....................................................... 222,945 196,645 13.4
Other............................................................. 15,763 15,096 4.4
------------ ------------ ---
718,337 643,102 11.7
International
Admissions........................................................ 13,322 -- --
Concessions....................................................... 2,222 -- --
Other............................................................. 49 -- --
------------ ------------ ---
15,593 -- --
On-screen advertising and other..................................... 15,667 12,870 21.7
------------ ------------ ---
Total revenues.................................................... $ 749,597 $ 655,972 14.3%
------------ ------------ ---
------------ ------------ ---
COST OF OPERATIONS
Domestic
Film rentals...................................................... $ 239,480 $ 215,099 11.3%
Concession costs.................................................. 36,045 30,417 18.5
Rent.............................................................. 75,116 64,813 15.9
Other............................................................. 198,555 172,087 15.4
------------ ------------ ---
549,196 482,416 13.8
International
Film rentals...................................................... 7,719 -- --
Concession costs.................................................. 703 -- --
Rent.............................................................. 4,945 -- --
Other............................................................. 5,377 -- --
------------ ------------ ---
18,744 -- --
On-screen advertising and other..................................... 12,062 8,942 34.9
------------ ------------ ---
Total cost of operations.......................................... $ 580,002 $ 491,358 18.0%
------------ ------------ ---
------------ ------------ ---
GENERAL AND ADMINISTRATIVE
Domestic and corporate.............................................. $ 45,558 $ 44,200 3.1%
International....................................................... 6,864 4,550 50.9
On-screen advertising and other..................................... 4,225 3,309 27.7
------------ ------------ ---
Total general and administrative.................................. $ 56,647 $ 52,059 8.8%
------------ ------------ ---
------------ ------------ ---
DEPRECIATION AND AMORTIZATION
Domestic and corporate.............................................. $ 56,623 $ 42,550 33.1%
International....................................................... 1,436 -- --
On-screen advertising and other..................................... 1,744 1,336 30.5
------------ ------------ ---
Total depreciation and amortization................................. $ 59,803 $ 43,886 36.3%
------------ ------------ ---
------------ ------------ ---
</TABLE>

REVENUES. Total revenues increased 14.3%, or $93,625,000, during the year
(53 weeks) ended April 3, 1997 compared to the year (52 weeks) ended March 28,
1996.

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<PAGE>
Total domestic revenues increased 11.7%, or $75,235,000, from the prior
year. Admissions revenues increased 11.2%, or $48,268,000, due to a 6.4%
increase in attendance, which contributed $27,658,000 of the increase, and a
4.7% increase in average ticket prices, which contributed $20,610,000 of the
increase. The increase in attendance was due primarily to AMCE's megaplex
theatres (theatres having at least 14 screens with predominately stadium-style
seating). Attendance at megaplex theatres increased during the year as a result
of the addition of 12 new megaplex theatres with 248 screens and from the
operation for a full fiscal year of AMCE's remaining five domestic megaplex
theatres with 98 screens that were opened in fiscal 1996. The increase in
attendance from megaplex theatres was partially offset by a decrease in
attendance at multiplex theatres (theatres generally without stadium-style
seating and having less than 14 screens) and the closure or sale of 15 theatres
with 76 screens. Attendance at multiplex theatres decreased as a result of
competitive factors. Also, during the first nine months of the fiscal year,
attendance at all theatres was impacted by film product from AMCE's key
suppliers which did not deliver the results achieved in the prior fiscal year.
The increase in average ticket prices is due to price increases and the growing
number of megaplexes in AMCE's circuit, which yield higher average ticket prices
than multiplexes. Concessions revenues at domestic theatres increased by 13.4%,
or $26,300,000, due to a 6.9% increase in average concessions per patron, which
contributed $13,692,000 of the increase, and the increase in total attendance,
which contributed $12,608,000 of the increase. The increase in average
concessions per patron is attributable to the introduction of new concessions
products and the increasing number of megaplexes in AMCE's circuit, where
concession spending per patron is higher than in multiplex theatres.

Total international revenues were the result of admissions and concessions
revenues from AMCE's two international theatres, the Canal City 13 located in
Fukuoka, Japan and the Arrabida 20 located in Porto, Portugal, which opened
during the first and third quarters of fiscal 1997, respectively. Admissions and
concessions revenues accounted for 85% and 14% of total international revenues,
respectively. AMCE's initial attendance at the Canal City 13 was negatively
impacted by film distributors in Japan who restricted AMCE's ability to obtain
film product until approximately two weeks after its competitors had received
it. This delay in releasing films to AMCE has generally been eliminated.

On-screen advertising and other revenues increased 21.7%, or $2,797,000, due
primarily to an increase in the number of screens served by AMCE's on-screen
advertising business, a result of its expansion program.

COST OF OPERATIONS. Total cost of operations increased 18.0%, or
$88,644,000, during the year (53 weeks) ended April 3, 1997 compared to the year
(52 weeks) ended March 28, 1996.

Total domestic cost of operations increased 13.8%, or $66,780,000, from the
prior year. Film rentals expense increased 11.3%, or $24,381,000, due to higher
admissions revenues. As a percentage of admissions revenues, film rentals
expense was 49.9% in each year. The 18.5%, or $5,628,000, increase in concession
costs is attributable to the increase in concessions revenues. As a percentage
of concessions revenues, concession costs increased from 15.5% to 16.2% due
primarily to increases in raw popcorn costs and the lower margins on new
concessions products. Rent expense increased 15.9%, or $10,303,000, due to the
higher number of screens in operation. Other cost of operations increased 15.4%,
or $26,468,000, from the prior year due to the higher number of screens in
operation, $1,825,000 of advertising expenses associated with the opening of new
theatres and higher expenses associated with AMCE's theatre management
development program.

Total international cost of operations were the result of expenses
associated with AMCE's new theatres in Japan and Portugal. As a percentage of
admissions revenues, film rentals expense was 57.9% primarily because film
rentals in Japan are generally higher than those domestically. Concession costs
were 31.6% of concessions revenues due to the high procurement costs of
concessions products sourced from the United States. As a percentage of total
revenues, rent expense was 31.7% as a result of low attendance and admissions
revenues and the higher real estate costs in Japan.

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<PAGE>
On-screen advertising and other cost of operations increased 34.9%, or
$3,120,000, as a result of the higher number of screens served and related
start-up expenses.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
8.8%, or $4,588,000, during the year (53 weeks) ended April 3, 1997.

Domestic and corporate general and administrative expenses increased 3.1%,
or $1,358,000, primarily due to increases in costs associated with AMCE's
development of theatres and increased pension and retirement expenses of
$1,992,000. These increases were partially offset by a decrease of $3,500,000 in
the current year's bonus expense and severance payments of $967,000 for two
former executive officers made during the prior year.

International general and administrative expenses increased 50.9%, or
$2,314,000, due primarily to increases in costs associated with AMCE's
development of new theatres and other expenses to support AMCE's international
operations and expansion plan.

General and administrative expenses associated with on-screen advertising
and other increased 27.7%, or $916,000, due primarily to an increase in payroll
and related costs to support the expansion program at AMCE's on-screen
advertising business.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
36.3%, or $15,917,000, during the year (53 weeks) ended April 3, 1997. This
increase was caused by an increase in employed theatre assets resulting from
AMCE's expansion plan and an impairment loss of $7,231,000 due to expected
declines in future cash flows of certain theatres.

OPERATING INCOME. Operating income decreased 22.6%, or $15,524,000, during
the year (53 weeks) ended April 3, 1997. The decrease in operating income is
attributable to the attendance and revenue decline at multiplex theatres and an
increase in domestic and corporate general and administrative expenses of
$1,358,000, the effects of which were partially offset by an increase in
attendance and revenues at megaplex theatres. Additionally, operating income was
reduced by operating losses of $4,587,000 from AMCE's international theatres in
Japan and Portugal, an increase in international general and administrative
expenses of $2,314,000 and an increase in operating losses of $1,647,000 from
AMCE's on-screen advertising business.

INTEREST EXPENSE. Interest expense decreased 23.6%, or $6,806,000, during
the year (53 weeks) ended April 3, 1997 compared to the prior year. The decrease
in interest expense resulted from lower rates under the AMCE Credit Facility,
which was partially offset by an increase in average outstanding borrowings
related to AMCE's expansion plan.

INVESTMENT INCOME. Investment income decreased 87.9% or $6,196,000, during
the year (53 weeks) ended April 3, 1997 due to a decrease in outstanding cash
and investments compared to the prior year. Cash and investments decreased as a
result of AMCE's redemption of substantially all of its 11 7/8% Senior Notes due
2000 (the "Senior Notes") and 12 5/8% Senior Subordinated Notes due 2002 (the
"12 5/8% Senior Subordinated Notes") on December 28, 1995. Earnings Before
Income Taxes and Extraordinary Item. Earnings before income taxes and
extraordinary item decreased by 31.7%, or $14,776,000, during the year (53
weeks) ended April 3, 1997 due primarily to the $15,524,000 decrease in
operating income.

NET EARNINGS. Net earnings before extraordinary item decreased $8,376,000
during the year (53 weeks) ended April 3, 1997 to $18,995,000 from $27,371,000
in the prior year. Net earnings for the period were $18,995,000 compared to
$8,021,000 in the prior year, which included an extraordinary item (a loss of
$19,350,000 in connection with the early extinguishment of debt). Net earnings
before extraordinary item per common share, after deducting preferred dividends,
was $.74 compared to $1.21 for the prior

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<PAGE>
year. Net earnings per common share, after deducting preferred dividends, was
$.74 compared to $.06 for the prior year.

YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995

Set forth below in the table is a summary of revenues and cost of operations
attributable to AMCE's operations for the year (52 weeks) ended March 28, 1996
and March 30, 1995.

<TABLE>
<CAPTION>
52 WEEKS ENDED 52 WEEKS ENDED
---------------------------- ----------------------------
MARCH 28, % OF TOTAL MARCH 30, % OF TOTAL
1996 REVENUES 1995 REVENUES
----------- --------------- ----------- ---------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
REVENUES
Admissions................................ $ 431,361 66% $ 371,145 66%
Concessions............................... 196,645 30 169,120 30
Other..................................... 27,966 4 23,079 4
----------- --- ----------- ---
Total................................... $ 655,972 100% $ 563,344 100%
----------- --- ----------- ---
----------- --- ----------- ---
COST OF OPERATIONS
Film rentals.............................. $ 215,099 33% $ 182,669 33%
Concession costs.......................... 30,417 5 24,383 4
Rent...................................... 64,813 10 60,076 11
Other..................................... 181,029 27 165,635 29
----------- --- ----------- ---
Total................................... $ 491,358 75% $ 432,763 77%
----------- --- ----------- ---
----------- --- ----------- ---
</TABLE>

REVENUES. Total revenues for the year (52 weeks) ended March 28, 1996
increased 16.4%, or $92,628,000, to $655,972,000 compared to $563,344,000 for
the year (52 weeks) ended March 30, 1995. Admissions revenues increased 16.2%,
or $60,216,000, due to a 11.1% increase in attendance, which contributed
$41,151,000 of the increase, and a 4.4% increase in average ticket prices, which
contributed $19,065,000 of the increase. The increase in attendance resulted
from the popularity of films licensed during fiscal 1996 and the net addition of
89 screens since fiscal 1995 at new and higher performing locations. Attendance
during the prior year was impacted by a dispute with a major distributor over
film licensing terms, which resulted in AMCE licensing that distributor's films
for a smaller number of its theatres than it otherwise would have. In fiscal
1996, AMCE licensed that distributor's films for what it considers to be a more
acceptable number of AMCE's theatres. Concessions revenues increased by 16.3%,
or $27,525,000, due to the increase in total attendance, which caused an
increase of $18,752,000, and a 6.9% increase in average concessions per patron,
which contributed $8,773,000 of the increase.

COST OF OPERATIONS. Total cost of operations increased 13.5%, or
$58,595,000, in fiscal 1996 to $491,358,000 from $432,763,000 in fiscal 1995. As
a percentage of total revenues, cost of operations was 75% and 77% in fiscal
1996 and 1995, respectively. Film rentals expense increased 17.8%, or
$32,430,000, in fiscal 1996 due to higher attendance levels, which contributed
$29,637,000 of the increase, and an increase in the percentage of admissions
paid to film distributors, which caused an increase of $2,793,000. Concessions
costs, rent and other costs of operations increased 10.5%, or $26,165,000, from
the prior year due to increases in payroll of $6,641,000, concession costs of
$6,034,000, rent of $4,737,000 and other theatre operating expenses associated
with the increase in admissions and concessions revenues and from the higher
number of screens in operation.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
25.0%, or $10,420,000, to $52,059,000 in fiscal 1996 from $41,639,000 in fiscal
1995. The increase in general and administrative expenses is primarily
attributable to payroll and other costs associated with AMCE's development of
theatres in the United States and certain international markets, additional
bonus expense of $3,074,000 related to improved profitability of AMCE and
severance payments of $967,000

72
<PAGE>
for two former executive officers. As a percentage of total revenues, general
and administrative expenses increased to 7.9% in fiscal 1996 from 7.4% in fiscal
1995.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
15.8%, or $5,973,000, to $43,886,000 in fiscal 1996 from $37,913,000 in fiscal
1995. This increase resulted primarily from the reduction, effective December
30, 1994, in the estimated lives of lease rights and location premiums on
certain smaller theatres to correspond to the base terms of the theatre leases,
an increase in employed theatre assets and the recognition of an impairment loss
of $1,799,000 in connection with the adoption of Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.

INTEREST EXPENSE. Interest expense decreased 19.7%, or $7,080,000, to
$28,828,000 in fiscal 1996 from $35,908,000 in fiscal 1995. The decrease in
interest expense resulted from lower interest rates under the AMCE Credit
Facility as compared to the rates under the Senior Notes and 12 5/8% Senior
Subordinated Notes.

INVESTMENT INCOME. Investment income decreased 29.6%, or $2,961,000, to
$7,052,000 in fiscal 1996 from $10,013,000 in fiscal 1995 due primarily to a net
gain of $1,407,000 recorded in fiscal 1995 from the sales of stock of TPI
Enterprises, Inc. and AmeriHealth, Inc. and a decrease of $1,513,000 in interest
income in fiscal 1996.

EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Earnings before income
taxes and extraordinary item increased 86.8%, or $21,693,000, to $46,671,000 in
fiscal 1996 from $24,978,000 in fiscal 1995. AMCE recorded a $19,350,000
extraordinary loss, net of income tax benefit of $13,400,000, related to
extinguishment of debt in fiscal 1996.

NET EARNINGS. For the year (52 weeks) ended March 28, 1996, AMCE recorded
net earnings of $8,021,000, a $25,957,000 decrease from net earnings of
$33,978,000 for the year (52 weeks) ended March 30, 1995. Net earnings per
common share, after deducting $7,000,000 of preferred dividends, was $.06 in
fiscal 1996 compared to $1.63 in fiscal 1995. The decrease in net earnings was
impacted by an extraordinary loss of $19,350,000 incurred as a result of AMCE's
repurchase of Senior Notes and 12 5/8% Senior Subordinated Notes in fiscal 1996.
Also, in fiscal 1996 AMCE had a tax expense of $19,300,000, as opposed to a tax
benefit of $9,000,000 in fiscal 1995. The fiscal 1995 tax benefit resulted from
a $19,792,000 reduction in the deferred tax valuation allowance established
under Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES. Earnings per share before extraordinary item, after deduction of
preferred dividends, was $1.21 in fiscal 1996 compared to $1.63 in fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

AMCE's revenues are collected in cash, principally through box office
admissions and theatre concessions sales. AMCE has an operating "float" which
partially finances its operations and which generally permits AMCE to maintain a
smaller amount of working capital capacity. This float exists because admissions
revenues are received in cash, while exhibition costs (primarily film rentals)
are ordinarily paid to distributors from 30 to 45 days following receipt of box
office admissions revenues. AMCE is only occasionally required to make advance
payments or non-refundable guarantees of film rentals. Film distributors
generally release during the summer and holiday seasons the films which they
anticipate will be the most successful. Consequently, AMCE typically generates
higher revenues during such periods. Cash flows from operating activities, as
reflected in the Consolidated Statements of Cash Flows, were $134,074,000,
$96,847,000 and $44,366,000 for fiscal years 1997, 1996 and 1995, respectively,
and $31,230,000 and $18,725,000 for the thirteen weeks ended July 3, 1997 and
June 27, 1996, respectively.

73
<PAGE>
During the current fiscal year, AMCE had capital expenditures and net
increases in refundable construction advances of $94,162,000 and $26,912,000,
respectively, primarily for the development of new theatres and the addition of
screens at existing locations. AMCE has continued its expansion plan by opening
3 megaplex theatres with 74 screens and one multiplex theatre with 6 screens and
expanding an existing multiplex theatre by 10 screens. In addition, AMCE closed
or sold 3 multiplex theatres with 18 screens resulting in a circuit total of 21
megaplex theatres with 440 screens and 209 multiplex theatres with 1,591 screens
as of July 3, 1997.

AMCE has plans to open approximately 700 screens during fiscal 1998. If
these planned screens are opened as scheduled, AMCE estimates that total capital
expenditures for fiscal 1998 will aggregate approximately $400 million. Included
in these amounts are assets which AMCE may place into sale/ leaseback or other
comparable financing programs which will have the effect of reducing AMCE's net
cash outlays. As of July 3, 1997, AMCE had under construction 26 megaplex
theatres with 608 screens and 2 multiplex theatres with 25 screens.

The AMCE Credit Facility permits borrowings at interest rates based on
either the bank's base rate or LIBOR and requires an annual commitment fee based
on margin ratios that could result in a rate of .1875% to .375% on the unused
portion of the commitment. The AMCE Credit Facility matures in 2004. The
commitment thereunder will reduce by $25 million on each of December 31, 2002,
March 31, 2003, June 30, 2003 and September 30, 2003 and by $50 million on
December 31, 2003. As of July 3, 1997, AMCE had outstanding borrowings of
$200,000,000 under the AMCE Credit Facility at an average interest rate of 6.5%
per annum.

Covenants of the AMCE Credit Facility impose limitations on indebtedness,
creation of liens, change of control, transactions with affiliates, mergers,
investments, guaranties, asset sales, dividends, business activities and
pledges. As of July 3, 1997, AMCE was in compliance with all financial covenants
relating to the AMCE Credit Facility.

Prior to its April 10, 1997 amendment and restatement, the AMCE Credit
Facility contained a covenant that generally limited AMCE's capital
expenditures. This covenant has been eliminated.

On March 19, 1997, AMCE sold $200 million aggregate principal amount of
9 1/2% Senior Subordinated Notes due 2009 (the "Notes"). The Note Indenture
requires AMCE to use its best efforts to consummate a registered offer to
exchange the Notes (the "Exchange Offer") for notes of AMCE with terms identical
in all material respects to the Notes. If the Exchange Offer is not effected by
September 15, 1997, the interest rate on the Notes will increase by .50%
following such date until the Exchange Offer is consummated. The Exchange Offer
closed on September 5, 1997.

AMCE believes that cash generated from operations, existing cash and
equivalents, amounts received from sale/leaseback or other comparable financing
programs which AMCE is currently pursuing and the unused commitment amount under
the AMCE Credit Facility will be sufficient to fund operations and planned
capital expenditures for the next twelve months.

During the thirteen weeks ended July 3, 1997, various holders of AMCE's
$1.75 Cumulative Convertible Preferred Stock (the "AMCE Convertible Preferred
Stock") converted 369,800 shares into 637,535 shares of AMCE Common Stock at a
conversion rate of 1.724 shares of AMCE Common Stock for each share of AMCE
Convertible Preferred Stock. AMCE Convertible Preferred Stock dividend payments
decreased 14.8%, or $242,000, to $1,389,000 for the thirteen weeks ended July 3,
1997 from $1,631,000 in the prior year as a result of the conversions. Future
conversions will continue to reduce the amount of dividends paid by AMCE and
increase the number of shares of AMCE Common Stock outstanding.

RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS

During fiscal 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), EARNINGS PER
SHARE. SFAS 128 eliminates the presentation

74
<PAGE>
of primary and fully diluted earnings per share ("EPS") and requires
presentation of basis and diluted EPS. The principal difference between primary
and basic EPS is that common stock equivalents are not included with the
weighted average number of shares outstanding used in the computation of basic
EPS. Diluted EPS is computed similarly to fully diluted EPS. SFAS 128 is
effective for periods ending after December 15, 1997, including interim periods,
and requires restatement of all prior-period EPS data. Early adoption is not
permitted. AMCE plans to adopt SFAS 128 during the third quarter of fiscal 1998.
The impact of adopting SFAS 128 on primary and fully diluted loss per share for
the thirteen weeks ended July 3, 1997 and June 27, 1996 is not expected to be
material.

During fiscal 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), REPORTING
COMPREHENSIVE INCOME, and Statement of Financial Accounting Standards No. 131
("SFAS 131"), DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION. SFAS 130 requires disclosure of comprehensive income and its
components in a company's financial statements and is effective for fiscal years
beginning after December 15, 1997. SFAS 131 requires new disclosures of segment
information in a company's financial statements and is effective for fiscal
years beginning after December 15, 1997. AMCE is currently evaluating the
financial statement impact of adopting SFAS 130 and SFAS 131.

75
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS

PURCHASE OF INITIAL PROPERTIES

The Company will enter into the Purchase Agreement with AMC and one of its
subsidiaries pursuant to which the Company will acquire the Initial Properties
for an aggregate cash consideration of approximately $247.3 million. The
Purchase Agreement will contain representations and warranties by AMC
customarily found in agreements of such types.

OPTION PROPERTIES

The Company and AMC and certain of its subsidiaries and the current
owner/lessor of certain Properties will enter into the Option Agreements
pursuant to which AMC and such owner/lessor will grant the Company options, each
for a period of 90 days following the actual opening date of the megaplex
theatre on such Option Property, to acquire any or all of the Option Properties
for an aggregate estimated purchase price of $136.8 million. One of the Initial
Properties and three of the Option Properties have adjacent land parcels that,
if not under contract for sale or sold at the time of the related theatre
acquisition, may be purchased by the Company for an aggregate purchase price of
$10.4 million.

RIGHT TO PURCHASE

The Company and AMCE will enter into the AMCE Right to Purchase Agreement
whereby the Company will have a right of first refusal and first offer to
purchase and lease back to AMCE any megaplex theatre and related entertainment
property acquired or developed and owned (or ground-leased) by AMCE or its
subsidiaries for a period of five years following the Formation Transactions.
The initial annual rental rate on properties leased back to AMC will be
determined through the right of first refusal and first offer process at the
time of such lease back.

EMPLOYMENT AGREEMENTS

The Company will enter into employment agreements with Robert L. Harris and
David M. Brain, pursuant to which Mr. Harris will serve as President and Chief
Development Officer and Mr. Brain will serve as Chief Financial Officer of the
Company each for a period of two years (extendable at the option of the Company)
at an initial annual compensation of $225,000 and $175,000, respectively,
subject to any increases in base compensation approved by the Compensation
Committee. See "Management-- Employment Agreements."

COMPANY OFFICES

The Company has entered into a lease for its executive offices to be located
at 1221 Baltimore Avenue, Kansas City, Missouri, a building owned by AMC.

PURCHASE OF SHARES BY EXECUTIVE OFFICERS

Robert L. Harris will purchase 80,000 Shares pursuant to the Share Purchase
Program and will be granted 40,000 restricted Shares pursuant to the Restricted
Share Program and options to purchase 40,000 Shares pursuant to the Share Option
Program. David M. Brain will purchase 40,000 Shares pursuant to the Share
Purchase Program and will be granted 20,000 restricted Shares pursuant to the
Restricted Share Program and options to purchase 20,000 Shares pursuant to the
Share Option Program.

76
<PAGE>
POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of the Company's investment objectives and
policies, financing policies and policies with respect to certain other
activities. These policies are determined by the Board of Trustees and may be
amended or revised from time to time at the discretion of the Board of Trustees
without a vote of the Company's shareholders.

INVESTMENT OBJECTIVES AND POLICIES

The Company's investment objectives are to maximize current returns to
shareholders through increases in Funds from Operations and to increase
long-term total returns to shareholders through appreciation in the value of the
Shares. The Company will seek to accomplish its objectives through (i) its
ownership interests in the Initial Properties; (ii) selective acquisitions of
the Option Properties, additional AMC-operated properties, Planet
Movies-operated properties and additional megaplex theatres leased to other
qualified theatrical exhibitors; and (iii) develop or acquire ETRCs and
single-tenant out-of-home location based entertainment or entertainment-related
properties.

The Company will consider a variety of factors in evaluating potential
investments in entertainment or entertainment-related properties, including (i)
the long-term investment potential of the asset and the reputation and
creditworthiness of the current owner, manager or developer of the property;
(ii) the proposed terms for purchasing the property; (iii) the proposed terms
for leasing the property, including rental payments and lease term; and (iv) the
condition of the property, including the quality of construction of the
improvements thereon.

The Company may purchase or lease properties for long-term investment,
expand and improve the properties it owns or acquires after the Formation
Transactions or sell such properties, in whole or in part, when circumstances
warrant. The Company may also participate with other entities in property
ownership, through joint ventures or other types of co-ownership. Equity
investments may be subject to existing mortgage financing and other indebtedness
which have priority over the equity interest of the Company.

While the Company emphasizes equity real estate investments, it may, in its
discretion, invest in mortgages, equity or debt securities of other REITs,
partnerships and other real estate interests. Such mortgage investments may
include participating in convertible mortgages. The Company does not currently
intend to purchase securities of, or interests in, other entities engaged in
real estate activities.

There are no limitations on the percentage of the Company's assets that may
be invested in any one property, venture or type of security. The Board of
Trustees may establish limitations as it deems appropriate from time to time. No
limitations have been set on the number of properties in which the Company will
seek to invest or on the concentration of investments in any one geographic
region.

DISPOSITIONS; AMC'S RIGHT OF FIRST REFUSAL AND FIRST OFFER

The Company has no current intention to cause the disposition of any of the
Properties, although it reserves the right to do so if the Board of Trustees
determines that such action would be in the best interests of the Company.
Pursuant to the Leases, AMC will have a right of first refusal and first offer
to acquire any Property or any interest in an entertainment or
entertainment-related property acquired or developed by the Company and operated
by AMC. See "Leases" for a more detailed discussion of the terms and conditions
of the Leases.

FINANCING

Upon consummation of the Formation Transactions, the Company expects to have
no outstanding indebtedness. The Company presently intends to maintain a ratio
of debt to total market capitalization of less than 50%. The Board of Trustees
may, however, from time to time reevaluate this policy and

77
<PAGE>
decrease or increase such ratio accordingly. The Company will determine its
financing policies in light of then current economic conditions, relative costs
of debt and equity capital, market values of properties, growth and acquisition
opportunities and other factors. The Company is negotiating to obtain a
commitment for the $200 million Bank Credit Facility that will be used in
acquiring additional entertainment and entertainment-related properties,
including the Option Properties and related land parcels, and for certain other
purposes, including expanding existing properties and working capital, as
necessary. The Company expects to close the Bank Credit Facility as part of the
Formation Transactions. If the Board of Trustees determines that additional
funding is desirable, the Company may raise such funds through additional equity
offerings, debt financing or retention of cash flow (subject to considerations
relating to provisions in the Code concerning taxability of undistributed REIT
income and REIT qualification), or a combination of these methods.

Indebtedness incurred by the Company may be in the form of publicly or
privately placed debt instruments or financings from banks, institutional
investors or other lenders, any of which indebtedness may be unsecured or may be
secured by mortgages or other interests in the property owned by the Company.
There are no limits on the number or amounts of mortgages or other interests
which may be placed on any one property. In addition, such indebtedness may be
with or without recourse to all or any part of the property of the Company or
may be limited to the particular property to which the indebtedness relates. The
proceeds from any borrowings may be used for the payment of distributions, for
working capital, to refinance indebtedness or to finance acquisitions,
expansions or developments of new properties.

In the event that the Board of Trustees determines to raise additional
equity capital, the Board of Trustees has the authority, without shareholder
approval, to issue additional Shares or other equity interests (including
Preferred Shares and other securities senior to the Shares) of the Company in
any manner (and on such terms and for such consideration) it deems appropriate,
including in exchange for property. Existing shareholders would have no
preemptive right to purchase shares issued in any offering, and any such
offering might cause a dilution of a shareholder's investment in the Company.

WORKING CAPITAL RESERVES

The Company will attempt to maintain working capital reserves (and when not
sufficient, access to borrowings) in amounts that the Board of Trustees
determines to be adequate to meet normal contingencies in connection with the
operation of the Company's business and investments.

CONFLICT OF INTEREST POLICIES

The Company will adopt certain policies and enter into certain agreements
designed to minimize potential conflicts of interest. It is expected that no
trustee will vote on contracts or transactions between the Company and other
entities affiliated with such trustee. However, there can be no assurance that
these policies always will be successful in eliminating the influence of such
conflicts, and if they are not successful, decisions could be made that might
fail to reflect fully the interests of all shareholders. See "Conflicts of
Interest."

DECLARATION OF TRUST AND BYLAW PROVISIONS

The Company's Bylaws provide that any transactions between the Company and
any of its trustees or any other entity in which a trustee has a material
financial interest is subject to the interested director transaction provision
of Maryland law. Such provision generally provides that a contract or other
transaction with such trustee or where such material financial interest exists
is not void or voidable if (i) the fact of the common directorship or interest
is disclosed or known to (a) the Board, and the Board ratifies the contract or
transaction by the affirmative vote of a majority of disinterested trustees or
(b) the stockholders, and the contract or transaction is approved by a majority
of the votes cast by stockholders

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other than the interested person or (ii) the contract or transaction is fair and
reasonable to the corporation.

