UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2007.ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  to
 .Commission File No. 000-30578


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MAGNA ENTERTAINMENT CORP.(Exact name of registrant as specified in its charter)

|Delaware(State or Other Jurisdiction of Incorporation or Organization) 337 Magna Drive
Aurora, Ontario, Canada(Address of Principal Executive Offices) |  | 98-0208374(I.R.S. Employer Identification No.) L4G 7K1(Zip Code)
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------
|                                                                                                                                                       |  |                                                                 
|Securities registered pursuant to Section 12(b) of the Act:                                                                                           
|                                                                                                                                                       |  |                                                                 
|Title of each class                                                                                                                                    |  | Name of each exchange on which registered                       
|Class A Subordinate Voting Stock                                                                                                                       |  | NASDAQ Global Market                                            
|                                                                                                                                                       |  |                                                                 
|Securities registered pursuant to Section 12(g) of the Act: None                                                                                      

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o
No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
o No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "accelerated filer", and "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one). Large accelerated filer
o Accelerated Filer ý Non-accelerated
Filer o (Do not check if a smaller reporting company) o Smaller reporting company
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes
o No ý



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As of June 30, 2007, the aggregate market value of the Class A Subordinate Voting Stock held by non-affiliates of the registrant was approximately
$143,839,197 (based on the closing sale price of $2.92 per share of Class A Subordinate Voting Stock reported on The Nasdaq Global Market on June 30, 2007, the last day of the
registrant's most recently completed second quarter). As of June 30, 2007, non-affiliates held no shares of Class B Stock. There is no active market for such stock.

The
number of shares of Class A Subordinate Voting Stock of the registrant outstanding as of March 10, 2008 was 58,158,887.

The
number of shares of Class B Stock of the registrant outstanding as of March 10, 2008 was 58,466,056.

Documents Incorporated by Reference

Portions of the registrant's definitive proxy statement (our "Proxy Statement") to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the registrant's fiscal year end of December 31, 2007 are incorporated by reference in Parts II and III of this Annual Report to the
extent stated herein. Except with respect to information specifically incorporated by reference in this Annual Report, the documents incorporated by reference are not deemed to be filed as
part hereof.

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INDEX

|                                                                                                                     |  | Page
|-------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I                                                                                                               |  | 4   
|Item 1. Business                                                                                                     |  | 4   
|Item 1A. Risk Factors                                                                                                |  | 35  
|Item 1B. Unresolved Staff Comments                                                                                   |  | 51  
|Item 2. Properties                                                                                                   |  | 51  
|Item 3. Legal Proceedings                                                                                            |  | 51  
|Item 4. Submission of Matters to a Vote of Security Holders                                                          |  | 52  
|PART II                                                                                                              |  | 53  
|Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 53  
|Item 6. Selected Financial Data                                                                                      |  | 54  
|Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 57  
|Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                                  |  | 87  
|Item 8. Financial Statements and Supplementary Data                                                                  |  | 88  
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 142 
|Item 9A. Controls and Procedures                                                                                     |  | 142 
|Item 9B. Other Information                                                                                           |  | 144 
|PART III                                                                                                             |  | 144 
|Item 10. Directors and Executive Officers of the Registrant                                                          |  | 144 
|Item 11. Executive Compensation                                                                                      |  | 144 
|Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              |  | 144 
|Item 13. Certain Relationships and Related Transactions                                                              |  | 144 
|Item 14. Principal Accountant Fees and Services                                                                      |  | 144 
|PART IV                                                                                                              |  | 145 
|Item 15. Exhibits and Financial Statement Schedules                                                                  |  | 145 
|SIGNATURES                                                                                                           |  | 146 
|EXHIBIT INDEX                                                                                                        |  | 147 

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Part I

Item 1. Business

Available Information

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K with the Securities and Exchange Commission ("SEC"). You may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NW,
Washington, DC 20549. You may obtain information on the hours of operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

We
maintain a website that contains information about us, none of which is incorporated by reference in, or shall be deemed included in, this Annual Report. It is accessible at www.magnaentertainment.com.
Through our website, stockholders and the general public may access free of charge (other than any connection charges from
internet service providers) our SEC filings, including this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K and amendments to these reports, as soon as reasonably practicable after filing. Information contained in or otherwise accessed through our website does not form
part of this Annual Report. Any reference to our website is an inactive textual reference only.

In
this Annual Report, when we use the terms "we", "us", "our", "MEC" and the "Company", we are referring to Magna Entertainment Corp., the Registrant, and its subsidiaries, unless the
context otherwise
requires. In this Annual Report, unless stated otherwise, all references to "$" are to U.S. dollars and all references to "Cdn. $" are to Canadian dollars.

Special Note Regarding Forward-Looking Information

This Annual Report on Form 10-K contains "forward-looking statements" within the meaning of applicable securities legislation, including
Section 27A of the Securities Act, Section 21E of the Exchange Act and theSecurities Act(Ontario). These forward-looking statements are
made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and theSecurities Act(Ontario). Please see
"Management's Discussion and Analysis of Results of Operations and Financial Position  Forward-looking Statements" for commentary applicable to all
forward-looking statements contained in this Annual Report.

Incorporation and Corporate Structure

We were incorporated on March 4, 1999 under the laws of the State of Delaware as MI Venture Inc. Our certificate of incorporation was amended by a
certificate of amendment on August 30, 1999 to reclassify our Common Stock into Class A Common Stock and to add a new class of stock designated as Class C Common Stock. Our
certificate of incorporation was further amended on November 4, 1999 to change our name to MI Entertainment Corp., add share provisions for our Class A Subordinate Voting Stock and
Class B Stock, and reclassify and subdivide our issued and outstanding Class C Common Stock into Class B Stock. Our certificate of incorporation was further amended on
January 26, 2000 to change our name to Magna Entertainment Corp. Our certificate of incorporation was further amended on February 29, 2000 to broaden our corporate purpose, clarify the
attributes of our Class A Subordinate Voting Stock and Class B Stock, and implement our Corporate Constitution. Subsequently, our certificate of incorporation was restated on
March 1, 2000 to consolidate all prior amendments.

Our
registered office is located at 1209 Orange Street, Wilmington, Delaware, 19801 and our principal executive office is located at 337 Magna Drive, Aurora, Ontario,
Canada L4G 7K1.

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Our Business

We own horse racetracks in California, Florida, Maryland, Texas, Oklahoma, Ohio, Oregon and Ebreichsdorf, Austria. In addition, we operated a racetrack in
Michigan until November 2007 and, under a management agreement, operate a racetrack in Pennsylvania that we previously owned. Based on revenues, MEC is North America's number one owner and
operator of horse racetracks, and is a leading supplier, via simulcasting, of live racing content to the growing inter-track, off-track and account wagering markets. We currently operate
or manage seven thoroughbred racetracks, one standardbred (harness racing) racetrack and two racetracks that run both thoroughbred and quarterhorse meets, as well as the simulcast wagering venues at
these tracks. Also, we previously managed the thoroughbred and standardbred meets at Magna Racino, but now expect that a local operator will manage future meets at that facility. Three of
the racetracks owned or operated by us (Gulfstream Park, Remington Park and Magna Racino), include casino operations with alternative gaming machines. In addition, we operate
off-track betting facilities, a United States national account wagering business known as XpressBet®, which permits customers to place wagers by telephone and over the
Internet on horse races at over 100 North American racetracks and internationally on races in Australia, South Africa, Dubai, Germany, the United Kingdom and Hong Kong, and a European
account wagering service known as MagnaBet. Under a series of March 2007 agreements with Churchill Downs Incorporated ("Churchill Downs" or "CDI"), we own a 50% interest in a joint
venture, TrackNet Media Group, LLC ("TrackNet Media"), the content management company formed for distribution of the full breadth of MEC's horse racing content. In addition to making horse
racing content available for both MEC and CDI, it also makes such content available for third parties, including racetracks, off-track betting facilities, casinos and advance deposit
wagering companies, and purchases horse racing content from third parties to be made available through CDI's and MEC's respective outlets. The TrackNet Media arrangement also involves the exchange by
MEC and CDI of their respective horse racing signals such that Churchill Downs racing content is available for wagering through MEC-owned tracks and simulcast-wagering facilities and
through our advance deposit wagering platform, XpressBet®, and our racing content is similarly available for wagering through CDI tracks and off-track betting facilities and
through CDI-owned advance deposit wagering platforms. A separate joint venture with Churchill Downs also involves the ownership by MEC and CDI of equal (50%) shares in HorseRacing
TV ("HRTV"), a television network focused on horse racing that we initially launched on the Racetrack Television Network ("RTN"). HRTV is currently distributed
to more than 15 million cable and satellite TV subscribers. RTN, in which we have a minority interest, was formed to telecast races from our racetracks and other racetracks to paying
subscribers, via private direct to home satellite. We also own AmTote International, Inc. ("AmTote"), a provider of totalisator services to the pari-mutuel industry. To support
certain of our thoroughbred racetracks, we own and operate thoroughbred training centers in Palm Beach County, Florida and in the Baltimore, Maryland area and, under a lease agreement, operate an
additional thoroughbred training center situated near San Diego, California. We also own and operate production facilities in Austria and in North Carolina for StreuFex, a straw-based
horse bedding product.

We
own all the land on which our racetracks are located, with the exception of Lone Star Park at Grand Prairie, Remington Park and Portland Meadows (in which we own a minority
interest in the land). In December 2007, we re-acquired the land upon which Great Lakes Downs is located and that land has been listed for sale in connection with our debt
elimination efforts.

At
December 31, 2007, in addition to our racetracks, our real estate portfolio includes a residential development in Austria. We are also working with potential developers and
strategic partners on proposals for developing leisure and entertainment or retail-based projects on excess lands surrounding, or adjacent to, certain of our premier racetracks. We entered into a
Limited Liability Company Agreement with Forest City
Enterprises, Inc. ("Forest City") concerning the proposed development of "The Village at Gulfstream Park", a mixed-use retail, entertainment and residential project on
a portion of the Gulfstream Park property. The Limited Liability Company Agreement also contemplated additional agreements, including a ground lease, a reciprocal easement agreement, a development
agreement, a leasing agreement and a management agreement which were executed upon satisfaction of certain conditions. We have also entered into definitive operating agreements with certain affiliates
of Caruso Affiliated regarding the proposed mixed use development of approximately 51 acres surrounding Santa Anita Park, though construction has not yet proceeded due to a legal challenge from
a neighboring developer. See "Our Strategy  Developing Our Significant Real Estate Assets".

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In
recent years, particularly since mid-2004, there has been much activity impacting the proposed passage of legislation that would permit our racetracks to offer alternative
gaming, such as slot machines, video lottery terminals and other forms of non-pari-mutuel gaming. A March 2005 referendum having a direct impact on our plan to provide
alternative gaming at Gulfstream Park was held in Broward County, in which that track is located. The referendum resulted in voters approving the authorization of slot machines in the county and, in
respect of a challenge to the validity of the referendum, a lower court decision granted summary judgment in favor of "Floridians for a Level Playing Field" ("FLPF"), a group in which Gulfstream Park
is a member. However, an August 2006 Florida First District Court of Appeals decision ruled that a trial is necessary to determine whether the constitutional amendment adopting the slots
initiative was invalid because the petitions bringing the initiative forward did not contain the minimum number of valid signatures. Though FLPF pursued various procedural options in response to the
First District Court of Appeals decision, the Florida Supreme Court ruled in late September 2007 that the matter was not procedurally proper for consideration by the court. That ruling
effectively remanded the matter to the trial court for a trial on the merits, which will likely take an additional year or more to fully develop and could take as many as three years to achieve a full
factual record and trial court ruling for an appellate court to review. Notwithstanding the status of the FLPF litigation, new July 2007 Florida legislation (i) clarified Florida Slot
Machine Act provisions regarding on-site availability of automated teller machines, check cashing services and hours of operations, as well as the permitted number of slot machines, which
was increased, and (ii) addressed the activities of card rooms, specifically the permitted hours of operations, bet limits, prizes and jackpot payouts, and the types of permitted card games.
Under legislation that was approved by the citizens of the State of Oklahoma in a referendum held in November 2004, Remington Park is permitted to operate electronic gaming machines. Initially
permitted to offer 650 gaming machines, Remington Park is entitled to install an additional 50 electronic gaming machines on each of the third and fifth anniversaries of the gaming
license, which would bring the total number of electronic gaming machines to 750. For additional information on our alternative gaming efforts and the impact of legislative changes and judicial
decisions, see "Our Properties".

In
February 2006, we announced the formation of PariMax, Inc. ("PariMax"), a new company to oversee the development of our various electronic distribution platforms
including XpressBet®, HRTV (in which we now have a 50% interest), MagnaBet, RaceONTV and AmTote. The recently formed TrackNet Media joint
venture with Churchill Downs is also in the purview of PariMax.

We
have also continued to increase the international aspect of our business. In the more traditional, licensed betting office market, since March 2006 one of our Austrian
subsidiaries has been operating a service with
Ladbrokes which provides U.S. horse racing to the Ladbrokes Xtra service in Britain and Ireland. Ladbrokes Xtra currently serves approximately 2,000 Ladbrokes shops in the U.K. and
Ireland. In 2007, we extended our relationship with Satellite Information Services (SIS), to continue to provide selected U.S. horse races to all of the approximately 10,000 betting
shops in the U.K. and Ireland through 2009. In January 2008 one of our subsidiaries entered into simulcast agreements with each of International Betting Association Ltd., the owner of
Bet 3000, the largest bookmaker chain in Germany, and Pferdewetten, de GmbH, the largest horse racing account wagering company in Germany.

2007
was a challenging year for MEC. Although revenues from continuing operations increased by 9.0% to $625.7 million, our net loss increased to $113.8 million from
$87.4 million in 2006, primarily due to increased losses at Gulfstream Park and continued high debt service costs. Also, in 2006 we recognized a $126.4 million gain on sale of intangible
assets related to The Meadows and a write-down of long-lived assets of $88.6 million.

Please
see "Management's Discussion and Analysis of Financial Condition and Results of Operations  Recent Developments and Current Initiatives" for
further information.

Please
see our financial statements under "Financial Statements and Supplementary Data" for financial information concerning our business and segments, including a geographic breakdown
of revenues and information concerning long-lived assets.

Our Strategy

MEC has had a brief history. In its formative years from 1998 to 2002, its focus was on acquiring racetracks and other operations related to the horse racing
industry. As a result, MEC now has a diversified portfolio of

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operations
and assets related to horse racing, as well as casino interests. More recently, particularly since 2005, the Company's strategic focus has shifted in an effort to improve operations and
reduce indebtedness. During 2007, debt elimination became a key objective. We intend to improve the financial situation of the Company by:

Proceeding with Debt Elimination Plan

Following the completion of a strategic review of assets and operations, on September 12, 2007, our Board of Directors approved a debt elimination plan
(the "Plan"), designed to eliminate the Company's net debt by December 31, 2008 by generating funding from: (i) the sale of certain real estate, racetracks and other assets;
(ii) the sale of, or entering into strategic transactions involving, the Company's other racing, gaming and
technology operations; and (iii) a possible future equity issuance. We also arranged for $100.0 million of funding to address immediate liquidity concerns and provide sufficient time to
implement the Plan. This funding was comprised of: (i) a $20.0 million private placement of Class A Subordinate Voting Stock ("Class A Stock") to Fair Enterprise Limited
("Fair Enterprise"), a company that forms part of an estate planning vehicle for the family of Frank Stronach, MEC's Chairman and Interim Chief Executive Officer (the "Fair Enterprise Private
Placement"); and (ii) a short-term bridge loan facility of up to $80.0 million (the "Bridge Loan") with a subsidiary of our controlling shareholder, MI
Developments Inc. ("MID"). Although we continue to implement the Plan, since the adoption of the Plan, weakness in the U.S. real estate and credit markets has adversely impacted our
ability to execute the Plan as market demand for our assets has been weaker than expected and financing for potential buyers has become more difficult to obtain. These conditions have not abated
through the date of this Report, with the result that it will take us longer to execute the Plan than originally anticipated. As a result, we will likely need to seek extensions from existing lenders
and additional funds in the short-term from one or more possible sources. The availability of such extensions and additional funds is not assured and, if available, the terms thereof are
not determinable at this time. Refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations  Long-term and related
party debt" for further details of the terms of the Bridge Loan, including the security granted, and the Gulfstream Park and Remington Park project financings.

The
Plan contemplates selling certain real estate properties, including those situated in the following locations: Dixon, California; Ocala, Florida; Aventura and Hallandale, Florida,
both adjacent to Gulfstream Park; Porter, New York; Anne Arundel County, Maryland, adjacent to Laurel Park; and Ebreichsdorf, Austria, adjacent to the Magna Racino. We have
initiated an active program to sell the Dixon and Ocala real estate properties and have listed both of these properties for sale with a real estate broker. The Porter lands, which comprise three
parcels of land, have been sold. The sale of one parcel closed in December 2007 and sales of the remaining two parcels closed in early January 2008. The sale of these properties
generated net proceeds of approximately $1.7 million, net of transaction costs, which was used to repay a portion of the Bridge Loan subsequent to December 31, 2007. We recognized an
impairment charge of $1.3 million in 2007 in relation to the Porter Lands. On December 21, 2007, MEC entered into an agreement to sell 225 acres of excess real estate located in
Ebreichsdorf, Austria to a subsidiary of Magna International Inc. ("Magna") for a purchase price of 20.0 million Euros (approximately $29.4 million), subject to customary closing
adjustments. The closing of the transaction is expected to occur during the first quarter of 2008 following the satisfaction of customary closing conditions including the receipt of all necessary
regulatory approvals. We are required to use Euros 7.5 million of the net proceeds to repay a portion of a Euros 15.0 million term loan facility and the remaining portion of the net
proceeds is required to be used to repay a portion of the Bridge Loan.

We
also intend to explore the sale of our membership interests in the mixed-use developments at Gulfstream Park in Florida and Santa Anita Park in California that we are
pursuing under joint venture arrangements with Forest City and Caruso Affiliated, respectively.

The
racetracks that we intend to sell include: Great Lakes Downs in Michigan, Remington Park in Oklahoma, Thistledown in Ohio and our interest in Portland Meadows in Oregon. We ceased
racing at Great Lakes Downs on November 4, 2007 and listed the property for sale with a real estate broker in October 2007. In September 2007, we engaged a U.S. investment
bank, recognized as an experienced advisor in the gaming industry, to assist in soliciting potential purchasers and manage the sale process for certain assets and in October 2007, the
U.S. investment bank began marketing Remington Park and Thistledown for sale. In

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November 2007,
we initiated an active program to locate a buyer and began marketing our interest in Portland Meadows for sale.

We
have also entered into two consulting agreements related to the Plan. Upon completion of a strategic review of the Company by Greenbrook Capital Partners Inc. ("Greenbrook") in
September 2007, we entered into a consulting agreement with Greenbrook under which Greenbrook will assist us with the implementation of the Plan by providing consulting services until
December 12, 2008 (unless terminated earlier). Tom Hodgson, the senior partner of Greenbrook and former President and Chief Executive Officer of the Company (from March 2005 to
March 2006), carried out Greenbrook's strategic review and is responsible for carrying out Greenbrook's obligations under the consulting agreement. We also entered into a September 2007
consulting agreement with our parent company, MID, pursuant to which MID will provide consulting services to our management and Board of Directors in connection with the Plan. We are required to
reimburse MID for its expenses, but there are no fees payable to MID in connection with the consulting agreement. This consulting arrangement may be terminated by either party under certain
circumstances.

Although
we continue to implement our Plan, real estate and credit markets have continued to demonstrate weakness in the first part of 2008. This has reduced the likelihood that we will
be able to complete asset sales at acceptable prices as quickly as originally contemplated. In light of these adverse developments, combined with our upcoming debt maturities and operational funding
requirements, we will likely need to seek extensions or additional funds in the short-term from one or more possible sources. The availability of such extensions or additional funds from
existing lenders, including MID, or from other sources is not assured and, if available, the terms thereof are not determinable at this time. We expect that we will enter into negotiations with such
existing lenders, including MID, with a view to extending, restructuring or refinancing such facilities. There is no assurance that such negotiations, if any, will result in a favorable outcome for
MEC. If we are unable to repay our obligations when due, other current and long-term debt will also become due on demand as a result of cross-default provisions within loan agreements,
unless we are able to obtain waivers or extensions. Unless we are successful in our efforts, we could be required to liquidate assets in the fastest manner possible to raise funds, seek protection
from our creditors in one or more ways or be unable to continue as a going concern. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations  Going Concern" and "Risk Factors  Risks Regarding Our Company" elsewhere in this Report for more information.

We
also intend to explore other strategic transactions involving other racing, gaming and technology operations, including: partnerships or joint ventures in respect of the existing
gaming facility at Gulfstream Park; partnerships or joint ventures in respect of potential alternative gaming operations at certain of our other racetracks that currently do not have gaming
operations; and transactions involving our technology operations, which may include one or more of the assets that comprise our PariMax business.

Further Developing Our In-Home Simulcasting and Wagering Services

In order to advance efforts to increase our overall customer base we formed PariMax. PariMax business units aggregate content from both MEC and
non-MEC racetracks, creating economies of scale as we repackage and deliver this content in compelling formats to various customer segments. We believe this approach will enable us to
cost-effectively present live horse racing action to an increasing number of locations for an increasing number of hours per week, thus growing our reach to new customers and growing
frequency among existing customers. This growth would benefit PariMax, MEC-owned tracks, and non-MEC tracks, which elect to utilize PariMax services. For the domestic,
in-home wagering market, these services include XpressBet®, which offers account wagering on over 100 North American racetracks via the Internet and by telephone.
XpressBet® is complemented by HorseRacing TV, a specialty television network focused on horse racing in which we hold a fifty percent interest. HRTV is
distributed to more than 15 million cable and satellite television subscribers and enables fans to watch live racing content from all over the United States, as well as Australia, South
Africa, Dubai, Germany, the United Kingdom and Hong Kong. We believe that broad television distribution will help increase future interest in horse racing and attract additional wagering customers. At
present, HorseRacing TV is carried on cable in 27 states and is available nationally on Dish Network as well as RTN. In an effort to broaden the audience, reach and
appeal of horse racing and wagering thereon, we are pursuing carriage agreements with additional cable and satellite operators to achieve expanded distribution of HRTV in
North America.

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Our
strategy is to focus on the development of complete wagering solutions and concentrate on serving the global wagering market by developing product lines which meet the needs of both
distribution partners and end consumers worldwide. AmTote provides a variety of wagering interfaces and connectivity products for racetracks, off-track betting operators, and account
wagering providers, both domestically and abroad. For consumers, XpressBet® and MagnaBet are PariMax' account wagering platforms, which provide video streaming and wagering
opportunities to an increasingly international customer base. Consumers are further served by PariMax' investment in the television channel HRTV in the United States.

TrackNet
Media is focused on increasing the amount of money returned to host racetracks and their horsemen from wagering outlets that do not conduct live thoroughbred racing. These
outlets include casinos, account wagering companies, rebate shops, greyhound racetracks, jai-alai frontons, certain off-track betting networks, and international locations.
During the past year, TrackNet Media has been successful in its endeavors to increase the host fees received from certain of these outlets, and it anticipates further success in the year ahead.

In
the area of account wagering, TrackNet Media advocates the broad, non-exclusive distribution of wagering content. We believe this will benefit customers who previously had
to maintain several advance deposit wagering accounts to wager on a wide variety of racing signals, thus increasing the
market size for this wagering content. TrackNet Media believes that many other racetrack operators now share its view that the non-exclusive distribution of account wagering rights is best
for the fans, racetracks and horsemen. Several high profile racing associations that were previously "exclusive" for account wagering purposes have recently decided to distribute their content on a
broad, non-exclusive basis. These racing associations include the New York Racing Association, the New Jersey Sports and Exposition Authority and others.

Enhanced
wagering integrity is another goal for TrackNet Media, which is expected to invest resources to better monitor the entities that haves access to the companies' racing content
and wagering pools. TrackNet Media staff will work closely with domestic and international outlets licensed to simulcast and accept wagers on TrackNet Media-licensed products to ensure that MEC and
CDI signals are being used appropriately and in ways that provide compensation to the horsemen and racetracks that produce the content. Third parties will not be allowed to sublicense TrackNet Media
products to other tracks, off-track betting operators, casinos, rebate shops or advance deposit wagering providers, thereby reducing the risk of horse racing signal piracy and other
integrity issues. This increased ability to control and monitor the use of our content is intended to curtail current business practices employed by entities looking to benefit from our content while
diverting revenues that would otherwise benefit track operators and horsemen.

Through
TrackNet Media, MEC and Churchill Downs will also focus on improving the production quality of their simulcast signals. TrackNet Media will also utilize technological advances to
better promote MEC and CDI racing products as gaming and entertainment options.

Entering New Markets

PariMax oversees the development of new markets for MEC around the world. We currently distribute our content to inter-track and off-track venues in
the United States, Canada, Mexico, South America, the Caribbean, the United Kingdom, Ireland, Germany and Austria.

The
formation of TrackNet Media and the related agreements with Churchill Downs, which has upgraded the assets and capabilities of PariMax, aids our efforts to maintain our presence in
recently entered new markets, as well as potential new markets. The increased wagering integrity presented by TrackNet Media is expected to slow the leakage of revenues to offshore competitors that
would otherwise flow to track operators and horsemen. By exchanging content with Churchill Downs, we will provide consumers in these newer markets, as well as our current customers, with access to a
wider variety of content. While we have made a sizeable increase in the amount of our content available to our customers, the sale of 50% of our interest in HRTV to Churchill Downs has
resulted in operating costs savings.

In
April 2006, we entered into a joint venture agreement with Churchill Downs and Racing UK Limited, a media rights company and subscription television channel owned by thirty
leading British racecourses, to establish Racing World Limited, a company registered in England and Wales. Racing World is a distribution

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vehicle
for account wagering rights and audio-visual signals in the United Kingdom and Ireland in respect of horse racing content from MEC, CDI, and most other North American racetracks. Racing
World also operates a television channel which is available to customers who receive Sky satellite service and subscribe to the Setanta Sports Pack (of which Racing UK is also a member). Racing
World has to date entered into definitive agreements with two account wagering providers to take wagers on Racing World content: RacingUS.com, an affiliate of XpressBet®, and Newcote
Service Limited, which is part of the Victor Chandler Group of Companies and owns www.vcbet.com.

In
the more traditional, licensed betting office market, one of our Austrian subsidiaries has been operating a service with Ladbrokes which provides U.S. horse racing to the
Ladbrokes Xtra service in Britain and Ireland. Ladbrokes Xtra currently serves approximately 2,000 Ladbrokes shops in the U.K. and Ireland. In 2007, we extended our relationship with Satellite
Information Services (SIS), to continue to provide selected U.S. horse races to all of the approximately 10,000 betting shops in the U.K. and Ireland through 2009. We continue to believe
the British and Irish markets have great potential for evening distribution of U.S. product, and our strategy is to continue to explore partnerships that allow us to strategically and
cost-effectively deploy in these markets. We also believe that, subject to applicable regulation, significant opportunities exist to expand the distribution of our content through the
further development of our European and international distribution network. To this end, in January 2008 one of our subsidiaries entered into simulcast agreements with each of International
Betting Association Ltd., the owner of Bet 3000, the largest bookmaker chain in Germany, and Pferdewetten, de GmbH, the largest horse racing account wagering company in Germany.

Improving the Quality of the Entertainment Experience and Facilities at Certain of Our Racetracks

In order to increase our customer base, we intend to improve the quality of the entertainment experience at our racetracks by offering a variety of experiences
with horse racing as the feature attraction. In pursuit of this strategy, we have begun and intend to continue to redevelop and modernize various of our facilities. The 2006 completed redevelopment of
Gulfstream Park, located just outside Miami, Florida, included the construction of new wider and longer racing surfaces, which allows Gulfstream Park to run a longer live racing season and offer
larger field sizes as well as a new grandstand/entertainment facility, each of which permit greater attendance and handle. In addition, Gulfstream Park has a casino offering slot machines and video
poker and has a poker and racing lounge offering no-limit tables and a sports and simulcast area. Gulfstream Park also simulcasts the signal from Calder Race Course. Gulfstream Park offers
customers a number of different dining options and an improved quality of entertainment, including the addition in August 2007 of Christine Lee's, a well known local restaurant with a
37 year history in Southern Florida. We are also partners with Forest City in a joint venture involving the proposed development around Gulfstream Park of The Village at Gulfstream
Park. For details of the operations at Gulfstream Park, including our casino operations and our joint venture with Forest City, see "Our
Properties  Gulfstream Park".

Employing "Best Practice" Improvements at our Racetracks

Through our acquisitions, we own some of the largest and what we believe to be some of the highest-quality thoroughbred racetracks in North America, as measured
in terms of total handle, average daily attendance and average daily wagering, both on and off-track. As the various racetracks acquisitions have resulted in the Company achieving the
desired scale of operations, we have intensified efforts to improve the efficiency of our integrated racetrack operations and related wagering operations. Continued improvement in this area is
expected to afford us the opportunity to both grow our revenues and achieve significant operational synergies through the implementation of best practices, cost reductions realized from economies of
scale and increased efficiencies. The maintenance of the quality of the live racing experience for our customers and horsemen is critical and, in some cases, may require upgrading and expanding our
physical facilities, technology and business processes in order to attract more customers and the best available horses, trainers and jockeys.

Adding Alternative Gaming, if Permitted, at Certain of Our Racetracks

In order to broaden our market appeal and thereby increase attendance and revenues, we intend to pursue alternative gaming opportunities, where available.
Alternative gaming legislation that authorizes slot machines, video lottery terminals or electronic gaming at certain designated locations has been approved in Oklahoma,

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where
our racetrack Remington Park is located, in Pennsylvania, where we operate The Meadows racetrack and Broward County, Florida, where our Gulfstream Park racetrack is located.

Under
legislation which was approved by the citizens of the State of Oklahoma in a referendum held on November 2, 2004, Remington Park is permitted to operate electronic gaming
machines. In November 2005, we opened a gaming facility with 650 electronic gaming machines, the maximum permitted by Oklahoma legislation at that time. We are in the process of adding
an additional 50 machines, as permitted by the enabling legislation which allows for an additional 50 machines on each of the third and fifth anniversaries of the gaming license. See
"Government Regulation  Alternative Gaming  Oklahoma" below.

In
Florida we obtained the licenses necessary to permit the November 2006 opening of the Gulfstream Park slots facility which opened initially with 516 slot machines, and
currently offers approximately 825 machines. Two pieces of July 2007 Florida legislation became effective, which have benefited the operations at Gulfstream Park. First, Florida House Bill
1047 clarified a number of provisions in the Florida Slot Machine Act with respect to the on-site availability of automated teller machines, check cashing services and hours of
operations and increases the number of permitted slot machines. The second, SB 752, is related to card rooms and addresses hours of operations, bet limits, prizes and jackpot payouts, and the types of
permitted card games.

In
November 2007, the Maryland legislature passed legislation to authorize a statewide November 18, 2008 referendum on a constitutional amendment which, if approved, would permit
the installation of slot machines at Laurel Park and would permit Pimlico to share in slots revenue for purposes of purses. Initial indications are that Laurel Park would be permitted to install 4,750
of the total 15,000 slot machines that would be permitted in the state.

Developing Our Significant Real Estate Assets

We have a significant portfolio of high quality real estate located in densely populated urban markets. Included in this real estate portfolio is land adjacent to
several of our racetracks, Santa Anita Park, Gulfstream Park, Golden Gate Fields, Lone Star Park at Grand Prairie, Laurel Park and Magna Racino. We are considering a variety of options
with respect to this land. In addition to the work commenced on the joint venture with Forest City in respect of land adjacent to Gulfstream Park in Florida and the intention to have work proceed on
the joint venture development of approximately 51 acres of undeveloped land adjacent to Santa Anita Park in California in the event we are successful in the face of a neighboring developer's
legal challenge, we are considering other possible development with business partners who could be expected to provide the necessary marketing and development expertise, as well as the necessary
financing.

See
"Proceeding with Debt Elimination Plan" for details of our continued efforts to sell real estate assets and the proceeds from the sales which will be used, primarily, to reduce
our debt.

Technology Leadership

In addition to our continued focus on operating the racetracks we own or manage, we have also endeavored to establish a technology leadership position within the
horseracing industry. By acquiring or developing interests in television channels, an advance deposit wagering platform, AmTote and TrackNet Media, and bringing those electronic distribution platforms
under the purview of PariMax, we have applied a focused approach to technology issues. Since our July 2006 acquisition of all the shares of AmTote, a provider of totalisator services to the
pari-mutuel industry, we have been able to play a greater role in processing wagering transactions. We hope to leverage our technological advancements to continue to increase sales to
others participants in the pari-mutuel industry, both in North America and worldwide.

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Intellectual Property Management

In order to improve the utilization of our investment in the quality racing content being generated from our premier racing facilities and our partnerships with
others who are owners of premier racing facilities, we are undertaking an organized approach to intellectual property management. Our intellectual property ranges from ownership of racing content and
the pari-mutuel racing event that is determined by the race outcome, to the techniques and technology used to process wagers placed on the pari-mutuel racing event. In recent
years we have focused on the creation of alternative pari-mutuel wagering solutions, new wager types that use existing pari-mutuel wagering solutions and exploration in the
development of wagers for non-traditional pari-mutuel wagering events. Acquisition of intellectual property has and will continue to include in-house research and development
and the purchasing of intellectual property developed outside of the Company. Our intellectual property management includes the filing of patents, regular review of patents filed and awarded, review
of the competitive landscape and review of the legislative landscape nationally and internationally.

For
a discussion of the impact various customer-focused agreements with Churchill Downs are expected to have on, among other things, the management of our racing content see "Our
Business" and "Our Strategy  Further Developing Our In-Home Simulcasting and Wagering Services".

Our History

We were incorporated in Delaware on March 4, 1999. In November 1999, Magna, our original parent company and one of the most diversified automotive
parts suppliers in the world, completed a reorganization of its corporate structure, under which Magna's non-automotive businesses and certain real estate assets were transferred to us. As
part of this reorganization, our capital structure was amended to establish two classes of stock: Class A Subordinate Voting Stock, with one vote per share, and Class B Stock, with
20 votes per share.

On
March 10, 2000, Magna distributed to holders of its Class A Subordinate Voting Shares and Class B Shares, by way of a special dividend, approximately
15.7 million shares composed of our Class A Subordinate Voting
Stock and exchangeable shares of MEC Holdings (Canada) Inc. Each exchangeable share was exchangeable by the holder for one share of our Class A Subordinate Voting Stock at any time. The
purpose of these shares was to permit certain Canadian shareholders of Magna that were subject to limitations on their holdings of shares of non-Canadian issuers to receive shares of a
Canadian issuer in the special dividend by Magna described above. On December 30, 2002, all remaining exchangeable shares of MEC Holdings (Canada) Inc., other than those already owned by
us, were purchased by us in exchange for shares of our Class A Subordinate Voting Stock on a one-for-one basis.

On
August 19, 2003, the shareholders of Magna approved the spin off of its wholly-owned subsidiary, MID. As a result of the spin-off transaction, MID acquired Magna's
controlling interest in MEC. MID is a real estate operating company engaged in the ownership, development, management, leasing, acquisition and expansion of industrial and commercial real estate
properties located in Canada, Europe, the United States and Mexico. Virtually all of MID's income-producing properties are under long-term leases to Magna and its subsidiaries.

On
October 29, 2007, the Company completed a $20.0 million private placement of the Company's Class A Subordinate Voting Stock to Fair Enterprise under which Fair
Enterprise was issued 8.9 million shares of Class A Subordinate Voting Stock at a price of $2.25 per share. As a result of the private placement, the percentage of Class A
Subordinate Voting Stock beneficially owned by Fair Enterprise increased from approximately 7.5% to approximately 21.6% of the issued and outstanding Class A Subordinate Voting Stock,
representing approximately 10.8% of the equity of the Company.

As
of February 28, 2008, MID owns, directly or indirectly, all of our outstanding Class B Stock and 4,362,328 shares of our Class A Subordinate Voting Stock. As a result,
MID is able to exercise approximately 96% of the total voting power attached to all of our outstanding stock, and therefore is able to elect all our directors and to control us. Each company has its
own board of directors and management team, although we share the same Chairman. In addition, our Board of Directors has established a committee of independent directors to whom they have delegated
the responsibility of reviewing any proposed related party transactions, including any proposed transactions between us and MID or between us and Magna. Sales or a spin-off or other

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distribution
of our stock by MID or by certain of our other significant stockholders under our registration statements could depress our stock price. See "Risk
Factors  Risks Relating to Our Securities".

Overview of the Horse Racing Industry

Pari-Mutuel Wagering

Pari-mutuel wagering on horse racing is a form of wagering in which wagers on horse races are aggregated in a commingled pool of wagers, called a
mutuel pool, and the payoff to winning customers is determined by both the total dollar amount of wagers in the mutuel pool and the allocation of those dollars among the various kinds of bets. Unlike
casino gaming, the customers bet against each other, and not against the operator, and therefore the operator bears no risk of loss with respect to any wagering conducted. The pari-mutuel
operator retains a pre-determined percentage of the total amount wagered, called the takeout, on each event, regardless of the outcome of the wagering event, and the remaining balance of
the mutuel pool is distributed to the winning customers. Of the percentage retained by the pari-mutuel operator, a portion is paid to the horse owners in the form of purses or winnings,
which encourage the horse owners and their trainers to enter their horses in a track's races. Pari-mutuel wagering on horse racing is the largest form of pari-mutuel wagering,
and it is currently authorized in over 40 states of the United States, all provinces of Canada and approximately 100 other countries around the world.

Recent History

Over the past twenty years live attendance at horse racetracks in the United States has declined substantially due to a number of factors, including the
growth in off-track and account wagering; increased competition from other forms of gaming and leisure entertainment; the attrition of the racing industry's traditional customer base; the
lack of, or deterioration in, the quality of live racing events at many racetracks; and the inability of racetrack operators to broaden the appeal of wagering on horse racing. Declines in live
attendance have resulted in an overall decline in the amount of money wagered on-track on horse racing, which has exacerbated the problem of producing high-quality live
wagering events and in developing entertaining racetrack facilities.

In
the early 1990s, the introduction of off-track and inter-track wagering became more prevalent and reversed the decline in the total amount of dollars wagered on horse
racing. The rise in off-track and inter-track wagering has resulted in an increase in total industry revenues, and the creation of larger pools of wagers on horse races at certain
racetracks. This has more than offset the decline in live on-track wagering due to declining live attendance.

The
early 1990's also saw the advent of a form of pari-mutuel and non-pari-mutuel wagering termed account wagering, or advance deposit wagering.
Account wagering allows subscribers to establish wagering accounts and utilize various interactive platforms, such as the telephone, the Internet and interactive television, to transmit their wagering
information to a designated account wagering operator, which then places wagers on the subscribers' behalf. Account wagering has grown steadily as a convenient and popular wagering option, for both
pari-mutuel and non-pari-mutuel bettors alike. The rising popularity of account wagering serves as both an opportunity for the pari-mutuel wagering
industry to further expand revenues and a challenge to prevent this new wagering platform from further eroding on-track attendance and wagering.

The Growth in Off-track and Inter-track Wagering

Pari-mutuel wagering on thoroughbred horse racing in the United States increased from $12.5 billion in 1997 to $15.2 billion in
2003, before receding to $14.7 billion in 2007, according to The Jockey Club. This overall increase from 1997 resulted primarily from the growth of off-track and inter-track
wagering, which has grown by approximately 33.7% from $9.8 billion in 1997 to $13.1 billion in 2007. The decrease during 2006 and 2007 resulted primarily from an increase in the number
of non-pari-mutuel wagering options available to the general public, including lotteries, casinos and poker. This increased competition is both from on-line options and more
traditional bricks and mortar establishments. Simulcasting live racing events to off-track and inter-track venues has been facilitated by technological advances and the introduction of
legislative changes.

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U.S. Thoroughbred Pari-Mutuel Wagering Handle (in Billions)

|                 |  | 1997 |        | 1998 |   | 1999   |  | 2000 |        | 2001 |   | 2002   |  | 2003 |        | 2004 |   | 2005   |  | 2006 |        | 2007
|---------------- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ----
|Total Handle     |  | $    | 12.542 |      | $ | 13.115 |  | $    | 13.724 |      | $ | 14.321 |  | $    | 14.550 |      | $ | 15.062 |  | $    | 15.180 |     
|On-Track Handle  |  | $    | 2.703  |      | $ | 2.498  |  | $    | 2.359  |      | $ | 2.270  |  | $    | 2.112  |      | $ | 2.029  |  | $    | 1.902  |     
|Off-Track Handle |  | $    | 9.839  |      | $ | 10.617 |  | $    | 11.365 |      | $ | 12.051 |  | $    | 12.438 |      | $ | 13.033 |  | $    | 13.278 |     

Source: Equibase Company LLC; The Jockey Club.

Simulcasting
is the process of transmitting the audio and video signal of a live racing performance, referred to as the content, from one facility to other locations or venues where
wagering on such content is permitted. Simulcast wagering provides racetracks with the opportunity to increase revenues by exporting their live racing content to as many wagering locations as
possible, such as other racetracks, off-track betting facilities and casinos, and by importing racing content and wagering opportunities from other racetracks. Account wagering is a form
of off-track wagering whereby the betting customer establishes a wagering account with an established account wagering provider. The account wagering subscriber uses the balance in the
wagering account to fund wagers processed on the subscriber's behalf by the account wagering provider. Since its inception, account wagering has gained a growing percentage of the dollars wagered
through off-track wagering operators. Account wagering is conducted both by operators based and licensed in the United States, such as our subsidiary, XpressBet, Inc. and by
operators located outside the United States.

Industry
revenues have increased because simulcast wagering, including account wagering, provides racetracks that export their live content with additional customers in multiple
locations who would not have otherwise been able to place wagers on the live racing event. Similarly, simulcast wagering provides operators of wagering venues who import content from other racetracks
with more product upon which their customers can place wagers. Providers of live racing content who export their content to other venues generally charge these venues a percentage of all monies
wagered on their content, while operators of pari-mutuel wagering venues that import racing content retain a
pre-determined percentage of all amounts wagered at their facility on the imported content. Because the competition for time slots is relatively intense, the growth of simulcast wagering
has been particularly beneficial to the operators of premier racetracks, which tend to offer higher quality racing, with larger fields and higher purses. Conversely, operators of smaller or lesser
quality racetracks have historically benefited less from export simulcasting of their content, due to a lack of demand for their content. Part of our strategy involves efforts to broaden the
distribution of, and demand for, the racing content from our smaller tracks. We are pursuing strategies, such as the formation of PariMax, to benefit from this revenue growth opportunity while at the
same time exploring ways to minimize the potential negative effects often associated with non-U.S. companies placing wagers on behalf of U.S. citizens.

We
expect that off-track and inter-track wagering will experience continued growth as additional venues able to import simulcast content are established both domestically and
internationally and new distribution channels for pari-mutuel wagering, such as the telephone, Internet and interactive television, are further developed. With the formation of TrackNet
Media, we have been able to focus more intensely on rationalizing the acquisition and distribution of horse racing content.

Because
of the high quality of our thoroughbred racing content and racetrack properties, we believe we are well positioned to participate in the future growth of off-track,
inter-track and account wagering as both a leading exporter and importer of live racing content, particularly since TrackNet Media has become key to our content acquisition and distribution efforts.

For
a discussion of our recent strategic initiatives related to off-track and inter-track wagering see "Our Business" and "Our
Strategy  Further Developing Our In-Home Simulcasting and Wagering Services".

Our Content

Our racetracks are geographically diversified. Santa Anita Park is near Los Angeles, Gulfstream Park is near Miami, Golden Gate Fields is near San Francisco, Lone
Star Park at Grand Prairie is near Dallas, Pimlico Race Course is in Baltimore, Laurel Park is between Washington, D.C. and Baltimore, Thistledown is near Cleveland, Remington Park is in
Oklahoma City and Portland Meadows is near Portland, Oregon. The Meadows and Maroñas, two racetracks to which we provide management services, are located near Pittsburgh, Pennsylvania
and in Montevideo, Uruguay, respectively. Magna Racino, is located near Vienna, Austria.

