<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended October 31, 2000         Commission file number 0-7607
                          ----------------                                ------

                            FAIR GROUNDS CORPORATION
                            ------------------------
             (Exact name of registrant as specified in its charter)

    Louisiana                                                    72-0361770
-------------------------------------------------------------------------------
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                               Identification No.)

1751 Gentilly Blvd.,  New Orleans LA                                 70119
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(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number including area code               504/944-5515
                                                     ---------------------------

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

  Title of each class               Name of each exchange on which registered
  -------------------               -----------------------------------------

    NOT APPLICABLE                                    NONE

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

                           Common Stock, No Par Value
                           --------------------------
                                (Title of Class)

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

                      Yes [X]                       No [ ]

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $3,594,800 computed by reference to the price at which the equity
sold on December 20, 2000.

The number of shares outstanding of the issuer's single class of common stock
was 2,194 as of January 25, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE



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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item                                                                                                          Page
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<S>               <C>                                                                                         <C>
ITEM 1.           BUSINESS...................................................................................    1

ITEM 2.           PROPERTIES.................................................................................    8

ITEM 3.           LEGAL PROCEEDINGS..........................................................................    9

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................   10

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................   11

ITEM 6.           SELECTED FINANCIAL DATA....................................................................   12

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS.........   13

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................   19

ITEM 8.           FINANCIAL STATEMENTS.......................................................................   19

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......   41

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.........................................   42

ITEM 11.          EXECUTIVE COMPENSATION.....................................................................   43

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............................   44

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................................   45

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON  FORM 8-K...........................   48

SIGNATURES        ...........................................................................................   51

</TABLE>




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                                     PART I

ITEM 1.  BUSINESS

GENERAL OVERVIEW OF BUSINESS

Fair Grounds Corporation (the "Company"), which was incorporated in 1941, is the
owner of the Fair Grounds Race Course in New Orleans, Louisiana, at which
thoroughbred horse racing, off-track betting and video poker gaming are
conducted. The Fair Grounds Race Course currently is in its 129th racing season,
making it the third oldest thoroughbred racing track in the United States. In
addition to its live racing operations, the Company operates four off-track
betting facilities, referred to herein as tele-tracks, at locations in St.
Bernard, Jefferson, St. John and LaFourche Parishes, Louisiana, as well as a
tele-track facility located at the Fair Grounds Race Course. The Company is
planning to open a new tele-track in Jefferson Parish during the second quarter
of fiscal 2001. Through Finish Line Management Corporation ("Finish Line"), an
affiliate, the Company operates five tele-track facilities in Terrebonne, St.
Tammany and Jefferson Parishes, Louisiana. At each location, the Company makes
available pari-mutuel wagering and food and beverage services to the public and
receives revenues from such services. Video poker wagering is conducted at all
locations other than the two facilities located in St. Tammany Parish. The
Company conducts its annual live racing meet and operates its tele-tracks for
off-track betting pursuant to the rules and under the authority of the Louisiana
State Racing Commission (the "Racing Commission"), a statutory body, the members
of which are appointed by the Governor of Louisiana. The Company's live races
are simulcasted to its tele-tracks and to other facilities located both inside
and outside Louisiana.

The Company's fiscal year ends on October 31; accordingly, unless otherwise
indicated, references herein to a year mean the fiscal year which ended in the
calendar year to which reference is made. For example, references to "fiscal
2000" means the fiscal year ended October 31, 2000. On December 15, 2000, the
Company effected a 1 for 200 reverse stock split. All share and per share data
have been adjusted to reflect the reverse stock split for all periods reported.
Fractional shares resulting from the reverse stock split are not reflected as
being cashed out until after December 15, 2000.

DESCRIPTION OF BUSINESS

Live Racing Meet

Live Racing at the Fair Grounds Race Course. Annually, upon application and
after hearing, the Racing Commission grants to each of the horse racing tracks
operating in Louisiana certain dates during which live racing meets may be
conducted. Currently four licensees, including the Company, operate live racing
meets in Louisiana at various times during the year.

The Company's live racing meet is conducted annually at the Fair Grounds Race
Course generally from Thanksgiving Day to late March. One other track in
Louisiana, Delta Downs, conducts its live racing meet during that same time
period. Such track is smaller and is located approximately two hundred miles
from New Orleans. Delta Downs also simulcasts to and allows wagering to be
accepted on its live races at the tele-tracks to which the Company simulcasts
its live races and at which wagering on the Company's live races is accepted.



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The Company's live racing meet for the fiscal year ended October 31, 2000 was
conducted over 88 racing days. Total paid attendance at the Fair Grounds Race
Course during the live racing meet was 162,090 in fiscal 2000 compared to
177,693 in fiscal 1999 and 189,439 in fiscal 1998. The total on-track handle,
which is the amount of money handled during the live racing meet through the
Company's mutuel machines at the Fair Grounds Race Course, was $26,136,189 in
fiscal 2000, $27,412,562 in fiscal 1999 and $25,789,351 in fiscal 1998. See
"Sources of Revenue."

During its annual live racing meet, the Company attracts thoroughbred horses
from racing stables located in Louisiana and from nationally known racing
stables in Kentucky and elsewhere. Approximately 35% of the thoroughbred
starters at the Fair Grounds Race Course during its live racing meet are
Louisiana-bred. The live racing meet features races with guaranteed purses in
excess of $250,000 and purses averaging approximately $22,000 per race.

For the fiscal year ending October 31, 2001, the Racing Commission granted the
Company a license to conduct its live racing meet during the period from
November 23, 2000 through March 26, 2001, a total of 88 racing days, with live
racing being conducted generally five days a week (Thursday through Monday) and
with ten to eleven races during each racing day.

Simulcasting of Live Races. In addition to conducting live horse racing during
the live racing meet, the Company simulcasts its live races to, and allows
wagering to be accepted at, the tele-tracks which it operates in St. Bernard,
St. John, Jefferson and LaFourche Parishes, Louisiana, the tele-tracks which are
licensed to the Company and operated by Finish Line, and tele-tracks operated by
the other horse racing tracks in Louisiana. The Company also simulcasts live
races to certain other wagering facilities located outside of Louisiana. The
Company has continued to experience significant increases in the demand for the
Company's races from out-of-state markets. Total handle from such out-of-state
markets during the fiscal 2000 racing season was approximately $366 million, a
14% increase over the previous racing season. The Company earns a net commission
(after payment of purses) of approximately 1.5% of the out-of-state handle.

Off-Track Betting

Ownership and Operation of Tele-Track Facilities. Louisiana authorizes off-track
wagering and regulates the licensure by the Racing Commission of tele-tracks,
the ownership of such facilities, the commissions which can be earned on wagers
and other related matters. In 1988 each horse racing track then operating in
Louisiana was granted a license to operate tele-tracks at its racetrack and also
within a 55-mile radius of its racetrack, provided that the voters of the parish
where the tele-track was to be located approved the establishment of such a
facility. When two pari-mutuel racetracks are located within the same 55-mile
radius, any tele-tracks opened in such areas are to be jointly owned unless one
of the eligible racetracks does not wish to participate. The Company and
Jefferson Downs Corporation ("Jefferson Downs"), which is an affiliate of the
Company and which through 1992 conducted live racing at a facility located
approximately 12 miles west of the Fair Grounds Race Course, are parties to an
agreement, entered into in 1992 when Jefferson Downs ceased its live racing,
pursuant to which the Company, through Finish Line, operates the tele-tracks
formerly operated by Jefferson Downs. Total paid attendance at the Company's
tele-tracks (excluding the former Jefferson Downs tele-tracks) during the fiscal
year ended October 31, 2000 was 332,919 compared to 379,910 during fiscal 1999
and 391,271 during fiscal 1998, and the total off-track handle at such
facilities during the 2000 fiscal year was $96,204,844 compared to $98,852,338
in fiscal 1999 and $93,921,423 in fiscal 1998. See



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"Sources of Revenue" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Company is a party to a Management Agreement (the "Management Agreement")
with Finish Line pursuant to which Finish Line operates the tele-track
facilities owned by Jefferson Downs and transferred to the Company effective in
May 1993. The Management Agreement is for a term of ten years, which commenced
on November 1, 1992, with the option granted to Finish Line to extend the term
for two additional five-year periods. Pursuant to the Management Agreement,
Finish Line has the exclusive responsibility for the direction, supervision,
management and operation of such facilities, collects all monies from such
operation and pays all expenses in connection therewith. The Company receives
0.1% of the gross pari-mutuel handle at such facilities, and Finish Line is to
receive monthly compensation equal to the difference between the gross receipts
collected at such facilities less all expenses (including the guaranteed payment
to the Company) paid by Finish Line. In addition, Finish Line is to indemnify
the Company for, among other things, all obligations under the leases assigned
by Jefferson Downs to the Company. A portion of the handle generated at these
tele-tracks is set aside to supplement purses for live racing at the Fair
Grounds Race Course. See "Purse Supplements," below.

Simulcasting to Tele-Track Facilities. When a live racing meet is not in
progress at the Fair Grounds Race Course, horse races are simulcasted from other
tracks then conducting live racing in Louisiana, as well as from various race
tracks throughout the United States hosting races of national prominence, to the
Company's tele-tracks, to the tele-track facility located at the Fair Grounds
Race Course and to other off-track tele-tracks. The Company generally is
required to make payments in the form of host track fees and purse supplements
to those tracks conducting live races which are simulcasted to the Company's
tele-tracks. The Company's tele-tracks generally are open daily, depending on
patron demands and race offerings, for afternoon and evening racing programs
which are simulcasted to the tele-tracks.

Purse Supplements. A portion of the handle generated at tele-track facilities is
required by Louisiana law to be set aside and used to supplement purses at live
racing facilities. Purse supplements are computed on a sliding scale of 5.5%, 6%
and 6.5% on the tele-tracks' daily handle plus an additional 1.5% of all
"exotic" wagers at tele-track facilities. Purse supplements of 6.5% of handle
are required on all wagers when off-track betting is conducted at the racing
facility of the primary licensee.

Breakage and Uncashed Mutuel Tickets. Race tracks and tele-tracks are allowed to
retain breakage, which is the residual amount remaining in the betting pool
after winnings are paid out to the nearest dime; however, one-half of such
revenue must be paid out as purses. During fiscal 2000, the Company's revenue
from breakage was $642,167 compared to $698,018 in fiscal 1999 and $518,822 in
fiscal 1998. Race tracks are also allowed to retain the proceeds from uncashed
winning pari-mutuel tickets, up to $250,000 for each live or simulcasted meet,
with the excess to be remitted to the State of Louisiana. During the fiscal year
ended October 31, 2000, the Company retained approximately $497,249 in proceeds
of such uncashed mutuel tickets as compared to approximately $540,124 in fiscal
1999 and $476,740 in fiscal 1998.



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Telephone and Internet Wagering

Louisiana has recently enacted legislation that will permit the Company to
accept telephone and Internet wagers. The Company has recently begun to accept
telephone wagers and anticipates installing systems to accept Internet wagering
during fiscal 2001. The Company is optimistic about the long term benefits of
telephone and Internet wagering.

Video Poker Operations

Louisiana permits pari-mutuel facilities to install and operate an unlimited
number of video poker machines. Other types of businesses in Louisiana, such as
bars, truck stops and restaurants, are permitted to operate video poker machines
but are restricted in the number of machines they may operate. See "Regulation."
The owners of pari-mutuel wagering facilities such as the Company are required
to set aside one-half of the net revenues from such devices in excess of certain
amounts and use such amounts which are set aside to supplement purses for live
racing or, if live racing is not then being conducted, to place such amounts in
an interest-bearing account and utilize them to supplement purses during the
next live racing meet. Any such funds which are earned from devices located at a
tele-track are to be used for purse supplements by the owner of the tele-track
or, if it is jointly owned, to be divided among the owners in proportion to
their ownership interests.

The Company, Jefferson Downs and Finish Line entered into an agreement in
February 1992 with Video Services, Inc. ("VSI"), whereby VSI was granted the
exclusive right and license by the Company to install, maintain and operate
video draw poker devices at the Fair Grounds Race Course and Jefferson Downs
Race Course and at the tele-tracks operated by the Company, Jefferson Downs and
Finish Line. Such agreement was for an initial term of five years, with an
option by VSI to extend the term for an additional five years, which option was
exercised. Pursuant to such agreement, the Company receives a percentage of the
revenues from the operation of the devices installed at the Company's
facilities, such percentage being calculated on the basis of the average amount
collected daily from each device during each month, after the payment of prizes,
taxes and fees. See "Sources of Revenue." The devices installed by VSI pursuant
to such agreement remain the property of VSI. As of October 31, 2000, there were
a total of 335 devices in operation at the Company's facilities (not including
tele-tracks operated by Finish Line). In addition, there were a total of 335
devices at the tele-tracks operated by Finish Line as of October 31, 2000. The
Company receives purse supplements from the tele-tracks operated by Finish Line,
which includes the tele-tracks formerly owned by Jefferson Downs.

The agreement also provides for the Company and Finish Line to share in an
annual promotional fee of $270,000 paid by VSI. During fiscal 2000, by agreement
between the Company and Finish Line, the total amount of such promotional fee
was retained by the Company. Of such amount, $135,000 was set aside for purse
supplements to be paid during the Company's 2000-2001 racing meet.

SOURCES OF REVENUE

Income from Wagering

The principal component of the Company's revenue is generated from pari-mutuel
wagering, both on-track and off-track. In pari-mutuel wagering on horses, those
who wager on the first, second and third place horses share the total stakes, or
pool, less a percentage retained by the Company. The



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term "pool" means the total amount wagered to win (first place), to place
(second place), or to show (third place) on every horse in a given race, or
exacta, quinella and trifecta wagers on certain combinations of horses. Under
the pari-mutuel system, bettors wager against each other and not against the
racing facility, which has no interest in which horse wins or loses. Racing
facilities are authorized under Louisiana law to retain a stated percentage of
the total money handled through the mutuel machines located at such racing
facilities and their tele-tracks on each racing day. Mutuel commissions range
from 17% to 25% of money handled depending upon the type of wager. For the
fiscal year ended October 31, 2000, the Company received pari-mutuel commissions
and related income of $25.8 million compared to $26.5 million for fiscal 1999
and $24.7 million for fiscal 1998. Total commission income (less pari-mutuel
taxes) was $22.7 million for fiscal 2000, $23.2 for fiscal 1999 and $21.6
million for fiscal 1998.