Pursuant to the Declaration of Trust, each trustee is required to discharge
his or her duties in good faith, in a manner he or she reasonably believes to be
in the best interest of the Company and with the care an ordinarily prudent
person in a like position would use under similar circumstances.

OTHER POLICIES

The Company intends to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. The Company does not intend
(i) to invest in the securities of other issuers for the purpose of exercising
control over such issuer; (ii) to underwrite securities of other issuers; or
(iii) to trade actively in loans or other investments.

The Company may make investments other than as previously described
(including bonds, preferred stocks and common stocks), although it does not
currently intend to do so. The Company may repurchase or otherwise reacquire
Shares or any other securities it may issue and may engage in such activities in
the future. The Board of Trustees has no present intention of causing the
Company to repurchase any of the Shares, and any such action would be taken only
in conformity with applicable federal and state laws and the requirements for
qualifying as a REIT under the Code and the Treasury regulations thereunder.
Although it may do so in the future, the Company has not issued Shares or any
other securities in exchange for property, nor has it reacquired any of its
Shares or any other securities. See "The Formation Transactions." The Company
may make loans to third parties, including, without limitation, to its officers
and to joint ventures in which it decides to participate. Such loans will
generally require the approval of the Board of Trustees.

At all times, the Company intends to make investments in such a manner as to
be consistent with the requirements of the Code to qualify as a REIT unless,
because of changes in future economic, market or legal conditions, or changes in
the Code or in the Treasury Regulations, the Board of Trustees determines to
revoke the Company's REIT election if the Board determines that such factors
make it no longer beneficial to qualify as a REIT.

CONFLICTS OF INTEREST

GENERAL

Several conflicts of interest exist on the part of the Company, its trustees
and officers and AMCE, AMC and their respective directors and officers. The
following descriptions set forth the principal conflicts of interest, including
the relationships through which they arise, and the policies and procedures
implemented by the Company to address those conflicts.

POTENTIAL CONFLICTS OF INTEREST

AFFILIATED TRUSTEES. Peter C. Brown is the Chairman of the Board of
Trustees of the Company and the President, Chief Financial Officer and Director
of AMCE. As of August 22, 1997, Mr. Brown owned options to purchase 159,000
shares of AMCE common stock. Prior to consummation of the Formation
Transactions, Robert L. Harris, the President and Chief Development Officer of
the Company, expects to exercise and sell the shares of AMCE's common stock
subject to options that are owned by him and currently exercisable and cancel
the remaining options. The Company's Bylaws provide that any transactions
between the Company and any of its trustees or any other entity in which a
trustee has a material financial interest is subject to the interested director
transaction provision of Maryland law. Accordingly, it is expected that no
trustee will vote on contracts or transactions between the Company and other
entities affiliated with such trustee. See "Management," "Policies and
Objectives with Respect

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to Certain Activities--Declaration of Trust and Bylaw Provisions" and
"Relationship Between AMCE and the Company after the Formation Transactions."

PURCHASE PRICE OF THE PROPERTIES. The purchase price of each Property was
determined by management of both AMCE and the Company as the cost of developing
and constructing such Property. The purchase price of the land parcels was
determined by management of both AMCE and the Company based on an estimated
market value for such parcels less estimated marketing and selling costs. It is
possible that if such valuations had been determined on an arm's-length basis,
or had been the subject of independent valuations or appraisals, the sum of the
values of the Properties might have been greater or lower than the sum of the
values determined by the management of AMCE and of the Company.

TERMS OF LEASES. The Lease payment obligations with respect to the
Properties were determined by management of AMC and management of the Company
and were not negotiated on an arm's-length basis. However, the Lease payments
that AMC is obligated to make are based on an initial lease rate of 10.5%, which
the Company believes reflects the fair rental value of the Properties to the
Company.

POTENTIAL FOR FUTURE CONFLICTS. After the Offering, AMCE and the Company
may be in situations where they have differing interests resulting from the
significant ongoing relationship between the companies. Such situations include
the fact that after the Offering (i) AMC will lease, pursuant to the Leases
guaranteed by AMCE, the Initial Properties which will be owned by the Company;
(ii) the Company will have options to acquire the Option Properties and related
land parcels that are owned by AMC and a right of first refusal and first offer
to purchase any megaplex theatre and related entertainment properties acquired
or developed and owned (or ground-leased) by AMCE or its subsidiaries for a
period of five years following the closing of the Offering; (iii) AMC will
lease, pursuant to Leases guaranteed by AMCE, any acquired Option Property from
the Company; and (iv) AMC will have a right of first refusal and first offer to
acquire any Property or any interest in an entertainment or entertainment-
related property acquired or developed by the Company and operated by AMC.
Accordingly, the potential exists for disagreements as to the compliance with
these agreements. Additionally, the possible need by the Company, from time to
time, to finance, refinance or effect a sale of any of the properties operated
by AMC may result in a need to modify the lease with AMC with respect to such
property. Any such modification will require the consent of AMC, and the lack of
consent from AMC could adversely affect the Company's ability to consummate such
financings or sales. Because of the relationships described above, there exists
the risk that the Company will not achieve the same results in its dealings with
AMCE or from its operations that it might achieve if such relationships did not
exist. Similar potential for future conflicts exist with respect to Planet
Movies as a result of AMCE's participation in such joint venture or otherwise.

THE FORMATION TRANSACTIONS

Prior to or simultaneously with the closing of the Offering, the Company and
AMCE will engage in the Formation Transactions, which are designed to
consolidate the ownership interests in the Initial Properties in the Company, to
facilitate the Offering and to enable the Company to qualify as a REIT for
federal income tax purposes commencing with its taxable year ending December 31,
1997. None of such transactions is expected to occur unless all such
transactions occur. These transactions include the following:

- The Company, which was formed as a Maryland real estate investment trust
on August 22, 1997, will sell 13,700,000 Shares in the Offering (including
120,000 Shares to certain executive officers of the Company) for net
proceeds of approximately $252.8 million after deduction of the
underwriting discount and estimated offering expenses (assuming an initial
public offering price of $20.00 per Share);

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- The Company will use the net proceeds of the Offering to acquire the
Initial Properties from AMC for an aggregate purchase price of
approximately $247.3 million payable in cash;

- The Company will lease the Initial Properties to AMC, pursuant to the
Leases, for initial terms ranging from 13 to 15 years. Each Lease may be
extended upon the same terms and conditions for four five-year renewal
terms each at the option of AMC. Pursuant to the Leases, the Company will
grant to AMC a right of first refusal and first offer to acquire any
Property or any interest in an entertainment or entertainment-related
property acquired or developed by the Company and operated by AMC;

- The Company will enter into the Option Agreements with AMCE and certain of
its subsidiaries and the current owner/lessor of certain Properties
pursuant to which the Company will be granted the option to acquire any or
all of the Option Properties for an aggregate estimated purchase price of
$136.8 million for a period of 90 days following the actual opening date
of the megaplex theatre on such Option Properties. If acquired, the Option
Properties will be leased to AMC pursuant to Leases on substantially the
same terms and conditions as the Leases to the Initial Properties.

- The Company will acquire a land parcel adjacent to one of the Initial
Properties and will have options to acquire land parcels adjacent to three
of the Option Properties, if not under contract for sale or sold at the
time of the related theatre acquisition, for an aggregate purchase price
of $10.4 million.

- The Company will enter into the AMCE Right to Purchase Agreement pursuant
to which AMCE will grant the Company a right of first refusal and first
offer to purchase and lease back to AMC, any megaplex theatre property
acquired or developed and owned (or ground-leased) by AMCE or its
subsidiaries for a period of five years following the closing of the
Offering. The purchase price and the initial annual rental rate for
properties acquired will be determined through the right of first refusal
and first offer process at the time of such acquisition and lease back;

- The Company will enter into the $200 million Bank Credit Facility; and

- The Company will enter into employment agreements with certain of the
Company's executive officers, including Robert L. Harris, the President
and Chief Development Officer of the Company, and David M. Brain, the
Chief Financial Officer of the Company.

BENEFITS TO THE COMPANY AND ITS OFFICERS AND TRUSTEES

The benefits of the Formation Transactions to the Company and its officers
and trustees include:

- The ability to access public capital markets;

- The creation of an entity which, through its distributions to
shareholders, is able to reduce or avoid the incurrence of federal income
tax, allowing its shareholders to participate in real estate investments
without the "double taxation" of income that generally results from an
investment in a regular corporation;

- The ability of the Company to take advantage of acquisition and
development opportunities through its strong capital base;

- The Company will enter into employment agreements with Robert L. Harris
and David M. Brain providing for annual initial compensation of $225,000
and $175,000, respectively, and signing bonuses upon consummation of the
Formation Transactions of $40,000 and $30,000, respectively;

- Robert L. Harris, the President and Chief Development Officer of the
Company, will purchase 80,000 Shares at the initial public offering price
pursuant to the Share Purchase Program and will be granted 40,000
restricted Shares pursuant to the Restricted Share Program and options to

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purchase 40,000 Shares pursuant to the Share Option Program. David M.
Brain, the Chief Financial Officer of the Company, will purchase 40,000
Shares at the initial public offering price pursuant to the Share Purchase
Program and will be granted 20,000 restricted Shares pursuant to the
Restricted Share Program and options to purchase 20,000 Shares pursuant to
the Share Option Program; and

- Each non-employee trustee (other than the Chairman of the Board of
Trustees) will receive options to acquire 10,000 Shares at the initial
public offering price. Such options will vest immediately upon the date of
grant.

BENEFITS TO AMCE

The benefits of the Formation Transactions to AMCE and its subsidiaries
include:

- AMC will receive approximately $247.3 million in cash in exchange for the
Initial Properties it will sell to the Company.

- In the event the Company determines to exercise the Company's option to
purchase all of the Option Properties that are owned or leased by AMC, AMC
could receive up to approximately $136.8 million in cash;

- In the event AMC has not contracted to sell or sold the land parcels and
the Company exercises its options to acquire such land parcels, AMC would
receive up to approximately $10.4 million in cash;

- AMCE will have the proceeds of the sale of the Initial Properties
available to discharge certain indebtedness under the AMCE Credit
Facility, which will become available for reborrowing; and

- AMCE will expand its marketing opportunities through increased access to
capital.

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PRINCIPAL SHAREHOLDERS OF THE COMPANY

The following table sets forth certain information regarding the beneficial
ownership of Shares by each trustee of the Company, by each Named Executive
Officer, by all trustees and officers of the Company as a group and by each
person who is expected to be the beneficial owner of 5% or more of the
outstanding Shares immediately following the closing of the Offering. The table
assumes (i) the consummation of the Formation Transactions, and (ii) no exercise
of the Underwriters' over-allotment option. Each person named in the table has
sole voting and investment power with respect to all the Shares shown as
beneficially owned by such person except as otherwise set forth in the notes to
the table.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF OUTSTANDING FOLLOWING THE
NAME OF BENEFICIAL OWNERS SHARES OFFERING
- -------------------------------------------------------- ----------- -------------------------
<S> <C> <C>
Peter C. Brown.......................................... -- *%

Robert L. Harris(1)..................................... 120,050 *

David M. Brain(1)....................................... 60,050 *

Robert J. Druten(2)..................................... 10,000 *

Scott Ward(2)........................................... 10,000 *

All executive officers and trustees as a group (5
persons)............................................... 200,100 1.5%
</TABLE>

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

* Less than 1%.

(1) Includes restricted Shares that will be awarded pursuant to the Restricted
Share Program.

(2) Represents options that will be granted pursuant to the Share Option Program
at the initial public offering price and will vest immediately upon the date
of grant.

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RELATIONSHIP BETWEEN AMCE AND THE COMPANY
AFTER THE FORMATION TRANSACTIONS

For the purpose of governing certain of the ongoing relationships between
AMCE and the Company after the Formation Transactions and to provide mechanisms
for an orderly transition, prior to the completion of the Formation
Transactions, AMCE and the Company will have entered into the various agreements
and will adopt policies as described herein. The Company believes that the
agreements are fair to it and contain terms which generally are comparable to
those which would have been reached in arm's-length negotiations with
unaffiliated parties. Such agreements include (a) the Purchase Agreement, (b)
the Option Agreements, (c) the AMCE Right to Purchase Agreement and (d) the
Leases.

PURCHASE AGREEMENT. Prior to the closing of the Offering, the Company and
subsidiaries of AMCE will enter into the Purchase Agreement which provides the
terms of the sale of the Initial Properties for aggregate cash consideration of
approximately $247.3 million. Pursuant to the Purchase Agreement, the transfer
of the Initial Properties is subject to the closing of the Offering as well as
the normal and customary conditions to the closing of real estate transactions.
The Purchase Agreement will contain representations and warranties by
subsidiaries of AMCE concerning the Initial Properties customarily found in
agreements of such types.

OPTION AGREEMENTS. Prior to the closing of the Offering, the Company and
subsidiaries of AMCE and the current owner/lessor of certain Properties will
enter into the Option Agreements, pursuant to which subsidiaries of AMCE and
such owner/lessor will grant the Company exclusive options to acquire any or all
of the Option Properties for an aggregate estimated purchase price of $136.8
million. One of the Initial Properties and three of the Option Properties have
adjacent land parcels that, if not under contract for sale or sold at the time
of the related theatre acquisition, may be purchased by the Company for an
aggregate purchase price of $10.4 million.

AMCE RIGHT TO PURCHASE AGREEMENT. It is anticipated that AMCE or its
subsidiaries will acquire or develop additional entertainment or
entertainment-related properties in the future. The Company and AMCE will enter
into the AMCE Right to Purchase Agreement whereby the Company will have a right
of first refusal and first offer to purchase and lease back to AMC any megaplex
theatre and related entertainment property acquired or developed and owned (or
ground-leased) by AMCE and its subsidiaries for a period of five years following
the closing of the Offering. The right of first refusal provides that if AMCE or
any of its subsidiaries obtains an acceptable third party offer to acquire any
interest in a Future AMCE Property, prior to selling any interest in such
property, AMCE must first offer to sell the Future AMCE Property to the Company
on the same terms and conditions contained in such third party offer. Such right
of first refusal must be exercised at least 5 days prior to the date the offer
by the potential third-party purchaser expires, but not less than 10 business
days after AMCE notifies the Company of the terms of such potential sale. If the
Company declines to purchase such Future AMCE Property on such terms and
conditions, AMCE will be free to sell such Future AMCE Property for a specified
period of time at a price at least equal to the price offered to the Company and
on terms and conditions substantially consistent with those offered to the
Company. The right of first offer provides that if AMCE or any of its
subsidiaries desires to sell any interest in a Future AMCE Property, AMCE must
notify the Company and the Company will have the right to make an offer to
acquire such property within a specified period of time. If the Company declines
to make an offer, AMCE will be free to sell such property for a specified period
of time. If the Company makes an offer but AMCE declines to sell such Future
AMCE Property to the Company on the terms and conditions contained in such
offer, AMCE will be restricted from selling such Future AMCE Property for a
specified period of time except upon terms and conditions and at a price more
favorable to AMCE than those offered by the Company.

LEASES. The Company will lease the Initial Properties to AMC pursuant to
the Leases. For a detailed discussion of the terms and conditions of the Leases,
see "Leases."

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POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS. After completion of the
Formation Transactions, AMCE and its subsidiaries and the Company will have
significant contractual and other ongoing relationships, as described above.
Such ongoing relationships may present certain conflict situations where the
Company and AMCE may have differing interests. See "Risk Factors--Conflicts of
Interest." The Company will adopt appropriate policies and procedures to be
followed by the Board of Trustees of the Company to attempt to address those
conflicts. Whether or not a conflict of interest situation exists will be
determined on a case-by-case basis in accordance with the policies and
procedures to be developed by the Company's Board of Trustees. The Company's
Bylaws provide that any transactions between the Company and any of its trustees
or any other entity in which a trustee has a material financial interest is
subject to the interested director transaction provision of Maryland law. See
"Policies and Objectives with Respect to Certain Activities--Declaration of
Trust and Bylaw Provisions."

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DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

The following summary of the terms of the shares of beneficial interest of
the Company does not purport to be complete and is subject to and qualified in
its entirety by reference to the Company's Declaration of Trust and Bylaws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part.

GENERAL

The Declaration of Trust provides that the Company may issue up to
50,000,000 Shares and 5,000,000 preferred shares of beneficial interest, $.01
par value per share ("Preferred Shares"). Upon the closing of the Offering,
13,760,100 Shares will be issued and outstanding and no Preferred Shares will be
issued and outstanding. As permitted by Maryland law, the Declaration of Trust
contains a provision permitting the Board of Trustees, without any action by the
shareholders of the Company, to amend the Declaration of Trust to increase or
decrease the aggregate number of shares of beneficial interest or the number of
shares of any class of shares of beneficial interest that the Company has
authority to issue. Under Maryland law, a shareholder is not personally liable
for the obligations of a real estate investment trust solely as a result of his
status as a shareholder. For a description of certain provisions that could have
the effect of delaying, deferring or preventing a change in control, see "Risk
Factors--Limitations on Size of Holdings of Shares and Change in Control" and
"Certain Provisions of Maryland Law and of the Company's Declaration of Trust
and Bylaws."

The transfer agent and registrar for the Shares is .

COMMON SHARES

All Shares offered hereby will be duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other class or series
of beneficial interest and to the provisions of the Declaration of Trust
regarding the restriction of the transfer of shares of beneficial interest,
holders of Shares are entitled to receive dividends on such shares if, as and
when authorized and declared by the Board of Trustees of the Company out of
assets legally available therefor and to share ratably in the assets of the
Company legally available for distribution to its shareholders in the event of
its liquidation, dissolution or winding up after payment of or adequate
provision for all known debts and liabilities of the Company.

Subject to the provisions of the Declaration of Trust regarding the
restriction on the transfer of shares of beneficial interest, each outstanding
Share entitles the holder to one vote on all matters submitted to a vote of
shareholders, including the election of trustees, and, except as provided with
respect to any other class or series of shares, the holders of such Shares will
possess the exclusive voting power. There is no cumulative voting in the
election of trustees, which means that the holders of a majority of the
outstanding Shares can elect all of the trustees then standing for election and
the holders of the remaining Shares will not be able to elect any trustees.

Holders of Shares have no preference, conversion, exchange, sinking fund,
redemption or appraisal rights and have no preemptive rights to subscribe for
any securities of the Company. Subject to the provisions of the Declaration of
Trust regarding the restriction on transfer of shares of beneficial interest,
Shares will have equal dividend, liquidation and other rights.

Under Maryland law, a Maryland real estate investment trust generally cannot
dissolve, amend its declaration of trust or merge, unless approved by the
affirmative vote of shareholders holding at least two thirds of the shares
entitled to vote on the matter unless a lesser percentage (but not less than a
majority of all of the votes entitled to be cast on the matter) is set forth in
the trust's Declaration of Trust. The Declaration of Trust of the Company
provides for a majority of all votes entitled to be cast on the matter in such
situations. Under Maryland law, a declaration of trust may permit the trustees
by a two-thirds vote to amend the declaration of trust from time to time to
qualify as a REIT under the Code or

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Maryland law without the affirmative vote or written consent of the
shareholders. The Company's Declaration of Trust permits such action by the
Board of Trustees.

The Declaration of Trust authorizes the Board of Trustees to reclassify any
unissued Shares into other classes or series of classes of beneficial interest
and to establish the number of shares in each class or series and to set the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions of redemption for each such class or series.

PREFERRED SHARES

The Board is empowered by the Declaration of Trust, without the approval of
shareholders, to classify any unissued Preferred Shares and to reclassify any
previously classified but unissued Preferred Shares of any series from time to
time. Prior to the issuance of any such shares, the Board is required to set,
subject to the provisions of the Declaration of Trust regarding the restriction
on transfers of shares, the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for such shares. Upon the
closing of the Offering, no Preferred Shares will be outstanding and the Company
has no present plans to issue any Preferred Shares following the closing of the
Offering.

POWER TO ISSUE ADDITIONAL SHARES AND PREFERRED SHARES

The Company believes that the power of the Board of Trustees to issue
additional authorized but unissued Shares or Preferred Shares and to classify or
reclassify unissued Shares or Preferred Shares and thereafter to cause the
Company to issue such classified or reclassified shares of beneficial interest
will provide the Company with increased flexibility in structuring possible
future financings and acquisitions and in meeting other needs which might arise.
The additional classes or series, as well as the Shares, will be available for
issuance without further action by the Company's shareholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. Although the Board of Trustees has no intention at the present time of
doing so, it could authorize the Company to issue a class or series that could,
depending upon the terms of such class or series, delay, defer or prevent a
transaction or a change in control of the Company that might involve a premium
price for holders of Shares or otherwise be in their best interest.

RESTRICTION ON SIZE OF HOLDINGS OF SHARES

The Company's Declaration of Trust contains certain restrictions on the
number of Shares that individual shareholders may own. Generally, for the
Company to qualify as a REIT under the Code, no more than 50% in value of the
Company's outstanding Shares (after taking into account options to acquire
Shares) may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities and constructive ownership among
specified family members) during the last half of a taxable year (other than the
Company's first taxable year). The Shares must also be beneficially owned (other
than during the Company's first taxable year) by 100 or more persons during at
least 335 days of a taxable year or during a proportionate part of a shorter
taxable year. Because the Company intends to qualify as a REIT, its Declaration
of Trust contains restrictions on the acquisition of the Company's Shares
intended to ensure compliance with these requirements.

Subject to certain exceptions specified in the Company's Declaration of
Trust, no holder may own, or be deemed to own by virtue of the attribution
provisions of the Code, more than 9.8% (the "Ownership Limit") of the number or
value of the Company's issued and outstanding Shares. The Board, upon receipt of
a ruling from the Internal Revenue Service ("IRS") or an opinion of counsel or
other evidence satisfactory to the Board and upon such other conditions as the
Board may direct, may also exempt a

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proposed transferee from the Ownership Limit. The proposed transferee must give
written notice to the Company of the proposed transfer no later than the
fifteenth day prior to any transfer which, if consummated, would result in the
intended transferee owning Shares in excess of the Ownership Limit. The Board
may require such opinions of counsel, affidavits, undertakings or agreements as
it may deem necessary or advisable in order to determine or ensure the Company's
status as a REIT. Any transfer of Shares that would (i) create a direct or
indirect ownership of Shares in excess of the Ownership Limit, (ii) result in
the Shares being beneficially owned by fewer than 100 persons (determined
without reference to any rules of attribution) as provided in Section 856(a) of
the Code or (iii) result in the Company being "closely held" within the meaning
of Section 856(h) of the Code, shall be null and void ab initio, and the
intended transferee will acquire no rights to the Shares. The foregoing
restrictions on transferability and ownership will not apply if the Board
determines, which determination must be approved by the shareholders, that it is
no longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT.

Any Shares the purported transfer of which would result in a person owning
Shares in excess of the Ownership Limit or cause the Company to become "closely
held" under Section 856(h) of the Code that is not otherwise permitted as
provided above will constitute excess shares ("Excess Shares"), which will be
transferred pursuant to the Company's Declaration of Trust to a party not
affiliated with the Company designated by the Company as the trustee of a trust
for the exclusive benefit of an organization or organizations described in
Sections 170(b)(1)(A) and 170(c) of the Code and identified by the Board as the
beneficiary or beneficiaries of the trust (the "Charitable Beneficiary"), until
such time as the Excess Shares are transferred to a person whose ownership will
not violate the restrictions on ownership. While these Excess Shares are held in
trust, distributions on such Excess Shares will be paid to the trust for the
benefit of the Charitable Beneficiary and may only be voted by the trustee for
the benefit of the Charitable Beneficiary. Subject to the Ownership Limit, the
Excess Shares shall be transferred by the trustee at the direction of the
Company to any person (if the Excess Shares would not be Excess Shares in the
hands of such person). The purported transferee of the Shares that are
transferred to the Excess Shares trust will thereupon receive the lesser of (i)
the price paid by the purported transferee for the Excess Shares (or, if no
consideration was paid, fair market value on the day of the event causing the
Excess Shares to be held in trust) and (ii) the price received from the sale or
other disposition of the Excess Shares held in trust. Any proceeds in excess of
the amount payable to the purported transferee will be paid to the Charitable
Beneficiary. In addition, such Excess Shares held in trust are subject to
purchase by the Company for a 90-day period at a purchase price equal to the
lesser of (i) the price paid for the Excess Shares by the purported transferee
(or, if no consideration was paid, fair market value at the time of the event
causing the shares to be held in trust) and (ii) the fair market value of the
Excess Shares on the date the Company elects to purchase. Fair market value, for
these purposes, means the last reported sales price reported on the NYSE on the
trading day immediately preceding the relevant date, or if not then traded on
the NYSE, the last reported sales price on the trading day immediately preceding
the relevant date as reported on any exchange or quotation system over or
through which the relevant class of shares may be traded, or if not then traded
over or through any exchange or quotation system, then the market price on the
relevant date as determined in good faith by the Board.

From and after the purported transfer to the purported transferee of the
Excess Shares, the purported transferee shall cease to be entitled to
distributions (other than liquidating distributions), voting rights and other
benefits with respect to the Excess Shares except the right to payment on the
transfer of the Excess Shares as described above. Any distribution paid to a
purported transferee on Excess Shares prior to the discovery by the Company that
such Excess Shares have been transferred in violation of the provisions of the
Declaration of Trust shall be repaid, upon demand, to the Company, which shall
pay any such amounts to the trust for the benefit of the Charitable Beneficiary.
If the foregoing transfer restrictions are determined to be void, invalid or
unenforceable by any court of competent jurisdiction, then the purported
transferee of any Excess Shares may be deemed, at the option of the

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Company, to have acted as an agent on behalf of the Company in acquiring such
Excess Shares and to hold such Excess Shares on behalf of the Company.

All certificates representing Shares will bear a legend referring to the
restrictions described above.

All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage between 1/2 of 1% and 5%, as
provided in the rules and regulations promulgated under the Code) of the number
or value of the Company's outstanding Shares must give a written notice
containing certain information to the Company by January 31 of each year. In
addition, each shareholder shall upon demand be required to disclose to the
Company in writing such information with respect to the direct, indirect and
constructive ownership of Shares as the Board deems reasonably necessary to
comply with the provisions of the Code applicable to a REIT, to determine the
Company's status as a REIT, to comply with the requirements of any taxing
authority or governmental agency or to determine any such compliance.

These ownership limitations could have the effect of delaying, deferring or
preventing a change of control of the Company in which holders of some, or a
majority, of the Shares might receive a premium for their Shares over the then
prevailing market price or which such holders might believe to be otherwise in
their best interest.

CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S DECLARATION OF TRUST AND BYLAWS

The following summary of certain provisions of Maryland law and the
Company's Declaration of Trust and Bylaws does not purport to be complete and is
subject to and qualified in its entirety by reference to Maryland law and to the
Company's Declaration of Trust and Bylaws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.

CLASSIFICATION AND REMOVAL OF THE TRUSTEES

The Company's Declaration of Trust provides that the number of trustees may
be increased or decreased from time to time by the vote of a majority of the
Board but may not be less than three. Pursuant to the Company's Declaration of
Trust, the trustees are divided into three classes. One class will hold office
initially for a term expiring at the annual meeting of shareholders to be held
in 1998, another class will hold office initially for a term expiring at the
annual meeting of shareholders to be held in 1999 and another class will hold
office initially for a term expiring at the annual meeting of shareholders to be
held in 2000. As the term of each class expires, trustees in that class will be
elected for a term of three years and until their successors are duly elected
and qualify. The Company believes that classification of the Board will help to
assure the continuity and stability of the Company's business strategies and
policies as determined by the Board. Holders of Shares will have no right to
cumulative voting in the election of trustees. Consequently, at each annual
meeting of shareholders, the holders of a majority of the Shares will be able to
elect all of the successors of the class of trustees whose terms expire at that
meeting.

The classified trustee provision could have the effect of making the removal
of incumbent trustees more time-consuming and difficult, which could discourage
a third party from making a tender offer or otherwise attempting to obtain
control of the Company, even though such an attempt might be beneficial to the
Company and its shareholders. At least two annual meetings of shareholders,
instead of one, will generally be required to effect a change in a majority of
the Board. Thus, the classified board provision could increase the likelihood
that incumbent trustees will retain their positions.

The Declaration of Trust provides that a trustee may be removed only for
cause (as defined in the Declaration of Trust) and only by the affirmative vote
of at least two-thirds of the votes entitled to be cast generally in the
election of trustees. This provision, when coupled with the provision in the
Bylaws authorizing the Board of Trustees to fill vacant trusteeships, precludes
shareholders from removing

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incumbent trustees except upon the existence of cause for removal and a
substantial affirmative vote and filling the vacancies created by such removal
with their own nominees.

