Magna Entertainment Corp. announces results for the fourth quarter and year ended December 31, 2007



    AURORA, ON, Feb. 29 /CNW/ - Magna Entertainment Corp. ("MEC") (NASDAQ:  
MECA; TSX: MEC.A) today reported its financial results for the fourth quarter
and year ended December 31, 2007.

    
    -------------------------------------------------------------------------
                              Three months ended           Year ended
                                 December 31,              December 31,
                           --------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
                                                 (unaudited)

    Revenues(i)            $  117,286   $  102,551   $  625,715   $  574,198

    Earnings (loss) before
     interest, taxes,
     depreciation and
     amortization
     ("EBITDA")(i)(iii)    $  (17,071)  $    9,134   $  (17,525)  $   10,011

    Net loss(iii)
      Continuing
       operations          $  (40,617)  $   (8,357)  $ (107,869)  $  (79,612)
      Discontinued
       operations(ii)          (2,363)      (4,126)      (5,890)      (7,739)
    -------------------------------------------------------------------------
    Net loss               $  (42,980)  $  (12,483)  $ (113,759)  $  (87,351)
    -------------------------------------------------------------------------

    Diluted loss per
     share(iii)
      Continuing
       operations          $    (0.36)  $    (0.08)  $    (0.99)  $    (0.74)
      Discontinued
       operations(ii)           (0.02)       (0.04)       (0.05)       (0.07)
    -------------------------------------------------------------------------
    Diluted loss per share $    (0.38)  $    (0.12)  $    (1.04)  $    (0.81)
    -------------------------------------------------------------------------

    (i)    Revenues and EBITDA for all periods presented are from continuing
           operations only.

    (ii)   Discontinued operations for 2007 and 2006 includes the operations
           of Remington Park in Oklahoma, Thistledown in Ohio, Portland
           Meadows in Oregon and Great Lakes Downs in Michigan. Discontinued
           operations in 2006 also includes the operations of Fontana Golf
           Club, the sale of which was completed on November 1, 2006, Magna
           Golf Club, the sale of which was completed on August 25, 2006 and
           a restaurant and related real estate in the United States, the
           sale of which was completed on May 26, 2006.

    (iii)  EBITDA, net loss and diluted loss per share for the three months
           and year ended December 31, 2007 each includes a recovery of an
           impairment loss of $0.1 million and an impairment loss of
           $1.3 million, respectively, related to excess real estate in
           Porter, New York.

           EBITDA, net loss and diluted loss per share for the three months
           and year ended December 31, 2006 each includes a gain on sale of
           intangible assets related to The Meadows of $126.4 million and
           an impairment charge of $88.6 million, representing $76.2 million
           related to Magna Racino(TM)'s long-lived assets, $11.2 million
           related to The Meadows' long-lived assets and $1.3 million related
           to a 34 acre parcel of residential development land in Canada.

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

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

    Frank Stronach, MEC's Chairman and Interim Chief Executive Officer,
commented: "We remain firmly committed to implementing our debt elimination
plan, although the weak U.S. real estate and credit markets have adversely
impacted our progress to date on asset sales."

    During the fourth quarter, we completed a $20.0 million private placement
of equity. In addition, we entered into an agreement to sell 225 acres of
excess real estate in Ebreichsdorf, Austria for a purchase price of Euros
20.0 million (U.S. $29.4 million). This transaction is expected to close
during the first quarter of 2008 following the satisfaction of customary
closing conditions including the receipt of all necessary regulatory
approvals. We have also closed the sales of three parcels of excess real
estate in Porter, New York for aggregate net proceeds of $1.7 million and have
engaged real estate brokers and listed for sale Great Lakes Downs and our real
estate properties in Dixon, California and Ocala, Florida. Also, we are
marketing our interest in Portland Meadows for sale and have engaged a U.S.
investment bank to sell Remington Park and Thistledown.

    Ron Charles, MEC's Chief Operating Officer, added: "We also remain
focused on improving operations. While we are encouraged by the profitability
improvements this quarter at our PariMax operations, including XpressBet(R),
AmTote and HRTV(TM), we continue to be disappointed with the operating results
at Gulfstream Park. Gulfstream Park's slot and racing operations have been
impacted by the ongoing construction of The Village at Gulfstream Park(TM), a
lifestyle mixed-use development, the first phase of which is scheduled to be
completed by February 2009. Gulfstream Park's weak results have continued
during its 2008 race meet as on-track attendance and handle have declined.
Santa Anita Park has also had a challenging 2008 race meet because of track
drainage problems caused by the installation of a new synthetic racing
surface. Santa Anita Park has cancelled eleven days of live racing in 2008,
which has negatively impacted results. However, we have made up three live
race days since then and expect to make up additional live race days during
the remainder of Santa Anita Park's 2008 race meet. We plan to implement a
permanent solution for the racing surface later this year."

    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.

    Revenues from continuing operations were $117.3 million for the three
months ended December 31, 2007, an increase of $14.7 million or 14.4% compared
to $102.6 million for the three months ended December 31, 2006. The increased
revenues were primarily due to:

    
    -   California revenues above the prior year period by $12.0 million
        primarily due to a change in the racing calendar at Golden Gate
        Fields, which resulted in 25 additional live race days in the fourth
        quarter of 2007 compared to the prior year period and increased
        rental and other revenues at Santa Anita Park from the Oak Tree Meet,
        which operated 31 days in the fourth quarter of 2007 compared to 26
        days in the fourth quarter of 2006;

    -   Florida revenues above the prior year period by $3.3 million
        primarily due to increased wagering revenues at Gulfstream Park with
        the introduction of year round simulcasting operations in 2007;

    -   PariMax revenues above the prior year period by $2.9 million
        primarily due to increased revenues at AmTote International, Inc. as
        a result of sales to new tote customers and increased revenues at
        XpressBet(R) as a result of a 14% growth in handle; and

    -   Residential development and other real estate operations revenues
        above the prior year period by $1.4 million primarily due to
        increased housing unit sales at our European residential housing
        development;

    partially offset by:

    -   Maryland revenues below the prior year period by $1.8 million
        primarily due to six fewer live race days at Laurel Park compared to
        the prior year period; and

    -   Northern U.S. revenues below the prior year period by $1.6 million
        primarily due to handle and attendance declines as a result of the
        grandstand at The Meadows being demolished to accommodate a new
        grandstand/casino re-construction project by Millennium-Oaktree.
    

    Revenues from continuing operations were $625.7 million for the year
ended December 31, 2007, an increase of $51.5 million or 9.0% compared to
$574.2 million for the year ended December 31, 2006. The increased revenues
for the year ended December 31, 2007 compared to the prior year are primarily
due to a $34.1 million increase in Florida revenues as the Gulfstream Park
casino facility generated $32.1 million of additional gaming revenues in 2007
compared to the prior year and a $28.8 million increase in PariMax revenues as
a result of a full year of results of AmTote in 2007, as we completed the
acquisition of the remaining 70% equity interest in AmTote in July 2006, and
increased revenues at XpressBet(R) as a result of a 14% growth in handle.

    EBITDA from continuing operations decreased by $26.2 million to an EBITDA
loss of $17.1 million for the three months ended December 31, 2007 from EBITDA
of $9.1 million in the three months ended December 31, 2006. EBITDA for the
prior year period was positively impacted by a $126.4 million gain on sale of
intangible assets related to The Meadows and was negatively impacted by
write-downs on long-lived assets of $88.6 million. EBITDA from continuing
operations for the three months ended December 31, 2007 was impacted by:

    
    -   PariMax operations above the prior year period by $5.1 million
        primarily as a result of reduced losses at HRTV(TM) with the
        formation of our joint venture with Churchill Downs Incorporated in
        April 2007 and increased revenues at AmTote and XpressBet(R);

    -   California operations above the prior year period by $4.5 million
        primarily due to a change in the racing calendar at Golden Gate
        Fields and increased rental and other revenues at Santa Anita Park as
        a result of the longer Oak Tree Meet;

    -   Predevelopment, pre-opening and other costs decreased from the prior
        year period by $4.0 million primarily due to the prior year period
        including $3.0 million of costs written-off in connection with our
        Michigan racing license and $2.1 million of pre-opening costs related
        to Gulfstream Park's slot facility;

    -   Residential development and other real estate operations above the
        prior year period by $1.1 million primarily due to increased housing
        unit sales at our European residential housing development; and

    -   Corporate and other operations above the prior year period by
        $1.3 million primarily due to cost reductions and higher severance
        charges in the prior year period;

    partially offset by:

    -   Florida operations below the prior year period by $3.0 million as
        increased gaming revenues at Gulfstream Park were more than offset by
        higher marketing and operating costs for the new casino facility,
        which was only open for a portion of the fourth quarter in 2006; and

    -   Maryland operations below the prior year period by $1.0 million
        primarily due to six fewer live race days at Laurel Park compared to
        the prior year period.
    

    EBITDA from continuing operations decreased by $27.5 million to an EBITDA
loss of $17.5 million for the year ended December 31, 2007 from EBITDA of
$10.0 million in the year ended December 31, 2006. EBITDA for the prior year
was positively impacted by a $126.4 million gain on sale of intangible assets
related to The Meadows and was negatively impacted by write-downs on
long-lived assets of $88.6 million. EBITDA from continuing operations for the
year ended December 31, 2007 was impacted by a $13.6 million improvement at
our PariMax operations due to improved performance at XpressBet(R), HRTV and
AmTote, a $7.7 million reduction in predevelopment, pre-opening and other
costs and a $3.3 million improvement at our European operations due to cost
reductions at Magna Racino(TM), partially offset by a $12.3 million decrease
at our Florida operations due to increased losses at the Gulfstream Park slot
facility.

    During the three months ended December 31, 2007 cash used for operations
was $14.0 million, which improved $6.0 million from cash used for operations
of $20.0 million in the fourth quarter of 2006, primarily due to the increase
in loss from continuing operations being more than offset by increases in
items not involving current cash flows and changes in non-cash working capital
balances in 2007 relative to the prior year period. Cash used for investing
activities during the three months ended December 31, 2007 was $17.2 million,
which included $18.1 million of real estate property and fixed asset additions
and $1.5 million of other asset additions, partially offset by $2.5 million of
proceeds on the sale of real estate and fixed assets. Cash provided from
financing activities during the three months ended December 31, 2007 of
$45.5 million includes net borrowings of $25.4 million from our controlling
shareholder, $19.6 million of net proceeds received from a private placement
of Class A Subordinate Voting Stock to Fair Enterprise Limited and net
borrowings of $13.3 million from bank indebtedness, partially offset by net
repayments of  $12.8 million of long-term debt. Although we continue to
implement our debt elimination plan, the sale of assets under the debt
elimination plan is taking longer than originally contemplated and, as a
result, we will likely need to seek extensions from existing lenders and
additional funds in the short-term from one or more possible sources. The
availability of such extensions or additional funds is not assured and, if
available, the terms thereof are not determinable at this time.

    We will hold a conference call to discuss our fourth quarter and year end
results on Friday February 29, 2008 at 10:00 a.m. EST. The number to use for
this call is 1-800-926-4402. Please call 10 minutes prior to the start of the
conference call. The dial-in number for overseas callers is 212-231-2901. We
will also web cast 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, as well as MagnaBet(TM) internationally. Pursuant to joint ventures,
MEC has a fifty percent interest in HorseRacing TV(TM), a 24-hour horse racing
television network and TrackNet Media Group, LLC, a content management company
formed for distribution of the full breadth of MEC's horse racing content.

