Magna Entertainment Corp. announces results for the fourth quarter and year ended December 31, 2006



    AURORA, ON, March 5 /CNW/ - Magna Entertainment Corp. ("MEC") (NASDAQ:  
MECA; TSX: MEC.A) today reported its financial results for the fourth quarter
and year ended December 31, 2006.

    
    -------------------------------------------------------------------------
                                Years Ended            Three Months Ended
                                December 31,              December 31,
                              -----------------        ------------------
                              2006         2005         2006         2005
                              ----         ----         ----         ----

    Revenues(i)            $  702,139   $  604,428   $  132,869   $  122,815

    Earnings (loss)
     before interest,
     taxes, depreciation
     and amortization
     ("EBITDA")(i)
     (iii)(iv)             $   12,297   $  (34,137)  $    7,045   $  (18,972)

    Net income (loss)
     (iii)(iv)
      Continuing
       operations          $  (85,183)  $ (101,964)  $  (12,491)  $  (36,472)
      Discontinued
       operations(ii)      $   (2,168)  $   (3,329)  $        8   $   (3,261)
    -------------------------------------------------------------------------
    Total net loss         $  (87,351)  $ (105,293)  $  (12,483)  $  (39,733)
    -------------------------------------------------------------------------

    Diluted loss per
     share(iii)(iv)
      Continuing
       operations          $    (0.79)  $    (0.95)  $    (0.12)  $    (0.34)
      Discontinued
       operations(ii)      $    (0.02)  $    (0.03)  $        -   $    (0.03)
    -------------------------------------------------------------------------
    Total diluted loss
     per share             $    (0.81)  $    (0.98)  $    (0.12)  $    (0.37)
    -------------------------------------------------------------------------

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

    (i)   Revenues and EBITDA for all periods presented are from continuing
          operations only.
    (ii)  Discontinued operations for 2006 includes the Fontana Golf Club,
          the sale of which was completed on November 1, 2006, the Magna Golf
          Club, the sale of which was completed on August 25, 2006 and the
          operations of a restaurant and related real estate in the United
          States, the sale of which was completed on May 26, 2006. Results
          for 2005 have been reclassified to reflect only continuing
          operations, with the Fontana Golf Club, the Magna Golf Club, the
          operations of the restaurant and related real estate in the United
          States as noted above, as well as Flamboro Downs, the sale of which
          was completed on October 19, 2005 and Maryland-Virginia Racing
          Circuit, Inc., the sale of which was completed on September 30,
          2005, being reported as discontinued operations.
    (iii) EBITDA, net loss and diluted loss per share for the three months
          and year ended December 31, 2006 include a gain on sale of
          intangible assets related to The Meadows of $126.4 million.
    (iv)  EBITDA, net loss and diluted loss per share for the three months
          and year ended December 31, 2006 include a non-cash impairment
          charge of $76.2 million related to Magna Racino(TM)'s long-lived
          assets, a non-cash impairment loss of $11.2 million related to
          The Meadows' long-lived assets and a non-cash impairment loss of
          $1.3 million related to a 34 acre parcel of residential development
          land in Canada, in respect of which all of our interests and rights
          were disposed of subsequent to December 31, 2006.

          All amounts are reported in U.S. dollars in thousands, except per
          share figures.
    -------------------------------------------------------------------------
    

    In announcing these results, Blake Tohana, Executive Vice-President and
Chief Financial Officer remarked, "MEC made significant progress during the
fourth quarter of 2006 in selling assets and paying down debt. We closed The
Meadows transaction in November 2006, which generated a gain on sale of
intangible assets of $126.4 million and contributed to debt repayments of
$116.7 million and a net reduction in bank indebtedness of $33.4 million
during the quarter. In February 2007, we disposed of two non-core real estate
properties for proceeds of $30.1 million, which were used to pay down debt. We
are continuing to pursue other funding sources to further strengthen our
balance sheet, which may include additional non-core asset sales, partnerships
and raising equity. We also remain focused on improving operations. Although
we are disappointed with the fourth quarter results at Gulfstream Park, we
have already taken steps to reduce costs and improve profitability from both
the slots and racing operations. We look forward to the installation of an
additional 700 slot machines at Gulfstream Park later this month, which we
expect will also contribute to improved results."

    Our racetracks operate for prescribed periods each year. As a result, our
racing revenues and operating results for any quarter will not be indicative
of our racing revenues and operating results for the year.

    Our financial results for the three months and year ended December 31,
2006 reflect the full quarter's operations for all of MEC's racetracks and
pari-mutuel wagering and gaming operations. Discontinued operations for 2006
includes the Fontana Golf Club, the sale of which was completed on November 1,
2006, the Magna Golf Club, the sale of which was completed on August 25, 2006
and the operations of a restaurant and related real estate in the United
States, the sale of which was completed on May 26, 2006. Discontinued
operations for 2005 includes the Fontana Golf Club, the Magna Golf Club and
the operations of the restaurant and related real estate in the United States
as noted above, as well as Flamboro Downs, the sale of which was completed on
October 19, 2005 and Maryland-Virginia Racing Circuit, Inc., the sale of which
was completed on September 30, 2005.

    Revenues from continuing operations for the three months ended December
31, 2006 increased $10.1 million or 8.2% to $132.9 million, compared to $122.8
million for the three months ended December 31, 2005. The increased revenues
were primarily due to:

    
    -  Florida operations above the prior year period by $10.3 million
       primarily due to gaming revenues at the Gulfstream Park casino
       facility, which opened on November 15, 2006;

    -  Southern U.S. operations above the prior year period by $7.4 million
       primarily due to an increase in gaming revenues at the Remington Park
       casino facility, which opened on November 21, 2005;

    -  Technology operations above the prior year period by $7.5 million
       primarily due to the acquisition of the remaining 70% equity interest
       in AmTote in July 2006, the operations of which are now being
       consolidated whereas previously our 30% equity interest was accounted
       for on an equity basis; partially offset by

    -  California operations below the prior year period by $15.1 million
       primarily due to a change in the racing calendar at Golden Gate
       Fields, whereby there were 46 live race days in the three months ended
       December 31, 2005 compared to 12 live race days in the three months
       ended December 31, 2006.
    

    Revenues from continuing operations were $702.1 million in 2006, compared
to $604.4 million in 2005, an increase of $97.7 million or 16.2%. The
increased revenues in the year ended December 31, 2006 compared to the prior
year period are primarily due to the same factors noted above for the three
months ended December 31, 2006, but also includes increased attendance, handle
and wagering revenues at Santa Anita Park as a result of better weather and
more effective marketing efforts, increased live race days at Golden Gate
Fields whereby live race days increased from 96 days in 2005 to 106 days in
2006, increased racing revenues at Gulfstream Park due to the opening of the
new clubhouse facility and increased wagering revenues at Laurel Park as a
result of additional live race days and increased average field size.

    EBITDA from continuing operations for the three months ended December 31,
2006 improved $26.0 million to $7.0 million compared to an EBITDA loss of
$19.0 million in the three months ended December 31, 2005. EBITDA was
positively impacted by a $126.4 million gain on sale of intangible assets
related to The Meadows and negatively impacted by the non-cash write-down of
long-lived assets of $88.6 million. In our core racing and gaming operations,
EBITDA was also impacted by:

    
    -  California operations below the prior year period by $6.7 million
       primarily due to a change in the racing calendar at Golden Gate
       Fields, which resulted in 34 less live race days in the three months
       ended December 31, 2006 compared to the same period last year;

    -  Florida operations below the prior year period by $2.7 million as
       increased gaming revenues at Gulfstream Park were more than offset by
       higher operating costs; and

    -  Predevelopment, pre-opening and other costs above the prior year
       period by $4.2 million due to a write-off of costs incurred in
       connection with our Michigan racing license and costs incurred in
       pursuit of the legalization of alternative gaming in Ohio, which was
       defeated by the voters in the November 2006 general election.
    

    EBITDA from continuing operations is $12.3 million for 2006, compared to
a loss of $34.1 million in 2005, an improvement of $46.4 million. EBITDA was
positively impacted by a $126.4 million gain on sale of intangible assets
related to The Meadows and negatively impacted by the non-cash write-down of
long-lived assets of $88.6 million. EBITDA from our core racing and gaming
operations for the year ended December 31, 2006 was impacted primarily by the
same factors influencing revenues and EBITDA as noted previously.

    During the fourth quarter of 2006, cash used for operations was $21.4
million, which has increased from cash used for operations of $13.9 million in
the fourth quarter of 2005 primarily due to a decrease in net loss adjusted
for items not involving current cash flows. Cash provided from investing
activities during the three months ended December 31, 2006 was $156.1 million,
which included $171.8 million of proceeds received on The Meadows transaction
and proceeds on the disposition of real estate properties, fixed and other
assets of $5.2 million, partially offset by real estate property and fixed
asset additions of $20.8 million. Cash used for financing activities during
the three months ended December 31, 2006 of $127.0 million includes $90.7
million of net repayments of advances and long-term debt with our parent,
$33.4 million of net repayments of bank indebtedness and $2.9 million of net
repayments of long-term debt.

    Cash used for operations in 2006 was $61.6 million, increasing from a use
of cash in operations in 2005 of $57.6 million primarily due to a decrease in
changes in non-cash working capital balances at December 31, 2006 compared to
December 31, 2005. Cash provided from investing activities in 2006 of
$87.5 million included $171.8 million of proceeds received on The Meadows
transaction and $14.5 million of proceeds on the disposal of real estate
properties, fixed and other assets, partially offset by $89.4 million of real
estate property and fixed asset additions and $9.3 million on the acquisition
of AmTote. Cash used for financing activities during the year ended
December 31, 2006 of $51.3 million includes $27.3 million of net repayments of
advances and long-term debt with our parent, $20.8 million of net repayments
of bank indebtedness and $3.2 million of net repayments of long-term debt.

    We will hold a conference call to discuss our fourth quarter and year end
results on March 5, 2007 at 11:00 a.m. EST. The number to use for this call is
1-877-812-1330. Please call 10 minutes prior to the start of the conference
call. The dial-in number for overseas callers is 706-679-7563. The conference
call will be chaired by Michael Neuman, Chief Executive Officer of MEC. We
will also be webcasting the conference call at www.magnaentertainment.com. If
you have any teleconferencing questions, please call Karen Richardson at   
905-726-7465.

    MEC, North America's largest owner and operator of horse racetracks,
based on revenue, acquires, develops, owns and operates horse racetracks and
related pari-mutuel wagering operations, including off-track betting
facilities. MEC also develops, owns and operates casinos in conjunction with
its racetracks where permitted by law. MEC owns and operates AmTote
International, Inc., a provider of totalisator services to the pari-mutuel
industry, XpressBet(R), a national Internet and telephone account wagering
system, and HorseRacing TV(TM), a 24-hour horse racing television network, as
well as MagnaBet(TM) internationally.

    This press release contains "forward-looking statements" within the
meaning of applicable securities legislation, including Section 27A of the
United States Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the United States Securities Exchange Act of 1934, as amended
(the "Exchange Act") and forward-looking information as defined in the
Securities Act (Ontario) (collectively referred to as forward-looking
statements). These forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995 and
the Securities Act (Ontario) and include, among others, statements regarding:
strategies and plans; expectations as to our potential ability to strengthen
our balance sheet; expectations as to financing and liquidity requirements and
arrangements; expectations as to operational improvements; expectations as to
cost savings, revenue growth and earnings; the time by which certain
redevelopment projects, transactions or other objectives will be achieved;
estimates of costs relating to environmental remediation and restoration;
proposed new racetracks or other developments, products and services;
expectations as to the timing and receipt of government approvals and
regulatory changes in gaming and other racing laws and regulations;
expectations that claims, lawsuits, environmental costs, commitments,
contingent liabilities, labor negotiations or agreements, or other matters
will not have a material adverse effect on our consolidated financial
position, operating results, prospects or liquidity; projections, predictions,
expectations, estimates, beliefs or forecasts as to our financial and
operating results and future economic performance; and other matters that are
not historical facts.

    Forward-looking statements should not be read as guarantees of future
performance or results, and will not necessarily be accurate indications of
whether or the times at or by which such performance or results will be
achieved. Undue reliance should not be placed on such statements. Forward-
looking statements are based on information available at the time and/or
management's good faith assumptions and analyses made in light of our
perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in the
circumstances and are subject to known and unknown risks, uncertainties and
other unpredictable factors, many of which are beyond the Company's control,
that could cause actual events or results to differ materially from such
forward-looking statements. Factors that could cause actual results to differ
materially from our forward-looking statements include, but may not be limited
to, material adverse changes: in general economic conditions, the popularity
of racing and other gaming activities as recreational activities, the
regulatory environment affecting the horse racing and gaming industries, and
our ability to develop, execute or finance our strategies and plans within
expected timelines or budgets. In drawing conclusions set out in our forward-
looking statements above, we have assumed, among other things, that there will
not be any material adverse changes: in general economic conditions, the
popularity of horse racing and other gaming activities, the regulatory
environment, and our ability to develop, execute or finance our strategies and
plans as anticipated.

    Forward-looking statements speak only as of the date the statements were
made. We assume no obligation to update forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
forward-looking statements. If we update one or more forward-looking
statements, no inference should be drawn that we will make additional updates
with respect thereto or with respect to other forward-looking statements.


