UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

For the fiscal year ended December 31, 2004

OR

For the transition period                      to                     

Commission File No. 0-16760

3600 Las Vegas Boulevard South - Las Vegas, Nevada 89109
(Address of principal executive office) (Zip Code)

(702) 693-7120
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

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     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 such filing requirements for the past 90 days: Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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: þ

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): Yes þ No o

     The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant as of June 30, 2004 (based on the closing price on the New York Stock Exchange Composite Tape on June 30, 2004 was $4.2 billion. As of March 7, 2005, 143, 333, 444 shares of Registrant’s Common Stock, $.01 par value, were outstanding.

     Portions of the Registrant’s definitive Proxy Statement for its 2005 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

 

TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS
	ITEM 2. PROPERTIES
	ITEM 3. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
	ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
	ITEM 6.SELECTED FINANCIAL DATA
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM 9A. CONTROLS AND PROCEDURES
PART III
	ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	ITEM 11. EXECUTIVE COMPENSATION
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
Exhibit Index
Exhibit 10.1(10)
Exhibit 21
Exhibit 23
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

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Table of Contents

PART I

ITEM 1. BUSINESS

General

     MGM MIRAGE is referred to as the “Company” or the “Registrant,” and may also be referred to as “we,” “us” or “our”. MGM MIRAGE is one of the largest gaming companies in the world. We own what we believe to be the world’s finest collection of casino resorts. Our strategy is predicated on creating resorts of memorable character, treating our employees well and providing superior service for our guests. The Company was organized as MGM Grand, Inc. on January 29, 1986 and is a Delaware corporation. In May 2000, MGM Grand Inc. acquired Mirage Resorts, Incorporated in a merger transaction. Mirage Resorts, Incorporated is also referred to in this Form 10-K as “Mirage”.

Our Operating Casino Resorts

     We have provided below certain information about our casino resorts as of December 31, 2004. Except as otherwise indicated, we wholly own and operate the resorts shown below.

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(1)		Includes slot machines and other coin-operated gaming devices.
(2)		Includes blackjack (“21”), baccarat, craps, roulette, pai gow, pai gow poker, Caribbean stud poker, and other table games. Does not include poker tables.
(3)		Owned and operated by a 50-50 joint venture with Mandalay Resort Group.
(4)		Owned and operated by a 50-50 limited liability company with Boyd Gaming Corporation.

 

     Las Vegas Strip Resorts

Bellagio

     Bellagio is an elegant European-style luxury resort located on an approximately 80-acre site with 1,450 feet of frontage at the center of the Las Vegas Strip. The resort overlooks an eight-acre lake. Each day, more than 1,000 fountains in the lake come alive at regular intervals in a choreographed ballet of water, music and lights. Bellagio features award-winning casual and gourmet restaurants, including the world-famous Le Cirque, Olives, Michael Mina and Picasso restaurants; upscale retail boutiques, including those leased to Armani, Chanel, Gucci, Prada and Tiffany & Co.; and extensive meeting, convention and banquet space. Bellagio’s specially designed theatre is home to the spectacular show “O” produced and performed by the talented Cirque du Soleil organization. Bellagio also offers Light, an upscale nightclub, Caramel, a sophisticated lounge and nightclub, as well as several other bars and lounges. The Bellagio Gallery of Fine Art features rotating exhibitions of original masterpieces from museums and private collections. The surroundings of Bellagio are lushly landscaped with classical gardens and European fountains and pools. Inside, a botanical conservatory is filled with vibrant colors and pleasing scents that change with the seasons. Bellagio has received the prestigious Five Diamond award from AAA for the last four years, as has Picasso. Le Cirque has also earned the award for the last two years.

     We recently expanded Bellagio. In December 2004, we opened a new 928-room tower and an expanded spa and salon. In addition, we added retail and meeting space and Sensi, a new restaurant featuring multiple exhibition kitchens. In 2005, we will open an expanded poker room, upgrade the fountain show and remodel many of the common areas of Bellagio.

MGM Grand Las Vegas

     MGM Grand Las Vegas is a destination resort located on approximately 113 acres, with over 350 feet of frontage on the Las Vegas Strip and 1,450 feet of frontage on Tropicana Avenue. MGM Grand Las Vegas includes the Mansion, an exclusive enclave featuring a collection of exquisite suites and a private dining room catering to our premium gaming customers. MGM Grand Las Vegas features an extensive array of restaurants, including Craftsteak, by the James Beard award-winning chef Tom Colicchio, NOBHILL and SeaBlue by Michael Mina, Pearl, Shibuya, Diego, and Fiamma Trattoria. Other amenities include the Studio 54 nightclub, Tabu, the Ultra Lounge, Teatro, numerous retail shopping outlets, a 380,000 square foot state-of-the-art conference center, and an extensive pool and spa complex.

     Entertainment options at MGM Grand Las Vegas include KÀ, the newest Cirque du Soleil show performed in a custom designed theatre seating almost 2,000 guests; the Hollywood Theatre, showcasing headliner entertainment; and La Femme. The MGM Grand Garden is a special events center with a capacity of over 16,000 seats, and provides a venue for concerts by such stars as Madonna, Cher, Paul McCartney, the Rolling Stones, Billy Joel and others, as well as championship boxing and other sporting events.

     In 2002, we entered into an agreement with Turnberry Associates to develop luxury condominium towers at MGM Grand Las Vegas. We initially contributed land to the project for a 50% investment. Turnberry Associates contributed $9 million in cash and is managing the development and sales process. The venture obtained construction financing for the remainder of the estimated $210 million cost of the first tower, which will feature 576 units. We will have the opportunity to rent the condominiums to third parties on behalf of owners who elect to have us do so. Based on market acceptance of the initial tower, we and Turnberry Associates have commenced the sales phase for a second tower.

     We recently completed the renovation of the 29^th floor at MGM Grand Las Vegas as the SKYLOFTS, featuring the ultimate in personal service for discerning guests in two floor suites with the finest guest amenities. In 2005, we will open a poker room and relocate the sports book in the renovated Dome Casino, and expand our Mansion casino and add two new restaurants by world famous chef Joel Robuchon in the former sports book location.