The Company also receives, during its live racing meet, a percentage of the
handle from all tele-tracks and racing facilities to which its races are
simulcasted, paid in the form of host track fees as compensation for the
simulcasting of its races to such facilities. The Company also pays host track
fees to other racing facilities for the simulcasting of races to the Company's
tele-tracks. For the fiscal year ended October 31, 2000, the Company received
host track fees of $11.4 million and paid host track fees of $3.1 million.
During fiscal 1999 the Company received host track fees of $10.3 million and
paid host track fees of $3.2 million, and during fiscal 1998 the Company
received host track fees of $7.1 million and paid host track fees of $2.8
million.

Income from Video Poker Operations

For the fiscal year ended October 31, 2000, revenue from video poker operations
was $2.9 million compared to $3.0 million in fiscal 1999 and $2.9 million in
fiscal 1998. As previously described, there were a total of 335 devices in
operation at the Company's facilities (not including the tele-tracks operated by
Finish Line) as of October 31, 2000.

Other Sources of Revenue

Additional revenue to the Company is generated from program sales, admission
charges collected by the racing facility and tele-tracks, parking, and food and
beverage services, all of which are operated directly by the Company. Pursuant
to its agreement with the publisher of the Daily Racing Form, the Company is the
wholesaler for sales of the Daily Racing Form in the greater New Orleans area.

For two weekends each year, after the Company's live racing meet has concluded,
the infield of the Fair Grounds Race Course is used by a non-profit organization
in New Orleans to host a Jazz and Heritage Festival. As compensation for the use
of its facilities, the Company receives all revenues from certain beverage
concessions during the Jazz and Heritage Festival. The Company and the sponsor
of the Jazz and Heritage Festival are parties to an agreement for the use of the
Company's facilities through the year 2001. Revenues from the 2000 Festival were
$1.8 million, compared to $1.2 million from the 1999 Festival and $1.4 million
from the 1998 Festival.

Seasonality

The Company's business is seasonal, and the Company has received and should
continue to receive a majority of its revenues during the first and second
quarters of its fiscal year when its



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live racing meet is held. Although live racing is conducted only during the
first and second quarters of each fiscal year, the Company's tele-tracks are
operated year-round, enabling the Company to earn revenues throughout the fiscal
year but on a smaller scale in the third and fourth quarters than in the first
and second quarters of its fiscal year. In addition, video poker operations are
conducted year-round; however, revenue from video poker operations generally is
higher during the months when live racing is conducted at the Company's race
track since attendance there is higher during such period.

For information regarding the Company's operating revenues, income or loss from
operations, other income, net income or loss and total assets, see "Selected
Financial Data."

COMPETITION

The Company faces competition from other companies in the gaming industry,
including those which offer pari-mutuel wagering. Activities which compete or
which have the potential for competing with the Company's racing facility,
tele-tracks and video poker operations include other horse racing tracks and
tele-tracks, riverboat and dockside gambling, casinos operated on Indian
reservations, a land-based casino in New Orleans, state-sponsored lotteries and
video poker in restaurants, bars, hotels and truck stops. All such activities
are present in the State of Louisiana, the Mississippi Gulf Coast area or
elsewhere in the State of Mississippi.

In recent years, the growth of gaming in the United States has been reflected in
various forms, including riverboats, dockside gaming facilities, Native American
gaming ventures, land-based casinos, state-sponsored lotteries, and expanded
off-track wagering opportunities. The impact of the lottery, video poker, and
casinos or riverboats on live racing in Louisiana has been felt by all of the
existing tracks. Additional forms of gaming which may be introduced in the
future, as well as future expansions, additions and enhancements to existing
facilities by the Company's competitors, could result in additional funds being
directed away from the Company's on-track and off-track facilities.

Horse Racing

The Company's racing facility and tele-tracks compete for patrons with a number
of sporting events and leisure time and entertainment activities in the New
Orleans area and throughout Louisiana, including race tracks and tele-tracks
owned and operated by three other licensees.

The Company also competes with other race tracks in Louisiana and throughout the
United States in securing high caliber thoroughbred horses to run at the
Company's race track. The Company believes that it provides high quality horse
racing at the Fair Grounds Race Course.

Other Forms of Legalized Gaming

Louisiana Lottery. A state-wide lottery began operations in Louisiana in
September 1991. The Company believes that at its inception the Louisiana lottery
contributed significantly to a decline in the Company's average daily
pari-mutuel handle (consisting of both on-track and off-track wagering);
however, the Company believes that the lottery has had little impact during the
last several fiscal years.



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Casino Gambling. A number of dockside casinos are currently operating in or near
Biloxi, Mississippi, located on the Mississippi Gulf Coast approximately 60
miles east of New Orleans. In addition, a substantial number of dockside gaming
facilities are in operation.

The Louisiana Riverboat Economic Development and Gaming Control Act, which
became effective in July 1991, approved the conduct of riverboat gaming
activities on 12 separate waterways in Louisiana. The legislation authorizes the
issuance of up to 15 licenses to operate riverboat casinos within the State,
with no more than six in any one Parish. As of January 1, 2001, 14 licenses had
been granted and there were 13 licensed riverboats in operation in Louisiana, 3
of which were operating in the New Orleans area.

In 1992, the Louisiana legislature approved a single land-based casino to be
developed in downtown New Orleans. Such legislation provided that the casino is
to be the only such authorized casino in the State of Louisiana. The City of New
Orleans awarded contracts for the development and operation of such casino
project, and in May 1995 temporary gambling operations commenced and
construction on the permanent casino facility was begun. The temporary gambling
operations and construction were halted in the Fall of 1995 when the developer
of the casino filed for bankruptcy. Construction of the land-based casino was
started again in 1998 and the land-based casino opened in late October 1999
under the name "Harrah's New Orleans." In January 2001, the owner and operator
of Harrah's New Orleans filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code.

Video Poker Operations. As described herein, pari-mutuel facilities may have an
unlimited number of video poker devices at such facilities. Any person who has
been granted a license to sell alcoholic beverages for consumption on the
premises may be granted a license for the placement of devices on such premises;
however, with the exception of pari-mutuel facilities and truck stop facilities,
a licensee may not have more than three such devices. Truck stop facilities may
have no more than 50 devices. Devices which are placed in restaurants are to be
operated only in designated areas which are separate from the dining areas of
such restaurants. The Company believes that there are numerous establishments
throughout the New Orleans area at which video poker devices are located;
however, the Company does not believe that the placement of such devices at such
other establishments has had a material adverse effect on the revenue which has
been generated from the operation of such devices at the Company's racetrack and
tele-tracks.

REGULATION

The Company's operation of pari-mutuel wagering at its racetrack and tele-tracks
is subject to extensive regulation pursuant to Louisiana law and the rules and
regulations of the Racing Commission which govern, among other things, (i) the
awarding of licenses for the conduct of live racing meets; (ii) the conduct of
thoroughbred horse racing; (iii) the types of wagering which may be offered by
the Company and other pari-mutuel facilities; and (iv) the disposition of
revenue generated from wagering. Off-track wagering is also regulated by the
Racing Commission. Such legislation, and subsequent regulations adopted by the
Racing Commission, govern the ownership and operation of off-track wagering
facilities, the commissions which facilities may earn on wagers and the amounts
which must be set aside as purse supplements, as described elsewhere herein.

The Company's video poker operations are subject to regulation under the Video
Draw Poker Devices Control Law by the gaming enforcement division of the
Louisiana State Police. Such legislation describes the specifications which must



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be met before devices can be utilized in Louisiana, and also sets forth certain
licensing, accounting and reporting requirements.

EMPLOYEES

During its live racing season, the Company, through a wholly-owned subsidiary,
employs approximately 805 persons. At all other times, the Company employs
approximately 400 persons.

ITEM 2.  PROPERTIES

The Company owns its racetrack site which consists of approximately 145 acres of
land situated within a fenced area adjacent to Gentilly Boulevard in the New
Orleans city limits and within a ten-minute drive from downtown New Orleans.
Located on such property is a one-mile oval, sandy loam race track and a
seven-furlong turf track inside the main track.

The Company owns the new grandstand facility and the tele-track facility
described herein. The new facility is a multi-tiered concrete and steel
structure, with a total seating capacity for approximately 5,000 people. The
size of the new facility, together with the adjacent tele-track building, is
approximately 217,000 square feet in the aggregate. There is general seating in
a bleacher area in the front of the grandstand with reserved seating, including
the new clubhouse area, located in tiered areas above the grandstand. In a
significant change from the design of the old building, the paddock is located
in the middle of and behind the grandstand and may be viewed through a glass
area from all levels of the facility.

The Company also owns 50 modern concrete barns with supporting buildings and
facilities which are located on the property and are capable of quartering
approximately 2,000 horses. There is an all-concrete parking lot which can
accommodate approximately 4,000 vehicles within the fenced area.

The Company leases the facilities for its off-track tele-tracks under lease
agreements which contain various terms, except for the new location for the
LaPlace, Louisiana tele-track which is owned by the Company. The tele-tracks
formerly licensed to Jefferson Downs and now licensed to the Company are also
leased; however, as described herein, Finish Line has agreed to indemnify the
Company for, among other things, all obligations under the leases assigned by
Jefferson Downs to the Company.

The Company has an agreement with Autotote Limited ("Autotote") pursuant to
which Autotote provides the Company with wagering services, including
totalisator, computer and related services. The Company pays Autotote a
percentage of the total pari-mutuel handle and also pays Autotote certain
equipment and contingent rental fees in connection with leasing certain
equipment from Autotote.

See Note 7 of Notes to the Financial Statements included elsewhere herein for a
description of the Company's lease obligations.



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ITEM 3.  LEGAL PROCEEDINGS

The following is a brief description of the litigation that is pending or was
terminated during the fourth quarter of fiscal 2000:

In 1996, a suit was filed in U.S. District Court in Baton Rouge by Livingston
Downs Racing Association ("Livingston") naming the Company and other defendants
in an antitrust/civil RICO suit alleging the Company participated in a
conspiracy to prevent the plaintiff from entering the live racing, off-track
betting and video poker markets. The Company filed a motion for summary judgment
in late 1998 but that motion has not been decided by the U.S. District Court.
Livingston had previously filed a series of other legal actions against the
Company which were resolved in the Company's favor. Management believes that
Livingston's claims in this case are without merit. However, there is no
assurance that the Company will successfully defend all of Livingston's claims.
Because the amount in question has not yet been determined but could be
substantial and because there is no assurance that there will be insurance
coverage or that it will be adequate, as discussed below, the failure of the
Company to prevail in this lawsuit could have a material adverse effect on the
Company's operations, financial condition and cash flows.

In a declaratory judgment action related to the Livingston suit brought by
insurers for the Company and several of its affiliates, which case has been
consolidated with the suit filed by Livingston, on January 14, 1999 the U.S.
District Court granted the Company's motion for summary judgment, finding that
coverage exists under certain of the Company's insurance policies for claims
asserted by Livingston and that the insurers have a duty to defend. The insurers
have filed a motion for new trial that is pending in the U.S. District Court.
There is no assurance that the motion for new trial will be denied or, if
denied, that the decision of the U. S. District Court will be affirmed on appeal
or that the insurance policies will provide sufficient coverage to indemnify the
Company fully.

A suit was filed in 1996 in the 19th Judicial District Court in Louisiana by the
Louisiana Horsemen's Benevolent and Protective Association ("LHBPA"), an
association of horsemen organized to promote the dissemination of information on
issues critical to horsemen and the exchange of ideas and information, against
the Company, the State of Louisiana, and all other pari-mutuel wagering
facilities operating in Louisiana. The LHBPA is seeking a larger portion of
video poker proceeds on the grounds that the State of Louisiana and the horse
racing tracks in Louisiana have misinterpreted a Louisiana statute specifying
the amount of revenues from video poker machines at pari-mutuel wagering
facilities that are to be used as purse supplements. A motion for summary
judgment seeking dismissal of this action was filed in April 1999 and is pending
before the court. On August 8, 2000, the court denied a motion for summary
judgment filed by another pari-mutuel wagering facility. In the process of
denying that motion, the court indicated that it appeared that the pari-mutuel
wagering facilities were improperly deducting tax payments in calculating the
amount of revenues to be used in determining purse supplements. Notwithstanding
such indication by the court, management believes that the Company is in
compliance with the Louisiana statute and the guidelines established by the
Louisiana State Police Gaming Division, which regulates compliance with the
State of Louisiana video poker law, and that the Company has sufficient defenses
to all claims. However, there is no assurance that the Company will successfully
defend the LHBPA's claims. Because the amount in question could be substantial,
the failure by the Company to prevail in this lawsuit could have a material
adverse effect on the Company's operations, financial condition and cash flows.



                                       9
<PAGE>   12



Except as described above, there are no material pending legal proceedings,
other than ordinary routine litigation incidental to its business, to which the
Company is a party or of which any of its property is the subject.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

EXECUTIVE OFFICERS OF THE REGISTRANT

In accordance with Instruction 3 to Item 401(b) of Regulation S-K, the following
information is submitted concerning the executive officers of the Company:

BRYAN G. KRANTZ, age 40, is President, General Manager and a director of the
Company and has served in those capacities since 1990. Mr. Krantz is also
President of Finish Line Management Corporation, which operates certain
off-track betting facilities in Louisiana.

MARIE G. KRANTZ, age 65, is Chairman of the Board of Directors and Treasurer of
the Company and has served in those capacities since 1990. Ms. Krantz is also
Secretary/Treasurer of Finish Line Management Corporation.

MERVIN MUNIZ, JR., age 58, is Director of Racing and Racing Secretary and has
served in those capacities since prior to 1990.

GORDON M. ROBERTSON, age 60, is Chief Financial Officer of the Company and has
served in those capacities since 1990.

DAVID R. SHERMAN, age 48, is Secretary of the Company and has served in that
capacity since 2000.

No family relationships exist between or among any nominee, director or
executive officer of the Company, except that Bryan G. Krantz is the son of
Marie G. Krantz. The officers of the Company are elected annually by the Board
of Directors of the Company at the first meeting of the Board held after the
annual meeting of shareholders.



                                       10
<PAGE>   13



                                     PART II

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

The Company's common shares are traded in the over-the-counter market and are
quoted in the "pink sheets" promulgated by the National Quotation Bureau, Inc.
and are qualified for listing on the OTC Bulletin Board under the symbol "FGRD".
Trading in the Company's common shares has been sporadic and relatively inactive
for many years.

The following chart sets forth the range of the high and low bid quotations for
the common shares of the Company for each period indicated. The following bid
quotations have been adjusted to give effect to the 1 for 200 reverse stock
split that was effected on December 15, 2000. The quotations represent prices
between dealers and do not include retail markups, markdowns, commissions or
other adjustments and may not represent actual transactions. The information
presented was obtained from Dorsey & Company, a broker-dealer located in New
Orleans, Louisiana.