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2008 Racing Schedule

As illustrated in the chart below, live racing is offered throughout the year at our racetracks. The racing dates for Santa Anita Park indicated below include The
Oak Tree Meet.

|Racetrack*                      |  | Scheduled Racing Meets                                                                                  
|------------------------------- |  | --------------------------------------------------------------------------------------------------------
|Santa Anita Park                |  | December 26, 2007  April 20, 2008 and September 24, 2008  October 26, 2008                            
|Gulfstream Park                 |  | January 3, 2008  April 20, 2008                                                                        
|Golden Gate Fields              |  | January 3, 2008  February 3, 2008, May 14, 2008  June 22, 2008, September 17, 2008  December 21, 2008
|Laurel Park                     |  | January 1, 2008  April 13, 2008, August 8  20, 2008, September 8, 2008  December 28, 2008            
|Lone Star Park at Grand Prairie |  | April 20, 2008  July 27, 2008 and September 26, 2008  November 29, 2008                               
|Pimlico Race Course             |  | April 13, 2008  June 7, 2008                                                                           
|The Meadows                     |  | January 1, 2008  December 31, 2008                                                                     
|Thistledown                     |  | May 1, 2008  September 29, 2008                                                                        
|Remington Park                  |  | March 7, 2008  June 1, 2008 and August 21, 2008  December 14, 2008                                    
|Portland Meadows                |  | January 1, 2008  March 11, 2008 and October 21, 2008  December 31, 2008                               
|Great Lakes Downs               |  | None                                                                                                    
|Magna Racino                   |  | None, on our own account                                                                                

Our Properties

Set forth below is a description of certain of our properties. See "Our Strategy  Proceeding with Debt Elimination Plan"
for information regarding our intention to sell assets in order to raise funds to repay debt.

Santa Anita Park

Santa Anita Park is situated on approximately 305 acres of land in the City of Arcadia, California, approximately 14 miles northeast of Los Angeles.
Approximately 10.9 million people are located within a 30-mile radius of Santa Anita Park.

Santa
Anita Park opened for thoroughbred horse racing in 1934 and hosts The Santa Anita Meet. The Santa Anita Meet generally commences on December 26 and runs until the end of
April each year. In addition, we lease Santa Anita Park to The Oak Tree Racing Association, which is an unaffiliated not-for-profit California association that holds a license
to host The Oak Tree Meet for five to six weeks each fall. Pursuant to this lease, which was extended in September 2007 until the later of November 30, 2016 or the close of the 2016 Oak
Tree Meet, we receive rent that consists primarily of a percentage of the on-track handle wagered on races run at Santa Anita Park and a percentage of The Oak Tree Racing Association net
commissions from fees earned on racing content, exported from or imported to Santa Anita Park. Santa Anita Park was the site of the Breeders' Cup World Thoroughbred Championships in 2003
during The Oak Tree Meet, as it will be in 2008 and 2009. Santa Anita Park has one of the longest racing schedules of the top North American racetracks, totaling approximately 110 to 116 racing
days each year (including The Oak Tree Meet). Average daily attendance in

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2007
was approximately 9,300 customers per live racing day, representing one of the highest average daily attendance figures of all North American racetracks.

Santa
Anita Park had one of the highest total handles, or total amounts wagered, of all North American racetracks in 2007, approximately $1.335 billion, including wagers made at
Santa Anita Park on its races (including The Oak Tree Meet), wagers made at other wagering venues and through various account wagering operations on Santa Anita Park's races (excluding wagers placed
in Northern California and via account wagering systems licensed to operate in California), and wagers made at Santa Anita Park and its inter-track facilities on imported races. Wagers on Santa Anita
Park's races (including The Oak Tree Meet and all venues at which wagers were placed) totaled approximately $955.3 million in 2007. Of this amount, approximately $790.8 million in wagers
were placed at other wagering venues to which we exported Santa Anita Park's races via simulcast and through various account wagering operations. Santa Anita Park exports its simulcast signal to
approximately 1,000 off-track and inter-track wagering facilities in 23 countries. Throughout the year, Santa Anita Park operates as an inter-track wagering facility where
customers can wager on races that are imported to Santa Anita Park from other racetracks.

Santa
Anita Park's facilities include a large art deco-style grandstand structure with seating for approximately 19,000 customers, as well as standing room for
additional customers, a one-mile oval dirt track as well as a 7/8-mile turf course, stalls for approximately 2,000 horses and parking facilities
sufficient to accommodate approximately 17,000 cars. During the summer of 2007 a synthetic track surface was installed at Santa Anita Park, as mandated by the California Horse Racing Board
("CHRB"). During January and early February 2008, racing was cancelled on 11 days (offset in part by three rescheduled days) because additional work on the track surface was required to
address drainage problems.

In
January 2004, we completed certain renovation and improvement projects that included the opening of Sirona's, a 25,000 square foot sports bar and
restaurant located across from the walking ring. Sirona's operates year-round from an open-air terrace overlooking a seven acre garden paddock.
After-race activities feature a weekly musical concert from its garden stage. Other enhancements include two new customer convenient food service facilities in our front garden, eight high
definition video projection systems in our major betting halls, two LED screens flanking our walking ring, and the extensive landscaping and lighting of our main entry and south parking lot.

In
September 2006, The Santa Anita Companies, Inc. entered into definitive operating agreements with certain Caruso Affiliated affiliates to develop approximately
51 acres of undeveloped lands surrounding Santa Anita Park. This project contemplates a mixed-use development with approximately 800,000 square feet of retail space,
entertainment and restaurants as well as approximately 4,000 parking spaces. After the project was approved by the Arcadia City Council in April 2007, Westfield Corporation
("Westfield"), a developer of a neighboring parcel of land, has challenged the manner in which the entitlement process for the development of the land surrounding Santa Anita Park had been proceeding.
On May 16, 2007, Westfield commenced civil litigation in the Los Angeles Superior Court in an attempt to overturn the Arcadia City Council's approval and granting of entitlements related to the
construction of The Shops at Santa Anita. In addition, on May 21, 2007, Arcadia First! filed a petition against the City of Arcadia to overturn the entitlements and named the Company and
certain of its subsidiaries as real parties in interest. If either Westfield or Arcadia First! is ultimately successful in its challenge, development efforts could potentially be delayed or suspended.
The first hearings on the merits of the petitioners' claims are scheduled to be heard before the trial judge during the third week of April 2008.

Gulfstream Park

Gulfstream Park is located on approximately 250 acres of land in the cities of Hallandale and Aventura, between Miami and Ft. Lauderdale in Florida. There
are approximately 4.3 million people living within a 40-mile radius of Gulfstream Park.

Gulfstream
Park opened in 1939 and for many years, ending in 2001, the annual meet at Gulfstream Park lasted for approximately 63 days between January and March. Beginning in
2002, Gulfstream Park was granted approval to run its meet for approximately 90 days between January and April. The Breeders' Cup, one of the

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preeminent
series of races in the United States, was held at Gulfstream Park in 1989, 1992 and 1999. In 2007, average daily attendance was approximately 5,500 customers per live
racing day.

The
redevelopment of Gulfstream Park, which commenced in 2004, was completed in 2006. The project included significant modifications and enhancements to the racing surfaces and stable
area, including the construction of a new, wider turf course, which was completed prior to the start of the 2005 race meet. The project also included the construction of a modern clubhouse/grandstand
offering an array of restaurants and entertainment facilities. In addition, Gulfstream Park has a casino offering approximately 825 slot machines and video poker and has a poker and racing lounge
offering 20 no-limit tables and a sports and simulcast area. On September 6, 2007, a Florida Supreme Court ruling was issued which allows for cross-simulcasting, subsequent
to which Gulfstream Park, Calder Race Course and the Florida horsemen entered into an agreement permitting Gulfstream Park and Calder Race Course to take simulcast wagering on each other's live cards
as well as on any other signal the live track imports. Gulfstream Park began simulcasting the signal from Calder Race Course on September 22, 2007.

Gulfstream
Park offers customers a number of different dining options and an improved quality of entertainment, including the addition in August 2007 of Christine Lee's a well
known local restaurant with a 37 year history in Southern Florida.

Though
the performance of Gulfstream Park has not met our desired objectives, the implementation of beneficial Florida legislation in July 2007, the favorable
September 2007 Florida Supreme Court decision permitting cross-simulcasting, the opening of Christine Lee's and a Fall 2007 reconfiguration of the casino's first floor are expected to improve
Gulfstream Park's financial performance. For additional information on the Florida legislation and September decision of the Florida Supreme Court, see "Our Strategy" and "Our
Strategy  Adding Alternative Gaming, if permitted, at Certain of Our Racetracks".

Gulfstream
Park had total handle during 2007 of approximately $746.8 million, which includes wagers made at Gulfstream Park on its races, wagers made on Gulfstream Park races at other
wagering venues and through various account wagering operations, and wagers made at Gulfstream Park on races imported to its inter-track facility. Wagers on Gulfstream Park's races totaled
approximately $604.9 million in 2007. Of this amount, approximately $540.8 million in wagers were placed at other wagering venues to which we exported Gulfstream Park's signal and through
various account wagering operations.

We
are also partners with Forest City in a joint venture formed pursuant to a May 2005 Limited Liability Company Agreement. The joint venture contemplates the development of The
Village at Gulfstream Park, a 60-acre master-planned lifestyle destination which will offer shops, destination retailers, signature restaurants, unique entertainment options
and an appealing residential live/work environment. Phase I of the development will include 375,000 square feet of lifestyle retail space, featuring 70 upscale shops,
specialty stores and restaurants and 70,000 square feet of office space. Operating agreements, including a ground lease, a reciprocal easement agreement, a development agreement, a
leasing agreement and a management agreement were executed in connection with the joint venture in due course and the groundbreaking for Phase 1 occurred in June 2007. This phase is
expected to open in the first quarter of 2009. Upon completion, The Village at Gulfstream Park is expected to result in the development of 1,500 condominiums,
750,000 square feet of retail space, 140,000 square feet of office space, a 500-room hotel and a 2,500 seat cinema. The project is expected to be built
over 15 years and will involve the construction of 225 affordable/workforce-housing units both on the site itself and in the neighbourhoods within the city.

On
December 8, 2005, legislation authorizing the operation of slot machines within existing, licensed Broward County, Florida pari-mutel facilities that have conducted
live racing or games during each of 2002 and 2003 was passed by the Florida Legislature. On January 4, 2006, the Governor of Florida signed the legislation into law and subsequently the
Division of Pari-mutuel Wagering developed the governing rules and regulations. In October 2006, we were awarded a gaming license for slot machine operations at Gulfstream Park
despite an August 2006 decision rendered by the Florida First District Court of Appeals that ruled that a trial is necessary to determine whether the constitutional amendment adopting the slots
initiative was invalid because the petitions bringing the initiative forward did not contain the minimum number of valid signatures. Previously, a lower court decision had granted summary judgment in
favor of "Floridians for a Level Playing Field" ("FLPF"), a group in which Gulfstream Park is a member. Though FLPF pursued various procedural options in

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response
to the First District Court of Appeals decision, the Florida Supreme Court ruled in late September 2007 that the matter was not procedurally proper for consideration by the court. That
ruling effectively remanded the matter to the trial court for a trial on the merits, which will likely take an additional year or more to fully develop and could take as many as three years to achieve
a full factual record and trial court ruling for an appellate court to review. Also, new July 2007 Florida legislation (i) clarified Florida Slot Machine Act provisions regarding
on-site availability of automated teller machines, check cashing services and hours of operations, as well as the permitted number of slot machines, which was increased, and
(ii) addressed the activities of card rooms, specifically the permitted hours of operations, bet limits, prizes and jackpot payouts, and the types of permitted card games.

On
November 28, 2007, we sought and were granted amicus curiae status in a suit filed by the House of Representatives and Speaker Marco Rubio against the Governor of the State of
Florida, Charlie Crist, relating to the approval of tribal compacts. The Florida Supreme Court heard arguments on January 30, 2008 and judgment is currently pending.

Golden Gate Fields

Golden Gate Fields is located on approximately 154 acres of land in the cities of Albany and Berkeley, California, approximately eight miles from Oakland
and approximately 11 miles from San Francisco. There are approximately 5.2 million people within a 40-mile radius of Golden Gate Fields.

Golden
Gate Fields' racing season lasts for approximately 98 racing days. The season is split throughout the year and has varied for the last few years. Average daily attendance
in 2007 was approximately 2,500 customers per live racing day.

Golden
Gate Fields had total handle during 2007 of approximately $442.5 million, including wagers made at Golden Gate Fields on its races, wagers made at other wagering venues and
through various account wagering systems on Golden Gate Fields' races (excluding wagers placed in Southern California, and wagers placed via advanced deposit wagering systems licensed to operate in
California) and wagers made at Golden Gate Fields and its inter-track facilities on imported races. Wagers on Golden Gate Fields' races totaled approximately $249.6 million in 2007. Of this amount,
approximately $226.0 million in wagers were placed at
other wagering venues to which we exported Golden Gate Fields' races via simulcast and through various account wagering operations. Golden Gate Fields exports its simulcast signal to approximately
900 off-track and inter-track wagering facilities in the United States, Canada, Mexico and the Caribbean. Throughout the year, Golden Gate Fields operates as an inter-track
wagering facility where customers can wager on races that are imported from other racetracks.

Golden
Gate Fields' facilities include a one-mile track and a 7/8-mile turf course, stalls for over 1,350 horses, a main grandstand with
seating for approximately 8,000 customers, a Clubhouse with seating for approximately 4,500 customers, a Turf Club with seating for approximately 1,200 customers and parking for
over 4,100 cars.

During
the late summer of 2007, a new synthetic track surface was installed at Gold Gate Fields, in compliance with CHRB mandated requirements. The track was installed in time for the
Golden Gate Fields 2007-2008 meet running from November 2007 to February 2008. As was expected, the new track surface helped reduce injuries and track maintenance costs and
increased field size.

We
are considering retail-based development proposals at Golden Gate Fields. This development would be intended to further enhance the entertainment experience at Golden Gate Fields,
broaden the demographic composition of our customer base and strengthen the loyalty of our existing customers. These proposals are preliminary. If, after a detailed review, we decide to proceed with
such proposals or alternative proposals, additional time would be required to obtain or finalize the necessary regulatory approvals and negotiate with potential business partners who could be expected
to provide marketing and development expertise and the necessary financing.

Laurel Park

In November 2002, we acquired a controlling interest in The Maryland Jockey Club, which owns and operates Laurel Park and Pimlico Race Course. In
September 2007, the Company exercised its option to acquire

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the
remaining voting and equity interests in The Maryland Jockey Club, pursuant to an agreement with certain companies controlled by Joseph De Francis, then a member of the Company's Board of
Directors, and Karin De Francis. Under the terms of the option agreement, the Company paid $18.3 million plus interest on October 5, 2007 in connection with the option exercise. Laurel
Park, which first appeared on the racing scene in 1911, is located on approximately 236 acres of land in Laurel, Maryland, between Washington, D.C. and Baltimore. There are approximately
6.6 million people living within a 40-mile radius of Laurel Park.

Laurel
Park's racing season in 2007 was 148 days. Average daily attendance at Laurel Park in 2007 was approximately 2,800 customers per live racing day.

Laurel
Park's handle was approximately $525.9 million in 2007, including wagers made at Laurel Park on its races, wagers made at other wagering venues and through various account
wagering operations on Laurel Park's races, and wagers made at Laurel Park on imported races. Wagers on Laurel Park's races totaled approximately $368.1 million in 2007. Of this amount,
approximately $346.3 million in wagers were placed at other wagering venues to which we exported Laurel Park's signal via simulcast and through various account wagering operations.

Laurel
Park's facilities include a grandstand with seating for approximately 5,200 customers, a 11/8-mile dirt track with a seven and one
half-furlong chute which opened in January 2005, and a 7/8-mile turf course which opened in September 2005. Laurel Park has stalls for
approximately 1,000 horses and parking facilities sufficient to accommodate approximately 8,000 cars.

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

Lone Star Park at Grand Prairie

On October 23, 2002, we acquired Lone Star Park at Grand Prairie ("Lone Star Park"), which operates thoroughbred and American quarter horse meets and is
located on approximately 285 acres of land in the City of Grand Prairie, Texas, approximately 12 miles west of Dallas. There are approximately 5.1 million people living within a
40-mile radius of Lone Star Park.

Lone
Star Park is one of the newest horse racing facilities in the United States, having opened for live thoroughbred and quarter horse racing in 1997. Lone Star Park's
thoroughbred meet generally commences each year in early April and continues through mid-July. Its quarter horse meet generally commences each year in early October and continues through
November. Average daily attendance during the 2007 spring thoroughbred meet was approximately 7,100 customers per live race day and 3,100 customers during the fall quarter horse meet. In addition to
its live racing facilities, Lone Star Park contains a state-of-the-art 36,000 square foot simulcast pavilion, which operates year-round.

Lone
Star Park had total handle during 2007 of approximately $290.9 million, which includes wagers made at Lone Star Park on its races, wagers made on Lone Star Park races at
other wagering venues and through various account wagering operations, and wagers made at Lone Star Park on races imported to its inter-track facility. Wagers on Lone Star Park's races totaled
approximately $127.5 million in 2007. Of this amount, approximately $95.5 million in wagers were placed at other wagering venues to which we exported Lone Star Park's signal and through
various account wagering operations.

Lone
Star Park's facilities include a grandstand with seating for approximately 10,000 customers, a one-mile dirt track, a 7/8-mile turf
track, stalls for approximately 1,600 horses and parking facilities sufficient to accommodate approximately 10,000 cars. In addition to its grandstand, clubhouse and turf club seating,
Lone Star Park has two floors of luxury suites. Lone Star Park's simulcast pavilion can also accommodate approximately 2,100 customers.

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Lone
Star Park was the site of the 2004 Breeders' Cup World Thoroughbred Championships, making it the youngest track in history to host this prestigious event. An
overwhelming response from racing fans from around the world resulted in what at that time was the fastest sellout in Breeders' Cup history with a total attendance of 53,717 on race day.

Lone
Star Park is operated pursuant to a lease with a governmental entity associated with the City of Grand Prairie. The lease expires in 2027, at which time we will have an option to
purchase the Lone Star Park real property at a purchase price equal to one-half of its then fair market value. Pursuant to the lease terms, if we exercise the option, we will receive
credit against the purchase price in an amount equal to the sum of all rent payments made during the life of the lease discounted back to 1997 at a rate of 8% per annum.

Pimlico Race Course

Historic Pimlico Race Course, home of the Preakness Stakes®, first opened its doors in 1870, making it the second oldest racetrack in the
United States. Pimlico is situated on approximately 116 acres of land in Baltimore, approximately 30 miles from Laurel Park. There are approximately 5.2 million people
living within a 40-mile radius of Pimlico.

The
Preakness Stakes® dates back to 1873, two years before the first Kentucky Derby was run. Since 1909, the Preakness Stakes® has been run annually at Pimlico
without interruption and this year's race, on May 17, 2008, will mark the 133rd edition of this sporting classic. Past winners of the Preakness Stakes® include
legendary race horses such as Man o' War, Citation, Secretariat, Seattle Slew, Affirmed and, in 2007, Curlin, the winner of the National Thoroughbred Racing Association ("NTRA") sponsored Eclipse
Awards as 2007 Horse of the Year and Three Year Old of the Year.

The
racing season at Pimlico in 2007 consisted of approximately 31 racing days in a Spring meet, between early April and mid-June. The Spring meet features
10 graded stakes races, including the middle jewel of thoroughbred racing's Triple Crown, the Preakness Stakes®, which is run annually on the third Saturday in May. Average daily
attendance in 2007 was approximately 3,600 customers per live racing day.

Pimlico's
handle was approximately $284.7 million in 2007, including wagers made at Pimlico on its races, wagers made at other wagering venues and through various account wagering
operations on Pimlico's races, and wagers made at Pimlico on imported races. Wagers on Pimlico's races totaled approximately $165.5 million in 2007. Of this amount, approximately
$153.1 million in wagers were placed at other wagering venues to which its signal was exported via simulcast and through various account wagering operations.

Pimlico's
facilities include a grandstand with seating for approximately 13,000 customers, a one-mile dirt track with 13/16-mile and
3/4-mile chutes, a 7/8-mile turf course, stalls for approximately 700 horses and parking facilities sufficient to accommodate approximately
3,500 cars.

The Meadows

We acquired The Meadows racetrack, which was our first standardbred (harness racing) track, in April 2001. It is located in Meadow Lands, Pennsylvania, in
the greater Pittsburgh area, on approximately 155 acres of land. There are approximately 2.8 million people living within a 50-mile radius of The Meadows.

The
Meadows first opened in 1963 and has a year-round racing schedule encompassing approximately 205 live racing days. As part of this acquisition, we also acquired
four off-track betting facilities in the greater Pittsburgh area, located in New Castle, Harmar Township, Moon Township and West Mifflin. In 2004, The Meadows opened a fifth
off-track betting in Greensburg, which was subsequently closed in February 2007.

The
Meadows' facilities previously included a grandstand with seating for approximately 5,000 customers, a 5/8-mile harness track, stalls for
approximately 990 horses and parking facilities to accommodate approximately 3,000 cars. The grandstand and parking facilities are currently being renovated as part of the construction
by the property owners of a permanent casino and integrated racing facility, which is expected to be completed in early 2009. The Meadows' off-track betting facilities each contain a
restaurant and bar and offer wagering on simulcast races from racetracks across the country.

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The
Meadows and its associated off-track betting facilities generated approximately $205.1 million in handle in 2006, including wagers made at The Meadows on its
races, wagers made at other wagering venues and through various account wagering operations on The Meadows' races, wagers made at The Meadows on races imported to its inter-track facilities and wagers
made at The Meadows' associated off-track betting facilities. Wagers on The Meadows' races (including all venues at which the
wagers were placed) totalled approximately $73.5 million in 2006. Of this amount, approximately $68.8 million in wagers were placed at other wagering venues to which we exported The
Meadows' races via simulcast and through various account wagering operations. The Meadows exports its simulcast signal to approximately 240 off-track and inter-track wagering
facilities in the United States, Canada and the Caribbean. Throughout the year, The Meadows operates as an inter-track wagering facility where customers can wager on races that are imported to
The Meadows from other racetracks.

In
July 2004, legislation was enacted in Pennsylvania that entitled The Meadows to apply for a license to operate between 1,500 and 3,000 slot machines, subject to future
expansion of up to 2,000 additional slot machines upon certain conditions being met. As described below, a Conditional Category 1 Gaming License was ultimately approved in
September 2006, shortly before we sold our ownership interest in The Meadows.

On
November 14, 2006, we completed the sale of all of the outstanding shares of Washington Trotting Association, Inc., Mountain Laurel Racing, Inc. and MEC
Pennsylvania Racing, Inc. (collectively "The Meadows"), each a wholly-owned subsidiary of the Company, through which we owned and operated The Meadows, a standardbred racetrack in Pennsylvania,
to PA Meadows, LLC, a company jointly owned by William Paulos and William Wortman, controlling shareholders of Millennium Gaming, Inc., and a fund managed by Oaktree Capital
Management, LLC ("Oaktree" and together with PA Meadows, LLC, "Millennium-Oaktree"). On closing, we received cash consideration of $171.8 million, net of transaction costs of
$3.2 million, and a holdback agreement, under which $25.0 million is payable to us over a five-year period, subject to offset for certain indemnification obligations. Under
the terms of the holdback agreement, we agreed to release the security requirement for the holdback amount, defer subordinate payments under the holdback, defer receipt of holdback payments until the
opening of the permanent casino at The Meadows and defer receipt of holdback payments to the extent of available cash flows as defined in the holdback agreement, in exchange for Millennium-Oaktree
providing an additional $25.0 million of equity support for PA Meadows, LLC. The Company also entered into a racing services agreement whereby we pay $50 thousand per annum and
continue to operate, for our own account, the racing operations at The Meadows for at least five years. On December 12, 2007, Cannery Casino Resorts, LLC, the parent company of
Millennium-Oaktree, announced it had entered into an agreement to sell Millennium-Oaktree to Crown Limited. If the deal is consummated, either party to the racing services agreement will have the
option to terminate the arrangement. The Meadows participates in a multi-employer defined benefit pension plan for which the pension plan's total vested liabilities exceed its assets. The Meadow's
estimated unfunded liability for vested benefits is approximately $3.7 million. The Meadows withdrew from the pension plan in the fourth quarter of 2007. As part of the indemnification
obligations under the holdback agreement with Millennium-Oaktree, the withdrawal liability that has been triggered as a result of the withdrawal from the plan will be offset against the amount owing
to us under the holdback agreement.

Thistledown

Thistledown is located on approximately 128 acres in North Randall, Ohio, approximately 10 miles southeast of downtown Cleveland. There are
approximately 3.0 million people living within a 40-mile radius of Thistledown.

Thistledown
has one of the longest racing seasons of all North American thoroughbred racetracks, consisting of approximately 136 racing days between April and November.
Thistledown hosts the Summit, Thistledown,
Randall and Cranwood meets. Annually, Thistledown hosts the Ohio Derby, which is the premier graded stakes race in Ohio.

Thistledown's
handle was approximately $175.8 million in 2007, including wagers made at Thistledown on its races, wagers made at other wagering venues and through various account
wagering operations on Thistledown's races, and wagers made at Thistledown on races imported to its inter-track facilities. Wagers on Thistledown's races (including all venues at which wagers were
placed) totaled approximately $100.7 million in

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2007.
Of this amount, approximately $87.1 million in wagers were placed at other wagering venues to which we exported Thistledown's races via simulcast and through various account wagering operations.
Thistledown exports its simulcast signal to as many as 700 off-track and inter-track wagering facilities in the United States. Throughout the year, Thistledown operates as an
inter-track wagering facility where customers can wager on races that are imported to Thistledown from other racetracks.

Thistledown's
facilities include a grandstand with seating for approximately 8,000 customers, a 600 seat tiered dining room, a 200 seat private party suite, a luxury
suite for corporate and group events, a one-mile oval track, stalls for approximately 1,500 horses and parking for approximately 6,000 cars.

Remington Park

Remington Park is situated on approximately 370 acres adjacent to Interstates 35 and 44 in Oklahoma City, Oklahoma. There are approximately
1.1 million people living within a 40-mile radius of Remington Park.

In
2007, the racing schedule consisted of two meets totaling 119 days of live racing days, which included a 50 day quarter horse meet from mid-March through
early June and a 69 day thoroughbred meet from early August through the end of November 2007.

Remington
Park's handle was approximately $122.7 million in 2007, including wagers made at Remington Park on its races, wagers made at other wagering venues and through various
account wagering operations on Remington Park's races, and wagers made at Remington Park on races imported to its inter-track and associated off-track betting facilities. Wagers on
Remington Park's races (including all venues at which wagers were placed) totaled approximately $69.6 million in 2007. Of this amount, approximately $60.7 million in wagers were placed at other
wagering venues to which we exported Remington Park's races via simulcast and through various account wagering operations. Remington Park exports its simulcast signal to approximately
600 off-track and inter-track wagering facilities in the United States. Throughout the year, Remington Park operates as an inter-track wagering facility where customers can
wager on races that are imported to Remington Park from other racetracks across the country.

Remington
Park's facilities include a grandstand with seating for approximately 20,000 customers, 21 suites for corporate and group events, a one-mile dirt
track, a 7/8-mile turf course, stalls for approximately 1,300 horses, lighting to permit night racing and parking facilities sufficient to accommodate approximately
8,000 cars.

The
property on which Remington Park is located is leased from the Oklahoma Zoological Trust pursuant to a lease which extends through 2013, with options to renew until 2063 in
ten-year increments.

Under
legislation which was approved by the citizens of the State of Oklahoma in a referendum held on November 2, 2004, Remington Park is permitted to operate electronic gaming
machines. In November 2005, we opened a gaming facility with 650 electronic gaming machines, the maximum amount permitted by the legislation at Remington Park at that time and we are in
the process of adding an additional 50 machines, as permitted by the enabling legislation which allows for the additional 50 machines on each of the third and fifth anniversaries of the
gaming license. See "Government Regulation  Alternative Gaming  Oklahoma" below. During 2007, the machines generated an
average daily net win per unit of $233. Under the terms of the legislation, gaming operations at the racetrack are permitted for up to 18 hours per day, not to exceed 106 hours per week.
The distribution of revenues from the racetrack's electronic gaming operations will vary based on the annual gross revenues of the racetrack from gaming less all monetary payouts ("Adjusted Gross
Revenues"). The legislation allocates between 10% and 30% of the Adjusted Gross Revenues to the State, primarily for the funding of education, between 20% and 30% for the benefit of the horsemen and
the remaining 50% to 60% to the racetrack, out of which the racetrack operator will pay its capital and operating costs. Remington Park may be eligible for an additional 50 machines in 2010.
The gaming facility has significantly improved Remington Park's operating results and contributions to the horse racing industry through increased purses.

Portland Meadows

Portland Meadows is a thoroughbred racetrack located on approximately 100 acres in the Delta Park area of Portland, Oregon. There are approximately
2.0 million people living within a 40-mile radius of Portland Meadows. Portland Meadows first opened in 1946 and offers approximately 75 live racing days between October

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and
April. Portland Meadows' facilities include a grandstand with seating for approximately 10,000 customers, a one-mile sand track, stalls for approximately 850 horses and
parking facilities to accommodate approximately 2,500 cars.

Portland
Meadows generated approximately $85.7 million in handle during the 2007 calendar year, including wagers made at Portland Meadows on its races, wagers made at other
wagering venues and through various account wagering operations on Portland Meadows' races and wagers on imported races at Portland Meadows and off-track betting facilities within the
State of Oregon during Portland Meadows' live meet. Wagers on Portland Meadows' races (including all venues at which the wagers were placed) totaled approximately $34.7 million in 2007. Of this
amount, approximately $32.6 million in wagers were placed at
other wagering venues to which we exported Portland Meadows' races via simulcast and through various account wagering operations. Portland Meadows exports its simulcast signal to approximately
175 off-track and inter-track wagering facilities in the United States. Throughout the year, Portland Meadows operates as a simulcast wagering facility where customers can
wager on races that are imported to Portland Meadows from other racetracks. In addition, we expended considerable efforts to work with legislators and industry participants in response to the Oregon
Racing Commission's June 2007 decision, under request from the Oregon Attorney General, to revoke a rule permitting Instant Racing at Portland Meadows. Although the Office of Administrative
Hearings released a February 27, 2008 proposed order in our favor approving Instant Racing wagering at Portland Meadows, we are waiting for confirmation as to whether the Oregon Racing
Commission will accept that recommendation.

We
operate racing at Portland Meadows, subject to the satisfaction of certain conditions, pursuant to a long term lease. We own an approximately 22% interest in the real property upon
which the Portland Meadows facility is located. Further to our announced intention to sell our interest in Portland Meadows, in November 2007 we initiated an active program to locate a buyer
and began marketing our interest in Portland Meadows.

Great Lakes Downs

Further to our January 18, 2007 announcement that the 2007 race meet would be the last we would run at Great Lakes Downs, this track was closed in
November 2007. In December 2007, pursuant to an October 2007 repurchase agreement, we re-acquired the 85 acre site underlying the racetrack upon exercise of an
option right granted in connection with our previous August 2004 sale of the land and associated racetrack license. As the re-acquisition was completed with the intention of
completing a subsequent re-sale of the land, the property underlying the racetrack has been listed for sale and we have voluntarily surrendered our racing license.

To
the date of closing, Great Lakes Downs' handle was approximately $48.5 million in 2007, including wagers made at Great Lakes Downs on its races, wagers made at other wagering
venues and through various account wagering operations on Great Lakes Downs' races, and wagers made at Great Lakes Downs on imported races. Wagers on Great Lakes Downs' races (including all venues at
which wagers were placed) totaled approximately $38.1 million in 2007. Of this amount, approximately $36.0 million in wagers were placed at other wagering venues to which we exported
Great Lakes Downs' races via simulcast and through various account wagering operations. Great Lakes Downs exports its simulcast signal to approximately 250 off-track and inter-track
wagering facilities in the United States.

Magna Racino

Magna Racino opened on April 4, 2004 and is situated on approximately 650 acres in Ebreichsdorf, just outside Vienna, Austria. There
are approximately 2.5 million people living within a 30-mile radius of Magna Racino.

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During 2007, Magna Racino was visited by over 35,000 guests on 25 race days between mid-March and November.

Magna
Racino features both thoroughbred and standardbred racing on three different tracks, a 5/8-mile sand track, a one-mile sand
track and a one-mile turf course. In 2006, Magna Racino had a total of 79 paddocks. Magna Racino's sportsbook facility is operated by Admiral Sportwetten
AG under an agreement that entitles Magna Racino to receive a percentage of all wagers placed with Admiral at Magna Racino. Magna Racino's 150 video
lottery terminals are operated by the Austrian Lottery, a division of Casinos Austria AG, under an agreement that entitles Magna Racino to receive a percentage of the gross profit and
recovery of certain costs from the video lottery terminal operations located at Magna Racino.

Magna
Racino's handle was approximately $2.4 million in 2007 including wagers made at Magna Racino on its races, wagers made at other wagering venues and
through account wagering operations on Magna Racino races and wagers made at Magna Racino on imported races. Magna Racino exports its simulcast signal to various
off-track and inter-track wagering facilities in Germany and Austria. Throughout the year, Magna Racino operates as an inter-track wagering facility on show days where
customers can wager on races that are imported to Magna Racino from other racetracks around the world.

On
February 19, 2007, we announced that we recorded a non-cash impairment charge related to Magna Racino net of income taxes, of approximately
$59.7 million ($0.56 per share) in the fourth quarter of 2006. In early August 2007, we announced that there would be a cessation of racing for our own account at the Magna
Racino at the close of the 2007 meet.

We
announced on December 21, 2007 that we had entered into an agreement to sell 225 acres of excess real estate located in Ebreichsdorf, Austria to a subsidiary of Magna
for a purchase price of 20.0 million Euros (approximately $29.4 million) subject to customary adjustments. The closing of the transaction is expected to occur during the first
quarter of 2008 following the satisfaction of customary closing conditions including receipt of all necessary regulatory approvals. We are required to use Euros 7.5 million of the net proceeds
to repay a portion of a Euros 15.0 million term loan facility and the remaining portion of the net proceeds is required to be used to repay a portion of the Bridge Loan.

Training Centers

Palm Meadows®

On October 18, 2000, we acquired 481 acres of land in Palm Beach County, Florida for a total purchase price of $22.9 million. The property is
located approximately 40 miles north of Gulfstream Park. We have developed Palm Meadows, a horse boarding and training center, which is operated in conjunction with Gulfstream Park.

Palm
Meadows® has helped us to continue to attract high-quality horses to Gulfstream Park, which has allowed us to increase both our number of live races and the
total amount wagered on our races.

The
facility opened in November 2002 and currently includes a 11/8-mile dirt track, a 7/8-mile turf course, one-mile dirt jogging track,
stalls for up to 1,424 horses, administrative offices, dormitories, pavilion and a 60,000 square foot compost building.

On
March 28, 2007, we sold a 157 acre parcel of excess land adjacent to the Palm Meadows Training Center and certain development rights to MID for cash consideration of
$35.0 million.

San Luis Rey Downs

San Luis Rey Downs is a horse boarding and training center situated approximately 45 miles north of downtown San Diego. It is located on approximately
200 acres of land and includes over 500 horse stalls, a one-mile oval dirt main track, a 3/8-mile dirt training track, an equine exercise swimming
pool, 50,000 square foot practice arena, horse trails and related facilities and equipment. Due to its proximity to Santa Anita Park, San Luis Rey Downs supplements Santa Anita Park's stabling
facilities, which we believe enables us to continue to attract some of the top horses in North America.

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On
June 7, 2007, we sold San Luis Rey Downs to a subsidiary of MID for cash consideration of approximately $24.0 million. The Company also entered into a lease agreement
whereby an MEC subsidiary leases the property under a triple-net lease with a three year term for a nominal annual rent in addition to operating costs that arise from the use of the
property. The lease is terminable at any time by either party on four-months notice.

Bowie Training Center

The Bowie Training Center is located in Prince George's County, Maryland on approximately 162 acres. The site is located eight miles from Laurel Park and
30 miles from Pimlico Race Course. The facility includes approximately 1,000 stalls, a one-mile oval dirt main track, a 1/4-mile covered dirt
track, 17 barns and dormitories capable of accommodating up to 224 grooms. Originally opened in 1914 as a racetrack, the property has been used since 1985 as a year-round
training center to support thoroughbred racing at Pimlico and Laurel Park.

Account Wagering Operations

Account wagering involves the placing of wagers on live horse racing events through various forms of electronic media, which could include telephone, the Internet
and interactive television.

PariMax

In February 2006, we announced the formation of PariMax, a new company to oversee the development of our various electronic distribution platforms
including MEC Global Wagering Solutions, XpressBet®, the Company's 50% interest in HRTV, MagnaBet, Racing US and AmTote. PariMax focuses on the development of
complete wagering solutions and will concentrate on serving the global wagering market by developing product lines which meet the needs of both distribution partners and end consumers worldwide. For
distribution partners, MEC Global Wagering Solutions provides simulcasting and wagering solutions both domestically and internationally. AmTote continues to provide a variety of wagering interfaces
and connectivity products for racetracks, off-track betting facilities, and account wagering providers, both domestically and abroad. For consumers, XpressBet®,
MagnaBet and Racing US are PariMax's account wagering platforms, which provide video streaming and wagering opportunities to an increasingly international customer base. Consumers are
further served by PariMax supported television channels, including HRTV in the United States (a joint venture between MEC and Churchill Downs). PariMax also holds our 50%
interest in TrackNet Media.

TrackNet Media

TrackNet Media is the vehicle through which MEC and Churchill Downs horse racing content is made available to third parties, including racetracks,
off-track betting facilities, casinos and advance deposit wagering companies. TrackNet Media also distributes horse racing content for third parties and this content is made available
through MEC's and Churchill Downs' respective outlets. Under the reciprocal content swap agreement, MEC and CDI exchange their respective horse racing signals. Churchill Downs racing content is
available for wagering through MEC-owned tracks and simulcast-wagering facilities and through our advance deposit wagering platform, XpressBet®, and, similarly, our racing
content is available for wagering through CDI tracks and off-track betting facilities and through CDI-owned advance deposit wagering platforms. For additional details on
TrackNet Media see "Our Business" and "Our Strategy  Further Developing Our In-Home Simulcasting and Wagering Services".

XpressBet®

We offer advance deposit account wagering by telephone and over the Internet through XpressBet®, to customers in certain jurisdictions of the
United States and, in connection with Racing World, to customers in the United Kingdom and Ireland, subject to legal and governmental restrictions. See
" Government Regulation" below. Operators of advance deposit account wagering businesses may establish a hub in a state where advance deposit account wagering is expressly
permitted, establish accounts into which customers deposit funds through debit or credit cards or by check to fund their wagering, and receive wagering instructions from these customers. Wagers placed
on behalf of customers are not allowed to exceed the amounts on deposit in their accounts.

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Customers
of XpressBet® may place wagers either over the telephone with a live teller, over the telephone with a voice-activated automated teller, over the telephone with a touch tone
recognition system or through the Internet.

XpressBet®
was developed from the account wagering business operated by The Meadows harness racetrack in Pennsylvania under the trade name Call-A-Bet.
Call-A-Bet launched a telephone account wagering business in 1983 for Pennsylvania account holders. In 1995, Call-A-Bet expanded its customer base
throughout the United States. We purchased Ladbroke Racing Pennsylvania, Inc., which included The Meadows and Call-A-Bet, in April 2001 and upon obtaining
a license to conduct advance deposit account wagering in California in January 2002, re-branded the account wagering company as XpressBet®. Our subsidiary,
XpressBet, Inc. is primarily responsible for conducting our account wagering operations. XpressBet, Inc. is currently licensed as a multi-jurisdictional wagering hub in Oregon, where its
totalisator hub operations are located. This license permits XpressBet, Inc., to place advance deposit account wagers on behalf of residents in Oregon and other jurisdictions that do not
prohibit account wagering. In addition, XpressBet, Inc. has received state-based licenses or racing commission approval in California, Idaho, Maryland, Massachusetts, Pennsylvania, Virginia and
Washington. See " Government Regulation" below for a further discussion of the regulatory issues that affect our XpressBet® account wagering business.

Wagering
through an XpressBet® account is permitted only after XpressBet® has verified the account holder's identity, address and age and the account has been
funded. XpressBet® account holders can wager on over 100 North American racetracks and internationally on races in Australia, South Africa, Dubai, Germany, the United Kingdom and
Hong Kong. The XpressBet® service provides up-to-the-minute racing information, including live odds and results, race program information,
real-time audio and video streaming and an easy-to-use betting screen.

The
primary source of revenue for XpressBet® is the takeout on the handle wagered by its customers through advance deposit wagering accounts. The takeout revenue is reduced
by host track fees, purse account funds, source market fees and other operating expenses. For the year ended December 31, 2007, total handle wagered through XpressBet® was
approximately $175.6 million.

MagnaBet

MagnaBet offers advance deposit account wagering over the Internet to customers in Austria, Germany and Spain. MagnaBet holds licenses
issued by the provincial government of Lower Austria and the provincial government of Hanover, Germany, which allows it to accept and process pari-mutuel wagers. Customers deposit funds
through credit cards, prepaid cards, bank transfers and internet-banking to fund their wagering accounts, and receive wagering instructions from these customers. Wagers placed by customers are not
allowed to exceed the amounts on deposit in their accounts.

We
launched MagnaBet in Austria in September 2004, where its operations are located, in Germany in December 2004 and in Spain in April 2005. Wagering
through a MagnaBet account is permitted only after MagnaBet has verified the account holder's identity, address and age and the account has been funded. MagnaBet
account holders can wager on thoroughbred and harness races at Magna Racino, on races at Krieau and Baden, Austrian standardbred racetracks, and internationally on over 100 North
American thoroughbred and standardbred racetracks, 33 German thoroughbred and standardbred racetracks, 31 UK and 4 South American thoroughbred racetracks. The
MagnaBet service provides up-to-the-minute racing information, including live odds and results, race program and past performance information,
real-time audio and video streaming and an easy-to-use betting screen.

The
primary source of revenue for MagnaBet is the takeout on the handle wagered by its customers through advance deposit accounts. The takeout revenue is reduced by host
track fees, totalisator purse account funds, source market fees and other operating expenses. For the year ended December 31, 2007, total handle wagered through MagnaBet was
approximately $9.8 million.

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Television Distribution

We believe that broad television distribution will help increase future interest in the sport of horse racing and attract additional wagering customers. In order
to accomplish this goal, we have entered into a number of television distribution initiatives.

HorseRacing TV

HorseRacing TV is a television network focused on horse racing. HorseRacing TV carries horse racing from racetracks located throughout
North America as well as commentary and related content, combined into a single signal produced by Santa Anita Park's award-winning television department. In January 2003, we launched
HorseRacing TV on our first cable television system (Time Warner San Diego) and we have quickly grown the network's distribution to over 15 million cable and satellite subscribers
nationally. HorseRacing TV has entered into a national distribution agreement with Dish Network (Echostar Communications Corp.) that makes HRTV available in all
50 U.S. states. Additionally, HorseRacing TV has entered into agreements with certain national/regional cable television operators, including Comcast, to make HorseRacing
TV available via cable distribution in 18 states. HorseRacing TV is also available on RTN (see below).

On
March 5, 2007, we announced that Churchill Downs had purchased a 50% interest in HorseRacing TV in connection with a series of customer-focused agreements with
Churchill Downs. The sale of that 50% interest has resulted in operating costs savings, some of which have been reinvested to increase production values. The sale, coupled with the formation of
TrackNet Media, has provided consumers with access to a wider variety of content. See "Our Business" and "Our Strategy  Further Developing Our
In-Home Simulcasting and Wagering Services" for further details on the customer-focused agreements.

RTN

In 2002, we entered into an arrangement with Roberts Communications Network, Inc. and an affiliate of Greenwood Racing, Inc. to form RTN, a private
U.S. direct-to-home satellite service that currently offers twenty channels dedicated to horse racing on a monthly subscription basis. We hold a minority interest in
RTN, which is independently managed by Roberts Communications Network, Inc., and we are primarily a content provider to the service.

Other Television Distribution

From time to time, we seek exclusive and non-exclusive television distribution agreements with television networks and other distribution outlets to
cover horse racing events from our tracks. In 2005 we came to an agreement with NBC to extend its live broadcast of the Preakness until 2010. NBC will also carry the Santa Anita Derby and Florida
Derby on one of its networks through 2010. Additionally, HDNet has carried live and tape-delayed, high-definition television coverage of certain horse races from Lone Star Park
at Grand Prairie and Santa Anita Park. We continue to seek new outlets for national television coverage of our horse racing content in order to promote the sport of horse racing and attract additional
wagering customers to our racetracks and other wagering platforms. The NTRA also occasionally arranges for races at various of our racetracks to be broadcast on ESPN or ESPN2.

Magna 5 Pick 5

In January 2004, we introduced a new Pick 5 wager, the Magna 5, which offers a guaranteed $500,000 minimum pool every Saturday
afternoon during selected periods each year. Sponsored by XpressBet®/HRTV, the Magna 5 features five races in the span of about one hour from premier tracks such
as Santa Anita Park, Gulfstream Park, Golden Gate Fields and Laurel Park. While the Magna 5features races from our tracks, the national
wager is offered at pari-mutuel outlets throughout the country. Over ten weeks, the Magna 5 drew an average pool of $645,582, $547,687 and $567,835 in 2007, 2006 and 2005,
respectively.

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Sunshine Millions®

On January 25, 2003, we launched the Sunshine Millions®, a thoroughbred horse racing event which features California breds and Florida breds in
head to head competition. The annual event, which is hosted by Santa Anita Park and Gulfstream Park, consists of eight races, four races at Santa Anita Park and four races at Gulfstream Park, with
purses ranging from $250,000 to $1 million per race, for a total of $3.6 million in guaranteed purses.

