##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2005                                                 
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file
number 333-125986





AMERICAN REAL ESTATE HOLDINGS


LIMITED PARTNERSHIP


(Exact name of registrant as specified in its charter)





|                                                                   |  |                                      
|------------------------------------------------------------------ |  | -------------------------------------
|Delaware                                                           |  | 13-3398767                           
|(State or other jurisdiction of
    incorporation or organization) |  | (IRS Employer
    Identification No.)
|100 South Bedford Road, Mt. Kisco, New York                        |  | 10549                                
|(Address of principal executive offices)                           |  | (Zip Code)                           

(914) 242-7700


(Registrants telephone number, including area code)





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


None


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


None


o þ


o þ




þ o


S-K 10-K 10-K. þ


12b-2


o o þ


12b-2 o þ












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##### 










TABLE OF CONTENTS


|                       |  |                                                                                                    |  |      |     | 
|---------------------- |  | -------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                       |  |                                                                                                    |  | Page |    
|                       |  |                                                                                                    |  |      |    
|PART I                
|Item 1.                |  | Business                                                                                           |  |      | 2   | 
|Item 1A.               |  | Risk Factors                                                                                       |  |      | 31  | 
|Item 1B.               |  | Unresolved Staff Comments                                                                          |  |      | 49  | 
|Item 2.                |  | Properties                                                                                         |  |      | 49  | 
|Item 3.                |  | Legal Proceedings                                                                                  |  |      | 51  | 
|Item 4.                |  | Submission of Matters to a Vote of Security
    Holders                                            |  |      | 52  | 
|PART II               
|Item 5.                |  | Market for Registrants Common Equity
    and Related Security Holder Matters                      |  |      | 53  | 
|Item 6.                |  | Selected Consolidated Financial Data                                                               |  |      | 54  | 
|Item 7.                |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations          |  |      | 54  | 
|Item 7A.               |  | Quantitative and Qualitative Disclosures
    About Market Risk                                     |  |      | 79  | 
|Item 8.                |  | Financial Statements and Supplementary
    Data                                                    |  |      | 82  | 
|Item 9.                |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure           |  |      | 132 | 
|Item 9A.               |  | Controls and Procedures                                                                            |  |      | 132 | 
|Item 9B.               |  | Other Information                                                                                  |  |      | 135 | 
|PART III              
|Item 10.               |  | Directors and Executive Officers of the
    Registrant                                             |  |      | 136 | 
|Item 11.               |  | Executive Compensation                                                                             |  |      | 139 | 
|Item 12.               |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters |  |      | 141 | 
|Item 13.               |  | Certain Relationships and Related
    Transactions                                                 |  |      | 142 | 
|Item 14.               |  | Principal Accountant Fees and Services                                                             |  |      | 146 | 
|PART IV               
|Item 15.               |  | Exhibits, Financial Statement Schedules                                                            |  |      | 147 | 
|EX-21: SUBSIDIARIES   
|EX-31.1: CERTIFICATION
|EX-31.2: CERTIFICATION
|EX-32.1: CERTIFICATION
|EX-32.2: CERTIFICATION



1



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Introduction


out-of


10-K


10-K


Recent Developments






| |          
| | ---------
| | Oil & Gas



| |   |                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In March 2005, we purchased an additional interest in our
    Longfellow Ranch oil and gas property for $31.9 million.
    The Longfellow Ranch is a highly productive, gas prone area
    located in Pecos County, Texas and includes the Val Verde basin,
    a gas producing area;                                       
|
| |  | In April 2005, we acquired TransTexas Gas Corporation, now known
    as National Onshore LP, an oil and gas exploration and
    production company with operations and properties in South Texas;                                                                                                                           
|
| |  | In June 2005, we acquired Panaco, Inc., now known as National
    Offshore LP, an oil and gas exploration and production company
    with operations and properties in the Gulf Coast and the Gulf of
    Mexico;                                                                                                           
|
| |  | In June 2005, we acquired the managing membership interest in
    NEG Holding LLC, which through its subsidiary NEG Operating LLC,
    engages in the exploration and production of oil and gas in
    Arkansas, Louisiana, Texas and Oklahoma; and                                                                         
|
| |  | In November 2005, we purchased oil and gas properties and
    acreage in the Minden Field near our existing properties in East
    Texas. The Minden Field property acquisition includes
    3,500 net acres with 17 producing properties and has
    reserves totaling approximately 67.5 Bcfe as of
    December 31, 2005.

2



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##### Table of Contents





| |       
| | ------
| | Gaming



| |   |                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In June 2005, we acquired shares of common stock of GB Holdings,
    Inc., or GBH, and shares of Atlantic Coast Entertainment
    Holdings Inc., the indirect holding company of The Sands Hotel
    and Casino located in Atlantic City, New Jersey; and                                                                     
|
| |  | In December 2005, we entered into an agreement with subsidiaries
    of Harrahs Entertainment, Inc. to purchase, for
    $170.0 million, both the Flamingo Laughlin Hotel and Casino
    in Laughlin, Nevada and approximately 7.7 acres of
    primarily undeveloped land that lies between the boardwalk and
    The Sands.



| |             
| | ------------
| | Home Fashion



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In August 2005, we purchased for $219.9 million in cash and
    a portion of the debt of WestPoint Stevens, Inc., approximately
    two-thirds of the outstanding equity of WestPoint International,
    Inc., or WPI, the acquirer in a bankruptcy proceeding of
    substantially all of the assets of WestPoint Stevens Inc., a
    leading U.S. manufacturer of bed, bath and other home
    fashion products. We also made available to WPI a revolving
    credit facility. See Item 3. Legal Proceedings.



| |          
| | ---------
| | Financing





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In February 2005, AREP issued $480.0 million principal
    amount of 7.125% senior notes due 2013. Simultaneously,
    AREH executed a note in favor of AREP in the original principal
    amount of $480.0 million and AREP distributed to AREH the
    net proceeds of the note offering. The loan is under the same
    terms and conditions as AREPs 7.125% senior notes due
    2013. We used the net proceeds of the offering to fund the
    acquisition of TransTexas in April 2005 and for general business
    purposes;                                                                                                                                                                                                                                
|
| |  | In June 2005, we consolidated our oil and gas operations and
    properties under our newly formed subsidiary, NEG Oil &
    Gas LLC (formerly AREP Oil & Gas LLC). Based on reserve
    reports prepared as of December 31, 2005 by independent
    petroleum consultants, the proved reserves of NEG Oil &
    Gas were 500.5 Bcfe. The total standardized measure of our
    proved reserves was $1,772.1 million, of which 86% was
    natural gas and 50% proved developed;                                                                                                                                                                                                                                                                                   
|
| |  | In December 2005, NEG, Inc., our newly-formed subsidiary,
    entered into an agreement and plan of merger pursuant to which
    National Energy Group, Inc., of which we own 50.01% of the
    common stock, will merge with and into NEG and the stockholders
    of National Energy Group, including us, will receive shares of
    common stock of NEG;                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | In December 2005, NEG Oil & Gas entered into a new
    $500.0 million revolving credit facility with an initial
    borrowing base of $335.0 million, of which
    $300.0 million was drawn at closing. The borrowings were
    used to refinance an existing revolving credit facility, to
    repay loans of $85.0 million from us to finance the Minden
    Field acquisition and to pay a $78.0 million distribution
    to us. This facility will mature in December 2010 and is secured
    by substantially all of the assets of NEG Oil & Gas and
    its subsidiaries. The borrowing base will be re-determined
    semi-annually based on, among other things, the lenders
    review of the mid-year and year-end reserve reports of NEG
    Oil & Gas;
|
| |  | In February 2006, NEG filed a registration statement for an
    initial public offering. The proceeds of the offering will be
    used to purchase a managing membership interest in NEG
    Oil & Gas. Following the offering, we expect to retain
    a membership interest in NEG Oil & Gas and own more
    than a majority of the voting power of NEG; and                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | We are pursuing asset-backed financing at WestPoint Home, Inc.,
    a subsidiary of WPI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

3



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Our Businesses


Oil and Gas




| |           
| | ----------
| | Background









| |   |                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a 50.01% ownership interest in National Energy Group, a publicly
    traded oil and gas management company. National Energy Group
    manages our oil and gas operations and its principal asset
    consists of its non-managing membership interest in NEG Holding;
|
| |  | a managing membership interest in NEG Holding;                                                                                                                                                                                                                       
|
| |  | National Onshore; and                                                                                                                                                                                                                                                
|
| |  | National Offshore.                                                                                                                                                                                                                                                   



| |                
| | ---------------
| | Recent Activity









4



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S-1




| |                   
| | ------------------
| | Oil & Gas Strategy









| |                
| | ---------------
| | Operating Areas



5



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##### Table of Contents





Production data


|               |       |         |     |       |        |             |       |         |             |  |            |     |  |  |        |        | 
|-------------- | ----- | ------- | --- | ----- | ------ | ----------- | ----- | ------- | ----------- |  | ---------- | --- |  |  | ------ | ------ | 
|               |       |         |     |       |        | Natural Gas |       |         | Natural Gas | 
|               |       | Oil     |     |       | Gas    |             |       | Liquids |             |  | Equivalent |    
|Areas          |       | (MBbls) |     |       | (MMcf) |             |       | (MBbls) |             |  | (MMcfe)    |    
|               |       |         |     |       |        |             |       |         |             |  |            |    
|West Texas     |       |         | 299 |       |        |             | 7,132 |         |             |  |           |     |  |  | 8,926  |       
|East Texas     |       |         | 39  |       |        |             | 5,569 |         |             |  |           |     |  |  | 5,803  |       
|Gulf Coast     |       |         | 547 |       |        |             | 9,204 |         |             |  | 350        |     |  |  | 14,586 |       
|Gulf of Mexico |       |         | 513 |       |        |             | 3,396 |         |             |  |           |     |  |  | 6,474  |       
|Other          |       |         | 42  |       |        |             | 2,806 |         |             |  |           |     |  |  | 3,058  |       
|               |       |         |     |       |        |             |       |         |             |  |            |    
|               | Total |         |     | 1,440 |        |             |       | 28,107  |             |  |            | 350 |  |  |        | 38,847 | 
|               |       |         |     |       |        |             |       |         |             |  |            |    

Drilling inventory and areas of operation


|               |       |              |       |       |               |            |     |       |   |  |         |         |  |  |        |         | 
|-------------- | ----- | ------------ | ----- | ----- | ------------- | ---------- | --- | ----- | - |  | ------- | ------- |  |  | ------ | ------- | 
|               |       |              |       |       |               | Acreage(2) |    
|               |       | Identified   |       |       |               |            |     |      
|               |       | Drilling     |       |       | 2005 Drilling |            |     | Total |   |  | Total   |        
|Areas          |       | Locations(1) |       |       | Success %     |            |     | Gross |   |  | Net     |        
|               |       |              |       |       |               |            |     |       |   |  |         |        
|West Texas     |       |              | 1,549 |       |               |            | 92  | %     |   |  | 140,100 |         |  |  | 42,300 |        
|East Texas     |       |              | 180   |       |               |            | 100 |       |   |  | 21,500  |         |  |  | 19,400 |        
|Gulf Coast     |       |              | 43    |       |               |            | 82  |       |   |  | 53,600  |         |  |  | 29,800 |        
|Gulf of Mexico |       |              | 49    |       |               |            | 67  |       |   |  | 53,600  |         |  |  | 28,900 |        
|Other          |       |              | 7     |       |               |            | 91  |       |   |  | 70,500  |         |  |  | 36,900 |        
|               |       |              |       |       |               |            |     |       |   |  |         |        
|               | Total |              |       | 1,828 |               |            |     | 92    | % |  |         | 339,300 |  |  |        | 157,300 | 
|               |       |              |       |       |               |            |     |       |   |  |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Identified drilling locations represent total gross drilling
    locations identified and scheduled by management of NEG
    Oil & Gas as an estimate of multi-year drilling
    activities on existing acreage. Of the total locations shown in
    the table, 570 are classified as proved undeveloped. Actual
    drilling activities may change depending on the availability of
    capital, regulatory approvals, seasonal restrictions, oil and
    natural gas prices, costs, drilling results and other factors.
|   
|(2) | Includes 13,260, 7,333 and 8,050 net acres with leases
    expiring during 2006, 2007 and 2008, respectively.                                                                                                                                                                                                                                                                                                                                                                                                            

West Texas area.


Longfellow Ranch.


6



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Goldsmith Adobe Unit.


East Texas area.




Gulf Coast area. 3-D




Gulf of Mexico area. 3-D




Other areas.


7



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##### Table of Contents



Anadarko Basin.


Arkoma Basin.




| |                   
| | ------------------
| | Oil & Gas Reserves





|               |  |                    |       |             |            |  |    |               |  |  |           |   |  |            |     |   |  |  |    | 
|-------------- |  | ------------------ | ----- | ----------- | ---------- |  | -- | ------------- |  |  | --------- | - |  | ---------- | --- | - |  |  | -- | 
|               |  |                    |       |             |            |  |    | December 2005 |  |  |          
|               |  |                    |       | Average Net |            |  |   
|               |  | Proved Reserves(1) |       |             | Daily      |  |    | Reserve       | 
|               |  |                    |       |             | Production |  |    | Life(2)       | 
|Areas          |  | Bcfe(1)            |       |             | % Gas      |  |    | % Developed   |  |  | (MMcfe/d) |   |  | (in years) |    
|               |  |                    |       |             |            |  |    |               |  |  |           |   |  |            |    
|West Texas     |  |                    | 222.2 |             |            |  | 90 | %             |  |  | 37        | % |  |            | 26  |   |  |  | 25 | 
|East Texas     |  |                    | 124.9 |             |            |  | 97 |               |  |  | 41        |   |  |            | 21  |   |  |  | 22 | 
|Gulf Coast     |  |                    | 80.2  |             |            |  | 72 |               |  |  | 80        |   |  |            | 42  |   |  |  | 5  | 
|Gulf of Mexico |  |                    | 40.1  |             |            |  | 49 |               |  |  | 51        |   |  |            | 17  |   |  |  | 6  | 
|Other          |  |                    | 33.1  |             |            |  | 92 |               |  |  | 97        |   |  |            | 7   |   |  |  | 11 | 
|               |  |                    |       |             |            |  |    |               |  |  |           |   |  |            |    
|Total          |  |                    | 500.5 |             |            |  | 86 | %             |  |  | 50        | % |  |            | 113 | % |  |  | 13 | 
|               |  |                    |       |             |            |  |    |               |  |  |           |   |  |            |    






|    |                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The total proved reserves used in this table were derived from
    reserve information prepared by Netherland, Sewell &
    Associates, Inc. and DeGolyer and MacNaughton, independent
    petroleum consultants.
|   
|(2) | Based on proved reserves and annual production volumes for 2005.                                                                                                                                                 

|                            |  |         |        |  |             |             |         |            |  |  |         | 
|--------------------------- |  | ------- | ------ |  | ----------- | ----------- | ------- | ---------- |  |  | ------- | 
|                            |  |         |        |  |             | Natural Gas |        
|                            |  | Oil     |        |  | Natural Gas |             |         | Equivalent | 
|                            |  | (MBbls) |        |  | (MMcf)      |             |         | (MMcfe)    | 
|                            |  |         |        |  |             |             |         |            | 
|Proved Developed Reserves   |  |         | 8,340  |  |             |             | 200,520 |            |  |  | 250,560 | 
|Proved Undeveloped Reserves |  |         | 3,564  |  |             |             | 228,530 |            |  |  | 249,915 | 
|                            |  |         |        |  |             |             |         |            | 
|Total Proved Reserves       |  |         | 11,904 |  |             |             | 429,050 |            |  |  | 500,475 | 
|                            |  |         |        |  |             |             |         |            | 



| |                                        
| | ---------------------------------------
| | Oil & Gas Production and Unit Economics



8



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|                                          |                                                                      |                          |        |       |      |   |        |       |  |   |        |       | 
|----------------------------------------- | -------------------------------------------------------------------- | ------------------------ | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                          |                                                                      | Years Ended December 31, |       
|                                          |                                                                      |                          |       
|                                          |                                                                      | 2005                     |        |       | 2004 |   |        | 2003  | 
|                                          |                                                                      |                          |        |       |      |   |        |       | 
|Production data:                          |                                                                      |                          |        |       |      |   |        |       |  |   |        |      
|Oil (MBbls)                               |                                                                      |                          | 1,440  |       |      |   | 935    |       |  |   | 811    |      
|Natural gas (MMcf)                        |                                                                      |                          | 28,107 |       |      |   | 18,995 |       |  |   | 15,913 |      
|Natural gas liquids (MBbls)               |                                                                      |                          | 350    |       |      |   | 549    |       |  |   | 166    |      
|Natural gas equivalents (MMcfe)           |                                                                      |                          | 38,847 |       |      |   | 27,799 |       |  |   | 21,772 |      
|Average sales price(1):                   |                                                                      |                          |        |       |      |   |        |       |  |   |        |      
|Oil average sales price (per Bbl)         |                                                                      |                          |        |       |      |   |        |       |  |   |        |      
|                                          | Price excluding realized gains or losses on derivative
    contracts |                          | $      | 55.72 |      |   | $      | 39.55 |  |   | $      | 30.26 | 
|                                          | Price including realized gains or losses on derivative contracts     |                          |        | 48.95 |      |   |        | 29.89 |  |   |        | 27.32 | 
|Natural gas average sales price (per Mcf) |                                                                      |                          |        |       |      |   |        |       |  |   |        |      
|                                          | Price excluding realized gains or losses on derivative
    contracts |                          |        | 7.85  |      |   |        | 5.73  |  |   |        | 5.07  | 
|                                          | Price including realized gains or losses on derivative contracts     |                          |        | 6.38  |      |   |        | 5.39  |  |   |        | 4.70  | 
|Natural gas liquids (per Bbl)             |                                                                      |                          | 33.46  |       |      |   | 26.72  |       |  |   | 23.24  |      
|Expense per Mcfe:                         |                                                                      |                          |        |       |      |   |        |       |  |   |        |      
|Lease operating expenses                  |                                                                      | $                        | 0.70   |       |      | $ | 0.49   |       |  | $ | 0.49   |      
|Transportation and gathering              |                                                                      |                          | 0.13   |       |      |   | 0.11   |       |  |   | 0.07   |      
|Taxes, other than income                  |                                                                      |                          | 0.43   |       |      |   | 0.39   |       |  |   | 0.37   |      
|Depreciation, depletion and amortization  |                                                                      |                          | 2.35   |       |      |   | 2.17   |       |  |   | 1.81   |      
|General and administrative expenses       |                                                                      |                          | 0.40   |       |      |   | 0.49   |       |  |   | 0.36   |      






|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Excludes the effect of unrealized gains and losses on derivative
    contracts.



| |                  
| | -----------------
| | Drilling Activity



|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |      |  |    |    |    |  |      |      |      | 
|--------------------- | -------------- | ----------------------- | -------------- | -- | ---- | -- |  | ----- | ---- | ---- | --- | -- | -- | ----- |  | ---- | ---- | ---- |  | -- | -- | -- |  | ---- | ---- | ---- | 
|                      |                | Year Ended December 31, |               
|                      |                |                         |               
|                      |                | 2005                    |                |    | 2004 |    |  | 2003  |     
|                      |                |                         |                |    |      |    |  |       |     
|                      |                | Gross                   |                |    | Net  |    |  | Gross |      |      | Net |    |    | Gross |  |      | Net  |     
|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |     
|Exploratory Wells(1): |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |      |  |    |    |    |  |     
|                      | Productive(2)  |                         |                | 45 |      |    |  | 21.2  |      |      |     | 57 |    |       |  | 22.0 |      |      |  | 29 |    |    |  | 8.0  |     
|                      | Non-productive |                         |                | 7  |      |    |  | 2.5   |      |      |     | 14 |    |       |  | 4.1  |      |      |  | 2  |    |    |  | 0.2  |     
|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |     
|                      |                | Total                   |                |    | 52   |    |  |       | 23.7 |      |     |    | 71 |       |  |      | 26.1 |      |  |    | 31 |    |  |      | 8.2  |     
|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |     
|Development Wells(1): |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |      |  |    |    |    |  |     
|                      | Productive(2)  |                         |                | 45 |      |    |  | 30.2  |      |      |     | 40 |    |       |  | 20.0 |      |      |  | 38 |    |    |  | 27.4 |     
|                      | Non-productive |                         |                | 1  |      |    |  | 0.2   |      |      |     |   |    |       |  |     |      |      |  | 1  |    |    |  | 0.4  |     
|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |     
|                      |                | Total                   |                |    | 46   |    |  |       | 30.4 |      |     |    | 40 |       |  |      | 20.0 |      |  |    | 39 |    |  |      | 27.8 |     
|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |     
|                      |                |                         | Combined Total |    |      | 98 |  |       |      | 54.1 |     |    |    | 111   |  |      |      | 46.1 |  |    |    | 70 |  |      |      | 36.0 | 
|                      |                |                         |                |    |      |    |  |       |      |      |     |    |    |       |  |      |      |     

9



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|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The number of net wells is the sum of the fractional working
    interests owned in gross wells.                                                                        
|   
|(2) | Productive wells consist of wells that are completed or capable
    of production. Wells that are completed in more than one
    producing zone are counted as one well.



| |                            
| | ---------------------------
| | Production and Sales Prices



Control Over Production
Activities






| |                      
| | ---------------------
| | Markets and Customers







| |                       
| | ----------------------
| | Regulatory Environment



10



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##### Table of Contents



Environmental and Land Use Laws and Regulation.


Potential Material Costs Associated with Environmental
Regulation of Our Oil & Gas Operations.








clean-up


11



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##### Table of Contents









| |                 
| | ----------------
| | Other Regulation

Federal Leases.








12



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##### Table of Contents



State Regulation of Exploration
and Production.




Operating Hazards and
Insurance




Title to Properties


right-of 10-K.


Competition




Employees




13



---



##### Table of Contents



Gaming




| |         
| | --------
| | Business







| |                            
| | ---------------------------
| | Las Vegas Gaming Operations

Stratosphere Casino Hotel & Tower.








Arizona Charlies Decatur.


24-hour


14



---



##### Table of Contents



out-of


Arizona Charlies Boulder.


24-hour


out-of






| |                                
| | -------------------------------
| | Atlantic City Gaming Operations







| |                     
| | --------------------
| | Pending Acquisitions





15



---



##### Table of Contents









| |         
| | --------
| | Strategy







| |          
| | ---------
| | Marketing











| |            
| | -----------
| | Competition





16



---



##### Table of Contents







Regulation






| |                  
| | -----------------
| | Nevada Gaming Law







| |   |                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | preventing unsavory or unsuitable persons from being directly or
    indirectly involved with gaming at any time or in any capacity;                                                                                                                                                                                   
|
| |  | establishing and maintaining responsible accounting practices
    and procedures; and                                                                                                                                                                                                                                  
|
| |  | maintaining effective controls over the financial practices of
    licensees, including establishing minimum procedures for
    internal fiscal affairs, and safeguarding assets and revenue,
    providing reliable recordkeeping and requiring the filing of
    periodic reports with the Nevada Gaming Authorities.
|
| |  | preventing cheating and fraudulent practices; and                                                                                                                                                                                                                                                                      
|
| |  | providing a source of state and local revenue through taxation
    and licensing fees.                                                                                                                                                                                                                                 



Owner and Operator Licensing Requirements.




17



---



##### Table of Contents



Our Registration Requirements.




Individual Licensing Requirements.




Consequences of Violating Gaming Laws.


Requirements for Beneficial Securities Holders.




18



---



##### Table of Contents







| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | voting on all matters voted on by stockholders or interest
    holders;                                                                                                                                            
|
| |  | making financial and other inquiries of management of the type
    normally made by securities analysts for informational purposes
    and not to cause a change in its management, policies or
    operations; and
|
| |  | other activities that the Nevada Gaming Commission may determine
    to be consistent with such investment intent.                                                                                                 

Consequences of Being Found Unsuitable.




| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pay that person any dividend or interest upon any voting
    securities;                                                                                                                                                            
|
| |  | allow that person to exercise, directly or indirectly, any
    voting right held by that person;                                                                                                                                    
|
| |  | pay remuneration in any form to that person for services
    rendered or otherwise; or                                                                                                                                              
|
| |  | fail to pursue all lawful efforts to require the unsuitable
    person to relinquish such persons voting securities
    including, if necessary, the immediate purchase of the voting
    securities for cash at fair market value.

Gaming Laws Relating to Securities Ownership.




| |   |                                                                                            
| | - | -------------------------------------------------------------------------------------------
| |  | pays to the unsuitable person any dividend, interest or any
    distribution whatsoever;   
|
| |  | recognizes any voting right by the unsuitable person in
    connection with the securities;
|
| |  | pays the unsuitable person remuneration in any form; or                                    

19



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##### Table of Contents





| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | makes any payment to the unsuitable person by way of principal,
    redemption, conversion, exchange, liquidation or similar
    transaction.



Approval of Public Offerings.


Approval of Changes in Control.




| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | mergers;                                                                     
|
| |  | consolidation;                                                               
|
| |  | stock or asset acquisitions;                                                 
|
| |  | management or consulting agreements; or                                      
|
| |  | any act or conduct by a person by which the person obtains
    control of us.



Approval of Defensive Tactics.


20



---



##### Table of Contents







| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | assure the financial stability of corporate gaming operators and
    their affiliates;
|
| |  | preserve the beneficial aspects of conducting business in the
    corporate form; and 
|
| |  | promote a neutral environment for the orderly governance of
    corporate affairs.    



Fees and Taxes.




| |   |                                          
| | - | -----------------------------------------
| |  | a percentage of gross revenues received; 
|
| |  | the number of gaming devices operated; or
|
| |  | the number of table games operated.      



Foreign Gaming Investigations.




| |   |                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | knowingly violates any laws of the foreign jurisdiction
    pertaining to the foreign gaming operation;                                                                                                                                                                                                                   
|
| |  | fails to conduct the foreign gaming operation in accordance with
    the standards of honesty and integrity required of Nevada gaming
    operations;                                                                                                                                                                     
|
| |  | engages in any activity or enters into any association that is
    unsuitable because it poses an unreasonable threat to the
    control of gaming in Nevada, reflects, or tends to reflect,
    discredit or disrepute upon the State of Nevada or gaming in
    Nevada, or is contrary to the gaming policies of Nevada;
|
| |  | engages in activities or enters into associations that are
    harmful to the State of Nevada or its ability to collect gaming
    taxes and fees; or                                                                                                                                                                     
|
| |  | employs, contracts with or associates with a person in the
    foreign operation who has been denied a license or finding of
    suitability in Nevada on the ground of unsuitability.                                                                                                                                    

License for Conduct of Gaming and Sale of Alcoholic
Beverage.