    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:
the current status and the potential impact of the September 2007 adopted debt
elimination plan on our debt reduction efforts, as to which there can be no
assurance of success; expectations as to our ability to complete asset sales
at the appropriate prices and in a timely manner; the impact of the bridge
loan facility arranged in September 2007; expectations as to our ability to
comply with the bridge loan facility and existing credit facilities;
strategies and plans; 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. Important 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;
our ability to obtain or maintain government and other regulatory approvals
necessary or desirable to proceed with proposed real estate developments;
increased regulation affecting certain of our non-racetrack operations, such
as broadcasting ventures; 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 we will be able to successfully implement our debt
elimination plan and comply with the terms of and refinance or repay on
maturity our existing financing arangements (including our bridge loan with a
subsidiary of our controlling shareholder and our senior secured revolving
credit facility with a Canadian financial institution), and there will not be
any material adverse changes: in general economic conditions, the popularity
of horse racing and other gaming activities, weather and other environmental
conditions at our facilities, 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,
                           --------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
                                         (restated                 (restated
                                          - note 7)                 - note 7)
    Revenues
    Racing and gaming
      Pari-mutuel wagering $   71,936   $   61,516   $  432,280   $  442,831
      Gaming                    9,286        9,043       41,117        9,043
      Non-wagering             33,175       30,788      143,843      117,378
    -------------------------------------------------------------------------
                              114,397      101,347      617,240      569,252
    -------------------------------------------------------------------------
    Real estate and other
      Sale of real estate         270            -          270            -
      Other                     2,619        1,204        8,205        4,946
    -------------------------------------------------------------------------
                                2,889        1,204        8,475        4,946
    -------------------------------------------------------------------------
                              117,286      102,551      625,715      574,198
    -------------------------------------------------------------------------

    Costs, expenses and other income
    Racing and gaming
      Pari-mutuel purses,
       awards and other        42,278       37,675      259,916      276,160
      Gaming purses, taxes
       and other                6,322        6,059       28,324        6,059
      Operating costs          63,583       61,172      273,011      237,586
      General and
       administrative          17,849       19,069       68,816       67,004
    -------------------------------------------------------------------------
                              130,032      123,975      630,067      586,809
    -------------------------------------------------------------------------

    Real estate and other
      Cost of real estate
       sold                       270            -          270            -
      Operating costs           2,003        1,703        4,918        3,839
      General and
       administrative             152          158          713          191
    -------------------------------------------------------------------------
                                2,425        1,861        5,901        4,030
    -------------------------------------------------------------------------
    Predevelopment,
     pre-opening and other
     costs                      1,101        5,060        2,866       10,602
    Depreciation and
     amortization              12,697       11,372       42,297       38,989
    Interest expense, net      15,415       14,795       50,621       57,758
    Write-down (recovery)
     of long-lived assets        (136)      88,627        1,308       88,627
    Equity loss                   935          268        3,098          493
    Gain on sale of
     intangible assets
     related to The
     Meadows                        -     (126,374)           -     (126,374)
    -------------------------------------------------------------------------
                              162,469      119,584      736,158      660,934
    -------------------------------------------------------------------------
    Loss from continuing
     operations before
     income taxes             (45,183)     (17,033)    (110,443)     (86,736)
    Income tax benefit         (4,566)      (8,676)      (2,574)      (7,124)
    -------------------------------------------------------------------------
    Loss from continuing
     operations               (40,617)      (8,357)    (107,869)     (79,612)
    Loss from discontinued
     operations                (2,363)      (4,126)      (5,890)      (7,739)
    -------------------------------------------------------------------------
    Net loss                  (42,980)     (12,483)    (113,759)     (87,351)
    Other comprehensive
     income (loss)
      Foreign currency
       translation
       adjustment               1,123       (3,468)       5,245        3,104
      Change in fair value
       of interest rate
       swap                      (629)         (55)      (1,052)         (88)
      Change in net
       unrecognized
       pension actuarial
       gains                      585            -          585            -
    -------------------------------------------------------------------------
    Comprehensive loss     $  (41,901)  $  (16,006)  $ (108,981)  $  (84,335)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share for
     Class A Subordinate
     Voting Stock and
     Class B Stock:
      Basic and Diluted
        Continuing
         operations        $    (0.36)  $    (0.08)  $    (0.99)  $    (0.74)
        Discontinued
         operations             (0.02)       (0.04)       (0.05)       (0.07)
    -------------------------------------------------------------------------
    Loss per share         $    (0.38)  $    (0.12)  $    (1.04)  $    (0.81)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of
     shares of Class A
     Subordinate Voting
     Stock and Class B
     Stock outstanding
     during the period
     (in thousands):
      Basic and Diluted       113,886      107,510      109,219      107,461
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



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

                              Three months ended           Years ended
                                 December 31,              December 31,
                           --------------------------------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
                                         (restated                 (restated
                                          - note 7)                 - note 7)

    Cash provided from
     (used for):

    Operating activities of
     continuing operations
    Net loss from
     continuing operations $  (40,617)  $   (8,357)  $ (107,869)  $  (79,612)
    Items not involving
     current cash flows         9,113      (31,235)      39,648       10,547
    -------------------------------------------------------------------------
                              (31,504)     (39,592)     (68,221)     (69,065)
    Changes in non-cash
     working capital
     balances                  17,461       19,591        6,399        5,223
    -------------------------------------------------------------------------
                              (14,043)     (20,001)     (61,822)     (63,842)
    -------------------------------------------------------------------------

    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                (18,131)     (19,800)     (74,382)     (80,422)
    Other asset disposals
     (additions)               (1,512)       2,237       (4,690)       2,539
    Proceeds on disposal
     of real estate
     properties and
     fixed assets               2,438        2,950        7,681        6,428
    Proceeds on real
     estate sold to related
     parties                       22            -       88,031        5,578
    -------------------------------------------------------------------------
                              (17,183)     157,164       16,640       96,553
    -------------------------------------------------------------------------

    Financing activities of
     continuing operations
    Proceeds from bank
     indebtedness              32,891        1,015       73,831       19,144
    Proceeds from
     indebtedness and
     long-term debt with
     parent                    25,844       22,665       52,362       77,294
    Proceeds from long-term
     debt                       9,474          448       13,819       12,582
    Repayment of bank
     indebtedness             (19,617)     (34,429)     (41,132)     (39,929)
    Repayment of
     indebtedness and
     long-term debt with
     parent                      (438)    (111,800)      (3,026)    (111,800)
    Repayment of long-term
     debt                     (22,259)      (3,325)     (73,578)     (15,800)
    Issuance of share
     capital                   19,581            -       19,581            -
    -------------------------------------------------------------------------
                               45,476     (125,426)      41,857      (58,509)
    -------------------------------------------------------------------------

    Effect of exchange rate
     changes on cash and
     cash equivalents              39          402          170         (104)
    -------------------------------------------------------------------------
    Net cash flows
     provided from
     (used for) continuing
     operations                14,289       12,139       (3,155)     (25,902)
    -------------------------------------------------------------------------

    Cash provided from
     (used for)
     discontinued
     operations
    Operating activities of
     discontinued
     operations                (2,646)       1,286       (3,062)       3,572
    Investing activities of
     discontinued
     operations                  (970)      15,506       (4,417)      54,963
    Financing activities of
     discontinued
     operations                  (697)      (1,594)      (4,264)     (25,224)
    -------------------------------------------------------------------------

    Net cash flows provided
     from (used for)
     discontinued
     operations                (4,313)      15,198      (11,743)      33,311
    -------------------------------------------------------------------------

    Net increase (decrease)
     in cash and cash
     equivalents during
     the period                 9,976       27,337      (14,898)       7,409
    Cash and cash
     equivalents, beginning
     of period                 33,417       30,954       58,291       50,882
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $   43,393   $   58,291   $   43,393   $   58,291
    Less: Cash and cash
     equivalents, end of
     period of
    discontinued operations    (9,078)     (10,636)      (9,078)     (10,636)
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period of
    continuing operations  $   34,315   $   47,655   $   34,315   $   47,655
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



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


                                                              December 31,
                                                     ------------------------
                                                           2007         2006
    -------------------------------------------------------------------------
                                                                  (restated -
                                                                     notes 6
                                                                         & 7)
    -------------------------------------------------------------------------
                                   ASSETS
    -------------------------------------------------------------------------
    Current assets:
      Cash and cash equivalents                      $   34,315   $   47,655
      Restricted cash                                    28,264       29,061
      Accounts receivable                                35,335       32,010
      Due from parent                                     4,463        6,648
      Income taxes receivable                                 -          580
      Inventories                                         6,450        6,117
      Prepaid expenses and other                          9,991        8,593
      Assets held for sale                               35,658            -
      Discontinued operations                            71,970       20,266
    -------------------------------------------------------------------------
                                                        226,446      150,930
    -------------------------------------------------------------------------
    Real estate properties, net                         751,492      771,783
    Fixed assets, net                                    90,672       80,733
    Racing licenses                                     109,868      109,868
    Other assets, net                                    10,996        4,590
    Future tax assets                                    53,168       42,388
    Assets held for sale                                      -       36,063
    Discontinued operations                                   -       50,530
    -------------------------------------------------------------------------
                                                     $1,242,642   $1,246,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                     LIABILITIES AND SHAREHOLDERS' EQUITY
    -------------------------------------------------------------------------
    Current liabilities:
      Bank indebtedness                              $   39,214   $    6,515
      Accounts payable                                   65,533       69,302
      Accrued salaries and wages                          8,347        7,674
      Customer deposits                                   2,575        2,531
      Other accrued liabilities                          52,387       50,635
      Income taxes payable                                1,948            -
      Long-term debt due within one year                 32,727       85,724
      Due to parent                                     137,003        2,823
      Deferred revenue                                    4,339        4,211
      Liabilities related to assets held for sale         1,047            -
      Discontinued operations                            43,547       15,716
    -------------------------------------------------------------------------
                                                        388,667      245,131
    -------------------------------------------------------------------------
    Long-term debt                                       89,680       93,721
    Long-term debt due to parent                         67,107      147,144
    Convertible subordinated notes                      222,527      221,437
    Other long-term liabilities                          18,325       16,776
    Future tax liabilities                               93,623       90,059
    Liabilities related to assets held for sale               -        1,047
    Discontinued operations                                   -       30,952
    -------------------------------------------------------------------------
                                                        879,929      846,267
    -------------------------------------------------------------------------

    Shareholders' equity:
    Class A Subordinate Voting Stock
      (Issued: 2007 - 58,159; 2006 - 49,055)            339,435      319,087
    Class B Stock
      (Convertible into Class A Subordinate
       Voting Stock)
      (Issued: 2007 and 2006 - 58,466)                  394,094      394,094
    Contributed surplus                                  91,825       41,718
    Other paid-in-capital                                 2,031        1,410
    Accumulated deficit                                (510,057)    (396,298)
    Accumulated comprehensive income                     45,385       40,607
    -------------------------------------------------------------------------
                                                        362,713      400,618
    -------------------------------------------------------------------------
                                                     $1,242,642   $1,246,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    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.
        ("MEC" or 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 $113.8 million,
        $87.4 million and $105.3 million for the years ended December 31,
        2007, 2006 and 2005, respectively, and has an accumulated deficit of
        $510.1 million and a working capital deficiency of $162.2 million at
        December 31, 2007. At December 31, 2007, the Company had
        $209.4 million of debt that matures in 2008, including amounts owing
        under the Company's $40.0 million senior secured revolving credit
        facility with a Canadian financial institution, which is scheduled to
        mature on March 31, 2008 (refer to Note 9[i]), and its bridge loan
        facility of up to $80.0 million with a subsidiary of MI Developments
        Inc. ("MID"), the Company's controlling shareholder, which is
        scheduled to mature on May 31, 2008 (refer to Notes 15 and 18), and
        the Company's obligation to repay $100.0 million of indebtedness
        under the Gulfstream Park project financings with a subsidiary of MID
        by May 31, 2008 (refer to Note 15). 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, renewing or extending current
        financing arrangements and meeting its obligations with respect to
        secured and unsecured creditors, none of which is assured. If the
        Company is unable to repay its obligations when due, other current
        and long-term debt will also become due on demand as a result of
        cross-default provisions within loan agreements, unless the Company
        is able to obtain waivers or extensions. On September 12, 2007, the
        Company's Board of Directors approved a debt elimination plan
        designed to eliminate net debt by December 31, 2008 by generating
        funding from the sale of assets, entering into strategic transactions
        involving certain of the Company's racing, gaming and technology
        operations, and a possible future equity issuance. The success of the
        debt elimination plan is not assured. To address short-term liquidity
        concerns and provide sufficient time to implement the debt
        elimination plan, the Company arranged $100.0 million of funding,
        comprised of (i) a $20.0 million private placement of the Company's
        Class A Subordinate Voting Stock to Fair Enterprise Limited ("Fair
        Enterprise"), a company that forms part of an estate planning vehicle
        for the family of Frank Stronach, the Chairman and Interim Chief
        Executive Officer of the Company; and (ii) a short-term bridge loan
        facility of up to $80.0 million with a subsidiary of MID. Although
        the Company continues to implement its debt elimination plan, the
        sale of assets under the debt elimination plan is taking longer than
        originally contemplated. As a result, the Company will likely need to
        seek additional funds in the short-term from one or more possible
        sources. The availability of such additional funds is not assured
        and, if available, the terms thereof are not determinable at this
        time. These consolidated financial statements do not give effect to
        any adjustments to recorded amounts and their classification, 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 interim consolidated financial statements
        have been prepared in accordance with generally accepted accounting
        principles in the United States ("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 interim consolidated
        financial statements in conformity with U.S. GAAP requires management
        to make estimates and assumptions that affect the amounts reported in
        the interim consolidated financial statements and accompanying notes.
        Actual results could differ from these 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, 2006.