BUSINESS COMBINATIONS

Under the MGCL, as applicable to Maryland real estate investment trusts,
certain "business combinations" (including a merger, consolidation, share
exchange, or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland real estate investment
trust and any person who beneficially owns 10% or more of the voting power of
the trust's shares or an affiliate of the trust who, at any time within the
two-year period prior to the date in question, was the beneficial owner of 10%
or more of the voting power of the then-outstanding voting shares of the trust
(an "Interested Shareholder") or an affiliate of such an Interested Shareholder
are prohibited for five years after the most recent date on which the Interested
Shareholder became an Interested Shareholder. Thereafter, any such business
combination must be recommended by the board of trustees of such trust and
approved by the affirmative vote of at least (a) 80% of the votes entitled to be
cast by holders of outstanding voting shares of the trust and (b) two-thirds of
the votes entitled to be cast by holders of outstanding voting shares of the
trust other than shares held by the Interested Shareholder with whom (or with
whose affiliate) the business combination is to be effected, unless, among other
conditions, the trust's common shareholders receive a minimum price (as defined
in the MGCL) for their Shares and the consideration is received in cash or in
the same form as previously paid by the Interested Shareholder for its shares.
These provisions of Maryland law do not apply, however, to business combinations
that are approved or exempted by the board of trustees of the trust prior to the
time that the Interested Shareholder becomes an Interested Shareholder.

CONTROL SHARE ACQUISITIONS

The MGCL, as applicable to Maryland real estate investment trusts, provides
that "Control Shares" of a Maryland real estate investment trust acquired in a
"Control Share acquisition" have no voting rights except to the extent approved
by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror, by officers or by directors who are
employees of the corporation. "Control Shares" are voting shares which, if
aggregated with all other such shares previously acquired by the acquiror, or in
respect of which the acquiror is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than one-third,
(ii) one-third or more but less than a majority, or (iii) a majority of all
voting power. Control Shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained shareholder approval.
A "Control Share acquisition" means the acquisition of Control Shares, subject
to certain exceptions. A person who has made or proposes to make a Control Share
acquisition, upon satisfaction of certain conditions (including an undertaking
to pay expenses), may compel the board of trustees to call a special meeting of
shareholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the trust may itself present
the question at any shareholders meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the trust may redeem any or all
of the Control Shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the Control Shares, as of the date of the last Control Share
acquisition or of any meeting of shareholders at which the voting rights of such
shares are considered and not approved. If voting rights for Control Shares are
approved at a shareholders meeting and the acquiror becomes entitled to vote a
majority of the shares entitled to vote, all other shareholders may exercise
appraisal rights. The fair value of the

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shares as determined for purposes of such appraisal rights may not be less than
the highest price per share paid by the acquiror in the Control Share
acquisition.

The Control Share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the trust is a party to the
transaction, or to acquisitions approved or exempted by the declaration of trust
or bylaws of the trust.

AMENDMENT TO THE DECLARATION OF TRUST

The Declaration of Trust, including its provisions on classification of the
Board of Trustees and removal of trustees, may be amended only by the
affirmative vote of the holders of not less than a majority of all of the votes
entitled to be cast on the matter. Under Maryland law, a real estate investment
trust generally cannot dissolve, amend its declaration of trust or merge, unless
approved by the affirmative vote of shareholders holding at least two-thirds of
the shares entitled to vote on the matter unless a lesser percentage (but not
less than a majority of all of the votes entitled to be cast on the matter) is
set forth in the real estate investment trust's declaration of trust. The
Company's Declaration of Trust provides for approval in such situations by a
majority of all of the votes entitled to be cast on the matter. Under Maryland
law, a declaration of trust may permit the trustees by a two-thirds vote to
amend the declaration of trust from time to time to qualify as a real estate
investment trust under the Code or Maryland law without the affirmative vote or
written consent of the shareholders. The Company's Declaration of Trust permits
such action by the Board of Trustees.

DISSOLUTION OF THE COMPANY

Pursuant to the Company's Declaration of Trust, the dissolution of the
Company must be approved by the affirmative vote of the holders of not less than
a majority of all of the votes entitled to be cast on the matter.

ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS

For nominations or other business to be properly brought before an annual
meeting of shareholders by a shareholder, the Company's Bylaws require such
shareholder to deliver a notice to the Secretary, absent specified
circumstances, not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting setting forth: (i) as to each
person whom the shareholder proposes to nominate for election or reelection as a
trustee, all information relating to such person that is required to be
disclosed in solicitations of proxies for the election of trustees, pursuant to
Regulation 14A of the Exchange Act; (ii) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such shareholder as they appear on the Company's books, and of
such beneficial owner and (y) the number of Shares which are owned beneficially
and of record by such shareholder and such beneficial owner, if any.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
DECLARATION OF TRUST AND BYLAWS

The business combination provisions and the control share acquisition
provisions of the MGCL, the provisions of the Declaration of Trust on
classification of the Board of Trustees and removal of trustees and the advance
notice provisions of the Bylaws could delay, defer or prevent a transaction or a
change in control of the Company that might involve a premium price for holders
of Shares or otherwise be in their best interest.

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MARYLAND ASSET REQUIREMENTS

To maintain its qualification as a Maryland real estate investment trust,
Maryland law requires that the Company hold, either directly or indirectly, at
least 75% of the value of its assets in real estate assets, mortgages or
mortgage-related securities, government securities, cash and cash equivalent
items, including high-grade short-term securities and receivables. Maryland law
also prohibits using or applying land for farming, agricultural, horticultural
or similar purposes.

SHARES AVAILABLE FOR FUTURE SALE

As of the date of this prospectus, the Company had 100 Shares issued and
outstanding. Upon the closing of the Offering, the Company will have 13,760,100
Shares issued and outstanding and 80,000 Shares reserved pursuant to awards
under the Compensation Programs prior to the consummation of the Offering. The
Company has reserved an additional 1,240,000 Shares for future issuance upon
exercise of awards granted under the Compensation Programs. See
"Management--Compensation Programs." All of the 13,700,000 Shares to be issued
or sold by the Company in the Offering, other than Shares purchased by Robert L.
Harris, David M. Brain and other affiliates, will be tradeable without
restriction under the Securities Act. The Shares currently issued and
outstanding or reserved for issuance upon exercise of options will be eligible
for sale in the future, subject to the volume resale, manner of sale and notice
limitations of Rule 144 under the Securities Act.

In general, under Rule 144, a person (or persons whose Shares are aggregated
in accordance with the Rule) who has beneficially owned his or her Shares for at
least one year, including any such persons who may be deemed "affiliates" of the
Company (as defined in the Securities Act), would be entitled to sell within any
three-month period a number of Shares that does not exceed the greater of 1% of
the then outstanding number of Shares or the average weekly trading volume of
the Shares during the four calendar weeks preceding each such sale. After Shares
are held for two years, a person who is not deemed an "affiliate" of the Company
is entitled to sell such Shares under Rule 144 without regard to the volume
limitations described above. Sales of Shares by affiliates will continue to be
subject to the volume limitations. As defined in Rule 144, an "affiliate" of an
issuer is a person that directly or indirectly, through the use of one or more
intermediaries, controls, is controlled by, or is under common control with,
such issuer.

No prediction can be made as to the effect, if any, that future sales of
Shares or the availability of Shares for future sale will have on the market
prices of Shares. Sales of substantial amounts of Shares (including Shares
issued upon the exercise of options), or the perception that such sales could
occur, could adversely affect the prevailing market price of the Shares.

For a description of certain restrictions on transfers of Shares by the
Company (and certain of its trustees and officers), see "Underwriting."

FEDERAL INCOME TAX CONSIDERATIONS

The following summary of the taxation of the Company and the material
federal income tax consequences to holders of the Shares is for general
information only, and is not tax advice. The tax treatment of a holder of Shares
will vary depending upon the holder's particular situation, and this discussion
addresses only holders that hold Shares as capital assets and does not purport
to deal with all aspects of taxation that may be relevant to particular holders
in light of their personal investment or tax circumstances, or to certain types
of holders (including dealers in securities or currencies, banks, tax-exempt
organizations, life insurance companies, persons that hold Shares that are a
hedge or that are hedged against currency risks or that are part of a straddle
or conversion transaction) subject to special treatment under the federal income
tax laws. This summary is based on the Code, its legislative history, existing
and proposed regulations thereunder, published rulings and court decisions, all
as currently in effect and all subject to change at any time, perhaps with
retroactive effect.

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INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND SALE OF SHARES, INCLUDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP AND SALE IN THEIR PARTICULAR CIRCUMSTANCES AND POTENTIAL CHANGES IN
APPLICABLE LAWS.

TAXATION OF THE COMPANY AS A REIT

GENERAL

The Company plans to make an election to be taxed as a REIT under Sections
856 through 860 of the Code, commencing with its taxable year ending December
31, 1997. The Company believes that, commencing with such taxable year, it will
be organized and will operate in such a manner as to qualify for taxation as a
REIT under the Code.

In the opinion of Sullivan & Cromwell, commencing with its taxable year
ending December 31, 1997, the Company will be organized in conformity with, and
its proposed method of operation will enable it to meet, the requirements for
qualification and taxation as a REIT under the Code. Investors should be aware,
however, that opinions of counsel are not binding upon the Internal Revenue
Service or any court. In providing its opinion, Sullivan & Cromwell is relying
upon representations received from the Company. The qualification and taxation
of the Company as a REIT depends upon its ability to meet, through actual annual
operating results, distribution levels, share ownership requirements and the
various qualification tests imposed under the Code. Accordingly, while the
Company intends to qualify to be treated as a REIT, no assurance can be given
that the actual results of the Company's operations for any particular year will
satisfy such requirements. Sullivan & Cromwell will not monitor the compliance
of the Company with the requirements for REIT qualification on an ongoing basis.

The sections of the Code applicable to REITs are highly technical and
complex. Certain aspects thereof are summarized below.

As a REIT, the Company generally will not be subject to federal corporate
income taxes on its net income that is currently distributed to shareholders.
This treatment substantially eliminates the "double taxation" (at the corporate
and shareholder levels) that generally results from investment in a regular
corporation. However, the Company will be subject to federal income tax as
follows. First, the Company will be taxed at regular corporate rates on any
undistributed real estate investment trust taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other non-qualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from "prohibited
transactions" (which are, in general, certain sales or other dispositions of
property, other than foreclosure property, held primarily for sale to customers
in the ordinary course of business), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by (b) a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its real estate investment trust
ordinary income for such year, (ii) 95% of its real estate investment trust
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, the Company would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually distributed.
Seventh, if the Company acquires any asset from a C corporation (i.e., generally
a corporation subject to full corporate-level tax) in certain transactions in

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which the basis of the asset in the hands of the Company is determined by
reference to the basis of the asset (or any other property) in the hands of the
C corporation, and the Company recognizes gain on the disposition of such asset
during the ten-year period beginning on the date on which such asset was
acquired by the Company (the "Recognition Period"), then, pursuant to the
Treasury regulations that have not yet been issued and to the extent of the
excess of the fair market value of the asset as of the date of the Company's
acquisition over the Company's adjusted basis in such asset on such date, such
gain will be subject to tax at the highest regular corporate rate. The results
described above with respect to assets acquired from a C corporation assume that
the Company will make an election pursuant to Internal Revenue Service Notice
88-19.

REQUIREMENTS FOR QUALIFICATION

The Code defines a REIT as a corporation, trust or association (1) which is
managed by one or more trustees or directors, (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest, (3) which would otherwise be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code, (4) which is neither
a financial institution nor an insurance company subject to certain provisions
of the Code, (5) the beneficial ownership of which is held by 100 or more
persons, (6) during the last half of each taxable year, not more than 50% in
value of the outstanding shares of which is owned, directly or constructively,
by five or fewer individuals (as defined in the Code to include certain
entities) and (7) which meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (1) to
(4) must be met during the entire taxable year and that condition (5) must be
met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months.

The Company's Declaration of Trust provides for restrictions regarding the
ownership and transfer of the Company's shares of beneficial interest, which
restrictions are intended to assist the Company in satisfying the share
ownership requirements described in (5) and (6) above. The ownership and
transfer restrictions pertaining to the Shares are described under the heading
"Description of Shares of Beneficial Interest--Restriction on Size of Holdings
of Shares."

INCOME TESTS. In order to maintain qualification as a REIT, the Company
annually must satisfy two gross income requirements. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property") or from certain types of temporary investments. Second, at least
95% of the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from such real property
investments, dividends, interest and gain from the sale or disposition of stock
or securities (or from any combination of the foregoing).

Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the terms "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if the REIT, directly or under the applicable attribution rules,
owns a 10% or greater interest in such tenant (a "Related Party Tenant"). The
applicable attribution rules, however, are highly complex and difficult to
apply, and the Company may inadvertently enter into leases with tenants who,
through application of such rules, will constitute Related Party Tenants. In
such event, rent paid by the Related Party Tenant will not qualify as "rents
from real property," which may jeopardize the Company's status as a REIT. Third,
if rent attributable to personal property leased in connection with a lease of
real

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property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property". Finally, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an independent contractor from whom the REIT derives no revenue;
provided, however, that the Company may directly perform certain services that
are "usually or customarily rendered" in connection with the rental of space for
occupancy only or are not considered "rendered to the occupant" of the property.

Pursuant to the Leases, AMC will lease from the Company the land, buildings
and improvements comprising the Properties for initial terms ranging from 13 to
15 years. The Leases will be "triple net" leases which will require AMC to pay
substantially all expenses associated with the operation of the Properties, such
as real estate taxes, insurance, utilities, services, maintenance and other
operating expenses and any ground lease payments. During the Fixed Term and the
Extended Terms of the Leases, AMC will pay Annual Base Rent which will be
payable in monthly installments. Annual Base Rent will be increased each year by
the Base Rent Escalation. In addition, AMC will pay Annual Percentage Rent.

On an ongoing basis, the Company will use its best efforts: (i) not to
charge rent for any property that is based in whole or in part on the income or
profits of any person (except by reason of being based on a percentage of
receipts or sales, as described above); (ii) not to rent any property to a
Related Party Tenant (taking into account the applicable constructive ownership
rules), unless the Company determines in its discretion that the rent received
from such Related Party Tenant is not material and will not jeopardize the
Company's status as a REIT; (iii) not to derive rental income attributable to
personal property (other than personal property leased in connection with the
lease of real property, the amount of which is less than 15% of the total rent
received under the lease); and (iv) not to perform services considered to be
rendered to the occupant of the property, other than through an independent
contractor from whom the Company derives no revenue or if the provisions of such
services will not jeopardize the Company's status as a REIT. Because the Code
provisions applicable to REITs are complex, however, the Company may fail to
meet one or more of the foregoing objectives, which failure may jeopardize the
Company's status as a REIT. For a discussion of the consequences of any failure
be the Company to qualify as a REIT, see "--Failure to Qualify."

Rents under the Leases (the "Rent") will constitute "rents from real
property" only if the Leases are treated as true leases for federal income tax
purposes and are not treated as service contracts, joint ventures, financing
arrangements or some other type of arrangement. The determination of whether the
Leases are true leases depends on an analysis of all surrounding facts and
circumstances. In making such a determination, courts have considered a variety
of factors, including the following: (i) the intent of the parties; (ii) the
form of the agreement; (iii) the degree of control over the property that is
retained by the property owner (e.g., whether the lessee has substantial control
over the operation of the property or whether the lessee was required simply to
use its best efforts to perform its obligations under the agreement); (iv) the
extent to which the property owner retains the risk of loss with respect to the
operation of the property (e.g., whether the lessee bears the risk of increases
in operating expenses or the risk of damage to the property); and (v) the extent
to which the property owner retains the burdens and benefits of ownership of the
property.

Section 7701(e) of the Code provides that a contract that purports to be a
service contract (or a partnership agreement) will be treated instead as a lease
of property if the contract is properly treated as such, taking into account all
relevant factors, including whether or not: (i) the service recipient is in
physical possession of the property; (ii) the service recipient controls the
property; (iii) the service recipient has a significant economic or possessory
interest in the property (e.g., the property's use is likely to be dedicated to
the service recipient for a substantial portion of the useful life of the
property, the recipient shares the risk that the property will decline in value,
the recipient shares in any appreciation in the value of the property, the
recipient shares in savings in the property's operating costs, or the recipient

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bears the risk of damage to or loss of the property); (iv) the service provider
does not bear any risk of substantially diminished receipts or substantially
increased expenditures if there is nonperformance under the contract; (v) the
service provider does not use the property concurrently to provide significant
services to entities unrelated to the service recipient; and (vi) the total
contract price does not substantially exceed the rental value of the property
for the contract period. Since the determination whether a service contract
should be treated as a lease is inherently factual, the presence or absence of
any single factor may not be dispositive in every case.

The Leases should be treated as true leases for federal income tax purposes,
based, in part, on the following facts: (i) the Company and AMC intend for their
relationship to be that of a lessor and lessee and such relationship will be
documented by lease agreements; (ii) AMC will have the right to exclusive
possession and use and quiet enjoyment of the Properties during the term of the
Leases; (iii) AMC will bear the cost of, and be responsible for, day-to-day
maintenance and repair of the Properties, and will dictate how the Properties
are operated, maintained, and improved; (iv) AMC will bear all of the costs and
expenses of operating the Properties during the terms of the Leases; (v) AMC
will benefit from any savings in the costs of operating the Properties during
the terms of the Leases; (vi) AMC will generally indemnify the Company against
all liabilities imposed on the Company during the term of the Leases by reason
of (a) injury to persons or damage to property occurring at the Properties, or
(b) AMC's use, management, maintenance or repair of the Properties; (vii) AMC is
obligated to pay substantial fixed rent for the period of use of the Properties;
(viii) AMC stands to incur substantial losses (or reap substantial gains)
depending on how successfully it operates the Properties; (ix) the useful lives
of the Properties are significantly longer than the terms of the Leases; and (x)
the Company will receive the benefit of any increase in value, and will bear the
risk of any decrease in value, of the Properties during the terms of the Leases.

Investors should be aware that there are no controlling Treasury
regulations, published rulings, or judicial decisions involving leases with
terms substantially similar to those contained in the Leases that address
whether such leases constitute true leases for federal income tax purposes. If
the Leases are recharacterized as service contracts or partnership agreements,
rather than true leases, part or all of the payments that the Company receives
from AMC may not be considered rent or may not otherwise satisfy the various
requirements for qualification as "rents from real property." In that case, the
Company likely would not be able to satisfy either the 75% or 95% gross income
tests and, as a result, would lose its REIT status.

For the Rent to constitute "rents from real property," the other
requirements enumerated above also must be satisfied. One requirement is that
the Rent attributable to personal property leased in connection with the lease
of a property must not be greater than 15% of the total Rent received under the
Leases. The Rent attributable to the personal property associated with a
property is the amount that bears the same ratio to total rent for the taxable
year as the average of the adjusted bases of the personal property in the
property at the beginning and at the end of the taxable year bears to the
average of the aggregate adjusted bases of both the real and personal property
comprising the property at the beginning and at the end of such taxable year
(the "Adjusted Basis Ratio"). The Company will not lease any personal property
to AMC pursuant to the Leases. The Adjusted Basis Ratio with respect to each
Lease is anticipated to be less than 15%. Accordingly, Rent received by the
Company should satisfy this requirement.

A second requirement for qualification of the Rent as "rents from real
property" is that the Rent must not be based in whole or in part on the income
or profits of any person. The Rent paid by AMC for the Properties will be a
fixed amount (as adjusted based in part on the gross revenues of each Property)
and will not be based in whole or in part on the net income of any person with
respect to the Properties. Thus, the Rent should also satisfy this requirement.

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A third requirement for qualification of the Rent as "rents from real
property" is that the Company must not own, directly or constructively, 10% or
more of AMC or any other tenant of the Properties. The constructive ownership
rules generally provide that if 10% or more in value of the shares of the
Company are owned, directly or indirectly, by or for any person, the Company is
considered as owning the shares owned, directly or indirectly, by or for such
person. The Declaration of Trust provides that no person may own, directly or
constructively, more than 9.8% of the Company. See "Description of Shares of
Beneficial Interest--Restriction on Size of Holding of Shares." Assuming the
Declaration of Trust is complied with, neither AMC nor any other person should
ever own, directly or constructively, 10% or more of the Company, and thus the
constructive ownership rules should not be triggered.

A fourth requirement for qualification of the Rent as "rents from real
property" is that the Company cannot furnish or render noncustomary services to
the tenants of its properties, or manage or operate such properties, other than
through an independent contractor who is adequately compensated and from whom
the Company itself does not derive or receive any income. Provided that the
Leases are respected as true leases, the Company should satisfy this requirement
with respect to the Rent because it will not be performing for AMC any services
other than customary services. As described above, however, if the Leases are
recharacterized as service contracts or partnership agreements, the Rent likely
would be disqualified as "rents from real property" because the Company would be
considered to furnish or render services to the occupants of the properties and
to manage or operate the properties other than through an independent contractor
from whom the Company derives or receives no income. If the Company provides
services to a tenant that are other than those usually or customarily provided
in connection with the rental of space for occupancy only, amounts received by
the Company for such services will not be treated as "rents from real property"
for purposes of the REIT gross income tests but will not cause other amounts
received with respect to the property to fail to be treated as "rents from real
property" unless the amounts received in respect of such services, together with
amounts received for certain management services, exceeds 1% of all amounts
received or accrued by the Company during the taxable year with respect to such
property. Under the literal wording of Section 856 of the Code, if the 1%
threshold is exceeded, then all amounts received or accrued by the Company with
respect to the property will not qualify as "rents from real property," even if
the impermissible services are provided to some, but not all, of the tenants of
the property.

Based on the foregoing, the Rent should qualify as "rents from real
property" for purposes of the 75% and 95% gross income tests. As described
above, however, there can be no complete assurance that the Service will not
assert successfully a contrary position and, therefore, prevent the Company from
qualifying as a REIT.

If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its federal income tax
return, and any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. As discussed above under "--General," even if these relief
provisions apply, a tax would be imposed with respect to the excess income.

OTHER ISSUES. Because the majority of the Properties will be acquired from,
and all will be leased to AMC, the Service could assert that the Company
realized prepaid rental income in the year of purchase to the extent that the
value of such Properties exceeds the purchase price paid by the Company for such
Properties. In litigated cases involving sale-leasebacks which have considered
this issue, courts generally have concluded that buyers have realized prepaid
rent where both parties acknowledged that the purported purchase price for the
property was substantially less than the fair market value, and the proposed
rents were substantially less than the fair market rentals. Because of the lack
of clear precedent and the inherently factual nature of the inquiry, no
assurances can be given that

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the Internal Revenue Service could not successfully assert the existence of
prepaid rental income in such circumstances. The value of property and the fair
market rent for properties involved in sale-leasebacks are inherently factual
matters and always subject to challenge. The Company believes that the purchase
price paid for the Properties is approximately equal to the fair market value of
the Properties.

Additionally, Section 467 of the Code (concerning leases with increasing
rents) may apply to these Leases because they provide for rents that increase
from one period to the next. Section 467 provides that in the case of a
so-called "disqualified leaseback agreement," rental income must be accrued at a
constant rate. If such constant rate accrual is required, the Company would
recognize rental income in excess of cash rents and, as a result, may fail to
meet the 95% dividend distribution requirement. "Disqualified leaseback
agreements" include leaseback transactions where a principal purpose of
providing increasing rent under the agreement is the avoidance of federal income
tax. The Company and AMC have represented that the principal purpose of rent
increases under the Leases is not the avoidance of federal income taxes.
Furthermore, under Treasury regulations, tax avoidance is not considered a
principal purpose where the lessee is required to pay third party costs, such as
insurance, maintenance and taxes, or where rent is adjusted based on reasonable
price indices. Accordingly, the Company believes that the Leases will not be
subject to rent leveling under Code Section 467. It should be noted, however,
that leases involved in sale-leaseback transactions are subject to special
scrutiny under this provision of the Code.

ASSET TESTS. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by real
estate assets (including (i) real estate assets held by the Company's qualified
REIT subsidiaries and the Company's allocable share of real estate assets held
by partnerships in which the Company owns an interest, (ii) for a period of one
year from the date of the Company's receipt of proceeds of an offering of its
shares of beneficial interest or long-term (at least five years) debt, stock or
debt instruments purchased with such proceeds and (iii) stock issued by another
REIT), cash, cash items and government securities. Second, not more than 25% of
the Company's total assets may be represented by securities other than those in
the 75% asset class. Third, of the investments included in the 25% asset class,
the value of any one issuer's securities (other than securities issued by
another REIT) owned by the Company may not exceed 5% of the value of the
Company's total assets and the Company may not own more than 10% of any one
issuer's outstanding voting securities.

ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "real estate investment trust taxable income" (computed without regard
to the dividends paid deduction and the Company's net capital gain) and (ii) 95%
of the net income (after tax), if any, from foreclosure property minus (B) the
sum of certain items of non-cash income. In addition, if the Company disposes of
any asset acquired from a C corporation in a carryover basis transaction during
its Recognition Period, the Company will be required, pursuant to Treasury
regulations which have not yet been promulgated, to distribute at least 95% of
the built-in gain (after tax), if any, recognized on the disposition of such
asset. Such distributions must be paid in the taxable year to which they relate,
or in the following taxable year if declared before the Company timely files its
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. To the extent that the Company does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "real estate investment trust taxable income," as adjusted, it
will be subject to tax thereon at regular ordinary and capital gain corporate
tax rates. Furthermore, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its ordinary income for such year,
(ii) 95% of its capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution

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over the amounts actually distributed. The Company intends to satisfy the annual
distribution requirements.

It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company. In the event that
such timing differences occur, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term, or
possibly long-term, borrowings or to pay dividends in the form of taxable share
dividends.

Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, the Company
will be required to pay interest based upon the amount of any deduction taken
for deficiency dividends.

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief.

TAXATION OF HOLDERS OF SHARES

U.S. SHAREHOLDERS

As used herein, the term "U.S. Shareholder" means a holder of Shares who
(for United States federal income tax purposes) is (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.

As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Shareholders as ordinary income. Such distributions will not be
eligible for the dividends-received deduction in the case of U.S. Shareholders
that are corporations. Distributions made by the Company that are properly
designated by the Company as capital gain dividends will be taxable to U.S.
Shareholders as gain from the sale and exchange of a capital asset held for more
than one year (to the extent that they do not exceed the Company's actual net
capital gain for the taxable year) without regard to the period for which a U.S.
Shareholder has held his shares. U.S. Shareholders that are corporations may,
however, be required to treat up to 20% of certain capital gain dividends as
ordinary income.

To the extent that the Company makes distributions (not designated as
capital gain dividends) in excess of its current and accumulated earnings and
profits, such distributions will be treated first as a

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tax-free return of capital to each U.S. Shareholder, reducing the adjusted basis
which such U.S. Shareholder has in his Shares for tax purposes by the amount of
such distribution (but not below zero), with distributions in excess of a U.S.
Shareholder's adjusted basis in his shares taxable as capital gains (provided
that the Shares have been held as a capital asset). Dividends authorized by the
Company in October, November or December of any year and payable to a
shareholder of record on a specified date in any such month shall be treated as
both paid by the Company and received by the shareholder on December 31 of such
year, provided that the dividend is actually paid by the Company on or before
January 31 of the following calendar year. Shareholders may not include in their
own income tax returns any net operating losses or capital losses of the
Company.

Distributions made by the Company and gain arising from the sale or exchange
by a U.S. Shareholder of Shares will not be treated as passive activity income,
and, as a result, U.S. Shareholders generally will not be able to apply any
"passive losses" against such income or gain.

Upon any sale or other disposition of Shares, a U.S. Shareholder will
recognize gain or loss for federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition, and (ii) the holder's
adjusted basis in the Shares for tax purposes. Such gain or loss will be capital
gain or loss if the Shares have been held by the U.S. Shareholder as a capital
asset. Long-term capital gain of an individual U.S. Shareholder is generally
subject to a maximum tax rate of 28% in respect of property held for more than
one year and the maximum rate is reduced to 20% in the case of property held in
excess of 18 months. In general, any loss recognized by a U.S. Shareholder upon
the sale or other disposition of shares of the Company that have been held for
six months or less (after applying certain holding period rules) will be treated
as a long-term capital loss, to the extent of distributions received by such
U.S. Shareholder from the Company which were required to be treated as long-term
capital gains.

U.S. Shareholders holding Shares at the close of the Company's taxable year
will be required to include, in computing their long-term capital gains for the
taxable year in which the last day of the Company's taxable year falls, such
amount as the Company may designate in a written notice mailed to its
shareholders. The Company may not designate amounts in excess of the Company's
undistributed net capital gain for the taxable year. Each U.S. Shareholder
required to include such a designated amount in determining such shareholder's
long-term capital gains will be deemed to have paid, in the taxable year of the
inclusion, the tax paid by the Company in respect of such undistributed net
capital gains. U.S. Shareholders subject to these rules will be allowed a credit
or a refund, as the case may be, for the tax deemed to have been paid by such
shareholders. U.S. Shareholders will increase their basis in their Shares by the
difference between the amount of such includible gains and the tax deemed paid
by the shareholder in respect of such gains.

BACKUP WITHHOLDING. The Company will report to its U.S. Shareholders and
the IRS the amount of dividends paid during each calendar year, and the amount
of tax withheld, if any. Under the backup withholding rules, a shareholder may
be subject to backup withholding at the rate of 31% with respect to dividends
paid unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A U.S. Shareholder that does not provide the Company with his
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
shareholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions to any shareholders who fail to
certify their non-foreign status to the Company.

