MAJESTIC STAR CASINO LLC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

or

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

Commission file number: 333-06489

Indiana THE MAJESTIC STAR CASINO, LLC 43-1664986

Indiana THE MAJESTIC STAR CASINO CAPITAL CORP. 35-2100872

(State or other jurisdiction of (Exact name of registrant as specified in its charter) (I.R.S. Employer
incorporation or organization) Identification No.)

One Buffington Harbor Drive
Gary, Indiana
46406-3000
(219) 977-7823

(Registrant's address and telephone number, including area code)
Securities registered pursuant to section 12(b) of the act: None
Securities registered pursuant to section 12(g) of the act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.

Yes X No ______
---

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE: NONE

OMITTED ITEMS - The Registrant completed the acquisition of the assets of three
subsidiaries of Fitzgeralds Gaming Corporation on December 6, 2001. Financial
statements for the acquired businesses are not yet available in order to comply
with Rule 3-02 of Regulation S-X. Accordingly, reference to such financial data
in Item 6 and Item 7 is omitted from this Report, and such financial statements
are omitted from Item 8. Such information will be filed by amendment of this
Report.

THE MAJESTIC STAR CASINO, LLC
2001 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

Item 1. Business ....................................................................... 1

Item 2. Properties ..................................................................... 11

Item 3. Legal Proceedings .............................................................. 12

Item 4. Submission of Matters to a Vote of Security Holders ............................ 13

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .......... 13

Item 6. Selected Financial Data ........................................................ 13

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations .......................................................... 14

Item 7A. Quantitative and Qualitative Disclosures About Market Risk ..................... 29

Item 8. Financial Statements and Supplementary Data .................................... 30

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ........................................................... 30

PART III

Item 10 Directors and Executive Officers of Registrant ................................. 30

Item 11. Executive Compensation ......................................................... 31

Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters ................................................ 32

Item 13. Certain Relationships and Related Transactions ................................. 32

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............... 33

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PART I

ITEM 1. BUSINESS

GENERAL

The Majestic Star Casino, LLC (the "Company" or the "Registrant," which
may also be referred to as "Majestic Star," "we," "us" or "our") was formed in
December 1993 as an Indiana limited liability company. The Company is a
multi-jurisdictional gaming company that owns and operates one riverboat gaming
facility located in Gary, Indiana and, through certain "unrestricted
subsidiaries," three Fitzgeralds-brand casino-hotels located in Tunica County,
Mississippi ("Fitzgeralds Tunica"), Black Hawk, Colorado ("Fitzgeralds Black
Hawk") and downtown Las Vegas, Nevada ("Fitzgeralds Las Vegas"). As of April 1,
2002, the riverboat casino and the Fitzgeralds properties collectively contain
approximately 4,348 slot machines, 115 table games and 1,145 hotel rooms.

In June 1999, the Company issued $130.0 million of 10 7/8% Senior
Secured Notes due 2006 (the "Majestic Star Senior Secured Notes"). The Majestic
Star Casino Capital Corp. ("Majestic Star Capital"), one of the Company's two
direct wholly-owned subsidiaries, was formed solely to serve as a co-issuer to
facilitate the offering of the Majestic Star Senior Secured Notes and has no
assets or operations. In August 1999, the Company entered into a $20.0 million
credit facility (the "Majestic Star Credit Facility"). The Majestic Star Senior
Secured Notes and the Majestic Star Credit Facility are secured by substantially
all current and future assets of the Company other than certain excluded assets
which excluded assets include the assets of the Company's unrestricted
subsidiaries.

The Company's other direct wholly-owned subsidiary, Majestic Investor,
LLC ("Investor"), was organized on September 12, 2000 as an "unrestricted
subsidiary" under the Company's Indenture relating to the Majestic Star Senior
Secured Notes (the "Majestic Star Indenture"). On November 22, 2000, Investor
entered into a definitive agreement to purchase Fitzgeralds Tunica, Fitzgeralds
Black Hawk and Fitzgeralds Las Vegas from Fitzgeralds Gaming Corporation
("Fitzgeralds") for approximately $149.0 million in cash, subject to
adjustments, plus the assumption of certain liabilities. On October 16, 2001,
Investor assigned all of its rights and obligations to purchase the Fitzgeralds
assets to Majestic Investor Holdings, LLC ("Investor Holdings"), a wholly-owned
subsidiary of Investor and also an "unrestricted subsidiary" under the Majestic
Star Indenture. The acquisition was consummated on December 6, 2001. The assets
of Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas are held
by Barden Mississippi Gaming, LLC ("Barden Mississippi"), Barden Colorado
Gaming, LLC ("Barden Colorado"), and Barden Nevada Gaming, LLC ("Barden
Nevada"), respectively. Each of such entities are direct wholly-owned
subsidiaries of Investor Holdings and "unrestricted subsidiaries" under the
Majestic Star Indenture.

On December 6, 2001, Investor Holdings issued $152.6 million 11.653%
Senior Secured Notes due 2007 (the "Investor Holdings Senior Secured Notes") to
finance the purchase of the Fitzgeralds assets. Majestic Investor Capital Corp.,
co-issuer of the Investor Holdings Senior Secured Notes and a wholly-owned
subsidiary of Investor Holdings, was formed specifically to facilitate the
offering of such notes and has no material assets or operations. Also on
December 6, 2001, Investor Holdings entered into a $15.0 million credit facility
(the "Investor Holdings Credit Facility").

The Investor Holdings Senior Secured Notes and the Investor Holdings
Credit Facility are secured by substantially all current and future assets of
Investor Holdings (including the Fitzgeralds assets) other than certain excluded
assets. Because each of Investor, Investor Holdings, Barden Mississippi, Barden
Colorado and Barden Nevada is an "unrestricted subsidiary" under the Majestic
Star Indenture, their assets, including Fitzgeralds Tunica, Fitzgeralds Black
Hawk and Fitzgeralds Las Vegas, are excluded from the collateral securing the
Majestic Star Senior Secured Notes and the Majestic Star Credit Facility.
Accordingly, the Majestic Star Senior Secured Notes and the Majestic Star Credit
Facility are secured

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primarily by the assets of the riverboat casino and gaming facility in Gary,
Indiana and Majestic Star's noteholders and lender have no recourse to the
Fitzgeralds assets. Similarly, the Investor Holdings Senior Secured Notes and
the Investor Holdings Credit Facility are secured primarily by the Fitzgeralds
assets and Investor Holdings' noteholders and lender have no recourse to the
Majestic Star assets. Majestic Star does not guarantee or otherwise have any
obligations under the Investor Holdings Senior Secured Notes or the Investor
Holdings Credit Facility. In addition, Investor Holdings and its subsidiaries
are prohibited from making distributions to the Company and its subsidiaries
except under certain prescribed conditions. The Company and certain of its
subsidiaries also are prohibited from engaging in transactions with Investor
Holdings and its subsidiaries other than on an arm's length basis and in
accordance with certain other prescribed conditions.

Because the Company's noteholders and lender have no recourse to the
Fitzgeralds assets, this Annual Report on Form 10-K focuses primarily on the
Company's consolidated operations and on the Company's riverboat gaming
operation, with limited information concerning the Fitzgeralds operations. For
additional information specific to the operation of the Fitzgeralds properties,
please refer to the Majestic Investor Holdings, LLC Annual Report on Form 10-K
from inception (September 14, 2001) through December 31, 2001, as filed with the
Securities and Exchange Commission (the "Investor Holdings 10-K").

THE RIVERBOAT CASINO AND GAMING FACILITY

The Company's riverboat casino and gaming facility, the Majestic Star
Casino, commenced operations in Gary, Indiana on June 7, 1996 pursuant to a
five-year riverboat owner's license granted to it by the Indiana Gaming
Commission (the "IGC"). On August 23, 2001, the Company's riverboat ownership
license was unanimously renewed by the IGC for a one-year period beginning June
7, 2001 (as under Indiana gaming laws, a licensee may only renew its original
license for one-year periods). As of April 1, 2002, the Company's vessel
contains approximately 43,000 square feet of casino space, 1,445 slot machines
and 52 table games on three decks. The Majestic Star Casino is part of a gaming
complex (the "Buffington Harbor Gaming Complex") developed at Buffington Harbor
in Gary, Indiana, and owned by Buffington Harbor Riverboats, L.L.C. ("BHR" or
the "BHR Joint Venture"), a joint venture which is owned equally (50%) by the
Company and Trump Indiana, Inc. (the "Joint Venture Partner"). The Company and
the Joint Venture Partner, the holder of a second gaming license to operate from
Gary, formed the BHR Joint Venture to own and operate certain common facilities
of the Buffington Harbor Gaming Complex such as a guest pavilion, vessel berths,
parking lots and other infrastructure. The Company and the Joint Venture Partner
each operate its own riverboat casino at the Buffington Harbor Gaming Complex on
a staggered cruise schedule, which reduces waiting times to board a riverboat
casino.

The executive offices of the Company are located at One Buffington
Harbor Drive, Gary, Indiana 46406-3000, and the Company's telephone number is
(219) 977-7823.

OPERATING STRATEGY

The principle elements of our operating strategy include:

Focus on Quality and Service at an Affordable Price. The Company's
casinos provide a high-quality casino entertainment experience at an affordable
price to attract middle income guests. We believe these middle income guests
constitute the largest segment of potential gaming customers who we can then
identify, qualify and target for direct marketing activities. The Company's
approach to business focuses on guest service and includes trained hosts to
personally assist guests; friendly employees; quality food, beverages and
lodging at a moderate price (except for the Gary riverboat casino and
Fitzgeralds Black Hawk, which do not include hotels); a mix of gaming machines
tailored to its customers; and personal attention through direct mail promotions
and targeted incentives.

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Management recognizes that consistent quality and a comfortable
atmosphere stem from the collective care and friendliness of each team member.
Toward this end, management takes a hands-on approach through active and direct
involvement with team members at all levels.

The Company believes that such an approach to business creates a
comfortable, familiar and friendly environment that promotes customer loyalty
and satisfaction, enhances playing time, leads to a high rate of repeat business
and is the basis for the further development of the Company's gaming brands and
its reputation for quality and service at an affordable price.

Promote Gaming Brands. The Company believes it is important to promote
its gaming brands to attract and retain customers. In February 2000, the Company
began a comprehensive integrated marketing campaign to brand the Majestic Star
Casino as "the place to play" for slot customers from the middle income segment.
The Company's registered tagline, "We've Got Your Slots"(R) has appeared in all
advertising venues including television, radio, print and outdoor media and will
allow the Company to enhance its slot leadership positioning among Chicago-area
gaming facilities. The Company intends to utilize this broad marketing technique
to attract middle income customers, who it is then able to qualify and target
for direct marketing activities.

The Fitzgeralds brand developed into what the Company believes to be a
nationally recognized gaming brand by using a consistent Irish Luck theme
throughout the casinos, hotels, restaurants and bars at all of its properties.
The Irish Luck theme incorporates various aspects of Irish folklore, such as
leprechauns, horseshoes, four-leaf clovers, the Blarney Stone and a pot of gold
at the end of a rainbow, as well as Irish music. The Company believes that this
theme creates an exciting and comfortable environment together with a
distinctive brand identity for customers.

Capitalize on Player Tracking and Extensive Guest Database. Direct
marketing to our guests is a key component of the Company's operating strategy.
Each of the Company's properties contains a player tracking system that permits
detailed player tracking at each individual property. The system uses the
Majestic and Fitzgeralds Cards to track individual or combined play at slot
machines, table games and keno, as well as food and beverage and hotel
expenditures at each individual property. This player tracking system allows us
to identify players and their gaming preferences and practices and to develop a
comprehensive customer database for marketing and guest services purposes. Our
player tracking program allows us to target our marketing programs to categories
of players, including through advertising programs, promotions, tournaments with
substantial cash prizes, special group and tour packages and other events and
incentives designed to promote customer loyalty and increase repeat business.
Our tracking system also allows us to better tailor our pricing, promotions,
gaming machine selection and other guest services to customer preferences. In
the future, we intend to fully integrate our tracking system data in order for
each property to share its data with other related properties and thereby
encourage customers of each individual property to patronize our other related
properties. On a consolidated basis, the Company currently has over 670,000
active players in its Majestic and Fitzgeralds database and over 118,000 active
players in its Majestic database.

In addition, the Company has established the Club Majestic and Club
Majestic Premier Slot Clubs ("Club Majestic"). Club Majestic enables the Company
to maintain a comprehensive database of information about its customers. The
Company also has an established strategy for recruiting and retaining higher
activity casino customers through the reward of certain promotional allowances,
such as direct mail cash back offers for slot customers, and complimentary food,
beverage and entertainment when gaming play warrants. Promotional allowances are
a relatively small percentage of the potential casino revenue obtainable from
these tracked high limit customers. The Company offers two VIP lounges for Club
Majestic guests. The Company has aggressively utilized its VIP lounges for
entertaining Club Majestic guests and for special events and promotions.
Majestic Star Casino management believes that its continued marketing efforts at
its riverboat gaming facility, combined with the amenities offered by its

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vessel and the extension of credit to customers, will allow the Company to
continue to increase its share of the middle and higher income market in the
greater Chicago metropolitan area.

Emphasis on Slot Play. The Company emphasizes slot machine wagering,
which it believes is the fastest growing and most profitable segment of the
casino entertainment business. The increasing popularity of slot machines is
due, in part, to the continuing rapid technological development that is
resulting in the replacement of older devices with advanced interactive
electronic games and bill acceptors. These newer games offer greater variety,
higher pay outs and longer periods of play for the casino entertainment dollar
relative to simple older devices. The Company continues to enhance and modify
its mix of slot machines to meet the demand of its customers. The Company
attempts to maintain payout percentages that are competitive to attract and
retain customers.

Emphasis on Attributes of Buffington Harbor. With respect to the
Majestic Star Casino, the Company emphasizes the attributes of the Buffington
Harbor Gaming Complex, including the ability to park once and play twice (at two
casinos) and direct highway access. In June 2000, the Company launched a
marketing campaign with its Joint Venture Partner whereby both entities jointly
advertise the attributes of the Buffington Harbor Gaming Complex principally
through billboards and print. The Buffington Harbor Gaming Complex also has
enhanced and expanded its food outlets. In 2000, three new food kiosks were
introduced including Harbor Treats and Shou Ki Sushi which are owned and
operated by third parties and Jackpot Java which is owned and operated by BHR.
Entertainment is also being provided in the Lakeshore lounge on weekends.
Currently, a 2,000 space covered parking structure is under construction at the
Buffington Harbor Gaming Complex, which is expected to be completed in May 2002.

GROWTH STRATEGY

The Company believes that there are substantial future growth
opportunities within each of the markets where its properties are located. With
respect to the Majestic Star Casino, the Company's expansion strategy is focused
on increasing the overall size of the Buffington Harbor Gaming Complex. Don H.
Barden, Chairman and CEO of the Company, through an affiliated company, Gary New
Century, LLC ("GNC"), purchased for $25.0 million approximately 190 acres
adjacent to Buffington Harbor in September 2000. A portion of this acreage was
subsequently sold by Mr. Barden to a joint venture, Buffington Harbor Parking
Associates, LLC ("BHPA") formed by the Joint Venture Partner and AMB Parking,
LLC ("AMB") (a company wholly-owned indirectly by Mr. Barden) in order to
jointly construct and operate a multi-level covered parking structure. The
parking structure is expected to provide customers with approximately 2,000
covered parking spaces and indoor access to the Buffington Harbor Gaming
Complex. Customers currently either park their automobiles in a remote
self-parking lot or use valet parking services. The parking project is estimated
to cost approximately $37.7 million including approximately $14.2 million for
the land. Approximately $20.9 million of the project costs for the parking
structure was financed with the balance of $16.8 million being funded by lease
payments from the Company and the Joint Venture Partner. The financing was
obtained pursuant to a Construction and Term Loan Agreement, dated June 19,
2001, between BHPA and US Bank, N.A., as agent. Upon completion of the parking
garage, the Company and the Joint Venture Partner each anticipate entering into
a lease with BHPA with lease payments in an amount sufficient to service the
debt on the BHPA financing. Each party will receive a credit of up to 50% of the
lease obligations if the other party (the Company or the Joint Venture Partner,
as the case may be) makes its lease payments. The Company believes that the
convenience of the new parking structure will attract a significant number of
new customers to Buffington Harbor, thereby providing opportunities for the
Company to increase its net revenues and cash flow.

The Buffington Harbor Gaming Complex is located on an approximately
100-acre site. The Company believes that this is only one of two locations in
the Chicago market with the capacity to significantly expand its land-based
facilities. In addition to the BHR Joint Venture property, GNC, an affiliate of
the Company, has entered into discussions with various parties concerning the
feasibility of developing the land adjacent to the BHR Joint Venture property.

4

There are a number of projects planned or in development with respect
to the Fitzgeralds properties, including a waterfront park being developed by
Tunica County adjacent to the Fitzgeralds Tunica property, infrastructure
developments in the Black Hawk market, and entertainment and retail projects in
Las Vegas. For further information regarding the Company's growth strategy for
each of the Fitzgeralds properties, please refer to the Investor Holdings 10-K.

We regularly evaluate possible expansion and acquisition opportunities.
We may undertake these opportunities either alone or with joint venture
partners. The Company's ability to expand will depend upon a number of factors
including, but not limited to: (i) the identification and availability of
suitable locations, and the negotiation of acceptable purchase, lease, joint
venture or other terms; (ii) securing required state and local licenses, permits
and approvals, which in some jurisdictions may be limited in number, (iii)
political factors; (iv) the risks typically associated with any new
construction; and (v) the availability of adequate financing or acceptable
terms, particularly in light of restrictive covenants contained in the
instruments relating to the Majestic Star Senior Secured Notes and the Majestic
Star Credit Facility (and the Investor Holdings Senior Secured Notes and
Investor Holdings Credit Facility with respect to Investor Holdings), which
limit the Company's and Investor Holdings', as the case may be, ability to
obtain such financing. As a result, there can be no assurance that the Company
will be able to expand either its current properties or to add any other
additional locations or, if such expansion occurs, that it will be successful.

COMPETITION

The Company faces intense competition in each of the markets in which
its gaming facilities are located. Many of the Company's competitors have
significantly greater name recognition and financial, marketing and other
resources. The Company's riverboat casino and Fitzgeralds properties compete
principally with other gaming properties in or near California, Illinois,
Indiana, Nevada, Michigan, Mississippi and Colorado, including gaming operations
on Native American lands. In addition to regional competitors, the Company
competes with gaming facilities nationwide, including land-based casinos in
Nevada and Atlantic City, not only for customers but also for employees and
potential future gaming sites.

The Company also competes, to some extent, with other forms of gaming
on both a local and national level, including state-sponsored lotteries,
Internet gaming, on- and off-track wagering and card parlors. The expansion of
legalized gaming to new jurisdictions throughout the United States has increased
competition faced by the Company and will continue to do so in the future.
Additionally, if gaming were legalized in jurisdictions near the Company's
properties where gaming currently is not permitted, the Company would face
additional competition. There can be no assurance that the Company will be able
to continue to compete successfully in its existing markets or that the Company
will be able to compete successfully against any such future competition.

The Majestic Star Casino is dependent primarily on adults residing
within 150 miles of the Buffington Harbor Gaming Complex, which includes the
Chicago metropolitan area. Illinois and Indiana state laws limit the total
number of gaming licenses issuable in the Chicago metropolitan area to ten. Nine
of the licenses are currently in operation and the number of licenses cannot be
increased without legislative action. The Company also expects to compete to a
lesser extent with six additional riverboats authorized to operate in southern
Indiana, of which five are currently operational. There can be no assurance that
Indiana or Illinois will not authorize additional gaming licenses in the future.
The authorization of additional gaming licenses could have a material adverse
effect on the Company.

Dockside gaming was approved in Illinois in June 1999. Since such
approval, the Illinois gaming market grew by approximately 8.1% and the
northwest Indiana gaming market grew by approximately 7.3%. Notwithstanding the
market growth, management is unable to predict whether increased competition in
the market from dockside gaming will have a negative impact on the Company's
revenues.

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At present, Harrahs is operating a barge-based casino in Illinois and Hollywood
is in the process of constructing its own barge-based casino.

Legislation has also been introduced in Illinois to provide for
land-based casinos in Chicago and to expand riverboat gaming, including
authorization of additional or existing operators to move to new sites. In 2002,
legislation was introduced in Indiana to provide for dockside gaming and to
allow riverboat gambling companies to own two of the state's ten gaming
licenses. To date, no such legislation has been enacted. The Company is unable
to predict whether any such legislation, in Illinois, Indiana or elsewhere, will
be enacted or whether, if passed, it would have a material adverse impact on the
results of operations or financial condition of the Company.

The Majestic Star Casino also competes with gaming operations on Native
American lands, including those located, or to be located, in Michigan,
Wisconsin and possibly northern Indiana. The Saginaw Chippewa Indian Tribe is
currently operating one of the largest Native American gaming complexes in the
United States in Mt. Pleasant, Michigan, approximately 250 miles northeast of
Gary, Indiana. The Pokagon Band of Potawatomi Indians have revenue-sharing and
infrastructure financing agreements with local officials in New Buffalo
Township, Michigan. These agreements advance the Band's goal of opening a
land-based gaming facility by December 2002. The Pokagons plan to have the
second largest casino in the Midwest, which would be substantially larger in
size than any of the riverboats currently operating in the Chicago metropolitan
area. The casino would be approximately 50 miles east of the Buffington Harbor
Gaming Complex.

The Company believes that the Majestic Star Casino's ability to compete
successfully in the riverboat gaming industry will be primarily based on the
quality and location of its gaming facilities, the effectiveness of its
marketing efforts, and overall levels of customer service and satisfaction. The
Company believes that the construction of the parking facility will provide
added competitive benefits to the Buffington Harbor Gaming Complex.

For information regarding competition specific to the Fitzgeralds
properties, please refer to the Investor Holdings 10-K.

FINANCIAL INFORMATION ABOUT SEGMENTS

For financial information regarding the Company's business segments,
see Note 15 of the Notes to Consolidated Financial Statements.

EMPLOYEES AND UNIONS

At December 31, 2001, on a consolidated basis, the Company employed
approximately 3,482 persons and had collective bargaining contracts with unions
covering approximately 488 of its employees. The Company believes that its
overall relations with its employees are good.

At December 31, 2001, the Majestic Star Casino employed approximately
965 persons and the BHR Joint Venture employed approximately 366 persons. The
Majestic Star Casino and the BHR Joint Venture have collective bargaining
agreements with Local 1 of the Hotel Employees and Restaurant Employees
International Union ("H.E.R.E."), covering approximately 66 employees of the
Majestic Star Casino and approximately 173 employees of the BHR Joint Venture.
The Majestic Star Casino's H.E.R.E. members are exclusively in food and beverage
positions. The agreements expired on June 30, 2001 and are currently being
renegotiated. The BHR Joint Venture also has collective bargaining agreements
with the Operating Engineers Union, covering approximately 14 employees of its
facilities department. The agreement with the BHR Joint Venture expired on July
1, 2001 and a new agreement has been ratified and is in the process of being
signed. The Majestic Star Casino also has a collective bargaining agreement with
the Seafarers International Union that covers approximately 29 employees in the
marine operations department. The agreement expires on July 10, 2003.

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

For information regarding employees specific to the Fitzgeralds
properties, please refer to the Investor Holdings 10-K.

TRADE NAMES, TRADEMARKS AND SERVICES MARKS

The Company owns certain trademarks which are integral to the business
and operation of its riverboat gaming facility. The most significant of these
are Majestic Star Casino (words and design), Majestic Star, Club Majestic, Club
Majestic Premier, Change Your Luck! and We've Got Your Slots. Majestic Star
Casino (words and design), Majestic Star and Club Majestic are currently
registered in the United States Patent and Trademark Office ("PTO") and
applications for registrations of the other above referenced trademarks have
been filed in the PTO. Generally, registrations with the PTO last for ten years
and may be renewed for additional ten-year periods.

With respect to the Fitzgeralds properties, as part of the Fitzgeralds
acquisition, Investor Holdings acquired proprietary rights in registered and
common law trade names, trademarks and service marks used in connection with the
business, including the "Fitzgeralds" mark. Fitzgeralds retained limited rights
to use the "Fitzgeralds" mark.