        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 revenues and operating results.

        Comparative Amounts

        Certain of the comparative amounts have been reclassified to reflect
        discontinued operations and assets held for sale.

        Impact of Recently Issued Accounting Standards

        In September 2006, the Financial Accounting Standards Board ("FASB")
        issued Statement of Financial Accounting Standard No. 157, Fair Value
        Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a
        framework for measuring fair value in accordance with U.S. GAAP and
        expands disclosures about fair value measurements. The provisions of
        SFAS 157 are effective for 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.

        In February 2007, the FASB issued Statement of Financial Accounting
        Standard No. 159, The Fair Value Option for Financial Assets and
        Liabilities ("SFAS 159"). SFAS 159 allows companies to voluntarily
        choose, at specified election dates, to measure certain financial
        assets and liabilities, as well as certain non-financial instruments
        that are similar to financial instruments, at fair value (the "fair
        value option"). The election is made on an instrument-by-instrument
        basis and is irrevocable. If the fair value option is elected for an
        instrument, SFAS 159 specifies that all subsequent changes in fair
        value for that instrument be reported in income. The provisions of
        SFAS 159 are effective for fiscal years beginning after
        November 15, 2007. The Company is currently reviewing SFAS 159, but
        has not yet determined the impact on the Company's consolidated
        financial statements.

    3.  Accounting Change

        Income Taxes

        In July 2006, the FASB issued FASB Interpretation 48, Accounting for
        Uncertainty in Income Taxes ("FIN 48"), which clarifies the
        accounting for uncertainty in income taxes recognized in an entity's
        financial statements in accordance with Statement of Financial
        Accounting Standards No. 109, Accounting for Income Taxes. FIN 48
        requires an entity to recognize the tax benefit of uncertain tax
        positions only when it is more likely than not, based on the
        position's technical merits, that the position would be sustained
        upon examination by the respective taxing authorities. The tax
        benefit is measured as the largest benefit that is more than
        fifty-percent likely of being realized upon final settlement with the
        respective taxing authorities. Effective January 1, 2007, the Company
        adopted the provisions of FIN 48 on a retroactive basis, which did
        not result in any charge to accumulated deficit as a cumulative
        effect of an accounting change or adjustment to the liability for
        unrecognized tax benefits. Accordingly, the adoption of FIN 48 did
        not have an effect on the Company's results of operations or
        financial position. It is the Company's policy to account for
        interest and penalties associated with income tax obligations as a
        component of income tax expense.

        The Company accounts for uncertain tax positions in accordance with
        FIN 48. Accordingly, the Company reports a liability for unrecognized
        tax benefits resulting from uncertain tax positions taken or expected
        to be taken in a tax return. The Company recognizes interest and
        penalties, if any, related to unrecognized tax benefits in income tax
        expense. The Company did not recognize any interest and penalties as
        provision for income taxes in the accompanying consolidated
        statements of operations and comprehensive loss for the three months
        and year ended December 31, 2007 as the maximum interest and penalty
        period have elapsed.

        As of December 31, 2007, the Company had $4.0 million of unrecognized
        income tax benefits and $0.3 million of related accrued interest and
        penalties (net of any tax effect) and $0.3 million of foreign
        exchange, $2.6 million of which could ultimately reduce its effective
        tax rate. The Company is currently under audit in Austria. Although
        it is not possible to accurately predict the timing of the conclusion
        of the audit, the Company anticipates that the Austrian audit
        relating to the years 2002 through 2005 will be completed before the
        end of 2008. Given the stage of completion of the audit, the Company
        is unable to estimate the range of any possible changes to the
        unrecognized income tax benefit the audit may cause over the next
        year. In addition, the Company does not anticipate any other
        significant changes to unrecognized income tax benefits over the next
        year.

        A reconciliation of the beginning and ending amount of unrecognized
        tax benefits is as follows:

        Unrecognized tax benefits balance at January 1, 2007      $    4,000
        Gross increases for tax positions of prior years                   -
        Gross decreases for tax positions of prior years                   -
        Settlements                                                        -
        Lapse of statement of limitations                                  -
        Foreign currency impact                                          329
        ---------------------------------------------------------------------
        Unrecognized tax benefits balance at December 31, 2007    $    4,329
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As of January 1, 2008, the following tax years remained subject to
        examination by the major tax jurisdictions:

        Major Jurisdictions                                    Open Years
        ---------------------------------------------------------------------
        Austria                                            2002 through 2007
        Canada                                             2001 through 2007
        United States                                      2003 through 2007
        ---------------------------------------------------------------------

        The Company is subject to income taxes in many state and local taxing
        jurisdictions in the United States and Canada, many of which are
        still open to tax examinations. Management does not believe these
        represent a significant financial exposure to the Company.

    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 for a total cash purchase price, including
        transaction costs, of $4.3 million. 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. The results of
        AmTote have been consolidated from July 26, 2006 and are included in
        the racing and gaming - PariMax 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                                                  12,691
        Other assets                                                     127
        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
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  Sale of The Meadows

        On November 14, 2006, the Company completed the sale of all of the
        outstanding shares of Washington Trotting Association, Inc., Mountain
        Laurel Racing, Inc. and MEC Pennsylvania Racing, Inc. (collectively
        "The Meadows"), each a wholly-owned subsidiary of the Company,
        through which the Company owned and operated The Meadows, a
        standardbred racetrack in Pennsylvania, to 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"). On closing, the Company received
        cash consideration of $171.8 million, net of transaction costs of
        $3.2 million, and a holdback agreement, under which $25.0 million is
        payable to the Company over a five-year period, subject to offset for
        certain indemnification obligations. Under the terms of the holdback
        agreement, 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. The Company also
        entered into a racing services agreement whereby the Company pays
        $50 thousand per annum and continues to operate, for its own account,
        the racing operations at The Meadows for at least five years. On
        December 12, 2007, Cannery Casino Resorts, LLC, the parent company of
        Millennium-Oaktree, announced it had entered into an agreement to
        sell Millennium-Oaktree to Crown Limited. If the deal is consummated,
        either party to the racing services agreement will have the option to
        terminate the arrangement. The transaction proceeds of $171.8 million
        were allocated to the assets of The Meadows as follows: (i)
        $7.2 million was allocated to the long-lived assets representing the
        fair value of the underlying real estate and fixed assets based on
        appraised values; and (ii) $164.6 million was allocated to the
        intangible assets representing the fair value of the racing/gaming
        licenses based on applying the residual method to determine the fair
        value of the intangible assets. On the closing date of the
        transaction, the net book value of the long-lived assets was
        $18.4 million, resulting in a non-cash impairment loss of
        $11.2 million relating to the long-lived assets, and the net book
        value of the intangible assets was $32.6 million, resulting in a gain
        of $132.0 million on the sale of the intangible assets. This gain was
        reduced by $5.6 million, representing the net present value of the
        operating losses expected over the term of the racing services
        agreement. Accordingly, the net gain recognized by the Company on the
        disposition of the intangible assets was $126.4 million for the year
        ended December 31, 2006.

        Given that the racing services agreement was effectively a lease of
        property, plant and equipment and since the amount owing under the
        holdback note is to be paid to the extent of available cash flows as
        defined in the holdback agreement, the Company was deemed to have
        continuing involvement with the long-lived assets for accounting
        purposes. As a result, the sale of The Meadows' real estate and fixed
        assets was precluded from sales recognition and not accounted for as
        a sale-leaseback, but rather using the financing method of accounting
        under U.S. GAAP. Accordingly, $12.8 million of the proceeds were
        deferred, representing the fair value of long-lived assets of
        $7.2 million and the net present value of the operating losses
        expected over the term of the racing services agreement of
        $5.6 million, and recorded as "other long-term liabilities" on the
        consolidated balance sheet at the date of completion of the
        transaction. The deferred proceeds are being 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.
        For the year ended December 31, 2007, the Company recognized
        $1.8 million of the deferred proceeds in income, which is recorded as
        an offset to racing and gaming "general and administrative" expenses
        on the accompanying consolidated statements of operations and
        comprehensive loss. With respect to the $25.0 million holdback
        agreement, the Company will recognize this consideration upon the
        settlement of the indemnification obligations and as payments are
        received (refer to Note 16(l)).

    6.  Assets Held for Sale

        (a) In November and December 2007, the Company entered into sale
            agreements for three parcels of excess real estate comprising
            approximately 825 acres in Porter, New York, subject to the
            completion of due diligence by the purchasers and customary
            closing conditions. These sale transactions were completed on
            December 28, 2007, January 7, 2008 and January 10, 2008 for total
            cash consideration of $1.7 million, net of transaction costs. At
            December 31, 2007, the two parcels of real estate for which the
            sale had not been completed are reflected as "assets held for
            sale" on the consolidated balance sheets. The net proceeds
            received on closing were used to repay a portion of the bridge
            loan facility of up to $80.0 million with a subsidiary of MID
            subsequent to year end.

        (b) On December 21, 2007, the Company entered into an agreement to
            sell 225 acres of excess real estate located in Ebreichsdorf,
            Austria to a subsidiary of Magna International Inc. ("Magna"), a
            related party, for a purchase price of Euros 20.0 million
            (U.S. $29.4 million), subject to customary closing adjustments.
            The closing of the transaction is expected to occur during the
            first quarter of 2008 following the satisfaction of customary
            closing conditions including the receipt of all necessary
            regulatory approvals. Of the net proceeds that are expected to be
            received on closing, Euros 7.5 million is required to be used to
            repay a portion of a Euros 15.0 million term loan facility and
            the remaining portion of the net proceeds is required to be used
            to repay a portion of the bridge loan facility of up to
            $80.0 million with a subsidiary of MID.

        (c) On August 9, 2007, the Company announced its intention to sell
            real estate properties located in Dixon, California and Ocala,
            Florida. The Company has initiated an active program to locate
            potential buyers for these properties and has listed the
            properties for sale with a real estate broker. Accordingly, at
            December 31, 2007, these real estate properties are classified as
            "assets held for sale" on the consolidated balance sheets in
            accordance with Statement of Financial Accounting Standard No.
            144, Accounting for Impairment or Disposal of Long-Lived Assets
            ("SFAS 144"). In accordance with the terms of the Company's
            bridge loan agreement with a subsidiary of MID, the Company is
            required to use the net proceeds from the sale of these real
            estate properties to pay down principal amounts outstanding under
            the bridge loan and the amount of such net proceeds will
            permanently reduce the committed amount of the bridge loan.

        (d) The Company's assets held for sale and related liabilities at
            December 31, 2007 and 2006 are shown below. All assets held for
            sale and related liabilities are classified as current at
            December 31, 2007 as the assets and related liabilities described
            in sections (a) through (c) above are expected to be sold within
            one year from the consolidated balance sheet date.

                                                              December 31,
                                                     ------------------------
                                                           2007         2006
            -----------------------------------------------------------------
                                         ASSETS
            -----------------------------------------------------------------
            Real estate properties, net
              Dixon, California                      $   19,139   $   18,711
              Ocala, Florida                              8,407        8,427
              Ebreichsdorf, Austria                       6,619        5,935
              Porter, New York(i)                         1,493        2,990
            -----------------------------------------------------------------
                                                     $   35,658   $   36,063
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                       LIABILITIES
            -----------------------------------------------------------------
            Future tax liabilities                   $    1,047   $    1,047
            -----------------------------------------------------------------
            -----------------------------------------------------------------

           (i) The Company entered into sale agreements for three parcels of
               excess real estate comprising 825 acres in Porter, New York.
               The Company recognized a non-cash impairment loss of
               $1.3 million for the year ended December 31, 2007, which
               represents the excess of the carrying value of the assets over
               the fair value. The impairment loss is included in the real
               estate and other operations segment.