21



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##### Table of Contents





| |                      
| | ---------------------
| | New Jersey Gaming Law







| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
| |  | the granting and renewal of casino licenses;                                                                                         
|
| |  | the suitability of the approved hotel facility, and the amount
    of authorized casino space and gaming units permitted therein;    
|
| |  | the qualification of natural persons and entities related to the
    casino licensee;                                                
|
| |  | the licensing of certain employees and all gaming-related
    vendors and certain non-gaming related vendors of casino
    licensees;
|
| |  | the types of games offered to the public and the rules under
    which the games are played;                                         
|
| |  | the selling and redeeming of gaming chips;                                                                                           
|
| |  | the granting and duration of credit and the enforceability of
    gaming debts;                                                      
|
| |  | management control procedures, accounting and cash control
    methods and reports to gaming agencies;                               
|
| |  | the security standards;                                                                                                              
|
| |  | the manufacture and distribution of gaming equipment; and                                                                            
|
| |  | the simulcasting of horse races by casino licensees,
    advertising, entertainment and alcoholic beverages.                         

Casino Control Commission.


Casino License.




22



---



##### Table of Contents





Control Persons.


Financial Sources.


Institutional Investors.




23



---



##### Table of Contents





Ownership and Transfer of Securities.








Regulatory Violations and Conservatorship.




| |            
| | -----------
| | Seasonality



24



---



##### Table of Contents







| |          
| | ---------
| | Employees





| |                                  
| | ---------------------------------
| | Corporate Structure and Financing







Real Estate




| |                   
| | ------------------
| | Rental Real Estate







25



---



##### Table of Contents





| |                        
| | -----------------------
| | Real Estate Development







New Seabury Development.


Grand Harbor and Oak Harbor.


Penwood.


Hammond Ridge.


Pondview Estates. 91-acre on-site


Falling Waters. 793-unit 24-hour


Additional Developments.


26



---



##### Table of Contents





| |                            
| | ---------------------------
| | Hotel and Resort Operations

New Seabury Resort.


Grand Harbor and Oak Harbor.




| |            
| | -----------
| | Seasonality





| |          
| | ---------
| | Employees



Home Fashion




| |           
| | ----------
| | Background







27



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##### Table of Contents







| |         
| | --------
| | Business









| |         
| | --------
| | Strategy





| |                                
| | -------------------------------
| | Brands, Trademarks and Licenses



® ® ® ® ® ® ® ® ®






28



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| |          
| | ---------
| | Marketing



point-of






| |            
| | -----------
| | Competition





| |            
| | -----------
| | Seasonality



29



---



##### Table of Contents





| |          
| | ---------
| | Employees



Investments












| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | fixed income securities with an aggregate value of
    $11.1 million;                                                           
|
| |  | equity securities and equity derivatives in publicly traded
    companies with an aggregate value of
    $350.4 million; and    
|
| |  | equity securities in companies that are not publicly traded with
    limited liquidity with an aggregate value of $10.0 million.





30



---



##### Table of Contents







Available Information


10-K, 10-Q, 8-K,


S-1





Item 1A.     Risk
Factors.


Risks Relating to Our Structure




| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Our general partner and its control person could exercise
    their influence over us to your detriment.









| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Certain of our management are committed to the management of
    other businesses.



31



---



##### Table of Contents





| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To service our indebtedness, we will require a significant
    amount of cash. Our ability to maintain our current cash
    position or generate cash depends on many factors beyond our
    control.







| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | We are a holding company and will depend on the businesses of
    our subsidiaries to satisfy our obligations.







| |                                                                         
| | ------------------------------------------------------------------------
| | We or our subsidiaries may be able to incur substantially
    more debt.



32



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our failure to comply with the covenants contained under any
    of AREPs debt instruments, including the indentures
    governing the outstanding notes, including a failure as a result
    of events beyond our control, could result in an event of
    default which would materially and adversely affect our
    financial condition.





| |                                                                    
| | -------------------------------------------------------------------
| | We may be subject to the pension liabilities of our
    affiliates.











| |                                                                           
| | --------------------------------------------------------------------------
| | We are subject to the risk of possibly becoming an investment
    company.



33



---



##### Table of Contents











| |                                        
| | ---------------------------------------
| | We may become taxable as a corporation.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During 2004 and 2005, we identified three significant
    deficiencies in our internal control over financial reporting.
    If we were to discover other significant deficiencies in the
    future, including at any recently acquired entity, it may affect
    adversely our ability to provide timely and reliable financial
    information and satisfy our reporting obligations under federal
    securities laws, which also could affect our ability to remain
    listed with the New York Stock Exchange or the market price of
    our depositary units.



34



---



##### Table of Contents













Risks Related to our Businesses


General






| |   |                                                             
| | - | ------------------------------------------------------------
| |  | the continued threat of terrorism;                          
|
| |  | economic downturn;                                          
|
| |  | loss of any of our or our subsidiaries key personnel;       
|
| |  | the availability, as needed, of additional financing; and   
|
| |  | the continued availability of insurance at acceptable rates.

Oil & Gas




| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Oil and gas prices are volatile. A decrease in oil and
    natural gas prices could have a material adverse effect on our
    business, financial condition, cash flows or results of
    operations.



35



---



##### Table of Contents







| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | changes in global supply and demand for oil and natural gas;                                         
|
| |  | commodity processing, gathering and transportation availability;                                     
|
| |  | actions of the Organization of Petroleum Exporting Countries;                                        
|
| |  | domestic and foreign governmental regulations and taxes;                                             
|
| |  | domestic and foreign political conditions, including embargoes,
    affecting oil-producing activity;
|
| |  | the level of global oil and natural gas exploration activity and
    inventories;                    
|
| |  | the price and availability of domestic and imported oil and
    natural gas;                         
|
| |  | the price, availability and consumer acceptance of alternative
    fuel sources;                     
|
| |  | the availability of refining capacity;                                                               
|
| |  | technological advances affecting energy consumption;                                                 
|
| |  | weather conditions;                                                                                  
|
| |  | financial and commercial market uncertainty;                                                         
|
| |  | worldwide economic conditions; and                                                                   
|
| |  | disruptions as a result of natural calamities.                                                       





| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Estimating our reserves, production and future net cash flow
    is difficult to do with any certainty.

10-K




36



---



##### Table of Contents







| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Prospects that we decide to drill may not yield gas or oil in
    commercially viable quantities.

10-K.




| |                                                                 
| | ----------------------------------------------------------------
| | Our Oil & Gas business involves significant
    operating risks.





| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | well blowouts;                                                                         
|
| |  | craterings and explosions;                                                             
|
| |  | pipe failures and ruptures;                                                            
|
| |  | pipeline accidents and failures;                                                       
|
| |  | casing collapses;                                                                      
|
| |  | unexpected formations or pressures;                                                    
|
| |  | fires;                                                                                 
|
| |  | mechanical and operational problems that affect production;                            
|
| |  | formations with abnormal pressures;                                                    
|
| |  | uncontrollable flows of oil, natural gas, brine or well
    fluids; and                
|
| |  | releases of contaminants into the environment, including
    groundwater contamination.





| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The marketability of our production is dependent upon
    gathering systems, transportation facilities and processing
    facilities that we do not control.



37



---



##### Table of Contents









| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | Commodity price risk management activities may limit future
    revenues from price increases and result in financial losses or
    reduce its income.





| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | production is less than expected;                                                                                                            
|
| |  | a counterparty to a derivative contract fails to perform under
    the contract;                                                             
|
| |  | there is a change in the expected differential between the
    underlying price in the derivative contract and actual prices
    received; or
|
| |  | there is a sudden, unexpected event that materially impacts oil
    or natural gas prices.                                                   







| |   |                                                      
| | - | -----------------------------------------------------
| |  | cash flow available for capital expenditures:        
|
| |  | ability to borrow and raise additional capital;      
|
| |  | quantity of oil and natural gas it can produce;      
|
| |  | quantity of oil and gas reserves; and                
|
| |  | operating results for oil and natural gas activities.







38



---



##### Table of Contents







| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | We may experience difficulty finding and acquiring additional
    reserves and may be unable to compensate for the depletion of
    proved reserves.





| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Shortages of oil field equipment, services and qualified
    personnel could reduce our cash flow and adversely affect the
    results of operations of NEG Oil & Gas.





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Oil and gas exploration, exploitation and development
    activities may not be successful.





| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | title problems;                                                            
|
| |  | problems in delivery of our oil and natural gas to market;                 
|
| |  | pressure or irregularities in geological formations;                       
|
| |  | equipment failures or accidents;                                           
|
| |  | shortages of, or delays in obtaining, equipment or qualified
    personnel;

39



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| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | adverse weather conditions;                                                                        
|
| |  | reductions in oil and natural gas prices;                                                          
|
| |  | compliance with environmental and other governmental
    requirements; and                         
|
| |  | costs of, or shortages or delays in the availability of,
    drilling rigs, equipment and services.

Our acquisition
activities may not be successful.






| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | unexpected losses of key employees, customers and suppliers of
    an acquired business;                                                                                                    
|
| |  | difficulties in conforming the financial, technical and
    management standards, processes, procedures and controls of the
    acquired business with those of our existing operations; and
|
| |  | diversion of management and other resources.                                                                                                                                                





| |                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to compete successfully in the future with
    respect to acquiring prospective reserves, developing reserves,
    marketing its production, attracting and retaining quality
    personnel, implementing new technologies and raising additional
    capital.





| |                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot control activities on properties we do not operate.
    If NEG Oil & Gas is not able to fund required capital
    expenditures with respect to non-operated properties, it may
    result in a reduction or forfeiture of the interests of NEG
    Oil & Gas in those properties.



40



---



##### Table of Contents







| |   |                                                      
| | - | -----------------------------------------------------
| |  | the timing and amount of capital expenditures;       
|
| |  | the operators expertise and financial resources;    
|
| |  | approval of other participants in drilling wells; and
|
| |  | selection of technology.                             





| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our activities are subject to complex laws and regulations,
    including environmental laws and regulations that can adversely
    affect the cost, manner and feasibility of doing business.





| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | land use restrictions where many of our operations are located;                                                           
|
| |  | drilling bonds and other financial responsibility requirements;                                                           
|
| |  | spacing of wells;                                                                                                         
|
| |  | emissions into the air;                                                                                                   
|
| |  | unitization and pooling of properties;                                                                                    
|
| |  | habitat and endangered species protection, reclamation and
    remediation;                                               
|
| |  | the containment and disposal of hazardous substances, oil field
    waste and other waste materials;                      
|
| |  | the use of underground storage tanks;                                                                                     
|
| |  | the use of underground injection wells, which affects the
    disposal of water and other produced liquids from our wells;
|
| |  | safety precautions;                                                                                                       
|
| |  | the prevention of oil spills;                                                                                             
|
| |  | releases of contaminants into the environment;                                                                            
|
| |  | wetlands protection;                                                                                                      
|
| |  | the closure of exploration and production facilities; and                                                                 
|
| |  | operational reporting requirements.                                                                                       





| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | governmental sanctions, such as fines, penalties, and injunctive
    relief;
|
| |  | property and natural resource damages;                                      
|
| |  | releases or discharges of hazardous materials;                              
|
| |  | well reclamation costs;                                                     

41



---



##### Table of Contents





| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | oil spill clean-up
    costs;                                                                         
|
| |  | other remediation and
    clean-up costs;                                                             
|
| |  | plugging and abandonment costs, which may be particularly high
    in the case of offshore facilities;
|
| |  | personal injuries; and                                                                                
|
| |  | other environmental damages.                                                                          



clean-up




| |                                                                           
| | --------------------------------------------------------------------------
| | We may be required to write down the carrying value of our
    properties.





| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Changes in the financial condition of any of our large oil
    and gas purchasers could make it difficult to collect amounts
    due from those purchasers.



42



---



##### Table of Contents



Gaming




| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The gaming industry is highly regulated. The gaming
    authorities and state and municipal licensing authorities have
    significant control over our operations.







| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | Rising operating costs for our gaming properties could have a
    negative impact on our profitability.





| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our properties use significant amounts of electricity, natural
    gas and other forms of energy, and energy price increases may
    reduce our profitability;          
|
| |  | our Nevada properties use significant amounts of water and a
    water shortage may adversely affect our operations;                                                    
|
| |  | some of our employees are covered by collective bargaining
    agreements and we may incur higher costs or work slow-downs or
    stoppages due to union activities; and
|
| |  | our reliance on slot machine revenues and the concentration of
    manufacturing of slot machines in certain companies could impose
    additional costs on us.         



| |                                                        
| | -------------------------------------------------------
| | We face substantial competition in the gaming industry.





| |   |                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we compete with many world class destination resorts with
    greater name recognition, different attractions, amenities and
    entertainment options;                                                                              
|
| |  | we compete with the continued growth of gaming on Native
    American tribal lands;                                                                                                                                                  
|
| |  | the existence of legalized gambling in other jurisdictions may
    reduce the number of visitors to our properties;                                                                                                                  
|
| |  | certain states have legalized, and others may legalize, casino
    gaming in specific venues, including race tracks and/or in
    specific areas, including metropolitan areas from which we
    traditionally attract customers; and
|
| |  | our properties also compete and will in the future compete with
    all forms of legalized gambling.                                                                                                                                 

43



---



##### Table of Contents







| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Our acquisition of the Flamingo in Laughlin, Nevada and the
    Traymore site in Atlantic City, New Jersey may not be
    successful.









| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Sands has recently incurred operating losses which could
    result in our determining that, for financial reporting
    purposes, our investment has been impaired.





| |                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Creditors of GBH have indicated that they intend to challenge
    the transactions consummated in July 2004, which, among other
    things resulted in the transfer of The Sands to ACE Gaming, and
    intend to attempt to subordinate our claims against GBH Holdings
    to those of other creditors.



44



---



##### Table of Contents





Real Estate Operations




| |                                                                                
| | -------------------------------------------------------------------------------
| | Our investment in property development may be more costly
    than anticipated.





| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | We may be subject to environmental liability as an owner or
    operator of development and rental real estate.



Home Fashion




| |                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A recent court order may result in our ownership of WPI being
    reduced to less than 50%. Uncertainties arising from this
    decision may adversely affect WPIs operations and
    prospects and the value of our investment in it.

Contrarian Funds Inc. v. WestPoint Stevens, Inc.
et al.






45



---



##### Table of Contents







| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | WPI recently acquired its business from the former owners
    through bankruptcy proceedings. We cannot assure you that it
    will be able to operate profitably.





| |                                                                                 
| | --------------------------------------------------------------------------------
| | WPI may not be able to secure additional financing to meet
    its future needs.







| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | The loss of any of WPIs large customers could have an
    adverse effect on WPIs business.





| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A portion of WPIs sales are derived from licensed
    designer brands. The loss of a significant license could have an
    adverse effect on WPIs business.



46



---



##### Table of Contents







| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A shortage of the principal raw materials WPI uses to
    manufacture its products could force WPI to pay more for those
    materials and, possibly, cause WPI to increase its prices, which
    could have an adverse effect on WPIs operations.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | The home fashion industry is highly competitive and
    WPIs success depends on WPIs ability to compete
    effectively in the market.





| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | WPI intends to increase the percentage of its products that
    are made overseas. There is no assurance that WPI will be
    successful in obtaining goods of sufficient quality on a timely
    basis and on advantageous terms. WPI will be subject to
    additional risks relating to doing business overseas.





| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | challenges caused by distance;                                 
|
| |  | language and cultural differences;                             
|
| |  | legal and regulatory restrictions;                             
|
| |  | the difficulty of enforcing agreements with overseas suppliers;
|
| |  | currency exchange rate fluctuations;                           
|
| |  | political and economic instability;                            

47



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##### Table of Contents





| |   |                                                             
| | - | ------------------------------------------------------------
| |  | potential adverse tax consequences; and                     
|
| |  | higher costs associated with doing business internationally.



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | There has been consolidation of retailers of WPIs
    products that may reduce its profitability.





| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | WPI is subject to various federal, state and local
    environmental and health and safety laws and regulations. If it
    does not comply with these regulations, it may incur significant
    costs in the future to become compliant.



Investments




| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to identify suitable investments, and our
    investments may not result in favorable returns or may result in
    losses.





| |                                                                 
| | ----------------------------------------------------------------
| | Our investments may be subject to significant
    uncertainties.



| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | Our investments may not be successful for many reasons
    including, but not limited to:
|
| |  | fluctuation of interest rates;                                                           
|
| |  | lack of control in minority investments;                                                 
|
| |  | worsening of general economic and market conditions;                                     

48



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| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | lack of diversification;                                                            
|
| |  | fluctuation of U.S. dollar exchange rates; and                                      
|
| |  | adverse legal and regulatory developments that may affect
    particular businesses.








|         |                           
|-------- | --------------------------
|Item 1B. | Unresolved Staff Comments.








|        |            
|------- | -----------
|Item 2. | Properties.

Oil & Gas




| |                 
| | ----------------
| | Productive Wells



|               |       |       |     |     |             |  |       |       |  |  |     |     |  |       |       |       |     |  |     |     |  |  |       |       | 
|-------------- | ----- | ----- | --- | --- | ----------- |  | ----- | ----- |  |  | --- | --- |  | ----- | ----- | ----- | --- |  | --- | --- |  |  | ----- | ----- | 
|               |       | Oil   |     |     | Natural Gas |  |       | Total | 
|               |       |       |     |     |             |  |       |       | 
|Area:          |       | Gross |     |     | Net         |  |       | Gross |  |  | Net |     |  | Gross |       |       | Net | 
|               |       |       |     |     |             |  |       |       |  |  |     |     |  |       |       |       |     | 
|West Texas     |       |       | 164 |     |             |  | 159.6 |       |  |  | 174 |     |  |       | 67.1  |       |     |  | 338 |     |  |  | 226.7 |      
|East Texas     |       |       | 3   |     |             |  | 2.7   |       |  |  | 104 |     |  |       | 100.3 |       |     |  | 107 |     |  |  | 103.0 |      
|Gulf Coast     |       |       | 31  |     |             |  | 20.2  |       |  |  | 98  |     |  |       | 68.7  |       |     |  | 129 |     |  |  | 88.9  |      
|Gulf of Mexico |       |       | 28  |     |             |  | 15.7  |       |  |  | 27  |     |  |       | 8.7   |       |     |  | 55  |     |  |  | 24.4  |      
|Other          |       |       | 39  |     |             |  | 12.5  |       |  |  | 210 |     |  |       | 97.2  |       |     |  | 249 |     |  |  | 109.7 |      
|               |       |       |     |     |             |  |       |       |  |  |     |     |  |       |       |       |     | 
|               | Total |       |     | 265 |             |  |       | 210.7 |  |  |     | 613 |  |       |       | 342.0 |     |  |     | 878 |  |  |       | 552.7 | 
|               |       |       |     |     |             |  |       |       |  |  |     |     |  |       |       |       |     | 



| |                  
| | -----------------
| | Leasehold Acreage



|               |       |                   |        |         |                     |  |        |         |  |  |         |         |  |  |        |        | 
|-------------- | ----- | ----------------- | ------ | ------- | ------------------- |  | ------ | ------- |  |  | ------- | ------- |  |  | ------ | ------ | 
|               |       | Developed Acreage |        |         | Undeveloped Acreage | 
|               |       |                   |        |         |                     | 
|Area:          |       | Gross             |        |         | Net                 |  |        | Gross   |  |  | Net(1)  |        
|               |       |                   |        |         |                     |  |        |         |  |  |         |        
|West Texas     |       |                   | 31,200 |         |                     |  | 15,900 |         |  |  | 108,900 |         |  |  | 26,400 |       
|East Texas     |       |                   | 14,500 |         |                     |  | 13,800 |         |  |  | 7,000   |         |  |  | 5,600  |       
|Gulf Coast     |       |                   | 32,300 |         |                     |  | 17,600 |         |  |  | 21,300  |         |  |  | 12,200 |       
|Gulf of Mexico |       |                   | 53,600 |         |                     |  | 28,900 |         |  |  |        |         |  |  |       |       
|Other          |       |                   | 70,500 |         |                     |  | 36,900 |         |  |  |        |         |  |  |       |       
|               |       |                   |        |         |                     |  |        |         |  |  |         |        
|               | Total |                   |        | 202,100 |                     |  |        | 113,100 |  |  |         | 137,200 |  |  |        | 44,200 | 
|               |       |                   |        |         |                     |  |        |         |  |  |         |        






|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(1) | Includes 13,260, 7,333 and 8,050 net acres with leases
    expiring during 2006, 2007 and 2008, respectively.





49



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Gaming




| |          
| | ---------
| | Las Vegas





Atlantic City




Real Estate




| |                   
| | ------------------
| | Rental Real Estate





| |                        
| | -----------------------
| | Real Estate Development



450-unit








| |                            
| | ---------------------------
| | Hotel and Resort Operations





50



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##### Table of Contents



Home Fashion















|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.



WestPoint Stevens, Inc.






51



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##### Table of Contents



Contrarian Funds
Inc. v. WestPoint Stevens, Inc. et. al.












| |    
| | ---
| | GBH












|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.



52



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PART II







|        |                                                                                                                         
|------- | ------------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Security Holder Matter and Issuer Purchases of Equity
    Securities.



Distributions




| |                                               
| | ----------------------------------------------
| | Distribution Policy and Quarterly Distribution







53



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|        |                                                 
|------- | ------------------------------------------------
|Item 6. | Selected Historical Consolidated Financial Data.

10-K. 10-K. 10-K.


|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |         |        |  |   |         |        | 
|------------------------------------------------------------- | --------------- | ----------------------------------- | --------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                                              |                 | Year Ended December 31,             |          
|                                                              |                 |                                     |          
|                                                              |                 | 2005                                |           |         | 2004 |   |         | 2003    |  |   | 2002    |        |  | 2001 |        
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|                                                              |                 | (In $000s except unit and per unit) |          
|Total revenues                                                |                 | $                                   | 1,262,493 |         |      | $ | 670,276 |         |  | $ | 576,845 |        |  | $    | 588,061 |        |  | $ | 589,293 |       
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|Income (loss) from continuing operations                      |                 | $                                   | (44,550   | )       |      | $ | 77,536  |         |  | $ | 60,907  |        |  | $    | 46,438  |        |  | $ | 86,739  |       
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|Total income from discontinued operations                     |                 | $                                   | 23,262    |         |      | $ | 81,329  |         |  | $ | 9,962   |        |  | $    | 6,038   |        |  | $ | 7,477   |       
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|Earnings (loss) before cumulative effect of accounting change |                 | $                                   | (21,288   | )       |      | $ | 158,865 |         |  | $ | 70,869  |        |  | $    | 52,476  |        |  | $ | 94,216  |       
|Cumulative effect of accounting change                        |                 |                                     |          |         |      |   |        |         |  |   | 1,912   |        |  |      |        |        |  |   |        |       
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|Net earnings (loss)                                           |                 | $                                   | (21,288   | )       |      | $ | 158,865 |         |  | $ | 72,781  |        |  | $    | 52,476  |        |  | $ | 94,216  |       
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|Net earnings (loss) attributable to:                          |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |         |        |  |   |         |       
|                                                              | Limited partner |                                     | $         | (21,075 | )    |   | $       | 157,276 |  |   | $       | 72,053 |  |      | $       | 51,952 |  |   | $       | 93,274 | 
|                                                              | General partner |                                     |           | (213    | )    |   |         | 1,589   |  |   |         | 728    |  |      |         | 524    |  |   |         | 942    | 
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        
|Net earnings (loss)                                           |                 | $                                   | (21,288   | )       |      | $ | 158,865 |         |  | $ | 72,781  |        |  | $    | 52,476  |        |  | $ | 94,216  |       
|                                                              |                 |                                     |           |         |      |   |         |         |  |   |         |        |  |      |        

|                                           |  |            |           |  |      |   |           |      |  |   |           |  |  |         |           |  |  |   |           | 
|------------------------------------------ |  | ---------- | --------- |  | ---- | - | --------- | ---- |  | - | --------- |  |  | ------- | --------- |  |  | - | --------- | 
|                                           |  | 2005       |           |  | 2004 |   |           | 2003 |  |   | 2002(1)   |  |  | 2001(1) |          
|                                           |  |            |           |  |      |   |           |      |  |   |           |  |  |         |          
|                                           |  | (In $000s) |          
|Balance Sheet Data:                        |  |            |           |  |      |   |           |      |  |   |           |  |  |         |           |  |  |   |           | 
|Cash and cash equivalents                  |  | $          | 575,348   |  |      | $ | 806,182   |      |  | $ | 553,100   |  |  | $       | 145,071   |  |  | $ | 219,521   | 
|Investments                                |  |            | 834,413   |  |      |   | 350,527   |      |  |   | 165,477   |  |  |         | 393,245   |  |  |   | 313,882   | 
|Property, plant and equipment, net         |  |            | 1,635,238 |  |      |   | 1,263,852 |      |  |   | 1,115,983 |  |  |         | 1,074,515 |  |  |   | 1,001,387 | 
|Total assets                               |  |            | 3,971,137 |  |      |   | 2,869,679 |      |  |   | 2,172,561 |  |  |         | 2,018,142 |  |  |   | 2,044,158 | 
|Long term debt (including current portion) |  |            | 1,424,374 |  |      |   | 752,634   |      |  |   | 374,421   |  |  |         | 435,675   |  |  |   | 530,745   | 
|Partners equity                           |  |            | 1,626,635 |  |      |   | 1,764,185 |      |  |   | 1,644,715 |  |  |         | 1,402,924 |  |  |   | 1,313,731 | 






|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.









| |   |                               
| | - | ------------------------------
| |  | Consolidated Financial Results
|
| |  | Oil & Gas                     
|
| |  | Gaming                        

54



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| |   |                                
| | - | -------------------------------
| |  | Real Estate                    
|
| |  | Home Fashion                   
|
| |  | Holding Company and Investments





| |   |                               
| | - | ------------------------------
| |  | Consolidated Financial Results
|
| |  | Oil & Gas                     
|
| |  | Gaming                        
|
| |  | Real Estate                   
|
| |  | Home Fashion                  





Overview


out-of










| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We acquired additional Oil & Gas and Gaming assets from
    affiliates of Mr. Icahn for aggregate consideration of
    $180.0 million in cash and AREPs depositary units
    valued at $457.0 million;                                  
|
| |  | Our subsidiary, GB Holdings, Inc., or GBH, filed for bankruptcy
    on September 29, 2005;                                                                                                                                               
|
| |  | We continued to sell properties in our net lease portfolio;                                                                                                                                                                              
|
| |  | In February 2005, AREP issued $480 million principal amount
    of
    71/8% senior unsecured notes due 2013 which we
    guaranteed;                                                                                                    
|
| |  | We incurred losses of $41.3 million on a short position
    that we had initiated in 2004;                                                                                                                                               
|
| |  | Oil & Gas activities: production volumes and the market
    prices for oil and gas rose in 2005 over the prior year but the
    positive impact was offset by the negative impact of derivative
    losses; and                          
|
| |  | On August 8, 2005, we acquired approximately two thirds of
    the outstanding equity of WPI, the acquirer in a bankruptcy
    proceeding of substantially all of the assets of WestPoint
    Stevens Inc. See Item 3. Legal Proceedings.