The Mirage

     The Mirage is a luxurious, tropically themed destination resort located on approximately 100 acres, shared with TI, with 2,200 feet of combined Strip frontage near the center of the Las Vegas Strip. The exterior of the resort is landscaped with palm trees, abundant foliage and more than four acres of lagoons and other water features centered around a 54-foot volcano and waterfall. Each evening, the volcano erupts at regular intervals, with flames that spectacularly illuminate the front of the resort. Inside the front entrance is an atrium with a tropical garden and additional water features capped by a 100-foot-high glass dome, designed to replicate the sights, sounds and fragrances of the South Seas. Located at the rear of the hotel, adjacent to the swimming pool area, is a dolphin habitat featuring Atlantic bottlenose dolphins and The Secret Garden of Siegfried & Roy, an attraction that allows guests to view the beautiful exotic animals of Siegfried & Roy, the world-famous illusionists.

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     The Mirage features a wide array of restaurants, including the recently added Cravings, the Adam Tihany designed buffet experience, and Carnegie Deli. Entertainment at The Mirage includes a show featuring Danny Gans, the renowned singer/impersonator, in The Danny Gans Theatre. The Mirage also has numerous retail shopping outlets and 170,000 square feet of convention space, including the 90,000-square foot Mirage Events Center.

     The Mirage is currently expanding and upgrading its amenities. In 2005, we will construct a 18,000-square foot nightclub and add or renovate several restaurants. We are also constructing a custom theatre for a new Cirque du Soleil production based on the works of The Beatles, scheduled to open in 2006.

Treasure Island (“TI”)

     TI is a Caribbean-themed resort located next to The Mirage. TI and The Mirage are connected by a monorail. TI features several restaurants, including the recently remodeled buffet Dishes, Isla Mexican Kitchen and Canter’s Deli. Bars and lounges at TI include Mist and Tangerine, which features indoor/outdoor space with views of the Las Vegas Strip and nightly burlesque entertainment. The showroom at TI features Mystère, a unique choreographic mix of magic, special effects and feats of human prowess produced and performed by Cirque du Soleil. The Sirens of TI Show is performed at the front of the resort, providing a significant presence to visitors on the Las Vegas Strip and beckoning visitors into TI. In recognition of its superior customer service and facilities, TI has been awarded the Four Diamond rating by AAA. Construction is almost complete on a new pedestrian bridge linking TI to the Fashion Show Mall, along with a new north entrance to TI directly accessed by the pedestrian bridge.

New York-New York Hotel and Casino

     New York-New York is a themed destination resort on the Las Vegas Strip at Tropicana Avenue, covering approximately 20 acres. The architecture at New York-New York replicates many of New York City’s landmark buildings and icons, including the Statue of Liberty, the Empire State Building, Central Park, the Brooklyn Bridge and a Coney Island-style roller coaster. The casino features highly themed interiors including Park Avenue with retail shops, a Central Park setting in the central casino area, and Little Italy with its traditional food court set inside a typical residential neighborhood. New York-New York also features several restaurants and numerous bars and lounges, including nationally recognized Coyote Ugly and ESPNZone and Nine Fine Irishmen, an authentic Irish Pub. Entertainment includes Zumanity by Cirque du Soleil and headline performer Rita Rudner. We recently remodeled all of the standard rooms at New York-New York.

Monte Carlo Resort & Casino

     Monte Carlo is located on approximately 46 acres with 600 feet of frontage on the Las Vegas Strip, approximately one-half mile south of Bellagio. We own 50% of this resort in a joint venture with Mandalay Resort Group, which manages the resort. Monte Carlo has a palatial style reminiscent of the Belle Époque, the French Victorian architecture of the late 19th century. The resort has amenities such as fine dining at Andre’s, a brew pub featuring live entertainment, a health spa, a beauty salon, a 1,200-seat theatre featuring the world-renowned magician Lance Burton, and a large pool area.

Boardwalk Hotel and Casino

     Boardwalk is located between Bellagio and Monte Carlo on the Las Vegas Strip. This facility includes 654 hotel rooms and 32,000 square feet of casino space. Other amenities at Boardwalk include a coffee shop, a buffet, an entertainment lounge, a gift shop, interior meeting space and two outdoor swimming pools. Boardwalk will be closed within the next two years in order to begin construction of Project CityCenter.

Other Nevada Resorts

Primm Valley Resorts

     Primm Valley Resorts consists of three hotel-casinos on both sides of Interstate 15 at the California/Nevada state line in Primm, Nevada (about 40 miles south of Las Vegas) and the Primm Valley Golf Club nearby in California. Buffalo Bill’s Resort & Casino, Primm Valley Resort & Casino, Whiskey Pete’s Hotel & Casino, Primm Valley Golf Club and three gas stations including the Primm Center (collectively, the “Primm Valley Resorts”) form a major destination location and offer visitors driving from California the first opportunity to wager upon entering Nevada and the last opportunity before leaving.

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     Primm Valley Resorts offer an array of amenities and attractions, including a 25,000-square foot conference center, numerous owned and leased restaurants, and a variety of amusement rides. The 6,100-seat Star of the Desert Arena hosts top-name entertainers. Connected to Primm Valley Resorts is the Fashion Outlet of Las Vegas, a shopping mall containing approximately 400,000 square feet of retail space with over 100 retail outlet stores. The Fashion Outlet is owned and operated by a third party.

Golf Resorts

     We own and operate an exclusive world-class golf course, Shadow Creek, located approximately ten miles north of our Las Vegas Strip resorts. Shadow Creek is ranked 7^th in Golf Digest’s ranking of America’s 100 Greatest Public Courses. We also own and operate the Primm Valley Golf Club, located four miles south of Primm in California, which includes two 18-hole championship courses. All of these golf courses were designed by renowned golf course architect Tom Fazio.

Other Resorts

MGM Grand Detroit

     MGM Grand Detroit is our interim casino facility in Detroit, Michigan. The facility’s interior is decorated in an Art Deco motif with themed bars, a VIP lounge and several restaurants, including our signature upscale restaurant, the Hollywood Brown Derby. The site is conveniently located off the Howard Street exit from the John C. Lodge Expressway in downtown Detroit, and has parking for over 3,000 vehicles in two parking garages and additional on-site covered parking.