        (e) On September 12, 2007, the Company's Board of Directors approved
            a debt elimination plan designed to eliminate net debt by
            generating funding from the sale of certain assets, entering into
            strategic transactions involving the Company's racing, gaming and
            technology operations, and a possible future equity issuance
            (refer to Note 1). In addition to the sales of real estate
            described in sections (a) through (c) above, the debt elimination
            plan also contemplates the sale of real estate properties located
            in Aventura and Hallandale, Florida, both adjacent to Gulfstream
            Park and in Anne Arundel County, Maryland, adjacent to Laurel
            Park. The Company also intends to explore selling its membership
            interests in the mixed-use developments at Gulfstream Park in
            Florida and Santa Anita Park in California that the Company is
            pursuing under joint venture arrangements with Forest City
            Enterprises, Inc. ("Forest City") and Caruso Affiliated,
            respectively. The Company also intends to sell Great Lakes Downs
            in Michigan; Thistledown in Ohio; and its interest in Portland
            Meadows in Oregon. The Company also intends to explore other
            strategic transactions involving other racing, gaming and
            technology operations, including: partnerships or joint ventures
            in respect of the existing gaming facility at Gulfstream Park;
            partnerships or joint ventures in respect of potential
            alternative gaming operations at certain of the Company's other
            racetracks that currently do not have gaming operations; the
            possible sale of Remington Park, a horse racetrack and gaming
            facility in Oklahoma City; and transactions involving the
            Company's technology operations, which may include one or more of
            the assets that comprise the Company's PariMax business.

           (i)   For those properties that have not been classified as held
                 for sale as noted in sections (a) through (c) above, the
                 Company has determined that they do not meet all of criteria
                 required in SFAS 144 for the following reasons and,
                 accordingly, these assets continue to be classified as held
                 and used at December 31, 2007:

                 Real estate properties located in Aventura and Hallandale,
                 Florida (adjacent to Gulfstream Park): At December 31, 2007,
                 the Company had not established a selling price for these
                 properties since it had not completed its market price
                 analysis. Also, the Company had not initiated an active
                 program to locate a buyer for these assets as the properties
                 had not been listed for sale with an external agent and were
                 not being actively marketed for sale.

                 Real estate property in Anne Arundel County, Maryland
                 (adjacent to Laurel Park): At December 31, 2007, the Company
                 had not established a selling price for this property since
                 it had not completed its market price analysis. Also, the
                 Company had not initiated an active program to locate a
                 buyer for this asset as the property had not been listed for
                 sale with an external agent and was not being actively
                 marketed for sale. In addition, given the near term
                 potential for a legislative change to permit video lottery
                 terminals at Laurel Park and the possible effect on the
                 Company's development plans for the overall property is such
                 that at December 31, 2007, the Company does not expect to
                 complete the sale of this asset within one year.

                 Membership interest in the mixed-use development at
                 Gulfstream Park with Forest City and membership interest in
                 the mixed-use development at Santa Anita Park with Caruso
                 Affiliated: At December 31, 2007, the Company had not
                 established a selling price for either of these assets since
                 it had not completed its market analysis and independent
                 appraisal process. As such, these assets were not being
                 actively marketed for sale at a price that is reasonable in
                 relation to their current fair value.

           (ii)  The following assets have met the criteria of SFAS 144 to be
                 reflected as assets held for sale and also met the
                 requirements to be reflected as discontinued operations at
                 December 31, 2007 and have been presented accordingly:

                 Great Lakes Downs: In October 2007, the property was listed
                 for sale with a real estate broker. The 2007 race meet at
                 Great Lakes Downs concluded on November 4, 2007 and the
                 facility was then closed. In order to facilitate the sale of
                 this property, the Company re-acquired Great Lakes Downs
                 from Richmond Racing Co., LLC in December 2007 pursuant to a
                 prior existing option right.

                 Thistledown and Remington Park: In September 2007, the
                 Company engaged a U.S. investment bank, to assist in
                 soliciting potential purchasers and managing the sale
                 process for certain assets contemplated in the debt
                 elimination plan. In October 2007, the U.S. investment bank
                 initiated an active program to locate potential buyers and
                 began marketing these assets for sale.

                 Portland Meadows: In November 2007, the Company initiated an
                 active program to locate potential buyers and began
                 marketing this asset for sale.

    7.  Discontinued Operations

        (a) For the year ended December 31, 2007

            As part of the debt elimination plan approved by the Board of
            Directors (refer to Note 6(e)), the Company intends to sell Great
            Lakes Downs in Michigan, Thistledown in Ohio, Portland Meadows in
            Oregon and Remington Park in Oklahoma City. Accordingly, at
            December 31, 2007, these operations have been classified as
            discontinued operations.

        (b) For the year ended December 31, 2006

           (i)   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, 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 in
                 contributed surplus on the consolidated balance sheets.

           (ii)  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.

           (iii) 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.

        (c) The Company's results of operations related to discontinued
            operations for the three months and years ended December 31, 2007
            and 2006 are as follows:

                                Three months ended            Years ended
                                    December 31,              December 31,
                           --------------------------------------------------
                                 2007         2006         2007         2006
            -----------------------------------------------------------------
            Results of
             Operations
            Revenues       $   28,860   $   31,002   $  122,200   $  142,534
            Costs and
             expenses          29,681       31,347      120,873      133,303
            -----------------------------------------------------------------
                                 (821)        (345)       1,327        9,231
            Predevelopment,
             pre-opening
             and other
             costs                343        1,681          447        3,557
            Depreciation
             and
             amortization         515        1,388        3,976        7,069
            Interest
             expense, net         652          872        2,794        4,984
            Equity loss            32            -            -            -
            Impairment loss
             recorded on
             disposition            -            -            -        1,202
            -----------------------------------------------------------------
            Loss before gain
             on disposition    (2,363)      (4,286)      (5,890)      (7,581)
            Gain on
             disposition            -            -            -        1,495
            -----------------------------------------------------------------
            Loss before
             income taxes      (2,363)      (4,286)      (5,890)      (6,086)
            Income tax
             expense
             (recovery)             -         (160)           -        1,653
            -----------------------------------------------------------------
            Loss from
             discontinued
             operations    $   (2,363)  $   (4,126)  $   (5,890)  $   (7,739)
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            The Company's assets and liabilities related to discontinued
            operations at December 31, 2007 and 2006 are shown below. All
            assets and liabilities related to discontinued operations are
            classified as current at December 31, 2007 as they are expected
            to be sold within one year from the consolidated balance sheet
            date.

                                                              December 31,
                                                     ------------------------
                                                           2007         2006
            -----------------------------------------------------------------
                                         ASSETS
            -----------------------------------------------------------------
            Current assets:
              Cash and cash equivalents              $    9,078   $   10,636
              Restricted cash                             7,069        5,133
              Accounts receivable                         3,424        3,939
              Inventories                                   327          267
              Prepaid expenses and other                  1,341          291
              Real estate properties, net                39,094            -
              Fixed assets, net                          11,531            -
              Other assets, net                             106            -
            -----------------------------------------------------------------
                                                         71,970       20,266
            -----------------------------------------------------------------
            Real estate properties, net                       -       38,048
            Fixed assets, net                                 -       12,408
            Other assets, net                                 -           74
            -----------------------------------------------------------------
                                                              -       50,530
            -----------------------------------------------------------------
                                                     $   71,970   $   70,796
            -----------------------------------------------------------------
            -----------------------------------------------------------------

                                       LIABILITIES
            -----------------------------------------------------------------
            Current liabilities:
              Accounts payable                       $    8,964   $    6,803
              Accrued salaries and wages                    797        1,118
              Other accrued liabilities                   5,091        5,593
              Long-term debt due within one year             23           30
              Due to parent (refer to Note 15(a)(v))        397          285
              Deferred revenue                            1,257        1,887
              Long-term debt                                115            -
              Long-term debt due to parent (refer
               to Note 15(a)(v))                         26,143            -
              Other long-term liabilities                   760            -
            -----------------------------------------------------------------
                                                         43,547       15,716
            -----------------------------------------------------------------
            Long-term debt                                    -          138
            Long-term debt due to parent (refer to
             Note 15(a)(v))                                   -       30,106
            Other long-term liabilities                       -          708
            -----------------------------------------------------------------
                                                              -       30,952
            -----------------------------------------------------------------
                                                     $   43,547   $   46,668
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    8.  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,
                           --------------------------------------------------
                              2007(i)      2006(ii)     2007(i)      2006(ii)
        ---------------------------------------------------------------------
        Porter, New York
         real estate       $     (136)  $        -   $    1,308   $        -
        Magna Racino(TM)            -       76,166            -       76,166
        The Meadows                 -       11,182            -       11,182
        Residential
         development real
         estate                     -        1,279            -        1,279
        ---------------------------------------------------------------------
                           $     (136)  $   88,627   $    1,308   $   88,627
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)  The Company entered into sale agreements for three parcels of
             excess real estate comprising 825 acres in Porter, New York. The
             Company recognized a non-cash impairment loss of $1.3 million
             for the year ended December 31, 2007, which represents the
             excess of the carrying value of the assets over the fair value,
             less selling costs. The impairment loss is included in the real
             estate and other operations segment (refer to Note 6(a)).

        (ii) 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. Expectations regarding revenue growth and new customer
             acquisition had not materialized as revenue growth for the year
             ended December 31, 2006 had leveled off, which was reflected in
             the future revenue projections of Magna Racino(TM)'s 2007
             business plan. Based on Magna Racino(TM)'s 2007 business plan,
             its estimated undiscounted cash flows were not sufficient to
             recover the carrying value of its long-lived assets.
             Accordingly, a non-cash impairment charge of $76.2 million was
             required of the long-lived assets for the year ended
             December 31, 2006, which is included in the racing and gaming
             operations segment.

             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). The Company recognized a
             non-cash impairment loss of $1.3 million related to this parcel
             of residential development land for the year ended December 31,
             2006, which is included in the real estate and other operations
             segment (refer to Note 15(g)).

             On November 14, 2006, the Company completed The Meadows
             transaction and 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 year ended December 31, 2006, which is included
             in the racing and gaming operations segment (refer to Note 5).

    9.  Bank Indebtedness

        The Company's bank indebtedness consists of the following short-term
        bank loans:
                                                              December 31,
                                                     ------------------------
                                                           2007         2006
        ---------------------------------------------------------------------
        $40.0 million senior secured revolving
         credit facility(i)                          $   34,891   $        -
        $7.5 million revolving loan facility(ii)          3,499        6,515
        $3.0 million revolving credit facility(iii)         824            -
        ---------------------------------------------------------------------
                                                     $   39,214   $    6,515
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        (i)   The Company has a $40.0 million senior secured revolving credit
              facility with a Canadian financial institution, which was
              scheduled to mature on January 31, 2008, but subsequent to year
              end was amended and extended to March 31, 2008 (refer to
              Note 18(b)). 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. At
              December 31, 2007, the Company had borrowings of $34.9 million
              (December 31, 2006 - nil) under the credit facility and had
              issued letters of credit totaling $4.3 million (December 31,
              2006 - $24.7 million), such that $0.8 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,
              2007 was 11.0% (December 31, 2006 - nil).

        (ii)  A wholly-owned subsidiary of the Company that owns and operates
              Santa Anita Park has a $7.5 million revolving loan agreement
              under its existing credit facility with a U.S. financial
              institution, which was scheduled to mature on October 8, 2007,
              but on October 2, 2007, was amended and extended to
              October 31, 2012. The revolving loan agreement requires that
              the aggregate outstanding principal be fully repaid for a
              period of 60 consecutive days during each year, 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, 2007, the Company had borrowings of $3.5 million
              (December 31, 2006 - $6.5 million) under the revolving loan
              agreement. 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, 2007 was 7.3% (December 31, 2006 -
              8.3%).

        (iii) On May 11, 2007, a wholly-owned subsidiary of the Company,
              AmTote, completed a refinancing of its existing credit
              facilities with a U.S. financial institution. The refinancing
              includes: (i) a $3.0 million revolving credit facility to
              finance working capital requirements, available by way of U.S.
              dollar loans and letters of credit, bearing interest at LIBOR
              plus 2.75%, with a maturity date of May 1, 2008; (ii) a
              $4.2 million term loan for the repayment of AmTote's debt
              outstanding under its existing term loan facilities, bearing
              interest at LIBOR plus 3.0%, with a maturity date of May 11,
              2011 (refer to Note 10); and (iii) an equipment loan of up to
              $10.0 million to finance up to 80% of eligible capital costs
              related to tote service contracts, bearing interest at LIBOR
              plus 3.0%, with a maturity date of May 11, 2012 (refer to
              Note 10). Loans under the credit facilities are secured by a
              first charge on the assets and a pledge of stock of AmTote.

              At December 31, 2007, the Company had borrowed $0.8 million
              under the $3.0 million revolving credit facility, which has a
              weighted average interest rate at December 31, 2007 of 7.7%.

        (iv)  At December 31, 2007, the Company is in compliance with all of
              the above noted loan agreements and related covenants.