SEASONALITY

The gaming operations of the Company's properties may be seasonal and,
depending on the location and other circumstances, the effects of such
seasonality could be significant. The properties' results are affected by
inclement weather in relevant markets. For example, because of the climate in
the Chicago metropolitan area, the Majestic Star Casino's operations are
expected to be seasonal with stronger results generally expected during the
period from May through September. Fitzgeralds Black Hawk, located in the Rocky
Mountains of Colorado, is subject to snow and icy road conditions during the
winter months. Also, at Fitzgeralds Las Vegas, business levels are generally
weaker from Thanksgiving through the middle of January (except during the week
between Christmas and New Year's) and throughout the summer, and generally
stronger from mid-January through Easter and from mid-September through
Thanksgiving. At Fitzgeralds Tunica and Fitzgeralds Black Hawk, business levels
are typically weaker from Thanksgiving through the end of the winter and
typically stronger from mid-June to mid-November. Accordingly, the Company's
results of operations are expected to fluctuate from quarter to quarter and the
results for any fiscal quarter may not be indicative of results for future
fiscal quarters.

ENVIRONMENTAL MATTERS

The Company is subject to certain federal, state and local
environmental, safety and health laws, regulations and ordinances, including the
Clear Air Act, Clean Water Act, Occupational Safety and Health Act, Oil
Pollution Act, Resource Conservation Recovery Act and the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"). The Company may incur material liability if contamination is
discovered on any of its properties.

For information regarding environmental matters specific to the
Fitzgeralds properties, please refer to the Investor Holdings 10-K.

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GOVERNMENTAL REGULATION

The ownership and operation of the Company's gaming facilities are
subject to various state and local laws and regulations in the jurisdictions
where they are located. The following is a summary of the provisions of the
Indiana laws and regulations applicable to the Company's riverboat gaming
facility and other laws and regulations applicable to the Company as a
registered holding company in Nevada and Mississippi. For information regarding
governmental regulations specific to the Fitzgeralds gaming facilities, please
refer to the Investor Holdings 10-K. The summary does not purport to be a full
description thereof and is qualified in its entirety by reference to such laws
and regulations.

Indiana Gaming Regulation

The ownership and operation of the Majestic Star Casino is subject to
regulation by the State of Indiana.

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

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

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

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

In determining whether to grant or renew an owner's license to an
applicant, the IGC considers a number of factors, including (i) the character,
reputation, experience and financial integrity of the applicant, (ii) the
facilities or proposed facilities for the conduct of riverboat gaming, (iii) the
prospective revenue to be collected by the state from the conduct of riverboat
gaming, (iv) the good faith affirmative action plan to recruit, train and
upgrade minorities in all employment classifications, (v) the financial ability
of the applicant to purchase and maintain adequate liability and casualty
insurance, (vi) whether the applicant has adequate capitalization to provide and
maintain the riverboat for the duration of the license and (vii) the extent to
which the applicant meets or exceeds other standards adopted by the IGC. The IGC
may also give favorable consideration to applicants for economically depressed
areas and applicants who provide for significant development of a large
geographic area. A person or entity holding a riverboat owner's license issued
by the IGC may not own more than a ten percent interest in another such
licensee. Legislation has been introduced during both the 2001 and 2002 Indiana
legislative sessions that would allow a person or entity to own not more than
two casinos. To date no such legislation has been enacted.

8

An owner's license expires five years after the effective date of the license
(unless earlier terminated or revoked) and may be renewed for one year periods
by the IGC upon satisfaction of certain statutory and regulatory requirements. A
gaming license is a revocable privilege and is not a property right pursuant to
the Riverboat Gambling Act. On June 3, 1996, the Majestic Star Casino obtained a
gaming license from the IGC. On August 23, 2001, the Company's riverboat
ownership license was unanimously renewed by the IGC for a one year period
beginning June 7, 2001.

Under IGC regulations, minimum and maximum wagers on games are left to
the discretion of the licensee. Wagering is required to be conducted with
tokens, chips or electronic cards instead of cash or coins. Each riverboat
gaming excursion is limited to a maximum duration of four hours unless a longer
excursion is expressly approved by the IGC. In January 2001, a bill providing
for dockside gaming as well as increased gross wagering taxes was passed by the
Indiana House of Representatives, one of the two legislative bodies of the
Indiana General Assembly. A similar bill providing for dockside gaming was
defeated by the Senate Rules Committee on March 28, 2001. In the 2002 regular
session of the Indiana General Assembly, legislation was introduced to, among
other things, authorize dockside gaming, authorize pari-mutuel pull tab gaming
at two Indiana horse racing facilities and certain off track betting facilities,
authorize a riverboat to be located in French Lick and West Baden, Indiana, make
certain changes to the admission taxes and wagering taxes collected by the State
of Indiana, allow a person or entity to own up to a 100% interest in not more
than two riverboats and make various other changes in the Riverboat Gambling
Act. Differing versions of this legislation passed each of the Indiana House of
Representatives and the Indiana Senate and the legislation was assigned to a
conference committee. The conference committee was unable to reconcile the
differences between the House and Senate versions of the legislation, and the
2002 regular session of the Indiana General Assembly adjourned on March 14,
2002, without enacting this legislation. To date no such legislation has been
enacted.

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

An Indiana admission tax of $3.00 for each person admitted to each
gaming excursion is imposed upon the license owner. Legislation has been
introduced in the past that would increase the admission tax to $5.00 per
person, and that would alter the way in which admission taxes are calculated,
but to date, no such legislation has been enacted. The Company is unable to
predict if this legislation will be reintroduced or if any other legislation
introduced in Indiana related to riverboat gaming will be enacted. If
legislation is enacted to increase the admission tax, the effect of such an
increase could have a material impact on the results of operations of the
Company. A 20% tax is imposed on the "adjusted gross receipts" received from
gaming operations, which is defined under the Riverboat Gambling Act as the
total of all cash and property received (including checks received by the
licensee whether or not collected), less the total of all cash paid out as
winnings to patrons and uncollected gaming receivables (not to exceed 2%).
Legislation has been introduced as recently as the 2002 Indiana General Assembly
session that would increase the tax and allow the riverboats to operate dockside
and/or barge facilities, but to date, no such legislation has been enacted. The
riverboat owner licensee must remit the admission and wagering taxes before the
close of business on the day following the day on which the taxes were incurred.
Indiana laws also permit the imposition of real property taxes on Indiana
riverboats at rates to be determined by local taxing authorities of the
jurisdiction in which a riverboat operates.

9

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

The Riverboat Gambling Act places special emphasis upon minority and
women business enterprise participation in the riverboat industry. The IGC is
directed by Indiana statute to establish annual goals for a riverboat owner
licensee for the use of minority and women business enterprises. Each riverboat
owner licensee is required to submit annually to the IGC a report that included
the total dollar value of contracts awarded for goods and services and the
percentage awarded to minority and women's business enterprises. The IGC may
suspend, limit or revoke an owner's gaming license or impose a fine for failure
to comply with these statutory requirements. For the calendar year ended
December 31, 2001, the Company has submitted unaudited reports to the IGC that
it believes meets these statutory requirements.

In addition, the Company and its affiliates are subject to restrictions
on the incurrence of debt. A riverboat licensee and its affiliates may enter
into debt transactions that total one million dollars or more only with the
prior approval of the Indiana Gaming Commission. Such approval is subject to
compliance with request procedures and a showing that each person with whom the
riverboat licensee and its affiliates enters into a debt transaction would be
suitable for licensure under the Indiana Riverboat Gambling Act. The Company and
Investor Holdings received such approval in mid-November 2001 in connection with
the purchase of the Fitzgeralds assets and the issuance of the Investor Holdings
Senior Secured Notes and a $15 million credit facility with Foothill Capital
Corporation ("Investor Holdings Credit Facility").

Other Gaming Regulation

The gaming licenses of the Fitzgerald Tunica and Fitzgerald Las Vegas
gaming facilities are held by Barden Mississippi and Barden Las Vegas,
respectively. Under the applicable gaming laws and regulations in Mississippi
and Nevada, each direct and indirect owner of such licenses is required to be
registered with the applicable gaming authorities and found suitable to own the
stock of its direct subsidiary. Accordingly, Barden Development, Inc., an
Indiana corporation and the sole owner and manager of the Company ("BDI"); the
Company, the owner of Investor; and Investor Holdings, the owner of each of
Barden Mississippi and Barden Nevada are "registered corporations" under and
subject to applicable Mississippi and Nevada law. Violation of applicable laws
and regulations by a registered corporation could subject such entity to
substantial fines and, under certain circumstances, forfeiture of earnings and
suspension or forfeiture of the gaming license.

Treasury Department Regulations

The Internal Revenue Code and Treasury Regulations require operators of
casinos located in the United States to file information returns for U.S.
citizens, including names and addresses of winners, for keno and slot machine
winnings in excess of prescribed amounts. The Internal Revenue Code and Treasury
Regulations also require operators to withhold taxes on some keno, bingo, and
slot machine winnings of nonresident aliens. We are unable to predict the extent
to which these requirements, if extended, might impede or otherwise adversely
affect operations of, and/or income from, the other games.

Regulations adopted by the Financial Crimes Enforcement Network of the
Treasury Department and the gaming regulatory authorities in some of the
domestic jurisdictions in which we operate casinos, require the reporting of
currency transactions in excess of $10,000 occurring within a gaming day,
including identification of the patron by name and social security number. This
reporting obligation began in May 1985 and may have resulted in the loss of
gaming revenues to jurisdictions outside the United States which are exempt from
the ambit of these regulations.

10

Compliance with Other Laws and Regulations

The Company's operations are also subject to extensive state and local
regulations in addition to the regulations described above, and, on a periodic
basis, we must obtain various other licenses and permits, including those
required to sell alcoholic beverages.

ITEM 2. PROPERTIES

The Company currently owns and operates the Majestic Star Casino in
Gary, Indiana, and through its indirect subsidiaries, Fitzgeralds Tunica in
Tunica County, Mississippi, Fitzgeralds Black Hawk in Black Hawk, Colorado, and
Fitzgeralds Las Vegas in Las Vegas, Nevada.

Buffington Harbor, Gary, Indiana
- --------------------------------

The Majestic Star Casino operates from the Buffington Harbor Gaming
Complex, which is shared with the Joint Venture Partner. Buffington Harbor is
located at the interchange of U.S. 12 and Indiana State Highway 912, just off of
I-80/94 and the Indiana Toll Road. The Buffington Harbor Gaming Complex is a
two-level, 90,000 square foot structure containing a 352-seat buffet, a 110-seat
steakhouse restaurant, several bars and lounges, gift shops and areas for
staging and ticketing. The complex features a grand entrance, granite and marble
floors, unique metallic finishes, two large fountains and a variety of lighting
effects.

The Buffington Harbor Gaming Complex is situated on an approximately
100-acre site, containing approximately 3,000 parking spaces, and offers valet
parking and convenient bus loading and unloading facilities. The Buffington
Harbor Gaming Complex includes a guest pavilion, vessel berths, parking lots and
other common area facilities. The Buffington Harbor Gaming Complex has three
food kiosks; Harbor Treats and Shou Ki Sushi, which are owned and operated by
third parties, and Jackpot Java, which is owned and operated by BHR.
Entertainment is also being provided in the Lakeshore lounge on weekends.
Buffington Harbor has the largest concentration of gaming positions in the
Chicago Market, offering patrons a total of approximately 3,500 gaming
positions, which is greater than the number of gaming positions that exist at
any other site in northwest Indiana. This number is also substantially greater
than the number of gaming positions allowed at any individual Illinois gaming
site, which is currently limited by Illinois gaming laws to 1,200. The Company
believes that it has achieved operating cost savings and marketing advantages
over its competitors as a result of the operation of two casinos at the same
location.

Buffington Harbor offers two cruising vessel casinos (one owned by the
Company and the other owned by the Joint Venture Partner) with a staggered
cruising schedule. As a result, patrons enjoy significantly reduced waiting
times to board a casino. Specifically, the maximum scheduled waiting time for
Buffington Harbor patrons is 30 minutes, compared to a maximum of 90 minutes in
all other northwest Indiana gaming locations. Further, gaming customers in the
Chicago area, Indianapolis, South Bend and Fort Wayne, Indiana, and Kalamazoo
and Grand Rapids, Michigan can conveniently access Buffington Harbor.

BHPA is constructing a parking garage which it intends to operate on
the land formerly leased from Lehigh Portland Cement Company and purchased from
GNC. The parking structure is expected to provide customers with approximately
2,000 covered parking spaces and indoor access to the Buffington Harbor Gaming
Complex. Customers currently either park their automobiles in a remote self
parking lot or use valet parking services. The Company believes that the
convenience of the new parking structure will attract a significant number of
new customers to Buffington Harbor, thereby providing opportunities to increase
its net revenues and cash flow. Upon completion of the parking garage, the
Company and the Joint Venture Partner each anticipate entering into identical
leases with BHPA with lease payments sufficient to service BHPA's debt. Each
party will receive a credit of up to 50% of the lease obligations if the other
party (the Company or the Joint Venture Partner, as the case may be) makes lease
payments. The Company expects the parking garage to open in May 2002.

11

All of the Company's assets related to the Majestic Star Casino,
including the vessel are subject to a lien in favor of the holders of the
Majestic Star Senior Secured Notes and the lender under the Majestic Star Credit
Facility.

Fitzgeralds Properties
- ----------------------

Fitzgeralds Tunica is located in north Tunica County, Mississippi,
approximately 30 miles from downtown Memphis, Tennessee, and is the focal point
of a heavily wooded, 50-acre site situated by the Mississippi River. Fitzgeralds
Black Hawk is located adjacent to the entrance to the downtown gaming area of
Black Hawk, Colorado, next to the Gilpin Casino and across the street from
Bullwhackers. Fitzgeralds Las Vegas is located on the city block bounded by
Fremont, Carson, Third and Fourth Streets at the Fremont Street Experience in
downtown Las Vegas. All of the Company's assets related to the Fitzgerald
properties are subject to a lien in favor of the holders of the Investor
Holdings Senior Secured Notes and the lender under the Investor Holdings Credit
Facility.

For further information regarding the Fitzgeralds properties, please
refer to the Investor Holdings 10-K.

ITEM 3. LEGAL PROCEEDINGS

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

On June 25, 1997, a complaint was filed in an Illinois Cook County
Court against Majestic Star Casino. The plaintiff, a former employee, was
injured during and as a result of a routine boat drill attempt and is requesting
compensatory and punitive damages totaling approximately $3.5 million. The suit
alleges that Majestic Star Casino failed to provide adequate safety measures to
their employees during these drills. The parties are in settlement negotiations.
The Company does not believe that the resolution of this suit will have a
material impact on the Company's financial position and results of operation.

On March 27, 1998, a complaint was filed in the Lake County Superior
Court in East Chicago, Indiana, against BHR, the Joint Venture Partner, and the
Company. The plaintiff, a former employee of the Company, claims to have been
assaulted in the BHR parking lot on June 25, 1997 and is requesting compensatory
and punitive damages totaling approximately $11.0 million. The suit alleges that
the Joint Venture Partner and the Company failed to provide adequate security to
prevent assaults. The Company intends to vigorously defend against such suit.
However, it is too early to determine the outcome of such suit and the effect,
if any, on the Company's financial position and results of operations.

On March 2, 2000, the Company was issued a notice of audit findings,
and on May 11 and 12, 2000, was issued notices of assessment by the Indiana
Department of Revenue for income tax withholding deficiencies for the years
ended 1996 and 1998. The Indiana Department of Revenue has taken the position
that wagering taxes should not be classified as an allowable deductible expense
for calculating state income taxes and therefore requires that wagering taxes be
added back to net income to determine the tax liability. The estimated tax
deficiency for 1996 is approximately $239,000 excluding interest and the
estimated tax deficiency for 1998 is approximately $315,000 excluding interest.
This same finding has been protested by other Indiana casinos. The Company has
filed an administrative protest and demand for hearing with the Indiana
Department of Revenue. However, it is too early to determine the outcome of such
a protest.

12

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

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

Not applicable.

PART II

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

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

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

(DOLLARS IN THOUSANDS)
Years Ended December 31,
2001 (1) 2000 1999 1998 1997
---- ---- ---- ---- ----

STATEMENT OF OPERATIONS DATA:
Net Operating Revenues (2) $129,593 $113,433 $ 117,172 $ 114,188 $ 94,393
Pre-opening Expenses 1,018 -- -- -- 1,254
Operating Income 17,024 10,920 18,932 13,685 607
Interest Expense, Net 15,628 14,105 14,605 14,991 11,046
Income (Loss)
Before Extraordinary Item (1,551) (5,367) 1,478 (4,473) (13,887)
Extraordinary Item -- (383) (15,238) -- --
Net Loss (1,551) (5,750) (13,760) (4,473) (13,887)

OTHER DATA
Adjusted EBITDA: (3) 27,045 21,223 27,307 23,219 12,701

At December 31,
BALANCE SHEET DATA: 2001 (1) 2000 1999 1998 1997
---- ---- ---- ---- ----

Cash and Cash Equivalents $ 25,925 $ 16,120 $ 20,145 $ 17,295 $ 8,084
Restricted Cash 1,000 2,000 7,358 -- 11,905
Investment in BHR, Net 33,899 43,924 38,146 40,749 43,542
Total Assets 291,060 126,597 133,150 125,261 134,762
Current Liabilities 37,144 21,795 21,311 11,109 11,699
Long-Term Debt 273,897 128,233 128,922 108,390 110,829
Total Liabilities 311,041 150,028 150,233 128,259 133,286
Members' Equity/(Deficit) (19,981) (23,431) (17,083) (2,998) 1,476

NOTES:
- -----
1. Includes 25 days of operations for the Fitzgeralds properties and balance
sheet data for the properties at December 31, 2001.

2. Net operating revenue is defined as gross revenues less promotional
allowances.

13

3 Adjusted EBITDA represents earnings before interest, taxes on income,
depreciation and amortization, and excludes: (i) $100,000 in costs
associated with an abandoned acquisition for 1999; (ii) loss on bond
redemption for 1999 and 2000; (iii) unused line of credit fees for 2000 and
2001; (iv) non-operating expenses associated with dockside lobbying
initiatives, economic development and extraordinary items of $772,000 in
2000; (v) loss on investment in BHR; (vi) pre-opening costs of $1,018,000
associated with the acquisition of Fitzgeralds; and (vii) losses on
disposals of assets. Adjusted EBITDA is a supplemental financial measurement
used by the Company in the evaluation of its gaming business and by many
gaming industry analysts. Adjusted EBITDA should only be read in conjunction
with all of the Company's financial data summarized above and its financial
statements prepared in accordance with generally accepted accounting
principles ("GAAP") appearing elsewhere herein, and should not be construed
as an alternative either to income from operations (as determined in
accordance with GAAP) as an indication of the Company's operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. The Company believes that
an analysis of Adjusted EBITDA enhances the understanding of the financial
performance of companies with substantial depreciation and amortization.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Statement on Forward-Looking Information
- ----------------------------------------

This report includes statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor provisions of those sections and the Private
Securities Litigation Reform Act of 1995. Words such as "believes,"
"anticipates," "estimates" or "expects" used in the Company's press releases and
reports filed with the Securities and Exchange Commission are intended to
identify forward-looking statements. All forward-looking statements involve
risks and uncertainties. Although the Company believes its expectations are
based upon reasonable assumptions within the bounds of its current knowledge of
its business and operations, there can be no assurances that actual results will
not materially differ from expected results. The Company cautions that these and
similar statements included in this report and in previously filed periodic
reports are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements. Such
factors include, without limitation, the following: the construction of a
covered parking facility located at the Company's gaming complex; the risk of
the JV Partner not making its lease payments when due in connection with such
parking facility; the ability to fund planned development needs and to service
debt from existing operations; increased competition in existing markets or the
opening of new gaming jurisdictions; a decline in the public acceptance of
gaming; the limitation, conditioning or suspension of the Company's gaming
license; increases in or new taxes imposed on gaming revenues; admission taxes;
taxes on gaming devices; a finding of unsuitability by regulatory authorities
with respect to the Company or its officers, or key employees; loss and/or
retirement of key executives; our inability to timely and cost effectively
integrate operations of the Fitzgeralds casinos; significant increase in fuel or
transportation prices; adverse economic conditions in the Company's markets;
severe and unusual weather in the Company's markets; non-renewal of the
Company's gaming license from the appropriate regulatory authorities; adverse
results of significant litigation matters; and the continuing effects of recent
terrorist attacks and any future occurrences of terrorist attacks or other
destabilizing events.

For more information on these and other factors, see "Factors that May
Affect Future Results." We caution readers not to place undue reliance on
forward-looking statements, which speak only as of the date thereof. All
subsequent written and oral forward-looking statements attributable to us are
expressly qualified in their entirety by the cautionary statements and factors
that may affect future results contained throughout
this report. The Company undertakes no obligation to publicly release any
revisions to such forward-looking statements to reflect events or circumstances
after the date hereof.

The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto listed in Item 14(a).

14

Overview
- --------

The Majestic Star Casino has been owned and operated by the Company
since 1996. In December 2001, the Company, through a series of indirect
wholly-owned subsidiaries acquired Fitzgeralds Tunica, Fitzgeralds Black Hawk
and Fitzgeralds Las Vegas.

On a consolidated basis, gross revenues increased to $138.4 million in
2001 from $118.5 million in 2000, primarily as a result of the acquisition of
the Fitzgeralds casino properties on December 6, 2001 and a 10.9% increase in
slot revenue at Majestic Star Casino.

Casino operations provided approximately 95.8% and 97.5% of the
Company's gross revenues during 2001 and 2000, respectively, and substantially
all of its income from operations. Slot machine income has been the primary
component of the Company's gaming revenues, providing approximately 84.5% and
80.6% of such revenues during 2001 and 2000, respectively.

The discussion below focuses on the results of the Majestic Star Casino
as well as the Company and its subsidiaries on a consolidated basis, including
25 days of operations for the Fitzgeralds casino properties. For a discussion of
the results of the 25 days of operations for the Fitzgeralds casino properties,
please refer to the Investor Holdings 10-K.

Results of Operations
- ---------------------

The following table sets forth information derived from the Company's
statements of income expressed as a percentage of gross revenues.

Consolidated Statements of Income -- Percentage of Gross Revenues

For The Years Ended December 31,
2001 2000 1999
---- ---- ----
Revenues: (2)
- --------
Casino 95.8% 97.5% 97.6%
Rooms 0.8% 0.0% 0.0%
Food and beverage 2.4% 1.6% 1.6%
Other 1.0% 0.9% 0.8%
------------------------------------
100.0% 100.0% 100.0%
Less promotional allowances -6.3% -4.2% -2.5%
------------------------------------
Net revenues 93.7% 95.8% 97.5%
------------------------------------
Costs and Expenses: (2)
- ------------------
Casino 18.4% 17.9% 16.2%
Rooms 0.5% 0.0% 0.0%
Food and beverage 2.2% 2.0% 1.9%
Other 0.1% 0.0% 0.0%
Gaming taxes 25.1% 27.3% 27.3%
Advertising and promotions 5.7% 6.8% 5.7%
General and administrative 19.5% 21.8% 20.6%
Economic incentive - City of Gary 2.7% 2.7% 3.0%
Depreciation and amortization 6.5% 7.7% 7.0%
Pre-opening expenses 0.7% 0.0% 0.0%
Loss on disposal of assets 0.0% 0.4% 0.0%
------------------------------------
Total costs and expenses 81.4% 86.6% 81.7%
------------------------------------
Operating income (2) 12.3% 9.2% 15.8%
------------------------------------
Other Income (Expense):
- ---------------------

15

Loss on investment in
Buffington Harbor Riverboats, L.L.C. -2.0% -1.7% -2.4%
Interest income 0.3% 0.8% 0.9%
Interest expense -11.5% -12.8% -12.9%
Other nonoperating expense -0.1% -0.1% -0.1%
----------------------------
Total other income (expense) -13.3% -13.8% -14.5%
----------------------------
Income (loss) before extraordinary item -1.0% -4.6% 1.2%
- --------------------------------------- ----------------------------
Extraordinary item:
Loss on bond redemption 0.0% -0.3% -12.7%
Net loss: -1.0% -4.9% -11.5%
============================
Adjusted EBITDA: (in millions) (1) $ 27.0 $ 21.2 $ 27.3
- ---------------- ============================

(1) For a definition of Adjusted EBITDA, see Note 3 of Notes to Selected
Consolidated Financial Data contained in Item 6.

(2) New accounting guidance, effective January 1, 2001, requires that the cost
of the cash-back component of our Slot Club program, including promotional
coupons, be treated as a reduction of revenues. These costs had previously
been reflected in costs and expenses. The new guidance impacts only the
classification of these costs on our income statement. It does not impact
operating profit or EBITDA. The prior years' results have been reclassified
to reflect the impact of implementing this new guidance.

