PARK PLACE ENTERTAINMENT CORP, 424B3, 1998-11-06

PARK PLACE ENTERTAINMENT CORP
424B3, 1998-11-06
HOTELS & MOTELS

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<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-65645

SUPPLEMENT
DATED NOVEMBER 6, 1998
TO

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

HILTON HOTELS CORPORATION
AND
GRAND CASINOS, INC.
JOINT PROXY STATEMENT

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

PARK PLACE ENTERTAINMENT CORPORATION PROSPECTUS

The following information supplements and should be read in conjunction with
the Joint Proxy Statement/Prospectus dated October 23, 1998 of Hilton Hotels
Corporation, a Delaware corporation, Grand Casinos, Inc., a Minnesota
corporation and Park Place Entertainment Corporation, a Delaware corporation and
an indirect, wholly owned subsidiary of Hilton, previously furnished to Hilton
stockholders and Grand shareholders of record on October 20, 1998.

This Supplement is being furnished to (a) record holders of Hilton common
stock on October 20, 1998, in connection with the solicitation of proxies by the
Board of Directors of Hilton for use at a Special Meeting of Stockholders of
Hilton to be held November 24, 1998 and at any and all adjournments or
postponements of the Hilton Special Meeting and (b) record holders of Grand
common stock on October 20, 1998, in connection with the solicitation of proxies
by the Board of Directors of Grand for use at the Special Meeting of
Stockholders of Grand, and at any and all adjournments or postponements of the
Grand Special Meeting. The Hilton and Grand Special Meetings are being held in
connection with certain transactions contemplated by the Agreement and Plan of
Merger, dated as of June 30, 1998 by and among Hilton, Park Place, Gaming
Acquisition Corporation, a wholly owned subsidiary of Park Place, Grand and
Lakes Gaming, Inc., a wholly owned subsidiary of Grand. We originally mailed the
Joint Proxy Statement/ Prospectus to stockholders of Hilton and shareholders of
Grand on October 26, 1998. This Supplement contains additional financial
information that has since become available relating to the financial results of
operations of Hilton, Grand, Park Place and Lakes for the first three fiscal
quarters of 1998. The purpose of this Supplement is to inform you of such
additional information.

To the extent information in this Supplement differs from or conflicts with
information contained in the Joint Proxy Statement/Prospectus, then this
Supplement shall supersede and replace the information in the Joint Proxy
Statement/Prospectus. Capitalized terms used herein and not otherwise defined
herein shall have the meanings provided in the Joint Proxy Statement/Prospectus.

SHAREHOLDERS ARE URGED TO CONSIDER THOSE MATTERS SET FORTH IN "RISK FACTORS"
BEGINNING ON PAGE 27 OF THE JOINT PROXY STATEMENT/PROSPECTUS. NONE OF THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION, THE NEVADA GAMING COMMISSION, THE
NEVADA STATE GAMING CONTROL BOARD, THE MISSISSIPPI GAMING COMMISSION, THE NEW
JERSEY CASINO CONTROL COMMISSION, THE LOUISIANA GAMING CONTROL BOARD, THE
MISSOURI GAMING COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Supplement is November 6, 1998. This Supplement is first
being mailed to the stockholders of Hilton and shareholders of Grand on or about
November 9, 1998. This Supplement should be read in conjunction with the Joint
Proxy Statement/Prospectus dated October 23, 1998.
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA--THIRD QUARTER FISCAL 1998

In the following tables, we are providing certain additional summary
financial information to aid you in your analysis of the financial aspects of
the Transactions as set forth in the Joint Proxy Statement/ Prospectus. These
tables, which relate to information for the first three fiscal quarters of 1998,
supplement and should be read in conjunction with the other Summary Historical
and Pro Forma Financial Data commencing on page 18 of the Joint Proxy
Statement/Prospectus and include (i) unaudited pro forma financial information
of New Park Place after giving effect to the Transactions, (ii) selected
historical financial information of Hilton and unaudited pro forma financial
information of Hilton after giving effect to the Hilton distribution, (iii)
selected historical financial information and unaudited pro forma financial
information of Park Place after giving effect to the Hilton distribution (but
prior to the merger), (iv) selected historical financial information of Grand
and unaudited pro forma financial information of Grand after giving effect to
the Grand distribution, and (v) selected historical financial information of
Lakes after giving effect to the Grand distribution. References herein to "New
Park Place" refer to Park Place following the Hilton distribution and the
merger.

NEW PARK PLACE SUMMARY SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION

In the table below, we attempt to illustrate the financial results with
respect to September 30, 1998 financial information of New Park Place that might
have occurred if the Transactions had been completed at earlier periods. It is
important to remember that this information is hypothetical, and does not
necessarily reflect the financial performance that would have actually resulted
if the Transactions had been completed on the dates assumed. It is also
important to remember that this information does not necessarily reflect future
financial performance if the Transactions actually occur. Please see "Unaudited
Pro Forma Condensed Financial Statements" beginning on page 7 for a more
detailed explanation of this analysis and the dates upon which the Transactions
were assumed to have occurred.

<TABLE>
<CAPTION>
PARK PLACE GRAND NEW PARK PLACE
PRO FORMA PRO FORMA PRO FORMA
----------- ----------- --------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
TWELVE MONTHS ENDED OR AS OF SEPTEMBER 30, 1998
RESULTS OF OPERATIONS:
Total revenue.......................................................... $ 2,285 $ 578 $ 2,863
Total operating income................................................. 224 74 298
Income from continuing operations...................................... 63(1) 23 86(1)
Income from continuing operations per share--Basic..................... .24 .55 .28
Income from continuing operations per share--Diluted................... .24 .53 .28
OTHER OPERATING DATA:
EBITDA(2).............................................................. $ 548 $ 131 $ 679
BALANCE SHEET:
Cash, cash equivalents and temporary investments....................... $ 110 $ 79 $ 189
Total assets........................................................... 5,870 1,209 7,093
Total debt............................................................. 1,610 566 2,228
Total stockholders' equity............................................. 3,324 458 3,718
NINE MONTHS ENDED SEPTEMBER 30, 1998
RESULTS OF OPERATIONS:
Total revenue.......................................................... $ 1,733 $ 447 $ 2,180
Total operating income................................................. 271 61 332
Income from continuing operations...................................... 113 20 133
Income from continuing operations per share--Basic..................... .43 .47 .44
Income from continuing operations per share--Diluted................... .43 .46 .43
OTHER OPERATING DATA:
EBITDA(2).............................................................. $ 438 $ 106 $ 544
</TABLE>

1
<PAGE>
- ------------------------

(1) Includes after-tax non-recurring charges totaling $59 million related to the
recognition of an impairment loss on the Flamingo Casino-Kansas City and an
impairment loss and other costs associated with the closure of the Flamingo
Casino-New Orleans.

(2) EBITDA is earnings before interest, taxes, depreciation, amortization and
non-cash items, which can be computed by adding depreciation, amortization
and non-cash items to operating income. EBITDA is presented supplementally
because management believes it allows for a more complete analysis of
results of operations. Non-cash items, such as asset write-downs and
impairment losses are excluded from EBITDA as these items do not impact
operating results on a recurring basis. Pre-tax non-cash charges for Park
Place and New Park Place totaled $96 million for the twelve months ended
September 30, 1998 and relate to the recognition of an impairment loss on
the Flamingo Casino-Kansas City and an impairment loss and other costs
associated with the closure of the Flamingo Casino-New Orleans. EBITDA
should not be considered as an alternative to any measure of performance as
promulgated under generally accepted accounting principles (such as
operating income or income from continuing operations) nor should it be
considered as an indicator of the overall financial performance of the
companies. The calculations of EBITDA may be different from the calculations
used by other companies and therefore comparability may be limited. Pro
forma depreciation, amortization and non-cash items for Park Place, Grand,
and New Park Place totaled $167 million, $45 million and $212 million,
respectively, for the nine months ended September 30, 1998.

2
<PAGE>
HILTON AND PARK PLACE SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA
FINANCIAL INFORMATION

We derived the historical information under the heading "Historical" from
the Hilton and Park Place unaudited financial statements for the nine months
ended September 30, 1997 and 1998. The information is only a summary and you
should read it in conjunction with Hilton's and Park Place's historical
financial statements (and related notes) contained in this Supplement and in the
annual reports and other information Hilton has filed with the Securities and
Exchange Commission (the "SEC"). See "Where You Can Find More Information" on
page 251 of the Joint Proxy Statement/Prospectus.

In the table below under the heading "Pro Forma", we also attempt to
illustrate the financial results that might have occurred if the Hilton
Distribution had been completed as of January 1, 1997 for purposes of the
Results of Operations and Other Operating Data and at September 30, 1998 for the
Balance Sheet. It is important to remember that this information is
hypothetical, and does not necessarily reflect the financial performance that
would have actually resulted if the Hilton distribution had been completed on
the dates assumed. It is also important to remember that this information does
not necessarily reflect future financial performance if the Hilton distribution
actually occurs. Please see "Unaudited Pro Forma Condensed Financial Statements"
beginning on page 7 for a more detailed explanation of this analysis.

<TABLE>
<CAPTION>
HILTON PARK PLACE
-------------------- ------------------------
NINE MONTHS ENDED OR NINE MONTHS
ENDED OR AS OF
AS OF SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------------
1998 1997 1998 1997
--------- --------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
HISTORICAL
RESULTS OF OPERATIONS:
Total revenue(1)................................................ $ 3,006 $ 2,682 $ 1,733 $ 1,593
Total operating income.......................................... 631 558 279 246
Income from continuing operations............................... 262 255 118 116
Income from continuing operations per share--Basic.............. 1.02 .98 .45 .44
Income from continuing operations per share--Diluted............ .98 .95 .45 .44
Cash dividends declared per common share........................ .24 .24 -- --
OTHER OPERATING DATA:
EBITDA(2)....................................................... $ 891 $ 785 $ 446 $ 400
BALANCE SHEET:
Cash, cash equivalents and temporary investments(1)............. $ 152 $ 110
Total assets(1)................................................. 8,938 5,870
Total debt...................................................... 3,916 1,610
Total stockholders' equity...................................... 3,507 --
Division equity................................................. -- 3,331

PRO FORMA
RESULTS OF OPERATIONS:
Total revenue................................................... $ 1,273 $ 1,089 $ 1,733 $ 1,593
Total operating income.......................................... 352 312 271 238
Income from continuing operations............................... 144 139 113 111
Income from continuing operations per share--Basic.............. .55 .53 .43 .42
Income from continuing operations per share--Diluted............ .53 .51 .43 .42
Weighted average common and equivalent shares--Basic............ 261 263 261 263
Weighted average common and equivalent shares--Diluted.......... 291 293 263 265
OTHER OPERATING DATA:
EBITDA(2)....................................................... $ 445 $ 385 $ 438 $ 392
BALANCE SHEET:
Cash, cash equivalents and temporary investments................ $ 42 $ 110
Total assets.................................................... 3,691 5,870
Total debt...................................................... 2,929 1,610
Total stockholders' equity...................................... 169 3,324
</TABLE>

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

(1) On November 20, 1997, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus in EITF 97-2 "Application of
FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice
Management Entities and Certain Other Entities with Contractual Management
Arrangements." EITF 97-2 addresses the circumstances in which a management
entity may include the revenues and expenses of a managed entity in its
financial statements.

Upon adoption of EITF 97-2, which is expected to be in the fourth quarter of
1998, Hilton and Park Place will no longer include in their financial
statements the revenues, operating expenses and working capital of their
managed properties. The revenues

3
<PAGE>
presented assume application of EITF 97-2 to Hilton's and Park Place's
financial statements which have reduced historical revenues for the nine
month periods ended September 30, 1998 and 1997 by $1,136 million and $1,295
million, respectively, for Hilton and by $290 million and $332 million,
respectively, for Park Place. Application of the standard reduces historical
cash, cash equivalents and temporary investments as of September 30, 1998 by
$99 million for Hilton and by $11 million for Park Place and reduces
historical total assets as of September 30, 1998 by $257 million for Hilton
and by $31 million for Park Place.

(2) EBITDA is earnings before interest, taxes, depreciation, amortization and
non-cash items, which can be computed by adding depreciation, amortization
and non-cash items to operating income. EBITDA is presented supplementally
because management believes it allows for a more complete analysis of
results of operations. Non-cash items, such as asset write-downs and
impairment losses are excluded from EBITDA as these items do not impact
operating results on a recurring basis. This information should not be
considered as an alternative to any measure of performance as promulgated
under generally accepted accounting principles (such as operating income or
income from continuing operations) nor should it be considered as an
indicator of the overall financial performance of Hilton. The calculations
of EBITDA may be different from the calculations used by other companies and
therefore comparability may be limited. Historical depreciation,
amortization and non-cash items for the nine months ended September 30, 1998
and 1997 totaled $260 million and $227 million, respectively, for Hilton and
$167 million and $154 million, respectively, for Park Place. Pro forma
depreciation, amortization and non-cash items for the nine months ended
September 30, 1998 and 1997 totaled $93 million and $73 million,
respectively, for Hilton and $167 million and $154 million, respectively,
for Park Place.

4
<PAGE>
GRAND AND LAKES SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL
INFORMATION

We derived the following historical information under the heading
"Historical" from the Grand and Lakes unaudited financial statements for the
nine months ended September 28, 1997 and September 27, 1998. The information is
only a summary and you should read it in conjunction with Grand's and Lake's
historical financial statements (and related notes) contained in this Supplement
and in the annual reports and other information Grand has filed with the SEC.
See "Where You Can Find More Information" on page 251 of the Joint Proxy
Statement/Prospectus.