55



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| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | The key factors affecting the financial results for the years
    ended December 31, 2005 versus 2004 were:



| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Decreased operating income, principally due to the operating
    loss of $22.4 million in the Home Fashion segment and an
    increase of $12.7 million in Holding Company costs.
    Oil & Gas operating income was reduced by
    $69.3 million due to unrealized derivative losses;
|
| |  | Net losses on securities of $21.3 million in 2005 versus
    gains of $16.5 million in 2004;                                                                                                                                                                                          
|
| |  | Impairment charges of $52.4 million in connection with the
    bankruptcy of GBH;                                                                                                                                                                                                     
|
| |  | Interest expense increased $41.2 million due to higher debt
    levels; and                                                                                                                                                                                                           
|
| |  | Reduced gains on sales of properties: income from
    discontinued operations fell $58.1 million.                                                                                                                                                                                     



| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | The key factors affecting the financial results for the year
    ended December 31, 2004 versus 2003 were:



| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | Increased operating income principally due to a
    $28.4 million increase in operating income from gaming
    activities;
|
| |  | Interest expense increased $20.7 million due to higher debt
    levels;                                                   
|
| |  | Interest income increased $21.4 million due to increased
    levels of investments;                                       
|
| |  | Net gains on securities were $16.5 million in 2004 versus
    $1.7 million in the prior year;                             
|
| |  | Increased gains on sales of properties: income from gains on
    discontinued operations rose $71.8 million; and          
|
| |  | An impairment charge of $15.6 million in 2004 related to
    our interest in GBH.                                         

Results of Operations




| |                               
| | ------------------------------
| | Consolidated Financial Results



| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004









56



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| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003









| |          
| | ---------
| | Oil & Gas







| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A 50.01% ownership interest in National Energy Group, or NEG, a
    publicly traded oil and gas management company. National Energy
    Group manages the oil and gas operations and its principal asset
    consists of its non- managing membership interest in NEG Holding
    LLC;
|
| |  | A managing membership interest in NEG Holding;                                                                                                                                                                                                                                        
|
| |  | National Onshore LP; and                                                                                                                                                                                                                                                              
|
| |  | National Offshore LP.                                                                                                                                                                                                                                                                 



57



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|                              |                                          |                          |         |         |      |   |         |         |  |   |         |        | 
|----------------------------- | ---------------------------------------- | ------------------------ | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------ | 
|                              |                                          | Years Ended December 31, |        
|                              |                                          |                          |        
|                              |                                          | 2005                     |         |         | 2004 |   |         | 2003    | 
|                              |                                          |                          |         |         |      |   |         |         | 
|Gross oil and gas revenues    |                                          | $                        | 312,661 |         |      | $ | 161,055 |         |  | $ | 108,713 |       
|Realized derivatives losses   |                                          |                          | (51,263 | )       |      |   | (16,625 | )       |  |   | (8,309  | )     
|Unrealized derivatives losses |                                          |                          | (69,254 | )       |      |   | (9,179  | )       |  |   | (2,614  | )     
|                              |                                          |                          |         |         |      |   |         |         | 
|                              | Oil and gas revenues                     |                          |         | 192,144 |      |   |         | 135,251 |  |   |         | 97,790 | 
|Plant revenues                |                                          |                          | 6,710   |         |      |   | 2,737   |         |  |   | 2,119   |       
|                              |                                          |                          |         |         |      |   |         |         | 
|                              | Total revenues                           |                          |         | 198,854 |      |   |         | 137,988 |  |   |         | 99,909 | 
|                              |                                          |                          |         |         |      |   |         |         | 
|Cost and expenses:            |                                          |                          |         |         |      |   |         |         |  |   |         |       
|                              | Total oil and gas operating expenses     |                          |         | 54,800  |      |   |         | 31,075  |  |   |         | 22,345 | 
|                              | Depreciation, depletion and amortization |                          |         | 91,100  |      |   |         | 60,123  |  |   |         | 39,455 | 
|                              | General and administrative expenses      |                          |         | 15,433  |      |   |         | 13,737  |  |   |         | 7,769  | 
|                              |                                          |                          |         |         |      |   |         |         | 
|                              |                                          |                          | 161,333 |         |      |   | 104,935 |         |  |   | 69,569  |       
|                              |                                          |                          |         |         |      |   |         |         | 
|Operating income              |                                          | $                        | 37,521  |         |      | $ | 33,053  |         |  | $ | 30,340  |       
|                              |                                          |                          |         |         |      |   |         |         | 





|                                          |                                                                  |                          |        |       |      |   |        |       |  |   |        |       | 
|----------------------------------------- | ---------------------------------------------------------------- | ------------------------ | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                          |                                                                  | Years Ended December 31, |       
|                                          |                                                                  |                          |       
|                                          |                                                                  | 2005                     |        |       | 2004 |   |        | 2003  | 
|                                          |                                                                  |                          |        |       |      |   |        |       | 
|Production data:                          |                                                                  |                          |        |       |      |   |        |       |  |   |        |      
|Oil (MBbls)                               |                                                                  |                          | 1,440  |       |      |   | 935    |       |  |   | 811    |      
|Natural gas (MMcf)                        |                                                                  |                          | 28,107 |       |      |   | 18,895 |       |  |   | 15,913 |      
|Natural gas liquids (MBbls)               |                                                                  |                          | 350    |       |      |   | 549    |       |  |   | 166    |      
|Natural gas equivalents (MMcfe)           |                                                                  |                          | 38,847 |       |      |   | 27,799 |       |  |   | 21,772 |      
|Average Sales Price(1):                   |                                                                  |                          |        |       |      |   |        |       |  |   |        |      
|Oil average sales price (per Bbl)         |                                                                  |                          |        |       |      |   |        |       |  |   |        |      
|                                          | Price excluding realized gains or losses on derivative contracts |                          | $      | 55.72 |      |   | $      | 39.55 |  |   | $      | 30.26 | 
|                                          | Price including realized gains or losses on derivative contracts |                          |        | 48.95 |      |   |        | 29.89 |  |   |        | 27.32 | 
|Natural gas average sales price (per Mcf) |                                                                  |                          |        |       |      |   |        |       |  |   |        |      
|                                          | Price excluding realized gains or losses on derivative contracts |                          |        | 7.85  |      |   |        | 5.73  |  |   |        | 5.07  | 
|                                          | Price including realized gains or losses on derivative contracts |                          |        | 6.38  |      |   |        | 5.39  |  |   |        | 4.70  | 
|Natural gas liquids (per Bbl)             |                                                                  |                          | 33.46  |       |      |   | 26.72  |       |  |   | 23.24  |      
|Expense per Mcfe:                         |                                                                  |                          |        |       |      |   |        |       |  |   |        |      
|Total oil and gas operating expenses      |                                                                  | $                        | 1.41   |       |      | $ | 1.12   |       |  | $ | 1.03   |      
|Depreciation, depletion and amortization  |                                                                  |                          | 2.35   |       |      |   | 2.14   |       |  |   | 1.80   |      
|General and administrative expenses       |                                                                  |                          | 0.40   |       |      |   | 0.49   |       |  |   | 0.36   |      






|    |                                                                                
|--- | -------------------------------------------------------------------------------
|(1) | Excludes the effect of unrealized gains and losses on derivative
    contracts.



58



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| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004

mark-to














| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003



59



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mark-to














| |       
| | ------
| | Gaming







60



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##### Table of Contents





|          |                                     |              |         |         |      |  |         |         |  |  |         |         | 
|--------- | ----------------------------------- | ------------ | ------- | ------- | ---- |  | ------- | ------- |  |  | ------- | ------- | 
|          |                                     | December 31, |        
|          |                                     |              |        
|          |                                     | 2005         |         |         | 2004 |  |         | 2003    | 
|          |                                     |              |         |         |      |  |         |         | 
|Revenues: |                                     |              |         |         |      |  |         |         |  |  |         |        
|          | Casino                              |              | $       | 329,789 |      |  | $       | 325,615 |  |  | $       | 302,701 | 
|          | Hotel                               |              |         | 73,924  |      |  |         | 65,561  |  |  |         | 58,253  | 
|          | Food and beverage                   |              |         | 92,006  |      |  |         | 88,851  |  |  |         | 81,545  | 
|          | Tower, retail and other income      |              |         | 38,668  |      |  |         | 37,330  |  |  |         | 34,059  | 
|          |                                     |              |         |         |      |  |         |         | 
|          | Gross revenues                      |              |         | 534,387 |      |  |         | 517,357 |  |  |         | 476,558 | 
|          | Less promotional allowances         |              |         | 44,066  |      |  |         | 46,521  |  |  |         | 46,189  | 
|          |                                     |              |         |         |      |  |         |         | 
|          | Net revenues                        |              |         | 490,321 |      |  |         | 470,836 |  |  |         | 430,369 | 
|          |                                     |              |         |         |      |  |         |         | 
|Expenses: |                                     |              |         |         |      |  |         |         |  |  |         |        
|          | Casino                              |              |         | 110,821 |      |  |         | 112,452 |  |  |         | 113,941 | 
|          | Hotel                               |              |         | 31,734  |      |  |         | 27,669  |  |  |         | 24,751  | 
|          | Food and beverage                   |              |         | 60,284  |      |  |         | 56,425  |  |  |         | 53,471  | 
|          | Other operating expenses            |              |         | 16,715  |      |  |         | 14,905  |  |  |         | 15,305  | 
|          | Selling, general and administrative |              |         | 172,947 |      |  |         | 169,736 |  |  |         | 165,754 | 
|          | Depreciation and amortization       |              |         | 37,641  |      |  |         | 38,414  |  |  |         | 34,345  | 
|          |                                     |              |         |         |      |  |         |         | 
|          |                                     |              | 430,142 |         |      |  | 419,601 |         |  |  | 407,567 |        
|          |                                     |              |         |         |      |  |         |         | 
|          | Operating income                    |              | $       | 60,179  |      |  | $       | 51,235  |  |  | $       | 22,802  | 
|          |                                     |              |         |         |      |  |         |         | 



| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004











61



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| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003











62



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| |                    
| | -------------------
| | Results by Location



|                         |              |                          |         |         |      |   |         |         |  |   |         |         | 
|------------------------ | ------------ | ------------------------ | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                         |              | Years Ended December 31, |        
|                         |              |                          |        
|                         |              | 2005                     |         |         | 2004 |   |         | 2003    | 
|                         |              |                          |         |         |      |   |         |         | 
|Net revenues:            |              |                          |         |         |      |   |         |         |  |   |         |        
|Las Vegas                |              | $                        | 327,985 |         |      | $ | 299,981 |         |  | $ | 262,811 |        
|Atlantic City            |              |                          | 162,336 |         |      |   | 170,855 |         |  |   | 167,558 |        
|                         |              |                          |         |         |      |   |         |         | 
|                         | Total Gaming |                          | $       | 490,321 |      |   | $       | 470,836 |  |   | $       | 430,369 | 
|                         |              |                          |         |         |      |   |         |         | 
|Operating income (loss): |              |                          |         |         |      |   |         |         |  |   |         |        
|Las Vegas                |              | $                        | 67,052  |         |      | $ | 48,862  |         |  | $ | 23,847  |        
|Atlantic City            |              |                          | (6,873  | )       |      |   | 2,373   |         |  |   | (1,045  | )      
|                         |              |                          |         |         |      |   |         |         | 
|                         | Total Gaming |                          | $       | 60,179  |      |   | $       | 51,235  |  |   | $       | 22,802  | 
|                         |              |                          |         |         |      |   |         |         | 

Accounting for the
Impairment or Disposal of Long-lived Assets.


63



---



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| |            
| | -----------
| | Real Estate



|                    |                      |                                     |   |        |         |  |   |        |        |  |   |        |        | 
|------------------- | -------------------- | ----------------------------------- | - | ------ | ------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                    |                      | Year Ended December 31,             |  
|                    |                      |                                     |  
|                    |                      | 2005                                |   |        | 2004    |  |   | 2003   |       
|                    |                      |                                     |   |        |         |  |   |        |       
|Revenues:           |                      |                                     |   |        |         |  |   |        |        |  |   |       
|                    | Rental real estate:  |                                     |   |        |         |  |   |        |        |  |   |        |       
|                    |                      | Interest income on financing leases |   | $      | 7,299   |  |   | $      | 9,880  |  |   | $      | 13,115 | 
|                    |                      | Rental income                       |   |        | 9,157   |  |   |        | 8,771  |  |   |        | 7,809  | 
|                    | Property development |                                     |   | 58,270 |         |  |   | 26,591 |        |  |   | 13,266 |       
|                    | Resort operations    |                                     |   | 25,911 |         |  |   | 16,210 |        |  |   | 12,377 |       
|                    |                      |                                     |   |        |         |  |   |        |       
|                    |                      | Total revenues                      |   |        | 100,637 |  |   |        | 61,452 |  |   |        | 46,567 | 
|                    |                      |                                     |   |        |         |  |   |        |       
|Operating expenses: |                      |                                     |   |        |         |  |   |        |        |  |   |       
|                    | Rental real estate   |                                     |   | 4,198  |         |  |   | 7,739  |        |  |   | 5,315  |       
|                    | Property development |                                     |   | 47,130 |         |  |   | 22,313 |        |  |   | 12,187 |       
|                    | Resort operations    |                                     |   | 27,963 |         |  |   | 16,592 |        |  |   | 11,358 |       
|                    |                      |                                     |   |        |         |  |   |        |       
|                    |                      | Total expenses                      |   |        | 79,291  |  |   |        | 46,644 |  |   |        | 28,860 | 
|                    |                      |                                     |   |        |         |  |   |        |       
|                    | Operating income     |                                     | $ | 21,346 |         |  | $ | 14,808 |        |  | $ | 17,707 |       
|                    |                      |                                     |   |        |         |  |   |        |       

Rental Real Estate




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004





| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003





|                                            |  |                         |        |  |      |   |         |      |  |   |        | 
|------------------------------------------- |  | ----------------------- | ------ |  | ---- | - | ------- | ---- |  | - | ------ | 
|                                            |  | Year Ended December 31, |       
|                                            |  |                         |       
|                                            |  | 2005                    |        |  | 2004 |   |         | 2003 | 
|                                            |  |                         |        |  |      |   |         |      | 
|Properties sold                             |  |                         | 14     |  |      |   | 57      |      |  |   | 9      | 
|Proceeds received                           |  | $                       | 52,525 |  |      | $ | 245,424 |      |  | $ | 21,164 | 
|Mortgage debt repaid                        |  | $                       | 10,702 |  |      | $ | 93,845  |      |  | $ | 4,375  | 
|Total gain recorded                         |  | $                       | 16,315 |  |      | $ | 80,459  |      |  | $ | 10,474 | 
|Gain recorded in continuing operations      |  | $                       | 176    |  |      | $ | 5,262   |      |  | $ | 7,121  | 
|Gain recorded in discontinued operations(i) |  | $                       | 16,139 |  |      | $ | 75,197  |      |  | $ | 3,353  | 






|    |                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | In addition to gains on the rental portfolio of
    $16.1 million, a gain of $5.7 million on the sale of a
    resort property was recognized in 2005.

64



---



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| |                     
| | --------------------
| | Property Development



| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004





| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003







| |                  
| | -----------------
| | Resort Operations



| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004







| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003







| |             
| | ------------
| | Home Fashion







65



---



##### Table of Contents





| |                                                                              
| | -----------------------------------------------------------------------------
| | Results of Operations for period from August 8, 2005 to
    December 31, 2005





| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | adverse competitive conditions for U.S. mills compared to
    mills located overseas;                
|
| |  | growth of low priced imports from Asia and Latin America
    resulting from lifting of import quotas;
|
| |  | retailers of consumer goods have become fewer and more powerful
    over time; and                   
|
| |  | long term increases in pricing and decreases in availability of
    raw materials.                   



|                                    |  |   |         |  
|----------------------------------- |  | - | ------- | -
|Revenues                            |  | $ | 472,681 |  
|Expenses:                           |  |   |         |  
|Cost of sales                       |  |   | 421,408 |  
|Selling, general and administrative |  |   | 73,702  |  
|                                    |  |   |        
|Operating loss                      |  | $ | (22,429 | )
|                                    |  |   |        







| |      
| | -----
| | Other





| |            
| | -----------
| | Seasonality



66



---



##### Table of Contents





| |                
| | ---------------
| | Holding Company



| |                      
| | ---------------------
| | Investment Activities









| |                                    
| | -----------------------------------
| | General and Administrative Expenses





| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004







| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003



Interest Income and Expense




| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to the year ended
    December 31, 2004





| |                                                                              
| | -----------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to the year ended
    December 31, 2003



67



---



##### Table of Contents







| |                                          
| | -----------------------------------------
| | Impairment Charges from GB Holdings, Inc.







| |                            
| | ---------------------------
| | Other Income (Expense), net



|                                                              |  |              |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                              |  | December 31, |        
|                                                              |  |              |        
|                                                              |  | 2005         |         |   | 2004 |   |         | 2003 | 
|                                                              |  |              |         |   |      |   |         |      | 
|Net realized gains (losses) on sales of marketable securities |  | $            | (26,938 | ) |      | $ | 40,159  |      |  | $ | 1,653   |  
|Unrealized losses on securities sold short                    |  |              | (4,178  | ) |      |   | (18,807 | )    |  |   |        |  
|Unrealized gains (losses) on marketable securities            |  |              | 9,856   |   |      |   | (4,812  | )    |  |   |        |  
|Write-down of marketable equity and debt securities           |  |              |        |   |      |   |        |      |  |   | (19,759 | )
|Minority interest                                             |  |              | 13,822  |   |      |   | 2,074   |      |  |   | 2,721   |  
|Gain on sale or disposition of real estate                    |  |              | 176     |   |      |   | 5,262   |      |  |   | 7,121   |  
|Other                                                         |  |              | 11,021  |   |      |   | 6,740   |      |  |   | (140    | )
|                                                              |  |              |         |   |      |   |         |      | 
|                                                              |  | $            | 3,759   |   |      | $ | 30,616  |      |  | $ | (8,404  | )
|                                                              |  |              |         |   |      |   |         |      | 







Effective Income Tax Rate




68



---



##### Table of Contents





Liquidity and Capital Resources


Consolidated Financial
Results














69



---



##### Table of Contents





Cash Flows








Borrowings




|                                                                               |  |              |           |  |      |   |         | 
|------------------------------------------------------------------------------ |  | ------------ | --------- |  | ---- | - | ------- | 
|                                                                               |  | December 31, |          
|                                                                               |  |              |          
|                                                                               |  | 2005         |           |  | 2004 |  
|                                                                               |  |              |           |  |      |  
|Senior unsecured 7.125% notes due 2013  AREP,
    net of discount             |  | $            | 474,750   |  |      | $ |        | 
|Senior unsecured 8.125% notes due 2012  AREP,
    net of discount             |  |              | 344,726   |  |      |   | 343,425 | 
|Senior secured 7.85% notes due 2012  ACEP                                     |  |              | 215,000   |  |      |   | 215,000 | 
|Borrowings under credit facilities  NEG
    Oil & Gas                         |  |              | 300,000   |  |      |   | 51,834  | 
|Mortgages payable                                                              |  |              | 81,512    |  |      |   | 91,896  | 
|GBH Notes (see Note 16)                                                        |  |              |          |  |      |   | 43,741  | 
|Other                                                                          |  |              | 8,386     |  |      |   | 6,738   | 
|                                                                               |  |              |           |  |      |  
|Total long-term debt                                                           |  |              | 1,424,374 |  |      |   | 752,634 | 
|Less: current portion, including debt related to real estate
    held for sale |  |              | 24,155    |  |      |   | 76,679  | 
|                                                                               |  |              |           |  |      |  
|                                                                               |  | $            | 1,400,219 |  |      | $ | 675,955 | 
|                                                                               |  |              |           |  |      |  



| |                              
| | -----------------------------
| | Senior unsecured notes  AREP



| |                                       
| | --------------------------------------
| | Senior unsecured 7.125% notes due 2013

1 8


70



---



##### Table of Contents









| |                                       
| | --------------------------------------
| | Senior unsecured 8.125% notes due 2012

1 8 1 8






| |                                                             
| | ------------------------------------------------------------
| | Senior unsecured notes restrictions and covenants 
    AREP







71



---



##### Table of Contents









| |                                               
| | ----------------------------------------------
| | Senior secured 7.85% notes due
    2012  ACEP











| |                                            
| | -------------------------------------------
| | Borrowings under credit facilities  Mizuho

Co-Agents.




72



---



##### Table of Contents









| |                                                               
| | --------------------------------------------------------------
| | NEG Oil & Gas LLC Senior Secured Revolving Credit
    Facility













73



---



##### Table of Contents





| |                  
| | -----------------
| | Mortgages payable



|                                                               |  |              |         |   |      |   |         |  
|-------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                               |  | December 31, |        
|                                                               |  |              |        
|                                                               |  | 2005         |         |   | 2004 |  
|                                                               |  |              |         |   |      |  
|Total mortgages                                                |  | $            | 81,512  |   |      | $ | 91,896  |  
|Less current portion and mortgages on properties held for sale |  |              | (18,104 | ) |      |   | (31,177 | )
|                                                               |  |              |         |   |      |  
|                                                               |  | $            | 63,408  |   |      | $ | 60,719  |  
|                                                               |  |              |         |   |      |  



| |                        
| | -----------------------
| | Contractual Commitments



|                                         |       |        |      |       |       |   |       |       |  |   |         |       |  |       |       |         |  |   |       |         | 
|---------------------------------------- | ----- | ------ | ---- | ----- | ----- | - | ----- | ----- |  | - | ------- | ----- |  | ----- | ----- | ------- |  | - | ----- | ------- | 
|                                         |       | Less   |      |       |       |   |       |       |  |   |        
|                                         |       | Than   |      |       | 1-3   |   |       | 3-5   |  |   | After   |       |  |      
|                                         |       | 1 Year |      |       | Years |   |       | Years |  |   | 5 Years |       |  | Total |      
|                                         |       |        |      |       |       |   |       |       |  |   |         |       |  |       |      
|Senior unsecured 7.125% notes            |       | $      |     |       |       | $ |      |       |  | $ |        |       |  | $     | 480.0 |         |  | $ | 480.0 |        
|Senior unsecured 8.125% notes            |       |        |     |       |       |   |      |       |  |   |        |       |  |       | 353.0 |         |  |   | 353.0 |        
|Senior secured 7.85% notes               |       |        |     |       |       |   |      |       |  |   |        |       |  |       | 215.0 |         |  |   | 215.0 |        
|Senior debt interest                     |       |        | 79.8 |       |       |   | 164.0 |       |  |   | 159.5   |       |  |       | 185.5 |         |  |   | 588.8 |        
|Oil & Gas Credit facility                |       |        |     |       |       |   |      |       |  |   | 300.0   |       |  |       |      |         |  |   | 300.0 |        
|Interest on Oil & Gas Credit Facility    |       |        | 19.3 |       |       |   | 38.6  |       |  |   | 38.6    |       |  |       |      |         |  |   | 96.5  |        
|Derivative obligations                   |       |        | 68.0 |       |       |   | 17.9  |       |  |   |        |       |  |       |      |         |  |   | 85.9  |        
|Mortgages payable                        |       |        | 4.5  |       |       |   | 28.9  |       |  |   | 8.7     |       |  |       | 39.4  |         |  |   | 81.5  |        
|Lease obligations                        |       |        | 15.7 |       |       |   | 23.0  |       |  |   | 12.7    |       |  |       | 13.8  |         |  |   | 65.2  |        
|Construction and development obligations |       |        | 29.3 |       |       |   | 3.4   |       |  |   |        |       |  |       |      |         |  |   | 32.7  |        
|Other                                    |       |        | 43.8 |       |       |   | 11.4  |       |  |   | 6.4     |       |  |       |      |         |  |   | 61.6  |        
|                                         |       |        |      |       |       |   |       |       |  |   |         |       |  |       |      
|                                         | Total |        | $    | 260.4 |       |   | $     | 287.2 |  |   | $       | 525.9 |  |       | $     | 1,286.7 |  |   | $     | 2,360.2 | 
|                                         |       |        |      |       |       |   |       |       |  |   |         |       |  |       |      

Derivative Obligations






| |                        
| | -----------------------
| | Textile purchase orders





| |                                  
| | ---------------------------------
| | Obligations Related to Securities



74



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##### Table of Contents







| |                               
| | ------------------------------
| | Off Balance Sheet Arrangements



Discussion of Segment Liquidity and Capital Resources




| |          
| | ---------
| | Oil & Gas











| |                              
| | -----------------------------
| | NEG Oil & Gas Credit Facility





| |       
| | ------
| | Gaming



75



---



##### Table of Contents









3,000-seat








| |            
| | -----------
| | Real Estate







| |                          
| | -------------------------
| | Asset Sales and Purchases







| |             
| | ------------
| | Home Fashion



76



---



##### Table of Contents











| |              
| | -------------
| | Distributions





| |                                           
| | ------------------------------------------
| | Critical Accounting Policies and Estimates







| |                                                   
| | --------------------------------------------------
| | Accounting for the Impairment of Long-Lived Assets





Accounting for the Impairment
or


77



---



##### Table of Contents



Disposal of Long-lived Assets




| |                                           
| | ------------------------------------------
| | Commitments and Contingencies  Litigation





| |                               
| | ------------------------------
| | Oil and Natural Gas Properties

units-of






| |                                            
| | -------------------------------------------
| | Accounting for Asset Retirement Obligations

Accounting for Asset Retirement Obligations


Income Taxes






78



---



##### Table of Contents









| |                           
| | --------------------------
| | Forward Looking Statements

104-67.




Certain Trends and Uncertainties


10-K.







|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk.





| |                   
| | ------------------
| | Interest Rate Risk







79



---



##### Table of Contents





| |                  
| | -----------------
| | Equity Price Risk







| |                     
| | --------------------
| | Commodity Price Risk







Revenue Recognition  Oil and Natural Gas
Properties 10-K.