Florida
breds won seven out of eight races when they competed head to head against California breds during the sixth edition of the Sunshine Millions® held on
January 26, 2008. This event was covered on ESPN2. Overnight ratings for the broadcast secured a 0.2 national rating. All sources of handle for Gulfstream Park and Santa Anita Park, together
with on-site handle, topped $26.8 million for the 2008 edition of the Sunshine Millions®. Santa Anita reported that attendance on Saturday was 28,414, compared to
36,355 in 2006. Results for the 2008 edition of the Sunshine Millions ® were adversely impacted by inclement weather in California through most of January.

StreuFEX

In 2002, we purchased FEX ÖKO Faserverarbeitungs-GMBH ("FOF"), an Austrian company that manufactures and sells StreuFex, a
horse bedding product made from straw that is ground and turned into pellets. With the purchase of FOF, we acquired a StreuFEX manufacturing plant in Neusied/Zaya, Austria. In 2003, we
purchased approximately 80 acres of land in Lumberton, North Carolina on which we have built a StreuFEX manufacturing facility. The Lumberton facility commenced operations and we
introduced StreuFex to the North American market in the first quarter of 2004. The Lumberton facility currently supplies both Gulfstream Park and Palm Meadows Training Center with horse
bedding. In September 2007, FEX Straw Manufacturing Inc. ("FEX") entered into a technology license agreement with Premier Equine Products Pty Ltd. ("PEP"), under which FEX granted
PEP an exclusive license to manufacture and sell StreuFEX horse bedding product in Australia, New Zealand, Hong Kong, Macau, Japan and Singapore for 20 years. Under the
arrangement, FEX received a one-time up-front license fee and will receive ongoing royalty fees over the duration of the agreement based on the number of tons of
StreuFEX manufactured by PEP. In the event that PEP enters into any sublicense agreement, FEX will further be entitled to a sublicense fee as well as similar
annual product sales-based fees. PEP is an Australian company that specializes in the provision of feed and bedding solutions, and the associated products and services, to the equine industry.

Dixon Downs Development

For some time, we explored the possibility of the future development of a thoroughbred racetrack with an associated retail shopping and entertainment complex, on
vacant land that we own in Dixon, California. The Dixon City Council approved the project in October 2006, but opponents gathered sufficient signatures on petitions to force an election in
which Dixon residents voted on four measures aimed at overturning the City Council's various votes approving the project. In the April 17, 2007 election, Dixon voters overturned the four
separate actions that were previously approved by the Dixon City Council allowing our proposed racetrack and mixed-use development. As a result, we have begun activities to sell the Dixon
lands, including formally listing this 260 acre site for sale with a real estate broker.

Competition

We face numerous sources of competition. We compete with other racetracks for customers both with respect to attendance at our racetracks and in the simulcast
wagering markets. We also compete with other racetracks for horses, jockeys and backstretch personnel. Certain of our competitors operate in jurisdictions which permit alternative gaming at
racetracks, which enhances their ability to compete for horsemen by offering larger purses and attracts additional potential customers to their facilities. One of our competitors, Churchill Downs, has
been in operation for a much longer period of time than we have and may have greater name recognition. We expect this competition from other racetracks to intensify as new gaming operators enter our
markets and existing competitors expand their operations and consolidate management of multiple racetracks.

We
also compete for customers with other sports, entertainment and gaming operators, including casinos and government-sponsored lotteries. We also compete with Internet and other account
wagering gaming services

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that
allow their customers to wager on a wide variety of sporting events and Las Vegas-style casino games from home, many of which are currently operating from off-shore locations in
violation of U.S. law by accepting wagers from U.S. residents.

Gaming
companies that operate on-line and offer internet-based wagering services often do not have the same level of overhead as we do as they do not have similar capital
expenditure requirements, which often results in those companies being able to offer services at discount prices. In addition, while we are required to pay certain percentages of handle to local
horsemen, state regulatory agencies and other possible entities in accordance with applicable U.S. federal and state law and horse industry regulations, off-shore
on-line operators are often not required to pay such amounts to local
horsemen, regulators or other entities, which means those operators are able to attract U.S. based customers by offering rebates traditional U.S. based operations, like ours, cannot
afford to offer.

As
we continue to develop our account wagering operations, including telephone, Internet and interactive television wagering, we expect our competition with other account wagering
operators to also increase. In addition, our ability to conduct account wagering on races from racetracks that we do not own is dependent on our ability to enter into agreements with those racetracks
whereby we obtain account wagering rights. Certain racetracks, including those currently operated by the New York Racing Association, have entered into contracts with other account wagering
operators, granting such operators exclusive rights to accept certain types of account wagering on their races. We may not be able to obtain access, on terms that are acceptable to us, to racing
content from racetracks not owned by us for our account wagering operations as a result of these exclusive arrangements or otherwise.

Government Regulation



Horse racing is a highly regulated industry. In the United States, individual states control the operations of racetracks located within their respective
jurisdictions with the intent of, among other things, protecting the public from unfair and illegal gambling practices, generating tax revenue, licensing racetracks and operators and preventing
organized crime from being involved in the industry. Although the specific form may vary, states that regulate horse racing generally do so through a horse racing commission or other gambling
regulatory authority. Regulatory authorities perform background checks on all racetrack owners prior to granting them the necessary operating licenses. Horse owners, trainers, jockeys, drivers,
stewards, judges and backstretch personnel are also subject to licensing by governmental authorities. State regulation of horse races extends to virtually every aspect of racing and usually extends to
details such as the presence and placement of specific race officials, including timers, placing judges, starters and patrol judges.

In
the United States, interstate pari-mutuel wagering on horse racing is also subject to the federal Interstate Horseracing Act of 1978 and the federal Interstate Wire
Act of 1961. As a result of these two statutes, racetracks can commingle wagers from different racetracks and wagering facilities and broadcast horse racing events to other licensed establishments.

We
currently satisfy the applicable licensing requirements of the racing and gambling regulatory authorities in each state or province where we maintain racetracks and/or carry on
business, including the California Horse Racing Board, the Florida Department of Business and Professional Regulation Division of Pari-Mutuel Wagering, the Texas Racing Commission, the
Maryland Racing Commission, the Virginia Racing Commission, the Oklahoma Horse Racing Commission, the Ohio State Racing Commission, the Pennsylvania State Harness Racing Commission, the Pennsylvania
Gaming Control Board, the Nevada
Gaming Commission, the New Jersey Casino Control Commission, the Oregon Racing Commission and the Government of the Province of Lower Austria. Please see our discussion of our wholly-owned
subsidiary, XpressBet, Inc., for a list of the jurisdictions where it is licensed or has received regulatory approval to conduct interstate account wagering. With respect to our racetracks,
licenses to conduct live horse racing and to participate in simulcast wagering are required, and there is no assurance that these licenses will be granted, renewed or maintained in good standing,
as applicable.

In
California, the CHRB is responsible for regulating the form of wagering, the length and conduct of meets and the allocation and distribution of pari-mutuel wagers within
the limits set by the California legislature. The CHRB has annually licensed one of our subsidiaries, Los Angeles Turf Club, Inc. as well as The Oak Tree Racing Association to conduct separate
racing meets at Santa Anita Park. At present, the CHRB has not

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licensed
other thoroughbred racetracks in Southern California to conduct racing during these meets. However, night quarter horse racing is conducted at Los Alamitos Race Course in Southern California
during portions of these meets. The CHRB also annually licenses the operations of Golden Gate Fields in respect of the two racing meets that it conducts each year. As with the Southern California
market, the CHRB has not licensed other thoroughbred racetracks in Northern California to conduct racing during these meets. The CHRB also has licensed XpressBet, Inc., as an
out-of-state account wagering hub, to place wagers on behalf of California residents as described more fully below. Currently, there are two other licensees in California that
are licensed to conduct account wagering in that state. Our financial condition and operating results could be materially adversely affected by legislative changes or action by the CHRB that would
increase the number of competitive racing days, reduce the number of racing days available to us and The Oak Tree Racing Association, authorize other forms of wagering, grant additional licenses
authorizing competitors to conduct account wagering, or remove or limit our authority to conduct account wagering in California as it is currently being conducted. In the first quarter of 2006, the
CHRB passed a motion to require all California thoroughbred racetracks to install a synthetic racing surface, such as "Polytrack", "Tapeta Footings" or "Cushion Track", by the end of 2007 or face a
loss of dates. We installed new synthetic racing surfaces at Santa Anita and Golden Gate Fields in 2007 at a cost of approximately $11.8 million and $8.8 million, respectively.

In
Maryland, the Maryland Racing Commission approves annual licenses for racetracks to conduct thoroughbred and standardbred horse races with pari-mutuel wagering. However,
Maryland's racing law effectively provides that except for Pimlico and Laurel Park, the Maryland Racing Commission may not issue thoroughbred racetrack licenses or thoroughbred race dates to any
racetracks that have a circumference of at least one mile and are located within the Baltimore and Washington, D.C. markets. Other than a track located in Timonium, Maryland (a northern
suburb of Baltimore), which has a racetrack circumference of less than one mile and which typically conducts an eight-day race meeting in connection with the Maryland State Fair, the
Maryland Racing Commission has not approved a thoroughbred track license or thoroughbred race dates for any racetrack in either the Baltimore or Washington, D.C. markets.

In
Florida, the Division of Pari-Mutuel Wagering considers applications for annual licenses for thoroughbred, standardbred and quarter horse meetings with
pari-mutuel wagering. Due to a change in Florida tax laws in 2001, Florida racetracks are no longer prevented from applying for race days outside of their traditional racing season. While
this revised tax structure has enabled Gulfstream Park to apply for and receive additional race days since 2002, the deregulation of the race day allocation process may, in the future, cause an
overlap in racing seasons which could result in Gulfstream Park facing direct
competition from other Miami-area racetracks. In early September 2007, the Florida Supreme Court issued a unanimous opinion that struck down a statute which prevented Gulfstream
Park Racing & Casino from accepting wagers on daytime simulcast signals from other thoroughbred racetracks across the country. As a result of that decision, Gulfstream Park has been able to
accept wagers on daytime simulcast signals since completing successful negotiations with other industry participants. The Florida Supreme Court opinion dismissed an appeal by the Division of
Pari-Mutuel Wagering of a September 2005 appeal court ruling affirming a July 2004 trial court ruling in Gulfstream Park's favor. That trial court had ruled that
Section 550.615(6) of the Florida Statutes, which prohibited simulcasting at Gulfstream Park while it was not running its meet, was unconstitutional. In connection with its appeal of the
September 2005 appeal court ruling, the Division of Pari-Mutuel Wagering had sought and was granted a restrictive injunction that was lifted as a result of the September 2007
Florida Supreme Court opinion.

In
Texas, the Texas Racing Commission issues licenses to conduct live racing with pari-mutuel wagering on thoroughbred, quarter horse and greyhound races. Once issued, a
license can be suspended or revoked for a variety of reasons. Even with a license, a racetrack operator can conduct live racing only during the time periods authorized by the Texas Racing Commission.
The Texas Racing Commission has not licensed any operator of a horse or greyhound racetrack in the Dallas area, other than Lone Star Park.

In
Ohio, the Ohio State Racing Commission approves annual licenses for racetracks to conduct thoroughbred, standardbred and quarter horse races. The Ohio State Racing Commission has not
licensed any other operators of thoroughbred racetracks in the Cleveland area to conduct racing during Thistledown's meets. However, the Ohio State Racing Commission has licensed an operator of a
night harness racing track in the Cleveland area.

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In
Oklahoma, the Oklahoma Horse Racing Commission regulates all aspects of live thoroughbred and mixed breed (quarter horse, paint horse and appaloosa) horse racing with
pari-mutuel wagering, as well as alternative gaming operations by licensed tracks, as will be discussed in more detail below. The Commission considers and approves annual licenses for
thoroughbred and mixed breed race meetings. Currently, there are four racetracks in Oklahoma that are licensed to offer a live race meet with pari-mutuel wagering. Since it opened in 1988,
Remington Park has been the only racetrack licensed to conduct live horse racing and pari-mutuel wagering in the Oklahoma City metropolitan area.

Prior
to the closing in November 2007 of Great Lakes Downs in Muskegon, Michigan, we were subject to the jurisdiction of the Office of Racing Commissioner regarding the approval
of annual licenses for thoroughbred, standardbred and mixed breed (quarter horse, paint horse, appaloosa and arabian) race meetings with pari-mutuel wagering. In connection with the
cessation of operations at Great Lakes Downs in anticipation of the expected sale of the underlying land, and our decision to not proceed with building a new racetrack in Romulus, Michigan, we
voluntarily relinquished both our racing license and our Michigan racetrack license in the latter half of 2007.

In
Pennsylvania, the Pennsylvania State Harness Racing Commission approves annual licenses for standardbred racetracks, while the Pennsylvania State Horse Racing Commission approves
annual licenses for thoroughbred racetracks. Neither the Pennsylvania State Harness Racing Commission nor the Pennsylvania State Horse Racing Commission has licensed any operators of horse racetracks,
other than The Meadows, in the Pittsburgh area; however, on September 26, 2002, the Pennsylvania State Horse Racing Commission approved an application for a thoroughbred racing license for an
operation to be located near Erie, Pennsylvania, which is approximately 100 miles from The Meadows. Presque Isle Downs commenced racing on September 1, 2007. In addition, on
September 5, 2007, the Pennsylvania Harness Racing Commission approved an application for a standardbred racing license for an operation to be located in Lawrence County located approximately
60 miles from The Meadows and within eight miles of our New Castle off-track wagering facility. This new harness track is not expected to open before January 2010.

In
Oregon, the Oregon Racing Commission approves annual licenses for horse and greyhound racetracks, and, as discussed below, multi-jurisdictional account wagering hubs. The Oregon
Racing Commission has not licensed any operators of horse racetracks in the Portland area, other than Portland Meadows. The Oregon Racing Commission has, however, licensed five other account wagering
operators who compete with XpressBet, Inc. for account wagering customers. In June 2007, the Oregon Racing Commission, under request of the Oregon Attorney General, temporarily suspended
a rule permitting Instant Racing at Portland Meadows and began proceedings to repeal the Instant Racing Rules. Subsequently, we submitted an amended 2007/2008 race meet application that provided for
reduced racetrack operations during the course of the dispute, as well as Instant Racing. In response to the Oregon Racing Commission's denial of the Instant Racing component of our application, we
have proceeded with litigation challenging that denial. Upon evaluating the Instant Racing related developments and our investment in Portland Meadows, we decided to sell our interest in Portland
Meadows. Notwithstanding the intended sale of our interest, which has not yet taken place, we proceeded with the Instant Racing related litigation. Although the Office of Administrative Hearings
released a February 27, 2008 proposed order in our favor approving the Instant Racing wager at Portland Meadows, we are waiting for confirmation as to whether the Oregon Racing Commission will
accept that recommendation.

In
Austria, horse race meets are conducted at the Magna Racino by the Austrian Race Horse Owners Club under agreement with us. The Austrian Race Horse Owners Club conducts
standardbred (harness) and thoroughbred horse race meets pursuant to licenses issued by the Direktorium des Jockeyclub für Österreich (thoroughbred) and the Zentrale
für Traberzucht und Rennen in Österreich (standardbred harness). There is no limitation as to the number of racing days that can be conducted under these licenses. We
have previously announced a cessation of racing for our own account at the Magna Racino at the close of the 2007 meet.

In
addition to conducting live horse racing with pari-mutuel wagering at our various tracks in the United States, we conduct telephone and Internet account wagering
through our subsidiary, XpressBet, Inc., and the entities that hold the licenses to conduct horseracing and pari-mutuel wagering at The Meadows. XpressBet, Inc. currently
holds a license to serve as a multi-jurisdictional account wagering hub by the Oregon Racing Commission which expires June 30, 2008. The Oregon license enables XpressBet, Inc. to open
accounts and accept wagering instructions on behalf of U.S citizens in respect of horse and dog races and to open

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accounts
and accept wagering instructions on behalf of non-U.S. citizens in respect of horse races. XpressBet, Inc. also holds account wagering licenses issued by the
California Horse Racing Board, the Idaho Racing Commission, the Virginia Racing Commission and the Washington Horse Racing Commission. XpressBet, Inc. also has received regulatory approvals
from the Massachusetts Racing Commission and the Maryland Racing Commission to open accounts and place wagers on behalf of residents from those states. The two entities that conduct horseracing and
pari-mutuel wagering at The Meadows are entitled to serve as a Pennsylvania-based account wagering hub by virtue of their annual licenses to conduct standardbred racing and
pari-mutuel wagering. XpressBet, Inc. has an agreement with the entities that conduct horseracing and pari-mutuel wagering at The Meadows to provide account wagering
services to those entities' account holders and to conduct their respective account wagering operations under the brand XpressBet®. In accordance with its multi-jurisdictional hub license
from Oregon and, to the extent applicable, state-based requirements imposed by states where it is licensed or otherwise approved, XpressBet, Inc. opens wagering accounts on behalf of residents
from various states and countries and processes wagering instructions from those account holders in respect of races conducted throughout the United States and in other countries.

Laws
governing account wagering in the United States vary from state to state. Currently, approximately seventeen states have expressly authorized some form of account wagering by
their residents. A smaller number of states have expressly prohibited pari-mutuel wagering and/or account wagering. The remaining states have authorized pari-mutuel wagering
but have neither expressly authorized nor expressly prohibited their residents from placing wagers through account wagering hubs located in different states. We believe that the amendment to the
Federal Interstate Horseracing Act of 1978, described above, clarified that an account wagering operation may open accounts on behalf of and accept wagering instructions from residents of states where
pari-mutuel wagering is legal and where providing wagering instructions to account wagering operators located in other states is not expressly prohibited by statute, regulation or other
government restrictions. Although our account wagering operations are conducted in accordance with what we believe is a valid interpretation of applicable state and federal law, certain state
attorneys general, district attorneys and other law enforcement officials have expressed concern over the legality of interstate account wagering. The amendment to the federal Interstate Horseracing
Act of 1978 may not be interpreted similarly by all interested parties, and there may be challenges to our account wagering activities or those of other account wagering operations by both state and
federal law enforcement authorities, which could have a material adverse effect on our business, financial conditions, operating results and prospects.

On
September 30, 2006, President George W. Bush signed into law the Unlawful Internet Gambling Enforcement Act, which prohibits the use of credit cards, checks, electronic funds
transfers and certain other funding methods for most forms of Internet gambling. The new law contains an exemption for pari-mutuel wagers placed pursuant to the Federal Interstate
Horseracing Act. It is unclear, however, whether and to what extent we will be able to utilize this exemption in respect to all of our account wagering operations as they are currently being
conducted. The U.S. Treasury Department, in consultation with the U.S. Federal Reserve Board and the U.S. Department of Justice, has released proposed regulations
which could potentially benefit all or a portion of our account wagering operations though it is currently uncertain if the proposed regulations will become final in the form as released.

In
addition to placing account wagers on behalf of U.S. residents, we also place wagers on behalf of account holders who reside in countries other than the United States.
In the case of foreign-based account wagers, they are placed either directly or indirectly through our Oregon-licensed XpressBet, Inc. subsidiary. Regardless of which entity processes a wager,
we comply with the regulatory requirements imposed by each of the jurisdictions that have licensed us to accept wagers from non-U.S. residents. The laws regarding account wagering
by residents of countries other than the United States vary from country to country, and we seek to understand and comply with those laws to the greatest extent possible. As with any issue that
turns on the interpretation of legal requirements, it is possible that law enforcement authorities from these foreign jurisdictions may disagree with our interpretation of their laws in respect of
account wagering and seek to challenge our ability to place account wagers on behalf of their residents. In certain cases, such challenges could have a material adverse effect on our business,
financial conditions, operating results and prospects, including the licenses we hold to conduct horse racing and pari-mutuel wagering (including account wagering) in the U.S.

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In Pennsylvania, the Pennsylvania State Harness Racing Commission approves annual licenses for standardbred racetracks, while the Pennsylvania State Horse Racing
Commission approves annual licenses for thoroughbred racetracks. Neither the Pennsylvania State Harness Racing Commission nor the Pennsylvania State Horse Racing Commission has licensed any operators
of horse racetracks, other than The Meadows, which we currently manage, in the Pittsburgh area; however, on September 26, 2002, the Pennsylvania State Horse Racing Commission approved an
application for a thoroughbred racing license for an operation to be located near Erie, Pennsylvania, which is approximately 100 miles from The Meadows. Presque Isle Downs commenced racing on
September 1, 2007. In addition, on September 5, 2007, the Pennsylvania harness Racing Commission approved an application for a standardbred racing license for an operation to be located
in Lawrence County located approximately 60 miles from The Meadows and within eight miles of our New Castle off-track wagering facility. This new harness track is not
expected to open before January 2010.



Under legislation approved by the citizens of the State of Oklahoma in a referendum held on November 2, 2004, Remington Park, our Oklahoma City racetrack,
was permitted to operate 650 electronic gaming machines, subject to increases of an additional 50 machines in each of the third and fifth years after the issuance of the applicable
license. The Oklahoma Horse Racing Commission was empowered under the legislation to oversee licensees' licenses and operations. The Commission promulgated temporary regulations regarding the
licensure of electronic gaming operators and the operation of the electronic gaming machines, and subsequently adopted permanent regulations on June 25, 2006. On August 11, 2005, we
received our license to operate 650 electronic gaming machines in 2005 and we opened for business on November 21, 2005.

On
November 15, 2006, we received our 2008 gaming license. On January 1, 2008, we were permitted to operate an additional 50 machines. As a result of an amendment to
the Rules for Racetrack Gaming on March 23, 2006, as adopted by Governor Henry on June 25, 2006, the definition of the types of authorized games was expanded to include "Compact
Electronic Game". A Compact Electronic Game means a gaming machine allowed to be used under Oklahoma laws by a federally recognized Indian tribe in Oklahoma. Pursuant to certain compacts entered into
in February 2006, Class III games are accordingly permitted at Remington Park, and the facility is gradually switching from Class II games to Class III games.



On November 2, 2004, Amendment 4 to the Florida State Constitution was approved, permitting the governing bodies of Broward and Miami-Dade
counties to each hold a county-wide referendum on whether to authorize slot machines within existing, licensed pari-mutuel facilities that have conducted live racing during
each of the last two years. On March 9, 2005, voters in Broward County, where Gulfstream Park is located, approved the referendum by a majority vote. Subsequently, on December 8, 2005,
the state legislature adopted legislation to allow for and govern the slot machine operators of Gulfstream Park and the three other qualifying Broward County pari-mutuel facilities. This
legislation, Florida Statutes Chapter 551, permitted Gulfstream Park and the three other pari-mutuel facilities in Broward County to operate up to 1,500 slot machines at each
of their gaming facilities. On July 1, 2007, two pieces of legislation became effective, which have benefited the operations at Gulfstream Park. First, Florida House Bill 1047 clarifies
a number of provisions in the Florida Slot Machine Act with respect to the on-site availability of automated teller machines, check cashing services and hours of operations and increases
the number of permitted slot machines. The second piece of legislation is SB 752, which is related to card rooms and addresses hours of operations, bet limits, prizes and jackpot payouts, and
the types of permitted card games. As a result of SB 752 the Gulfstream Park card room may be open year-round instead of just on live pari-mutuel days, bet limits can be
$5, instead of $2, prizes and jackpots can be paid to players and $100 buy-in games of no-limit Texas Hold'em are permitted. The slot machine nonrefundable, annual license fee
is $3.0 million and there is a required $250,000 annual minimum contributions to responsible gaming. As a result of the July 2007 legislation, we are permitted to offer gaming for a
maximum of 18 hours per day, 24 hours per day on Saturdays, Sundays and state holidays. The tax payable to the state is 50% of Gulfstream Park's gross gaming revenues. In addition, under
the legislation, we are required to have

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written
agreements with the Florida Horsemen's Benevolent and Protective Associations and the Florida Thoroughbred Breeders' Association, Inc. prior to the renewal of a gaming license. We
currently have agreements with each of these parties. We have entered into an agreement with Broward County, identical in principal terms to agreements entered into by the three other
pari-mutuel facilities in that County, that contains, among other things, provision for payment to the County of 1.5% of gross terminal revenues up to a level of $250.0 million of
gross terminal revenues and 2.0% on gross terminal revenues in excess of $250.0 million. This agreement also provides for further payments of an additional 1.7% on the first $250 million
of gross gaming revenues and 2.5% on gross terminal revenues in excess of $250.0 million to go into escrow or account for the relevant city, until Gulfstream Park reaches agreement with the
city thereby replacing the escrow.

The
Legislation required the Division of Pari-Mutuel Wagering to promulgate regulations regarding the licensure and regulation of slot machine operators at the four
qualifying pari-mutuel facilities in Broward County. The Division of Pari-Mutuel Wagering adopted rules on June 25, 2006. On October 13, 2006, we received a
license to conduct slot machine gaming at Gulfstream Park. On November 16, 2006, we opened the Gulfstream Park Racing & Casino slots facility with 516 slot machines and, after
completing improvements to the facilities now offer 875 machines. We received a renewal of our gaming license on September 14, 2007.



Austrian law permits Glucks  und Unterhaltungsspiel Ebreichsdorf Betriebsges.m.bH, a division of Casinos Austria AG, to
operate video lottery terminals at the Magna Racino under license and pursuant to the Games of Chance Act (Austria).

Our Real Estate Portfolio

As of December 31, 2007, the aggregate net book values of our real estate properties are as follows:

|                                         |  | ($ millions)
|---------------------------------------- |  | ------------
|Revenue-Producing Racing Real Estate     |  | 655.8       
|Excess Racing Real Estate                |  | 87.1        
|Revenue-Producing Non-Racing Real Estate |  | 8.5         
|                                         |  |             
|Total                                    |  | 751.4       
|                                         |  |             

Included
in our Excess Racing Real Estate is land adjacent to several of our racetracks, Santa Anita Park, Gulfstream Park, Lone Star Park at Grand Prairie, Laurel Park
(in respect of which we disposed of a portion of the excess land, a 64 acre parcel in February 2007), Pimlico Race Course and Magna Racino. We are considering a
variety of options with respect to this excess land, including entertainment and retail-based developments that could be undertaken in conjunction with business partners who might provide the
necessary financing.

Our
Revenue-Producing Non-Racing Real Estate includes our European residential development.

Environmental Matters

We are subject to a wide range of requirements under environmental laws and regulations relating to wastewater discharge, waste management and storage of
hazardous substances. Those requirements include United States Environmental Protection Agency and state regulations that address the impacts of manure and wastewater generated by concentrated
animal feeding operations ("CAFO") on water quality, including, but not limited to, storm water discharges. CAFO regulations include permit requirements and water quality discharge standards.
Enforcement of CAFO regulations has been receiving increased governmental attention. Compliance with these and other environmental laws and regulations can, in some circumstances, require significant
capital expenditures. Moreover, violations can result in significant penalties and, in some cases, interruption or cessation of operations. Historically, environmental laws and regulations have not
had a material adverse effect on our financial condition and operating results.

The
California Regional Water Quality Control Board (the "California Water Quality Board") requires that Santa Anita Park apply for, and keep in force, a wastewater discharge
permit which governs and regulates the

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amount
of contaminated water that may be discharged into the storm drain and the water table as a result of maintenance of the horse population on site. With the issuance of the permit, there are
certain compliance efforts that the California Water Quality Board has requested that management address over the five-year permit period. The California Water Quality Board has not given
deadlines for immediate compliance nor is our current permit at risk for non-compliance. Citations are not expected unless Santa Anita Park does not make an effort to comply. Upon receipt
of the permit, we commenced discussions with the California Water Quality Board regarding the nature of the compliance requests and commenced the planning process as to how the Company would address
these requirements over the next five years. It is our expectation that a number of these requirements are being addressed through planned capital projects, including the Summer 2007 installation of
the polytrack a new, synthetic racing surface and the anticipated rebuild of barns on the backside over the next several years. Given the fact that a number of these remediation requirements would be
better addressed through capital projects rather than merely a repair or fix of existing facilities, the ultimate cost of remediation will be impacted by the decision on how to best address the
remediation requirements.

While
we have environmental permits for many of our racetracks and other business operations and are taking steps to comply with them and other applicable environmental legal
requirements, we cannot be certain that we have all required environmental permits or are otherwise in compliance with all applicable environmental requirements. Where we determine that an
environmental permit or other remediation or compliance programs are required of existing or acquired racetracks and other business operations, we intend to seek the necessary approvals, which may
require us to make significant capital expenditures. Also, changes in governmental laws and regulations are ongoing, as evidenced by changes to the CAFO regulations that make environmental compliance
increasingly expensive. In addition to environmental requirements that regulate our operations, various environmental laws and regulations in the United States, Canada and Europe impose
liability on us as a current or previous owner and manager of real property, for the cost of maintenance, removal and remediation of hazardous materials released or deposited on or in properties now
or previously managed by us or disposed of in other locations. We have adopted a health and safety and environmental policy, pursuant to which we are committed to ensuring that a systematic review
program is implemented and measured for each of our operations with a goal of continued improvement in health and
safety and environmental matters. We believe that environmental legal requirements will not have a material adverse impact on our business, although there can be no assurance of that.

Employees

As of December 31, 2007, we employed approximately 5,300 employees, approximately 3,000 of whom were represented by unions. Due to the seasonal nature of
the live horse racing industry, the number of our seasonal and part-time employees will vary considerably throughout the year.

Since
our inception, we have not had a work stoppage. We consider our relations with our employees to be good. We also believe that our future success will depend in part on our
continued ability to attract, integrate, retain and motivate highly-qualified professional, technical and managerial personnel, and upon the continued service of our senior management.

Item 1A. Risk Factors

The most significant risks and uncertainties we face are described below, but other risks and uncertainties that are not known to us or that we currently believe
are not material or are similar to those faced by other companies in our industry may also have a material adverse effect on our business, financial condition, operating results or prospects.

If
any of the following risks, or any of the risks described in the other documents we file with the SEC and Canadian securities regulatory authorities, actually occur or increase, our
business, financial condition, operating results and prospects could be materially adversely affected. In that case, the trading price of the shares of our Class A Subordinate Voting Stock
could decline substantially and investors may lose all or part of the value of the shares of our Class A Subordinate Voting Stock held by them.

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Risks Regarding Our Company

We currently have a number of debt obligations that we will be unable to meet unless we can extend or restructure existing facilities or
raise capital from other sources, neither of which is assured. If we are unsuccessful in negotiations with our existing lenders, we may have to seek protection from our creditors, be unable to
continue as a going concern and/or our stock may become illiquid or worthless.

At
December 31, 2007, we had $209.4 million of debt that matures in 2008, including amounts under our $40.0 million senior secured revolving credit facility with a
Canadian financial institution which is scheduled to mature on March 31, 2008, our Bridge Loan of up to $80.0 million with a subsidiary of MID, which is scheduled to mature on
May 31, 2008 and our obligation to repay $100.0 million of indebtedness under the Gulfstream Park project financing with a subsidiary of MID, which is due by May 31, 2008. In the
event we are unable to extend or restructure such facilities, we will not have sufficient cash to meet the obligations under these facilities unless we are able to raise capital from other sources in
the short term, including as a result of (i) asset sales under the Plan, (ii) additional financing arrangements or (iii) operations, none of which are assured. If we are unable to
repay our obligations when due, other current and long-term debt will also become due on demand as a result of cross-default provisions within loan agreements, unless we are able to obtain
waivers or extensions. As a result, we could be required to liquidate assets in the fastest manner possible to raise funds, seek protection from our creditors in one or more ways or be unable to
continue as a going concern, any of which will have a material adverse effect on our business and operations.

There is no assurance that we will be able to complete asset sales or undertake strategic transactions as contemplated under our debt elimination plan announced
in September 2007 at acceptable prices or as quickly as originally contemplated.

The
Plan was designed to eliminate net debt by December 31, 2008 by generating funding from the sale of assets, entering into strategic transactions involving certain of the
Company's racing, gaming and technology operations, and a possible future equity issuance. To date, we have not yet closed any significant transactions under the Plan and have not entered into any
strategic transactions. Although the Company continues to implement the Plan, weakness in the U.S. real estate and credit markets has adversely affected our ability to execute the Plan as
market demand for our assets has been weaker than expected and financing for buyers has become more difficult to obtain. We cannot predict when these market conditions may improve. Any failure or
delay in implementation of the Plan will adversely affect our ability to meet upcoming debt maturities, satisfy operational requirements or continue as a going concern.

Although our financial statements have been prepared on a going concern basis, there can be no assurance that we will be able to continue as a
going concern.

Although
our financial statements since March 31, 2006 have been prepared on a going concern basis (which contemplates the realization of assets and the discharge of liabilities
in the normal course of business for the foreseeable future) there is substantial doubt as to our ability to continue as a going concern as a result of our recurring losses from operations, working
capital deficiency and accumulated deficit as at December 31, 2007. Our financial statements do not give effect to any adjustments which would be necessary should MEC be unable to continue as a
going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in our financial
statements. Our ability to continue as a going concern is dependent on our generating cash flows that are adequate to sustain the operations of our business, renewing, extending, restructuring or
refinancing current financing arrangements and meeting our obligations with respect to secured and unsecured creditors, none of which is assured. If the Company is unable to repay its obligations when
due, other current and long-term debt will also become due on demand as a result of cross-default provisions within loan agreements, unless the Company is able to obtain waivers or
extensions. As a result, the Company will likely need to seek additional funds in the short-term from one or more possible sources. The availability of such additional funds is not assured
and, if available, the terms thereof are not determinable at this time.

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As a result of our financial condition, our Board of Directors has a duty to creditors that may adversely affect the interests of our
shareholders.

Because
of our financial condition, our Board of Directors has a duty to our creditors that may affect the interests of our shareholders. When a Delaware corporation is operating in the
vicinity of insolvency, the Delaware courts have imposed upon the corporation's directors a fiduciary duty to the corporation's creditors. Our Board of Directors may be required to make decisions that
consider the interests of creditors at the expense of our stockholders to fulfill its fiduciary duty. For instance, we may be required to preserve our assets to maximize the repayment of debts versus
employing the assets to further grow our business and increase shareholder value.

We have a history of net losses; we anticipate additional losses and may never become profitable.

We
have incurred net losses in each fiscal year since the year ended December 31, 2002. For our fiscal year ended December 31, 2007, we incurred a net loss of $113.8
million. As of December 31, 2007, our accumulated deficit was $510.1 million. We expect to continue to incur additional operating losses in the future and there is no assurance that we will be
profitable in any future period.

We expect that during 2008 we will require additional financing to fund our current planned operations and the implementation of our strategic plan, but we may
not be able to obtain such financing on satisfactory terms, if at all.

We
expect that during 2008, we will be required to seek additional financing in order to fund our operations and the implementation of our strategic plan, including capitalizing on
future growth opportunities. If additional financing or other sources of funds are not available to us as needed, or are not available on terms that are acceptable to us, our ability to continue as a
going concern, to add alternative gaming to our racetracks where permitted or to improve or expand our operations as planned may be adversely affected.

We
have already entered into numerous financing arrangements secured by significant portions of our assets, which would limit our ability to provide security for new loans. Please see
"Management's Discussion and Analysis of Results of Operations and Financial Position  Working Capital, Cash and Other Resources" and "Financial Statements and
Supplementary Data".

Following
the expiry of our existing financing arrangements, there can be no assurance that the amounts, terms and conditions involved in the renewal or extension of our existing
financing arrangements will be favourable, or that we will be able to renew or extend any of these financing arrangements at all. In particular, our controlling shareholder, MID, has entered into
financing arrangements with us in the past and there is no assurance that such arrangements will be continued or extended on favorable terms in the future. If we are unable to renew or extend our
financing arrangements when due, on favourable terms, or at all, our business, operations and financial condition may be materially adversely affected.

Our senior secured revolving credit facility imposes significant restrictions on us.

Our
senior secured revolving credit facility, which matures on March 31, 2008, requires us to maintain aggregate earnings before interest, taxes, depreciation and amortization
from operations at Santa Anita Park and Golden Gate Fields, calculated on a rolling 12 month basis of not less than $15.0 million. This revolving credit facility is secured by a first
charge on the assets of Golden Gate Fields and a second charge on the assets of Santa Anita Park and is guaranteed by certain of our subsidiaries which own and operate Golden Gate Fields and Santa
Anita Park. The credit agreement contains customary covenants relating to our ability to incur additional indebtedness, make future acquisitions, enter into certain related party transactions,
consummate asset dispositions, incur capital expenditures and make restricted payments. These restrictions may limit our ability to expand, pursue our business strategies and obtain additional funds.
Our ability to meet these financial covenants may be adversely affected by a deterioration in business conditions or our results of operations, adverse regulatory developments and other events beyond
our control. At September 30, 2007, we were not in compliance with one of the financial covenants contained in the credit agreement. A waiver was obtained from the lender for the financial
covenant breach at September 30, 2007. At December 31, 2007, we were in compliance with the financial covenant. Failure to comply with these restrictions may result in the occurrence of
an event of default under the senior, revolving credit facility and trigger a cross-default under certain of our

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other
credit facilities. Upon the occurrence of an event of default, the lender may terminate the senior secured revolving credit facility, demand immediate payment of all amounts borrowed by us and
require adequate security or collateral for all outstanding letters of credit outstanding under the facility, which could adversely affect our ability to repay our debt securities and would adversely
affect the trading price of our Class A Subordinate Voting Stock.

Repayments under our Gulfstream Park project financings and Remington Park project financings impose limitations on the amount of funds available to grow those
businesses.

Each
of our Gulfstream Park project financing, which matures in 2016, and Remington Park project financing, which matures in 2015, require payment of principal and interest. These
payments limit the amount of funds available to invest back into these properties. In addition, each of these loans provide that certain cash from the respective operations of Gulfstream Park and
Remington Park must be used to pay deferred interest on the loans. This requirement will further limit the funds available to service our debt obligations and operational requirements.

Our business is heavily concentrated at certain of our racetracks.

Six
of our racetracks, Santa Anita Park, Laurel Park, Pimlico Race Course, Gulfstream Park, Lone Star Park and Golden Gate Fields accounted for approximately 79.2% of our revenue from
continuing operations for the year ended December 31, 2007. If a business interruption were to occur and continue for a significant length of time at any of these racetracks, it could adversely
affect our operating results. Additionally, certain of our other racetrack properties have experienced operating losses before interest, income taxes, depreciation and amortization over the past three
years. The operating performance of these racetracks may not improve in the future.

We are controlled by MID and therefore MID is able to prevent any takeover of us by a third party.

MID
owns all our outstanding Class B Stock, which is entitled to 20 votes per share, and approximately 4.36 million shares of our Class A Stock,
and therefore is able to exercise approximately 96% of the total voting power of our outstanding stock. It is therefore able to elect all our directors and to control us. As a result, MID is
able to cause or prevent a change in our control.

Our relationship with MID is not at "arm's length", and therefore MID may influence us to make decisions that are not in the best interests of our other
stockholders.

Our
relationship with MID is not at "arm's length". In addition to the ownership of our stock as described in the preceding risk factor (and in the risks described below in
"  Risks Relating to Our Securities"), sales or a spin-off or other distribution of our Class A Subordinate Voting Stock by MID or by certain
of our other significant stockholders under our registration statements could depress our stock price. Our Chairman and Interim Chief Executive Officer is also the Chairman of MID's board of
directors. In some cases, the interests of MID may not be the same as those of our other stockholders, and conflicts of interest may arise from time to time that may be resolved in a manner
detrimental to us or our minority stockholders. MID is able to cause us to effect certain corporate transactions without the consent of the holders of our Class A Subordinate Voting Stock,
subject to applicable law and the fiduciary duties of our directors and officers. Consequently, transactions effected between us and MID may not be on the same terms as could be obtained from
independent parties, resulting in the possibility of our minority stockholders' interests being compromised.

We may not be able to attract or retain the personnel necessary to achieve our business objectives.

Our
future success depends in part on our continued ability to hire, assimilate in a timely manner and retain qualified personnel. Since June 22, 2007 we have had an Interim Chief
Executive Officer and, as of yet, have not been able to retain a permanent appointee. Our most recent permanent Chief Executive Office appointee stepped down after holding the position for
approximately four months. The loss of key managers could have a material adverse effect on our business, results of operations and financial condition.

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Although a prospectus supplement related to a given offering of securities may describe the proposed use of proceeds of such offering, our management may have
broad discretion over the use of proceeds from any offering of securities described in such prospectus supplement, and may spend the proceeds in ways with which shareholders do
not agree.

Our
management may retain broad discretion as to the use of proceeds from any offering of securities described in any prospectus or any prospectus supplement. Accordingly, shareholders
may not have an opportunity to evaluate the specific uses of those proceeds and shareholders may not agree with those uses. Our failure to use the proceeds effectively could have an adverse effect on
our business, financial condition, operating results and prospects.

We are exposed to currency exchange rate fluctuations which could aversely affect our profitability as reported in U.S. Dollars.

Our
business outside the United States is generally transacted in currencies other than U.S. dollars. Fluctuations in currencies relative to the U.S. dollar may make
it more difficult to perform period-to-period comparisons of our operating results. Moreover, fluctuations in the U.S. dollar relative to currencies in which earnings
are generated outside the United States could result in a reduction in our profitability as reported in U.S. dollars.

Risks Relating to Our Wagering and Gaming Operations

The passage of legislation permitting alternative gaming at racetracks, such as slot machines, video lottery terminals and other forms of
non-pari-mutuel gaming, can be a long and uncertain process. A decision to prohibit, delay or remove alternative gaming rights at racetracks by the government or the citizens
of a state, or other jurisdiction, in which we own or operate a racetrack, could adversely affect our business or prospects.

Three
jurisdictions currently allow alternative gaming to be conducted at racetracks or other facilities owned and/or operated by MEC: Florida, Oklahoma and Pennsylvania, and one
jurisdiction, Oregon, permits a limited number of video lottery terminal machines to be operated at our racetrack and our network of off-track betting centers, as well as bars and taverns
located throughout the state. We are pursuing legislation similar to that which exists in Florida, Oklahoma, and Pennsylvania in other U.S. states where certain of our racetracks are located.
There can be no assurance, however, that alternative gaming at racetracks will become permitted in those states.

In
the event that alternative gaming legislation is enacted in additional jurisdictions, there can be no certainty as to the terms of such legislation or regulations, including the
timetable for commencement, the conditions and feasibility of operation and whether alternative gaming rights are to be limited to racetracks. If we proceed to conduct alternative gaming at any of our
racetracks, there may be significant costs and other resources to be expended, and there will be significant risks involved, including the risk of changes in the enabling legislation, that may have a
material adverse effect on the relevant racetrack's operations and profitability.

The
regulatory risks and uncertainties that are inherent in the conduct of alternative gaming also apply in other jurisdictions outside the United States. The Magna
Racino, located approximately 20 miles south of Vienna, Austria, serves as landlord to video lottery terminal operations conducted by a
licensed casino operator. Under that arrangement, the racetrack retains 50% of the gross profit (excluding certain costs). This arrangement has an indefinite term (with a minimum five year term
ending in September 2009) and is terminable by either party on 12 months prior notice. There can be no assurance as to how long this arrangement will continue, and if it does, whether
the terms will remain the same.

A decline in the popularity of horse racing could adversely impact our business.

The
continued popularity of horse racing is important to our growth plans and our operating results. Our business plan anticipates our attracting new customers to our racetracks,
off-track betting facilities and account wagering operations. Even if we are successful in making acquisitions and expanding and improving our current operations, we may not be able to
attract a sufficient number of new customers to achieve our business plan.

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Public
tastes are unpredictable and subject to change. Any decline in interest in horse racing or any change in public tastes may adversely affect our revenues and, therefore, our operating results.

Declining on-track attendance and increasing competition in simulcasting may materially adversely affect our operating
results.

There
has been a general decline in the number of people attending and wagering at live horse races at North American racetracks due to a number of factors, including increased
competition from other forms of gaming, unwillingness of customers to travel a significant distance to racetracks and the increasing availability of off-track and account wagering. The
declining attendance at live horse racing events has prompted racetracks to rely increasingly on revenues from inter-track, off-track and account wagering markets. The
industry-wide focus on inter-track, off-track and account wagering markets has increased competition among racetracks for outlets to simulcast their live races. A continued
decrease in attendance at live events and in on-track wagering, as well as increased competition in the inter-track, off-track and account wagering markets, could lead to a
decrease in the amount wagered at our facilities and on races conducted at our racetracks and may materially adversely affect our business, financial condition, operating results and prospects.

Gaming companies that operate on-line and offer internet-based wagering services may materially adversely affect our operating
results.

Gaming
companies that operate on-line and offer internet-based wagering services often do not have the same level of overhead as we do as they do not have similar capital
expenditure requirements, which often results in those companies being able to offer services at discount prices. In addition, unlike traditional operations, like ours, these off-shore
online operators often do not pay certain percentages of handle to local horsemen, state regulatory agencies and other possible entities in accordance with applicable U.S. federal and state law
and horse industry regulations, which means those operators are able to attract U.S. based customers that might otherwise use our services by offering rebates we cannot afford to offer.