2001 Compared to 2000
- ---------------------

Consolidated gross revenues for the year ended December 31, 2001
amounted to approximately $138,367,000, an increase of $19,916,000 or 16.8% over
gross revenues recorded in the year ended December 31, 2000. Majestic Star, for
the year ended December 31, 2001, accounted for approximately $125,535,000
(90.7%), an increase of $7,084,000 compared to the year ended December 31, 2000.
The 6.0% increase in gross revenues at Majestic Star was primarily attributable
to a $10,114,000 or 10.9% increase in slot revenue partially offset by a
$3,374,000 or 15.1% decline in table game revenues as a result of a 11.7%
decrease in the table drop and a lower than anticipated table hold.

Consolidated casino revenues during the year ended December 31, 2001
totaled approximately $132,554,000, of which slot machines accounted for
approximately $112,211,000 (84.7%) and table games accounted for approximately
$20,343,000 (15.3%). Majestic Star's casino revenues during the year ended
December 31, 2001 totaled approximately $122,195,000, an increase of
approximately $6,740,000 or 5.8%, of which slot machines accounted for
approximately $103,200,000 (84.5%) and table games accounted for approximately
$18,995,000 (15.5%). The average number of slot machines in operation was 1,423
during the year ended December 31, 2001, compared to 1,435 during the year ended
December 31, 2000. The average win per slot machine per day increased to
approximately $199 for the year ended December 31, 2001, from approximately $177
during the year ended December 31, 2000. During the year ended December 31,
2001, slot machine coin-in and win increased by approximately 6.2% and 10.9%,
respectively, compared to the year ended December 31, 2000, resulting in a
higher win per slot machine per day. The percentage increases in slot coin-in
and win is partially attributed to an aggressive multi-media marketing campaign
(including direct mail) emphasizing the tag line "Change Your Luck" combined
with a reconfiguration of the casino gaming floor which optimized the available
space to accommodate the casino patrons. The average number of table games in
operation during the year ended December 31, 2001, decreased to 50 from 55
during the year ended December 31, 2000. The average win per table game per day
during the year ended December 31, 2001, decreased to approximately $1,033,
compared to approximately $1,108 during the year ended December 31, 2000. During
the year ended December 31, 2001, the decline in table games revenues was
attributable to a
decline of approximately $16,311,000 or 11.7% in table drop and a decrease in
the table hold from 16.0% to 15.4% in comparison to the prior year. The average
daily win per state passenger count was approximately $38 and the average daily
win per patron was approximately $67 during the year ended December 31, 2001,
compared to an average daily win per state passenger count of approximately $37
and an average daily win per patron of

16

approximately $68 during the year ended December 31, 2000.

Consolidated room revenues totaled $1,079,000 or 0.78% of the gross
revenue for the year ended December 31, 2001 and was attributed to the 25 days
of operations for the Fitzgeralds properties. Majestic Star does not operate a
hotel.

Consolidated food and beverage revenue for the twelve months ended
December 31, 2001 totaled approximately $3,319,000 or 2.4% of gross revenues,
compared to approximately $1,925,000 or 1.6% of gross revenues for the year
ended December 31, 2000. Majestic Star accounted for approximately

$2,129,000 or 64.1% of consolidated food and beverage revenue for the twelve
months ended December 31, 2001, an increase of $204,000 or 10.6% compared to the
year ended December 31, 2000.

Consolidated other revenues totaled approximately $1,416,000 or 1.0% of
consolidated gross revenues for the year ended December 31, 2001. Majestic Star
accounted for approximately $1,212,000 or 85.6% of other revenues, compared to
approximately $1,071,000 or 0.9% of gross revenues during the year ended
December 31, 2000. Other revenue at Majestic Star consisted primarily of
commission income.

Consolidated promotional allowances deducted from the Company's gross
revenues for the years ended December 31, 2001 and 2000, were approximately
$8,774,000 or 6.3% of gross revenues and $5,018,000 or 4.2% of gross revenues,
respectively. Of this amount Majestic Star accounted for $6,464,000 or 73.7% of
consolidated promotional allowances, an increase of $1,446,000 or 28.8% compared
to the year ended December 31, 2000. Promotional allowances provided to the
Majestic Star's gaming patrons at facilities located in, and/or owned by BHR for
the year ended December 31, 2001 and 2000, totaled approximately $805,000 and
$435,000, respectively, and are characterized in the financial statements as an
expense. BHR and other third-party operators of food kiosks invoice the Majestic
Star monthly for these promotional allowances at cost, which approximates retail
value.

Consolidated casino operating expenses for the year ended December 31,
2001, totaled approximately $25,517,000 or 18.4% of gross revenues and 19.3% of
casino revenues compared to approximately $21,180,000 or 17.9% of gross revenues
and 18.3% of casino revenues, respectively, for the year ended December 31,
2000. These expenses were primarily comprised of salaries, wages and benefits,
and operating expenses of the casino. Majestic Star accounted for approximately
$21,406,000 or 17.1% of Majestic Star gross revenues and 17.5% of Majestic Star
casino revenues compared to approximately $21,180,000 or 17.9% of gross revenues
and 18.3% of casino revenues, respectively, for the year ended December 31,
2000. The dollar increase of $226,000 in casino operating expenses is primarily
attributed to an increase of approximately $120,000 for gaming equipment rental
and other various casino operating expenses.

Consolidated gaming taxes totaled approximately $34,835,000 for the
year ended December 31, 2001, compared to approximately $32,350,000 during the
year ended December 31, 2000. Gaming taxes are levied on adjusted gross
receipts, as defined by Indiana gaming laws, at the rate of 20%, plus $3 per
passenger per the state passenger count. Majestic Star accounted for
approximately $34,026,000 and $32,350,000 of gaming taxes during the years ended
December 31, 2001 and 2000, respectively. An additional $3,667,000 was paid
during the year ended December 31, 2001, compared to approximately $3,231,000 in
the year ended December 31, 2000, to the City of Gary under an economic
incentive agreement whereby Majestic Star pays 3% of adjusted gross receipts
directly to the City.

Advertising and promotion expenses includes salaries, wages and
benefits of the marketing and casino service departments, as well as promotions,
advertising and special events. Consolidated advertising and promotion expenses
for the year ended December 31, 2001 totaled approximately $7,830,000 or 5.7% of
gross revenues, compared to $8,020,000 or 6.8% for the year ended December 31,
2000. Of this

17

amount, Majestic Star accounted for approximately $6,904,000 or 4.9% of gross
revenues for the year ended December 31, 2001 and approximately $8,020,000 or
6.8% of gross revenues for the year ended December 31, 2000. The $1,116,000 or
13.9% decrease in advertising and promotion expenses during the year ended
December 31, 2001 was primarily the result of a decrease in mass marketing
expenditures partially offset by an increase in operating supplies.

Consolidated general and administrative expenses for the year ended
December 31, 2001 were approximately $26,934,000 or 19.5% of gross revenues,
compared to $25,800,000 or 21.8% of gross revenues during the year ended
December 31, 2000. Majestic Star accounted for approximately $25,364,000 or
94.2% of the general and administrative expenses for the year ended December 31,
2001 and $25,800,000 for the year ended December 31, 2000. These expenses
included approximately $6,317,000 for berthing fees paid to BHR, $6,151,000 for
marine operations including housekeeping, and $2,693,000 for security and
surveillance operations during the year ended December, 31, 2001. The dollar
decrease of $436,000 in these expenses is primarily attributed to a reduction of
approximately $651,000 in berthing fees, partially offset by higher professional
fees and fees to the Indiana Gaming Commission.

Consolidated depreciation and amortization for the year ended December
31, 2001 was approximately $8,991,000 or 6.5% of gross revenues, compared to
approximately $9,114,000 or 7.7% of gross revenues during the year ended
December 31, 2000. Depreciation and amortization attributed to Majestic Star for
the year ended December 31, 2001 was approximately $8,070,000 compared to
approximately $9,114,000 during the year ended December 31, 2000. The dollar
decrease totaled approximately $1,044,000, of which approximately $491,000 is
depreciation expense and approximately $553,000 is amortization expense. The
decrease for the year ended December 31, 2001 is primarily attributable to
machinery and equipment being fully depreciated and deferred licensing fees
being fully amortized.

The consolidated operating income for the year ended December 31, 2001
was approximately $17,024,000 or 12.3% of gross revenues, compared to an
operating income for the year ended December 31, 2000 of $10,920,000 or 9.2% of
gross revenues. Operating income attributed to the Majestic Star for the year
ended December 31, 2001 was approximately $17,302,000 or 13.8% of gross Majestic
Star revenues. During the year ended December 31, 2001, Majestic Star had a net
loss on the disposition of assets totaling approximately $12,000. The $6,382,000
or 58.4% increase is attributed to a 6.0% increase in gross Majestic Star
revenues partially offset by increased expenses as previously discussed.

The consolidated net interest expense for the year ended December 31,
2001 was $15,628,000 or approximately 11.3% of gross revenues compared to
$14,105,000 or approximately 11.9% for the same period last year. Net interest
expense attributed to the Majestic Star for the year ended December 31, 2001 was
$14,636,000 or approximately 10.6% of gross revenues, compared to $14,105,000
for the same period last year. The $531,000 increase in net interest expense at
Majestic Star is primarily attributed to a $712,000 decrease in interest income,
partially offset by a $181,000 increase in interest expense associated with the
line of credit.

The Company's expense on the redemption of its 12-3/4% Senior Secured
Notes for the year ended December 31, 2000 was approximately $382,500 and is
classified as an extraordinary item. The loss relating to its investment in BHR
(primarily for depreciation and amortization) for the years ended December 31,
2001 and 2000 was approximately $2,798,000 and $2,059,000, respectively. Costs
of approximately $6,317,000 and $6,968,000 associated with operating BHR are
included in the operating expense line "General and Administrative" and are
fully reflected in operating income for the years ended December 31, 2001 and
2000, respectively. Other non-operating expenses of $149,000 and $125,000 for
the years ended December 31, 2001 and 2000, respectively, represent fees
associated with the line of credit.

As a result of the foregoing, the Company realized a consolidated loss
of approximately

18

$1,551,000 during the year ended December 31, 2001, compared to a loss (before
the extraordinary item) of $5,368,000 during the year ended December 31, 2000.
The Majestic Star realized a loss of $280,000 during the year ended December 31,
2001, compared to a loss (before the extraordinary item) of $5,368,000 during
the year ended December 31, 2000. The Majestic Star net losses were
approximately $280,000 and $5,750,000 during the years ended December 31, 2001,
and 2000, respectively.

2000 Compared to 1999
- ---------------------

Gross revenues for the year ended December 31, 2000 amounted to
approximately $118,451,000, a decrease of $1,726,000 over gross revenues
recorded in the year ended December 31, 1999. The 1.4% decrease in gross
revenues was primarily attributable to a $5,400,000 decline in table game
revenues primarily as a result of a 5.4% decrease in table drop and a lower than
anticipated table hold partially offset by a $3,600,000 or 4.0% increase in slot
revenues.

Casino revenues during the year ended December 31, 2000 totaled
approximately $115,455,000, of which slot machines accounted for approximately
$93,086,000 (80.6%) and table games accounted for approximately $22,369,000
(19.4%). The average number of slot machines in operation was 1,435 during the
year ended December 31, 2000, compared to 1,436 during the year ended December
31, 1999. The average win per slot machine per day increased to approximately
$177 for the year ended December 31, 2000, from approximately $171 during the
year ended December 31, 1999. During the year ended December 31, 2000, slot
machine coin-in and win increased by approximately 3.8% and 4.0%, respectively,
compared to the year ended December 31, 1999, resulting in a higher win per slot
machine per day. The percentage increases in slot coin-in and win is partially
attributed to an aggressive multi-media marketing campaign emphasizing the
registered tag line "We've Got Your Slots"(C) combined with a reconfiguration of
the casino gaming floor which optimized the available space to accommodate the
casino patrons. The average number of table games in operation during the year
ended December 31, 2000 decreased to 55 from 58 during the year ended December
31, 1999. The average win per table game per day during the year ended December
31, 2000 decreased to approximately $1,108, compared to approximately $1,314
during the year ended December 31, 1999. During the year ended December 31,
2000, the decline in table games revenues were attributable to a decline of
approximately $7,904,000 or 5.4% in table drop and a decrease in the table hold
from 18.8% to 16.0% in comparison to the prior year. The average daily win per
state passenger count was approximately $38 and the average daily win per patron
was approximately $67 during the year ended December 31, 2000, compared to an
average daily win per state passenger count of approximately $37 and an average
daily win per patron of approximately $67 for the year ended December 31, 1999.

Food and beverage revenues for the twelve months ended December 31,
2000 totaled approximately $1,925,000 or 1.6% of gross revenues, compared to
approximately $1,949,000 or 1.6% of gross revenues for the year ended December
31, 1999. Other revenues totaled approximately $1,071,000 or 0.9% of gross
revenues for the year ended December 31, 2000, consist primarily of commission
income, compared to approximately $960,000 during the year ended December 31,
1999.

Promotional allowances included in the Company's gross food and casino
revenues for the year ended December 31, 2000 and 1999 were approximately
$5,018,000 and $3,005,000, respectively. Promotional allowances provided to the
Company's gaming patrons at facilities located in, and/or owned by BHR for the
year ended December 31, 2000 and 1999 totaled approximately $435,000 and
$758,000, respectively, and are characterized in the financial statements as an
expense. BHR and other third-party operators of food kiosks invoice the Company
monthly for these promotional allowances at cost, which approximates retail
value.

Casino operating expenses for the year ended December 31, 2000 totaled
approximately $21,180,000 or 17.9% of gross revenues and 18.3% of casino
revenues compared to approximately $19,443,000 or 16.2% of gross revenues and
16.6% of casino revenues for the year ended December 31,

19

1999. These expenses are primarily comprised of salaries, wages and benefits,
and operating expenses of the casino. The dollar increase of $1,737,000 in
casino operating expenses is primarily attributed to approximately $669,000 for
gaming equipment rental primarily for participation games including Wheel of
Fortune(C), Jeopardy(C) and Monopoly(C), approximately $400,000 associated with
Club Majestic and approximately $248,000 for repair and maintenance of gaming
equipment, primarily to upgrade bill validators and monitors on video games.

Gaming taxes totaled approximately $32,350,000 for the year ended
December 31, 2000, compared to approximately $32,900,000 for the year ended
December 31, 1999. These taxes are levied on adjusted gross receipts, as defined
by Indiana gaming laws, at the rate of 20% plus $3 per passenger per the state
passenger count. An additional $3,231,000 was paid during the year ended
December 31, 2000, compared to approximately $3,626,000 in the year ended
December 31, 1999, to the City of Gary under an economic incentive agreement
whereby the Company pays 3% of the adjusted gross receipts directly to the City.

Advertising and promotion expenses for the year ended December 31, 2000
totaled approximately $8,020,000 or 6.8% of gross revenues, compared to
approximately $6,816,000 or 5.7% of gross revenues during the year ended
December 31, 1999. Advertising and promotion expenses included salaries, wages
and benefits of the marketing and casino service departments, as well as
promotions, advertising and special events. The $1,204,000 or 17.7% increase in
advertising and promotion expenses during the year ended December 31, 2000 was
primarily the result of an increase of $456,000 in television advertising and
$414,000 in postage and direct mail advertising as part of undertaking an
aggressive and integrated brand image campaign that was conducted during the
first and second quarters of 2000.

General and administrative expenses for the year ended December 31,
2000 were approximately $25,800,000 or 21.8% of gross revenues, compared to
$24,738,000 or 20.6% of gross revenues during the year ended December 31, 1999.
These expenses included approximately $6,968,000 for berthing fees paid to BHR,
$6,402,000 for marine operations including housekeeping, and $2,608,000 for
security and surveillance operations during the year ended December 31, 2000.
The dollar increase of $1,062,000 in these expenses is primarily attributed to
approximately $380,000 in payroll and related expenses, an increase of
approximately $326,000 in insurance related expenses and approximately $250,000
for acquisition related expenses incurred by Majestic Investor, LLC, an
unrestricted subsidiary.

Depreciation and amortization for the year ended December 31, 2000 was
approximately $9,114,000 or 7.7% of gross revenues, compared to approximately
$8,375,000 or 7.0% of gross revenues, during the year ended December 31, 1999.
The dollar increase totaled approximately $739,000, of which approximately
$514,000 is depreciation expense and approximately $225,000 is amortization
expense. The dollar increase for the year ended December 31, 2000 is primarily
attributable to new machinery and equipment placed into service during the past
year and amortization of the debt issue costs associated with the June 1999
issuance of the 10 7-8% Senior Secured Notes.

Operating income for the year ended December 31, 2000 was approximately
$10,920,000 or 9.2% of gross revenues, compared to an operating income for the
year ended December 31, 1999 of $18,931,000, or 15.7% of gross revenues. During
the year ended December 31, 2000, the Company had a net loss on the disposition
of assets totaling approximately $417,000. The $8,011,000 or 42.3% decrease in
operating income is principally attributable to increased expenditures of
approximately $4,494,000 associated with casino operations, a decrease in gross
revenues of approximately $1,726,000 and approximately $1,062,000 in increased
general and administrative expenses including $125,000 in non-operating
expenses, and approximately $250,000 for acquisition related expenses incurred
by Majestic Investor, LLC, an unrestricted subsidiary, and an increase of
approximately $739,000 for depreciation and amortization as previously
discussed.

Net interest expense for the year ended December 31, 2000 was
$14,105,000 or approximately

20

11.9% of gross revenues, compared to $14,605,000 or approximately 12.2% for the
same period last year. The $500,000 decrease in net interest expense is
primarily attributable to the refinancing of the 12-3/4% Senior Secured Notes
with Contingent Interest and the repayment of the $8.8 million demand note to
BDI both of which occurred during the second quarter of 1999.

The Company's expense on the redemption of its 12-3/4% Senior Secured
Notes for the years ended December 31, 2000 and 1999 was approximately $382,500
and $15,238,000, respectively, and is classified as an extraordinary item. The
loss relating to its investment in BHR for the years ended December 31, 2000 and
1999 was approximately $2,059,000 and $2,848,000, respectively. Costs of
approximately $6,968,000 associated with operating BHR are included in the
operating expense line "General and Administrative" and are fully reflected in
operating income. Other non-operating expenses of $125,000 for the year ended
December 31, 2000 represent fees associated with the line of credit.

As a result of the foregoing, the Company realized a loss (before the
extraordinary item) of $5,368,000 during the year ended December 31, 2000,
compared to income (before the extraordinary item) of $1,478,000 in the year
ended December 31, 1999. Net losses were approximately $5,750,000 and
$13,760,000 during the years ended December 31, 2000 and 1999, respectively.

Earnings Before Interest, Income Taxes, Depreciation and Amortization

Adjusted EBITDA is presented solely as a supplemental disclosure and is
used by the Company to assist in the evaluation of the cash generating ability
of its gaming business. Consolidated Adjusted EBITDA during the twelve months
ended December 31, 2001 was approximately $27,045,000. Adjusted EBITDA
attributed to the Majestic Star during the twelve months ended December 31, 2001
was approximately $25,385,000 or 20.2% of gross Majestic Star revenues, compared
to approximately $21,223,000 or 17.9% of gross Majestic Star revenues during the
twelve months ended December 31, 2000. The $4,162,000 increase in Adjusted
EBITDA at Majestic Star is primarily the result of a decrease in operating
expenditures and an increase in casino revenue. Adjusted EBITDA during 2001
excludes pre-opening costs, loss on investment in BHR, line of credit fees and
loss on disposal of assets. Adjusted EBITDA during 2000 excludes loss on bond
redemption, loss on investment in BHR, line of credit fees, loss on disposal of
assets, and $772,000 of non-operating expenses associated with dockside lobbying
initiatives, economic development and extraordinary items.

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

Liquidity and Capital Resources

At December 31, 2001, the Company had cash and cash equivalents of
approximately $25.9 million. This amount included $17.7 million at Majestic
Investor Holdings, LLC and $8.2 million at Majestic Star. During the year ended
December 31, 2001, the Company's capital expenditures were approximately $5.0
million, which included approximately $2.5 million for vessel and barge
improvements, $2.2 million for slot machines and other gaming equipment,
$140,000 for furniture and equipment, and $132,000 for computer equipment and
software. These capital expenditures include an additional $2.2 million for the
settlement of disputed use tax payments associated with the chartered vessel and
the subsequent construction of the permanent vessel. The Company also made a
capital contribution of approximately $215,000 to BHR during the year ended
December 31, 2001.

The Company, including the accounts of Majestic Investor, LLC, has met
its capital requirements to date through net cash from operations, capital
contributions and equipment loans. For the year ended
December 31, 2001, net cash provided by operating activities totaled
approximately $12.4 million,

21

compared to net cash provided by operating activities of approximately $4.7
million during the year ended December 31, 2000. At Majestic Star for the year
ended December 31, 2001, net cash provided by operating activities totaled
approximately $8.8 million and cash used by investing activities totaled
approximately $4.4 million, compared to approximately $6.2 million provided by
operating activities and $19.8 million used in investing activities, during the
year ended December 31, 2000. At the Majestic Star for the year ended December
31, 2001, cash used by financing activities totaled approximately $8.8 million,
which included net repayments of $7.8 million under the line of credit facility,
compared to $6.0 million provided by financing activities during the year ended
December 31, 2000. As of April 1, 2002, there are no outstanding borrowings
under the Majestic Star Credit Facility.

Management believes that the Company's cash flow from operations and
its current lines of credit will be adequate to meet the Company's anticipated
future requirements for working capital, its capital expenditures and scheduled
payments of interest and principal on the Senior Secured Notes, lease payments
to BHPA and other permitted indebtedness for the year 2002. No assurance can be
given, however, that such proceeds and operating cash flow, in light of
increased competition, principally dockside gambling in Illinois and the
purchase of certain Indiana gaming facilities by larger more recognized brand
names, will be sufficient for such purposes. If necessary and to the extent
permitted under the Indenture, the Company will seek additional financing
through borrowings and debt or equity financing. There can be no assurance that
additional financing, if needed, will be available to the Company, or that, if
available, the financing will be on terms favorable to the Company. In addition,
there is no assurance that the Company's estimate of its reasonably anticipated
liquidity needs is accurate or that unforeseen events will not occur, resulting
in the need to raise additional funds.

New Accounting Principles

We have adopted Emerging Issues Task Force ("EITF") No. 00-14,
"Accounting for Certain Sales Incentives," EITF 00-22, "Accounting for `Points'
and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers
for Free Products or Services to Be Delivered in the Future," and EITF 00-25,
"Accounting for Consideration from a Vendor to a Retailer in Connection with the
Purchase or Promotion of the Vendor's Products," which required the cash-back
component of the Company's Slot Club reward program, including promotional
coupons, be classified as a reduction of revenues.

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets" and SFAS No.
143, "Accounting for Asset Retirement Obligations." SFAS No. 141 requires all
business combinations to be accounted for using the purchase method of
accounting. SFAS No. 141 is required to be implemented for all acquisitions
initiated after June 30, 2001, and all business combinations accounted for using
the purchase method for which the date of acquisition is July 1, 2001, or later.
We applied SFAS No. 141 for our acquisition of the Fitzgeralds assets.

Under SFAS No. 142, goodwill and other indefinite lived intangible
assets are no longer subject to amortization over their useful lives, rather,
they are subject to assessments for impairment at least annually. Also, under
SFAS No. 142, an intangible asset should be recognized if the benefit of the
intangible asset is obtained through contractual or other legal rights or if the
intangible asset can be sold, transferred, licensed, rented or exchanged. Such
intangibles will be amortized over their useful lives. Under SFAS No. 142, our
acquisition of the Fitzgeralds assets was immediately subject to the provisions
of SFAS No. 142. We will test these assets for impairment at least annually.

Under SFAS No. 143, the fair value of a liability for an asset
retirement obligation is required to be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS No. 143 will be implemented by us on January 1, 2002.
Adoption of SFAS No. 143 is not anticipated to have a material impact on our
consolidated financial statements.

22

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" which supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" and amends Accounting Principles Board ("APB") Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effect of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. Adoption of SFAS No. 144 will not have a material impact on
our consolidated financial statements.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
requires our management to make estimates and assumptions about the effects of
matters that are inherently uncertain. We have summarized our significant
accounting policies in Note 2 to our consolidated financial statements. Of our
accounting policies, we believe the following may involve a higher degree of
judgment and complexity.