<TABLE>
<CAPTION>

FISCAL                            1999              1999                2000              2000
QUARTER ENDED                     LOW BID           HIGH BID            LOW BID           HIGH BID
-------------                     -------           ---------            -------          ---------
<S>                               <C>               <C>                 <C>               <C>
 January 31                       $4,500.00         $5,000.00           $6,400.00         $6,900.00
 April 30                         $4,850.00         $5,400.00           $6,050.00         $6,400.00
 July 31                          $5,500.00         $6,226.00           $6,100.00         $7,400.00
 October 31                       $6,100.00         $7,000.00           $6,476.00         $8,800.00
</TABLE>

As of January 25, 2001, there were approximately 73 shareholders of record of
the 2,194 issued and outstanding common shares of the Company.

On April 30, 1999, the Company paid a special cash dividend of $200 per share
to shareholders of record at the close of business on April 15, 1999. There were
no cash dividends declared or paid during fiscal 2000. The Company presently has
no plans to declare any additional cash dividends.

The Company is not subject to any restrictions (other than non-contractual
business considerations) affecting its present or future ability to pay
dividends with respect to its common shares.

See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations."



                                       11
<PAGE>   14



ITEM 6.  SELECTED FINANCIAL DATA

                            FAIR GROUNDS CORPORATION
                             SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                   For the Five Years Ended October 31,
                                           ------------------------------------------------------------------------------------

                                               2000              1999              1998              1997              1996
                                           ------------      ------------      ------------      ------------      ------------
<S>                                        <C>               <C>               <C>               <C>               <C>
OPERATING REVENUES                         $ 41,747,390      $ 41,794,601      $ 36,785,091      $ 30,980,259      $ 27,496,500

OPERATING EXPENSES                           43,952,235        43,537,452        39,209,437        32,201,167        29,809,843
                                           ------------      ------------      ------------      ------------      ------------

LOSS FROM CONTINUING OPERATIONS              (2,204,845)       (1,742,851)       (2,424,346)       (1,220,908)       (2,313,343)

INTEREST EXPENSE                                 21,539            19,783            19,752           266,435           791,566

OTHER INCOME                                  1,924,704           399,015         1,483,027         3,013,320         4,279,503
                                           ------------      ------------      ------------      ------------      ------------

INCOME (LOSS) BEFORE INCOME TAXES, AND
  EXTRAORDINARY ITEM                           (301,680)       (1,343,836)         (961,071)        1,525,977         1,174,594

PROVISION (BENEFIT) FOR INCOME TAXES             (1,511)         (236,256)         (645,355)          775,288           294,896

EXTRAORDINARY ITEM - GAIN
  FROM FIRE (net of taxes)                      395,002         2,517,713         6,272,628         9,022,525                --
                                           ------------      ------------      ------------      ------------      ------------

NET INCOME                                 $     94,833      $  1,410,133      $  5,956,912      $  9,773,214      $    879,698
                                           ============      ============      ============      ============      ============

COMMON SHARES OUTSTANDING                       2,342.9           2,342.9           2,342.9           2,342.9           2,342.9
                                           ============      ============      ============      ============      ============

LOSS FROM CONTINUING OPERATIONS
  PER COMMON SHARE                         $    (942.00)     $    (744.00)     $  (1,034.00)     $    (522.00)     $    (988.00)
                                           ============      ============      ============      ============      ============

NET INCOME PER COMMON SHARE                $      40.00      $     602.00      $   2,542.00      $   4,160.00      $     374.00
                                           ============      ============      ============      ============      ============

SPECIAL CASH DIVIDENDS PAID PER SHARE      $         --      $     200.00      $         --      $         --      $         --
                                           ============      ============      ============      ============      ============

TOTAL ASSETS                               $ 49,022,206      $ 48,951,539      $ 49,144,377      $ 48,089,820      $ 34,791,597
                                           ============      ============      ============      ============      ============
</TABLE>



                                       12
<PAGE>   15



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

RESULTS OF OPERATIONS

Fiscal 2000 Compared to Fiscal 1999

Revenues. During the fiscal years ended October 31, 2000 and 1999, the Company
derived its pari-mutuel income by conducting live racing meets of 88 days during
each fiscal year and in the operation of its tele-tracks for off-track wagering.
During each such fiscal year, in addition to live racing conducted at the Fair
Grounds Race Course in New Orleans, the Company operated tele-tracks in New
Orleans at the Fair Grounds Race Course and on Bourbon Street, and at locations
in Jefferson, Lafourche, St. Bernard and St. John Parishes, Louisiana. Through
Finish Line Management Corporation, an affiliated company, the Company operated
tele-track facilities in Terrebonne, St. Tammany, and Jefferson Parishes,
Louisiana. In late July 2000, the Company closed its Bourbon Street tele-track.
However, the Company believes that this closure will not have a material adverse
effect on the Company's operations based upon the lack of profitability of that
tele-track in the past.

For the fiscal year ended October 31, 2000, the Company reported total in-state
pari-mutuel wagering of $122,341,033 compared to $126,264,900 in fiscal 1999.

Comparative pari-mutuel wagering and attendance figures for the fiscal years
ended October 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                   2000                      1999
                                                              --------------            --------------
<S>                                                           <C>                       <C>
Pari-mutuel wagering:
   On-track handle                                            $   26,136,189            $   27,412,562
   Off-track handle                                               96,204,844                98,852,338
                                                              --------------            --------------
   Total in-state wagering                                    $  122,341,033            $  126,264,900
                                                              ==============            ==============

   Out-of-state simulcast handle                              $  366,467,601            $  321,342,925
                                                              ==============            ==============

Attendance:
   On-track                                                          162,090                   170,684
   Off-track                                                         332,919                   379,910
                                                              --------------            --------------
   Total Attendance                                                  495,009                   550,594
                                                              ==============            ==============
</TABLE>

The Company believes that the $1,276,373, or 4.6%, decrease in on-track handle
is primarily due to the increased competition locally from the land-based casino
which opened in October 1999 and from other simulcast signals competing with the
Company's signal.

The Company believes that the $2,647,494, or 2.68%, decrease in off-track handle
is partially due to the relocation in May 2000 of Finish Line Management
Corporation's Kenner, Louisiana tele-track facility to a new location that is
approximately 10 miles from the Company's tele-track in Metairie, Louisiana. The
Company is planning to open a new tele-track in 2001 in eastern part of
Jefferson Parish, Louisiana and believes that the handle and attendance at that
facility will partially or completely offset the decreases in handle and
attendance attributable to the relocated Kenner tele-track location. The
Company's lease for its La Place tele-track in St. John the Baptist Parish
terminated in January 2001 and the Company is currently operating its La Place
tele-track in temporary facilities on property purchased by the Company in La
Place while its new tele-track is constructed.



                                       13
<PAGE>   16


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

The Company also believes that the decline in the off-track handle is partially
attributable to the closure of the Bourbon Street tele-track in July 2000. As
previously reported, the tele-track had a poor operating performance for several
years prior to the date of its closure.

The Company believes that the $45,124,676, or 14%, increase in out-of-state
handle is primarily due to the continued high quality of racing at the Fair
Grounds Race Course. In addition, during the year ended October 31, 2000, the
Company experienced significant handle increases from California, as the
Company's races became one of the two featured simulcasts signals in that state
starting in January 2000.

The Company's total operating revenues for the year ended October 31, 2000
decreased $47,211, or .1%, from the prior fiscal year. The net decrease included
decreases of $637,376, or 2.5%, in pari-mutuel commissions; $55,851, or 8%, in
breakage; $49,676, or 2.2%, in concessions revenue; $89,521 or 12.8%, in
admissions revenue; $68,836, or 2.3%, in video poker revenue; $42,875, or 7.9%,
in uncashed mutual ticket revenue; and $103,720, or 7.1%, in programs and forms
revenue. These decreases were almost entirely offset by the increase of
$1,062,640, or 10.3%, in the Company's out-of-state handle as discussed above.

Racing Expenses. Total racing expenses for the year ended October 31, 2000
increased $1,047,387, or 2.8%, over the prior fiscal year, primarily as a result
of the increased out-of-state pari-mutuel activities. The increase in racing
expenses was attributable to an increase of $179,160, or 1.1%, in purses, as
well as increases in salaries and related taxes and benefits, contracts and
services, utilities, advertising and promotion, cost of sales - concessions,
repairs and maintenance and rent, partially offset by decreases in depreciation,
host track fees; and miscellaneous expenses.

The increase in rent was due to the increased monthly rent at the Bourbon Street
tele-track location until its closure in July 2000, as well as rent payments,
beginning in February 2000, for a new tele-track location to be opened in the
eastern part of Jefferson Parish, Louisiana. Depreciation decreased in fiscal
2000 due to many of the leasehold improvements at the Company's tele-tracks
becoming fully depreciated in the prior fiscal year. Contracts and services
increased due to the Company's totalisator vendor's fees increasing in
proportion to the increased out-of-state handle.

General and Administrative Expenses. General and administrative expenses
decreased by $632,604, or 10%, in fiscal 2000 primarily as a result of decreases
in legal, audit and director fees, insurance, and office expenses, partially
offset by increases in salaries and related benefits and miscellaneous expenses.
Legal, audit and director fees decreased in fiscal 2000 as a result of the
conclusion, prior to fiscal 2000, of most of the fire-related and certain other
litigation.

Other Income (Expense). Other income increased in fiscal 2000 by $1,504,150, or
377%, compared to fiscal 1999 in part as a result of a $502,519, or 40%,
increase in Jazz and Heritage Festival income which was attributable to an
increase in the sales prices of beverages sold at the 2000 Festival.
Additionally, in fiscal 1999, a financing charge of $988,789 was incurred and
paid in connection with a guarantee of corporate indebtedness; no such guarantee
fee was paid in fiscal 2000.



                                       14
<PAGE>   17



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

Extraordinary Items. During the year ended October 31, 1999, the Company
received settlement payments in connection with the fire-related litigation in
the aggregate amount of $3,996,370. These proceeds were reflected in the
Company's financial statements net of $1,478,657 of related taxes. In the fiscal
2000, the Company received $493,752 in connection with the fire-related
litigation, which is reflected in the Company's financial statements net of
$98,750 of related taxes.

Income Taxes. For the year ended October 31, 2000, the income tax benefit was
$1,511 compared to $236,256 in fiscal 1999. The difference between fiscal years
reflects changes in pretax income between the respective fiscal years.

Net Income. The Company reported net income of $94,833 for the year ended
October 31, 2000 compared to net income of $1,410,133 for the year ended October
31, 1999.

Fiscal 1999 Compared to Fiscal 1998

Revenues. During the fiscal years ended October 31, 1999 and 1998, the Company
derived its pari-mutuel income by conducting live racing meets of 88 days during
each fiscal year and in the operation of its tele-tracks for off-track wagering.
During each such fiscal year, in addition to live racing conducted at the Fair
Grounds race course in New Orleans, the Company operated tele-tracks in New
Orleans at the Fair Grounds Race Course and on Bourbon Street, and at locations
in Jefferson, Lafourche, St. Bernard and St. John Parishes, Louisiana. Through
Finish Line Management Corporation, an affiliated company, the Company operated
tele-track facilities in Terrebonne, St. Tammany, and Jefferson Parishes,
Louisiana.

For the fiscal year ended October 31, 1999, the Company reported total in-state
pari-mutuel wagering of $126,264,900 compared to $119,710,774 in fiscal 1998.

Comparative pari-mutuel wagering and attendance figures for the fiscal years
ended October 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                1999                 1998
                                                           --------------       --------------
<S>                                                        <C>                  <C>
Pari-mutuel wagering:
   On-track handle                                         $   27,412,562       $   25,789,351
   Off-track handle                                            98,852,338           93,921,423
                                                           --------------       --------------
   Total in-state wagering                                 $  126,264,900       $  119,710,774
                                                           ==============       ==============

   Out-of-state simulcast handle                           $  321,342,925       $  219,765,629
                                                           ==============       ==============

Attendance:
   On-track                                                       170,684              189,439
   Off-track                                                      379,910              391,271
                                                           --------------       --------------
   Total Attendance                                               550,594              580,710
                                                           ==============       ==============
</TABLE>



                                       15
<PAGE>   18



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

The Company attributes the $1,623,211, or 6.3%, increase in the on-track handle
in the 1999 fiscal year primarily to the improved quality of racing resulting
from increased purses paid during the fiscal 1999 race meet.

The Company believes that the $4,930,915, or 5.3%, increase in off-track handle
is primarily due to the Company transmitting better simulcasting signals and to
higher quality horses racing in the Company's fiscal 1999 live racing meet. The
$101,577,296, or 46.2%, increase in out-of-state handle is believed to be the
result of those same factors. In addition, during the fiscal 1999 race meet the
Company's races were sometimes simulcasted to locations that have not generally
received simulcasts of the Company's races, thus increasing the Company's
simulcasting handle. Those locations received simulcasts of the Company's races
during fiscal 1999 because certain other tracks were unable to conduct live
racing and simulcast their races to those locations due to severe winter
weather.

During the fiscal year ended October 31, 1999, the Company experienced
significant simulcast handle increases from California and New York. These two
markets accounted for approximately $46.4 million, or 46%, of the handle
increase.

With the increase in total handle, the Company's operating revenues in the
fiscal year ended October 31, 1999 increased by $5,009,510, or 13.6%, from the
prior fiscal year. This included increases of $1,539,409, or 6.5%, in
pari-mutuel commissions, $179,196, or 34.5%, in breakage, $63,384, or 13.3% in
uncashed mutuel tickets, $77,285, or 3.5%, in concessions, $3,210,979, or 45.2%,
in host track fees, $80,674, or 2.8%, in video poker revenues, $11,516, or
25.5%, in parking revenues, and $211,722, or 34.6%, in miscellaneous revenues.
Miscellaneous revenue included approximately $150,000 of promotional fee
revenues paid by third parties which advertise in the Company's racing program
plus $135,000 of promotional fees paid to the Company by its video poker
operator. Also included in miscellaneous revenues is group sales and special
events revenues held at the Company's facilities which have continued to
increase since the building of its new grandstand and clubhouse facilities.
These increases were partially offset by a $55,442, or a 7.4%, decrease in
admissions revenues, a $143,557, or 9%, decrease in programs and forms revenue
and a $165,656 or 5.2% increase in pari-mutuel tax expense. Admissions are no
longer collected at the Company's teletrack in Lafourche Parish. Programs and
forms revenues have decreased as a result of a continued decline in racing form
sales. Management believes racing form sales are being replaced by the sales of
less expensive racing programs. In addition, some information found in these
racing publications can now be obtained by the public over the internet, thus
reducing the demand for program and form sales.