    10. Long-term Debt

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

                                                               December 31,
                                                         --------------------
                                                             2007       2006
            -----------------------------------------------------------------
            Term loan facility, amended on
             October 2, 2007, bearing interest at LIBOR
             plus 2.0% per annum (7.2% at December 31,
             2007; 6.7% at December 31, 2006) with a
             maturity date of October 31, 2012. 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. The term loan facility contains
             cross-default provisions to the Company's
             senior secured revolving credit facility.
             At December 31, 2007, the term loan is fully
             drawn and is repayable in monthly principal
             amounts of $375 thousand until maturity.     $ 66,375  $ 64,167

            Term loan facility of Euros 15.0 million,
             amended on December 16, 2007, bearing
             interest at the three-month Euro Interbank
             Offered Rate plus 2.0% per annum (6.8% at
             December 31, 2007; 5.5% at December 31,
             2006) and is secured by a first and second
             mortgage on land in Austria owned by the
             European subsidiary. At December 31, 2007,
             the term loan is fully drawn and is
             repayable in two installments of
             Euros 7.5 million, due on each of
             February 29, 2008 and December 31, 2008
             (refer to Note 18(d)).                         22,073    19,794

            Capital leases (imputed interest rate of 8.5%)
             maturing April 1, 2027, secured by
             buildings and improvements at Lone Star
             Park at Grand Prairie.                         15,380    15,519

            Term loan facility, bearing interest at
             either the U.S. Prime rate or LIBOR plus 2.6%
             per annum (7.3% at December 31, 2007; 8.0%
             at December 31, 2006) 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 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 The
             Maryland Jockey Club ("MJC").                   6,343     6,874

            Bank term loan of up to Euros 4.0 million,
             amended on July 24, 2007, bearing interest
             at Euro Overnight Index Average rate ("EONIA")
             plus 3.0% per annum (6.6% at December 31,
             2007) with a maturity date of July 31, 2008.
             The bank term loan at December 31, 2006
             bore interest at EONIA 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 (refer to Note 18(c)).            3,580     5,938

            Term loan facility of $4.2 million, bearing
             interest at LIBOR plus 3.0% per annum (8.0%
             at December 31, 2007) with a maturity date
             of May 11, 2011. The term loan is repayable
             in monthly principal and interest payments.
             The loan is secured by a first charge on the
             assets and a pledge of stock of AmTote.         3,301         -

            Term loan facility, bearing interest at 7.7%
             per annum, with a maturity date of
             June 7, 2017. On 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.      3,053     4,030

            Equipment loan of up to $10.0 million to finance
             up to 80% of eligible capital costs related to
             tote service contracts, bearing interest at
             LIBOR plus 3.0% per annum (8.2% at
             December 31, 2007) with a maturity date of
             May 11, 2012. The equipment loan is
             repayable in monthly principal and interest
             payments. The loan is secured by a first
             charge on the assets and a pledge of stock
             of AmTote.                                      1,974         -

            Other loans of various subsidiaries,
             including equipment loans, with interest
             rates ranging from 4.9% to 7.0%.                  328       808

            Term loan facility of Euros 15.0 million,
             which bore interest at 4.0% per annum and
             was fully repaid on February 9, 2007.               -    19,794

            Obligation to pay $18.3 million on exercise
             of either the put or call option to acquire
             the remaining voting and equity interests
             in MJC, which bore interest at the six-month
             LIBOR. The option was exercised on
             September 24, 2007 and the obligation was
             fully repaid on October 5, 2007.                    -    18,312

            Construction loan facility of up to
             $16.6 million with the general contractor
             for the reconstruction of the racetrack
             facilities at Gulfstream Park, which bore
             interest at the U.S. Prime rate plus 0.4%
             per annum and was fully repaid on
             May 17, 2007.                                       -    10,617

            Term loan facility, which bore interest at
             either the U.S. Prime rate or LIBOR plus
             2.6% per annum and was fully repaid on
             February 16, 2007.                                  -     9,187

            Term loan facilities of $1.75 million and
             $1.25 million, which bore interest at the
             U.S. Prime rate plus 1.25% per annum and
             were fully repaid on May 11, 2007.                  -     2,448

            Revolving term loan facility of $3.0 million,
             which bore interest at the U.S. Prime rate
             plus 1.0% per annum and was fully repaid on
             May 11, 2007.                                       -     1,957
            -----------------------------------------------------------------
                                                           122,407   179,445
            Less: due within one year                      (32,727)  (85,724)
            -----------------------------------------------------------------
                                                          $ 89,680  $ 93,721
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            At December 31, 2007, 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, 2007 was 9.2% (December 31, 2006 - 8.3%).

        (b) Future principal repayments on long-term debt at
            December 31, 2007 are as follows:

                                        Continuing  Discontinued
                                        operations   operations        Total
            -----------------------------------------------------------------
            2008                        $   32,727   $       23   $   32,750
            2009                             7,026           23        7,049
            2010                             7,079           13        7,092
            2011                             8,348            8        8,356
            2012                            49,910            8       49,918
            Thereafter                      17,317           63       17,380
            -----------------------------------------------------------------
                                        $  122,407   $      138   $  122,545
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    11. Capital Stock

        (a) Changes in Class A Subordinate Voting Stock and Class B Stock for
            the three months and year ended December 31, 2007 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, 2006        49,055 $319,087     58,466 $394,094    107,521 $713,181
    Issued under
     the Long-term
     Incentive
     Plan               204      741          -        -        204      741
    -------------------------------------------------------------------------
    Issued and
     outstanding
     at March 31,
     2007 and June
     30, 2007        49,259  319,828     58,466  394,094    107,725  713,922
    Issued under
     the Long-term
     Incentive
     Plan                 1        5          -        -          1        5
    -------------------------------------------------------------------------
    Issued and
     outstanding
     at September
     30, 2007        49,260  319,833     58,466  394,094    107,726  713,927
    Issued under
     the Long-term
     Incentive
     Plan                10       21          -        -         10       21
    Issued under
     the Private
     Placement(i)     8,889   19,581          -        -      8,889   19,581
    -------------------------------------------------------------------------
    Issued and
     outstanding
     at December
     31, 2007        58,159 $339,435     58,466 $394,094    116,625 $733,529
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

            (i)   On October 29, 2007, the Company completed a private
                  placement of the Company's Class A Subordinate Voting Stock
                  to Fair Enterprise and received proceeds of $19.6 million,
                  net of transaction costs of $0.4 million. Pursuant to the
                  terms of the subscription agreement entered into on
                  September 13, 2007, Fair Enterprise was issued 8.9 million
                  shares of Class A Subordinate Voting Stock at a price of
                  $2.25 per share. The price per share was set at the greater
                  of (i) 90% of the volume weighted average price per share
                  of Class A Subordinate Voting Stock on NASDAQ for the five
                  trading days commencing on September 13, 2007; and
                  (ii) U.S. $1.91, being 100% of the volume weighted average
                  price per share of Class A Subordinate Voting Stock on
                  NASDAQ for the five trading days immediately preceding
                  September 13, 2007 (the date of announcement of the private
                  placement). Prior to this transaction, Fair Enterprise
                  owned approximately 7.5% of the issued and outstanding
                  Class A Subordinate Voting Stock. Upon completion of the
                  private placement, the percentage of Class A Subordinate
                  Voting Stock beneficially owned by Fair Enterprise has
                  increased to approximately 21.6% of the issued and
                  outstanding Class A Subordinate Voting Stock, representing
                  approximately 10.8% of the equity of the Company. The
                  shares of Class A Subordinate Voting Stock issued pursuant
                  to the subscription agreement were issued and sold in a
                  private transaction exempt from registration under
                  Section 4(2) of the Securities Act of 1933, as amended.

        (b) 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 and convertible
            subordinated notes issued and outstanding at December 31, 2007
            were exercised or converted:

                                                            Number of Shares
            -----------------------------------------------------------------
            Class A Subordinate Voting Stock outstanding              58,159
            Class B Stock outstanding                                 58,466
            Options to purchase Class A Subordinate Voting Stock       4,950
            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
            -----------------------------------------------------------------
                                                                     151,675
            -----------------------------------------------------------------
            -----------------------------------------------------------------

    12. Long-term Incentive Plan

        The Company's Long-term Incentive Plan (the "Plan") (adopted in 2000
        and amended in 2007) 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 9.2 million shares of Class A Subordinate Voting Stock
        remain available to be issued under the Plan, of which 7.8 million
        are available for issuance pursuant to stock options and tandem stock
        appreciation rights and 1.4 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 awarded 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 were 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 of the Company. These performance shares vested
        over a six or eight month period to December 31, 2005 and were
        distributed, subject to certain conditions, in two equal
        installments. The first distribution occurred in March 2006 and the
        second distribution occurred in March 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. During 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, at December 31, 2006, there were 62,908
        vested performance shares remaining to be issued under this 2005
        incentive compensation arrangement. During the year ended
        December 31, 2007, all of these performance shares were issued with a
        stated value of $0.2 million. At December 31, 2007, there are no
        performance shares to be issued under the 2005 incentive compensation
        arrangement. The Company recognized no compensation expense related
        to the 2005 incentive compensation arrangement for the years ended
        December 31, 2007 and 2006.

        In 2006, the Company continued the incentive compensation program as
        described in the immediately preceding paragraph. The program was
        similar in all respects except that the 2006 performance shares
        vested over a 12-month period to December 31, 2006 and were
        distributed, subject to certain conditions, in March 2007. During the
        year ended December 31, 2006, 162,556 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 118,318 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. During the year ended
        December 31, 2007, 111,841 of these vested performance awards were
        issued with a stated value of $0.4 million and 6,477 were forfeited.
        Accordingly, at December 31, 2007, there are no performance shares to
        be issued under the 2006 incentive compensation arrangement. The
        Company recognized no compensation expense related to the 2006
        incentive compensation arrangement for the year ended
        December 31, 2007 (for the year ended December 31, 2006 -
        $0.8 million).

        At December 31, 2007, there is no unrecognized compensation expense
        related to these performance share award arrangements.

        During the year ended December 31, 2007, 40,942 shares with a stated
        value of $0.2 million (for the year ended December 31, 2006 - 25,896
        shares with a stated value of $0.2 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 subject to option is as follows
        (number of shares subject to option in the following table are
        expressed in whole numbers and have not been rounded to the nearest
        thousand):


                                                            Weighted Average
                                 Shares Subject to Option     Exercise Price
                                 -------------------------  -----------------
                                         2007        2006        2007   2006
            -----------------------------------------------------------------
            Balance outstanding at
             January 1              4,905,000   4,827,500       $6.08  $6.14
            Forfeited or expired(i)  (166,000)          -        6.74      -
            -----------------------------------------------------------------
            Balance outstanding at
             March 31               4,739,000   4,827,500        6.06   6.14
            Forfeited or expired(i)   (25,000)    (64,000)       5.71   6.80
            -----------------------------------------------------------------
            Balance outstanding at
             June 30                4,714,000   4,763,500        6.07   6.13
            Granted                   390,000           -        3.20      -
            Forfeited or expired(i)   (14,000)          -        5.20      -
            -----------------------------------------------------------------
            Balance outstanding at
             September 30           5,090,000   4,763,500        5.85   6.13
            Granted                         -     200,000           -   5.25
            Forfeited or expired(i)  (140,000)    (58,500)       6.92   7.13
            -----------------------------------------------------------------
            Balance at December 31  4,950,000   4,905,000       $5.82  $6.08
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            (i) For the three months and years ended December 31, 2007 and
                2006, options forfeited or expired were as a result of
                employment contracts being terminated and voluntary
                employee resignations. No options that were forfeited were
                subsequently reissued.

            Information regarding stock options outstanding is as follows:

                                   Options Outstanding   Options Exercisable
                                  ---------------------  --------------------
                                       2007       2006       2007       2006
            -----------------------------------------------------------------
            Number                4,950,000  4,905,000  4,406,334  4,412,968
            Weighted average
             exercise price           $5.82      $6.08      $5.99      $6.08
            Weighted average
             remaining
             contractual
             life (years)               3.6        4.2        2.9        3.8
            -----------------------------------------------------------------

            At December 31, 2007, the 4,950,000 stock options outstanding had
            exercise prices ranging from $2.78 to $7.00 per share. The
            average fair value of the stock option grants for the year ended
            December 31, 2007 was $1.36 (for the year ended December 31, 2006
            - $2.26) 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,
                                           ----------------------------------
                                                  2007   2006    2007   2006
            -----------------------------------------------------------------
            Risk free interest rates              N/A     4.4%   4.15%   4.4%
            Dividend yields                       N/A       -       -      -
            Volatility factor of expected
             market price of Class A
             Subordinate Voting Stock             N/A   0.510   0.559  0.510
            Weighted average expected
             life (years)                         N/A    4.00    5.00   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 year ended
            December 31, 2007 related to stock options was approximately
            $0.6 million (for the year ended December 31, 2006 -
            $1.4 million). At December 31, 2007, the total unrecognized
            compensation expense related to stock options is $0.4 million,
            which is expected to be recognized into expense over a period of
            3.7 years.