Our strategy of increasing international distribution of North American horse racing may not be successful.

We
believe that there is a demand for North American horse racing in the international market, but we may not be correct in our belief. Our plan to distribute our content internationally
has not been successfully carried out by any other company to date. We are spending financial capital and deploying human capital in an effort to capture the international market. If we are not
successful, it may have a material adverse effect on our ability to meet any future revenue expectations and, therefore, our operating results.

Both our pari-mutuel gaming and alternative gaming activities at racetracks are dependent on governmental regulation and approvals. Amendments to such
regulation or the failure to obtain such approvals could adversely affect our business.

All
our pari-mutuel wagering and alternative gaming operations at racetracks are contingent upon the continued governmental approval of these operations as forms of legalized
gaming. All our current gaming operations are subject to extensive governmental regulation and could be subjected at any time to additional or more restrictive regulation, or banned entirely.

We
may be unable to obtain, maintain or renew all governmental licenses, registrations, permits and approvals necessary for the operation of our pari-mutuel wagering and
other gaming facilities. Licenses to conduct live horse racing and wagering, simulcast wagering and alternative gaming at racetracks must be obtained from each jurisdiction's regulatory authority, in
many cases annually. In addition, licenses or approvals to conduct account wagering must be obtained in certain jurisdictions in which our account wagering customers reside, in many cases annually.
The denial, loss or non-renewal of any of our licenses, registrations, permits or approvals may materially limit the number of races we conduct or the form or types of
pari-mutuel wagering and other gaming activities we offer, and could have a material adverse effect on our business. In addition, we currently devote significant financial and management
resources to complying with the various governmental regulations to which our operations are subject. Any significant increase in governmental regulation would increase the amount of our resources
devoted to governmental compliance, could substantially restrict our business, and could materially adversely affect our operating results.

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If the court challenge to a November 14, 2007 agreement between the State of Florida and the Seminole Tribe of Florida is unsuccessful, the casino at
Gulfstream Park will be forced to compete with an entity that does not have a similar tax burden and, therefore, will likely have significant resources to apply to marketing and
other efforts.

On
November 28, 2007, we sought and were granted amicus curiae status in a suit filed by the House of Representatives and Speaker Marco Rubio against the Governor of the State of
Florida, Charlie Crist, relating to the approval of tribal compacts. The Florida Supreme Court heard arguments on January 30, 2008 and judgment is currently pending.

Any future expansion of our pari-mutuel and gaming operations will likely require us to obtain additional governmental approvals or, in some cases,
amendments to current laws governing such activities.

The
high degree of regulation in the pari-mutuel and gaming industry is a significant obstacle to our growth strategy, especially with respect to alternative gaming at
racetracks and account wagering, including telephone, interactive television and Internet-based wagering. Currently, non-pari-mutuel gaming is only offered at three
U.S. racetracks we own, Remington Park, Gulfstream Park and Portland Meadows, at which we offer a limited number of video lottery terminal machines. Non-pari-mutuel
gaming is also offered at The Meadows, a U.S. racetrack that we operate.

Account
wagering in the United States may currently be conducted only through hubs or bases located in certain states. Our expansion opportunities with respect to account wagering
will be limited unless more states amend their laws to permit account wagering or, in the alternative, if states take action to make such activities unlawful. In addition, the licensing and
legislative amendment processes can be both lengthy and costly, and we may not be successful in obtaining required legislation, licenses, registrations, permits and approvals.

In
the past, certain state attorneys general, district attorneys and other law enforcement officials have expressed concern over the legality of interstate account wagering. In
December 2000, legislation was enacted in the United States that amends the Interstate Horseracing Act of 1978. We believe that this amendment clarifies that inter-track simulcasting,
off-track betting and account wagering, as currently conducted by the U.S. horse racing industry, are authorized under U.S. federal law. The amendment may not be interpreted
in this manner by all concerned, however, and there may be challenges to these activities by both state and federal law enforcement authorities, which could have a material adverse impact on our
business, financial condition, operating results and prospects.

On
September 30, 2006, President George W. Bush signed into law the Unlawful Internet Gambling Enforcement Act, which prohibits the use of credit cards, checks, electronic funds
transfers and certain other funding methods for most forms of Internet gambling. The new law contains an exemption which, at the very least, permits such funding for pari-mutuel account
wagering conducted in compliance with the Interstate Horseracing Act. It is unclear at this time, however, how U.S. law enforcement authorities, including the U.S. Department of Justice,
will interpret the application of this new law. Furthermore, as required by the Unlawful Internet Gambling Enforcement Act, the U.S. Treasury Department, in consultation with
the U.S. Federal Reserve Board and the U.S. Department of Justice, released proposed regulations. See "Government Regulation  Horse Racing".
As it is currently unclear whether or to what extent the proposed regulations may be amended prior to becoming final, it is uncertain if the regulations or interpretations by U.S. Federal law
enforcement authorities will benefit our account wagering operations or require us to curtail our account wagering operations. If our operations need to be curtailed we may suffer a materially adverse
impact on our account wagering business which, in turn could have a materially adverse impact on our business, financial condition, operating results and financial performance. Since the passage of
the federal Unlawful Internet Gambling Enforcement Act in the United States, it is unclear just how federal and/or state prosecutors will address wagers that involve parties from outside the
United States. If this new act is interpreted as prohibiting international wagers, it will have a material adverse effect on our business, financial condition, operating results and financial
performance.

Even
before the passage of the Unlawful Internet Gambling Enforcement Act, certain financial institutions began blocking the use of credit cards issued by them for Internet gambling,
either voluntarily or as part of a settlement with the office of the Attorney General for New York. Legislation or actions of this nature, if enacted

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or
implemented without providing for a meaningful exception to allow account wagering to be conducted as it is currently being conducted by the U.S. horse racing industry, could inhibit account
wagering by restricting or prohibiting its use altogether or, at a minimum, by restricting or prohibiting the use of credit cards and other commonly used financial instruments to fund wagering
accounts. If enacted or implemented, these or any other forms of legislation or practices restricting account wagering could cause our business and its growth to suffer.

The U.S. Federal Government's response to a recent ruling by the World Trade Organization on the U.S.'s Internet gambling policy could adversely
affect our financial performance.

In
the spring of 2005, the World Trade Organization Appellate Body ruled that a claim from the island country of Antigua regarding U.S. Federal policy on international gambling
may have merit due to an apparent inconsistency in how the U.S. treats interstate pari-mutuel wagers under the Interstate Horseracing Act and all other sports wagers, both on an
interstate and international basis. The WTO Appellate Body ruled that the Interstate Horseracing Act raised questions regarding whether the U.S. has taken a consistently negative position
regarding Internet wagering across state and international boundaries. As a part of its ruling, the WTO Appellate Body ordered the U.S. to clarify its position on interstate
pari-mutuel wagering on or before April 3, 2006. The Federal government elected to file no response, preferring to rely, instead on its historical position that interstate account
wagering violates the U.S. Federal Wire Act. The U.S. has subsequently pursued eliminating gambling from the list of permitted services that are among the permitted services contained in
the treaty that was the subject of Antigua's complaint to the World Trade Organization. However, there are no assurances that such approach will ultimately result in establishing a consensus. If a
consensus is not established, the extent to which Federal authorities successfully prosecute account wagering operators based in the United States or that take wagers from United States
residents could have a material adverse effect on our revenues, business, financial condition, operating results and financial performance. Alternatively, if, as a result of the U.S.'s position,
offshore wagering is permitted into the United States, that also could have a material adverse effect on our revenues and financial performance.

Uncertainty as to the effect of Congress' attempt to eliminate the federal income tax withholding requirement on winning wagers by foreign nationals could subject
us to tax liability.

In
October 2004, a bill was enacted to enable U.S. pari-mutuel wagering operators to accept wagers from foreign nationals located in foreign countries into
their pari-mutuel pools. The
previous law required U.S. pari-mutuel wagering operators to withhold federal income tax on any winning wagers placed by foreign nationals located in foreign countries. Any failure
to withhold income tax from these wagers made the payer entity liable. We believe that the new law reflects Congress' intent to eliminate the tax withholding requirement from winning
pari-mutuel wagers placed by foreign nationals located in foreign countries. In the absence of specific rules expressing how this new law is to be interpreted, however, there is a risk
that the law will be interpreted differently from Congress' apparent intent, thus imposing an obligation on tracks to continue withholding federal income tax from winning wagers by foreign nationals
located in foreign countries. This uncertainty could expose us to tax liability if it is determined that our method for accepting foreign wagers into our pools is incorrect. Any resulting tax
liability imposed on us could have a material adverse impact on our revenues and financial performance.

We may not be able to continue to operate our slot facility at Gulfstream Park in the long term if the constitutional amendment adopting the slots initiative is
determined to be invalid. At December 31, 2007, our casino facility at Gulfstream Park had a carrying value of $29.6 million.

On
November 15, 2006, the Company opened the slots facility at Gulfstream Park, which now offers approximately 825 slot machines. The Company opened the slots facilities
despite an August 2006 decision rendered by the Florida First District Court of Appeals that reversed a lower court decision granting summary judgment in favor of "Floridians for a Level
Playing Field" ("FLPF"), a group in which Gulfstream Park is a member. The Court ruled that a trial is necessary to determine whether the constitutional amendment adopting the slots initiative,
approved by Floridians in the November 2004 election, was invalid because the petitions bringing the initiative forward did not contain the minimum number of valid signatures. FLPF filed an
application for a rehearing, rehearing en banc before the full panel of the Florida First District Court of Appeals and Certification by the Florida Supreme Court. On November 30, 2006, in a
split decision, the en banc court affirmed the August 2006 panel decision and certified the matter to the Florida Supreme Court, which stayed

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the
appellate court ruling pending its jurisdictional review of the matter. On September 27, 2007, the Florida Supreme Court ruled that the matter was not procedurally proper for consideration
by the court. Its order effectively remanded the matter to the trial court for a trial on the merits. A trial on the merits will likely take over a year to fully develop and could take as many as
three years to achieve a full factual record and trial court ruling for an appellate court to review. The Company believes that the August 2006 decision rendered by the Florida First District
Court of Appeals is incorrect and that any allegations of fraud in the securing of the petitions will ultimately be disproven at the trial level, and accordingly, we have proceeded to open the slots
facility. In the event the November 2004 election results are ultimately held to be invalid, we could potentially have a write-down of casino assets and our Florida operations would
be negatively impacted.

We face significant competition from other racetrack operators, including those in states where more extensive gaming options are authorized, which could hurt our
operating results.

We
face significant competition in each of the jurisdictions in which we operate racetracks and we expect this competition to intensify as new racetrack operators enter our markets and
existing competitors expand their operations and consolidate management of multiple racetracks. In addition, the introduction of legislation enabling slot machines or video lottery terminals to be
installed at racetracks in certain states allows those racetracks to increase their purses and compete more effectively with us for horse owners, trainers and
customers. Competition from existing racetrack operators, as well as the addition of new competitors, may have a material adverse effect on our future performance and operating results.

Competition from non-racetrack gaming operators may reduce the amount wagered at our facilities and materially adversely affect our operating
results.

We
compete for customers with casinos, sports wagering services and other non-racetrack gaming operators, including government-sponsored lotteries, which benefit from
numerous distribution channels, including supermarkets and convenience stores, as well as from frequent and extensive advertising campaigns. We do not enjoy the same access to the gaming public or
possess the advertising resources that are available to government sponsored lotteries as well as some of our other non-racetrack competitors, which may adversely affect our ability to
compete effectively with them.

We currently face significant competition from Internet and other forms of account wagering, which may reduce our profitability.

Internet
and other account wagering gaming services allow their customers to wager on a wide variety of sporting events and casino games from home. Although many on-line
wagering services are operating from offshore locations in violation of U.S. law by accepting wagers from U.S. residents, they may divert wagering dollars from legitimate wagering venues
such as our racetracks and account wagering operations. Moreover, our racetrack operations generally require greater ongoing capital expenditures in order to expand our business than the capital
expenditures required by Internet and other account wagering gaming operators. Currently, we cannot offer the diverse gaming options provided by many Internet and other account wagering gaming
operators and may face significantly greater costs in operating our business. Our inability to compete successfully with these operators could be materially adverse to our business. It is anticipated
that the passage of the Unlawful Internet Gambling Funding Prohibition Act will reduce the amount of competition from non-pari-mutuel account wagering operations, however, it
is unclear at this time whether this new law will indeed curtail this type of wagering activity.

In
addition, the market for account wagering is affected by changing technology. Our ability to anticipate such changes and to develop and introduce new and enhanced services on a timely
basis will be a significant factor in our ability to expand, remain competitive and attract new customers.

It is not certain that TrackNet Media will exist beyond the initial five year term provided for in the limited liability company agreement under which it
was formed.

The
TrackNet Media limited liability agreement provides for an initial five year term. Although that agreement contemplates that it may be extended, such an extension would only occur if
both MEC and Churchill Downs decide to do so. As Churchill Downs is a competitor in the horseracing industry, there is a possibility that one or both of the parties may decide not to continue with the
joint venture arrangement, in which case there

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may
be considerable effort and cost expended to unwind the joint venture. Also, if the joint venture does not continue past the end of the initial term, we may lose access to Churchill Downs
racing content.

TrackNet Media may not be able to enter into agreements with additional content owners.

In
the event, the main competitor of HRTV, TVG, is able to sign other horseracing content owners to exclusive agreements, as has been their past business practice, those
content owners will not be able to make available their content to TrackNet Media, and HRTV, respectively, which will in turn negatively impact our ability to attract additional
customers.

Expansion of gaming conducted by Native American groups may lead to increased competition in our industry, which may negatively impact our growth and
profitability.

In
March 2000, the California state constitution was amended, resulting in the expansion of gaming activities permitted to be conducted by Native American groups in California.
This has led to, and may continue to lead to, increased competition and may have an adverse effect on the profitability of Santa Anita Park and Golden Gate Fields and our future growth in California.
It may also affect the purses that those tracks are able to offer and therefore adversely affect our ability to attract top horses.

Several
Native American groups in Florida have previously expressed interest in opening or expanding existing casinos in southern Florida, which could compete with Gulfstream Park and
reduce its profitability. For example, the Seminole Tribe of Florida has partnered with Hard Rock International to open hotel and casino operations in Tampa and Hollywood, Florida. Also, the State of
Florida has entered into a November 14, 2007 agreement with the Seminole Tribe of Florida approving tribal compacts. Though the validity of Governor Charlie Crist's actions are being challenged
in litigation by, among others, the House of Representatives, if the agreement with the Seminole Tribe is ultimately upheld, our facilities will face even greater competition.

Officials
with the Miami, Oklahoma based Shawnnee Tribe announced January 23, 2008 that they had made a filing with the Bureau of Indian Affairs in connection with a plan to have
104 acres of land in northeast Oklahoma City put into federal trust for the purpose of a resort development which would include casino facilities. It is currently too early to determine if the
Shawnee Tribe's plan will succeed, though if it does it would represent a significant challenge to our casino operations at Remington Park.

Moreover,
other Native American groups may open or expand casinos in other regions of the country where we currently operate, or plan to operate, racetracks or other gaming operations.
Any such competition from Native American groups could adversely affect our growth and profitability.

Some jurisdictions view our operations primarily as a means of raising taxes, and therefore we are particularly vulnerable to additional or increased taxes
and fees.

We
believe that the prospect of raising significant additional revenue through taxes and fees is one of the primary reasons that certain jurisdictions permit legalized gaming. As a
result, gaming companies are typically subject to significant taxes and fees in addition to the normal federal, state, provincial and local income taxes, and such taxes and fees may be increased at
any time. From time to time, legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry. For instance, U.S. legislators
have proposed the imposition of a U.S. federal tax on gross gaming revenues. It is not possible to determine with certainty the likelihood of any such changes in tax laws or their
administration; however, if enacted, such changes could have a material adverse effect on our business.

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Industry controversies could cause a decline in bettor confidence and result in changes to legislation, regulation, or industry practices of the horse racing
industry, which could materially reduce the amount wagered on horse racing and increase our costs, and therefore adversely affect our revenue and operating results.

In
general, the pari-mutuel wagering industry is adversely affected by negative information that can erode bettor confidence. Any investigation (whether or not charges are
ultimately laid) or any materially negative information arising out of an investigation by the FBI or any other federal, state or industry regulatory body, including, without limitation, any negative
information concerning the internal controls and security of totalisator systems related to pari-mutuel wagering activities, may materially reduce the amount wagered on horse racing. Such
a reduction would likely negatively impact the revenue and earnings of companies engaged in the horse racing industry, including us.

Improper
conduct concerns can also lead to the imposition of additional controls, which may in some cases negatively impact our business and results from operations. For example, several
persons were convicted of fraudulent conduct in connection with certain Pick 6 wagers made on the 2002 Breeders' Cup hosted by Arlington Park in Chicago, Illinois. As a result of the Pick
6 controversy, the horse racing industry focused on another area of bettor concern, late odds changes, which sometimes occur as odds updates in the totalisator system cause significant changes
in the odds after a race has commenced. We have expended considerable resources in connection with our role with various industry groups that are focused on making technological improvements in an
effort to, among other things, reduce late odds shifts and provide additional controls.

Also,
in January 2005, the FBI announced indictments against 17 individuals alleged to have been engaged in money laundering, tax evasion and an illegal gambling
conspiracy, in each case arising out of incidents connected with the horseracing industry. Certain of the alleged criminal acts are purported to have occurred through the facilities of certain rebate
wagering operations, known as "rebate shops", that commingle significant amounts of wagers into wager pools hosted by U.S. racetrack operators, including MEC. One of the indictments arose out
of an alleged scheme of doping horses to enhance performance. None of the indictments accused any rebate shops or U.S. racetrack operators of wrongdoing, however, the full impact of this
controversy on bettor confidence is unclear.

If we pay persons who place fraudulent "winning" wagers, we would remain liable to pay the holders of the proper winning wagers the full amount due
to them.

We
may be subject to claims from customers for fraudulent "winning" wagers. If we paid those claims, we would remain liable to the holders of the proper winning wagers for the full
amount due to them and would have the responsibility to attempt to recover the money that we paid on the fraudulent claims. We may not be able to recover that money, which would adversely affect our
operating results.

Our operating results fluctuate seasonally and may be impacted by a reduction in live racing dates due to regulatory factors.

We
experience significant fluctuations in quarterly operating results due to the seasonality associated with the racing schedules at our racetracks. Generally, our revenues from
racetrack operations are greater in the first quarter of the calendar year than in any other quarter. We have a limited number of live racing dates at each of our racetracks and the number of live
racing dates varies somewhat from year to year. The allocation of live racing dates in most of the jurisdictions in which we operate is subject to regulatory approval from year to year and, in any
given year, we may not receive the same or more racing dates than we have had in prior years. We are also faced with the prospect that competing racetracks may seek to have some of our historical
dates allocated to them. A significant decrease in the number of our live racing dates would reduce our revenues and cause our business to suffer.

Compliance with new requirements mandated by regulators can represent a significant cost and, in the event those requirements must be met quickly, could lead to
operational difficulties.

During
January and early February 2008, additional work on drainage problems was required on the synthetic track surface installed at Santa Anita Park. As a result of these
problems and the additional work required, racing at Santa Anita Park was cancelled on 11 days (offset in part by three rescheduled days) during

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the
critical time of the opening of the 2008 meet, and the running of the California half of the Sunshine Millions was jeopardized.

Unfavourable weather conditions may result in a reduction in the number of races we hold.

Since
horse racing is conducted outdoors, unfavourable weather conditions, including extremely high or low temperatures, excessive precipitation, storms or hurricanes, may cause races to
be cancelled or may reduce attendance and wagering. Since a substantial portion of our operating expenses is fixed, a reduction in the number of races held or the number of horses racing due to
unfavourable weather would reduce our revenues and cause our business to suffer.

We periodically enter into agreements with third parties over whom we have limited control but whose conduct could affect the licenses that we hold in various
jurisdictions.

From
time to time, we may enter into agreements with third parties over whom we have limited control. Conduct arising from or related to these agreements or joint venture arrangements
could have an impact on the various licenses that our subsidiaries hold in multiple jurisdictions. If one of these agreements or joint venture arrangements has an adverse impact on any of these
licenses, such adverse impact could have a material adverse impact on us or our financial condition, operating results or prospects, primarily through the impact associated with any loss, denial,
suspension or other penalty imposed on such licenses.

The profitability of our racetracks is partially dependent upon the size and health of the local horse population in the areas in which our racetracks
are located.

Horse
population is a factor in a racetrack's profitability because it generally affects the average number of horses (i.e., the average "field size") that run in races. Larger
field sizes generally mean increased wagering and higher wagering revenues due to a number of factors, including the availability of exotic bets (such as "exacta" and "trifecta" wagers). Various
factors have led to both short-term and long-term declines in the horse population in certain areas of the country, including competition from racetracks in other areas,
increased costs and changing economic returns for owners and breeders, and the spread of various debilitating and contagious equine diseases, such as the Mare Reproductive Loss Syndrome, which can
cause large numbers of mares to sustain late term abortions or embryonic loss, the neurologic form of Equine Herpes Virus-l and Strangles, which is a disease of the respiratory system
caused by the organism Streptococcus equi. If any of our tracks are faced with a sustained outbreak of a contagious equine disease, or if we are unable to attract horse owners to stable and race their
horses at our tracks by offering a competitive environment, including improved facilities, well-maintained racetracks, better living conditions for backstretch personnel involved in the
care and training of horses stabled at our tracks, and a competitive purse structure, our profitability could decrease. In addition to equine specific maladies, in the event other serious diseases
present themselves and pose a serious threat to the horse population and/or people working in our operations, which are labor intensive in a number of cases, we may be required to cease operations at
affected locations until such time as the threat has passed, in which case our operations would likely be negatively impacted.

We depend on agreements with our horsemen's industry associations to operate our business.

The
U.S. Interstate Horseracing Act of 1978, as well as various state racing laws, require that, in order to simulcast races and, in some cases conduct live racing, we have
written agreements with the horsemen at our racetracks, who are represented by industry associations. In some jurisdictions, if we fail to maintain operative agreements with the industry associations,
we may not be permitted to conduct live racing or simulcasting at tracks or account wagering from hubs located within those jurisdictions. In addition, our simulcasting agreements are generally
subject to the approval of the industry associations. Should we fail to renew existing agreements with the industry associations on satisfactory terms or fail to obtain approval for new simulcast
agreements, we would lose revenues and our operating results would suffer.

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If we are unable to continue to negotiate satisfactory union contracts, some of our employees may commence a strike. A strike by our employees or a work stoppage
by backstretch personnel, who are employed by horse owners and trainers, may lead to lost revenues and could have a material adverse effect on our business.

As
of December 31, 2007, we employed approximately 5,300 employees, approximately 3,000 of whom were represented by unions. A strike or other work stoppage by our employees could
lead to lost revenues and have a material adverse effect on our business, financial condition, operating results and prospects.

Legislation enacted in California in 2002 could facilitate the organization of backstretch personnel in that state.

A
strike by backstretch personnel could, even though they are not our employees, lead to lost revenues and therefore adversely affect our operating results.

An earthquake in California could interrupt our operations at Santa Anita Park and Golden Gate Fields, which would adversely impact our cash flow from these
racetracks.

Two
of our largest racetracks, Santa Anita Park and Golden Gate Fields, are located in California and are therefore subject to greater earthquake risks than our other operations. We do
not maintain significant earthquake insurance on the structures at our California racetracks. We maintain fire insurance for fire risks, including those resulting from earthquakes, subject to policy
limits and deductibles. There can be no assurance that earthquakes or the fires often caused by earthquakes will not seriously damage our California racetracks and related properties or that the
recoverable amount of insurance proceeds will be sufficient to fully cover reconstruction costs and other losses. If an uninsured or underinsured loss occurs, we could lose anticipated revenue and
cash flow from our California racetracks.

A severe hurricane hitting the Miami area could interrupt our operations at Gulfstream Park, which would adversely impact our cash flow from
this track.

Gulfstream
Park is located in Aventura, Florida, just inland from the Atlantic Ocean. The new construction at Gulfstream Park has been built to withstand severe winds but significant
flooding resulting from a hurricane or other tropical storm could result in significant damage to the facility. If the facility sustained serious damage, the operations and results would be negatively
impacted.

Real Estate Ownership and Development Risks

Our ownership and development of real estate is subject to risks and may involve significant ongoing expenditures or losses that could
adversely affect our operating results.

All
real estate investments are subject to risks including: general economic conditions, such as the availability and cost of financing; local real estate conditions, such as an
oversupply of residential, office, retail or warehousing space, or a reduction in demand for real estate in the area; governmental regulation, including taxation of property and environmental
legislation; and the attractiveness of properties to potential purchasers or tenants. The real estate industry is also capital intensive and sensitive to interest rates. Further, significant
expenditures, including property taxes, mortgage payments, maintenance costs, insurance costs and related charges, must be made throughout the period of ownership of real property, which expenditures
may negatively impact our operating results.

Redevelopment projects at our racetracks may result in a write down of the value of certain assets may cause temporary disruptions of our racing
operations.

We
have completed the redevelopment of the racing surfaces, the grandstand and the backstretch facilities at Gulfstream Park in Florida. We have also completed the redevelopment of the
dirt racing surfaces and the turf track at Laurel Park. These redevelopments resulted in write-downs in 2004 of $26.3 million and $0.4 million, respectively. The redevelopment at
Gulfstream Park resulted in a racing meet using temporary facilities for 2005 and the re-opening of Laurel Park for its 2004 - 2005 meet was delayed due to
construction delays, which also resulted in a loss of a number of racing days. In addition, since the commencement in June 2007 of construction of our Forest City joint venture
mixed-use development, The Village at Gulfstream

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Park,
on lands immediately adjacent to Gulfstream Park, a perceived lack of convenient parking has been a contributing factor in a reduction in attendance.

Racetrack redevelopment efforts made pursuant to deadlines mandated by state regulators may result in difficulties with integration that adversely impact
racetrack performance.

During
the summer of 2007 a synthetic track surface was installed at Santa Anita Park, in order to meet the installation deadline mandated by the CHRB. During January and early
February 2008, additional work on the track surface was required to address drainage problems. As a result of these problems and the additional work required, racing at Santa Anita Park had to
be cancelled on 11 days (offset in part by three rescheduled days) during the critical time of the opening of the 2008 meet, and the running of the California half of the Sunshine Millions was
jeopardized. In the event regulators in other states in which we operate adopt the same approach as the CHRB and mandate the installation of synthetic tracks, in addition to the capital cost
associated with such installations, there is a risk that installation problems could develop and race days could be lost, which in turn would negatively impact financial performance.

We may not be able to complete expansion or redevelopment projects successfully and on time, which would materially adversely affect our growth and our operating
results.

We
intend to further develop our racetracks and expand our gaming activities. Numerous factors, including regulatory and financial constraints, could cause us to alter, delay or abandon
our existing plans. If we proceed to develop new facilities or enhance our existing facilities, we face numerous risks that could require substantial changes to our plans. These risks include the
inability to secure all required permits and the failure to resolve potential land use issues, as well as risks typically associated with any construction project, including possible shortages of
materials or skilled labour, unforeseen engineering or environmental problems, delays and work stoppages, weather interference and unanticipated cost overruns. For example, Gulfstream Park was forced
to run its 2005 meet from temporary facilities which reduced total on-track wagering at Gulfstream Park and attendance in 2005. In addition, we encountered delays in the rebuilding of the
racetrack surfaces at Laurel Park, which resulted in a late re-opening of Laurel Park for its 2004 - 2005 meet and a loss of certain race dates. Even if completed
in a timely manner, an expansion project may not be successful, which would affect our growth and could have a material adverse effect on our future profitability.

The recent subprime mortgage crisis in the United States, in which the majority of our properties are situated, could have various negative impacts on our
properties, business and our debt elimination plan.

The
subprime mortgage crisis of 2007 has seen high default rates on subprime and other mortgage loans made to higher-risk borrowers with lower income or lesser credit history
than "prime" borrowers. As a result, there was a sharp rise in home foreclosures which started in the United States during the Fall of 2006, which became a global financial crisis during 2007
and 2008. Though the full impact of the crisis is not yet known, if it negatively impacts the value of our real estate holdings due to a general devaluing of real estate, it may be difficult to
execute plans to lease space at our two mixed-use developments, "The Village at Gulfstream Park" in Florida, construction of which commenced in June 2007, and The Shops
at Santa Anita in California, construction of which has not yet commenced due to a neighboring land owner's legal challenge to the Arcadia City Council's approval of the development.

The
weak U.S. real estate and credit markets have adversely impacted our progress to date on asset sales we intend to complete in connection with our September 2007 adopted
debt elimination plan.

We face strict environmental regulation and may be subject to liability for environmental damage, which could materially adversely affect our financial
results.

We
are subject to a wide range of requirements under environmental laws and regulations relating to waste water discharge, waste management and storage of hazardous substances.
Compliance with environmental laws and regulations can, in some circumstances, require significant capital expenditures. Moreover, violations can result in significant penalties and, in some cases,
interruption or cessation of operations. The California Water Quality Board requires that Santa Anita Park apply for, and keep in force, a wastewater discharge permit which governs and regulates the
amount of contaminated water that may be discharged into the storm drain and the water table as a result of maintenance of the horse population on site. With the issuance of the permit, there are

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certain
compliance efforts that the California Water Quality Board has requested that management address over the five-year permit period. The California Water Quality Board has not given
deadlines for immediate compliance nor is our current permit at risk for non-compliance. Citations are not expected unless Santa Anita Park does not make an effort to comply. Upon receipt
of the permit, we commenced discussions with the California Water Quality Board regarding the nature of the compliance requests and commenced the planning process as to how the Company would address
these requirements over the next five years. It is our expectation that a number of these requirements are being addressed through planned capital projects, including the Summer 2007 installation of
the polytrack a new, synthetic racing surface and the anticipated rebuild of barns on the backside over the next several years. Given the fact that a number of these remediation requirements would be
better addressed through capital projects rather than merely a repair or fix of existing facilities, the ultimate cost of remediation will be impacted by the decision on how to best address the
remediation requirements.

Furthermore,
we may not have all required environmental permits and we may not otherwise be in compliance with all applicable environmental requirements. Where we do not have an
environmental permit but one may be required, we will determine if one is in fact required and, if so, will seek to obtain one and address any related compliance issues, which may require significant
capital expenditures.

Various
environmental laws and regulations in the United States, Canada and Europe impose liability on us as a current or previous owner and manager of real property, for the cost
of maintenance, removal and remediation of hazardous substances released or deposited on or in properties now or previously owned or managed by us or disposed of in other locations. Our ability to
sell properties with hazardous substance contamination or to borrow money using that property as collateral may also be uncertain.

Changes
to environmental laws and regulations, resulting in more stringent terms of compliance, or the enactment of new environmental legislation, could expose us to additional
liabilities and ongoing expenses.

Any
of these environmental issues could have a material adverse effect on our business.

We may not be able to sell or otherwise monetize some of our real estate, excess racing real estate and revenue-producing non-racing real estate when
we need to or at the price we want, which may materially adversely affect our financial condition.

At
times, it may be difficult for us to dispose of or otherwise monetize some of our excess racing real estate and revenue-producing non-racing real estate. The costs of
holding real estate may be high and we may be faced with ongoing expenditures with little prospect of earning revenue on our excess racing real estate properties. If we have inadequate cash reserves
or credit facilities, we may have to dispose of properties at prices that are substantially below the prices we desire, and in some cases, below the prices we originally paid for the properties, which
may materially adversely affect our financial condition and our growth plans.

We require governmental approvals for some of our properties which may take a long time to obtain or which may not be granted, either of which could materially
adversely affect our existing business or our growth.

Some
of our properties will require zoning and other approvals from local government agencies. The process of obtaining these approvals may take many months and we might not obtain the
necessary approvals. Holding costs, while regulatory approvals are being sought, and delays may render a project economically unfeasible. If we do not obtain all of our necessary approvals, our plans,
growth and profitability could be materially adversely affected.

Risks Relating to Our Securities



Should our Class A Subordinate Voting Stock be delisted by NASDAQ for any reason, there could be a material adverse effect on the
liquidity of the shares of Class A Subordinate Voting Stock.

As
a result of the bid price of our publicly held Class A Subordinate Voting Stock closing below the $1.00 per share minimum for 30 consecutive business days, on
February 12, 2008, we received a letter from the Nasdaq Stock Market advising that in accordance with Nasdaq Marketplace Rules, MEC has until August 11, 2008 (or such later date
as may be permitted by Nasdaq) to regain compliance with the minimum bid price for MEC's

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publicly
held Class A Subordinate Voting Stock required for continued listing on the Nasdaq Global Market. The February 12, 2008 letter further stated, that we will receive further notification
from Nasdaq staff (i) stating that we have regained compliance, in the event the bid price of MEC's Class A Subordinate Voting Stock on the Nasdaq Global Market closes at $1.00 per share
or more for a minimum of 10 consecutive trading days or (ii) indicating that our Class A Subordinate Voting Stock will be delisted, in the event the minimum bid price requirement
is not satisfied.

Our stock price may be volatile, and future issuances or sales of our stock may decrease our stock price.

The
trading price of our Class A Subordinate Voting Stock has experienced, and may continue to experience, substantial volatility. The following factors have had, and may continue
to have, a significant effect on the market price of our Class A Subordinate Voting Stock:



These
factors could have a material adverse effect on the market price of our Class A Subordinate Voting Stock and other securities, regardless of our financial condition and
operating results.

The trading price of our Class A Subordinate Voting Stock could decrease as a result of our issuing additional shares as consideration for future
acquisitions or efforts to raise funds to finance operations.

We
may issue our Class A Subordinate Voting Stock as full or partial consideration in connection with future acquisitions or efforts to raise funds to finance operations. To the
extent that we do so, the percentage of our common equity and voting stock that our existing stockholders own will decrease and, particularly if such acquisitions or operations do not contribute
proportionately to our profitability, the trading price of our shares may also decrease.

Sales or a spin-off or other distribution of our Class A Subordinate Voting Stock by MI Developments Inc. or by certain of our other
significant stockholders under our registration statements could depress our stock price.

As
of March 10, 2008, MI Developments Inc. owned, directly or indirectly, 4,362,328 shares of our Class A Subordinate Voting Stock and
58,466,056 shares of our Class B Stock (which are convertible into shares of our Class A Subordinate Voting Stock on a one-for-one basis). In addition, we
have an effective registration statement that permits the secondary sale of shares of our Class A Subordinate Voting Stock by some of our stockholders who received those shares in connection
with our past acquisitions. A total of 4,793,043 shares were initially registered pursuant to that registration statement. In December 2002, we issued $75.0 million aggregate
principal amount of our 71/4% convertible Subordinated Notes due December 15, 2009 that are currently

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convertible
into 8,823,529 shares of our Class A Subordinate Voting Stock (subject to certain potential adjustments). In June 2003, we issued $150.0 million aggregate
principal amount of our 8.55% Convertible Subordinated Notes due June 15, 2010 that are convertible into 21,276,595 shares of our Class A Subordinate Voting Stock. We have
effective registration statements filed with the SEC covering all such shares of our Class A Subordinate Voting Stock issuable upon the conversion of such notes. In connection with the
October 29, 2007 closing by MEC of a $20.0 million private placement of the Company's Class A Subordinate Voting Stock to Fair Enterprise, Fair Enterprise was issued
8.9 million shares of Class A Subordinate Voting Stock at a price of $2.25 per share. As a result of the private placement, the percentage of Class A Subordinate Voting Stock
beneficially owned by Fair Enterprise has increased to approximately 21.6% of the issued and outstanding Class A Subordinate Voting Stock, representing approximately 10.8% of the equity of the
Company. Sales of a substantial number of shares of our Class A Subordinate Voting Stock, by MID, Fair Enterprise or upon conversion of our Convertible Notes could depress the prevailing market
price of our Class A Subordinate Voting Stock.

We have no current plans to pay dividends and may never pay dividends.

We
have not paid any dividends to date on our Class A Subordinate Voting Stock and we do not anticipate declaring or paying cash dividends until we generate after-tax
profits, if ever. See "Dividends and Dividend Policy" below.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties

Information concerning properties required by this item is incorporated by reference to the information contained in "Item 1. Business" of
this Report.

Item 3. Legal Proceedings

We are not directly involved in any material litigation nor, to our knowledge, is any material litigation threatened against us, other than routine litigation
arising in the ordinary course of business or that which is expected to be covered by insurance other than:

On
November 15, 2006, the Company opened the slots facility at Gulfstream Park, which now offers approximately 825 slot machines. The Company opened the slots facilities
despite an August 2006 decision rendered by the Florida First District Court of Appeals that reversed a lower court decision granting summary judgment in favor of "Floridians for a Level
Playing Field" ("FLPF"), a group in which Gulfstream Park is a member. The Court ruled that a trial is necessary to determine whether the constitutional amendment adopting the slots initiative,
approved by Floridians in the November 2004 election, was invalid because the petitions bringing the initiative forward did not contain the minimum number of valid signatures. FLPF filed
an application for a rehearing, rehearing en banc before the full panel of the Florida First District Court of Appeals and Certification by the Florida Supreme Court. On November 30,
2006, in a split decision, the en banc court affirmed the August 2006 panel decision and certified the matter to the Florida Supreme Court, which stayed the appellate court ruling pending its
jurisdictional review of the matter. On September 27, 2007, the Florida Supreme Court ruled that the matter was not procedurally proper for consideration by the court. Its order effectively
remanded the matter to the trial court for a trial on the merits. A trial on the merits will likely take over a year to fully develop and could take as many as three years to achieve a full factual
record and trial court ruling for an appellate court to review. The Company believes that the August 2006 decision rendered by the Florida First District Court of Appeals is incorrect and that
any allegations of fraud in the securing of the petitions will ultimately be disproven at the trial level, and accordingly, we proceeded to open the slots facility.

On
November 28, 2007, we sought and were granted amicus curiae status in a suit filed by the House of Representatives and Speaker Marco Rubio against the Governor of the State of
Florida, Charlie Crist, relating to the approval of tribal compacts. The Florida Supreme Court heard arguments on January 30, 2008 and judgment is currently pending.

51

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

In
September 2006, one of our subsidiaries, The Santa Anita Companies, Inc., entered into definitive operating agreements with certain Caruso Affiliated affiliates to
develop approximately 51 acres of undeveloped lands surrounding Santa Anita Park. This project contemplates a mixed-use
development with approximately 800,000 square feet of retail, entertainment and restaurants as well as approximately 4,000 parking spaces. After the project was approved by the
Arcadia City Council April 2007, Westfield, a developer of a neighboring parcel of land, has challenged the manner in which the entitlement process for the development of the land surrounding
Santa Anita Park has been proceeding. On May 16, 2007, Westfield commenced civil litigation in the Los Angeles Superior Court in an attempt to overturn the Arcadia City Council's approval and
granting of entitlements related to the construction of The Shops at Santa Anita. In addition, on May 21, 2007, Arcadia First! filed a petition against the City of Arcadia to overturn the
entitlements and named the Company and certain of its subsidiaries as real parties in interest. If either Westfield or Arcadia First! is ultimately successful in its challenge, development efforts
could potentially be delayed or suspended. The first hearings on the merits of the petitioners' claims are scheduled to be heard before the trial judge during the third week of April 2008.

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

No matter was submitted to a vote of our stockholders during the fourth quarter of the fiscal year covered by this Report.

52

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Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Trading History

Our Class A Subordinate Voting Stock is listed and traded on the Nasdaq Global Market ("Nasdaq") and the Toronto Stock Exchange ("TSX") under the symbols
"MECA" and "MEC.A", respectively. Class A Subordinate Voting Stock commenced trading on Nasdaq on February 23, 2000 and closed at a price of $3.06 per share, and on the TSX on
February 23, 2000 where it closed at a price of Cdn. $4.60 per share. The following table sets forth for the calendar periods indicated the high and low sale prices per share of the
Class A Subordinate Voting Stock as reported by Nasdaq and the TSX.

|      |                                        | Nasdaq |   | TSX 
|----- | -------------------------------------- | ------ | - | ----
|
|2006: |                                        |        |   |     
|      | First Quarter                          |        | $ | 7.55
|      | Second Quarter                         |        | $ | 6.89
|      | Third Quarter                          |        | $ | 5.84
|      | Fourth Quarter                         |        | $ | 5.58
|2007: |                                        |        |   |     
|      | First Quarter                          |        | $ | 4.57
|      | Second Quarter                         |        | $ | 3.92
|      | Third Quarter                          |        | $ | 2.99
|      | Fourth Quarter                         |        | $ | 2.85
|2008: |                                        |        |   |     
|      | First Quarter (through March 10, 2008) |        | $ | 0.98

On
February 28, 2008, the last sale price of the Class A Subordinate Voting Stock as reported by Nasdaq was $0.88 and by the TSX was Cdn. $0.87.

Our
Class B Stock is unlisted and not actively traded.

The
number of security holders of record as of February 28, 2008 was as follows: Class A Subordinate Voting Stock: 583; Class B Stock: two.

Securities Authorized for Issuance under Equity Compensation Plans

Information relating to compensation plans under which our equity securities are authorized for issuance is incorporated herein by reference from the section of
our Proxy Statement titled "Equity Based Compensation Plan Information", which Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after our fiscal year
end of December 31, 2007.

Comparative Stock Performance Graph

The following graph compares the cumulative total shareholder return on MEC's Class A Subordinate Voting Stock to the cumulative total shareholder return
of the Nasdaq 100 Market Index and a peer group index. The peer group index used by MEC is the Bloomberg US Entertainment Index, which is a published industry peer index of companies engaged in
the entertainment industry. The graph depicts the results of an investment of $100 in MEC's Class A Subordinate Voting Stock, the Nasdaq 100 Market Index and the Bloomberg US
Entertainment Index.

53

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Magna Entertainment Corp. vs Peer GroupDecember 2002 to December 2007

GRAPHIC

Dividends and Dividend Policy

We have never declared or paid dividends on our Class A Subordinate Voting Stock or Class B Stock and we do not anticipate declaring or paying cash
dividends until we generate after-tax profits, if ever. The holders of our Class A Subordinate Voting Stock and our Class B Stock are entitled to receive their proportionate
share of dividends declared by our Board of Directors, except in the case of certain stock dividends. Any dividends will be declared on our Class A Subordinate Voting Stock and Class B
Stock in accordance with our restated certificate of incorporation, including our Corporate Constitution, which sets forth certain dividend entitlements for our stockholders if we generate
after-tax profits, subject to applicable law.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Item 6. Selected Financial Data

The following tables set forth our selected consolidated financial and operating data for the periods indicated. The selected consolidated financial and operating
data as at and for the years ended December 31, 2003, 2004, 2005, 2006 and 2007 have been derived from and should be read in conjunction with our audited Consolidated Financial Statements as at
and for the years ended December 31, 2003 (as filed with our Annual Report for the fiscal year ended December 31, 2003), December 31, 2004 (as filed with our Annual
Report for the year ended December 31, 2004), December 31, 2005 (as filed with our Annual Report for the year ended December 31, 2005), December 31, 2006
(as filed with our Annual Report for the year ended December 31, 2006) and December 31, 2007 (included in this Report). The selected financial and operating information should

54

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also
be read in conjunction with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report.

|                                                                                                                                                |  | Years Ended December 31, |         
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------
|
|
|Racing and Gaming Revenues                                                                                                                      |  | $                        | 590,331 
|Real Estate and Other Revenues                                                                                                                  |  |                          | 6,206   
|                                                                                                                                                |  |                          |         
|Total Revenues                                                                                                                                  |  | $                        | 596,537 
|                                                                                                                                                |  |                          |         
|Racing and Gaming Costs and Expenses                                                                                                            |  | $                        | 570,166 
|Real Estate and Other Costs and Expenses                                                                                                        |  |                          | 9,781   
|Pre-development, pre-opening and other                                                                                                          |  |                          | 7,983   
|Depreciation and amortization                                                                                                                   |  |                          | 25,876  
|Write-down of long-lived and intangible assets                                                                                                  |  |                          | 122,622 
|Equity loss (income)                                                                                                                            |  |                          | (143    
|Gain on sale of intangible assets related to The Meadows                                                                                        |  |                          |        
|Interest expense, net                                                                                                                           |  |                          | 12,167  
|                                                                                                                                                |  |                          |         
|Loss from continuing operations before income taxes                                                                                             |  | $                        | (151,915
|Income tax benefit                                                                                                                              |  |                          | (56,905 
|                                                                                                                                                |  |                          |         
|Loss from continuing operations                                                                                                                 |  | $                        | (95,010 
|Loss from discontinued operations                                                                                                               |  |                          | (10,087 
|                                                                                                                                                |  |                          |         
|Net Loss                                                                                                                                        |  | $                        | (105,097
|                                                                                                                                                |  |                          |         
|Loss per share for Class A Subordinate Voting Stock and Class B Stock:                                                                          |  |                          |         
|Basic and Diluted                                                                                                                               |  |                          |         
|Continuing operations                                                                                                                           |  | $                        | (0.89   
|Discontinued operations                                                                                                                         |  |                          | (0.09   
|                                                                                                                                                |  |                          |         
|Loss per share                                                                                                                                  |  | $                        | (0.98   
|                                                                                                                                                |  |                          |         
|Average number of shares of Class A Subordinate Voting Stock, Class B Stock and Exchangeable Shares outstanding during the year (in thousands): |  |                          |         
|Basic and Diluted                                                                                                                               |  |                          | 107,143 

|
|

|                              |  | Years Ended December 31, |         
|----------------------------- |  | ------------------------ | --------
|
|EBITDA(3)                     |  | $                        | (113,872
|Capital expenditures(4)       |  |                          | 90,787  
|Cash provided from (used for) |  |                          |         
|Operating activities          |  |                          | 12,874  
|Investing activities          |  |                          | (94,236 
|Financing activities          |  |                          | 102,692 

55

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|
|

|                                             |  | At December 31,
|-------------------------------------------- |  | ---------------
|
|Cash and cash equivalents                    |  | $              
|Real estate properties and fixed assets, net |  |                
|Total assets                                 |  |                
|Total debt(5)                                |  |                
|Shareholders' equity                         |  |                

GAAP and Non-GAAP Financial Measures

We evaluate the operating and financial performance of our business using several measures, including revenue, EBITDA (defined as income (loss) before interest,
income taxes, depreciation and amortization), income (loss) before income taxes, net income (loss) and diluted earnings (loss) per share. We measure and present EBITDA because it is a measure that is
widely used by analysts and investors in evaluating our operating performance. This measure should be considered in addition to, but not as a substitute for or superior to, other measures of financial
performance prepared in accordance with generally accepted accounting principles.