    
    MAGNA ENTERTAINMENT CORP.
    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
    -------------------------------------------------------------------------
    (Unaudited)
    (U.S. dollars in thousands,
     except per share figures)

                                Three months ended            Years ended
                                    December 31,              December 31,
                                 2006         2005         2006         2005
                           --------------------------------------------------
                                         (restated-                (restated-
                                            note 6)                   note 6)
    -------------------------------------------------------------------------
    Revenues
    Racing and gaming
      Pari-mutuel
       wagering            $   75,499   $   89,833   $  501,300   $  488,480
      Gaming                   21,770        6,132       64,824        6,132
      Non-wagering             34,396       26,765      131,069      105,173
    -------------------------------------------------------------------------
                              131,665      122,730      697,193      599,785
    -------------------------------------------------------------------------
    Real estate and other
      Other                     1,204           85        4,946        4,643
    -------------------------------------------------------------------------
                              132,869      122,815      702,139      604,428
    -------------------------------------------------------------------------

    Costs, expenses and
     other income
    Racing and gaming
      Pari-mutuel purses,
       awards and other        46,335       57,197      312,009      303,638
      Gaming taxes,
       purses and other        12,041        2,630       32,939        2,630
      Operating costs          75,041       61,452      290,426      253,535
      General and
       administrative          21,284       16,410       73,533       63,135
    -------------------------------------------------------------------------
                              154,701      137,689      708,907      622,938
    -------------------------------------------------------------------------
    Real estate and other
      Operating costs           1,682        1,594        3,839        4,831
      General and
       administrative             179           26          191           36
    -------------------------------------------------------------------------
                                1,861        1,620        4,030        4,867
    -------------------------------------------------------------------------
    Predevelopment,
     pre-opening and
     other costs                6,741        2,588       14,159       11,882
    Depreciation and
     amortization              12,651        9,251       43,902       36,240
    Interest expense, net      15,561       10,337       60,702       32,826
    Write-down of
     long-lived assets         88,627            -       88,627            -
    Equity loss (income)          268         (110)         493       (1,122)
    Gain on sale of
     intangible assets
     related to The
     Meadows                 (126,374)           -     (126,374)           -
    -------------------------------------------------------------------------
                              154,036      161,375      794,446      707,631
    -------------------------------------------------------------------------
    Loss from continuing
     operations before
     income taxes             (21,167)     (38,560)     (92,307)    (103,203)
    Income tax benefit         (8,676)      (2,088)      (7,124)      (1,239)
    -------------------------------------------------------------------------
    Net loss from
     continuing operations    (12,491)     (36,472)     (85,183)    (101,964)
    Net income (loss)
     from discontinued
     operations                     8       (3,261)      (2,168)      (3,329)
    -------------------------------------------------------------------------
    Net loss                  (12,483)     (39,733)     (87,351)    (105,293)
    Other comprehensive
     income (loss)
      Foreign currency
       translation
       adjustment              (3,468)      (2,752)       3,104      (14,971)
      Change in fair
       value of interest
       rate swap                  (55)           9          (88)         415
    -------------------------------------------------------------------------
    Comprehensive loss     $  (16,006)  $  (42,476)  $  (84,335)  $ (119,849)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share for
     Class A Subordinate
      Voting Stock or
       Class B Stock:
      Basic and Diluted
        Continuing
         operations        $    (0.12)  $    (0.34)  $    (0.79)  $    (0.95)
        Discontinued
         operations                 -        (0.03)       (0.02)       (0.03)
    -------------------------------------------------------------------------
    Loss per share         $    (0.12)  $    (0.37)  $    (0.81)  $    (0.98)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of
     shares of Class A
     Subordinate
      Voting Stock or
       Class B Stock
       outstanding during
       the period
       (in thousands):
        Basic and Diluted     107,510      107,360      107,461      107,356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MAGNA ENTERTAINMENT CORP.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------------------------------------------
    (Unaudited)
    (U.S. dollars in thousands)

                                Three months ended            Years ended
                                    December 31,              December 31,
                                 2006         2005         2006         2005
                           --------------------------------------------------
                                         (restated-                (restated-
                                            note 6)                  -note 6)
    -------------------------------------------------------------------------
    Cash provided from
     (used for):

    Operating activities
     of continuing
     operations
    Net loss from
     continuing
     operations            $  (12,491)  $  (36,472)  $  (85,183)  $ (101,964)
    Items not involving
     current cash flows       (28,994)       6,052       18,873       33,007
    -------------------------------------------------------------------------
                              (41,485)     (30,420)     (66,310)     (68,957)
    Changes in non-cash
     working capital
     balances                  20,099       16,501        4,668       11,359
    -------------------------------------------------------------------------
                              (21,386)     (13,919)     (61,642)     (57,598)
    -------------------------------------------------------------------------

    Investing activities
     of continuing
     operations
    Acquisition of
     business, net of
     cash acquired                  -            -       (9,347)           -
    Proceeds on
     The Meadows
     transaction              171,777            -      171,777            -
    Real estate property
     and fixed asset
     additions                (20,848)     (66,516)     (89,448)    (149,170)
    Other asset disposals
     (additions)                2,237       (1,027)       2,539       (1,333)
    Proceeds on disposal
     of real estate
     properties and
     fixed assets               2,950            -        6,428        4,403
    Proceeds on real
     estate sold to a
     related party                  -            -        5,578        1,400
    -------------------------------------------------------------------------
                              156,116      (67,543)      87,527     (144,700)
    -------------------------------------------------------------------------

    Financing activities
     of continuing
     operations
    Net increase (decrease)
     in bank indebtedness     (33,414)       1,960      (20,785)       2,760
    Proceeds from advances
     and long-term debt
     with parent               22,664       80,419       89,513      156,519
    Issuance of
     long-term debt               448          209       12,582          209
    Repayment of advances
     and long-term debt
     with parent             (113,400)           -     (116,800)           -
    Repayment of
     long-term debt            (3,318)      (4,365)     (15,816)     (15,600)
    -------------------------------------------------------------------------
                             (127,020)      78,223      (51,306)     143,888
    -------------------------------------------------------------------------

    Effect of exchange
     rate changes on cash
     and cash equivalents         402         (478)        (104)       1,141
    -------------------------------------------------------------------------
    Net cash flows
     provided from (used
     for) continuing
     operations                 8,112       (3,717)     (25,525)     (57,269)
    -------------------------------------------------------------------------

    Cash provided from
     (used for)
     discontinued
     operations
    Cash flows provided
     from (used for)
     operating activities
     of discontinued
     operations                 2,671       (6,145)       1,372       (8,502)
    Cash flows provided
     from investing
     activities of
     discontinued
     operations                16,554       28,840       63,989       35,149
    Cash flows provided
     from (used for)
     financing activities
     of discontinued
     operations                     -       (4,673)     (32,427)      20,863
    -------------------------------------------------------------------------
    Net cash flows
     provided from
     discontinued
     operations                19,225       18,022       32,934       47,510
    -------------------------------------------------------------------------

    Net increase (decrease)
     in cash and cash
     equivalents during
     the period                27,337       14,305        7,409       (9,759)
    Cash and cash
     equivalents,
     beginning of period       30,954       36,577       50,882       60,641
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $   58,291   $   50,882   $   58,291   $   50,882
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MAGNA ENTERTAINMENT CORP.
    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
    (REFER TO NOTE 1 - GOING CONCERN)
    (Unaudited)
    (U.S. dollars and share amounts in thousands)

                                                              December 31,
                                                     ------------------------
                                                           2006         2005
    -------------------------------------------------------------------------
                                                                  (restated -
                                                                     notes 5
                                                                       and 6)
    -------------------------------------------------------------------------
                                   ASSETS
    -------------------------------------------------------------------------
    Current assets:
      Cash and cash equivalents                      $   58,291   $   50,882
      Restricted cash                                    34,194       24,776
      Accounts receivable                                35,949       36,473
      Due from parent                                     6,648       13,668
      Income taxes receivable                               580          396
      Inventories                                         6,384        2,618
      Prepaid expenses and other                          8,884        4,030
      Assets held for sale                                    -       61,185
      Discontinued operations                                 -        2,723
    -------------------------------------------------------------------------
                                                        150,930      196,751
    -------------------------------------------------------------------------
    Real estate properties, net                         845,894      903,413
    Fixed assets, net                                    93,141       59,239
    Racing licenses                                     109,868      109,868
    Other assets, net                                     4,664       14,002
    Future tax assets                                    42,388       45,012
    Discontinued operations                                   -       86,359
    -------------------------------------------------------------------------
                                                     $1,246,885   $1,414,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                     LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
      Bank indebtedness                              $    6,515   $   30,260
      Accounts payable                                   76,105       62,935
      Accrued salaries and wages                          8,792        7,798
      Customer deposits                                   2,531        2,549
      Other accrued liabilities                          56,228       66,081
      Long-term debt due within one year                 85,754       32,382
      Due to parent                                       3,108       72,060
      Deferred revenue                                    6,098        6,789
      Liabilities related to assets held for sale             -       27,436
      Discontinued operations                                 -       15,609
    -------------------------------------------------------------------------
                                                        245,131      323,899
    -------------------------------------------------------------------------
    Long-term debt                                       93,859      138,271
    Long-term debt due to parent                        177,250      113,500
    Convertible subordinated notes                      221,437      220,347
    Other long-term liabilities                          17,484        1,702
    Future tax liabilities                               91,106      101,602
    Discontinued operations                                   -       55,729
    -------------------------------------------------------------------------
                                                        846,267      955,050
    -------------------------------------------------------------------------

    Shareholders' equity:
    Class A Subordinate Voting Stock
      (Issued: 2006 - 49,055; 2005 - 48,895)            319,087      318,105
    Class B Stock
      (Convertible into Class A Subordinate
       Voting Stock)
      (Issued: 2006 and 2005 - 58,466)                  394,094      394,094
    Contributed surplus                                  41,718       17,943
    Other paid-in-capital                                 1,410            -
    Deficit                                            (396,298)    (308,947)
    Accumulated comprehensive income                     40,607       38,399
    -------------------------------------------------------------------------
                                                        400,618      459,594
    -------------------------------------------------------------------------
                                                     $1,246,885   $1,414,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    MAGNA ENTERTAINMENT CORP.
    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    -------------------------------------------------------------------------
    (Unaudited)
    (all amounts in U.S. dollars unless otherwise noted and all tabular
    amounts in thousands, except per share figures)

    1.  Going Concern

        These consolidated financial statements of Magna Entertainment Corp.
        (the "Company") have been prepared on a going concern basis, which
        contemplates the realization of assets and the discharge of
        liabilities in the normal course of business for the foreseeable
        future. The Company has incurred net losses of $87.4 million and
        $105.3 million for the years ended December 31, 2006 and 2005,
        respectively, and has an accumulated deficit of $396.3 million and a
        working capital deficiency of $94.2 million at December 31, 2006.
        Accordingly, the Company's ability to continue as a going concern is
        in substantial doubt and is dependent on the Company generating cash
        flows that are adequate to sustain the operations of the business,
        renew or extend current financing arrangements and maintain its
        obligations with respect to secured and unsecured creditors, none of
        which is assured. During the year ended December 31, 2006, the
        Company completed asset sale transactions for proceeds totaling
        $269.4 million. On February 7, 2007 (refer to Note 15), MI
        Developments Inc. ("MID") acquired all of the Company's interests and
        rights in two real estate properties, a 34 acre parcel of residential
        development land in Aurora, Ontario, Canada and a 64 acre parcel of
        excess land at Laurel Park in Howard County, Maryland, in return for
        cash consideration of Cdn. $12.0 million (U.S. $10.1 million) and
        U.S. $20.0 million, respectively. The Company is continuing to pursue
        other funding sources, which may include further asset sales,
        partnerships and raising capital through equity offerings, however,
        the successful realization of these efforts is not determinable at
        this time. These consolidated financial statements do not give effect
        to any adjustments which would be necessary should the Company be
        unable to continue as a going concern and, therefore, be required to
        realize its assets and discharge its liabilities in other than the
        normal course of business and at amounts different from those
        reflected in the consolidated financial statements.

    2.  Summary of Significant Accounting Policies

        Basis of Presentation

        The accompanying unaudited consolidated financial statements have
        been prepared in accordance with United States generally accepted
        accounting principles ("U.S. GAAP") for interim financial information
        and with instructions to Form 10-Q and Article 10 of Regulation S-X.
        Accordingly, they do not include all of the information and footnotes
        required by U.S. GAAP for complete financial statements. The
        preparation of the consolidated financial statements in conformity
        with U.S. GAAP requires management to make estimates and assumptions
        that affect the amounts reported in the consolidated financial
        statements and accompanying notes. Actual results could differ from
        estimates. In the opinion of management, all adjustments, which
        consist of normal and recurring adjustments, necessary for fair
        presentation have been included.  For further information, refer to
        the consolidated financial statements and footnotes thereto included
        in the Company's annual report on Form 10-K for the year ended
        December 31, 2005.

        Seasonality

        The Company's racing business is seasonal in nature. The Company's
        racing revenues and operating results for any quarter will not be
        indicative of the racing revenues and operating results for the year.
        The Company's racing operations have historically operated at a loss
        in the second half of the year, with the third quarter generating the
        largest operating loss. This seasonality has resulted in large
        quarterly fluctuations in revenue and operating results.

        Comparative Amounts

        Certain of the comparative amounts have been reclassified to conform
        to the current year's method of presentation and to reflect
        discontinued operations and changes in assets held for sale.

        Impact of Recently Issued Accounting Standards

        Under Staff Accounting Bulletin 74, the Company is required to
        disclose certain information related to new accounting standards,
        which have not yet been adopted due to delayed effective dates.

        In June 2006, the Financial Accounting Standards Board ("FASB")
        issued FASB Interpretation No. 48, "Accounting for Uncertainty in
        Income Taxes" ("FIN 48").  FIN 48 clarifies the accounting for
        uncertainty in income taxes recognized in the Company's consolidated
        financial statements in accordance with FASB Statement No. 109,
        "Accounting for Income Taxes", and prescribes a minimum recognition
        threshold and measurement attribute for the financial statement
        recognition and measurement of a tax provision taken or expected to
        be taken in a tax return. The provisions of FIN 48 are effective for
        fiscal years beginning after December 15, 2006. The Company is
        currently reviewing FIN 48, but has not yet determined the impact on
        the Company's consolidated financial statements.

        In September 2006, the FASB issued Statement of Financial Accounting
        Standard ("SFAS") No. 157, "Fair Value Measurements" ("SFAS 157").
        SFAS 157 defines fair value, establishes a framework for measuring
        fair value in accordance with generally accepted accounting
        principles, and expands disclosures about fair value measurements.
        The provisions of SFAS 157 are effective for the fiscal years
        beginning after November 15, 2007. The Company is currently reviewing
        SFAS 157, but has not yet determined the impact on the Company's
        consolidated financial statements.

    3.  Accounting Changes

        (a) Employee Defined Benefit and Postretirement Plans

            In September 2006, the FASB issued SFAS No. 158, "Employers'
            Accounting for Defined Benefit Pension and Other Postretirement
            Plans" ("SFAS 158"). SFAS 158 requires employers to recognize the
            funded status (the difference between the fair value of plan
            assets and the projected benefit obligations) of a defined
            benefit postretirement plan as an asset or liability on the
            consolidated balance sheet with a corresponding adjustment to
            accumulated comprehensive income (loss), net of tax, measure the
            fair value of plan assets and benefit obligations as of the
            balance sheet date and provide additional disclosures about
            certain effects on net periodic benefit cost for the next fiscal
            year that arise from delayed recognition of the gains or losses,
            prior service costs or credits, and transition assets or
            obligations.