80



---



##### Table of Contents





|                                                                      |  |                  |                |  |                  |  |               |       |  |  |         |  |  |  |       | 
|--------------------------------------------------------------------- |  | ---------------- | -------------- |  | ---------------- |  | ------------- | ----- |  |  | ------- |  |  |  | ----- | 
|Type of Contract                                                      |  | Production Month |                |  | Volume per Month |  |               | Floor |  |  | Ceiling | 
|                                                                      |  |                  |                |  |                  |  |               |       |  |  |         | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 31,000 Bbls   |       |  |  | 41.65   |  |  |  | 45.25 | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 16,000 Bbls   |       |  |  | 41.75   |  |  |  | 45.40 | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 540,000 MMBTU |       |  |  | 6.00    |  |  |  | 7.25  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 120,000 MMBTU |       |  |  | 6.00    |  |  |  | 7.28  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 500,000 MMBTU |       |  |  | 4.50    |  |  |  | 5.00  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 500,000 MMBTU |       |  |  | 4.50    |  |  |  | 5.00  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 46,000 Bbls   |       |  |  | 60.00   |  |  |  | 68.50 | 
|(We participate in a second ceiling at $84.50 on the
    46,000 Bbls) |  |                  |                |  |                  |  |               |       |  |  |         |  |  |  |       | 
|No cost collars                                                       |  |                  | Jan  Dec 2007 |  |                  |  | 30,000 Bbls   |       |  |  | 57.00   |  |  |  | 70.50 | 
|No cost collars                                                       |  |                  | Jan  Dec 2007 |  |                  |  | 30,000 Bbls   |       |  |  | 57.50   |  |  |  | 72.00 | 
|No cost collars                                                       |  |                  | Jan  Dec 2007 |  |                  |  | 930,000 MMBTU |       |  |  | 8.00    |  |  |  | 10.23 | 
|No cost collars                                                       |  |                  | Jan  Dec 2008 |  |                  |  | 46,000 Bbls   |       |  |  | 55.00   |  |  |  | 69.00 | 
|No cost collars                                                       |  |                  | Jan  Dec 2008 |  |                  |  | 750,000 MMBTU |       |  |  | 7.00    |  |  |  | 10.35 | 



|                                  |  |                          |          |   |      |   |         |      |  |   |         |  
|--------------------------------- |  | ------------------------ | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                  |  | Years Ended December 31, |         
|                                  |  |                          |         
|                                  |  | 2005                     |          |   | 2004 |   |         | 2003 | 
|                                  |  |                          |          |   |      |   |         |      | 
|Realized loss (net cash payments) |  | $                        | (51,263  | ) |      | $ | (16,625 | )    |  | $ | (8,309  | )
|Unrealized loss                   |  |                          | (69,254  | ) |      |   | (9,179  | )    |  |   | (2,614  | )
|                                  |  |                          |          |   |      |   |         |      | 
|                                  |  | $                        | (120,517 | ) |      | $ | (25,804 | )    |  | $ | (10,923 | )
|                                  |  |                          |          |   |      |   |         |      | 

81



---



##### Table of Contents








|        |                                             
|------- | --------------------------------------------
|Item 8. | Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












Internal Control 
Integrated Framework




| |                       
| | ----------------------
| | /s/ GRANT THORNTON LLP







82



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |             
| | ------------
| | /s/ KPMG LLP





83



---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |             
| | ------------
| | /s/ KPMG LLP





84



---



##### Table of Contents



AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP AND
SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


DECEMBER 31, 2005 AND 2004


|                                        |                                           |                                          |           |           |           |  |         |           |           | 
|--------------------------------------- | ----------------------------------------- | ---------------------------------------- | --------- | --------- | --------- |  | ------- | --------- | --------- | 
|                                        |                                           | December 31,                             |          
|                                        |                                           |                                          |          
|                                        |                                           | 2005                                     |           |           | 2004      | 
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | (In $000s except per                     |          
|                                        |                                           | unit amounts)                            |          
|ASSETS                                 
|Current assets:                         |                                           |                                          |           |           |           |  |         |          
|                                        | Cash and cash equivalents                 |                                          | $         | 575,348   |           |  | $       | 806,182   |          
|                                        | Investments                               |                                          |           | 820,699   |           |  |         | 99,088    |          
|                                        | Inventories, net                          |                                          |           | 244,239   |           |  |         |          |          
|                                        | Trade, notes and other receivables, net   |                                          |           | 255,014   |           |  |         | 107,097   |          
|                                        | Other current assets                      |                                          |           | 287,984   |           |  |         | 209,418   |          
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total current assets                     |           |           | 2,183,284 |  |         |           | 1,221,785 | 
|                                        |                                           |                                          |           |           |           | 
|Property, plant and equipment, net:     |                                           |                                          |           |           |           |  |         |          
|                                        | Oil & Gas                                 |                                          |           | 742,459   |           |  |         | 527,384   |          
|                                        | Gaming                                    |                                          |           | 441,059   |           |  |         | 445,400   |          
|                                        | Real Estate                               |                                          |           | 285,694   |           |  |         | 291,068   |          
|                                        | Home Fashion                              |                                          |           | 166,026   |           |  |         |          |          
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total property, plant and equipment, net |           |           | 1,635,238 |  |         |           | 1,263,852 | 
|                                        |                                           |                                          |           |           |           | 
|Investments                             |                                           |                                          | 13,714    |           |           |  | 251,439 |          
|Intangible assets                       |                                           |                                          | 23,402    |           |           |  |        |          
|Other assets                            |                                           |                                          | 115,499   |           |           |  | 132,603 |          
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total assets                             |           | $         | 3,971,137 |  |         | $         | 2,869,679 | 
|                                        |                                           |                                          |           |           |           | 
|                                       
|LIABILITIES AND PARTNERS EQUITY       
|Current liabilities:                    |                                           |                                          |           |           |           |  |         |          
|                                        | Accounts payable                          |                                          | $         | 93,810    |           |  | $       | 90,690    |          
|                                        | Accrued expenses                          |                                          |           | 225,690   |           |  |         | 60,967    |          
|                                        | Current portion of long-term debt         |                                          |           | 24,155    |           |  |         | 76,679    |          
|                                        | Securities sold not yet purchased         |                                          |           | 75,883    |           |  |         | 90,674    |          
|                                        | Margin liability on marketable securities |                                          |           | 131,061   |           |  |         |          |          
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total current liabilities                |           |           | 550,599   |  |         |           | 319,010   | 
|                                        |                                           |                                          |           |           |           | 
|Long-term debt                          |                                           |                                          | 1,400,219 |           |           |  | 675,955 |          
|Other non-current liabilities           |                                           |                                          | 89,085    |           |           |  | 92,789  |          
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total long-term liabilities              |           |           | 1,489,304 |  |         |           | 768,744   | 
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total liabilities                        |           |           | 2,039,903 |  |         |           | 1,087,754 | 
|                                        |                                           |                                          |           |           |           | 
|Minority interests                      |                                           |                                          | 304,599   |           |           |  | 17,740  |          
|                                        |                                           |                                          |           |           |           | 
|Commitments and contingencies (Note 22) |                                           |                                          |           |           |           |  |         |          
|Partners equity                        |                                           |                                          |           |           |           |  |         |          
|                                        | Limited partner                           |                                          |           | 1,610,369 |           |  |         | 1,746,543 |          
|                                        | General partner                           |                                          |           | 16,266    |           |  |         | 17,642    |          
|                                        |                                           |                                          |           |           |           | 
|                                        | Partners equity                          |                                          |           | 1,626,635 |           |  |         | 1,764,185 |          
|                                        |                                           |                                          |           |           |           | 
|                                        |                                           | Total liabilities and partners equity   |           | $         | 3,971,137 |  |         | $         | 2,869,679 | 
|                                        |                                           |                                          |           |           |           | 



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AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


|                                                              |                                              |                                  |           |         |      |   |         |         |   |   |         |         |  
|------------------------------------------------------------- | -------------------------------------------- | -------------------------------- | --------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                              |                                              | Years Ended December 31,         |          
|                                                              |                                              |                                  |          
|                                                              |                                              | 2005                             |           |         | 2004 |   |         | 2003    |  
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|                                                              |                                              | (In $000s, except per unit data) |          
|Revenues:                                                     |                                              |                                  |           |         |      |   |         |         |   |   |         |        
|                                                              | Oil & Gas                                    |                                  | $         | 198,854 |      |   | $       | 137,988 |   |   | $       | 99,909  |  
|                                                              | Gaming                                       |                                  |           | 490,321 |      |   |         | 470,836 |   |   |         | 430,369 |  
|                                                              | Real Estate                                  |                                  |           | 100,637 |      |   |         | 61,452  |   |   |         | 46,567  |  
|                                                              | Home Fashion                                 |                                  |           | 472,681 |      |   |         |        |   |   |         |        |  
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|                                                              |                                              |                                  | 1,262,493 |         |      |   | 670,276 |         |   |   | 576,845 |        
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Expenses:                                                     |                                              |                                  |           |         |      |   |         |         |   |   |         |        
|                                                              | Oil & Gas                                    |                                  |           | 161,333 |      |   |         | 104,935 |   |   |         | 69,569  |  
|                                                              | Gaming                                       |                                  |           | 430,142 |      |   |         | 419,601 |   |   |         | 407,567 |  
|                                                              | Real Estate                                  |                                  |           | 79,291  |      |   |         | 46,644  |   |   |         | 28,860  |  
|                                                              | Home Fashion                                 |                                  |           | 495,110 |      |   |         |        |   |   |         |        |  
|                                                              | Holding Company                              |                                  |           | 14,435  |      |   |         | 6,019   |   |   |         | 4,720   |  
|                                                              | Acquisition costs                            |                                  |           | 4,664   |      |   |         | 414     |   |   |         |        |  
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|                                                              |                                              |                                  | 1,184,975 |         |      |   | 577,613 |         |   |   | 510,716 |        
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Operating income                                              |                                              |                                  | 77,518    |         |      |   | 92,663  |         |   |   | 66,129  |        
|Other income (expense), net:                                  |                                              |                                  |           |         |      |   |         |         |   |   |         |        
|                                                              | Interest expense                             |                                  |           | (98,257 | )    |   |         | (57,072 | ) |   |         | (36,416 | )
|                                                              | Interest income                              |                                  |           | 45,888  |      |   |         | 45,241  |   |   |         | 23,806  |  
|                                                              | Impairment charges on GB Holdings, Inc.      |                                  |           | (52,366 | )    |   |         | (15,600 | ) |   |         |        |  
|                                                              | Other income (expense), net                  |                                  |           | 3,759   |      |   |         | 30,616  |   |   |         | (8,404  | )
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Income (loss) from continuing operations before income taxes  |                                              |                                  | (23,458   | )       |      |   | 95,848  |         |   |   | 45,115  |        
|                                                              | Income tax (expense) benefit                 |                                  |           | (21,092 | )    |   |         | (18,312 | ) |   |         | 15,792  |  
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Income (loss) from continuing operations                      |                                              |                                  | (44,550   | )       |      |   | 77,536  |         |   |   | 60,907  |        
|Discontinued operations:                                      |                                              |                                  |           |         |      |   |         |         |   |   |         |        
|                                                              | Income from discontinued operations          |                                  |           | 1,413   |      |   |         | 6,132   |   |   |         | 6,609   |  
|                                                              | Gain on sales and disposition of real estate |                                  |           | 21,849  |      |   |         | 75,197  |   |   |         | 3,353   |  
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Income from discontinued operations                           |                                              |                                  | 23,262    |         |      |   | 81,329  |         |   |   | 9,962   |        
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Earnings (loss) before cumulative effect of accounting change |                                              |                                  | (21,288   | )       |      |   | 158,865 |         |   |   | 70,869  |        
|Cumulative effect of accounting change                        |                                              |                                  |          |         |      |   |        |         |   |   | 1,912   |        
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Net earnings (loss)                                           |                                              | $                                | (21,288   | )       |      | $ | 158,865 |         |   | $ | 72,781  |        
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|Net earnings (loss) attributable to:                          |                                              |                                  |           |         |      |   |         |         |   |   |         |        
|                                                              | Limited partner                              |                                  | $         | (21,075 | )    |   | $       | 157,276 |   |   | $       | 72,053  |  
|                                                              | General partner                              |                                  |           | (213    | )    |   |         | 1,589   |   |   |         | 728     |  
|                                                              |                                              |                                  |           |         |      |   |         |         |  
|                                                              |                                              | $                                | (21,288   | )       |      | $ | 158,865 |         |   | $ | 72,781  |        
|                                                              |                                              |                                  |           |         |      |   |         |         |  



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AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS


EQUITY AND COMPREHENSIVE INCOME (LOSS)


YEARS ENDED DECEMBER 31, 2005, 2004 and 2003


|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |   |   |           |          |  
|------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | --------- | ------ | ------ | --------- | - | --------- | --------- | - | - | --------- | -------- | -
|                                                                                                                    |                                                                        | General   |        |        | Limited   |   |           | Total     |  
|                                                                                                                    |                                                                        | Partners |        |        | Partners |   |           | Partners |  
|                                                                                                                    |                                                                        | Equity    |        |        | Equity    |   |           | Equity    |  
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|Balance, December 31, 2002                                                                                          |                                                                        | $         | 14,029 |        |           | $ | 1,388,895 |           |   | $ | 1,402,924 |         
|Comprehensive income:                                                                                               |                                                                        |           |        |        |           |   |           |           |   |   |           |         
|                                                                                                                    | Net earnings                                                           |           |        | 728    |           |   |           | 72,053    |   |   |           | 72,781   |  
|                                                                                                                    | Reclassification of unrealized loss on sale of debt securities         |           |        | 8      |           |   |           | 753       |   |   |           | 761      |  
|                                                                                                                    | Net unrealized gains on securities available for sale                  |           |        | 92     |           |   |           | 9,082     |   |   |           | 9,174    |  
|                                                                                                                    | Sale of marketable equity securities available for sale                |           |        | (3     | )         |   |           | (277      | ) |   |           | (280     | )
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|                                                                                                                    | Comprehensive income                                                   |           |        | 825    |           |   |           | 81,611    |   |   |           | 82,436   |  
|Change in deferred tax asset valuation allowance related to
    book-tax differences existing at time of bankruptcy |                                                                        |           | 471    |        |           |   | 46,634    |           |   |   | 47,105    |         
|Capital distributions                                                                                               |                                                                        |           | (28    | )      |           |   | (2,780    | )         |   |   | (2,808    | )       
|Loss on change in reporting entity                                                                                  |                                                                        |           | (12    | )      |           |   | (1,184    | )         |   |   | (1,196    | )       
|                                                                                                                    | Net adjustment for TransTexas acquisition                              |           |        | 1,162  |           |   |           | 115,092   |   |   |           | 116,254  |  
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|Balance, December 31, 2003                                                                                          |                                                                        |           | 16,447 |        |           |   | 1,628,268 |           |   |   | 1,644,715 |         
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|Comprehensive income:                                                                                               |                                                                        |           |        |        |           |   |           |           |   |   |           |         
|                                                                                                                    | Net earnings                                                           |           |        | 1,589  |           |   |           | 157,276   |   |   |           | 158,865  |  
|                                                                                                                    | Reclassification of unrealized gains on marketable securities
    sold |           |        | (96    | )         |   |           | (9,472    | ) |   |           | (9,568   | )
|                                                                                                                    | Net unrealized gains on securities available for sale                  |           |        |       |           |   |           | 33        |   |   |           | 33       |  
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|                                                                                                                    | Comprehensive income                                                   |           |        | 1,493  |           |   |           | 147,837   |   |   |           | 149,330  |  
|Capital distribution from American Casino                                                                           |                                                                        |           | (179   | )      |           |   | (17,737   | )         |   |   | (17,916   | )       
|Capital contribution to American Casino                                                                             |                                                                        |           | 228    |        |           |   | 22,572    |           |   |   | 22,800    |         
|Arizona Charlies acquisition                                                                                        |                                                                        |           | (1,259 | )      |           |   | (124,641  | )         |   |   | (125,900  | )       
|Change in deferred tax asset related to acquisition of Arizona
    Charlies                                         |                                                                        |           | 25     |        |           |   | 2,465     |           |   |   | 2,490     |         
|Net adjustment for Panaco acquisition                                                                               |                                                                        |           | 916    |        |           |   | 90,645    |           |   |   | 91,561    |         
|Distribution to General Partner                                                                                     |                                                                        |           | (19    | )      |           |   | (1,900    | )         |   |   | (1,919    | )       
|Loss on change in reporting entity                                                                                  |                                                                        |           | (10    | )      |           |   | (966      | )         |   |   | (976      | )       
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|Balance, December 31, 2004                                                                                          |                                                                        |           | 17,642 |        |           |   | 1,746,543 |           |   |   | 1,764,185 |         
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|Comprehensive income:                                                                                               |                                                                        |           |        |        |           |   |           |           |   |   |           |         
|                                                                                                                    | Net loss                                                               |           |        | (213   | )         |   |           | (21,075   | ) |   |           | (21,288  | )
|                                                                                                                    | Net unrealized gains on securities available for sale                  |           |        | 2      |           |   |           | 228       |   |   |           | 230      |  
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|                                                                                                                    | Comprehensive loss                                                     |           |        | (211   | )         |   |           | (20,847   | ) |   |           | (21,058  | )
|                                                                                                                    | Capital contributions                                                  |           |        | 93     |           |   |           | 9,186     |   |   |           | 9,279    |  
|                                                                                                                    | Partnership distributions                                              |           |        | (126   | )         |   |           | (12,496   | ) |   |           | (12,622  | )
|                                                                                                                    | AREP Oil & Gas acquisitions                                            |           |        | (1,717 | )         |   |           | (170,025  | ) |   |           | (171,742 | )
|GBH/ Atlantic Coast Entertainment Holdings acquisitions                                                             |                                                                        |           | 582    |        |           |   | 57,667    |           |   |   | 58,249    |         
|Change in reporting entity and other                                                                                |                                                                        |           | 24     |        |           |   | 2,426     |           |   |   | 2,450     |         
|CEO LP Unit Options                                                                                                 |                                                                        |           | 5      |        |           |   | 487       |           |   |   | 492       |         
|Return of capital to GB Holdings, Inc.                                                                              |                                                                        |           | (26    | )      |           |   | (2,572    | )         |   |   | (2,598    | )       
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  
|Balance, December 31, 2005                                                                                          |                                                                        | $         | 16,266 |        |           | $ | 1,610,369 |           |   | $ | 1,626,635 |         
|                                                                                                                    |                                                                        |           |        |        |           |   |           |           |  





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AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |         |          |          |          |         |         |         | 
|---------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------- | ------- | ---------- | -------- | ------- | -------- | -------- | -------- | ------- | ------- | ------- | 
|                                         |                                                                                          | Years Ended December 31,                           |                                                                                    
|                                         |                                                                                          |                                                    |                                                                                    
|                                         |                                                                                          | 2005                                               |                                                                                     |                                                            | 2004    |         |            | 2003     |        
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          | (In $000s)                                         |                                                                                    
|Cash flows from operating activities:    |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |         |          |          |         
|                                         | Income (loss) from continuing operations                                                 |                                                    | $                                                                                   | (44,550                                                    | )       |         | $          | 77,536   |         |          | $        | 60,907   |        
|                                         | Adjustments to reconcile net earnings to net cash provided by
    operating activities:  |                                                    |                                                                                     |                                                            |         |         |            |          |         |          |          |          |        
|                                         |                                                                                          | Depreciation, depletion and amortization           |                                                                                     |                                                            | 156,434 |         |            |          | 105,114 |          |          |          | 78,401  |        
|                                         |                                                                                          | Investment (gains) losses                          |                                                                                     |                                                            | 21,260  |         |            |          | (16,540 | )        |          |          | (2,607  | )      
|                                         |                                                                                          | Change in fair market value of derivative contract |                                                                                     |                                                            | 69,254  |         |            |          | 9,179   |          |          |          | 2,614   |        
|                                         |                                                                                          | Impairment loss on investment in GB Holdings, Inc. |                                                                                     |                                                            | 52,366  |         |            |          | 15,600  |          |          |          |        |        
|                                         |                                                                                          | Minority interest                                  |                                                                                     |                                                            | (13,822 | )       |            |          | (2,074  | )        |          |          | (2,721  | )      
|                                         |                                                                                          | Deferred income tax (expense) benefit              |                                                                                     |                                                            | 10,130  |         |            |          | 14,297  |          |          |          | (22,256 | )      
|                                         |                                                                                          | Net proceeds from sales of trading securities      |                                                                                     |                                                            | 28,560  |         |            |          |        |          |          |          |        |        
|                                         |                                                                                          | Changes in operating assets and liabilities:       |                                                                                     |                                                            |         |         |            |          |         |          |          |          |         |        
|                                         |                                                                                          |                                                    | Increase in trade notes and other receivables                                       |                                                            |         | (821    | )          |          |         | (16,442  | )        |          |         | (870    | )      
|                                         |                                                                                          |                                                    | Decrease (increase) in other assets                                                 |                                                            |         | (18,725 | )          |          |         | (123,001 | )        |          |         |        |        
|                                         |                                                                                          |                                                    | Decrease (increase) in inventory                                                    |                                                            |         | 17,880  |            |          |         |         |          |          |         |        |        
|                                         |                                                                                          |                                                    | Increase (decrease) in accounts payable, accrued expenses and
    other liabilities |                                                            |         | (60,092 | )          |          |         | 101,848  |          |          |         | (42,001 | )      
|                                         |                                                                                          | Other                                              |                                                                                     |                                                            | (1,378  | )       |            |          | (9,597  | )        |          |          | 262     |        
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          |                                                    |                                                                                     | Net cash provided by continuing operations                 |         |         | 216,496    |          |         |          | 155,920  |          |         |         | 71,729  | 
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          | Income from discontinued operations                |                                                                                     |                                                            | 23,262  |         |            |          | 81,329  |          |          |          | 9,962   |        
|                                         |                                                                                          |                                                    | Depreciation and amortization                                                       |                                                            |         | 250     |            |          |         | 1,319    |          |          |         | 5,108   |        
|                                         |                                                                                          |                                                    | Net gain from property transactions                                                 |                                                            |         | (21,849 | )          |          |         | (75,197  | )        |          |         | (3,353  | )      
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          |                                                    |                                                                                     | Net cash provided by discontinued operations               |         |         | 1,663      |          |         |          | 7,451    |          |         |         | 11,717  | 
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          |                                                    |                                                                                     | Net cash provided by operating activities                  |         |         | 218,159    |          |         |          | 163,371  |          |         |         | 83,446  | 
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|Cash flows from investing activities:    |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |         |          |          |         
|                                         | Capital expenditures                                                                     |                                                    |                                                                                     | (362,689                                                   | )       |         |            | (241,752 | )       |          |          | (82,966  | )      
|                                         | Purchases of marketable equity and debt securities included in
    investments           |                                                    |                                                                                     | (766,933                                                   | )       |         |            | (285,923 | )       |          |          | (73,631  | )      
|                                         | Proceeds from sales of marketable equity and debt securities
    included in investments |                                                    |                                                                                     | 197,653                                                    |         |         |            | 93,556   |         |          |          | 278,321  |        
|                                         | Net proceeds from the sales and disposition of real estate                               |                                                    |                                                                                     | 8,414                                                      |         |         |            | 43,590   |         |          |          | 15,828   |        
|                                         | Repayment of mezzanine loans included in investments                                     |                                                    |                                                                                     |                                                           |         |         |            | 49,130   |         |          |          | 12,200   |        
|                                         | Purchase (decrease) of debt securities of affiliates                                     |                                                    |                                                                                     |                                                           |         |         |            | (101,500 | )       |          |          |         |        
|                                         | Repayment of related party note                                                          |                                                    |                                                                                     |                                                           |         |         |            |         |         |          |          | 250,000  |        
|                                         | Acquisitions of businesses, net of cash acquired                                         |                                                    |                                                                                     | (293,649                                                   | )       |         |            | (125,900 | )       |          |          | (148,101 | )      
|                                         | Cash related to combination of entities accounted for as a
    pooling of interest       |                                                    |                                                                                     |                                                           |         |         |            | 23,753   |         |          |          | 15,312   |        
|                                         | Other                                                                                    |                                                    |                                                                                     | 10,934                                                     |         |         |            | 1,872    |         |          |          | 4,198    |        
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          |                                                    |                                                                                     | Net cash (used in) provided by investing activities        |         |         | (1,206,270 | )        |         |          | (543,174 | )        |         |         | 271,161 | 
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|Cash flows from discontinued operations: |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |         |          |          |         
|                                         |                                                                                          |                                                    |                                                                                     | Net proceeds from the sales and disposition of real estate |         |         | 53,404     |          |         |          | 201,834  |          |         |         | 5,336   | 
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          |                                                    |                                                                                     | Net cash (used in) provided by investing activities        |         |         | (1,152,866 | )        |         |          | (341,340 | )        |         |         | 276,497 | 
|                                         |                                                                                          |                                                    |                                                                                     |                                                            |         |         |            |          |        
|                                         |                                                                                          | (continued on next page)                          

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##### Table of Contents



AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Continued)


YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003


|                                                               |                                                           |                                               |                                           |         |          |         |         |         |         |         |         |        |         |        | 
|-------------------------------------------------------------- | --------------------------------------------------------- | --------------------------------------------- | ----------------------------------------- | ------- | -------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------ | 
|                                                               |                                                           | Years Ended December 31,                      |                                          
|                                                               |                                                           |                                               |                                          
|                                                               |                                                           | 2005                                          |                                           |         | 2004     |         |         | 2003    |        
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|                                                               |                                                           | (In $000s)                                    |                                          
|Cash flows from financing activities:                          |                                                           |                                               |                                           |         |          |         |         |         |         |         |         |       
|                                                               | Partners equity:                                         |                                               |                                           |         |          |         |         |         |         |         |         |        |        
|                                                               |                                                           | Distribution to partners                      |                                           |         | (12,622  | )       |         |         | (17,916 | )       |         |        |        |       
|                                                               |                                                           | Partners contribution                        |                                           |         | 9,279    |         |         |         | 22,800  |         |         |        |        |       
|                                                               | Debt:                                                     |                                               |                                           |         |          |         |         |         |         |         |         |        |        
|                                                               |                                                           | Proceeds from credit facilities               |                                           |         | 382,648  |         |         |         | 8,000   |         |         |        | 99,405  |       
|                                                               |                                                           | Repayment of credit facilities                |                                           |         | (130,609 | )       |         |         |        |         |         |        | (3,994  | )     
|                                                               |                                                           | Proceeds from senior notes payable            |                                           |         | 474,000  |         |         |         | 557,594 |         |         |        |        |       
|                                                               |                                                           | Increase (decrease) in due to affiliates      |                                           |         | 7,079    |         |         |         | (16,468 | )       |         |        |        |       
|                                                               |                                                           | Proceeds from mortgages payable               |                                           |         | 4,425    |         |         |         | 10,000  |         |         |        | 20,000  |       
|                                                               |                                                           | Mortgages paid upon disposition of properties |                                           |         | (5,675   | )       |         |         | (26,800 | )       |         |        | (3,837  | )     
|                                                               |                                                           | Periodic principal payments                   |                                           |         | (3,941   | )       |         |         | (14,692 | )       |         |        | (61,998 | )     
|                                                               |                                                           | Debt issuance costs                           |                                           |         | (13,618  | )       |         |         | (25,177 | )       |         |        | (952    | )     
|                                                               |                                                           | Other                                         |                                           |         | (165     | )       |         |         | 755     |         |         |        |        |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|                                                               |                                                           |                                               | Net cash provided by financing activities |         |          | 710,801 |         |         |         | 498,096 |         |        |         | 48,624 | 
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Cash flows from discontinued operations:                       |                                                           |                                               |                                           |         |          |         |         |         |         |         |         |       
|                                                               | Mortgages paid upon disposition of properties             |                                               |                                           | (6,928  | )        |         |         | (67,045 | )       |         |         | (538   | )      
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|                                                               |                                                           |                                               | Net cash provided by financing activities |         |          | 703,873 |         |         |         | 431,051 |         |        |         | 48,086 | 
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Net increase (decrease) in cash and cash equivalents           |                                                           |                                               | (230,834                                  | )       |          |         | 253,082 |         |         |         | 408,029 |       
|Cash and cash equivalents, beginning of year                   |                                                           |                                               | 806,182                                   |         |          |         | 553,100 |         |         |         | 145,071 |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Cash and cash equivalents, end of year                         |                                                           | $                                             | 575,348                                   |         |          | $       | 806,182 |         |         | $       | 553,100 |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Supplemental information:                                      |                                                           |                                               |                                           |         |          |         |         |         |         |         |         |       
|                                                               | Cash payments for interest, net of amounts capitalized    |                                               | $                                         | 77,745  |          |         | $       | 60,472  |         |         | $       | 78,890 |        
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|                                                               | Cash payments for income taxes, net of refunds            |                                               | $                                         | 10,194  |          |         | $       | 2,912   |         |         | $       | 609    |        
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|                                                               | Conversion of bonds in connection with acquisition of WPI |                                               | $                                         | 205,850 |          |         | $       |        |         |         | $       |       |        
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Net unrealized gains (losses) on securities available for sale |                                                           | $                                             | 230                                       |         |          | $       | 33      |         |         | $       | 9,174   |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Debt conversion re Atlantic Coast                              |                                                           | $                                             | 29,500                                    |         |          | $       |        |         |         | $       |        |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Contribution of note from NEG Holding LLC                      |                                                           | $                                             |                                          |         |          | $       |        |         |         | $       | 10,940  |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        
|Change in tax asset related to acquisition                     |                                                           | $                                             | 7,329                                     |         |          | $       | 2,490   |         |         | $       |        |       
|                                                               |                                                           |                                               |                                           |         |          |         |         |         |        





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AMERICAN REAL ESTATE HOLDINGS LIMITED PARTNERSHIP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND
SUBSIDIARIES


DECEMBER 2005, 2004 AND 2003




|   |                                                  
|-- | -------------------------------------------------
|1. | Description Of Business And Basis Of Presentation











| |                           
| | --------------------------
| | Change in Reporting Entity

8-K




| |                        
| | -----------------------
| | Discontinued Operations





| |                                                    
| | ---------------------------------------------------
| | Acquisition of the Assets of WestPoint Stevens Inc.