Racing Expenses. Total racing expenses increased $3,348,937, or 10%, in the 1999
fiscal year over the prior period, primarily as a result of the increased
pari-mutuel activities. This increase included an increase of $2,326,443, or
17.4%, in purses. Other increases included salaries and related taxes and
benefits, contracts and services, rent, repairs and maintenance, concessions
costs, advertising and promotion, and host track fees paid by the Company. These
increases were partially offset by decreases in utilities, depreciation, and
program paper, forms and other supplies.



                                       16
<PAGE>   19



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

General and Administrative Expenses. General and administrative expenses
increased by $979,078, or 18.2%, in the 1999 fiscal year primarily as a result
of performance bonuses paid in the second fiscal quarter to key personnel,
increased property taxes, increased office expenses and increased legal fees
relating to ongoing litigation discussed elsewhere herein. Also contributing to
the higher general and administrative expenses in fiscal 1999 was a $118,000
increase in the accrual for contingent liabilities over the prior year based
upon management's evaluation of outstanding contingencies at October 31, 1999.
These increases were partially offset by decreases in insurance costs due to
lower property and general liability premiums, and decreased contracts and
services.

Other Income (Expense). Other income decreased in the fiscal year ended October
31, 1999 by $1,064,260, or 72.7%, due, in part, to a $127,931 decrease in Jazz
and Heritage Festival income. The decrease in Jazz and Heritage Festival income
was primarily attributable to a $25,000 increase of the festival sponsorship fee
paid by the Company, a decrease in infield food sales compared to the 1998
festival, and increased cost of goods sold at the 1999 festival. The decrease in
other income was also attributable to the Company's payment, during the 1999
fiscal year, of a guaranty fee in the amount of $988,789 to Marie G. Krantz for
her guaranty of, and pledge of personal assets to secure, the Company's
reconstruction debt from 1995 through completion of construction in late 1997.
No additional guaranty payments are due to Ms. Krantz, and the Company will not
be making a similar guaranty payment in the 2000 fiscal year.

Extraordinary Items. During the fiscal year ended October 31, 1999, the Company
received settlement payments in connection with the fire related litigation
previously reported in the aggregate amount of $4 million. These proceeds were
reported net of related taxes of approximately $1.48 million. In the comparable
prior fiscal year period, settlements totaled $9.96 million and were reported
net of $3.68 million of related taxes.

Income Taxes. For the fiscal year ended October 31, 1999, income tax benefit was
$236,256, compared to $645,355 for fiscal 1998. The difference between periods
reflects changes in pretax income and deferred tax assets and liabilities
between the respective periods.

Net Income. The Company reported net income of $1,410,133 for the fiscal year
ended October 31, 1999 compared to $5,956,912 for the fiscal year ended October
31, 1998. The Company's net income in fiscal 1999 was significantly reduced from
that in fiscal 1998 primarily due to a substantial reduction in the fire-related
litigation recoveries in the 1999 fiscal year. The Company anticipates that
there may be a further reduction in net income in fiscal 2000 inasmuch as the
Company may not receive any significant litigation recoveries in fiscal 2000.
Excluding the extraordinary items and income taxes discussed above, net income
(loss) in the current fiscal year was $(1,343,836) compared to $(961,071) in the
fiscal year ended October 31, 1998.



                                       17
<PAGE>   20


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES

General

Cash and cash equivalents increased $1,389,279 during the fiscal year ended
October 31, 2000, as a result of cash provided by operating activities of
$1,400,594 and cash provided by financing activities of $80,412, partially
offset by cash used for investing of $91,727. The cash used for investing
included barn improvements and equipment purchases made during the fiscal year.

As of October 31, 2000, the Company had received cumulatively, since the
December 1993 fire, approximately $48.3 million, before taxes, of insurance
proceeds resulting from fire loss claims submitted to the Company's insurance
carriers or in litigation settlements. The Company's new main grandstand and
racing facility was substantially completed in November 1997 and was opened for
the start of the Company's 1997-98 live racing meet. The total cost of
constructing and furnishing the facility, including the tele-track facility at
the Fair Grounds Race Course that was completed in late 1994, was in excess of
$35 million.

In November 1999, the Company entered into a working capital line of credit
agreement with First Bank and Trust for an initial term of one year. The term of
the loan agreement has been extended to November 22, 2001. The line of credit is
for $2.5 million with interest on amounts outstanding at Citibank N.A.'s prime
rate less 0.5% per annum or LIBOR plus 2% from time to time in effect, as
selected by the Company. No amounts have been drawn down on the line of credit
since it was entered into in November 1999.

On April 30, 1999, the Company paid a special cash dividend of $200.00 per share
to shareholders of record at the close of business on April 15, 1999. The
Company presently has no plans to declare any additional cash dividends.

The Company believes that the combination of existing cash, cash from future
operations, funds available under its working capital line of credit, and the
Company's capacity to incur short-term and long-term indebtedness, if necessary,
will be sufficient to fund the Company's cash requirements for the foreseeable
future, including payment of cash in lieu of fractional shares in connection
with the reverse stock split and construction of the Company's new tele-track
facilities. The Company has a deferred tax liability of approximately $9.28
million at October 31, 2000 arising from reinvestment of fire insurance and
other litigation settlements into its new facilities within the allowable
replacement period. That deferred tax liability is to be paid over approximately
36 years which is the remaining useful life of the new facilities for tax
purposes. The Company currently anticipates payment of that liability with funds
obtained through the sources outlined above. See Note 5, "Commitments and
Contingencies" in the Notes to Financial Statements for the Years Ended October
31, 2000, 1999 and 1998 included elsewhere herein.

Impact of Inflation

To date, inflation has not had a material effect in the Company's operations.



                                       18
<PAGE>   21



FORWARD-LOOKING STATEMENTS

The statements in this Annual Report that are forward-looking are based upon
current expectations, and actual results may differ materially. Therefore, the
inclusion of such forward-looking information should not be regarded as a
representation by the Company that the objectives or plans of the Company will
be achieved. Such statements include, but are not limited to, the Company's
expectations regarding the source of funds for payment of its deferred tax
liability, the long term benefits of telephone and Internet wagering, the
Company's net income in fiscal 2000, and the adequacy of its cash, cash
equivalents and borrowings available under its new working capital line of
credit to fund the Company's future cash requirements. Words such as
"anticipates," "believes," "expects," "intends," "estimated" and variations of
such words and similar expressions are intended to identify such forward-looking
statements. Forward-looking statements contained herein involve numerous risks
and uncertainties, and there are a number of factors that could cause actual
results to differ materially including, but not limited to, the following:
changing economic, market and business conditions, the ability of the Company to
compete effectively for top horses and trainers necessary to field high-quality
horse racing; the ability of the Company to grow its share of the interstate
simulcast market; a substantial change in allocation of live racing days; the
impact of competition from alternative gaming (including casinos and lotteries)
and other sports and entertainment options in those markets in which the Company
operates; and the Company's success in attracting new patrons and generating
additional revenue for purses.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company utilizes an overnight sweep arrangement pursuant to which available
funds are invested in daily repurchase agreements which are collateralized by
U.S. government or agency securities. The Company also has deposits in U.S.
Treasury money market funds which are short-term in nature and guaranteed by the
U.S. government. Because of the short-term duration of the financial instruments
held by the Company, management does not believe that its financial instruments
are materially sensitive to changes in interest rates.

ITEM 8.   FINANCIAL STATEMENTS

The following financial statements of the Company, including the notes thereto,
and the Report of Independent Certified Public Accountants are included
herewith:

Report of Independent Certified Public Accountants

Balance Sheets at October 31, 2000 and 1999

Statements of Operations for the Three Years Ended October 31, 2000

Statements of Changes in Stockholders' Equity for the Three Years Ended October
31, 2000

Statements of Cash Flows for the Three Years Ended October 31, 2000



                                       19
<PAGE>   22



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors
and Stockholders of the
Fair Grounds Corporation


We have audited the accompanying balance sheets of the FAIR GROUNDS CORPORATION
(the "Company") as of October 31, 2000 and 1999, and the related statements of
operations, of changes in stockholders' equity, and of cash flows for each of
the three years in the period ended October 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of October 31,
2000 and 1999 and the results of its operations and its cash flows for each of
the three years ended October 31, 2000 in conformity with generally accepted
accounting principles.

/s/ Rebowe & Company

Metairie, Louisiana
JANUARY 5, 2001



                                       20
<PAGE>   23



                            FAIR GROUNDS CORPORATION
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       October 31,
                                                           ----------------------------------
ASSETS                                                          2000                1999
                                                           --------------      --------------

<S>                                                        <C>                 <C>
CURRENT ASSETS
   Cash and cash equivalents                               $    9,878,087      $    8,488,808
   Cash and cash equivalents - restricted                         131,068             125,665
   Accounts receivable                                            140,570             291,083
   Accounts receivable - related parties                          674,927             788,139
   Mutuel settlements                                                  --             181,630
   Inventory                                                      146,157             125,156
   Deferred income taxes                                          103,600             103,600
   Prepaid expenses                                               622,431             468,165
                                                           --------------      --------------

        Total Current Assets                                   11,696,840          10,572,246
                                                           --------------      --------------

OTHER ASSETS                                                       87,581              53,768
                                                           --------------      --------------

PROPERTY, PLANT AND EQUIPMENT
   Buildings and improvements                                  44,454,012          44,177,698
   Land improvements                                            4,463,899           4,463,899
   Automotive equipment                                         1,009,705             963,243
   Machinery and equipment                                      2,940,351           2,696,449
   Furniture and fixtures                                         425,202             405,352
                                                           --------------      --------------

        Total                                                  53,293,169          52,706,641

   Less: accumulated depreciation and amortization            (19,341,665)        (17,667,397)
                                                           --------------      --------------

   Depreciable property - net                                  33,951,504          35,039,244
   Land                                                         3,286,281           3,286,281
                                                           --------------      --------------

        Property, plant and equipment - net                    37,237,785          38,325,525
                                                           --------------      --------------

        TOTAL ASSETS                                       $   49,022,206      $   48,951,539
                                                           ==============      ==============

</TABLE>



                                       21
<PAGE>   24



                            FAIR GROUNDS CORPORATION
                           BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                     October 31,
                                                                        -------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                         2000                   1999
                                                                        --------------         --------------

<S>                                                                     <C>                    <C>
CURRENT LIABILITIES
   Notes payable                                                        $      190,025         $      109,613
   Accounts payable                                                          1,139,823                849,288
   Accrued liabilities:
     Deferred purses                                                         7,926,101              8,104,835
     Host track fees                                                           411,540                432,721
     Uncashed mutual tickets                                                   469,001                391,790
     Other                                                                     561,482                543,183
   Deferred revenues                                                           293,931                282,970
   Mutual settlements                                                           70,480                     --
   Income taxes payable                                                          5,082                  4,932
                                                                        --------------         --------------

        Total Current Liabilities                                           11,067,465             10,719,332
                                                                        --------------         --------------

DEFERRED INCOME TAXES                                                        9,280,520              9,652,819
                                                                        --------------         --------------

        Total Liabilities                                                   20,347,985             20,372,151
                                                                        --------------         --------------

COMMITMENTS AND CONTINGENCIES                                                       --                     --
                                                                        --------------         --------------

STOCKHOLDERS' EQUITY
   Capital stock - no par value; authorized 3,000 shares,
     2,349.7 shares issued and 2,342.9 shares outstanding                    1,525,092              1,525,092
   Additional paid-in capital                                                1,936,702              1,936,702
   Retained earnings                                                        25,247,952             25,153,119
                                                                        --------------         --------------

        Total                                                               28,709,746             28,614,913

   Less: treasury stock at cost, 6.8 shares                                    (35,525)               (35,525)
                                                                        --------------         --------------

        Total Stockholders' Equity                                          28,674,221             28,579,388
                                                                        --------------         --------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $   49,022,206         $   48,951,539
                                                                        ==============         ==============
</TABLE>

See accompanying notes to financial statements.



                                       22
<PAGE>   25


                            FAIR GROUNDS CORPORATION
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                   For the Years Ended October 31,
                                                   ----------------------------------------------------------------

                                                        2000                     1999                    1998
                                                   ---------------         ---------------         ----------------
<S>                                                <C>                     <C>                     <C>
REVENUES
   Pari-mutuel commissions                         $    24,653,375         $    25,290,751         $     23,751,342
   Breakage                                                642,167                 698,018                  518,822
   Uncashed mutuel tickets                                 497,249                 540,124                  476,740
                                                   ---------------         ---------------         ----------------
        Total                                           25,792,791              26,528,893               24,746,904

   Less: pari-mutuel tax                                (3,138,152)             (3,330,231)              (3,164,575)
                                                   ---------------         ---------------         ----------------

   Commission income                                    22,654,639              23,198,662               21,582,329
   Host track fees                                      11,092,043              10,005,413                6,802,990
   Host track fees - related parties                       281,601                 305,591                  297,035
                                                   ---------------         ---------------         ----------------

        Total Mutuel Income                             34,028,283              33,509,666               28,682,354

   Concessions                                           2,222,397               2,272,073                2,194,788
   Admissions (net of taxes)                               608,106                 697,627                  753,069
   Parking                                                  53,904                  56,606                   45,090
   Video poker                                           2,911,599               2,980,435                2,899,761
   Programs and forms                                    1,351,285               1,455,005                1,598,562
   Miscellaneous                                           571,816                 823,189                  611,467
                                                   ---------------         ---------------         ----------------

        Total Operating Revenues                        41,747,390              41,794,601               36,785,091
                                                   ---------------         ---------------         ----------------

RACING EXPENSES
   Purses                                               15,845,408              15,666,248               13,339,805
   Salaries and related taxes and benefits               7,849,626               7,710,882                7,058,677
   Contracts and services                                2,935,048               2,353,119                2,197,555
   Depreciation                                          1,674,268               1,763,051                1,847,867
   Host track fees                                       3,127,364               3,168,059                2,785,281
   Program paper, forms and other supplies               1,675,699               1,649,714                1,774,943
   Utilities                                             1,047,287                 998,231                1,204,332
   Advertising and promotion                               558,584                 298,452                  650,101
   Advertising - related party                             627,188                 628,365                  502,000
   Cost of sales - concessions                             972,087                 866,532                  716,918
   Repairs and maintenance                                 834,909                 774,331                  733,474
   Rent                                                    566,219                 359,872                  326,973
   Miscellaneous                                           524,575                 685,385                  704,012
                                                   ---------------         ---------------         ----------------