Beau Rivage

     Beau Rivage is a luxurious beachfront resort located on a 41-acre site with 1,400 feet of frontage where Interstate 110 meets the Gulf Coast in Biloxi, Mississippi. The graceful driveway leading to Beau Rivage is lined with intricate gardens and stately oak trees and large trees fill the resort’s skylit atrium lobby. Distinctive restaurants offer a variety of dining experiences, including a café nestled in the atrium gardens, Port House, a steak and seafood restaurant surrounded by tropical fish and coral reefs, and Mikado, featuring creative and contemporary Asian cuisine. Adjoining its lavish health spa and salon is a lushly landscaped swimming pool and café overlooking the Gulf of Mexico. Beau Rivage also offers a state-of-the-art convention center, a shopping esplanade, a 1,600-seat theatre and a brew pub with live entertainment. Beau Rivage is rated as a Four Diamond resort by AAA. We have begun construction on a world-class golf course, Fallen Oak, designed by Tom Fazio, to be located approximately 20 minutes from the resort.

Borgata

     The Borgata Hotel Casino and Spa is located on 29 acres at Renaissance Pointe in Atlantic City, New Jersey and opened July 3, 2003. In addition to its 2,000 guest rooms and suites and extensive gaming floor, Borgata includes several specialty restaurants, retail shops, a European-style health spa, meeting space and unique entertainment venues. Borgata is the first new casino in Atlantic City in over 13 years. We own 50% of the limited liability company that owns Borgata. Boyd Gaming Corporation owns the other 50% and also operates the resort.

     Borgata is currently expanding its gaming and non-gaming amenities, adding 36 casino table games and 600 slot machines, along with additional restaurant, entertainment and other amenities. This project is expected to be completed in 2006. Additionally, Borgata has plans to add another hotel tower featuring 800 guestrooms, suites and resort condominiums, along with a new spa, parking garage and meeting rooms. This project is expected to be completed in 2007. Neither project is expected to require contributions from us, as existing operating cash flow and Borgata’s recently renegotiated bank credit facility is anticipated to provide for the cost of the expansions.

Mandalay Resort Group

     On June 16, 2004, we announced that we had entered into a definitive merger agreement with Mandalay Resort Group (“Mandalay”), a publicly traded company, under which we will acquire Mandalay for $71.00 in cash for each share of common stock of Mandalay. Mandalay owns and operates eleven properties in Nevada, owns and operates Gold Strike, a hotel/casino in Tunica County, Mississippi, owns a 50% interest in Silver Legacy in Reno, a 50% interest in Monte Carlo in Las Vegas, a 50% interest in Grand Victoria, a riverboat in Elgin, Illinois, and a 53.5% interest in MotorCity Casino in Detroit, Michigan.

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     The total consideration is approximately $8.1 billion, including equity value of approximately $4.8 billion, convertible debentures with a redemption value of approximately $574 million, the assumption or repayment of other outstanding Mandalay debt with a fair value of approximately $2.6 billion as of December 31, 2004, and $100 million of estimated transaction costs. The transaction is structured as a merger of one of our wholly-owned subsidiaries with and into Mandalay. The transaction will be accounted for as a purchase and is anticipated to close during the first quarter of 2005, subject to the disposition of one of the Detroit casinos and addressing Illinois regulatory matters regarding Mandalay’s ownership interest in Grand Victoria.

     As of January 31, 2005, Mandalay’s resorts (including Monte Carlo) included over 35,000 hotel rooms and offered almost 900 table games and over 22,000 slot machines in nearly 1.1 billion square feet of casino space.

Future Development

Project CityCenter

     In November 2004, we announced a plan to develop a multi-billion dollar urban metropolis, initially called Project CityCenter, on 66 acres of land on the Las Vegas Strip, between Bellagio and Monte Carlo. We anticipate that the first phase of Project CityCenter will include a 4,000-room casino resort, three 400-room boutique hotels, approximately 550,000 square feet of retail shops, dining and entertainment venues, and 1,650 units of luxury condominium, hotel/condominium and private residence clubs.

     We expect that the complete design work for Project CityCenter will take 18 months and that the first phase will open in 2009. The design, budget and schedule of Project CityCenter are still preliminary however, and the ultimate timing, cost and scope of Project CityCenter are subject to risks attendant to large-scale projects.

Atlantic City, New Jersey

     We own approximately 130 acres on Renaissance Pointe in Atlantic City, New Jersey. In addition, Borgata occupies 29 acres at Renaissance Pointe, including 27 acres it owns and two acres we lease to Borgata. Of the remaining land, approximately 95 acres are suitable for development, and a portion of these acres consists of common roads, landscaping and master plan improvements which we designed and developed as required by our agreement with Boyd.

     In October 2002, we announced the suspension of our development activities on our wholly-owned project on the Renaissance Pointe land in Atlantic City. We must apply for and receive numerous governmental permits and satisfy other conditions before construction of a new resort on the Renaissance Pointe site could begin. No assurance can be given that we will develop a casino resort in New Jersey, or its ultimate schedule, size, configuration or cost if we do develop a casino resort.

Detroit, Michigan

     The Michigan Gaming Control and Revenue Act provides that not more than three casinos may be licensed at any one time by the State of Michigan and that they be located only in the City of Detroit. In November 1997, MGM Grand Detroit, LLC was selected to develop one of the three authorized hotel-casino complexes. MGM Grand Detroit, Inc., our wholly owned subsidiary, holds a controlling interest in MGM Grand Detroit, LLC. A minority interest in MGM Grand Detroit, LLC is held by Partners Detroit, LLC, a Michigan limited liability company owned by residents and entities located in the Detroit metropolitan area.

     MGM Grand Detroit, LLC has operated an interim casino facility in downtown Detroit since July 1999. In August 2002 the Detroit City Council approved revised development agreements with our subsidiary and two other developers. The revised development agreement released us and the City from certain of the obligations under the original agreement and significantly changed other provisions of the original agreement.

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     We are currently in the process of obtaining land and developing plans for the permanent facility. The design, budget and schedule of the permanent facility are not finalized, and the ultimate timing, cost and scope of the facility are subject to risks attendant to large-scale projects. The ability to construct the permanent casino facility is currently subject to resolution of the Lac Vieux litigation – see “Item 3. Legal Proceedings”. The 6^th Circuit Court of Appeals has issued an injunction, pending appeal, prohibiting the City and the developers from commencing construction pending further action of the 6^th Circuit Court. Therefore, we do not know when we will be able to commence construction of, or complete, the permanent facility.