90



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| |                              
| | -----------------------------
| | Filing Status of Subsidiaries





|   |                                           
|-- | ------------------------------------------
|2. | Summary Of Significant Accounting Policies





| |                            
| | ---------------------------
| | Principles of Consolidation

78-9, Accounting for Investments in Real Estate Ventures 04-05, Investors Accounting for an Investment in a Limited
Partnership when the Investor is the Sole General Partner and
the Limited Partners have Certain Rights






Consolidation of Variable
Interest Entities




| |                                                            
| | -----------------------------------------------------------
| | Use of Estimates in Preparation of Financial
    Statements



91



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| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                
| | ---------------
| | Restricted Cash





| |            
| | -----------
| | Investments







| |                    
| | -------------------
| | Accounts Receivable





| |            
| | -----------
| | Inventories

(first-in,




|                 |  |              |         |  |           |   |         | 
|---------------- |  | ------------ | ------- |  | --------- | - | ------- | 
|                 |  | December 31, |         |  | August 8, |  
|                 |  | 2005         |         |  | 2005      |  
|                 |  |              |         |  |           |  
|Raw materials    |  | $            | 33,083  |  |           | $ | 35,740  | 
|Goods in process |  |              | 100,337 |  |           |   | 114,448 | 
|Finished goods   |  |              | 110,819 |  |           |   | 111,931 | 
|                 |  |              |         |  |           |  
|                 |  | $            | 244,239 |  |           | $ | 262,119 | 
|                 |  |              |         |  |           |  

92



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

construction-in










| |                  
| | -----------------
| | Intangible Assets

Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible Assets,




| |                                                   
| | --------------------------------------------------
| | Accounting for the Impairment of Long-Lived Assets







| |                                            
| | -------------------------------------------
| | Accounting for Asset Retirement Obligations

Accounting for Asset Retirement
Obligations


93



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| |       
| | ------
| | Leases

Accounting for Leases




| |                               
| | ------------------------------
| | Oil and Natural Gas Properties

units-of










| |            
| | -----------
| | Derivatives

Accounting for Derivative Instruments and Hedging
Activities


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Accounting for Certain
Derivative Instruments and Certain Hedging Activities




| |                                
| | -------------------------------
| | Revenue and Expense Recognition

Home Fashion




Gaming




Oil and Gas




Real Estate Accounting for Sales of Real Estate




| |             
| | ------------
| | Income Taxes



95



---



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| |                         
| | ------------------------
| | Share-Based Compensation

Share-Based Payment






| |                  
| | -----------------
| | Reclassifications





| |                               
| | ------------------------------
| | Recently Issued Pronouncements

Accounting Changes and Error Corrections Accounting Changes Reporting
Accounting Changes in Interim Financial Statements 
An Amendment of APB Opinion No. 28


Inventory Costs  An Amendment of ARB No. 43,
Chapter 4


78-9-1, Interaction of AICPA Statement of
Position 78-9 and
EIFT No. 04-5


96



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115-1 124-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments 115-1 124-1). 115-1 124-1 115-1 124-1 115-1 124-1


Accounting for Certain Hybrid Instruments- an
amendment of FASB Statements No. 133 and 140.




|   |                           
|-- | --------------------------
|3. | Related Party Transactions











| |                  
| | -----------------
| | Oil & Gas Segment





97



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| |               
| | --------------
| | Gaming Segment



| |                     
| | --------------------
| | Las Vegas Properties





| |                       
| | ----------------------
| | Atlantic City Property











98



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99



---



##### Table of Contents





















100



---



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|   |          
|-- | ---------
|4. | Oil & Gas





|                                         |  |              |         |  |      |   |         | 
|---------------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                         |  | December 31, |        
|                                         |  |              |        
|                                         |  | 2005         |         |  | 2004 |  
|                                         |  |              |         |  |      |  
|Current assets                           |  | $            | 172,188 |  |      | $ | 81,748  | 
|Oil and gas properties, full cost method |  |              | 742,459 |  |      |   | 527,384 | 
|Other noncurrent assets                  |  |              | 43,648  |  |      |   | 40,492  | 
|                                         |  |              |         |  |      |  
|Total assets                             |  | $            | 958,295 |  |      | $ | 649,624 | 
|                                         |  |              |         |  |      |  
|Current liabilities                      |  | $            | 103,726 |  |      | $ | 48,832  | 
|Noncurrent liabilities                   |  |              | 360,479 |  |      |   | 123,651 | 
|                                         |  |              |         |  |      |  
|Total liabilities                        |  | $            | 464,205 |  |      | $ | 172,483 | 
|                                         |  |              |         |  |      |  

101



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|                              |                                          |                          |         |         |      |   |         |         |  |   |         |        | 
|----------------------------- | ---------------------------------------- | ------------------------ | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------ | 
|                              |                                          | Years Ended December 31, |        
|                              |                                          |                          |        
|                              |                                          | 2005                     |         |         | 2004 |   |         | 2003    | 
|                              |                                          |                          |         |         |      |   |         |         | 
|Gross oil and gas revenues:   |                                          | $                        | 312,661 |         |      | $ | 161,055 |         |  | $ | 108,713 |       
|Realized derivatives losses   |                                          |                          | (51,263 | )       |      |   | (16,625 | )       |  |   | (8,309  | )     
|Unrealized derivatives losses |                                          |                          | (69,254 | )       |      |   | (9,179  | )       |  |   | (2,614  | )     
|                              |                                          |                          |         |         |      |   |         |         | 
|                              | Oil and gas revenues                     |                          |         | 192,144 |      |   |         | 135,251 |  |   |         | 97,790 | 
|Plant revenues                |                                          |                          | 6,710   |         |      |   | 2,737   |         |  |   | 2,119   |       
|                              |                                          |                          |         |         |      |   |         |         | 
|                              | Total revenues                           |                          |         | 198,854 |      |   |         | 137,988 |  |   |         | 99,909 | 
|                              |                                          |                          |         |         |      |   |         |         | 
|Cost and expenses:            |                                          |                          |         |         |      |   |         |         |  |   |         |       
|                              | Total oil and gas operating expenses     |                          |         | 54,800  |      |   |         | 31,075  |  |   |         | 22,345 | 
|                              | Depreciation, depletion and amortization |                          |         | 91,100  |      |   |         | 60,123  |  |   |         | 39,455 | 
|                              | General and administrative expenses      |                          |         | 15,433  |      |   |         | 13,737  |  |   |         | 7,769  | 
|                              |                                          |                          |         |         |      |   |         |         | 
|                              |                                          |                          | 161,333 |         |      |   | 104,935 |         |  |   | 69,569  |       
|                              |                                          |                          |         |         |      |   |         |         | 
|                              | Operating income                         |                          | $       | 37,521  |      |   | $       | 33,053  |  |   | $       | 30,340 | 
|                              |                                          |                          |         |         |      |   |         |         | 





Consolidation of Variable Interest Entities






| |                                    
| | -----------------------------------
| | Other Acquisitions and Dispositions





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| |                              
| | -----------------------------
| | NEG Oil & Gas Credit Facility





| |                  
| | -----------------
| | Capitalized Costs



|                                                           |       |              |           |           |      |   |         |         | 
|---------------------------------------------------------- | ----- | ------------ | --------- | --------- | ---- | - | ------- | ------- | 
|                                                           |       | December 31, |          
|                                                           |       |              |          
|                                                           |       | 2005         |           |           | 2004 |  
|                                                           |       |              |           |           |      |  
|Proved properties                                          |       | $            | 1,229,923 |           |      | $ | 923,094 |        
|Other property and equipment                               |       |              | 6,029     |           |      |   | 5,595   |        
|                                                           |       |              |           |           |      |  
|                                                           | Total |              |           | 1,235,952 |      |   |         | 928,689 | 
|Less: Accumulated depreciation, depletion and amortization |       |              | 493,493   |           |      |   | 401,305 |        
|                                                           |       |              |           |           |      |  
|                                                           |       | $            | 742,459   |           |      | $ | 527,384 |        
|                                                           |       |              |           |           |      |  



|                        |       |              |         |         |      |   |         |         |  |   |         |         | 
|----------------------- | ----- | ------------ | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                        |       | December 31, |        
|                        |       |              |        
|                        |       | 2005         |         |         | 2004 |   |         | 2003    | 
|                        |       |              |         |         |      |   |         |         | 
|Acquisitions            |       | $            | 114,244 |         |      | $ | 128,673 |         |  | $ | 184,667 |        
|Exploration costs       |       |              | 75,357  |         |      |   | 62,209  |         |  |   | 6,950   |        
|Development costs       |       |              | 124,305 |         |      |   | 52,765  |         |  |   | 29,640  |        
|                        |       |              |         |         |      |   |         |         | 
|                        | Total |              | $       | 313,906 |      |   | $       | 243,647 |  |   | $       | 221,257 | 
|                        |       |              |         |         |      |   |         |         | 
|Depletion rate per Mcfe |       | $            | 2.33    |         |      | $ | 2.11    |         |  | $ | 1.85    |        
|                        |       |              |         |         |      |   |         |         | 





| |                                             
| | --------------------------------------------
| | Supplemental Reserve Information (Unaudited)

Disclosures about Oil
and Gas Producing Activities




103



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|                           |                                                                               |           |            |             |             |  |             |             |  
|-------------------------- | ----------------------------------------------------------------------------- | --------- | ---------- | ----------- | ----------- |  | ----------- | ----------- | -
|                           |                                                                               | Crude Oil |            |             | Natural Gas | 
|                           |                                                                               |           |            |             |             | 
|                           |                                                                               | (Barrels) |            |             | (Thousand   | 
|                           |                                                                               |           |            | cubic feet) |            
|December 31, 2002          |                                                                               |           | 5,208,673  |             |             |  | 122,567,337 |            
|                           | Reserves of National Onshore purchased from affiliate of general
    partner  |           |            | 1,120,400   |             |  |             | 41,440,700  |  
|                           | Sales of reserves in place                                                    |           |            | (25,399     | )           |  |             | (744,036    | )
|                           | Extensions and discoveries                                                    |           |            | 494,191     |             |  |             | 61,637,828  |  
|                           | Revisions of previous estimates                                               |           |            | 2,344,071   |             |  |             | (2,728,657  | )
|                           | Production                                                                    |           |            | (976,374    | )           |  |             | (15,913,351 | )
|                           |                                                                               |           |            |             |             | 
|December 31, 2003          |                                                                               |           | 8,165,562  |             |             |  | 206,259,821 |            
|                           | Reserves of National Offshore purchased from affiliate of
    general partner |           |            | 5,203,599   |             |  |             | 25,981,749  |  
|                           | Sales of reserves in place                                                    |           |            | (15,643     | )           |  |             | (344,271    | )
|                           | Extensions and discoveries                                                    |           |            | 524,089     |             |  |             | 50,226,279  |  
|                           | Revisions of previous estimates                                               |           |            | 204,272     |             |  |             | 9,810,665   |  
|                           | Production                                                                    |           |            | (1,484,005  | )           |  |             | (18,895,077 | )
|                           |                                                                               |           |            |             |             | 
|December 31, 2004          |                                                                               |           | 12,597,874 |             |             |  | 273,039,166 |            
|                           |                                                                               |           |            |             |             | 
|                           | Purchase of reserves in place                                                 |           |            | 483,108     |             |  |             | 94,937,034  |  
|                           | Sales of reserves in place                                                    |           |            | (624,507    | )           |  |             | (7,426,216  | )
|                           | Extensions and discoveries                                                    |           |            | 743,019     |             |  |             | 79,591,588  |  
|                           | Revisions of previous estimates                                               |           |            | 494,606     |             |  |             | 17,015,533  |  
|                           | Production                                                                    |           |            | (1,789,961  | )           |  |             | (28,106,819 | )
|                           |                                                                               |           |            |             |             | 
|December 31, 2005          |                                                                               |           | 11,904,139 |             |             |  | 429,050,286 |            
|                           |                                                                               |           |            |             |             | 
|Proved developed reserves: |                                                                               |           |            |             |             |  |             |            
|                           | December 31, 2003                                                             |           |            | 6,852,118   |             |  |             | 125,765,372 |  
|                           |                                                                               |           |            |             |             | 
|                           | December 31, 2004                                                             |           |            | 8,955,300   |             |  |             | 151,765,372 |  
|                           |                                                                               |           |            |             |             | 
|                           | December 31, 2005                                                             |           |            | 8,340,077   |             |  |             | 200,519,972 |  
|                           |                                                                               |           |            |             |             | 



| |                                             
| | --------------------------------------------
| | Standardized Measure Information (Unaudited)



104



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|                                                          |  |              |            |   |      |   |           |  
|--------------------------------------------------------- |  | ------------ | ---------- | - | ---- | - | --------- | -
|                                                          |  | December 31, |           
|                                                          |  |              |           
|                                                          |  | 2005         |            |   | 2004 |  
|                                                          |  |              |            |   |      |  
|Future cash inflows                                       |  | $            | 4,891,094  |   |      | $ | 2,203,900 |  
|Future production and development costs                   |  |              | (1,556,792 | ) |      |   | (836,092  | )
|Future income taxes                                       |  |              |           |   |      |   | (32,979   | )
|                                                          |  |              |            |   |      |  
|Future net cash flows                                     |  |              | 3,334,302  |   |      |   | 1,334,829 |  
|Annual discount (10%) for estimating timing of cash flows |  |              | (1,562,242 | ) |      |   | (563,549  | )
|                                                          |  |              |            |   |      |  
|Standardized measure of discounted future net cash flows  |  | $            | 1,772,060  |   |      | $ | 771,280   |  
|                                                          |  |              |            |   |      |  



|                                                                                                   |  |              |           |   |      |   |          |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                                   |  | December 31, |          
|                                                                                                   |  |              |          
|                                                                                                   |  | 2005         |           |   | 2004 |   |          | 2003 | 
|                                                                                                   |  |              |           |   |      |   |          |      | 
|Beginning of year                                                                                  |  | $            | 771,280   |   |      | $ | 620,498  |      |  | $ | 310,632 |  
|Sales of reserves in place                                                                         |  |              | (34,820   | ) |      |   | (1,376   | )    |  |   | (2,476  | )
|Sales and transfers of crude oil and natural gas produced net of
    production costs              |  |              | (212,550  | ) |      |   | (130,640 | )    |  |   | (74,186 | )
|Net change in prices and production costs                                                          |  |              | 408,908   |   |      |   | 16,686   |      |  |   | 77,205  |  
|Development costs incurred during the period and changes in
    estimated future development costs |  |              | (150,639  | ) |      |   | (96,236  | )    |  |   | (70,350 | )
|Acquisitions of reserves                                                                           |  |              | 415,208   |   |      |   | 75,239   |      |  |   | 101,804 |  
|Extensions and discoveries                                                                         |  |              | 411,092   |   |      |   | 193,022  |      |  |   | 211,325 |  
|Revisions of previous quantity estimates                                                           |  |              | 68,937    |   |      |   | 31,730   |      |  |   | 37,718  |  
|Accretion of discount                                                                              |  |              | 77,128    |   |      |   | 62,050   |      |  |   | 34,457  |  
|Income taxes                                                                                       |  |              | 24,097    |   |      |   |         |      |  |   |        |  
|Changes in production rates and other                                                              |  |              | (6,581    | ) |      |   | 307      |      |  |   | (5,631  | )
|                                                                                                   |  |              |           |   |      |   |          |      | 
|End of year                                                                                        |  | $            | 1,772,060 |   |      | $ | 771,280  |      |  | $ | 620,498 |  
|                                                                                                   |  |              |           |   |      |   |          |      | 





|   |       
|-- | ------
|5. | Gaming



105



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|                                   |                   |              |         |         |      |   |         |         | 
|---------------------------------- | ----------------- | ------------ | ------- | ------- | ---- | - | ------- | ------- | 
|                                   |                   | December 31, |        
|                                   |                   |              |        
|                                   |                   | 2005         |         |         | 2004 |  
|                                   |                   |              |         |         |      |  
|Current assets                     |                   | $            | 158,250 |         |      | $ | 122,554 |        
|Property, plant and equipment, net |                   |              | 441,059 |         |      |   | 445,400 |        
|Other assets                       |                   |              | 57,632  |         |      |   | 69,714  |        
|                                   |                   |              |         |         |      |  
|                                   | Total assets      |              | $       | 656,941 |      |   | $       | 637,668 | 
|                                   |                   |              |         |         |      |  
|Current liabilities                |                   | $            | 59,271  |         |      | $ | 105,385 |        
|Long term debt                     |                   |              | 217,335 |         |      |   | 220,633 |        
|Other liabilities                  |                   |              | 14,926  |         |      |   | 53,733  |        
|                                   |                   |              |         |         |      |  
|                                   | Total liabilities |              | $       | 291,532 |      |   | $       | 379,751 | 
|                                   |                   |              |         |         |      |  

106



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|                 |                                     |              |         |         |      |   |         |         |  |   |         |         | 
|---------------- | ----------------------------------- | ------------ | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                 |                                     | December 31, |        
|                 |                                     |              |        
|                 |                                     | 2005         |         |         | 2004 |   |         | 2003    | 
|                 |                                     |              |         |         |      |   |         |         | 
|Revenues:        |                                     |              |         |         |      |   |         |         |  |   |         |        
|                 | Casino                              |              | $       | 329,789 |      |   | $       | 325,615 |  |   | $       | 302,701 | 
|                 | Hotel                               |              |         | 73,924  |      |   |         | 65,561  |  |   |         | 58,253  | 
|                 | Food and beverage                   |              |         | 92,006  |      |   |         | 88,851  |  |   |         | 81,545  | 
|                 | Tower, retail and other income      |              |         | 38,668  |      |   |         | 37,330  |  |   |         | 34,059  | 
|                 |                                     |              |         |         |      |   |         |         | 
|                 | Gross revenues                      |              |         | 534,387 |      |   |         | 517,357 |  |   |         | 476,558 | 
|                 | Less promotional allowances         |              |         | 44,066  |      |   |         | 46,521  |  |   |         | 46,189  | 
|                 |                                     |              |         |         |      |   |         |         | 
|                 | Net revenues                        |              |         | 490,321 |      |   |         | 470,836 |  |   |         | 430,369 | 
|                 |                                     |              |         |         |      |   |         |         | 
|Expenses:        |                                     |              |         |         |      |   |         |         |  |   |         |        
|                 | Casino                              |              |         | 110,821 |      |   |         | 112,452 |  |   |         | 113,941 | 
|                 | Hotel                               |              |         | 31,734  |      |   |         | 27,669  |  |   |         | 24,751  | 
|                 | Food and beverage                   |              |         | 60,284  |      |   |         | 56,425  |  |   |         | 53,471  | 
|                 | Tower, retail and other             |              |         | 16,715  |      |   |         | 14,905  |  |   |         | 15,305  | 
|                 | Selling, general and administrative |              |         | 172,947 |      |   |         | 169,736 |  |   |         | 165,754 | 
|                 | Depreciation and amortization       |              |         | 37,641  |      |   |         | 38,414  |  |   |         | 34,345  | 
|                 |                                     |              |         |         |      |   |         |         | 
|                 |                                     |              | 430,142 |         |      |   | 419,601 |         |  |   | 407,567 |        
|                 |                                     |              |         |         |      |   |         |         | 
|Operating income |                                     | $            | 60,179  |         |      | $ | 51,235  |         |  | $ | 22,802  |        
|                 |                                     |              |         |         |      |   |         |         | 









|   |            
|-- | -----------
|6. | Real Estate



107



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|                    |                      |                                     |   |        |         |  |   |        |        |  |   |        |        | 
|------------------- | -------------------- | ----------------------------------- | - | ------ | ------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                    |                      | Year Ended December 31,             |  
|                    |                      |                                     |  
|                    |                      | 2005                                |   |        | 2004    |  |   | 2003   |       
|                    |                      |                                     |   |        |         |  |   |        |       
|Revenues:           |                      |                                     |   |        |         |  |   |        |        |  |   |       
|                    | Rental real estate:  |                                     |   |        |         |  |   |        |        |  |   |        |       
|                    |                      | Interest income on financing leases |   | $      | 7,299   |  |   | $      | 9,880  |  |   | $      | 13,115 | 
|                    |                      | Rental income                       |   |        | 9,157   |  |   |        | 8,771  |  |   |        | 7,809  | 
|                    | Property development |                                     |   | 58,270 |         |  |   | 26,591 |        |  |   | 13,266 |       
|                    | Resort operations    |                                     |   | 25,911 |         |  |   | 16,210 |        |  |   | 12,377 |       
|                    |                      |                                     |   |        |         |  |   |        |       
|                    |                      | Total revenues                      |   |        | 100,637 |  |   |        | 61,452 |  |   |        | 46,567 | 
|                    |                      |                                     |   |        |         |  |   |        |       
|Operating expenses: |                      |                                     |   |        |         |  |   |        |        |  |   |       
|                    | Rental real estate   |                                     |   | 4,198  |         |  |   | 7,739  |        |  |   | 5,315  |       
|                    | Property development |                                     |   | 47,130 |         |  |   | 22,313 |        |  |   | 12,187 |       
|                    | Resort operations    |                                     |   | 27,963 |         |  |   | 16,592 |        |  |   | 11,358 |       
|                    |                      |                                     |   |        |         |  |   |        |       
|                    |                      | Total expenses                      |   |        | 79,291  |  |   |        | 46,644 |  |   |        | 28,860 | 
|                    |                      |                                     |   |        |         |  |   |        |       
|                    | Operating income     |                                     | $ | 21,346 |         |  | $ | 14,808 |        |  | $ | 17,707 |       
|                    |                      |                                     |   |        |         |  |   |        |       



| |                   
| | ------------------
| | Rental Real Estate





| |                                                          
| | ---------------------------------------------------------
| | Property Development and Associated Resort
    Activities





|                   |                      |                   |   |         |         |  |   |         |         | 
|------------------ | -------------------- | ----------------- | - | ------- | ------- |  | - | ------- | ------- | 
|                   |                      | December 31,      |  
|                   |                      |                   |  
|                   |                      | 2005              |   |         | 2004    | 
|                   |                      |                   |   |         |         | 
|Rental Properties: |                      |                   |   |         |         |  |   |        
|                   | Finance leases, net  |                   | $ | 73,292  |         |  | $ | 85,281  |        
|                   |                      | Operating leases  |   |         | 50,012  |  |   |         | 49,118  | 
|                   | Property development |                   |   | 116,007 |         |  |   | 106,537 |        
|                   | Resort properties    |                   |   | 46,383  |         |  |   | 50,132  |        
|                   |                      |                   |   |         |         | 
|                   |                      | Total real estate |   | $       | 285,694 |  |   | $       | 291,068 | 
|                   |                      |                   |   |         |         | 