Revenue Recognition - Casino revenues is the net win from gaming
activities, which is the difference between gaming wins and losses. Hotel and
other revenue is recognized at the time the related service is performed.

Goodwill - We have approximately $10.6 million of goodwill recorded on
our balance sheet at December 31, 2001 related to the acquisition of the
Fitzgeralds properties. We regularly evaluate our acquired businesses for
potential impairment indicators. Additionally, we adopted the provisions of SFAS
No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002, that
require us to perform impairment testing at least annually. Our judgments
regarding the existence of impairment indicators are based on, among other
things, the regulatory and market status and operational performance of each of
our acquired businesses. Future events could significantly impact our judgments
and any resulting impairment loss could have a material adverse impact on our
financial condition and results of operations.

Property and Equipment - At December 31, 2001, we have approximately
$170.2 million of net property and equipment recorded on our balance sheet.
Third-party valuations were obtained for property and equipment and intangible
assets acquired in connection with the Fitzgeralds acquisitions. We depreciate
our assets on a straight-line basis over their estimated useful lives. The
estimate of the useful lives is based on the nature of the asset as well as our
current operating strategy. Future events, such as property expansions, new
competition and new regulations, could result in a change in the manner in which
we are using certain assets requiring a change in the estimated useful lives of
such assets. In assessing the recoverability of the carrying value of property
and equipment, we must make assumptions regarding estimated future cash flows
and other factors. If these estimates or the related assumptions change in the
future, we may be required to record impairment charges for these assets.

Slot Club Liability - The Fitzgeralds casinos offer a program whereby
participants can accumulate points for casino wagering that can currently be
redeemed for cash, lodging, food and beverages and merchandise. A liability is
recorded for the estimate of unredeemed points based upon the Fitzgeralds
casinos' redemption history. This liability can be impacted by changes in the
program, increases in membership and changes in the redemption patterns of the
participants.

Litigation, Claims and Assessments - We also utilize estimates for
litigation, claims and assessments. These estimates are based upon our knowledge
and experience about past and current events and also upon reasonable future
events. Actual results may differ from those estimates.

23

Contractual Commitments:

The following table summarizes our obligations and commitments to make
future payments under certain contracts, including long-term debt obligations,
capitalized leases and operating leases at December 31, 2001.

-----------------------------------------------------------------------------------------------
Payments Due By Year
-----------------------------------------------------------------------------------------------
Contractual Obligations 2002 2003 2004 2005 2006 Thereafter Total
------------ ------------ ------------ ---------- --------------- -------------- --------------

Long-Term Debt $ - $ - $ - $ - $ 128,556,629 $145,085,432 $273,642,061
Capital Leases 156,574 133,066 84,346 37,460 - - 411,446
Operating Leases 1,422,407 1,254,338 972,948 811,604 774,092 774,092 6,009,481
------------ ------------ ------------ ---------- --------------- -------------- --------------
Total $1,578,981 $1,387,404 $1,057,294 $849,064 $ 129,330,721 $145,859,524 $280,062,988

-----------------------------------------------------------------------------------------
Payments Due By Year
-----------------------------------------------------------------------------------------
Other Commercial Commitments 2002 2003 2004 2005 2006 Thereafter Total
-------------- ---------- ----------- ----------- ----------- ----------- ---------------

Lines of Credit $ 6,500,000 $ - $ - $ - $ - $ - $ 6,500,000
Total $ 6,500,000 $ - $ - $ - $ - $ - $ 6,500,000

FACTORS THAT MAY AFFECT FUTURE RESULTS

Risks Related to Our Substantial Debt

Our significant indebtedness could adversely affect our financial health.

We have a significant amount of debt. We currently have outstanding
$130 million of long-term debt represented by the Majestic Star Senior Secured
Notes and $152.6 million of long-term debt represented by the Investor Holdings
Senior Secured Notes. In addition, the Majestic Star Indenture will permit us to
incur additional debt in certain circumstances, including to finance the
purchase of furniture and equipment.

Our high level of debt could have significant effects on our business.
For example, it could, among other things:

. make it more difficult for us to satisfy our obligations with
respect to the Majestic Star Senior Secured Notes and our
other outstanding indebtedness;

. increase our vulnerability to adverse economic and industry
conditions or a downturn in our business;

. result in an event of default if we fail to comply with the
financial and other restrictive covenants contained in the
Majestic Star Indenture or in the Majestic Star Credit
Facility, which event of default could result in all of our
indebtedness becoming immediately due and payable and would
permit some or all of our lenders to foreclose on our assets
securing such indebtedness;

. limit our ability to fund or obtain additional financing for
future working capital, capital expenditures and other
general financial requirements;

. require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working
capital, capital expenditures, development projects,
acquisitions and other general corporate purposes;

24

. limit our flexibility in planning for, or reacting to, changes
in our business and industry; and

. place us at a competitive disadvantage compared to our
competitors that have less debt.

The occurrence of any one of these events could have a material adverse
effect on our business, financial condition, results of operations and
prospects.

We may not be able to generate sufficient cash flow to service our debt.

We might not be able to generate sufficient cash flow to service our
debt, to repay the Majestic Star Senior Secured Notes when due or to meet
unanticipated capital needs or shortfalls in our projections. We plan to be able
to service our debt and repay the Majestic Star Senior Secured Notes when due
with cash from operations. Our ability to generate sufficient cash flow to
satisfy our obligations will depend on the future performance of our gaming
operations, which is subject to many economic, political, competitive,
regulatory and other factors that we are not able to control. However, if cash
flows from operations are not sufficient to satisfy our obligations, we may need
to seek additional financing in the debt or equity markets, refinance the
Majestic Star Senior Secured Notes, sell selected assets or reduce or delay
planned activities and capital expenditures. Any such financings or sale of
assets might not be available on economically favorable terms, if at all, and
may be difficult because of governmental restrictions on ownership. In the event
that we are left without sufficient liquidity to meet our debt service
requirements, an event of default would occur under the Majestic Star Indenture
and the Majestic Star Credit Facility. The Majestic Star Senior Secured Notes
and the Majestic Star Credit Facility are secured by substantially all of the
Majestic Star casino's current and future assets.

The Majestic Star Indenture and the Majestic Star Credit Facility contain
covenants that significantly restrict our operations.

The Majestic Star Indenture and the Majestic Star Credit Facility does,
and any other future debt agreement will, contain numerous covenants imposing
financial and operating restrictions on our business. These restrictions may
affect our ability to operate our business, limit our ability to take advantage
of potential business opportunities as they arise and adversely affect the
conduct of our current business. These covenants will place restrictions on our
ability and the ability of our subsidiaries to, among other things:

. incur more debt;

. pay dividends, redeem or repurchase our stock or make other
distributions;

. make acquisitions or investments;

. use assets as security in other transactions;

. enter into transactions with affiliates;

. merge or consolidate with others;

. dispose of assets or use asset sale proceeds;

. create liens on our assets; and

. extend credit.

The Majestic Star Credit Facility also requires us to meet a number of
financial ratios and tests. Our

25

ability to meet these ratios and tests and to comply with other provisions
governing our indebtedness may be adversely affected by our operations and by
changes in economic or business conditions or other events beyond our control.

Risks Related to Our Business

We may be unable to successfully integrate the three Fitzgeralds casinos, and we
may not realize any of the anticipated benefits of the acquisition.

We acquired the three Fitzgeralds casino properties from Fitzgeralds
and certain of its affiliates on December 6, 2001. We cannot assure you that we
will be able to integrate or manage the Fitzgeralds properties effectively or
realize any of the anticipated benefits of the acquisition, including expected
cost reductions. Our ability to integrate the three Fitzgeralds casino
properties, to realize the expected cost reductions and to achieve our
objectives in connection with the Fitzgeralds acquisition is highly dependent
on, among other things, our ability to maintain effective senior management
teams at Fitzgeralds Tunica, Fitzgeralds Black Hawk and Fitzgeralds Las Vegas.
We plan to maintain such management through retention of certain current
executives, relocation of certain Majestic executives to the Fitzgeralds
properties and the attraction of new executives. If, for any reason, these
executives do not continue to be active in management after the acquisition, or
we fail to attract capable new executives, our operations after consummation of
the Fitzgeralds acquisition could be materially adversely affected. In addition,
certain of our executives provide management services to Investor Holdings and
its subsidiaries and to Majestic Star. Accordingly, such executives will not be
able to devote all of their time to Majestic Star.

We face significant competition in each market where we operate.

We face intense competition in each of the markets in which our gaming
facilities are located. Many of our competitors have significantly greater name
recognition and financial, marketing and other resources than we do. Our
properties compete principally with other gaming properties in or near
California, Illinois, Indiana, Nevada, Mississippi and Colorado. In some of
these jurisdictions, competition is expected to intensify as new gaming
operations enter these markets and existing competitors consolidate with one
another or expand or enhance their operations. In addition, we compete with
gaming facilities nationwide, including casinos located on Indian reservations
and other land-based casinos in Nevada and Atlantic City, as well as elsewhere,
not only for customers but also for employees and potential future gaming sites.
We also compete, to some extent, with other forms of gaming on both a local and
national level, including state-sponsored lotteries, Internet gaming, on-and
off-track wagering and card parlors. The expansion of legalized gaming to new
jurisdictions throughout the United States also has increased competition faced
by us and will continue to do so in the future. Additionally, if gaming were
legalized in jurisdictions near our properties where gaming currently is not
permitted, we would face additional competition.

Increased competition may require us to make substantial capital
expenditures to maintain and enhance the competitive positions of our
properties, including updating slot machines to reflect changing technology,
refurbishing rooms and public service areas periodically, replacing obsolete
equipment on an ongoing basis and making other expenditures to increase the
attractiveness and add to the appeal of our properties. Because we are highly
leveraged, after satisfying our obligations under our outstanding indebtedness,
there can be no assurance that we will have sufficient funds to undertake these
expenditures or that we will be able to obtain sufficient financing to fund such
expenditures. If we are unable to make such expenditures, our competitive
position and our results of operations could be materially adversely affected.

Extensive government regulation continuously impacts our operations.

The ownership, management and operation of gaming facilities is subject
to extensive laws, regulations and ordinances which are administered by various
federal, state and local government entities and
agencies. The gaming authorities located in the jurisdictions in which we
operate have broad authority and

26

discretion to require us and our officers, directors, managers, members,
employees and certain security holders to obtain various licenses,
registrations, permits, findings of suitability and other approvals. To enforce
applicable gaming regulations, gaming authorities may, among other things,
limit, suspend or revoke the licenses of any gaming entity or individual, and
may levy fines or forfeiture of assets against us or individuals for violations
of gaming laws or regulations. Any of these actions would have a material
adverse effect on us.

Government regulations require us to:

. pay gaming fees and taxes in each state where we operate a casino;

. obtain a gaming license in each state where we operate a casino,
which we must have renewed periodically and which may be suspended
or revoked if we do not meet detailed regulatory requirements;

. receive and maintain federal and state environmental approvals; and

. receive and maintain local licenses to sell alcoholic beverages in
our casinos.

No assurances can be given that any new gaming licenses, liquor
licenses, registrations, findings of suitability, permits and approvals,
particularly those related to any proposed expansion, will be given or that
existing ones will be renewed when they expire. We know of no reason why our
existing gaming licenses would not be renewed or maintained, or why new licenses
would not be granted to us; however, any failure to renew or maintain our
licenses or receive new licenses when necessary would have a material adverse
effect on us.

The compliance costs associated with these laws, regulations and
licenses are significant. A change in the laws, regulations and licenses
applicable to our business or a violation of any current or future laws or
regulations of our gaming licenses could require us to make material
expenditures or could otherwise materially adversely affect our business or
financial results.

Legislation at local referenda on gaming may restrict or adversely impact our
operations.

The casino entertainment industry is subject to political and
regulatory uncertainty. In some of the jurisdictions in which we currently
operate or from which we attract customers, or in which we may expand, gaming is
subject to local referenda. If the results of a referendum held in a
jurisdiction in which we operate were to restrict gaming in whole or in part or
if the results of a referendum in a nearby non-gaming jurisdiction were to
permit gaming, our results of operations could be negatively impacted.

Many of our employees belong to unions; any labor disruptions, work stoppages or
significant union imposed wage increases could have an adverse impact on our
business.

As of December 31, 2001, the Majestic Star Casino employed
approximately 965 people and the BHR Joint Venture employed approximately 366
people. Any labor disruptions or work stoppages could have a material adverse
effect on our operations. A significant number of such employees are unionized.

Energy price increases may adversely affect our costs of operations and our
revenues.

Our casino properties use significant amounts of electricity, natural
gas and other forms of energy. While no shortages of energy have been
experienced, the recent substantial increases in the cost of electricity in the
United States will negatively affect our operating results. The extent of the
impact is subject to the magnitude and duration of the energy price increases,
but this impact could be material. In addition, energy

27

price increases in cities that constitute a significant source of customers for
our properties could result in a decline in disposable income of potential
customers and a corresponding decrease in visitation to our properties, which
could negatively impact our revenues.

The casino industry generally is dependent on a number of factors that are
beyond our control.

The economic health of the casino industry is affected by a number of
factors that are beyond our control, including: (i) general economic conditions;
(ii) levels of disposable income of casino patrons; (iii) increased
transportation costs resulting in decreased travel by patrons; (iv) local
conditions in key gaming markets, including seasonal and weather-related
factors; (v) increase in gaming taxes or fees; (vi) competitive conditions in
the gaming industry and in particular gaming markets, including the effect of
such conditions on the pricing of our games and products; and (vii) the relative
popularity of entertainment alternatives to casino gaming that compete for the
leisure dollar. Any of these factors could negatively impact the casino industry
generally, and as a result, our revenues and results of operations.

Continuing effects of the terrorist attacks on the World Trade Center in New
York and the Pentagon in Washington, D.C., and any future occurrences of
terrorist or other destabilizing events, could negatively affect our revenues
and cash flow.

On September 11, 2001, the World Trade Center buildings in New York
City and the Pentagon in Washington, D.C. were attacked by terrorists using
hijacked airplanes. The effects of these events have included a decline in
vacation travel and tourism due to, among other factors, fears regarding
additional acts of terrorism, and reduced operations by airlines due to
decreased demands for air travel, new security directives and increased costs.
The magnitude and duration of these effects is unknown and cannot be predicted.
Any decline in vacation travel and tourism could adversely affect our revenues,
particularly with respect to Fitzgeralds Las Vegas, where the majority of our
customers rely on air travel to visit our casino property. Continued or even
worsening negative market conditions related to those terrorist actions, any
future occurrences of terrorist or other destabilizing events, and other actions
that perpetuate a climate of war could cause existing and potential customers to
further delay and cancel travel, convention and vacation plans, could decrease
wagering and increase costs, and as a result could adversely affect our revenues
and cash flow in the future.

We are prohibited by the Majestic Star Indenture from engaging in certain
transactions with Investor and Investor Holdings

We are prohibited from engaging in transactions with Investor, Investor
Holdings and its subsidiaries other than on an arms length basis and, if a
proposed transaction exceeds $2.0 million in value, we may only participate in
such transaction with the approval of a majority of the disinterested members of
our board of managers or following receipt of a written fairness opinion from a
nationally recognized investment banking firm stating that the transaction is
fair to us from a financial point of view. Such restrictions could have an
adverse effect on us by limiting our ability to engage in transactions with
Investor, Investor Holdings and its subsidiaries, which could potentially impact
any synergies we realize from the Fitzgeralds acquisition.

28

Any failure by the Joint Venture Partner to fund operations or make lease
payment, or any significant conflicts between us and our Joint Venture Partner
could have an adverse effect on the operations of the Buffington Harbor Gaming
Complex, which would adversely affect our business

In 1995, we formed the BHR Joint Venture with the Joint Venture Partner
to develop and operate the dockside pavilion and common areas of the Buffington
Harbor Gaming Complex. Efficient operation of the BHR Joint Venture to support
our casino will depend upon our continuing ability, as well as that of our Joint
Venture Partner, to fund day-to-day operations and agree on related business
matters. In addition, the Joint Venture Partner is required to make lease
payments related to the parking facility and we receive a 50% credit towards our
lease obligations. Any failure by the Joint Venture Partner to fund operations
of the BHR Joint Venture when required or make the lease payments related to the
parking facility (including its obligations under the BHPA lease), or any
significant conflict in this relationship that is not promptly resolved, would
adversely affect the operations of the gaming complex. A significant disruption
in the business of the gaming complex is likely to adversely affect the
operations of the Majestic Star Casino and our ability to generate revenues.

Many factors affecting the labor pool in Indiana could increase our labor costs

We are dependent upon the available labor pool of unskilled and
semi-skilled employees. We are also subject to the Fair Labor Standards act,
which governs such matters as minimum wage, overtime and other working
conditions. In addition, our agreement with the City of Gary, Indiana, requires
us to use our best efforts to have an employee base comprised of 70% racial
minorities, 52% females, 67% residents of the City of Gary and 90% residents of
Lake County, Indiana. A shortage in the labor pool, especially in the City of
Gary and in Lake County, or other general inflationary pressures or changes in
applicable state or federal minimum wage or other labor laws, could result in
increased labor costs to us.

We are subject to potential exposure to environmental liabilities

The Buffington Harbor Gaming Complex is located on a site where prior
industrial operations and activities may have resulted in contamination of the
environment. As the owner and operator of the Majestic Star Casino and a member
of the BHR Joint Venture, we could be held responsible for the costs of
addressing any contamination. Our liability under applicable environmental laws
may be imposed without regard to whether we knew of, or were responsible for,
the presence of hazardous substances and, in some cases, may not be limited to
the value of the affected property. There can be no assurance that further
development of the facility, including the proposed new parking facility, or of
a new harbor, and the related construction, will not identify environmental
contamination. If this were to occur, the costs of remediation or the disruption
to our business could adversely affect our operations and may also adversely
affect our ability to sell, lease or operate the property or to borrow against
it. Neither we nor the BHR Joint Venture is entitled to indemnification from any
prior owners or operators of the site with respect to environmental matters.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any financial instruments held for
traditional purposes, such as trading or other speculative purposes, and does
not hedge any of its market risks with derivative instruments.

The Company's primary market risk exposure relates to interest risk
exposure through its borrowings and third-party financing, including the
Majestic Star Credit Facility, under which any interest accrues on a floating
rate basis. These sources of credit, along with cash flow from operations, are
used to maintain liquidity and fund business operations. The Company typically
replaces borrowings under its third-party vendor financing, as necessary, with
shorter termed variable rate financing generally secured by the assets being
acquired. The nature and amount of the Company's debt may vary as a result of
future business requirements, market conditions and other factors.

29

The Majestic Star Credit Facility has a maximum credit line of $20.0
million. Assuming we have borrowed against the maximum available under the
Majestic Star Credit Facility, a one-half percentage point change in the
underlying variable rate would result in a change in related interest expense of
$100,000. Additionally, should we assume variable rate debt in the future, we
will be subject to market risk, which is the risk of loss from changes in market
prices and interest rates.

At April 1, 2002, Majestic Star had no outstanding borrowings under its
credit facility.

In addition, we have approximately $130.0 million principal amount of
notes outstanding under the Majestic Star Indenture. Our fixed rate debt
instruments are not generally affected by a change in the market rates of
interest and therefore, such instruments generally do not have an impact on
future earnings. However, as our fixed rate debt matures, future earnings and
cash flows may be impacted by changes in interest rates related to debt incurred
to fund repayments under maturing facilities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The following table sets forth certain information with respect to the
executive officers of the Company as of December 31, 2001. The Company does not
have directors since it is a limited liability company.

Name and Age Position(s) Held
------------ ----------------
Don H. Barden, 58 Chairman, President and Chief Executive Officer

Michael E. Kelly, 40 Executive Vice President, Chief Operating and
Financial Officer and Secretary

Don H. Barden, is the Chairman, President and Chief Executive Officer
of the Company and, since November 16, 1993, Chairman and President of BDI, with
responsibility for key policy making functions. Since their formations, Mr.
Barden is also President and Chief Executive Officer of Investor and Manager of
Investor Holdings; Barden Colorado Gaming, LLC and Barden Mississippi Gaming
LLC; Chairman, President and Chief Executive Officer of Investor Holdings,
Majestic Investor Capital Corp. ("Investor Capital"), Barden Colorado Gaming,
LLC, Barden Mississippi Gaming, LLC and Barden Nevada Gaming, LLC. Mr. Barden
also has served as a director of Investor Capital since its formation.
Additionally, he is the President and Chief Executive Officer of a group of
other companies he owns and/or operates. Over the past 30 years, Mr. Barden has
successfully developed, owned and operated many business enterprises in various
industries including real estate development, casino gaming, broadcasting, cable
television and international trade.

Michael E. Kelly, is the Executive Vice President, Chief Operating and
Financial Officer and Secretary of the Company since January 1, 1999, with
overall responsibility for the daily operations. From April 1996 through
December 31, 1998, Mr. Kelly was the Vice President and Chief Financial Officer
of the Company with overall responsibility for the Company's financial reporting
and investor relations functions. Mr. Kelly assumed the responsibility for
management of daily operations and related activities of the Company effective
October 17, 1998. From October 1998 through October 2001, Mr. Kelly also served
as the Company's General Manager. Mr. Kelly is a Vice President of BDI since
April 1996 and director of Majestic Investor Capital Corp. since its formation.
Since their formation, Mr. Kelly is also Executive Vice President, Chief
Operating and Financial Officer of Investor; Manager of Investor Holdings, and
Barden Mississippi Gaming, LLC; Executive Vice President, Chief Operating and
Financial Officer and Secretary of

30

Investor Holdings, Investor Capital, Barden Colorado Gaming, LLC, Barden
Mississippi Gaming, LLC and Barden Nevada Gaming, LLC; Director of Majestic
Investor Capital Corp. From June 1994 to April 1996, Mr. Kelly held various
positions with Fitzgeralds Gaming Corporation, including Vice President of
Finance. Mr. Kelly also was the Senior Director of Operations and Chief
Financial Officer of Fitzgeralds Tunica from July 1994 to November 1995. From
September 1991 to June 1994, Mr. Kelly was Vice President and Chief Financial
Officer of Empress River Casino Corporation and its affiliates. From 1982 to
1991, Mr. Kelly was employed in various senior finance and administrative
functions by Harrah's Hotel & Casino in New Jersey and Nevada and by the
Fitzgeralds Group in Reno and Las Vegas, Nevada.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation earned for services
performed for the Company during the three fiscal years ended December 31, 2001
by the Company's Chief Executive Officer and each of its other executive
officers (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation earned for services
performed for the Company, Investor and, following its formation in September of
2001, Investor Holdings, and each of its subsidiaries, during the years shown
below by our Chief Executive Officer and our other executive officer. All
compensation is paid by the Company.

Annual
Compensation(1) All Other
Name and Position Year Salary Bonus Compensation(2)
----------------- ---- ------ ----- ---------------

Don H. Barden (3) 2001 $332,788 $ -- $ 1,271
Chairman, President and Chief 2000 331,250 -- 920
Executive Officer 1999 289,000 -- 1,139

Michael E. Kelly (3) 2001 $296,635 $175,000 $24,901
Executive Vice President, Chief 2000 280,000 100,000 18,589
Operating and Financial Officer 1999 275,000 70,000 14,919
and Secretary

__________________
(1) The incremental cost to the Company of providing perquisites and other
personal benefits did not exceed, as to any "Named Executive Officer," the
lesser of $50,000 or 10% of the total salary and bonus paid to such
executive officer for any such year and, accordingly, is omitted from the
table.

(2) Amounts represent contractual payments under individual employment
agreements. In 2001, the Company contributed a 401(k) match of $17,530 to
Mr. Kelly, and Mr. Kelly was also reimbursed by the Company $4,647 for
non-deductible medical plan expenditures. In 2001, life insurance premiums
of $1,271 and $2,724 were paid by the Company on behalf of Messrs. Barden
and Kelly, respectively. In 2000, the Company contributed a 401(k) match of
$11,520 to Mr. Kelly, and Mr. Kelly was also reimbursed by the Company
$5,045 for non-deductible medical plan expenditures. In 2000, life
insurance premiums of $920 and $2,024 were paid by the Company on behalf of
Messrs. Barden and Kelly, respectively. In 1999, the Company contributed a
401(k) match of $7,601 to Mr. Kelly, and Mr. Kelly was also reimbursed
$4,904 for non-deductible medical plan expenditures. In 1999, life
insurance premiums of $1,139 and $2,414 were paid on behalf of Messrs.
Barden and Kelly, respectively.