In the table below under the heading "Pro Forma", we also attempt to
illustrate the financial results that might have occurred if the Grand
distribution had been completed as of December 30, 1996 for purposes of the
Results of Operations and Other Operating Data and at September 27, 1998 for the
Balance Sheet. No pro forma Lakes financial statements have been prepared as
there are no material differences between the Lakes historical financial results
and the financial results that might have occurred if the Grand distribution had
been completed as of the beginning of each period presented. It is important to
remember that this information is hypothetical, and does not necessarily reflect
the financial performance that would have actually resulted if the Grand
distribution had been completed on such date. It is also important to remember
that this information does not necessarily reflect future financial performance
if the Grand distribution actually occurs. Please see "Unaudited Pro Forma
Condensed Financial Statements" beginning on page 7 for a more detailed
explanation of this analysis.

<TABLE>
<CAPTION>
GRAND LAKES
-------------------------------- --------------------------------
NINE MONTHS ENDED OR AS OF NINE MONTHS ENDED OR AS OF
-------------------------------- --------------------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 28,
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
HISTORICAL
RESULTS OF OPERATIONS:
Total revenue................................ $ 511 $ 460 $ 64 $ 62
Total operating income(1).................... 117 116 56 58
Income from continuing operations............ 69 55 49 37
Income from continuing operations per share--
Basic...................................... 1.64 1.31 4.68 3.51
Income from continuing operations per share--
Diluted.................................... 1.60 1.28 4.58 3.43
OTHER OPERATING DATA:
EBITDA(2).................................... $ 163 $ 151 $ 57 $ 59
BALANCE SHEET:
Cash, cash equivalents and temporary
investments................................ $ 112 $ 33
Total assets................................. 1,341 132
Total debt................................... 567 1
Total stockholders' equity................... 574 --
Division equity.............................. -- 116
PRO FORMA
RESULTS OF OPERATIONS:
Total revenue................................ $ 447 $ 398
Total operating income....................... 61 58
Income from continuing operations............ 20 18
Income from continuing operations per share--
Basic...................................... .47 .44
Income from continuing operations per share--
Diluted.................................... .46 .43
Weighted average common and equivalent
shares-- Basic............................. 42 42
Weighted average common and equivalent
shares-- Diluted........................... 43 43
OTHER OPERATING DATA:
EBITDA(2).................................... $ 106 $ 92
BALANCE SHEET:
Cash, cash equivalents and temporary
investments................................ $ 79
Total assets................................. 1,209
Total debt................................... 566
Total stockholders' equity................... 458
</TABLE>

5
<PAGE>
- ------------------------
(1) Total operating income of Grand for the nine months ended September 27, 1998
and September 28, 1997 exclude amortization of debt issuance costs of $3
million and $2 million, respectively, which has been reclassified to
interest expense to conform to the financial presentation of Park Place.

(2) EBITDA is earnings before interest, taxes, depreciation and amortization,
which can be computed by adding depreciation and amortization to operating
income. EBITDA is presented supplementally because management believes it
allows for a more complete analysis of results of operations. This
information should not be considered as an alternative to any measure of
performance as promulgated under generally accepted accounting principles
(such as operating income or income from continuing operations) nor should
it be considered as an indicator of the overall financial performance of
Grand. The calculations of EBITDA may be different from the calculations
used by other companies and therefore comparability may be limited.
Historical depreciation and amortization for Grand for the nine months ended
September 27, 1998 and September 28, 1997 totaled $46 million and $35
million, respectively. Pro forma depreciation and amortization for Grand for
the nine months ended September 27, 1998 and September 28, 1997 totaled $45
million and $34 million, respectively. Historical depreciation and
amortization for Lakes for the nine months ended September 27, 1998 and
September 28, 1997 totaled $1 million and $1 million, respectively.

6
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

HILTON HOTELS CORPORATION
UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma statements of income and balance sheet of Hilton
illustrate the estimated effects of the Hilton Distribution. The unaudited pro
forma balance sheet of Hilton as of September 30, 1998 presents the financial
position of Hilton as if the Hilton Distribution had been completed as of such
date. The unaudited pro forma income statements of Hilton for the nine month
periods ended September 30, 1998 and 1997 present the results of operations of
Hilton as if the Hilton Distribution had been completed as of January 1, 1997.

The unaudited pro forma financial statements of Hilton and Notes thereto
should be read in conjunction with the Unaudited Pro Forma Condensed Financial
Statements commencing on page 103 of the Joint Proxy Statement/Prospectus and
with the Hilton consolidated financial statements contained in the Hilton Hotels
Corporation Annual Report on Form 10-K for the fiscal year ended December 31,
1997 and the Hilton Hotels Corporation Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1998, each of which are incorporated by
reference in the Joint Proxy Statement/Prospectus. See "Where You Can Find More
Information" in the Joint Proxy Statement/Prospectus.

The pro forma financial data of Hilton does not purport to represent what
the financial position or results of operations would have been if the Hilton
Distribution had in fact been consummated on such date or at the beginning of
the period indicated or to project the financial position or results of
operations for any future date or period. The pro forma adjustments are based
upon available information and upon certain assumptions that Hilton's management
believes are reasonable in the circumstances.

7
<PAGE>
HILTON HOTELS CORPORATION

UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTED PRO FORMA PRO FORMA
HILTON HOTELS PRESENTATION HILTON HOTELS SPIN-OFF HILTON HOTELS
CORPORATION ADJUSTMENT(1) CORPORATION ADJUSTMENTS(2) CORPORATION
------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue
Rooms.............................. $ 1,458 $ (547) $ 911 $ (228) $ 683
Food and beverage.................. 769 (314) 455 (169) 286
Casino............................. 1,468 (270) 1,198 (1,198) --
Other products and services........ 447 (5) 442 (138) 304
------ ------ ------ ------ ------
4,142 (1,136) 3,006 (1,733) 1,273
------ ------ ------ ------ ------
Expenses
Rooms.............................. 387 (136) 251 (82) 169
Food and beverage.................. 609 (233) 376 (155) 221
Casino............................. 785 (152) 633 (633) --
Other expenses..................... 1,684 (615) 1,069 (578) 491
Corporate expense.................. 46 -- 46 (6) 40
------ ------ ------ ------ ------
3,511 (1,136) 2,375 (1,454) 921
------ ------ ------ ------ ------
Operating income..................... 631 -- 631 (279) 352
Interest and dividend income....... 27 -- 27 (17) 10
Interest expense................... (164) -- (164) 66(3) (98)
Interest expense, net, from equity
investments...................... (13) -- (13) 9 (4)
------ ------ ------ ------ ------
Income from continuing operations
before income tax and minority
interest........................... 481 -- 481 (221) 260
Provision for income taxes......... (207) -- (207) 101 (106)
Minority interest, net............. (12) -- (12) 2 (10)
------ ------ ------ ------ ------
Income from continuing operations.... $ 262 $ -- $ 262 $ (118) $ 144
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Income from continuing operations per
share:
Basic.............................. $ 1.02 $ 1.02 $ .55
------ ------ ------
------ ------ ------
Diluted............................ $ .98 $ .98 $ .53
------ ------ ------
------ ------ ------
Weighted average common and
equivalent shares(4):
Basic.............................. 247 247 261
------ ------ ------
------ ------ ------
Diluted............................ 278 278 291(5)
------ ------ ------
------ ------ ------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

8
<PAGE>
HILTON HOTELS CORPORATION

UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTED PRO FORMA PRO FORMA
HILTON HOTELS PRESENTATION HILTON HOTELS SPIN-OFF HILTON HOTELS
CORPORATION ADJUSTMENT(1) CORPORATION ADJUSTMENTS(2) CORPORATION
------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue
Rooms.............................. $ 1,432 $ (622) $ 810 $ (235) $ 575
Food and beverage.................. 740 (347) 393 (157) 236
Casino............................. 1,369 (299) 1,070 (1,070) --
Other products and services........ 436 (27) 409 (131) 278
------ ------ ------ ------ ------
3,977 (1,295) 2,682 (1,593) 1,089
------ ------ ------ ------ ------
Expenses
Rooms.............................. 393 (159) 234 (82) 152
Food and beverage.................. 583 (258) 325 (139) 186
Casino............................. 743 (180) 563 (563) --
Other expenses..................... 1,651 (698) 953 (549) 404
Corporate expense.................. 49 -- 49 (14) 35
------ ------ ------ ------ ------
3,419 (1,295) 2,124 (1,347) 777
------ ------ ------ ------ ------
Operating income..................... 558 -- 558 (246) 312
Interest and dividend income....... 34 -- 34 (22) 12
Interest expense................... (131) -- (131) 59(3) (72)
Interest expense, net, from equity
investments...................... (13) -- (13) 6 (7)
------ ------ ------ ------ ------
Income from continuing operations
before income tax and minority
interest........................... 448 -- 448 (203) 245
Provision for income taxes......... (184) -- (184) 84 (100)
Minority interest, net............. (9) -- (9) 3 (6)
------ ------ ------ ------ ------
Income from continuing operations.... $ 255 $ -- $ 255 $ (116) $ 139
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Income from continuing operations per
share:
Basic.............................. $ .98 $ .98 $ .53
------ ------ ------
------ ------ ------
Diluted............................ $ .95 $ .95 $ .51
------ ------ ------
------ ------ ------
Weighted average common and
equivalent shares(4):
Basic.............................. 250 250 263
------ ------ ------
------ ------ ------
Diluted............................ 281 281 293(5)
------ ------ ------
------ ------ ------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

9
<PAGE>
HILTON HOTELS CORPORATION

UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN MILLIONS)

<TABLE>
<CAPTION>
ADJUSTED PRO FORMA
PRO FORMA HILTON PRO FORMA HILTON
HILTON HOTELS PRESENTATION HOTELS SPIN-OFF HOTELS
CORPORATION ADJUSTMENT(1) CORPORATION ADJUSTMENTS(6) CORPORATION
------------- -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents............... $ 221 $ (69) $ 152 $ (110) $ 42
Temporary investments.............. 30 (30) -- -- --
Accounts receivable, net........... 420 (105) 315 (113) 202
Other current assets............... 220 (53) 167 (101) 66
------ ------- ------------ ------- ------------
Total current assets............... 891 (257) 634 (324) 310
Investments.......................... 434 -- 434 436(3) 870
Property and equipment, net.......... 6,420 -- 6,420 (3,990) 2,430
Goodwill............................. 1,329 -- 1,329 (1,309) 20
Other assets......................... 121 -- 121 (60) 61
------ ------- ------------ ------- ------------
Total investments, property and
other assets..................... 8,304 -- 8,304 (4,923) 3,381
------ ------- ------------ ------- ------------
Total assets......................... $ 9,195 $ (257) $ 8,938 $ (5,247) $ 3,691
------ ------- ------------ ------- ------------
------ ------- ------------ ------- ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses........................... $ 888 $ (257) $ 631 $ (278)(7) $ 353
Current maturities of long-term
debt............................... 104 -- 104 (46) 58
Income taxes payable................. 53 -- 53 (7)(7) 46
------ ------- ------------ ------- ------------
Total current liabilities.......... 1,045 (257) 788 (331) 457
Long-term debt....................... 3,812 -- 3,812 (941)(3) 2,871
Deferred income taxes................ 627 -- 627 (587) 40
Insurance reserves and other......... 204 -- 204 (50) 154
------ ------- ------------ ------- ------------
Total liabilities.................. 5,688 (257) 5,431 (1,909) 3,522
Stockholders' equity................. 3,507 -- 3,507 (3,338)(7) 169
------ ------- ------------ ------- ------------
Total liabilities and stockholders'
equity............................. $ 9,195 $ (257) $ 8,938 $ (5,247) $ 3,691
------ ------- ------------ ------- ------------
------ ------- ------------ ------- ------------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

10
<PAGE>
HILTON HOTELS CORPORATION

NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS

Upon the adoption of EITF 97-2, which is expected to be in the fourth quarter
of 1998, Hilton will no longer include in its financial statements the
revenues, operating expenses and working capital of its managed properties.
This pro forma adjustment reflects the application of EITF 97-2 to Hilton's
historical financial statements. Application of EITF 97-2 has no impact on
pro forma operating income, net income, earnings per share or stockholders'
equity.

(2) Represents the results of Park Place which will be reflected as discontinued
operations after the Hilton Distribution.

(3) A pro-rata portion of Hilton's public and corporate bank debt balance and
related interest expense has been allocated to Park Place. The amounts
allocated to Park Place are based on the estimate that approximately 50% of
Hilton's public and corporate bank debt balance will be allocated to Park
Place at the time of the Hilton Distribution. Hilton will be obligated to
make any payment Park Place fails to make with respect to $623 million, net
of discount, of senior notes which Park Place will assume pursuant to a debt
assumption agreement. Park Place will be obligated to reimburse Hilton for
any payments made on its behalf. As a result, these notes have been included
in the pro forma Hilton long-term debt balance and a related receivable from
Park Place has been included in Hilton's pro forma investments balance.

(4) Pro forma weighted average common and equivalent shares assume the
conversion of Hilton's Preferred Redeemable Increased Dividend Equity
Securities-SM- , 8% PRIDES-SM- , Convertible Preferred Stock ("PRIDES") as
of the date of original issuance in December 1996.

(5) The Hilton Distribution will result in an adjustment to the conversion price
of Hilton's 5% Convertible Subordinated Notes due 2006, which will
effectively increase the number of shares of Hilton Common Stock issuable
upon conversion. This increase has been reflected in the pro forma diluted
common and equivalent shares.

(6) Represents the removal of the assets and liabilities of Park Place as a
result of the Hilton Distribution.

(7) Includes the portion of the estimated costs of the Hilton Distribution to be
paid by Hilton totaling $12 million (before tax benefit of $5 million).

11
<PAGE>
NEW PARK PLACE
UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma statements of income and balance sheet of Park Place
illustrate the estimated effects of the Hilton Distribution. The unaudited pro
forma balance sheet of Park Place as of September 30, 1998 presents the
financial position of Park Place as if the Hilton Distribution had been
completed as of such date. The unaudited pro forma income statements of Park
Place for the nine month periods ended September 30, 1998 and 1997 present the
results of operations of Park Place as if the Hilton Distribution had been
completed as of January 1, 1997. The unaudited pro forma financial data of Park
Place and notes thereto should be read in conjunction with the Park Place
consolidated financial statements and notes thereto which are included in this
Supplement and in the Joint Proxy Statement/ Prospectus.