The
following table reconciles our non-GAAP financial measures to the accompanying financial statements:

Reconciliation of Non-GAAP to GAAP Financial Measures

|                                                                                        |  | Years Ended December 31, |         
|--------------------------------------------------------------------------------------- |  | ------------------------ | --------
|
|
|Earnings (Loss) Before Interest, Income Taxes, Depreciation and Amortization ("EBITDA") |  |                          |         
|Loss before income taxes from continuing operations                                     |  | $                        | (151,915
|Interest expense, net                                                                   |  |                          | 12,167  
|Depreciation and amortization                                                           |  |                          | 25,876  
|                                                                                        |  |                          |         
|EBITDA from continuing operations                                                       |  | $                        | (113,872
|                                                                                        |  |                          |         

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

The following discussion of our results of operations and financial position should be read in conjunction with our consolidated financial
statements for the year ended December 31, 2007. This discussion includes forward-looking statements that reflect our current views with respect to future events and financial
performance and that involve risks and uncertainties. Our actual results, performance or achievements could differ materially from those anticipated in the forward-looking statements as a result of
certain factors, including risks discussed in "Management's Discussion and Analysis of Results of Operations and Financial Position  Forward-Looking Statements"
and "Risk Factors" included elsewhere in this Report. The amounts described below are based on our consolidated financial statements, which we prepare in accordance with United States generally
accepted accounting principles ("U.S. GAAP").

Overview

Magna Entertainment Corp. ("MEC", "we" or the "Company") owns horse racetracks in California, Florida, Maryland, Texas, Oklahoma, Ohio, Oregon and Ebreichsdorf,
Austria. In addition, we operated a racetrack in Michigan until November 2007 and, under a management agreement, operate a racetrack in Pennsylvania that we previously owned. Based on revenues,
MEC is North America's number one owner and operator of horse racetracks, and is a leading supplier, via simulcasting, of live racing content to the growing inter-track, off-track and
account wagering markets. We currently operate or manage seven thoroughbred racetracks, one standardbred (harness racing) racetrack and two racetracks that run both thoroughbred and quarterhorse
meets, as well as the simulcast wagering venues at these tracks. Also, we previously managed the thoroughbred and standardbred meets at Magna Racino, but now expect that a local operator
will manage future meets at that facility. Three of the racetracks owned or operated by us (Gulfstream Park, Remington Park and Magna Racino) include casino operations with alternative
gaming machines. In addition, we operate off-track betting facilities, a United States national account wagering business known as XpressBet®, which permits customers to
place wagers by telephone and over the Internet on horse races at over 100 North American racetracks and internationally on races in Australia, South Africa, Dubai, Germany, the
United Kingdom and Hong Kong, and a European account wagering service known as MagnaBet. Under a series of March 2007 agreements with Churchill Downs Incorporated ("CDI"),
we own a 50% interest in a joint venture, TrackNet Media Group, LLC ("TrackNet Media"), the content management company formed for distribution of the full breadth of MEC's horse racing content.
In addition to making horse racing content available for both MEC and CDI, it also makes such content available for third parties, including racetracks, off-track betting facilities,
casinos and advance deposit wagering companies, and purchases horse racing content from third parties to be made available through CDI's and MEC's respective outlets.
The TrackNet Media arrangement also involves the exchange by MEC and CDI of their respective horse racing signals such that CDI's racing content is available for wagering through MEC-owned
tracks and simulcast-wagering facilities and through our advanced deposit wagering platform, XpressBet®, and our racing content is similarly available for wagering through CDI tracks and
off-track betting facilities and through CDI-owned advance deposit wagering platforms. A separate joint venture with CDI also involves the ownership by MEC and CDI of equal
(50%) shares in HorseRacing TV ("HRTV"), a television network focused on horse racing that we initially launched on the Racetrack Television Network ("RTN").
HRTV is currently distributed to more than 15 million cable and satellite TV subscribers. RTN, in which we have a minority interest, was formed to telecast races from our
racetracks and other racetracks to paying subscribers, via private direct to home satellite. We also own AmTote International, Inc. ("AmTote"), a provider of totalisator services to the
pari-mutuel industry. To support certain of our thoroughbred racetracks, we own and operate thoroughbred training centers in Palm Beach County, Florida and in the Baltimore, Maryland area
and, under a lease agreement, operate an additional thoroughbred training center situated near San Diego, California. We also own and operate production facilities in Austria and in North Carolina for
StreuFex, a straw-based horse bedding product. In addition to our racetracks, our real estate portfolio includes a residential development in Austria. We are also working with potential
developers and strategic partners on proposals for developing leisure and entertainment or retail-based projects on excess lands surrounding, or adjacent to, certain of our premier racetracks.

2007
was a challenging year for MEC. Although revenues from continuing operations increased by 9.0% to $625.7 million, our net loss increased to $113.8 million from
$87.4 million in 2006, primarily due to increased

57

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losses
at Gulfstream Park and continued high debt service costs. Also, in 2006 we recognized a $126.4 million gain on sale of intangible assets related to The Meadows and a
write-down of long-lived assets of $88.6 million. We discuss our results of operations in detail in the "Results of Operation" section below.

Following
the completion of a strategic review of the Company's assets and operations, on September 12, 2007, our Board of Directors approved a debt elimination plan
(the "Plan"), designed to eliminate the Company's net debt by December 31, 2008 by generating funding from: (i) the sale of certain real estate, racetracks and other assets;
(ii) the sale of, or entering into strategic transactions involving, the Company's other racing, gaming and technology operations; and (iii) a possible future equity issuance. We also
arranged for $100.0 million of funding to address immediate liquidity concerns and provide sufficient time to implement the Plan. This funding was comprised of: (i) a
$20.0 million private placement of Class A Subordinate Voting Stock ("Class A Stock") to Fair Enterprise Limited ("Fair Enterprise"), a company that forms part of an estate
planning vehicle for the family of Frank Stronach, MEC's Chairman and Interim Chief Executive Officer (the "Fair Enterprise Private Placement"); and (ii) a short-term bridge
loan facility of up to $80.0 million (the "Bridge Loan") with a subsidiary of our controlling shareholder, MI Developments Inc. ("MID"). Although we continue to implement the
Plan, since the adoption of the Plan, weakness in the U.S. real estate and credit markets has adversely impacted our ability to execute the Plan as market demand for our assets has been weaker
than expected and financing for potential buyers has become more difficult to obtain. These conditions have not abated through the date of this Report, with the result that it will take us longer to
execute the Plan than originally anticipated. As a result, we will likely need to seek extensions from existing lenders and additional funds in the short-term from one or more possible
sources. The availability of such extensions and additional funds is not assured and, if available, the terms thereof are not determinable at this time.

At
December 31, 2007, we had a working capital deficiency of $162.2 million and had $209.4 million of debt that matures in 2008, including: (i) amounts owing
under our $40.0 million senior secured revolving credit facility with a Canadian financial institution, which is scheduled to mature on March 31, 2008, (ii) our
$80.0 million Bridge Loan, which is scheduled to mature on May 31, 2008, and (iii) our obligation to repay $100.0 million of indebtedness under the Gulfstream Park project
financings with a subsidiary of MID by May 31, 2008. Accordingly, our financial statements have been prepared with a "going concern" qualification. See "Outlook", "Liquidity and Capital
Resources" and "Going Concern" below for more information.

Debt Elimination Plan

The Plan contemplates selling certain real estate properties, including those situated in the following locations: Dixon, California; Ocala, Florida; Aventura and
Hallandale, Florida, both adjacent to Gulfstream Park; Porter, New York; Anne Arundel County, Maryland, adjacent to Laurel Park; and Ebreichsdorf, Austria, adjacent to the Magna
Racino. We have initiated an active program to sell the Dixon and Ocala real estate properties and have listed both of these properties for sale with a real estate broker. The Porter
lands, which comprise three parcels of land, have been sold  the sale of one parcel closed in December 2007 and sales of the remaining two parcels closed
in early January 2008. The sale of these properties generated net proceeds of approximately $1.7 million, net of transaction costs, which was used to repay a portion of the Bridge Loan
subsequent to December 31, 2007. We recognized an impairment charge of $1.3 million in 2007 in relation to the Porter lands.

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

We
also intend to explore the sale of our membership interests in the mixed-use developments at Gulfstream Park in Florida and Santa Anita Park in California that we are
pursuing under joint venture arrangements with Forest City Enterprises, Inc. ("Forest City") and Caruso Affiliated, respectively.

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The
racetracks that we intend to sell include: Great Lakes Downs in Michigan, Remington Park in Oklahoma, Thistledown in Ohio and our interest in Portland Meadows in Oregon. We ceased
racing at Great Lakes Downs on November 4, 2007 and listed the property for sale with a real estate broker in October 2007. In September 2007, we engaged a U.S. investment
bank, recognized as an experienced advisor in the gaming industry, to assist in soliciting potential purchasers and manage the sale process for certain assets
and in October 2007, the U.S. investment bank began marketing Remington Park and Thistledown for sale. In November 2007, we initiated an active program to locate a buyer and began
marketing our interest in Portland Meadows for sale.

We
also intend to explore other strategic transactions involving other racing, gaming and technology operations, including: partnerships or joint ventures in respect of the existing
gaming facility at Gulfstream Park; partnerships or joint ventures in respect of potential alternative gaming operations at certain of our other racetracks that currently do not have gaming
operations; and transactions involving our technology operations, which may include one or more of the assets that comprise our PariMax business.

The
real estate properties located in Dixon, California and Ocala, Florida, the two parcels of land in Porter, New York, that were sold in January 2008 and the excess land
in Ebreichsdorf, Austria that is under a contractual sale agreement, have been classified as "assets held for sale" on our consolidated balance sheet as at December 31, 2007. Similarly, the
operations of Great Lakes Downs, Remington Park, Thistledown and Portland Meadows have been presented as "discontinued operations" at December 31, 2007 given that all of these assets met the
criteria under U.S. GAAP for classification as either "assets held for sale" or "discontinued operations" at December 31, 2007. Comparative periods presented have been restated to
reflect the results of these assets held for sale and discontinued operations on a consistent basis.

Outlook

Although we continue to implement our Plan, real estate and credit markets have continued to demonstrate weakness in the first part of 2008. This has reduced the
likelihood that we will be able to complete asset sales at acceptable prices as quickly as originally contemplated. In light of these adverse developments, combined with our upcoming debt maturities
and operational funding requirements, we will likely need to seek extensions or additional funds in the short-term from one or more possible sources. The availability of such extensions or
additional funds from existing lenders, including MID, or from other sources is not assured and, if available, the terms thereof are not determinable at this time. We expect that we will enter into
negotiations with such existing lenders, including MID, with a view to extending, restructuring or refinancing such facilities. There is no assurance that such negotiations, if any, will result in a
favorable outcome for MEC. If we are unable to repay our obligations when due, other current and long-term debt will also become due on demand as a result of cross-default provisions
within loan agreements, unless we are able to obtain waivers or extensions. Unless we are successful in our efforts, we could be required to liquidate assets in the fastest manner possible to raise
funds, seek protection from our creditors in one or more ways or be unable to continue as a going concern. See the "Going Concern" section below and the section entitled "Risk
Factors  Risks Regarding Our Company" elsewhere in this Report for more information.

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Our Operations

Our revenues are derived primarily from our racing and gaming operations. Selected information about our racing and gaming operations is set forth below:

|                                      |                               |           |  |      |  | Year ended December 31, 2007                                  
|------------------------------------- | ----------------------------- | --------- |  | ---- |  | --------------------------------------------------------------
|
|Continuing Operations                 |                               |           |  |      |  |                                                               
|Santa Anita Park  Los Angeles        |                               | Dec. 1998 |  | 10.9 |  | Jan. 1 to Apr. 22 and
Dec. 26 to 31                           
|                                      |                               |           |  |      |  | The Oak Tree Meet
Sep. 26 to Nov. 4                           
|Gulfstream Park  Miami               |                               | Sep. 1999 |  | 4.3  |  | Jan. 3 to Apr. 22                                             
|Laurel Park
Baltimore                |                               | Nov. 2002 |  | 6.6  |  | Jan. 1 to Apr. 15 and
Aug. 10 to Aug. 23
and Sep. 5 to Dec. 29
|Golden Gate Fields
San Francisco     |                               | Dec. 1999 |  | 5.2  |  | Jan. 1 to Feb. 11 and
Apr. 25 to Jun. 10 and
Nov. 7 to Dec. 31
|Pimlico Race Course
Baltimore        |                               | Nov. 2002 |  | 5.2  |  | Apr. 19 to Jun. 9                                             
|Lone Star Park
Dallas                |                               | Oct. 2002 |  | 5.1  |  | Apr. 12 to Jul. 29 and
Oct. 5 to Dec. 1                       
|The Meadows
Pittsburgh               |                               | Apr. 2001 |  | 2.8  |  | Jan. 1 to Aug. 15 and
Nov. 1 to Dec. 31                       
|XpressBet®
National                  |                               | Apr. 2001 |  | N/A  |  | All year                                                      
|MagnaBet                             |                               | Apr. 2004 |  | N/A  |  | All year                                                      
|Magna Racino
Ebreichsdorf, Austria  |                               | Apr. 2004 |  | 2.5  |  | Mar. 18 to Nov. 11                                            
|                                      |                               |           |  |      |  |                                                               
|                                      | Total Continuing Operations   |           |  |      |  |                                                               
|                                      |                               |           |  |      |  |                                                               
|Discontinued Operations               |                               |           |  |      |  |                                                               
|Remington Park  Oklahoma City        |                               | Nov. 1999 |  | 1.1  |  | Mar. 9 to Jun. 3 and
Aug. 2 to Dec. 1                         
|Thistledown  Cleveland               |                               | Nov. 1999 |  | 3.0  |  | Apr. 12 to Nov. 19                                            
|Portland Meadows  Portland           |                               | Jul. 2001 |  | 2.0  |  | Jan. 1 to May 5 and
Oct. 7 to Dec. 31                         
|Great Lakes Downs
Muskegon, Michigan |                               | Feb. 2000 |  | 1.2  |  | May 5 to Nov. 6                                               
|                                      |                               |           |  |      |  |                                                               
|                                      | Total Discontinued Operations |           |  |      |  |                                                               
|                                      |                               |           |  |      |  |                                                               

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Our primary source of racing revenues is commissions earned from pari-mutuel wagering. Pari-mutuel wagering on horse
racing is a form of wagering in which wagers on horse races are aggregated in a commingled pool of wagers (the "mutuel pool") and the payoff to winning customers is determined by both the total
dollar amount of wagers in the mutuel pool and the allocation of those dollars among the various kinds of bets. Unlike casino gambling, the customers bet against each other, and not against us, and
therefore we bear no risk of loss with respect to any wagering conducted. We retain a pre-determined percentage of the total amount wagered (the "take-out") on each
event, regardless of the outcome of the wagering event, and the remaining balance of the mutuel pool is distributed to the winning customers. Of the percentage we retain, a portion is paid to the
horse owners in the form of purses or winnings, which encourage the horse owners and their trainers to enter their horses in our races. Our share of pari-mutuel wagering revenues is based
on pre-determined percentages of various categories of the pooled wagers at our racetracks. The maximum pre-determined percentages are approved by state regulators.
Pari-mutuel wagering on horse racing occurs on the live races being conducted at racetracks, as well as on televised racing signals, or simulcasts, received or imported by the simulcast
wagering facilities located at such racetracks or OTB facilities, and through various forms of account wagering. Our racetracks have simulcast wagering facilities to complement our live horse racing,
enabling our customers to wager on horse races being held at other racetracks.

We
derive our pari-mutuel wagering revenues from the following primary sources:



Wagers
placed at our racetracks or our OTB facilities on live racing conducted at one of our racetracks produce more net revenue for us than wagers placed on imported racing signals,
because we must pay the racetrack sending us its signal a fee generally equal to 3% to 4% of the amount wagered on its race. Wagers placed on imported signals, in turn, produce more revenue for us
than wagers placed on our signals exported to off-track venues (i.e. other racetracks, OTB facilities or casinos), where we are paid a commission generally equal to only 3% to 4% of
the amount wagered at the off-track venue on the signal we export to those venues. Revenues from our telephone and Internet account wagering operations vary depending upon the source of
the signal upon which the wager is placed.

We
also generate gaming revenues from our Gulfstream Park and Remington Park (which is reflected as "discontinued operations") gaming operations. Gaming revenues represent the net win
earned on slot wagers. Net win is the difference between wagers placed and winning payouts to patrons.

We
also generate non-wagering revenues which include totalisator equipment sales and service revenues from AmTote earned in the provision of totalisator services to
racetracks, food and beverage sales, program sales, admissions, parking, sponsorship, rental fees and other revenues.

Live
race days are a significant factor in the operating and financial performance of our racing business. Another significant factor is the level of wagering per customer on our racing
content on-track, at inter-track simulcast locations and at OTB facilities. There are also many other factors that have a significant impact on our racetrack revenues. Such factors
include, but are not limited to: attendance at our racetracks, inter-track simulcast locations and OTB facilities; activity through our XpressBet® and MagnaBet systems; the
number of races conducted at our racetracks and at racetracks whose signals we import and the average field size per race; our ability to attract the industry's top horses and trainers; inclement
weather; and changes in the economy.

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Set
forth below is a list of the total live race days by racetrack for the years ended December 31, 2007, 2006 and 2005:

|                                      |  | Years ended December 31,
|------------------------------------- |  | ------------------------
|
|Continuing Operations Racetracks      |  |                         
|Santa Anita Park(1)                   |  | 85                      
|Gulfstream Park                       |  | 88                      
|Golden Gate Fields                    |  | 98                      
|Laurel Park(2)                        |  | 148                     
|Lone Star Park                        |  | 99                      
|Pimlico Race Course(2)                |  | 31                      
|The Meadows                           |  | 205                     
|Magna Racino                         |  | 25                      
|                                      |  |                         
|                                      |  | 779                     
|                                      |  |                         
|Discontinued Operations Racetracks(3) |  |                         
|Thistledown                           |  | 136                     
|Remington Park                        |  | 119                     
|Portland Meadows                      |  | 75                      
|Great Lakes Downs                     |  | 98                      
|                                      |  |                         
|                                      |  | 428                     
|                                      |  |                         
|Total                                 |  | 1,207                   
|                                      |  |                         

We
recognize racing revenue prior to our payment of purses, stakes, awards and pari-mutuel taxes. The racing costs relating to these revenues are shown as
"pari-mutuel purses, awards and other" in our consolidated financial statements. We recognize gaming revenue prior to our payment of taxes and purses. The gaming costs relating to these
revenues are shown as "gaming purses, taxes and other" in our consolidated financial statements.

Our
operating costs principally include salaries and benefits, the cost of providing totalisator services and manufacturing totalisator equipment, utilities, the cost of food and
beverages sold, racetrack repairs and maintenance expenses, sales and marketing expenses, rent, printing costs, property taxes, license fees and insurance premiums.

Seasonality

Most of our racetracks operate for prescribed periods each year. As a result, our racing revenues and operating results for any quarter will not be indicative of
our racing revenues and operating results for any other quarter or for the year as a whole. Because five of our largest racetracks, Santa Anita Park, Gulfstream Park, Lone Star Park at Grand Prairie,
Pimlico Race Course and Golden Gate Fields, run live race meets principally during the first half of the year, our racing operations have historically operated at a loss in the second half of the
year, with our third quarter generating the largest operating loss. This seasonality has resulted in large quarterly fluctuations in revenue and operating results.

Real Estate and Other Operations

Our real estate and other revenues represent revenues earned from our European residential development.

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We
characterize our real estate as follows:



As
of December 31, 2007, the aggregate net book values of our real estate properties are as follows:

|                                                |  | $ millions
|----------------------------------------------- |  | ----------
|Revenue-Producing Racing and Gaming Real Estate |  | 655.8     
|Excess Racing Real Estate                       |  | 87.1      
|Revenue-Producing Non-Racing Real Estate        |  | 8.5       
|                                                |  |           
|                                                |  | 751.4     
|                                                |  |           

Included
in our Excess Racing Real Estate is land adjacent to certain of our racetracks, Santa Anita Park, Gulfstream Park, Lone Star Park at Grand Prairie, Laurel Park
(in respect of which we disposed of a portion of the excess land, a 64 acre parcel in February 2007), Pimlico Race Course and Magna Racino. We are considering a
variety of options with respect to this excess land, including entertainment and retail-based developments that could be undertaken in conjunction with business partners who might provide the
necessary financing.

Our
Revenue-Producing Non-Racing Real Estate includes our European residential development.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect: the amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We
base our estimates on historical experience and various other assumptions that are
believed to be reasonable and prudent in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. On an ongoing basis, we
evaluate our estimates. However, actual results could differ from those estimates under different assumptions or conditions.

Our
significant accounting policies are included in Note 2 to our consolidated financial statements. We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated financial statements.

Impairment of Intangible and Long-Lived Assets

Our most significant intangible assets are racing licenses which represent the value attributed to licenses to conduct race meets acquired through our racetrack
acquisitions. In accordance with Financial Accounting Standards Board Statement No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", intangibles are evaluated for impairment on
an annual basis or when impairment indicators are present. Racing license impairment is assessed based on a comparison of the fair value of an individual reporting unit's racing license to its
carrying value. An impairment write-down to fair value would occur if estimated discounted cash flows from operations less charges for contributory assets assumed to be owned by third
parties is less than the carrying value of the racing license.

Under
Financial Accounting Standards Board Statement No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived Assets", our
long-lived assets are evaluated for impairment whenever

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events
or changes in circumstances indicate that the carrying value may not be recoverable. If such events or changes in circumstances are present, we assess the recoverability of the
long-lived assets by determining whether the carrying value of such assets can be recovered through projected undiscounted cash flows. If the sum of expected future cash flows,
undiscounted and without interest charges, is less than net book value, the excess of the net book value over the estimated fair value, based on discounted future cash flows and appraisals, is charged
to operations in the period in which such impairment is determined by management. When long-lived assets are identified as available for sale, if necessary, the carrying value is reduced
to the estimated fair value less costs of disposal. Fair value is determined based upon discounted cash flows of the assets, appraisals and, if appropriate, current estimated net sales proceeds from
pending offers.

We
believe the accounting estimates related to intangibles and long-lived asset impairment assessments are "critical accounting estimates" because they are subject to
significant measurement uncertainty and are susceptible to change as management is required to make forward-looking assumptions regarding cash flows and business operations. Any resulting impairment
loss could have a material impact on our consolidated operating results and on the amount of assets reported on our consolidated balance sheets.

Future Income Tax Assets

At December 31, 2007, we recorded future tax assets (net of related valuation allowances) in respect of loss carryforwards and other deductible
temporary differences. We evaluate quarterly the realizability of our future tax assets by assessing our valuation allowance and by adjusting the allowance as necessary. The assessment considers
forecasts of future taxable income and tax planning strategies that could be implemented to realize the future tax assets. Should operations not yield future taxable income or if tax planning
strategies can not be implemented, then there could be a material impact on our consolidated tax expense or recovery and on the amount of future tax assets reported on our consolidated
balance sheets.

Stock-Based Compensation

Prior to January 1, 2006, we accounted for stock-based compensation under the recognition and measurement provisions of APB Opinion No. 25
("APB 25"), "Accounting for Stock Issued to Employees", and related Interpretations, as permitted by SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), "Share-Based Payment" ("SFAS 123(R)"), using the
modified-prospective method. Under the modified-prospective method, compensation expense recognized in 2006 includes: (a) compensation expense for all share-based payments granted prior to, but
not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense
for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R).

Revenue Recognition

A significant component of our revenues is generated from our racing and gaming operations. Revenues generated from horse racing are recorded on a daily basis and
are recognized gross of purses, stakes and awards as well as pari-mutuel wagering taxes. Gaming revenues represent the net win earned on slots wagers. Net win is the difference between
wagers placed and winning payouts to patrons, and is recorded at the time wagers are made. Non-wagering revenues include totalisator equipment sales and service revenues from AmTote earned
in the provision of totalisator services to racetracks, food and beverage sales, program sales, admissions, parking, sponsorship, rental fees and other revenues. Revenues derived principally from
totalisator equipment sales are recognized upon shipment or acceptance of the equipment by the customer depending on the terms of the underlying contracts. Revenues generated from service contracts in
the provision of totalisator services are recognized when earned based on the terms of the service contract. Revenues from food and beverage and program sales are recorded at the time of sale.
Revenues from admissions and parking are recorded on a daily basis, except for seasonal amounts which are recorded ratably over the racing season. Revenues from sponsorship and rental fees are
recorded ratably over the terms of the respective agreements or when the related event occurs. Revenues from the sale of residential development inventory are recognized when title passes to the
purchaser and collection is reasonably assured.

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Employee Defined Benefit and Postretirement Plans

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans"
("SFAS 158"). SFAS 158 requires employers to recognize the funded status (the difference between the fair value of plan assets and the projected benefit obligations) of a defined
benefit postretirement plan as an asset or liability on the consolidated balance sheet with a corresponding adjustment to accumulated comprehensive income (loss), net of tax, measure the fair value of
plan assets and benefit obligations as of the balance sheet date and provide additional disclosures about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed
recognition of the gains or losses, prior service costs or credits, and transition assets or obligations. On December 31, 2006, we adopted the recognition and disclosure provisions of
SFAS 158. The adjustment to accumulated comprehensive income (loss) upon adoption represented the net unrecognized actuarial gain or loss determined in accordance with
SFAS No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), which was previously netted against the plan's funded status pursuant to the provisions of SFAS 87. These
amounts will be subsequently recognized as net periodic pension cost pursuant to our historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in
subsequent periods and are not recognized as net periodic pension cost in the same periods will be recognized as a component of other comprehensive income (loss). Those amounts will be subsequently
recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated comprehensive income (loss) upon adoption of SFAS 158.

Litigation

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

Off-Balance Sheet Arrangements

At December 31, 2007, we do not have any material off-balance sheet arrangements that have not been disclosed in either our consolidated
financial statements or in this Report.

Related Party Transactions

Refer to Note 22 to our consolidated financial statements which describes all material related party transactions.

Results of Operations

The following is a discussion and comparison of our results of operations and financial position for the years ended December 31, 2007, 2006
and 2005.

Year Ended December 31, 2007 Compared to December 31, 2006

Racing and gaming operations

In 2007, we operated our continuing operations racetracks for 28 fewer live race days compared to the prior year primarily due to a decrease in the awarded
live race days at Golden Gate Fields in 2007 compared to the prior year and planned reductions in live race days at Magna Racino.

In
2007, revenues from our racing and gaming operations increased $48.0 million or 8.4% to $617.2 million, compared to $569.3 million in 2006, primarily
due to:



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Pari-mutuel
purses, awards and other decreased $16.2 million or 5.9% to $259.9 million in 2007, from $276.2 million in 2006, primarily due to decreased
wagering at Golden Gate Fields, Laurel Park, Gulfstream Park, MagnaBet and The Meadows for reasons noted above as well as increased inter-company eliminations of tote fees paid by our
racetracks to AmTote, which became a wholly-owned subsidiary in July 2006 and reduced carriage costs related to HRTV which is now being accounted for using equity accounting with
the formation of a joint venture with CDI in late April 2007. As a percentage of pari-mutuel wagering revenues, pari-mutuel purses, awards and other decreased from 62.4%
in 2006 to 60.1% in 2007 primarily due to lower wagering at MagnaBet which has historically had a higher than average purses, awards and other costs.

Gaming
purses, taxes and other increased $22.2 million to $28.3 million in 2007, compared to $6.1 million in 2006, due to the opening of the casino facility at
Gulfstream Park in November 2006 and the expanded casino facility in March 2007. As a percentage of gaming revenues, gaming purses, taxes and other increased from 67.0% in 2006 to 68.9%
in 2007 as a result of increased slot revenues.

Operating
costs in our racing and gaming operations increased $35.4 million or 14.9% to $273.0 million in 2007, from $237.6 million in 2006, primarily due to:



As
a percentage of total racing and gaming revenues, operating costs increased from 41.7% in 2006 to 44.2% in 2007, primarily as a result of higher costs incurred during the
start-up of the casino operations at Gulfstream Park.

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General and administrative expenses in our racing and gaming operations increased by $1.8 million or 2.7% to $68.8 million in 2007, compared to $67.0 million in
2006. Several of our racetracks experienced lower general and administrative expenses as a result of cost reduction initiatives, which were more than offset by an increase in our PariMax operations
with the consolidation of AmTote as noted previously. As a percentage of total racing and gaming revenues, general and administrative expenses decreased from 11.8% in 2006 to 11.1% in 2007.

Real estate and other operations

Revenues from real estate and other operations increased $3.5 million from $4.9 million in 2006 to $8.5 million in 2007 and includes
$0.3 million of revenues related to the sale of one parcel of land in Porter, New York. The remaining increase in revenues is attributable to increased housing unit sales at our European
residential housing development in 2007 compared to 2006. Real estate and other operating costs and general and administrative expenses increased from $4.0 million in 2006 to
$5.6 million in 2007, primarily due to the increased sales activity in 2007 as well as the recognition of a $0.9 million recovery of warranty costs in 2006 from a third party for costs
incurred with respect to previously built housing units.

Predevelopment, pre-opening and other costs

Predevelopment, pre-opening and other costs decreased $7.7 million from $10.6 million in 2006 to $2.9 million in 2007.
Predevelopment, pre-opening and other costs incurred in 2007 represent $0.9 million of costs that we incurred pursuing alternative gaming opportunities, $0.9 million of costs
related to the Dixon Downs campaign, $0.5 million of costs incurred pursuing certain financing initiatives and $1.2 million of costs relating to developmental initiatives undertaken to
enhance our racing operations, partially offset by a recovery of $0.6 million of costs related to the Florida slot initiatives incurred in 2006. In 2006, the predevelopment,
pre-opening and other costs incurred represent $3.0 million incurred in the expensing of deferred development costs incurred related to the Romulus, Michigan racing license,
$2.5 million pursuing alternative gaming opportunities, $1.5 million incurred pursuing certain financing initiatives, $1.5 million of costs relating to development initiatives
undertaken to enhance our racing operations and $2.1 million of pre-opening costs incurred in the opening of the Gulfstream Park casino facility.

Depreciation and amortization

Depreciation and amortization increased $3.3 million from $39.0 million in 2006 to $42.3 million in 2007, primarily due to increased
depreciation on the slots facility at Gulfstream Park and on AmTote fixed assets as a result of full consolidation upon completion of the acquisition as noted previously, partially offset by reduced
depreciation at Magna Racino with the write-down of long-lived assets in the fourth quarter of 2006.

Interest income and expense

Net interest expense decreased $7.1 million to $50.6 million in 2007 from $57.8 million in 2006. The lower net interest expense is primarily
attributable to the repayment of a previous bridge loan facility with a subsidiary of MID, reduced borrowings under our $40.0 million senior secured revolving credit facility and repayment of
other debt during 2006 from the proceeds of various asset sales, partially offset by increased borrowings on our Gulfstream Park project financings with a subsidiary of MID. In 2007,
$0.4 million of interest was capitalized with respect to projects under development, compared to $2.6 million in 2006.

Write-down of long-lived assets

The write-down of long-lived assets in 2007 of $1.3 million represents an impairment charge related to our Porter, New York
real estate properties, of which one parcel was sold in the fourth quarter of 2007 and the remaining two parcels were sold in January 2008. The impairment loss represents the excess of our
carrying value of the real estate over the fair value of the real estate properties. The write-down of long-lived assets in 2006 of $88.6 million is comprised of a
$76.2 million write-down of Magna Racino's long-lived assets, a $11.2 million write-down on The Meadows' long-lived assets as
a result of the transaction with Millennium-Oaktree and a $1.3 million write-down on our Canadian residential development real estate.

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Equity loss

Equity loss in 2007 of $3.1 million increased $2.6 million from an equity loss of $0.5 million in 2006. In 2007, our equity loss represents
losses incurred on our investment in Racing World, HRTV, LLC, since its effective
date of April 27, 2007 and TrackNet Media, LLC from the date of creation on March 4, 2007. In 2006, our equity loss represented losses incurred in our investment in Racing World,
partially offset by equity income earned from our initial 30% equity investment in AmTote until July 26, 2006.

Gain on sale of intangible assets related to The Meadows

The gain on sale of intangible assets related to The Meadows in 2006 of $126.4 million represents the gain recognized on The Meadows' transaction with
Millennium-Oaktree, which was completed on November 14, 2006.

Income tax expense

We recorded an income tax recovery of $2.6 million on a loss from continuing operations of $110.4 million in 2007, whereas in 2006, we recorded an
income tax benefit of $7.1 million on a loss from continuing operations of $86.7 million. The income tax recovery of $2.6 million in 2007 represents the income tax benefit of
consolidating AmTote's operations in our consolidated tax position in 2007 as well as the release of valuation allowances on tax losses used in the current year and applied to gains recognized on land
sales. The income tax recovery of $7.1 million in 2006 represents the reversal of net future tax liabilities associated with temporary differences related to Magna Racino's
long-lived assets which were written down, partially offset by income tax expense recognized in certain U.S. operations.

Discontinued operations

Discontinued operations in 2007 include the operations of Remington Park in Oklahoma, Thistledown in Ohio, Portland Meadows in Oregon and Great Lakes Downs in
Michigan. In addition to Remington Park, Thistledown, Portland Meadows and Great Lakes Downs, discontinued operations in 2006 also includes the Fontana Golf Club, the sale of which was completed on
November 1, 2006, the Magna Golf Club, the sale of which was completed on August 25, 2006 and the operations of a restaurant and related real estate in the United States, the sale
of which was completed on May 26, 2006. The following table presents the results of operations from discontinued operations for 2007 and 2006:

|                                            |  | Years ended December 31, |        
|------------------------------------------- |  | ------------------------ | -------
|
|Revenues                                    |  | $                        | 122,200
|Costs and expenses                          |  |                          | 120,873
|                                            |  |                          |        
|                                            |  |                          | 1,327  
|Predevelopment, pre-opening and other costs |  |                          | 447    
|Depreciation and amortization               |  |                          | 3,976  
|Interest expense, net                       |  |                          | 2,794  
|Impairment loss recorded on disposition(i)  |  |                          |       
|                                            |  |                          |        
|Loss before gain on disposition             |  |                          | (5,890 
|Gain on disposition(ii)                     |  |                          |       
|                                            |  |                          |        
|Loss before income taxes                    |  |                          | (5,890 
|Income tax expense                          |  |                          |       
|                                            |  |                          |        
|Loss from discontinued operations           |  | $                        | (5,890 
|                                            |  |                          |        

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Year Ended December 31, 2006 Compared to December 31, 2005

Racing and gaming operations

In 2006, we operated our continuing operations racetracks for five fewer live race days compared to the prior year primarily due to a change in the racing
calendar at the Maryland Jockey Club and planned reductions in live race days at Magna Racino, partially offset by an increase in awarded live race days at Golden Gate Fields.

In
2006, revenues from our racing and gaming operations increased $47.2 million or 9.0% to $569.3 million, compared to $522.0 million in 2005, primarily
due to:



| |  |  |  | increased attendance and higher levels of handle and wagering at Santa Anita Park throughout the 2006 live race meet as a result of good weather in Southern California and focused marketing initiatives to attract patrons
"back to the track". Southern California experienced significant rainfall during the 2005 live race meet, which resulted in lower attendance and gross wagering and a reduction in the number of races that were run on the turf course during the 2005
live race meet. Turf course races typically generate higher levels of wagering; and
| |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | a change in the racing calendar at Golden Gate Fields, whereby live race days were increased from 96 days in 2005 to 106 days in 2006.
| |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------



Pari-mutuel purses, awards and other increased $9.5 million or 3.6% to $276.2 million in 2006, from $266.7 million in 2005,
primarily due to increased wagering at Santa Anita Park, Golden Gate Fields and Gulfstream Park for reasons noted above. As a percentage of pari-mutuel wagering revenues,
pari-mutuel purses, awards and other remained relatively consistent at 62.4% in 2006 and 62.3% in 2005.

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Gaming
purses, taxes and other increased $6.1 million to $6.1 million in 2006 as Gulfstream Park's casino facility opened in mid November 2006.

Operating
costs in our racing and gaming operations increased $20.0 million to $237.6 million in 2006, from $217.6 million in 2005, primarily due to:



As
a percentage of total racing and gaming revenues, operating costs remained consistent at 41.7% in both 2006 and 2005.

General
and administrative expenses in our racing and gaming operations increased $9.5 million to $67.0 million in 2006, from $57.5 million in 2005. The increase is
primarily attributable to increased costs at our Corporate office as a result of $2.7 million in severance for three senior executives at our Corporate office, which includes
$0.7 million of stock-based compensation and an additional $0.7 million of costs relating to stock-based compensation for other executives and employees. With the implementation of
SFAS 123(R) on January 1, 2006, we are now required to expense stock-based compensation, whereas historically, we have provided only pro-forma disclosure of stock-based
compensation expense. General and administrative expenses also increased in our PariMax operations with the consolidation of AmTote as previously noted.

As
a percentage of total racing and gaming revenues, general and administrative expenses increased from 11.0% in 2005 to 11.8% in 2006 primarily due to additional costs at our Corporate
office for severance and stock option arrangements and at AmTote.

Real estate and other operations

Revenues from real estate and other operations increased $0.3 million from $4.6 million in 2005 to $4.9 million in 2006. The increase in
revenues is attributable to increased housing unit sales at our European residential housing development in 2006 compared to the prior year. Real estate and other operating costs and general and
administrative expenses decreased from $4.9 million in 2005 to $4.0 million in 2006 primarily due to the recognition of a $0.9 million recovery of warranty costs in 2006 from a
third party for costs incurred with respect to previously built housing units.

Predevelopment, pre-opening and other costs

Predevelopment, pre-opening and other costs increased $1.1 million from $9.5 million in 2005 to $10.6 million in 2006.
Predevelopment, pre-opening and other costs incurred in 2006 represent $3.0 million incurred in the expensing of deferred development costs incurred related to the Romulus, Michigan
racing license, $2.5 million pursuing alternative gaming opportunities, $1.5 million incurred pursuing certain financing initiatives, $1.5 million of costs relating to development
initiatives undertaken to enhance our racing operations and $2.1 million of pre-opening costs incurred in the opening of the Gulfstream Park casino facility. In 2005, the
predevelopment, pre-opening and other costs incurred represented costs of $6.1 million pursuing alternative gaming opportunities, $1.0 million of legal costs relating to
protection of our distribution rights, $0.6 million on the write-off of information technology costs which were determined to have no future benefit, $0.4 million of

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costs
relating to the Laurel Park redevelopment and $1.4 million of costs relating to development initiatives undertaken to enhance our racing operations.

Depreciation and amortization

Depreciation and amortization increased $5.6 million from $33.4 million in 2005 to $39.0 million in 2006, primarily due to increased
depreciation on the clubhouse facility at Gulfstream Park which was substantially completed in the first quarter of 2006.

Interest income and expense

Our net interest expense increased $25.1 million to $57.8 million in 2006 from $32.6 million in 2005. The higher net interest expense is
primarily attributable to borrowings on a bridge loan facility and the Gulfstream Park project financings with MID. Prior to completion of the Gulfstream Park redevelopment, interest on these
financings were capitalized to the redevelopment project. In 2006, $2.6 million of interest was capitalized with respect to projects under development, compared to $5.7 million
in 2005.

Write-down of long-lived assets

The write-down of long-lived assets in 2006 of $88.6 million is comprised of a $76.2 million write-down of Magna
Racino's long-lived assets, a $11.2 million write-down on The Meadows' long-lived assets as a result of the transaction with Millennium-Oaktree
and a $1.3 million write-down on our Canadian
residential development real estate. We tested Magna Racino's long-lived assets for impairment upon completion of its 2007 business plan. We used an expected present value
approach of estimated future cash flows, including a probability-weighted approach in considering the likelihood of possible outcomes, and external valuation reports, to determine the fair value of
the long-lived assets. Based on this analysis, a non-cash write-down of $76.2 million was required. Subsequent to December 31, 2006, we disposed of
all of our interests and rights in a 34 acre parcel of residential development land in Aurora, Ontario, Canada for cash consideration of Cdn. $12.0 million
(U.S. $10.1 million). Based on this transaction, which established a fair value for the land, we recognized a non-cash impairment loss of $1.3 million related to this
property. There were no write-downs of long-lived assets in 2005.

Equity loss (income)

Equity loss in 2006 of $0.5 million decreased $1.6 million from equity income of $1.1 million in 2005. In 2006, our equity loss represents
losses incurred in our investment in Racing World, partially offset by equity income earned from our initial 30% equity investment in AmTote until July 26, 2006. In 2005, our equity earnings
represented earnings from our initial 30% equity investment in AmTote.

Gain on sale of intangible assets related to The Meadows

The gain on sale of intangible assets related to The Meadows in 2006 of $126.4 million represents the gain recognized on The Meadows' transaction with
Millennium-Oaktree, which was completed on November 14, 2006.

Income tax benefit

We recorded an income tax benefit of $7.1 million on a loss from continuing operations before income taxes of $86.7 million in 2006, whereas in
2005, we recorded an income tax benefit of $1.2 million on a loss from continuing operations before income taxes of $94.3 million. The income tax benefit in 2006 of $7.1 million
represents the reversal of net future tax liabilities associated with temporary differences related to Magna Racino's long-lived assets which were written down, partially
offset by income tax expense recognized in certain U.S. operations. The income tax benefit in 2005 of $1.2 million represents primarily certain Austrian income tax losses benefited,
partially offset by income tax expense recognized by certain U.S. operations.

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Discontinued operations

Discontinued operations in 2006 include the operations of Remington Park in Oklahoma, Thistledown in Ohio, Portland Meadows in Oregon and Great Lakes Downs in
Michigan, which are held for sale at December 31, 2006, the Fontana Golf Club, the sale of which was completed on November 1, 2006, the Magna Golf Club, the sale of which was completed
on August 25, 2006, the operations of a restaurant and related real estate in the United States, the sale of which was completed on May 26, 2006. In addition to Remington Park,
Thistledown, Portland Meadows, Great Lakes Downs, Fontana Golf Club, the Magna Golf Club and the operations of the restaurant and related real estate in the United States, discontinued
operations in 2005, also include Flamboro Downs, the sale of which was completed on October 19, 2005, and the Maryland-Virginia Racing Circuit, Inc., the sale of which was completed on
September 30, 2005. The following table presents the results of operations from discontinued operations for 2006 and 2005:

|                                               |  | Years ended December 31, |        
|---------------------------------------------- |  | ------------------------ | -------
|
|Revenues                                       |  | $                        | 142,534
|Costs and expenses                             |  |                          | 133,303
|                                               |  |                          |        
|                                               |  |                          | 9,231  
|Predevelopment, pre-opening and other costs    |  |                          | 3,557  
|Depreciation and amortization                  |  |                          | 7,069  
|Interest expense, net                          |  |                          | 4,984  
|Impairment loss recorded on disposition(i)(ii) |  |                          | 1,202  
|                                               |  |                          |        
|Loss before gain on disposition                |  |                          | (7,581 
|Gain on disposition(iii)(iv)                   |  |                          | 1,495  
|                                               |  |                          |        
|Loss before income taxes                       |  |                          | (6,086 
|Income tax expense                             |  |                          | 1,653  
|                                               |  |                          |        
|Loss from discontinued operations              |  | $                        | (7,739 
|                                               |  |                          |        

Year Ended December 31, 2005 Compared to December 31, 2004

Racing and gaming operations

In 2005, we operated our continuing operations racetracks for 104 fewer live race days compared to the prior year, primarily due to the expiration of the
Bay Meadows lease and fewer live race days at Golden Gate Fields and Gulfstream Park due to reductions in awarded live race days, partially offset by the resumption of the quarter horse meet at Lone
Star Park in 2005, which was cancelled in the prior year as the track hosted the Breeders' Cup in 2004.