31

(3) All of Mr. Barden's and Mr. Kelly's compensation is paid by the Company,
but a portion of such compensation is reimbursed by Investor Holdings
through an expense sharing agreement. See Item 13 - "Certain Relationships
and Related Transactions."

Employment Agreements

Mr. Barden serves as our Chairman, President and Chief Executive
Officer and currently receives annual compensation of $370,000 as an employee,
pursuant to a letter agreement dated October 22, 2001 with the Company.

Mr. Kelly serves as our Executive Vice President, Chief Operating and
Financial Officer and Secretary pursuant to a three-year employment agreement
with the Company dated October 22, 2001. Under this agreement, Mr. Kelly will
receive base compensation of $400,000 per year and can also earn annual
incentive compensation based upon his performance and the consolidated Company's
performance. In addition to such compensation, Mr. Kelly is entitled to term
life insurance in an amount equal to $2.5 million and other customary employee
benefits, including participation in the Company's 401(k) plan, together with a
$100,000 signing bonus and an interest-free loan in the amount of $200,000 to be
repaid in three equal annual installments. Mr. Kelly is also entitled to
additional compensation, upon a change in control, equal to his base salary and
incentive compensation for the remainder of the term of the agreement, plus 12
months thereafter. Mr. Kelly's employment agreement contains certain
non-competition provisions with a duration of 12 months following termination of
his employment.

Compensation Committee Interlocks and Insider Participation

The Company has no standing Compensation Committee. All compensation
decisions are made by BDI, the sole manager of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND
RELATED STOCKHOLDER MATTERS

The Company is indirectly wholly-owned by Don H. Barden, its Chairman,
President and Chief Executive Officer.

The following table sets forth certain information, as of April 1,
2002, with regard to the beneficial ownership of the membership interests in the
Company.

Name and Address of Beneficial Owner % Ownership
------------------------------------ -----------

Don H. Barden 100.0% (1)
163 Madison Avenue, Suite 2000
Detroit, Michigan 48226

(1) Includes the membership interests in the Company beneficially owned
directly by BDI. Mr. Barden is the beneficial owner of 100% of BDI.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Loans to Related Parties

Interest of $185,750 remains outstanding at December 31, 2001 on a $2.0
million note made by Investor to BDI. The note was later assigned to Investor
Holdings from Investor. BDI paid the principal of the note in conjunction with
the closing of the Fitzgeralds acquisition on December 6, 2001.

32

During 2001, Investor made a $700,000 loan to BDI and the Company made
a $300,000 employee loan to Mr. Barden. These loans accrue interest at 7% per
annum and are due on December 12, 2002.

Management Agreement

A Management Agreement was entered into on June 18, 1999 with BDI to
provide for, among other things, a management fee payable by the Company to BDI
for acting as our manager. The fees for each fiscal quarter will be equal to 5%
of the Company's Consolidated Cash Flow (as defined in the Indenture for the
Majestic Star Senior Secured Notes) for the immediately preceding fiscal quarter
and may not be paid if the Company is in default under the Majestic Star
Indenture or if the Company does not meet certain financial ratios as provided
in such Indenture. For the three month periods ending September 30, 1999,
December 31, 1999 and March 31, 2000, approximately $325,000, $282,000, and
$315,000, respectively, was paid to BDI in accordance with the Management
Agreement. No management fees were paid for the period April 1, 2000 through
September 30, 2001 since the Company has not met certain financial ratios as
provided in the Majestic Star Indenture. For the three months ended December 31,
2001, approximately $280,000 was paid to BDI in accordance with the Management
Agreement.

Expense Sharing Agreement

Pursuant to an expense sharing agreement entered into on October 22,
2001, Investor Holdings will reimburse the Company for sixty percent (60%) of
(i) the costs and expenses of executives and certain other employees, including,
but not limited to, salaries, bonuses, benefit payments, insurance and supplies,
(ii) rent and (iii) other similar costs and expenses paid by the Company. These
executives and employees will provide services to both the Company and to
Investor Holdings and its subsidiaries. Currently, due to restrictions set forth
in the Investor Holdings Indenture, the reimbursement percentage is capped at
fifty percent (50%) up to an aggregate of $1.7 million.

Naming Rights Agreement

GNC intends to develop an outdoor amphitheater on property it owns
adjacent to the Company's riverboat gaming facility. The Company entered into a
Naming Rights Agreement with GNC effective as of October 31, 2001. Pursuant to
the Naming Rights Agreement, GNC agreed to use the name "The Majestic Star
Amphitheater" as the name of the amphitheater and the Company paid GNC $1.5
million during 2001 for such rights. The initial term of the Naming Rights
Agreement is three years commencing on the opening of the amphitheater.

PART IV

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

(a) 1. Financial Statements as listed on Page F-1.

2. Financial Statement Schedule as listed on Page F-1.

3. Exhibits: The exhibits included as part of this report are listed
in the attached Exhibit Index on Page E-1, which is incorporated
herein by reference.

(b) Reports on Form 8-K:

The Company filed a Form 8-K on December 13, 2001 reporting consummation of the
acquisition of the Fitzgeralds assets.

33

INDEX OF FINANCIAL STATEMENTS

THE MAJESTIC STAR CASINO, LLC

Report of Independent Accountants F-2

Consolidated Balance Sheets as of December 31, 2001 and 2000 F-3

Consolidated Statements of Income for the years ended December 31, 2001,
2000 and 1999 F-4

Consolidated Statements of Changes in Members' Deficit for the years ended
December 31, 2001, 2000 and 1999 F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000, and 1999 F-6

Notes to the Consolidated Financial Statements F-7

Schedule:

Schedule II - Valuation and Qualifying Accounts F-31

Financial Statements of Buffington Harbor Riverboats, L.L.C.:

Balance Sheets at December 31, 2001 and 2000 F-33

Statements of Operations for the years ended December 31, 2001, 2000 and 1999 F-34

Statements of Members' Capital for the years ended December 31, 2001, 2000
and 1999 F-35

Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 F-36

Notes to the Financial Statements F-37

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Members of
The Majestic Star Casino, LLC:

In our opinion, the financial statements listed in the index appearing
under Item 14(a)1 on page F-1 present fairly, in all material respects, the
financial position of The Majestic Star Casino, LLC and its subsidiaries at
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 14(a)(2) on page F-1 presents fairly in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Chicago, Illinois
April 8, 2002

F-2

THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000

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

ASSETS
Current Assets:
Cash and cash equivalents ............................................ $ 25,925,291 $ 16,119,512
Accounts receivable, less allowance for doubtful accounts
of $359,702 and $120,000, respectively ............................ 3,079,523 2,059,577
Inventories .......................................................... 995,708 53,479
Prepaid expenses ..................................................... 2,190,255 636,337
Note due from affiliate .............................................. 700,000 2,000,000
Due from Buffington Harbor Riverboats, L.L.C ......................... 333,838 -
Restricted cash ...................................................... - 2,000,000
------------- -------------
Total current assets .............................................. 33,224,615 22,868,905
------------- -------------

Property, equipment, and vessel improvements, net ...................... 170,195,013 49,158,571

Intangible assets (net) ................................................ 19,290,753 -

Other Assets:
Deferred financing costs, less accumulated amortization
of $2,202,831 and $1,269,380, respectively ........................ 10,530,426 5,840,448
Deferred costs, net of accumulated amortization
of $-0- and $5,099,462, respectively .............................. - 552,553
Investment in Buffington Harbor Riverboats, L.L.C .................... 33,898,771 43,924,033
Goodwill ............................................................. 10,602,250 -
Restricted cash ...................................................... 1,000,000 -
Other assets, prepaid leases and deposits ............................ 12,317,704 4,252,799
------------- -------------
Total other assets ........................................... 68,349,151 54,569,833
------------- -------------

Total Assets ................................................. $ 291,059,532 $ 126,597,309
============= =============

LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities:
Current maturities of long-term debt ................................. $ 6,656,574 $ 8,811,719
Accounts payable ..................................................... 2,978,502 789,293
Accrued payroll and related .......................................... 6,194,601 1,108,066
Accrued interest ..................................................... 8,294,312 7,107,058
Other accrued liabilities ............................................ 13,020,097 3,597,924
Due to Buffington Harbor Riverboats, L.L.C ........................... - 380,736
------------- -------------
Total current liabilities .................................... 37,144,086 21,794,796

Long-term debt, net of current maturities .............................. 273,896,933 128,233,486
------------- -------------

Total Liabilities ............................................ 311,041,019 150,028,282
------------- -------------

Commitments and contingencies

Members' Deficit:
Members' contributions ............................................... 29,000,000 24,000,000
Accumulated deficit .................................................. (48,981,487) (47,430,973)
------------- -------------
Total Members' Deficit ....................................... (19,981,487) (23,430,973)
------------- -------------

Total Liabilities and Members' Deficit ....................... $ 291,059,532 $ 126,597,309
============= =============

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

F-3

THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

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

Revenues:
Casino ............................................ $132,553,506 $115,455,271 $117,267,702
Rooms ............................................. 1,079,456
Food and beverage ................................. 3,318,575 1,925,023 1,948,927
Other ............................................. 1,415,692 1,070,965 960,431
------------ ------------ ------------
138,367,229 118,451,259 120,177,060

Less promotional allowances ................... (8,774,349) (5,017,777) (3,005,433)
------------ ------------ ------------

Net revenues .................................. 129,592,880 113,433,482 117,171,627
------------ ------------ ------------

Costs and expenses:
Casino ............................................ 25,517,276 21,179,612 19,442,984
Rooms ............................................. 628,910 - -
Food and beverage ................................. 3,027,514 2,402,518 2,342,445
Other ............................................. 108,732 - -
Gaming taxes ...................................... 34,834,624 32,350,368 32,899,551
Advertising and promotion ......................... 7,829,759 8,019,655 6,816,067
General and administrative ........................ 26,933,763 25,799,848 24,737,833
Economic incentive - City of Gary ................. 3,667,100 3,230,679 3,626,056
Depreciation and amortization ..................... 8,990,616 9,113,681 8,375,223
Pre-opening expenses .............................. 1,018,234 - -
Loss on disposal of assets ........................ 12,114 416,904 -
------------ ------------ ------------
112,568,642 102,513,265 98,240,159
------------ ------------ ------------

Operating income .............................. 17,024,238 10,920,217 18,931,468
------------ ------------ ------------

Other income (expense):
Loss on investment in
Buffington Harbor Riverboats, L.L.C. .......... (2,797,740) (2,058,669) (2,848,004)
Interest income ................................... 399,752 893,453 1,058,213
Interest expense .................................. (16,028,074) (14,998,377) (15,496,091)
Interest expense to affiliate ..................... - - (167,455)
Other non-operating expense ....................... (148,690) (124,503) -
------------ ------------ ------------
(18,574,752) (16,288,096) 17,453,337)
------------ ------------ ------------

Income (loss) before extraordinary item ....... (1,550,514) (5,367,879) 1,478,131

Extraordinary Item:
Loss on bond redemption .......................... - (382,500) (15,238,156)
------------ ------------ ------------

Net loss ...................................... $ (1,550,514) $ (5,750,379) $(13,760,025)
============ ============ ============

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

F-4

THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' DEFICIT

For the Years Ended December 31, 2001, December 31, 2000, and December 31, 1999

Capital Accumulated Total
Contributions Deficit Members' Deficit
------------- ------------ -----------------
Balance, December 31, 1998 $24,000,000 $(26,997,824) $ (2,997,824)
Net loss - (13,760,025) (13,760,025)
Cash distribution to Members - (325,135) (325,135)
------------ ------------ ------------

Balance, December 31, 1999 24,000,000 (41,082,984) (17,082,984)
Net loss - (5,750,379) (5,750,379)
Cash distribution to Members - (597,610) (597,610)
------------ ------------ ------------

Balance, December 31, 2000 24,000,000 (47,430,973) (23,430,973)
Member's contribution 5,000,000 - 5,000,000
Net loss - (1,550,514) (1,550,514)
------------ ------------ ------------

Balance, December 31, 2001 $29,000,000 $(48,981,487) $(19,981,487)
============ ============ ============

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

F-5

THE MAJESTIC STAR CASINO, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

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

Cash Flows From Operating Activities:
Net loss ............................................................ $ (1,550,514) $ (5,750,379) $ (13,760,025)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation ........................................................ 6,987,173 6,835,778 6,322,363
Amortization ........................................................ 2,003,444 2,277,903 2,052,860
Loss on investment in Buffington Harbor Riverboats, L.L.C ........... 2,797,740 2,058,669 2,848,004
Loss on disposal of assets .......................................... 12,114 416,904 -
Loss on bond redemption ............................................. - 382,500 15,238,156
(Increase) in accounts receivable, net .............................. (440,012) (65,416) (1,145,818)
(Increase) decrease in inventories .................................. 36,221 13,570 (25,101)
(Increase) decrease in prepaid expenses ............................. (539,246) 405,411 (57,236)
(Increase) in other assets ......................................... (470,733) (1,738,980) (3,224,105)
Increase (decrease) in accounts payable ............................. 637,465 (69,794) 431,017
Increase (decrease) in accrued payroll and other expenses ........... 203,763 171,458 (137,193)
Increase (decrease) in accrued interest ............................. 1,187,254 (796,202) 3,686,838
Increase (decrease) in other accrued liabilities .................... 1,546,616 605,290 (77,899)
------------- ------------- -------------
Net cash provided by operating activities ........................ 12,411,285 4,746,712 12,151,861
------------- ------------- -------------

Cash Flows From Investing Activities:
Payment for purchase of Fitzgeralds, net of cash received ........... (143,758,152) - -
Acquisition of property, equipment and vessel improvements .......... (5,089,848) (3,039,635) (3,919,960)
(Increase) decrease in prepaid lease and deposits ................... 2,287,437 (98,404) (15,000)
Proceeds from sale of equipment ..................................... 1,850 179,200 -
Investment in Buffington Harbor Riverboats, LLC ..................... (214,665) (7,836,489) (245,330)
Purchase of naming rights ........................................... (1,500,000) - -
(Increase) decrease in restricted cash .............................. 2,000,000 (2,000,000) -
Purchase of 49% interest in Gary New Century ........................ - (9,000,000) -
Sale of 49% interest in Gary New Century ............................ - 9,000,000 -
Cash paid for other investing activities ............................ - - (100,000)
------------- ------------- -------------
Net cash used in investing activities ............................ (146,273,378) (12,795,328) (4,280,290)
------------- ------------- -------------

Cash Flows From Financing Activities:
Redemption of 12-3/4% Senior Secured Notes .......................... - (6,382,500) (116,005,298)
Proceeds from issuance of 10-7/8% Senior Secured Notes .............. - - 127,738,000
Proceeds from issuance of 11.653% Senior Secured Notes .............. 145,000,400 - -
Payment of Senior Secured Notes issuance costs ...................... (5,349,230) - (4,241,526)
Member's equity contribution ........................................ 5,000,000 - -
(Increase) decrease in restricted cash .............................. - 7,357,874 (7,357,874)
Line of credit, net ................................................. (1,300,000) 7,800,000 -
Increase in short-term debt ......................................... - - 6,000,000
Increase in long-term debt .......................................... - - 75,226
Cash paid to reduce long-term debt .................................. (983,298) (2,154,680) (2,145,966)
Cash received from loans from Barden Development, Inc ............... 2,000,000 4,000,000 -
Payment of loan to member ........................................... - - (8,759,355)
Issuance of loans to Barden Development, Inc ........................ (700,000) (6,000,000) -
Distribution to Barden Development, Inc. ............................ - (597,610) (325,135)
------------- ------------- -------------
Net cash provided (used) by financing activities ................. 143,667,872 4,023,084 (5,021,928)
------------- ------------- -------------

Net increase (decrease) in cash and cash equivalents ................ 9,805,779 (4,025,532) 2,849,643
Cash and cash equivalents, beginning of year ........................ 16,119,512 20,145,044 17,295,401
------------- ------------- -------------
Cash and cash equivalents, end of year .............................. $ 25,925,291 $ 16,119,512 $ 20,145,044
============= ============= =============

NONCASH INVESTING ACTIVITIES:

Conversion of Investment in Buffington Harbor Riverboats, LLC
to prepaid lease ................................................. $ 6,213,615 $ - $ -

Interest paid:
Principal Member .................................................... $ - $ - $ 266,508
Equipment Debt ...................................................... 35,898 237,513 487,926
Senior Secured Notes-Fixed Interest, 10.875% ........................ 14,137,500 14,648,021 -
Senior Secured Notes-Fixed Interest, 12.75% ......................... - 382,500 8,233,313
Senior Secured Notes-Contingent Interest, 12.75% .................... - 250,545 3,018,090
Line of credit ...................................................... 423,831 276,000 -
Indiana Department of Revenue ....................................... 260,374 - -

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

F-6

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation:

The Majestic Star Casino, LLC (the "Company") was formed on December 8,
1993, as an Indiana limited liability company ("LLC"), to provide gaming and
related entertainment to the public. The Company commenced gaming operations in
the City of Gary (the "City") at Buffington Harbor, located in Lake County, in
the State of Indiana on June 7, 1996. Majestic Investor, LLC was formed in
September 2000 as an "unrestricted subsidiary" of the Company under the
Indenture relating to the Company's 10-7/8% Senior Secured Notes. Majestic
Investor, LLC was initially formed to satisfy the Company's off-site development
obligations under the Development Agreement with the City of Gary.

Majestic Investor, LLC entered into a definitive purchase and sale
agreement dated as of November 22, 2000, as amended December 4, 2000, with
Fitzgeralds Gaming Corporation and certain of its affiliates (the "Seller") to
purchase substantially all of the assets of three of its subsidiaries for
approximately $149.0 million in cash, subject to adjustment in certain
circumstances, plus assumption of certain liabilities. Majestic Investor, LLC
assigned all of its rights and obligations to Majestic Investor Holdings, LLC, a
wholly-owned subsidiary of Majestic Investor, LLC, following the formation of
Majestic Investor Holdings, LLC. Majestic Investor Holdings, LLC completed the
purchase of the Fitzgeralds assets on December 6, 2001. The three Fitzgeralds
brand casinos are "restricted subsidiaries" of Majestic Investor Holdings, LLC
under the Indenture relating to Majestic Investor Holdings, LLC's 11.653% Senior
Secured Notes and "unrestricted subsidiaries" under the Company's Indenture
relating to the Company's 10-7/8% Senior Secured Notes.

Except where otherwise noted, the words "we," "us," "our," and similar
terms, as well as the "Company," refer to The Majestic Star Casino, LLC and all
of its subsidiaries.

The accompanying consolidated financial statements include the accounts
of The Majestic Star Casino, LLC and its wholly-owned subsidiary, Majestic
Investor, LLC. Intercompany transactions are eliminated. Investment in
affiliates in which the Company has the ability to exercise significant
influence, but not control, are accounted for by the equity method.

2. Summary of Significant Accounting Policies:

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated in the consolidation.

CASH AND CASH EQUIVALENTS - The Company considers cash equivalents to include
short-term investments with original maturities of ninety days or less. Cash
equivalents are carried at cost plus accrued interest which approximates fair
value. The Company places its cash primarily in checking and money market
accounts with high credit quality financial institutions which, at times, have
exceeded federally insured limits.

F-7

MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

2. Summary of Significant Accounting Policies (Continued)

RESTRICTED CASH - At December 31, 2001, restricted cash represents U.S. Treasury
Notes held in an escrow account for the benefit of certain owners of land leased
to Barden Nevada Gaming, LLC.

CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of casino
accounts receivable. The Company extends credit to approved casino customers
following background checks and investigations of creditworthiness. An estimated
allowance for doubtful accounts is maintained to reduce the Company's
receivables to their carrying amount, which approximates fair value. Management
believes that as of December 31, 2001, no significant concentrations of credit
risk existed for which an allowance had not already been determined and
recorded.

INVENTORIES - Inventories consisting principally of food, beverage, operating
supplies and gift shop items are stated at the lower of cost or market value.
Cost is determined by the first-in, first-out method.

OTHER ASSETS - The estimated cost of normal operating quantities (base stock) of
china, silverware, glassware, linen, uniforms and utensils has been recorded as
an asset and is not being depreciated. Costs of base stock replacements are
expensed as incurred. Other assets in the accompanying consolidated balance
sheets includes $1,243,910 and $539,392 of base stock inventories at December
31, 2001 and 2000, respectively.

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation
expense is computed utilizing the straight-line method over the estimated useful
lives of the depreciable assets. Certain equipment held under capital leases are
classified as property and equipment and amortized using the straight-line
method over the lease terms and the related obligations are recorded as
liabilities. Costs of major improvements are capitalized; costs of normal
repairs and maintenance are charged to expense as incurred. Gains or losses on
dispositions of property and equipment are recognized in the consolidated
statement of income when incurred.

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

DEFERRED FINANCING COSTS - Deferred financing costs represent agent's
commissions, closing costs and professional fees incurred in connection with the
issuance of the Company's 10 7/8% Senior Secured Notes and $20.0 million line of
credit, and Majestic Investor Holdings, LLC's 11.653% Senior Secured Notes and
the $15.0 million line of credit. Such costs are being amortized over the terms
of the related notes and lines of credit, respectively, using the effective
interest method.

F-8

MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

2. Summary of Significant Accounting Policies (Continued)

DEFERRED COSTS - Development and obligation payments to the City and licensing
costs represent direct costs associated with the development of the riverboat
casino, and were deferred until operations commenced on June 7, 1996. These
costs have been amortized over five years, the life of the gaming license.

GOODWILL - Goodwill represents the cost of net assets acquired in excess of
their fair value. Goodwill for acquisitions after June 30, 2001 is not subject
to amortization but is subject to impairment testing at least annually.

INTANGIBLE ASSETS - Intangible assets are amortized over their estimated useful
lives, generally eight to ten years.

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

CASINO REVENUE - Casino revenue is the net win from gaming activities, which is
the difference between gaming wins and losses. Hotel and other revenue is
recognized at the time the related service is performed.

PROMOTIONAL ALLOWANCES - Approximately $7,813,635, $4,607,090, and $2,674,947 of
cash-back components of the Company's Slot Club reward programs, including
promotional coupons, have been classified as a reduction of revenue in the
accompanying consolidated statement of income as promotional allowances in the
determination of net revenues for the years ended December 31, 2001, 2000 and
1999, respectively. In addition, operating revenues include the retail value of
hotel rooms, food and beverage and other services, which were provided to
customers without charge. The corresponding charges have been deducted from
revenue in the accompanying consolidated statements of income as promotional
allowances in the determination of net revenues. The estimated direct cost of
providing promotional allowances has been included in costs and expenses as
follows:

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

Hotel $ 254,918 $ - $ -
Food and beverage 1,008,421 179,782 191,879
Other 231,933 105,391 55,062

PRE-OPENING EXPENSES - Pre-opening expenses are expensed as incurred.

F-9

MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

2. Summary of Significant Accounting Policies (Continued)

FEDERAL INCOME TAXES - The Company has historically been treated as a
partnership for U.S. federal income tax purposes. As a result of a change in the
Company's ownership structure in June 2001, the Company ceased to be a
partnership for U.S. federal income tax purposes, and is now an entity
disregarded for U.S. federal income tax purposes. At all times during 2001,
income of the Company was taxed directly to its owner, and, accordingly, no
provision for federal income taxes is reflected in the financial statements.

ADVERTISING COSTS - Advertising expenditures are expensed as incurred.
Advertising costs included in advertising and promotion expenses were
$2,698,484, $3,169,974, and $2,514,166 for the years ended December 31, 2001,
2000 and 1999, respectively.

LONG-LIVED ASSETS - Long-lived assets and certain identifiable intangibles held
and used by the Company are reviewed for impairment when events or changes in
circumstances warrant such a review. The carrying value of a long-lived or
intangible asset is considered impaired when the anticipated undiscounted cash
flow from such asset is less than its carrying value. In that event, an
impairment loss is recognized. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair values are reduced for the cost
of disposition.

SLOT CLUB LIABILITY - The Company has accrued for the liability of points earned
but not redeemed by its slot club members, less inactive players and expired
points. The liability is calculated based on average historical redemption rate.
Expenses incurred from actual cash redemption and the change in reserve for slot
club redemption is included in promotional allowances on the consolidated
statement of income.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company believes, based upon current
information, that the carrying value of the Company's cash and cash equivalents,
restricted cash, accounts receivable and accounts payable approximates fair
value. The Company estimates the fair value of its long-term debt approximates
its carrying value based on quoted market prices for the same or similar issues.