The unaudited pro forma statements of income and balance sheet of New Park
Place are based upon the pro forma financial statements of Park Place and the
pro forma financial statements of Grand, which are included herein and in the
Joint Proxy Statement/Prospectus, and should be read in conjunction with those
pro forma financial statements and related notes.

The unaudited pro forma statements of income of New Park Place for the nine
month periods ended September 30, 1998 and 1997 give effect to (i) the
acquisition of Grand applying the purchase method of accounting; and (ii)
certain adjustments that are directly attributable to the Merger as if such
transactions were consummated as of January 1, 1997.

The unaudited pro forma balance sheet of New Park Place presents the
combined financial position of Park Place and Grand as of September 30, 1998.
The unaudited pro forma balance sheet reflects (i) the acquisition of Grand
applying the purchase method of accounting; and (ii) certain adjustments that
are directly attributable to the Merger. Such data further assume that the
transactions described above were consummated as of September 30, 1998.

The pro forma financial data of Park Place and New Park Place do not purport
to represent what the financial position or results of operations of Park Place
and New Park Place would have been if the Hilton Distribution, Grand
Distribution and Merger had in fact been consummated on such date or at the
beginning of the period indicated or to project the financial position or
results of operations for any future date or period. The pro forma adjustments
are based upon available information and upon certain assumptions that Park
Place and Grand management believe are reasonable in the circumstances. In the
opinion of management, all adjustments necessary to present fairly the unaudited
pro forma financial information have been made.

For the purposes of preparing the financial statements of New Park Place,
management of Park Place will undertake a study to establish the fair value of
the acquired assets and liabilities of Grand. The allocation of the purchase
price to the assets and liabilities acquired reflected in this pro forma
financial data is preliminary. Accordingly, the actual financial position and
results of operations may differ from these pro forma amounts.

12
<PAGE>
NEW PARK PLACE

UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL PRO FORMA PARK PRO FORMA NEW PARK
PARK PLACE ADJUSTMENTS PLACE GRAND(2) PLACE(1)
---------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Revenue
Casino................................ $1,468 $ (270)(3) $1,198 $385 $1,583
Rooms................................. 239 (11)(3) 228 27 255
Food and beverage..................... 203 (34)(3) 169 25 194
Other products and services........... 113 25(3) 138 10 148
---------- ----------- --------- --------- ------
2,023 (290) 1,733 447 2,180
---------- ----------- --------- --------- ------
Expenses
Casino................................ 785 (152)(3) 633 127 760
Rooms................................. 86 (4)(3) 82 12 94
Food and beverage..................... 182 (27)(3) 155 28 183
Other expenses........................ 685 (107)(3) 578 199 777
Corporate expense..................... 6 8(4) 14 20 34
---------- ----------- --------- --------- ------
1,744 (282) 1,462 386 1,848
---------- ----------- --------- --------- ------
Operating income........................ 279 (8) 271 61 332
Interest and dividend income.......... 17 -- 17 2 19
Interest expense...................... (66) -- (66) (33) (99)
Interest expense, net, from equity
investments......................... (9) -- (9) -- (9)
---------- ----------- --------- --------- ------
Income from continuing operations before
income tax and minority interest...... 221 (8) 213 30 243
Provision for income taxes............ (101) 3(5) (98) (10) (108)
Minority interest, net................ (2) -- (2) -- (2)
---------- ----------- --------- --------- ------
Income from continuing operations....... $ 118 $ (5) $ 113 $ 20 $ 133
---------- ----------- --------- --------- ------
---------- ----------- --------- --------- ------
Income from continuing operations per
share:
Basic................................. $ .43 $ .44
--------- ------
--------- ------
Diluted............................... $ .43 $ .43
--------- ------
--------- ------
Weighted average common and equivalent
shares(6):
Basic................................. 261 304
--------- ------
--------- ------
Diluted............................... 263 308
--------- ------
--------- ------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

13
<PAGE>
NEW PARK PLACE

UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL PRO FORMA PARK PRO FORMA NEW PARK
PARK PLACE ADJUSTMENTS PLACE GRAND(2) PLACE(1)
---------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
Revenue
Casino........................... $1,369 $ (299)(3) $1,070 $348 $1,418
Rooms............................ 243 (8)(3) 235 20 255
Food and beverage................ 195 (38)(3) 157 22 179
Other products and services...... 118 13(3) 131 8 139
---------- ----------- --------- --------- ------
1,925 (332) 1,593 398 1,991
---------- ----------- --------- --------- ------
Expenses
Casino........................... 743 (180)(3) 563 121 684
Rooms............................ 86 (4)(3) 82 7 89
Food and beverage................ 168 (29)(3) 139 25 164
Other expenses................... 668 (119)(3) 549 175 724
Corporate expense................ 14 8(4) 22 12 34
---------- ----------- --------- --------- ------
1,679 (324) 1,355 340 1,695
---------- ----------- --------- --------- ------
Operating income................... 246 (8) 238 58 296
Interest and dividend income..... 22 -- 22 6 28
Interest expense................. (59) -- (59) (36) (95)
Interest expense, net, from
equity investments............. (6) -- (6) -- (6)
---------- ----------- --------- --------- ------
Income from continuing operations
before income tax and minority
interest......................... 203 (8) 195 28 223
Provision for income taxes....... (84) 3(5) (81) (10) (91)
Minority interest, net........... (3) -- (3) -- (3)
---------- ----------- --------- --------- ------
Income from continuing
operations....................... $ 116 $ (5) $ 111 $ 18 $ 129
---------- ----------- --------- --------- ------
---------- ----------- --------- --------- ------
Income from continuing operations
per share:
Basic............................ $ .42 $ .42
--------- ------
--------- ------
Diluted.......................... $ .42 $ .42
--------- ------
--------- ------
Weighted average common and
equivalent shares(6):
Basic............................ 263 307
--------- ------
--------- ------
Diluted.......................... 265 310
--------- ------
--------- ------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

14
<PAGE>
NEW PARK PLACE

UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(IN MILLIONS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA PRO FORMA PRO FORMA MERGER PRO FORMA
PARK PLACE ADJUSTMENTS PARK PLACE GRAND(2) ADJUSTMENTS NEW PARK PLACE
----------- ------------- ----------- ----------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents...... $ 119 $ (9)(3) $ 110 $ 79 $ -- $ 189
Temporary investments..... 2 (2)(3) -- -- -- --
Accounts receivable,
net..................... 130 (17)(3) 113 12 -- 125
Other current assets...... 104 (3)(3) 101 23 35(9) 159
----------- ------------- ----------- ----------- ----- ------
Total current assets...... 355 (31) 324 114 35 473
Investments................. 187 -- 187 -- -- 187
Property and equipment,
net....................... 3,990 -- 3,990 1,063 -- 5,053
Goodwill.................... 1,309 -- 1,309 -- -- 1,309
Other assets................ 60 -- 60 32 (21)(10) 71
----------- ------------- ----------- ----------- ----- ------
Total investments,
property and other
assets.................. 5,546 -- 5,546 1,095 (21) 6,620
----------- ------------- ----------- ----------- ----- ------
Total assets................ $ 5,901 $ (31) $ 5,870 $ 1,209 $ 14 $ 7,093
----------- ------------- ----------- ----------- ----- ------
----------- ------------- ----------- ----------- ----- ------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses.................. $ 321 $ (19)(3 (7) $ 302 $ 89 $ 26 (11 $ 417
Current maturities of
long-term debt............ 46 -- 46 -- -- 46
Income taxes payable........ 2 (5)(7) (3) -- -- (3)
----------- ------------- ----------- ----------- ----- ------
Total current
liabilities............. 369 (24) 345 89 26 460
Long-term debt.............. 1,564 -- 1,564 566 52 (12 2,182
Deferred income taxes....... 587 -- 587 96 -- 683
Insurance reserves and
other..................... 50 -- 50 -- -- 50
----------- ------------- ----------- ----------- ----- ------
Total liabilities......... 2,570 (24) 2,546 751 78 3,375
Division equity............. 3,331 (3,331)(8) -- -- -- --
Stockholders' equity........ -- 3,324(8) 3,324 458 (64) 13) 3,718
----------- ------------- ----------- ----------- ----- ------
Total liabilities and
stockholders' equity...... $ 5,901 $ (31) $ 5,870 $ 1,209 $ 14 $ 7,093
----------- ------------- ----------- ----------- ----- ------
----------- ------------- ----------- ----------- ----- ------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

15
<PAGE>
NEW PARK PLACE

NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS

The following table sets forth the determination and allocation of the
purchase price of Grand's Mississippi Business. The number of shares of Park
Place to be issued to Grand shareholders will be determined by an exchange ratio
based upon a valuation factor for Grand's Mississippi Business and Park Place.
For purposes of the pro forma financial statements, the exchange ratio is .9699.
The value of the Park Place shares to be issued to Grand shareholders will be
based on the trading value of those shares immediately prior to the merger. For
purposes of the pro forma financial statements, the value of Park Place shares
to be issued to Grand shareholders is based on an estimated allocation
percentage of the trading value of Hilton's common stock as of October 31, 1998.

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Net equity purchase price............... $ 394
Assumption of Mississippi Business
debt.................................. 566
Transaction costs and expenses.......... 11
------
Pro forma purchase price................ $ 971
------
------
</TABLE>

The preliminary allocation of the pro forma purchase price is as follows:

<TABLE>
<CAPTION>
<S> <C>
Property and equipment.................. $1,063
Other, net.............................. (92)
------
$ 971
------
------
</TABLE>

(1) Pro forma results of New Park Place do not reflect any cost savings or
operating efficiencies which may be achievable to the combined company. Park
Place expects to realize annual pretax cost savings of approximately $8
million, primarily due to the elimination of duplicative corporate office
and operational support functions and greater purchasing economies of scale.
However, there can be no assurance as to the amount and timing of these
savings, which could be adversely impacted by difficulties in integrating
the two companies or the inability to realize anticipated purchasing
economies.

In addition, pro forma results do not reflect the anticipated refinancing of
the Grand debt. Park Place expects to achieve annual pretax interest expense
savings of approximately $14 million by refinancing the Grand debt with a
combination of fixed and floating rate debt at an average rate of
approximately 6.7%. There can be no assurance, however, that Park Place will
be able to obtain such financing.

(2) There are no significant adjustments required to the historical financial
data of Pro Forma Grand to conform to the accounting policies of Park Place.
Certain reclassifications have been made to the historical balances of Grand
to conform the financial presentation of the two entities. Specifically,
casino allowances have been reclassified as reductions of the appropriate
revenue categories, selling, general and administrative expenses have been
reclassified to other expenses and corporate expense, and amortization of
debt issuance costs has been reclassified to interest expense.

(3) On November 20, 1997, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus in EITF 97-2 "Application of
FASB Statement No. 94 and APB Opinion No. 16 to Physician Practice
Management Entities and Certain Other Entities with Contractual Management
Arrangements." EITF 97-2 addresses the circumstances in which a management
entity may include the revenues and expenses of a managed entity in its
financial statements.

16
<PAGE>
NEW PARK PLACE

NOTES TO UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS (CONTINUED)

Upon the adoption of EITF 97-2, which is expected to be in the fourth quarter
of 1998, Park Place will no longer include in its financial statements the
revenues, operating expenses and working capital of its managed properties.
This pro forma adjustment reflects the application of EITF 97-2 to Park
Place's historical financial statements. Application of EITF 97-2 has no
impact on pro forma operating income, net income, earnings per share or
stockholders' equity.

(4) Represents additional corporate expense expected to be incurred by Park
Place to operate as a separate public company. These costs include, among
other things, an accounting, tax and financial reporting group, a treasury
and investor relations department, a general counsel, an expanded human
resources group and a separate Board of Directors.

(5) To record the tax effect of the pro forma adjustment for additional
corporate expenses.

(6) Weighted average common and equivalent shares assume the conversion of the
PRIDES as of the date of original issuance.

(7) Includes the portion of the estimated costs of the Hilton Distribution to be
paid by Park Place totaling $12 million (before tax benefit of $5 million).

(8) Reflects the issuance of approximately 260 million shares of Park Place
Common Stock at the time of the Hilton Distribution and the after tax impact
of the estimated costs of the Hilton Distribution to be paid by Park Place.

(9) To record the deferred tax effect of the pro forma balance sheet
adjustments, primarily related to property and equipment, debt and estimated
severance costs.

(10) Reflects deferred financing costs and other deferred costs of Grand not
valued in purchase accounting.

(11) Reflects the accrual of severance costs relating to certain Grand employees
and direct merger costs of Park Place and Grand. Severance costs include
change of control benefits for certain Grand executives and termination
benefits related to the elimination of duplicative corporate office and
operational support functions.

(12) To adjust the Grand debt to estimated fair market value.

(13) The net increase in stockholders' equity results from (i) the issuance of
an estimated $358 million in Park Place equity consideration in connection
with the Merger and (ii) the elimination of Grand's historical net assets.

17
<PAGE>
GRAND CASINOS, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma statements of income and balance sheet of Grand
illustrate the estimated effects of the Grand Distribution. The unaudited pro
forma balance sheet of Grand as of September 27, 1998 presents the financial
position of Grand as if the Grand Distribution had been completed as of such
date. The unaudited pro forma income statements of Grand for the nine month
periods ended September 27, 1998 and September 28, 1997 present the results of
operations of Grand as if the Grand Distribution had been completed as of
December 30, 1996.

The unaudited pro forma financial data of Grand and notes thereto should be
read in conjunction with the Grand consolidated financial statements contained
in the Grand Casinos, Inc. Annual Report on Form 10-K for the fiscal year ended
December 28, 1997 and the Grand Casinos, Inc. Quarterly Report on Form 10-Q for
the fiscal quarter ended September 27, 1998, each of which are incorporated in
the Joint Proxy Statement/Prospectus by reference.