            For the year ended December 31, 2007, the Company recognized
            total compensation expense of $0.6 million (for the year ended
            December 31, 2006 - $2.3 million) relating to performance share
            awards, director compensation and stock options under the Plan.

    13. Other Paid-in-Capital

        Other paid-in-capital consists of accumulated stock option
        compensation expense less the fair value of stock options at the date
        of grant that have been exercised and reclassified to share capital.
        Changes in other paid-in-capital for the three months and years ended
        December 31, 2007 and 2006 are shown in the following table:

                                                          2007          2006
        ---------------------------------------------------------------------
        Balance at January 1                        $    1,410    $        -
        Stock-based compensation expense                    73           772
        ---------------------------------------------------------------------
        Balance at March 31                              1,483           772
        Stock-based compensation expense                    70           289
        ---------------------------------------------------------------------
        Balance at June 30                               1,553         1,061
        Stock-based compensation expense                   463           135
        ---------------------------------------------------------------------
        Balance at September 30                          2,016         1,196
        Stock-based compensation expense                    15           214
        ---------------------------------------------------------------------
        Balance at December 31                      $    2,031    $    1,410
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    14. 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,
                           --------------------------------------------------
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
                            Basic and    Basic and    Basic and    Basic and
                              Diluted      Diluted      Diluted      Diluted
        ---------------------------------------------------------------------
        Loss from
         continuing
         operations        $  (40,617)  $   (8,357)  $ (107,869)  $  (79,612)
        Loss from
         discontinued
         operations            (2,363)      (4,126)      (5,890)      (7,739)
        ---------------------------------------------------------------------
        Net loss           $  (42,980)  $  (12,483)  $ (113,759)  $  (87,351)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Weighted average
         number of shares
         outstanding:
          Class A
           Subordinate
           Voting Stock        55,420       49,044       50,753       48,995
          Class B Stock        58,466       58,466       58,466       58,466
        ---------------------------------------------------------------------
        Diluted weighted
         average number
         of shares
         outstanding          113,886      107,510      109,219      107,461
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Loss per share:
          Continuing
           operations      $    (0.36)  $    (0.08)  $    (0.99)  $    (0.74)
          Discontinued
           operations           (0.02)       (0.04)       (0.05)       (0.07)
        ---------------------------------------------------------------------
        Loss per share     $    (0.38)  $    (0.12)  $    (1.04)  $    (0.81)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        As a result of the net loss for the three months and year ended
        December 31, 2007, options to purchase 4,950,000 shares and notes
        convertible into 30,100,124 shares have been excluded from the
        computation of diluted loss per share since their effect is anti-
        dilutive.

        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.

    15. Transactions with Related Parties

        (a) The Company's indebtedness and long-term debt due to parent
            consists of the following:
                                                              December 31,
                                                     ------------------------
                                                           2007         2006
            -----------------------------------------------------------------
             Bridge loan facility(i)                 $   35,889   $        -
             Gulfstream Park project financing
               Tranche 1(ii)                            130,324      131,350
               Tranche 2(iii)                            24,304       18,617
               Tranche 3(iv)                             13,593            -
            -----------------------------------------------------------------
                                                        204,110      149,967
             Less: due within one year                 (137,003)      (2,823)
            -----------------------------------------------------------------
                                                     $   67,107   $  147,144
            -----------------------------------------------------------------
            -----------------------------------------------------------------
            (i)   Bridge Loan Facility

                  On September 12, 2007, the Company entered into a bridge
                  loan agreement with a subsidiary of MID pursuant to which
                  up to $80.0 million of financing will be made available to
                  the Company, subject to certain conditions. The bridge loan
                  matures on May 31, 2008, is non-revolving and bears
                  interest at a rate of LIBOR plus 10.0% per annum, which
                  increased to LIBOR plus 11.0% on December 31, 2007. If, by
                  February 29, 2008, the Company has not entered into
                  agreements acceptable to MID for asset sales that would
                  yield aggregate net proceeds sufficient to repay the entire
                  outstanding loan amount, the interest rate increases by an
                  additional 1.0% per annum. An arrangement fee of
                  $2.4 million was paid to MID on closing and there is a
                  commitment fee equal to 1.0% per annum (payable in arrears)
                  on the undrawn portion of the $80.0 million maximum loan
                  commitment. In addition, on February 29, 2008, there is an
                  additional arrangement fee equal to 1.0% of the maximum
                  principal amount then available under this facility. The
                  bridge loan is required to be repaid by way of the payment
                  of the net proceeds of any asset sale, any equity offering
                  (other than the Fair Enterprise private placement) or any
                  debt offering, subject to specified amounts required to be
                  paid to eliminate other prior-ranking indebtedness. The
                  bridge loan is secured by essentially all of the assets of
                  the Company and by guarantees provided by certain
                  subsidiaries of the Company. The guarantees are secured by
                  charges over the lands owned by Golden Gate Fields, Santa
                  Anita Park and Thistledown, and charges over the lands in
                  Dixon, California and Ocala, Florida, as well as by pledges
                  of the shares of certain of the Company's subsidiaries. The
                  bridge loan is also cross-defaulted to all other
                  obligations to MID and to other significant indebtedness of
                  the Company and certain of its subsidiaries. Pursuant to
                  the terms of the bridge loan, advances after
                  January 15, 2008 are subject to MID being satisfied that
                  the Company's $40.0 million senior secured revolving credit
                  facility will be further extended to at least
                  April 30, 2008 or that satisfactory refinancing of that
                  facility has been arranged. In addition, the first advance
                  that would result in the then outstanding loan amount under
                  the bridge loan exceeding $40.0 million is subject to MID
                  being satisfied that the Company is in compliance with, can
                  reasonably be expected to be able to implement, and is
                  using all commercially reasonable efforts to implement the
                  debt elimination plan.

                  During the year ended December 31, 2007, the Company
                  received loan advances of $38.0 million, incurred interest
                  expense and commitment fees of $1.2 million, and repaid
                  interest and commitment fees of $0.8 million, such that at
                  December 31, 2007, $38.4 million was outstanding under the
                  bridge loan facility, including $0.2 million of accrued
                  interest and commitment fees payable. During the year ended
                  December 31, 2007, the Company incurred $4.2 million of
                  loan origination costs and amortized $1.8 million of loan
                  origination costs, such that at December 31, 2007,
                  $2.5 million of net loan origination costs 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. The weighted average interest rate on
                  the borrowings outstanding under the bridge loan at
                  December 31, 2007 is 16.2%.

                  In July 2005, as amended on July 26, 2006 and
                  September 29, 2006, a subsidiary of MID provided to the
                  Company a non-revolving bridge loan facility of up to
                  $119.0 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, a third
                  arrangement fee of $0.5 million was paid when the third
                  tranche was made available to the Company and a fourth
                  arrangement fee of $0.2 million was paid in connection with
                  the amendments on September 29, 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 then
                  outstanding). This bridge loan facility was fully repaid on
                  November 14, 2006.

                  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 of
                  commitment fees and interest expense were incurred related
                  to the bridge loan, of which no amounts remained
                  outstanding at December 31, 2006.

            (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 15(a)(v)
                  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, interest was capitalized to the
                  principal balance of the loan. Commencing January 1, 2007,
                  the Company is required to 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 ("Palm Meadows") 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. During the year ended
                  December 31, 2007, the Company received no loan advances
                  (for the year ended December 31, 2006 - $24.9 million),
                  incurred interest expense of $13.7 million (for the year
                  ended December 31, 2006 - $12.8 million), repaid interest
                  of $12.5 million (for the year ended December 31, 2006 -
                  nil) and repaid outstanding principal of $2.5 million (for
                  the year ended December 31, 2006 - nil), such that at
                  December 31, 2007, $133.5 million was outstanding under
                  this project financing arrangement, including $1.1 million
                  of accrued interest payable. At December 31, 2007, net loan
                  origination costs of $3.2 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 September 12, 2007, certain amendments were made to the
                  Gulfstream Park and Remington Park project financings. In
                  return for the lender agreeing to waive any applicable
                  make-whole payments for repayments made under either of the
                  project financings prior to May 31, 2008, the required
                  amendments provide, among other things, that under the
                  Gulfstream Park project financing arrangement: (i)
                  Gulfstream Park's obligations are now guaranteed by the
                  Company; and (ii) $100.0 million of indebtedness under the
                  Gulfstream Park project financings must be repaid by
                  May 31, 2008.

            (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 an additional 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 second tranche of the Gulfstream
                  Park financing has a five-year term and 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 to the principal balance of the loan. Beginning
                  January 1, 2007, this tranche requires blended payments of
                  principal and interest based on a 25-year amortization
                  period commencing on that date. Advances related to phase
                  one of 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. During the
                  year ended December 31, 2007, the Company received loan
                  advances of $5.5 million (for the year ended December 31,
                  2006 - $18.8 million), incurred interest expense of
                  $2.4 million (for the year ended December 31, 2006 -
                  $0.4 million), repaid accrued interest of $2.2 million (for
                  the year ended December 31, 2006 - nil), and repaid
                  outstanding principal of $0.4 million (for the year ended
                  December 31, 2006 - nil), such that at December 31, 2007,
                  $24.7 million was outstanding under this project financing
                  arrangement, including $0.2 million of accrued interest
                  payable. At December 31, 2007, net loan origination costs
                  of $0.4 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.

            (iv)  Gulfstream Park Project Financing - Tranche 3

                  On December 22, 2006, certain of the Company's subsidiaries
                  that own and operate Gulfstream Park entered into an
                  additional amending agreement relating to the existing
                  Gulfstream Park project financing arrangement with a
                  subsidiary of MID by adding an additional 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. This third tranche of
                  the Gulfstream Park financing has a five-year term and
                  bears interest at a rate of 10.5% per annum, compounded
                  semi-annually. Prior to May 1, 2007, interest on this
                  tranche was capitalized to the principal balance of the
                  loan. Beginning May 1, 2007, this tranche requires blended
                  payments of principal and interest based on a
                  25-year amortization period commencing on that date.
                  Advances related to phase two of the slots facility are
                  made available by way of progress draw advances and there
                  is no prepayment penalty associated with this tranche. A
                  lender fee of $0.2 million (1% of the amount of this
                  tranche) was added to the principal amount of the loan as
                  consideration for the amendments on January 19, 2007, when
                  the first funding advance was made available to the
                  Company. During the year ended December 31, 2007, the
                  Company received loan advances of $13.8 million (for the
                  year ended December 31, 2006 - nil), incurred interest
                  expense of $1.0 million (for the year ended December 31,
                  2006 - nil), repaid accrued interest of $0.7 million (for
                  the year ended December 31, 2006 - nil), and repaid
                  outstanding principal of $0.2 million (for the year ended
                  December 31, 2006 - nil), such that at December 31, 2007,
                  $13.9 million was outstanding under this project financing
                  arrangement, including $0.1 million of accrued interest
                  payable. At December 31, 2007, net loan origination costs
                  of $0.3 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)  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, interest was capitalized to the principal
                  balance of the loan. Commencing January 1, 2007, the
                  Company is required to 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
                  Gulfstream Park lands and a charge over Palm Meadows
                  and contains cross-guarantee, cross-default and
                  cross-collateralization provisions. During the year
                  ended December 31, 2007, the Company received no loan
                  advances (for the year ended December 31, 2006 -
                  $12.5 million), incurred interest expense of $3.1 million
                  (for the year ended December 31, 2006 - $3.2 million),
                  repaid accrued interest of $2.8 million (for the year ended
                  December 31, 2006 - nil), and repaid outstanding principal
                  of $4.2 million (for the year ended December 31, 2006 -
                  $5.0 million), such that at December 31, 2007,
                  $27.7 million was outstanding under this project financing
                  arrangement, including $0.2 million of accrued interest
                  payable. At December 31, 2007, net loan origination costs
                  of $1.2 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. The
                  Remington Park project financing has been reflected in
                  discontinued operations (refer to Note 7).