            On December 31, 2006, the Company adopted the recognition and
            disclosure provisions of SFAS 158. The adjustment to accumulated
            comprehensive income (loss) upon adoption represents the net
            unrecognized actuarial gain or loss determined in accordance with
            SFAS No. 87, "Employers' Accounting for Pension" ("SFAS 87"),
            which was previously netted against the plan's funded status
            pursuant to the provisions of SFAS 87. These amounts will be
            subsequently recognized as net periodic pension cost pursuant to
            the Company's historical accounting policy for amortizing such
            amounts. Actuarial gains and losses that arise in subsequent
            periods and are not recognized as net periodic pension cost in
            the same periods will be recognized as a component of other
            comprehensive income (loss). Those amounts will be subsequently
            recognized as a component of net periodic pension cost on the
            same basis as the amounts recognized in accumulated comprehensive
            income (loss) upon adoption of SFAS 158.

            The effect of adopting SFAS 158 on the Company's consolidated
            balance sheets at December 31, 2006 is presented in the following
            table. The adoption of SFAS 158 had no effect on the Company's
            consolidated balance sheet at December 31, 2005 and on the
            consolidated statements of operations for the three months and
            years ended December 31, 2006 and 2005.

                                                 December 31, 2006
                                        -------------------------------------
                                          Prior to    Effect of           As
                                          Adoption     Adoption     Reported
            -----------------------------------------------------------------
            Accrued pension and
             postretirement liability   $    1,827   $    1,347   $    3,174
            Future tax liability
             (asset), net               $   49,257   $     (539)  $   48,718
            Accumulated comprehensive
             income (loss)              $   41,415   $     (808)  $   40,607
            -----------------------------------------------------------------

            Included in accumulated comprehensive income at December 31, 2006
            is an unrecognized actuarial gain of $0.8 million, net of tax,
            that has not yet been recognized in net periodic pension cost.
            The actuarial gain included in accumulated comprehensive income
            and expected to be recognized in net periodic pension cost during
            the year ended December 31, 2007 is $0.1 million, net of tax.

            SFAS 158's provisions regarding the change in the measurement
            date of postretirement benefit plans are not applicable as the
            Company currently uses a measurement date of December 31 for its
            pension and postretirement plans.

        (b) Stock-Based Compensation

            Prior to January 1, 2006, the Company accounted for stock-based
            compensation under the recognition and measurement provisions of
            APB Opinion No. 25, "Accounting for Stock Issued to Employees",
            and related Interpretations, as permitted by SFAS No. 123,
            "Accounting for Stock-Based Compensation" ("SFAS 123"). No stock-
            based compensation expense was recognized in the consolidated
            statements of operations and comprehensive loss related to stock
            options for the three months and year ended December 31, 2005 as
            all options granted had an exercise price no less than the fair
            market value of the Company's Class A Subordinate Voting Stock at
            the date of grant.

            Effective January 1, 2006, the Company adopted the fair value
            recognition provisions of SFAS No. 123(R), "Share-Based Payment"
            ("SFAS 123(R)"), using the modified-prospective method. Under the
            modified-prospective method, compensation expense recognized in
            the three months and year ended December 31, 2006 includes: (a)
            compensation expense for all share-based payments granted prior
            to, but not yet vested as of January 1, 2006, based on the grant-
            date fair value estimated in accordance with the original
            provisions of SFAS 123, and (b) compensation expense for all
            share-based payments granted subsequent to January 1, 2006, based
            on the grant-date fair value estimated in accordance with the
            provisions of SFAS 123(R). Results for the three months and year
            ended December 31, 2005 have not been restated.

            The Company's loss from continuing operations before income
            taxes, net loss from continuing operations and net loss for the
            three months ended December 31, 2006 increased $0.2 million as a
            result of adopting SFAS 123(R) on January 1, 2006 and basic and
            diluted loss per share for the three months ended December 31,
            2006 remained unchanged.

            The Company's loss from continuing operations before income
            taxes, net loss from continuing operations and net loss for the
            year ended December 31, 2006 increased $1.4 million and basic and
            diluted loss per share increased $0.01 per share as a result of
            adopting SFAS 123(R) on January 1, 2006.

            As a result of the adoption of SFAS 123(R), for the three months
            and year ended December 31, 2006, the Company recognized $0.2
            million and $1.4 million, respectively, of stock-based
            compensation expense related to stock options which has been
            recorded on the consolidated balance sheets as other paid-in-
            capital. The adoption of SFAS 123(R) for the three months and
            year ended December 31, 2006 had no impact on cash flows. The
            Company has estimated a nominal annual effective tax rate for the
            year ended December 31, 2006 and accordingly has applied this
            effective tax rate to the stock-based compensation expense
            recognized for the three months and year ended December 31, 2006
            resulting in a nominal income tax impact related to stock-based
            compensation expense.

            The pro-forma impact on net loss and loss per share if the
            Company had applied the fair value recognition provisions of SFAS
            123 to stock-based compensation for the three months and year
            ended December 31, 2005 is as follows:


                                             Three months ended   Year ended
                                                    December 31, December 31,
                                                           2005         2005
            -----------------------------------------------------------------
            Net loss, as reported                    $  (39,733)  $ (105,293)
            Pro-forma stock compensation expense
             determined under the fair value method,
             net of tax                                    (266)        (877)
            -----------------------------------------------------------------
            Pro-forma net loss                       $  (39,999)  $ (106,170)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Loss per share
              Basic - as reported                    $    (0.37)  $    (0.98)
              Basic - pro-forma                      $    (0.37)  $    (0.99)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

              Diluted - as reported                  $    (0.37)  $    (0.98)
              Diluted - pro-forma                    $    (0.37)  $    (0.99)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    4.  Acquisition

        On August 22, 2003, MEC Maryland Investments Inc. ("MEC Maryland"),
        a wholly-owned subsidiary of the Company, acquired a 30% equity
        interest in AmTote International, Inc. ("AmTote") for a total cash
        purchase price, including transaction costs, of $4.3 million. MEC
        Maryland had a purchase option (the "First Option") to acquire an
        additional 30% equity interest in AmTote, exercisable at any time
        during the three-year period commencing after the date of
        acquisition. If MEC Maryland exercised the First Option, it had a
        second purchase option (the "Second Option") to acquire the
        remaining 40% equity interest in AmTote, exercisable at any time
        during the three-year period commencing after the date that the
        First Option was exercised. In addition, if the Company exercised
        the First Option, the holders of the AmTote shares had a put option,
        exercisable within 120 days of the exercise date of the First Option
        whereby MEC Maryland could have been required to purchase the
        remaining 40% equity interest on 60 days notice.

        On July 26, 2006, MEC Maryland acquired the remaining 70% equity
        interest of AmTote for a total cash purchase price of $9.3 million,
        including transaction costs of $0.1 million, net of cash acquired of
        $5.5 million. AmTote is a leading provider of totalisator services to
        the North American pari-mutuel industry with service contracts with
        over 70 North American racetracks and other wagering entities. The
        results of AmTote have been consolidated from July 26, 2006 and are
        included in the racing and gaming - Technology operations segment.
        Prior to July 26, 2006, the results of AmTote were accounted for on
        an equity basis.

        The purchase price has been allocated to the assets and liabilities
        acquired as follows:

        ---------------------------------------------------------------------
        Non-cash working capital                                  $    1,203
        Fixed assets                                                  12,008
        Other assets                                                     127
        Goodwill                                                         683
        Long-term debt                                                (1,470)
        Other long-term liabilities                                     (980)
        Future tax liabilities                                        (2,224)
        ---------------------------------------------------------------------
        Net assets acquired and total purchase price,
         net of cash acquired                                     $    9,347
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The purchase price allocation for this acquisition and the impact of
        any preexisting relationship per EITF 04-1, "Accounting for
        Preexisting Relationships between the Parties to a Business
        Combination", is preliminary and may be adjusted further as a result
        of obtaining additional information regarding preliminary estimates
        of fair values made at the date of purchase.

    5.  Assets Held for Sale

        (a) On November 3, 2005, the Company announced that one of its
            subsidiaries that owns approximately 157 acres of excess real
            estate in Palm Beach County, Florida had entered into an
            agreement to sell the real property to Toll Bros., Inc. (the
            "purchaser"), a Pennsylvania real estate development company for
            $51.0 million in cash. The proposed sale was subject to the
            completion of due diligence by the purchaser by April 3, 2006 and
            a closing by April 28, 2006. Accordingly, the excess real estate
            was classified as "assets held for sale" at December 31, 2005. On
            April 3, 2006, the Company announced the termination of the sale
            agreement and, as such, the purchaser did not proceed with the
            proposed sale as stipulated in the agreement. With the
            termination of the sale agreement, the Company determined that
            the plan of sale criteria under SFAS No. 144, "Accounting for
            Impairment or Disposal of Long-Lived Assets", are no longer met
            and accordingly, the property has been reclassified to reflect
            the carrying amount of the property in "real estate properties,
            net" rather than in "assets held for sale" on the consolidated
            balance sheets.

        (b) On November 9, 2005, the Company announced that it had entered
            into a share purchase agreement (the "Initial SPA") with PA
            Meadows, LLC, a company jointly owned by William Paulos and
            William Wortman, controlling shareholders of Millennium Gaming,
            Inc. and a fund managed by Oaktree Capital Management, LLC
            ("Oaktree" and together, with PA Meadows, LLC, "Millennium-
            Oaktree"), providing for the acquisition by Millennium-Oaktree of
            all of the outstanding shares of Washington Trotting Association,
            Inc., Mountain Laurel Racing, Inc. and MEC Pennsylvania Racing,
            Inc. (collectively "The Meadows"), each wholly-owned subsidiaries
            of the Company, through which the Company owned and operated The
            Meadows, a standardbred racetrack in Pennsylvania. On July 26,
            2006, the Company announced that it had entered into an amended
            share purchase agreement, which modified the Initial SPA with
            respect to the sale of The Meadows. As a result of regulatory
            requirements relating to the approval of the issuance of a gaming
            license by the Pennsylvania Gaming Control Board, as well as
            significant changes in the economic and regulatory environment in
            Pennsylvania since the date of the Initial SPA, including
            regulations adopted by the Pennsylvania Department of Revenue in
            respect of the amount of local share assessment taxes payable to
            North Strabane Township and Washington County, the parties agreed
            to revise the terms of the Initial SPA. The $225.0 million
            purchase price in the Initial SPA, which included a $39.0 million
            holdback note, was reduced to $200.0 million, with a $25.0
            million holdback note, payable to the Company over a five-year
            period, subject to offset for certain indemnification
            obligations. Concurrently with entering into the amended share
            purchase agreement, the parties entered into a racing services
            agreement whereby the Company will pay $50 thousand per annum and
            will continue to operate for its own account, the racing
            operations at The Meadows, for at least five years. On November
            14, 2006, the Company completed The Meadows transaction and
            received cash consideration of $171.8 million, net of transaction
            costs of $3.2 million, and the holdback note in the amount of
            $25.0 million. Also, on November 14, 2006, the holdback
            note agreement was amended such that the Company agreed to
            release the security requirement for the holdback amount, defer
            subordinate payments under the holdback, defer receipt of
            holdback payments until the opening of the permanent casino at
            The Meadows and defer receipt of holdback payments to the extent
            of available cash flows as defined in the holdback agreement, in
            exchange for Millennium-Oaktree providing an additional
            $25.0 million of equity support for PA Meadows, LLC. This
            transaction established fair values of the assets of The Meadows
            and accordingly, the Company performed impairment testing of
            these assets as of the date immediately prior to completion of
            the transaction. Based on this analysis, the Company recognized a
            non-cash impairment loss of $11.2 million related to the
            long-lived assets and a gain of $126.4 million related to the
            disposition of the intangible assets, representing the
            racing/gaming licenses. Based on the terms of the racing services
            agreement and the holdback note agreement, the sale of The
            Meadows' real estate properties and fixed assets were not
            accounted for as a sale and leaseback, but rather using the
            financing method of accounting under U.S. GAAP as the Company was
            deemed to have a continuing interest in the transaction.
            Accordingly, for accounting purposes, $12.8 million of the
            proceeds were deferred and recorded as "other long-term
            liabilities" on the consolidated balance sheet at December 31,
            2006. The deferred proceeds will be recognized in the
            consolidated statements of operations and comprehensive loss over
            the five-year term of the racing services agreement and/or at the
            point when the sale leaseback subsequently qualifies for sales
            recognition. As a result of the real estate properties and fixed
            assets being accounted for using the financing method of
            accounting, $17.7 million of these assets that were previously
            classified as "assets held for sale" (refer to Note 5(c)) have
            been reclassified to "real estate properties, net" and "fixed
            assets, net" at December 31, 2006. Given the indemnification
            obligations and other terms contained in the holdback agreement,
            the $25.0 million holdback note is considered continuing
            involvement and will be recognized in the consolidated financial
            statements upon the settlement of indemnification obligations and
            as payments are received.

            In accordance with the terms of the senior secured revolving
            credit facility and the Company's bridge loan agreement with MID,
            the Company used the net proceeds from The Meadows transaction
            to fully pay down principal amounts outstanding under the bridge
            loan and to permanently pay down $39.0 million of the principal
            amounts outstanding under the senior secured revolving credit
            facility. The Company also repaid $2.0 million of a construction
            loan and placed $15.0 million into escrow with MID.

        (c) The Company's assets held for sale and related liabilities at
            December 31, 2005 are shown below. The Company did not have any
            assets held for sale and related liabilities at December 31,
            2006. All assets held for sale and related liabilities were
            classified as current at December 31, 2005 as the assets and
            related liabilities described in section (b) above were sold
            within one year from the balance sheet date.