The pro forma financial data of Grand does not purport to represent what the
financial position or results of operations of Grand would have been if the
Grand Distribution had in fact been consummated on such date or at the beginning
of the period indicated or to project the financial position or results of
operations for any future date or period. The pro forma adjustments are based
upon available information and upon certain assumptions that Grand's management
believes are reasonable in the circumstances.

18
<PAGE>
GRAND CASINOS, INC.

UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
GRAND SPIN-OFF GRAND
CASINOS, INC.(1) ADJUSTMENTS(2) CASINOS, INC.
---------------- -------------- -------------
<S> <C> <C> <C>
Revenue
Casino................................ $385 $ -- $385
Rooms................................. 27 -- 27
Food and beverage..................... 25 -- 25
Other products and services........... 74 (64) 10
------ ----- -----
511 (64) 447
------ ----- -----
Expenses
Casino................................ 127 -- 127
Rooms................................. 12 -- 12
Food and beverage..................... 28 -- 28
Other expenses........................ 199 -- 199
Corporate expense..................... 28 (8) 20
------ ----- -----
394 (8) 386
------ ----- -----
Operating income........................ 117 (56) 61
Interest and dividend income.......... 6 (4) 2
Interest expense...................... (33) -- (33)
------ ----- -----
Income from continuing operations before
income tax............................ 90 (60) 30
Provision for income taxes............ (21) 11 (10)
------ ----- -----
Income from continuing operations....... $ 69 $ (49) $ 20
------ ----- -----
------ ----- -----
Income from continuing operations per
share:
Basic................................. $1.64 $.47
------ -----
------ -----
Diluted............................... $1.60 $.46
------ -----
------ -----
Weighted average common and equivalent
shares:
Basic................................. 42 42
------ -----
------ -----
Diluted............................... 43 43
------ -----
------ -----
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

19
<PAGE>
GRAND CASINOS, INC.

UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
GRAND SPIN-OFF GRAND
CASINOS, INC.(1) ADJUSTMENTS(2) CASINOS, INC.
---------------- -------------- -------------
<S> <C> <C> <C>
Revenue
Casino................................ $348 $ -- $348
Rooms................................. 20 -- 20
Food and beverage..................... 22 -- 22
Other products and services........... 70 (62) 8
------ ----- -----
460 (62) 398
------ ----- -----
Expenses
Casino................................ 121 -- 121
Rooms................................. 7 -- 7
Food and beverage..................... 25 -- 25
Other expenses........................ 175 -- 175
Corporate expense..................... 16 (4) 12
------ ----- -----
344 (4) 340
------ ----- -----
Operating income........................ 116 (58) 58
Interest and dividend income.......... 9 (3) 6
Interest expense...................... (36) -- (36)
------ ----- -----
Income from continuing operations before
income tax............................ 89 (61) 28
Provision for income taxes............ (34) 24 (10)
------ ----- -----
Income from continuing operations....... $ 55 $ (37) $ 18
------ ----- -----
------ ----- -----
Income from continuing operations per
share:
Basic................................. $1.31 $.44
------ -----
------ -----
Diluted............................... $1.28 $.43
------ -----
------ -----
Weighted average common and equivalent
shares:
Basic................................. 42 42
------ -----
------ -----
Diluted............................... 43 43
------ -----
------ -----
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

20
<PAGE>
GRAND CASINOS, INC.

UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 27, 1998
(IN MILLIONS)

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
GRAND SPIN-OFF GRAND
CASINOS, INC. ADJUSTMENTS(3) CASINOS, INC.
------------- -------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents.................. $ 112 $ (33) $ 79
Accounts receivable, net.............. 21 (9) 12
Other current assets.................. 36 (13) 23
------ -------------- ------
Total current assets.................... 169 (55) 114
Property and equipment, net............. 1,065 (2) 1,063
Other assets............................ 107 (75) 32
------ -------------- ------
Total property and other assets....... 1,172 (77) 1,095
------ -------------- ------
Total assets............................ $1,341 $ (132) $1,209
------ -------------- ------
------ -------------- ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses... $ 103 $ (14) $ 89
Long-term debt.......................... 567 (1) 566
Deferred income taxes................... 97 (1) 96
------ -------------- ------
Total liabilities..................... 767 (16) 751
Stockholders' equity.................... 574 (116) 458
------ -------------- ------
Total liabilities and stockholders'
equity................................ $1,341 $ (132) $1,209
------ -------------- ------
------ -------------- ------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGES)

21
<PAGE>
GRAND CASINOS, INC.

NOTES TO UNAUDITED PRO FORMA
FINANCIAL STATEMENTS

(1) There are no significant adjustments required to the historical financial
data of Grand to conform to the accounting policies of Park Place. Certain
reclassifications have been made to the historical balances of Grand to
conform the financial presentation of the two entities. Specifically, casino
allowances have been reclassified as reductions of the appropriate revenue
categories, selling, general and administrative expenses have been
reclassified to other costs and expenses and corporate expense, and
amortization of debt issuance costs has been reclassified to interest
expense.

(2) Represents the results of Lakes, which will be distributed to Grand
shareholders upon consummation of the Transactions.

(3) Represents the removal of the assets and liabilities of Lakes as a result of
the Grand Distribution.

22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--PARK PLACE--SEPTEMBER 30, 1998

STRATEGY

Park Place expects to expand its gaming business through acquisitions of
quality assets in established markets and selective new development. The pending
merger with Grand's Mississippi Business exemplifies Park Place's continued
execution of this strategy which began with the December 1996 merger with Bally
Entertainment Corporation. Park Place's new development efforts are currently
concentrated on the construction of the 2,900-room Paris Casino-Resort on the
Las Vegas Strip which is expected to open in the fall of 1999. Park Place
intends to seek additional expansion and new development opportunities, both
domestically and internationally, where superior returns can be demonstrated.
Park Place believes that in addition to its cash flow from operations, it will
have access to financial resources sufficient to finance its future growth. The
following discussion should be read in conjunction with the unaudited financial
statements of Park Place for the nine months ended September 30, 1998 and 1997
included in this Supplement and incorporated by reference in the Joint Proxy
Statement/Prospectus.

FINANCIAL CONDITION

LIQUIDITY

Net cash provided by operating activities for the nine months ended
September 30, 1998 increased $56 million to $257 million from the prior year due
primarily to significantly improved results at the Las Vegas Hilton, the
addition of 300 hotel rooms at the Conrad International Punta del Este Resort
and Casino in late 1997 and the opening of "The Wild Wild West" Casino in
Atlantic City.

ACQUISITIONS AND CAPITAL SPENDING

Cash used in investing activities was $524 million and $401 million for the
nine months ended September 30, 1998 and 1997, respectively. Investing
activities cash flows include expenditures for normal capital replacements, new
construction, and improvement projects at existing facilities that are evaluated
on an ROI basis. Investing activities also include acquisitions and investments
in and loans to affiliates.

Capital expenditures for the nine month period ended September 30, 1998
include costs relating to the construction (which began in April 1997) of the
$760 million, 2,900-room Paris Casino-Resort. This property, which is located
adjacent to the Bally's Las Vegas on the Strip, will feature an 85,000 square
foot casino, a 50-story replica of the Eiffel Tower, thirteen restaurants,
130,000 square feet of convention space and a retail shopping complex with a
French influence. This project is expected to be completed in the fall of 1999
with the majority of expenditures occurring in the 1998 and 1999 periods.

In June 1997, Bally's Grand, Inc., a majority owned subsidiary which owns
Bally's Las Vegas, agreed to settle pending shareholder litigation and pursuant
thereto repurchased certain outstanding shares of common stock and warrants. As
a result, the indirect ownership of Bally's Grand, Inc. increased from 84% to
95% at a cost of $55 million. Under the terms of the settlement, Park Place
acquired the remaining interest in March 1998. Acquisitions in the 1998 period
include the acquisition of the remaining 5% interest in Bally's Grand, Inc. for
$44 million and the $15 million acquisition of the Atlantic City Country Club.

In addition to an estimated $550 million in 1998 expenditures related to
acquisitions and new construction, Park Place anticipates spending approximately
$170 million in 1998 on normal capital replacements, ADA/safety compliance
projects, structural and technology upgrades and $50 million on improvement
projects that are evaluated on a ROI basis.

23
<PAGE>
FINANCING

Concurrently with the Hilton Distribution, Park Place will assume primary
liability for $625 million of Hilton's fixed rate debt. The payment terms of
this debt assumption will mirror the terms of Hilton's existing $300 million
7 3/8% Notes due 2002 and its $325 million 7% Notes due 2004. Hilton and Park
Place will enter into supplemental indentures with the Trustee providing for the
assumption by Park Place of the payment obligations under the existing
indentures. See "The Transactions--Arrangements Between Hilton and Park
Place--Assumption Agreement Relating to Certain Indebtedness" in the Joint Proxy
Statement/ Prospectus. In addition, Park Place will be allocated a majority of
Hilton's outstanding obligations under its $1.75 billion bank revolving credit
facility at the time of the Hilton Distribution. Park Place expects to enter
into a new bank credit facility on commercially competitive terms. The new bank
facility will, among other things, facilitate the refinancing of the Hilton
allocated bank debt and allow Park Place to pursue its acquisition and
development strategy.

Park Place's expected pro rata portion of Hilton's public and corporate bank
debt balances at the time of the Hilton Distribution is estimated to be 50%. As
such, the pro rata portion of Hilton's historical outstanding public debt and
corporate bank debt balances and related interest expense has been allocated to
Park Place for all periods presented.

RESULTS OF OPERATIONS

The following discussion presents an analysis of results of operations of
Park Place for the nine months ended September 30, 1998 and 1997. EBITDA
(earnings before interest, taxes, depreciation, amortization and non-cash items)
is presented supplementary in the tables below and in the discussion of
operating results because management believes it allows for a more complete
analysis of results of operations. Non-cash items, such as asset write-downs and
impairment losses, are excluded from EBITDA as these items do not impact
operating results on a recurring basis. This information should not be
considered as an alternative to any measure of performance as promulgated under
generally accepted accounting principles (such as operating income or income
from continuing operations), nor should it be considered as an indicator of the
overall financial performance of Park Place. Park Place's calculation of EBITDA
may be different from the calculation used by other companies and therefore
comparability may be limited.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

A summary of Park Place's consolidated revenue and earnings for the nine
months ended September 30, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
1998 1997 % CHANGE
----- ----- ---------
(IN
MILLIONS)
<S> <C> <C> <C>
Revenue........................................... $2,023 $1,925 5%
Operating income.................................. 279 246 13%
Income from continuing operations................. 118 116 2%

Other Operating Data
EBITDA............................................ $ 446 $ 400 12%
</TABLE>

Total revenue increased five percent in the nine month period to $2.0
billion. Casino revenue, a component of gaming revenue, increased seven percent
to $1.5 billion in 1998 compared to $1.4 billion in the prior year. Total EBITDA
was $446 million, a 12 percent increase from $400 million in the 1997 period,
and operating income increased 13 percent to $279 million from $246 million in
1997. Park Place's 1998 nine month results benefited from significantly improved
operations at the Las Vegas Hilton, the addition of 300 hotel rooms at the
Conrad International Punta del Este in late 1997 and the opening of The Wild
Wild West casino in Atlantic City.

24
<PAGE>
EBITDA at the Las Vegas Hilton increased $15 million over the prior year to
$50 million. Park Place's efforts to broaden the property's domestic customer
base have resulted in significant increases in non-baccarat table game and slot
volume and a decrease in baccarat play. Non-baccarat table game win increased 50
percent and slot revenue increased 22 percent on higher volume and comparable
win percentages. Baccarat volume decreased 18 percent from the prior year,
however baccarat win increased 20 percent on a significantly increased win
percentage.

EBITDA from the Flamingo Hilton - Las Vegas declined $4 million from the
prior year to $77 million due to lower table game volume and win and a decline
in non-casino revenues. Occupancy declined one point to 90.3 percent, and the
average rate fell five percent to $76.31. Bally's Las Vegas generated EBITDA of
$67 million for the nine month period, a decrease of $2 million from the prior
year. The decline was due to a one point decrease in table game win percentage
combined with lower drop and lower rooms revenue resulting from a one point
decline in occupancy and a two percent decrease in the average rate to $89.76.
Combined EBITDA from the Reno Hilton and the Flamingo Hilton - Reno decreased $1
million from 1997.

Occupancy for the Nevada hotel-casinos was 88.1 percent in the 1998 period
compared to 87.8 percent last year. The average room rate for the Nevada
properties was $74.28 compared to $75.68 in the prior year period.

In Atlantic City, Bally's Park Place generated EBITDA of $130 million, an
increase of five percent from last year's $124 million, due primarily to the
opening of "The Wild Wild West" casino in July 1997. The Atlantic City Hilton
reported EBITDA of $31 million, $7 million above last year. The improvement was
due to higher table game drop and win as well as increased non-casino revenues
from the property's new 300-room tower.

Occupancy for the Atlantic City hotel-casinos was 94.7 percent in the 1998
period compared to 93.1 percent last year. The average room rate for the
Atlantic City properties was $83.93, down nine percent from $92.34 last year.

Combined EBITDA from Park Place's riverboat properties in Mississippi,
Louisiana, and Missouri increased $7 million over last year, while EBITDA
contribution from Park Place's two hotel-casinos in Australia was flat at $19
million.

The opening of 300 hotel rooms in the latter half of 1997 resulted in
significant growth in casino volume at the 43% owned Conrad International Punta
del Este Resort and Casino in Uruguay. EBITDA totaled $18 million in the nine
month period, a $13 million increase over the prior year. Results from this
property are highly seasonal, with the peak season falling in the first quarter.

Depreciation and amortization, including Park Place's proportionate share of
equity investments, increased $13 million to $166 million in the 1998 period due
primarily to the Las Vegas and Atlantic City expansion projects completed in
1997.