        Total Racing Expenses                           38,238,262              37,190,875               33,841,938
                                                   ---------------         ---------------         ----------------
</TABLE>


(Continued)



                                       23
<PAGE>   26


                            FAIR GROUNDS CORPORATION
                      STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                                             For the Years Ended October 31,
                                                              -------------------------------------------------------------
                                                                  2000                    1999                     1998
                                                              -------------           -------------           -------------

<S>                                                           <C>                     <C>                     <C>
GENERAL AND ADMINISTRATIVE EXPENSES
   Salaries and related taxes and benefits                    $   2,346,461           $   2,145,314           $   1,483,233
   Legal, audit and director fees                                   718,452               1,254,283               1,051,024
   Property taxes                                                   962,849                 965,661                 811,104
   Insurance                                                        704,799                 818,374                 827,775
   Office expenses                                                  299,959                 569,711                 408,938
   Contracts and services                                           121,357                 127,794                 179,880
   Miscellaneous                                                    560,096                 465,440                 605,545
                                                              -------------           -------------           -------------

        Total General and Administrative Expenses                 5,713,973               6,346,577               5,367,499
                                                              -------------           -------------           -------------

LOSS FROM OPERATIONS                                             (2,204,845)             (1,742,851)             (2,424,346)
                                                              -------------           -------------           -------------

OTHER INCOME (EXPENSE)
   Jazz and Heritage Festival income - net                        1,751,561               1,249,042               1,376,973
   Financing charge - related party                                      --                (988,789)                     --
   Interest expense                                                 (21,539)                (19,783)                (19,752)
   Interest income                                                  173,143                 158,545                 130,821
   Other                                                                 --                      --                 (24,767)
                                                              -------------           -------------           -------------

        Total Other Income                                        1,903,165                 399,015               1,463,275
                                                              -------------           -------------           -------------

LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM                    (301,680)             (1,343,836)               (961,071)

BENEFIT FOR INCOME TAXES                                             (1,511)               (236,256)               (645,355)
                                                              -------------           -------------           -------------

LOSS BEFORE EXTRAORDINARY ITEM                                     (300,169)             (1,107,580)               (315,716)

EXTRAORDINARY ITEM - INSURANCE PROCEEDS AS A RESULT OF
DECEMBER 1993 FIRE (net of $98,750, $1,478,657 and
$3,683,924 of related income taxes in 2000, 1999,
and 1998, respectively)                                             395,002               2,517,713               6,272,628
                                                              -------------           -------------           -------------

NET INCOME                                                    $      94,833           $   1,410,133           $   5,956,912
                                                              =============           =============           =============

</TABLE>
(Continued)



                                       24
<PAGE>   27



                            FAIR GROUNDS CORPORATION
                      STATEMENTS OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
                                                                      For the Years Ended October 31,
                                                              ---------------------------------------------
                                                                 2000              1999              1998
                                                              ---------         ---------         ---------

<S>                                                           <C>               <C>               <C>
PER SHARE OF COMMON STOCK:

LOSS BEFORE EXTRAORDINARY ITEM                                $ (128.00)        $ (474.00)        $ (136.00)

   EXTRAORDINARY ITEM, NET OF INCOME TAXES                       168.00          1,076.00          2,678.00
                                                              ---------         ---------         ---------

   NET INCOME                                                 $   40.00         $  602.00         $2,542.00
                                                              =========         =========         =========
</TABLE>



See accompanying notes to financial statements.
<PAGE>   28
                            FAIR GROUNDS CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
               For the Years Ended October 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                         Unrealized
                                                                                          Loss On
                                                           Additional                    Securities                   Total
                                              Capital       Paid-In       Retained       Available    Treasury    Stockholders'
                                               Stock        Capital       Earnings       For Sale      Stock         Equity
                                            -----------   -----------   ------------   ------------  ---------    -------------
<S>                                         <C>           <C>           <C>            <C>           <C>          <C>
Balance, October 31, 1997                   $1,525,092    $1,936,702    $ 18,254,654     $(3,122)    $(35,525)    $ 21,677,801

   Net Income                                       --            --       5,956,912          --           --        5,956,912

   Change in unrealized loss
   on securities available
   for sale                                         --            --              --       3,122           --            3,122
                                            ----------    ----------    ------------     -------     --------     ------------

Balance, October 31, 1998                    1,525,092     1,936,702      24,211,566          --      (35,525)      27,637,835

   Net Income                                       --            --       1,410,133          --           --        1,410,133

   Special cash dividends ($200 per share)          --            --        (468,580)         --           --         (468,580)
                                            ----------    ----------    ------------     -------     --------     ------------

Balance, October 31, 1999                    1,525,092     1,936,702      25,153,119          --      (35,525)      28,579,388

   Net Income                                       --            --          94,833          --           --           94,833

Balance, October 31, 2000                   $1,525,092    $1,936,702    $ 25,247,952     $    --     $(35,525)    $ 28,674,221
                                            ==========    ==========    ============     =======     ========     ============
</TABLE>

See accompanying notes to financial statements.


                                       27
<PAGE>   29

                            FAIR GROUNDS CORPORATION
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                               For the Years Ended October 31
                                                       -----------------------------------------------
                                                           2000              1999              1998
                                                       -----------       -----------       -----------
<S>                                                    <C>               <C>               <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES
  Net income                                           $    94,833       $ 1,410,133       $ 5,956,912
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
    Depreciation                                         1,674,268         1,763,051         1,847,867
    Financing charge - related party                            --           988,789                --
    Gain on sale of property                                (1,049)               --                --
    Benefit for deferred
      income taxes                                        (372,299)         (407,805)         (301,326)
    Gain on sale of
      investment securities                                     --                --              (725)
    Gain from fire                                        (493,752)       (3,996,370)       (9,900,000)
  Change in assets and liabilities:
    (Increase) decrease in:
    Accounts receivable and
      mutuel settlements                                   402,623           (42,250)          168,820
    Accounts receivable - related party                    113,212           (27,541)         (594,405)
    Inventory                                              (21,000)           (6,799)          (23,054)
    Prepaid expenses                                      (154,266)          (30,843)          (84,155)
    Cash and cash equivalents -
      restricted                                            (5,403)           (7,447)        2,525,484
    Deposits and other assets                              (33,813)          229,643          (157,895)
    Increase (decrease) in:
    Accounts payable and
      accrued liabilities                                  364,863          (510,259)          736,220
    Deferred purses                                       (178,734)          174,010           505,646
    Deferred revenues                                       10,961             7,269           134,861
    Income taxes payable                                       150          (445,253)          329,185
                                                       -----------       -----------       -----------

    Total Adjustments                                    1,305,761        (2,284,264)       (4,219,072)
                                                       -----------       -----------       -----------

  Net cash provided by (used for)
    operating activities                                 1,400,594          (874,131)        1,737,840
                                                       -----------       -----------       -----------
</TABLE>

(Continued)


                                       28
<PAGE>   30


                            FAIR GROUNDS CORPORATION
                      STATEMENTS OF CASH FLOWS (CONTINUED)


<TABLE>
<CAPTION>
                                                               For the Years Ended October 31
                                                      -----------------------------------------------
                                                          2000              1999              1998
                                                      -----------       -----------       -----------
<S>                                                   <C>               <C>               <C>
CASH FLOWS FROM INVESTING
  ACTIVITIES
  Capital expenditures                                $  (586,528)      $  (757,779)      $(3,478,477)
  Construction contract
    payable                                                    --           (58,732)       (1,097,994)
  Purchase of securities
    available for sale                                         --                --          (750,000)
  Proceeds from sale of
    securities available for sale                              --                --         1,346,725
  Proceeds from sale of property                            1,049                --            (1,111)
  Proceeds from fire
    litigation settlements                                493,752         3,996,370         9,900,000
                                                      -----------       -----------       -----------

  Net cash provided by (used for)
    investing activities                                  (91,727)        3,179,859         5,919,143
                                                      -----------       -----------       -----------

CASH FLOWS FROM FINANCING
  ACTIVITIES
  Special Cash dividends paid                                  --          (468,580)               --
  Payment of financing charge - related party                  --          (988,789)               --
  Proceeds from short-term
    borrowings                                            420,604         1,320,052         2,272,253
  Principal repayments
    of short-term borrowings                             (340,192)       (1,257,333)       (7,544,262)
                                                      -----------       -----------       -----------

  Net cash provided by (used for)
    financing activities                                   80,412        (1,394,650)       (5,272,009)
                                                      -----------       -----------       -----------

NET INCREASE IN CASH AND
  CASH EQUIVALENTS                                      1,389,279           911,078         2,384,974

CASH AND CASH EQUIVALENTS
  AT BEGINNING OF YEAR                                  8,488,808         7,577,730         5,192,756
                                                      -----------       -----------       -----------

CASH AND CASH EQUIVALENTS
  AT END OF YEAR                                      $ 9,878,087       $ 8,488,808       $ 7,577,730
                                                      ===========       ===========       ===========
</TABLE>

See accompanying notes to financial statements.


                                       29
<PAGE>   31

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company conducts a live winter/spring race meet for thoroughbred horses and
participates in inter-track wagering as a host track and as a receiving track.
In addition, the Company currently operates five off-track betting facilities
located in Southeast Louisiana, as well as a tele-track facility located at the
Fair Grounds Race Course. Most of the Company's revenues and receivables are
dependent on patrons of horse racing and other horse racing facilities and
tele-tracks. This results in a concentration of risk and could be affected by
regulations or economic conditions that impact the gaming industry.

Basis of Consolidation

The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiary, F. G. Staffing Services, Inc. All inter-company
balances and transactions have been eliminated in consolidation.

Uninsured Cash Deposits

As of October 31, 2000 and 1999, the Company had deposits in various financial
institutions in the aggregate of $10,263,924 and $8,622,684, respectively. In
fiscal year 2000, $327,461 was FDIC insured and $9,483,301 was invested in U.S.
Government Securities which are guaranteed by the Federal Government, but are
not FDIC insured. The remaining deposits exceeded insured limits as of October
31, 2000 and 1999 by $453,157 and $429,267, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Cash and Cash Equivalents - Restricted

As of October 31, 2000 and 1999, restricted cash totaled $131,068 and $125,665,
respectively. The restricted cash is a security deposit for the Company's
worker's compensation program.

Inventory

Inventory consists primarily of food and beverage items and is stated at the
lower of cost or market. Cost is determined by the first-in, first-out method.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. Depreciation is provided by the
straight-line method. The estimated useful lives of the buildings range from 20
to 40 years. Lives of other depreciable assets range from approximately 3 to 20
years. For financial reporting purposes,


                                       30
<PAGE>   32

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

leasehold improvements are amortized over the lesser of the term of the related
lease or the estimated useful life of the asset.

Advertising

Advertising costs are charged to operations when incurred.

Accounts Receivable

The Company has recorded accounts receivable from pari-mutuel wagering, video
poker and other activities. The majority of these receivables is settled at
least monthly and are considered fully collectable. Therefore, management does
not consider an allowance for doubtful accounts to be necessary.

Deferred Revenues

Promotional fees and reserved seating deposits received by the Company are
deferred and recognized as income over the duration of the racing meet.

Fair Value Disclosures

Financial Accounting Standards Board ("FASB") Statement No. 107, "Disclosure
about Fair Value of Financial Instruments," is a part of a continuing process by
the FASB to improve information on financial instruments. The following methods
and assumptions were used by the Company in estimating its fair value
disclosures for such financial instruments as defined by the Statement:

      Cash and Cash Equivalents -- The carrying amount reported in the balance
      sheet for cash and cash equivalents approximates its fair value.

      Notes Payable -- The carrying amount of the Company's borrowings under its
      line of credit agreements and other long-term debt approximates fair
      value, based upon current interest rates.

Uncashed Mutuel Tickets

Holders of uncashed winning pari-mutuel tickets have until 90 days after the end
of a given race meet to cash their winning tickets. Tickets that expire become
revenues of the Company, up to a maximum of $250,000 per live or simulcasted
race meet. Uncashed pari-mutuel tickets exceeding $250,000 per live or
simulcasted race meet are remitted to the State of Louisiana.

Income Taxes

The Company records income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement amounts of assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary


                                       31
<PAGE>   33


                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that included the enactment date. The most
significant deferred taxes of the Company relates to the deferred tax gain as a
result of the December 1993 fire as further discussed in Note 5.

Deferred Purses

Deferred purses include those amounts required by Louisiana law to be withheld
from commissions, video poker revenues, or out-of-state host fees earned by a
racing licensee and paid as purse supplements during the licensee's succeeding
live racing meet.

Net Income Per Share

Net income per share is determined by dividing net income by the weighted
average number of common shares outstanding during the period. Per share amounts
were determined using 2,342.9 common shares outstanding.

Use of Estimates

Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were used.

Reclassification

Certain prior year accounts have been reclassified to conform to the current
year presentation. This reclassification has no effect on the net income for the
years ended October 31, 1999 and 1998.

Reverse Stock Split

On December 15, 2000, the Company effected a 1 for 200 reverse stock split. All
share and per share data have been adjusted to reflect the reverse stock split
for all periods reported. Fractional shares resulting from the reverse stock
split are not reflected as being cashed out until after December 15, 2000.

Restatement of 1998 Financial Statements

The financial statements for the year ended October 31, 1998 have been restated
to correct for an error in the calculation of deferred income taxes. The
Company's Statement of Operations for the fiscal year ended October 31, 1998
erroneously reflected a benefit for income taxes of $3,364,232 and net income
for fiscal 1998 of $8,973,671. The benefit for income taxes was primarily
related to the insurance and litigation recoveries arising out of a fire at the
Company's race track in 1993 and the reinvestment of those recoveries in the
Company's new facilities. Had this error not occurred, 1998 net income would
have been reduced by $3,016,759 ($1,276 per share), to $5,956,912 ($2,542 per
share). Stockholders' equity at October 31, 1998 would have been $27,637,835 as
compared to the previously reported amount of $30,654,594. The Company's
financial statements as of October 31, 1998 have been restated to reflect this
adjustment.


                                       32
<PAGE>   34

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 2 - STATEMENTS OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES

Cash was paid during the following fiscal years for:

<TABLE>
<CAPTION>
                                    2000             1999               1998
                                -----------       -----------       -----------
<S>                             <C>               <C>               <C>
Interest                        $    21,539       $    19,783       $    19,752
                                ===========       ===========       ===========

Income taxes                    $   510,000       $ 1,298,000       $ 3,154,626
                                ===========       ===========       ===========
</TABLE>

There were no noncash investing or financing activities for fiscal years ended
October 31, 2000, 1999, and 1998.