United Kingdom

     In anticipation of reforms to gambling legislation currently before the United Kingdom’s House of Parliament, we have entered into several strategic agreements in the United Kingdom, including the following:

     In May 2003, we purchased a 25% interest in Metro Casinos Limited, which was developing a new casino in Bristol. Metro Casinos Limited is a subsidiary of R J Bown (Holdings) Ltd, the owner of the Westcliff Casino, one of the largest United Kingdom provincial casinos. We received regulatory approval for our investment in Metro Casinos Limited from the Gaming Board for Great Britain in November 2003. The Bristol facility opened in February 2004.

     In October 2003, we entered into an agreement with the Earls Court and Olympia Group, which operates large exhibition and trade show facilities in London, to form a jointly owned company. The entity would develop an entertainment and gaming facility, which we would operate in space leased from the Earls Court and Olympia Group, to complement the existing Olympia facilities. The agreement is subject to the implementation of proposed gaming law reforms and a tax structure acceptable to us, and obtaining required planning and other approvals. We own 82.5% of the entity.

     In November 2003, we entered into an agreement with Newcastle United PLC to create a 50-50 joint venture which would build a major new mixed-use development, including casino development, on a site in Newcastle’s city centre adjacent to Newcastle United’s football stadium. Newcastle United is one of the leading English Premier League (Soccer) clubs. Construction of the complex is contingent upon the implementation of proposed gaming law reforms and a tax structure acceptable to us, and obtaining required planning and other approvals. Newcastle United PLC contributed the land to the joint venture, and we made an equity investment and will develop and operate the complex, as well as own the casino development in leased premises within the complex.

     In February 2004, we announced an agreement in principle with The British Land Company PLC whereby we would operate a casino in leased premises within a newly developed leisure and entertainment complex adjacent to the Meadowhall Shopping Centre in Sheffield. The agreement is subject to the implementation of proposed gaming law reforms and a tax structure acceptable to us, and obtaining required planning and other approvals.

Macau

     In June 2004, we entered into a joint venture agreement with Pansy Ho Chiu-king to develop, build and operate a hotel-casino resort in Macau S.A.R. The facility, which will use the “MGM Grand” name, will be located on a prime waterfront site and will include world-class resort amenities including a hotel, restaurants, entertainment facilities, convention, retail and spa facilities in addition to a significant gaming component. The agreement is subject to, among other things, the approval of the government of Macau S.A.R. and other regulatory approvals as well as the entry into a subconcession agreement with Sociedade de Jogos de Macau (SJM), the holder of one of the existing concessions to operate a casino in Macau. The Company has committed to invest up to $280 million in the entity in the form of capital contributions and shareholder loans. The complete design, timing, cost and scope of the project are at a preliminary stage and are subject to the risks attendant to large-scale projects.

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New York Racing Association

     We have an understanding with the New York Racing Association (“NYRA”) to manage VLTs at NYRA’s Aqueduct horseracing facility in metropolitan New York. We would assist in the development of the facility, including providing project financing, and would manage the facility for a fee. Work was halted on the VLT facility in August 2003 pending the outcome of an investigation of certain aspects of NYRA’s operations by Federal prosecutors. In December 2003, NYRA reached agreement with the Justice Department whereby NYRA was indicted with prosecution deferred. NYRA agreed to pay a fine and the indictment will be dismissed with prejudice upon NYRA implementing certain reforms and otherwise complying with the terms of the agreement. Our participation is subject to a definitive agreement, regulatory approvals and certain legislative changes by the State of New York.

Other

     We have recently agreed to form a joint venture with CapitaLand, a listed company in Singapore, to pursue a gaming license in Singapore in the event that the government elects to legalize casino gaming. We will own 60% of the joint venture.

     We regularly evaluate possible expansion and acquisition opportunities in both the domestic and international markets. These opportunities may include the ownership, management and operation of gaming and other entertainment facilities in Nevada or in states other than Nevada or outside of the United States. We may undertake these opportunities either alone or in cooperation with one or more third parties. Development and operation of any gaming facility in a new jurisdiction is subject to many contingencies. Several of these contingencies are outside of our control and may include the passage of appropriate gaming legislation, the issuance of necessary permits, licenses and approvals, the availability of appropriate financing and the satisfaction of other conditions. We cannot be sure that we will decide or be able to proceed with any acquisition or expansion opportunities.

Marketing

     All of our casino resorts operate 24 hours each day, every day of the year. We do not consider our business to be particularly seasonal. We believe that the largest portion of our Nevada customers live in Southern California, although other geographic areas are also important.

     The level of gaming activity at our casinos and the pricing of our resorts’ hotel rooms are the most significant factors in determining our revenues and operating income. In 2004, we generated slightly over half of our net revenues from gaming activities and almost a quarter of our net revenues from room sales. We also receive a large amount of revenues from food and beverage, entertainment and retail operations. Since we believe that the number of walk-in customers also affects the success of all of our casino resorts, we design our facilities to maximize their attraction to guests of other hotels.

     The principal segments of the Nevada and Mississippi gaming markets are leisure travel, premium gaming customers, conventions, including small meetings and corporate incentive programs, and tour and travel. Bellagio, MGM Grand Las Vegas and The Mirage appeal to the upper end of each market segment, balancing their business by using the convention and tour and travel segments to fill the mid-week and off-peak periods. Our marketing strategy for TI and New York-New York is aimed at attracting middle- to upper-middle-income wagerers, largely from the leisure travel and, to a lesser extent, the tour and travel segments. Boardwalk and Primm Valley Resorts appeal primarily to middle-income customers attracted by room, food and beverage and entertainment prices that are lower than those offered by the major Las Vegas hotel-casinos.

     We utilize our world-class golf courses in marketing programs at our Las Vegas Strip and other Nevada resorts. Our major Las Vegas casino resorts offer luxury suite packages that include golf privileges at Shadow Creek. In connection with our marketing activities, we also invite our premium casino customers to play Shadow Creek on a complimentary basis. We use Primm Valley Golf Club for marketing purposes at our Las Vegas and Primm resorts, including offering room and golf packages at special rates.