CORPORATE ACTIVITY. Corporate expense decreased $8 million to $6 million
due primarily to a non-recurring accrual for litigation costs in the 1997
period. Interest income decreased $5 million to $17 million. Interest expense,
net of amounts capitalized, was $66 million and $59 million in the 1998 and 1997
nine month periods, respectively. Interest expense, net, from equity investments
increased $3 million to $9 million. The effective tax rate was 45.7% in 1998
versus 41.4% in the 1997 period. Minority interest decreased due to the purchase
of the remaining interest in Bally Grand, Inc.

YEAR 2000

Park Place is currently working to resolve the potential impact of the Year
2000 on the processing of date-sensitive information by its computerized
information systems. The Year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
Any of

25
<PAGE>
Park Place's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the Year 2000, which could result in
miscalculations or system failures.

Park Place has a Year 2000 program, the objective of which is to determine
and assess the risks of the Year 2000 issue, and plan and institute mitigating
actions to minimize those risks. Park Place's standard for compliance requires
that for a computer system or business process to be Year 2000 compliant, it
must be designed to operate without error in dates and date-related data prior
to, on and after January 1, 2000. Park Place expects to be fully Year 2000
compliant with respect to all significant business systems prior to December 31,
1999.

Park Place's various project teams are focusing their attention in the
following major areas:

INFORMATION TECHNOLOGY (IT)

Information Technology systems account for much of the Year 2000 work and
include all computer systems and technology managed by Park Place. These core
systems have been assessed, plans are in place, and work is being undertaken to
test and implement changes where required. No significant remediation has been
identified. The appropriate vendors and suppliers have been contacted as to
their Year 2000 compliance and their deliverables have been factored into Park
Place's plans.

NON-IT SYSTEMS

An inventory of all property level non-IT systems (including elevators,
electronic door locks, gaming devices, etc.) is near completion. The majority of
these non-IT systems have been assessed, plans are in place, and work is being
undertaken to test and implement changes where required. The appropriate vendors
and suppliers have been contacted as to their Year 2000 compliance and their
deliverables have been factored into Park Place's plans.

SUPPLIERS

Park Place is communicating with its significant suppliers to understand
their Year 2000 issues and how they might prepare themselves to manage those
issues as they relate to Park Place. To date, no significant supplier has
informed Park Place that a material Year 2000 issue exists which will have a
material effect on Park Place.

During the remainder of 1998 and in 1999, Park Place will continually review
its progress against its Year 2000 plans and determine what contingency plans
are appropriate to reduce its exposure to Year 2000 related issues.

Based on Park Place's current assessment, the costs of addressing potential
problems are expected to be less than $2 million. However, if Park Place is
unable to resolve its Year 2000 issues, contingency plans to update existing
systems (i.e., reservation, payroll, etc.) are in place for which Park Place
expects the cost to be an additional $2 million. If Park Place's customers or
vendors identify significant Year 2000 issues in the future and are unable to
resolve such issues in a timely manner, it could result in a material financial
risk. Accordingly, Park Place plans to devote the necessary resources to resolve
all significant Year 2000 issues in a timely manner.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 1998, the AICPA issued Statement of Position (SOP) 98-5, "Reporting
on the Costs of Start-Up Activities." This SOP requires that all nongovernmental
entities expense costs of start-up activities (pre-opening, pre-operating and
organizational costs) as those costs are incurred and requires the write-off of
any unamortized balances upon implementation. SOP 98-5 is effective for
financial statements issued for periods beginning after December 15, 1998. Park
Place expects to adopt SOP 98-5 in the first quarter of 1999. Adoption of the
SOP is not expected to have a material impact on 1999 results of operations.

26
<PAGE>
On November 20, 1997, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus in EITF 97-2 "Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
EITF 97-2 addresses the circumstances in which a management entity may include
the revenues and expenses of a managed entity in its financial statements.

Upon the adoption of EITF 97-2, which is expected to be in the fourth
quarter of 1998, Park Place will no longer include in its financial statements
the revenues, operating expenses and working capital of its managed properties.
Application of EITF 97-2 to Park Place's financial statements would have reduced
each of revenues and operating expenses by $290 million and $332 million for the
nine month periods ended September 30, 1998 and 1997, respectively. Application
of the standard would have reduced each of current assets and current
liabilities by $59 million at December 31, 1997 and $31 million at September 30,
1998. Application of EITF 97-2 would have no impact on reported operating
income, net income, earnings per share or stockholders' equity.

27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--LAKES--SEPTEMBER 27, 1998

OVERVIEW

Lakes develops, constructs and manages casinos and related hotel and
entertainment facilities in emerging and established gaming jurisdictions.
Lakes' revenues are currently derived from management fee income from Grand
Casino Avoyelles, Grand Casino Coushatta and Grand Casino Hinckley. Lakes
commenced operations in September 1990, and opened its first casino, Grand
Casino Mille Lacs, in April 1991. Grand Casino Hinckley commenced operations in
May 1992, Grand Casino Avoyelles commenced operations in June 1994 and Grand
Casino Coushatta commenced operations in January 1995.

Pursuant to the Avoyelles, Coushatta and Hinckley management contracts,
Lakes receives a fee based on the net distributable profits (as defined in the
contracts) generated by Grand Casino Avoyelles, Grand Casino Coushatta and Grand
Casino Hinckley. The management agreement for Grand Casino Mille Lacs expired on
April 2, 1998. Lakes believes that the management agreement for Grand Casino
Hinckley, which expires in May 1999, will not be renewed.

Lakes' limited operating history may not be indicative of Lakes' future
performance. In addition, a comparison of results from year to year may not be
meaningful due to the opening of new facilities during each year. Lakes' growth
strategy contemplates the expansion of existing operations and the pursuit of
opportunities to develop and manage additional gaming facilities. The successful
implementation of this growth strategy is contingent upon the satisfaction of
various conditions, including obtaining governmental approvals, the impact of
increased competition, and the occurrence of certain events, many of which are
beyond the control of Lakes.

The following discussion and analysis should be read in conjunction with the
unaudited financial statements and notes thereto of Lakes for the nine months
ended September 27, 1998 and September 28, 1997 included in this Supplement and
the Lakes financial statements in the Joint Proxy Statement/ Prospectus.

RESULTS OF OPERATIONS

MANAGEMENT CONTRACTS

Lakes is prohibited by the IGRA from having an ownership interest in any
casino it manages for Indian tribes. The management contracts for the various
Indian-owned casinos that the Company manages for Indian tribes generally have
terms of seven years. As noted above, the management contract for Grand Casino
Hinckley expires May 15, 1999 and the management contracts for Grand Casino
Avoyelles and Grand Casino Coushatta expire June 3, 2001 and January 16, 2002,
respectively. There can be no assurance that any of these management contracts
will be renewed upon expiration or approved by NIGC upon any such renewal. The
failure to renew the Lakes management contracts would result in the loss of
revenues to Lakes derived from such contracts, which could have an adverse
effect on Lakes' results of operations. The Coushatta Tribe and the
Tunica-Biloxi Tribe each entered into tribal-state compacts with the State of
Louisiana on September 29, 1992. These compacts were approved in November 1992
by the Secretary of the Interior. Each compact expires in November 1999, but
will automatically renew for an additional seven-year term unless either the
tribe or the State of Louisiana delivers to the other written notice of non-
renewal at least 180 days prior to the applicable expiration date. Lakes'
management agreements with the Tunica-Biloxi Tribe and the Coushatta Tribe
expire after November 1999. In the event the compacts are not renewed, gaming
will not be permitted at Grand Casino Avoyelles or Grand Casino Coushatta. There
can be no assurance that these compacts will be renewed on terms and conditions
acceptable to either of the tribes.

Revenues are calculated in accordance with generally accepted accounting
principles and are presented in a manner consistent with industry practice. Net
distributable profits from Grand Casino

28
<PAGE>
Avoyelles, Grand Casino Coushatta and Grand Casino Hinckley, are computed using
a modified cash basis of accounting in accordance with the management contracts.
The effect of the use of the modified cash basis of accounting is to accelerate
the write-off of capital equipment and leased assets, which thereby impacts the
timing of net distributable profits.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 27, 1998 TO THE NINE MONTHS ENDED
SEPTEMBER 28, 1997

EARNINGS PER COMMON SHARE AND NET EARNINGS. Basic and diluted earnings per
common share were $4.68 and $4.58, respectively, for the nine months ended
September 27, 1998. This compares to basic and diluted earnings of $3.51 and
$3.43 per share for the prior year's comparable period. Earnings increased $12.5
million to $49.3 million for the nine months ended September 27, 1998 compared
to the same period in the prior year, primarily due to a decrease in the
provision for income taxes.

REVENUES. Grand Casino Mille Lacs, Grand Casino Hinckley, Grand Casino
Avoyelles and Grand Casino Coushatta generated $64.3 million in management fee
income during the nine months ended September 27, 1998 as compared to $62.0
million for the prior year's comparable period. Gross revenue increases at Grand
Casino Hinckley, Grand Casino Avoyelles and Grand Casino Coushatta offset the
fact that the management contract for Grand Casino Mille Lacs expired at the end
of the first quarter. Contributing to the increases were a 378-room hotel at
Grand Casino Hinckley, which opened in November of 1997, and a special events
center and RV resort at Grand Casino Avoyelles, which opened during the first
quarter of 1998.

COSTS AND EXPENSES. Total costs and expenses were $8.6 million for the
nine-month period ended September 27, 1998 compared to $3.7 million for the same
period in the prior year. Selling, general, and administrative expenses
increased in the amount of $4.6 million from $3.1 million for the nine months
ended September 28, 1997 to $7.7 million for the nine months ended September 27,
1998 due primarily to an increase in reserves for Stratosphere litigation.

OTHER. Interest income was constant at $4.0 million for the nine months
ended September 27, 1998 and September 28, 1997. Interest expense was $0.1
million for both periods. The provision for income taxes for the nine months
ended September 27, 1998 was $10.3 million or an effective tax rate of 17.3%.
This compares to a provision for income taxes of $24.7 million or an effective
tax rate of 40.2% for the nine months ended September 28, 1997. The decrease
relates to the tax benefit recognized from the previous write-off of a note
receivable from Stratosphere. The result of the recognition of the tax benefit
was a reduction in the provision for income taxes in the amount of $13.1
million.

CAPITAL RESOURCES, CAPITAL SPENDING, AND LIQUIDITY

At September 27, 1998, Lakes had $38.2 million in cash and cash equivalents.
The cash balances are planned to be used for loans to current tribal partners to
help develop existing operations, the pursuit of additional gaming
opportunities, and settlement of pending litigation matters.

For the nine months ended September 27, 1998 and September 28, 1997, net
cash provided by operating activities totaled $66.2 and $44.9 million,
respectively. For the nine months ended September 27, 1998 and September 28,
1997, proceeds from repayment of notes receivable amounted to $4.7 and $4.6
million, respectively. Also, payments for land held for development amounted to
$10.3 million during each of these periods.

As Security to support Lakes' indemnification obligations to Grand under the
Grand Distribution Agreement and the Merger Agreement, and as a condition to the
consummation of the Merger, Lakes has agreed to irrevocably deposit, in trust
for the benefit of Grand, as a wholly owned subsidiary of Park Place, an
aggregate of $30 million, consisting of four annual installments of $7.5
million, at the end of each of the four year periods subsequent to the Effective
Date. Lakes' ability to satisfy this funding obligation is materially dependent
upon the continued success of its operations and the general risks inherent in
its business. In the event Lakes is unable to satisfy its funding obligation, it
would be in breach of its

29
<PAGE>
agreement with Grand, possibly subjecting itself to additional liability for
contract damages, which could have a material adverse effect on Lakes' business
and results of operations. See "Business and Properties of Lakes--Legal
Proceedings in Joint Proxy Statement/Prospectus."

Prior to the effectiveness of the Second Amended Plan, Grand owned
approximately 37% of the issued and outstanding common stock of Stratosphere.
Stratosphere and its wholly owned operating subsidiary developed and operate the
Stratosphere Tower, Hotel and Casino in Las Vegas, Nevada. In January 1997,
Stratosphere and its wholly owned operating subsidiary filed for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. In October 1997, Grand announced
that it had not been able to reach an agreement with holders of a significant
portion of Stratosphere's first mortgage notes for a consensual reorganization
of Stratosphere that would involve Grand's participation. Grand announced that
it had no intention of participating in any plan of reorganization for
Stratosphere and terminated the Amended Investment Agreement.

The Second Amended Plan has been confirmed by the Bankruptcy Court and as of
October 14, 1998 has been declared effective. Pursuant to the Second Amended
Plan, all of the Stratosphere common stock outstanding prior to the effective
date has been canceled, including all Stratosphere common stock which Lakes
would have owned.

Under the terms of the Grand Distribution Agreement, Lakes has agreed to
assume any future liabilities arising out of Grand's investment in Stratosphere.
See "Risk Factors--Risks Relating to the Business of Lakes--Stratosphere
Corporation; Pending Litigation"--"Business and Properties of Lakes-- Legal
Proceedings."

In September 1997, the successor trustee (the "Stratosphere Trustee") under
the indenture pursuant to which Stratosphere Corporation issued Stratosphere
Corporation's first mortgage notes filed a complaint in the U.S. District Court
of Nevada--IBJ SCHROEDER BANK & TRUST COMPANY, INC. V. GRAND CASINOS, INC.--File
No. CV-S-97--1252-DWH (RJJ)--naming Grand as defendant.

The complaint alleges that Grand failed to perform under the Standby Equity
Commitment entered into between Stratosphere Corporation and Grand in connection
with Stratosphere Corporation's issuance of such first mortgage notes in March
1995. The complaint seeks an order compelling specific performance of what the
Committee claims are Grand's obligations under the Standby Equity Commitment.
The Stratosphere Trustee filed the complaint in its alleged capacity as a third
party beneficiary under the Standby Equity Commitment.