TAXATION OF TAX-EXEMPT SHAREHOLDERS. The IRS has ruled that amounts
distributed as dividends by a REIT generally do not constitute unrelated
business taxable income ("UBTI") when received by a tax-exempt entity. Based on
that ruling, provided that a tax-exempt shareholder (except certain tax-

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exempt shareholders described below) has not held its Shares as "debt financed
property" within the meaning of the Code and such Shares are not otherwise used
in a trade or business, the dividend income from Shares will not be UBTI to a
tax-exempt shareholder. Similarly, income from the sale of Shares will not
constitute UBTI unless such tax-exempt shareholder has held such Shares as "debt
financed property" within the meaning of the Code or has used the Shares in a
trade or business.

For tax-exempt shareholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17), and (c)(20) of the Code, respectively, income from
an investment in the Company's Shares will constitute UBTI unless the
organization is able to properly deduct amounts set aside or placed in reserve
for certain purposes so as to offset the income generated by its Shares. Such
prospective investors should consult their own tax advisors concerning these
"set aside" and reserve requirements.

Notwithstanding the foregoing, however, a portion of the dividends paid by a
"pension-held REIT" will be treated as UBTI to any trust which (i) is described
in Section 401(a) of the Code, (ii) is tax-exempt under Section 501(a) of the
Code, and (iii) holds more than 10% (by value) of the equity interests in the
REIT. Tax-exempt pension, profit-sharing and stock bonus funds that are
described in Section 401(a) of the Code are referred to below as "qualified
trusts."

A REIT is a "pension-held REIT" if (i) it would not have qualified as a REIT
but for the fact that Section 856(h)(3) of the Code provides that stock owned by
qualified trusts shall be treated, for purposes of the "not closely held"
requirement, as owned by the beneficiaries of the trust (rather than by the
trust itself) and (ii) either (A) at least one qualified trust holds more than
25% (by value) of the interests in the REIT or (B) one or more qualified trusts,
each of which owns more than 10% (by value) of the interests in the REIT, hold
in the aggregate more than 50% (by value) of the interests in the REIT. The
percentage of any REIT dividend treated as UBTI is equal to the ratio of (i) the
gross income (less direct expenses related thereto) of the REIT from unrelated
trades or businesses (determined as though the REIT were a qualified trust) to
(ii) the total gross income (less direct expenses related thereto) of the REIT.
A DE MINIMIS exception applies where this percentage is less than 5% for any
year. The Company does not expect to be classified as a "pension-held REIT".

Tax-exempt entities will be subject to the rules described above, under the
heading "--U.S. Shareholders" concerning the inclusion of the Company's
designated undistributed net capital gains in the income of its shareholders.
Thus, such entities will, after satisfying filing requirements, be allowed a
credit or refund of the tax deemed paid by such entities in respect of such
includible gains.

NON-U.S. SHAREHOLDERS

The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
will be made herein to provide more than a limited summary of such rules.
Prospective Non-U.S. Shareholders should consult with their own tax advisors to
determine the impact of U.S. federal, state and local income tax laws with
regard to an investment in Shares, including any reporting requirements.

ORDINARY DIVIDENDS. Distributions, other than distributions that are
treated as attributable to gain from sales or exchanges by the Company of U.S.
real property interests (discussed below) and other than distributions
designated by the Company as capital gain dividends, will be treated as ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions to Non-U.S. Shareholders will
ordinarily be subject to a withholding tax equal to 30% of the gross amount of
the distribution, unless an applicable tax treaty reduces that tax. However, if
income from the investment in the Shares is treated as effectively connected
with the Non-U.S. Shareholder's conduct of a U.S. trade or business, the
Non-U.S. Shareholder generally will be

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subject to tax at graduated rates in the same manner as U.S. shareholders are
taxed with respect to such dividends (and may also be subject to the 30% branch
profits tax if the shareholder is a foreign corporation). The Company expects to
withhold U.S. tax at the rate of 30% on the gross amount of any dividends, other
than dividends treated as attributable to gain from sales or exchanges of U.S.
real property interests and capital gain dividends, paid to a Non-U.S.
Shareholder, unless (i) a lower treaty rate applies and the required form
evidencing eligibility for that reduced rate is filed with the Company or the
appropriate withholding agent or (ii) the Non-U.S. Shareholder files an IRS Form
4224 (or a successor form) with the Company or the appropriate withholding agent
claiming that the distributions are "effectively connected" income.

Distributions to a Non-U.S. Shareholder that are designated by the Company
at the time of distribution as capital gain dividends which are not attributable
to or treated as attributable to the disposition by the Company of a U.S. real
property interest generally will not be subject to U.S. federal income taxation,
except as described below.

RETURN OF CAPITAL. Distributions in excess of current and accumulated
earnings and profits of the Company, which are not treated as attributable to
the gain from disposition by the Company of a U.S. real property interest, will
not be taxable to a Non-U.S. Shareholder to the extent that they do not exceed
the adjusted basis of the Non-U.S. Shareholder's Shares, but rather will reduce
the adjusted basis of such Shares. To the extent that such distributions exceed
the adjusted basis of a Non-U.S. Shareholder's Shares, they will give rise to
tax liability if the Non-U.S. Shareholder otherwise would be subject to tax on
any gain from the sale or disposition of its Shares, as described below. If it
cannot be determined at the time a distribution is made whether such
distribution will be in excess of current and accumulated earnings and profits,
the distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Shareholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of the Company.

CAPITAL GAIN DIVIDENDS. For any year in which the Company qualifies as a
REIT, distributions that are attributable to gain from sales or exchanges by the
Company of U.S. real property interests will be taxed to a Non-U.S. Shareholder
under the provisions of the Foreign Investment in Real Property Tax Act of 1980,
as amended ("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Shareholder as if such gain were effectively connected with a U.S. business.
Thus, Non-U.S. Shareholders will be taxed on such distributions at the normal
capital gain rates applicable to U.S. Shareholders (subject to any applicable
alternative minimum tax and special alternative minimum tax in the case of
nonresident alien individuals). The Company is required by applicable Treasury
regulations under FIRPTA to withhold 35% of any distribution that could be
designated by the Company as a capital gain dividend. However, if the Company
designates as a capital gain dividend a distribution made prior to the day the
Company actually effects such designation, then (although such distribution may
be taxable to a Non-U.S. Shareholder) such distribution is not subject to
withholding under FIRPTA; rather, the Company must effect the 35% FIRPTA
withholding from distributions made on and after the date of such designation,
until the distributions so withheld equal the amount of the prior distribution
designated as a capital gain dividend. The amount withheld is creditable against
the Non-U.S. Shareholder's U.S. tax liability.

SALES OF SHARES. Gain recognized by a Non-U.S. Shareholder upon a sale or
exchange of Shares generally will not be taxed under FIRPTA if the Company is a
"domestically controlled REIT," defined generally as a REIT in respect of which
at all times during a specified testing period less than 50% in value of the
stock is and was held directly or indirectly by foreign persons. It is currently
anticipated that the Company will continue to be a "domestically controlled
REIT," and, therefore, that the sale of Shares will not be subject to taxation
under FIRPTA. However, gain not subject to FIRPTA will be taxable to a Non-U.S.
Shareholder if (i) investment in the Shares is treated as "effectively
connected" with the Non-U.S. Shareholder's U.S. trade or business, in which case
the Non-U.S. Shareholder will be subject to the

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same treatment as U.S. Shareholders with respect to such gain, or (ii) the
Non-U.S. Shareholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, or maintains an office or a fixed place of business in the
United States to which the gain is attributable, in which case the nonresident
alien individual will be subject to a 30% tax on the individual's capital gains.
A similar rule will apply to capital gain dividends not subject to FIRPTA.

If the Company were not a domestically-controlled REIT, a Non-U.S.
Shareholder's sale of Shares would be subject to tax under FIRPTA only if the
selling Non-U.S. Shareholder owned more than 5% of the class of Shares sold at
any time during a specified period (generally the shorter of the period that the
Non-U.S. Shareholder owned the Shares sold or the five-year period ending on the
date of disposition). If the gain on the sale of Shares were to be subject to
tax under FIRPTA, the Non-U.S. Shareholder would be subject to the same
treatment as U.S. Shareholders with respect to such gain (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals) and the purchaser of such Shares would be
required to withhold 10% of the gross purchase price.

TREATY BENEFITS. Pursuant to current Treasury Regulations, dividends paid
to an address in a country outside the United States are generally presumed to
be paid to a resident of such country for purposes of determining the
applicability of withholding discussed above and the applicability of a tax
treaty rate.

Under the recently Proposed Regulations that are proposed to be effective
for distributions made after December 31, 1997, however, a Non-U.S. Shareholder
who wishes to claim the benefit of an applicable treaty rate would be required
to satisfy applicable certification requirements. In addition, under the
Proposed Regulations, in the case of Shares held by a foreign partnership, (x)
the certification requirement would generally be applied to the partners in the
partnership and (y) the partnership would be required to provide certain
information, including a United States taxpayer identification number. The
Proposed Regulations provide look-through rules in the case of tiered
partnerships. It is not certain whether, or in what form, the Proposed
Regulations will be adopted. Shareholders that are partnerships or entities that
are similarly fiscally transparent for federal income tax purposes, and persons
holding Shares through such entities, may be subject to restrictions on their
ability to claim benefits under U.S. tax treaties and should consult a tax
advisor.

OTHER TAX CONSEQUENCES

The Company and its shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its shareholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective shareholders are urged to consult
their own tax advisors regarding the effect of state and local tax laws on an
investment in the Company.

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UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc, Furman Selz LLC and Prudential Securities
Incorporated are acting as representatives, has severally agreed to purchase
from the Company, the respective number of Shares set forth opposite its name
below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co................................................................
Morgan Stanley & Co. Incorporated..................................................
Salomon Brothers Inc...............................................................
Furman Selz LLC....................................................................
Prudential Securities Incorporated.................................................
-------------
Total............................................................................ 13,580,000
-------------
-------------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Shares offered hereby,
if any are taken.

The Underwriters propose to offer the Shares in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of $ per Share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per Share to certain brokers and
dealers. After the Shares are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 2,037,000
additional Shares solely to cover over-allotments, if any. If the Underwriters
exercise their over-allotment option, the Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of Shares to be purchased by each of them, as shown in
the foregoing table, bears to the 13,580,000 Shares offered.

The Company and its trustees and executive officers have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the last closing of the Offering, they will
not offer, sell, contract to sell or otherwise dispose of any Shares or
securities of the Company (other than, in the case of the Company, pursuant to
Compensation Programs existing on the date of this Prospectus) which are
substantially similar to the Shares or which are convertible into or
exchangeable for securities which are substantially similar to the Shares
without the prior written consent of Goldman, Sachs & Co., except that the
Company may sell Shares to the Underwriters in connection with the Offering.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of Shares
offered by them.

Prior to the Offering, there has been no public market for the Shares. The
initial public offering price will be negotiated among the Company and the
representatives. Among the factors to be considered in determining the initial
public offering price of the Shares, in addition to prevailing market
conditions, will be the dividend yields and price to earnings ratios of publicly
traded real estate investment trusts that the Company and the representatives
believe to be comparable to the Company, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management,
the current state of the Company's industry and the economy as a whole.

104
<PAGE>
Application has been made to list the Shares on the NYSE under the symbol
"EPR." In order to meet one of the requirements for listing the Shares on the
NYSE, the Underwriters have undertaken to sell lots of 100 or more Shares to a
minimum of 2,000 beneficial holders.

In connection with the Offering, the Underwriters may purchase and sell the
Shares in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Shares; and syndicate short positions involve the
sale by the Underwriters of a greater number of Shares than they are required to
purchase from the Company in the offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Shares sold in the Offering for their account
may be reclaimed by the syndicate if such Shares are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Shares, which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the NYSE, in the over-the-counter market or
otherwise.

The Company and AMCE have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act.

The Company will pay an advisory fee equal to 0.50% of the gross proceeds of
the Offering (including any exercise of the Underwriters' over-allotment option)
to Goldman, Sachs & Co. for advisory services in connection with the evaluation,
analysis and structuring of the Company's formation and the Offering.

From time to time, Goldman, Sachs & Co. and Furman Selz LLC have provided
investment banking services to AMCE, including acting as lead manager in
connection with the offering of Notes by AMCE and as financial advisor to the
Special Committee of the AMCE Board of Directors in connection with the merger
of Durwood, Inc. into AMCE, respectively.

EXPERTS

The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement of which this Prospectus forms a part
have been audited by Ernst & Young LLP, independent certified public
accountants, to the extent indicated in their reports thereon also appearing
elsewhere herein and in the Registration Statement. Such financial statements
have been included herein in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

The financial statements of AMCE included in this Prospectus and elsewhere
in the Registration Statement of which this Prospectus forms a part have been
audited by Coopers & Lybrand L.L.P., independent certified public accountants,
to the extent indicated in their reports thereon also appearing elsewhere herein
and in the Registration Statement. Such financial statements have been included
herein in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.

VALIDITY OF SHARES

The validity of the Shares will be passed upon for the Company by Sullivan &
Cromwell, Los Angeles, California and for the Underwriters by Willkie Farr &
Gallagher, New York, New York. As to certain matters of Maryland law, Sullivan &
Cromwell and Willkie Farr & Gallagher will rely upon the opinion of Ballard
Spahr Andrews & Ingersoll, Baltimore, Maryland.

105
<PAGE>
GLOSSARY

Unless the context otherwise requires, the following capitalized terms shall
have the meanings set forth below for purposes of this Prospectus:

"ADA" means the Americans with Disabilities Act of 1990.

"AMC" means American Multi-Cinema, Inc., a Missouri corporation and a
wholly-owned subsidiary of AMCE and the Company's lessee under the Leases.

"AMCE" means AMC Entertainment Inc., a Delaware corporation and the
guarantor of AMC's obligations under the Leases.

"AMCE Credit Facility" means AMCE's $425 million credit facility, which was
amended and restated as of April 10, 1997.

"AMCE Right to Purchase Agreement" means the right to purchase agreement
between the Company and AMCE and its subsidiaries pursuant to which the Company
will have a right of first refusal and first offer to purchase any megaplex
theatre and related entertainment property acquired or developed and owned by
AMCE or its subsidiaries for a period of five years following the closing of the
Offering.

"Annual Base Rent" means an annual base rent payable during the Fixed Term
and the Extended Terms.

"Annual Percentage Rate" means 6%.

"Annual Percentage Rent" means percentage rent equal to the sum of 6% of
Gross Receipts in excess of a baseline amount.

"Bank Credit Facility" means the Company's proposed $200 million unsecured
line of credit.

"Base Rent Escalation" means, for any year, the increase in Annual Base Rent
equal to 2% of the rent applicable to a Property for the preceding year.

"Board" means the Company's Board of Trustees.

"Cash Available for Distribution" means Funds from Operations minus deferred
rent, capital expenditures and principal payments on indebtedness.

"Charitable Beneficiary" means an organization or organizations described in
Sections 170(b)(1)(A) and 170(c) of the Code and identified by the Board as the
beneficiary or beneficiaries of the Excess Shares trust.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Company" means Entertainment Properties Trust, a Maryland corporation
formed in August 1997.

"Control Share acquisition" means, under Maryland law, the acquisition of
Control Shares, subject to certain exceptions.

"Control Shares" means, under Maryland law, voting shares which, if
aggregated with all other such shares previously acquired by the acquiror, or in
respect of which the acquiror is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than one-third,
(ii) one-third or more but less than a majority, or (iii) a majority of all
voting power.

"Cross-Default Termination Date" means the earlier to occur of (i) the date
AMCE's senior long-term debt obligations are rated, or AMCE's corporate credit
rating is, investment grade by either Standard &

106
<PAGE>
Poor's Corporation or Moody's Investors Service, Inc., (ii) AMC's rent payments
to the Company represent less than 50% of the Company's rental income for any
fiscal quarter or (iii) the expiration of the Fixed Term with respect to a
Lease.

"ETRCs" mean entertainment themed retail centers, which are generally large
multi-tenant retail developments that incorporate elements such as theme retail
stores and restaurants, book or music superstores, high-tech attractions,
interactive game centers, live entertainment venues and other specialty retail
that is oriented to entertainment or leisure-time activities.

"Event of Default" means an event of default under the Leases.

"Excess Shares" means Shares that would result in a person owning Shares in
excess of the Ownership Limit or cause the Company to become "closely held"
under Section 856(h) of the Code, unless acquired in a permitted transfer.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Extended Term" means the four additional five-year terms under the Leases.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.

"Fixed Term" means the initial terms ranging from 13 to 15 years under the
Leases.

"Formation Transactions" means the transactions designed to consolidate the
ownership interests in the Initial Properties in the Company, to facilitate the
Offering and to enable the Company to qualify as a REIT for federal income tax
purposes commencing with its taxable year ending December 31, 1997.

"Funds from Operations" means net earnings (loss) (computed in accordance
with GAAP), excluding significant non-recurring items, gains (or losses) from
debt restructuring and sales of property, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and joint
ventures.

"Future AMCE Property" means any megaplex theatre or related entertainment
property acquired or developed and owned (or ground-leased) by AMCE or its
subsidiaries following the Formation Transactions.

"Future Property" means any entertainment or entertainment-related property
acquired or developed by the Company and operated by AMC following the Formation
Transactions.

"GAAP" means generally accepted accounting principles.

"Gross Receipts" with respect to a Property generally means the receipts
from the sale of theatre admission tickets and concessions received by AMC in or
from the Properties during each lease year, with certain deductions and
exceptions.

"Initial Properties" means the twelve megaplex theatres that the Company
will acquire concurrently with or within a short period following the closing of
the Offering.

"Interested Shareholder" means any person who beneficially owns 10% or more
of the voting power of a Maryland real estate investment trust's shares or an
affiliate of a Maryland real estate investment trust who, at any time within the
two-year period prior to the date in question, was the beneficial owner of 10%
or more of the voting power of the then-outstanding voting shares of the real
estate investment trust.

"IRS" means the Internal Revenue Service.

"Leases" means the long-term triple net leases pursuant to which AMC will
lease the Properties from the Company.

"megaplex theatres" are theatres having at least 14 screens with
predominantly stadium style seating (seating with an elevation between rows to
provide unobstructed viewing).

107
<PAGE>
"MGCL" means the Maryland General Corporate Law, as amended.

"multiplex theatres" are theatres generally without stadium-style seating
and having less than 14 screens.

"NAREIT" means the National Association of Real Estate Investment Trusts.

"Notes" means the $200 million aggregate principal amount of 9 1/2% Senior
Subordinated Notes due 2009.

"NYSE" means the New York Stock Exchange, Inc.

"Offering" means the offering of Shares to the public by the Company
pursuant to this Prospectus.

"Option Agreements" means agreements between the Company and AMC and one of
its subsidiaries and the current owner/lessor of certain properties pursuant to
which the Company will have exclusive options to acquire any or all of the
Option Properties.

"Option Properties" means megaplex theatres, currently under construction by
AMC, that the Company will have the right to acquire and lease to AMC pursuant
to the Option Agreements.

"Ownership Limit" means 9.8% of the number or value of the Company's issued
and outstanding shares.

"Planet Movies" means the joint venture between AMCE and Planet Hollywood
International, Inc.

"Preferred Shares" means preferred shares of beneficial interest, par value
$.01 per share, of the Company.

"Properties" means the Initial Properties and the Option Properties.

"Purchase Agreement" means an agreement of sale and purchase between the
Company and AMC and one of its subsidiaries which provides the terms of the sale
of the Initial Properties.

"Recognition Period" means the 10-year period beginning on the day the
Company acquires assets from a C corporation in certain transactions.

"REIT" means a real estate investment trust as defined under the Code.

"SDDS-TM-" and "SONY Dynamic Digital Sound-TM-" are trademarks of Sony
Incorporated.

"Securities Act" means the Securities Act of 1933, as amended.

"Shares" means the common shares of beneficial interest, par value $.01 per
share, of the Company.

"Treasury" means the United States Treasury Department.

"UBTI" means unrelated business taxable income as defined under the Code.

"Underwriting Agreement" means the Underwriting Agreement between the
Company and the Underwriters.

"Underwriters" means the Underwriters named in this Prospectus.

108
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
THE COMPANY
PRO FORMA FINANCIAL STATEMENTS:
Condensed Pro Forma Financial Statements............................................. F-2
Condensed Pro Forma Statement of Operations for the six months ended June 30, 1997... F-3
Condensed Pro Forma Statement of Operations for the year ended December 31, 1996..... F-4
Condensed Pro Forma Balance Sheet as of June 30, 1997................................ F-5
Notes to Condensed Pro Forma Financial Statements.................................... F-6
AUDITED FINANCIAL STATEMENTS:
Report of Independent Auditors....................................................... F-7
Balance Sheet as of August 29, 1997.................................................. F-8
Notes to Balance Sheet............................................................... F-9

AMC ENTERTAINMENT INC.
PRO FORMA FINANCIAL STATEMENTS:
Condensed Pro Forma Financial Statements............................................. F-10
Condensed Pro Forma Consolidated Statement of Operations for the thirteen weeks ended
July 3, 1997....................................................................... F-11
Condensed Pro Forma Consolidated Statement of Operations for the year (53 weeks)
ended April 3, 1997................................................................ F-12
Condensed Pro Forma Consolidated Balance Sheet as of July 3, 1997.................... F-13
Notes to Condensed Pro Forma Financial Statements.................................... F-14
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Statements of Operations for the thirteen weeks ended July 3, 1997 and
June 27, 1996...................................................................... F-15
Consolidated Balance Sheets as of July 3, 1997 and April 3, 1997..................... F-16
Consolidated Statements of Cash Flows for the thirteen weeks ended July 3, 1997 and
June 27, 1996...................................................................... F-17
Notes to Consolidated Financial Statements........................................... F-18
AUDITED FINANCIAL STATEMENTS:
Report of Independent Accountants.................................................... F-21
Consolidated Statements of Operations for the year (53 weeks) ended April 3, 1997 and
the years (52 weeks) ended March 28, 1996 and March 30, 1995....................... F-22
Consolidated Balance Sheets as of April 3, 1997 and March 28, 1996................... F-23
Consolidated Statements of Cash Flows for the year (53 weeks) ended April 3, 1997 and
the years (52 weeks) ended March 28, 1996 and March 30, 1995....................... F-24
Consolidated Statements of Stockholders Equity for the year (53 weeks) ended April 3,
1997 and the years (52 weeks) ended March 28, 1996 and March 30, 1995.............. F-26
Notes to Consolidated Financial Statements........................................... F-27
</TABLE>

F-1
<PAGE>
ENTERTAINMENT PROPERTIES TRUST

CONDENSED PRO FORMA FINANCIAL STATEMENTS

(UNAUDITED)

The following unaudited Condensed Pro Forma Statements of Operations and
Balance Sheet have been prepared giving effect to the Formation Transactions.
The Condensed Pro Forma Statements of Operations for the six months ended June
30, 1997 and the year ended December 31, 1996 assume that the Formation
Transactions occurred on January 1, 1996. The Condensed Pro Forma Balance Sheet
assumes that the Formation Transactions occurred on June 30, 1997.

The unaudited Condensed Pro Forma Financial Statements do not purport to
represent the Company's financial position or results of operations had the
Formation Transactions in fact occurred on such dates. In addition, the
unaudited Condensed Pro Forma Financial Statements are not intended to be
indicative of the Company's future financial position or results of operations.

The unaudited Condensed Pro Forma Financial Statements should be read in
conjunction with the Company's historical financial statements and "The
Company's Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.

F-2
<PAGE>
ENTERTAINMENT PROPERTIES TRUST

CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1997

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------- ------------- -----------
<S> <C> <C> <C>
Rental income.......................................... $ -- $ 14,814(1) $ 14,814
General and administrative expenses.................... -- 1,105(2) 1,105
Depreciation........................................... -- 2,677(3) 2,677
--------- ------------- -----------
Operating income..................................... -- 11,032 11,032
Interest expense, net.................................. -- 332(4) 332
--------- ------------- -----------
Net earnings........................................... $ -- $ 10,700 $ 10,700
--------- ------------- -----------
--------- ------------- -----------
Net earnings per share................................. $ -- $ 0.78
--------- -----------
--------- -----------
Weighted average number of shares outstanding:......... -- 13,760
--------- -----------
--------- -----------
</TABLE>

See Notes to Condensed Pro Forma Financial Statements.

F-3
<PAGE>
ENTERTAINMENT PROPERTIES TRUST

CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL(1) ADJUSTMENTS PRO FORMA
----------- ------------- -----------
<S> <C> <C> <C>
Rental income........................................ $ -- $ 29,628(1) $ 29,628
General and administrative expenses.................. -- 2,209(2) 2,209
Depreciation......................................... -- 5,354(3) 5,354
----------- ------------- -----------
Operating income................................... -- 22,065 22,065
Interest expense, net................................ -- 664(4) 664
----------- ------------- -----------
Net earnings......................................... $ -- $ 21,401 $ 21,401
----------- ------------- -----------
----------- ------------- -----------
Net earnings per share............................... $ -- $ 1.56
----------- -----------
----------- -----------
Weighted average number of shares outstanding:....... -- 13,760
----------- -----------
----------- -----------
</TABLE>

See Notes to Condensed Pro Forma Financial Statements.

F-4
<PAGE>
ENTERTAINMENT PROPERTIES TRUST

CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997

(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL(5) ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash................................................... $ 2 $ 964(6) $ 966
Real estate owned, at cost............................. -- 248,356(7) 248,356
Intangible assets, net................................. -- 1,000(8) 1,000
Other long-term assets................................. -- 100(9) 100
--------- ----------- ---------
Total assets......................................... $ 2 $250,420 $250,422
--------- ----------- ---------
--------- ----------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities.................................... $-- $ -- $ --
Long-term debt......................................... -- -- --
Shareholders' equity:
Common shares, $.01 par value........................ -- 138(10) 138
Additional paid-in capital........................... 2 250,282(10) 250,284
--------- ----------- ---------
$ 2 $250,420 $250,422
--------- ----------- ---------
--------- ----------- ---------
</TABLE>

See Notes to Condensed Pro Forma Financial Statements

F-5
<PAGE>
ENTERTAINMENT PROPERTIES TRUST

NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS

(UNAUDITED)

(2) Represents management's estimates of general and administrative expenses,
including compensation.

(3) Represents depreciation of the Initial Properties over a 40-year period.

(4) Represents estimated Bank Credit Facility fees and amortization and
interest income on pro forma cash.

(5) The amounts presented hereunder were taken from the Company's August 29,
1997 Consolidated Balance Sheet.

(6) Represents the estimated remaining net proceeds of the Offering after the
Formation Transactions.

(7) Represents the net book value of the Initial Properties and the one related
land parcel as of June 30, 1997.

(8) Represents capitalized financing fees in connection with the Bank Credit
Facility.

(9) Represents furniture, fixtures, and equipment for the Company's office
space.

(10) Represents the issuance of 13,700,000 Shares in the Offering at an assumed
initial public offering price of $20.00 per share. The estimated costs of
the Offering, including the underwriting discount, have been reflected as an
offset to additional paid-in capital, as well as the purchase of 120,000
Shares by certain executive officers of the Company with loans from the
Company aggregating $2.4 million pursuant to the Share Purchase Program.

F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS

THE BOARD OF TRUSTEES
Entertainment Properties Trust

We have audited the accompanying balance sheet of Entertainment Properties
Trust, a Maryland real estate investment trust (the Company) , as of August 29,
1997. This balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on the balance sheet based on our audit.

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

In our opinion, the balance sheet referred to above presents fairly, in all
materials respects, the financial position of Entertainment Properties Trust as
of August 29, 1997, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Kansas City, Missouri
August 29, 1997

F-7
<PAGE>
ENTERTAINMENT PROPERTIES TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
BALANCE SHEET
AUGUST 29, 1997

<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash............................................................................... $ 2,000

SHAREHOLDERS' EQUITY
Shareholders' equity:
Common shares, $.01 par value; 1,000 shares authorized; 100 shares issued and
outstanding...................................................................... $ 1
Additional paid-in capital......................................................... 1,999
---------
$ 2,000
---------
---------
</TABLE>

See accompanying notes.

See Notes to Balance Sheet.

F-8
<PAGE>
ENTERTAINMENT PROPERTIES TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
NOTES TO BALANCE SHEET
AUGUST 29, 1997

1. ORGANIZATION

Entertainment Properties Trust (the "Company") was formed August 22, 1997 as
a Maryland real estate investment trust. The Company has had no operations to
date, but has issued 100 Common Shares to founding shareholders.

2. FEDERAL INCOME TAXES

At the earliest possible date, the Company plans to qualify as a real estate
investment trust (REIT) under the Internal Revenue Code and, accordingly, will
not be subject to federal income taxes on amounts distributed to shareholders
provided that it distributes at least 95% of its real estate investment trust
taxable income and meets certain other requirements.

3. INTENTIONS OF THE COMPANY (UNAUDITED)

The Company has announced its intention to sell 13,700,000 Common Shares in
an initial public offering. Immediately after the closing of the Offering, the
Company intends to consummate the following transactions with American
Multi-Cinema, Inc. (AMC): (a) purchase of 12 megaplex theatres and a related
land parcel for $248.3 million and enter into triple net leases with AMC for
original fixed terms of 13 to 15 years with renewal terms for four additional
five-year terms at the option of AMC, (b) execute an option agreement to
purchase 5 additional megaplex theatres for an estimated $136.8 million and
related land parcels for an aggregate of $10.4 million and (c) execute a right
to purchase agreement to purchase additional megaplex theatres or related
entertainment properties acquired or developed and owned by AMC for a period of
five years following the close of the offering.

The Company will be dependent on AMC for its initial revenues. Also, due to
the nature of the business and the contractual relationships with AMC, including
the operating leases, the Company's ability to be successful is dependent on a
number of factors, including key personnel, continuing qualification as a REIT
and continued availability of financial resources.