NOTE 3 - NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                                   October 31
                                                                          ---------------------------
                                                                            2000               1999
                                                                          --------           --------
<S>                                                                       <C>                <C>
Imperial Premium Finance, Inc.
Installment note - insurance
premium financing; interest at 6.75%,
final installment due April 2000                                                --             69,130

INAC Corp; Installment note -
insurance premium financing; interest at 7.25%,
final installment
due February 2001                                                          167,053             40,483

INAC Corp.; Installment note -
insurance premium financing;
interest at 7.80%, final installment
due May 2001                                                                22,972                 --
                                                                          --------           --------

                                                                          $190,025           $109,613
                                                                          ========           ========
</TABLE>

In November 1999, the Company entered into a working capital line of credit
agreement with First Bank and Trust for an initial term of one year. The term of
the loan agreement has been extended to November 22, 2001. The line of credit is
for $2.5 million with interest on amounts outstanding at Citibank N.A.'s prime
rate less 0.5% per annum or LIBOR plus 2% from time to time in effect, as
selected by the Company. No amounts had been drawn down on the line of credit as
of October 31, 2000.


                                       33
<PAGE>   35

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 4 - INCOME TAXES

The components of the income tax provision (benefit) are as follows:

<TABLE>
<CAPTION>
                                            October 31
                           ---------------------------------------------
                              2000             1999              1998
                           ---------       -----------       -----------
<S>                        <C>             <C>               <C>
Current:
     Federal               $ 408,782       $ 1,278,244       $ 3,188,238
     State                    65,082           200,413           495,686
                           ---------       -----------       -----------
          Total              473,864         1,478,657         3,683,924
Deferred                    (372,298)         (236,256)         (645,355)
                           ---------       -----------       -----------

          Total            $ 101,566       $ 1,242,401       $ 3,038,569
                           =========       ===========       ===========
</TABLE>

Approximately $99,000, $1.5 million and $3.7 million of the deferred income tax
provision is reported net of the extraordinary item - gain on fire on the
Statement of Operations for the years ended October 31, 2000, 1999 and 1998,
respectively.

For the fiscal years ended October 31, 2000 and 1999, the tax effects of
temporary differences that gave rise to significant portions of the deferred tax
assets and liabilities are presented below. There was no activity in the
valuation allowance in fiscal years 2000 and 1999.

<TABLE>
<CAPTION>
                                                                           October 31
                                                                 -----------------------------
                                                                     2000              1999
                                                                 -----------       -----------
<S>                                                              <C>               <C>
Current deferred tax assets:
General liability insurance contingency accrual                  $   103,600       $   103,600
                                                                 -----------       -----------

Total current deferred tax assets                                $   103,600       $   103,600
                                                                 ===========       ===========


Non-current deferred tax assets:
Tax accumulated depreciation in excess of book                   $(1,478,290)      $(1,850,589)
                                                                 -----------       -----------

Total non-current deferred tax assets                             (1,478,290)       (1,850,589)

Non-current deferred tax liabilities:
Deferred tax on gain from fire                                    (7,802,230)       (7,802,230)
                                                                 -----------       -----------
Net non-current deferred tax liabilities                         $(9,280,520)      $(9,652,819)
                                                                 ===========       ===========
</TABLE>

A reconciliation of the provision (benefit) for taxes on income at the Company's
federal statutory income tax rate to the tax provision (benefit) for financial
reporting purposes for fiscal years ending October 31, 2000, 1999 and 1998 is as
follows:


                                       34
<PAGE>   36

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 4 - INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
                                                                               October 31
                                                            -----------------------------------------------
                                                               2000              1999                1998
                                                            ---------         ----------         ----------
<S>                                                         <C>               <C>                <C>
Expected tax provision                                      $  53,152         $  901,862         $3,058,464
State income taxes                                              7,608            200,413            495,686
Additional tax basis attributable to gain                           -                  -           (347,473)
Other                                                          40,806            140,126           (168,108)
                                                            ---------         ----------         ----------
Actual tax provision                                        $ 101,566         $1,242,401         $3,038,569
                                                            =========         ==========         ==========
</TABLE>

As of October 31, 2000, the Company has recorded a non-current deferred tax
liability totaling $9,280,520 as a result of the deferred gain on the fire for
income tax purposes. The Company has reinvested all fire insurance and
litigation proceeds into its new facilities within the allowable replacement
period, therefore deferring the gain on the involuntary conversion. As a result,
the Company has a difference between the book and tax bases of such facilities.
This taxable difference will reverse with the scheduled depreciation of such
assets over its remaining tax life.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company has been a party to a number of legal proceedings which arose as a
result of the December 1993 fire that destroyed the Company's main clubhouse and
grandstand building or in connection with the Company's efforts to collect
insurance proceeds after the fire. The following is a brief description of
fire-related proceedings and other litigation during the fiscal year ended
October 31, 2000:

Fire Related Litigation

The following is a brief description of the Traveler's Litigation that arose as
a result of the December 1993 fire and in connection with the Company's efforts
to collect insurance proceeds after the fire and that was concluded during the
first nine months of fiscal 2000: On May 14, 1994, the Company filed an action
in the 24th Judicial Court in the State of Louisiana against Travelers Indemnity
Company of Illinois ("Travelers") and others. The Company contended that the
insurance policy provided by Travelers provided the Company with blanket
coverage in the amount of $24.2 million in excess of the $10 million of
underlying coverage, and, accordingly, that Travelers was liable for the
difference between $24.2 million and the amount previously paid by Travelers
(approximately $9.5 million), plus statutory penalties of 10% of the amount not
paid, interest, attorney's fees and costs. The Company further contended that
the insurance agent and the insurance broker who arranged for the insurance were
liable to the Company for any damages sustained including any damages sustained
because the amount of coverage was less than that claimed by the Company.
Travelers' position was that its liability under such policy was limited to the
amount which it had previously paid. In November 1996, the Company entered into
a joint settlement with the insurance agent and broker, whereby the Company
received a total of $10 million from those parties. The settlement agreement
included a "Mary Carter" provision whereby the insurance agent and broker became
entitled to share in certain recoveries that the Company might eventually obtain
on its remaining claims against Travelers. The litigation against Traveler's was
concluded in January 2000 and the Company was awarded an additional $327,147 in
attorneys fees, and penalties and interest, which was paid by Traveler's. Under
the Mary Carter provision, the Company was entitled to retain the full amount of
such payment. This recovery of $206,103 (net of


                                       35
<PAGE>   37

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

$121,044 of income taxes) is shown as an extraordinary item on the Company's
Statement of Operations for the year ended October 31, 2000.

Other Litigation

In 1996, a suit was filed in U.S. District Court in Baton Rouge by Livingston
Downs Racing Association ("Livingston") naming the Company and other defendants
in an antitrust/civil RICO suit alleging the Company participated in a
conspiracy to prevent the plaintiff from entering the live racing, off track
betting and video poker markets. The Company filed a motion for summary judgment
in late 1998 but that motion has not been decided by the U.S. District Court.
Livingston had previously filed a series of other legal actions against the
Company which were resolved in the Company's favor. Management believes that
Livingston's claims in this case are without merit. However, there is no
assurance that the Company will successfully defend all of Livingston's claims.
Because the amount in question has not yet been determined but could be
substantial and because there is no assurance that there will be insurance
coverage or that it will be adequate, as discussed below, the failure of the
Company to prevail in this lawsuit could have a material adverse effect on the
Company's operations, financial condition and cash flows. In a declaratory
judgment action related to the Livingston suit brought by insurers for the
Company and several of its affiliates, which case has been consolidated with the
suit filed by Livingston, on January 14, 1999 the U.S. District Court granted
the Company's motion for summary judgment, finding that coverage exists under
certain of the Company's insurance policies for claims asserted by Livingston
and that the insurers have a duty to defend. The insurers have filed a motion
for new trial that is pending in the U.S. District Court. There is no assurance
that the motion for new trial will be denied or, if denied, that the decision of
the U.S. District Court will be affirmed on appeal or that the insurance
policies will provide sufficient coverage to indemnify the Company fully.

A suit was filed in 1996 by the Louisiana Horsemen's Benevolent and Protective
Association ("LHBPA"), an association of horsemen organized to promote the
dissemination of information on issues critical to horsemen and the exchange of
ideas and information, against the Company, the State of Louisiana, and all
other pari-mutuel wagering facilities operating in Louisiana. The LHBPA is
seeking a larger portion of video poker proceeds on the grounds that the State
of Louisiana and the horse racing tracks in Louisiana have misinterpreted a
Louisiana statute specifying the amount of revenues from video poker machines at
pari-mutuel waging facilities that are to be used as purse supplements. A motion
for summary judgment seeking dismissal of this action was filed in April 1999
and is pending before the court. On August 8, 2000, the court denied a motion
for summary judgment filed by another pari-mutuel wagering facility. In the
process of denying that motion, the court indicated that it appeared that the
pari-mutuel wagering facilities were improperly deducting tax payments in
calculating the amount of revenues to be used in determining purse supplements.
Notwithstanding such indication by the court, management believes that the
Company is in compliance with the Louisiana statute and the guidelines
established by the Louisiana State Police Gaming Division, which regulates
compliance with the State of Louisiana video poker law, and that the Company has
sufficient defenses to all claims. However, there is no assurance that the
Company will successfully defend the LHBPA's claims. Because the amount in
question could be substantial, the failure by


                                       36
<PAGE>   38
                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

the Company to prevail in this lawsuit could have a material adverse effect on
the Company's operations, financial condition and cash flows.

In November 2000 a civil action was filed in the Civil District Court for the
Parish of Orleans, Louisiana by the owner of the facility that the Company
leased for its Bourbon Street tele-track facility seeking damages for failure of
the Company to restore the premises to its original condition on termination of
the lease. Although the case has just recently been filed and discovery has not
been completed, the Company believes that it has meritorious defenses to the
claims asserted and intends to vigorously defend its position in the action.
There is no assurance, however, that the case will not be decided adversely to
the Company.

The Company also has an accrued liability of $280,000 for contingent liabilities
related to certain claims outstanding as of October 31, 2000. This amount has
been reported as "Other Current Liability" in the October 31, 2000 Balance
Sheet.

Except as described above, there are no material pending legal proceedings,
other than ordinary routine litigation incidental to its business, to which the
Company is a party or of which any of its property is the subject.

NOTE 6 - RELATED PARTY TRANSACTIONS

In April 1996, Bryan G. Krantz purchased 1,698.02 shares of the Company's stock
from a Trust which had previously acquired the shares from Marie G. Krantz. A
promissory note was executed by Bryan G. Krantz in favor of the Trust for
$9,984,358 with interest at 5.76% per year. The note is due in April 2005 and
cannot be prepaid. The note is secured by a Stock Pledge Agreement in favor of
the Trust executed by Bryan G. Krantz and Marie G. Krantz, in her capacity as
Voting Trustee of a Voting Trust which at the time of such purchase, and
throughout the period referred to herein, held such shares. In April 1998, Bryan
G. Krantz transferred said 1,698.02 shares of the Company's common stock to
Finish Line Management Corporation ("Finish Line"), together with all of his
interest in the Voting Trust and the voting trust certificate issued by Marie G.
Krantz, as Voting Trustee, representing a beneficial interest in 1,698.02 shares
of the Company's common stock. Finish Line assumed Bryan G. Krantz's
indebtedness to the Trust and agreed to be bound by the Stock Pledge Agreement.
Bryan G. Krantz owns 100% of the capital stock of Finish Line, having acquired
from Marie G. Krantz, as Voting Trustee, in March 1998 the 66.6% of the
outstanding capital stock of Finish Line not theretofore owned by him.
Accordingly, the transfer of the 1,698.02 shares of common stock from Bryan G.
Krantz to Finish Line did not constitute a change in beneficial ownership of
said 1,698.02 shares.

Marie G. Krantz, Chairman of the Board of Directors and Treasurer of the
Company, has voting control, as Voting Trustee, over the 1,698.02 shares of
common stock of the Company (72.27% of the outstanding common stock of the
Company) owned by Finish Line.


                                       37
<PAGE>   39

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 6 - RELATED PARTY TRANSACTIONS  (CONTINUED)

In August 1992, the Company entered into a Management Agreement with Finish Line
to operate five tele-track facilities previously operated by Jefferson Downs
Corporation ("Jefferson Downs"), all of the capital stock of which is owned by
Marie G. Krantz and Bryan G. Krantz, for a period of ten years, commencing
November 1, 1992, with the option granted to Finish Line to extend the term of
the Management Agreement for two additional five year periods. The Management
Agreement provides that Finish Line is to have the exclusive responsibility for
the direction, supervision, management and operation of such facilities, is to
collect all monies from such operation and is to pay all expenses in connection
therewith. The Company receives a monthly payment of 0.1% of the gross
pari-mutuel handle at such facilities plus purse supplements, and Finish Line
receives monthly compensation equal to the difference between the gross receipts
collected at such facilities less all expenses (including the payment to the
Company described herein) paid by Finish Line. In addition, Finish Line is to
indemnify the Company for, among other things, all obligations under the leases
assigned by Jefferson Downs to the Company. During the fiscal years ended
October 31, 2000, 1999 and 1998, the Company received $68,021, $87,530, and
$90,668, respectively, from Finish Line in accordance with the Management
Agreement. Accounts receivable from Finish Line were $661,033 and $774,245 at
October 31, 2000 and 1999, respectively.

The following table reflects the host track fees and purse supplement receipts
from Finish Line for the fiscal years ended October 31, 2000, 1999, and 1998.

<TABLE>
<CAPTION>
                                     Received by the Company and Paid
                               by Finish Line for the Years Ended October 31
                               ---------------------------------------------
                                  2000             1999               1998
                               ----------       ----------        ----------
<S>                            <C>              <C>               <C>
Host track fees                $  281,601       $  305,591        $  297,035
                               ==========       ==========        ==========

Purse supplement receipts      $5,139,992       $4,986,874        $4,788,281
                               ==========       ==========        ==========
</TABLE>

Marie G. Krantz and Bryan G. Krantz each own 50% of the capital stock of
Continental Advertising, Inc. ("Continental"). During the fiscal years ended
October 31, 2000, 1999 and 1998, the Company made payments to Continental of
$627,188, $628,365, and $502,000, respectively, to reimburse Continental for
advertising expenses paid by it. Continental does not generate any net income
and the Krantz's do not receive any form of compensation from it. As of October
31, 2000 and 1999, the Company was due amounts included in accounts receivable
of $13,894 and $13,894 from Continental, respectively.