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - We adopted Emerging Issues Task
Force ("EITF") No. 00-14, "Accounting of Certain Sales Incentive," EITF No.
00-22, "Accounting for `Points' and Certain Other Time-Based or Volume-Based
Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered
in the Future," and EITF 00-25, "Accounting for Consideration from a Vendor to a
Retailer in Connection with the Purchase or Promotion of the Vendor's Product,"
which requires the cash-back component of the Company's slot club reward
program, including promotional

F-10

MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

2. Summary of Significant Accounting Policies (Continued)

coupons, be classified as a reduction of revenues. We historically reported the
costs of such points as an expense. Such expenses have been reclassified to
promotional allowances for all periods presented.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Statements ("SFAS") No. 141, "Business Combinations,"
SFAS No. 142, "Goodwill and Other Intangible Assets" and SFAS No. 143,
"Accounting for Asset Retirement Obligations." SFAS No. 141 requires all
business combinations to be accounted for using the purchase method of
accounting. SFAS No. 141 is required to be implemented for all acquisitions
initiated after June 30, 2001, and all business combinations accounted for using
the purchase method for which the date of acquisition is July 1, 2001, or later.
We applied SFAS No. 141 for our acquisition of the Fitzgeralds assets.

Under SFAS No. 142, goodwill and other indefinite lived intangible assets are no
longer subject to amortization over their useful lives, rather, they are subject
to assessments for impairment at least annually. Also, under SFAS No. 142, an
intangible asset should be recognized if the benefit of the intangible asset is
obtained through contractual or other legal rights or if the intangible asset
can be sold, transferred, licensed, rented or exchanged. Such intangibles will
be amortized over their useful lives. Under SFAS No. 142, our acquisition of the
Fitzgeralds assets was immediately subject to the provisions of SFAS No. 142. We
will test those assets for impairment at least annually.

Under SFAS No. 143, the fair value of a liability for an asset retirement
obligations is required to be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS No. 143 will be implemented by us on January 1, 2002.
Adoption of SFAS No. 143 is not anticipated to have a material impact on our
consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" which supercedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
and amends Accounting Principles Board ("APB") Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effect of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and is effective for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. Adoption of SFAS No. 144 will not have a material impact on our
consolidated financial statements.

3. Certificate of Suitability

On December 9, 1994, the Indiana Gaming Commission (the "Commission") awarded
the Company one of two certificates (the "Certificate") for a riverboat owner's
license for a riverboat casino to be docked in the City. Having complied with
certain statutory and regulatory requirements and other conditions of the
Commission, the Company received a five-year riverboat owner's license on June
3, 1996. On August 23, 2001, the Company's riverboat ownership license was
renewed for a one-year period beginning June 7, 2001. There can be no assurance
that the Company's license will be renewed beyond the one-year period.

F-11

MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

3. Certificate of Suitability (Continued)

The second certificate was issued to Trump Indiana, Inc. ("Trump"). The Company
and Trump jointly developed and operate a docking location from which the
entities are conducting their respective riverboat gaming operations in the
City.

4. City of Gary, Indiana Development Obligation

On September 7, 1995, the Company and the City entered into an agreement for the
purpose of summarizing procedures regarding the acquisition of a certain parcel
of land in accordance with the Certificate. The Company paid the City $250,000
under the terms of this agreement. On September 29, 1995, the Company and Trump
entered into an agreement with the City for which the Company paid the City
$5,000,000. As of December 31, 2001, the deferred costs representing the
Company's development obligation to the City has been fully amortized.

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

The Company fulfilled all commitments with respect to the Development Agreement
as of September 2000, by purchasing and equipping the Permanent Vessel,
constructing substantial harbor improvements and the BHR facilities, and by
investing in an affiliated entity that purchased land for future development
adjacent to the BHR facility. In addition, the Company is current on its ongoing
economic incentive payments.

5. Acquisitions

On December 6, 2001, we, through certain indirect wholly-owned subsidiaries,
completed the acquisition of substantially all of the assets and assumed certain
liabilities of Fitzgeralds Las Vegas, Inc. ("Fitzgeralds Las Vegas"),
Fitzgeralds Mississippi, Inc. ("Fitzgeralds Tunica") and 101 Main Street Limited
Liability Company ("Fitzgeralds Black Hawk") (the "Fitzgeralds assets") for
approximately $152.7 million in cash. We are accounting for the acquisition
under the purchase method. Accordingly, the purchase price is allocated to the
underlying assets acquired and liabilities assumed based upon their estimated
fair values at the date of acquisition. We determined the estimated fair value
of property and equipment and intangible assets based upon third-party
valuations.

F-12

MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2001, DECEMBER 31, 2000, AND DECEMBER 31, 1999

5. Acquisitions (Continued)

The purchase price was determined based upon estimates of future cash flows and
the net worth of the assets acquired. Majestic Investor Holdings, LLC funded the
acquisition through the issuance of its 11.653% Senior Secured Notes (see Note
10). The results of operations for the twenty-five days ended December 31, 2001,
since the acquisition on December 6, 2001, are included in our consolidated
statement of income. The following table summarizes the estimated fair value of
the assets acquired and the liabilities assumed at the acquisition date.

(In millions) At December 6, 2001
-------------------

Current assets $ 12.2
Property and equipment 122.9
Intangible assets 19.4
Goodwill 10.6
Other noncurrent assets 2.0
------

Total assets acquired 167.1
------

Current liabilities 14.0
Other noncurrent liabilities 0.4
------

Total liabilities assumed 14.4
------

Net $152.7
======

Intangible assets include $9.8 million for customer relationships, $3.7 million
for tradename and $5.2 million for gaming licenses. Intangible assets for
customer relationships and tradenames are being amortized over a period of 8-10
years. In accordance with SFAS 142, goodwill, and other indefinite lived
intangible assets, such as the Company's gaming license, are not amortized but
instead are subject to impairment tests at least annually.

The following unaudited pro forma consolidated financial information has been
prepared assuming our acquisition had occurred on January 1, 2000.

For the years ended
December 31, 2001 December 31, 2000
-----------------------------------------------
(unaudited)

Net revenues $291,114,248 $ 273,171,030

Income from operations $ 36,724,595 $ 26,614,526

Net income (loss) $ 167,824 $ (10,531,166)

These unaudited pro forma results are presented for comparative purposes only.
The pro forma results are not necessarily indicative of what our actual results
would have been had the acquisition been completed as of the beginning of the
year, or of future results.

F-13

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Property and Equipment

Property and equipment at December 31, 2001 and 2000 consists of the following:

Substantially all property and equipment are pledged as collateral on long-term
debt. See Note 10.

Estimated
Service Life
2001 2000 (Years)

Land used in casino operations $ 6,403,371 $ -
Vessel, building and improvements 116,161,959 44,639,971 25-39
Site Improvements 15,870,892 - 9
Barge and improvements 15,555,248 848,946 5-15
Leasehold improvements 237,763 195,253 5
Furniture, fixtures and equipment 44,131,889 25,399,692 4-5
Construction in progress 713,772 -
------------ ------------
199,074,894 71,083,862

Less accumulated depreciation and amortization (28,879,881) (21,925,291)
------------ ------------

Property and equipment, net $170,195,013 $ 49,158,571
============ ============

F-14

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Other Intangible Assets

The gross carrying amount and accumulated amortization of the Company's
intangible assets, other than goodwill, as of December 31, 2001 are as follows:

Gross Carrying Accumulated
Amount Amortization
------------------ -------------------
(in thousands)

Amortized intangible assets:

Customer relationships $ 9,800 $ (84)
Tradename 3,700 (25)
Riverboat excursion license 700 -
----------------- -----------------
Total $14,200 $(109)
----------------- -----------------

Unamortized intangible assets:

Gaming license $ 5,200
-----------------
Total $ 5,200
=================

The amortization expense recorded on the intangible assets for the year ended
December 31, 2001 was $0.1 million. The estimated amortization expenses for each
of the five succeeding fiscal years is as follows:

For the year ending December 31,
- --------------------------------
2002 $1,595
2003 1,642
2004 1,642
2005 1,642
2006 1,642

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

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

F-15

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Investment in Buffington Harbor Riverboats, L.L.C. (Continued)

The following represents selected financial information of BHR:

December 31, 2001 December 31, 2000
BALANCE SHEET

Cash and cash equivalents $ 317,646 $ 286,921
Current assets 782,001 15,843,359
Property, plant and equipment, net 69,650,069 75,100,370
Other assets 111,478 116,955

Total assets 70,543,548 91,060,684

Current liabilities 2,745,899 10,311,785

Total liabilities 2,745,899 10,311,785

Members' equity
The Majestic Star Casino, LLC 33,898,825 43,924,033

Total members' equity 67,797,649 80,748,899

Years Ended December 31,
------------------------
2001 2000 1999
---- ---- ----
STATEMENTS OF INCOME

Gross revenue $ 16,468,581 17,814,012 $ 18,293,939

Operating income (loss) (5,981,620) (4,350,334) (5,701,264)

Net income (loss) (5,595,475) (4,117,338) (5,696,010)

At December 31, 2001, 2000, and 1999, the Company's consolidated income
statements reflect approximately $8,614,000, $8,973,000, and $9,300,000,
respectively, in vessel berthing fees and promotional allowances of which
$8,947,000, $8,519,000, and $9,123,000 was paid in 2001, 2000, and 1999,
respectively.

F-16

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Other Accrued Liabilities

Other accrued liabilities at December 31 were comprised of:

2001 2002
---- ----

Property taxes $ 2,168,667 $1,439,220
Slot Club points 2,087,087 -
Progressive jackpots 2,883,958 488,706
Other 5,880,385 1,669,998
------------ ----------
$ 13,020,097 $3,597,924

10. Long - Term Debt

Long-term debt at December 31 is as follows:

2001 2000
---- ----

$152,632,000 senior secured notes payable, net of unamortized discount of
$7,546,568; collateralized by a first priority lien on substantially all of
the assets of Majestic Investor Holdings, LLC, due in semi-annual
installments of interest at 11.653% on May 31 and November 30;
with a final payment of principal and interest due on November 30, 2007. $ 145,085,432 $ -

$130,000,000 senior secured notes payable, net of unamortized discount of
$1,443,371 at 2001 and $1,766,514 at 2000; collateralized by a first
priority lien on substantially all of the assets of Majestic Star Casino,
LLC, due in semi-annual installments of interest at 10 7/8% on July 1 and
January 1; with a final payment of principal and interest due on July 1, 2006. 128,556,629 128,233,486

$20.0 million four-year credit facility established on August 2, 1999,
expiring on August 2, 2003; collateralized by substantially all current and
future assets of Majestic Star Casino, LLC, other than excluded assets;
interest rate at the borrowers choice of LIBOR plus 3.75% or 1.5% points
above the base rate which approximates the prime rate, with a minimum
interest rate of 8.5%. - 7,800,000

$15.0 million four-year credit facility established on December 6, 2001,
expiring on December 5, 2005; collateralized by substantially all current
and future assets of Majestic Investor Holdings, LLC, other than excluded
assets; interest rate at the borrowers choice of LIBOR plus 2.0% or the
base rate which approximates the prime rate. 6,500,000 -

Equipment and software financing payable at Majestic Investor Holdings, LLC
including related use taxes; collateralized by gaming equipment; interest
rates from 7.5% to 12.0%; due in aggregate monthly installments of
$13,526 with varying maturity dates through 2005. 411,446 -

Equipment financing payable at Majestic Star Casino, LLC including related
use taxes; collateralized by gaming equipment; due in aggregate monthly
installments with varying maturity dates through September 2001. - 1,011,719
------------- -------------
280,553,507 137,045,205

Less current maturities (6,656,574) (8,811,719)
------------- -------------

Long-term debt, net of current maturities $ 273,896,933 $ 128,233,486
============= =============

F-17

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Long - Term Debt (Continued)

The schedules maturities of long-term debt are as follows:

Year Ending December 31,
2002 $ 6,656,574
2003 133,066
2004 84,346
2005 37,460
2006 128,556,629
Thereafter 145,085,432
-----------

$280,553,507
============

Senior Secured Notes

On June 18, 1999, the Company issued $130.0 million of 10-7/8% Senior Secured
Notes due 2006. In October 1999, the Company successfully completed an exchange
of its privately placed $130.0 million 10-7/8% Senior Secured Notes Series A for
$130.0 million 10-7/8% Senior Secured Notes Series B that are registered with
the Securities and Exchange Commission. The net proceeds from the offering were
utilized to redeem $99.0 million principal amount of the Company's 12-3/4%
Senior Secured Notes due 2003 with Contingent Interest. During June 1999,
approximately $4.2 million of the net proceeds were utilized for fees to fund
the repurchase and approximately $7.5 million of the net proceeds were
classified as restricted cash to effect a covenant defeasance of the $6.0
million of remaining 12-3/4% Senior Secured Notes due 2003 with Contingent
Interest. During May 2000, the Company redeemed this remaining $6.0 million of
12-3/4% Senior Secured Notes. Holders of the outstanding 10-7/8% Senior Secured
Notes have the right to require that the Company repurchase the notes at a
premium under certain conditions, including a change in control of the Company.

The 10-7/8% Senior Secured Notes bear interest at a fixed rate of 10-7/8% per
annum payable January 1 and July 1 each year, commencing January 1, 2000.
Substantially all of the Company's current and future assets other than certain
excluded assets are pledged as collateral. Excluded assets include the assets of
our "unrestricted subsidiaries," which include the subsidiaries that hold our
Fitzgeralds assets. The notes rank senior in right of payment to any of the
Company's subordinated indebtedness and equally with any of the Company's senior
indebtedness.

F-18

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Long - Term Debt (Continued)

After July 1, 2003, the Company may, at its option, redeem all or some of
the notes at a premium that will decrease over time from 105.438% to 100%
of their face amount, plus interest. Prior to July 1, 2002, if the Company
publicly offers certain equity securities, as defined, it may, at its
option, apply part of the net proceeds from those transactions to redeem up
to 35% of the principal amount of the notes at 110.875% of their face
amount, plus interest. If the Company goes through a change of control, it
must give holders of the notes the opportunity to sell the Company their
notes at 101% of their face amount, plus interest.

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

On December 6, 2001, Majestic Investor Holdings, LLC issued $152.6 million
of 11.653% Senior Secured Notes due 2007. The net proceeds of $145,000,400
from the offering, together with an equity contribution were utilized to
purchase substantially all of the assets of Fitzgeralds Tunica, Fitzgeralds
Black Hawk and Fitzgeralds Las Vegas and to pay related fees and expenses.

The 11.653% Senior Secured Notes bear interest at a fixed rate of 11.653%
per annum payable May 31 and November 30 each year, commencing May 31,
2002. Substantially all of Majestic Investor Holdings' current and future
assets other than certain excluded assets are pledged as collateral. The
notes rank senior in right of payment to any of Majestic Investor Holdings
LLC's subordinated indebtedness and equally with any of Majestic Investor
Holdings LLC's senior indebtedness.

On or after November 30, 2005, Majestic Investor Holdings LLC has the right
to redeem notes from time to time at a price that will decrease over time
from 105.827% of the principal amount in 2005 to 100% of the principal
amount in 2006, plus, in each case, accrued and unpaid interest. Prior to
November 30, 2004, Majestic Investor Holdings LLC may, at its option, apply
part of the net proceeds from certain equity offerings to redeem up to 35%
of the principal amount of the notes at 111.653% of their face amount, plus
accrued and unpaid interest.

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

F-19

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Long - Term Debt (Continued)

Credit Facilities

On August 2, 1999, the Company established a $20.0 million credit facility,
which is also secured by substantially all current and future assets, other
than certain excluded assets. The lien on the collateral securing this
credit facility is structurally senior to the lien securing the 10-7/8%
Senior Secured Notes. As of December 31, 2000, $7.8 million of the credit
facility was outstanding. During 2001, $8.0 million was borrowed on this
credit facility, and at December 31, 2001, these borrowings had been repaid
in full. As of April 1, 2002, there was no outstanding balance on the
credit facility.

The terms of the $20.0 million line of credit is four years with an
interest rate at the Company's choice of LIBOR plus 3.75% or 1.5 percentage
points above the base rate. The base rate approximates the prime rate. The
minimum interest rate is 8.5%. The credit agreement includes covenants,
which among other things, (i) require operating income as defined in the
credit facility of at least $10.0 million for twelve consecutive months
during the credit period, and (ii) restrict the Company's ability to incur,
assume, or guarantee any indebtedness.

On December 6, 2001, Majestic Investor Holdings, LLC established a $15.0
million credit facility. It is permitted to borrow up to $12.0 million
under the credit facility, pending the approval by the Nevada Gaming
Authorities of the pledge by Majestic Investor Holdings, LLC of the
membership interests in Barden Nevada Gaming, LLC in connection with the
credit facility. Majestic Investor Holdings, LLC recently filed an
application for the necessary approval by the Nevada Gaming Authorities for
the pledge necessary in connection with the credit facility. The terms of
the $15.0 million line of credit is four years with an interest rate at the
Company's choice of LIBOR plus 2.0%, or the base rate, which approximates
the prime rate. The credit facility is secured by substantially all of
Majestic Investor Holdings, LLC's current and future assets, other than
certain excluded assets. The lien on the collateral securing Majestic
Investor Holdings, LLC's credit facility is senior to the lien on the
collateral securing the senior secured notes. The credit facility also
contains financial covenants and restrictions on, among other things,
indebtedness, investments, distributions and mergers. As of April 1, 2002,
the outstanding balance on the credit facility was approximately $1.7
million.

Intercreditor Agreements

In connection with Majestic Star entering into its $20.0 million credit
facility, the trustee (as collateral agent) under the indenture associated
with Majestic Star's senior secured notes entered into an intercreditor
agreement with Foothill Capital Corporation, the lender under Majestic
Star's credit facility. In addition, in connection with Majestic Investor
Holdings entering into its $15.0 million credit facility, the trustee (as
collateral agent) under the indenture associated with Majestic Investor
Holdings' senior secured notes entered into a virtually identical
intercreditor agreement with Foothill Capital Corporation, the lender under
Majestic Investor Holdings' credit facility. Both intercreditor agreements
provide for the subordination of the liens securing the respective senior
secured notes to the liens securing the indebtedness under the respective
credit facilities.

F-20

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Long - Term Debt (Continued)

The intercreditor agreements, among other things, limits the trustee's rights in
an event of default under the respective senior secured notes. Under the
intercreditor agreements, if the respective senior secured notes become due and
payable prior to the stated maturity or are not paid in full at the stated
maturity at a time during which there is indebtedness outstanding under the
corresponding credit facilities, the trustee will not have the right to
foreclose upon the collateral unless and until the lender under the
corresponding credit facilities fails to take steps to exercise remedies with
respect to or in connection with the collateral within 180 days following notice
to such lender of the occurrence of an event of default under the corresponding
indenture. In addition, the intercreditor agreements prevent the trustee and the
holders of the respective senior secured notes from pursuing remedies with
respect to the collateral in an insolvency proceeding. The intercreditor
agreements also provide that the net proceeds from the sale of the corresponding
collateral will first be applied to repay indebtedness outstanding under the
corresponding credit facilities and thereafter to the holders of the
corresponding senior secured notes.

11. Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value as of
December 31, 2001 of the Company's financial instruments. (Refer to Notes 2 and
10).

Carrying Estimated
Value Fair Value
----- ----------

Assets:
Cash and equivalents $ 25,925,291 $ 25,925,291
Restricted cash $ 1,000,000 $ 1,000,000

Liabilities:
Long-term debt (including capital lease
obligations and line of credit borrowings) $280,553,507 $278,097,313

12. Savings Plan

The Company contributes to a defined contribution plan which provides for
contributions in accordance with the plan document. The plan is available to
certain employees with at least one year of service. The Company contributes a
matching contribution up to a maximum of 3% of an employee's salary limited to a
specified dollar amount as stated in the plan document. The Company's
contributions to the plan amounted to $402,000, $340,000 and $303,000 during
2001, 2000 and 1999, respectively.

F-21

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Commitments and Contingencies

Leases

The Company has operating leases that cover various office and gaming equipment.
Future minimum lease payments for operating leases with initial terms in excess
of one year as of December 31, 2001 are as follows:

Year ending December 31,
2002 $ 1,422,407
2003 1,254,338
2004 972,948
2005 811,604
2006 774,092
Thereafter 774,092
------------

$ 6,009,481
============

Employment Agreements

Mr. Don H. Barden serves as the Company's Manager, Chairman, President and Chief
Executive Officer and currently receives annual compensation of $370,000 as an
employee, pursuant to a letter agreement dated October 22, 2001 with The
Majestic Star Casino, LLC.

Mr. Michael E. Kelly serves as the Company's Manager, Executive Vice President,
Chief Operating and Financial Officer and Secretary pursuant to a three-year
employment agreement with The Majestic Star Casino, LLC dated October 22, 2001.
Under this agreement, Mr. Kelly will receive base compensation of $400,000 per
year and can also earn annual incentive compensation based upon his performance
and Majestic Star's performance. In addition to such compensation, Mr. Kelly is
entitled to term life insurance in an amount equal to $2.5 million and other
customary employee benefits, including participation in The Majestic Star
Casino, LLC's 401(k) plan, together with a $100,000 signing bonus and an
interest-free loan in the amount of $200,000 to be repaid in three equal annual
installments. Mr. Kelly is also entitled to additional compensation, upon a
change in control, equal to his base salary and incentive compensation for the
remainder of the term of the agreement, plus 12 months thereafter. Mr. Kelly's
employment agreement contains certain non-competition provisions with a duration
of 12 months following termination of his employment.

The amounts payable pursuant to the agreements with Messrs. Barden and Kelly are
the responsibility of the Company. As indicated in Note 14, the Company entered
into an Expense Reimbursement/Sharing Agreement with Majestic Investor Holdings
whereby Majestic Investor Holdings will reimburse the Company for a specified
percentage of expenses paid by the Company for Majestic Investor Holdings'
corporate overhead.

F-22

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Commitments and Contingencies (Continued)

Letter of Credit/Surety Bond

In May 1996, the Company was required by the City of Gary, to maintain a Surety
Bond in the amount of $12.5 million to guarantee the remaining $10.0 million of
its site off-site development obligation and $2.5 million to satisfy state and
local regulatory obligations. The Surety Bond was secured by a $3.5 million
letter of credit issued by a bank, which was collateralized by $3.6 million in
cash. In September 2000, the Company met its development obligation,
concurrently the Surety Bond was reduced from $12.5 million to $2.5 million and
the bank released $1.0 million of the cash collateral. In March 2001, the
Company replaced its existing Surety Bond with a new $2.5 million unsecured
Surety Bond. In conjunction with the release of the original Surety Bond, the
letter of credit was canceled and the remaining $2.6 million of cash collateral
was released to the Company. The new Surety Bond is secured only by a personal
guarantee of Don H. Barden. If Mr. Barden is required to make payments to the
bonding company as a result of the guaranty, the Company will be obligated to
reimburse Mr. Barden for any such payments.

Legal Proceedings

On June 25, 1997, a complaint was filed in an Illinois Cook County Court against
Majestic Star Casino. The plaintiff, a former employee, was injured during and
as a result of a routine boat drill attempt and is requesting compensatory and
punitive damages totaling approximately $3.5 million. The suit alleges that
Majestic Star Casino failed to provide adequate safety measures to their
employees during these drills. The parties are in settlement negotiations. The
Company does not believe that the resolution of this suit will have a material
impact on the Company's financial position and results of operation.

On March 27, 1998, a complaint was filed in the Lake County Superior Court in
East Chicago, Indiana, against BHR, the Joint Venture Partner, and the Company.
The plaintiff, a former employee of the Company, claims to have been assaulted
in the BHR parking lot on June 25, 1997 and is requesting compensatory and
punitive damages totaling approximately $11.0 million. The suit alleges that the
Joint Venture Partner and the Company failed to provide adequate security to
prevent assaults. The Company intends to vigorously defend against such suit.
However, it is too early to determine the outcome of such suit and the effect,
if any, on the Company's financial position or results of operations.

On March 2, 2000, the Company was issued a notice of audit findings, and on May
11 and 12, 2000, was issued notices of assessment by the Indiana Department of
Revenue for income tax withholding deficiencies for the years ended 1996 and
1998. The Indiana Department of Revenue has taken the position that wagering
taxes should not be classified as an allowable deductible expense for
calculating state income taxes and therefore requires that wagering taxes be
added back to net income to determine the tax liability. The estimated tax
deficiency for 1996 is approximately $239,000 excluding interest and the
estimated tax deficiency for 1998 is approximately $315,000 excluding interest.
This same finding has been protested by other Indiana casinos. The Company has
filed an administrative protest and demand for hearing with the Indiana
Department of Revenue. However, it is too early to determine the outcome of such
a protest.