In November 1997, Grand submitted a motion requesting, among other things,
that the court dismiss the complaint. Grand's request that the court dismiss the
complaint has been denied. Discovery is pending. See "Legal Proceedings--Standby
Equity Commitment Litigation."

YEAR 2000

Lakes is currently working to fully determine and resolve the potential
impact of the Year 2000 on the processing of date-sensitive information by its
computerized information systems and components. The Year 2000 problem is the
result of computer programs being written using two digits (rather than four) to
define the applicable year. Any of Lakes' programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the Year
2000, which could result in miscalculations or system failures.

Lakes has a Year 2000 program, the objective of which is to determine and
assess the risks of the Year 2000 issue, and plan and institute mitigating
actions to minimize those risks. Pursuant to the Lakes Year 2000 program, the
Company hired a Year 2000 consultant and has established an internal review team
to monitor and facilitate efficient Year 2000 compliance. Lakes is currently in
the process of upgrading its financial reporting systems, IT based and
otherwise, to ensure that they are Year 2000 compliant. Lakes' vendors and
consultants have represented to management that the new financial systems meet
Year 2000 requirements. Lakes' standard for compliance requires that for a
computer system or business process to

30
<PAGE>
be Year 2000 compliant, it must be designed to operate without error in dates
and date-related data prior to, on and after January 1, 2000. Between now and
the Year 2000, Lakes will proceed through its various phases of assessment,
detailed planning, implementation, testing and management. Lakes expects to be
fully Year 2000 compliant by mid-1999.

Generally, Lakes is confident that the implementation of its Year 2000
program in conjunction with the engagement of a consultant and the replacement
of all of Lakes' financial reporting systems will resolve any IT system
compliance issues. Lakes has not currently identified any material non-IT system
Year 2000 issues.

During the remainder of 1998 and 1999, Lakes will continually review its
progress against its Year 2000 plans and determine what contingency plans are
feasible and appropriate to reduce its exposure to Year 2000 related issues.

Based on Lakes' current assessment, the costs of addressing potential
problems are not currently expected to have a material adverse impact on Lakes'
financial position, results of operations or cash flows in future periods.
However, the historical and estimated costs relating to the resolution of Lakes'
Year 2000 compliance issues cannot be fully and finally determined at this time.
If significant customers or vendors identify Year 2000 issues in the future and
are unable to resolve such issues in a timely manner, it could result in a
material financial risk. Lakes plans to initiate formal communications with all
of its material suppliers to determine the extent to which Lakes' interface
systems are vulnerable to those third parties' failures to resolve their own
Year 2000 issues. Lakes plans to devote the necessary resources to resolve all
significant Year 2000 issues in a timely manner.

While Lakes fully anticipates achieving Year 2000 compliance well in advance
of January 1, 2000, there are certain risks which exist with respect to Lakes'
business and the Year 2000. Those risks range from slight delays and
inefficiencies in processing data and carrying out accounting and financial
functions to, in a most reasonably likely worst case scenario, extensive and
costly inability to process data, provide vital accounting functions and
communicate with customers and suppliers. Until Lakes substantially completes
its Year 2000 program, it is uncertain if there will be any material effect on
Lakes' results of operation, liquidity or financial condition. As of the date of
this filing, Lakes has not finalized a contingency plan to address the failure
to be Year 2000 compliant.

ACCOUNTING PRONOUNCEMENTS

Lakes adopted Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income,"
effective December 29, 1997. SFAS 130 requires minimum pension liability
adjustments, unrealized gains or losses on Lakes' securities available for sale
and foreign currency translation adjustments, which prior to adoption were
reported separately in division equity, to be included in other comprehensive
earnings. Total comprehensive earnings for the nine months ended September 27,
1998 and September 28, 1997 were $50.5 million and $35.6 million. Differences
between comprehensive earnings for these periods were due to unrealized holding
gains and losses on securities available for sale.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants (AICPA) has issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires
companies to expense as incurred all start-up and preopening costs that are not
otherwise capitalizable as long-lived assets. SOP 98-5 is effective for
financial statements for fiscal years beginning after December 15, 1998. Lakes
does not believe the adoption of this pronouncement will be material to the
combined financial statements.

31
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
PARK PLACE ENTERTAINMENT CORPORATION
Consolidated Statements of Income for the Nine Months Ended September
30, 1998 and 1997 (unaudited)....................................... F-2
Consolidated Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997................................................... F-3
Consolidated Statements of Cash Flow for the Nine Months Ended
September 30, 1998 and 1997 (unaudited)............................. F-4
Notes to Consolidated Financial Statements............................ F-5

LAKES GAMING, INC.
Combined Statements of Earnings for the Nine Months ended September
27, 1998 (unaudited) and September 28, 1997 (unaudited)............. F-8
Combined Balance Sheets as of September 27, 1998 (unaudited) and
December 28, 1997................................................... F-9
Combined Statements of Cash Flows for the Nine Months Ended September
27, 1998 (unaudited) and September 28, 1997 (unaudited)............. F-10
Notes to Combined Financial Statements................................ F-11
</TABLE>

F-1
<PAGE>
PARK PLACE ENTERTAINMENT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Revenue
Casino....................................................................................... $ 1,468 $ 1,369
Rooms........................................................................................ 239 243
Food and beverage............................................................................ 203 195
Other products and services.................................................................. 113 118
--------- ---------
2,023 1,925
--------- ---------
Expenses
Casino....................................................................................... 785 743
Rooms........................................................................................ 86 86
Food and beverage............................................................................ 182 168
Other expenses............................................................................... 685 668
Corporate, net............................................................................... 6 14
--------- ---------
1,744 1,679
--------- ---------
Operating Income............................................................................... 279 246
Interest and dividend income................................................................. 17 22
Interest expense............................................................................. (66) (59)
Interest expense, net, from equity investments............................................... (9) (6)
--------- ---------
Income Before Income Taxes and Minority Interest............................................... 221 203
Provision for income taxes................................................................... (101) (84)
Minority interest, net....................................................................... (2) (3)
--------- ---------
Net Income..................................................................................... $ 118 $ 116
--------- ---------
--------- ---------

Basic Earnings Per Share--Pro Forma............................................................ $ .45 $ .44
--------- ---------
--------- ---------
Diluted Earnings Per Share--Pro Forma.......................................................... $ .45 $ .44
--------- ---------
--------- ---------
Weighted Average Common and Equivalent Shares--Pro Forma
Basic........................................................................................ 261 263
--------- ---------
--------- ---------
Diluted...................................................................................... 263 265
--------- ---------
--------- ---------
</TABLE>

See notes to consolidated financial statements

F-2
<PAGE>
PARK PLACE ENTERTAINMENT CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)

<TABLE>
<CAPTION>
SEPTEMBER
30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Assets
Cash and equivalents.................. $ 119 $ 224
Temporary investments................. 2 40
Accounts receivable, net.............. 130 159
Other current assets.................. 104 86
----------- ------
Total current assets................ 355 509
Investments........................... 187 176
Property and equipment, net........... 3,990 3,621
Goodwill.............................. 1,309 1,303
Other assets.......................... 60 80
----------- ------
Total investments, property and
other assets...................... 5,546 5,180
----------- ------
Total Assets.......................... $5,901 $5,689
----------- ------
----------- ------
Liabilities and Division Equity
Accounts payable and accrued
expenses............................ $ 321 $ 357
Current maturities of long-term
debt................................ 46 34
Income taxes payable.................. 2 2
----------- ------
Total current liabilities........... 369 393
Long-term debt........................ 1,564 1,272
Deferred income taxes and other
liabilities......................... 637 643
Division equity....................... 3,331 3,381
----------- ------
Total Liabilities and Division
Equity.............................. $5,901 $5,689
----------- ------
----------- ------
</TABLE>

See notes to consolidated financial statements

F-3
<PAGE>
PARK PLACE ENTERTAINMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(IN MILLIONS)

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Operating Activities
Net income..................................................................................... $ 118 $ 116
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................................ 161 149
Amortization of loan costs................................................................... 1 1
Change in working capital components......................................................... (26) 36
Change in deferred income taxes.............................................................. 14 12
Change in other liabilities.................................................................. (26) (71)
Other........................................................................................ 15 (42)
--------- ---------
Net cash provided by operating activities...................................................... 257 201
--------- ---------
Investing Activities
Capital expenditures........................................................................... (469) (304)
Additional investments......................................................................... (8) (51)
Payments on notes and other.................................................................... 11 9
Acquisitions, net of cash acquired............................................................. (58) (55)
--------- ---------
Net cash used in investing activities.......................................................... (524) (401)
--------- ---------
Financing Activities
Payments on debt............................................................................... (7) (7)
Advances from Parent........................................................................... 169 169
--------- ---------
Net cash provided by financing activities...................................................... 162 162
--------- ---------
Decrease in Cash and Equivalents................................................................. (105) (38)
Cash and Equivalents at Beginning of Year........................................................ 224 252
--------- ---------
Cash and Equivalents at End of Period............................................................ $ 119 $ 214
--------- ---------
--------- ---------
</TABLE>

See notes to consolidated financial statements

F-4
<PAGE>
PARK PLACE ENTERTAINMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998

NATURE OF OPERATIONS AND BASIS OF PRESENTATION

On June 30, 1998, Hilton Hotels Corporation (Parent) announced that it will
separate its gaming and lodging operations (the Spin-Off), thereby creating a
new publicly held gaming company which will be renamed Park Place Entertainment
Corporation (Park Place). As part of the Spin-Off, Parent will contribute to
Park Place, at book value, substantially all of its gaming assets and
operations. During the period covered by these financial statements, these
businesses were under common control operating as a division of Parent. These
financial statements have been prepared from Parent's historical accounting
records and present substantially all of the operations of businesses that will
be owned and operated by Park Place as if Park Place had been a separate entity
for all periods presented. The separation will be accomplished through a tax
free distribution (the Hilton Distribution) to Parent shareholders of the shares
of Park Place. Following completion of the Hilton Distribution, the Company will
merge with the Mississippi gaming operations of Grand Casinos, Inc. (Grand) in a
transaction comprised entirely of Park Place stock.

Both transactions are subject to shareholder and regulatory approvals and
are expected to be completed by year-end 1998. Parent plans to obtain a ruling
from the Internal Revenue Service that the distribution will not be taxable to
Park Place or its shareholders. The Boards of Directors of both Parent and Grand
have approved the transactions.

In anticipation of the Spin-Off, a pro-rata portion of Parent's historical
public and corporate bank debt balance and related interest expense has been
allocated to Park Place for all periods presented. The amounts of these balances
allocated to Park Place were based on the estimate that approximately 50 percent
of Parent's public and corporate bank debt will be assumed by Park Place at the
time of the Hilton Distribution.

The Spin-Off will result in the division of certain of Parent's existing
corporate support functions between the two resulting entities. Corporate
expense included in Park Place's financial results represents an allocation of
Parent's consolidated corporate expense to the entities comprising Park Place.
The allocation of corporate expense is based on a specific review to identify
costs incurred for the benefit of the lodging business, the gaming business or
both, and in management's judgment results in a reasonable allocation of such
costs. Incremental costs, estimated to be approximately $10 million annually,
will be incurred by Park Place to support its operations as a stand-alone entity
after the Hilton Distribution.

Park Place is primarily engaged in the ownership and management of casinos
and casino hotel properties. Park Place operates in select markets throughout
the world, predominately in the United States.

F-5
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL

The consolidated interim financial statements have been prepared without
audit. Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principals have been condensed or omitted. Park Place believes the disclosures
made are adequate to make the interim financial information presented not
misleading.

In the opinion of management, the accompanying consolidated interim
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position and
the results of operations for the unaudited periods.

The consolidated financial statements for prior years reflect certain
reclassifications to conform with classifications adopted in 1998. These
reclassifications have no effect on net income.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Park Place,
its majority owned and controlled subsidiaries and the gaming division
contributed as described above. Park Place also consolidates the operating
results and working capital of affiliates operated under long-term management
agreements, including such affiliates in which Park Place has investments of 50%
or less. These agreements effectively convey to Park Place the right to use the
properties in exchange for payments to the property owners, which are based
primarily on the properties' profitability. The consolidated financial
statements include the following amounts related to managed casinos:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1998 1997
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Revenue...................................................................... $ 323 $ 355
Operating expenses, including remittances to owners.......................... 290 332
Current assets and current liabilities(1).................................... 31
</TABLE>

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

(1) Including cash and equivalents of $9 million.

On November 20, 1997, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus in EITF 97-2 "Application of FASB
Statement No. 94 and APB Opinion No. 16 to Physician Practice Management
Entities and Certain Other Entities with Contractual Management Arrangements."
EITF 97-2 addresses the circumstances in which a management entity may include
the revenues and expenses of a managed entity in its financial statements.

Upon adoption of EITF 97-2, which is expected to be in the fourth quarter of
1998, Park Place will no longer include in its financial statements the
revenues, operating expenses and working capital of its managed properties.
Application of EITF 97-2 will have no impact on reported operating income, net
income, earnings per share or stockholders' equity.

PRO FORMA EARNINGS PER SHARE

Pro forma earnings per share (EPS) is calculated for all periods presented
based on the expected Hilton Distribution. Basic EPS is calculated by dividing
net income by the weighted average number of common shares outstanding. Diluted
EPS reflects the effect of assumed stock option exercises.

F-6
<PAGE>
LONG-TERM DEBT

A pro-rata portion of Parent's historical corporate debt balance and
interest expense has been allocated to Park Place and included in these
consolidated financial statements for all periods presented based on an estimate
of Parent's corporate debt that will be assumed by Park Place at the time of the
Hilton Distribution. The amounts of Parent's corporate interest expense
allocated to Park Place were $64 million and $54 million for the nine months
ended September 30, 1998 and 1997, respectively.