                                                                 December 31,
                                                                        2005
            -----------------------------------------------------------------
                                                (restated-notes 5(a) and (b))
                                   ASSETS
            -----------------------------------------------------------------
            Current assets:
            Restricted cash                                       $      443
            Accounts receivable                                          450
            Income taxes receivable                                      857
            Inventories                                                  157
            Prepaid expenses and other                                   812
            Racing license                                            58,266
            Other assets, net                                            200
            -----------------------------------------------------------------
                                                                  $   61,185
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                 LIABILITIES
            -----------------------------------------------------------------
            Current liabilities:
            Accounts payable                                      $    2,012
            Accrued salaries and wages                                    44
            Other accrued liabilities                                    623
            Deferred revenue                                             312
            Future tax liabilities                                    24,445
            -----------------------------------------------------------------
                                                                  $   27,436
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    6.  Discontinued Operations

        (a) On November 1, 2006, a wholly-owned subsidiary of the Company
            completed the sale of the Fontana Golf Club located in
            Oberwaltersdorf, Austria to a subsidiary of Magna International
            Inc. ("Magna"), a related party, for a sale value of Euros 30.0
            million (U.S. $38.3 million), which included cash consideration
            of Euros 13.2 million (U.S. $16.9 million), net of transaction
            costs, and approximately Euros 16.8 million (U.S. $21.4 million)
            of debt assumed by Magna. The Company recognized a gain on
            disposition of approximately $20.9 million, net of tax, which was
            recorded as a contribution of equity on the consolidated balance
            sheets.

        (b) On August 25, 2006, a wholly-owned subsidiary of the Company
            completed the sale of the Magna Golf Club located in Aurora,
            Ontario, Canada to Magna, for cash consideration of Cdn. $51.8
            million (U.S. $46.4 million), net of transaction costs. The
            Company recognized an impairment loss of $1.2 million at the date
            of disposition equal to the excess of the Company's carrying
            value of the assets disposed over their fair values at the date
            of disposition. Of the sale proceeds, Cdn. $32.6 million (U.S.
            $29.3 million) was used to pay all amounts owing under certain
            loan agreements with Bank Austria Creditanstalt AG related to the
            Magna Golf Club.

        (c) On May 26, 2006, the Company completed the sale of a restaurant
            and related real estate in the United States and received cash
            consideration of $2.0 million, net of transaction costs, and
            recognized a gain on disposition of approximately $1.5 million.

        (d) On August 16, 2005, the Company and Great Canadian Gaming
            Corporation ("GCGC") entered into a share purchase agreement
            under which GCGC acquired all of the outstanding shares of
            Ontario Racing, Inc. ("ORI"). Required regulatory approval for
            the sale transaction was obtained on October 17, 2005 and the
            Company completed the transaction on October 19, 2005. On
            closing, GCGC paid Cdn. $50.7 million (U.S. $43.1 million) and
            U.S. $23.6 million, in cash and assumed ORI's existing debt.

            As required under U.S. GAAP, the Company's long-lived assets and
            racing licenses are tested for impairment on an annual basis or
            whenever events or changes in circumstances indicate that the
            carrying value may not be recoverable. The sale transaction
            described above established fair values of certain assets of
            Flamboro Downs and accordingly, the Company performed impairment
            testing of these assets at June 30, 2005. Based on this analysis,
            the Company recognized a non-cash impairment loss of $15.0
            million before income taxes or $12.5 million after income taxes
            of Flamboro Downs' racing license.

        (e) On August 18, 2005, three subsidiaries of the Company entered
            into a share purchase agreement with Colonial Downs, L.P.
            ("Colonial LP") pursuant to which Colonial LP purchased all of
            the outstanding shares of Maryland-Virginia Racing Circuit, Inc.
            ("MVRC"). MVRC was an indirect subsidiary of the Company that
            managed the operations of Colonial Downs, a thoroughbred and
            standardbred horse racetrack located in New Kent, Virginia,
            pursuant to a management agreement with Colonial LP, the owner of
            Colonial Downs. Required regulatory approval for the sale
            transaction was obtained on September 28, 2005 and the Company
            completed the transaction on September 30, 2005. On closing, the
            Company received cash consideration of $6.8 million, net of
            transaction costs, and a one-year interest-bearing note in the
            principal amount of $3.0 million, which was repaid during the
            year ended December 31, 2006. The Company recognized a gain on
            disposition of approximately $9.8 million.

        (f) The Company's results of operations related to discontinued
            operations for the three months and years ended December 31, 2006
            and 2005 are as follows:

                                Three months ended             Years ended
                                   December 31,                December 31,
                           --------------------------------------------------
                                 2006         2005         2006         2005
            -----------------------------------------------------------------
            Results of
             Operations
            Revenues       $      684   $    5,388   $   14,593   $   42,710
            Costs and
             expenses             621        5,708       11,205       32,786
            -----------------------------------------------------------------
                                   63         (320)       3,388        9,924
            Depreciation
             and
             amortization         109          770        2,156        3,765
            Interest
             expense, net         106          394        2,040        3,872
            Impairment
             loss recorded
             on disposition         -        2,671        1,202       14,961
            -----------------------------------------------------------------
            Loss before
             gain on
             disposition         (152)      (4,155)      (2,010)     (12,674)
            Gain on
             disposition            -            -        1,495        9,837
            -----------------------------------------------------------------
            Loss before
             income taxes        (152)      (4,155)        (515)      (2,837)
            Income tax
             expense
            (benefit)            (160)        (894)       1,653          492
            -----------------------------------------------------------------
            Net income
             (loss)        $        8   $   (3,261)  $   (2,168)  $   (3,329)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            The Company's assets and liabilities related to discontinued
            operations as at December 31, 2005 are shown below. The Company
            did not have any assets or liabilities related to discontinued
            operations at December 31, 2006.

                                                                December 31,
                                                                        2005
            -----------------------------------------------------------------
                                   ASSETS
            -----------------------------------------------------------------
            Current assets:
            Accounts receivable                                   $    1,777
            Income taxes receivable                                        3
            Inventories                                                  919
            Prepaid expenses and other                                    24
            -----------------------------------------------------------------
                                                                       2,723
            -----------------------------------------------------------------
            Real estate properties, net                               73,106
            Fixed assets, net                                          4,437
            Other assets, net                                            974
            Future tax assets                                          7,842
            -----------------------------------------------------------------
                                                                      86,359
            -----------------------------------------------------------------
                                                                  $   89,082
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                 LIABILITIES
            -----------------------------------------------------------------
            Current liabilities:
            Accounts payable                                      $      447
            Accrued salaries and wages                                   456
            Other accrued liabilities                                  2,806
            Income taxes payable                                       4,192
            Long-term debt due within one year                         5,651
            Deferred revenue                                           2,057
            -----------------------------------------------------------------
                                                                      15,609
            -----------------------------------------------------------------
            Long-term debt                                            44,559
            Other long-term liabilities                               11,170
            -----------------------------------------------------------------
                                                                      55,729
            -----------------------------------------------------------------
                                                                  $   71,338
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    7.  Write-down of Long-lived Assets

        The Company's long-lived assets are tested for recoverability
        whenever events or changes in circumstances indicate that the
        carrying value may not be recoverable. If such events or changes in
        circumstances are present, the Company assesses the recoverability of
        the long-lived assets by determining whether the carrying value of
        such assets can be recovered through projected undiscounted cash
        flows. If the sum of expected future cash flows, undiscounted and
        without interest charges, is less than net book value, the excess of
        the net book value over the estimated fair value, based on discounted
        future cash flows and appraisals, is charged to operations in the
        period in which such impairment is determined by management. The
        long-lived assets consist of fixed assets and real estate properties.

        Write-downs and impairment losses relating to long-lived assets
        recognized are as follows:

                                Three months ended            Years ended
                                    December 31,              December 31,
                           --------------------------------------------------
                                 2006         2005         2006         2005
        ---------------------------------------------------------------------
        Magna
         Racino(TM)(i)     $   76,166   $        -   $   76,166   $        -
        Residential
         development real
         estate(ii)             1,279            -        1,279            -
        The Meadows(iii)       11,182            -       11,182            -
        ---------------------------------------------------------------------
                           $   88,627   $        -   $   88,627   $        -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   The Company tested Magna Racino(TM)'s long-lived assets for
              impairment upon completion of its 2007 business plan. The
              Company used an expected present value approach of estimated
              future cash flows, including a probability-weighted approach in
              considering the likelihood of possible outcomes, and external
              valuation reports to determine the fair value of the long-lived
              assets. Based on this analysis, a non-cash impairment charge of
              $76.2 million was required of the long-lived assets for the
              three months and year ended December 31, 2006, which is
              included in the racing and gaming - European operations
              segment.

        (ii)  On February 7, 2007 (refer to Note 15(c)), MID acquired all of
              the Company's interests and rights in a 34 acre parcel of
              residential development land in Aurora, Ontario, Canada for
              cash consideration of Cdn. $12.0 million (U.S. $10.1 million).
              Based on this transaction, which established a fair value for
              the land, the Company recognized a non-cash impairment loss of
              $1.3 million related to this parcel of residential development
              land for the three months and year ended December 31, 2006,
              which is included in the real estate and other operations
              segment.

        (iii) On November 14, 2006, the Company completed The Meadows
              transaction, which established fair values of certain assets of
              The Meadows. Accordingly, the Company performed impairment
              testing of these assets as of the date immediately prior to
              completion of the transaction. Based on this analysis, the
              Company recognized a non-cash impairment loss of $11.2 million
              of The Meadows' long-lived assets for the three months and year
              ended December 31, 2006, which is included in the racing and
              gaming - Northern U.S. operations segment (refer to Note 5(b)).

    8.  Bank Indebtedness

        (a) On July 26, 2006, the Company amended its senior secured
            revolving credit facility by increasing the maximum permitted
            borrowings for general corporate purposes to $50.0 million and
            providing for an additional $14.0 million to finance the
            Company's purchase of the remaining 70% equity interest of AmTote
            (refer to Note 4). On November 14, 2006, as required under this
            amended credit facility, the Company permanently reduced the
            outstanding borrowings by repaying $39.0 million from proceeds on
            The Meadows transaction, such that the remaining maximum
            permitted borrowings were $25.0 million. On December 22, 2006,
            the Company further amended the credit facility to extend the
            maturity date to March 30, 2007, to make an additional $15.0
            million available, to revise certain financial performance
            covenants and to increase the applicable interest rate. With the
            additional amount available, the maximum permitted borrowings
            under the credit facility is $40.0 million.

            The credit facility is available by way of U.S. dollar loans and
            letters of credit. Loans under the facility are secured by a
            first charge on the assets of Golden Gate Fields and a second
            charge on the assets of Santa Anita Park, and are guaranteed by
            certain subsidiaries of the Company. In addition, the Company has
            pledged the shares of its wholly-owned subsidiary that owns
            AmTote. At December 31, 2006, the Company had no borrowings under
            the credit facility (December 31, 2005 - $27.3 million) but had
            issued letters of credit totaling $24.7 million (December 31,
            2005 - $21.7 million), such that $15.3 million was unused and
            available.

            The loans under the facility bear interest at the U.S. Base rate
            plus 5% or the London Interbank Offered Rate ("LIBOR") plus 6%.
            The weighted average interest rate on the loans outstanding under
            the credit facility at December 31, 2006 was nil given no
            outstanding borrowings (December 31, 2005 - 9.3%).

        (b) On December 4, 2006, a wholly-owned subsidiary of the Company
            that owns and operates Santa Anita Park entered into a $10.0
            million revolving loan arrangement under its existing credit
            facility. The revolving loan agreement matures on October 8,
            2007. The revolving loan agreement is guaranteed by the Company's
            wholly-owned subsidiary, the Los Angeles Turf Club, Incorporated
            ("LATC") and is secured by a first deed of trust on Santa Anita
            Park and the surrounding real property, an assignment of the
            lease between LATC, the racetrack operator, and The Santa Anita
            Companies, Inc. ("SAC") and a pledge of all of the outstanding
            capital stock of LATC and SAC. At December 31, 2006, the Company
            had borrowings under the revolving loan agreement of $6.5 million
            (December 31, 2005 - nil) such that $3.5 million was unused and
            available. Borrowings under the revolving loan agreement bear
            interest at the U.S. Prime rate. The weighted average interest
            rate on the borrowings outstanding under the revolving loan
            agreement at December 31, 2006 was 8.25% (December 31, 2005 -
            nil).

        (c) On July 31, 2006, one of the Company's European subsidiaries
            amended and extended its bank term line of credit of Euros 2.5
            million and its bank term loan of Euros 2.9 million. The
            amendments to the agreement included converting the two
            facilities into one bank term loan, requiring the repayment of
            Euros 0.9 million on July 31, 2006, extending the term to July
            31, 2007 and requiring a further repayment of Euros 0.7 million
            on January 31, 2007. The bank term loan bears interest at the
            Euro Overnight Index Average ("EONIA") rate plus 1.1% per annum,
            which was 4.8% at December 31, 2006. A European subsidiary has
            provided two first mortgages on real estate as security for this
            bank term loan. At December 31, 2006, the amount outstanding
            under the fully drawn bank term loan is Euros 4.5 million (U.S.
            $5.9 million) and is included in "long-term debt due within one
            year" on the consolidated balance sheets. At December 31, 2005,
            the amount outstanding under the bank term line of credit of
            Euros 2.5 million (U.S. $3.0 million) is included in "bank
            indebtedness" on the consolidated balance sheets.