F-9
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONDENSED PRO FORMA FINANCIAL STATEMENTS

(UNAUDITED)

The following unaudited Condensed Pro Forma Statements of Operations and
Balance Sheet have been prepared giving effect to the Formation Transactions.
The Condensed Pro Forma Statements of Operations for the thirteen-weeks ended
July 3, 1997 and the year (53 weeks) ended April 3, 1997 assume that the
Formation Transactions occurred on March 29, 1996. The Condensed Pro Forma
Balance Sheet assumes that the Formation Transactions occurred on July 3, 1997.

The unaudited Condensed Pro Forma Financial Statements do not purport to
represent AMCE's financial position or results of operations had the Formation
Transactions in fact occurred on such dates. In addition, the unaudited
Condensed Pro Forma Financial Statements are not intended to be indicative of
the AMCE's future financial position or results of operations.

The unaudited Condensed Pro Forma Financial Statements should be read in
conjunction with AMCE's historical financial statements and "AMCE's Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.

F-10
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

THIRTEEN-WEEKS ENDED JULY 3, 1997

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL(1) ADJUSTMENTS PRO FORMA
----------- -------------- -----------
<S> <C> <C> <C>
Revenues.............................................. $ 194,462 $ -- $ 194,462
Cost of operations.................................... 159,670 3,918(2) 163,588
General and administrative............................ 14,755 -- 14,755
Depreciation and amortization......................... 16,367 (927)(3) 15,440
----------- ------- -----------
Operating income.................................... 3,670 (2,991) 679
Interest expense...................................... 8,245 (2,086)(4) 6,159
Other income, net..................................... 1,350 -- 1,350
----------- ------- -----------
Loss before income taxes.............................. (3,225) (905) (4,130)
Income tax provision.................................. (1,386) (389)(5) (1,775)
----------- ------- -----------
Net loss.............................................. $ (1,839) $ (516) $ (2,355)
----------- ------- -----------
----------- ------- -----------
Preferred dividends................................... 1,369 1,369
----------- -----------
Net loss for common shares............................ $ (3,208) $ (3,724)
----------- -----------
----------- -----------
Loss per share:
Primary............................................. $ (0.18) $ (0.21)
----------- -----------
----------- -----------
Fully diluted....................................... $ (0.18) $ (0.21)
----------- -----------
----------- -----------
Weighted average number of shares outstanding:
Primary............................................. 18,006 18,006
----------- -----------
----------- -----------
Fully diluted....................................... 18,006 18,006
----------- -----------
----------- -----------
</TABLE>

See Notes to Condensed Pro Forma Financial Statements.

F-11
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR (53 WEEKS) ENDED APRIL 3, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL(1) ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues............................................... $749,597 $ -- $749,597
Cost of operations..................................... 580,002 8,652(2) 588,654
General and administrative............................. 56,647 -- 56,647
Depreciation and amortization.......................... 59,803 (2,296)(3) 57,507
---------- ----------- ---------
Operating income..................................... 53,145 (6,356) 46,789
Interest expense....................................... 22,022 (4,598)(4) 17,424
Other income, net...................................... 772 -- 772
---------- ----------- ---------
Earnings before income taxes........................... 31,895 (1,758) 30,137
Income tax provision................................... 12,900 (710)(5) 12,190
---------- ----------- ---------
Net earnings........................................... $ 18,995 $(1,048) $ 17,947
---------- ----------- ---------
---------- ----------- ---------
Preferred dividends.................................... 5,907 5,907
---------- ---------
Net earnings for common shares......................... $ 13,088 $ 12,040
---------- ---------
---------- ---------
Earnings per share:
Primary.............................................. $ 0.74 $ 0.68
---------- ---------
---------- ---------
Fully diluted........................................ $ 0.73 $ 0.67
---------- ---------
---------- ---------
Weighted average number of shares outstanding:
Primary.............................................. 17,726 17,726
---------- ---------
---------- ---------
Fully diluted........................................ 17,940 17,940
---------- ---------
---------- ---------
</TABLE>

See Notes to Condensed Pro Forma Financial Statements.

F-12
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 3, 1997
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL(1) ADJUSTMENTS PRO FORMA
---------- ------------ ---------
<S> <C> <C> <C>
ASSETS
Current assets......................................... $112,978 $ -- $112,978
Property, net.......................................... 624,220 (150,732)(6) 473,488
Intangible assets, net................................. 27,681 -- 27,681
Other long-term assets................................. 67,850 2,877(8) 70,727
---------- ------------ ---------
Total assets......................................... $832,729 $(147,855) $684,874
---------- ------------ ---------
---------- ------------ ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities.................................... $160,602 $ 2,877(8) $163,479
Corporate borrowings................................... 404,450 (154,064)(7) 250,386
Capital lease obligations.............................. 54,167 -- 54,167
Other long-term liabilities............................ 46,973 3,332(8) 50,305
---------- ------------ ---------
666,192 (147,855) 518,337
Stockholders' equity................................... 166,537 -- 166,537
---------- ------------ ---------
$832,729 $(147,855) $684,874
---------- ------------ ---------
---------- ------------ ---------
</TABLE>

See Notes to Condensed Pro Forma Financial Statements.

F-13
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)

(1) The amounts presented hereunder were taken from AMCE's July 3, 1997 and
April 3, 1997 Consolidated Financial Statements.

(2) Represents rent expense of $3,981,000 and $8,767,000 for the thirteen weeks
ended July 3, 1997 and the year (53 weeks) ended April 3, 1997,
respectively, for the periods the completed Initial Properties were in
operation, net of amortized gain of $64,000 and $215,000 for the thirteen
weeks ended July 3, 1997 and the year (53 weeks) ended April 3, 1997,
respectively, from the sale of the completed Initial Properties.

(3) Represents the elimination of historical depreciation on the completed
Initial Properties.

(4) Represents the reduction of interest expense associated with the reduction
of outstanding indebtedness under the AMCE Credit Facility with the net
proceeds from the Formation Transactions.

(5) Represents the adjustment to income taxes to the expected effective tax rate
of 43.0% and 40.4% for the thirteen-weeks ended July 3, 1997 and the year
(53 weeks) ended April 3, 1997, respectively.

(6) Represents the net book value of the completed Initial Properties as of July
3, 1997.

(7) Represents the paydown of the AMCE Credit Facility with the net proceeds
from the Formation Transactions.

(8) Represents the deferral of the gain on sale of the completed Initial
Properties, net of expenses, and the related current and deferred income tax
effect.

F-14
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED
--------------------
JULY 3, JUNE 27,
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
Revenues
Admissions.......................................................... $ 125,998 $ 106,285
Concessions......................................................... 59,072 49,831
Other............................................................... 9,392 5,811
--------- ---------
Total revenues.................................................... 194,462 161,927
Expenses
Film exhibition costs............................................... 71,142 56,139
Concession costs.................................................... 10,056 8,525
Other............................................................... 78,472 68,157
--------- ---------
Total cost of operations.......................................... 159,670 132,821
General and administrative.......................................... 14,755 13,025
Depreciation and amortization....................................... 16,367 11,674
--------- ---------
Total expenses.................................................... 190,792 157,520
--------- ---------
Operating income.................................................. 3,670 4,407
Other expense (income)
Interest expense
Corporate borrowings.............................................. 5,899 2,335
Capital lease obligations......................................... 2,346 2,574
Investment income................................................... (172) (182)
Gain on disposition of assets....................................... (1,178) (18)
--------- ---------
Loss before income taxes.............................................. (3,225) (302)
Income tax provision.................................................. (1,386) (125)
--------- ---------
Net loss.............................................................. $ (1,839) $ (177)
--------- ---------
--------- ---------
Preferred dividends................................................... 1,369 1,546
--------- ---------
Net loss for common shares............................................ $ (3,208) $ (1,723)
--------- ---------
--------- ---------
Loss per share:
Primary............................................................. $ (.18) $ (.10)
--------- ---------
--------- ---------
Fully diluted....................................................... $ (.18) $ (.10)
--------- ---------
--------- ---------
</TABLE>

See Notes to Consolidated Financial Statements.

F-15
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JULY 3, APRIL 3,
1997 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................. $ 24,245 $ 24,715
Receivables, net of allowance for doubtful accounts of $735 as of July
3, 1997 and $704 as of April 3, 1997................................ 70,140 42,188
Other current assets.................................................. 18,593 16,769
Total current assets................................................ 112,978 83,672
--------- ---------
Property, net......................................................... 624,220 543,058
Intangible assets, net................................................ 27,681 28,679
Other long-term assets................................................ 67,850 62,804
--------- ---------
Total assets........................................................ $ 832,729 $ 718,213
--------- ---------
--------- ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 105,187 $ 88,367
Accrued expenses and other liabilities................................ 51,805 42,459
Current maturities of corporate borrowings and capital lease
obligations......................................................... 3,610 3,441
--------- ---------
Total current liabilities........................................... 160,602 134,267
Corporate borrowings.................................................. 404,450 315,046
Capital lease obligations............................................. 54,167 55,237
Other long-term liabilities........................................... 46,973 43,651
--------- ---------
Total liabilities................................................... 666,192 548,201
Stockholders' equity:
$1.75 Cumulative Convertible Preferred Stock, 66 2/3 CENTS par value;
2,933,800 shares issued and outstanding as of July 3, 1997 and
3,303,600 shares issued and outstanding as of April 3, 1997
(aggregate liquidation preference of $73,345 as of July 3, 1997 and
$82,590 as of April 3, 1997)........................................ 1,956 2,202
Common Stock, 66 2/3 CENTS par value; 7,242,004 shares issued as of
July 3, 1997 and 6,604,469 shares issued as of April 3, 1997 4,828 4,403
Convertible Class B Stock, 66 2/3 CENTS par value; 11,157,000 shares
issued and outstanding.............................................. 7,438 7,438
Additional paid-in capital............................................ 107,602 107,781
Foreign currency translation adjustment............................... (2,295) (2,048)
Retained earnings..................................................... 47,377 50,605
--------- ---------
166,906 170,381
Less--Common Stock in treasury, at cost, 20,500 shares as of July 3,
1997 and April 3, 1997.............................................. 369 369
--------- ---------
Total stockholders' equity.......................................... 166,537 170,012
--------- ---------
Total liabilities and stockholders' equity............................ $ 832,729 $ 718,213
--------- ---------
--------- ---------
</TABLE>

See Notes to Consolidated Financial Statements.

F-16
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
JULY 3, JUNE 27,
1997 1996
--------- -----------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................ $ (1,839) $ (177)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization....................................... 16,367 11,674
Gain on sale of other long-term assets.............................. (1,178) (18)
Change in assets and liabilities:
Receivables......................................................... (1,040) 636
Other current assets................................................ (1,824) 722
Accounts payable.................................................... 8,788 9,145
Accrued expenses and other liabilities.............................. 12,169 (3,623)
Other, net.......................................................... (213) 366
--------- -----------
Total adjustments................................................... 33,069 18,902
--------- -----------
Net cash provided by operating activities........................... 31,230 18,725
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................ (94,162) (48,674)
Net change in refundable construction advances...................... (26,912) (881)
Proceeds from disposition of long-term assets....................... 2,446 --
Other, net.......................................................... (7,934) (3,144)
--------- -----------
Net cash used in investing activities............................... (126,562) (52,699)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility...................... 90,000 35,000
Principal payments under capital lease obligations and other........ (877) (604)
Cash overdrafts..................................................... 8,032 535
Proceeds from exercise of stock options............................. -- 141
Dividends paid on preferred stock................................... (1,389) (1,631)
Deferred financing costs and other.................................. (635) --
--------- -----------
Net cash provided by financing activities........................... 95,131 33,441
--------- -----------
Effect of exchange rate changes on cash and equivalents............. (269) --
--------- -----------
NET DECREASE IN CASH AND EQUIVALENTS.................................. (470) (533)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD........................... 24,715 10,795
--------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD................................. $ 24,245 $ 10,262
--------- -----------
--------- -----------
Cash paid during the period for:
Interest (net of amounts capitalized of $1,859 and $368)............ $ 4,795 $ 5,093
Income taxes paid (refunded)........................................ 4,994 (3,222)
</TABLE>

See Notes to Consolidated Financial Statements.

F-17
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 3, 1997

(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

AMC Entertainment Inc. ("AMCE") is a holding company which, through its
direct and indirect subsidiaries, including American Multi-Cinema, Inc. ("AMC")
and its subsidiaries (collectively with AMCE, unless the context otherwise
requires, the "Company"), is principally involved in the operation of motion
picture theatres throughout the United States and in Japan and Portugal. The
Company is also involved in the business of providing on-screen advertising and
other services to AMC and other theatre circuits through a wholly-owned
subsidiary, National Cinema Network, Inc. ("NCN").

Prior to fiscal 1998, NCN was consolidated with the Company as of a fiscal
period end that was one month earlier than the Company' fiscal period end.
Beginning in fiscal year 1998, this one-month reporting lag was eliminated and
NCN results include activity for four months.

The accompanying unaudited consolidated financial statements have been
prepared in response to the requirements of Form 10-Q and should be read in
conjunction with the Company's annual report on Form 10-K for the year (53
weeks) ended April 3, 1997. In the opinion of management, these interim
financial statements reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position and results of operations. Due to the seasonal nature of the Company's
business, results for the thirteen weeks ended July 3, 1997, are not necessarily
indicative of the results to be expected for the fiscal year (52 weeks) ending
April 2, 1998.

The year-end consolidated balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.

Certain amounts have been reclassified from prior period consolidated
financial statements to conform with the current year presentation.

NOTE 2--EARNINGS PER SHARE

Primary earnings per share is computed by dividing net earnings less
preferred dividends by the sum of the weighted average number of common shares
outstanding and outstanding stock options, when their effect is dilutive. The
average shares used in the computations were 18,006,000 for the thirteen weeks
ended July 3, 1997 and 16,817,000 for the thirteen weeks ended July 27, 1996. On
a fully diluted basis, net earnings and shares outstanding are adjusted to
assume conversion of the $1.75 Cumulative Convertible Preferred Stock, if
dilutive. The average shares used in the computations were 18,006,000 for the
thirteen weeks ended July 3, 1997 and 16,817,000 for the thirteen weeks ended
June 27, 1996.

NOTE 3--MERGER WITH PARENT

The Board of Directors has approved an agreement (the "Merger Agreement")
providing for the merger of the Company and its principal stockholder, Durwood,
Inc. ("DI"), with the Company remaining as the surviving entity (the "Merger").
The Merger has been sought by members of the Durwood family so that they may
hold their interests in the Company directly instead of indirectly through DI
and a related entity. In the Merger, stockholders of DI would exchange their
shares of DI stock for shares of the Company's stock. Although the outstanding
shares of the Company's Common Stock will increase and the outstanding shares of
its Class B Stock will decrease if the Merger is effected, no aggregate increase

F-18
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JULY 3, 1997

(UNAUDITED)

NOTE 3--MERGER WITH PARENT (CONTINUED)
in total outstanding shares will occur because the shares of the Company owned
by DI will be canceled and the shares of the Company held by other stockholders
would not be exchanged in the Merger.

A special meeting of the stockholders of the Company will be held on August
15, 1997. At the meeting, holders of the Company's Common Stock and Class B
Stock will be asked to approve and adopt the Merger Agreement. A condition to
the Merger is that the Merger Agreement receive approval of the holders of a
majority of the shares of Common Stock other than DI, the Durwood family, their
spouses and children and officers and directors of the Company.

DI is primarily a holding company with no significant operations or assets
other than its equity interest in the Company. The Merger will be accounted for
as a corporate reorganization and the recorded balances for consolidated assets,
liabilities, total stockholders' equity and results of operations of the Company
will not be affected. If the Merger occurs, the Company will be responsible for
paying 50% of its costs in connection with the Merger; the aggregate merger
costs for both the Company and DI are estimated to be approximately $2 million.
Management does not believe that the transaction will have a significant effect
on the Company's financial condition, liquidity or capital resources.

F-19
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT ACCOUNTANTS
YEAR (53 WEEKS) ENDED
APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995

F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of AMC Entertainment Inc.
Kansas City, Missouri

We have audited the accompanying consolidated balance sheets of AMC
Entertainment Inc. and subsidiaries as of April 3, 1997 and March 28, 1996, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year (53 weeks) ended April 3, 1997 and the years (52 weeks) ended
March 28, 1996 and March 30, 1995. 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 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 consolidated financial position of AMC
Entertainment Inc. and subsidiaries as of April 3, 1997 and March 28, 1996, and
the consolidated results of their operations and their cash flows for the year
(53 weeks) ended April 3, 1997 and the years (52 weeks) ended March 28, 1996 and
March 30, 1995, in conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Kansas City, Missouri

May 16, 1997

F-21
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND
YEARS (52 WEEKS) ENDED MARCH 28, 1996 AND MARCH 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Admissions............................................................... $ 492,951 $ 431,361 $ 371,145
Concessions.............................................................. 225,167 196,645 169,120
Other.................................................................... 31,479 27,966 23,079
----------- ----------- -----------
Total revenues....................................................... 749,597 655,972 563,344

Expenses
Film rentals............................................................. 247,199 215,099 182,669
Concession costs......................................................... 36,748 30,417 24,383
Other.................................................................... 296,055 245,842 225,711
----------- ----------- -----------
Total cost of operations............................................. 580,002 491,358 432,763
General and administrative............................................... 56,647 52,059 41,639
Depreciation and amortization............................................ 59,803 43,886 37,913
----------- ----------- -----------
Total expenses....................................................... 696,452 587,303 512,315
----------- ----------- -----------
Operating income..................................................... 53,145 68,669 51,029

Other expense (income)
Interest expense
Cororate borrowings.................................................... 12,016 18,099 24,502
Capital lease obligations.............................................. 10,006 10,729 11,406
Investment income........................................................ (856) (7,052) (10,013)
Loss on disposition of assets............................................ 84 222 156
----------- ----------- -----------
Earnings before income taxes and extraordinary item........................ 31,895 46,671 24,978
Income tax provision....................................................... 12,900 19,300 (9,000)
----------- ----------- -----------
Earnings before extraordinary item......................................... 18,995 27,371 33,978
Extraordinary item -- Loss on extinguishment of debt (net of income tax
benefit of $13,400)...................................................... -- (19,350) --
----------- ----------- -----------
Net earnings............................................................... $ 18,995 $ 8,021 $ 33,978
----------- ----------- -----------
----------- ----------- -----------
Preferred dividends........................................................ 5,907 7,000 7,000
----------- ----------- -----------
Net earnings for common shares............................................. $ 13,088 $ 1,021 $ 26,978
----------- ----------- -----------
----------- ----------- -----------
Earnings per share before extraordinary item:
Primary.................................................................. $ .74 $ 1.21 $ 1.63
----------- ----------- -----------
----------- ----------- -----------
Fully diluted............................................................ $ .73 $ 1.20 $ 1.45
----------- ----------- -----------
----------- ----------- -----------
Earnings per share:
Primary.................................................................. $ .74 $ .06 $ 1.63
----------- ----------- -----------
----------- ----------- -----------
Fully diluted............................................................ $ .73 $ .06 $ 1.45
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

F-22
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

APRIL 3, 1997 AND MARCH 28, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents.................................................................. $ 24,715 $ 10,795
Receivables, net of allowance for doubtful accounts of $704 as of April 3, 1997 and
$801 as of March 28, 1996........................................................... 42,188 20,503
Other current assets.................................................................. 16,769 15,179
----------- -----------
Total current assets................................................................ 83,672 46,477
Property, net........................................................................... 543,058 355,485
Intangible assets, net.................................................................. 28,679 36,483
Other long-term assets.................................................................. 62,804 45,013
----------- -----------
Total assets........................................................................ $ 718,213 $ 483,458
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable...................................................................... $ 88,367 $ 59,353
Accrued expenses and other liabilities................................................ 42,459 43,319
Current maturities of corporate borrowings and capital lease obligations.............. 3,441 2,904
----------- -----------
Total current liabilities........................................................... 134,267 105,576
Corporate borrowings.................................................................... 315,046 126,127
Capital lease obligations............................................................... 55,237 59,141
Other long-term liabilities............................................................. 43,651 33,696
----------- -----------
Total liabilities................................................................... 548,201 324,540
Commitments and contingencies
Stockholders' equity:
$1.75 Cumulative Convertible Preferred Stock, 66 2/3 CENTS par value; 3,303,600 and
4,000,000 shares issued and outstanding as of April 3, 1997, and March 28, 1996,
respectively (aggregate liquidation preference of $82,590 and $100,000 as of April
3, 1997 and March 28, 1996, respectively)........................................... 2,202 2,667
Common Stock, 66 2/3 CENTS par value; 6,604,469 and 5,388,880 shares issued as of
April 3, 1997, and March 28, 1996, respectively..................................... 4,403 3,593
Convertible Class B Stock, 66 2/3 CENTS par value; 11,157,000 shares issued and
outstanding......................................................................... 7,438 7,438
Additional paid-in capital............................................................ 107,781 107,986
Foreign currency translation adjustment............................................... (2,048) --
Retained earnings..................................................................... 50,605 37,603
----------- -----------
170,381 159,287
Less--Common Stock in treasury, at cost, 20,500 shares as of April 3, 1997 and March
28, 1996............................................................................ 369 369
----------- -----------
Total stockholders' equity.......................................................... 170,012 158,918
----------- -----------
Total liabilities and stockholders' equity.......................................... $ 718,213 $ 483,458
----------- -----------
----------- -----------
</TABLE>

See Notes to Consolidated Financial Statements.

F-23
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS)
ENDED MARCH 28, 1996 AND MARCH 30, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash flows from operating activities:
Net earnings.......................................................... $ 18,995 $ 8,021 $ 33,978
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization....................................... 59,803 43,886 37,913
Deferred income taxes............................................... (2,476) (1,328) (21,285)
Gain on sale of available for sale investments...................... -- -- (1,407)
Extraordinary item.................................................. -- 19,350 --
Loss on sale of long-term assets.................................... 84 222 156
Change in assets and liabilities:
Receivables....................................................... (609) (1,537) 807
Other current assets.............................................. 1,578 10,167 (578)
Accounts payable.................................................. 41,486 7,458 341
Accrued expenses and other liabilities............................ 12,441 7,640 (5,763)
Other, net............................................................ 2,772 2,968 204
------------ ------------ ------------
Total adjustments............................................... 115,079 88,826 10,388
------------ ------------ ------------
Net cash provided by operating activities............................. 134,074 96,847 44,366
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures.................................................. (253,380) (120,796) (56,403)
Purchase of real estate investment.................................... (7,692) -- --
Acquisition of minority interest...................................... (7,400) -- --
Purchases of available for sale investments........................... -- (424,134) (314,368)
Proceeds from maturities of available for sale investments............ -- 493,278 364,374
Proceeds from sales of available for sale investments................. -- -- 11,689
Proceeds from disposition of long-term assets......................... 15,054 2,243 70
Net change in refundable construction advances........................ (21,076) (10,394) (182)
Other, net............................................................ (9,423) (7,045) (1,516)
------------ ------------ ------------
Net cash provided by (used in) investing activities................... (283,917) (66,848) 3,664
------------ ------------ ------------
Cash flows from financing activities:
Net borrowings (repayments) under revolving credit facility........... (10,000) 120,000 --
Proceeds from issuance of 9 1/2% Senior Subordinated Notes............ 198,938 -- --
Principal payments under capital lease obligations.................... (2,835) (2,455) (2,088)
Repurchase of 11 7/8% Senior and 12 5/8% Senior Subordinated Notes.... -- (220,734) --
Cash overdrafts....................................................... (11,673) 22,848 --
Other repayments...................................................... -- (404) (34)
Proceeds from exercise of stock options............................... 140 878 239
Dividends paid on preferred stock..................................... (5,993) (7,000) (7,233)
Deferred financing costs and other.................................... (4,595) (3,570) --
------------ ------------ ------------
Net cash provided by (used in) financing activities................... 163,982 (90,437) (9,116)
------------ ------------ ------------
Effect of exchange rate changes on cash and equivalents............... (219) -- --
------------ ------------ ------------
Net increase (decrease) in cash and equivalents......................... 13,920 (60,438) 38,914
Cash and equivalents at beginning of year............................... 10,795 71,233 32,319
------------ ------------ ------------
Cash and equivalents at end of year..................................... $ 24,715 $ 10,795 $ 71,233
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-24
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

(IN THOUSANDS)

Supplemental Schedule of Noncash Investing and Financing Activities:

During 1995, capital lease obligations of $1,363 were incurred in connection
with property acquired.

Supplemental Disclosures of Cash Flow Information:

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized of $3,344, $3,003 and $870)............. $ 24,188 $ 34,775 $ 35,878
Income taxes, net............................................................ 6,285 9,787 14,822
</TABLE>

See Notes to Consolidated Financial Statements.

F-25
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN
PREFERRED STOCK COMMON STOCK CLASS B STOCK ADDITIONAL CURRENCY
---------------------- ---------------------- ------------------------ PAID-IN TRANSLATION
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT
----------- --------- ----------- --------- ------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 1,
1994.................. 4,000,000 $ 2,667 5,266,830 $ 3,511 11,157,000 $ 7,438 $ 106,951 $ --
Net earnings.......... -- -- -- -- -- -- -- --
Exercise of options on
Common Stock........ -- -- 39,550 27 -- -- 212 --
Dividends declared:
$1.75 Preferred
Stock............. -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ------------- --------- ----------- -----------
Balance, March 30,
1995.................. 4,000,000 2,667 5,306,380 3,538 11,157,000 7,438 107,163 --
Net earnings.......... -- -- -- -- -- -- -- --
Exercise of options on
Common Stock........ -- -- 82,500 55 -- -- 823 --
Dividends declared:
$1.75 Preferred
Stock............. -- -- -- -- -- -- -- --
Acquisition of Common
Stock in Treasury... -- -- -- -- -- -- -- --
----------- --------- ----------- --------- ------------- --------- ----------- -----------
Balance, March 28,
1996.................. 4,000,000 2,667 5,388,880 3,593 11,157,000 7,438 107,986 --
Net earnings.......... -- -- -- -- -- -- -- --
Exercise of options on
Common Stock........ -- -- 15,000 10 -- -- 130 --
Preferred Stock
conversions......... (696,400) (465) 1,200,589 800 -- -- (335) --
Dividends declared:
$1.75 Preferred
Stock............. -- -- -- -- -- -- -- --
Foreign currency
translation
adjustment.......... -- -- -- -- -- -- -- (2,048)
----------- --------- ----------- --------- ------------- --------- ----------- -----------
Balance, April 3,
1997.................. 3,303,600 $ 2,202 6,604,469 $ 4,403 11,157,000 $ 7,438 $ 107,781 $ (2,048)
----------- --------- ----------- --------- ------------- --------- ----------- -----------
----------- --------- ----------- --------- ------------- --------- ----------- -----------

COMMON STOCK IN
TREASURY TOTAL
RETAINED ---------------------- STOCKHOLDERS'
EARNINGS SHARES AMOUNT EQUITY
--------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Balance, April 1,
1994.................. $ 9,837 -- $ -- $ 130,404
Net earnings.......... 33,978 -- -- 33,978
Exercise of options on
Common Stock........ -- -- -- 239
Dividends declared:
$1.75 Preferred
Stock............. (7,233) -- -- (7,233)
--------- --------- ----------- --------------
Balance, March 30,
1995.................. 36,582 -- -- 157,388
Net earnings.......... 8,021 -- -- 8,021
Exercise of options on
Common Stock........ -- -- -- 878
Dividends declared:
$1.75 Preferred
Stock............. (7,000) -- -- (7,000)
Acquisition of Common
Stock in Treasury... -- 20,500 (369) (369)
--------- --------- ----------- --------------
Balance, March 28,
1996.................. 37,603 20,500 (369) 158,918
Net earnings.......... 18,995 -- -- 18,995
Exercise of options on
Common Stock........ -- -- -- 140
Preferred Stock
conversions......... -- -- -- --
Dividends declared:
$1.75 Preferred
Stock............. (5,993) -- -- (5,993)
Foreign currency
translation
adjustment.......... -- -- -- (2,048)
--------- --------- ----------- --------------
Balance, April 3,
1997.................. $ 50,605 20,500 $ (369) $ 170,012
--------- --------- ----------- --------------
--------- --------- ----------- --------------
</TABLE>

See Notes to Consolidated Financial Statements.

F-26
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Approximately 78% of AMCE's outstanding voting securities are owned by
Durwood, Inc. ("DI"). See Note 12 for further description of AMCE's transactions
with DI.

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 amounts reported in the financial
statements and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in the
future, they may ultimately differ from actual results.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of AMCE and all subsidiaries. All significant intercompany balances
and transactions have been eliminated.

FISCAL YEAR: The Company has a 52/53 week fiscal year ending on the
Thursday closest to the last day of March. The 1997 fiscal year reflects a 53
week period, fiscal years 1996 and 1995 each reflect a 52 week period. Fiscal
year 1998 will reflect a 52 week period.

REVENUES AND FILM RENTAL COSTS: Revenues are recognized when admissions and
concessions sales are received at the theatres. Film rental costs are recognized
based on the applicable box office receipts and the terms of the film licenses.