108



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| |                                                                          
| | -------------------------------------------------------------------------
| | Real Estate Leased to Others Accounted for Under the
    Financing Method



|                                           |  |              |         |  |      |   |         | 
|------------------------------------------ |  | ------------ | ------- |  | ---- | - | ------- | 
|                                           |  | December 31, |        
|                                           |  |              |        
|                                           |  | 2005         |         |  | 2004 |  
|                                           |  |              |         |  |      |  
|Minimum lease payments receivable          |  | $            | 79,849  |  |      | $ | 97,725  | 
|Unguaranteed residual value                |  |              | 43,429  |  |      |   | 48,980  | 
|                                           |  |              |         |  |      |  
|                                           |  |              | 123,278 |  |      |   | 146,705 | 
|Less unearned income                       |  |              | 46,239  |  |      |   | 57,512  | 
|                                           |  |              |         |  |      |  
|                                           |  |              | 77,039  |  |      |   | 89,193  | 
|Less current portion of lease amortization |  |              | 3,747   |  |      |   | 3,912   | 
|                                           |  |              |         |  |      |  
|                                           |  | $            | 73,292  |  |      | $ | 85,281  | 
|                                           |  |              |         |  |      |  



|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ | 10,484 | 
|2007       |  |   | 9,570  | 
|2008       |  |   | 8,214  | 
|2009       |  |   | 7,993  | 
|2010       |  |   | 5,067  | 
|Thereafter |  |   | 38,521 | 
|           |  |   |       
|           |  | $ | 79,849 | 
|           |  |   |       





| |                                                                          
| | -------------------------------------------------------------------------
| | Real Estate Leased to Others Accounted for Under the
    Operating Method



|                              |  |              |        |  |      |   |        | 
|----------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                              |  | December 31, |       
|                              |  |              |       
|                              |  | 2005         |        |  | 2004 |  
|                              |  |              |        |  |      |  
|Land                          |  | $            | 12,449 |  |      | $ | 13,666 | 
|Commercial Buildings          |  |              | 56,256 |  |      |   | 45,972 | 
|                              |  |              |        |  |      |  
|                              |  |              | 68,705 |  |      |   | 59,638 | 
|Less accumulated depreciation |  |              | 18,693 |  |      |   | 10,520 | 
|                              |  |              |        |  |      |  
|                              |  | $            | 50,012 |  |      | $ | 49,118 | 
|                              |  |              |        |  |      |  

109



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|           |  |   |        | 
|---------- |  | - | ------ | 
|2006       |  | $ | 12,921 | 
|2007       |  |   | 12,286 | 
|2008       |  |   | 11,809 | 
|2009       |  |   | 10,602 | 
|2010       |  |   | 9,437  | 
|Thereafter |  |   | 31,248 | 
|           |  |   |       
|           |  | $ | 88,303 | 
|           |  |   |       





| |                       
| | ----------------------
| | Property Held for Sale



|                                            |  |              |        |  |      |   |         |      |  |   |        | 
|------------------------------------------- |  | ------------ | ------ |  | ---- | - | ------- | ---- |  | - | ------ | 
|                                            |  | December 31, |       
|                                            |  |              |       
|                                            |  | 2005         |        |  | 2004 |   |         | 2003 | 
|                                            |  |              |        |  |      |   |         |      | 
|Properties sold                             |  |              | 14     |  |      |   | 57      |      |  |   | 9      | 
|Proceeds received                           |  | $            | 52,525 |  |      | $ | 254,424 |      |  | $ | 21,164 | 
|Mortgage debt repaid                        |  | $            | 10,702 |  |      | $ | 93,845  |      |  | $ | 4,375  | 
|Total gain recorded                         |  | $            | 16,315 |  |      | $ | 80,459  |      |  | $ | 10,474 | 
|Gain recorded in continuing operations      |  | $            | 176    |  |      | $ | 5,262   |      |  | $ | 7,121  | 
|Gain recorded in discontinued operations(i) |  | $            | 16,139 |  |      | $ | 75,197  |      |  | $ | 3,353  | 






|    |                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | In addition to gains on the rental portfolio of
    $16.1 million, a gain of $5.7 million on the sale of a
    resort property was recognized in 2005.



|                              |  |              |        |  |      |   |        | 
|----------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                              |  | December 31, |       
|                              |  |              |       
|                              |  | 2005         |        |  | 2004 |  
|                              |  |              |        |  |      |  
|Leased to others              |  | $            | 29,230 |  |      | $ | 74,444 | 
|Vacant                        |  |              | 1,049  |  |      |   | 450    | 
|                              |  |              |        |  |      |  
|                              |  |              | 30,279 |  |      |   | 74,894 | 
|Less accumulated depreciation |  |              | 3,046  |  |      |   | 16,873 | 
|                              |  |              |        |  |      |  
|                              |  | $            | 27,233 |  |      | $ | 58,021 | 
|                              |  |              |        |  |      |  



110



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| |                        
| | -----------------------
| | Discontinued Operations



|                                    |  |              |       |  |      |   |        |      |  |   |        | 
|----------------------------------- |  | ------------ | ----- |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                    |  | December 31, |      
|                                    |  |              |      
|                                    |  | 2005         |       |  | 2004 |   |        | 2003 | 
|                                    |  |              |       |  |      |   |        |      | 
|Rental income                       |  | $            | 4,157 |  |      | $ | 14,804 |      |  | $ | 22,374 | 
|Hotel and resort operating income   |  |              | 709   |  |      |   | 3,868  |      |  |   | 6,128  | 
|                                    |  |              |       |  |      |   |        |      | 
|                                    |  |              | 4,866 |  |      |   | 18,672 |      |  |   | 28,502 | 
|                                    |  |              |       |  |      |   |        |      | 
|Mortgage interest expense           |  |              | 1,165 |  |      |   | 3,494  |      |  |   | 6,837  | 
|Depreciation and amortization       |  |              | 250   |  |      |   | 1,319  |      |  |   | 5,108  | 
|Property expenses                   |  |              | 1,401 |  |      |   | 3,927  |      |  |   | 4,268  | 
|Hotel and resort operating expenses |  |              | 637   |  |      |   | 3,800  |      |  |   | 5,680  | 
|                                    |  |              |       |  |      |   |        |      | 
|                                    |  |              | 3,453 |  |      |   | 12,540 |      |  |   | 21,893 | 
|                                    |  |              |       |  |      |   |        |      | 
|Income from discontinued operations |  | $            | 1,413 |  |      | $ | 6,132  |      |  | $ | 6,609  | 
|                                    |  |              |       |  |      |   |        |      | 



| |      
| | -----
| | Other





|   |             
|-- | ------------
|7. | Home Fashion







111



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|                                         |  |   |         | 
|---------------------------------------- |  | - | ------- | 
|Book value of first and second lien debt |  | $ | 205,850 | 
|Cash purchases of additional equity      |  |   | 187,000 | 
|Exercise of rights                       |  |   | 32,881  | 
|Transaction costs                        |  |   | 2,070   | 
|                                         |  |   |        
|                                         |  | $ | 427,801 | 
|                                         |  |   |        



|                                 |  |            |         |  |            |   |          |           |  |   |          |  
|-------------------------------- |  | ---------- | ------- |  | ---------- | - | -------- | --------- |  | - | -------- | -
|                                 |  | August 8,  |         |  | Excess     |   |          | Basis     | 
|                                 |  | 2005       |         |  | Fair Value |   |          | August 8, | 
|                                 |  | Fair Value |         |  | Over Cost  |   |          | 2005      | 
|                                 |  |            |         |  |            |   |          |           | 
|Current assets                   |  | $          | 588,000 |  |            | $ |         |           |  | $ | 588,000  |  
|Property and equipment           |  |            | 294,360 |  |            |   | (98,399  | )         |  |   | 195,961  |  
|Intangible assets                |  |            | 35,700  |  |            |   | (12,298  | )         |  |   | 23,402   |  
|                                 |  |            |         |  |            |   |          |           | 
|Assets acquired                  |  |            | 918,060 |  |            |   | (110,697 | )         |  |   | 807,363  |  
|                                 |  |            |         |  |            |   |          |           | 
|Current liabilities              |  |            | 111,363 |  |            |   |         |           |  |   | 111,363  |  
|Other liabilities                |  |            | 11,044  |  |            |   |         |           |  |   | 11,044   |  
|                                 |  |            |         |  |            |   |          |           | 
|Liabilities assumed              |  |            | 122,407 |  |            |   |         |           |  |   | 122,407  |  
|                                 |  |            |         |  |            |   |          |           | 
|Net assets acquired              |  | $          | 795,653 |  |            | $ | (110,697 | )         |  |   | 684,956  |  
|                                 |  |            |         |  |            |   |          |           | 
|Minority interest at acquisition |  |            |         |  |            |   |          |           |  |   | (257,155 | )
|                                 |  |            |         |  |            |   |          |           | 
|                                 |  |            |         |  |            |   |          |           |  | $ | 427,801  |  
|                                 |  |            |         |  |            |   |          |           | 





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|                                  |  |              |         |  |           |   |         | 
|--------------------------------- |  | ------------ | ------- |  | --------- | - | ------- | 
|                                  |  | December 31, |         |  | August 8, |  
|                                  |  | 2005         |         |  | 2005      |  
|                                  |  |              |         |  |           |  
|Current assets                    |  | $            | 583,496 |  |           | $ | 588,000 | 
|Property plant and equipment, net |  |              | 166,026 |  |           |   | 195,961 | 
|Intangible assets                 |  |              | 23,402  |  |           |   | 23,402  | 
|                                  |  |              |         |  |           |  
|Total assets                      |  | $            | 772,924 |  |           | $ | 807,363 | 
|                                  |  |              |         |  |           |  
|Current liabilities               |  | $            | 103,931 |  |           | $ | 111,363 | 
|Other liabilities                 |  |              | 5,214   |  |           |   | 11,044  | 
|                                  |  |              |         |  |           |  
|Total liabilities                 |  | $            | 109,145 |  |           | $ | 122,407 | 
|                                  |  |              |         |  |           |  





|               |                                     |   |         |         | 
|-------------- | ----------------------------------- | - | ------- | ------- | 
|Revenues       |                                     | $ | 472,681 |        
|Expenses:      |                                     |   |         |        
|               | Cost of sales                       |   |         | 421,408 | 
|               | Selling, general and administrative |   |         | 73,702  | 
|               |                                     |   |        
|Operating loss |                                     | $ | (22,429 | )      
|               |                                     |   |        







|                                         |  |                                       |           |                    |     |   |          |             |  |   |        |  |  |   |           |  
|---------------------------------------- |  | ------------------------------------- | --------- | ------------------ | --- | - | -------- | ----------- |  | - | ------ |  |  | - | --------- | -
|                                         |  | Twelve Months Ended December 31, 2005 |          
|                                         |  |                                       |          
|                                         |  |                                       |           | Pro Forma          |     |   |         
|                                         |  | AREP                                  |           |                    | WPI |   |          | Adjustments |  |   |       
|                                         |  |                                       |           |                    |     |   |          |             |  |   | Total  | 
|                                         |  |                                       |           | (January 1, 2005   |     |   |          |             | 
|                                         |  |                                       |           | to August 7, 2005) |     |   |          |             | 
|                                         |  | (In $000s)                            |          
|Revenues                                 |  | $                                     | 1,262,493 |                    |     | $ | 728,362  |             |  | $ |       |  |  | $ | 1,990,855 |  
|                                         |  |                                       |           |                    |     |   |          |             |  |   |        | 
|Income (loss) from continuing operations |  | $                                     | (44,550   | )                  |     | $ | (157,935 | )           |  | $ | 98,487 |  |  | $ | (103,998  | )
|                                         |  |                                       |           |                    |     |   |          |             |  |   |        | 
|Net income (loss)                        |  | $                                     | (21,288   | )                  |     | $ | (157,935 | )           |  | $ | 98,487 |  |  | $ | (80,736   | )
|                                         |  |                                       |           |                    |     |   |          |             |  |   |        | 
|Basic earnings (loss) per L.P. units:    |  |                                       |           |                    |     |   |          |             |  |   |        |  |  |   |           |  
|Income (loss) from continuing            |  |                                       |           |                    |     |   |          |             |  |   |        |  |  |   |           |  

113



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|                                         |  |                                       |         |           |     |   |           |             |  |   |         |  |  |   |           | 
|---------------------------------------- |  | ------------------------------------- | ------- | --------- | --- | - | --------- | ----------- |  | - | ------- |  |  | - | --------- | 
|                                         |  | Twelve Months Ended December 31, 2004 |        
|                                         |  |                                       |        
|                                         |  |                                       |         | Pro Forma |     |   |          
|                                         |  | AREP                                  |         |           | WPI |   |           | Adjustments |  |   |        
|                                         |  |                                       |         |           |     |   |           |             |  |   | Total   | 
|                                         |  | (In $000s)                            |        
|Revenues                                 |  | $                                     | 670,276 |           |     | $ | 1,618,684 |             |  | $ |        |  |  | $ | 2,288,960 | 
|                                         |  |                                       |         |           |     |   |           |             |  |   |         | 
|Income (loss) from continuing operations |  | $                                     | 77,536  |           |     | $ | (183,275  | )           |  | $ | 178,954 |  |  | $ | 73,215    | 
|                                         |  |                                       |         |           |     |   |           |             |  |   |         | 
|Net income (loss)                        |  | $                                     | 158,865 |           |     | $ | (183,275  | )           |  | $ | 178,954 |  |  | $ | 154,544   | 
|                                         |  |                                       |         |           |     |   |           |             |  |   |         | 





|   |            
|-- | -----------
|8. | Investments



|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |         |         |   |        |         |         | 
|------------------------- | -------------------------------------- | ----------------- | ------- | ------- | ----------------- | - | ------- | --------- | - | - | -------- | ------- | ------- | - | ------ | ------- | ------- | 
|                          |                                        | December 31, 2005 |         |         | December 31, 2004 |  
|                          |                                        |                   |         |         |                   |  
|                          |                                        | Amortized         |         |         | Carrying          |   |         | Amortized |   |   | Carrying |        
|                          |                                        | Cost              |         |         | Value             |   |         | Cost      |   |   | Value    |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|Current Investments:      |                                        |                   |         |         |                   |   |         |           |   |   |          |         |         |   |        |        
|Trading securities:       |                                        |                   |         |         |                   |   |         |           |   |   |          |         |         |   |        |        
|                          | Marketable equity and debt securities  |                   | $       | 33,301  |                   |   | $       | 39,232    |   |   | $        |        |         |   | $      |        |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|                          | Total current trading                  |                   |         | 33,301  |                   |   |         | 39,232    |   |   |          |        |         |   |        |        |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|Available for Sale        |                                        |                   |         |         |                   |   |         |           |   |   |          |         |         |   |        |        
|                          | U.S. Government and agency obligations |                   |         | 3,346   |                   |   |         | 3,346     |   |   |          | 96,840  |         |   |        | 96,840  |        
|                          | Marketable equity and debt securities  |                   |         | 746,731 |                   |   |         | 746,839   |   |   |          | 2,248   |         |   |        | 2,248   |        
|                          | Other debt securities                  |                   |         | 31,282  |                   |   |         | 31,282    |   |   |          |        |         |   |        |        |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|                          | Total current available for sale       |                   |         | 781,359 |                   |   |         | 781,467   |   |   |          | 99,088  |         |   |        | 99,088  |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|Total current investments |                                        | $                 | 814,660 |         |                   | $ | 820,699 |           |   | $ | 99,088   |         |         | $ | 99,088 |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|Non-Current Investments:  |                                        |                   |         |         |                   |   |         |           |   |   |          |         |         |   |        |        
|                          | U.S. Government and agency obligations |                   | $       |        |                   |   | $       |          |   |   | $        | 5,491   |         |   | $      | 5,491   |        
|                          | Marketable equity and debt securities: |                   |         |         |                   |   |         |           |   |   |          |         |         |   |        |         |        
|                          |                                        | WestPoint Stevens |         |         |                  |   |         |           |  |   |          |         | 205,850 |   |        |         | 205,850 | 
|                          | Other securities                       |                   |         | 13,714  |                   |   |         | 13,714    |   |   |          | 40,098  |         |   |        | 40,098  |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        
|                          | Total non-current                      |                   | $       | 13,714  |                   |   | $       | 13,714    |   |   | $        | 251,439 |         |   | $      | 251,439 |        
|                          |                                        |                   |         |         |                   |   |         |           |   |   |          |        



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| |                                  
| | ---------------------------------
| | Securities Sold Not Yet Purchased





| |                                          
| | -----------------------------------------
| | Margin Liability on Marketable Securities





| |      
| | -----
| | Other





| |            
| | -----------
| | Restatement

10-K 10-K.




|   |                                        
|-- | ---------------------------------------
|9. | Trade, Notes And Other Receivables, Net



|                                               |  |              |         |   |      |   |         |  
|---------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                               |  | December 31, |        
|                                               |  |              |        
|                                               |  | 2005         |         |   | 2004 |  
|                                               |  |              |         |   |      |  
|Trade receivables  Home Fashion               |  | $            | 173,050 |   |      | $ |        |  
|Allowance for doubtful accounts  Home Fashion |  |              | (8,313  | ) |      |   |        |  
|Trade receivables  Oil & Gas                  |  |              | 58,956  |   |      |   | 42,959  |  
|Allowance for doubtful accounts  Oil & Gas    |  |              | (5,572  | ) |      |   | (6,988  | )
|Other                                          |  |              | 36,893  |   |      |   | 71,126  |  
|                                               |  |              |         |   |      |  
|                                               |  | $            | 255,014 |   |      | $ | 107,097 |  
|                                               |  |              |         |   |      |  

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|    |                     
|--- | --------------------
|10. | Other Current Assets



|                     |  |              |         |  |      |   |         | 
|-------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                     |  | December 31, |        
|                     |  |              |        
|                     |  | 2005         |         |  | 2004 |  
|                     |  |              |         |  |      |  
|Assets held for sale |  | $            | 49,876  |  |      | $ | 58,021  | 
|Restricted cash      |  |              | 161,210 |  |      |   | 142,857 | 
|Other                |  |              | 76,898  |  |      |   | 8,540   | 
|                     |  |              |         |  |      |  
|                     |  | $            | 287,984 |  |      | $ | 209,418 | 
|                     |  |              |         |  |      |  







|    |                                   
|--- | ----------------------------------
|11. | Property, Plant And Equipment, Net



|                                                          |  |              |           |   |      |   |           |  
|--------------------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                                          |  | December 31, |          
|                                                          |  |              |          
|                                                          |  | 2005         |           |   | 2004 |  
|                                                          |  |              |           |   |      |  
|Land                                                      |  | $            | 182,539   |   |      | $ | 171,710   |  
|Buildings and improvements                                |  |              | 374,160   |   |      |   | 330,029   |  
|Proved oil and gas properties                             |  |              | 1,229,923 |   |      |   | 924,252   |  
|Machinery, equipment and furniture                        |  |              | 357,018   |   |      |   | 203,001   |  
|Assets leased to others (see Note 6)                      |  |              | 141,997   |   |      |   | 144,866   |  
|Construction in progress                                  |  |              | 69,893    |   |      |   | 52,079    |  
|                                                          |  |              |           |   |      |  
|                                                          |  |              | 2,355,530 |   |      |   | 1,825,937 |  
|                                                          |  |              |           |   |      |  
|Less accumulated depreciation, depletion and amortization |  |              | (720,292  | ) |      |   | (562,085  | )
|                                                          |  |              |           |   |      |  
|Net property, plant and equipment                         |  | $            | 1,635,238 |   |      | $ | 1,263,852 |  
|                                                          |  |              |           |   |      |  





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|    |                         
|--- | ------------------------
|12. | Other Non-Current Assets



|                          |  |              |         |  |      |   |         | 
|------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                          |  | December 31, |        
|                          |  |              |        
|                          |  | 2005         |         |  | 2004 |  
|                          |  |              |         |  |      |  
|Deferred taxes            |  | $            | 51,511  |  |      | $ | 56,416  | 
|Deferred finance costs(1) |  |              | 14,570  |  |      |   | 7,973   | 
|Restricted deposits       |  |              | 24,805  |  |      |   | 23,519  | 
|Due from affiliate        |  |              | 22,953  |  |      |   | 20,107  | 
|Other                     |  |              | 1,660   |  |      |   | 24,588  | 
|                          |  |              |         |  |      |  
|                          |  | $            | 115,499 |  |      | $ | 132,603 | 
|                          |  |              |         |  |      |  








|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(1) | Net of accumulated amortization of $3.6 million and
    $2.6 million as of December 31, 2005 and 2004,
    respectively.



|    |                              
|--- | -----------------------------
|13. | Other Non-Current Liabilities



|                                           |  |              |        |  |      |   |        | 
|------------------------------------------ |  | ------------ | ------ |  | ---- | - | ------ | 
|                                           |  | December 31, |       
|                                           |  |              |       
|                                           |  | 2005         |        |  | 2004 |  
|                                           |  |              |        |  |      |  
|Asset retirement obligations (see Note 18) |  | $            | 41,228 |  |      | $ | 56,524 | 
|Derivative liability (see Note 19)         |  |              | 17,893 |  |      |   | 7,766  | 
|Other long-term liabilities                |  |              | 29,964 |  |      |   | 28,499 | 
|                                           |  |              |        |  |      |  
|                                           |  | $            | 89,085 |  |      | $ | 92,789 | 
|                                           |  |              |        |  |      |  



|    |                   
|--- | ------------------
|14. | Minority Interests



|               |  |              |         |  |      |   |        | 
|-------------- |  | ------------ | ------- |  | ---- | - | ------ | 
|               |  | December 31, |        
|               |  |              |        
|               |  | 2005         |         |  | 2004 |  
|               |  |              |         |  |      |  
|WPI            |  | $            | 247,015 |  |      | $ |       | 
|Atlantic Coast |  |              | 57,584  |  |      |   |       | 
|GBH            |  |              |        |  |      |   | 17,740 | 
|               |  |              |         |  |      |  
|               |  | $            | 304,599 |  |      | $ | 17,740 | 
|               |  |              |         |  |      |  

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|    |               
|--- | --------------
|15. | Long-Term Debt



|                                                                               |  |              |           |  |      |   |         | 
|------------------------------------------------------------------------------ |  | ------------ | --------- |  | ---- | - | ------- | 
|                                                                               |  | December 31, |          
|                                                                               |  |              |          
|                                                                               |  | 2005         |           |  | 2004 |  
|                                                                               |  |              |           |  |      |  
|Senior unsecured 7.125% notes due 2013  AREP,
    net of discount             |  | $            | 474,750   |  |      | $ |        | 
|Senior unsecured 8.125% notes due 2012  AREP,
    net of discount             |  |              | 344,726   |  |      |   | 343,425 | 
|Senior secured 7.85% notes due 2012  ACEP                                     |  |              | 215,000   |  |      |   | 215,000 | 
|Borrowings under credit facilities  NEG
    Oil & Gas                         |  |              | 300,000   |  |      |   | 51,834  | 
|Mortgages payable                                                              |  |              | 81,512    |  |      |   | 91,896  | 
|GBH Notes (see Note 16)                                                        |  |              |          |  |      |   | 43,741  | 
|Other                                                                          |  |              | 8,386     |  |      |   | 6,738   | 
|                                                                               |  |              |           |  |      |  
|Total long-term debt                                                           |  |              | 1,424,374 |  |      |   | 752,634 | 
|Less: current portion, including debt related to real estate
    held for sale |  |              | 24,155    |  |      |   | 76,679  | 
|                                                                               |  |              |           |  |      |  
|                                                                               |  | $            | 1,400,219 |  |      | $ | 675,955 | 
|                                                                               |  |              |           |  |      |  



| |                              
| | -----------------------------
| | Senior unsecured notes  AREP



| |                                       
| | --------------------------------------
| | Senior unsecured 7.125% notes due 2013

1 8






| |                                       
| | --------------------------------------
| | Senior unsecured 8.125% notes due 2012

1 8




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| |                                                             
| | ------------------------------------------------------------
| | Senior unsecured notes restrictions and
    covenants  AREP













| |                                               
| | ----------------------------------------------
| | Senior secured 7.85% notes due 2012 
    ACEP





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| |                                                
| | -----------------------------------------------
| | Borrowings under credit facilities 
    Mizuho









| |                                                               
| | --------------------------------------------------------------
| | NEG Oil & Gas LLC Senior Secured Revolving Credit
    Facility







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| |                  
| | -----------------
| | Mortgages payable



|                                                               |  |              |         |   |      |   |         |  
|-------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                               |  | December 31, |        
|                                                               |  |              |        
|                                                               |  | 2005         |         |   | 2004 |  
|                                                               |  |              |         |   |      |  
|Total mortgages                                                |  | $            | 81,512  |   |      | $ | 91,896  |  
|Less current portion and mortgages on properties held for sale |  |              | (18,104 | ) |      |   | (31,177 | )
|                                                               |  |              |         |   |      |  
|                                                               |  | $            | 63,408  |   |      | $ | 60,719  |  
|                                                               |  |              |         |   |      |  



|            |  |   |        | 
|----------- |  | - | ------ | 
|2006        |  | $ | 4,512  | 
|2007        |  |   | 4,849  | 
|2008        |  |   | 24,042 | 
|2009        |  |   | 6,811  | 
|2010        |  |   | 1,851  | 
|2011  2016 |  |   | 39,447 | 
|            |  |   |       
|            |  | $ | 81,512 | 
|            |  |   |       



|    |                                          
|--- | -----------------------------------------
|16. | Impairment Charges From GB Holdings, Inc.