    9.  Long-term Debt

        (a) The Company's long-term debt consists of the following:

                                                               December 31,
                                                         --------------------
                                                              2006       2005
            -----------------------------------------------------------------
            Term loan facility, bearing interest at
             LIBOR plus 2.0% per annum (6.7% at
             December 31, 2006; 6.3% at December 31,
             2005) with a maturity date of October 7,
             2007, subject to a further extension at
             the Company's option to October 7,2009.
             The facility is guaranteed by LATC and is
             secured by a first deed of trust on Santa
             Anita Park and the surrounding real
             property, an assignment of the lease
             between LATC, the racetrack operator, and
             SAC and a pledge of all of the outstanding
             capital stock of LATC and SAC. At
             December 31, 2006, the term loan is fully
             drawn and is repayable in monthly
             principal amounts of $417 thousand until
             maturity.                                   $  64,167  $ 69,167

            Term loan facility of Euros 15.0 million,
             bearing interest at 4.0% per annum with a
             maturity date of February 9, 2007, secured
             by a pledge of land and a guarantee by
             the Company (Refer to Note 15(b)).             19,794    17,761

            Term loan facility of Euros 15.0 million,
             bearing interest at the three-month Euro
             Interbank Offered Rate ("EURIBOR") plus
             2.0% per annum (5.5% at December 31, 2006;
             4.3% at December 31, 2005) with a maturity
             date of December 31, 2007, secured by a
             first and second mortgage on land in
             Austria owned by the European subsidiary.      19,794    17,761

            Obligation to pay $18.3 million on exercise
             of either the put or call option to
             acquire the remaining voting and equity
             interests in The Maryland Jockey Club
             ("MJC"), bearing interest at the six-month
             LIBOR (5.4% at December 31, 2006; 4.6% at
             December 31, 2005). The Company can
             exercise the call option at any time during
             the period starting 48 months and ending
             60 months after November 27, 2002 (the date
             on which MJC was acquired), and the put
             option can be exercised by the other party
             at any time during the first five years
             after November 27, 2002.                       18,312    18,312

            Capital leases (imputed interest rate of
             8.5%) maturing April 1, 2027, secured by
             buildings and improvements at Lone Star
             Park at Grand Prairie.                         15,519    15,520

            Construction loan facility of up to
             $16.6 million with the general contractor
             for the reconstruction of the racetrack
             facilities at Gulfstream Park. The loan
             matures on April 14, 2007 and may be
             extended at the lender's option to
             July 31, 2008. The loan bears interest at
             the U.S. Prime rate plus 0.40% per annum
             (8.65% at December 31, 2006) and may be
             repaid at any time, in whole or in part
             without penalty. Loans under the facility
             are secured by a mortgage over land in
             Ocala, Florida and a guarantee of
             $5.0 million by the Company. The Company
             repaid $2.0 million using proceeds from The
             Meadows transaction on November 14, 2006.      10,617         -

            Term loan facility, bearing interest at
             either the U.S. Prime rate or LIBOR plus
             2.6% per annum (8.0% at December 31,
             2006; 7.0% at December 31, 2005), with a
             maturity date of December 15, 2019. The
             term loan is repayable in quarterly
             principal and interest payments. The loan
             is secured by deeds of trust on land,
             buildings and improvements and security
             interests in all other assets of certain
             affiliates of MJC.                              9,187     9,608

            Term loan facilities, bearing interest at
             either the U.S. Prime rate or LIBOR plus
             2.6% per annum (8.0% at December 31, 2006;
             7.0% at December 31, 2005) until
             December 1, 2008, with a maturity date of
             December 1, 2013. On December 1, 2008, the
             interest rate is reset to the market rate
             for a United States Treasury security of
             an equivalent term plus 2.6%. The term
             loans are repayable in quarterly principal
             and interest payments. The loans are
             secured by deeds of trust on land,
             buildings and improvements and security
             interests in all other assets of certain
             affiliates of MJC.                              6,874    13,698

            Bank term loan of Euros 2.9 million at
             December 31, 2005, bearing interest at
             EURIBOR plus 0.625% per annum (3.1% at
             December 31, 2005). The term loan was due
             July 2006, but was amended and extended in
             conjunction with the bank term line of
             credit of Euros 2.5 million (refer to
             Note 8(c)). The amendments included
             converting the two facilities into one
             bank term loan, requiring the repayment of
             Euros 0.9 million on July 31, 2006,
             extending the term to July 31, 2007 and
             requiring a further repayment of Euros
             0.7 million on January 31, 2007. Bank term
             loan at December 31, 2006 bears interest
             at EONIA rate plus 1.1% per annum (4.8% at
             December 31, 2006). A European subsidiary
             has provided two first mortgages on real
             estate properties as security for this
             facility.                                       5,938     3,442

            Term loan facility, bearing interest at
             7.0% per annum until June 7, 2007, with a
             maturity date of June 7, 2017. On June 7,
             2007 and June 7, 2012, the interest rate
             is reset to the market rate for a United
             States Treasury security of an equivalent
             term plus 2.6%. The term loan is repayable
             in quarterly principal and interest
             payments. The term loan is callable on
             December 31, 2011. The loan is secured by
             a deed of trust on land, buildings
             and improvements and security interests
             in all other assets of certain affiliates
             of MJC.                                         4,030     4,274

            Term loan facilities of $1.75 million and
             $1.25 million bearing interest at the U.S.
             Prime rate plus 1.25% per annum (9.5% at
             December 31, 2006) with monthly principal
             repayments of $29 thousand and
             $21 thousand, respectively. The term loan
             facilities are due April 30, 2007. The
             loans are secured by all of AmTote's
             assets up to $1.75 million and
             $1.25 million, respectively.                    2,448         -

            Revolving term loan facility of
             $3.0 million, bearing interest at the U.S.
             Prime rate plus 1.0% per annum (9.25% at
             December 31, 2006) with interest payable
             monthly. The revolving term loan facility
             is due April 30, 2007. The loan is secured
             by all of AmTote's assets up to
             $3.0 million.                                   1,957         -

            Other loans to various subsidiaries from
             various banks and city governments,
             including equipment loans and a term loan,
             with interest rates ranging from 4.0%
             to 8.1%.                                          976     1,110
            -----------------------------------------------------------------
                                                          $179,613  $170,653
            Less: due within one year                      (85,754)  (32,382)
            -----------------------------------------------------------------
                                                          $ 93,859  $138,271
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            At December 31, 2006, the Company is in compliance with all of
            these long-term debt agreements and related financial covenants.

            The overall weighted average interest rate on long-term debt,
            long-term debt due to parent and convertible subordinated notes
            at December 31, 2006 was 8.3% (December 31, 2005 - 7.4%).

        (b) Future principal repayments on long-term debt at December 31,
            2006 are as follows:

            2007                                                  $   85,754
            2008                                                       6,720
            2009                                                      55,873
            2010                                                       1,786
            2011                                                       4,366
            Thereafter                                                25,114
            -----------------------------------------------------------------
                                                                  $  179,613
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    10. Capital Stock and Long-Term Incentive Plan

        (a) Capital Stock

            Changes in the Class A Subordinate Voting Stock and Class B Stock
            for the three months and year ended December 31, 2006 are shown
            in the following table (number of shares and stated value have
            been rounded to the nearest thousand):

                        Class A
                      Subordinate
                      Voting Stock         Class B Stock          Total
                   ------------------- ------------------- ------------------
                   Number of   Stated  Number of   Stated  Number of   Stated
                      Shares    Value     Shares    Value     Shares    Value
    -------------------------------------------------------------------------
    Issued and
     outstanding
     at December
     31, 2005         48,895 $318,105     58,466 $394,094    107,361 $712,199
    Issued under
     the Long-term
     Incentive Plan      100      680          -        -        100      680
    -------------------------------------------------------------------------
    Issued and
     outstanding at
     March 31, 2006   48,995  318,785     58,466  394,094    107,461  712,879
    Issued under
     the Long-term
     Incentive Plan        4       24          -        -          4       24
    -------------------------------------------------------------------------
    Issued and
     outstanding at
     June 30, 2006    48,999  318,809     58,466  394,094    107,465  712,903
    Issued under
     the Long-term
     Incentive Plan       39      206          -        -         39      206
    -------------------------------------------------------------------------
    Issued and
     outstanding at
     September 30,
     2006             49,038  319,015     58,466  394,094    107,504  713,109
    Issued under
     the Long-term
     Incentive Plan       17       72          -        -         17       72
    -------------------------------------------------------------------------
    Issued and
     outstanding at
     December 31,
     2006             49,055 $319,087     58,466 $394,094    107,521 $713,181
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        (b) Long-Term Incentive Plan

            The Company's Long-term Incentive Plan (the "Plan") adopted in
            2000 allows for the grant of non-qualified stock options,
            incentive stock options, stock appreciation rights, restricted
            stock, bonus stock and performance shares to directors, officers,
            employees, consultants, independent contractors and agents. A
            maximum of 7.6 million shares of Class A Subordinate Voting Stock
            remain available to be issued under the Plan, of which
            6.3 million are available for issuance pursuant to stock options
            and tandem stock appreciation rights and 1.3 million are
            available for issuance pursuant to any other type of award under
            the Plan.

            During 2005, the Company introduced an incentive compensation
            program for certain officers and key employees, which awards
            performance shares of Class A Subordinate Voting Stock under the
            Plan. The number of shares of Class A Subordinate Voting Stock
            underlying the performance share awards is based either on a
            percentage of a guaranteed bonus or a percentage of total 2005
            compensation divided by the market value of the Class A
            Subordinate Voting Stock on the date the program was approved by
            the Compensation Committee of the Board of Directors. These
            performance shares vested over a six or eight month period to
            December 31, 2005 and are distributable, subject to certain
            conditions, in two equal installments. The first distribution
            occurred prior to March 31, 2006 and the second distribution is
            to occur on or about March 31, 2007. During the year ended
            December 31, 2005, 201,863 performance share awards were granted
            under the Plan with a weighted average grant-date market value of
            either U.S. $6.26 or Cdn. $7.61 per share and 2,392 performance
            share awards were issued with a nominal stated value. At
            December 31, 2005, there were 199,471 performance share awards
            vested with a weighted average grant-date market value of either
            U.S. $6.26 or Cdn. $7.61 per share and no non-vested performance
            share awards. For the year ended December 31, 2006, 131,751 of
            these vested performance awards were issued with a stated value
            of $0.8 million and 4,812 were forfeited. Accordingly, there are
            62,908 vested performance shares remaining to be issued under
            this 2005 incentive compensation arrangement. The compensation
            expense related to these performance shares for the three months
            and year ended December 31, 2005 was approximately $0.5 million
            and $1.3 million, respectively.

            For 2006, the Company continued the incentive compensation
            program as described in the immediately preceding paragraph. The
            program is similar in all respects except that the 2006
            performance shares vest over a 12 month period to December 31,
            2006 and will be distributed, subject to certain conditions, on
            or about March 31, 2007. For the year ended December 31, 2006,
            161,099 performance share awards were granted under the Plan with
            a weighted average grant-date market value of either U.S. $6.80
            or Cdn. $7.63 per share, 1,616 performance share awards were
            issued with a nominal stated value and 42,622 performance share
            awards were forfeited. At December 31, 2006, there were 116,861
            performance share awards vested with an average grant-date market
            value of either U.S. $6.80 or Cdn. $7.63 per share and no
            non-vested performance share awards. The compensation expense
            related to these performance shares for the three months ended
            December 31, 2006 was nominal and for the year ended December 31,
            2006 was approximately $0.8 million. At December 31, 2006, there
            is no unrecognized compensation expense related to these
            performance shares as all the performance share awards were
            vested.

            For the year ended December 31, 2006, 25,896 shares (for the year
            ended December 31, 2005 - 14,175) shares with a stated value of
            $0.2 million (for the year ended December 31, 2005 -
            $0.1 million) were issued to Company directors in payment of
            services rendered.

            The Company grants stock options to certain directors, officers,
            key employees and consultants to purchase shares of the Company's
            Class A Subordinate Voting Stock. All of such stock options give
            the grantee the right to purchase Class A Subordinate Voting
            Stock of the Company at a price no less than the fair market
            value of such stock at the date of grant. Generally, stock
            options under the Plan vest over a period of two to six years
            from the date of grant at rates of 1/7th to 1/3rd per year and
            expire on or before the tenth anniversary of the date of grant,
            subject to earlier cancellation upon the occurrence of certain
            events specified in the stock option agreements entered into by
            the Company with each recipient of options.

            Information with respect to shares under option at December 31,
            2006 and 2005 is as follows (number of shares subject to option
            in the following tables are expressed in whole numbers and have
            not been rounded to the nearest thousand):

                                                            Weighted Average
                                 Shares Subject to Option     Exercise Price
                                 -------------------------  -----------------
                                         2006        2005        2006   2005
            -----------------------------------------------------------------
            Balance at January 1    4,827,500   4,500,500       $6.14  $6.18
            Granted                         -     490,000           -   6.40
            Exercised                       -           -           -      -
            Forfeited and
             expired(i)                     -    (145,000)          -   6.76
            -----------------------------------------------------------------
            Balance at March 31     4,827,500   4,845,500       $6.14  $6.19
            Granted                         -     155,000           -   6.70
            Exercised                       -           -           -      -
            Forfeited and
             expired(i)               (64,000)    (88,000)       6.80   7.32
            -----------------------------------------------------------------
            Balance at June 30      4,763,500   4,912,500       $6.13  $6.18
            Granted                         -           -           -      -
            Exercised                       -           -           -      -
            Forfeited and
             expired(i)                     -    (150,000)          -   8.08
            -----------------------------------------------------------------
            Balance at
             September 30           4,763,500   4,762,500       $6.13  $6.12
            Granted                   200,000      75,000        5.25   7.24
            Exercised                       -           -           -      -
            Forfeited and
             expired(i)               (58,500)    (10,000)       7.13   6.70
            -----------------------------------------------------------------
            Balance at
             December 31            4,905,000   4,827,500       $6.08  $6.14
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i) For the three months and years ended December 31, 2006 and
                2005, options forfeited were primarily as a result of
                employment contracts being terminated and voluntary employee
                resignations. No options that were forfeited for the three
                months and years ended December 31, 2006 and 2005 were
                subsequently reissued.

                                   Options Outstanding   Options Exercisable
                                  ---------------------  --------------------
                                       2006       2005       2006       2005
            -----------------------------------------------------------------
            Number                4,905,000  4,827,500  4,412,968  4,127,715
            Weighted average
             exercise price           $6.08      $6.14      $6.08      $6.07
            Weighted average
             remaining contractual
             life (years)               4.2        5.1        3.8        4.5
            -----------------------------------------------------------------

            At December 31, 2006, the 4,905,000 stock options outstanding had
            exercise prices ranging from $3.91 to $7.24 per share. The
            average fair value of the stock option grants for the year ended
            December 31, 2006 was $2.26 (for the year ended December 31, 2005
            - $2.94) using the Black-Scholes option valuation model. The fair
            value of stock option grants was estimated at the date of grant
            using the following assumptions:

                                           Three months ended    Years ended
                                                  December 31,   December 31,
                                           ----------------------------------
                                                  2006   2005    2006   2005
            -----------------------------------------------------------------
            Risk free interest rates              4.4%   4.3%    4.4%   4.0%
            Dividend yields                          -      -       -      -
            Volatility factor of expected
             market price of Class A
             Subordinate Voting Stock            0.510  0.527   0.510  0.547
            Weighted average expected life
             (years)                              4.00   4.00    4.00   4.00
            -----------------------------------------------------------------

            The Black-Scholes option valuation model was developed for use in
            estimating the fair value of traded options that require the
            input of highly subjective assumptions including the expected
            stock price volatility. Because the Company's stock options have
            characteristics significantly different from those of traded
            options and because changes in the subjective input assumptions
            can materially affect the fair value estimate, in management's
            opinion, the existing models do not necessarily provide a
            reliable single measure of the fair value of the Company's stock
            options.