CASH AND EQUIVALENTS: Cash and equivalents consists of cash on hand and
temporary cash investments with original maturities of less than thirty days.
The Company invests excess cash in deposits with major banks and in temporary
cash investments. Such investments are made only in instruments issued or
enhanced by high quality financial institutions (investment grade or better).
Amounts invested in a single institution are limited to minimize risk. Under the
Company's cash management system, checks issued but not presented to banks
frequently result in overdraft balances for accounting purposes and are
classified within accounts payable in the balance sheet. The amount of these
checks included in accounts payable as of April 3, 1997 and March 28, 1996 was
$11,175,000 and $22,848,000, respectively.

INVESTMENTS: For purposes of determining gross realized gains and losses,
the cost of investment securities sold is determined upon specific
identification. Proceeds and gross realized gains from the sales in 1995 of
equity securities classified as other long-term assets as of March 31, 1994 were
$11,689,000 and $1,407,000, respectively.

REFUNDABLE CONSTRUCTION ADVANCES: Included in receivables as of April 3,
1997 and March 28, 1996 is $33,193,000 and $12,117,000, respectively, due from
developers to fund a portion of the

F-27
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
construction costs of new theatres that are to be operated by the Company
pursuant to lease agreements. These amounts are repaid by the developers either
during construction or shortly after completion.

PROPERTY: Property is recorded at cost. The Company uses the straight-line
method in computing depreciation and amortization for financial reporting
purposes and accelerated methods, with respect to certain assets, for income tax
purposes. The estimated useful lives are generally as follows:

<TABLE>
<S> <C>
Buildings and improvements.................................. 20 to 40 years
Leasehold improvements...................................... 5 to 25 years
Furniture, fixtures and equipment........................... 3 to 10 years
</TABLE>

Expenditures for additions (including interest during construction), major
renewals and betterments are capitalized, and expenditures for maintenance and
repairs are charged to expense as incurred. The cost of assets retired or
otherwise disposed of and the related accumulated depreciation are eliminated
from the accounts in the year of disposal. Gains or losses resulting from
property disposals are credited or charged to operations currently.

INTANGIBLE ASSETS: Intangible assets are recorded at cost and are comprised
of lease rights, which are amounts assigned to theatre leases assumed under
favorable terms, and location premiums on acquired theatres which are being
amortized on a straight-line basis over the estimated remaining useful life of
the theatre. Accumulated amortization on intangible assets was approximately
$41,690,000 and $36,035,000 as of April 3, 1997 and March 28, 1996,
respectively.

Effective December 30, 1994, the Company reduced the estimated lives of
lease rights and location premiums on certain smaller theatres to correspond to
the base terms of the theatre leases. This change in accounting estimate was
made to better match the estimated life of the intangible assets with the life
of the theatre due to the Company's strategic plans to primarily own and operate
larger theatres. The effect of this change in estimate was to increase
amortization expense in 1995 by $1,542,000 and decrease net earnings by
$876,000, or $.05 per share.

OTHER LONG-TERM ASSETS: Other long-term assets are comprised principally of
costs incurred in connection with the issuance of debt securities which are
being amortized over the respective life of the issue; investments in real
estate; investments in partnerships and corporate joint ventures accounted for
under the equity method; preopening costs relating to new theatres which are
being amortized over two years; and long-term deferred income taxes.

FOREIGN CURRENCY TRANSLATION: The financial statements of subsidiaries
outside the United States are generally measured using the local currency as the
functional currency. Assets and liabilities of these subsidiaries are translated
at the rates of exchange at the balance sheet date. Income and expense items are
translated at average rates of exchange. The resultant translation adjustments
are included in foreign currency translation adjustment, a separate component of
stockholders' equity. Gains and losses from foreign currency transactions of
these subsidiaries are included in net earnings and have not been material.

F-28
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES: Income taxes are calculated in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), ACCOUNTING FOR INCOME
TAXES. The statement requires that deferred income taxes reflect the impact of
temporary differences between the amount of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and regulations.

EARNINGS PER SHARE: Primary earnings per share is computed by dividing net
earnings for common shares by the sum of the weighted average number of common
shares outstanding and outstanding stock options, when their effect is dilutive.
The average shares used in the computations were 17,726,000 in 1997, 16,795,000
in 1996 and 16,593,000 in 1995. On a fully diluted basis, both net earnings and
shares outstanding are adjusted to assume the conversion of $1.75 Cumulative
Convertible Preferred Stock, if dilutive. The average shares used in the
computations were 17,940,000 in 1997, 17,031,000 in 1996 and 23,509,000 in 1995.

CHANGES IN ACCOUNTING PRINCIPLES: During fiscal 1996, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. The Statement allows companies
to measure compensation cost in connection with employee stock compensation
plans using a fair value based method or to continue to use an intrinsic value
based method to account for stock options and awards. The Company has chosen to
continue using the intrinsic value based method while adopting the
disclosure-only provisions of the pronouncement.

During the fourth quarter of fiscal 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF ("SFAS 121"). This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to those assets to
be held and used. In connection with the adoption of this Statement, the Company
reviewed the assets and related intangibles of its motion picture theatres for
impairment on a disaggregated basis. The expected future cash flows of certain
theatres, undiscounted and without interest charges, were less than the carrying
value of the assets. As a result, the Company recognized an impairment loss of
$1,799,000. The impairment loss represents the amount by which the carrying
value of the theatre assets, including intangibles, exceeded the estimated fair
value of those assets. The estimated fair value of assets was determined as the
present value of estimated expected future cash flows. The loss is included in
depreciation and amortization in the Consolidated Statements of Operations.

During fiscal 1997, the Company continued to review the assets and related
intangibles of its motion picture theatres for impairment in accordance with the
provisions of SFAS 121. As a result of expected declines in future cash flows of
certain theatres the Company recognized an impairment loss of $7,231,000 which
is included in depreciation and amortization in the Consolidated Statements of
Operations.

During fiscal 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), EARNINGS PER
SHARE. SFAS 128 eliminates the presentation of primary and fully diluted
earnings per share ("EPS") and requires presentation of basic and diluted EPS.
The principal difference between primary and basic EPS is that common stock
equivalents are not included with the weighted average number of shares
outstanding used in the computation of basic

F-29
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 1--THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EPS. Diluted EPS is computed similarly to fully diluted EPS. SFAS 128 is
effective for periods ending after December 15, 1997, including interim periods,
and requires restatement of all prior-period EPS data. Early adoption is not
permitted. Management has not yet determined the impact that this statement will
have on the Company.

PRESENTATION: Certain amounts have been reclassified from prior period
consolidated financial statements to conform with the current year presentation.

NOTE 2--ACQUISITION

On January 10, 1997, the Company purchased the 20% minority interest in the
common stock of AMC Philadelphia, Inc., an 80% owned subsidiary, for $7,400,000
in cash. The acquisition has been accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the assets
acquired is being amortized on a straight-line basis over the estimated useful
life of the assets acquired.

NOTE 3--PROPERTY

A summary of property is as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Property owned:
Land............................................... $ 60,090 $ 35,610
Buildings and improvements......................... 221,396 146,061
Furniture, fixtures and equipment.................. 264,619 205,761
Leasehold improvements............................. 211,720 146,152
--------- ---------
757,825 533,584

Less--accumulated depreciation and amortization.... 246,476 213,654
--------- ---------
511,349 319,930

Property leased under capital leases:
Buildings.......................................... 66,074 67,274
Less--accumulated amortization..................... 34,365 31,719
--------- ---------
31,709 35,555
--------- ---------
$ 543,058 $ 355,485
--------- ---------
--------- ---------
</TABLE>

Included in property is $83,558,000 and $35,289,000 of construction in
progress as of April 3, 1997 and March 28, 1996, respectively.

F-30
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 4--OTHER ASSETS AND LIABILITIES

Other assets and liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Other current assets:
Prepaid rent......................................... $ 7,366 $ 6,412
Prepaid income taxes................................. -- 3,074
Deferred income taxes................................ 6,376 3,207
Other................................................ 3,027 2,486
--------- ---------
$ 16,769 $ 15,179
--------- ---------
--------- ---------
Other long-term assets:
Investments in real estate........................... $ 15,329 $ 6,922
Investments in partnerships and corporate joint
ventures........................................... 733 1,121
Deferred charges, net................................ 12,147 6,203
Deferred income taxes................................ 23,813 24,506
Preopening costs..................................... 6,519 2,636
Other................................................ 4,263 3,625
--------- ---------
$ 62,804 $ 45,013
--------- ---------
--------- ---------
Accrued expenses and other liabilities:
Taxes other than income.............................. $ 10,030 $ 7,110
Income taxes......................................... 6,017 --
Interest............................................. 1,512 841
Payroll and vacation................................. 4,982 6,149
Casualty claims and premiums......................... 4,655 2,034
Deferred income...................................... 8,911 11,634
Accrued bonus........................................ 3,974 7,634
Other................................................ 2,378 7,917
--------- ---------
$ 42,459 $ 43,319
--------- ---------
--------- ---------
</TABLE>

F-31
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 5--CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS

A summary of corporate borrowings and capital lease obligations is as
follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
$425 million revolving Credit Facility due 2004....... $ 110,000 $ 120,000
11 7/8% Senior Notes due 2000......................... 615 614
9 1/2% Senior Subordinated Notes due 2009............. 198,940 --
12 5/8% Senior Subordinated Notes due 2002............ 4,882 4,878
Capital lease obligations, interest ranging from
7 1/4% to 20%....................................... 58,652 62,022
Other indebtedness.................................... 635 658
--------- ---------
Total................................................. 373,724 188,172
Less-current maturities............................... 3,441 2,904
--------- ---------
$ 370,283 $ 185,268
--------- ---------
--------- ---------
</TABLE>

On December 28, 1995, the Company completed the redemption of $99,383,000 of
its outstanding 11 7/8% Senior Notes due 2000 at a price of $1,117.90 per $1,000
principal amount and $95,096,000 of its outstanding 12 5/8% Senior Subordinated
Notes due 2002 at a price of $1,144.95 per $1,000 principal amount. In addition,
the terms of the Indentures governing the remaining Senior and Senior
Subordinated Notes were amended to eliminate certain restrictive covenants.
Sources of funds for the redemption were cash and investments on hand and
borrowings on a credit facility. Premiums paid to redeem the Senior and Senior
Subordinated Notes, together with the write-off of unamortized debt issue costs
and other costs directly related to the debt redemptions, resulted in an
extraordinary loss of $19,350,000, net of income tax benefit of $13,400,000. The
extraordinary loss reduced earnings per share by $1.15 for the year (52 weeks)
ended March 28, 1996.

As a part of the refinancing plan, the Company entered into a $425 million
credit facility (the "Credit Facility"), which was amended and restated as of
April 10, 1997. The Credit Facility permits borrowings at interest rates based
on either the bank's base rate or LIBOR and requires an annual commitment fee
based on margin ratios that could result in a rate of .1875% to .375% on the
unused portion of the commitment. The Credit Facility matures in 2004. The
commitment thereunder will reduce by $25 million on each of December 31, 2002,
March 31, 2003, June 30, 2003 and September 30, 2003 and by $50 million on
December 31, 2003. As of April 3, 1997, the Company had outstanding borrowings
of $110,000,000 under the Credit Facility at an average interest rate of 6.4%
per annum.

Covenants of the Credit Facility impose limitations on the incurrence of
additional indebtedness, creation of liens, change of control, transactions with
affiliates, mergers, investments, guaranties, asset sales, business activities
and pledges. The Company is also required to maintain certain financial
covenants, as defined in the Credit Facility. As of April 3, 1997, the Company
was in compliance with all financial covenants relating to the Credit Facility.

Prior to its April 10, 1997 amendment and restatement, the Credit Facility
contained a covenant that generally limited the Company's capital expenditures.
This covenant has been eliminated.

F-32
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 5--CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
Costs related to the establishment of the Credit Facility were capitalized
and are charged to interest expense over the life of the Credit Facility.
Unamortized issuance costs of $2,821,000 as of April 3, 1997 are included in
other long-term assets.

On March 19, 1997, the Company sold $200 million of Senior Subordinated
Notes due 2009 (the "Notes"). The Notes bear interest at the rate of 9 1/2% per
annum, payable in March and September. The Notes are redeemable at the option of
the Company, in whole or in part, at any time on or after March 15, 2002 at
104.75% of the principal amount thereof, declining ratably to 100% of the
principal amount thereof on or after March 15, 2006, plus in each case interest
accrued to the redemption date. Upon a change of control (as defined in the Note
Indenture), each holder of the Notes will have the right to require the Company
to repurchase such holder's Notes at a price equal to 101% of the principal
amount thereof plus accrued and unpaid interest to the date of repurchase. The
Notes are subordinated to all existing and future senior indebtedness (as
defined in the Note Indenture) of the Company.

The Note Indenture contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to incur additional
indebtedness and pay dividends or make distributions in respect of their capital
stock. If the Notes attain "investment grade status" (as defined in the Note
Indenture), the covenants in the Note Indenture limiting the Company's ability
to incur additional indebtedness and pay dividends will cease to apply. As of
April 3, 1997, the Company was in compliance with all financial covenants
relating to the Note Indenture.

The Note Indenture also requires the Company to use its best efforts to
consummate a registered offer to exchange the Notes (the "Exchange Offer") for
notes of AMCE with terms identical in all material respects to the Notes or
cause a shelf registration statement with respect to the Notes to become
effective. In the event that certain filing deadlines as specified in the Note
Indenture are not met, the interest rate borne by the Notes could increase as
much as 1.0% per annum. The Company anticipates meeting its filing deadlines.

The discount on the Notes is being amortized to interest expense following
the interest method of amortization. Costs related to the issuance of the Notes
were capitalized and are charged to interest expense, following the interest
method, over the life of the securities. Unamortized issuance costs of
$4,572,000 as of April 3, 1997 are included in other long-term assets.

F-33
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 5--CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
Minimum annual payments required under existing capital lease obligations
(net present value thereof) and maturities of corporate borrowings as of April
3, 1997, are as follows (in thousands):

<TABLE>
<CAPTION>
CAPITAL LEASE OBLIGATIONS
-------------------------------------
MINIMUM NET
LEASE LESS PRESENT CORPORATE
PAYMENTS INTEREST VALUE BORROWINGS TOTAL
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1998.................... $ 12,795 $ 9,380 $ 3,415 $ 26 $ 3,441
1999.................... 12,800 8,715 4,085 30 4,115
2000.................... 12,211 8,026 4,185 34 4,219
2001.................... 11,939 7,294 4,645 653 5,298
2002.................... 11,110 6,529 4,581 43 4,624
Thereafter.............. 70,161 32,420 37,741 314,286 352,027
----------- ----------- ----------- ----------- ---------
Total................. $ 131,016 $ 72,364 $ 58,652 $ 315,072 $ 373,724
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
</TABLE>

The Company maintains a letter of credit in the normal course of its
business. The unused portion of the letter of credit was $2,378,000 as of April
3, 1997.

NOTE 6--STOCKHOLDERS' EQUITY

The authorized Common Stock of AMCE consists of two classes of stock. Except
for the election of directors, each holder of Common Stock (66 2/3 CENTS par
value; 45,000,000 shares authorized) is entitled to one vote per share, and each
holder of Class B Stock (66 2/3 CENTS par value; 30,000,000 shares authorized)
is entitled to 10 votes per share. Common stockholders voting as a class are
presently entitled to elect two of the seven members of AMCE's Board of
Directors with Class B stockholders electing the remainder.

Holders of the Company's stock have no pre-emptive or subscription rights
and there are no restrictions with respect to transferability. Holders of the
Common Stock have no conversion rights, but holders of Class B Stock may elect
to convert at any time on a share-for-share basis into Common Stock.

The Company has authorized 10,000,000 shares of Preferred Stock
(66 2/3 CENTS par value), of which 3,303,600 shares of $1.75 Cumulative
Convertible Preferred Stock (66 2/3 CENTS par value) (the "Convertible Preferred
Stock") are issued and outstanding. Dividends are payable quarterly at an annual
rate of $1.75 per share. The Convertible Preferred Stock has preference in
liquidation in the amount of $25 per share plus accrued and unpaid dividends.
The Convertible Preferred Stock is convertible at the option of the holder into
shares of Common Stock at a conversion price of $14.50 per share of Common
Stock, subject to change in certain events. In lieu of conversion the Company
may, at its option, pay to the holder cash equal to the then market value of the
Common Stock. The Company may redeem in whole or in part the Convertible
Preferred Stock at a redemption price beginning at $26.00 per share, declining
ratably to $25.00 per share after March 15, 2001.

F-34
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
During 1997, various holders of the Company's Convertible Preferred Stock
converted 696,400 shares into 1,200,589 shares of Common Stock at a conversion
rate of 1.724 shares of Common Stock for each share of Convertible Preferred
Stock.

STOCK-BASED COMPENSATION PLANS

In June 1983, AMCE adopted a stock option plan (the "1983 Plan") for
selected employees. This plan provided for the grant of rights to purchase
shares of Common Stock under both incentive and non-incentive stock option
agreements. The number of shares which could be sold under the plan could not
exceed 750,000 shares. The 1983 Plan provided that the exercise price could not
be less than the fair market value of the stock at the date of grant and
unexercised options expired no later than ten years after date of grant.
Pursuant to the terms of the 1983 Plan, no further options may be granted under
this plan.

In September 1984, AMCE adopted a non-qualified stock option plan (the "1984
Plan"). This plan provided for the grant of rights to purchase shares of Common
Stock under non-qualified stock option agreements. The number of shares which
could be sold under the plan could not exceed 750,000 shares. The 1984 Plan
provided that the exercise price would be determined by the Company's Stock
Option Committee and that the options expired no later than ten years after date
of grant. Pursuant to the terms of the 1984 Plan, no further options may be
granted under this plan.

In November 1994, AMCE adopted a stock option and incentive plan (the "1994
Plan"). This plan provides for three basic types of awards: (i) grants of stock
options which are either incentive or non-qualified stock options, (ii) grants
of stock awards, which may be either performance or restricted stock awards, and
(iii) performance unit awards. The number of shares of Common Stock which may be
sold or granted under the plan may not exceed 1,000,000 shares. The 1994 Plan
provides that the exercise price for stock options may not be less than the fair
market value of the stock at the date of grant and unexercised options expire no
later than ten years after date of grant. Options issued under the 1994 Plan
vest over two years from the date of issuance.

The Company has adopted the disclosure-only provisions of SFAS 123. As
permitted by SFAS 123, the Company has chosen to continue to account for
stock-based compensation using the intrinsic value method. Accordingly, no
compensation expense has been recognized for the Company's stock-based
compensation plans other than for performance-based stock awards. In 1997 and
1996, the Company granted to certain individuals stock awards which are issuable
at the end of a performance period ending April 2, 1998 based on certain
performance criteria. The number of shares which may be issued at the end of the
performance period ranges from zero to 216,000. The Company recognized
compensation expense for performance stock awards of $586,000 and $772,000 in
1997 and 1996, respectively. Had compensation expense for the Company's plans
been determined based on the fair value at the grant dates for stock options and
awards granted in 1997 and 1996, the Company's net earnings and net earnings for
common shares would have been different.

F-35
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
The pro forma amounts under SFAS 123 are indicated below (in thousands
except per share amounts):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net earnings
As reported............................................ $ 18,995 $ 8,021
Pro forma.............................................. $ 18,664 $ 8,210
Net earnings per common share
As reported............................................ $ .74 $ .06
Pro forma.............................................. $ .72 $ .07
</TABLE>

The following table reflects the weighted average fair value per option
granted during the year, as well as the significant weighted average assumptions
used in determining fair value using the Black-Scholes option-pricing model:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Fair value on grant date.................................. $ 11.63 $ 6.96
Risk-free interest rate................................... 6.24% 5.64%
Expected life (years)..................................... 5 5
Expected volatility....................................... 42.9% 46.0%
Expected dividend yield................................... -- --
</TABLE>

F-36
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock option activity under all plans is as follows:

<TABLE>
<CAPTION>
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE PRICE NUMBER EXERCISE PRICE NUMBER EXERCISE PRICE
OF SHARES PER SHARE OF SHARES PER SHARE OF SHARES PER SHARE
----------- --------------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
year.......... 487,500 $ 9.67 776,500 $ 9.57 813,300 $ 9.29
Granted......... 103,250 $ 24.80 23,250 $ 14.50 36,500 $ 11.75
Canceled........ (17,250) $ 10.04 (229,750) $ 9.46 (33,750) $ 9.38
Exercised....... (15,000) $ 9.375 (82,500) $ 10.65 (39,550) $ 6.01
----------- ------- ----------- ------- ----------- -------
Outstanding at
end of year... 558,500 $ 12.47 487,500 $ 9.67 776,500 $ 9.57
----------- ------- ----------- ------- ----------- -------
----------- ------- ----------- ------- ----------- -------
Exercisable at
end of year... 365,875 $ 10.51 233,250 $ 9.45 230,000 $ 9.79
----------- ------- ----------- ------- ----------- -------
----------- ------- ----------- ------- ----------- -------
Available for
grant at end
of year....... 630,500 746,500 817,500
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The following table summarizes information about stock options as of April
3, 1997:

<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
---------------------------------------------------- EXERCISABLE STOCK OPTIONS
WEIGHTED-AVERAGE --------------------------------
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OF SHARES CONTRACTUAL LIFE EXERCISE PRICE OF SHARES EXERCISE PRICE
- ----------------- ----------- ------------------ ------------------- ----------- -------------------
<C> <C> <S> <C> <C> <C>
$9.25 to $11.75 436,500 6.3 years $ 9.46 335,250 $ 9.51
$14.50 to $18.50 29,250 8.7 years $ 15.94 9,375 $ 14.50
$24.50 to $26.375 92,750 9.1 years $ 25.52 21,250 $ 24.50
----------- ---------- ------- ----------- -------
$9.25 to $26.375 558,500 6.9 years $ 12.47 365,875 $ 10.51
----------- ---------- ------- ----------- -------
----------- ---------- ------- ----------- -------
</TABLE>

F-37
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 7--INCOME TAXES

Income taxes reflected in the Consolidated Statements of Operations for the
three years ended April 3, 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal....................................... $ 11,418 $ 5,134 $ 7,738
State......................................... 3,958 2,094 4,547
--------- --------- ---------
Total current............................... 15,376 7,228 12,285
Deferred:
Federal....................................... (2,114) (1,121) (1,238)
State......................................... (362) (207) (255)
Change in valuation allowance................. -- -- (19,792)
--------- --------- ---------
Total deferred.............................. (2,476) (1,328) (21,285)
--------- --------- ---------
Total provision................................. 12,900 5,900 (9,000)
Tax benefit of extraordinary
item--extinguishment of debt.................. -- 13,400 --
--------- --------- ---------
Total provision before extraordinary item....... $ 12,900 $ 19,300 $ (9,000)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The effective tax rate on income before extraordinary items was 40.4%,
41.4%, and (36.0%) in 1997, 1996 and 1995, respectively. The difference between
the effective rate and the U.S. federal income tax statutory rate of 35% is
accounted for as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Tax on earnings before provision for income tax and
extraordinary item at statutory rates......................... $ 11,163 $ 16,335 $ 8,742
Add (subtract) tax effect of:
State income taxes, net of federal tax benefit................ 2,258 3,163 2,973
Change in valuation allowance................................. -- -- (19,792)
Other, net.................................................... (521) (198) (923)
--------- --------- ---------
Income tax provision............................................ $ 12,900 $ 19,300 $ (9,000)
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-38
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 7--INCOME TAXES (CONTINUED)
The significant components of deferred income tax assets and liabilities as
of April 3, 1997 and March 28, 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
DEFERRED INCOME TAX DEFERRED INCOME TAX
---------------------- ----------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------- ----------- --------- -----------
Accrued reserves and liabilities.................. $ 9,189 $ 179 $ 5,323 $ 343
<S> <C> <C> <C> <C>
Investments in partnerships....................... -- 495 -- 419
Capital lease obligations......................... 11,464 -- 10,852 --
Depreciation...................................... 5,587 -- 7,842 --
Deferred rents.................................... 6,254 -- 5,266 --
Other............................................. 550 2,181 683 1,491
--------- ----------- --------- -----------
Total............................................. 33,044 2,855 29,966 2,253
Less: Current deferred income taxes............... 6,586 210 3,702 495
--------- ----------- --------- -----------
Total noncurrent deferred income taxes............ $ 26,458 $ 2,645 $ 26,264 $ 1,758
--------- ----------- --------- -----------
--------- ----------- --------- -----------
Net noncurrent deferred income taxes.............. $ 23,813 $ 24,506
--------- ---------
--------- ---------
</TABLE>

SFAS 109 requires that a valuation allowance be provided against deferred
tax assets if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. Based upon
positive earnings in recent years and the expectation that taxable income will
continue for the foreseeable future, management believes it is more likely than
not that the Company will realize its deferred tax assets and, accordingly, no
valuation allowance has been provided as of April 3, 1997 and March 28, 1996.

NOTE 8--LEASES

The majority of the Company's operations are conducted in premises occupied
under lease agreements with base terms ranging generally from 15 to 25 years,
with certain leases containing options to extend the leases for up to an
additional 20 years. The leases provide for fixed rentals and/or rentals based
on revenues with a guaranteed minimum. The Company also leases certain equipment
under leases expiring at various dates. The majority of the leases provide that
the Company will pay all, or substantially all, taxes, maintenance, insurance
and certain other operating expenses. Assets held under capital lease
obligations are included in property. Performance under some leases has been
guaranteed by DI.

F-39
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 8--LEASES (CONTINUED)
Following is a schedule, by year, of future minimum rental payments required
under existing operating leases that have initial or remaining non-cancellable
terms in excess of one year as of April 3, 1997 (in thousands):

<TABLE>
<S> <C>
1998........................................................... $ 68,551
1999........................................................... 69,070
2000........................................................... 68,406
2001........................................................... 66,388
2002........................................................... 63,748
Thereafter..................................................... 722,341
----------
Total minimum payments required.............................. $1,058,504
----------
----------
</TABLE>

The Company has entered into agreements to lease space for the operation of
theatres not yet fully constructed. The scheduled completion of construction and
theatre openings are at various dates during fiscal 1998. The future minimum
rental payments required under the terms of these leases total approximately
$429 million.

In addition, the Company entered into a master lease agreement during fiscal
1997 for three theatres with an expected cost of approximately $81 million.
Rental amounts will be based on the final construction costs of the theatres and
the lessor's cost of funds and will be finalized as the theatres open. The
initial lease term under the agreement will be three years. The master lease
agreement provides for a substantial residual value guarantee by the Company and
includes purchase and renewal options. The Company expects these leases to be
classified as operating leases.

The Company records rent expense on a straight-line basis over the term of
the lease. Included in long-term liabilities as of April 3, 1997 and March 28,
1996 is $16,278,000 and $12,858,000, respectively, of deferred rent representing
pro rata future minimum rental payments for leases with scheduled rent
increases.

Rent expense is summarized as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Minimum rentals................................ $ 80,670 $ 64,657 $ 59,790
Percentage rentals based on revenues........... 2,008 2,354 1,970
--------- --------- ---------
$ 82,678 $ 67,011 $ 61,760
--------- --------- ---------
--------- --------- ---------
</TABLE>

NOTE 9--EMPLOYEE BENEFIT PLANS

The Company sponsors a non-contributory defined benefit pension plan
covering, after a minimum of one year of employment, all employees age 21 or
older, who have completed 1,000 hours of service in their first twelve months of
employment or in a calendar year and who are not covered by a collective
bargaining agreement.

F-40
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
The plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of credited service with the Company (not exceeding
thirty-five) and the employee's highest five year average compensation.
Contributions to the plan reflect benefits attributed to employees' services to
date, as well as services expected to be earned in the future. Plan assets are
invested in a group annuity contract with an insurance company pursuant to which
the plan's benefits are paid to retired and terminated employees and the
beneficiaries of deceased employees.

The following table sets forth the plan's funded status as of December 31,
1996 and 1995 (plan valuation dates) and the amounts included in the
Consolidated Balance Sheets as of April 3, 1997 and March 28, 1996 (in
thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $11,139 and $10,041................................. $ 11,309 $ 10,205
--------- ---------
--------- ---------
Projected benefit obligation for service rendered to date................ $ 18,489 $ 17,051
Plan assets at fair value................................................ (10,857) (9,580)
--------- ---------
Projected benefit obligation in excess of plan assets.................... 7,632 7,471
Unrecognized net loss from past experience different from that assumed
and effects of changes in assumptions.................................. (686) (1,509)
Unrecognized net obligation upon adoption being recognized over 15
years.................................................................. (1,411) (1,588)
--------- ---------
Pension liability........................................................ $ 5,535 $ 4,374
--------- ---------
--------- ---------
</TABLE>

Net pension expense includes the following components (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost....................................... $ 1,191 $ 855 $ 1,261
Interest cost...................................... 1,188 966 971
Actual return on plan assets....................... (1,218) (1,630) 55
Net amortization and deferral...................... 563 1,096 (190)
--------- --------- ---------
Net pension expense................................ $ 1,724 $ 1,287 $ 2,097
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company also sponsors a non-contributory Supplemental Executive
Retirement Plan (the "SERP") which provides certain employees additional pension
benefits. The actuarial present value of accumulated plan benefits related to
the SERP was $569,000 and $379,000 as of April 3, 1997 and March 28, 1996,
respectively, which is reflected in the Consolidated Balance Sheets.