     We believe Beau Rivage is the most luxurious hotel-casino on the Mississippi Gulf Coast. Beau Rivage seeks to attract the most affluent customers in each market segment, particularly those who live in major cities in the Southeast United States, as well as customers residing in the Gulf Coast region. MGM Grand Detroit markets primarily to customers within a 150-mile radius of Detroit. Its customers are attracted by its diverse gaming and dining offerings, its convenient location and its ample onsite parking facilities.

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     We advertise on radio, television and billboards and in newspapers and magazines in selected cities throughout the United States, as well as on the Internet and by direct mail. We also advertise through our regional marketing offices located in major United States and foreign cities. A key element of marketing to high-level wagerers is personal contact by our marketing personnel. Direct marketing is also important in the convention segment. We maintain internet websites which inform customers about our resorts and allow our customers to reserve hotel rooms and make restaurant and show reservations.

     We utilize technology to maximize revenue and efficiency in gaming as well. Our Players Club links seven of our United States resorts, and consolidates all slots and table games activity for customers with a Players Club account. Customers qualify for benefits at all of these resorts, regardless of where they play. We believe that our Players Club enables us to more effectively market to our customers. Almost all of the slot machines at our United States resorts operate with International Game Technology’s EZ-Pay™ cashless gaming system. We believe that this system enhances the customer experience and increases the revenue potential of our slot machines.

Issuance of Markers

     Marker play represents a significant portion of the table games volume at Bellagio, MGM Grand Las Vegas and The Mirage. Our other facilities do not emphasize marker play to the same extent, although we offer markers to customers at those casinos as well.

     We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their marker balances timely. These collection efforts are similar to those used by most large corporations when dealing with overdue customer accounts, including the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. In Nevada, Mississippi and Michigan, amounts owed for markers which are not timely paid are enforceable under state laws. All other states are required to enforce a judgment for amounts owed for markers which are not timely paid, entered into in Nevada, Mississippi or Michigan, pursuant to the Full Faith and Credit Clause of the United States Constitution. Amounts owed for markers which are not timely paid are not legally enforceable in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States. A significant portion of our Company’s accounts receivable, for amounts unpaid resulting from markers which are not collectible through banking channels, is owed by major casino customers from the Far East. The collectibility of unpaid markers is affected by a number of factors, including changes in currency exchange rates and economic conditions in the customers’ home countries.

Supervision of Gaming Activities

     In connection with the supervision of gaming activities at our casinos, we maintain stringent controls on the recording of all receipts and disbursements. These audit and cash controls include:

	•	Locked cash boxes on the casino floor;
	•	Daily cash and coin counts performed by employees who are independent of casino operations;
	•	Constant observation and supervision of the gaming area;
	•	Observation and recording of gaming and other areas by closed-circuit television;
	•	Constant computer monitoring of our slot machines; and
	•	Timely analysis of deviations from expected performance.

Competition

Las Vegas, Nevada

     Our Las Vegas casino resorts compete with a large number of other hotel-casinos in the Las Vegas area, including major hotel-casinos on or near the Las Vegas Strip, major hotel-casinos in the downtown area, which is about five miles from the center of the Strip, and several major facilities elsewhere in the Las Vegas area. According to the Las Vegas Convention and Visitors Authority, there were approximately 132,000 guestrooms in Las Vegas at December 31, 2004, up from approximately 130,000 rooms at December 31, 2003. Las Vegas visitor volume was 37.4 million in 2004, a 5% increase from the 35.5 million reported for 2003. Additional new hotel-casinos and expansion projects at existing Las Vegas hotel-casinos are under construction or have been proposed. In addition, further expansion of Native American gaming in California is likely. We are unable to determine to what extent increased competition will affect our future operating results.

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Primm, Nevada

     The Primm Valley Resorts compete primarily with two hotel-casinos located 11 miles north along Interstate 15 in Jean, Nevada and with the numerous other hotels and casinos in the Las Vegas area, as well as Native American gaming facilities in Southern California. Since many of our current customers stop at Primm as they are driving on Interstate 15 to and from major casino-hotels located in Las Vegas, we believe that our success at Primm is also favorably influenced by the popularity of the Las Vegas resorts. The expansion of Native American gaming has already had an impact on our Primm Valley Resorts, and the substantial expansion of Native American gaming facilities in California, which is currently anticipated, could have a further adverse effect on the Primm Valley Resorts.

Detroit, Michigan

     MGM Grand Detroit competes in this market with two other interim casinos located in Detroit, as well as a government-owned casino located nearby in Windsor, Ontario. There are Native American casinos in Michigan, but none are near the Detroit metropolitan area.

Biloxi, Mississippi

     Beau Rivage competes with 11 other casinos in the Mississippi Gulf Coast market, nine of which offer hotel accommodations. Gulf Coast casinos also compete in the regional market with a land-based casino in New Orleans and a land-based Native American hotel-casino in central Mississippi. Casinos in the Gulf Coast market also compete for the south Florida market with casinos in the Bahamas. Gulf Coast casinos compete to a lesser extent with a number of casinos in Mississippi and Louisiana.

Other

     Our Company’s facilities also compete for gaming customers with hotel-casino operations located in other areas of the United States and other parts of the world, and for vacationers with non-gaming tourist destinations such as Hawaii, Florida and cruise ships. Our hotel-casinos compete to a lesser extent with state-sponsored lotteries, off-track wagering, card parlors, and other forms of legalized gaming in the United States. In recent years, certain states have legalized, and several other states have considered legalizing, casino gaming. We do not believe that legalization or expansion of casino gaming in those jurisdictions would have a material adverse impact on our operations. However, we do believe that the legalization of large-scale land-based casino gaming in or near certain major metropolitan areas, particularly in California, could have a material adverse effect on the Las Vegas market.

How We Compete

     Our major casino resorts compete on the basis of:

	•	Recruiting, training and retaining well-qualified and motivated employees who provide superior and friendly customer service;
	•	Offering high-quality guestrooms and dining, entertainment and retail options;
	•	Providing unique, “must-see” entertainment attractions;
	•	Our marketing and promotional programs; and
	•	The superior locations and sites of our resorts.