            The compensation expense recognized for the three months and year
            ended December 31, 2006 related to stock options was
            approximately $0.2 million and $1.4 million, respectively (for
            the three months and year ended December 31, 2005 - nil). At
            December 31, 2006, the total unrecognized compensation expense
            related to stock options is $0.7 million, which is expected to be
            recognized into expense over a period of 3.8 years.

            Prior to implementation of SFAS 123(R) on January 1, 2006,
            pro-forma information regarding net loss and loss per share was
            required under SFAS 123 and was determined as if the Company had
            accounted for its stock options under the fair value method under
            SFAS 123. The Company's SFAS 123 pro-forma net loss and the
            related per share amounts for the three months and year ended
            December 31, 2005 is as follows:

                                            Three months ended    Year ended
                                                   December 31,  December 31,
                                                          2005          2005
            -----------------------------------------------------------------

            Net loss, as reported                   $  (39,733)   $ (105,293)
            Pro-forma stock compensation
             expense determined under the
             fair value method, net of tax                (266)         (877)
            -----------------------------------------------------------------
            Pro-forma net loss                      $  (39,999)   $ (106,170)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Loss per share
              Basic - as reported                   $    (0.37)   $    (0.98)
              Basic - pro-forma                     $    (0.37)   $    (0.99)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

              Diluted - as reported                 $    (0.37)   $    (0.98)
              Diluted - pro-forma                   $    (0.37)   $    (0.99)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            For purposes of pro-forma disclosures, the estimated fair value
            of the options is amortized to expense over the option's vesting
            period.

            For the three months and year ended December 31, 2006, the
            Company recognized total compensation expense of $0.3 million and
            $2.3 million, respectively (for the three months and year ended
            December 31, 2005 - $0.5 million and $1.4 million, respectively),
            relating to performance share awards, director compensation and
            stock options under the Plan.

        (c) Maximum Shares

            The following table (number of shares have been rounded to the
            nearest thousand) presents the maximum number of shares of
            Class A Subordinate Voting Stock and Class B Stock that would be
            outstanding if all of the outstanding options, convertible
            subordinated notes and performance shares issued and outstanding
            as at December 31, 2006 were exercised or converted:

                                                            Number of Shares
            -----------------------------------------------------------------
            Class A Subordinate Voting Stock outstanding              49,055
            Class B Stock outstanding                                 58,466
            Options to purchase Class A Subordinate
             Voting Stock                                              4,905
            8.55% Convertible Subordinated Notes,
             convertible at $7.05 per share                           21,276
            7.25% Convertible Subordinated Notes,
             convertible at $8.50 per share                            8,824
            Performance share awards of Class A Subordinate
             Voting Stock                                                180
            -----------------------------------------------------------------
                                                                     142,706
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    11. Loss Per Share

        The following is a reconciliation of the numerator and denominator of
        the basic and diluted loss per share computations (in thousands,
        except per share amounts):

                                  Three months ended          Years ended
                                      December 31,            December 31,
                               ----------------------------------------------
                                    2006        2005        2006        2005
        ---------------------------------------------------------------------
                               Basic and   Basic and   Basic and   Basic and
                                 Diluted     Diluted     Diluted     Diluted
        ---------------------------------------------------------------------

        Net loss from
         continuing operations $ (12,491)  $ (36,472)  $ (85,183)  $(101,964)
        Net income (loss)
         from discontinued
         operations                    8      (3,261)     (2,168)     (3,329)
        ---------------------------------------------------------------------
        Net loss                 (12,483)    (39,733)    (87,351)   (105,293)
        Interest, net of
         related tax on
         convertible
         subordinated notes            -           -           -           -
        ---------------------------------------------------------------------
                               $ (12,483)  $ (39,733)  $ (87,351)  $(105,293)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Weighted average
         shares outstanding:
          Class A Subordinate
           Voting Stock           49,044      48,894      48,995      48,890
          Class B Stock           58,466      58,466      58,466      58,466
        ---------------------------------------------------------------------
                                 107,510     107,360     107,461     107,356
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Loss per share:
          Continuing
           operations          $   (0.12)  $   (0.34)  $   (0.79)  $   (0.95)
          Discontinued
           operations                  -       (0.03)      (0.02)      (0.03)
        ---------------------------------------------------------------------
        Loss per share         $   (0.12)  $   (0.37)  $   (0.81)  $   (0.98)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As a result of the net loss for the three months and year ended
        December 31, 2006, options to purchase 4,905,000 shares, notes
        convertible into 30,100,124 shares and 179,769 performance share
        awards have been excluded from the computation of diluted loss per
        share since the effect is anti-dilutive.

        As a result of the net loss for the three months and year ended
        December 31, 2005, options to purchase 4,827,500 shares, notes
        convertible into 30,100,124 shares and 199,471 performance share
        awards have been excluded from the computation of diluted loss per
        share since the effect is anti-dilutive.

    12. Transactions With Related Parties

        (a) The Company's indebtedness and long-term debt due to parent
            consists of the following:

                                                              December 31,
                                                      -----------------------
                                                            2006        2005
            -----------------------------------------------------------------
            Bridge loan facility, including accrued
             interest and commitment fees payable of
             nil (December 31, 2005 -
             $0.6 million)(i)                        $        -   $   72,060
            Gulfstream Park project financing-
             Tranche 1, including long-term accrued
             interest payable of $16.5 million
             (December 31, 2005 - $3.7 million)(ii)     131,350       93,646
            Gulfstream Park project financing-
             Tranche 2, including long-term accrued
             interest payable of $0.4 million
             (December 31, 2005 - nil)(iii)              18,617            -
            Remington Park project financing,
             including long-term accrued interest
             payable of $0.4 million
             (December 31, 2005 - $0.3 million)(iv)      30,391       19,854
            -----------------------------------------------------------------
                                                     $  180,358   $  185,560
            Less: due within one year                    (3,108)     (72,060)
            -----------------------------------------------------------------
                                                     $  177,250   $  113,500
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i)   Bridge Loan Facility

                  In July 2005, a subsidiary of MID provided to the Company a
                  non-revolving bridge loan facility of up to $100.0 million
                  available in three tranches. An arrangement fee of
                  $1.0 million was paid on closing, a second arrangement fee
                  of $0.5 million was paid when the second tranche was made
                  available to the Company and a third arrangement fee of
                  $0.5 million was paid when the third tranche was made
                  available to the Company. On July 26, 2006, the Company
                  amended and extended the facility and the bridge loan
                  maturity date was extended from August 31, 2006 to
                  December 5, 2006. In connection with the amendments on
                  July 26, 2006, there was an extension fee of $0.5 million
                  (0.5% of the amount of the bridge loan). There was a
                  commitment fee of 1.0% per year on the undrawn portion of
                  the maximum amount of the loan commitment, payable
                  quarterly in arrears. At the Company's option, the loan
                  bore interest either at: (1) floating rate, with annual
                  interest equal to the greater of (a) U.S. Base rate, as
                  announced from time to time, plus 5.5% and (b) 9.0% (with
                  interest in each case payable monthly in arrears); or (2)
                  fixed rate, with annual interest equal to the greater of:
                  (a) LIBOR plus 6.5% and (b) 9.0%, subject to certain
                  conditions. The overall weighted average interest rate on
                  the advances under the bridge loan at December 31, 2006 was
                  nil as no amounts remained outstanding under the bridge
                  loan facility (December 31, 2005 - 10.9%). The bridge loan
                  was secured by substantially all of the assets of the
                  Company and guaranteed by certain subsidiaries of the
                  Company. The guarantees were secured by first ranking
                  security over the lands owned by The Meadows (ahead of the
                  Gulfstream Park project financing as described in Note 12
                  (a)(ii) and (iii) below), second ranking security over the
                  lands owned by Golden Gate Fields (behind an existing third
                  party lender) and third ranking security over the lands
                  owned by Santa Anita Park (behind existing third party
                  lenders). In addition, the Company had pledged the shares
                  and licenses of certain subsidiaries (or provided negative
                  pledges where a pledge was not available due to regulatory
                  constraints or due to a prior pledge to an existing third
                  party lender). As security for the loan, the Company had
                  also assigned all inter-company loans made between the
                  Company and its subsidiaries and all insurance proceeds to
                  the lender, and taken out title insurance for all real
                  property subject to registered security. The bridge loan
                  was cross-defaulted to all other obligations of the Company
                  and its subsidiaries to the lender and to the Company's
                  other principal indebtedness. The security over the lands
                  owned by The Meadows had the same rank in priority as to
                  the same types of security provided for in the loan related
                  to the reconstruction of facilities at Gulfstream Park.

                  On September 29, 2006, the Company further amended the
                  bridge loan. The maximum permitted borrowings under the
                  bridge loan were increased by $19.0 million to a total of
                  $119.0 million. An arrangement fee of $0.2 million was paid
                  in connection with these amendments to the bridge loan.

                  For the year ended December 31, 2006, $37.7 million was
                  advanced under the bridge loan, $111.8 million was repaid
                  and $5.7 million of net loan origination costs were
                  amortized, such that at December 31, 2006 no amounts
                  remained outstanding under the bridge loan. In addition,
                  for the year ended December 31, 2006, $9.7 million (for the
                  year ended December 31, 2005 - $2.5 million) of commitment
                  fees and interest expense were incurred related to the
                  bridge loan, of which no amounts (December 31, 2005 -
                  $0.6 million) remained outstanding at December 31, 2006.

                  Under an amendment to the bridge loan, the Company was
                  required to place $13.0 million from the Flamboro Downs
                  sale proceeds, and such additional amounts as necessary to
                  ensure that future Gulfstream Park construction costs can
                  be funded, into escrow with MID.

                  In accordance with the terms of the senior secured
                  revolving credit facility and the bridge loan agreement,
                  the Company was required to use the net proceeds from the
                  sale of Flamboro Downs to pay down the principal amount
                  owing under the two loans in equal portions. However, both
                  MID and the lender under the senior secured revolving
                  credit facility agreed to mutually waive this repayment
                  requirement, subject to certain other amendments, including
                  provisions for repayment upon closing of certain future
                  asset sales.

            (ii)  Gulfstream Park Project Financing - Tranche 1

                  In December 2004, certain of the Company's subsidiaries
                  entered into a $115.0 million project financing arrangement
                  with a subsidiary of MID for the reconstruction of
                  facilities at Gulfstream Park. This project financing
                  arrangement was amended on July 22, 2005 in connection with
                  the Remington Park loan as described in note 12(a)(iv)
                  below. The project financing was made by way of progress
                  draw advances to fund reconstruction. The loan has a ten-
                  year term from the completion date of the reconstruction
                  project, which was February 1, 2006. Prior to the
                  completion date, amounts outstanding under the loan bore
                  interest at a floating rate equal to 2.55% per annum above
                  MID's notional cost of borrowing under its floating rate
                  credit facility, compounded monthly. After the completion
                  date, amounts outstanding under the loan bear interest at a
                  fixed rate of 10.5% per annum, compounded semi-annually.
                  Prior to January 1, 2007, payment of interest was deferred.
                  Commencing January 1, 2007, the Company will make monthly
                  blended payments of principal and interest based on a
                  25-year amortization period commencing on the completion
                  date. The loan contains cross-guarantee, cross-default and
                  cross-collateralization provisions. The loan is guaranteed
                  by the Company's subsidiaries that own and operate
                  Remington Park and the Palm Meadows Training Center and is
                  collateralized principally by security over the lands
                  forming part of the operations at Gulfstream Park,
                  Remington Park and Palm Meadows and over all other assets
                  of Gulfstream Park, Remington Park and Palm Meadows,
                  excluding licenses and permits. For the year ended
                  December 31, 2006, $24.9 million (for the year ended
                  December 31, 2005 - $67.0 million) was advanced and
                  $12.8 million (for the year ended December 31, 2005 -
                  $3.6 million) of interest was accrued on this loan, such
                  that at December 31, 2006, $134.8 million was outstanding
                  under the Gulfstream Park loan, including $16.5 million of
                  accrued interest (December 31, 2005 - $3.7 million). Net
                  loan origination expenses of $3.5 million have been
                  recorded as a reduction of the outstanding loan balance.
                  The loan balance is being accreted to its face value over
                  the term to maturity.

            (iii) Gulfstream Park Project Financing - Tranche 2

                  On July 26, 2006, certain of the Company's subsidiaries
                  that own and operate Gulfstream Park entered into an
                  amending agreement relating to the existing Gulfstream Park
                  project financing arrangement with a subsidiary of MID by
                  adding a new tranche of $25.8 million, plus lender costs
                  and capitalized interest, to fund the design and
                  construction of phase one of the slots facility to be
                  located in the existing Gulfstream Park clubhouse building,
                  as well as related capital expenditures and start-up costs,
                  including the acquisition and installation of approximately
                  500 slot machines. The new Gulfstream Park financing has a
                  five-year term and, consistent with the existing Gulfstream
                  Park facility, bears interest at a fixed rate of 10.5% per
                  annum, compounded semi-annually. Prior to January 1, 2007,
                  interest on this tranche was capitalized. Beginning
                  January 1, 2007, this tranche provides for blended payments
                  of principal and interest based on a 25-year amortization
                  period commencing on that date. Advances related to the
                  slots facility were made available by way of progress draw
                  advances and there is no prepayment penalty associated with
                  this tranche. The Gulfstream Park project financing
                  facility was further amended to introduce a mandatory
                  annual cash flow sweep of not less than 75% of Gulfstream
                  Park's total excess cash flow, after permitted capital
                  expenditures and debt service, to be used to repay the
                  additional principal amount being made available under the
                  new tranche. A lender fee of $0.3 million (1% of the amount
                  of this tranche) was added to the principal amount of the
                  loan as consideration for the amendments. For the year
                  ended December 31, 2006, $18.8 million (for the year ended
                  December 31, 2005 - nil) was advanced and $0.4 million (for
                  the year ended December 31, 2005 - nil) of interest was
                  accrued on this loan, such that at December 31, 2006,
                  $19.4 million was outstanding under this tranche, including
                  $0.4 million (December 31, 2005 - nil) of accrued interest.
                  Net loan origination expenses of $0.8 million have been
                  recorded as a reduction of the outstanding loan balance.
                  The loan balance is being accreted to its face value over
                  the term to maturity.