            (vi)  Future principal repayments on the indebtedness and
                  long-term debt due to parent at December 31, 2007 are
                  scheduled to occur as follows:

                                        Continuing  Discontinued
                                        operations   operations        Total
                  -----------------------------------------------------------
                  2008                  $  137,003   $      397   $  137,400
                  2009                         882          180        1,062
                  2010                         977          199        1,176
                  2011                       1,083          220        1,303
                  2012                       1,199          244        1,443
                  Thereafter                62,966       25,300       88,266
                  -----------------------------------------------------------
                                        $  204,110   $   26,540   $  230,650
                  -----------------------------------------------------------
                  -----------------------------------------------------------

        (b) At December 31, 2007, $4.5 million (December 31, 2006 -
            $6.5 million) of the funds the Company placed into escrow with
            MID remains in escrow.

        (c) On December 21, 2007, the Company entered into an agreement to
            sell 225 acres of excess real estate located in Ebreichsdorf,
            Austria to a subsidiary of Magna for a purchase price of
            Euros 20.0 million (U.S. $29.4 million), subject to customary
            adjustments. The closing of the transaction is expected to occur
            during the first quarter of 2008 following the satisfaction of
            customary closing conditions, including the receipt of all
            necessary regulatory approvals. The net proceeds received on
            closing will be used to repay debt.

        (d) On October 29, 2007, the Company completed a private placement of
            the Company's Class A Subordinate Voting Stock to Fair Enterprise
            and received proceeds of $19.6 million, net of transaction costs
            of $0.4 million. Pursuant to the terms of the subscription
            agreement entered into on September 13, 2007, Fair Enterprise was
            issued 8.9 million shares of Class A Subordinate Voting Stock at
            a price of $2.25 per share. The price per share was set at the
            greater of (i) 90% of the volume weighted average price per share
            of Class A Subordinate Voting Stock on NASDAQ for the five
            trading days commencing on September 13, 2007; and
            (ii) U.S. $1.91, being 100% of the volume weighted average price
            per share of Class A Subordinate Voting Stock on NASDAQ for the
            five trading days immediately preceding September 13, 2007 (the
            date of announcement of the private placement). Prior to this
            transaction, Fair Enterprise owned approximately 7.5% of the
            issued and outstanding Class A Subordinate Voting Stock. Upon
            completion of the private placement, the percentage of Class A
            Subordinate Voting Stock beneficially owned by Fair Enterprise
            has increased to approximately 21.6% of the issued and
            outstanding Class A Subordinate Voting Stock, representing
            approximately 10.8% of the equity of the Company. The shares of
            Class A Subordinate Voting Stock issued pursuant to the
            subscription agreement were issued and sold in a private
            transaction exempt from registration under Section 4(2) of the
            Securities Act of 1933, as amended.

        (e) On September 24, 2007, the Company exercised its option to
            acquire the remaining voting and equity interests in MJC,
            pursuant to an agreement with certain companies controlled by
            Joseph De Francis, a member of the Company's Board of Directors,
            and Karin De Francis. Under the terms of the option agreement,
            the Company paid $18.3 million plus interest on October 5, 2007.

        (f) On June 7, 2007, the Company sold 205 acres of land and
            buildings, located in Bonsall, California, and on which the San
            Luis Rey Downs Training Center is situated, to MID for cash
            consideration of approximately $24.0 million. The Company also
            has entered into a lease agreement whereby a subsidiary of the
            Company will lease the property from MID for a three year period
            on a triple-net lease basis, which provides for a nominal annual
            rent in addition to operating costs that arise from the use of
            the property. The lease is terminable at any time by either party
            on four months notice. The gain on sale of the property of
            approximately $17.7 million, net of tax, has been reported as a
            contribution of equity in contributed surplus.

        (g) On March 28, 2007, the Company sold a 157 acre parcel of excess
            land adjacent to the Palm Meadows Training Center, located in
            Palm Beach County, Florida and certain development rights to MID
            for cash consideration of $35.0 million. The gain on sale of the
            excess land and development rights of approximately
            $16.7 million, net of tax, has been reported as a contribution of
            equity in contributed surplus.

            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), which was equal to the
            carrying value of the land.

            On February 7, 2007, MID also acquired a 64 acre parcel of excess
            land at Laurel Park in Howard County, Maryland for cash
            consideration of $20.0 million. The gain on sale of the excess
            land of approximately $15.8 million, net of tax, has been
            reported as a contribution of equity in contributed surplus.

            The Company has been granted profit participation rights in
            respect of each of these three properties under which it is
            entitled to receive 15% of the net proceeds from any sale or
            development after MID achieves a 15% internal rate of return.

        (h) The Company has entered into a consulting agreement with MID,
            dated September 12, 2007, under which MID will provide consulting
            services to the Company's management and Board of Directors in
            connection with the debt elimination plan. The Company is
            required to reimburse MID for its expenses, but there are no fees
            payable to MID in connection with the consulting agreement. The
            consulting agreement may be terminated by either party under
            certain circumstances.

        (i) 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 incurred
            in pursuit of the Romulus, Michigan racing license.

        (j) 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.

        (k) 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 one-time payment of
            $0.3 million.

        (l) 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.

        (m) 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 15(k)) and stipulated an
            annual fee of Cdn. $5.0 million. For the year ended December 31,
            2007, no amount (for the year ended December 31, 2006 -
            $2.9 million) has been recognized in discontinued operations
            related to this agreement.

        (n) 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 Fontana Golf Club in
            Oberwaltersdorf, Austria. The agreement, which was retroactive to
            March 1, 2004, ended on November 1, 2006 as a result of the sale
            of the Fontana Golf Club (refer to Note 15(j)) and stipulated an
            annual fee of Euros 2.5 million. For the year ended December 31,
            2007, no amount (for the year ended December 31, 2006 -
            $2.6 million) has been recognized in discontinued operations
            related to this agreement.

        (o) 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.

        (p) During the year ended December 31, 2007, the Company incurred
            $3.7 million (for the year ended December 31, 2006 -
            $3.8 million) of rent for facilities and central shared and other
            services to Magna and its subsidiaries. At December 31, 2007,
            amounts due to Magna and its subsidiaries is $2.8 million
            (December 31, 2006 - $1.4 million).

    16. 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 laws 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) On May 18, 2007, ODS Technologies, L.P., doing business as TVG
            Network, filed a summons against the Company, HRTV, LLC and
            XpressBet, Inc. seeking an order that the defendants be enjoined
            from infringing certain patents relating to interactive wagering
            systems and for an award for damages to compensate for the
            infringement. An Answer to Complaint, Affirmative Defenses and
            Counterclaims have been filed on behalf of the defendants. At the
            present time, the final outcome related to this action cannot be
            accurately determined by management.

        (d) The Company has letters of credit issued with various financial
            institutions of $1.1 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 $4.3 million (refer to Note 9(i)).

        (e) 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, 2007, these indemnities amounted to $6.3 million
            with expiration dates through 2009.

        (f) At December 31, 2007, the Company had commitments under operating
            leases requiring future minimum annual rental payments for the
            years ending December 31 as follows:

                                        Continuing  Discontinued
                                        operations   operations        Total
            -----------------------------------------------------------------
            2008                        $    2,957   $    1,536   $    4,493
            2009                             2,270        1,392        3,662
            2010                             1,952        1,374        3,326
            2011                             1,096          789        1,885
            2012                               686          765        1,451
            Thereafter                         610       23,718       24,328
            -----------------------------------------------------------------
                                        $    9,571   $   29,574   $   39,145
            -----------------------------------------------------------------
            -----------------------------------------------------------------

            Commitments under operating leases do not include contingent
            rental payments.

            For the year ended December 31, 2007, payments under these
            operating leases amounted to approximately $6.0 million (for the
            year ended December 31, 2006 - $9.4 million). The Company also
            rents or leases certain totalisator equipment and services from
            third parties, 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
            $1.6 million for the year ended December 31, 2007 (for the year
            ended December 31, 2006 - $3.5 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, 2007 and 2006.

            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
            $1.7 million of such payments for the year ended December 31,
            2007 (for the year ended December 31, 2006 - $2.1 million).

        (g) Contractual commitments outstanding at December 31, 2007, which
            related to construction and development projects, amounted to
            approximately $4.2 million.

        (h) On March 4, 2007, the Company entered into a series of customer-
            focused agreements with CDI in order to enhance wagering
            integrity and security, to own and operate HRTV(TM), to buy and
            sell horse racing content, and to promote the availability of
            horse racing signals to customers worldwide. These agreements
            involved the formation of a joint venture, TrackNet Media, a
            reciprocal content swap agreement and the purchase by CDI from
            the Company of a 50% interest in HRTV(TM). TrackNet Media is the
            vehicle through which the Company and CDI horse racing content is
            made available to third parties, including racetracks, off-track
            betting facilities, casinos and advance deposit wagering
            companies. TrackNet Media purchases horse racing content from
            third parties to be made available through the Company's and
            CDI's respective outlets. Under the reciprocal content swap
            agreement, the Company and CDI will exchange their respective
            horse racing signals. To facilitate the sale of 50% of HRTV(TM)
            to CDI, on March 4, 2007, HRTV, LLC was created with an effective
            date of April 27, 2007. Both the Company and CDI are required to
            make quarterly capital contributions, on an equal basis, until
            October 2009 to fund the operations of HRTV, LLC; however, the
            Company may under certain circumstances be responsible for
            additional capital commitments. The Company's share of the
            required capital contributions to HRTV, LLC is expected to be
            approximately $7.0 million of which $2.0 million has been
            contributed to December 31, 2007.

        (i) On November 15, 2006, the Company opened the slots facility at
            Gulfstream Park. The Company opened the slots facilities despite
            an August 2006 decision rendered by the Florida First District
            Court of Appeals 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 Florida 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. On September 27, 2007, the
            Florida Supreme Court ruled that the matter was not procedurally
            proper for consideration by the court. Its order effectively
            remanded the matter to the trial court for a trial on the merits.
            A trial on the merits will likely take over a year to fully
            develop and could take as many as three years to achieve a full
            factual record and trial court ruling for an appellate court to
            review. The Company believes that the August 2006 decision
            rendered by the Florida First District Court of Appeals is
            incorrect and that any allegations of fraud in the securing of
            the petitions will ultimately be disproved at the trial level,
            and accordingly, the Company has opened the slots facility. At
            December 31, 2007, the carrying value of the fixed assets related
            to the slots facility is approximately $29.6 million. If the
            August 2006 decision rendered by the Florida First District Court
            of Appeals is correct, the Company may incur a write-down of
            these fixed assets.

        (j) 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 Company is obligated to contribute 50% of any
            equity amounts in excess of $15.0 million as and when needed;
            however, to December 31, 2007, the Company has not made any such
            contributions. At December 31, 2007, approximately $42.3 million
            of costs have been incurred by The Village at Gulfstream Park,
            LLC, which have been funded by a construction loan and equity
            contributions from Forest City. The Company has reflected its
            share of equity amounts in excess of $15.0 million, of
            approximately $5.8 million, as an obligation which is included in
            "other accrued liabilities" on the accompanying consolidated
            balance sheets. The Limited Liability Company Agreement also
            contemplated additional agreements, including a ground lease, a
            reciprocal easement agreement, a development agreement, a leasing
            agreement and a management agreement which were executed upon
            satisfaction of certain conditions. Upon the opening of The
            Village at Gulfstream Park(TM), construction of which commenced
            in June 2007, annual cash receipts (adjusted for certain
            disbursements and reserves) will first be distributed to the
            Forest City partner, subject to certain limitations, until such
            time as the initial contribution accounts of the partners are
            equal. Thereafter, the cash receipts are generally expected to be
            distributed to the partners equally, provided they maintain their
            equal interest in the partnership. The annual cash payments made
            to the Forest City partner to equalize the partners' initial
            contribution accounts will not exceed the amount of the annual
            ground rent.

        (k) 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 The
            Shops at Santa Anita on approximately 51 acres of undeveloped
            lands surrounding Santa Anita Park. This development project,
            first contemplated in an April 2004 Letter of Intent which also
            addressed the possibility of developing undeveloped lands
            surrounding Golden Gate Fields, contemplates a mixed-use
            development with approximately 800,000 square feet of retail,
            entertainment and restaurants as well as 4,000 parking spaces.
            Westfield Corporation ("Westfield"), a developer of a neighboring
            parcel of land, has challenged the manner in which the
            entitlement process for the development of the land surrounding
            Santa Anita Park has been proceeding. On May 16, 2007, Westfield
            commenced civil litigation in the Los Angeles Superior Court in
            an attempt to overturn the Arcadia City Council's approval and
            granting of entitlements related to the construction of The Shops
            at Santa Anita. In addition, on May 21, 2007, Arcadia First!
            filed a petition against the City of Arcadia to overturn the
            entitlements and named the Company and certain of its
            subsidiaries as real parties in interest. If either Westfield or
            Arcadia First! is ultimately successful in its challenge,
            development efforts could potentially be delayed or suspended.
            The first hearings on the merits of the petitioners' claims are
            scheduled to be heard before the trial judge during the third
            week of April 2008. To December 31, 2007, the Company has
            expended approximately $9.9 million on these initiatives, of
            which $3.6 million was paid during the year ended December 31,
            2007. These amounts have been recorded as "real estate
            properties, net" on the accompanying consolidated balance sheets.
            Under the terms of the Letter of Intent, the Company may be
            responsible to fund additional costs; however, to December 31,
            2007, the Company has not made any such payments.