In February 1992, the Company, Jefferson Downs and Finish Line entered into an
agreement with Video Services, Inc. ("VSI"), whereby VSI was granted the
exclusive right and license by the Company to install, maintain and operate
video draw poker devices at the Fair Grounds Race Course, Jefferson Downs Race
Course and at the tele-tracks then operated by the Company, Jefferson Downs and
Finish Line. Such agreement was for an initial term of five years, with an
option by VSI to extend the term for an additional five years, which option was
exercised. The agreement provides that the Company is to receive a percentage of
the revenues from the operation of the devices installed at the Company's
facilities (not including the facilities operated for the Company by Finish
Line). Such percentage is calculated on the basis of the average amount


                                       38
<PAGE>   40

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 6 - RELATED PARTY TRANSACTIONS (CONTINUED)

collected daily from each device during each month, after the payment of prizes,
taxes and fees. One-half of the net revenues from such devices, after deduction
of certain amounts, are required by state statute to be paid as purse
supplements during the live racing meet. In addition, this agreement entitles
the Company and Finish Line to share in a $270,000 annual promotional fee paid
by VSI. In each of fiscal years 2000, 1999 and 1998, upon agreement of the
Company and Finish Line, the Company received the total promotional fee of
$270,000. Of this amount, $135,000 was set aside each year as purse supplements
to be paid during the upcoming racing season.

The video poker draw devices which have been installed and are to be installed
by VSI remain the property of VSI. As of October 31, 2000, 1999 and 1998, there
were a total of 335, and 337, 315 devices, respectively, in operation at all of
the Company's facilities. In addition, there were a total of 335, and 345, 414
devices in operation at the Finish Line facilities as of October 31, 2000, 1999
and 1998, respectively.

In March 1999, the Company, as approved by its Board of Directors, paid to Marie
G. Krantz a guaranty fee in the amount of $988,789, which was computed on the
basis of the Company's outstanding reconstruction indebtedness during the period
set forth below, for her guaranty of, and pledge of personal assets to secure,
the Company's reconstruction debt from 1995 through completion of construction
in late 1997.

NOTE 7 - LEASES

The Company has various operating leases for the use of buildings and parking
facilities to operate off-track betting facilities in Louisiana. The location,
lease terms, and monthly payments are as follows:

<TABLE>
<CAPTION>
                                                                                    Monthly
            Location                                Lease Term                      Payment
---------------------------------    ---------------------------------------        -------
<S>                                  <C>                                            <C>
 St. Bernard Parish, Louisiana       February 1, 1999 to January 31, 2004           $ 9,325
---------------------------------    ---------------------------------------        -------
 LaPlace, Louisiana                  November 16, 1999 to November 15,
                                     2000                                           $ 4,420
---------------------------------    ---------------------------------------        -------
East Jefferson Parish, Louisiana     January 1, 2000 to December 31, 2001
                                     January 1, 2001 to December 31, 2002           $10,000

                                                                                    $13,125
---------------------------------    ---------------------------------------        -------
 Thibodeaux, Louisiana               October 1, 2000 to September 30, 2001
                                                                                    $ 2,400
---------------------------------    ---------------------------------------        -------
 Metairie, Louisiana                 February 1, 1999 to January 31, 2001           $ 9,500
</TABLE>


                                       39
<PAGE>   41

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 7 - LEASES (CONTINUED)

The tele-tracks formerly licensed to Jefferson Downs and now licensed to the
Company are also leased; however, as described herein, Finish Line has agreed to
indemnify the Company for, among other things, all obligations under the leases
assigned by Jefferson Downs to the Company.

Future obligations over the primary lease terms, not including renewal periods,
of the Company's long-term leases as of October 31, 2000 are as follows:

<TABLE>
<CAPTION>
                        Year Ending
                        October 31
                        -----------
                        <S>                             <C>
                          2001                          $       403,800
                          2002                                  151,400
                          2003                                  111,900
                          2004                                   27,975
                                                        ---------------
                          Total                         $       695,075
                                                        ===============
</TABLE>

The Company is party to an agreement with Autotote Limited to provide wagering
services, including computer and all related services to carry out the
totalisator function for the Company, until November 20, 2002. The Company pays
Autotote Limited 0.0039% of the total on-track pari-mutuel handle, plus fixed
equipment rental fees for certain equipment provided by Autotote. The minimum to
be paid to Autotote Limited for each year of the agreement is $200,000. No
estimates of future obligations under this agreement have been included in the
above table. For the fiscal years ended October 31, 2000, 1999, and 1998, the
Company incurred $200,000 in minimum rental fees and $729,900, $695,670 and
$647,187, respectively, in equipment and contingent rental fees in connection
with its agreement with Autotote Limited. Such rental fees were recorded as
racing expenses - contracts and services.

NOTE 8 - STOCK OPTIONS

The Company has a stock option plan whereby all incentive stock options granted
under the Plan are intended to qualify as incentive stock options under Section
422(b) of the Internal Revenue Code. Under the Plan, the option price per share
must be at least equal to 100% of the fair market value per share of the common
shares of the Company on the date of the grant. An aggregate of 100 common
shares has been reserved for issue and may be granted up to February 28, 2001.
No options were granted or exercised during fiscal years ended October 31, 2000,
1999 and 1998. No options were outstanding at October 31, 2000.

NOTE 9 - DEFINED CONTRIBUTION PLAN

The Company's 401(k) Plan is a defined contribution plan covering all full-time
employees that have at least one year of service and are age twenty-one or
older.

Plan participants may contribute to the Plan, and the Company may make matching
contributions subject to the provisions of the Employees Retirement Income
Security Act.


                                       40
<PAGE>   42

                            FAIR GROUNDS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
               For the Years Ended October 31, 2000, 1999 and 1998

NOTE 9 - DEFINED CONTRIBUTION PLAN (CONTINUED)

The Company did not make any matching contributions to the Plan during the years
ended October 31, 2000, 1999, and 1998.

NOTE 10 - SUBSEQUENT EVENTS

LaPlace Land Acquisition

In November 2000, the Company acquired land located in St. John the Baptist
Parish on which to construct a new location for the LaPlace, Louisiana
tele-track.

In January 2001, the Company's LaPlace tele-track lease was not renewed and the
tele-track was moved into a temporary structure located on the newly acquired
property. A temporary facility will be used until a permanent building can be
constructed on the property. The temporary structure is being leased for
approximately $9,000 a month over a twelve month lease term.

Reverse Stock Split

On November 28, 2000, the Company's shareholders approved a proposal to amend
the Company's Articles of Incorporation to effect a reverse stock split of the
Company's common shares. The amendment to the Articles of Incorporation became
effective on December 15, 2000, and the reverse stock split was effected at a
ratio of one new share for each 200 shares outstanding as of the December 15,
2000. As a result of the reverse stock split, the Company has fewer than 300
shareholders of record, and the Company has filed a Certification and Notice of
Termination of Registration to deregister its common shares under the Securities
Exchange Act of 1934. The deregistration of the Company's common shares will
become effective March 29, 2001.

The amendment to the Company's Articles of Incorporation provides that no
fractional shares will be issued in connection with the reverse stock split, and
that, in lieu thereof, the Company will pay to each shareholder of record on the
effective date of the reverse stock split an amount in cash equal to $40.00 for
each share held of record by such person immediately prior to the effectiveness
of the reverse stock split that is not combined with other common shares held by
such person to form one new common share of the Company. The Board estimates
that the total cost to be incurred by the Company in connection with the reverse
stock split for payment of cash in lieu of issuing fractional shares, including
transactional expenses of approximately $190,000, will be approximately
$1,265,000. The Company is financing the transaction from working capital and,
if necessary, the Company's outstanding line of credit with First Bank and
Trust.

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

         None


                                       41
<PAGE>   43

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The following table shows each director of the Company, his or her age,
present positions and offices with the Company, principal occupation and the
name and principal business of the corporation or other organization in which
such occupation has been carried on, the year he or she first became a director
of the Company and directorships in certain other corporations, based upon
information furnished to the Company by each director or otherwise available to
the Company. Unless otherwise indicated, each director of the Company has
engaged in the occupations stated below for at least the last five years. No
family relationships exist between or among any director or executive officer of
the Company, except that Bryan G. Krantz is the son of Marie G. Krantz.

<TABLE>
<CAPTION>
                                                                                                           DIRECTOR
                                                                                        AGE                 SINCE
                                                                                        ---                --------
<S>                                                                                     <C>                <C>
WILLIAM K. CALDWELL, JR.                                                                48                   2000
Director of Golf, Chateau Golf & Country Club,
New Orleans, Louisiana.

RICHARD KATCHER                                                                         82                   1994
Retired; attorney with Baker and Hostetler, Cleveland, Ohio until 1995.

BRYAN G. KRANTZ                                                                         40                   1990
President and General Manager of the Company;
President of Finish Line Management Corporation,
which operates certain off-track betting facilities in Louisiana.

MARIE G. KRANTZ                                                                         65                   1990
Chairman of the Board of Directors and Treasurer of the Company;
Secretary-Treasurer of Finish Line Management Corporation.

RONALD J. MAESTRI                                                                       59                   1991
Director of Special Events, New Orleans Sports Foundation since March 2000;
Director of Athletics, University of New Orleans prior to March 2000.

CHARMAINE R. MOREL                                                                      66                   1987
Secretary of Victory Financial Group, Inc.
since 2000; Administrative Assistant, MOTA L.L.C., Metairie Louisiana, which
operates Artiesia Restaurant, from 1998 to 2000; Administrative Assistant,
Fennelly & Bayley, Inc., d/b/a Mike's on the Avenue, a restaurant in New
Orleans, prior to 2000; Secretary/Treasurer of Victory Management Group, a
company providing management services, from 1993 to 1995.

LANGDON H. STONE                                                                        55                   2000
President, Stone Insurance, Inc.,
New Orleans, Louisiana

WAYNE E. THOMAS                                                                         53                   1996
Self-employed insurance agent.
</TABLE>


                                       42
<PAGE>   44

         The information relating to executive officers of the Company is set
forth on page 12 of the Company's Annual Report on Form 10-K.

Section 16(a)  Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors, executive officers and holders of more
than 10% of the common shares of the Company to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and reports
of changes in ownership of common shares of the Company. Based upon a review of
these filings and written representations from the applicable reporting persons,
the Company believes that its directors and executive officers complied with all
applicable Section 16(a) filing requirements during the fiscal year ended
October 31, 2000, except that a Form 5 was not timely filed by Bryan G. Krantz
to report two transactions.

ITEM 11.          EXECUTIVE COMPENSATION.

         The following table sets forth certain information concerning the
annual and long-term compensation for services in all capacities to the Company
for the fiscal years ended October 31, 20000, October 31, 1999 and October 31,
1998 of the chief executive officer of the Company and of each other executive
officer of the Company whose salary and bonus for the fiscal year ended October
31, 2000 exceeded $100,000.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                        Annual Compensation
    Name and                          -----------------------       All Other
Principal Position         Year        Salary          Bonus      Compensation
------------------         ----       --------       --------     ------------
<S>                        <C>        <C>            <C>          <C>
BRYAN G. KRANTZ            2000       $458,333       $455,000     $  3,600(1)
President and              1999        400,000        400,000        3,600
General Manager            1998        296,955              0        3,600

MARIE G. KRANTZ            2000       $250,000       $300,000     $  3,600(1)
Chairman of the            1999        241,666        250,000      992,389
Board and Treasurer        1998        163,622              0        3,600
</TABLE>

(1)      Annual retainer paid to each director of the Company.

DIRECTOR COMPENSATION

         The Company pays each director (including directors who are employees
of the Company) a retainer of $3,600 annually, payable quarterly.


                                       43
<PAGE>   45

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table sets forth certain information regarding the
beneficial ownership of common shares of the Company, as of January 25, 2001, of
(i) each person who, to the knowledge of the Company, owns beneficially more
than 5% of the outstanding common shares of the Company, (ii) each director,
(iii) each executive officer of the Company listed in the Summary Compensation
Table and (iv) all directors and executive officers of the Company as a group.
The information set forth in the following table is based upon statements filed
by such persons with the Commission and information otherwise available to the
Company. Unless otherwise indicated, each person has sole voting and investment
power of the common shares of the Company beneficially owned by him or her.

<TABLE>
<CAPTION>
                                            AMOUNT AND NATURE           PERCENTAGE
                                              OF BENEFICIAL                 OF
BENEFICIAL OWNER                                 OWNERSHIP               CLASS(A)
----------------                            -----------------           ----------
<S>                                         <C>                         <C>
William K. Caldwell, Jr.                            2                         *
Richard Katcher                                     2                         *
Bryan G. Krantz                                 1,706 (b)(d)              77.76%
Marie G. Krantz                                 1,703 (c)(d)              77.62%
Ronald J. Maestri                                   2                         *
Charmaine R. Morel                                  2                         *
Langdon H. Stone                                    2                         *
Wayne E. Thomas                                     2                         *
All Directors and Executive
Officers as a Group                             1,715(e)                  78.17%
</TABLE>

*        Less than 1% of Class.

(a)      The percentage of class beneficially owned has been computed on the
         basis of 2,194 common shares outstanding on January 25, 2001.

(b)      Bryan G. Krantz is the beneficial owner of the following common shares
         of the Company: 1,700 common shares held by Marie G. Krantz as Voting
         Trustee under the Voting Trust Agreement described below, constituting
         77.48% of the common shares outstanding and 6 common shares held
         jointly by him and his wife, constituting less than 1% of the common
         shares outstanding. Finish Line Management Corporation ("Finish Line"),
         all the outstanding capital stock of which is beneficially owned by Mr.
         Krantz, holds the Voting Trust certificate respecting 1,698 common
         shares in the Voting Trust, and Mr. Krantz holds the Voting Trust
         certificate respecting 2 common shares in the Voting Trust. Mr. Krantz,
         as a director, executive officer and the beneficial owner of all of the
         outstanding capital stock of Finish Line, may be deemed to share with
         Ms. Krantz the power to dispose or direct the disposition of 1,698
         common shares held by Ms. Krantz as Voting Trustee, the Voting Trust
         certificate with respect to which is held by Finish Line. In addition,
         Mr. Krantz has the sole power to dispose or direct the disposition of 2
         common shares held by Ms. Krantz as Voting Trustee, the Voting Trust
         certificate with respect to which is held by him and shares with his
         wife the power to vote or direct the vote and to dispose or direct the
         disposition of the 6 common shares held jointly with her. Mr. Krantz's
         address is 1751 Gentilly Boulevard, New Orleans, Louisiana 70119.