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In
2005, revenues from our racing and gaming operations decreased $69.5 million or 11.7% to $522.0 million, compared to $591.5 million in 2004, primarily
due to:



| |  |  |  | the expiry of the Bay Meadows lease on December 31, 2004;                                                                                                                                                                                                                                                                                     
| |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | nine fewer live race days at Golden Gate Fields due to a change in the racing calendar; and                                                                                                                                                                                                                                                   
| |  |  |  | lower levels of handle and gross wagering at Santa Anita Park as a result of significant rainfall in Southern California in the first quarter of 2005, which resulted in the cancellation of a live race day and significantly reduced the number of races
on the turf course. Turf course races typically generate higher levels of wagering;



Pari-mutuel purses, awards and other decreased $26.8 million or 9.1% to $266.7 million in 2005, from $293.4 million in 2004,
primarily due to the expiry of the Bay Meadows and Multnomah Greyhound Park leases, fewer live race days at Golden Gate Fields and decreased wagering at Santa Anita Park, Gulfstream Park and Lone Star
Park for reasons noted above, partially offset by an increase in pari-mutuel taxes at XpressBet® as a result of a $1.6 million provision for state
pari-mutuel taxes for 2003, 2004 and 2005, which was recorded in 2005. As a percentage of pari-mutuel wagering revenues, pari-mutuel purses, awards and other
increased from 60.5% in 2004 to 62.3% in 2005, primarily due to lower pari-mutuel wagering revenues and the increase in pari-mutuel taxes at XpressBet® as
noted above.

Operating
costs in our racing and gaming operations decreased $26.2 million to $217.6 million in 2005, from $243.8 million in 2004, primarily due to:



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As
a percentage of total racing and gaming revenues, operating costs increased from 41.2% in 2004 to 41.7% in 2005, primarily as a result of the decline in racing revenues.

General
and administrative expenses in our racing and gaming operations decreased $3.8 million to $57.5 million in 2005, from $61.3 million in 2004, primarily
due to:



As
a percentage of total racing and gaming revenues, general and administrative expenses increased from 10.4% in 2004 to 11.0% in 2005 due primarily to the decline in racing revenues.

Real estate and other operations

Revenues from real estate and other operations decreased $16.3 million from $20.9 million in 2004 to $4.6 million in 2005. The decrease in
revenues is primarily attributable to the fact that in 2004, four Non-Core Real Estate properties were sold which generated revenues of $16.4 million and income before income taxes
of $9.6 million, whereas in 2005, there were no sales of Non-Core Real Estate.

Predevelopment, pre-opening and other costs

Predevelopment, pre-opening and other costs decreased $8.8 million from $18.3 million in 2004 to $9.5 million in 2005.
Predevelopment, pre-opening and other costs incurred in 2005 represented costs of $6.1 million pursuing alternative gaming opportunities, $1.0 million of legal costs relating
to protection of our distribution rights, $0.6 million on the write-off of information technology costs which were determined to have no future benefit, $0.4 million of costs
relating to the Laurel Park redevelopment and $1.4 million of costs relating to development initiatives undertaken to enhance our racing operations. In 2004, the predevelopment,
pre-opening and other costs incurred represented costs of $11.3 million pursuing alternative gaming opportunities, $2.7 million on the development of a simplified wagering
machine, $1.3 million of costs relating to the Laurel Park redevelopment and $3.0 million of costs relating to developmental initiatives undertaken to enhance our racing operations.

Depreciation and amortization

Depreciation and amortization increased $2.2 million from $31.3 million in 2004 to $33.4 million in 2005, primarily due to increased
depreciation in our European operations primarily at the Magna Racino, which commenced operations and depreciation of fixed assets on April 4, 2004 and increased depreciation at
certain of our facilities on recent fixed asset additions.

Interest income and expense

Our net interest expense in 2005 increased $10.7 million to $32.6 million from $21.9 million in 2004. The higher net interest expense is
primarily attributable to increased borrowings on our senior secured revolving credit facility and on a bridge loan facility with MID. In 2005, $5.7 million of interest was capitalized with
respect to projects under development, compared to $4.0 million in 2004.

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Write-down of long-lived assets

During 2004, we commenced a major redevelopment of the Gulfstream Park racetrack and the racing surfaces at Laurel Park. As a result, we recognized a
non-cash write-down of $26.3 million related to Gulfstream Park's long-lived assets and $0.4 million related to Laurel Park's long-lived
assets in connection with these redevelopments.

Income tax benefit

We recorded an income tax benefit of $1.2 million on a loss from continuing operations before income taxes of $94.3 million in 2005, whereas in
2004, we recorded an income tax benefit of $4.9 million on a loss from continuing operations before income taxes of $96.9 million. The income tax benefit in 2005 of $1.2 million
represents primarily certain Austrian income tax losses benefited, partially offset by income tax expense recognized by certain U.S. operations. The income tax benefit in 2004 of
$4.9 million represents a reduction in enacted income tax rates in Austria, which resulted in a revaluation of our European net future tax liabilities, partially offset by income tax expense
recognized by certain U.S. operations.

Discontinued operations

Discontinued operations in 2005 and 2004 include the operations of Remington Park in Oklahoma, Thistledown in Ohio, Portland Meadows in Oregon and Great Lakes
Downs in Michigan, which are held for sale at December 31, 2005, the Fontana Golf Club, the sale of which was completed on November 1, 2006, the Magna Golf Club, the sale of which was
completed on August 25, 2006, the operations of a restaurant and related real estate in the United States, the sale of which was completed on May 26, 2006, Flamboro Downs,
the sale of which was completed on October 19, 2005, and the Maryland-Virginia Racing Circuit, Inc., the sale of which was completed on September 30, 2005. The following table
presents the results of operations from discontinued operations for 2005 and 2004:

|                                            |  | Years ended December 31, |        
|------------------------------------------- |  | ------------------------ | -------
|
|Revenues                                    |  | $                        | 120,475
|Costs and expenses                          |  |                          | 113,999
|                                            |  |                          |        
|                                            |  |                          | 6,476  
|Predevelopment, pre-opening and other costs |  |                          | 2,388  
|Depreciation and amortization               |  |                          | 6,574  
|Interest expense, net                       |  |                          | 4,085  
|Impairment loss recorded on disposition(i)  |  |                          | 14,961 
|                                            |  |                          |        
|Loss before gain on disposition             |  |                          | (21,532
|Gain on disposition(ii)                     |  |                          | 9,837  
|                                            |  |                          |        
|Loss before income taxes                    |  |                          | (11,695
|Income tax expense                          |  |                          | 492    
|                                            |  |                          |        
|Loss from discontinued operations           |  | $                        | (12,187
|                                            |  |                          |        

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Liquidity and Capital Resources

At December 31, 2007, we had a working capital deficiency of $162.2 million and had $209.4 million of debt that matures in 2008. Also, we
continue to experience operational losses. Accordingly, unless we are able to generate increased cash flows through improvements in the operation of our business, assets sales or strategic
transactions as contemplated by our Plan or otherwise and/or renewal, extension or replacement of our current financing arrangements, none of which are assured, we may not be able to generate cash
flows that are adequate to sustain the operations of the business and pay our secured and unsecured creditors when due.

Cash Flows

Year Ended December 31, 2007

Operating activities

Cash used in operations before changes in non-cash working capital balances decreased $0.8 million from $69.1 million in 2006 to
$68.2 million in 2007, due to an increase in items not involving current cash flows, partially offset by an increase in loss from continuing operations. In 2007, cash provided from
non-cash working capital balances was $6.4 million compared to cash provided from non-cash working capital balances of $5.2 million in 2006. Cash provided from
non-cash working capital balances of $6.4 million in 2007 is primarily due to an increase in income taxes payable and other accrued liabilities, partially offset by an increase in
accounts receivable at December 31, 2007 compared to the respective balances at December 31, 2006.

Investing activities

Cash provided from investing activities in 2007 was $16.6 million, including $95.7 million of proceeds received on the disposal of real estate
properties and fixed assets, partially offset by $74.4 million of expenditures on real estate property and fixed assets and $4.7 million of expenditures on other asset additions.
Expenditures on real estate property and fixed asset additions in 2007 of $74.4 million consisted of $19.9 million on the Gulfstream Park casino facilities, $20.7 million on the
installation of synthetic racing surfaces at Santa Anita Park and Golden Gate Fields, $8.2 million on maintenance capital improvements, $7.2 million on the Gulfstream Park redevelopment,
$10.8 million on equipment and terminals at AmTote primarily related to new totalisator service contracts and $7.6 million of expenditures related to other racetrack property
enhancements, infrastructure and development costs on certain of our properties and PariMax operations.

Financing activities

Cash provided from financing activities was $41.9 million in 2007 arising from proceeds from bank indebtedness of $73.8 million, proceeds from
indebtedness and long-term debt with our parent company of $52.4 million, proceeds of other long-term debt of $13.8 million and issuance of share capital of
$19.6 million, partially offset by repayment of other long-term debt of $73.6 million, repayment of bank indebtedness of $41.1 million and repayment of
long-term debt with our parent company of $3.0 million. The proceeds from indebtedness and long-term debt with our parent company of $52.4 million consists of
$33.8 million on the bridge loan, $5.4 million on the second tranche of the Gulfstream Park project financing arrangement and $13.2 million on the third tranche of the Gulfstream
Park project financing arrangement.

Year Ended December 31, 2006

Operating activities

Cash used in operations before changes in non-cash working capital increased $6.2 million from a use of cash of $62.9 million in 2005 to
a use of cash of $69.1 million in 2006, due primarily to a decrease in items not involving current cash flows, partially offset by an improvement in net loss from continuing operations. In 2006
and 2005, cash provided from non-cash working capital balances was consistent at $5.2 million.

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Investing activities

Cash provided from investing activities in 2006 was $96.6 million, and included $171.8 million of net proceeds on The Meadows transaction and
$14.5 million of net proceeds received on the disposal of real estate properties, fixed and other assets, partially offset by expenditures of $80.4 million on real estate property and
fixed assets and $9.3 million on the acquisition of AmTote. Expenditures on real estate property and fixed asset additions in 2006 of $80.4 million consisted of $43.5 million on
the Gulfstream Park redevelopment, $15.8 million on the Gulfstream Park gaming facility, $6.4 million on maintenance capital improvements and $14.7 million of expenditures related
to other racetrack property enhancements, infrastructure and development costs on certain of our properties and technology operations.

Financing activities

Cash used in financing activities was $58.5 million in 2006, and included repayment of indebtedness and long-term debt with parent of
$111.8 million, repayment of bank indebtedness of $39.9 million and repayment of long-term debt of $15.8 million, partially offset by proceeds of $77.3 million
from advances and long-term debt with our parent company, proceeds on bank indebtedness of $19.1 million and the issuance of long-term debt of $12.6 million. The
proceeds from indebtedness and long-term debt with our parent company of $77.3 million consists of $34.6 million on the bridge loan, $24.6 million on the first tranche
of the Gulfstream Park project financing arrangement and $18.1 million on the second tranche of the Gulfstream Park project financing arrangement.

Year Ended December 31, 2005

Operating activities

Cash used in operations before changes in non-cash working capital increased $14.2 million to a use of cash of $62.9 million in 2005
from a use of cash of $48.8 million in 2004, primarily due to a decrease in items adjusting net loss to net cash. In 2005, cash provided from non-cash working capital balances was
$5.2 million, compared to cash provided from non-cash working capital balances of $0.6 million in 2004. Cash provided from non-cash working capital balances of
$5.2 million in 2005 is primarily due to a net increase in accounts payable, other accrued liabilities and amounts due from parent, partially offset by a decrease in accounts receivable and
income taxes receivable at December 31, 2005 compared to the respective balances at December 31, 2004.

Investing activities

Cash used for investing activities in 2005 was $118.6 million, including expenditures of $123.0 million on real estate property and fixed asset
additions and $1.4 million on other asset additions, partially offset by $5.8 million of net proceeds received on the disposal of real estate properties and fixed assets. Expenditures on
real estate property and fixed asset additions in 2005 of $123.0 million consisted of $91.0 million on the Gulfstream Park redevelopment, $11.0 million at The Maryland Jockey
Club, $7.8 million on maintenance capital improvements and $13.2 million of expenditures related to other racetrack property enhancements, infrastructure and development costs on certain
of our properties and technology operations.

Financing activities

Cash provided from financing activities was $124.2 million in 2005 arising from indebtedness and long-term debt from our parent company of
$136.8 million, net advances on our bank indebtedness of $2.8 million and an issuance of long-term debt of $0.2 million, partially offset by repayment of
long-term debt of $15.6 million. The proceeds from indebtedness and long-term debt with our parent company of $136.8 million consists of $70.6 million on
the bridge loan and $66.2 million on the first tranche of the Gulfstream Park project financing arrangement. The issuance of debt of $0.2 million represents an equipment loan at The
Maryland Jockey Club. The net advances of $2.8 million on our bank indebtedness relates to a $3.0 million bank term line of credit at one of our European subsidiaries.

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Working Capital, Cash and Other Resources

Our net working capital deficiency was $162.2 million at December 31, 2007, compared to $94.2 million at December 31, 2006. The
increase in working capital deficiency at December 31, 2007 compared to the same date in 2006, is primarily due to the amendment to our Gulfstream Park project financing arrangement which
requires us to repay $100.0 million to MID by May 31, 2008, as well as borrowings on the Bridge Loan. At December 31, 2007, we had cash and cash equivalents of
$34.3 million, bank indebtedness of $39.2 million and total shareholders' equity of $362.7 million.

Bank indebtedness

We have a $40.0 million senior secured revolving credit facility with a Canadian financial institution, which was scheduled to mature on January 31,
2008, but on January 31, 2008 was amended and extended to February 29, 2008 and on February 28, 2008 was further extended to March 31, 2008. The credit facility is
available by way of U.S. dollar loans and letters of credit. Loans under the facility bear interest at the U.S. Base rate plus 5% or the London Interbank Offered Rate ("LIBOR") plus 6%.
Loans under the facility are secured by a first charge on the assets of Golden Gate Fields and a second charge on the assets of Santa Anita Park, and are guaranteed by certain of our subsidiaries. At
December 31, 2007, we had borrowings of $34.9 million under the credit facility and had issued letters of credit totaling $4.3 million, such that $0.8 million of the loan
facility was unused and available.

One
of our wholly-owned subsidiaries, The Santa Anita Companies, Inc. ("SAC"), has a $7.5 million revolving loan agreement under its existing credit facility with a
U.S. financial institution. While the maturity date is October 31, 2012, there is a requirement for the facility to be fully repaid for a period of 60 consecutive days during each
year. The revolving loan agreement is guaranteed by our wholly-owned subsidiary, the Los Angeles Turf Club, Incorporated ("LATC") and is secured by a first deed of trust on Santa Anita Park and the
surrounding real property, an assignment of the lease between LATC, the racetrack operator, and SAC and a pledge of all of the outstanding capital stock of LATC and SAC. Loans under the agreement bear
interest at the U.S. Prime rate. At December 31, 2007, we had borrowings of $3.5 million under the revolving loan agreement.

One
of our wholly-owned subsidiaries, AmTote, has a $3.0 million revolving credit facility with a U.S. financial institution, which matures on May 1, 2008, and is
secured by a first charge on the assets and a pledge of stock of AmTote. Loans under the facility are available by way of U.S. dollar loans and letters of credit, bearing interest at LIBOR plus
2.75%. At December 31, 2007, we had borrowed $0.8 million under the revolving credit facility, such that $2.2 million of the facility was unused and available.

Long-term and related party debt

Bridge Loan

On September 12, 2007, we entered into the Bridge Loan pursuant to which up to $80.0 million of financing will be made available, subject to certain
conditions. The Bridge Loan matures on May 31, 2008, is non-revolving and bears interest at a rate of LIBOR plus 11.0% per annum. On February 29, 2008, as we had not entered
into agreements acceptable to MID for asset sales that would yield aggregate net proceeds sufficient to repay the entire outstanding loan amount, the interest rate increased by an additional 1.0% per
annum. An arrangement fee of $2.4 million was paid to MID on closing and there is a commitment fee equal to 1.0% per annum (payable in arrears) on the undrawn portion of the
$80.0 million maximum loan commitment. In addition, on February 29, 2008, there was an additional arrangement fee equal to 1.0% of the maximum principal amount then available under this
facility.

The
Bridge Loan is required to be repaid by way of the payment of the net proceeds of any asset sale, any equity offering (other than the Fair Enterprise Private Placement) or any debt
offering, subject to specified amounts required to be paid to eliminate other prior-ranking indebtedness. The Bridge Loan is secured by essentially all of our assets and by guarantees provided by
certain of our subsidiaries. The guarantees are secured by charges over the lands owned by Golden Gate Fields, Santa Anita Park and Thistledown, and charges over the lands in Dixon, California and
Ocala, Florida, as well as by pledges of the shares of certain of our

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subsidiaries.
The Bridge Loan is also cross-defaulted to all other obligations to MID and to other significant indebtedness of the Company and certain of our subsidiaries.

During
2007, we received loan advances of $38.0 million, incurred interest expense and commitment fees of $1.2 million, and repaid interest and commitment fees of
$0.8 million, such that at December 31, 2007, $38.4 million was outstanding under the Bridge Loan, including $0.2 million of accrued interest and commitment fees payable.
During 2007, we incurred $4.2 million of loan origination costs and amortized $1.8 million of loan origination costs, such that at December 31, 2007, $2.5 million of net
loan origination costs have been recorded as a reduction of the outstanding loan balance. The loan balance is being accreted to its face value over the term to maturity.

Pursuant
to the terms of the Bridge Loan, advances after January 15, 2008 are subject to MID being satisfied that our $40.0 million senior secured revolving credit facility
will be further extended to at least April 30, 2008 or that satisfactory refinancing of that facility has been arranged. As our senior secured revolving credit facility was extended to
March 31, 2008, MID has waived this condition for advances between January 15, 2008 and March 31, 2008.

Gulfstream Park and Remington Park Project Financings

In December 2004, certain of our subsidiaries entered into a $115.0 million project financing arrangement with a subsidiary of MID, for the
reconstruction of facilities at Gulfstream Park. This project financing arrangement was amended on July 22, 2005 in connection with the Remington Park loan as described below. The project
financing was made by way of progress draw advances to fund reconstruction. The loan has a ten-year term from the completion date of the reconstruction project, which was
February 1, 2006. Prior to the completion date, amounts outstanding under the loan bore interest at a floating rate equal to 2.55% per annum above MID's notional cost of borrowing under its
floating rate credit facility, compounded monthly. After the completion date, amounts outstanding under the loan bear interest at a fixed rate of 10.5% per annum, compounded semi-annually.
Prior to January 1, 2007, interest was capitalized to the principal balance of the loan. Commencing January 1, 2007, we are required to make monthly blended payments of principal and
interest based on a 25-year amortization period commencing on the completion date. The loan contains cross-guarantee, cross-default and cross-collateralization provisions. The loan is
guaranteed by our subsidiaries that own and operate Remington Park and the Palm Meadows Training Center ("Palm Meadows") and is collateralized principally by security over the lands forming part of
the operations at Gulfstream Park, Remington Park and Palm Meadows and over all other assets of Gulfstream Park, Remington Park and Palm Meadows, excluding licenses and permits. During 2007, we
received no loan advances, incurred interest expense of $13.7 million, repaid interest of $12.5 million and repaid outstanding principal of $2.5 million, such that at
December 31, 2007, $133.5 million was outstanding under this project financing arrangement, including $1.1 million of accrued interest payable. At December 31, 2007, net
loan origination expenses of $3.2 million have been recorded as a reduction of the outstanding loan balance. The loan balance is being accreted to its face value over the term
to maturity.

On
July 26, 2006, the Gulfstream Park project financing arrangement was amended to add an additional tranche of $25.8 million, plus lender costs and capitalized interest,
to fund the design and construction of phase one of the slots facility to be located in the existing Gulfstream Park clubhouse building, as well as related capital expenditures and
start-up costs, including the acquisition and installation of approximately 500 slot machines. The second tranche of the Gulfstream Park financing has a five-year term
and bears interest at a fixed rate of 10.5% per annum, compounded semi-annually. Prior to January 1, 2007, interest on this tranche was capitalized to the principal balance of the
loan. Beginning January 1, 2007, this tranche requires blended payments of principal and interest based on a 25-year amortization period commencing on that date. Advances related to
phase one of the slots facility were made available by way of progress draw advances and there is no prepayment penalty associated with this tranche. The Gulfstream Park project financing facility was
further amended to introduce a mandatory annual cash flow sweep of not less than 75% of Gulfstream Park's total excess cash flow, after permitted capital expenditures and debt service, to be used to
repay the additional principal amount being made available under the new tranche. A lender fee of $0.3 million (1% of the amount of this tranche) was added to the principal amount of the loan
as consideration for the amendments. During 2007, we received loan advances of $5.5 million, incurred interest expense of $2.4 million, repaid accrued interest of $2.2 million,
and

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repaid
outstanding principal of $0.4 million, such that at December 31, 2007, $24.7 million was outstanding under this project financing arrangement, including $0.2 million
of accrued interest payable. At December 31, 2007, net loan origination expenses of $0.4 million have been recorded as a reduction of the outstanding loan balance. The loan balance is
being accreted to its face value over the term to maturity.

On
December 22, 2006, the Gulfstream Park project financing arrangement was further amended to add an additional tranche of $21.5 million, plus lender costs and capitalized
interest, to fund the design and construction of phase two of the slots facility, as well as related capital expenditures and start-up costs, including the acquisition and installation of
approximately 700 slot machines. This third tranche of the Gulfstream Park financing has a five-year term and bears interest at a rate of 10.5% per annum, compounded
semi-annually. Prior to May 1, 2007, interest on this tranche was capitalized to the principal balance of the loan. Beginning May 1, 2007, this tranche requires blended
payments of principal and interest based on a 25-year amortization period commencing on that date. Advances related to phase two of the slots facility are made available by way of progress
draw advances and there is no prepayment penalty associated with this tranche. A lender fee of $0.2 million (1% of the amount of this tranche) was added to the principal amount of the loan as
consideration for the amendments on January 19, 2007, when the first funding advance was made available to us. During 2007, we received loan advances of $13.8 million, incurred interest
expense of $1.0 million, repaid accrued interest of $0.7 million, and repaid outstanding principal of $0.2 million, such that at December 31, 2007, $13.9 million was
outstanding under this project financing arrangement, including $0.1 million of accrued interest payable. At December 31, 2007, net loan origination expenses of $0.3 million have
been recorded as a reduction of the outstanding loan balance. The loan balance is being accreted to its face value over the term to maturity.

On
September 12, 2007, certain amendments were made to the Gulfstream Park and Remington Park project financings. In return for the lender agreeing to waive any applicable
make-whole payments for repayments made under either of the project financings prior to May 31, 2008, the required amendments provide, among other things, that under the Gulfstream
Park project financing arrangement: (i) Gulfstream Park's obligations are now guaranteed by MEC; and (ii) $100.0 million of indebtedness under the Gulfstream Park project
financings must be repaid by May 31, 2008.

A
subsidiary of MID provided project financing of $34.2 million to finance the build-out of the casino facility at Remington Park. Advances under the loan were made by
way of progress draw advances to fund the capital expenditures relating to the development, design and construction of the casino facility, including the purchase and installation of electronic gaming
machines. The loan has a ten-year term from the completion date of the reconstruction project, which was November 28, 2005. Prior to the completion date, amounts outstanding under
the loan bore interest at a floating rate equal to 2.55% per annum above MID's notional cost of LIBOR borrowing under its floating rate credit facility, compounded monthly. After the completion date,
amounts outstanding under the loan bear interest at a fixed rate of 10.5% per annum, compounded semi-annually. Prior to January 1, 2007, interest was capitalized to the principal
balance of the loan. Commencing January 1, 2007, we are required to make monthly blended payments of principal and interest based on a 25-year amortization period commencing on the
completion date. Certain cash from the operations of Remington Park must be used to pay deferred interest on the loan plus a portion of the principal under the loan equal to the deferred interest on
the Gulfstream Park construction loan. The loan is secured by all assets of Remington Park, excluding licenses and permits. The loan is also secured by a charge over the Gulfstream Park lands and a
charge over Palm Meadows and contains cross-guarantee, cross-default and cross-collateralization provisions. During 2007, we received no loan advances, incurred interest expense of
$3.1 million, repaid accrued interest of $2.8 million and repaid outstanding principal of $4.2 million, respectively, such that at December 31, 2007, $27.7 million
was outstanding under this project financing arrangement, including $0.2 million of accrued interest payable. At December 31, 2007, net loan origination expenses of $1.2 million
have been recorded as a reduction of the outstanding loan balance. The loan balance is being accreted to its face value over the term to maturity.

At
December 31, 2007, $4.5 million of the funds we placed into escrow with MID remain in escrow, which is included in "due from parent" on the consolidated
balance sheets.

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SAC Secured Term Loan Facility

One of our subsidiaries, SAC, has a secured term loan facility that was scheduled to mature on October 8, 2007, but on October 2, 2007, was amended
and extended. The principal amendments to the term loan agreement included increasing the amount available under the facility from $60.0 million to $67.5 million, reducing the monthly
principal repayments to $0.4 million, extending the maturity date until October 31, 2012 and modifying certain financial covenants. Borrowings under the facility bear interest at LIBOR
plus 2.0% per annum. On March 1, 2007, April 27, 2007 and July 26, 2007, we entered into interest rate swap contracts, each with an effective date of October 1, 2007, which
fix the rate of interest at 6.98%, 7.06% and 7.24% per annum, respectively, to October 8, 2009 on a notional amount of $10.0 million per contract on the outstanding balance under the SAC
term loan facility. Additionally, on October 4, 2007, we entered into an interest rate swap contract, with an effective date of October 8, 2009, which fixes the rate of interest at 7.15%
per annum to October 31, 2012 on a notional amount of $23.4 million of the outstanding balance under the SAC term loan facility. The loan facility is guaranteed by LATC, our wholly-owned
subsidiary, and is secured by a first deed of trust on Santa Anita Park and the surrounding real property, an assignment of the lease between LATC, the racetrack operator, and SAC and a pledge of all
of the outstanding capital stock of LATC and SAC. The loan contains cross-default provisions with respect to our senior secured revolving credit facility. At December 31, 2007,
$66.4 million was outstanding under this fully drawn facility.

8.55% Convertible Subordinated Notes

In June 2003, we issued $150.0 million of 8.55% convertible subordinated notes, which are convertible at any time at the option of the holders into
shares of our Class A Stock at a conversion price of $7.05 per share, subject to adjustment under certain circumstances, and mature on June 15, 2010. The notes are redeemable at the
principal amount together with accrued and unpaid interest, at our option, under certain conditions in the period from June 2, 2006 to June 1, 2008. At December 31, 2007, all of
the notes remained outstanding.

7.25% Convertible Subordinated Notes

In December 2002, we issued $75.0 million of 7.25% convertible subordinated notes, which are convertible at any time at the option of the holders
into shares of our Class A Stock at a conversion price of $8.50 per share, subject to adjustment under certain circumstances, and mature on December 15, 2009. The notes were redeemable
at the principal amount together with accrued and unpaid interest, at our option, under certain
conditions in the period from December 21, 2005 to December 14, 2007. At December 31, 2007, all of the notes remained outstanding.

Other Term Loan Facilities

One of our European subsidiaries has a Euros 15.0 million term loan facility, secured by a first and second mortgage on land in Austria owned by the
European subsidiary, which bears interest at the European Interbank Offered Rate ("EURIBOR") plus 2.0% per annum. At December 31, 2007, Euros 15.0 million
(U.S. $22.1 million) was outstanding under this fully drawn facility, and is repayable in two installments of Euros 7.5 million each due on February 29, 2008 and
December 31, 2008, respectively. In February 2008, the due date for the first installment was extended to March 15, 2008 and on March 12, 2008, the due date for the
first installment was further extended to March 31, 2008.

Two
of our subsidiaries, which are part of The Maryland Jockey Club, are party to secured term loan facilities that bear interest at the U.S. Prime rate or LIBOR plus 2.6% and
7.7% per annum, respectively. Both term loans have interest rate adjustment clauses that reset to the market rate for U.S. Treasury security of an equivalent term plus 2.6% at set dates
prescribed in the agreements. At December 31, 2007, $6.3 million and $3.1 million, respectively, were outstanding under these fully drawn term loan facilities which mature on
December 1, 2013 and June 7, 2017, respectively. Both loan facilities are secured by deeds of trust on land, buildings and improvements and security interests in all other assets of
certain affiliates of The Maryland Jockey Club.

One
of our subsidiaries, Pimlico Racing Association, Inc., has a revolving term loan facility that permits the prepayment of outstanding principal without penalty. This facility
matures on December 1, 2013, bears interest

81

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at
either the U.S. Prime rate or LIBOR plus 2.6% per annum and is secured by deeds of trust on land, buildings and improvements and security interests in all other assets of the subsidiary and
certain affiliates of The Maryland Jockey Club. At December 31, 2007, there are no borrowings on this facility as the subsidiary has made prepayments of $8.1 million. Accordingly, the
subsidiary is permitted to re-borrow up to this amount.

On
July 24, 2007, one of our European subsidiaries amended and extended its Euros 3.9 million bank term loan facility by increasing the amount available under the bank term
loan facility of up to Euros 4.0 million, bearing interest at the Euro Overnight Index Average rate ("EONIA") plus 3.0% per annum (previously EONIA plus 1.1% per annum), and extending the term
to July 31, 2008. A European subsidiary has provided two first mortgages on real estate properties as security for this term loan. At December 31, 2007, Euros 2.4 million
(U.S. $3.6 million) was outstanding under the fully drawn bank term loan facility. In January 2008, we agreed to reduce the amount available under the bank term loan facility to
Euros 3.5 million and increase the interest rate to EONIA plus 3.75% per annum.

On
May 11, 2007, AmTote completed a refinancing of its existing credit facilities with a new lender. The refinancing included a $3.0 million revolving credit facility to
finance working capital requirements, a $4.2 million term loan for the repayment of AmTote's debt outstanding under its existing term loan facilities and an equipment term loan of up to
$10.0 million to finance up to 80% of eligible capital costs related to tote service contracts. The term loan facilities bear interest at LIBOR plus 3.0%. Loans under the credit facilities are
secured by a first charge on the assets and a pledge of stock of AmTote. The $4.2 million term loan matures on May 11, 2011 and the $10.0 million term loan matures on
May 11, 2012. At December 31, 2007, $3.3 million was outstanding under the $4.2 million term loan facility and $2.0 million was outstanding under the equipment term
loan facility.

Shelf Registration Statement

On February 21, 2007, we filed a shelf registration statement on Form S-3 (the "U.S. Registration Statement") with the
United States Securities and Exchange Commission (the "SEC") and a preliminary short form base shelf prospectus (the "Canadian Prospectus") with the securities commissions in each
of the Provinces in Canada (collectively, the "Canadian Securities Commissions"). As the U.S. Registration Statement has been declared effective by the SEC and the Canadian Prospectus has
received a final receipt from the Canadian Securities Commissions, we will be able to offer to sell up to U.S. $500.0 million of our equity securities (including stock, warrants, units
and, subject to filing a Canadian rights offering circular or prospectus with the Canadian Securities Commissions, rights) from time to time in one or more public offerings or other offerings. The
terms of any such future offerings would be established at the time of such offering. The U.S. Registration Statement and Canadian Prospectus are intended to give us the flexibility to take
advantage of equity financing opportunities when and if deemed appropriate. There is no assurance when and if an equity financing could be completed.

Going Concern

The consolidated financial statements included with this Report have been prepared on a going concern basis, which contemplates the realization of assets and the
discharge of liabilities in the normal course of business for the foreseeable future. We have incurred net losses of $113.8 million, $87.4 million and $105.3 million for the years
ended December 31, 2007, 2006 and 2005, respectively, and had an accumulated deficit of $510.1 million and a working capital deficiency of $162.2 million at December 31,
2007. At December 31, 2007, we had $209.4 million of debt that matures in 2008, including amounts owing under our $40.0 million senior secured revolving credit facility with a
Canadian financial institution which is scheduled to mature on March 31, 2008, and the Bridge Loan, which is scheduled to mature on May 31, 2008, and our obligation to repay
$100.0 million of indebtedness under the Gulfstream Park project financings with a subsidiary of MID by May 31, 2008. Accordingly, our ability to continue as a going concern is in
substantial doubt and is dependent on generating cash flows that are adequate to sustain the operations of our business, renewing or extending current financing arrangements and meeting our
obligations with respect to secured and unsecured creditors, none of which is assured. If we are unable to repay our obligations when due, other current and long-term debt will also become
due on demand as a result of cross-default provisions within loan agreements, unless we are able to obtain waivers or extensions. On September 12, 2007, our Board of Directors

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approved
the Plan which was designed to eliminate net debt by December 31, 2008 by generating funding from the sale of assets, entering into strategic transactions involving certain of our
racing, gaming and technology operations, and a possible future equity issuance. The success of the Plan is not assured. To address short-term liquidity concerns and provide sufficient
time to implement the Plan, we arranged $100.0 million of funding, comprised of: (i) the Fair Enterprise Private Placement; and (ii) the Bridge Loan. Although we continue to
implement our Plan, the sale of assets under the Plan is taking longer than originally contemplated. As a result, we will likely need to seek additional funds in the short-term from one or
more possible sources. The availability of such additional funds is not assured and, if available, the terms thereof are not determinable at this time. Accordingly, the consolidated financial
statements included with this Report do not give effect to any adjustments to recorded amounts and their classification, which would be necessary should the Company be unable to continue as a going
concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the consolidated
financial statements.

In
order to fund operations, implement our strategic plan and capitalize on future growth opportunities, we will be required to seek additional financing and funds from one or more
possible sources, which may include MID, through means such as asset sales, project financings for racing and/or alternative gaming developments, investments by partners in certain of our racetracks
and other business operations and debt or equity offerings through public or private sources. If additional financing or other sources of funds are not available to us as needed, or are not available
on terms that are acceptable to us, our ability to continue as a going concern, add alternative gaming to our racetracks where and when permitted or improve and expand our operations as planned may be
adversely affected.

Contractual Obligations and Commitments

Our commitments to make future payments consist primarily of repayments of long-term debt including capital lease obligations, amounts due to our
parent, obligations under operating and facility leases, construction commitments and other long-term liabilities. Our contractual obligations and commitments at December 31, 2007
are as follows:

|                                                 |  | Less than 1 year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5 years |  | Total  
|------------------------------------------------ |  | ---------------- |  | ------------ |  | ------------ |  | ----------------- |  | -------
|
|Long-term debt                                   |  | 32,600           |  | 13,799       |  | 57,718       |  | 3,048             |  | 107,165
|Capital lease obligations(i)                     |  | 1,452            |  | 2,904        |  | 3,049        |  | 25,463            |  | 32,868 
|Amounts due to Parent                            |  | 137,400          |  | 2,238        |  | 2,746        |  | 88,266            |  | 230,650
|Convertible subordinated notes                   |  |                 |  | 225,000      |  |             |  |                  |  | 225,000
|Operating leases(ii)                             |  | 2,182            |  | 3,497        |  | 1,056        |  |                  |  | 6,735  
|Facility leases(iii)                             |  | 2,311            |  | 3,491        |  | 2,280        |  | 24,328            |  | 32,410 
|Construction and development project commitments |  | 4,157            |  |             |  |             |  |                  |  | 4,157  
|Joint venture funding(iv)                        |  | 2,480            |  | 2,548        |  |             |  |                  |  | 5,028  
|Other liabilities(v)                             |  | 469              |  |             |  |             |  |                  |  | 469    
|                                                 |  |                  |  |              |  |              |  |                   |  |        
|                                                 |  | 183,051          |  | 253,477      |  | 66,849       |  | 141,105           |  | 644,482
|                                                 |  |                  |  |              |  |              |  |                   |  |        

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Qualitative and Quantitative Disclosures about Market Risk

Our primary exposure to market risk related to financial instruments (or the risk of loss arising from adverse changes in market rates and prices,
including interest rates, foreign currency exchange rates and commodity prices) is with respect to our investments in companies with a functional currency other than the U.S. dollar.
Fluctuations in the U.S. dollar exchange rate relative to the Canadian dollar and the Euro will result in fluctuations in shareholders' equity and comprehensive income (loss). We have generally
not entered into
derivative financial arrangements for currency hedging purposes, and have not and will not enter into such arrangements for speculative purposes.

Additionally,
we are exposed to interest rate risk. Interest rates are sensitive to many factors, including governmental monetary and tax policies, domestic and international economic
and political considerations and other factors that are beyond our control.

Our
future earnings, cash flows and fair values relating to financial instruments are primarily dependent upon prevalent market rates of interest, such as the U.S. Prime rate,
LIBOR and EURIBOR. Based on interest rates at December 31, 2007 and our current credit and debt facilities, a 1% per annum increase or decrease in interest rates on our credit facilities and
other variable rate borrowings would not materially affect our annual future earnings and cash flows. Based on borrowing rates currently available to us, the carrying amount of our debt approximates
its fair value.

In
order to mitigate a portion of the interest rate risk associated with the SAC term loan facility, we have entered into the four interest rate swap contracts described under
"Long-term and related party debt".

Accounting Change

In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes"
("FIN 48"), which clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes". FIN 48 requires an entity to recognize the tax benefit of uncertain tax positions only when it is more likely than not, based on the
position's technical merits, that the position would be sustained upon examination by the respective taxing authorities. The tax benefit is measured as the largest benefit that is more than
fifty-percent likely of being realized upon final settlement with the respective taxing authorities. Effective January 1, 2007, we adopted the provisions of FIN 48 on a retroactive
basis, which did not result in any charge to accumulated deficit as a cumulative effect of an accounting change or adjustment to the liability for unrecognized tax benefits. Accordingly, the adoption
of FIN 48 did not have an effect on our results of operations or financial position. It is our policy to account for interest and penalties associated with income tax obligations as a component
of income tax expense. We did not recognize any interest and penalties as provision for income taxes in the consolidated statements of operations and comprehensive loss for the year ended
December 31, 2007 as the maximum interest and penalty period have elapsed.

As
of December 31, 2007, we had $4.0 million of unrecognized income tax benefits and $0.3 million of related accrued interest and penalties (net of any tax
effect) and $0.3 million of foreign exchange, $2.6 million of

84

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which
could ultimately reduce our effective tax rate. We are currently under audit in Austria. Although it is not possible to accurately predict the timing of the conclusion of the audit, we
anticipate that the Austrian audit relating to the years 2002 through 2005 will be completed before the end of 2008. Given the stage of completion of the audit, we are unable to estimate the range of
any possible changes to unrecognized income tax benefits the audit may cause over the next year. In addition, we do not anticipate any other significant changes to unrecognized income tax benefits
over the next year.

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

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

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

Impact of Recently Issued Accounting Standards

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

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

Forward-looking Statements

This Report contains "forward-looking statements" within the meaning of applicable securities legislation, including Section 27A of the
United States Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the United States Securities Exchange Act of 1934, as amended
(the "Exchange Act") and forward-looking information as defined in theSecurities Act(Ontario) (collectively referred to as forward-looking
statements). These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and theSecurities
Act(Ontario) and include, among others, statements regarding: the current status and the potential impact of the Plan on our debt reduction efforts, as to which there can be
no assurance of success; expectations as to our ability to complete asset sales at the appropriate prices and in a timely manner; the impact of the Bridge Loan; expectations as to our ability to
comply with the Bridge Loan and other credit facilities; strategies and plans; expectations as to financing and liquidity requirements and arrangements; expectations as to operations; expectations as
to revenues, costs and earnings; the time by which certain redevelopment projects, transactions or other objectives will be achieved; estimates of costs relating to environmental remediation and
restoration; proposed new racetracks or other developments, products and services; expectations as to the timing and receipt of government approvals and regulatory changes in gaming and other racing
laws and regulations; expectations that claims, lawsuits, environmental costs, commitments, contingent liabilities, labor negotiations or agreements, or other matters will not have a material adverse
effect on our consolidated financial position, operating results, prospects or

85

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liquidity;
projections, predictions, expectations, estimates, beliefs or forecasts as to our financial and operating results and future economic performance; and other matters that are not historical
facts.

Forward-looking
statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or the times at or by which such
performance or results will be achieved. Undue reliance should not be placed on such statements. Forward-looking statements are based on information available at the time and/or management's good
faith assumptions and analyses made in light of our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the
circumstances and are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control, that could cause actual events or results to differ
materially from such forward-looking statements. Important factors that could
cause actual results to differ materially from our forward-looking statements include, but may not be limited to, material adverse changes in: general economic conditions; the popularity of racing and
other gaming activities as recreational activities; the regulatory environment affecting the horse racing and gaming industries; our ability to obtain or maintain government and other regulatory
approvals necessary or desirable to proceed with proposed real estate developments; increased regulation affecting certain of our non-racetrack operations, such as broadcasting ventures;
and our ability to develop, execute or finance our strategies and plans within expected timelines or budgets. In drawing conclusions set out in our forward-looking statements above, we have assumed,
among other things, that we will be able to successfully implement our Plan and comply with the terms of and/or obtain waivers or other concessions from our lenders and refinance or repay on maturity
our existing financing arrangements (including our Bridge Loan and our senior secured revolving credit facility with a Canadian financial institution), and there will not be any material adverse
changes in: general economic conditions; the popularity of horse racing and other gaming activities; weather and other environmental conditions at our facilities; the regulatory environment; and our
ability to develop, execute or finance our strategies and plans as anticipated.

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

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is contained in this Annual Report under "Management's Discussion and Analysis of Financial Condition and Results of
Operations  Qualitative and Quantitative Disclosures about Market Risk" and is incorporated herein by reference.

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Item 8. Financial Statements and Supplementary Data

88

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REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Shareholders and Board of Directors of Magna Entertainment Corp.

We
have audited the accompanying consolidated balance sheets of Magna Entertainment Corp. (the "Company") as of December 31, 2007 and 2006 and the related consolidated
statements of operations and comprehensive loss, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2007. Our audit
also includes the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

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

In
our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the
results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007 in conformity with U.S. generally accepted accounting
principles.

The
accompanying financial statements have been prepared assuming that Magna Entertainment Corp. will continue as a going concern. As more fully described in Note 1, the Company
has incurred recurring operating losses and has a working capital deficiency. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in
regards to these matters are also described in Note 1. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over
financial reporting as of December 31, 2007, based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 12, 2008 expressed our opinion that Magna Entertainment Corp. has maintained effective internal control over financial
reporting as of December 31, 2007.