     The principal negative factors relating to our competitive position are:

	•	Our limited geographic diversification (our major resorts are concentrated on the Las Vegas Strip and some of our largest competitors operate in more gaming markets than we do);
	•	There are a number of gaming facilities located closer to where our customers live than our resorts;
	•	Our guestroom, dining and entertainment prices are often higher than those of most of our competitors in each market, although we believe that the quality of our facilities and services is also higher; and
	•	Our hotel-casinos compete to some extent with each other for customers. Bellagio, MGM Grand Las Vegas and The Mirage, in particular, compete for some of the same high-end customers.

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Employees and Labor Relations

     As of December 31, 2004, we had approximately 33,000 full-time and 7,000 part-time employees. At that date, we had collective bargaining contracts with unions covering approximately 16,000 of our employees. We do not have union contracts at Beau Rivage or Boardwalk. We consider our employee relations to be good.

Regulation and Licensing

Nevada Government Regulation

     The ownership and operation of casino gaming facilities in Clark County, Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “Nevada Act”); and (ii) various local regulations. The Company’s gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the “Nevada Commission”), the Nevada State Gaming Control Board (the “Nevada Board”) and the Clark County Liquor and Gaming Licensing Board (the “CCLGLB”). The Nevada Commission, the Nevada Board, and the CCLGLB are collectively referred to as the “Nevada Gaming Authorities.”

     The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues; (iii) providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Any change in such laws, regulations and procedures could have an adverse effect on the Company’s gaming operations.

     MGM Grand Hotel, LLC, dba MGM Grand Las Vegas, New York-New York Hotel & Casino, LLC, dba New York-New York Hotel & Casino, The Primadonna Company, LLC, dba Primm Valley Resort, Buffalo Bill’s and Whiskey Pete’s, THE MIRAGE CASINO-HOTEL, dba The Mirage, Bellagio, LLC, dba Bellagio, Treasure Island Corp., dba Treasure Island at The Mirage, Boardwalk Casino, Inc., dba Boardwalk Hotel and Casino, and Victoria Partners, dba Monte Carlo Resort & Casino (collectively referred to as the “Casino Licensees”), operate casinos and are required to be licensed by the Nevada Gaming Authorities. Each gaming license requires the periodic payment of fees and taxes and is not transferable. MGM Grand Las Vegas, New York-New York, The Primadonna Company, LLC and MGM MIRAGE Manufacturing Corp. are also licensed as manufacturers and distributors of gaming devices and Boardwalk is licensed as a distributor of gaming devices. MGM Grand Las Vegas is also licensed to operate an International Gaming Salon. The Company and certain of its subsidiaries are also licensed as shareholders, members and/or managers of certain corporate and limited liability company Casino Licensees. The Company’s subsidiary MRGS Corp. is licensed as a 50% general partner of Victoria Partners, the joint venture with Mandalay Resort Group that owns and operates Monte Carlo.

     The Company and Mirage are also each required to be registered by the Nevada Commission as a publicly traded corporation (“Registered Corporation”) and as such, each is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder or member of, or receive any percentage of profits from, the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company, Mirage and the foregoing subsidiaries have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

     The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company, Mirage, the Casino Licensees, MGM MIRAGE Manufacturing Corp. or MRGS Corp., to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of the foregoing subsidiaries must file applications with the Nevada Gaming Authorities and may be required to be licensed by the Nevada Gaming Authorities. Certain officers, directors and key employees of the Company and Mirage who are actively and directly involved in the gaming activities of the foregoing subsidiaries may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing or a finding of suitability for any cause they deem reasonable.

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     A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability, or the gaming licensee by which the applicant is employed or for whom the applicant serves, must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities, and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

     If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or to continue having a relationship with the Company, Mirage, the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., such company or companies would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company, Mirage or the foregoing subsidiaries to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

     The Company, Mirage, the Casino Licensees, MGM MIRAGE Manufacturing Corp., and MRGS Corp. are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Company, Mirage and the foregoing subsidiaries must be reported to or approved by the Nevada Commission.

     If it were determined that the Nevada Act was violated by the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., the gaming licenses they hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company, Mirage, the foregoing subsidiaries and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Company’s gaming properties and, under certain circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the Company’s gaming properties) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company’s gaming operations.

     Any beneficial holder of the Company’s voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his or her suitability as a beneficial holder of the Company’s voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

     The Nevada Act requires any person who acquires more than 5% of any class of the Company’s voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of any class of the Company’s voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor” as defined in the Nevada Act, which acquires more than 10% but not more than 15% of any class of the Company’s voting securities, may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the Board of Directors of the Company, any change in the corporate charter, bylaws, management, policies or operations of the Company or any of its gaming affiliates, or any other action that the Nevada Commission finds to be inconsistent with holding the Company’s voting securities for investment purposes only. Activities that are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

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     Under the Nevada Act and under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which intends to acquire not more than 15% of any class of nonvoting securities of a privately held corporation, limited partnership or limited liability company that is also a registered holding or intermediary company or the holder of a gaming license, may apply to the Nevada Commission for a waiver of the usual prior licensing or finding of suitability requirement if such institutional investor holds such nonvoting securities for investment purposes only. An institutional investor shall not be deemed to hold nonvoting securities for investment purposes unless the nonvoting securities were acquired and are held in the ordinary course of business as an institutional investor, do not give the institutional investor management authority, and do not, directly or indirectly, allow the institutional investor to vote for the election or appointment of members of the board of directors, a general partner or manager, cause any change in the articles of organization, operating agreement, other organic document, management, policies or operations, or cause any other action that the Nevada Commission finds to be inconsistent with holding nonvoting securities for investment purposes only. Activities not deemed to be inconsistent with holding nonvoting securities for investment purposes only include: (i) nominating any candidate for election or appointment to the entity’s board of directors or equivalent in connection with a debt restructuring; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in the entity’s management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of nonvoting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

     Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, Mirage, the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., the Company, Mirage or the foregoing subsidiaries (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities for cash at fair market value. Additionally, the CCLGLB has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming licensee.