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|    |                            
|--- | ---------------------------
|17. | Other Income (Expense), Net



|                                                              |  |              |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                              |  | December 31, |        
|                                                              |  |              |        
|                                                              |  | 2005         |         |   | 2004 |   |         | 2003 | 
|                                                              |  |              |         |   |      |   |         |      | 
|Net realized gains (losses) on sales of marketable securities |  | $            | (26,938 | ) |      | $ | 40,159  |      |  | $ | 1,653   |  
|Unrealized losses on securities sold short                    |  |              | (4,178  | ) |      |   | (18,807 | )    |  |   |        |  
|Unrealized gains (losses) on marketable securities            |  |              | 9,856   |   |      |   | (4,812  | )    |  |   |        |  
|Write-down of marketable equity and debt securities           |  |              |        |   |      |   |        |      |  |   | (19,759 | )
|Minority interest                                             |  |              | 13,822  |   |      |   | 2,074   |      |  |   | 2,721   |  
|Gain on sale or disposition of real estate                    |  |              | 176     |   |      |   | 5,262   |      |  |   | 7,121   |  
|Other                                                         |  |              | 11,021  |   |      |   | 6,740   |      |  |   | (140    | )
|                                                              |  |              |         |   |      |   |         |      | 
|                                                              |  | $            | 3,759   |   |      | $ | 30,616  |      |  | $ | (8,404  | )
|                                                              |  |              |         |   |      |   |         |      | 









|    |                                             
|--- | --------------------------------------------
|18. | Asset Retirement Obligations  Oil &
    Gas





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|                   |  |              |         |   |      |   |        |  
|------------------ |  | ------------ | ------- | - | ---- | - | ------ | -
|                   |  | December 31, |        
|                   |  |              |        
|                   |  | 2005         |         |   | 2004 |  
|                   |  |              |         |   |      |  
|Beginning of year  |  | $            | 56,524  |   |      | $ | 6,745  |  
|Add: Accretion     |  |              | 3,019   |   |      |   | 593    |  
|Drilling additions |  |              | 2,067   |   |      |   | 216    |  
|National Offshore  |  |              |        |   |      |   | 49,538 |  
|Less: Revisions    |  |              | (2,813  | ) |      |   | (251   | )
|Settlements        |  |              | (431    | ) |      |   | (24    | )
|Dispositions       |  |              | (17,138 | ) |      |   | (293   | )
|                   |  |              |         |   |      |  
|End of year        |  | $            | 41,228  |   |      | $ | 56,524 |  
|                   |  |              |         |   |      |  



|    |                      
|--- | ---------------------
|19. | Oil & Gas Derivatives



|                                                                      |  |                  |                |  |                  |  |               |       |  |  |         |  |  |  |       | 
|--------------------------------------------------------------------- |  | ---------------- | -------------- |  | ---------------- |  | ------------- | ----- |  |  | ------- |  |  |  | ----- | 
|Type of Contract                                                      |  | Production Month |                |  | Volume per Month |  |               | Floor |  |  | Ceiling | 
|                                                                      |  |                  |                |  |                  |  |               |       |  |  |         | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 31,000 Bbls   |       |  |  | 41.65   |  |  |  | 45.25 | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 16,000 Bbls   |       |  |  | 41.75   |  |  |  | 45.40 | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 540,000 MMBTU |       |  |  | 6.00    |  |  |  | 7.25  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 120,000 MMBTU |       |  |  | 6.00    |  |  |  | 7.28  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 500,000 MMBTU |       |  |  | 4.50    |  |  |  | 5.00  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 500,000 MMBTU |       |  |  | 4.50    |  |  |  | 5.00  | 
|No cost collars                                                       |  |                  | Jan  Dec 2006 |  |                  |  | 46,000 Bbls   |       |  |  | 60.00   |  |  |  | 68.50 | 
|(We participate in a second ceiling at $84.50 on the
    46,000 Bbls) |  |                  |                |  |                  |  |               |       |  |  |         |  |  |  |       | 
|No cost collars                                                       |  |                  | Jan  Dec 2007 |  |                  |  | 30,000 Bbls   |       |  |  | 57.00   |  |  |  | 70.50 | 
|No cost collars                                                       |  |                  | Jan  Dec 2007 |  |                  |  | 30,000 Bbls   |       |  |  | 57.50   |  |  |  | 72.00 | 
|No cost collars                                                       |  |                  | Jan  Dec 2007 |  |                  |  | 930,000 MMBTU |       |  |  | 8.00    |  |  |  | 10.23 | 
|No cost collars                                                       |  |                  | Jan  Dec 2008 |  |                  |  | 46,000 Bbls   |       |  |  | 55.00   |  |  |  | 69.00 | 
|No cost collars                                                       |  |                  | Jan  Dec 2008 |  |                  |  | 750,000 MMBTU |       |  |  | 7.00    |  |  |  | 10.35 | 



|                                  |  |                          |          |   |      |   |         |      |  |   |         |  
|--------------------------------- |  | ------------------------ | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                  |  | Years Ended December 31, |         
|                                  |  |                          |         
|                                  |  | 2005                     |          |   | 2004 |   |         | 2003 | 
|                                  |  |                          |          |   |      |   |         |      | 
|Realized loss (net cash payments) |  | $                        | (51,263  | ) |      | $ | (16,625 | )    |  | $ | (8,309  | )
|Unrealized loss                   |  |                          | (69,254  | ) |      |   | (9,179  | )    |  |   | (2,614  | )
|                                  |  |                          |          |   |      |   |         |      | 
|                                  |  | $                        | (120,517 | ) |      | $ | (25,804 | )    |  | $ | (10,923 | )
|                                  |  |                          |          |   |      |   |         |      | 



123



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|    |                  
|--- | -----------------
|20. | Segment Reporting













124



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|                                  |                        |                      |         |           |         |   |         |         |        |   |         |         |        | 
|--------------------------------- | ---------------------- | -------------------- | ------- | --------- | ------- | - | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                  |                        | December 31,         |        
|                                  |                        |                      |        
|                                  |                        | 2005                 |         |           | 2004    |   |         | 2003    |       
|                                  |                        |                      |         |           |         |   |         |         |       
|Revenues:                         |                        |                      |         |           |         |   |         |         |        |   |         |        
|                                  | Oil & Gas              |                      | $       | 198,854   |         |   | $       | 137,988 |        |   | $       | 99,909  |       
|                                  | Gaming                 |                      |         | 490,321   |         |   |         | 470,836 |        |   |         | 430,369 |       
|                                  | Real estate            |                      |         |           |         |   |         |         |        |   |         |         |       
|                                  |                        | Property development |         |           | 58,270  |   |         |         | 26,591 |   |         |         | 13,266 | 
|                                  |                        | Rental real estate   |         |           | 16,456  |   |         |         | 18,651 |   |         |         | 20,924 | 
|                                  |                        | Resort operations    |         |           | 25,911  |   |         |         | 16,210 |   |         |         | 12,377 | 
|                                  |                        |                      |         |           |         |   |         |         |       
|                                  |                        | Total real estate    |         |           | 100,637 |   |         |         | 61,452 |   |         |         | 46,567 | 
|                                  | Home Fashion           |                      |         | 472,681   |         |   |         |        |        |   |         |        |       
|                                  |                        |                      |         |           |         |   |         |         |       
|                                  | Total revenues         |                      | $       | 1,262,493 |         |   | $       | 670,276 |        |   | $       | 576,845 |       
|                                  |                        |                      |         |           |         |   |         |         |       
|Net segment operating income:     |                        |                      |         |           |         |   |         |         |        |   |         |        
|                                  | Oil & Gas              |                      | $       | 37,521    |         |   | $       | 33,053  |        |   | $       | 30,340  |       
|                                  | Gaming                 |                      |         | 60,179    |         |   |         | 51,235  |        |   |         | 22,802  |       
|                                  | Real estate            |                      |         |           |         |   |         |         |        |   |         |         |       
|                                  |                        | Property development |         |           | 11,140  |   |         |         | 4,278  |   |         |         | 1,079  | 
|                                  |                        | Rental real estate   |         |           | 12,258  |   |         |         | 10,912 |   |         |         | 15,609 | 
|                                  |                        | Resort operations    |         |           | (2,052  | ) |         |         | (382   | ) |         |         | 1,019  | 
|                                  |                        |                      |         |           |         |   |         |         |       
|                                  |                        | Total real estate    |         |           | 21,346  |   |         |         | 14,808 |   |         |         | 17,707 | 
|                                  | Home Fashion           |                      |         | (22,429   | )       |   |         |        |        |   |         |        |       
|                                  |                        |                      |         |           |         |   |         |         |       
|                                  | Total segment earnings |                      |         | 96,617    |         |   |         | 99,096  |        |   |         | 70,849  |       
|Holding Company costs(i)          |                        |                      | (19,099 | )         |         |   | (6,433  | )       |        |   | (4,720  | )      
|                                  |                        |                      |         |           |         |   |         |         |       
|Total operating income            |                        |                      | 77,518  |           |         |   | 92,663  |         |        |   | 66,129  |        
|Interest expense                  |                        |                      | (98,257 | )         |         |   | (57,072 | )       |        |   | (36,416 | )      
|Interest income                   |                        |                      | 45,888  |           |         |   | 45,241  |         |        |   | 23,806  |        
|Impairment loss on GBH            |                        |                      | (52,366 | )         |         |   | (15,600 | )       |        |   |        |        
|Other income (expense)            |                        |                      | 3,759   |           |         |   | 30,616  |         |        |   | (8,404  | )      
|Income tax (expense) benefit      |                        |                      | (21,092 | )         |         |   | (18,312 | )       |        |   | 15,792  |        
|                                  |                        |                      |         |           |         |   |         |         |       
|Income from continuing operations |                        | $                    | (44,550 | )         |         | $ | 77,536  |         |        | $ | 60,907  |        
|                                  |                        |                      |         |           |         |   |         |         |       






|    |  |                                                                                                                                                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) |  | Holding Company costs include general and administrative
    expenses and acquisition (legal and professional) costs at the
    holding company level. Certain real estate expenses are included
    in the Holding Company to the extent they relate to
    administration of our various real estate holdings. Selling,
    general

125



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| |  |                                                                                                                                                                   
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | and administrative expenses of the segments are included in
    their respective operating expenses in the accompanying
    consolidated statements of operations.

|                                                   |                                       |                             |         |           |           |   |         |           |           |   |        |           |           | 
|-------------------------------------------------- | ------------------------------------- | --------------------------- | ------- | --------- | --------- | - | ------- | --------- | --------- | - | ------ | --------- | --------- | 
|                                                   |                                       | December 31,                |        
|                                                   |                                       |                             |        
|                                                   |                                       | 2005                        |         |           | 2004      |   |         | 2003      |          
|                                                   |                                       |                             |         |           |           |   |         |           |          
|Depreciation, depletion and amortization (D, D&A): |                                       |                             |         |           |           |   |         |           |           |   |        |          
|                                                   | Oil & Gas                             |                             | $       | 91,100    |           |   | $       | 60,123    |           |   | $      | 39,455    |          
|                                                   | Gaming                                |                             |         | 37,641    |           |   |         | 38,414    |           |   |        | 34,345    |          
|                                                   | Real estate:                          |                             |         |           |           |   |         |           |           |   |        |           |          
|                                                   |                                       | Rental real estate          |         |           | 3,758     |   |         |           | 2,432     |   |        |           | 1,572     | 
|                                                   |                                       | Resort operating properties |         |           | 1,593     |   |         |           | 2,989     |   |        |           | 2,807     | 
|                                                   |                                       |                             |         |           |           |   |         |           |          
|                                                   |                                       | Total real estate           |         |           | 5,351     |   |         |           | 5,421     |   |        |           | 4,379     | 
|                                                   |                                       |                             |         |           |           |   |         |           |          
|                                                   | Home Fashion                          |                             |         | 19,406    |           |   |         |          |           |   |        |          |          
|D, D&A in operating expenses                       |                                       |                             | 153,498 |           |           |   | 103,958 |           |           |   | 78,179 |          
|Amortization in interest expense                   |                                       |                             | 2,936   |           |           |   | 1,156   |           |           |   | 222    |          
|                                                   |                                       |                             |         |           |           |   |         |           |          
|Total D, D&A                                       |                                       | $                           | 156,434 |           |           | $ | 105,114 |           |           | $ | 78,401 |          
|                                                   |                                       |                             |         |           |           |   |         |           |          
|Assets                                             |                                       |                             |         |           |           |   |         |           |           |   |        |          
|                                                   | Oil & Gas                             |                             | $       | 958,295   |           |   | $       | 649,624   |           |   | $      | 438,697   |          
|                                                   | Gaming                                |                             |         | 658,161   |           |   |         | 637,668   |           |   |        | 682,336   |          
|                                                   | Real estate                           |                             |         | 442,594   |           |   |         | 477,531   |           |   |        | 543,691   |          
|                                                   | Home Fashion                          |                             |         | 772,924   |           |   |         |          |           |   |        |          |          
|                                                   |                                       |                             |         |           |           |   |         |           |          
|                                                   | Subtotal                              |                             |         | 2,831,974 |           |   |         | 1,764,823 |           |   |        | 1,664,724 |          
|                                                   |                                       | Reconciling items(ii)       |         |           | 1,139,163 |   |         |           | 1,104,856 |   |        |           | 507,837   | 
|                                                   |                                       |                             |         |           |           |   |         |           |          
|                                                   |                                       | Total assets                |         | $         | 3,971,137 |   |         | $         | 2,869,679 |   |        | $         | 2,172,561 | 
|                                                   |                                       |                             |         |           |           |   |         |           |          
|Capital expenditures:                              |                                       |                             |         |           |           |   |         |           |           |   |        |          
|                                                   | Oil & Gas                             |                             | $       | 321,228   |           |   | $       | 115,262   |           |   | $      | 36,817    |          
|                                                   | Gaming                                |                             |         | 33,300    |           |   |         | 30,967    |           |   |        | 44,669    |          
|                                                   | Rental Real estate                    |                             |         | 187       |           |   |         | 11,783    |           |   |        | 413       |          
|                                                   | Property Development                  |                             |         |          |           |   |         | 67,843    |           |   |        |          |          
|                                                   | Home Fashion                          |                             |         | 5,718     |           |   |         |          |           |   |        |          |          
|                                                   | Hotel and resort operating properties |                             |         | 2,256     |           |   |         | 15,897    |           |   |        | 1,067     |          
|                                                   |                                       |                             |         |           |           |   |         |           |          
|                                                   |                                       | $                           | 362,689 |           |           | $ | 241,752 |           |           | $ | 82,966 |          
|                                                   |                                       |                             |         |           |           |   |         |           |          






|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|(ii) |  | Reconciling items relate principally to cash and investments of
    the Holding Company.



|    |             
|--- | ------------
|21. | Income Taxes



|                                                           |  |             |           |   |      |   |           | 
|---------------------------------------------------------- |  | ----------- | --------- | - | ---- | - | --------- | 
|                                                           |  | December 31 |          
|                                                           |  |             |          
|                                                           |  | 2005        |           |   | 2004 |  
|                                                           |  |             |           |   |      |  
|Book basis of AREH net assets excluding corporate entities |  | $           | 2,156,608 |   |      | $ | 1,319,566 | 
|Book/tax basis difference                                  |  |             | (559,043  | ) |      |   | 120,820   | 
|                                                           |  |             |           |   |      |  
|Tax basis of net assets                                    |  | $           | 1,597,565 |   |      | $ | 1,440,386 | 
|                                                           |  |             |           |   |      |  

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|         |  |             |         |   |      |   |         |      |  |   |        |  
|-------- |  | ----------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|         |  | December 31 |        
|         |  |             |        
|         |  | 2005        |         |   | 2004 |   |         | 2003 | 
|         |  |             |         |   |      |   |         |      | 
|Current  |  | $           | (10,962 | ) |      | $ | (4,015  | )    |  | $ | (6,464 | )
|Deferred |  |             | (10,130 | ) |      |   | (14,297 | )    |  |   | 22,256 |  
|         |  |             |         |   |      |   |         |      | 
|         |  | $           | (21,092 | ) |      | $ | (18,312 | )    |  | $ | 15,792 |  
|         |  |             |         |   |      |   |         |      | 



|                     |                               |                                  |         |         |        |   |         |         |        |  
|-------------------- | ----------------------------- | -------------------------------- | ------- | ------- | ------ | - | ------- | ------- | ------ | -
|                     |                               | December 31                      |        
|                     |                               |                                  |        
|                     |                               | 2005                             |         |         | 2004   |  
|                     |                               |                                  |         |         |        |  
|Deferred tax assets: |                               |                                  |         |         |        |   |         |        
|                     | Property, plant and equipment |                                  | $       | 26,219  |        |   | $       | 16,871  |       
|                     | Net operating loss            |                                  |         | 54,583  |        |   |         | 90,490  |       
|                     | Other                         |                                  |         | 21,802  |        |   |         | 42,273  |       
|                     |                               |                                  |         |         |        |  
|                     |                               |                                  | 102,604 |         |        |   | 149,634 |        
|                     | Valuation allowance           |                                  |         | (48,788 | )      |   |         | (88,590 | )     
|                     |                               |                                  |         |         |        |  
|                     |                               | Net deferred tax assets          |         | $       | 53,816 |   |         | $       | 61,044 |  
|                     |                               | Less: Current portion            |         |         | (2,305 | ) |         |         | (4,628 | )
|                     |                               |                                  |         |         |        |  
|                     |                               | Deferred tax asset  Non-current |         | $       | 51,511 |   |         | $       | 56,416 |  
|                     |                               |                                  |         |         |        |  



|                                     |  |      |       |    |      |  |       |      |  |  |       |   
|------------------------------------ |  | ---- | ----- | -- | ---- |  | ----- | ---- |  |  | ----- | --
|                                     |  | 2005 |       |    | 2004 |  |       | 2003 | 
|                                     |  |      |       |    |      |  |       |      | 
|Federal statutory rate               |  |      | 35.0  | %  |      |  | 35.0  | %    |  |  | 35.0  | % 
|Tax deduction not given book benefit |  |      | 0.0   |    |      |  | 2.0   |      |  |  | 8.0   |   
|Valuation allowance                  |  |      | (42.7 | )  |      |  | 2.6   |      |  |  | (56.2 | ) 
|Income not subject to taxation       |  |      | (82.2 | )  |      |  | (19.3 | )    |  |  | (19.0 | ) 
|Other                                |  |      | (0.0  | )  |      |  | (1.2  | )    |  |  | (2.8  | ) 
|                                     |  |      |       |    |      |  |       |      | 
|                                     |  |      | (89.9 | )% |      |  | 19.1  | %    |  |  | (35.0 | )%
|                                     |  |      |       |    |      |  |       |      | 







| |               
| | --------------
| | Gaming Segment



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| |                  
| | -----------------
| | Oil & Gas Segment









128



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|    |                              
|--- | -----------------------------
|22. | Commitments And Contingencies



| |                      
| | ---------------------
| | Environmental Matters





| |            
| | -----------
| | GB Holdings







| |               
| | --------------
| | WPI litigation



129



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Contrarian Funds Inc. v. WestPoint
Stevens, Inc. et.al.












| |                    
| | -------------------
| | Pending Acquisition



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| |       
| | ------
| | Leases



|                                                    |  |                  |        |  |                |   |        | 
|--------------------------------------------------- |  | ---------------- | ------ |  | -------------- | - | ------ | 
|                                                    |  | Operating Leases |        |  | Capital Leases |  
|                                                    |  |                  |        |  |                |  
|2006                                                |  | $                | 15,109 |  |                | $ | 1,010  | 
|2007                                                |  |                  | 13,765 |  |                |   | 911    | 
|2008                                                |  |                  | 8,506  |  |                |   | 678    | 
|2009                                                |  |                  | 6,814  |  |                |   | 963    | 
|2010                                                |  |                  | 4,805  |  |                |   | 85     | 
|Thereafter                                          |  |                  | 4,983  |  |                |   | 7,318  | 
|                                                    |  |                  |        |  |                |  
|Total Minimum Lease Payments                        |  | $                | 53,982 |  |                |   | 10,965 | 
|                                                    |  |                  |        |  |                |  
|Less imputed interest costs                         |  |                  |        |  |                |   | 7,105  | 
|                                                    |  |                  |        |  |                |  
|Present value of Net Minimum Capital Lease Payments |  |                  |        |  |                | $ | 3,860  | 
|                                                    |  |                  |        |  |                |  



| |      
| | -----
| | Other





|    |                       
|--- | ----------------------
|23. | Employee Benefit Plans







|    |                                    
|--- | -----------------------------------
|24. | Fair Value Of Financial Instruments



|               |  |                |           |  |            |   |         |      |  |   |           |  |  |   |         | 
|-------------- |  | -------------- | --------- |  | ---------- | - | ------- | ---- |  | - | --------- |  |  | - | ------- | 
|               |  | Carrying Value |           |  | Fair Value |  
|               |  |                |           |  |            |  
|               |  | 2005           |           |  | 2004       |   |         | 2005 |  |   | 2004      | 
|               |  |                |           |  |            |   |         |      |  |   |           | 
|Investments    |  | $              | 834,413   |  |            | $ | 350,327 |      |  | $ | 834,413   |  |  | $ | 350,327 | 
|Long-term debt |  |                | 1,400,219 |  |            |   | 675,955 |      |  |   | 1,425,865 |  |  |   | 707,986 | 





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|    |                  
|--- | -----------------
|25. | Subsequent Events



| |           
| | ----------
| | Securities





| |                                           
| | ------------------------------------------
| | NEG Oil & Gas Inc. Initial Public Offering

S-1




| |                        
| | -----------------------
| | Change in status of CEO








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








|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures.



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Conclusion Regarding the Effectiveness of Disclosure
    Controls and Procedures

13a-15(e) 15d-15(e).








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| |                                     
| | ------------------------------------
| | Significant Deficiency of Subsidiary





| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control over
    Financial Reporting

13a-15f










133



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















134



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Item 9B.     Other
Information.




135



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PART III







|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant.



|                      |  |     |    |  |          |                                                           
|--------------------- |  | --- | -- |  | -------- | ----------------------------------------------------------
|Name                  |  | Age |    |  | Position
|                      |  |     |    |  |         
|Carl C. Icahn         |  |     | 70 |  |          | Chairman of the Board                                     
|William A. Leidesdorf |  |     | 60 |  |          | Director                                                  
|James L. Nelson       |  |     | 56 |  |          | Director                                                  
|Jack G. Wasserman     |  |     | 69 |  |          | Director                                                  
|Keith A. Meister      |  |     | 32 |  |          | Principal Executive Officer and Vice Chairman of the Board
|Jon F. Weber          |  |     | 47 |  |          | President and Chief Financial Officer                     



|                  |  |     |    |  |          |                                                                                                             
|----------------- |  | --- | -- |  | -------- | ------------------------------------------------------------------------------------------------------------
|Name              |  | Age |    |  | Position
|                  |  |     |    |  |         
|Bob G. Alexander  |  |     | 73 |  |          | Chairman of the Board, President and Chief Executive Officer,
    National Energy Group, Inc.               
|Richard P. Brown  |  |     | 58 |  |          | President and Chief Executive Officer, American
    Casino & Entertainment Properties LLC                   
|Joseph Pennacchio |  |     | 59 |  |          | President, WestPoint International, Inc.                                                                    
|Martin L. Hirsch  |  |     | 50 |  |          | Executive Vice President and Director of Acquisitions and
    Development, American Property Investors, Inc.

Carl C. Icahn


William A. Leidesdorf


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James L. Nelson


Jack G. Wasserman


Keith A. Meister


Jon F. Weber


137



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| |       
| | ------
| | Gaming

Richard P. Brown




| |          
| | ---------
| | Oil & Gas

Bob G. Alexander




| |             
| | ------------
| | Home Fashion

Joseph Pennacchio




| |            
| | -----------
| | Real Estate

Martin L. Hirsch


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Audit Committee






S-K, S-K.






Code of Ethics










|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.



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SUMMARY COMPENSATION TABLE


|                            |                                               |                        |      |           |     |  |         |         |  |              |         |        |  |  |        |       | 
|--------------------------- | --------------------------------------------- | ---------------------- | ---- | --------- | --- |  | ------- | ------- |  | ------------ | ------- | ------ |  |  | ------ | ----- | 
|                            |                                               | Annual Compensation(1) |     
|                            |                                               |                        |     
|                            |                                               |                        |      | All Other |    
|                            |                                               |                        |      | Salary    |     |  | Bonus   |         |  | Compensation |        
|Name and Principal Position |                                               | Year                   |      |           | ($) |  |         | ($)     |  |              | ($)(3)  |       
|                            |                                               |                        |      |           |     |  |         |         |  |              |         |       
|Keith A. Meister(2)         |                                               |                        | 2005 |           |     |  | 254,808 |         |  |              |        |        |  |  |       |      
|                            | Principal Executive Officer and Vice Chairman |                        |      | 2004      |     |  |         | 227,308 |  |              |         |       |  |  |        |      | 
|                            |                                               |                        |      | 2003      |     |  |         | 73,150  |  |              |         |       |  |  |        |      | 
|Jon F. Weber(2)             |                                               |                        | 2005 |           |     |  | 336,538 |         |  |              | 250,000 |        |  |  |       |      
|                            | President and Chief Financial Officer         |                        |      |           |     |  |         |         |  |              |         |        |  |  |        |       | 
|John P. Saldarelli(2)       |                                               |                        | 2005 |           |     |  | 206,462 |         |  |              | 22,000  |        |  |  | 25,261 |      
|                            | Vice President and Treasurer                  |                        |      | 2004      |     |  |         | 191,100 |  |              |         | 22,932 |  |  |        | 3,819 | 
|                            |                                               |                        |      | 2003      |     |  |         | 182,200 |  |              |         | 18,200 |  |  |        | 4,000 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to applicable regulations, certain columns of the
    Summary Compensation Table and each of the remaining tables have
    been omitted, as there has been no compensation awarded to,
    earned by or paid to any of the named executive officers by us,
    or by API, which was subsequently reimbursed by us, required to
    be reported in those columns or tables, except as noted below.                                                                                                                                                                                                                  
|   
|(2) | On August 18, 2003, Keith A. Meister was elected Chief
    Executive Officer and President of API. He served as President
    of API until April 2005 and as Chief Executive Officer until
    March 2006. Effective March 14, 2006, Mr. Meister was
    elected Principal Executive Officer and Vice Chairman of the
    Board of API. See Item 9B. Other Information. On
    April 26, 2005, Jon F. Weber was elected President of API.
    Effective November 16, 2005, Mr. Weber was elected
    Chief Financial Officer of API. John P. Saldarelli served as
    APIs Chief Financial Officer until November 16, 2005.
|   
|(3) | Represent matching contributions under our 401(k) plan. In 2005,
    AREP made a matching contribution to the employees
    individual plan account in the amount of one-half
    (1/2) of the first six and one-quarter (6.25%) percent of
    gross salary contributed by the employee. Mr. Saldarelli
    also received compensation for accrued vacation time.                                                                                                                                                                                                                                                         











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Employment Agreements









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







|                                                                  |  |                  |            |  |          |  |            |                 |  |  |           |  |  |  |       | 
|----------------------------------------------------------------- |  | ---------------- | ---------- |  | -------- |  | ---------- | --------------- |  |  | --------- |  |  |  | ----- | 
|                                                                  |  | Beneficial       |            |  |          |  | Beneficial |                 |  | 
|                                                                  |  | Ownership of     |            |  | Percent  |  |            | Ownership of    |  |  | Percent   | 
|Name of Beneficial Owner                                          |  | Depositary Units |            |  | of Class |  |            | Preferred Units |  |  | of Class  | 
|                                                                  |  |                  |            |  |          |  |            |                 |  |  |           | 
|Carl C. Icahn(1)                                                  |  |                  | 55,655,382 |  |          |  | 90.0%      |                 |  |  | 9,346,044 |  |  |  | 86.5% | 
|All directors and executive officers as a group
    (six persons) |  |                  | 55,655,382 |  |          |  | 90.0%      |                 |  |  | 9,346,044 |  |  |  | 86.5% | 






|    |                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Carl C. Icahn, through affiliates, is the beneficial owner of
    the 55,655,382 depositary units set forth above and may also be
    deemed to be the beneficial owner of the 700 depositary units
    owned of record by API Nominee Corp., which, in accordance with
    state law, are in the process of being turned over to the

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| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | relevant state authorities as unclaimed property; however,
    Mr. Icahn disclaims such beneficial ownership. The
    foregoing is exclusive of a 1.99% ownership interest which API
    holds by virtue of its 1% general partner interest in each of
    AREP and AREH.














|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.