                  On December 22, 2006, the Gulfstream Park project financing
                  agreement was further amended to add a new tranche of
                  $21.5 million, plus lender costs and capitalized interest,
                  to fund the design and construction of phase two of the
                  slots facility, as well as related capital expenditures and
                  start-up costs, including the acquisition and installation
                  of approximately 700 slot machines. To December 31, 2006,
                  there were no drawings on this tranche.

            (iv)  Remington Park Project Financing

                  In July 2005, the Company's subsidiary that owns and
                  operates Remington Park entered into a $34.2 million
                  project financing arrangement with a subsidiary of MID for
                  the build-out of the casino facility at Remington Park.
                  Advances under the loan were made by way of progress draw
                  advances to fund the capital expenditures relating to the
                  development, design and construction of the casino
                  facility, including the purchase and installation of
                  electronic gaming machines. The loan has a ten-year term
                  from the completion date of the reconstruction project,
                  which was November 28, 2005. Prior to the completion date,
                  amounts outstanding under the loan bore interest at a
                  floating rate equal to 2.55% per annum above MID's notional
                  cost of LIBOR borrowing under its floating rate credit
                  facility, compounded monthly. After the completion date,
                  amounts outstanding under the loan bear interest at a fixed
                  rate of 10.5% per annum, compounded semi-annually. Prior to
                  January 1, 2007, payment of interest was deferred.
                  Commencing January 1, 2007, the Company will make monthly
                  blended payments of principal and interest based on a
                  25-year amortization period commencing on the completion
                  date. Certain cash from the operations of Remington Park
                  must be used to pay deferred interest on the loan plus a
                  portion of the principal under the loan equal to the
                  deferred interest on the Gulfstream Park construction loan.
                  The loan is secured by all assets of Remington Park,
                  excluding licenses and permits. The loan is also secured by
                  a charge over the lands owned by Gulfstream Park and a
                  charge over the Palm Meadows Training Center and contains
                  cross-guarantee, cross-default and cross-collateralization
                  provisions. For the year ended December 31, 2006,
                  $12.5 million (for the year ended December 31, 2005 -
                  $20.7 million) was advanced, $3.2 million (for the year
                  ended December 31, 2005 - $0.3 million) of interest was
                  accrued and $5.0 million was repaid on this loan, such that
                  at December 31, 2006, $31.7 million was outstanding under
                  the Remington Park loan, including $0.4 million
                  (December 31, 2005 - $0.3 million) of accrued interest. Net
                  loan origination expenses of $1.3 million have been
                  recorded as a reduction of the outstanding loan balance.
                  The loan balance is being accreted to its face value over
                  the term to maturity.

            (v)   Future principal repayments on the indebtedness and long-
                  term debt due to parent at December 31, 2006 are expected
                  to occur as follows:

                  -----------------------------------------------------------
                  2007                                             $   3,108
                  2008                                                 1,838
                  2009                                                 2,037
                  2010                                                 2,256
                  2011                                                 2,499
                  Thereafter                                         168,620
                  -----------------------------------------------------------
                                                                   $ 180,358
                  -----------------------------------------------------------
                  -----------------------------------------------------------

        (b) At December 31, 2006, $6.5 million (December 31, 2005 -
            $13.7 million) of the funds the Company placed into escrow with
            MID remains in escrow.

        (c) A subsidiary of the Company had an option agreement with MID to
            acquire 100% of the shares of the MID subsidiary that owns land
            in Romulus, Michigan. The option agreement expired on
            December 15, 2006, and accordingly, the Company expensed
            approximately $3.0 million of deferred development costs in
            pursuit of the Romulus, Michigan racing license.

        (d) On November 1, 2006, a wholly-owned subsidiary of the Company
            sold its interest in the entity that owns and operates the
            Fontana Golf Club located in Oberwaltersdorf, Austria to a
            subsidiary of Magna for a sale value of Euros 30.0 million
            (U.S. $38.3 million). The Company received cash proceeds of
            approximately Euros 13.2 million (U.S. $16.9 million), net of
            transaction costs, and approximately Euros 16.8 million (U.S.
            $21.4 million) of debt was assumed by Magna. The gain on sale of
            Fontana Golf Club of approximately $20.9 million, net of tax, is
            reported as a contribution of equity. A subsidiary of MID
            received a fee of $0.2 million (1% of the net sale proceeds) as
            consideration for waiving repayment rights under the bridge loan
            agreement with MID.

        (e) On August 25, 2006, a wholly-owned subsidiary of the Company
            completed the sale of the Magna Golf Club located in Aurora,
            Ontario, Canada to Magna for cash consideration of Cdn.
            $51.8 million (U.S. $46.4 million), net of transaction costs. The
            Company recognized an impairment loss of $1.2 million at the date
            of disposition equal to the excess of the Company's carrying
            value of the assets disposed over their fair values at the date
            of disposition. A subsidiary of MID received a fee of
            Cdn. $0.2 million (1% of the net sale proceeds) as consideration
            for waiving repayment rights under the bridge loan agreement with
            MID.

            On August 25, 2006, in conjunction with the sale of the Magna
            Golf Club, the Company entered into an access agreement with
            Magna for the use of the Magna Golf Club's golf course and the
            clubhouse meeting, dining and other facilities. The agreement,
            which expires on August 25, 2011, required a payment of
            $0.3 million.

        (f) On March 31, 2006, the Company sold a non-core real estate
            property located in the United States to Magna for total proceeds
            of $5.6 million, net of transaction costs. The gain on sale of
            the property of approximately $2.9 million, net of tax, is
            reported as a contribution of equity. In accordance with the
            terms of the senior secured revolving credit facility, the
            Company used the net proceeds from this transaction to repay
            principal amounts outstanding under this credit facility.

        (g) During the year ended December 31, 2005, a wholly-owned
            subsidiary of the Company sold to Mr. Frank Stronach, the
            Chairman of the Board and a Director of the Company, two housing
            lots and a housing unit. These sales were in the normal course of
            operations of the Company and the total sales price for these
            properties was $1.4 million. The gain on the sale of the
            properties of approximately $0.7 million, net of tax, is reported
            as a contribution of equity.

        (h) On November 1, 2004, a wholly-owned subsidiary of the Company
            entered into an access agreement with Magna and one of its
            subsidiaries for their use of the golf course and the clubhouse
            meeting, dining and other facilities at the Magna Golf Club in
            Aurora, Ontario, Canada. The agreement, which was retroactive to
            January 1, 2004, ended on August 25, 2006 as a result of the sale
            of the Magna Golf Club (refer to Note 12(e)) and stipulated an
            annual fee of Cdn. $5.0 million. For the year ended December 31,
            2006, $2.9 million (for the year ended December 31, 2005 -
            $4.1 million) has been recognized in discontinued operations
            related to this agreement.

        (i) On November 1, 2004, a wholly-owned subsidiary of the Company
            entered into an access agreement with Magna and one of its
            subsidiaries for their use of the golf course and the clubhouse
            meeting, dining and other facilities at Fontana Sports in
            Oberwaltersdorf, Austria. The agreement, which was retroactive to
            March 1, 2004, ended on November 1, 2006 as a result of the sale
            of Fontana Sports (refer to Note 12(d)) and stipulated an annual
            fee of Euros 2.5 million. For the year ended December 31, 2006,
            $2.6 million (for the year ended December 31, 2005 -
            $3.1 million) has been recognized in discontinued operations
            related to this agreement.

        (j) During the period from January 1, 2006 to July 26, 2006, the
            Company paid $2.1 million (for the year ended December 31, 2005 -
            $2.4 million) of rent for totalisator equipment and fees for
            totalisator services to AmTote, a company in which the Company
            had a 30% equity interest up to July 26, 2006.

        (k) During the year ended December 31, 2006, the Company incurred
            $3.8 million (for the year ended December 31, 2005 -
            $4.5 million) of rent for facilities and central shared and other
            services to Magna and its subsidiaries.

    13. Commitments and Contingencies

        (a) The Company generates a substantial amount of its revenues from
            wagering activities and, therefore, it is subject to the risks
            inherent in the ownership and operation of a racetrack. These
            include, among others, the risks normally associated with changes
            in the general economic climate, trends in the gaming industry,
            including competition from other gaming institutions and state
            lottery commissions, and changes in tax and gaming laws.

        (b) In the ordinary course of business activities, the Company may be
            contingently liable for litigation and claims with, among others,
            customers, suppliers and former employees. Management believes
            that adequate provisions have been recorded in the accounts where
            required. Although it is not possible to accurately estimate the
            extent of potential costs and losses, if any, management
            believes, but can provide no assurance, that the ultimate
            resolution of such contingencies would not have a material
            adverse effect on the financial position of the Company.

        (c) The Company has letters of credit issued with various financial
            institutions of $2.0 million to guarantee various construction
            projects related to activity of the Company. These letters of
            credit are secured by cash deposits of the Company. The Company
            also has letters of credit issued under its senior secured
            revolving credit facility of $24.7 million.

        (d) The Company has provided indemnities related to surety bonds and
            letters of credit issued in the process of obtaining licenses and
            permits at certain racetracks and to guarantee various
            construction projects related to activity of its subsidiaries. At
            December 31, 2006, these indemnities amounted to $9.4 million
            with expiration dates through 2007.

        (e) At December 31, 2006, the Company had commitments under operating
            leases requiring minimum annual rental payments for the years
            ending December 31 as follows:

            -----------------------------------------------------------------
            2007                                                    $  6,368
            2008                                                       5,074
            2009                                                       4,390
            2010                                                       3,774
            2011                                                       1,906
            Thereafter                                                 6,212
            -----------------------------------------------------------------
                                                                    $ 27,724
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Commitments under operating leases do not include contingent
            rental payments.

            For the year ended December 31, 2006, payments under these
            operating leases amounted to approximately $9.4 million (for the
            year ended December 31, 2005 - $4.2 million). The Company also
            rents or leases certain totalisator equipment and services, for
            which the annual payments are contingent upon handle, live race
            days and other factors. The Company's rent expense relating to
            the totalisator equipment and services was $5.0 million for the
            year ended December 31, 2006 (for the year ended December 31,
            2005 - $5.2 million).

            The Company occupies land for the Remington Park racing facility
            under an operating lease that extends through 2013. The lease
            also contains options to renew for five 10-year periods after the
            initial term. The Company is obligated to pay rent based on
            minimum annual rental payments ranging from $470 thousand to
            $503 thousand plus one-half of one percent of the pari-mutuel
            wagers made at the track in excess of $187.0 million during the
            racing season and one percent of gaming revenue in excess of
            $60.0 million. The percentage rent was not applicable for the
            years ended December 31, 2006 and 2005.

            The Company owns an approximate 22% interest in the real property
            upon which Portland Meadows is located, and also owns the long-
            term rights to operate the facility pursuant to an operating
            lease. The operating lease requires the Company to pay rent equal
            to one percent of the wagers made at the track (including wagers
            on both live and import races), and also an additional percentage
            of revenues for other activities as follows: (a) one percent of
            revenues for horse-related activities, including simulcasting of
            horse races during the non-live season, (b) five percent of
            revenues not related to horse racing up to $800 thousand, and
            (c) three percent of revenues not related to horse racing in
            excess of $800 thousand. As the owner of approximately 22%
            interest in the real property, the Company receives approximately
            22% of the rent payments, which are applied to the rental
            payments made by the Company in order to reduce rent expense
            which is reflected in racing and gaming operating costs on the
            consolidated statements of operations and comprehensive loss.

            The racetrack and associated land under capital leases at Lone
            Star Park are included in the Grand Prairie Metropolitan Utility
            and Reclamation District ("GPMURD"). MEC Lone Star, L.P., a
            wholly-owned subsidiary of the Company, entered into an agreement
            with GPMURD, whereby it is required to make certain payments to
            GPMURD in lieu of property taxes. Such payments include amounts
            necessary to cover GPMURD operating expenses and debt service for
            certain bonds issued by GPMURD to fund improvements on the land
            up to the debt service requirements. The Company expensed
            $2.1 million of such payments for the year ended December 31,
            2006 (for the year ended December 31, 2005 - $1.8 million).

        (f) Contractual commitments outstanding at December 31, 2006, which
            related to construction and development projects, amounted to
            approximately $5.7 million.

        (g) On November 15, 2006, we opened the slots facility at Gulfstream
            Park and are proceeding with plans to make additional slot
            machines available in 2007. We have proceeded with the
            development of the slots facility at Gulfstream Park despite an
            August 2006 decision rendered by the Florida District Court of
            Appeals First District that reversed a lower court decision
            granting summary judgment in favor of "Floridians for a Level
            Playing Field" ("FLPF"), a group in which Gulfstream Park is a
            member. The Court ruled that a trial is necessary to determine
            whether the constitutional amendment adopting the slots
            initiative, approved by Floridians in the November 2004 election,
            was invalid because the petitions bringing the initiative forward
            did not contain the minimum number of valid signatures. FLPF
            filed an application for a rehearing, rehearing en banc before
            the full panel of the First District Court of Appeals and
            Certification by the Florida Supreme Court. On November 30, 2006,
            in a split decision, the en banc court affirmed the August 2006
            panel decision and certified the matter to the Florida Supreme
            Court, which stayed the appellate court ruling pending its
            jurisdictional review of the matter. The Florida Supreme Court
            has yet to confirm whether it will hear the matter. The Company
            believes that the August 2006 decision rendered by the Florida
            District Court of Appeals is incorrect, and accordingly, the
            Company is proceeding with the slots facility development.

        (h) In October 2003, the Company signed a Letter of Intent to explore
            the possibility of a joint venture between Forest City
            Enterprises, Inc. ("Forest City") and various affiliates of the
            Company, anticipating the development of a portion of the
            Gulfstream Park racetrack property. Forest City paid $2.0 million
            to the Company in consideration for its right to work exclusively
            with the Company on this project. This deposit has been included
            in "other accrued liabilities" on the Company's consolidated
            balance sheets. In May 2005, a Limited Liability Company
            Agreement was entered into with Forest City concerning the
            planned development of "The Village at Gulfstream Park(TM)". That
            agreement contemplates the development of a mixed-use project
            consisting of residential units, parking, restaurants, hotels,
            entertainment, retail outlets and other commercial use projects
            on a portion of the Gulfstream Park property. Forest City is
            required to contribute up to a maximum of $15.0 million as an
            initial capital contribution. The $2.0 million deposit received
            to date from Forest City shall constitute the final $2.0 million
            of the initial capital contribution. The Company is obligated to
            contribute 50% of any equity amounts in excess of $15.0 million
            as and when needed, however, to December 31, 2006, the Company
            has not made any such contributions. In the event the development
            does not proceed, the Company may have an obligation to fund a
            portion of those pre-development costs incurred to that point in
            time. As at December 31, 2006, approximately $13.9 million of
            costs have been incurred by The Village at Gulfstream Park, LLC,
            which have been funded entirely by Forest City. The Limited
            Liability Company Agreement also contemplates additional
            agreements, including a ground lease, a reciprocal easement
            agreement, a development agreement, a leasing agreement and a
            management agreement to be executed in due course and upon
            satisfaction of certain conditions.