The weighted average discount rate used to measure the plans' projected
benefit obligations was 7.0% for 1997 and 1996 and 7.75% in 1995. The rate of
increase in future compensation levels was 6.0% for 1997, 1996 and 1995 and the
expected long-term rate of return on assets was 8.5% for 1997, 1996 and 1995. A
limited number of employees are covered by collective bargaining agreements
under which payments are made to a union-administered fund.

F-41
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company sponsors a voluntary thrift savings plan covering the same
employees eligible for the pension plan. Since inception of the savings plan,
the Company has matched 50% of each eligible employee's elective contributions,
limited to 3% of the employee's salary.

The Company's expense under the thrift savings plan was $1,270,000,
$1,032,000 and $1,015,000 for 1997, 1996 and 1995, respectively.

The Company currently offers eligible retirees the opportunity to
participate in a health plan (medical and dental) and a life insurance plan.
Substantially all employees may become eligible for these benefits provided that
the employee must be at least 55 years of age and have 15 years of credited
service at retirement. The health plan is contributory, with retiree
contributions adjusted annually; the life insurance plan is noncontributory. The
accounting for the health plan anticipates future modifications to the
cost-sharing provisions to provide for retiree premium contributions of
approximately 20% of total premiums, increases in deductibles and co-insurance
at the medical inflation rate and coordination with Medicare. Retiree health and
life insurance plans are not funded. The Company is amortizing the transition
obligation on the straight-line method over a period of 20 years.

The following table sets forth the plans' accumulated postretirement benefit
obligation reconciled with the amounts included in the Consolidated Balance
Sheets as of April 3, 1997 and March 28, 1996 (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................. $ 618 $ 557
Fully eligible active plan participants.................................. 513 438
Other active plan participants........................................... 1,777 1,292
--------- ---------
Accumulated postretirement benefit obligation.............................. 2,908 2,287
Unrecognized net obligation upon adoption being recognized over 20 years... (697) (747)
Unrecognized gain (loss)................................................... (190) 105
--------- ---------
Postretirement benefit liability........................................... $ 2,021 $ 1,645
--------- ---------
--------- ---------
</TABLE>

Postretirement expense includes the following components (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................................... $ 199 $ 192 $ 188
Interest cost.......................................... 172 208 202
Net amortization and deferral.......................... 50 66 66
----- ----- -----
Postretirement expense................................. $ 421 $ 466 $ 456
----- ----- -----
----- ----- -----
</TABLE>

For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits assumed for 1997 was 7.5% for medical and 4.75%
for dental. The rates were assumed to decrease gradually to 5.0% for medical and
3.0% for dental at 2020 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
Increasing

F-42
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
the assumed health care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of April 3,
1997 by $862,000 and the aggregate of the service and interest cost components
of postretirement expense for 1997 by $164,000. The weighted-average discount
rate used in determining the accumulated postretirement benefit obligation was
7.0% for 1997 and 1996 and 7.75% for 1995.

NOTE 10--CONTINGENCIES

The Company, in the normal course of business, is party to various legal
actions. Management believes that the potential exposure, if any, from such
matters would not have a material adverse effect on the financial condition,
cash flows or results of operations of the Company.

NOTE 11--FUTURE DISPOSITION OF ASSETS

The Company has provided reserves for estimated losses from discontinuing
the operation of fast food restaurants, for theatres which have been or are
expected to be closed and for other future dispositions of assets.

In conjunction with the opening of certain new theatres in fiscal 1986
through 1988, the Company expanded its food services by leasing additional space
adjacent to those theatres to operate specialty fast food restaurants. The
Company discontinued operating the restaurants due to unprofitability. The
Company continues to sub-lease or to convert to other uses the space leased for
these restaurants. The Company is obligated under long-term lease commitments
with remaining terms of up to eleven years. As of April 3, 1997, the base rents
aggregate approximately $779,000 annually, and $7,150,000 over the remaining
term of the leases. As of April 3, 1997, the Company has subleased approximately
55% of the space with remaining terms ranging from 2 months to 68 months.
Non-cancellable subleases currently aggregate approximately $496,000 annually,
and $4,216,000 over the remaining term of the subleases.

NOTE 12--TRANSACTIONS WITH DURWOOD, INC.

The Company and DI maintain intercompany accounts. Charges to the
intercompany accounts include the allocation of AMC general and administrative
expense of $116,000 in 1996 and 1995 and payments made by AMC on behalf of DI.
There were no general and administrative allocations in 1997. DI and non-AMCE
subsidiaries owed the Company $181,000 and $795,000 as of April 3, 1997 and
March 28, 1996, respectively.

The Board of Directors has approved an agreement (the "Merger Agreement")
providing for the Merger of the Company and DI, with the Company remaining as
the surviving entity. The Merger has been sought by members of the Durwood
family so that they may hold their interests in the Company directly instead of
indirectly through DI and a related entity. In the Merger, stockholders of DI
would exchange their shares of DI stock for shares of the Company's stock.
Although the outstanding shares of the Company's Common Stock will increase and
the outstanding shares of its Class B Stock will decrease if the Merger is
effected, no aggregate increase in total outstanding shares will occur because
the shares of the Company owned by DI will be canceled and the shares of the
Company held by other stockholders would not be exchanged in the Merger. A
condition to the Merger is that the Merger

F-43
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEAR (53 WEEKS) ENDED APRIL 3, 1997 AND YEARS (52 WEEKS) ENDED MARCH 28, 1996
AND MARCH 30, 1995

NOTE 12--TRANSACTIONS WITH DURWOOD, INC. (CONTINUED)
Agreement receive approval of the holders of a majority of the shares of Common
Stock other than DI, the Durwood family, their spouses and children and officers
and directors of the Company.

DI is primarily a holding company with no significant operations or assets
other than its equity interest in the Company. Management expects that the
Merger will be accounted for as a corporate reorganization and that,
accordingly, the recorded balances for consolidated assets, liabilities, total
stockholders' equity and results of operations of the Company would not be
affected. If the Merger occurs, the Company will be responsible for paying 50%
of its costs in connection with the Merger; the aggregate merger costs for both
the Company and DI are estimated to be approximately $2 million. Management does
not believe that the transaction will have a significant effect on the Company's
financial condition, liquidity or capital resources.

NOTE 13--FAIR VALUE OF FINANCIAL INSTRUMENTS

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

The carrying value of cash and equivalents and investments in debt
securities approximates fair value because of the short duration of those
instruments. The fair value of publicly held corporate borrowings was based upon
quoted market prices. For other corporate borrowings, the fair value was based
upon rates available to the Company from bank loan agreements or rates based
upon the estimated premium over U.S. treasury notes with similar average
maturities.

The estimated fair values of the Company's financial instruments are as
follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash and equivalents........... $ 24,715 $ 24,715 $ 10,795 $ 10,795
Financial liabilities:
Cash overdrafts................ $ 11,175 $ 11,175 $ 22,848 $ 22,848
Corporate borrowings........... 315,072 315,804 126,150 126,992
</TABLE>

F-44
<PAGE>
AMC ENTERTAINMENT INC. AND SUBSIDIARIES

STATEMENTS OF OPERATIONS BY QUARTER

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 27, JUNE 29, SEPT. 26, SEPT. 28, DEC. 26, DEC. 28, APRIL 3, MARCH 28,
1996 1995 1996 1995 1996 1995 1997(3) 1996
--------- --------- ----------- ----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues............... $ 161,927 $ 153,409 $ 202,436 $ 184,482 $ 163,192 $ 154,970 $ 222,042 $ 163,111
Total cost of operations..... 132,821 118,738 155,593 135,497 130,464 118,252 161,124 118,871
General and administrative... 13,025 11,085 11,647 14,497 13,910 11,437 18,065 15,040
Depreciation and
amortization............... 11,674 9,972 12,740 10,471 13,129 10,399 22,260(2) 13,044(1)
--------- --------- ----------- ----------- --------- --------- --------- -----------
Operating income............. 4,407 13,614 22,456 24,017 5,689 14,882 20,593 16,156
Interest expense............. 4,909 8,309 4,852 8,318 5,275 7,883 6,986 4,318
Investment income............ 182 2,226 139 2,440 343 1,958 192 428
Gain (loss) on disposition of
assets..................... 18 (15) (49) (123) (53) 159 -- (243)
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) before income
taxes and extraordinary
item....................... (302) 7,516 17,694 18,016 704 9,116 13,799 12,023
Income tax provision......... (125) 3,100 7,125 7,400 285 3,800 5,615 5,000
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) before
extraordinary item......... (177) 4,416 10,569 10,616 419 5,316 8,184 7,023
Extraordinary item--Loss on
extinguishment of debt (net
of income tax benefit of
$13,400)................... -- -- -- -- -- (19,350) -- --
--------- --------- ----------- ----------- --------- --------- --------- -----------
Net earnings (loss).......... $ (177) $ 4,416 $ 10,569 $ 10,616 $ 419 $ (14,034) $ 8,184 $ 7,023
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Preferred dividends.......... 1,546 1,750 1,454 1,750 1,454 1,750 1,453 1,750
--------- --------- ----------- ----------- --------- --------- --------- -----------
Net earnings (loss) for
common shares.............. $ (1,723) $ 2,666 $ 9,115 $ 8,866 $ (1,035) $ (15,784) $ 6,731 $ 5,273
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) per share
before extraordinary item:
Primary.................... $ (.10) $ .16 $ .51 $ .53 $ (.06) $ .21 $ .38 $ .31
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Fully diluted.............. $ (.10) $ .16 $ .44 $ .45 $ (.06) $ .21 $ .34 $ .29
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Earnings (loss) per share:
Primary.................... $ (.10) $ .16 $ .51 $ .53 $ (.06) $ (.93) $ .38 $ .31
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------
Fully diluted.............. $ (.10) $ .16 $ .44 $ .45 $ (.06) $ (.93) $ .34 $ .29
--------- --------- ----------- ----------- --------- --------- --------- -----------
--------- --------- ----------- ----------- --------- --------- --------- -----------

<CAPTION>
FISCAL YEAR
--------------------
1997(3) 1996
--------- ---------
<S> <C> <C>
Total revenues............... $ 749,597 $ 655,972
Total cost of operations..... 580,002 491,358
General and administrative... 56,647 52,059
Depreciation and
amortization............... 59,803 43,886
--------- ---------
Operating income............. 53,145 68,669
Interest expense............. 22,022 28,828
Investment income............ 856 7,052
Gain (loss) on disposition of
assets..................... (84) (222)
--------- ---------
Earnings (loss) before income
taxes and extraordinary
item....................... 31,895 46,671
Income tax provision......... 12,900 19,300
--------- ---------
Earnings (loss) before
extraordinary item......... 18,995 27,371
Extraordinary item--Loss on
extinguishment of debt (net
of income tax benefit of
$13,400)................... -- (19,350)
--------- ---------
Net earnings (loss).......... $ 18,995 $ 8,021
--------- ---------
--------- ---------
Preferred dividends.......... 5,907 7,000
--------- ---------
Net earnings (loss) for
common shares.............. $ 13,088 $ 1,021
--------- ---------
--------- ---------
Earnings (loss) per share
before extraordinary item:
Primary.................... $ .74 $ 1.21
--------- ---------
--------- ---------
Fully diluted.............. $ .73 $ 1.20
--------- ---------
--------- ---------
Earnings (loss) per share:
Primary.................... $ .74 $ .06
--------- ---------
--------- ---------
Fully diluted.............. $ .73 $ .06
--------- ---------
--------- ---------
</TABLE>

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

(1) During the fourth quarter of 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
As a result, the Company recognized an impairment loss under SFAS 121 of
$1,799.

(2) During the fourth quarter of 1997, the Company recognized an impairment loss
under SFAS 121 of $7,231.

(3) Fiscal year 1997 consists of 53 weeks and the fiscal quarter ended April 3,
1997 consists of 14 weeks.

F-45
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.............................. 1
Prospectus Summary................................. 2
Risk Factors....................................... 14
The Company........................................ 22
Use of Proceeds.................................... 25
Capitalization..................................... 26
Distributions...................................... 27
Dilution........................................... 29
The Company's Selected Financial Information....... 30
The Company's Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................... 32
Business of the Company and its Properties......... 35
Leases............................................. 49
Management......................................... 55
AMC Entertainment Inc.............................. 62
Certain Relationships and Transactions............. 76
Policies and Objectives with Respect to Certain
Activities....................................... 77
Conflicts of Interest.............................. 79
The Formation Transactions......................... 80
Principal Shareholders of the Company.............. 83
Relationship Between AMCE and the Company after the
Formation Transactions........................... 84
Description of Shares of Beneficial Interest....... 86
Certain Provisions of Maryland Law and of the
Company's Declaration of Trust and Bylaws........ 89
Shares Available for Future Sale................... 92
Federal Income Tax Considerations.................. 92
Underwriting....................................... 104
Experts............................................ 105
Validity of Shares................................. 105
Glossary........................................... 106
Index to Financial Statements...................... F-1
</TABLE>

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

THROUGH AND INCLUDING, , 1997 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

13,700,000 SHARES

ENTERTAINMENT PROPERTIES TRUST

COMMON SHARES OF
BENEFICIAL INTEREST
(PAR VALUE $.01 PER SHARE)

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

PROSPECTUS

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

GOLDMAN, SACHS & CO.

MORGAN STANLEY DEAN WITTER

SALOMON BROTHERS INC

FURMAN SELZ

PRUDENTIAL SECURITIES INCORPORATED

REPRESENTATIVES OF THE UNDERWRITERS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II.

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table itemizes the expenses incurred by the Registrant in
connection with the offering of the shares being registered. All the amounts
shown are estimates (other than the SEC registration fee and the NASD fee).

<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
SEC registration fee............................................. $ 100,145

NASD fee......................................................... 30,500

New York Stock Exchange listing fee.............................. *

Printing and engraving fees...................................... 250,000

Legal fees and expenses (other than Blue Sky).................... *

Accounting fees and expenses..................................... *

Blue Sky fees and expenses (including fees of counsel)........... *

Other (including expenses related to the Formation
Transactions).................................................. *
---------

Total........................................................ $ *
---------
---------
</TABLE>

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

* To be filed by amendment.

ITEM 32. SALES TO SPECIAL PARTIES.

See Item 33.

ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.

On August 28, 1997, the Company issued 50 shares of Common Stock to Robert
L. Harris and 50 shares of Common Stock to David M. Brain at a purchase price of
$20.00 per share. Such shares were issued in a transaction exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.

ITEM 34. INDEMNIFICATION OF TRUSTEES AND OFFICERS.

Maryland law permits a Maryland corporation to include in its declaration of
trust a provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Registrant's
declaration of trust contains such a provision which eliminates such liability
to the maximum extent permitted by Maryland law.

The Registrant's officers and trustees are and will be indemnified under the
Registrant's declaration of trust against certain liabilities. The Registrant's
declaration of trust provides that the Registrant will, to the maximum extent
permitted by Maryland law in effect from time to time, indemnify and pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former trustee or officer of the
Registrant or (b) any individual who, while a trustee or officer of the
Registrant and at the request of the Registrant, serves or has served another
real estate

II-1
<PAGE>
investment trust, corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, shareholder,
partner or trustee of such real estate investment trust corporation,
partnership, joint venture, employee benefit plan or other enterprise. The
Registrant has the power, with the approval of the Registrant's Board of
Trustees, to provide such indemnification and advancement of expenses to a
person who served a predecessor of the Registrant in any of the capacities
described in (a) or (b) above and to any employee or agent of the Registrant or
its predecessors.

Maryland law permits a Maryland real estate investment trust to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent as permitted by the Maryland General Corporation Law ("MGCL") for
directors, officers, employees and agents of a Maryland corporation. The MGCL
requires a corporation (unless its charter provides otherwise, which the
Registrant's declaration of trust does not) to indemnify a director or officer
who has been successful, on the merits or otherwise, in the defense of any
proceeding to which he or she is made a party by reason of his or her service in
that capacity. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his or her good faith belief that he or she has met the standard of conduct
necessary for indemnification by the company and (b) a written undertaking by or
on his or her behalf to repay the amount paid or reimbursed by the company if it
shall ultimately be determined that the standard of conduct was not met.

The Registrant has entered into indemnity agreements with each of its
officers and trustees which provide for reimbursement of all expenses and
liabilities of such officer or trustee, arising out of any lawsuit or claim
against such officer or trustee due to the fact that he or she was or is serving
as an officer or trustee, except for such liabilities and expenses (a) the
payment of which is judicially determined to be unlawful, (b) relating to claims
under Section 16(b) of the Exchange Act or (c) relating to judicially determined
criminal violations.

The form of Underwriting Agreement filed as an exhibit to this Registration
Statement provides for the reciprocal indemnifications by the Underwriters of
the Registrant, and its trustees, officers and controlling persons, and by the
Registrant of the Underwriters, and their respective directors, officers and
controlling persons, against certain liabilities under the Securities Act.

ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.

The consideration to be received by the Registrant for the shares registered
will be credited to the appropriate capital account.

ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.

See Index to Financial Statements and Index to Exhibits.

II-2
<PAGE>
ITEM 37. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The Registrant hereby undertakes that: (1) for purposes of determining any
liability under the Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared effective;
and (2) for the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-11 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF KANSAS CITY, STATE OF MISSOURI, ON THE 10th DAY OF
SEPTEMBER, 1997.

<TABLE>
<S> <C> <C>
ENTERTAINMENT PROPERTIES TRUST

By: /s/ PETER C. BROWN
-----------------------------------------
</TABLE>

Each of the undersigned officers and/or trustees of the Registrant hereby
constitutes and appoints Peter C. Brown, Robert L. Harris and David M. Brain,
and each of them, as his or her attorneys-in-fact and agents, for him or her and
in his or her place and stead to execute any and all amendments, including
post-effective amendments, to this Registration Statement, or any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, in the
capacities set forth opposite his or her name, and file the same, with exhibits
thereto, and any other documents in connection therewith, with the Securities
and Exchange Commission, and hereby ratify all that said attorneys-in-fact, or
any of them, may do by virtue hereof.

Pursuant to requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ PETER C. BROWN Chairman of the Board of
- ------------------------------ Trustees (Principal September 10, 1997
PETER C. BROWN Executive Officer)

/s/ ROBERT L. HARRIS President, Chief
- ------------------------------ Development Officer and September 10, 1997
ROBERT L. HARRIS Trustee

/s/ DAVID M. BRAIN Chief Financial Officer
- ------------------------------ (Principal Financial and September 10, 1997
DAVID M. BRAIN Accounting Officer)

II-4
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT DESCRIPTION
- --------------- -----------------------------------------------------------------------------
<S> <C>
1* Form of Underwriting Agreement among Entertainment Properties Trust (the
"Company") and Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc, Furman Selz LLC and Prudential Securities
Incorporated as representatives of the several underwriters named therein

4.1 Declaration of Trust of the Company

4.2* Amended and Restated Declaration of Trust of the Company

4.3 Bylaws of the Company

4.4* Form of share certificate for common shares of beneficial interest of the
Company

5* Opinion of Sullivan & Cromwell as to the legality of the shares being
registered

8* Opinion of Sullivan & Cromwell as to certain tax matters

10.1* Form of Purchase Agreement between the Company and American Multi-Cinema,
Inc.

10.2* Form of Option Agreement between the Company and American Multi-Cinema, Inc.
and between the Company and Clip Funding

10.3* Form of AMCE Right to Purchase Agreement between the Company and AMC
Entertainment Inc.

10.4* Form of Lease entered into between the Company and American Multi-Cinema,
Inc., including the guarantee of AMC Entertainment Inc.

10.5* Credit Agreement

10.6* Form of Indemnification Agreement entered into between the Company and each
of its trustees

10.7* Share Option Program

10.8* Share Purchase Program

10.9* Restricted Share Program

10.10* Annual Incentive Program

10.11* Employment Agreement with Robert L. Harris

10.12* Employment Agreement with David M. Brain

21* Subsidiaries of the Company

23.1* Consent of Sullivan & Cromwell (included in Exhibits 5 and 8)

23.2 Consent of Ernst & Young LLP

23.3 Consent of Coopers & Lybrand L.L.P.

23.4 Consent of Robert J. Druten

23.5 Consent of Scott Ward

24* Power of Attorney pursuant to which amendments to this Registration Statement
may be filed (included on the signature page)
</TABLE>

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

* To be filed by amendment.

II-5

<PAGE>

ENTERTAINMENT PROPERTIES TRUST

DECLARATION OF TRUST

DATED AUGUST 21, 1997

This DECLARATION OF TRUST is made as of the date set forth above by
the undersigned Trustee (as defined herein).

ARTICLE I

FORMATION

The Trust is a real estate investment trust within the meaning of
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland, as amended from time to time ("Title 8"). The Trust shall not be
deemed to be a general partnership, limited partnership, joint venture, joint
stock company or a corporation (but nothing herein shall preclude the Trust from
being treated for tax purposes as an association under the Internal Revenue Code
of 1986, as amended from time to time (the "Code")).

ARTICLE II

NAME

The name of the Trust is:

Entertainment Properties Trust

Under circumstances in which the Board of Trustees of the Trust (the
"Board of Trustees" or "Board") determines that the use of the name of the Trust
is not practicable, the Trust may use any other designation or name for the
Trust.

ARTICLE III

PURPOSES AND POWERS

Section 1. PURPOSES. The purposes for which the Trust is formed are
to invest in and to acquire, hold, manage, administer, control and dispose of
property, including, without limitation or obligation, engaging in business as a
real estate investment trust under the Code.

Section 2. POWERS. The Trust shall have all of the powers granted to
real estate investment trusts by Title 8 and all other powers which are not
inconsistent with law and are

<PAGE>

appropriate to promote and attain the purposes set forth in the Declaration of
Trust.

ARTICLE IV

RESIDENT AGENT

The name of the resident agent of the Trust in the State of Maryland
is James J. Hanks, Jr., whose post office address is c/o Ballard Spahr Andrews
& Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202. The resident
agent is a citizen of and resides in the State of Maryland. The Trust may have
such offices or places of business within or outside the State of Maryland as
the Board of Trustees may from time to time determine.

ARTICLE V

BOARD OF TRUSTEES

Section 1. POWERS. Subject to any express limitations contained in
the Declaration of Trust or in the Bylaws, (a) the business and affairs of the
Trust shall be managed under the direction of the Board of Trustees and (b) the
Board shall have full, exclusive and absolute power, control and authority over
any and all property of the Trust. The Board may take any action as in its sole
judgment and discretion is necessary or appropriate to conduct the business and
affairs of the Trust. The Declaration of Trust shall be construed with the
presumption in favor of the grant of power and authority to the Board. Any
construction of the Declaration of Trust or determination made in good faith by
the Board concerning its powers and authority hereunder shall be conclusive.
The enumeration and definition of particular powers of the Board of Trustees
included in the Declaration of Trust or in the Bylaws shall in no way be limited
or restricted by reference to or inference from the terms of this or any other
provision of the Declaration of Trust or the Bylaws or construed or deemed by
inference or otherwise in any manner to exclude or limit the powers conferred
upon the Board or the trustees of the Trust (collectively, the "Trustees" and,
individually, a "Trustee") under the general laws of the State of Maryland or
any other applicable laws.

The Board, without any action by the shareholders of the Trust
(collectively, the "Shareholders" and, individually, a "Shareholder"), shall
have and may exercise, on behalf of the Trust, without limitation, the power to
terminate the status of the Trust as a real estate investment trust under the
Code; to adopt, amend and repeal Bylaws; to elect officers

- 2 -
<PAGE>

in the manner prescribed in the Bylaws; to solicit proxies from holders of
shares of beneficial interest of the Trust; and to do any other acts and deliver
any other documents necessary or appropriate to the foregoing powers.

Section 2. NUMBER. The number of Trustees initially shall be one,
which number may thereafter be increased or decreased by the Trustees then in
office from time to time; however, the total number of Trustees shall be not
less than one and not more than 15. No reduction in the number of Trustees
shall cause the removal of any Trustee from office prior to the expiration of
his term.

Section 3. INITIAL BOARD. The name and address of the Trustee who
shall serve until the earlier of the first annual meeting and until his
successor is duly elected and qualifies is:

NAME ADDRESS

Peter C. Brown c/o AMC Entertainment Inc.
106 W. 14th Street
Kansas, MO 64105

Section 4. TERM. The Trustees shall be elected at each annual
meeting of the Shareholders and shall serve until the next annual meeting of the
Shareholders and until their successors are duly elected and qualify.

Section 5. REMOVAL. A Trustee may be removed, at any time, with or
without cause, by the affirmative vote of the holders of a majority of the
Shares then outstanding and entitled to vote generally in the election of
Trustees.

ARTICLE VI

SHARES OF BENEFICIAL INTEREST

The beneficial interest in the Trust shall be divided into shares of
beneficial interest ("Shares"). The total number of Shares which the Trust has
authority to issue is 1,000 Common Shares, $.01 par value per share. The Board
of Trustees may classify or reclassify any unissued Shares from time to time by
setting or changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of redemption of the Shares.

- 3 -

<PAGE>

The Board of Trustees may authorize the issuance from time to time of
Shares of any class or series, whether now or hereafter authorized, or
securities or rights convertible into Shares of any class or series, whether now
or hereafter authorized, for such consideration (whether in cash, property, past
or future services, obligation for future payment or otherwise) as the Board of
Trustees may deem advisable (or without consideration in the case of a Share
split or Share dividend), subject to such restrictions or limitations, if any,
as may be set forth in the Declaration of Trust or the Bylaws of the Trust.

ARTICLE VII

SHAREHOLDERS

There shall be an annual meeting of the Shareholders, to be held after
delivery of the annual report and on proper notice to the Shareholders, at such
time and place as shall be determined by resolution of the Board of Trustees.

ARTICLE VIII

LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS
AND TRANSACTIONS BETWEEN THEM AND THE TRUST

Section 1. LIMITATION OF SHAREHOLDER LIABILITY. No Shareholder shall
be liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a Shareholder, nor
shall any Shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any Person in connection with the property or affairs
of the Trust.

Section 2. LIMITATION OF TRUSTEE AND OFFICER LIABILITY. To the
maximum extent that Maryland law in effect from time to time permits limitation
of the liability of trustees and officers of a real estate investment trust, no
Trustee or officer of the Trust shall be liable to the Trust or to any
Shareholder for money damages. Neither the amendment nor repeal of this
Section, nor the adoption or amendment of any other provision of this
Declaration of Trust inconsistent with this Section, shall apply to or affect in
any respect the applicability of the preceding sentence with respect to any act
or failure to act which occurred prior to such amendment, repeal or adoption.

- 4 -

<PAGE>

Section 3. EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS. Neither the
Shareholders nor the Trustees, officers, employees or agents of the Trust shall
be liable under any written instrument creating an obligation of the Trust, and
all persons shall look solely to the property of the Trust for the payment of
any claim under or for the performance of that instrument. The omission of the
foregoing exculpatory language from any instrument shall not affect the validity
or enforceability of such instrument and shall not render any Shareholder,
Trustee, officer, employee or agent liable thereunder to any third party, nor
shall the Trustees or any officer, employee or agent of the Trust be liable to
anyone for such omission.

Section 4. INDEMNIFICATION. The Trust shall have the power, to the
maximum extent permitted by Maryland law, to obligate itself to indemnify, and
to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to, each Shareholder Trustee or officer (including any person who,
while a Trustee of the Trust, is or was serving at the request of the Trust as a
director, officer, real estate investment trust, partner, trustee, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan) from all claims and
liabilities to which such person may become subject by reason of his being or
having been a Shareholder, Trustee, officer, employee or agent.

Section 5. TRANSACTIONS BETWEEN THE TRUST AND ITS TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS. Subject to any express restrictions in this Declaration
of Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust
may enter into any contract or transaction of any kind (including, without
limitation, for the purchase or sale of property or for any type of services,
including those in connection with underwriting or the offer or sale of
Securities of the Trust) with any person, including any Trustee, officer,
employee or agent of the Trust or any person affiliated with a Trustee, officer,
employee or agent of the Trust, whether or not any of them has a financial
interest in such transaction.

ARTICLE IX

AMENDMENT

Section 1. GENERAL. This Declaration of Trust may not be amended
except as provided in this Article IX.

Section 2. BY TRUSTEES. The Trustees, by a two-thirds vote, may
amend any provision of this Declaration of

- 5 -

<PAGE>

Trust from time to time to enable the Trust to qualify as a real estate
investment trust under the Code or under Title 8.

Section 3. BY SHAREHOLDERS. Except as provided in Section 2 of this
Article IX, this Declaration of Trust may be amended only by the affirmative
vote of the holders of not less than a majority of the Shares then outstanding
and entitled to vote thereon.

ARTICLE X

DURATION OF TRUST

The Trust shall continue perpetually unless terminated pursuant to any
applicable provision of Title 8.

ARTICLE XI

MISCELLANEOUS

This Declaration of Trust is executed by the Trustees and delivered in the
State of Maryland with reference to the laws thereof, and the rights of all
parties and the validity, construction and effect of every provision hereof
shall be subject to and construed according to the laws of the State of Maryland
without regard to conflicts of laws provisions thereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

- 6 -
<PAGE>

IN WITNESS WHEREOF, this Declaration of Trust has been executed on this
21st day of August, 1997 by the undersigned Trustee, who acknowledges that this
document is his act, that to the best of his knowledge, information, and belief,
the matters and facts set forth herein are true in all material respects and
that this statement is made under the penalties for perjury.

/s/ Peter C. Brown

- 7 -

<PAGE>

ENTERTAINMENT PROPERTIES TRUST

BYLAWS
ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICE. The principal office of the Trust shall be
located at such place or places as the Trustees may designate.