        (l) The Meadows participates in a multi-employer defined benefit
            pension plan for which the pension plan's total vested
            liabilities exceed its assets. An updated actuarial valuation is
            in the process of being obtained, however, based on allocation
            information currently provided by the plan, the portion of the
            estimated unfunded liability for vested benefits attributable to
            The Meadows is approximately $3.7 million. Effective November 1,
            2007, the New Jersey Sports & Exposition Authority withdrew from
            the plan and effective December 25, 2007, The Meadows also
            withdrew from the plan. As part of the indemnification
            obligations under the holdback agreement with Millennium-Oaktree
            (refer to Note 5), the withdrawal liability that has been
            triggered as a result of withdrawal from the plan will be offset
            against the amount owing to the Company under the holdback
            agreement.

        (m) MJC was party to agreements with the Maryland Thoroughbred
            Horsemen's Association and the Maryland Breeders' Association,
            which expired on December 31, 2007, under which the horsemen and
            breeders each contributed 4.75% of the costs of simulcasting to
            MJC. Without arrangements similar in effect to these agreements,
            there would be an increase in costs of approximately
            $2.0 million. At this time, the Company is uncertain as to the
            renewal of these agreements on comparable terms.

    17. 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 off-track betting
        network; (4) Southern U.S. operations include Lone Star Park; (5)
        Northern U.S. operations include The Meadows and its off-track
        betting 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); (7) PariMax operations include XpressBet(R), HRTV(TM)
        to April 27, 2007, MagnaBet(TM), RaceONTV(TM), AmTote and the
        Company's equity investments in Racing World Limited, TrackNet Media
        and HRTV, LLC from April 28, 2007; and (8) Corporate and other
        operations 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 the Company's residential
        housing development. Comparative amounts reflected in segment
        information for the three months and year ended December 31, 2006 and
        at December 31, 2006 have been reclassified to reflect the operations
        of Remington Park's racing and gaming operations and its off-track
        betting network, Thistledown, Great Lakes Downs and Portland Meadows
        and the Oregon off-track betting network as discontinued 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"
        sections of the Company's annual report on Form 10-K for the year
        ended December 31, 2006.  The following summary presents key
        information by operating segment:


                                Three months ended            Years ended
                                    December 31,              December 31,
                           --------------------------------------------------
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Revenues
        California
         operations        $   36,506   $   24,522   $  204,262   $  206,745
        Florida
         operations            15,389       12,041      125,075       90,962
        Maryland operations    23,759       25,541      112,289      116,412
        Southern U.S.
         operations            11,678       12,093       60,509       60,288
        Northern U.S.
         operations             7,589        9,186       36,525       40,267
        European operations     3,001        3,558        9,181       10,525
        PariMax operations     17,531       14,629       80,338       51,522
        ---------------------------------------------------------------------
                              115,453      101,570      628,179      576,721
        Corporate and other       103          221          361          339
        Eliminations           (1,159)        (444)     (11,300)      (7,808)
        ---------------------------------------------------------------------
        Total racing and
         gaming operations    114,397      101,347      617,240      569,252
        ---------------------------------------------------------------------

        Sale of real estate       270            -          270            -
        Residential
         development and
         other                  2,619        1,204        8,205        4,946
        ---------------------------------------------------------------------
        Total real estate
         and other
         operations             2,889        1,204        8,475        4,946
        ---------------------------------------------------------------------
        Total revenues     $  117,286   $  102,551   $  625,715   $  574,198
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                Three months ended            Years ended
                                    December 31,              December 31,
                           --------------------------------------------------
                                 2007         2006         2007         2006
        ---------------------------------------------------------------------
        Earnings (loss)
         before interest,
         income taxes,
         depreciation and
         amortization
         ("EBITDA")
        California
         operations        $    2,262   $   (2,273)  $   15,890   $   18,012
        Florida operations     (9,214)      (6,190)     (12,431)         (81)
        Maryland operations    (1,512)        (542)       6,511        7,605
        Southern U.S.
         operations              (473)         150        3,913        4,838
        Northern U.S.
         operations              (758)         (67)        (860)        (393)
        European operations    (1,804)      (2,466)      (7,424)     (10,757)
        PariMax operations        222       (4,900)       3,447      (10,114)
        ---------------------------------------------------------------------
                              (11,277)     (16,288)       9,046        9,110
        Corporate and other    (5,293)      (6,608)     (24,971)     (27,160)
        Predevelopment,
         pre-opening and
         other costs           (1,101)      (5,060)      (2,866)     (10,602)
        Write-down of
         long-lived assets          -      (87,348)           -      (87,348)
        Gain on sale of
         intangible assets
         related to
         The Meadows                -      126,374            -      126,374
        ---------------------------------------------------------------------
        Total racing and
         gaming operations    (17,671)      11,070      (18,791)      10,374
        ---------------------------------------------------------------------
        Residential
         development and
         other                    464         (657)       2,574          916
        Recovery
         (write-down) of
         long-lived assets        136       (1,279)      (1,308)      (1,279)
        ---------------------------------------------------------------------
        Total real estate
         and other
         operations               600       (1,936)       1,266         (363)
        ---------------------------------------------------------------------

        Total EBITDA       $  (17,071)  $    9,134   $  (17,525)  $   10,011
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



        Reconciliation of EBITDA to Net Loss

                                        Three months ended December 31, 2007
                                        -------------------------------------
                                        Racing and  Real Estate
                                            Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                     $  (17,671)  $      600   $  (17,071)
        Interest expense, net               15,401           14       15,415
        Depreciation and amortization       12,689            8       12,697
        ---------------------------------------------------------------------
        Income (loss) from continuing
         operations before income taxes $  (45,761)  $      578      (45,183)
        Income tax benefit                                            (4,566)
        ---------------------------------------------------------------------
        Loss from continuing operations                              (40,617)
        Loss from discontinued
         operations                                                   (2,363)
        ---------------------------------------------------------------------
        Net loss                                                  $  (42,980)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                        Three months ended December 31, 2006
                                        -------------------------------------
                                        Racing and  Real Estate
                                            Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                     $   11,070   $   (1,936)  $    9,134
        Interest expense (income), net      14,816          (21)      14,795
        Depreciation and amortization       11,365            7       11,372
        ---------------------------------------------------------------------
        Loss from continuing operations
         before income taxes            $  (15,111)  $   (1,922)     (17,033)
        Income tax benefit                                            (8,676)
        ---------------------------------------------------------------------
        Loss from continuing operations                               (8,357)
        Loss from discontinued
         operations                                                   (4,126)
        ---------------------------------------------------------------------
        Net loss                                                  $  (12,483)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                             Year ended December 31, 2007
                                        -------------------------------------
                                        Racing and  Real Estate
                                            Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                     $  (18,791)  $    1,266   $  (17,525)
        Interest expense, net               50,462          159       50,621
        Depreciation and amortization       42,265           32       42,297
        ---------------------------------------------------------------------
        Income (loss) from continuing
         operations before income taxes $ (111,518)  $    1,075     (110,443)
        Income tax benefit                                            (2,574)
        ---------------------------------------------------------------------
        Loss from continuing operations                             (107,869)
        Loss from discontinued
         operations                                                   (5,890)
        ---------------------------------------------------------------------
        Net loss                                                  $ (113,759)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                             Year ended December 31, 2006
                                        -------------------------------------
                                        Racing and  Real Estate
                                            Gaming    and Other
                                        Operations   Operations        Total
        ---------------------------------------------------------------------
        EBITDA (loss) from continuing
         operations                     $   10,374   $     (363)   $  10,011
        Interest expense (income), net      58,297         (539)      57,758
        Depreciation and amortization       38,790          199       38,989
        ---------------------------------------------------------------------
        Loss from continuing operations
         before income taxes            $  (86,713)  $      (23)     (86,736)
        Income tax benefit                                            (7,124)
        ---------------------------------------------------------------------
        Loss from continuing operations                              (79,612)
        Loss from discontinued
         operations                                                   (7,739)
        ---------------------------------------------------------------------
        Net loss                                                  $  (87,351)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------



                                                              December 31,
                                                           ------------------
                                                           2007         2006
        ---------------------------------------------------------------------
        Total Assets
        California operations                        $  320,781   $  309,443
        Florida operations                              358,907      361,550
        Maryland operations                             162,606      171,135
        Southern U.S. operations                         97,228       98,184
        Northern U.S. operations                         18,502       19,146
        European operations                              51,674       49,689
        PariMax operations                               43,717       41,625
        ---------------------------------------------------------------------
                                                      1,053,415    1,050,772
        Corporate and other                              71,903       55,370
        ---------------------------------------------------------------------
        Total racing and gaming operations            1,125,318    1,106,142
        ---------------------------------------------------------------------

        Residential development and other                 9,696       33,884
        ---------------------------------------------------------------------
        Total real estate and other operations            9,696       33,884
        ---------------------------------------------------------------------

        Total assets from continuing operations       1,135,014    1,140,026
        Total assets held for sale                       35,658       36,063
        Total assets of discontinued operations          71,970       70,796
        ---------------------------------------------------------------------
        Total assets                                 $1,242,642   $1,246,885
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    18. Subsequent Events

        (a) On January 7 and 10, 2008, the Company completed the sales
            transactions with respect to two parcels of excess real estate in
            Porter, New York for total cash consideration of $1.4 million,
            net of transaction costs, which was equal to the carrying value
            of the real estate (refer to Note 6(a)).

        (b) On January 31, 2008, the Company's senior secured revolving
            credit facility with a Canadian financial institution was amended
            and extended to February 29, 2008 and on February 28, 2008, the
            facility was further extended to March 31, 2008 (refer to
            Note 9(i)). Pursuant to the terms of the Company's bridge loan
            facility with a subsidiary of MID, advances after January 15,
            2008 are subject to MID being satisfied that the Company's senior
            secured revolving credit facility will be further extended to at
            least April 30, 2008 or that satisfactory refinancing of that
            facility has been arranged. As the senior secured revolving
            credit facility was extended to March 31, 2008, MID waived this
            condition for advances between January 15, 2008 and March 31,
            2008.

        (c) Effective January 1, 2008, the Company amended its bank term loan
            of up to Euros 4.0 million to reduce the amount available under
            the bank term loan facility of up to Euros 3.5 million and
            increase the interest rate to EONIA plus 3.75% per annum.

        (d) On February 12, 2008, the Company amended its Euros 15.0 million
            term loan facility whereby the first installment of
            Euros 7.5 million due on February 29, 2008 was extended until
            March 15, 2008.

        (e) On February 12, 2008, the Company received notice from The Nasdaq
            Stock Market advising that, in accordance with Nasdaq Marketplace
            Rule 4450(e)(2), the Company has 180 calendar days, or until
            August 11, 2008, to regain compliance with the minimum bid price
            for the Company's publicly held Class A Subordinate Voting Stock
            required for continued listing on the Nasdaq Global Market, as
            set forth in Nasdaq Marketplace Rule 4450(a)(5). The Company
            received this notice because the bid price of its publicly held
            Class A Subordinate Voting Stock closed below the $1.00 per share
            minimum for 30 consecutive business days prior to February 12,
            2008.

            The notice also states that if, at any time before August 11,
            2008, the bid price of the Company's Class A Subordinate Voting
            Stock on the Nasdaq Global Market closes at $1.00 per share or
            more for a minimum of 10 consecutive trading days, the Nasdaq
            staff will provide the Company with written notification that it
            has achieved compliance with its listing requirements. However,
            the notice states that if the Company cannot demonstrate
            compliance with such rule by August 11, 2008 (or such later date
            as may be permitted by Nasdaq), the Nasdaq staff will provide the
            Company with written notification that its Class A Subordinate
            Voting Stock will be delisted.

            During this 180 calendar day period, the Company's Class A
            Subordinate Voting Stock will continue to trade on the Nasdaq
            Global Market. This notification has no effect on the listing of
            the Company's Class A Subordinate Voting Stock on the Toronto
            Stock Exchange.
    





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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