As
discussed in Note 3 to these consolidated financial statements, the Company changed its accounting policy in regard to the accounting for income taxes for the year ended
December 31, 2007.

|Toronto, Canada
March 12, 2008 |  | /s/ ERNST & YOUNG LLP
      Ernst & Young LLP
      Chartered Accountants
      Licensed Public Accountants
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------

89

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

|                                                         |                                                                           |                         |    | Years ended December 31, |         
|-------------------------------------------------------- | ------------------------------------------------------------------------- | ----------------------- | -- | ------------------------ | --------
|
|
|Revenues                                                 |                                                                           | 21                      |    |                          |         
|Racing and gaming                                        |                                                                           |                         |    |                          |         
|                                                         | Pari-mutuel wagering                                                      |                         |    |                          | $       
|                                                         | Gaming                                                                    |                         |    |                          |         
|                                                         | Non-wagering                                                              |                         |    |                          |         
|                                                         |                                                                           |                         |    |                          |         
|                                                         |                                                                           |                         |    |                          | 617,240 
|                                                         |                                                                           |                         |    |                          |         
|Real estate and other                                    |                                                                           |                         |    |                          |         
|                                                         | Sale of real estate                                                       |                         |    |                          |         
|                                                         | Other                                                                     |                         |    |                          |         
|                                                         |                                                                           |                         |    |                          |         
|                                                         |                                                                           |                         |    |                          | 8,475   
|                                                         |                                                                           |                         |    |                          |         
|                                                         |                                                                           |                         |    |                          | 625,715 
|                                                         |                                                                           |                         |    |                          |         
|Costs, expenses and other income                         |                                                                           |                         |    |                          |         
|Racing and gaming                                        |                                                                           |                         |    |                          |         
|                                                         | Pari-mutuel purses, awards and other                                      |                         |    |                          |         
|                                                         | Gaming purses, taxes and other                                            |                         |    |                          |         
|                                                         | Operating costs                                                           |                         |    |                          |         
|                                                         | General and administrative                                                |                         |    |                          |         
|Real estate and other                                    |                                                                           |                         |    |                          |         
|                                                         | Cost of real estate sold                                                  |                         |    |                          |         
|                                                         | Operating costs                                                           |                         |    |                          |         
|                                                         | General and administrative                                                |                         |    |                          |         
|Predevelopment, pre-opening and other costs              |                                                                           |                         |    |                          | 2,866   
|Depreciation and amortization                            |                                                                           |                         |    |                          | 42,297  
|Interest expense, net                                    |                                                                           | 14, 22                  |    |                          | 50,621  
|Write-down of long-lived assets                          |                                                                           | 8                       |    |                          | 1,308   
|Equity loss (income)                                     |                                                                           |                         |    |                          | 3,098   
|Gain on sale of intangible assets related to The Meadows |                                                                           | 5                       |    |                          |        
|                                                         |                                                                           |                         |    |                          |         
|                                                         |                                                                           |                         |    |                          | 736,158 
|                                                         |                                                                           |                         |    |                          |         
|Loss from continuing operations before income taxes      |                                                                           |                         |    |                          | (110,443
|Income tax benefit                                       |                                                                           | 12                      |    |                          | (2,574  
|                                                         |                                                                           |                         |    |                          |         
|Loss from continuing operations                          |                                                                           |                         |    |                          | (107,869
|Loss from discontinued operations                        |                                                                           | 7                       |    |                          | (5,890  
|                                                         |                                                                           |                         |    |                          |         
|Net loss                                                 |                                                                           |                         |    |                          | (113,759
|Other comprehensive income (loss)                        |                                                                           |                         |    |                          |         
|                                                         | Foreign currency translation adjustment                                   |                         | 19 |                          |         
|                                                         | Change in fair value of interest rate swap                                |                         | 20 |                          |         
|                                                         | Change in net unrecognized pension actuarial gains                        |                         | 24 |                          |         
|                                                         |                                                                           |                         |    |                          |         
|Comprehensive loss                                       |                                                                           |                         |    | $                        | (108,981
|                                                         |                                                                           |                         |    |                          |         
|Loss per share for Class A Subordinate                   |                                                                           |                         |    |                          |         
|                                                         | Voting Stock and Class B Stock                                            |                         |    |                          |         
|                                                         | Basic and Diluted                                                         |                         |    |                          |         
|                                                         |                                                                           | Continuing operations   |    | 18                       |         
|                                                         |                                                                           | Discontinued operations |    | 18                       |         
|                                                         |                                                                           |                         |    |                          |         
|Loss per share                                           |                                                                           |                         |    | $                        | (1.04   
|                                                         |                                                                           |                         |    |                          |         
|Average number of shares of Class A Subordinate          |                                                                           |                         |    |                          |         
|                                                         | Voting Stock or Class B Stock outstanding during the year (in thousands): |                         |    |                          |         
|                                                         | Basic and Diluted                                                         |                         | 18 |                          |         
|                                                         |                                                                           |                         |    |                          |         

See accompanying notes

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

|                                                                        |                                                                                              |                                                                                 |  | Years ended December 31, |         
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |  | ------------------------ | --------
|
|
|Cash provided from (used for):                                          |                                                                                              |                                                                                 |  |                          |         
|OPERATING ACTIVITIES OF CONTINUING OPERATIONS:                          |                                                                                              |                                                                                 |  |                          |         
|Net loss from continuing operations                                     |                                                                                              |                                                                                 |  | $                        | (107,869
|                                                                        | Adjustments to reconcile net loss to net cash provided from (used for) operating activities: |                                                                                 |  |                          |         
|                                                                        |                                                                                              | Depreciation and amortization                                                   |  |                          |         
|                                                                        |                                                                                              | Future income taxes                                                             |  | 12                       |         
|                                                                        |                                                                                              | Amortization of loan origination costs                                          |  |                          |         
|                                                                        |                                                                                              | Amortization of convertible subordinated notes issue costs                      |  | 15                       |         
|                                                                        |                                                                                              | Amortization of financing obligation and other long-term liabilities            |  |                          |         
|                                                                        |                                                                                              | Deferred interest expense                                                       |  | 22                       |         
|                                                                        |                                                                                              | Write-down of long-lived assets                                                 |  | 8                        |         
|                                                                        |                                                                                              | Write-down of development costs                                                 |  | 22                       |         
|                                                                        |                                                                                              | Equity loss (income)                                                            |  |                          |         
|                                                                        |                                                                                              | Gain on sale of intangible assets related to The Meadows                        |  | 5                        |         
|                                                                        |                                                                                              | Gain on disposal of real estate properties                                      |  |                          |         
|                                                                        |                                                                                              | Gain on disposal of fixed assets                                                |  |                          |         
|                                                                        |                                                                                              | Stock-based compensation expense                                                |  | 3, 17                    |         
|                                                                        |                                                                                              | Issuance of Class A Subordinate Voting Stock under the Long-term Incentive Plan |  | 16                       |         
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|                                                                        |                                                                                              |                                                                                 |  |                          | (68,221 
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Changes in non-cash working capital balances:                           |                                                                                              |                                                                                 |  |                          |         
|                                                                        |                                                                                              | Restricted cash                                                                 |  |                          |         
|                                                                        |                                                                                              | Accounts receivable                                                             |  |                          |         
|                                                                        |                                                                                              | Due from parent                                                                 |  |                          |         
|                                                                        |                                                                                              | Income taxes payable/receivable                                                 |  |                          |         
|                                                                        |                                                                                              | Inventories                                                                     |  |                          |         
|                                                                        |                                                                                              | Prepaid expenses and other                                                      |  |                          |         
|                                                                        |                                                                                              | Accounts payable                                                                |  |                          |         
|                                                                        |                                                                                              | Accrued salaries and wages                                                      |  |                          |         
|                                                                        |                                                                                              | Customer deposits                                                               |  |                          |         
|                                                                        |                                                                                              | Other accrued liabilities                                                       |  |                          |         
|                                                                        |                                                                                              | Deferred revenue                                                                |  |                          |         
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|                                                                        |                                                                                              |                                                                                 |  |                          | 6,399   
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|                                                                        |                                                                                              |                                                                                 |  |                          | (61,822 
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|INVESTING ACTIVITIES OF CONTINUING OPERATIONS:                          |                                                                                              |                                                                                 |  |                          |         
|Acquisition of business, net of cash acquired                           |                                                                                              | 4                                                                               |  |                          |        
|Proceeds on The Meadows transaction                                     |                                                                                              | 5                                                                               |  |                          |        
|Real estate property additions                                          |                                                                                              |                                                                                 |  |                          | (61,217 
|Fixed asset additions                                                   |                                                                                              |                                                                                 |  |                          | (13,165 
|Other asset disposals (additions)                                       |                                                                                              |                                                                                 |  |                          | (4,690  
|Proceeds on real estate sold to related parties                         |                                                                                              | 22                                                                              |  |                          | 88,031  
|Proceeds on disposal of real estate properties                          |                                                                                              |                                                                                 |  |                          |        
|Proceeds on disposal of fixed assets                                    |                                                                                              |                                                                                 |  |                          | 7,681   
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|                                                                        |                                                                                              |                                                                                 |  |                          | 16,640  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|FINANCING ACTIVITIES OF CONTINUING OPERATIONS:                          |                                                                                              |                                                                                 |  |                          |         
|Proceeds from bank indebtedness                                         |                                                                                              | 13                                                                              |  |                          | 73,831  
|Proceeds from indebtedness and long-term debt with parent               |                                                                                              | 22                                                                              |  |                          | 52,362  
|Proceeds from long-term debt                                            |                                                                                              |                                                                                 |  |                          | 13,819  
|Repayment of bank indebtedness                                          |                                                                                              | 13                                                                              |  |                          | (41,132 
|Repayment of indebtedness and long-term debt with parent                |                                                                                              | 22                                                                              |  |                          | (3,026  
|Repayment of long-term debt                                             |                                                                                              |                                                                                 |  |                          | (73,578 
|Issuance of share capital                                               |                                                                                              | 16                                                                              |  |                          | 19,581  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|                                                                        |                                                                                              |                                                                                 |  |                          | 41,857  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Effect of exchange rate changes on cash and cash equivalents            |                                                                                              |                                                                                 |  |                          | 170     
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Net cash flows used for continuing operations                           |                                                                                              |                                                                                 |  |                          | (3,155  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Cash provided from (used for) discontinued operations:                  |                                                                                              |                                                                                 |  |                          |         
|Operating activities of discontinued operations                         |                                                                                              |                                                                                 |  |                          | (3,062  
|Investing activities of discontinued operations                         |                                                                                              |                                                                                 |  |                          | (4,417  
|Financing activities of discontinued operations                         |                                                                                              |                                                                                 |  |                          | (4,264  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Net cash flows provided from (used for) discontinued operations         |                                                                                              |                                                                                 |  |                          | (11,743 
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Net increase (decrease) in cash and cash equivalents during the year    |                                                                                              |                                                                                 |  |                          | (14,898 
|Cash and cash equivalents, beginning of year                            |                                                                                              |                                                                                 |  |                          | 58,291  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Cash and cash equivalents, end of year                                  |                                                                                              |                                                                                 |  |                          | 43,393  
|Less: cash and cash equivalents, end of year of discontinued operations |                                                                                              |                                                                                 |  |                          | (9,078  
|                                                                        |                                                                                              |                                                                                 |  |                          |         
|Cash and cash equivalents, end of year of continuing operations         |                                                                                              |                                                                                 |  | $                        | 34,315  
|                                                                        |                                                                                              |                                                                                 |  |                          |         

See accompanying notes

91

---



MAGNA ENTERTAINMENT CORP.  CONSOLIDATED BALANCE SHEETS  (Refer to Note 1  Going Concern)(U.S. dollars and share amounts in thousands)

|                                            |                                                     |            |    | December 31, |          
|------------------------------------------- | --------------------------------------------------- | ---------- | -- | ------------ | ---------
|
|
|ASSETS                                      |                                                     |            |    |              |          
|Current assets:                             |                                                     |            |    |              |          
|                                            | Cash and cash equivalents                           |            |    |              | $        
|                                            | Restricted cash                                     |            |    |              |          
|                                            | Accounts receivable                                 |            |    |              |          
|                                            | Due from parent                                     |            | 22 |              |          
|                                            | Income taxes receivable                             |            |    |              |          
|                                            | Inventories                                         |            |    |              |          
|                                            | Prepaid expenses and other                          |            |    |              |          
|                                            | Assets held for sale                                |            | 6  |              |          
|                                            | Discontinued operations                             |            | 7  |              |          
|                                            |                                                     |            |    |              |          
|                                            |                                                     |            |    |              | 226,446  
|                                            |                                                     |            |    |              |          
|Real estate properties, net                 |                                                     | 9          |    |              | 751,492  
|Fixed assets, net                           |                                                     | 10         |    |              | 90,672   
|Racing licenses                             |                                                     |            |    |              | 109,868  
|Other assets, net                           |                                                     | 11         |    |              | 10,996   
|Future tax assets                           |                                                     | 12         |    |              | 53,168   
|Assets held for sale                        |                                                     | 6          |    |              |         
|                                            |                                                     |            |    |              |          
|Discontinued operations                     |                                                     | 7          |    |              |         
|                                            |                                                     |            |    |              |          
|                                            |                                                     |            |    | $            | 1,242,642
|                                            |                                                     |            |    |              |          
|LIABILITIES AND SHAREHOLDERS' EQUITY        |                                                     |            |    |              |          
|Current liabilities:                        |                                                     |            |    |              |          
|                                            | Bank indebtedness                                   |            | 13 |              | $        
|                                            | Accounts payable                                    |            |    |              |          
|                                            | Accrued salaries and wages                          |            |    |              |          
|                                            | Customer deposits                                   |            |    |              |          
|                                            | Other accrued liabilities                           |            |    |              |          
|                                            | Income taxes payable                                |            |    |              |          
|                                            | Long-term debt due within one year                  |            | 14 |              |          
|                                            | Due to parent                                       |            | 22 |              |          
|                                            | Deferred revenue                                    |            |    |              |          
|                                            | Liabilities related to assets held for sale         |            | 6  |              |          
|                                            | Discontinued operations                             |            | 7  |              |          
|                                            |                                                     |            |    |              |          
|                                            |                                                     |            |    |              | 388,667  
|                                            |                                                     |            |    |              |          
|Long-term debt                              |                                                     | 14         |    |              | 89,680   
|Long-term debt due to parent                |                                                     | 22         |    |              | 67,107   
|Convertible subordinated notes              |                                                     | 15         |    |              | 222,527  
|Other long-term liabilities                 |                                                     | 24         |    |              | 18,325   
|Future tax liabilities                      |                                                     | 12         |    |              | 93,623   
|Liabilities related to assets held for sale |                                                     | 6          |    |              |         
|Discontinued operations                     |                                                     | 7          |    |              |         
|                                            |                                                     |            |    |              |          
|                                            |                                                     |            |    |              | 879,929  
|                                            |                                                     |            |    |              |          
|Commitments and contingencies               |                                                     | 22, 23     |    |              |          
|Shareholders' equity:                       |                                                     |            |    |              |          
|Class A Subordinate Voting Stock            |                                                     |            |    |              |          
|                                            | (Issued: 2007  58,159; 2006  49,055)              |            | 16 |              |          
|Class B Stock                               |                                                     |            |    |              |          
|                                            | (Convertible into Class A Subordinate Voting Stock) |            |    |              |          
|                                            | (Issued: 2007 and 2006  58,466)                    |            | 16 |              |          
|Contributed surplus                         |                                                     | 22         |    |              | 91,825   
|Other paid-in-capital                       |                                                     | 3, 17      |    |              | 2,031    
|Accumulated deficit                         |                                                     |            |    |              | (510,057 
|Accumulated comprehensive income            |                                                     | 19, 20, 24 |    |              | 45,385   
|                                            |                                                     |            |    |              |          
|                                            |                                                     |            |    |              | 362,713  
|                                            |                                                     |            |    |              |          
|                                            |                                                     |            |    | $            | 1,242,642
|                                            |                                                     |            |    |              |          

See accompanying notes

On behalf of the Board:

|Director | Director
|-------- | --------

92

---



MAGNA ENTERTAINMENT CORP.    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY(U.S. dollars in thousands)

|                                                                                                                                                    |  | Note  |  | Class A Subordinate
Voting Stock |         | Class B Stock |   | Contributed Surplus |  | Other
Paid-in-
Capital |        | Accumulated
Deficit |   | Accumulated
Comprehensive
Income (Loss) | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | -------------------------------- | ------- | ------------- | - | ------------------- |  | ---------------------- | ------ | ------------------- | - | --------------------------------------- | 
|Balances at December 31, 2004                                                                                                                       |  |       |  | $                                | 318,003 |               | $ | 394,094             |  | $                      | 17,282 |                     | $ |                                        | 
|Activity for the year ended December 31, 2005:                                                                                                      |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 
|Net loss                                                                                                                                            |  |       |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Foreign currency translation adjustment                                                                                                             |  | 19    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Change in fair value of interest rate swap                                                                                                          |  | 20    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Issue of Class A Subordinate Voting Stock under the Long-term Incentive Plan                                                                        |  | 16    |  |                                  | 102     |               |   |                    |  |                        |       |                     |   |                                        | 
|Gain on sale of real estate to a related party, net of tax                                                                                          |  | 22    |  |                                  |        |               |   |                    |  |                        | 661    |                     |   |                                        | 
|                                                                                                                                                    |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 
|Balances at December 31, 2005                                                                                                                       |  |       |  |                                  | 318,105 |               |   | 394,094             |  |                        | 17,943 |                     |   |                                        | 
|Activity for the year ended December 31, 2006:                                                                                                      |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 
|Net loss                                                                                                                                            |  |       |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Foreign currency translation adjustment                                                                                                             |  | 19    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Change in fair value of interest rate swap                                                                                                          |  | 20    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Adjustment, net of tax, for change in accounting policy related to Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans |  | 3     |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Adjustment, net of tax, for change in accounting policy related to stock option compensation expense                                                |  | 3, 17 |  |                                  |        |               |   |                    |  |                        |       |                     |   | 1,410                                   | 
|Issue of Class A Subordinate Voting Stock under the Long-term Incentive Plan                                                                        |  | 16    |  |                                  | 982     |               |   |                    |  |                        |       |                     |   |                                        | 
|Gain on sale of real estate to a related party, net of tax                                                                                          |  | 22    |  |                                  |        |               |   |                    |  |                        | 23,775 |                     |   |                                        | 
|                                                                                                                                                    |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 
|Balances at December 31, 2006                                                                                                                       |  |       |  |                                  | 319,087 |               |   | 394,094             |  |                        | 41,718 |                     |   | 1,410                                   | 
|Activity for the year ended December 31, 2007:                                                                                                      |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 
|Net loss                                                                                                                                            |  |       |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Foreign currency translation adjustment                                                                                                             |  | 19    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Change in fair value of interest rate swap                                                                                                          |  | 20    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Change in net unrecognized pension actuarial gains                                                                                                  |  | 24    |  |                                  |        |               |   |                    |  |                        |       |                     |   |                                        | 
|Stock option compensation expense                                                                                                                   |  | 3, 17 |  |                                  |        |               |   |                    |  |                        |       |                     |   | 621                                     | 
|Issue of Class A Subordinate Voting Stock under the Long-term Incentive Plan                                                                        |  | 16    |  |                                  | 767     |               |   |                    |  |                        |       |                     |   |                                        | 
|Issue of Class A Subordinate Voting Stock under the Private Placement                                                                               |  | 16    |  |                                  | 19,581  |               |   |                    |  |                        |       |                     |   |                                        | 
|Gain on sale of real estate to a related party, net of tax                                                                                          |  | 22    |  |                                  |        |               |   |                    |  |                        | 50,107 |                     |   |                                        | 
|                                                                                                                                                    |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 
|Balances at December 31, 2007                                                                                                                       |  |       |  | $                                | 339,435 |               | $ | 394,094             |  | $                      | 91,825 |                     | $ | 2,031                                   | 
|                                                                                                                                                    |  |       |  |                                  |         |               |   |                     |  |                        |        |                     |   |                                         | 

See accompanying notes

93

---



MAGNA ENTERTAINMENT CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in U.S. dollars unless otherwise noted and all tabular amounts in thousands,
except per share figures)

1.     GOING CONCERN



2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



94

---





95

---





96

---





97

---







98

---





3.     ACCOUNTING CHANGES





99

---





|                                             |  | December 31, 2006
|-------------------------------------------- |  | -----------------
|
|Accrued pension and postretirement liability |  | $                
|Future tax liability (asset), net            |  | $                
|Accumulated comprehensive income (loss)      |  | $                
|                                             |  |                  



100

---





|                      |                                                                                         | Year ended
December 31, 2005 |         
|--------------------- | --------------------------------------------------------------------------------------- | ---------------------------- | --------
|Net loss, as reported |                                                                                         | $                            | (105,293
|                      | Pro-forma stock compensation expense determined under the fair value method, net of tax |                              |         
|                      |                                                                                         |                              |         
|Pro-forma net loss    |                                                                                         | $                            | (106,170
|                      |                                                                                         |                              |         
|Loss per share        |                                                                                         |                              |         
|                      | Basic  as reported                                                                     |                              | $       
|                      | Basic  pro-forma                                                                       |                              | $       
|                      |                                                                                         |                              |         
|                      | Diluted  as reported                                                                   |                              | $       
|                      | Diluted  pro-forma                                                                     |                              | $       
|                      |                                                                                         |                              |         





4.     ACQUISITION



|Non-cash working capital                                           |  | $ | 1,203  |  
|------------------------------------------------------------------ |  | - | ------ | -
|Fixed assets                                                       |  |   | 12,691 |  
|Other assets                                                       |  |   | 127    |  
|Long-term debt                                                     |  |   | (1,470 | )
|Other long-term liabilities                                        |  |   | (980   | )
|Future tax liabilities                                             |  |   | (2,224 | )
|                                                                   |  |   |       
|Net assets acquired and total purchase price, net of cash acquired |  | $ | 9,347  |  
|                                                                   |  |   |       

5.     SALE OF THE MEADOWS



101

---





6.     ASSETS HELD FOR SALE



102

---





|                            |                       | December 31,
|--------------------------- | --------------------- | ------------
|
|ASSETS                      |                       |             
|Real estate properties, net |                       |             
|                            | Dixon, California     |             
|                            | Ocala, Florida        |             
|                            | Ebreichsdorf, Austria |             
|                            | Porter, New York(i)   |             
|                            |                       |             
|                            |                       | $           
|                            |                       |             
|LIABILITIES                 |                       |             
|Future tax liabilities      |                       | $           
|                            |                       |             





103

---





7.     DISCONTINUED OPERATIONS





104

---





|                                            |  | Years ended December 31, |        
|------------------------------------------- |  | ------------------------ | -------
|
|Results of Operations                       |  |                          |        
|Revenues                                    |  | $                        | 122,200
|Costs and expenses                          |  |                          | 120,873
|                                            |  |                          |        
|                                            |  |                          | 1,327  
|Predevelopment, pre-opening and other costs |  |                          | 447    
|Depreciation and amortization               |  |                          | 3,976  
|Interest expense, net                       |  |                          | 2,794  
|Impairment loss recorded on disposition     |  |                          |       
|                                            |  |                          |        
|Loss before gain on disposition             |  |                          | (5,890 
|Gain on disposition                         |  |                          |       
|                                            |  |                          |        
|Loss before income taxes                    |  |                          | (5,890 
|Income tax expense                          |  |                          |       
|                                            |  |                          |        
|Loss from discontinued operations           |  | $                        | (5,890 
|                                            |  |                          |        

105

---





|                                                      |                                                       | December 31,
|----------------------------------------------------- | ----------------------------------------------------- | ------------
|
|ASSETS                                                |                                                       |             
|Current assets:                                       |                                                       |             
|                                                      | Cash and cash equivalents                             |             
|                                                      | Restricted cash                                       |             
|                                                      | Accounts receivable                                   |             
|                                                      | Inventories                                           |             
|                                                      | Prepaid expenses and other                            |             
|                                                      | Real estate properties, net                           |             
|                                                      | Fixed assets, net                                     |             
|                                                      | Other assets, net                                     |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|Real estate properties, net                           |                                                       |             
|Fixed assets, net                                     |                                                       |             
|Other assets, net                                     |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       | $           
|                                                      |                                                       |             
|LIABILITIES                                           |                                                       |             
|Current liabilities:                                  |                                                       |             
|                                                      | Accounts payable                                      |             
|                                                      | Accrued salaries and wages                            |             
|                                                      | Other accrued liabilities                             |             
|                                                      | Long-term debt due within one year                    |             
|                                                      | Due to parent (refer to Note 22(a)(v))                |             
|                                                      | Deferred revenue                                      |             
|                                                      | Long-term debt                                        |             
|                                                      | Long-term debt due to parent (refer to Note 22(a)(v)) |             
|                                                      | Other long-term liabilities                           |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|Long-term debt                                        |                                                       |             
|Long-term debt due to parent (refer to Note 22(a)(v)) |                                                       |             
|Other long-term liabilities                           |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       |             
|                                                      |                                                       | $           
|                                                      |                                                       |             

8.     WRITE-DOWN OF LONG-LIVED ASSETS



106

---





|                                    |  | Years ended December 31,
|----------------------------------- |  | ------------------------
|
|Porter, New York real estate        |  | $                       
|Magna Racino                       |  |                         
|The Meadows                         |  |                         
|Residential development real estate |  |                         
|                                    |  |                         
|                                    |  | $                       
|                                    |  |                         



107

---





9.     REAL ESTATE PROPERTIES



|                                                     |                          | December 31, |        
|---------------------------------------------------- | ------------------------ | ------------ | -------
|
|Revenue-producing racing and gaming real estate      |                          |              |        
|Cost                                                 |                          |              |        
|                                                     | Land and improvements    |              | $      
|                                                     | Buildings                |              |        
|                                                     | Construction in progress |              |        
|                                                     |                          |              |        
|                                                     |                          |              | 850,295
|Accumulated depreciation                             |                          |              |        
|                                                     | Buildings                |              |        
|                                                     |                          |              |        
|Revenue-producing racing and gaming real estate, net |                          |              | 655,837
|                                                     |                          |              |        
|Excess racing real estate                            |                          |              | 87,128 
|                                                     |                          |              |        
|Development real estate                              |                          |              |       
|                                                     |                          |              |        
|Revenue-producing non-racing real estate             |                          |              |        
|Cost                                                 |                          |              |        
|                                                     | Land and improvements    |              |        
|                                                     | Buildings                |              |        
|                                                     |                          |              |        
|                                                     |                          |              | 8,620  
|Accumulated depreciation                             |                          |              |        
|                                                     | Buildings                |              |        
|                                                     |                          |              |        
|Revenue-producing non-racing real estate, net        |                          |              | 8,527  
|                                                     |                          |              |        
|                                                     |                          | $            | 751,492
|                                                     |                          |              |        



108

---



10.   FIXED ASSETS



|                                                      |                         | December 31, |        
|----------------------------------------------------- | ----------------------- | ------------ | -------
|
|Revenue-producing racing and gaming fixed assets      |                         |              |        
|Cost                                                  |                         |              |        
|                                                      | Machinery and equipment |              | $      
|                                                      | Furniture and fixtures  |              |        
|                                                      |                         |              |        
|                                                      |                         |              | 189,630
|Accumulated depreciation                              |                         |              |        
|                                                      | Machinery and equipment |              |        
|                                                      | Furniture and fixtures  |              |        
|                                                      |                         |              |        
|Revenue-producing racing and gaming fixed assets, net |                         |              | 90,641 
|                                                      |                         |              |        
|Revenue-producing non-racing fixed assets             |                         |              |        
|Cost                                                  |                         |              |        
|                                                      | Furniture and fixtures  |              |        
|Accumulated depreciation                              |                         |              |        
|                                                      | Furniture and fixtures  |              |        
|                                                      |                         |              |        
|Revenue-producing non-racing fixed assets, net        |                         |              | 31     
|                                                      |                         |              |        
|                                                      |                         | $            | 90,672 
|                                                      |                         |              |        



11.   OTHER ASSETS



|                                               |  | December 31,
|---------------------------------------------- |  | ------------
|
|Deferred development costs                     |  | $           
|Goodwill                                       |  |             
|Fair value of interest rate swaps (Note 20(c)) |  |             
|Long-term receivables                          |  |             
|Equity investments                             |  |             
|Other                                          |  |             
|                                               |  |             
|                                               |  | $           
|                                               |  |             

109

---



12.   INCOME TAXES



|                    |                                                       | Years ended December 31, |       
|------------------- | ----------------------------------------------------- | ------------------------ | ------
|
|Expected provision: |                                                       |                          |       
|                    | Federal statutory income tax rate (35%)               |                          | $     
|                    | State taxes and withholding taxes, net of benefit     |                          |       
|                    | Tax losses not benefited                              |                          |       
|                    | Foreign rate differentials                            |                          |       
|                    | Foreign dividends                                     |                          |       
|                    | Non-deductible expenses                               |                          |       
|                    | Tax on capital gain on like-kind exchange of property |                          |       
|                    | Taxable gain on related party property sales          |                          |       
|                    | Other                                                 |                          |       
|                    |                                                       |                          |       
|Income tax benefit  |                                                       | $                        | (2,574
|                    |                                                       |                          |       



|             |  |  
|------------ |  | -
|Years:       |  |  
|2008 to 2010 |  | $
|2012 to 2018 |  |  
|2020 to 2027 |  |  
|             |  |  
|             |  | $
|             |  |  



|              |  | Years ended December 31, |         
|------------- |  | ------------------------ | --------
|
|United States |  | $                        | (105,122
|Foreign       |  |                          | (5,321  
|              |  |                          |         
|              |  | $                        | (110,443
|              |  |                          |         

110

---





|                              |               | Years ended December 31, |       
|----------------------------- | ------------- | ------------------------ | ------
|
|Current income tax provision: |               |                          |       
|                              | United States |                          | $     
|                              | Foreign       |                          |       
|                              |               |                          |       
|                              |               |                          | 3,106 
|                              |               |                          |       
|Future income tax benefit:    |               |                          |       
|                              | United States |                          |       
|                              | Foreign       |                          |       
|                              |               |                          |       
|                              |               |                          | (5,680
|                              |               |                          |       
|                              |               | $                        | (2,574
|                              |               |                          |       



|                                                                    |                                                                                               | Years ended December 31, |        
|------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------ | -------
|
|Tax deferral on sale of real estate                                 |                                                                                               | $                        |       
|                                                                    | Amortization of purchase accounting fair value increments, for tax purposes in excess of book |                          |        
|Deductibility (non-deductibility) of interest expense               |                                                                                               |                          | 4,249  
|Tax gain in excess of book gain on disposal of real estate property |                                                                                               |                          |       
|Tax benefit of loss carry forwards                                  |                                                                                               |                          | (19,824
|Asset impairment write-down                                         |                                                                                               |                          |       
|Increase in valuation allowance                                     |                                                                                               |                          | 11,340 
|Other                                                               |                                                                                               |                          | (2,446 
|                                                                    |                                                                                               |                          |        
|                                                                    |                                                                                               | $                        | (5,680 
|                                                                    |                                                                                               |                          |        

111

---





|                       |                                                          | December 31,     |        
|---------------------- | -------------------------------------------------------- | ---------------- | -------
|
|Assets:                |                                                          |                  |        
|                       | Real estate properties tax value in excess of book value |                  | $      
|                       | Tax benefit of carry forwards:                           |                  |        
|                       |                                                          | Pre-acquisition  |        
|                       |                                                          | Post-acquisition |        
|                       | Tax benefit of charitable contribution carry forward     |                  |        
|                       | Benefit of various tax credit carry forwards             |                  |        
|                       |                                                          |                  |        
|                       |                                                          |                  | 144,759
|                       |                                                          |                  |        
|Valuation allowance:   |                                                          |                  |        
|                       | Pre-acquisition                                          |                  |        
|                       | Post-acquisition                                         |                  |        
|                       |                                                          |                  |        
|Future tax assets      |                                                          | $                | 53,168 
|                       |                                                          |                  |        
|Liabilities:           |                                                          |                  |        
|                       | Real estate properties book basis in excess of tax basis |                  | $      
|                       | Other assets book basis in excess of tax basis           |                  |        
|                       | Foreign branch tax deferral and other                    |                  |        
|                       |                                                          |                  |        
|Future tax liabilities |                                                          | $                | 93,623 
|                       |                                                          |                  |        





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

112

---





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



13.   BANK INDEBTEDNESS



|                                                          |  | December 31,
|--------------------------------------------------------- |  | ------------
|
|$40.0 million senior secured revolving credit facility(i) |  | $           
|$7.5 million revolving loan facility(ii)                  |  |             
|$3.0 million revolving credit facility(iii)               |  |             
|                                                          |  |             
|                                                          |  | $           
|                                                          |  |             



113

---





14.   DEBT AND COMMITMENTS



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | December 31, |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------
|
|Term loan facility, amended on October 2, 2007, bearing interest at LIBOR plus 2.0% per annum (7.2% at December 31, 2007; 6.7% at December 31, 2006) with a maturity date of October 31, 2012. The
facility is guaranteed by LATC and is secured by a first deed of trust on Santa Anita Park and the surrounding real property, an assignment of the lease between LATC, the racetrack operator, and SAC and a pledge of all of the outstanding capital
stock of LATC and SAC. The term loan facility contains cross-default provisions to the Company's senior secured revolving credit facility. At December 31, 2007, the term loan is fully drawn and is repayable in monthly principal amounts of
$375 thousand until maturity. |  | $            | 66,375
|Term loan facility of Euros 15.0 million, amended on December 16, 2007, bearing interest at the three- month Euro Interbank Offered Rate plus 2.0% per annum (6.8% at December 31, 2007; 5.5% at
December 31, 2006) and is secured by a first and second mortgage on land in Austria owned by the European subsidiary. At December 31, 2007, the term loan is fully drawn and is repayable in two installments of Euros 7.5 million, due on
each of February 29, 2008 and December 31, 2008 (refer to Note 25(d)).                                                                                                                                                                                                                    |  |              | 22,073
|Capital leases (imputed interest rate of 8.5%) maturing April 1, 2027, secured by buildings and improvements at Lone Star Park at Grand Prairie.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |              | 15,380
|Term loan facility, bearing interest at either the U.S. Prime rate or LIBOR plus 2.6% per annum (7.3% at December 31, 2007; 8.0% at December 31, 2006) until December 1, 2008, with a maturity date
of December 1, 2013. On December 1, 2008, the interest rate is reset to the market rate for a United States Treasury security of an equivalent term plus 2.6%. The term loan is repayable in quarterly principal and interest payments. The
loan is secured by deeds of trust on land, buildings and improvements and security interests in all other assets of certain affiliates of The Maryland Jockey Club ("MJC").                                                                                                           |  |              | 6,343 
|Bank term loan of up to Euros 4.0 million, amended on July 24, 2007, bearing interest at the Euro Overnight Index Average rate ("EONIA") plus 3.0% per annum (6.6% at December 31, 2007) with a maturity
date of July 31, 2008. The bank term loan at December 31, 2006 bore interest at EONIA plus 1.1% per annum (4.8% at December 31, 2006). A European subsidiary has provided two first mortgages on real estate properties as security for
this facility (refer to Note 25(c)).                                                                                                                                                                                                                                                 |  |              | 3,580 
|Term loan facility of $4.2 million, bearing interest at LIBOR plus 3.0% per annum (8.0% at December 31, 2007) with a maturity date of May 11, 2011. The term loan is repayable in monthly principal and
interest payments. The loan is secured by a first charge on the assets and a pledge of stock of AmTote.                                                                                                                                                                                                                                                                                                                                                                                                                       |  |              | 3,301 
|Term loan facility, bearing interest at 7.7% per annum, with a maturity date of June 7, 2017. On June 7, 2012, the interest rate is reset to the market rate for a United States Treasury security of an
equivalent term plus 2.6%. The term loan is repayable in quarterly principal and interest payments. The term loan is callable on December 31, 2011. The loan is secured by a deed of trust on land, buildings and improvements and security interests
in all other assets of certain affiliates of MJC.                                                                                                                                                                                                                      |  |              | 3,053 

114

---



|Equipment loan of up to $10.0 million to finance up to 80% of eligible capital costs related to tote service contracts, bearing interest at LIBOR plus 3.0% per annum (8.2% at December 31, 2007) with a
maturity date of May 11, 2012. The equipment loan is repayable in monthly principal and interest payments. The loan is secured by a first charge on the assets and a pledge of stock of AmTote. |  |   | 1,974   |   |   |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | - | - | ------- | -
|Other loans of various subsidiaries, including equipment loans, with interest rates ranging from 4.9% to 7.0%.                                                                                                                                                                                                                                                                                           |  |   | 328     |   |   | 808     |  
|Term loan facility of Euros 15.0 million, which bore interest at 4.0% per annum and was fully repaid on February 9, 2007.                                                                                                                                                                                                                                                                                |  |   |        |   |   | 19,794  |  
|Obligation to pay $18.3 million on exercise of either the put or call option to acquire the remaining voting and equity interests in MJC, which bore interest at the six-month LIBOR. The option was exercised on
September 24, 2007 and the obligation was fully repaid on October 5, 2007.                                                                                                             |  |   |        |   |   | 18,312  |  
|Construction loan facility of up to $16.6 million with the general contractor for the reconstruction of the racetrack facilities at Gulfstream Park, which bore interest at the U.S. Prime rate plus 0.4% per
annum and was fully repaid on May 17, 2007.                                                                                                                                                |  |   |        |   |   | 10,617  |  
|Term loan facility, which bore interest at either the U.S. Prime rate or LIBOR plus 2.6% per annum and was fully repaid on February 16, 2007.                                                                                                                                                                                                                                                            |  |   |        |   |   | 9,187   |  
|Term loan facilities of $1.75 million and $1.25 million, which bore interest at the U.S. Prime rate plus 1.25% per annum and were fully repaid on May 11, 2007.                                                                                                                                                                                                                                          |  |   |        |   |   | 2,448   |  
|Revolving term loan facility of $3.0 million, which bore interest at the U.S. Prime rate plus 1.0% per annum and was fully repaid on May 11, 2007.                                                                                                                                                                                                                                                       |  |   |        |   |   | 1,957   |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |  |   |         |   |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |  |   | 122,407 |   |   | 179,445 |  
|Less: due within one year                                                                                                                                                                                                                                                                                                                                                                                |  |   | (32,727 | ) |   | (85,724 | )
|                                                                                                                                                                                                                                                                                                                                                                                                         |  |   |         |   |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |  | $ | 89,680  |   | $ | 93,721  |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |  |   |         |   |  



|           |  | Continuing Operations |         | Discontinued Operations |   | Total
|---------- |  | --------------------- | ------- | ----------------------- | - | -----
|2008       |  | $                     | 32,727  |                         | $ | 23   
|2009       |  |                       | 7,026   |                         |   | 23   
|2010       |  |                       | 7,079   |                         |   | 13   
|2011       |  |                       | 8,348   |                         |   | 8    
|2012       |  |                       | 49,910  |                         |   | 8    
|Thereafter |  |                       | 17,317  |                         |   | 63   
|           |  |                       |         |                         |   |      
|           |  | $                     | 122,407 |                         | $ | 138  
|           |  |                       |         |                         |   |      

115

---





|2008                                                       |  | $ | 1,452   |  
|---------------------------------------------------------- |  | - | ------- | -
|2009                                                       |  |   | 1,452   |  
|2010                                                       |  |   | 1,452   |  
|2011                                                       |  |   | 1,452   |  
|2012                                                       |  |   | 1,597   |  
|Thereafter                                                 |  |   | 25,463  |  
|                                                           |  |   |        
|Total payments                                             |  |   | 32,868  |  
|Less: capital lease minimum payments representing interest |  |   | (17,488 | )
|                                                           |  |   |        
|Present value of lease payments                            |  | $ | 15,380  |  
|                                                           |  |   |        



|                           |  | Years ended December 31, |       
|-------------------------- |  | ------------------------ | ------
|
|Interest cost, gross       |  | $                        | 52,750
|Less: Interest capitalized |  |                          | (371  
|                           |  |                          |       
|Interest expense           |  |                          | 52,379
|Interest income            |  |                          | (1,758
|                           |  |                          |       
|Interest expense, net      |  | $                        | 50,621
|                           |  |                          |       



116

---





15.   CONVERTIBLE SUBORDINATED NOTES





16.   CAPITAL STOCK



117

---





|                                            |  | Class A Subordinate Voting Stock |  | Class B Stock |         | Total
|------------------------------------------- |  | -------------------------------- |  | ------------- | ------- | -----
|
|Issued and outstanding at December 31, 2004 |  | 48,878,796                       |  | $             | 318,003 |      
|Issued under the Long-term Incentive Plan   |  | 16,567                           |  |               | 102     |      
|                                            |  |                                  |  |               |         |      
|Issued and outstanding at December 31, 2005 |  | 48,895,363                       |  |               | 318,105 |      
|Issued under the Long-term Incentive Plan   |  | 159,264                          |  |               | 982     |      
|                                            |  |                                  |  |               |         |      
|Issued and outstanding at December 31, 2006 |  | 49,054,627                       |  |               | 319,087 |      
|Issued under the Long-term Incentive Plan   |  | 215,691                          |  |               | 767     |      
|Issued under the Private Placement(i)       |  | 8,888,888                        |  |               | 19,581  |      
|                                            |  |                                  |  |               |         |      
|Issued and outstanding at December 31, 2007 |  | 58,159,206                       |  | $             | 339,435 |      
|                                            |  |                                  |  |               |         |      



|                                                                     |  | Number of Shares
|-------------------------------------------------------------------- |  | ----------------
|Class A Subordinate Voting Stock outstanding                         |  | 58,159          
|Class B Stock outstanding                                            |  | 58,466          
|Options to purchase Class A Subordinate Voting Stock                 |  | 4,950           
|8.55% Convertible Subordinated Notes, convertible at $7.05 per share |  | 21,276          
|7.25% Convertible Subordinated Notes, convertible at $8.50 per share |  | 8,824           
|                                                                     |  |                 
|                                                                     |  | 151,675         
|                                                                     |  |                 

17.   LONG-TERM INCENTIVE PLAN



118

---





|                           |  | Shares Subject to Option |   | Weighted Average Exercise Price
|-------------------------- |  | ------------------------ | - | -------------------------------
|
|Balance, beginning of year |  | 4,905,000                |   | 4,827,500                      
|Granted                    |  | 390,000                  |   | 200,000                        
|Forfeited or expired(i)    |  | (345,000                 | ) | (122,500                       
|                           |  |                          |   |                                
|Balance, end of year       |  | 4,950,000                |   | 4,905,000                      
|                           |  |                          |   |                                

119

---







|                                                    |  | Options Outstanding |  | Options Exercisable
|--------------------------------------------------- |  | ------------------- |  | -------------------
|
|Number                                              |  | 4,950,000           |  | 4,905,000          
|Weighted average exercise price                     |  | $5.82               |  | $6.08              
|Weighted average remaining contractual life (years) |  | 3.6                 |  | 4.2                



|                                                                               |  | Years ended December 31,
|------------------------------------------------------------------------------ |  | ------------------------
|
|Risk free interest rates                                                       |  | 4.15%                   
|Dividend yields                                                                |  |                        
|Volatility factor of expected market price of Class A Subordinate Voting Stock |  | 0.559                   
|Weighted average expected life (years)                                         |  | 5.00                    



|                      |                                                                                         | Year ended December 31, 2005 |         
|--------------------- | --------------------------------------------------------------------------------------- | ---------------------------- | --------
|Net loss, as reported |                                                                                         | $                            | (105,293
|                      | Pro-forma stock compensation expense determined under the fair value method, net of tax |                              |         
|                      |                                                                                         |                              |         
|Pro-forma net loss    |                                                                                         | $                            | (106,170
|                      |                                                                                         |                              |         
|Loss per share        |                                                                                         |                              |         
|                      | Basic  as reported                                                                     |                              | $       
|                      | Basic  pro-forma                                                                       |                              | $       
|                      |                                                                                         |                              |         
|                      | Diluted  as reported                                                                   |                              | $       
|                      | Diluted  pro-forma                                                                     |                              | $       
|                      |                                                                                         |                              |         



120

---





18.   LOSS PER SHARE



|                                                      |                                  | Years ended December 31, |            
|----------------------------------------------------- | -------------------------------- | ------------------------ | -----------
|
|Loss from continuing operations                       |                                  | $                        | (107,869   
|Loss from discontinued operations                     |                                  |                          | (5,890     
|                                                      |                                  |                          |            
|Net loss                                              |                                  | $                        | (113,759   
|                                                      |                                  |                          |            
|Weighted average number of shares outstanding:        |                                  |                          |            
|                                                      | Class A Subordinate Voting Stock |                          |            
|                                                      | Class B Stock                    |                          |            
|                                                      |                                  |                          |            
|Diluted weighted average number of shares outstanding |                                  |                          | 109,219,233
|                                                      |                                  |                          |            
|Loss per share:                                       |                                  |                          |            
|Basic and Diluted                                     |                                  |                          |            
|                                                      | Continuing operations            |                          | $          
|                                                      | Discontinued operations          |                          |            
|                                                      |                                  |                          |            
|Loss per share                                        |                                  | $                        | (1.04      
|                                                      |                                  |                          |            



19.   FOREIGN CURRENCY TRANSLATION ADJUSTMENT



20.   FINANCIAL INSTRUMENTS





121

---









122

---





21.   SEGMENT INFORMATION



123

---





|               |                                        | Years ended December 31, |        
|-------------- | -------------------------------------- | ------------------------ | -------
|
|Revenues       |                                        |                          |        
|               | California operations                  |                          | $      
|               | Florida operations                     |                          |        
|               | Maryland operations                    |                          |        
|               | Southern U.S. operations               |                          |        
|               | Northern U.S. operations               |                          |        
|               | European operations                    |                          |        
|               | PariMax operations                     |                          |        
|               |                                        |                          |        
|               |                                        |                          | 628,179
|               | Corporate and other                    |                          |        
|               | Eliminations                           |                          |        
|               |                                        |                          |        
|               | Total racing and gaming operations     |                          |        
|               |                                        |                          |        
|               | Sale of real estate                    |                          |        
|               | Residential development and other      |                          |        
|               |                                        |                          |        
|               | Total real estate and other operations |                          |        
|               |                                        |                          |        
|Total revenues |                                        | $                        | 625,715
|               |                                        |                          |        

|                                                                                        |                                                          | Years ended December 31, |        
|--------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------ | -------
|
|Earnings (loss) before interest, income taxes, depreciation and amortization ("EBITDA") |                                                          |                          |        
|                                                                                        | California operations                                    |                          | $      
|                                                                                        | Florida operations                                       |                          |        
|                                                                                        | Maryland operations                                      |                          |        
|                                                                                        | Southern U.S. operations                                 |                          |        
|                                                                                        | Northern U.S. operations                                 |                          |        
|                                                                                        | European operations                                      |                          |        
|                                                                                        | PariMax operations                                       |                          |        
|                                                                                        |                                                          |                          |        
|                                                                                        |                                                          |                          | 9,046  
|                                                                                        | Corporate and other                                      |                          |        
|                                                                                        | Predevelopment, pre-opening and other costs              |                          |        
|                                                                                        | Write-down of long-lived assets                          |                          |        
|                                                                                        | Gain on sale of intangible assets related to The Meadows |                          |        
|                                                                                        |                                                          |                          |        
|                                                                                        | Total racing and gaming operations                       |                          |        
|                                                                                        |                                                          |                          |        
|                                                                                        | Residential development and other                        |                          |        
|                                                                                        | Write-down of long-lived assets                          |                          |        
|                                                                                        |                                                          |                          |        
|                                                                                        | Total real estate and other operations                   |                          |        
|                                                                                        |                                                          |                          |        
|Total EBITDA                                                                            |                                                          | $                        | (17,525
|                                                                                        |                                                          |                          |        