Section 2. ADDITIONAL OFFICES. The Trust may have additional offices at
such places as the Board of Trustees may from time to time determine or the
business of the Trust may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United States as
shall be stated in the notice of the meeting.

Section 2. ANNUAL MEETING. An annual meeting of the shareholders for the
election of Trustees and the transaction of any business within the powers of
the Trust shall be held during the second quarter of each year, after the
delivery of the annual report, referred to in Section 12 of this Article II, at
a convenient location and on proper notice, on a date and at the time set by the
Trustees, beginning with the year 1998. Failure to hold an annual meeting does
not invalidate the Trust's existence or affect any otherwise valid acts of the
Trust.

Section 3. SPECIAL MEETINGS. The chairman of the board or the president
or one-third of the Trustees may call special meetings of the shareholders.
Special meetings of shareholders shall also be called by the secretary upon the
written request of the holders of shares entitled to cast not less than a
majority of all the votes entitled to be cast at such meeting. Such request
shall state the purpose of such meeting and the matters proposed to be acted on
at such meeting. The secretary shall inform such shareholders of the reasonably
estimated cost of preparing and mailing notice of the meeting and, upon payment
by such shareholders to the Trust of such costs, the secretary shall give notice
to each shareholder entitled to notice of the meeting. Unless requested by
shareholders entitled to cast a majority of all the votes entitled to be cast at
such meeting, a special meeting need not be called to consider any matter which
is substantially the same as a matter voted on at any meeting of the
shareholders held during the preceding twelve months.

<PAGE>

Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of shareholders, the secretary shall give to each shareholder entitled
to vote at such meeting and to each shareholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such shareholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
shareholder at his post office address as it appears on the records of the
Trust, with postage thereon prepaid.

Section 5. SCOPE OF NOTICE. Any business of the Trust may be transacted
at an annual meeting of shareholders without being specifically designated in
the notice, except such business as is required by any statute to be stated in
such notice. No business shall be transacted at a special meeting of
shareholders except as specifically designated in the notice.

Section 6. ORGANIZATION. At every meeting of the shareholders, the
Chairman of the Board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the Chairman of the Board, one of the
following officers present shall conduct the meeting in the order stated: the
Vice Chairman of the Board, if there be one, the President, the Vice Presidents
in their order of rank and seniority, or a Chairman chosen by the shareholders
entitled to cast a majority of the votes which all shareholders present in
person or by proxy are entitled to cast, shall act as Chairman, and the
Secretary, or, in his absence, an assistant secretary, or in the absence of both
the Secretary and assistant secretaries, a person appointed by the Chairman
shall act as Secretary.

Section 7. QUORUM. At any meeting of shareholders, the presence in person
or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the Declaration of Trust
for the vote necessary for the adoption of any measure. If, however, such
quorum shall not be present at any meeting of the shareholders, the shareholders
entitled to vote at such meeting, present in person or by proxy, shall have the
power to adjourn the meeting from time to time to a date not more than 120 days
after the original record date without notice other than announcement at the
meeting. At such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.

Section 8. VOTING. A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is

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present shall be sufficient to elect a Trustee. Each share may be voted for
as many individuals as there are Trustees to be elected and for whose
election the share is entitled to be voted. A majority of the votes cast at
a meeting of shareholders duly called and at which a quorum is present shall
be sufficient to approve any other matter which may properly come before the
meeting, unless more than a majority of the votes cast is required herein or
by statute or by the Declaration of Trust. Unless otherwise provided in the
Declaration of Trust, each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.

Section 9. PROXIES. A shareholder may cast the votes entitled to be cast
by the shares owned of record by him either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the Trust before or at the time of
the meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.

Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or other entity or agreement of the partners
of the partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such shares. Any trustee or other
fiduciary may vote shares registered in his name as such fiduciary, either in
person or by proxy.

Shares of the Trust directly or indirectly owned by it shall not be voted
at any meeting and shall not be counted in determining the total number of
outstanding shares entitled to be voted at any given time, unless they are held
by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.

The Trustees may adopt by resolution a procedure by which a shareholder may
certify in writing to the Trust that any shares registered in the name of the
shareholder are held for the account of a specified person other than the
shareholder. The resolution shall set forth the class of shareholders who may
make the certification, the purpose for which the certification may be made, the
form of certification and the information to be contained in it; if the
certification is with respect to a record date or closing of the share transfer
books, the time after the record date or closing of the share transfer books
within which the

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certification must be received by the Trust; and any other provisions with
respect to the procedure which the Trustees consider necessary or desirable.
On receipt of such certification, the person specified in the certification
shall be regarded as, for the purposes set forth in the certification, the
shareholder of record of the specified shares in place of the shareholder who
makes the certification.

Section 11. INSPECTORS. At any meeting of shareholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders.

Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be PRIMA
FACIE evidence thereof.

Section 12. REPORTS TO SHAREHOLDERS.

The Trustees shall submit to the shareholders at or before the annual
meeting of shareholders a report of the business and operations of the Trust
during such fiscal year, containing a balance sheet and a statement of income
and surplus of the Trust, accompanied by the certification of an independent
certified public accountant, and such further information as the Trustees may
determine is required pursuant to any law or regulation to which the Trust is
subject. Within the earlier of 20 days after the annual meeting of shareholders
or 120 days after the end of the fiscal year of the Trust, the Trustees shall
place the annual report on file at the principal office of the Trust and with
any governmental agencies as may be required by law and as the Trustees may deem
appropriate.

Section 13. NOMINATIONS AND PROPOSALS BY SHAREHOLDERS.

(a) ANNUAL MEETINGS OF SHAREHOLDERS. (1) Nominations of persons for
election to the Board of Trustees and the proposal of business to be considered
by the shareholders may be made at an annual meeting of shareholders (i)
pursuant to the Trust's notice of meeting, (ii) by or at the direction of the
Trustees or (iii) by any shareholder of the Trust who was a shareholder of
record both at the time of giving of notice provided for in this Section 13(a)

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and at the time of the annual meeting, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in this Section 13(a).

(2) For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) (1)
of this Section 13, the shareholder must have given timely notice thereof in
writing to the secretary of the Trust and such other business must otherwise be
a proper matter for action by shareholders. To be timely, a shareholder's
notice shall be delivered to the secretary at the principal executive offices of
the Trust not later than the close of business on the 60th day nor earlier than
the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date or if the Trust has not previously held
an annual meeting, notice by the shareholder to be timely must be so delivered
not earlier than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made by the Trust. In no
event shall the public announcement of a postponement or adjournment of an
annual meeting to a later date or time commence a new time period for the giving
of a shareholder's notice as described above. Such shareholder's notice shall
set forth (i) as to each person whom the shareholder proposes to nominate for
election or reelection as a Trustee all information relating to such person that
is required to be disclosed in solicitations of proxies for election of Trustees
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Trustee if elected); (ii) as to
any other business that the shareholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the shareholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such shareholder, as they appear on the
Trust's books, and of such beneficial owner and (y) the number of each class of
shares of the Trust which are owned beneficially and of record by such
shareholder and such beneficial owner.

(3) Notwithstanding anything in the second sentence of paragraph
(a) (2) of this Section 13 to the contrary, in the event that the number of
Trustees to be elected to the Board of

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<PAGE>

Trustees is increased and there is no public announcement by the Trust
naming all of the nominees for Trustee or specifying the size of the
increased Board of

Trustees at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a shareholder's notice required by this Section 13(a)
shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
secretary at the principal executive offices of the Trust not later than the
close of business on the tenth day following the day on which such public
announcement is first made by the Trust.

(b) SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the Trust's notice of meeting. Nominations of
persons for election to the Board of Trustees may be made at a special
meeting of shareholders at which Trustees are to be elected (i) pursuant to
the Trust's notice of meeting (ii) by or at the direction of the Board of
Trustees or (iii) provided that the Board of Trustees has determined that
Trustees shall be elected at such special meeting, by any shareholder of the
Trust who was a shareholder of record both at the time of giving of notice
provided for in this Section 13(b) and at the time of the special meeting,
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 13(b). In the event the Trust calls a
special meeting of shareholders for the purpose of electing one or more
Trustees to the Board of Trustees, any such shareholder may nominate a person
or persons (as the case may be) for election to such position as specified in
the Trust's notice of meeting, if the shareholder's notice containing the
information required by paragraph (a) (2) of this Section 13 shall be
delivered to the secretary at the principal executive offices of the Trust
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting and of
the nominees proposed by the Trustees to be elected at such meeting. In no
event shall the public announcement of a postponement or adjournment of a
special meeting to a later date or time commence a new time period for the
giving of a shareholder's notice as described above.

(c) GENERAL. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 13 shall be eligible to serve
as Trustees and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 13. The chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made or proposed, as
the case may be, in accordance with the procedures set forth in this Section
13 and, if any proposed nomination or business is not in compliance

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with this Section 13, to declare that such nomination or proposal shall be
disregarded.

(2) For purposes of this Section 13, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed
by the Trust with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 13,
a shareholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this Section 13. Nothing in this Section 13
shall be deemed to affect any rights of shareholders to request inclusion of
proposals in the Trust's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.

Section 14. INFORMAL ACTION BY SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by
shareholders entitled to cast a sufficient number of votes to approve the
matter, as required by statute, the Declaration of Trust of the Trust or
these Bylaws, and such consent is filed with the minutes of proceedings of
the shareholders.

Section 15. VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.

ARTICLE III

TRUSTEES

Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall be an individual at least 21 years of age
who is not under legal disability. In case of failure to elect Trustees at
an annual meeting of the shareholders, the Trustees holding over shall
continue to direct the management of the business and affairs of the Trust
until their successors are elected and qualify.

Section 2. NUMBER. At any regular meeting or at any special meeting
called for that purpose, a majority of the entire Board of Trustees may
establish, increase or decrease the number of Trustees.

Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Trustees shall be held immediately after and at the

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same place as the annual meeting of shareholders, no notice other than this
Bylaw being necessary. The Trustees may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the Trustees without other notice than such resolution.

Section 4. SPECIAL MEETINGS. Special meetings of the Trustees may be
called by or at the request of the chairman of the board or the president or
by a majority of the Trustees then in office. The person or persons
authorized to call special meetings of the Trustees may fix any place, either
within or without the State of Maryland, as the place for holding any special
meeting of the Trustees called by them.

Section 5. NOTICE. Notice of any special meeting shall be given by
written notice delivered personally, telegraphed, facsimile-transmitted or
mailed to each Trustee at his business or residence address. Personally
delivered or telegraphed notices shall be given at least two days prior to the
meeting. Notice by mail shall be given at least five days prior to the meeting.
Telephone or facsimile-transmission notice shall be given at least 24 hours
prior to the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail properly addressed, with postage thereon
prepaid. If given by telegram, such notice shall be deemed to be given when the
telegram is delivered to the telegraph company. Telephone notice shall be
deemed given when the Trustee is personally given such notice in a telephone
call to which he is a party. Facsimile-transmission notice shall be deemed
given upon completion of the transmission of the message to the number given to
the Trust by the Trustee and receipt of a completed answer-back indicating
receipt. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Trustees need be stated in the notice,
unless specifically required by statute or these Bylaws.

Section 6. QUORUM. A majority of the entire Board of Trustees shall
constitute a quorum for transaction of business at any meeting of the Trustees,
provided that, if less than a majority of such Trustees are present at said
meeting, a majority of the Trustees present may adjourn the meeting from time to
time without further notice, and provided further that if, pursuant to the
Declaration of Trust or these Bylaws, the vote of a majority of a particular
group of Trustees is required for action, a quorum must also include a majority
of such group.

The Trustees present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Trustees to leave less than a quorum.

Section 7. VOTING. The action of the majority of the Trustees present at
a meeting at which a quorum is present shall be

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<PAGE>

the action of the Trustees, unless the concurrence of a greater proportion is
required for such action by applicable statute.

Section 8. TELEPHONE MEETINGS. Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.

Section 9. INFORMAL ACTION BY TRUSTEES. Any action required or permitted
to be taken at any meeting of the Trustees may be taken without a meeting, if a
consent in writing to such action is signed by each Trustee and such written
consent is filed with the minutes of proceedings of the Trustees.

Section 10. VACANCIES. If for any reason any or all the Trustees cease to
be Trustees, such event shall not terminate the Trust or affect these Bylaws or
the powers of the remaining Trustees hereunder (even if fewer than three
Trustees remain). Any vacancy (including a vacancy created by an increase in the
number of Trustees) shall be filled, at any regular meeting or at any special
meeting called for that purpose, by a majority of the Trustees. Any individual
so elected as Trustee shall hold office for the unexpired term of the Trustee he
is replacing.

Section 11. COMPENSATION; FINANCIAL ASSISTANCE.

(a) COMPENSATION. Trustees shall not receive any stated salary for their
services as Trustees but, by resolution of the Trustees, may receive
compensation per year and/or per meeting and/or per visit to real property owned
or to be acquired by the Trust and for any service or activity they performed or
engaged in as Trustees. Trustees may be reimbursed for expenses of attendance,
if any, at each annual, regular or special meeting of the Trustees or of any
committee thereof; and for their expenses, if any, in connection with each
property visit and any other service or activity performed or engaged in as
Trustees; but nothing herein contained shall be construed to preclude any
Trustees from serving the Trust in any other capacity and receiving compensation
therefor.

(b) FINANCIAL ASSISTANCE TO TRUSTEES. The Trust may lend money to,
guarantee an obligation of or otherwise assist a Trustee or a trustee of its
direct or indirect subsidiary. The loan, guarantee or other assistance may be
with or without interest, unsecured, or secured in any manner that the Board of
Trustees approves, including a pledge of Shares.

Section 12. REMOVAL OF TRUSTEES. The shareholders may, at any time,
remove any Trustee in the manner provided in the Declaration of Trust.

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Section 13. LOSS OF DEPOSITS. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings
and loan association, or other institution with whom moneys or shares have
been deposited.

Section 14. SURETY BONDS. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.

Section 15. RELIANCE. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his duties with respect to the Trust, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the Trust by any of its
officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Trustees or officers of the Trust,
regardless of whether such counsel or expert may also be a Trustee.

Section 16. INTERESTED TRUSTEE TRANSACTIONS. Section 2-419 of the
Maryland General Corporation Law (the "MGCL") shall be available for and apply
to any contract or other transaction between the Trust and any of its Trustees
or between the Trust and any other trust, corporation, firm or other entity in
which any of its Trustees is a trustee or director or has a material financial
interest.

Section 17. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
The Trustees shall have no responsibility to devote their full time to the
affairs of the Trust. Any Trustee or officer, employee or agent of the Trust
(other than a full-time officer, employee or agent of the Trust), in his
personal capacity or in a capacity as an affiliate, employee, or agent of any
other person, or otherwise, may have business interests and engage in business
activities similar or in addition to those of or relating to the Trust.

ARTICLE IV

COMMITTEES

Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Trustees may appoint
from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of one or more Trustees,
to serve at the pleasure of the Trustees.

Section 2. POWERS. The Trustees may delegate to committees appointed
under Section 1 of this Article any of the powers of the Trustees, except as
prohibited by law.

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Section 3. MEETINGS. In the absence of any member of any such committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint another Trustee to act in the place of such absent member.
Notice of committee meetings shall be given in the same manner as notice for
special meetings of the Board of Trustees.

One-third, but not less than one, of the members of any committee shall be
present in person at any meeting of such committee in order to constitute a
quorum for the transaction of business at such meeting, and the act of a
majority present shall be the act of such committee. The Board of Trustees may
designate a chairman of any committee, and such chairman or any member of any
committee may fix the time and place of its meetings unless the Board shall
otherwise provide. In the absence or disqualification of any member of any such
committee, the members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
Trustee to act at the meeting in the place of such absent or disqualified
members.

Each committee shall keep minutes of its proceedings and shall report the
same to the Board of Trustees at the next succeeding meeting, and any action by
the committee shall be subject to revision and alteration by the Board of
Trustees, provided that no rights of third persons shall be affected by any such
revision or alteration.

Section 4. TELEPHONE MEETINGS. Members of a committee of the Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.

Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Trustees may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.

Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Trustees shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.

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ARTICLE V

OFFICERS

Section 1. GENERAL PROVISIONS. The officers of the Trust shall include a
president, a secretary and a treasurer and may include a chairman of the board,
a vice chairman of the board, a chief executive officer, a chief operating
officer, a chief financial officer, one or more vice presidents, one or more
assistant secretaries and one or more assistant treasurers. In addition, the
Trustees may from time to time appoint such other officers with such powers and
duties as they shall deem necessary or desirable. The officers of the Trust
shall be elected annually by the Trustees at the first meeting of the Trustees
held after each annual meeting of shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except president and
vice president may be held by the same person. In their discretion, the
Trustees may leave unfilled any office except that of president and secretary.
Election of an officer or agent shall not of itself create contract rights
between the Trust and such officer or agent.

Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust may
be removed by the Trustees if in their judgment the best interests of the Trust
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer of the Trust may
resign at any time by giving written notice of his resignation to the Trustees,
the chairman of the board, the president or the secretary. Any resignation
shall take effect at any time subsequent to the time specified therein or, if
the time when it shall become effective is not specified therein, immediately
upon its receipt. The acceptance of a resignation shall not be necessary to
make it effective unless otherwise stated in the resignation. Such resignation
shall be without prejudice to the contract rights, if any, of the Trust.

Section 3. VACANCIES. A vacancy in any office may be filled by the
Trustees for the balance of the term.

Section 4. CHIEF EXECUTIVE OFFICER. The Trustees may designate a chief
executive officer from among the elected officers. The chief executive officer
shall have responsibility for implementation of the policies of the Trust, as
determined by the Trustees, and for the administration of the business affairs
of the Trust. In the absence of both the chairman and vice chairman of the
board, the chief executive officer shall preside over the

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<PAGE>

meetings of the Trustees and of the shareholders at which he shall be present.

Section 5. CHIEF OPERATING OFFICER. The Trustees may designate a chief
operating officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.

Section 6. CHIEF FINANCIAL OFFICER. The Trustees may designate a chief
financial officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.

Section 7. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman of the
board shall preside over the meetings of the Trustees and of the shareholders at
which he shall be present and shall in general oversee all of the business and
affairs of the Trust. In the absence of the chairman of the board, the vice
chairman of the board shall preside at such meetings at which he shall be
present. The chairman and the vice chairman of the board may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed. The chairman of the board and the vice chairman of
the board shall perform such other duties as may be assigned to him or them by
the Trustees.

Section 8. PRESIDENT. In the absence of the chairman, the vice chairman
of the board and the chief executive officer, the president shall preside over
the meetings of the Trustees and of the shareholders at which he shall be
present. In the absence of a designation of a chief executive officer by the
Trustees, the president shall be the chief executive officer and shall be ex
officio a member of all committees that may, from time to time, be constituted
by the Trustees. The president may execute any deed, mortgage, bond, contract
or other instrument, except in cases where the execution thereof shall be
expressly delegated by the Trustees or by these Bylaws to some other officer or
agent of the Trust or shall be required by law to be otherwise executed; and in
general shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Trustees from time to time.

Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other

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<PAGE>

duties as from time to time may be assigned to him by the president or by the
Trustees. The Trustees may designate one or more vice presidents as
executive vice president or as vice president for particular areas of
responsibility.

Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the shareholders, the Trustees and committees of the Trustees in
one or more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these Bylaws or as required by law;
(c) be custodian of the trust records and of the seal of the Trust; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (e) have general charge of the share
transfer books of the Trust; and (f) in general perform such other duties as
from time to time may be assigned to him by the chief executive officer, the
president or by the Trustees.

Section 11. TREASURER. The treasurer shall have the custody of the funds
and securities of the Trust and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys and other valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Trustees.

The treasurer shall disburse the funds of the Trust as may be ordered by
the Trustees, taking proper vouchers for such disbursements, and shall render
to the president and Trustees, at the regular meetings of the Trustees or
whenever they may require it, an account of all his transactions as treasurer
and of the financial condition of the Trust.

If required by the Trustees, the treasurer shall give the Trust a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his office and for the
restoration to the Trust, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, moneys and other
property of whatever kind in his possession or under his control belonging to
the Trust.

Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Trustees. The assistant treasurers shall, if required by the
Trustees, give bonds for the faithful performance of their duties in such sums
and with such surety or sureties as shall be satisfactory to the Trustees.

Section 13. SALARIES. The salaries and other compensation of the officers
shall be fixed from time to time by the Trustees and no officer shall be
prevented from receiving such

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salary or other compensation by reason of the fact that he is also a Trustee.

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1. CONTRACTS. The Trustees may authorize any officer or agent to
enter into any contract or to execute and deliver any instrument in the name of
and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding upon the Trustees and upon the Trust when authorized or
ratified by action of the Trustees.

Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Trust shall be signed by such officer or agent of the Trust in such manner
as shall from time to time be determined by the Trustees.

Section 3. DEPOSITS. All funds of the Trust not otherwise employed shall
be deposited from time to time to the credit of the Trust in such banks, trust
companies or other depositories as the Trustees may designate.

ARTICLE VII

Section 1. CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interests held by him in the Trust. Each
certificate shall be signed by the chairman, the president or a vice president
and countersigned by the secretary or an assistant secretary or the treasurer or
an assistant treasurer and may be sealed with the seal, if any, of the Trust.
The signatures may be either manual or facsimile. Certificates shall be
consecutively numbered; and if the Trust shall, from time to time, issue several
classes of shares, each class may have its own number series. A certificate is
valid and may be issued whether or not an officer who signed it is still an
officer when it is issued. Each certificate representing shares which are
restricted as to their transferability or voting powers, which are preferred or
limited as to their dividends or as to their allocable portion of the assets
upon liquidation or which are redeemable at the option of the Trust, shall have
a statement of such restriction, limitation, preference or redemption provision,
or a summary thereof, plainly stated on the certificate. In lieu

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of such statement or summary, the Trust may set forth upon the face or back
of the certificate a statement that the Trust will furnish to any
shareholder, upon request and without charge, a full statement of such
information.

Section 2. TRANSFERS. Certificates shall be treated as negotiable and
title thereto and to the shares they represent shall be transferred by delivery
thereof to the same extent as those of a Maryland stock corporation. Upon
surrender to the Trust or the transfer agent of the Trust of a share certificate
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, the Trust shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.

The Trust shall be entitled to treat the holder of record of any share or
shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.

Notwithstanding the foregoing, transfers of shares of beneficial interest
of the Trust will be subject in all respects to the Declaration of Trust and all
of the terms and conditions contained therein.

Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Trustees may direct a new certificate to be issued in place of any certificate
previously issued by the Trust alleged to have been lost, stolen or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed. When authorizing the issuance of a
new certificate, an officer designated by the Trustees may, in his discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or the owner's legal representative to
advertise the same in such manner as he shall require and/or to give bond, with
sufficient surety, to the Trust to indemnify it against any loss or claim which
may arise as a result of the issuance of a new certificate.

Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
determining shareholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
shareholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of shareholders not less
than ten days, before the date on which the

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meeting or particular action requiring such determination of shareholders of
record is to be held or taken.

In lieu of fixing a record date, the Trustees may provide that the share
transfer books shall be closed for a stated period but not longer than 20 days.
If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days before the date of such meeting.

If no record date is fixed and the share transfer books are not closed for
the determination of shareholders, (a) the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the 30th day before the meeting, whichever is the closer date to the meeting;
and (b) the record date for the determination of shareholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the Trustees, declaring
the dividend or allotment of rights, is adopted.

When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.

Section 5. STOCK LEDGER. The Trust shall maintain at its principal office
or at the office of its counsel, accountants or transfer agent, an original or
duplicate share ledger containing the name and address of each shareholder and
the number of shares of each class held by such shareholder.

Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may issue
fractional shares or provide for the issuance of scrip, all on such terms and
under such conditions as they may determine. Notwithstanding any other
provision of the Declaration of Trust or these Bylaws, the Trustees may issue
units consisting of different securities of the Trust. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Trust, except that the Trustees may provide that for a specified period
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.

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ARTICLE VIII

ACCOUNTING YEAR

The Trustees shall have the power, from time to time, to fix the fiscal
year of the Trust by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1. AUTHORIZATION. Dividends and other distributions upon the
shares of beneficial interest of the Trust may be authorized and declared by the
Trustees, subject to the provisions of law and the Declaration of Trust.
Dividends and other distributions may be paid in cash, property or shares of the
Trust, subject to the provisions of law and the Declaration of Trust.

Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Trustees may from
time to time, in their absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends or other distributions, for repairing or
maintaining any property of the Trust or for such other purpose as the Trustees
shall determine to be in the best interest of the Trust, and the Trustees may
modify or abolish any such reserve in the manner in which it was created.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the Declaration of Trust, the Board of
Trustees may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Trust as it shall deem appropriate
in its sole discretion.

ARTICLE XI

SEAL

Section 1. SEAL. The Trustees may authorize the adoption of a seal by the
Trust. The seal shall have inscribed thereon the name of the Trust and the year
of its formation. The Trustees may authorize one or more duplicate seals and
provide for the custody thereof.

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Section 2. AFFIXING SEAL. Whenever the Trust is permitted or required to
affix its seal to a document, it shall be sufficient to meet the requirements of
any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.

ARTICLE XII

INDEMNIFICATION AND ADVANCE OF EXPENSES

To the maximum extent permitted by Maryland law in effect from time to
time, the Trust shall indemnify (a) any Trustee or officer or any former
Trustee or officer (including among the foregoing, for all purposes of this
Article XII and without limitation, any individual who, while a Trustee or
officer and at the express request of the Trust, serves or has served another
real estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner
or trustee of such real estate investment trust, corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise) who has been
successful, on the merits or otherwise, in the defense of a proceeding to
which he was made a party by reason of service in such capacity, against
reasonable expenses incurred by him in connection with the proceeding and (b)
any Trustee or officer or any former Trustee or officer against any claim or
liability to which he may become subject by reason of such status unless it
is established that (i) his act or omission was material to the matter giving
rise to the proceeding and was committed in bad faith or was the result of
active and deliberate dishonesty, (ii) he actually received an improper
personal benefit in money, property or services or (iii) in the case of a
criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful. In addition, the Trust shall, without requiring a
preliminary determination of the ultimate entitlement to indemnification, pay
or reimburse, in advance of final disposition of a proceeding, reasonable
expenses incurred by a Trustee or officer or former Trustee or officer made a
party to a proceeding by reason of such status, provided that the Trust shall
have received (i) a written affirmation by the Trustee or officer of his good
faith belief that he has met the applicable standard of conduct necessary for
indemnification by the Trust as authorized by these Bylaws and (ii) a written
undertaking by or on his behalf to repay the amount paid or reimbursed by the
Trust if it shall ultimately be determined that the applicable standard of
conduct was not met. The Trust may, with the approval of its Trustees,
provide such indemnification or payment or reimbursement of

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expenses to any Trustee or officer or any former Trustee or officer who
served a predecessor of the Trust and to any employee or agent of the Trust
or a predecessor of the Trust. Neither the amendment nor repeal of this
Article, nor the adoption or amendment of any other provision of the
Declaration of Trust or these Bylaws inconsistent with this Article, shall
apply to or affect in any respect the applicability of this Article with
respect to any act or failure to act which occurred prior to such amendment,
repeal or adoption.

Any indemnification or payment or reimbursement of the expenses
permitted by these Bylaws shall be furnished in accordance with the
procedures provided for indemnification or payment or reimbursement of
expenses, as the case may be, under Section 2-418 of the MGCL for directors
of Maryland corporations. The Trust may provide to Trustees or officers such
other and further indemnification or payment or reimbursement of expenses, as
the case may be, to the fullest extent permitted by the MGCL, as in effect
from time to time, for directors of Maryland corporations.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Declaration of
Trust or Bylaws or pursuant to applicable law, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at nor the purpose of any meeting
need be set forth in the waiver of notice, unless specifically required by
statute. The attendance of any person at any meeting shall constitute a waiver
of notice of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.

ARTICLE XIV

AMENDMENT OF BYLAWS

The Trustees shall have the exclusive power to alter, amend or repeal any
provision of these Bylaws and to make new Bylaws.

ARTICLE XV

MISCELLANEOUS

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All references to the Declaration of Trust shall include any amendments
thereto.

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EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 29, 1997, in the Registration Statement (Form
S-11 ) of Entertainment Properties Trust for the registration of 13,700,000
shares of its common stock.

Ernst & Young LLP

Kansas City, Missouri
September 3, 1997

<PAGE>
EXHIBIT 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-11 of
our report dated May 16, 1997, on our audits of the consolidated financial
statements and consolidated financial statement schedule of AMC Entertainment
Inc. We also consent to the reference to our firm under the captions "Experts".

Coopers & Lybrand L.L.P.

Kansas City, Missouri
September 9, 1997

<PAGE>
EXHIBIT 23.4

CONSENT TO BE NAMED AS A FUTURE TRUSTEE

Pursuant to Rule 438 under the Securities Act of 1933, the undersigned
hereby consents to be named in the Registration Statement on Form S-11 filed by
Entertainment Properties Trust (the "Company") as a person who will become a
trustee of the Company prior to or upon consummation of the proposed offering of
shares of the Company's common shares of beneficial interest, par value $.01 per
share.

/s/ ROBERT J. DRUTEN

Dated: September 10, 1997

<PAGE>
EXHIBIT 23.5

CONSENT TO BE NAMED AS A FUTURE TRUSTEE

/s/ SCOTT WARD

Dated: September 10, 1997