                                       44
<PAGE>   46

(c)      Marie G. Krantz is the beneficial owner of 3 common shares of the
         Company held directly by her, constituting less than 1% of the common
         shares outstanding, and she may be deemed to be the beneficial owner of
         the 1,700 common shares held by her as Voting Trustee under the Voting
         Trust Agreement described below, constituting 77.48% of the common
         shares outstanding. In her capacity as Voting Trustee, Ms. Krantz has
         the sole power to vote or direct the vote of the 1,700 common shares
         held by her as Voting Trustee, and, as a director and executive officer
         of Finish Line, she may be deemed to share with Bryan G. Krantz the
         power to dispose or direct the disposition of 1,698 common shares held
         by her as Voting Trustee, the Voting Trust certificate with respect to
         which is held by Finish Line. She also has the sole power to vote or
         direct the vote and the sole power to dispose or direct the disposition
         of the 3 common shares held by her directly. The Voting Trust
         Agreement, pursuant to which Mr. Krantz and Richard Katcher, as Trustee
         of the Masoni Trust, are grantors and Ms. Krantz is Voting Trustee,
         provides that title to the 1,700 common shares is vested in Ms. Krantz
         as Voting Trustee during the term of the Voting Trust and that in such
         capacity she may exercise all rights of a holder of common shares of
         the Company, including the right to vote such common shares; however,
         the common shares which are subject to the Voting Trust Agreement may
         not be transferred, sold, assigned or otherwise disposed of by Ms.
         Krantz during the term of the Voting Trust, other than in connection
         with any corporate event or action which affects common shares other
         than the common shares subject to the Voting Trust Agreement. The
         Voting Trust Agreement, which was entered into in 1993, is for an
         initial term of 15 years, is irrevocable during its term, and is to
         survive the death of the grantors thereunder. It may be extended for an
         additional ten years at the written request of such grantors. The 1,698
         common shares as to which Mr. Krantz and Ms. Krantz may be deemed to
         share the power to dispose or direct the disposition and which are held
         by the Voting Trust are pledged, along with the Voting Trust
         certificate issued by the Voting Trust with respect to said 1,698
         common shares, to Richard Katcher, as Trustee of the Masoni Trust, as
         security for the payment of a promissory note made and delivered by Mr.
         Krantz in April 1996, and later assumed by Finish Line. A default in
         the payment of said note could result in the Masoni Trust acquiring
         control of the Company. Ms. Krantz's address is 1751 Gentilly
         Boulevard, New Orleans, Louisiana 70119.

(d)      Bryan G. Krantz and Marie G. Krantz, who together are the beneficial
         owners of an aggregate of 1,709 common shares, constituting
         approximately 77.89% of the common shares outstanding, have reported to
         the Commission that they constitute a "group" within the meaning of
         section 13(d)(3) of the Exchange Act. By virtue of their beneficial
         ownership of common shares of the Company and the matters set forth in
         filings made by them under Section 13(d) of the Exchange Act, Ms.
         Krantz and Mr. Krantz may be deemed to be controlling persons of the
         Company.

(e)      See notes (b) - (d) above. The number of common shares shown as
         beneficially owned includes any directors qualifying shares held by
         each director and nominee for election as a director.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In 1992, the Company entered into a Management Agreement (the
"Management Agreement") with Finish Line Management Corporation ("Finish Line").
The Management Agreement provides that Finish Line is to operate the Company's
tele-track facilities in Terrebonne, St. Tammany and Jefferson Parishes,
Louisiana, which were formerly owned by Jefferson Downs, for a period of ten
years, commencing November 1, 1992, with the option granted to Finish Line to
extend the term of the Management Agreement for two additional five-year
periods. The Management Agreement provides that Finish Line is to have the
exclusive responsibility for the direction, supervision, management and
operation of such facilities, is to collect all monies from such operation and
is to pay all expenses in connection therewith. Pursuant to the Management
Agreement, the Company receives 0.1% of the gross pari-mutuel


                                       45
<PAGE>   47

handle at such facilities, and Finish Line receives monthly compensation equal
to the difference between the gross receipts collected at such facilities less
all expenses (including the payment to the Company described above) paid by
Finish Line. In addition, Finish Line is to indemnify the Company for, among
other things, all obligations under the leases assigned by Jefferson Downs to
the Company. During the fiscal year ended October 31, 2000, Finish Line paid the
Company $68,021 under the Management Agreement, host track fees of $281,601 and
purse supplements of $5,139,992. As of October 31, 2000, the Company had
accounts receivable from Finish Line in the aggregate amount of $661,033. The
Company has received, and expects to continue receiving, payments pursuant to
the Agreement during the current fiscal year.

         The Company, Jefferson Downs and Finish Line are parties to an
agreement with Video Services, Inc. ("VSI") whereby VSI has the exclusive right
and license to install, maintain and operate video draw poker devices at the
Fair Grounds Race Course and at the tele-tracks operated by the Company and
Finish Line. The initial term of the Agreement, which was entered into in 1992,
was five years, with an option by VSI to extend the term for an additional five
years, which option has been exercised. Pursuant to such agreement, the Company
receives a percentage of the revenues from the operation of the devices
installed at the Company's facilities. Such percentage is calculated on the
basis of the average amount collected daily from each device during each month,
after the payment of prizes, taxes and fees. The devices installed by VSI
pursuant to such agreement remain the property of VSI. As of October 31, 2000,
there were a total of 335 devices in operation at all of the Company's
facilities (excluding the tele-tracks operated for the Company by Finish Line)
and 335 devices in operation at facilities managed by Finish Line, including the
facilities formerly owned by Jefferson Downs. In fiscal 2000, the Company
received gross video poker revenue of $2,911,599, including amounts to be paid
as purse supplements totaling $1,241,047. In addition, such agreement provides
that the Company, Jefferson Downs and Finish Line are entitled to receive an
annual promotional allowance from VSI in the aggregate amount of $270,000, which
for the fiscal year ended October 31, 2000 was paid in full to the Company, with
one-half of said amount set aside for purse supplements. The agreement also
provides for advances annually from VSI against future revenues of up to $1
million in the aggregate to the Company, Jefferson Downs and Finish Line. The
Company received all of such advance during the year ended October 31, 2000 and
has also received such an advance during the current fiscal year. The Company
anticipates that it will continue to receive revenues pursuant to the agreement
with VSI for the remaining term of that agreement.

         Marie G. Krantz is a director, the President and the owner of 66 2/3%
of the outstanding common stock, and Bryan Krantz is a director, Vice President
and the owner of 33 1/3% of the outstanding common stock, of Jefferson Downs.
Ms. Krantz is a director and executive officer, and Mr. Krantz is a director,
executive officer and the beneficial owner of all of the outstanding common
stock, of Finish Line. By virtue of such positions and ownership and their
positions with and relationship with such entities, the Company, Finish Line and
Jefferson Downs may be deemed to be affiliates.

         Ms. Krantz and Mr. Krantz each own 50% of the outstanding common stock
of Continental Advertising, Inc. ("Continental"), an advertising agency which
provided advertising services to the Company during the last fiscal year and is
continuing to provide advertising


                                       46
<PAGE>   48

services to the Company during the current fiscal year. During the 2000 fiscal
year, the Company made payments to Continental of $627,188 to reimburse it for
Company advertising expenses paid by it. As of October 31, 2000, the Company was
due $13,894 from Continental. No commission or any other form of compensation is
paid to the Krantzes for advertising services rendered to the Company by
Continental. The Board of Directors believes that the terms of such arrangement
are no less favorable to the Company than terms that would be available from
unrelated third parties for comparable transactions.

         From time to time, persons who are officers, directors or principal
shareholders of the Company own or have interests in horses racing at the
Company's race track. Such races are conducted under the rules and regulations
of the Louisiana Racing Commission, and no officer, director or principal
shareholder receives any extra or special benefits not shared by all others so
racing.


                                       47
<PAGE>   49

                                    PART IV

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

(a)(1)   The following audited financial statements are included in Part II,
         Item 8:

<TABLE>
<CAPTION>
Financial Statements                                                                                             Page
--------------------
<S>                       <C>                                                                                    <C>
                          Report of Independent Certified Public Accountants                                     20

                          Balance Sheets at October 31, 2000 and 1999                                            21

                          Statements of Operations for the Three Years                                           23
                          Ended October 31, 2000

                          Statements of Changes in Stockholder's                                                 27
                          Equity for the Three Years Ended
                          October 31, 2000

                          Statements of Cash Flows for the Three                                                 28
                          Years Ended October 31, 2000

                          Notes to Financial Statements                                                          30

(b)                       Report on Form 8-K:  None

(c)                       Exhibits: The following exhibits are filed as part of this report.
                          Those exhibits which have been previously filed and incorporated herein
                          by reference are identified by reference to the previous filing.
3.1                                                                                                               *
                          Articles of Incorporation of Fair Grounds Corporation, as amended
                          (incorporated  herein by reference to Exhibit (3)(a) to the Form 10-K of
                          the Company for the fiscal year ended October 31, 1991, filed on
                          January 29, 1992).

3.2                       Amendments to the Articles of Incorporation of Fair Grounds Corporation
                          filed with the Louisiana Secretary of State December 15, 2000.

3.3                                                                                                               *
                          Amended and Restated By-Laws of Fair Grounds Corporation (incorporated
                          herein by reference to Exhibit (3)(b) to the Form 10-K of the Company
                          for the fiscal year ended October 31, 1990).
</TABLE>



                                       48
<PAGE>   50

<TABLE>
<S>                        <C>                                                                                   <C>
   9                                                                                                              *
                           Voting Trust Agreement dated as of August 31, 1993, by and among Bryan
                           G. Krantz and Richard Katcher, Trustee, as grantors, and Marie G. Krantz
                           as Voting Trustee (incorporated herein by reference to Exhibit 2 to
                           Amendment No. 3 to Schedule 13D filed by such persons on October 13,
                           1993).

10.1                                                                                                              *
                           Net Commercial Lease Agreement dated November 10, 1988, between Pelican
                           Homestead and Savings Association and Fair Grounds Corporation
                           (incorporated herein by reference to Exhibit (10)(e) to the Form 10-K
                           of the Company for the fiscal year ended October 31, 1989).

10.2                                                                                                              *
                           Lease of Commercial Property dated February 1, 1989, between Mereaux
                           and Nunez, Inc. and Fair Grounds Corporation (incorporated herein by
                           reference to Exhibit (10)(f) to the Form 10-K of the Company for the
                           fiscal year ended October 31, 1989).

10.3                                                                                                              *
                           Lease Agreement dated March 8, 1989, between Richard F. Keyworth and
                           Fair Grounds Corporation (incorporated herein by reference to Exhibit
                           (10)(g) to the Form 10-K of the Company for the fiscal year ended
                           October 31, 1989).

10.4                                                                                                              *
                           Fair Grounds Corporation Stock Option Plan (incorporated herein by
                           reference to Appendix A to the definitive Information Statement of the
                           Company dated February 26, 1991).

10.5                                                                                                              *
                           Commercial Lease Agreement dated April 1, 1991 between Blake's
                           Superette, Inc. and Fair Grounds Corporation (incorporated herein by
                           reference to Exhibit (10)(m) to the Form 10-K of the Company for the
                           fiscal year ended October 31, 1991, filed on January 29, 1992).

10.6                                                                                                              *
                           Lease Agreement dated November 21, 1991 between Jefferson Downs
                           Corporation and Fair Grounds Corporation (incorporated herein by
                           reference to Exhibit (10)(n) to the Form 10-K of the Company for the
                           fiscal year ended October 31, 1991, filed on January 29, 1992).

10.7                                                                                                              *
                           Management Agreement by and between Finish Line Management Corp. and
                           Fair Grounds Corporation, dated October 9, 1992. (Incorporated herein
                           by reference to Exhibit (10)(q) to the Form 10-K of the Company for the
                           fiscal year ended October 31, 1992, filed on February 15, 1993.)
</TABLE>


                                       49
<PAGE>   51

<TABLE>
<S>                        <C>                                                                                   <C>
10.8                                                                                                              *
                           Agreement dated February 28, 1992, by and between Video Services,
                           Inc., Fair Grounds Corporation, Jefferson Downs Corporation and
                           Finish Line Management Corp. (Incorporated herein by reference to
                           Exhibit (10)(t) to the Form 10-K of the Company for the fiscal
                           year ended October 31, 1992, filed on February 15, 1993.)

10.9                                                                                                              *
                           Lease Agreement dated August 1, 1995 between Fair Grounds
                           Corporation and Robert J. and Iris Ann Saia. (Incorporated herein
                           by reference to Exhibit 10.9 to the Form 10-K of the Company for
                           the fiscal year ended October 31, 1998, filed on February 11,
                           1999.)

</TABLE>


*  Incorporated herein by reference as indicated.


                                       50
<PAGE>   52


                                   SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf, by
the undersigned, thereunto duly authorized.

                                            FAIR GROUNDS CORPORATION




                                            By: /s/ Bryan G. Krantz
                                               ---------------------------------
                                               Bryan G. Krantz, President

Date: January 29, 2001

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

<TABLE>
<CAPTION>
     Name                                   Capacity                        Date
---------------------------         -------------------------        -----------------
<S>                                 <C>                              <C>
PRINCIPAL EXECUTIVE OFFICER:


/s/ Bryan G. Krantz
-------------------
Bryan G. Krantz                     President                         January 29, 2001


PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER:



/s/ Gordon M. Robertson
-----------------------
Gordon M. Robertson,                Chief Financial Officer          January 29, 2001
</TABLE>


                                       51
<PAGE>   53


DIRECTORS:

<TABLE>
<S>                                 <C>                              <C>
/s/ Richard Katcher
-------------------------------
Richard Katcher                     Director                         January 29, 2001

/s/ Marie G. Krantz
------------------------------
Marie G. Krantz                     Director and Chairman
                                    of the Board                     January 29, 2001

/s/ Bryan G. Krantz
------------------------------
Bryan G. Krantz                     Director and President           January 29, 2001

/s/ Ronald J. Maestri
------------------------------
Ronald J. Maestri                   Director                         January 29, 2001

/s/ Charmaine R. Morel
------------------------------
Charmaine R. Morel                  Director                         January 29, 2001

/s/ Wayne E. Thomas
------------------------------
Wayne E. Thomas                     Director                         January 29, 2001
</TABLE>

                                       52