F-23

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Commitments and Contingencies (Continued)

From time to time, the Company may be involved in routine administrative
proceedings involving alleged violations of certain provisions of gaming
regulations of states in which the Company does business. Management believes
that the outcome of any such proceedings will not, either individually or in the
aggregate, have a material adverse effect on the Company or its ability to
retain and/or renew any license required for the Company's operations. No such
proceedings are pending at this time.

Gaming Regulations

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

The ownership and operation of our other casino gaming facilities in Nevada,
Mississippi and Colorado are also subject to various state and local regulations
in the jurisdictions where they are located. In Nevada, our gaming operations
are subject to the Nevada Gaming Control Act, and to the licensing and
regulatory control of the Nevada Gaming Commission, the Nevada State Gaming
Control Board and various local ordinances and regulations, including, without
limitation, applicable city and county gaming and liquor licensing authorities.
In Mississippi, our gaming operations are subject to the Mississippi Gaming
Control Act, and to the licensing and/or regulatory control of the Mississippi
Gaming Commission, the Mississippi State Tax Commission and various state and
local regulatory agencies, including liquor licensing authorities. In Colorado,
our gaming operations are subject to the Limited Gaming Act of 1991, which
created the Division of Gaming within the Colorado Department of Revenue and the
Colorado Limited Gaming Control Commission to license, implement, regulate and
supervise the conduct of limited gaming. Our operations are also subject to the
Colorado Liquor Code and the state and local liquor licensing authorities.

The Company's directors, officer, managers and key employees are required to
hold individual licenses, which requirements vary from jurisdiction to
jurisdiction. Licenses and permits for gaming operations and of individual
licensees are subject to renovation or non-renewal for cause. Under certain
circumstances, holders of our securities are required to secure independent
licenses and permits.

F-24

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Related Party Transactions

The Majestic Star Casino, LLC ("Majestic Star") entered into a Management
Agreement on June 18, 1999 with BDI to provide for, among other things, a
management fee payable by Majestic Star to BDI for acting as the manager. The
fees for each fiscal quarter will be equal to 5% of The Majestic Star Casino,
LLC's Consolidated Cash Flow (as defined in the Indenture for the Majestic Star
Senior Secured Notes) for the immediately preceding fiscal quarter and may not
be paid if Majestic Star is in default under the Indenture governing such notes
or if Majestic Star does not meet certain financial ratios as provided in such
Indenture. For the three month periods ending September 30, 1999, December 31,
1999 and March 31, 2000, approximately $325,000, $282,000, and $315,000
respectively, was paid to BDI in accordance with the Management Agreement. No
management fees have been paid for the period April 1, 2000 through September
30, 2001 since Majestic Star has not met certain financial ratios as provided in
the Indenture. For the three months ended December 31, 2001, approximately
$280,000 was paid to BDI in accordance with the Management Agreement.

In September 2000, Majestic Investor, LLC was capitalized by Majestic Star with
$9.0 million of capital contributions, including interest thereon. Majestic
Investor, LLC subsequently contributed this $9.0 million to Majestic Investor
Holdings, LLC in connection with the assignment of its rights and obligations
under the Fitzgeralds purchase and sale agreement to Majestic Investor Holdings,
LLC.

Prior to the consummation of the offering of the Majestic Investor Holdings, LLC
11.653% Senior Secured Notes, Majestic Investor Holdings, LLC issued a 35.71%
membership interest to Barden Development, Inc. (a company wholly-owned by Mr.
Barden and a member of the Majestic Star Casino, LLC)("BDI") in exchange for the
contribution by BDI of a note for $5.0 million. BDI subsequently contributed the
35.71% membership interest to Majestic Investor, LLC as additional
paid-in-equity. Majestic Investor, LLC currently owns 100% of the member
interests of Majestic Investor Holdings, LLC. BDI, upon closing of the offering
of the senior secured notes, contributed $5.0 million in repayment of the
promissory note.

On September 19, 2001, Majestic Investor Holdings, LLC entered into a Management
Agreement with BDI, which was amended and restated on December 5, 2001 effective
December 6, 2001, pursuant to which Majestic Investor Holdings, LLC will pay to
BDI fees for acting as the Manager of Majestic Investor Holdings, LLC, which
Management Fees, for any fiscal quarter, shall not exceed 1% of net revenues
plus 5% of consolidated cash flow for the immediately preceding fiscal quarter,
provided that the payment of such Management Fees shall be subordinated to the
payment in full of principal, interest, premium and liquidated damages, if any ,
then due on the senior secured notes.

On October 22, 2001, Majestic Investor Holdings, LLC entered into an Expense
Reimbursement/Sharing Agreement with Majestic Star, pursuant to which Majestic
Investor Holdings, LLC and its restricted subsidiaries will each reimburse
Majestic Star for sixty percent (60%) of the documented out-of-pocket expenses
paid by Majestic Star for Majestic Investor Holdings, LLC's corporate overhead,
including (i) the costs and expenses of executives and certain other employees,
including, but not limited to, salaries, bonuses, benefit payments, insurance,
and supplies, (ii) rent and (iii) other similar costs and expenses. These
executives and employees will provide services to both Majestic Investor
Holdings, LLC and to us and our subsidiaries. Currently, due to restrictions set
forth in the Investor Holdings Indenture, the reimbursement percentage is capped
at fifty percent (50%) up to an aggregate of $1.7 million.

F-25

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Related Party Transactions (Continued)

Interest of $185,750 on a $2.0 million note made by Majestic Investor, LLC to
BDI which was later assigned to Majestic Investor Holdings, LLC remains
outstanding at December 31, 2001. BDI paid the principal of the note in
conjunction with the closing of the acquisition on December 6, 2001.

In December 2001, Majestic Investor Holdings, LLC issued a $700,000 note to BDI.
The note bears interest at a rate of 7% per annum and is due and payable in full
on December 12, 2002.

During 2001, The Majestic Star Casino, LLC made a $300,000 employee loan to Mr.
Barden. This loan bears interest at a rate of 7% per annum and is due and
payable in full on December 12, 2002.

15. Segment Information

The Company owns and operates four properties as follows: a riverboat casino
located in Gary, Indiana; a casino and hotel located in downtown Las Vegas,
Nevada; a casino and hotel located in Tunica, Mississippi; and a casino located
in Black Hawk, Colorado (collectively, the "Properties"). The Company identifies
its business in four segments based on geographic location. The Properties
market in each of their segments primarily to middle-income guests. The major
products offered in each segment are as follows: casino, hotel (except in Gary,
Indiana and Black Hawk, Colorado) and food and beverage.

The accounting policies of each business segment are the same as those described
in the summary of significant accounting policies. There are minimal
inter-segment sales. Corporate costs are allocated to the business segment
through management fees.

A summary of the Properties' operations by business segment for the year ended
December 31, 2001 is presented below:

(in thousands)
Net revenues:
Majestic Star Casino .................................. $ 119,072
Fitzgeralds Las Vegas ................................. 3,081
Fitzgeralds Tunica .................................... 5,368
Fitzgeralds Black Hawk ................................ 2,072
Unallocated and other (1) ............................. --
------------
Total ............................................ $ 129,593
============

Income (loss) from operations:
Majestic Star Casino .................................. $ 17,303
Fitzgeralds Las Vegas ................................. (393)
Fitzgeralds Tunica .................................... 654
Fitzgeralds Black Hawk ................................ 674
Unallocated and other (1) ............................. (1,214)
------------
Total ............................................ $ 17,024
============

F-26

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Segment Information (Continued)

Segment depreciation and amortization:
Majestic Star Casino ................................................. $ 8,070
Fitzgeralds Las Vegas ................................................ 167
Fitzgeralds Tunica ................................................... 485
Fitzgeralds Black Hawk ............................................... 100
Unallocated and other (1) ............................................ 169
------------
Total ........................................................... $ 8,991
============

Expenditures for additions to long-lived assets:
Majestic Star Casino ................................................. $ 4,967
Fitzgeralds Las Vegas ................................................ --
Fitzgeralds Tunica ................................................... 100
Fitzgeralds Black Hawk ............................................... 23
Unallocated and other (1) ............................................ --
------------
Total ........................................................... $ 5,090
============

As of December 31, 2001
-----------------------
(In thousands)

Segment assets:
Majestic Star Casino ................................................. $ 107,659
Fitzgeralds Las Vegas ................................................ 45,157
Fitzgeralds Tunica ................................................... 91,338
Fitzgeralds Black Hawk ............................................... 30,915
Unallocated and other (1) ............................................ 16,352
------------
Total ........................................................... $ 291,421
Less: intercompany .................................................. (361)
------------
Total ........................................................... $ 291,060
============

___________________

(1) Unallocated and other include corporate items and eliminations that are not
allocated to the operating segments.

F-27

THE MAJESTIC STAR CASINO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Supplemental Guarantor Financial Information

The Company's $130.0 million, 10 7/8% Senior Secured Notes (See Note 10) are
guaranteed by substantially all of the assets of the Company, except for those
assets of Majestic Investor Holdings, LLC and its wholly-owned subsidiaries
which include the three casino properties acquired on December 6, 2001. The
guarantees on the 10 7/8% Senior Secured Notes rank senior in right of payment
to Majestic Star's subordinated indebtedness and equal with any of Majestic
Star's senior indebtedness.

Majestic Investor Holdings, LLC's $152.6 million, 11.653% Senior Secured Notes
(See Note 10) are unconditionally and irrevocably guaranteed, jointly and
severally by all of the restricted subsidiaries of Majestic Investor Holdings,
LLC. The guarantees rank senior in right of payment to all existing and future
subordinated indebtedness of these restricted subsidiaries and equal in right of
payment with all existing and future senior indebtedness of these restricted
subsidiaries.

The following condensed consolidating information presents condensed
consolidating financial statements as of December 31, 2001 and for the years
ended December 31, 2001 and 2000 of The Majestic Star Casino, LLC, Majestic
Investor Holdings, LLC, and the restricted subsidiaries of Majestic Investor
Holdings, LLC (on a combined basis) and the elimination entries necessary to
combine such entities on a consolidated basis. The Majestic Star Casino Capital
Corp. ("MSCCC"), a wholly-owned subsidiary of The Majestic Star Casino, LLC and
Majestic Investor Capital Corp. ("MICC"), a wholly-owned subsidiary of Majestic
Investor, LLC, do not have any material assets, obligations or operations.
Therefore, no information has been presented below for these subsidiaries.

F-28

Condensed consolidating balance sheets as of December 31, 2001

Majestic
Majestic Investor
Majestic Star investor Holdings, Guarantor Eliminating Consolidated
Casino, LLC LLC LLC Subsidiaries Entries Total
-------------- -------- ------------ -------------- -------------- ----------------
ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 8,220,476 $ - $ 498,363 $ 17,206,452 $ - $ 25,925,291
Accounts receivable (net) 1,642,462 - 269,501 1,196,044 (28,484) 3,079,523
Inventories 38,144 - - 957,564 - 995,708
Prepaid and other current assets 1,213,056 - 707,467 1,303,570 - 3,224,093
-------------- -------- ------------ -------------- -------------- ----------------
-
Total current assets 11,114,138 - 1,475,331 20,663,630 (28,484) 33,224,615
-------------- -------- ------------ -------------- -------------- ----------------

PROPERTY AND EQUIPMENT, NET 47,767,051 - - 122,427,962 - 170,195,013
INTANGIBLE ASSETS, NET - - - 19,290,753 - 19,290,753
DUE FROM RELATED PARTIES 1,177,829 - 150,855,685 - (152,033,514) -
INVESTMENT IN BHR 33,898,771 - - - - 33,898,771
OTHER ASSETS 23,869,749 - 14,545,956 5,025,618 (8,990,943) 34,450,380
-------------- -------- ------------ -------------- -------------- ----------------

TOTAL $ 117,827,538 $ - $166,876,972 $ 167,407,963 $(161,052,941) $ 291,059,532
-------------- -------- ------------ -------------- -------------- ----------------

LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)

CURRENT LIABILITIES
Current maturities of long-term debt $ - $ - $ 6,500,000 $ 156,574 $ - $ 6,656,574
Accounts payable, accrued and other 12,784,191 - 2,526,703 15,195,545 (18,927) 30,487,512
-------------- -------- ------------ -------------- -------------- ----------------
-
Total current liabilities 12,784,191 - 9,026,703 15,352,119 (18,927) 37,144,086
-------------- -------- ------------ -------------- -------------- ----------------

DUE TO RELATED PARTIES - - 1,168,273 150,865,241 (152,033,514) -
LONG-TERM DEBT, Net of current 128,556,629 - 145,085,432 254,872 - 273,896,933
portion
-------------- -------- ------------ -------------- -------------- ----------------

Total Liabilities 141,340,820 - 155,280,408 166,472,232 (152,052,441) 311,041,019
-------------- -------- ------------ -------------- -------------- ----------------

MEMBERS' EQUITY (DEFICIT) (23,513,282) - 11,596,564 935,731 (9,000,500) (19,981,487)
-------------- -------- ------------ -------------- -------------- ----------------

TOTAL $ 117,827,538 $ - $166,876,972 $ 167,407,963 $(161,052,941) $ 291,059,532
============== ======== ============ ============== ============== ================

F-29

Condensed consolidating statements of operations for the year ended December 31,
2001

Majestic
Majestic Star Investor, Majestic Investor Guarantor Eliminating Consolidated
Casino, LLC LLC Holdings, LLC Subsidiaries Entries Total
-------------- ----------- ----------------- ------------ ----------- ------------

OPERATING REVENUES:
Casino $ 122,194,707 $ - $ - $ 10,358,799 $ - $132,553,506
Rooms - - - 1,079,456 - 1,079,456
Food and beverage 2,128,771 - - 1,189,804 - 3,318,575
Other 1,211,834 - - 203,858 - 1,415,692
-------------- ----------- ----------------- ------------ ---------- ------------

Total revenues 125,535,312 - - 12,831,917 - 138,367,229
Less promotional allowances (6,463,501) - - (2,310,848) - (8,774,349)
-------------- ----------- ----------------- ------------- ---------- ------------
-
Net revenues 119,071,811 - - 10,521,069 - 129,592,880
-------------- ----------- ----------------- ------------- ---------- ------------

COSTS AND EXPENSES:
Casino 21,405,773 - - 4,111,503 - 25,517,276
Rooms - - - 628,910 - 628,910
Food and beverage 2,320,567 - - 706,947 - 3,027,514
Other - - - 108,732 - 108,732
Gaming taxes 34,026,160 - - 808,464 - 34,834,624
Advertising and promotion 6,903,533 - - 926,226 - 7,829,759
General and administration 25,364,120 - 26,476 1,543,167 - 26,933,763
Economic incentive-City of Gary 3,667,100 - - - - 3,667,100
Depreciation and amortization 8,069,968 - 168,930 751,718 - 8,990,616
Loss on disposal of assets 12,114 - - - - 12,114
Pre-opening costs - - 1,018,234 - - 1,018,234
-------------- ----------- ----------------- ------------ ---------- ------------
Total costs and expenses 101,769,335 - 1,213,640 9,585,667 - 112,568,642
----------- ----------------- ------------ ---------- ------------
Operating income (loss) 17,302,476 - (1,213,640) 935,402 - 17,024,238
-------------- ----------- ----------------- ------------ ---------- ------------

OTHER INCOME (EXPENSE):
Interest income 181,551 - 215,791 2,410 - 399,752
Interest expense (14,817,214) - (1,208,779) (2,081) - (16,028,074)
Other non-operating expense (2,946,430) - - - - (2,946,430)
-------------- ----------- ----------------- ------------ ---------- ------------

Net income (loss) $ (279,617) $ - $ (2,206,628) $ 935,731 $ - $ (1,550,514)
============== =========== ================= ============ ========== ============

F-30

Condensed consolidating statements of cash flows for the year ended December 31,
2001

Majestic
Majestic Star Investor, Majestic Investor Guarantor Eliminating Consolidated
Casino, LLC LLC Holdings, LLC Subsidiaries Entries Total
-------------- ----------- ----------------- ------------ ----------- ------------

NET CASH PROVIDED BY (USED IN) $ 8,840,041 $ 18,500 ($14,700,259) $ 17,334,730 $ 918,273 $ 12,411,285
OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for business acquired, net of
cash acquired - - (143,758,152) - - (143,758,152)
Acquisition of property and equipment (4,967,152) - - (122,696) - (5,089,848)
Decrease of prepaid lease and deposits 2,287,437 - - - - 2,287,437
Purchase of naming rights (1,500,000) - - - - (1,500,000)
Proceeds from sale of slot machine 1,850 - - - - 1,850
Investment in Buffington Harbor
Riverboats, LLC (214,665) - - - - (214,665)
Decrease in restricted cash - 2,000,000 - - - 2,000,000
-------------- ----------- ----------------- ------------ ----------- ------------

Net cash provided by (used in)
investing activities (4,392,530) 2,000,000 (143,758,152) (122,696) (146,273,378)
-------------- ----------- ----------------- ------------ ----------- ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of 11.653%
Senior Secured Notes - - 145,000,400 - - 145,000,400
Deferred financing costs - 1,465,860 (6,815,090) - - (5,349,230)
Member's equity contribution - - 5,000,000 - - 5,000,000
Contribution from Majestic Investor - (8,803,191) 8,803,191 - - -
Cash received for loan to Barden
Development, Inc. - 2,000,000 - - - 2,000,000
Cash advances to/from related parties - (250,000) 1,168,273 - (918,273) -
Issuance of loan to Barden Development,
Inc. - - (700,000) - - (700,000)
Line of credit, net (7,800,000) - 6,500,000 - - (1,300,000)
Cash paid to reduce long-term debt (977,716) - - (5,582) - (983,298)
-------------- ----------- ----------------- ------------ ----------- ------------

Net cash provided by (used in)
financing activities (8,777,716) (5,587,331) 158,956,774 (5,582) (918,273) 143,667,872
-------------- ----------- ----------------- ------------ ----------- ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,330,205) (3,568,831) 498,363 17,206,452 - 9,805,779

CASH AND CASH EQUIVALENTS BEGINNING
OF YEAR 12,550,681 3,568,831 - - - 16,119,512
-------------- ----------- ----------------- ------------ ----------- ------------

CASH AND CASH EQUIVALENTS END OF
YEAR $ 8,220,476 $ - $ 498,363 $17,206,452 $ - $ 25,925,291
============== =========== ================= ============ =========== ============

F-31

Condensed consolidating balance sheets as of December 31, 2000

Majestic Star, Eliminating Consolidated
Casino, LLC Majestic Investor, LLC Entries Total
----------- ---------------------- ------- -----

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,550,681 $3,568,831 $ - $ 16,119,512
Accounts receivable (net) 2,041,077 18,500 - 2,059,577
Intercompany accounts 250,000 (250,000) -
Inventories 53,479 - - 53,479
Prepaid expenses and other current assets 636,337 4,000,000 - 4,636,337
------------ ---------- ----------- -------------

Total current assets 15,531,574 7,337,331 - 22,868,905
------------ ---------- ----------- -------------

Property, equipment, and vessel improvements, net 49,158,571 - - 49,158,571

OTHER ASSETS:
Investment in Buffington Harbor Riverboats, L.L.C. 43,924,033 - 43,924,033
Investment in Majestic Investor 8,803,191 - (8,803,191) -
Other assets and deposits 9,179,940 1,465,860 - 10,645,8000
------------ ---------- ----------- -------------

Total other assets 61,907,164 1,465,860 (8,803,191) 54,569,833
------------ ---------- ----------- -------------

Total $126,597,309 $8,803,191 $(8,803,191) $ 126,597,309
============ ========== =========== =============

LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 8,811,719 $ - $ - $ 8,811,719
Accounts payable, accrued and other 12,983,077 - - 12,983,077
------------ ---------- ----------- -------------

Total current liabilities 21,794,796 - - 21,794,796
------------ ---------- ----------- -------------

Long-term debt, net of current maturities 128,233,486 - - 128,233,486
------------ ---------- ----------- -------------

Total liabilities 150,028,282 - - 150,028,282
------------ ---------- ----------- -------------

MEMBERS' EQUITY (DEFICIT): (23,430,973) 8,803,191 (8,803,191) (23,430,973)
------------ ---------- ----------- -------------

Total $126,597,309 $8,803,191 (8,803,191) $ 126,597,309
============ ========== =========== =============

F-32

Condensed Consolidating Statements of Operations
for the Year Ended December 31, 2000

Majestic Star
Casino, LLC Majestic Investor, LLC Consolidated Total
----------- ---------------------- ------------------

OPERATING REVENUES:
Casino $115,455,271 $ - $115,455,271
Food and beverage 1,925,023 - 1,925,023
Other 1,070,965 - 1,070,965
------------- ---------------------- ------------

Total revenue 118,451,259 - 118,451,259

Less promotional allowance (5,017,777) - (5,017,777)
------------- ---------------------- ------------

Net revenue 113,433,482 - 113,433,482
------------- ---------------------- -----------

COSTS AND EXPENSES:
Casino 21,179,612 - 21,179,612
Gaming and admission taxes 32,350,368 - 32,350,368
Food and beverage 2,402,518 - 2,402,518
Advertising and promotion 8,019,655 - 8,019,655
General and administrative 25,549,622 250,226 25,799,848
Economic incentive - City of Gary 3,230,679 - 3,230,679
Depreciation and amortization 9,113,681 - 9,113,681
Loss on disposal of assets 416,904 - 416,904
------------- ---------------------- ------------

Total costs and expenses 102,263,039 250,226 102,513,265
------------- ---------------------- ------------

Operating income (loss) 11,170,443 (250,226) 10,920,217
------------- ---------------------- ------------

Other income (expense):
Interest income 840,536 52,917 893,453'
Interest expense (14,998,377) - (14,998,377)
Other non-operating expense (2,183,172) - (2,183,172)
------------- ---------------------- ------------

Loss before extraordinary item (5,170,570) (197,309) (5,367,879)

Extraordinary Item:
Loss on bond redemption (382,500) - (382,500)
------------- ---------------------- ------------

Net (loss) $ (5,553,070) $ (197,309) $ (5,750,379)
===================================================================

F-33

Condensed consolidating statements of cash flows for
the year ended December 31, 2000

Majestic Star Majestic Consolidated
Casino, LLC Investor, LLC Total
------------ ------------ ------------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $ 6,178,381 $ (1,431,669) $ 4,746,712
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, equipment and vessel improvements (3,039,635) -- (3,039,635)
Sale of slot equipment 179,200 -- 179,200
Increase in deposits (98,404) -- (98,404)
Investment in Buffington Harbor Riverboats, L.L.C (7,836,489) -- (7,836,489)
(Increase) in restricted cash -- (2,000,000) (2,000,000)
Contribution to Majestic Investor, LLC (9,000,500) 9,000,500 --
Purchase of 49% interest in Gary New Century, LLC -- (9,000,000) (9,000,000)
Sale of 49% interest in Gary New Century, LLC -- 9,000,000 9,000,000
------------ ------------ ------------

Net cash (used in) provided by investing activities (19,795,828) 7,000,500 (12,795,328)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of 12-3/4% Senior Secured Notes (6,382,500) -- (6,382,500)
Dcrease in restricted cash 7,357,874 -- 7,357,874
Distribution to Barden Development, Inc. (597,610) -- (597,610)
Line of credit, net 7,800,000 -- 7,800,000
Cash paid to reduce long-term debt (2,154,680) -- (2,154,680)
Issuance of loans to Barden Development, Inc. (4,000,000) (2,000,000) (6,000,000)
Cash received for loans to Barden Development, Inc. 4,000,000 -- 4,000,000
------------ ------------ ------------
Net cash provided by (used in) financing activities 6,023,084 (2,000,000) 4,023,084
------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,594,363) 3,568,831 (4,025,532)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,145,044 -- 20,145,044
------------ ------------ ------------

CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,550,681 $ 3,568,831 $ 16,119,512
============ ============ ============

F-34

SCHEDULE II

THE MAJESTIC STAR CASINO, LLC
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

Balance at Charged to Balance at
beginning costs and Cash end
Description of year expenses Recoveries Deductions of year
- -------------------------------------------------------------------------------------------------------------------