        (i) In April 2004, the Company signed a Letter of Intent to explore
            the possibility of joint ventures between Caruso Affiliated and
            certain affiliates of the Company to develop certain undeveloped
            lands surrounding Santa Anita Park and Golden Gate Fields
            racetracks. Upon execution of this Letter of Intent, the Company
            agreed to fund 50% of approved pre-development costs in
            accordance with a preliminary business plan for each of these
            projects, with the goal of entering into operating agreements. As
            at December 31, 2006, the Company has expended approximately
            $6.3 million on this initiative, of which $4.2 million was paid
            during the year ended December 31, 2006. These amounts have been
            recorded as "fixed assets, net" on the Company's consolidated
            balance sheets. Under the terms of the Letter of Intent, the
            Company may be responsible to fund additional costs, however to
            December 31, 2006, the Company has not made any such payments. On
            September 28, 2006, certain of the Company's affiliates entered
            into definitive operating agreements with certain Caruso
            Affiliated affiliates regarding the proposed development of
            approximately 51 acres of undeveloped lands surrounding Santa
            Anita Park. This development project contemplates a mixed-use
            development with approximately 800,000 square feet of retail,
            entertainment and restaurants as well as 4,000 parking spaces.

        (j) A subsidiary of the Company participates in a multi-employer
            defined benefit pension plan for which the pension plan's total
            vested liabilities exceed its assets. Based on allocation
            information provided by the plan, the portion of the estimated
            unfunded liability for vested benefits attributable to the
            Company's subsidiary is approximately $3.7 million. Under
            specific circumstances, a "withdrawal liability" may be triggered
            by certain actions, which includes withdrawal from the pension
            plan. The Company does not have any present intention to withdraw
            from the pension plan.

    14. Segment Information

        Operating Segments

        The Company's reportable segments reflect how the Company is
        organized and managed by senior management. The Company has two
        principal operating segments: racing and gaming operations and real
        estate and other operations. The racing and gaming segment has been
        further segmented to reflect geographical and other operations as
        follows: (1) California operations include Santa Anita Park, Golden
        Gate Fields and San Luis Rey Downs; (2) Florida operations include
        Gulfstream Park's racing and gaming operations and the Palm Meadows
        Training Center; (3) Maryland operations include Laurel Park, Pimlico
        Race Course, Bowie Training Center and the Maryland OTB network;
        (4) Southern United States operations include Lone Star Park,
        Remington Park's racing and gaming operations and its OTB network;
        (5) Northern United States operations include The Meadows and its OTB
        network, Thistledown, Great Lakes Downs, Portland Meadows and the
        Oregon OTB network and the North American production and sales
        operations for StreuFex(TM); (6) European operations include Magna
        Racino(TM) and the European production and sales operations for
        StreuFex(TM); and (7) Technology operations include XpressBet(R),
        HorseRacing TV(TM), MagnaBet(TM), RaceONTV(TM), AmTote and the
        Company's equity investment in Racing World Limited. The Corporate
        and other segment includes costs related to the Company's corporate
        head office, cash and other corporate office assets and investments
        in racing related real estate held for development. Eliminations
        reflect the elimination of revenues between business units. The real
        estate and other operations segment includes other real estate
        operations which includes the Company's residential housing
        development. Comparative amounts reflected in segment information for
        the three months and year ended December 31, 2005 and as of
        December 31, 2005 for MagnaBet(TM) and RaceONTV(TM) have been
        reclassified from European operations to Technology operations.

        The Company uses revenues and earnings (loss) before interest, income
        taxes, depreciation and amortization ("EBITDA") as key performance
        measures of results of operations for purposes of evaluating
        operating and financial performance internally. Management believes
        that the use of these measures enables management and investors to
        evaluate and compare, from period to period, operating and financial
        performance of companies within the horse racing industry in a
        meaningful and consistent manner as EBITDA eliminates the effects of
        financing and capital structures, which vary between companies.
        Because the Company uses EBITDA as a key measure of financial
        performance, the Company is required by U.S. GAAP to provide the
        information in this note concerning EBITDA. However, these measures
        should not be considered as an alternative to, or more meaningful
        than, net income (loss) as a measure of the Company's operating
        results or cash flows, or as a measure of liquidity.

        The accounting policies of each segment are the same as those
        described in the "Summary of Significant Accounting Policies" section
        of the Company's annual report on Form 10-K for the year ended
        December 31, 2005.

        The following summary presents key information about reported
        segments for the three months and years ended December 31, 2006 and
        2005:

                                Three months ended            Years ended
                                    December 31,              December 31,
                          ---------------------------------------------------
                                 2006         2005         2006         2005
        ---------------------------------------------------------------------
        Revenues
        California
         operations        $   24,522   $   39,627   $  206,745   $  195,527
        Florida operations     12,041        1,771       90,962       74,542
        Maryland operations    25,541       26,931      116,412      111,252
        Southern U.S.
         operations            30,774       23,421      138,472       89,793
        Northern U.S.
         operations            21,030       21,695       90,562       92,532
        European operations     3,558        2,891       10,525        9,708
        Technology operations  14,629        7,154       51,522       34,196
        ---------------------------------------------------------------------
                              132,095      123,490      705,200      607,550
        Corporate and other       221            4          339          116
        Eliminations             (651)        (764)      (8,346)      (7,881)
        ---------------------------------------------------------------------
        Total racing and
         gaming operations    131,665      122,730      697,193      599,785
        ---------------------------------------------------------------------
        Other                   1,204           85        4,946        4,643
        ---------------------------------------------------------------------
        Total real estate
         and other
         operations             1,204           85        4,946        4,643
        ---------------------------------------------------------------------
        Total revenues     $  132,869   $  122,815   $  702,139   $  604,428
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                Three months ended            Years ended
                                    December 31,              December 31,
                          ---------------------------------------------------
                                 2006         2005         2006         2005
        ---------------------------------------------------------------------
        Earnings (loss)
         before interest,
         income taxes,
         depreciation and
         amortization
         ("EBITDA")
        California
         operations        $   (2,273)  $    4,423   $   18,012   $   16,674
        Florida operations     (6,190)      (3,528)         (81)        (254)
        Maryland operations      (542)      (2,251)       7,605        4,956
        Southern U.S.
         operations               986          983       12,784        4,665
        Northern U.S.
         operations(i)        (12,285)        (391)     (13,140)        (191)
        European
         operations(i)        (78,632)      (4,232)     (86,923)     (15,153)
        Technology operations  (4,900)      (3,276)     (10,114)      (8,657)
        ---------------------------------------------------------------------
                             (103,836)      (8,272)     (71,857)       2,040
        Corporate and other    (6,816)      (6,577)     (27,698)     (24,071)
        Predevelopment,
         pre-opening and
         other costs           (6,741)      (2,588)     (14,159)     (11,882)
        Gain on sale of
         intangible assets
         related to The
         Meadows              126,374            -      126,374            -
        ---------------------------------------------------------------------
        Total racing and
         gaming operations      8,981      (17,437)      12,660      (33,913)
        ---------------------------------------------------------------------
        Other(i)               (1,936)      (1,535)        (363)        (224)
        ---------------------------------------------------------------------
        Total real estate
         and other
         operations            (1,936)      (1,535)        (363)        (224)
        ---------------------------------------------------------------------
        Total EBITDA       $    7,045   $  (18,972)  $   12,297   $  (34,137)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                                              December 31,
                                                    -------------------------
                                                           2006         2005
        ---------------------------------------------------------------------
        Total Assets
        California operations                        $  309,443   $  295,066
        Florida operations                              361,550      303,069
        Maryland operations                             171,135      178,022
        Southern U.S. operations                        141,213      140,786
        Northern U.S. operations(i)                      46,913       58,037
        European operations(i)                           55,624      132,021
        Technology operations                            41,625       18,198
        ---------------------------------------------------------------------
                                                      1,127,503    1,125,199
        Corporate and other                              85,498      108,606
        ---------------------------------------------------------------------
        Total racing and gaming operations            1,213,001    1,233,805
        ---------------------------------------------------------------------
        Non-Core Real Estate                                  -        2,500
        Other                                            33,884       28,072
        ---------------------------------------------------------------------
        Total real estate and other operations           33,884       30,572
        ---------------------------------------------------------------------
        Total assets from continuing operations       1,246,885    1,264,377
        Total assets held for sale                            -       61,185
        Total assets from discontinued operations             -       89,082
        ---------------------------------------------------------------------
        Total assets                                 $1,246,885   $1,414,644
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i) For the three months and year ended December 31, 2006, the
            Northern U.S. operations includes a non-cash write-down of long-
            lived assets of $11.1 million related to The Meadows, European
            operations includes a non-cash write-down of long-lived assets of
            $76.2 million related to Magna Racino(TM) and other real estate
            operations includes a non-cash write-down of long-lived assets of
            $1.3 million related to non-core real estate in Aurora, Ontario,
            Canada.

        Reconciliation of EBITDA to Net Loss

                                        Three months ended December 31, 2006
                                       --------------------------------------
                                            Racing  Real Estate
                                        and Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                     $    8,981   $   (1,936)  $    7,045
        Interest expense (income), net      15,582          (21)      15,561
        Depreciation and amortization       12,644            7       12,651
        ---------------------------------------------------------------------
        Loss from continuing operations
         before income taxes            $  (19,245)  $   (1,922)     (21,167)
        Income tax benefit                                            (8,676)
        ---------------------------------------------------------------------
        Net loss from continuing
         operations                                                  (12,491)
        Net income from discontinued
         operations                                                        8
        ---------------------------------------------------------------------
        Net loss                                                  $  (12,483)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                        Three months ended December 31, 2005
                                       --------------------------------------
                                            Racing  Real Estate
                                        and Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA loss from continuing
         operations                     $  (17,437)  $   (1,535)  $  (18,972)
        Interest expense, net                9,907          430       10,337
        Depreciation and amortization        9,076          175        9,251
        ---------------------------------------------------------------------
        Loss from continuing operations
         before income taxes            $  (36,420)  $   (2,140)     (38,560)
        Income tax benefit                                            (2,088)
        ---------------------------------------------------------------------
        Net loss from continuing
         operations                                                  (36,472)
        Net loss from discontinued
         operations                                                   (3,261)
        ---------------------------------------------------------------------
        Net loss                                                  $  (39,733)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                              Year ended December 31, 2006
                                       --------------------------------------
                                            Racing  Real Estate
                                        and Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                     $   12,660   $     (363)  $   12,297
        Interest expense (income), net      61,241         (539)      60,702
        Depreciation and amortization       43,703          199       43,902
        ---------------------------------------------------------------------
        Loss from continuing operations
         before income taxes            $  (92,284)  $      (23)     (92,307)
        Income tax benefit                                            (7,124)
        ---------------------------------------------------------------------
        Net loss from continuing
         operations                                                  (85,183)
        Net loss from discontinued
         operations                                                   (2,168)
        ---------------------------------------------------------------------
        Net loss                                                  $  (87,351)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


                                              Year ended December 31, 2005
                                       --------------------------------------
                                            Racing  Real Estate
                                        and Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA loss from continuing
         operations                     $  (33,913)  $     (224)  $  (34,137)
        Interest expense (income), net      33,274         (448)      32,826
        Depreciation and amortization       36,017          223       36,240
        ---------------------------------------------------------------------
        Income (loss) from continuing
         operations before income taxes $ (103,204)  $        1     (103,203)
        Income tax benefit                                            (1,239)
        ---------------------------------------------------------------------
        Net loss from continuing
         operations                                                 (101,964)
        Net loss from discontinued
         operations                                                   (3,329)
        ---------------------------------------------------------------------
        Net loss                                                  $ (105,293)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    15. Subsequent Events

        (a) On February 21, 2007, the Company filed a shelf registration
            statement on Form S-3 (the "U.S. Registration Statement") with
            the United States Securities and Exchange Commission (the "SEC")
            and a preliminary short form base shelf prospectus (the "Canadian
            Prospectus") with the securities commissions in each of the
            Provinces in Canada (collectively, the "Canadian Securities
            Commissions"). After the U.S. Registration Statement is declared
            effective by the SEC and the Canadian Prospectus receives a final
            receipt by the Canadian Securities Commissions, the Company will
            be able to offer to sell up to U.S. $500.0 million of equity
            securities (including stock, warrants, units and, subject to
            filing a Canadian rights offering circular or prospectus with the
            Canadian Securities Commissions, rights) from time to time in one
            or more public offerings or other offerings.

        (b) On February 9, 2007, the Company repaid in full a term loan
            facility of Euros 15.0 million (U.S. $19.8 million), which was
            scheduled to mature on that date.

        (c) On February 7, 2007, MID acquired all of the Company's interests
            and rights in a 34 acre parcel of residential development land in
            Aurora, Ontario, Canada for cash consideration of
            Cdn. $12.0 million (U.S. $10.1 million) and a 64 acre parcel of
            excess land at Laurel Park in Howard County, Maryland for cash
            consideration of U.S. $20.0 million. In addition, the Company has
            been granted a profit participation right in respect of each
            property under which it is entitled to receive 15% of net
            proceeds from any sale or development after MID achieves a 15%
            internal rate of return.

        (d) On January 18, 2007, the Company announced that the 2007 race
            meet will be the last meet that MI Racing, Inc. will run at Great
            Lakes Downs. For the year ended December 31, 2006, Great Lakes
            Downs incurred a loss before income taxes of $1.8 million.
    





For further information:

For further information: Blake Tohana, Executive Vice-President and
Chief Financial Officer, Magna Entertainment Corp., 337 Magna Drive, Aurora,
ON, L4G 7K1, Tel: (905) 726-7493

Organization Profile

MAGNA ENTERTAINMENT CORP.

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