     The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file an application, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

     The Company is required to maintain a current stock ledger in Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the Company’s and Mirage’s stock certificates to bear a legend indicating that such securities are subject to the Nevada Act. However, to date, the Nevada Commission has not imposed such a requirement on either the Company or Mirage.

     Neither the Company nor Mirage may make a public offering of any securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful.

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     Under the Nevada Act, none of the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., may guarantee a security issued by the Company or Mirage pursuant to a public offering, or pledge their assets to secure the payment or performance of the obligations evidenced by such a security issued by the Company or Mirage, without the prior approval of the Nevada Commission. Similarly, neither the common stock nor other ownership interests of the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., may be pledged, nor may the pledge of such common stock or other ownership interests foreclose on such a pledge, without the prior approval of the Nevada Commission. Restrictions on the transfer of any equity security issued by the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., and agreements not to encumber such securities, are ineffective without the prior approval of the Nevada Commission.

     On January 22, 2004, the Nevada Commission granted the Company and Mirage prior approval to make public offerings for a period of 18 months, subject to certain conditions (the “Shelf Approval”). The Shelf Approval also includes approval for the Company and Mirage to place restrictions on the transfer of any equity security issued to the Casino Licensees, MGM MIRAGE Manufacturing Corp., or MRGS Corp., and to enter into agreements not to encumber such securities, pursuant to any public offering made under the Shelf Approval. However, the Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board. The Shelf Approval does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful.

     Changes in control of the Company or Mirage through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he or she obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and the Nevada Commission concerning a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process of the transaction.

     The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defensive tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated.

     The Nevada Act also requires prior approval of a plan of recapitalization proposed by a Registered Corporation’s board of directors in response to a tender offer made directly to the Registered Corporation’s stockholders for the purpose of acquiring control of the Registered Corporation.

     License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to Clark County. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. The tax on gross revenues received is generally 6.75%. An excise tax is also paid by the Casino Licensees on charges for admission to any facility where certain forms of live entertainment are provided. Nevada licensees that hold a license as a manufacturer or a distributor, such as MGM Grand Las Vegas, New York-New York, The Primadonna Company, LLC, the Boardwalk and MGM MIRAGE Manufacturing Corp., also pay certain fees and taxes to the State of Nevada.

     Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, “Licensees”), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Thereafter, Licensees are also required to comply with certain reporting requirements imposed by the Nevada Act.

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     Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in any activity or enter into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reflects or tends to reflect discredit or disrepute upon the State of Nevada or gaming in Nevada, or is contrary to the gaming policies of Nevada, engage in any activity or enter into any association that interferes with the ability of the State of Nevada to collect gaming taxes and fees, or employ, contract with or associate with any person in the foreign gaming operation who has been denied a license or a finding of suitability in Nevada on the ground of personal unsuitability, or who has been found guilty of cheating at gambling.

     The sale of alcoholic beverages by the Casino Licensees is subject to licensing, control and regulation by the applicable local authorities. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect upon the Company’s operations.

     Pursuant to a 1985 agreement with the United States Department of the Treasury (the “Treasury”) and provisions of the Money Laundering Suppression Act of 1994, the Nevada Commission and the Nevada Board have authority, under Regulation 6A of the Nevada Act, to enforce their own cash transaction reporting laws applicable to casinos which substantially parallel the federal Bank Secrecy Act. The Nevada Act requires gaming licensees to monitor receipts and disbursements of currency related to cash purchases of chips, cash wagers, cash deposits or cash payment of gaming debts in excess of $10,000 in a 24-hour period, and file reports of such transactions with the United States Internal Revenue Service. Casinos are required to file suspicious activity reports with the Treasury and provide copies thereof to the Nevada Board. Nevada casinos are required to meet the reporting and record keeping requirements of Treasury regulations recently amended by the USA PATRIOT Act of 2001.

Michigan Government Regulation and Taxation

     The Michigan Gaming Control and Revenue Act (the “Michigan Act”) subjects the ownership and operation of casino gaming facilities to extensive state licensing and regulatory requirements. The Michigan Act also authorizes local regulation of casino gaming facilities by the City of Detroit, provided that any such local ordinances regulating casino gaming are consistent with the Michigan Act and rules promulgated to implement it.

     The Michigan Act creates the Michigan Gaming Control Board (the “ Michigan Bord”) and authorizes it to grant casino licenses to not more than three applicants who have entered into development agreements with the City of Detroit. The Michigan Board is granted extensive authority to conduct background investigations and determine the suitability of casino license applicants, affiliated companies, officers, directors, or managerial employees of applicants and affiliated companies and persons or entities holding a one percent or greater direct or indirect interest in an applicant or affiliated company. Institutional investors holding less than certain specified amounts of debt or equity securities are exempted from meeting the suitability requirements of the Michigan Act, provided such securities are issued by a publicly traded corporation, such as MGM MIRAGE, and the securities were purchased for investment purposes only and not for the purpose of influencing or affecting the affairs of the issuer. Any person who supplies goods or services to a casino licensee which are directly related to, used in connection with, or affecting gaming, and any person who supplies other goods or services to a casino licensee on a regular and continuing basis, must obtain a supplier’s license from the Michigan Board. In addition, any individual employed by a casino licensee or by a supplier licensee whose work duties are related to or involved in the gambling operation or are performed in a restricted area or a gaming area of a casino must obtain an occupational license from the Michigan Board.

     The Michigan Act imposes the burden of proof on the applicant for a casino license to establish its suitability to receive and hold the license. The applicant must establish its suitability as to integrity, moral character and reputation, business probity, financial ability and experience, responsibility, and other criteria deemed appropriate by the Michigan Board. A casino license is valid for a period of one year and the Michigan Board may refuse to renew it upon a determination that the licensee no longer meets the requirements for licensure.

     The Michigan Board may, among other things, revoke, suspend or restrict a casino license. Substantial fines or forfeiture of assets for violations of gaming or liquor control laws or rules may also be levied against a casino licensee. In the event that a casino license is revoked or suspended for more than 120 days, the Michigan Act provides for the appointment of a conservator who, among other things, is required to preserve the assets to ensure that they shall continue to be operated in a sound and businesslike manner, or upon order of the Michigan Board, to sell or otherwise transfer the assets of the casino licensee or former licensee to another person or entity who meets the requirements of the Michigan Act for licensure, subject to certain approvals and consultations.