DIVISION EQUITY

Changes in division equity consisted of the following:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
-------------------
<S> <C>
Beginning balance......................................................... $ 3,381
Net income................................................................ 118
Intercompany activity with Parent......................................... (168)
------
Ending balance............................................................ $ 3,331
------
------
</TABLE>

SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest, net of amounts capitalized, was $65 million and $55
million for the nine months ended September 30, 1998 and 1997, respectively.
These amounts assume that interest expense allocated by Parent is paid in the
period allocated. No income taxes were paid by Park Place as these payments were
the responsibility of the Parent.

COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." The Company has adopted SFAS No. 130 beginning
January 1, 1998. The statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements or in the footnotes to the interim financial
statements. Comprehensive income for the nine months ended September 30, 1998
and 1997 is as follows:

<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
30,
----------
<S> <C> <C>
1998 1997
---- ----
Net income.............................. $118 $116
Change in unrealized holding
gains/losses on securities............ (3) 4
---- ----
Comprehensive income.................... $115 $120
---- ----
---- ----
</TABLE>

F-7
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)
COMBINED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
SEPTEMBER SEPTEMBER
27, 28,
1998 1997
------------ ------------
<S> <C> <C>
Revenues.......................................... $ 64,330 $ 62,001
------------ ------------
Costs and Expenses:
Selling, general, and administrative............ 7,684 3,126
Depreciation and amortization................... 932 591
------------ ------------
Total costs and expenses.................... 8,616 3,717
------------ ------------
Earnings from operations.................... 55,714 58,284
------------ ------------
Other Income (Expense):
Interest income................................. 4,000 3,967
Interest expense................................ (73 ) (73 )
Other........................................... (9 ) (650 )
------------ ------------
Total other income, net..................... 3,918 3,244
------------ ------------
Earnings Before Income Taxes...................... 59,632 61,528
Provision for Income Taxes........................ 10,327 24,738
------------ ------------
Net earnings................................ $ 49,305 $ 36,790
------------ ------------
------------ ------------
Earnings per share:
Basic........................................... $ 4.68 $ 3.51
------------ ------------
------------ ------------
Diluted......................................... $ 4.58 $ 3.43
------------ ------------
------------ ------------
Weighted average share outstanding.............. 10,541 10,469
------------ ------------
------------ ------------
Weighted average common and diluted shares
outstanding................................... 10,767 10,735
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to combined financial statements.

F-8
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)
COMBINED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents....................... $ 33,198 $ 33,208
Accounts receivable............................. 8,682 6,425
Income taxes receivable......................... -- 14,785
Current installments of notes receivable........ 7,571 6,654
Deferred income taxes........................... 4,919 4,988
Other current assets............................ 636 551
------------- -------------
Total current assets........................ 55,006 66,611

NOTES RECEIVABLE, less current installments....... 24,178 26,477
LAND HELD FOR DEVELOPMENT......................... 25,730 15,418

OTHER ASSETS:
Cash and cash equivalents--restricted........... 4,992 1,225
Securities available for sale................... 6,838 4,842
Property and equipment, net..................... 2,429 3,071
Investments in unconsolidated affiliates........ 8,351 8,180
Casino development costs........................ 4,498 4,144
Other long-term assets.......................... 282 2,125
------------- -------------
Total other assets.......................... 27,390 23,587
------------- -------------
Total assets................................ $ 132,304 $ 132,093
------------- -------------
------------- -------------

LIABILITIES AND DIVISION EQUITY

CURRENT LIABILITIES:
Accounts payable................................ -- 77
Current installments of long-term debt.......... 4 13
Litigation and claims accrual................... 9,318 8,736
Income taxes payable............................ 4,852 2,000
Other accrued expenses.......................... 4 103
------------- -------------
Total current liabilities................... 14,178 10,929
------------- -------------
LONG-TERM DEBT, less current installments......... 975 975
DEFERRED INCOME TAXES............................. 1,399 1,391

COMMITMENTS AND CONTINGENCIES

DIVISION EQUITY:
Division equity................................. 117,502 121,745
Net unrealized losses on securities available
for sale...................................... (1,750) (2,947)
------------- -------------
Total division equity....................... 115,752 118,798
------------- -------------
Total liabilities and division equity....... $ 132,304 $ 132,093
------------- -------------
------------- -------------
</TABLE>

See accompanying notes to combined financial statements.

F-9
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
SEPTEMBER SEPTEMBER
27, 1998 28, 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................... $ 49,305 $ 36,790
Adjustments to reconcile net earnings to net
cash provided by operating activities--
Depreciation and amortization................. 932 591
Changes in operating assets and liabilities:
Accounts receivable......................... (2,257 ) 176
Income taxes................................ 17,637 8,259
Other current assets........................ (85 ) 51
Accounts payable............................ (77 ) 20
Accrued expenses............................ 483 (1,641 )
Other....................................... 265 665
------------ ------------
Net cash provided by operating
activities.............................. 66,203 44,911
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for notes receivable................... (3,362 ) (1,328 )
Proceeds from repayment of notes receivable..... 4,745 4,634
Increase in restricted cash..................... (3,767 ) --
Payments for land held for development.......... (10,312 ) (10,283 )
Increase in other long-term assets.............. 187 (379 )
------------ ------------
Net cash used for investing activities.... $ (12,509 ) $ (7,356 )
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to parent.......................... $ (53,695 ) $ (38,169 )
Payments on long-term debt...................... (9 ) (8 )
------------ ------------
Net cash used for financing activities.... (53,704 ) (38,177 )
------------ ------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS..................................... (10 ) (622 )
CASH AND CASH EQUIVALENTS, beginning of year...... 33,208 33,852
------------ ------------
CASH AND CASH EQUIVALENTS, end of year............ $ 33,198 $ 33,230
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for--
Interest...................................... $ 73 $ 73
Income taxes.................................. -- 9,294
</TABLE>

See accompanying notes to combined financial statements.

F-10
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Lakes (the Company or Lakes), a division of Grand Casinos, Inc. (Grand),
represents all the assets and liabilities of the subsidiaries and operating
units owned and held by Grand, which exist primarily to manage Indian-owned
casinos under management contracts with Grand and manage certain other assets
related to potential development outside of the state of Mississippi. The
Company manages one Indian-owned casino in Minnesota and two Indian-owned
casinos in Louisiana. Lakes' assets previously included approximately 37% of the
common stock of Stratosphere Corporation (Stratosphere), which owns the
Stratosphere Tower, Casino and Hotel in Las Vegas, Nevada. Stratosphere is the
subject of Chapter 11 bankruptcy proceedings. See Note 8 for further discussion.
The Second Amended Plan has been approved by the Bankruptcy Court and was
declared effective on October 14, 1998. As such, all Stratosphere stock owned by
Lakes has been cancelled.

On June 30, 1998, Grand announced that it will separate its Mississippi
gaming operations and its managed Indian-owned casino operations, and create a
new publicly held company, expected to be named Lakes Gaming, Inc. The
separation will be accomplished through a tax-free distribution to Lakes Gaming,
Inc. of all of the assets and liabilities of its non-Mississippi business
(Lakes). Grand will then spin off all the common stock of Lakes Gaming, Inc. to
Grand shareholders. Each Grand shareholder will receive one share of Lakes
Gaming, Inc. for every four owned shares of Grand. Grand's Mississippi gaming
operations will be merged with the gaming operations of Hilton Hotels
Corporation (Park Place). Both transactions are hereinafter referred to as the
Transaction.

The Transaction is subject to shareholder and regulatory approvals and is
expected to be completed by year-end 1998. Grand plans to obtain a ruling from
the Internal Revenue Service (IRS) that notes that the transaction is tax-free
to Grand shareholders. The boards of directors of both Grand and Hilton have
approved the Transaction.

MANAGEMENT CONTRACTS OF LIMITED DURATION

The Company is prohibited by the Indian Gaming Regulatory Act from having an
ownership interest in any casino it manages for Indian tribes. The management
contracts for the various Indian-owned casinos that the Company manages for
Indian tribes generally have terms of seven years. The management contract for
Grand Casino Hinckley expires May 15, 1999, and the management contacts for
Grand Casino Avoyelles and Grand Casino Coushatta expire June 3, 2001 and
January 16, 2002, respectively. There can be no assurance that any of these
management contracts will be renewed upon expiration or approved by the National
Indian Gaming Commission ("NIGC") upon any such renewal. The failure to renew
the Company's management contracts would result in the loss of revenues to the
Company derived from such contracts, which would have an adverse effect on the
Company's results of operations. The Coushatta Tribe and the Tunica-Biloxi Tribe
each entered into tribal-state compacts with the State of Louisiana on September
29, 1992. These compacts were approved in November, 1992 by the Secretary of the
Interior. Each compact expires in November, 1999, but will automatically renew
for an additional seven year terms unless either the tribe or the State of
Louisiana delivers to the other written notice of non-renewal at least 180 days
prior to the applicable expiration date. The Company's management agreements
with the Tunica-Biloxi Tribe and the Coushatta Tribe expire after November 1999.
In the event the compacts are not renewed, legal gaming will not be permitted at
Grand Casino Avoyelles of Grand Casino Coushatta. There can be no assurance that
these compacts will be renewed on terms and conditions acceptable to either of
the tribes.

F-11
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
All other subsidiaries and affiliates are presented on a combined basis. All
material intercompany transactions and balances have been eliminated in the
accompanying combined financial statements.

USE OF ESTIMATES

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

UNAUDITED INTERIM FINANCIAL INFORMATION

The consolidated financial statements have been prepared by the Company in
accordance with generally accepted accounting principles for interim financial
information, in accordance with the rules and regulations of the Securities and
Exchange Commission. Pursuant to such rules and regulations, certain financial
information and footnote disclosures normally included in the consolidated
financial statements have been condensed or omitted. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included.

OPERATING EXPENSES

The operating expenses of the Company include the costs associated with the
management of all gaming operations for which the Company has a management
contract. Such amounts represent the direct cost of providing assistance in the
areas of casino operations, marketing and promotion, customer service,
accounting and legal and other administrative functions. Historically, certain
employees of Grand provided service to both Company and non-Company operations.
In these instances, costs were allocated based on estimated time spent on each
business group.

EARNINGS PER SHARE

Earnings per share (EPS) is calculated for all periods based on the expected
exchange of one Lakes share for every four owned Grand shares. Basic EPS is
calculated by dividing earnings by the weighted average common shares
outstanding. Diluted EPS reflects the potential dilutive effect of all common
stock equivalents outstanding by dividing net income by the weighted average of
all common and dilutive shares outstanding.

LAND HELD FOR DEVELOPMENT

Land held for development consists of amounts related to an approximately
15-acre site in Las Vegas, Nevada, which the Company controls. All or any
portion of this site may be sold, held for sale or held for future development.
The Company is currently evaluating the potential sale of all or any portion of
this site and in connection therewith has entered into a 90-day exclusive
listing agreement with a real estate broker for the active marketing of this
site.

F-12
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
ACCOUNTING PRONOUNCEMENTS

The Company adopted Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income,"
effective December 29, 1997. SFAS 130 requires minimum pension liability
adjustments, unrealized gains or losses on the Company's available for sale
securities and foreign currency translation adjustments, which prior to adoption
were reported separately in division equity, to be included in other
comprehensive earnings. Total comprehensive earnings for the nine months ended
September 27, 1998 and September 28, 1997 were $50.5 million and $35.6 million.
Differences between comprehensive earnings for these periods were due to
unrealized holding gains and losses on securities available for sale.

The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants (AICPA) has issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities". SOP 98-5 requires
companies to expense as incurred all start-up and preopening costs that are not
otherwise capitalizable as long-lived assets. SOP 98-5 is effective for
financial statements for fiscal years beginning after December 15, 1998. The
Company does not believe the adoption of this pronouncement will be material to
the combined financial statements.

2. MANAGEMENT CONTRACTS FOR INDIAN-OWNED CASINOS:

The Company had contracts with the Mille Lacs Band for the management of two
gaming facilities in Onamia and Hinckley, Minnesota. The management contract for
the gaming facility in Onamia expired on April 2, 1998. The contract for the
gaming facility in Hinckley expires on May 15, 1999. While no decision has been
made with respect to renewal of the management contract for the Hinckley
facility, the Company believes that the management agreement will not be
renewed. The Mille Lacs Band has an option to purchase the Company's interest in
the management contract of the Hinckley facility. The purchase price is equal to
the Company's share of distributable profits during the 12-month period
preceding the date of purchase, multiplied by the years remaining under the
initial term of the management contract (or portion thereof).

In addition, the Company holds a management contract with the Tunica-Biloxi
Tribe of Louisiana for a gaming facility in Marksville, Louisiana, that expires
on June 3, 2001 and a management contract with the Coushatta Tribe of Louisiana
for a gaming facility in Kinder, Louisiana, that expires on January 16, 2002.

The management contracts govern the relationship between the Company and the
tribes with respect to the construction and management of the casinos. The
construction or remodeling portion of the agreements commenced with the signing
of the respective contracts and continued until the casinos opened for business;
thereafter, the management portion of the respective management contracts
continues for a period of seven years.

Under terms of the contracts, the Company as manager of the casino receives
a percentage of the distributable profits (as defined in the contract) of the
operations as a management fee after payment of certain priority distributions,
a cash contingency reserve, and guaranteed minimum payments to the tribes. In
the event the management contracts are not renewed upon expiration of their
initial term, the Company will be entitled to payments equal to a percentage of
the fair value of certain leased gaming equipment.

F-13
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. MANAGEMENT CONTRACTS FOR INDIAN-OWNED CASINOS: (CONTINUED)
The management contracts for the Tunica-Biloxi Tribe of Louisiana and the
Coushatta Tribe of Louisiana have been approved by the Bureau of Indian Affairs
(BIA). In October 1996, the Company entered into a restated management contract
with the Mille Lacs Band for the facility in Hinckley, Minnesota, which the
Company believes restates the terms and conditions of the original management
contract consistent with NIGC requirements.

The restated management contract for the Hinckley, Minnesota, casino has not
been approved by the NIGC and the Company believes the NIGC will not approve the
contract prior to expiration. While the Company believes that all of its
management contracts meet all requirements of the Indian Gaming Regulatory Act
of 1988 (IGRA), the BIA or the NIGC may attempt to reduce the terms or the
management fees payable under the management contracts or require other changes
to the contracts.