124

---



|                                        |                                        | December 31,
|--------------------------------------- | -------------------------------------- | ------------
|
|Total Assets                            |                                        |             
|                                        | California operations                  |             
|                                        | Florida operations                     |             
|                                        | Maryland operations                    |             
|                                        | Southern U.S. operations               |             
|                                        | Northern U.S. operations               |             
|                                        | European operations                    |             
|                                        | PariMax operations                     |             
|                                        |                                        |             
|                                        |                                        |             
|                                        | Corporate and other                    |             
|                                        |                                        |             
|                                        | Total racing and gaming operations     |             
|                                        |                                        |             
|                                        | Residential development and other      |             
|                                        |                                        |             
|                                        | Total real estate and other operations |             
|                                        |                                        |             
|Total assets from continuing operations |                                        |             
|Total assets held for sale              |                                        |             
|Total assets of discontinued operations |                                        |             
|                                        |                                        |             
|Total assets                            |                                        | $           
|                                        |                                        |             

|                                                       |                                  | Years ended December 31,
|------------------------------------------------------ | -------------------------------- | ------------------------
|
|Real estate properties and fixed asset additions       |                                  |                         
|                                                       | Racing and gaming operations     |                         
|                                                       | Real estate and other operations |                         
|                                                       |                                  |                         
|Total real estate properties and fixed asset additions |                                  | $                       
|                                                       |                                  |                         



|                                                             |  | Year ended December 31, 2007 |         
|------------------------------------------------------------ |  | ---------------------------- | --------
|
|EBITDA (loss) from continuing operations                     |  | $                            | (18,791 
|Interest expense, net                                        |  |                              | 50,462  
|Depreciation and amortization                                |  |                              | 42,265  
|                                                             |  |                              |         
|Income (loss) from continuing operations before income taxes |  | $                            | (111,518
|Income tax benefit                                           |  |                              |         
|                                                             |  |                              |         
|Loss from continuing operations                              |  |                              |         
|Loss from discontinued operations                            |  |                              |         
|                                                             |  |                              |         
|Net loss                                                     |  |                              |         
|                                                             |  |                              |         

125

---



|                                                    |  | Year ended December 31, 2006 |        
|--------------------------------------------------- |  | ---------------------------- | -------
|
|EBITDA (loss) from continuing operations            |  | $                            | 10,374 
|Interest expense (income), net                      |  |                              | 58,297 
|Depreciation and amortization                       |  |                              | 38,790 
|                                                    |  |                              |        
|Loss from continuing operations before income taxes |  | $                            | (86,713
|Income tax benefit                                  |  |                              |        
|                                                    |  |                              |        
|Loss from continuing operations                     |  |                              |        
|Loss from discontinued operations                   |  |                              |        
|                                                    |  |                              |        
|Net loss                                            |  |                              |        
|                                                    |  |                              |        

|                                                             |  | Year ended December 31, 2005 |        
|------------------------------------------------------------ |  | ---------------------------- | -------
|
|EBITDA loss from continuing operations                       |  | $                            | (28,077
|Interest expense (income), net                               |  |                              | 33,666 
|Depreciation and amortization                                |  |                              | 33,374 
|                                                             |  |                              |        
|Income (loss) from continuing operations before income taxes |  | $                            | (95,117
|Income tax benefit                                           |  |                              |        
|                                                             |  |                              |        
|Loss from continuing operations                              |  |                              |        
|Loss from discontinued operations                            |  |                              |        
|                                                             |  |                              |        
|Net loss                                                     |  |                              |        
|                                                             |  |                              |        



|              |  | Years ended December 31,
|------------- |  | ------------------------
|
|United States |  | $                       
|Canada        |  |                         
|Europe        |  |                         
|              |  |                         
|              |  | $                       
|              |  |                         

126

---





|                                   |  | December 31,
|---------------------------------- |  | ------------
|
|United States                      |  | $           
|Canada                             |  |             
|Europe                             |  |             
|                                   |  |             
|Total from continuing operations   |  |             
|Total assets held for sale         |  |             
|Total from discontinued operations |  |             
|                                   |  |             
|                                   |  | $           
|                                   |  |             

22.   TRANSACTIONS WITH RELATED PARTIES



|                                  |                | December 31, |         
|--------------------------------- | -------------- | ------------ | --------
|
|Bridge loan facility(i)           |                | $            | 35,889  
|Gulfstream Park project financing |                |              |         
|                                  | Tranche 1(ii)  |              |         
|                                  | Tranche 2(iii) |              |         
|                                  | Tranche 3(iv)  |              |         
|                                  |                |              |         
|                                  |                |              | 204,110 
|Less: due within one year         |                |              | (137,003
|                                  |                |              |         
|                                  |                | $            | 67,107  
|                                  |                |              |         





127

---







128

---











129

---





|           |  | Continuing Operations |         | Discontinued Operations |   | Total 
|---------- |  | --------------------- | ------- | ----------------------- | - | ------
|2008       |  | $                     | 137,003 |                         | $ | 397   
|2009       |  |                       | 882     |                         |   | 180   
|2010       |  |                       | 977     |                         |   | 199   
|2011       |  |                       | 1,083   |                         |   | 220   
|2012       |  |                       | 1,199   |                         |   | 244   
|Thereafter |  |                       | 62,966  |                         |   | 25,300
|           |  |                       |         |                         |   |       
|           |  | $                     | 204,110 |                         | $ | 26,540
|           |  |                       |         |                         |   |       



130

---









131

---





23.   COMMITMENTS AND CONTINGENCIES



132

---





|           |  | Continuing Operations |       | Discontinued Operations |   | Total 
|---------- |  | --------------------- | ----- | ----------------------- | - | ------
|2008       |  | $                     | 2,957 |                         | $ | 1,536 
|2009       |  |                       | 2,270 |                         |   | 1,392 
|2010       |  |                       | 1,952 |                         |   | 1,374 
|2011       |  |                       | 1,096 |                         |   | 789   
|2012       |  |                       | 686   |                         |   | 765   
|Thereafter |  |                       | 610   |                         |   | 23,718
|           |  |                       |       |                         |   |       
|           |  | $                     | 9,571 |                         | $ | 29,574
|           |  |                       |       |                         |   |       



133

---





134

---





24.   OTHER LONG-TERM LIABILITIES



|                                               |  | December 31,
|---------------------------------------------- |  | ------------
|
|Finance obligation (Note 5)                    |  | $           
|Deferred revenue                               |  |             
|Pension liability                              |  |             
|Fair value of interest rate swaps (Note 20(c)) |  |             
|Postretirement liability                       |  |             
|Other                                          |  |             
|                                               |  |             
|                                               |  | $           
|                                               |  |             





|                                         |                                               | Years ended December 31, |    
|---------------------------------------- | --------------------------------------------- | ------------------------ | ---
|
|Components of net periodic pension cost: |                                               |                          |    
|                                         | Service cost                                  |                          | $  
|                                         | Interest cost on projected benefit obligation |                          |    
|                                         | Expected return on plan assets                |                          |    
|                                         | Settlements                                   |                          |    
|                                         | Amortization of prior service cost            |                          |    
|                                         | Amortization of net loss                      |                          |    
|                                         |                                               |                          |    
|Net periodic pension cost                |                                               | $                        | 459
|                                         |                                               |                          |    

135

---





|                                         |                                                | Years ended December 31, |       
|---------------------------------------- | ---------------------------------------------- | ------------------------ | ------
|
|Change in benefit obligation:            |                                                |                          |       
|                                         | Benefit obligation at beginning of year        |                          | $     
|                                         | Plans acquired through acquisition of AmTote   |                          |       
|                                         | Service cost                                   |                          |       
|                                         | Interest cost                                  |                          |       
|                                         | Benefits paid                                  |                          |       
|                                         | Actuarial gains                                |                          |       
|                                         | Settlements                                    |                          |       
|                                         |                                                |                          |       
|Benefit obligation at end of year        |                                                |                          | 18,577
|                                         |                                                |                          |       
|Change in plan assets:                   |                                                |                          |       
|                                         | Fair value of plan assets at beginning of year |                          |       
|                                         | Plans acquired through acquisition of AmTote   |                          |       
|                                         | Actual return on plan assets                   |                          |       
|                                         | Company contributions                          |                          |       
|                                         | Benefits paid                                  |                          |       
|                                         | Settlements                                    |                          |       
|                                         |                                                |                          |       
|Fair value of plan assets at end of year |                                                |                          | 16,857
|                                         |                                                |                          |       
|Funded status of plan (underfunded)      |                                                |                          | (1,720
|Unrecognized net gain                    |                                                |                          |      
|                                         |                                                |                          |       
|Net pension liability                    |                                                | $                        | (1,720
|                                         |                                                |                          |       
|Accumulated benefit obligation           |                                                | $                        | 16,446
|                                         |                                                |                          |       



|                  |  | December 31,
|----------------- |  | ------------
|
|Debt securities   |  | 49%         
|Equity securities |  | 48%         
|Real estate       |  | 3%          
|                  |  |             
|                  |  | 100%        
|                  |  |             



|                                                         |  | Years ended December 31,
|-------------------------------------------------------- |  | ------------------------
|
|Weighted average discount rate                           |  | 5.5 - 6.5%              
|Weighted average rate of increase in compensation levels |  | 4.0%                    
|Expected long-term rate of return                        |  | 6.5 - 8.5%              



136

---







|                                         |                                               | Years ended December 31,
|---------------------------------------- | --------------------------------------------- | ------------------------
|
|Components of net periodic benefit cost: |                                               |                         
|                                         | Service cost                                  |                         
|                                         | Interest cost on projected benefit obligation |                         
|                                         | Amortization of net loss                      |                         
|                                         |                                               |                         
|Net periodic benefit cost                |                                               | $                       
|                                         |                                               |                         



|                                                                     |                                                | Years ended December 31, |     
|-------------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ----
|
|Change in benefit obligation:                                        |                                                |                          |     
|                                                                     | Benefit obligation at beginning of year        |                          | $   
|                                                                     | Plan acquired through acquisition of AmTote    |                          |     
|                                                                     | Service cost                                   |                          |     
|                                                                     | Interest cost                                  |                          |     
|                                                                     | Plan participants' contributions               |                          |     
|                                                                     | Benefits paid                                  |                          |     
|                                                                     | Actuarial gains                                |                          |     
|                                                                     |                                                |                          |     
|Benefit obligation at end of year                                    |                                                |                          | 407 
|                                                                     |                                                |                          |     
|Change in plan assets:                                               |                                                |                          |     
|                                                                     | Fair value of plan assets at beginning of year |                          |     
|                                                                     | Company contributions                          |                          |     
|                                                                     | Plan participants' contributions               |                          |     
|                                                                     | Benefits paid                                  |                          |     
|                                                                     |                                                |                          |     
|Fair value of plan assets at end of year                             |                                                |                          |    
|                                                                     |                                                |                          |     
|Funded status of plan (underfunded) and net postretirement liability |                                                | $                        | (407
|                                                                     |                                                |                          |     
|Accumulated benefit obligation                                       |                                                | $                        | 407 
|                                                                     |                                                |                          |     

137

---





|                                                                             |  | Years ended December 31,
|---------------------------------------------------------------------------- |  | ------------------------
|
|Weighted average discount rate                                               |  | 6.5%                    
|Health care cost trend assumed for next year                                 |  | 10.0%                   
|Rate to which the cost trend is assumed to decline (the ultimate trend rate) |  | 5.0%                    
|Year that the rate reaches the ultimate trend rate                           |  | 2013                    





|                                       |  | Defined Benefit Pension Plans |        | Postretirement
Plan |   | Total
|-------------------------------------- |  | ----------------------------- | ------ | ------------------- | - | -----
|Expected employer contributions  2008 |  | $                             | 369    |                     | $ | 100  
|                                       |  |                               |        |                     |   |      
|Expected benefit payments:             |  |                               |        |                     |   |      
|2008                                   |  | $                             | 1,063  |                     | $ | 100  
|2009                                   |  |                               | 955    |                     |   | 90   
|2010                                   |  |                               | 1,104  |                     |   | 67   
|2011                                   |  |                               | 924    |                     |   | 57   
|2012                                   |  |                               | 1,160  |                     |   | 35   
|2013-2017                              |  |                               | 6,339  |                     |   | 101  
|                                       |  |                               |        |                     |   |      
|                                       |  | $                             | 11,545 |                     | $ | 450  
|                                       |  |                               |        |                     |   |      



138

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25.   SUBSEQUENT EVENTS



139

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MAGNA ENTERTAINMENT CORP.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2007

(Amounts in thousands, U.S. dollars)

|                                                                                                                                                                                                                           |                                                      |                                                       |        |        |       |        |   | Costs Capitalized Subsequent to Acquisition |        |        |    |       |       | Gross Amount at which Carried at Close of Period |   |        |        |        |    |        |        |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------------------- | ------ | ------ | ----- | ------ | - | ------------------------------------------- | ------ | ------ | -- | ----- | ----- | ------------------------------------------------ | - | ------ | ------ | ------ | -- | ------ | ------ | ------
|
|
|EXCESS REAL ESTATE                                                                                                                                                                                                         |                                                      |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|                                                                                                                                                                                                                           | Racing Operations                                    |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|                                                                                                                                                                                                                           |                                                      | Santa Anita Park (Arcadia, California, U.S.A.)        |        | 52,781 |       | 52,500 |   |                                            |        |       |    | 281   |       |                                                 |   |       |        | 52,500 |    | 281    |        | 52,781
|                                                                                                                                                                                                                           |                                                      | Gulfstream Park (Hallandale, Florida, U.S.A.)         |        | 13,234 |       | 14,201 |   |                                            |        | (967   | )  |      |       |                                                 |   |       |        | 13,234 |    |       |        | 13,234
|                                                                                                                                                                                                                           |                                                      | Lone Star Park (Grand Prairie, Texas, U.S.A.)         |        |       |       | 4,245  |   |                                            |        |       |    |      |       |                                                 |   |       |        | 4,245  |    |       |        | 4,245 
|                                                                                                                                                                                                                           |                                                      | Maryland Jockey Club (Baltimore, Maryland, U.S.A.)(i) |        | 5,869  |       | 10,900 |   |                                            |        | (5,031 | )  |      |       |                                                 |   |       |        | 5,869  |    |       |        | 5,869 
|                                                                                                                                                                                                                           |                                                      | MEC Grundstuckwicklungs GmbH (Ebreichsdorf, Austria)  |        |       |       | 5,462  |   |                                            |        | 3,651  |    |      |       | 1,886                                            |   |       |        | 10,999 |    |       |        | 10,999
|                                                                                                                                                                                                                           |                                                      |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|                                                                                                                                                                                                                           |                                                      | 71,884                                                |        | 87,308 |       |       |   | (2,347                                      | )      | 281    |    | 1,886 |       |                                                 |   | 86,847 |        | 281    |    | 87,128 |        |      
|                                                                                                                                                                                                                           |                                                      |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|ASSETS HELD FOR SALE                                                                                                                                                                                                       |                                                      |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|                                                                                                                                                                                                                           | Dixon Downs (Dixon, California, U.S.A.)              |                                                       | 19,139 |        | 6,584 |        |  |                                             | 12,533 |        | 22 |       |      |                                                  |  |        | 19,117 |        | 22 |        | 19,139 |       
|                                                                                                                                                                                                                           | Ocala (Ocala, Florida, U.S.A.)                       |                                                       | 8,407  |        | 7,227 |        |  |                                             | 1,180  |        |   |       |      |                                                  |  |        | 8,407  |        |   |        | 8,407  |       
|                                                                                                                                                                                                                           | MEC Grundstuckwicklungs GmbH (Ebreichsdorf, Austria) |                                                       |       |        | 4,512 |        |  |                                             |       |        |   |       | 2,107 |                                                  |  |        | 6,619  |        |   |        | 6,619  |       
|                                                                                                                                                                                                                           | New York, U.S.A.(i)                                  |                                                       |       |        | 725   |        |  |                                             | 768    |        |   |       |      |                                                  |  |        | 1,493  |        |   |        | 1,493  |       
|                                                                                                                                                                                                                           |                                                      |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|                                                                                                                                                                                                                           |                                                      | 27,546                                                |        | 19,048 |       |       |   | 14,481                                      |        | 22     |    | 2,107 |       |                                                 |   | 35,636 |        | 22     |    | 35,658 |        |      
|                                                                                                                                                                                                                           |                                                      |                                                       |        |        |       |        |   |                                             |        |        |    |       |       |                                                  |   |        |        |        |    |        |        |       
|(i)  The following provides a reconciliation of the total amount at which real estate was carried at the beginning of the year to the amount shown in the column "Gross Amount at
which Carried at Close
      of Period":

Maryland Jockey Club (Baltimore, Maryland, U.S.A.)Balance, beginning of year

$
10,900Deductions during the year:Cost of real estate sold


(5,031
)Balance, close of year

$
5,869New York, U.S.A.Balance, beginning of year

$
2,990Additions during the year:Costs Capitalized


81Deductions during the year:Cost of real estate sold


(270
)Writedown of real estate(ii)


(1,308
)Balance, close of year

$
1,493


140

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MAGNA ENTERTAINMENT CORP.
SUPPLEMENTARY INFORMATION
Quarterly Information[U.S. dollars in thousands, except per share figures]
[Unaudited]

|For the year ended December 31, 2007                                                    |                         | March 31 |         | June 30 |   | September 30 |       | December 31 |         | Total |  
|--------------------------------------------------------------------------------------- | ----------------------- | -------- | ------- | ------- | - | ------------ | ----- | ----------- | ------- | ----- | -
|Revenues                                                                                |                         | $        | 255,660 |         | $ | 169,539      |       | $           | 83,230  |       | $
|Earnings (loss) before interest, income taxes, depreciation and amortization ("EBITDA") |                         |          | 23,346  |         |   | 2,325        |       |             | (26,125 | )     |  
|Interest expense, net                                                                   |                         |          | 11,729  |         |   | 11,448       |       |             | 12,029  |       |  
|Depreciation and amortization                                                           |                         |          | 9,266   |         |   | 9,646        |       |             | 10,688  |       |  
|                                                                                        |                         |          |         |         |   |              |       |             |         |       |  
|Income (loss) from continuing operations before income taxes                            |                         |          | 2,351   |         |   | (18,769      | )     |             | (48,842 | )     |  
|Income tax expense (benefit)                                                            |                         |          | (1,168  | )       |   | 3,930        |       |             | (770    | )     |  
|                                                                                        |                         |          |         |         |   |              |       |             |         |       |  
|Income (loss) from continuing operations                                                |                         |          | 3,519   |         |   | (22,699      | )     |             | (48,072 | )     |  
|Loss from discontinued operations                                                       |                         |          | (1,050  | )       |   | (738         | )     |             | (1,739  | )     |  
|                                                                                        |                         |          |         |         |   |              |       |             |         |       |  
|Net income (loss)                                                                       |                         |          | 2,469   |         |   | (23,437      | )     |             | (49,811 | )     |  
|                                                                                        |                         |          |         |         |   |              |       |             |         |       |  
|Diluted earnings (loss) per share                                                       |                         |          |         |         |   |              |       |             |         |       |  
|                                                                                        | Continuing operations   |          |         | 0.03    |   |              | (0.21 | )           |         | (0.45 | )
|                                                                                        | Discontinued operations |          |         | (0.01   | ) |              | (0.01 | )           |         | (0.01 | )
|                                                                                        |                         |          |         |         |   |              |       |             |         |       |  
|Diluted earnings (loss) per share                                                       |                         | $        | 0.02    |         | $ | (0.22        | )     | $           | (0.46   | )     | $
|                                                                                        |                         |          |         |         |   |              |       |             |         |       |  

|For the year ended December 31, 2006                         |                         | March 31 |         | June 30 |   | September 30 |       | December 31 |         | Total |  
|------------------------------------------------------------ | ----------------------- | -------- | ------- | ------- | - | ------------ | ----- | ----------- | ------- | ----- | -
|Revenues                                                     |                         | $        | 246,904 |         | $ | 145,215      |       | $           | 79,528  |       | $
|EBITDA (loss)                                                |                         |          | 22,943  |         |   | (439         | )     |             | (21,627 | )     |  
|Interest expense, net                                        |                         |          | 12,715  |         |   | 14,759       |       |             | 15,489  |       |  
|Depreciation and amortization                                |                         |          | 8,773   |         |   | 8,854        |       |             | 9,990   |       |  
|                                                             |                         |          |         |         |   |              |       |             |         |       |  
|Income (loss) from continuing operations before income taxes |                         |          | 1,455   |         |   | (24,052      | )     |             | (47,106 | )     |  
|Income tax expense (benefit)                                 |                         |          | (711    | )       |   | 3,126        |       |             | (863    | )     |  
|                                                             |                         |          |         |         |   |              |       |             |         |       |  
|Income (loss) from continuing operations                     |                         |          | 2,166   |         |   | (27,178      | )     |             | (46,243 | )     |  
|Income (loss) from discontinued operations                   |                         |          | 46      |         |   | 840          |       |             | (4,499  | )     |  
|                                                             |                         |          |         |         |   |              |       |             |         |       |  
|Net income (loss)                                            |                         |          | 2,212   |         |   | (26,338      | )     |             | (50,742 | )     |  
|                                                             |                         |          |         |         |   |              |       |             |         |       |  
|Diluted earnings (loss) per share                            |                         |          |         |         |   |              |       |             |         |       |  
|                                                             | Continuing operations   |          |         | 0.02    |   |              | (0.26 | )           |         | (0.43 | )
|                                                             | Discontinued operations |          |         |        |   |              | 0.01  |             |         | (0.04 | )
|                                                             |                         |          |         |         |   |              |       |             |         |       |  
|Diluted earnings (loss) per share                            |                         | $        | 0.02    |         | $ | (0.25        | )     | $           | (0.47   | )     | $
|                                                             |                         |          |         |         |   |              |       |             |         |       |  

|For the year ended December 31, 2005                |                         | March 31 |         | June 30 |   | September 30 |       | December 31 |         | Total |  
|--------------------------------------------------- | ----------------------- | -------- | ------- | ------- | - | ------------ | ----- | ----------- | ------- | ----- | -
|Revenues                                            |                         | $        | 227,123 |         | $ | 143,265      |       | $           | 57,143  |       | $
|EBITDA (loss)                                       |                         |          | 12,432  |         |   | 3,390        |       |             | (26,640 | )     |  
|Interest expense, net                               |                         |          | 7,133   |         |   | 7,065        |       |             | 8,280   |       |  
|Depreciation and amortization                       |                         |          | 8,318   |         |   | 8,262        |       |             | 8,561   |       |  
|                                                    |                         |          |         |         |   |              |       |             |         |       |  
|Loss from continuing operations before income taxes |                         |          | (3,019  | )       |   | (11,937      | )     |             | (43,481 | )     |  
|Income tax expense (benefit)                        |                         |          | (826    | )       |   | 3,010        |       |             | (1,336  | )     |  
|                                                    |                         |          |         |         |   |              |       |             |         |       |  
|Loss from continuing operations                     |                         |          | (2,193  | )       |   | (14,947      | )     |             | (42,145 | )     |  
|Income (loss) from discontinued operations          |                         |          | (1,927  | )       |   | (11,957      | )     |             | 7,609   |       |  
|                                                    |                         |          |         |         |   |              |       |             |         |       |  
|Net loss                                            |                         |          | (4,120  | )       |   | (26,904      | )     |             | (34,536 | )     |  
|                                                    |                         |          |         |         |   |              |       |             |         |       |  
|Diluted earnings (loss) per share                   |                         |          |         |         |   |              |       |             |         |       |  
|                                                    | Continuing operations   |          |         | (0.02   | ) |              | (0.14 | )           |         | (0.39 | )
|                                                    | Discontinued operations |          |         | (0.02   | ) |              | (0.11 | )           |         | 0.07  |  
|                                                    |                         |          |         |         |   |              |       |             |         |       |  
|Diluted loss per share                              |                         | $        | (0.04   | )       | $ | (0.25        | )     | $           | (0.32   | )     | $
|                                                    |                         |          |         |         |   |              |       |             |         |       |  

Revenues, EBITDA (loss), interest expense, depreciation and amortization and income tax expense (benefit) reflect only continuing operations.

141

---



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

None.

Item 9A. Controls and Procedures

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial
reporting is a process defined to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Management
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal
Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based
on this evaluation of the Company's internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the
U.S. Securities Exchange Act of 1934) as of December 31, 2007, under the supervision and with the participation of the Company's management, including its Interim Chief Executive Officer
and Chief Financial Officer, the Interim Chief Executive Officer and Chief Financial Officer have concluded that the Company maintained effective internal control over financial reporting as of
December 31, 2007.

Based
on this evaluation carried out, as of December 31, 2007, under the supervision and with the participation of the Company's management, including its Interim Chief Executive
Officer and Chief Financial Officer, the Interim Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15(d)-15(e) under the U.S. Securities Exchange Act of 1934) are effective.

There
were no changes in our internal control over financial reporting during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

The
design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

The
effectiveness of our internal controls over financial reporting has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in
their report, which is included herein.

142

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROLS

To
the Shareholders and Board of Directors of Magna Entertainment Corp.

We
have audited Magna Entertainment Corp.'s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Magna Entertainment
Corp.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included
in the accompanying Management's annual report on internal control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting
based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, Magna Entertainment Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the
COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Magna Entertainment
Corp. as at December 31, 2007 and 2006, and the related consolidated statements of operations and comprehensive loss, changes in shareholders' equity and cash flows for each of the three years
in the period ended December 31, 2007 and our report dated March 12, 2008 expressed an unqualified opinion thereon. Our audits also included the financial statement schedule listed in
the Index at Item 15(a).

|
|

|Toronto, Canada
March 12, 2008 |  | /s/ ERNST & YOUNG LLP
      Ernst & Young LLP
      Chartered Accountants
      Licensed Public Accountants
|------------------------------ |  | -----------------------------------------------------------------------------------------------------------

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Item 9B. Other Information

Not applicable.

Part III

Item 10. Directors and Executive Officers of the Registrant

The information required herein is incorporated by reference from sections of our Proxy Statement titled "Nominees",
"Management  Executive Officers", "The Board of Directors and Committees of the Board  Audit Committee",
"Section 16(a) Beneficial Ownership Reporting Compliance" and "Code of Conduct", which Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after our
fiscal year end of December 31, 2007.

Item 11. Executive Compensation

The information required herein is incorporated by reference from sections of our Proxy Statement titled "The Board of Directors and Committees of the
Board  Directors' Compensation", "The Board of Directors and Committees of the Board  Compensation Committee Interlocks
and Insider Participation", "Executive Compensation" and "Corporate Governance, Human Resources and Compensation Committee Report", which Proxy Statement will be filed with the Securities and Exchange
Commission within 120 days after our fiscal year end of December 31, 2007.

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

The information required herein is incorporated by reference from the sections of our Proxy Statement titled "Equity-Based Compensation Plan Information" and
"Security Ownership", which Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after our fiscal year end of December 31, 2007.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required herein is incorporated by reference from the section of our Proxy Statement titled "Certain Relationships and Related Transactions",
which Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after our fiscal year end of December 31, 2007.

Item 14. Principal Accountant Fees and Services

The information required herein is incorporated by reference from the section of our Proxy Statement titled "Principal Accountant Fees and Services", which Proxy
Statement will be filed with the Securities and Exchange Commission within 120 days after our fiscal year end of December 31, 2007.

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Part IV

Item 15. Exhibits, Financial Statement Schedules



The
following Consolidated Financial Statements of Magna Entertainment Corp. as at or for the year ended December 31, 2007 are included in Part II, Item 8 of this
Annual Report:

Report
of the Independent Auditors
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Cash Flows
Consolidated Balance Sheets
Consolidated Statements of Changes in Shareholders' Equity
Notes to the Consolidated Financial Statements
Schedule III  Real Estate and Accumulated Depreciation



Please
refer to the exhibit index below.

145

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on this 14th day of March, 2008.

| |  | MAGNA ENTERTAINMENT CORP.
| |  | -------------------------
| |  | By:                      

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

|Signature |  | Title                                     |  | Date                                                                              
|--------- |  | ----------------------------------------- |  | ----------------------------------------------------------------------------------
|By:       |  | /s/FRANK STRONACHFrank Stronach           |  | Interim Chief Executive Officer and Chairman
(Principal Executive Officer)        
|By:       |  | /s/RON CHARLESRon Charles                 |  | Chief Operating Officer and Director                                              
|By:       |  | /s/BLAKE TOHANABlake Tohana               |  | Executive Vice-President and
Chief Financial Officer
(Principal Financial Officer)
|By:       |  | /s/MARY LYN SEYMOURMary Lyn Seymour       |  | Vice-President and Controller
(Principal Accounting Officer)                      
|By:       |  | /s/ANTHONY R. CAMPBELLAnthony R. Campbell |  | Director                                                                          
|By:       |  | /s/JERRY D. CAMPBELLJerry D. Campbell     |  | Director                                                                          
|By:       |  | /s/JENNIFER JACKSONJennifer Jackson       |  | Director                                                                          
|By:       |  | /s/WILLIAM J. MENEARWilliam J. Menear     |  | Director                                                                          
|By:       |  | /s/FRANK VASILKIOTIFrank Vasilkioti       |  | Director                                                                          
|By:       |  | /s/CHARLIE J. WILLIAMSCharlie J. Williams |  | Director                                                                          

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EXHIBIT INDEX

The following documents are filed as part of this Annual Report.

|Exhibit No. |  | Description of Document                                                                                                                                                                                                                                                                                                                                                    
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Restated Certificate of Incorporation of Magna Entertainment Corp. (incorporated herein by reference to exhibit 3.1 of the registrant's Report on Form 8-K filed on March 16, 2000).                                                                                                                                                                                       
|3.2         |  | By-Laws of Magna Entertainment Corp. (incorporated herein by reference to exhibit 3.2 of the registrant's Report on Form 10-Q filed on May 10, 2004).                                                                                                                                                                                                                      
|4.1         |  | Form of Stock Certificate for Class A Subordinate Voting Stock (incorporated herein by reference to exhibit 4 of the registrant's Registration Statement on Form S-1 originally filed on January 14, 2000
(File number 333-94791).                                                                                                                                         
|4.2         |  | Indenture dated as of December 2, 2002, between Magna Entertainment Corp. and The Bank of New York, as trustee, including the form of 71/4% Convertible Subordinated Notes due
December 15, 2009. (incorporated herein by reference to exhibit 4.1 to registrant's registration statement on Form S-3 filed January 31, 2003 (File number 333-102889)).                    
|4.3         |  | Indenture dated as of June 2, 2003, between Magna Entertainment Corp. and the Bank of New York, as trustee, including the form of 8.55% Convertible Subordinated Notes due June 15, 2010 (incorporated herein
by reference to exhibit 4.1 of the Registrant's Registration Statement on Form S-3 filed July 25, 2003 (file number 333-107368)).                            
|10.1        |  | Term Loan Credit Agreement dated as of November 15, 1999, as amended from time to time, between The Santa Anita Companies, Inc. and Wells Fargo Bank, National Association (incorporated herein by reference to the
exhibit 10.7 of the registrant's Registration Statement on Form S-1/A originally filed on February 14, 2000 (File number 333-94791)).                  
|10.2        |  | Magna Entertainment Corp. Long-Term Incentive Plan (incorporated herein by reference to exhibit 10.11 of the registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1999).                                                                                                                                                                         
|10.3        |  | Amendment No. 1 to the Term Loan Credit Agreement dated as of November 15, 1999, between The Santa Anita Companies, Inc. and Wells Fargo Bank, National Association (incorporated herein by reference to
exhibit 10.21 of the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000).                                                        
|10.4        |  | Amendment No. 2 to the Term Loan Credit Agreement dated as of November 15, 1999, between The Santa Anita Companies, Inc. and Wells Fargo Bank, National Association (incorporated herein by reference to
exhibit 10.22 of the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2000).                                                        
|10.5        |  | Amendment No. 3 to the Term Loan Credit Agreement dated as of November 1, 2001, between The Santa Anita Companies, Inc. and Wells Fargo Bank, National Association (incorporated herein by reference to
exhibit 10.16 of the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2002).                                                         
|10.6        |  | Option Agreement dated November 27, 2002 by and among the Company, Joseph LLC, Karin LLC, Joseph A. De Francis and Karin M. De Francis (incorporated herein by reference to exhibit 2.2
to registrant's Report on Form 8-K filed on December 12, 2002.) (Exhibit A to this Agreement has been omitted but will be furnished supplementally to the Commission upon request).
|10.7        |  | Employment Agreement between the Company and Blake Tohana dated July 1, 2003 (incorporated herein by reference to exhibit 10.29 to the registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003).                                                                                                                                               

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|10.8  |  | Loan Agreement dated March 5, 2004 between MEC Grundstucksentwicklungs GmbH and Raiffeisenlandesbank Niederosterreich-Wien AG in the amount of Euro 15,000,000 (incorporated herein by reference to
exhibit 10.1 to the registrant's Form 10-Q for the Quarter ended March 31, 2004).                          
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.09 |  | Term Loan Credit Agreement dated as of October 8, 2004 between Wells Fargo Bank, National Association and The Santa Anita Companies, Inc. (incorporated herein by reference to exhibit 10.1 to the
registrant's Report on Form 8-K filed on October 14, 2004).                                                 
|10.10 |  | Form of Election for Performance Shares in Lieu of Guaranteed Bonus for W. Thomas Hodgson, Jim McAlpine, Donald Amos, Paul Cellucci, Blake Tohana and certain other employees of the Registrant (incorporated herein by
reference to exhibit 10.1 of the Registrant's Report on Form 8-K filed on May 9, 2005).
|10.11 |  | Form of Indemnity Agreement dated as of October 31, 2005 (incorporated herein by reference to exhibit 10.1 of the registrant's Report on Form 8-K filed on November 2, 2005).                                                                                                                                  
|10.12 |  | Amended and Restated Credit Agreement between the Registrant and the Bank of Montreal, et al., dated as of July 22, 2005 (incorporated herein by reference to exhibit 10.5 to the registrant's Report on
Form 10-Q filed on November 9, 2005).                                                                 
|10.13 |  | First Amending Agreement made as of the 1st day of February, 2006 between the registrant and MID Islandi SF, et al (incorporated herein by reference to exhibit 10.1 of the registrant's Report on
Form 8-K filed on February 9, 2006).                                                                        
|10.14 |  | Separation Agreement between the registrant and W. Thomas Hodgson dated March 31, 2006 (incorporated herein by reference to exhibit 10.3 of the registrant's Report on Form 10-Q filed on May 9,
2006).                                                                                                        
|10.15 |  | Consulting Agreement made as of April 30, 2006 among MEC Holdings (Canada) Inc., the registrant, McAlpine Capital Advisors Inc. and Jim McAlpine (incorporated herein by reference to exhibit 10.2 of the
registrant's Report on Form 10-Q filed on August 9, 2006).                                           
|10.16 |  | First Amending Agreement to the Amended and Restated Credit Agreement, dated as of July 22, 2005, between the registrant and the Bank of Montreal, et al, made as of July 26, 2006. (incorporated herein by
reference to exhibit 10.1 of the registrant's Report on Form 10-Q filed on November 9, 2006).      
|10.17 |  | Second Amending Agreement to the Amended and Restated Credit Agreement, dated as of July 22, 2005, between the registrant and the Bank of Montreal, et al, made as of November 6, 2006. (incorporated herein
by reference to exhibit 10.2 of the registrant's Report on Form 10-Q filed on November 9, 2006).  
|10.18 |  | Second Amending Agreement made as of July 26, 2006 between the registrant and MID Islandi, sf., et al. (incorporated herein by reference to exhibit 10.3 of the registrant's Report on Form 10-Q filed on
November 9, 2006).                                                                                   
|10.19 |  | Third Amending Agreement made as of September 26, 2006 between the registrant and MID Islandi SF, et al. (incorporated herein by reference to exhibit 10.4 of the registrant's Report on Form 10-Q filed
on November 9, 2006).                                                                                 
|10.20 |  | Fourth Amending Agreement made as of September 29, 2006 between the registrant and MID Islandi SF, et al. (incorporated herein by reference to exhibit 10.5 of the registrant's Report on Form 10-Q filed
on November 9, 2006).                                                                                
|10.21 |  | Fifth Amending Agreement made as of November 6, 2006 between the registrant and MID Islandi SF, et al. (incorporated herein by reference to exhibit 10.6 of the registrant's Report on Form 10-Q filed on
November 9, 2006).                                                                                   

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|10.22 |  | Limited Liability Company Agreement of Santa Anita Associates, LLC between Santa Anita Commercial Enterprises, Inc. and Santa Anita Associates Holding Co., LLC, effective as of September 28, 2006
(incorporated herein by reference to exhibit 10.7 of the registrant's Report on Form 10-Q filed on November 9, 2006). (Portions of this document marked with "***" are subject to a pending Confidential Treatment Request filed with the
Secretary of the Securities and Exchange Commission and have been filed separately with the Securities and Exchange Commission).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23 |  | Letter Agreement between the Registrant and Donald Amos dated October 13, 2006. (incorporated herein by reference to exhibit 10.8 of the registrant's Report on Form 10-Q filed on November 9,
2006).                                                                                                                                                                                                                                                                                                                                                                         
|10.24 |  | Second Amended and Restated Loan Agreement made as of the 26th day of July, 2006 between Gulfstream Park Racing Association, Inc. and MID Islandi sf., et al. (incorporated herein by reference to
exhibit 10.9 of the registrant's Report on Form 10-Q filed on November 9, 2006).                                                                                                                                                                                                                                                                                           
|10.25 |  | Amended Stock Purchase Agreement dated as of July 26, 2006 amending the Stock Purchase Agreement, dated November 8, 2005 between the registrant and PA Meadows, LLC. (incorporated herein by reference to
exhibit 10.10 of the registrant's Report on Form 10-Q filed on November 9, 2006).                                                                                                                                                                                                                                                                                   
|10.26 |  | Post-Closing and Note Issuance Agreement, dated as of July 26, 2006 between the registrant and PA Meadows LLC. (incorporated herein by reference to exhibit 10.11 of the registrant's Report on Form 10-Q
filed on November 9, 2006).                                                                                                                                                                                                                                                                                                                                         
|10.27 |  | Racing Services Agreement entered into as of July 26, 2006 by and among the registrant, MEC Pennsylvania Racing Services, Inc., Mountain Laurel Racing, Inc., Washington Trotting Association, Inc., MEC
Pennsylvania Racing, Inc., MEC Pennsylvania Food Service, Inc., and MEC Racing Management (incorporated herein by reference to exhibit 10.12 of the registrant's Report on Form 10-Q filed on November 9, 2006).                                                                                                                                                     
|10.28 |  | Share Purchase Agreement made as of October 31, 2006 between Fontana Beteiligungs GmbH and Magna Steyr Metalforming AG (incorporated herein by reference to exhibit 10.1 of the registrant's Report on
Form 8-K filed on November 7, 2006). (The schedules to this agreement (Schedule A  List of Capitalized Terms; Schedule B  Net Working Capital as of September 30, 2006; and
Schedule C  Demerger Agreement) have not been included and will be furnished to Securities and Exchange Commission upon request).                                                       
|10.29 |  | Asset Purchase Agreement made August 25, 2006 between Magna International Inc. as the Purchaser and MEC Holdings (Canada) Inc. as the Vendor (incorporated herein by reference to exhibit 10.1 of the
registrant's Report on Form 8-K filed on November 8, 2006). (The schedules to this agreement, which are listed in Section 1.6 of the agreement, have not been included and will be furnished to the Securities and Exchange Commission
upon request).                                                                                                                   
|10.30 |  | Third Amended and Restated Gulfstream Loan Agreement dated December 22, 2006 between Gulfstream Park Racing Association, Inc., MID Islandi SF, Remington Park, Inc., GPRA Thoroughbred Training Center,
 Inc. and the registrant (incorporated herein by reference to exhibit 10.1 of the registrant's Report on Form 8-K filed on December 22, 2006).                                                                                                                                                                                                                        
|10.31 |  | Sixth Amending Agreement dated December 22, 2006 between the registrant and the Guarantors and Bank of Montreal (incorporated herein by reference to exhibit 10.2 of the registrant's Report on Form 8-K filed
on December 22, 2006).                                                                                                                                                                                                                                                                                                                                         
|10.32 |  | Employment Agreement between the Company and Michael Neuman dated February 27, 2007 (incorporated herein by reference to exhibit 10.1 to the registrant's Report on Form 8-K filed on March 5,
2007).                                                                                                                                                                                                                                                                                                                                                                         

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|10.33 |  | March 4, 2007 Limited Liability Company Operating Agreement of HRTV, LLC between Churchill Downs Incorporated, Magna Entertainment Corp. and MEC HRTV HOLDCO LLC (incorporated herein by reference to
exhibit 10.1 to the registrant's Report on Form 8-K filed on March 6, 2007).                                                          
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.34 |  | March 4, 2007 Limited Liability Company Operating Agreement of TRACKNET MEDIA GROUP, LLC between Churchill Downs Incorporated, CD CONTENTCO HC, LLC, the registrant and MEC CONTENT HOLDCO LLC
(incorporated herein by reference to exhibit 10.2 to the registrant's report on Form 8-K filed on March 6, 2007).                            
|10.35 |  | Agreement of Purchase and Sale made February 7, 2007 between MI Developments (Maryland) Inc., MI Developments Inc. and Laurel Racing Association Limited Partnership (incorporated herein by reference to
exhibit 10.35 of the registrant's Report on Form 10-K for the period ended December 31, 2006 filed March 15, 2007).               
|10.36 |  | Agreement of Purchase and Sale made March 27, 2007 between 20004 Delaware Inc., Palm Meadows Estates, LLC and GPRA Thoroughbred Training Center, Inc. (incorporated herein by reference to
exhibit 10.1 of the registrant's Report on Form 8-K filed on March 28, 2007).                                                                    
|10.37 |  | Agreement of Purchase and Sale made June 7, 2007 between 20005 Delaware Inc. and SLRD Thoroughbred Training Center, Inc. (incorporated herein by reference to exhibit 10.1 of the registrant's
Report on Form 8-K filed on June 7, 2007).                                                                                                   
|10.38 |  | Separation Agreement between the registrant and Michael Neuman effective June 22, 2007 (incorporated herein by reference to exhibit 10.1 of the registrant's Report Form 8-K filed on June 28,
 2007).                                                                                                                                      
|10.39 |  | Subscription Agreement between the registrant and Fair Enterprise Limited dated September 13, 2007 (incorporated herein by reference to exhibit 10.1 of the registrant's Report on Form 8-K filed
September 18, 2007).                                                                                                                      
|10.40 |  | Bridge Loan Agreement between the registrant, the Guarantors and MID ISlandi SF dated as of September 12, 2007 (incorporated herein by reference to exhibit 10.2 of the registrant's Report on Form 8-K filed
September 18, 2007).                                                                                                          
|10.41 |  | Second Amending Agreement in Respect of the Third Amended and Restated Gulfstream Park Loan Agreement between Gulfstream Park Racing Association, Inc., the Guarantors and MID Islandi SF dated as of September 12,
2007 (incorporated herein by reference to exhibit 10.3 of the registrant's Report on Form 8-K filed September 18, 2007).
|10.42 |  | Consulting Agreement between the registrant and Greenbrook Capital Partners Inc., effective September 1, 2007 (incorporated herein by reference to exhibit 10.4 of the registrant's Report on Form 8-K
filed September 18, 2007).                                                                                                           
|10.43 |  | Long Term Incentive Plan, as amended (incorporated herein by reference to exhibit 10.3 of the registrant's Report on Form 10-Q for the period ended June 30, 2007 filed August 9,
 2007).                                                                                                                                                   
|10.44 |  | Agreement of Purchase and sale made as of December 21, 2007 with a subsidiary of Magna International Inc.*                                                                                                                                                                                                                                  
|12    |  | Statement re: Computation of Earnings to Fixed Charges.*                                                                                                                                                                                                                                                                                    
|21    |  | Subsidiaries of the Registrant.*                                                                                                                                                                                                                                                                                                            
|23    |  | Consent of Ernst & Young LLP.*                                                                                                                                                                                                                                                                                                              
|24    |  | Power of Attorney.*                                                                                                                                                                                                                                                                                                                         
|31.1  |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.*                                                                                                                                                                                                         

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|31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.*         
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|32.1 |  | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.*
|32.2 |  | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002.*

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