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     The Michigan Board has adopted administrative rules to implement the terms of the Michigan Act. Among other things, the rules impose more detailed substantive and procedural requirements with respect to casino licensing and operations. Included are requirements regarding such things as licensing investigations and hearings, record keeping and retention, contracting, reports to the Michigan Board, internal control and accounting procedures, security and surveillance, extensions of credit to gaming patrons, conduct of gaming, and transfers of ownership interests in licensed casinos. The rules also establish numerous Michigan Board procedures regarding licensing, disciplinary and other hearings, and similar matters. The rules have the force of law and are binding on the Michigan Board as well as on applicants for or holders of casino licenses.

     The Michigan Liquor Control Commission licenses, controls and regulates the sale of alcoholic beverages by the MGM Grand Detroit casino pursuant to the Michigan Liquor Control Code of 1998. The Michigan Act also requires that casinos sell and distribute alcoholic beverages in a manner consistent with the Michigan Liquor Control Code.

     The Detroit City Council enacted an ordinance entitled “Casino Gaming Authorization and Casino Development Agreement Certification and Compliance.” The ordinance authorizes casino gaming only by operators who are licensed by the Michigan Board and are parties to a development agreement which has been approved and certified by the City Council and is currently in effect, or are acting on behalf of such parties. The development agreement among the City of Detroit, MGM Grand Detroit, LLC and the Economic Development Corporation of the City of Detroit has been so approved and certified and is currently in effect. The ordinance requires each casino operator to submit to the Mayor of Detroit and to the City Council periodic reports regarding the operator’s compliance with its development agreement or, in the event of non-compliance, reasons for non-compliance and an explanation of efforts to comply. The ordinance requires the Mayor of Detroit to monitor each casino operator’s compliance with its development agreement, to take appropriate enforcement action in the event of default and to notify the City Council of defaults and enforcement action taken; and, if a development agreement is terminated, it requires the City Council to transmit notice of such action to the Michigan Board within five business days along with Detroit’s request that the Michigan Board revoke the relevant operator’s certificate of suitability or casino license. If a development agreement is terminated, the Michigan Act requires the Michigan Board to revoke the relevant operator’s casino license upon the request of Detroit.

     The administrative rules of the Michigan Board prohibit a casino licensee or a holding company or affiliate that has control of a casino licensee in Michigan from entering into a debt transaction affecting the capitalization or financial viability of its Michigan casino operation without prior approval from the Michigan Board. On October 14, 2003, the Michigan Board authorized MGM Grand Detroit, LLC to borrow under the Company’s credit facilities for the purpose of financing the development of its permanent casino and the future expansion thereof, maintenance capital expenditures for its temporary and permanent casinos and the cost of renovating the temporary casino facility for adaptive re-use and/or sale following the completion of the permanent casino, and to secure such borrowings with liens upon substantially all of its assets. In the same order, the Michigan Board authorized MGM Grand Detroit, Inc. to pledge its equity interest in MGM Grand Detroit, LLC to secure such borrowings.

     The Michigan Act effectively provides that each of the three casinos in Detroit shall pay a wagering tax equal to 24% of its adjusted gross receipts (up from 18% prior to September 1, 2004 and subject to adjustment as described below), which tax is shared between Michigan and Detroit, an annual municipal service fee equal to the greater of $4 million or 1.25% of its adjusted gross receipts, to be paid to Detroit to defray its cost of hosting casinos, and an annual assessment in the initial amount of approximately $8.3 million and adjusted annually based upon a consumer price index, to be paid by each casino to Michigan to defray its regulatory enforcement and other casino-related costs. These payments are in addition to the taxes, fees and assessments customarily paid by business entities operating in Detroit. The development agreement between it and Detroit also obligates MGM Grand Detroit, LLC to pay $34 million to Detroit and $10 million to Detroit’s Minority Business Development Fund, both of which payments have been made, and beginning on January 1, 2006 to pay 1% of its adjusted gross receipts to Detroit, to be increased to 2% of its adjusted gross receipts in any calendar year in which adjusted gross receipts exceed $400 million. Once our subsidiary has operated a permanent casino complex for 30 consecutive days and is determined to be in compliance with its development agreement with Detroit, the wagering tax rate effective under the Michigan Act will be reduced to 19%. Conversely, if it does not commence such operations by July 1, 2009, the rate will increase annually on a graduated basis to a maximum of 27% until such operations have commenced.

     The Michigan Act provides that an entity holding more than a 10% ownership interest in one Michigan casino licensee is ineligible for licensure if it holds more than a 10% ownership interest in a second Michigan casino licensee. Therefore, upon consummation of its merger with Mandalay Resort Group, MGM MIRAGE will be required to dispose of its indirect ownership interest in MGM Grand Detroit, LLC or Detroit Entertainment, L.L.C. (Motor City Casino) in accordance with the Michigan Act and Michigan Rules.

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Mississippi Government Regulation

     We conduct our Mississippi gaming operations through an indirect subsidiary, Beau Rivage Resorts, Inc., which owns and operates Beau Rivage in Biloxi, Mississippi. The ownership and operation of casino facilities in Mississippi are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission and the Mississippi State Tax Commission.

     The Mississippi Gaming Control Act, (the “Mississippi Act”) which legalized dockside casino gaming in Mississippi, was enacted on June 29, 1990. Although not identical, the Mississippi Act is similar to the Nevada Gaming Control Act. Effective October 29, 1991, the Mississippi Gaming Commission adopted regulations in furtherance of the Mississippi Act which are also similar in many respects to the Nevada gaming regulations. The laws, regulations and supervisory procedures of Mississippi and the Mississippi Gaming Commission seek to:

•	prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity;
•	establish and maintain responsible accounting practices and procedures;
•	maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and making periodic reports to the Mississippi Gaming Commission;
•	prevent cheating and fraudulent practices;
•	provide a source of state and local revenues through taxation and licensing fees; and
•	ensure that gaming licensees, to the extent practicable, employ Mississippi residents.

     The regulations are subject to amendment and interpretation by the Mississippi Gaming Commission. Changes in Mississippi law or the regulations or the Mississippi Gaming Commission’s interpretations thereof may limit or otherwise materially a