Related Transactions with our General Partner and its
Affiliates




| |                               
| | ------------------------------
| | Preferred and Depositary Units



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| |          
| | ---------
| | Oil & Gas



| |                      
| | ---------------------
| | Management Agreements





| |             
| | ------------
| | Acquisitions











| |                  
| | -----------------
| | Gaming Operations

out-of out-of




143



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| |            
| | -----------
| | Investments





Other Related Transactions


1 8


1 8








144



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| |                                                          
| | ---------------------------------------------------------
| | Partnership Provisions Concerning Property
    Management

day-to




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Property Management and Asset Management
    Services.     To the extent that we
    acquire any properties requiring active management (e.g.,
    operating properties that are not net-leased) or asset
    management services, including on site services, we may enter
    into management or other arrangements with API or its
    affiliates. Generally, it is contemplated that under property
    management arrangements, the entity managing the property would
    receive a property management fee (generally 3% to 6% of gross
    rentals for direct management, depending upon the location) and
    under asset management arrangements, the entity managing the
    asset would receive an asset management fee (generally .5% to 1%
    of the appraised value of the asset for asset management
    services, depending upon the location) in payment for its
    services and reimbursement for costs incurred.
|
| |  | Brokerage and Leasing
    Commissions.     We also may pay
    affiliates of API real estate brokerage and leasing commissions
    (which generally may range from 2% to 6% of the purchase price
    or rentals depending on location; this range may be somewhat
    higher for problem properties or lesser-valued properties).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Lending Arrangements.     API or its
    affiliates may lend money to, or arrange loans for, us. Fees
    payable to API or its affiliates in connection with such
    activities include mortgage brokerage fees (generally .5% to 3%
    of the loan amount), mortgage origination fees (generally .5% to
    1.5% of the loan amount) and loan servicing fees (generally .10%
    to .12% of the loan amount), as well as interest on any amounts
    loaned by API or its affiliates to us.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Development and Construction
    Services.     API or its affiliates may
    also receive fees for development services, generally 1% to 4%
    of development costs, and general contracting services or
    construction management services, generally 4% to 6% of
    construction costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accountant Fees and Services.



Summary of Grant Thornton LLP Fees for Professional Services
Rendered for the


Years Ended December 31, 2005 and 2004


|                      |  |      |           |  |      |   |           | 
|--------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                      |  | 2005 |           |  | 2004 |  
|                      |  |      |           |  |      |  
|Audit fees(1)         |  | $    | 3,214,400 |  |      | $ | 1,010,100 | 
|Audit related fees(2) |  |      | 1,436,290 |  |      |   | 333,015   | 
|                      |  |      |           |  |      |  
|Total fees            |  | $    | 4,650,690 |  |      | $ | 1,343,115 | 
|                      |  |      |           |  |      |  






|    |                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Services related to audit of annual consolidated financial
    statements and internal controls, review of quarterly financial
    statements, review of reports filed with the SEC and other
    services.
|   
|(2) | Services related to limited reviews, consents, assistance with
    review of offering documents and registration statement filed
    with the SEC.                                                         



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PART IV







|         |                                         
|-------- | ----------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements:




|                                                                                                                                              |  |        |    | 
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ | -- | 
|                                                                                                                                              |  | Page   |   
|                                                                                                                                              |  | Number |   
|                                                                                                                                              |  |        |   
|Reports of Independent Registered Public Accounting Firms                                                                                     |  |        | 82 | 
|Consolidated Balance Sheets  December 31, 2005
    and 2004                                                                                  |  |        | 85 | 
|Consolidated Statements of Operations  Years ended
    December 31, 2005, 2004 and 2003                                                      |  |        | 86 | 
|Consolidated Statements of Changes in Partners Equity and
    Comprehensive Income (Loss)  Years ended
    December 31, 2005, 2004 and 2003 |  |        | 87 | 
|Consolidated Statements of Cash Flows  Years ended
    December 31, 2005, 2004 and 2003                                                      |  |        | 88 | 
|Notes to Consolidated Financial Statements                                                                                                    |  |        | 90 | 
|Schedule 1 Condensed Financial Information of Parent will
    be filed as an amendment within 30 days.                                        |  |        |    | 



|        |   |    |  |                                                                                                                                                                                                                                                                                                                                                                          
|------- | - | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |   
|Index   |   |   
|        |   |   
|        | 3 | .1 |  | Certificate of Limited Partnership of American Real Estate
    Partners, L.P. (AREP) dated February 17, 1987
    (incorporated by reference to Exhibit No. 3.1 to
    AREPs Form 10-Q for the quarter ended March 31,
    2004 (SEC File No. 1-9516), filed on May 10, 2004).                                                                                         
|        | 3 | .2 |  | Amended and Restated Agreement of Limited Partnership of AREP,
    dated May 12, 1987 (incorporated by reference to
    Exhibit No. 3.2 to AREPs Form 10-Q for the
    quarter ended March 31, 2004 (SEC File No. 1-9516),
    filed on May 10, 2004).                                                                                                                  
|        | 3 | .3 |  | Amendment No. 4 to the Amended and Restated Agreement of
    Limited Partnership of AREP, dated June 29, 2005
    (incorporated by reference to Exhibit No. 3.1 to
    AREPs Form 10-Q for the quarter ended March 31,
    2005 (SEC File No. 1-9516), filed on June 30, 2005).                                                                                         
|        | 3 | .4 |  | Amendment No. 3 to the Amended and Restated Agreement of
    Limited Partnership of AREP, dated May 9, 2002
    (incorporated by reference to Exhibit 3.8 to AREPs
    Form 10-K for the year ended December 31, 2002 (SEC
    File No. 1-9516), filed on March 31, 2003).                                                                                              
|        | 3 | .5 |  | Amendment No. 2 to the Amended and Restated Agreement of
    Limited Partnership of AREP, dated August 16, 1996
    (incorporated by reference to Exhibit 10.1 to AREPs
    Form 8-K (SEC File No. 1-9516), filed on
    August 16, 1996).                                                                                                                              
|        | 3 | .6 |  | Amendment No. 1 to the Amended and Restated Agreement of
    Limited Partnership of AREP, dated February 22, 1995
    (incorporated by reference to Exhibit 3.3 to AREPs
    Form 10-K for the year ended December 31, 1994 (SEC
    File No. 1-9516), filed on March 31, 1995).                                                                                        
|        | 3 | .7 |  | Certificate of Limited Partnership of American Real Estate
    Holdings Limited Partnership (AREH), dated
    February 17, 1987, as amended pursuant to First Amendment
    thereto, dated March 10, 1987 (incorporated by reference to
    Exhibit 3.5 to AREPs Form 10-Q for the quarter
    ended March 31, 2004 (SEC File No. 1-9516), filed on
    May 10, 2004).
|        | 3 | .8 |  | Amended and Restated Agreement of Limited Partnership of AREH,
    dated as of July 1, 1987 (incorporated by reference to
    Exhibit 3.5 to AREPs Form 10-Q for the quarter
    ended March 31, 2004 (SEC File No. 1-9516), filed on
    May 10, 2004).                                                                                                                

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|        |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    
|Index   |    |    
|        |    |    
|        | 3  | .9  |  | Amendment No. 3 to the Amended and Restated Agreement of
    Limited Partnership of AREH dated June 29, 2005
    (incorporated by reference to Exhibit No. 3.2 to
    AREPs Form 10-Q for the quarter ended March 31,
    2005 (SEC File No. 1-9516), filed on June 30, 2005).                                                                                                                                                            
|        | 3  | .10 |  | Amendment No. 2 to the Amended and Restated Agreement of
    Limited Partnership of AREH, dated June 14, 2002
    (incorporated by reference to Exhibit 3.9 to AREPs
    Form 10-K for the year ended December 31, 2002 (SEC
    File No. 1-9516), filed on March 31, 2003).                                                                                                                                                              
|        | 3  | .11 |  | Amendment No. 1 to the Amended and Restated Agreement of
    Limited Partnership of AREH, dated August 16, 1996
    (incorporated by reference to Exhibit 10.2 to AREPs
    Form 8-K (SEC File No. 1-9516), filed on
    August 16, 1996).                                                                                                                                                                                                
|        | 4  | .1  |  | Depositary Agreement among AREP, American Property Investors,
    Inc. and Registrar and Transfer Company, dated as of
    July 1, 1987 (incorporated by reference to Exhibit 4.1
    to AREPs Form 10-Q for the quarter ended
    March 31, 2004 (SEC File No. 1-9516), filed on
    May 10, 2004).                                                                                                                                      
|        | 4  | .2  |  | Amendment No. 1 to the Depositary Agreement dated as of
    February 22, 1995 (incorporated by reference to
    Exhibit 4.2 to AREPs Form 10-K for the year
    ended December 31, 1994 (SEC File No. 1-9516), filed
    on March 31, 1995).                                                                                                                                                                                              
|        | 4  | .3  |  | Form of Transfer Application (incorporated by reference to
    Exhibit 4.4 to AREPs Form 10-K for the year
    ended December 31, 2004 (SEC File No. 1-9516), filed
    on March 16, 2005.                                                                                                                                                                                                                                                
|        | 4  | .4  |  | Specimen Depositary Receipt (incorporated by reference to
    Exhibit 4.3 to AREPs Form 10-K for the year
    ended December 31, 2004 (SEC File No. 1-9516), filed
    on March 16, 2005.                                                                                                                                                                                                                                                 
|        | 4  | .5  |  | Specimen Certificate representing preferred units (incorporated
    by reference to Exhibit No. 4.9 to AREPs
    Form S-3 (SEC File No. 33-54767), filed on
    February 22, 1995).                                                                                                                                                                                                                                                       
|        | 4  | .6  |  | Registration Rights Agreement, dated as of February 7,
    2005, among AREP, AREP Finance., AREH and Bear,
    Stearns & Co. Inc. (incorporated by reference to
    Exhibit 4.11 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on February 10, 2005).                                                                                                                                                                                
|        | 4  | .7  |  | Registration Rights Agreement between AREP and X LP (now known
    as High Coast Limited Partnership) (incorporated by reference to
    Exhibit 10.2 to AREPs Form 10-K for the year
    ended December 31, 2004 (SEC File No. 1-9516), filed
    on March 16, 2005).                                                                                                                                                                     
|        | 4  | .8  |  | Registration Rights Agreement, dated June 30, 2005 between
    AREP and Highcrest Investors Corp., Amos Corp., Cyprus, LLC and
    Gascon Partners (incorporated by reference to Exhibit 10.6
    to AREPs Form 10-Q (SEC File No. 1-9516), filed
    on August 9, 2005).                                                                                                                                                                 
|        | 10 | .1  |  | Indenture, dated as of January 29, 2004, among American
    Casino & Entertainment Properties LLC
    (ACEP), American Casino & Entertainment
    Properties Finance Corp., (ACEP Finance), the
    guarantors from time to time party thereto and Wilmington Trust
    Company, as Trustee (the Trustee), (incorporated by
    reference to Exhibit 4.1 to ACEPs Form S-4 (SEC
    File No. 333-118149), filed on August 12, 2004).
|        | 10 | .2  |  | Form of ACEP and ACEP Finance 7.85% Note (incorporated by
    reference to Exhibit 4.10 to AREPs Form 10-Q for
    the quarter ended June 30, 2004 (SEC File No. 1-9516),
    filed on August 9, 2004).                                                                                                                                                                                                                                   
|        | 10 | .3  |  | Registration Rights Agreement, dated as of January 29,
    2004, among ACEP, ACEP Finance, the guarantors party thereto and
    Bear, Stearns & Co. Inc. (incorporated by reference to
    Exhibit 4.4 to ACEPs Form S-4 (SEC File
    No. 333-118149), filed on August 12, 2004).                                                                                                                                                        
|        | 10 | .4  |  | Amended and Restated Agency Agreement (incorporated by reference
    to Exhibit 10.12 to AREPs Form 10-K for the year
    ended December 31, 1994 (SEC File No. 1-9516), filed
    on March 31, 1995).                                                                                                                                                                                                                                    
|        | 10 | .5  |  | Service Mark License Agreement, by and between Becker Gaming,
    Inc. and Arizona Charlies, Inc., dated as of
    August 1, 2000 (incorporated by reference to ACEPs
    Form 10-K (SEC File No. 333-118149), filed on
    March 16, 2005.).                                                                                                                                                                                            

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|        |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    
|Index   |    |    
|        |    |    
|        | 10 | .6  |  | Management Agreement, dated September 12, 2001, by and
    between National Energy Group and NEG Operating LLC
    (incorporated by reference to Exhibit 99.4 to National
    Energy Groups Form 8-K (SEC File No. 000-19136),
    filed on September 27, 2001).                                                                                                                                                                                                                                                                                                 
|        | 10 | .7  |  | Pledge Agreement and Irrevocable Proxy, dated December 29,
    2003, made by National Energy Group in favor of Bank of Texas,
    N.A. (incorporated by reference to Exhibit 10.3 of National
    Energy Groups Form 8-K (SEC File No. 000-19036),
    filed on January 14, 2004).                                                                                                                                                                                                                                                                               
|        | 10 | .8  |  | Credit Agreement, dated as of January 29, 2004, by and
    among ACEP, certain subsidiaries of ACEP, the several lenders
    from time to time parties thereto and Bear Stearns Corporate
    Lending Inc., as Syndication Agent and Administrative Agent
    (incorporated by reference to Exhibit 10.1 to ACEPs
    Form S-4 (SEC File No. 333-118149), filed on
    August 12, 2004).                                                                                                                                                                         
|        | 10 | .9  |  | First Amendment to Credit Agreement, dated as of
    January 29, 2004 by and among ACEP, as the Borrower,
    certain subsidiaries of the Borrower, as Guarantors, The Several
    Lenders, Bear Stearns Corporate Lending Inc. as Syndication
    Agent, and Bear Stearns Corporate Lending Inc., as
    Administrative Agent, dated as of May 26, 2004, Bear,
    Stearns & Co. Inc., as Sole Lead Arranger and Sole
    Bookrunner (incorporated by reference to Exhibit 10.6 to
    ACEPs Form S-4 (SEC File No. 333-118149), filed
    on October 12, 2004).
|        | 10 | .10 |  | Pledge and Security Agreement, dated as of May 26, 2004, by
    and among ACEP, ACEP Finance, certain subsidiaries of ACEP and
    Bear Sterns Corporate Lending Inc. (incorporated by reference to
    Exhibit 10.2 to ACEPs Form S-4 (SEC File
    No. 333-118149), filed on August 12, 2004).                                                                                                                                                                                                                                                                 
|        | 10 | .11 |  | Management Agreement, dated November 16, 2004, by and
    between National Energy Group and Panaco, Inc.
    (Panaco) (incorporated by reference to
    Exhibit 10.13 to National Energy Groups
    Form 10-Q (SEC File No. 000-19136), filed on
    November 15, 2004).                                                                                                                                                                                                                                                                                       
|        | 10 | .12 |  | Management Agreement, dated August 28, 2003, by and between
    National Energy Group and TransTexas Gas Corporation
    (TransTexas) (incorporated by reference to
    Exhibit 10.1 to National Energy Groups Form 8-K
    (SEC File No. 000-19136), filed on September 10, 2003).                                                                                                                                                                                                                                                                            
|        | 10 | .13 |  | Purchase Agreement for Notes Issued by TransTexas, dated
    December 6, 2004, by and between Thornwood Associates LP
    (Thornwood) and AREP Oil & Gas (now known
    as NEG Oil & Gas) (incorporated by reference to
    Exhibit 99.1 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on December 10, 2004.                                                                                                                                                                                                                                              
|        | 10 | .14 |  | Assignment and Assumption Agreement, dated December 6,
    2004, by and between Thornwood and AREP Oil & Gas (now
    known as NEG Oil & Gas) (incorporated by reference to
    Exhibit 99.2 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on December 10, 2004).                                                                                                                                                                                                                                                                                           
|        | 10 | .15 |  | Membership Interest Purchase Agreement, dated as of
    December 6, 2004, by and among AREP Oil & Gas (now
    known as NEG Oil & Gas), Amos Corp., High River and
    Hopper Investments LLC (incorporated by reference to
    Exhibit 99.3 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on December 10, 2004).                                                                                                                                                                                                                                           
|        | 10 | .16 |  | Assignment and Assumption Agreement, dated December 6,
    2004, by and among AREP Oil & Gas (now known as NEG
    Oil & Gas), Arnos Corp., High River and Hopper
    Investments LLC (incorporated by reference to Exhibit 99.4
    to AREPs Form 8-K (SEC File No. 1-9516), filed
    on December 10, 2004).                                                                                                                                                                                                                                                   
|        | 10 | .17 |  | Amended and Restated Oil & Gas Term Loan Agreement by
    and among Thornwood and TransTexas, Galveston Bay Pipeline
    Company and Galveston Bay Processing Corporation and Thornwood,
    dated August 28, 2003 (incorporated by reference to
    Exhibit 99.5 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on December 10 2004).                                                                                                                                                                                                                       
|        | 10 | .18 |  | Amended and Restated Security and Pledge Agreement, dated August
    2003, by and among TransTexas, Galveston Bay Pipeline Company,
    Galveston Bay Processing Corporation and Thornwood (incorporated
    by reference to Exhibit 99.6 to AREPs Form 8-K
    (SEC File No. 1-9516, filed on December 10, 2004).                                                                                                                                                                                                                                               

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|        |    |     |  |                                                                                                                                                                                                                                                                                                                                      
|------- | -- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    
|Index   |    |    
|        |    |    
|        | 10 | .19 |  | Term Loan and Security Agreement among Panaco, Mid River LLC and
    Lenders Named Therein, dated as of November 16, 2004
    (incorporated by reference to Exhibit 99.7 to AREPs
    Form 8-K (SEC File No. 1-9516), filed on
    December 10, 2004).                                                                              
|        | 10 | .20 |  | Note Purchase Agreement, dated as of December 27,
    2004, by and among AREP Sands Holding LLC, Barberry Corp., and
    Cyprus, LLC (incorporated by reference to Exhibit 99.1 to
    AREPs Form 8-K (SEC File No. 1-9516, filed on
    December 30, 2004).                                                                        
|        | 10 | .21 |  | Amendment No. 1, dated as of May 23, 2005, to the
    Purchase Agreement, dated January 21, 2005, by and among
    AREP, as Purchaser, and Cyprus, LLC as seller (incorporated by
    reference to Exhibit 99.1 to Form 8-K (SEC File
    No. 1-9516) filed on May 27, 2005).                                                        
|        | 10 | .22 |  | Membership Interest Purchase Agreement, dated January 21,
    2005, by and among AREP as Purchaser and Gascon Partners, as
    Seller (incorporated by reference to Exhibit 99.1 to
    AREPs Form 8-K (SEC File No. 1-9516) filed on
    January 27, 2005).                                                                        
|        | 10 | .23 |  | Agreement and Plan of Merger, dated January 21, 2005, by
    and among National Onshore LP, Highcrest Investors Corp. and
    TransTexas Gas Corporation (incorporated by reference to
    Exhibit 99.2 to AREPs Form 8-K (SEC File
    No. 1-9516) filed on January 27, 2005).                                                     
|        | 10 | .24 |  | Agreement and Plan of Merger, dated January 21, 2005, by
    and among National Onshore LP, Highcrest Investors Corp., Amos
    Corp., AREP and Panaco, Inc. (incorporated by reference to
    Exhibit 99.3 to AREPs Form 8-K (SEC File
    No. 1-9516) filed on January 27, 2005).                                                 
|        | 10 | .25 |  | Purchase Agreement, dated January 21, 2005, by and among
    AREP, as Purchaser, and Cyprus, LLC as Seller (incorporated by
    reference to Exhibit 99.4 to AREPs Form 8-K (SEC
    File No. 1-9516) filed on January 27, 2005).                                                                                                   
|        | 10 | .26 |  | Registration Rights Agreement, dated February 7, 2005,
    among AREP, AREP Finance, AREH and Bear, Steams & Co.
    Inc. (incorporated by reference to Exhibit 4.11 to
    AREPs Form 8-K (SEC File No. 1-9516), filed on
    February 10, 2005).                                                                                  
|        | 10 | .27 |  | Indenture, dated as of February 7, 2005, among AREP, AREP
    Finance and AREH, as Guarantor, and Wilmington Trust Company, as
    Trustee (incorporated by reference to Exhibit 4.9 to
    AREPs Form 8-K (SEC File No. 1-9516), filed on
    February 10, 2005).                                                                  
|        | 10 | .28 |  | Form of AREP and AREP Finance
    71/8% Senior Note due 2013 (incorporated by reference to
    Exhibit 4.10 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on February 10, 2005).                                                                                                                                               
|        | 10 | .29 |  | Indenture, dated as of May 12, 2004, among AREP, AREP
    Finance, AREH, as guarantor and Wilmington Trust Company, as
    Trustee (incorporated by reference to Exhibit 4.1 to
    AREPs Form S-4 (SEC File No. 333-118021), filed
    on August 6, 2004).                                                                         
|        | 10 | .30 |  | Form of
    81/8% Senior Note due 2012 (incorporated by reference to
    Exhibit 4.1 to AREPs Form S-4 (SEC File
    No. 333-118021), filed on August 6, 2004).                                                                                                                                                                     
|        | 10 | .31 |  | Registration Rights Agreement, dated as of May 12, 2004,
    among AREP, AREP Finance, AREH and Bear, Steams & Co.
    Inc. (incorporated by reference to Exhibit 4.3 to
    AREPs Form S-4 (SEC File No. 333-118021), filed
    on August 6, 2004).                                                                                
|        | 10 | .32 |  | Credit Agreement, dated as of December 20, 2005, with
    Citicorp USA, Inc., as Administrative Agent, Bear Stearns
    Corporate Lending Inc., as Syndication Agent, and other lender
    parties thereto. (incorporated by reference to Exhibit 10.1
    to AREPs Form 8-K (SEC File No. 1-9516), filed
    on December 22, 2005).
|        | 10 | .33 |  | Security Agreement, dated as of December 20, 2005, from the
    Guarantors referred to therein to Citicorp USA, Inc., as
    Administrative Agent. (incorporated by reference to
    Exhibit 10.2 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on December 22, 2005).                                                         
|        | 10 | .34 |  | Guaranty, dated as of December 20, 2005, from the
    guarantors named therein and the Additional Guarantors referred
    to therein in favor of the Guaranteed Parties referred to
    therein. (incorporated by reference to Exhibit 10.3 to
    AREPs Form 8-K (SEC File No. 1-9516), filed on
    December 22, 2005).           

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|        |    |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | -- | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    
|Index   |    |    
|        |    |    
|        | 10 | .35 |  | Amended and Restated Credit Agreement, dated as of
    December 20, 2005, among NEG Operating LLC, as the
    Borrower, AREP Oil & Gas LLC (now known as NEG
    Oil & Gas), as the Lender, AREP Oil & Gas LLC,
    as Administrative Agent for the Lender, and Citicorp USA, Inc.,
    as Collateral Agent for the Lender and the Hedging
    Counterparties. (incorporated by reference to Exhibit 10.4
    to AREPs Form 8-K (SEC File No. 1-9516), filed
    on December 22, 2005).
|        | 10 | .37 |  | Equity Commitment Agreement, dated June 23, 2005, by and
    among WS Textile Co., Inc., Textile Holding Real Estate Holdings
    Limited Partnership and Aretex LLC (incorporated by reference to
    Exhibit 10.2 to AREPs Form 8-K (SEC File
    No. 1-9516), filed on July 1, 2005).                                                                                                                                                                                               
|        | 10 | .38 |  | Rights Offering Sponsor Agreement, dated June 23, 2005, by
    and between WS Textile Co., Inc. and AREH (incorporated by
    reference to Exhibit 10.3 to AREPs Form 8-K (SEC
    File No. 1-9516), filed on July 1, 2005).                                                                                                                                                                                                                                                           
|        | 10 | .41 |  | Agreement and Plan of Merger dated December 7, 2005, by and
    among American Real Estate Partners Oil & Gas LLC,
    National Energy Group, Inc., NEG IPOCO, Inc. (now known as NEG,
    Inc.), a corporation wholly owned by AREH (as thereafter
    defined), and, solely for purposes of Sections 3.2,3.3 and
    4.16 of the Agreement, AREH (incorporated by reference to
    Exhibit 10.1 to AREPs Form 8-K (SEC File
    No. 001-09516), filed on December 7, 2005).          
|        | 10 | .42 |  | Undertaking, dated November 20, 1998, by Starfire Holding
    Corporation, for the benefit of AREP and its subsidiaries
    (incorporated by reference to Exhibit 10.42 to AREPs
    Form 10-K for the year ended December 2005 (SEC File
    No. 1-9516, filed March 16, 2006).                                                                                                                                                                                                       
|        | 14 | .1  |  | Code of Business Conduct and Ethics (incorporated by reference
    to Exhibit 99.2 to AREPs Form 10-Q for the
    quarter ended September 30, 2004 (SEC File
    No. 1-9516), filed on November 9, 2004).                                                                                                                                                                                                                                                                              
|        | 21 |     |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 31 | .1  |  | Certification of Principal Executive officer pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                          
|        | 31 | .2  |  | Certification of Principal Financial officer pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                          
|        | 32 | .1  |  | Certification of Principal Executive officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                             
|        | 32 | .2  |  | Certification of Principal Financial officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                             
|        | 99 | .1  |  | Corporate Governance Guidelines (incorporated by reference to
    Exhibit 99.1 to AREPs Form 10-Q for the Quarter
    ended September 30, 2005 (SEC File No. 001-09516),
    filed November 14, 2005.                                                                                                                                                                                                                                                                                  

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SIGNATURES






| |                                          
| | -----------------------------------------
| | American Real Estate
    Holdings        
| | Limited Partnership                      
|
| | By: American Property
    Investors, Inc.
| | General
    Partner                      

Date: March 31,
2006


| |     |                     
| | --- | --------------------
| | By: | /s/ Keith A. Meister

| |                                
| | -------------------------------
| |                                
| | Keith A. Meister,              
| | Principal Executive Officer and
| | Vice Chairman of the Board     



|                                                     |  |                                                                                              |  |                |  | 
|---------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                            |  | Title                                                                                        |  | Date          
|                                                     |  |                                                                                              |  |               
|                                                    
|/s/ Keith A. Meister(Keith A. Meister)               |  | Principal Executive Officer and Vice Chairman of the Board
    (Principal Executive Officer) |  | March 31, 2006
|                                                    
|/s/ Jon F. Weber(Jon F. Weber)                       |  | President and Chief Financial Officer (Principal Financial
    Officer)                      |  | March 31, 2006
|                                                    
|/s/ Adrian Tannian(Adrian Tannian)                   |  | Chief Accounting Officer (Principal Accounting Officer)                                      |  | March 31, 2006
|                                                    
|/s/ Carl C. Icahn(Carl C. Icahn)                     |  | Chairman of the Board                                                                        |  | March 31, 2006
|                                                    
|/s/ William A.
    Leidesdorf(William A. Leidesdorf) |  | Director                                                                                     |  | March 31, 2006
|                                                    
|/s/ James L. Nelson(James L. Nelson)                 |  | Director                                                                                     |  | March 31, 2006
|                                                    
|/s/ Jack G. Wasserman(Jack G. Wasserman)             |  | Director                                                                                     |  | March 31, 2006

152