Allowance for doubtful accounts

Year ended December 31, 1999 $ 148,608 $ 75,504 $ 64,591 $ 252,155 $ 36,548

Year ended December 31, 2000 36,548 140,182 35,270 92,000 120,000

Year ended December 31, 2001 120,000 400,685 35,704 196,687 359,702

F-35

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

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

We have audited the accompanying balance sheets of Buffington Harbor Riverboats,
L.L.C. (a Delaware limited liability company) as of December 31, 2001 and 2000,
and the related statements of operations, members' capital and cash flows for
each of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Buffington Harbor Riverboats,
L.L.C. as of December 31, 2001 and 2000, and the results of its operations and
its cash flows for the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Roseland, New Jersey
January 30, 2002

F-36

BUFFINGTON HARBOR RIVERBOATS, L.L.C.
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
--------------------------

ASSETS 2001 2000
------ ---- ----

CURRENT ASSETS:
Cash $ 317,646 $ 286,921
Trade receivables 26,014 206,757
Due from members' (Note 2) - 549,947
Inventory 310,348 228,519
Prepaid expenses and other current assets 127,993 169,205
Note and accrued interest receivable from affiliate (Note 4) - 14,402,010
------------- -------------
Total current assets 782,001 15,843,359

PROPERTY, PLANT AND EQUIPMENT, NET (Notes 2 and 3) 69,650,069 75,100,370

OTHER ASSETS 111,478 116,955
------------- -------------
Total assets $ 70,543,548 $ 91,060,684
============= =============

LIABILITIES AND MEMBERS' CAPITAL
--------------------------------

CURRENT LIABILITIES:
Accounts payable $ 435,325 $ 1,425,399
Accrued expenses 1,752,105 1,787,219
Member advance (Note 4) - 7,099,167
Due to members' (Note 2) 558,469 -
------------- -------------
Total current liabilities 2,745,899 10,311,785

COMMITMENTS AND CONTINGENCIES (Note 4)

MEMBERS' CAPITAL 67,797,649 80,748,899
------------- -------------
Total liabilities and members' capital $ 70,543,548 $ 91,060,684
============= =============

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

F-37

BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
-----------------------------------------------------

2001 2000 1999
------------- -------------- -------------

REVENUES:
Food and beverage $ 1,495,123 $ 4,017,032 $ 4,454,387
Other (Note 2) 14,973,458 13,796,980 13,839,552
------------- -------------- -------------
Net revenues 16,468,581 17,814,012 18,293,939
------------- -------------- -------------

COST AND EXPENSES:
Food and beverage 2,725,991 2,483,154 2,843,285
General and administrative 13,659,254 13,151,389 14,957,381
Depreciation 5,595,497 6,260,583 6,022,374
Other 469,459 269,220 172,163
------------- --------------
22,450,201 22,164,346 23,995,203
------------- -------------- -------------
Loss from operations (5,981,620) (4,350,334) (5,701,264)

INTEREST INCOME, net 386,145 232,996 5,254
------------- -------------- -------------
Net loss $ (5,595,475) $ (4,117,338) $ (5,696,010)
============= ============== =============

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

F-38

BUFFINGTON HARBOR RIVERBOATS, L.L.C.
STATEMENTS OF MEMBERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
----------------------------------------------------

Retained
Member Earnings
Contributions (Deficit) Total
--------------- --------------- --------------

BALANCE, December 31, 1998 $ 99,607,746 $ (18,109,972) $ 81,497,774

Capital contribution made by Trump Indiana, Inc. 245,331 - 245,331
Capital contribution made by The Majestic Star Casino, LLC 245,331 - 245,331
Net loss - (5,696,010) (5,696,010)
--------------- --------------- --------------

BALANCE, December 31, 1999 100,098,408 (23,805,982) 76,292,426

Capital contribution made by Trump Indiana, Inc. 737,322 - 737,322
Capital contribution made by The Majestic Star Casino, LLC 7,836,489 - 7,836,489
Net loss - (4,117,338) (4,117,338)
--------------- --------------- --------------

BALANCE, December 31, 2000 108,672,219 (27,923,320) 80,748,899

Capital contribution made by Trump Indiana, Inc. 214,759 - 214,759
Capital contribution made by The Majestic Star Casino, LLC 214,666 - 214,666
Transfer of assignment of BHPA interest receivable (Note 4) (343,016) - (343,016)

Transfer of assignment of BHPA note receivable (Note 4) (7,442,184) - (7,442,184)

Net loss - (5,595,475) (5,595,475)
--------------- --------------- --------------

BALANCE, December 31, 2001 $ 101,316,444 $ (33,518,795) $ 67,797,649
=============== =============== ==============

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

F-39

BUFFINGTON HARBOR RIVERBOATS, L.L.C
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
----------------------------------------------------

2001 2000 1999
------------ ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,595,475) $ (4,117,338) $ (5,696,010)
Adjustments to reconcile net loss to net cash flows provided
by (used in) operating activities-
Depreciation 5,595,497 6,260,583 6,022,374
Deferred rent - (2,142,845) (357,144)
Changes in operating assets and liabilities-
(Increase) decrease in trade receivable 180,743 (146,574) 7,547
(Increase) decrease in due from members' 549,947 (173,182) 984,610
(Increase) decrease in inventory (81,829) 26,962 6,269
(Increase) decrease in prepaid expenses and other current
assets 41,212 (39,227) (51,062)
(Increase) decrease in due from affiliate 14,402,010 (14,402,010) -
Decrease in other assets 5,477 155,777 (5,015)
Increase (decrease) in accounts payable (990,074) 605,507 (443,519)
Increase (decrease) in accrued expenses (35,114) 181,523 143,937
Increase in due to members' 558,469 - -
------------ ------------ ------------
Net cash flows (used in) provided by operating activities 14,630,863 (13,790,824) 611,987
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES --
Purchases of property, plant and equipment, net (145,196) (1,688,037) (1,187,530)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES --
Capital distributions, net of contributions (7,355,775) 8,573,811 490,662
Member advance (7,099,167) 7,099,167 -
------------ ------------ ------------
Net cash flows provided by financing activities (14,454,942) 15,672,978 490,662
------------ ------------ ------------
Net increase (decrease) in cash 30,725 194,117 (84,881)

CASH BEGINNING OF PERIOD 286,921 92,804 177,685
------------ ------------ ------------

CASH END OF PERIOD $ 317,646 $ 286,921 $ 92,804
============ ============ ============

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

F-40

1. ORGANIZATION AND OPERATIONS
---------------------------

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
- ----------------

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

Revenue Recognition
- -------------------

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

Property, Plant and Equipment
- -----------------------------

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

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

Income Taxes
- ------------

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

Long-Lived Assets
- -----------------

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

F-41

3. PROPERTY, PLANT AND EQUIPMENT
-----------------------------

Property, plant and equipment is comprised of the following -

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

Land and land improvements $ 34,469,021 $ 36,883,043
Building and building improvements 40,400,529 40,392,638
Harbor improvements 19,519,620 17,089,620
Furniture, fixtures and equipment 7,939,228 7,818,771
------------ ------------
102,328,398 102,184,072
Less - Accumulated depreciation 32,678,329 27,083,702
------------ ------------
Total property, plant and equipment, net $ 69,650,069 $ 75,100,370
============ ============

4. COMMITMENTS AND CONTINGENCIES
-----------------------------

Indiana Gaming Regulations
- --------------------------

The ownership and operation of riverboat gaming operations in Indiana are
subject to state regulation under the Riverboat Gambling Act ("Act") and the
administrative rules promulgated thereunder. The Indiana Gaming Commission
("IGC") is empowered to administer, regulate and enforce the system of riverboat
gaming established under the Act and has jurisdiction and supervision over all
riverboat gaming operations in Indiana, as well as all persons on riverboats
where gaming operations are conducted. The IGC is empowered to regulate a wide
variety of gaming and nongaming related activities, including the licensing of
suppliers to, and employees at, riverboat gaming operations and to approve the
form of ownership and financial structure of not only riverboat owner and
supplier licensees, but also their entity qualifiers and intermediary and
holding companies. Indiana regulations continue to be revised and adopted by the
IGC. The IGC has broad rulemaking power, and it is impossible to predict what
effect, if any, the amendment of existing rules or the finalization of currently
new rules might have on the operations of BHR, Trump Indiana and Barden.

Leases
- ------

Under a lease agreement assumed by BHR from Trump Indiana with Lehigh Portland
Cement Co. ("Lehigh Cement"), BHR leased certain property which is integral to
the gaming operations of Trump Indiana and Barden (the "BHR Lease"). The BHR
Lease placed certain restrictions on the use of the harbor by the riverboats of
Barden and Trump Indiana, required the reimbursement of certain costs which may
have been incurred by Lehigh Cement, and required BHR to pursue the permitting
and construction of a new harbor. The BHR Lease was rent free through December
29, 1997 and subject to certain conditions, primarily continuing progress toward
permitting and construction of a new harbor, the BHR Lease would have extended
until the earlier of December 31, 2005 or the completion of a new harbor.
Subsequent to the original 30-month term and beginning January, 1998 BHR was
required to make payments of $125,000 per month for the remainder of the lease
term. As of December 31, 1999, BHR had recorded deferred rent expense
$2,142,845.

In September 2000, Buffington Harbor Parking Associates ("BHPA"), a joint
venture owned by Trump Indiana and Barden purchased for $15,000,000 (the
"Purchase") the Lehigh Cement property which was subject to the BHR Lease, and
at such time the BHR Lease was terminated. The purchase price was financed by an
advance from BHR of $14,182,856, with interest at 6%, and through the sale of
one acre of land to BHR for approximately $817,144. In connection with the
Purchase, the members advanced $7,099,167 and contributed $7,900,833 to BHR. As
a result of the above, BHR reversed $1,874,986 of deferred rent expense into
income. This amount is reflected as a reduction of general and administrative

F-42

expenses in the accompanying statement of operations.

In June 2001, BHR and BHPA terminated the BHPA agreement. A new agreement was
reached between BHR, Barden and Trump Indiana in which BHR transferred half of
the loan receivable as a return of capital to Barden in the amount of 7,099,167.
Trump Indiana was assigned half of the loan receivable, $7,099,167, in
satisfaction of the advance. In addition, BHR distributed half of the
construction-in-progress payments, $343,016, made by each member to BHR in order
to finance the construction of the garage as a return of capital contribution to
both Trump Indiana & Barden.

BHR also has noncancellable office equipment and vehicle leases. Rental expense
for such noncancellable operating leases was $1,367,607 and $412,309 for 2000
and 2001, respectively. Minimum rental payments under noncancellable operating
leases are as follows-

Years Ended December 31-
2002 $ 288,568
2003 81,171
2004 18,989
2005 2,884
2006 -
-----------
$ 391,612
===========

F-43

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized, on April 15, 2002.

THE MAJESTIC STAR CASINO, LLC
By: Barden Development Inc., Manager

By: /s/ Don H. Barden
----------------------------------------------------
Don H. Barden, President and Chief Executive Officer

THE MAJESTIC STAR CASINO CAPITAL CORP.

By /s/ Don H. Barden
----------------------------------------------------
Don H. Barden, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrants and
in the capacities and on the date indicated.

Signature Title Date
- --------- ----- ----

/s/ Don H. Barden President and Chief Executive Officer April 15, 2002
- ---------------------------- of the Manager, the Company and The
Don H. Barden Majestic Star Casino Capital Corp., and
Sole Director of The Majestic Star
Casino Capital Corp. (Principal
Executive Officer)

/s/ Michael E. Kelly Vice President, Chief Operating and April 15, 2002
- ---------------------------- Financial Officer and Secretary of
Michael E. Kelly the Company and The Majestic
Star Casino Capital Corp. (Principal
Financial and Accounting Officer)

EXHIBIT INDEX
-------------

Certain of the following exhibits have been previously filed with the Securities
and Exchange Commission by the Company or by Investor Holdings pursuant to the
requirements of the Securities Act of 1933 and the Securities Exchange Act of
1934. Such exhibits are identified by the parenthetical references following the
listing of each such exhibit and are incorporated herein by reference. Exhibits
previously filed by Investor Holdings are identified as such; all other
previously filed exhibits were filed by the Company. The Company's Commission
file number is 333-06489 and Investor Holdings' Commission file number is
333-81584.

Exhibit No. Description of Document
- ----------- -----------------------

2.1 Purchase and Sale Agreement dated as of November 22, 2000 by and among
Majestic Investor, LLC, Fitzgerald's Las Vegas, Inc., 101 Main Street
Limited Liability Company, Fitzgerald's Mississippi, Inc.,
Fitzgerald's Gaming Corporation and certain affiliates of the
foregoing parties, as amended by the First Amendment thereto dated as
of December 4, 2000 (Form 10-K for the year ended December 31, 2000)

2.2 Second Amendment to Purchase and Sale Agreement dated as of November
1, 2001 by and among Majestic Investor Holdings, LLC, Majestic
Investor, LLC, Barden Nevada Gaming, LLC, Barden Mississippi Gaming,
LLC, Barden Colorado Gaming, LLC, Fitzgeralds Las Vegas, Inc., 101
Main Street Limited Liability Company, Fitzgeralds Mississippi, Inc.
and Fitzgeralds Gaming Corporation (Form 8-K filed December 13, 2001)

3.1 Amended and Restated Articles of Organization of The Majestic Star
Casino, LLC (Registration Statement No. 333-06489)

3.2 Third Amended and Restated Operating Agreement of The Majestic Star
Casino, LLC dated as of March 29, 1996 (Registration Statement No.
333-06489)

3.3 First Amendment of Third Amended and Restated Operating Agreement of
The Majestic Star Casino, LLC, dated as of June 18, 1999 (Registration
Statement No. 333-85089)

3.4 Articles of Incorporation of The Majestic Star Casino Capital Corp.
(Registration Statement No. 333-85089)

3.5 Bylaws of The Majestic Star Casino Capital Corp. (Registration
Statement No. 333-85089)

4.1 Indenture dated as of June 18, 1999 by and among The Majestic Star
Casino, LLC, The Majestic Star Casino Capital Corp., and IBJ Whitehall
Bank & Trust Company, as Trustee (Registration Statement No.
333-85089)

4.2 Security Agreement dated as of June 18, 1999 by and between The
Majestic Star Casino, LLC and IBJ Whitehall Bank & Trust Company
(Registration Statement No. 333-85089)

E-1

4.3 Trademark Security Agreement dated as of June 18, 1999 by and between
The Majestic Star Casino, LLC and IBJ Whitehall Bank & Trust Company
(Registration Statement, No. 333-85089)

4.4 Preferred Ship Mortgage dated as of June 18, 1999 made by The Majestic
Star Casino, LLC in favor of IBJ Whitehall Bank & Trust Company
(Registration Statement No. 333-85089)

4.5 Pledge Agreement dated as of June 18, 1999 by and between The Majestic
Star Casino, LLC and IBJ Whitehall Bank & Trust Company (Registration
Statement No. 333-85089)

4.6 Pledge Agreement dated as of June 18, 1999 by and among Barden
Development, Inc., Gary Riverboat Gaming, LLC, and IBJ Whitehall Bank
& Trust Company (Registration Statement No. 333-85089)

4.7 Loan and Security Agreement dated as of August 2, 1999 by and between
The Majestic Star Casino, LLC and Foothill Capital Corporation (Form
10-Q for the quarter ended September 30, 1999)

4.8 Indenture dated as of December 6, 2001 between Majestic Investor
Holdings, LLC, Majestic Investor Capital Corp., as issuers, Barden
Colorado Gaming, LLC, Barden Mississippi Gaming, LLC and Barden Nevada
Gaming, LLC, as subsidiary guarantors, and the Bank of New York, as
Trustee (Investor Holdings Registration Statement No. 333-81584)

4.9 Registration Rights Agreement dated as of December 6, 2001 among
Majestic Investor Holdings, LLC, Majestic Investor Capital Corp.,
Barden Colorado Gaming, LLC, Barden Mississippi Gaming, LLC and Barden
Nevada Gaming, LLC, as guarantors, and Jefferies & Company, Inc.
(Investor Holdings Registration Statement No. 333-81584)

4.10 Guarantee dated as of December 6, 2001 of Barden Mississippi Gaming
LLC, Barden Colorado Gaming, LLC and Barden Nevada Gaming, LLC.
(Investor Holdings Registration Statement No. 333-81584)

4.11 Pledge and Security Agreement dated as of December 6, 2001 by and
among Majestic Investor Holdings, LLC, Majestic Investor Capital
Corp., Barden Colorado Gaming, LLC, Barden Mississippi Gaming, LLC,
Barden Nevada Gaming, LLC and The Bank of New York (Investor Holdings
Registration Statement No. 333-81584)

4.12 Pledge Agreement dated as of December 6, 2001 by and between Majestic
Investor, LLC and The Bank of New York (Investor Holdings Registration
Statement No. 333-81584)

4.13 Trademark Security Agreement dated as of December 6, 2001 by and among
Majestic Investor Holdings, LLC, Majestic Investor Capital Corp.,
Barden Colorado Gaming, LLC, Barden Mississippi Gaming, LLC, Barden
Nevada Gaming, LLC and The Bank of New York (Investor Holdings
Registration Statement No. 333-81584)

E-2

4.14 First Preferred Vessel Mortgage, dated as of December 6, 2001 by and
between Barden Mississippi, LLC and The Bank of New York (Investor
Holdings Registration Statement No. 333-81584)

4.15 Deed of Trust, Security Agreement and Fixture Filing with Financing
Statement and Assignment of Rents by and among Barden Mississippi
Gaming, LLC as Trustor, Jim B. Tohill as Trustee and The Bank of New
York as Beneficiary, dated as of December 6, 2001 (Investor Holdings
Registration Statement No. 333-81584)

4.16 Deed of Trust, Security Agreement and Fixture Filing with Assignment
of Rents by and among Barden Nevada Gaming, LLC as Trustor, Fidelity
National Title Agency of Nevada, Inc. as Trustee, and The Bank of New
York as Beneficiary, dated as of December 6, 2001 (Investor Holdings
Registration Statement No. 333-81584)

4.17 Deed of Trust, Security Agreement and Fixture Filing with Assignment
of Rents by and among Barden Colorado Gaming, LLC as Trustor, The
Public Trustee of the County of Gilpin, State of Colorado as Trustee,
and The Bank of New York as Beneficiary, dated as of December 6, 2001
(Investor Holdings Registration Statement No. 333-81584)

4.18 Intercreditor Agreement, dated as of December 6, 2001 between The Bank
of New York and Foothill Capital Corporation (Investor Holdings
Registration Statement No. 333-81584)

4.19 Loan and Security Agreement dated as of December 6, 2001 by and among
Majestic Investor Holdings, LLC, Barden Colorado Gaming, LLC, Barden
Mississippi Gaming, LLC, Barden Nevada Gaming, LLC and Foothill
Capital Corporation (Investor Holdings Registration Statement No.
333-81584)

4.20 Loan and Security Agreement dated as of December 6, 2001, by Majestic
Investor, LLC, Fitzgeralds Las Vegas, Inc., 101 Main Street Limited
Liability Company, Fitzgeralds Mississippi, Inc., Fitzgeralds Gaming
Corporation and certain affiliates of the foregoing parties dated as
November 22, 2000 (Investor Holdings Registration Statement No.
333-81584)

4.21 General Continuing Guaranty dated as of December 6, 2001, by Majestic
Investor Holdings, LLC, Majestic Investor Capital Corp., Barden
Colorado Gaming, LLC, Barden Mississippi Gaming, LLC and Barden Nevada
Gaming, LLC, in favor of Foothill Capital Corporation (Investor
Holdings Registration Statement No. 333-81584)

4.22 Guarantor Security Agreement dated as of December 6, 2001 by Majestic
Investor Holdings, LLC and Majestic Investor Capital Corp. in favor of
Foothill Capital Corporation (Investor Holdings Registration Statement
No. 333-81584)

4.23 First Preferred Vessel Mortgage, dated as of December 6, 2001 by
Barden Mississippi Gaming, LLC in favor of Foothill Capital
Corporation (Investor Holdings Registration Statement No. 333-81584)

E-3

4.24 Deed of Trust, Security Agreement and Fixture Filing with Financing
Statement and Assignment of Rents by and among Barden Mississippi
Gaming, LLC as Trustor, Jim B. Tohill as Trustee and Foothill Capital
Corporation as Beneficiary, dated as of December 6, 2001 (Investor
Holdings Registration Statement No. 333-81584)

4.25 Deed of Trust, Security Agreement and Fixture Filing with Financing
Statement and Assignment of Rents by and among Barden Nevada Gaming,
LLC as Trustor, Fidelity National Title Agency of Nevada, Inc. as
Trustee, and Foothill Capital Corporation as Beneficiary, dated as of
December 6, 2001 (Investor Holdings Registration Statement No.
333-81584)

4.26 Deed of Trust, Security Agreement and Fixture Filing with Financing
Statement and Assignment of Rents by and among Barden Colorado Gaming,
LLC as Trustor, The Public Trustee of the County of Gilpin, State of
Colorado as Trustee, and Foothill Capital Corporation as Beneficiary,
dated as of December 6, 2001 (Investor Holdings Registration Statement
No. 333-81584)

4.27 Stock Pledge Agreement dated as of December 6, 2001 between Majestic
Investor Holdings, LLC and Foothill Capital Corporation (Investor
Holdings Registration Statement No. 333-81584)

4.28 Guarantor Trademark Security Agreement dated as of December 6, 2001
between Majestic Investor Holdings, LLC and Foothill Capital
Corporation (Investor Holdings Registration Statement No. 333-81584)

4.29 Subordination of First Preferred Vessel Mortgage Upon Fitzgeralds
Tunica (Official No. 262757) (Investor Holdings Registration Statement
No. 333-81584)

4.30 Subordination Agreement dated as of December 6, 2001 by Barden
Mississippi Gaming, LLC and The Bank of New York, in favor of Foothill
Capital Corporation (Investor Holdings Registration Statement No.
333-81584)

4.31 Subordination Agreement dated as of December 6, 2001 by Barden Colorado
Gaming, LLC and The Bank of New York, in favor of Foothill Capital
Corporation (Investor Holdings Registration Statement No. 333-81584)

4.32 Subordination Agreement dated as of December 6, 2001 by Barden Nevada
Gaming, LLC and The Bank of New York, in favor of Foothill Capital
Corporation (Investor Holdings Registration Statement No. 333-81584)

10.1* Employment Agreement dated October 22, 2001 between Don H. Barden and
The Majestic Star Casino, LLC (Investor Holdings Registration Statement
No. 333-81584)

10.2* Employment Agreement dated October 22, 2001 between Michael E. Kelly
and The Majestic Star Casino, LLC (Investor Holdings Registration
Statement No. 333-81584)

E-4

10.3 Management Agreement dated as of June 9, 1999 between Barden
Development, Inc. and the Company (Form 10-K for the year ended
December 31, 1999)

10.4 Expense Reimbursement Agreement dated as of October 22, 2001 between
Majestic Investor Holdings, LLC and The Majestic Star Casino, LLC
(Investor Holdings Registration Statement No. 333-81584)

10.5 Contribution and Assignment Agreement by and between Majestic
Investor, LLC and Majestic Investor Holdings, LLC dated as of
September 27, 2001 (Investor Holdings Registration Statement No.
333-81584)

10.6 Berthing Agreement dated as of April 23, 1996 between The Majestic
Star Casino, LLC and Buffington Harbor Riverboats, LLC (Registration
Statement No. 333-06489)

10.7 First Amended and Restated Operating Agreement of Buffington Harbor
Riverboats, LLC made as of October 31, 1995 by and between Trump
Indiana, Inc. and The Majestic Star Casino, LLC, as amended
(Registration Statement No. 333-06489)

10.8 Equipment Financing Agreement dated April 5, 1996 by and between the
Company and International Gaming Technology (Registration Statement
No. 333-06489)

10.9 Equipment Financing Agreement dated May 5, 1996 by and between the
Company and International Gaming Technology (Registration Statement,
No. 333-06489)

10.10 Equipment Financing Agreement dated September 15, 1997 by and between
the Company and PDS Financial Corporation (Form 10-K for the period
ended December 31, 1997)

10.11 Equipment Financing Agreement dated October 27, 1997 by and between
the Company and PDS Financial Corporation (Form 10-K for the period
ended December 31, 1997)

21.1 List of Subsidiaries of The Majestic Star Casino, LLC

99.1 Letter to Commission Pursuant to Temporary Note 3T

_________________________

* Identifies current management contracts or compensatory plans or arrangements.

E-5