3. NOTES RECEIVABLE:

Notes receivable consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 28,
1998 1997
------------- ------------
<S> <C> <C>
Notes from the Coushatta Tribe with interest at a defined reference rate plus 1%
(not to exceed 16%), receivable in 84 monthly installments through January 2002... $ 21,846 $ 22,722
Notes from the Tunica-Biloxi Tribe with interest at a defined reference rate plus 1%
(not to exceed 16%), receivable in 84 monthly installments through June 2001...... 9,903 10,409
------------- ------------
Total notes receivable.......................................................... 31,749 33,131
Less--Current installments of notes receivable.................................... (7,571) (6,654)
------------- ------------
Notes receivable, less current installments....................................... $ 24,178 $ 26,477
------------- ------------
------------- ------------
</TABLE>

4. INCOME TAXES:

During the quarter ended September 27, 1998, the Company recognized an
income tax benefit related to the write-off of a note receivable from
Stratosphere Corporation. A deferred tax asset was recorded in 1996 when the
Company set up a reserve allowance due to uncertainty related to the
collectibility of the receivable. However, a full valuation allowance was
created for the deferred tax asset and no income tax benefit was recognized at
that time. Upon writing off the receivable and realizing the tax deduction in
the current year, the Company reversed a portion of the deferred tax asset
valuation allowance resulting in the recognition of a $13.1 million income tax
benefit.

F-14
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES:

LOAN GUARANTY AGREEMENTS

The Company has guaranteed a loan and security agreement entered into by the
Tunica-Biloxi Tribe of Louisiana for $16.5 million for the purpose of purchasing
a hotel and additional casino equipment. The agreement extends through 2000, and
as of September 27, 1998, the amount outstanding was 8.7 million.

On May 1, 1997, the Company entered into a guaranty agreement related to a
loan agreement entered into by the Coushatta Tribe of Louisiana in the amount of
$25.0 million, for the purpose of constructing a hotel and acquiring additional
casino equipment. The guaranty will remain in effect until the loan is paid. The
loan term is approximately five years. As of September 27, 1998, $16.4 million
has been advanced, and is outstanding.

The Company has provided a limited guaranty for the purpose of financing
Stratosphere Corporation Hotel and Casino equipment subject to a maximum
limitation amount of $8.7 million.

INDEMNIFICATION AGREEMENT

As a part of the Transaction, the Company has agreed to indemnify Grand
against all costs, expenses and liabilities incurred in connection with or
arising out of certain pending and threatened claims and legal proceedings to
which Grand and certain of its subsidiaries are likely to be parties. The
Company's indemnification obligations include the obligation to provide the
defense of all claims made in proceedings against Grand and to pay all related
settlements and judgments.

As security to support Lakes' indemnification obligations to Grand under
each of the Grand Distribution Agreement and the Merger Agreement, and as a
condition to the consummation of the Merger, Lakes has agreed to irrevocably
deposit, in trust for the benefit of Grand, as a wholly owned subsidiary of Park
Place, an aggregate of $30 million, consisting of four annual installments of
$7.5 million, during the four year period subsequent to the Effective Date.

As a part of the indemnification agreement, Lakes has agreed that it will
not declare or pay any dividends, make any distribution of Lakes' equity
interests, or otherwise purchase, redeem, defease or retire for value any equity
interests in Lakes without the written consent of Park Place.

The following descriptions are summaries and the status of certain pending
or threatened claims and legal proceedings for which the Company is obligated to
provide such indemnification.

STRATOSPHERE CORPORATION

In January 1997, Stratosphere and its wholly owned operating subsidiary
filed for reorganization under Chapter 11 of the U.S. Bankruptcy code.

In October 1997, the Company announced that it had not been able to reach an
agreement with holders of a significant portion of Stratosphere's First Mortgage
Notes for a consensual reorganization of Stratosphere that would involve the
Company's participation. The Company also announced that it had no intention of
participating in any plan of reorganization for Stratosphere.

On November 7, 1997, Stratosphere filed its Second Amended Plan, which has
been approved by the Bankruptcy Court and was declared effective on October 14,
1998. Pursuant to the Second Amended Plan, Stratosphere common stock that was
outstanding prior to the effective date of the Second Amended Plan

F-15
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
was canceled. Prior to the effectiveness of the Second Amended Plan, Grand owned
approximately 37% of the issued and outstanding common stock of Stratosphere.

In March 1995, in connection with Stratosphere's issuance of its First
Mortgage Notes, the Company entered into a Standby Equity Commitment Agreement
between Stratosphere and Grand (the Standby Equity Commitment). Grand agreed in
the Standby Equity Commitment, subject to the terms and conditions stated in the
Standby Equity Commitment, to purchase up to $20.0 million of additional equity
in Stratosphere during each of the first three years Stratosphere is operating
(as defined in the Standby Equity Commitment) to the extent Stratosphere's
consolidated cash flow (as defined in the Standby Equity Commitment) during each
of such years did not exceed $50.0 million.

Based on provisions of the U.S. Bankruptcy Code that Grand contends apply to
the Standby Equity Commitment, Grand has asserted that the enforceability of the
Standby Equity Commitment is in question. Both the Official Committee of
Noteholders in the Stratosphere Bankruptcy case (the Official Committee) and the
current trustee under the indenture (the Trustee) pursuant to which Stratosphere
issued its First Mortgage Notes claim that the Standby Equity Commitment is
enforceable.

The enforceability of the Standby Equity Commitment is the subject of
litigation to which Grand is a party in the Stratosphere Bankruptcy case (as a
result of a motion brought by the Official Committee), and the U.S. District
Court for the District of Nevada (as a result of an action brought by the
Trustee). On February 19, 1998, the bankruptcy court ruled that the Standby
Equity Commitment is not enforceable in the Stratosphere bankruptcy proceeding
as a matter of law.

The Second Amended Plan contemplates the formation of a new limited
liability company which will own and pursue certain alleged claims and causes of
action that Stratosphere and other persons may have against numerous
third-parties, including Grand and/or officers and/or directors of Grand. The
Second Amended Plan contemplates capitalizing this new limited liability company
with an investment of $5 million. As of October 30, 1998, Grand has not been
served with any such litigation.

STRATOSPHERE SECURITIES LITIGATION

Grand and certain persons who have been indemnified by Grand (including
certain Grand officers and directors) are defendants in legal actions pending in
the state court and in the federal court in Nevada. These actions arise out of
Grand's involvement in the Stratosphere Tower, Casino and Hotel project in Las
Vegas, Nevada.

The plaintiffs in the actions who are current and/or former Stratosphere
Corporation shareholders, seek to pursue the actions as class actions, and make
various claims against Grand and Grand-related defendants, including securities
fraud. In September 1997 Grand and certain defendants submitted a motion to
dismiss the plaintiffs' Second Amended Complaint. In April 1998, this motion was
granted, in part, and denied, in part. The plaintiffs are pursuing the claims
that survived the motion to dismiss. Grand and Grand-related defendants have
also submitted a motion for summary judgment seeking an order that such
defendants are entitled to judgment as a matter of law. As of September 1998,
the plaintiffs are engaged in discovery related to the issues raised by the
summary judgment motion. The court will not decide the motion until after such
discovery is completed and the parties have submitted their respective
arguments. The state court action has been stayed pending resolution of the
federal court action.

F-16
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
Grand intends to vigorously defend itself and the other Grand-related
defendants against the claims made in both the state and the federal action.

SECURITIES LITIGATION

Grand and certain of Grand's current and former officers and directors are
defendants in a legal action pending in the federal court in Minnesota. This
action arises out of Grand's involvement in Stratosphere.

The plaintiffs in the action who are current and/or former Grand
shareholders, seek to pursue the action as a class action and make various
claims against Grand and the other Grand-related defendants, including
securities fraud. Grand and Grand-related defendants submitted a motion to
dismiss the plaintiffs claims. In December 1997, that motion was granted in part
and denied in part. Grand and Grand related defendants have also submitted a
motion for summary judgment. Plaintiffs and Grand and the other defendants are
engaged in discovery in the action.

Grand intends to vigorously defend itself and the other Grand-related
defendants against the claims that survived Grand's motion to dismiss.

DERIVATIVE ACTION

Certain of Grand's officers and directors are defendants in a legal action
pending in the state court of Minnesota. This action arises out of Grand's
involvement in Stratosphere.

The plaintiffs in the action who are current and/or former Grand
shareholders, seek to pursue the action against the defendants on behalf of
Grand and make various claims that the defendants failed to fulfill claimed
duties to Grand. Grand is providing the defense for the defendants pursuant to
Grand's indemnification obligations to the defendants.

Grand's board of directors appointed an independent special litigation
committee under Minnesota law to evaluate whether Grand should pursue the claims
made by the plaintiffs. That committee has completed its evaluation and has
recommended to the court that the plaintiffs' claims not be pursued.

In January 1998, Grand submitted a motion for summary judgment based on the
special litigation committee's report. In May 1998, the court granted that
motion, thereby dismissing the plaintiffs' claims. In August 1998, the
plaintiffs appealed the court's ruling. That appeal is pending.

TULALIP TRIBES LITIGATION

In 1995, Grand entered into discussion with Seven Arrows, L.L.C. ("Seven
Arrows"), regarding possible participation by Grand in a proposed casino resort
development on land in the State of Washington held in trust by the United
States for the Tulalip Tribes. Grand and Seven Arrows entered into a letter of
intent providing for the negotiation of a revision to the Seven Arrows limited
liability company agreement by which Grand (or a subsidiary of Grand) would
become a member of Seven Arrows. Those negotiations were not completed, and no
revision to the limited liability company agreement was signed.

During the negotiations, Grand entered into an agreement (the "Advance
Agreement") with Seven Arrows and the Tulalip Tribes which provided for the loan
by Grand and Seven Arrows of certain amounts

F-17
<PAGE>
LAKES

(A DIVISION OF GRAND CASINOS, INC. AS DEFINED IN NOTE 1)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
to the Tulalip Tribes upon the satisfaction of certain conditions. Grand
contends that those conditions were never satisfied. Neither Grand nor Seven
Arrows advanced any amount under the Advance Agreement.

Seven Arrows, the Tulalip Tribes and Grand are currently parties to
litigation in the U.S. District Court in Washington with respect to a lease and
sublease between the Tulalip Tribes and Seven Arrows for the land on which the
casino was proposed and the Advance Agreement. Among other things, Seven Arrows
seeks damages from the Tulalip Tribes for lost profits of up to $15 million and
for recovery of sums paid to the Tribes between $2 million and $3 million in its
second amended complaint. Grand is not a party to the second amended complaint.

The Tulalip Tribes filed a complaint against Grand on September 30, 1998.
The complaint against Grand contains several counts, including (i) a request for
judgment declaring that the tribe's termination of the agreements was effective
and quieting title in the land; (ii) a claim that Grand is liable on the lease,
sublease, and Advance Agreement; (iii) a claim for negligent misrepresentation;
(iv) a claim that Grand stands as warrantor and surety of Seven Arrows's
obligations; and (v) a claim for estoppel. Each claim for damages seeks the sum
of $856,000 for out-of-pocket expenses and for "lost profits damages" in an
amount to be proved at trial.

Grand's answer has not yet been filed. Grand does not oppose the tribe's
effort to quiet title to its land. Grand denies that it is factually or legally
liable for the obligations or liabilities of Seven Arrows under the lease and
sublease. Grand contends that it did not breach the Advance Agreement. Grand
denies that it is liable for negligent misrepresentation.

Seven Arrows has, on previous occasions, threatened unpleaded claims against
Grand. Grand does not know the nature or extent of any such additional claims
and, as of the date hereof, has not received any pleading in any action stating
such a claim. However, Grand expects to receive a claim by Seven Arrows in the
near future. Such a claim, if made, could be in amounts material to Lakes.

Grand's liability for damages to all parties in the aggregate cannot exceed
$15 million. Discovery has commenced and a three-week bench trial is set for
November 1, 1999.

OTHER LITIGATION

Grand is involved in various other inquiries, administrative proceedings,
and litigation relating to contracts and other matters arising in the normal
course of business. While any proceeding or litigation has an element of
uncertainty, management currently believes that the final outcome of these
matters are not likely to have a material adverse effect upon Grand's or the
Company's consolidated financial position or results of operations.

F-18
<PAGE>
VOTING PROCEDURES

We enclosed a form of proxy for the Hilton Special Meeting with the Joint
Proxy Statement/Prospectus mailed to Hilton stockholders on October 26, 1998. If
you have already returned your proxy, your prior vote will still be counted,
unless you revoke your prior vote or send in a new proxy card.

We enclosed a form of proxy for the Grand Special Meeting with the Joint
Proxy Statement/Prospectus mailed to Grand shareholders on October 26, 1998. If
you have already returned your proxy card, your prior vote will still be
counted, unless you revoke your prior vote or send in a new proxy card.

IF YOU HAVE ALREADY RETURNED A PROXY CARD AND DO NOT WISH TO CHANGE YOUR
VOTE, NO FURTHER ACTION IS REQUIRED.

If you would like an additional copy of the Joint Proxy Statement/Prospectus
or a new proxy card, or if you have questions about the transactions, you should
contact D.F. King & Co., Inc. toll free at (800) 207-3155 if you are a Hilton
stockholder or (800) 290-6429 if you are a Grand shareholder. For Hilton
stockholders, you can also call Investor Relations at Hilton at (310) 278-4321.
For Grand shareholders, you can also call Investor Relations at Grand at (612)
449-9092.

FORWARD-LOOKING STATEMENTS

This Supplement and the Joint Proxy Statement/Prospectus contain
forward-looking statements with respect to Hilton, Park Place, Grand and Lakes
that are subject to risks and uncertainties. For further information, see page
101 of the Joint Proxy Statement/Prospectus, which also applies to this
Supplement.