1093273--3/16/2006--MAGNA_ENTERTAINMENT

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We expect that during 2006 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. Our senior secured revolving credit facility imposes important restrictions on us. Our bridge loan imposes important restrictions on us. Repayments under our Gulfstream Park Construction Loan and Remington Park Construction Loan impose limitations on the amount of funds available to grow those business. Each of our senior revolving credit facility and our bridge loan matures in 2006. Our operating income includes gains from the sale of non-core real estate, which sales may soon cease, causing our future operating income and cash flow to decrease. Our business is heavily concentrated at certain of our racetracks. In the state of Maryland, our operating agreement with the owner of Rosecroft Raceway expired on April 30, 2005. We are controlled by MI Developments Inc. and therefore MI Developments Inc. is able to prevent any takeover of us by a third party. Our relationship with MI Developments Inc. is not at "arm's length", and therefore MI Developments Inc. may influence us to make decisions that are not in the best interests of our other stockholders. We may not be able to attract or retain the personnel necessary to achieve our business objectives, in particular in respect of our search for a successor Chief Executive Officer. We are exposed to currency exchange rate fluctuations which could aversely affect 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, VLTs 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. A decline in the popularity of horse racing could adversely impact our business. Declining on-track attendance and increasing competition in simulcasting may materially adversely affect our operating results. Our strategy of increasing international distribution of North American horse racing may not be successful. 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. 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 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. Uncertainty as to the effect of Congress' attempt to eliminate the federal income tax withholding requirement on winning wagers by foreign nationals could delay our ability to open our pools to foreign wagers or subject us to tax liability. Ongoing litigation concerning our proposed facility in Romulus, Michigan, could threaten the license issued for that facility or cause us to expend greater sums to defend it. We may not be able to install synthetic racing surfaces at our California tracks on the timeline set out by the California Horse Racing Board. 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. Competition from non-racetrack gaming operators may reduce the amount wagered at our facilities and materially adversely affect our operating results. We currently face significant competition from Internet and other forms of account wagering, which may reduce our profitability. Expansion of gaming conducted by Native American groups may lead to increased competition in our industry, which may negatively impact 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. 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. 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. Our operating results fluctuate seasonally and may be impacted by a reduction in live racing dates due to regulatory factors. Unfavorable weather conditions may result in a reduction in the number of races we hold. 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. 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. We depend on agreements with our horsemen's industry associations to operate our business. 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. 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. A severe hurricane hitting the Miami area could interrupt our operations at Gulfstream Park, which would adversely impact our cash flow from this track. Our business depends on providers of totalisator services. Implementation of some of the recommendations of the National Gambling Impact Study Commission may harm our growth prospects. 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. Redevelopment projects at our racetracks may result in a write down of the value of certain assets and have caused and may continue to cause temporary disruptions of our racing operations. 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 face strict environmental regulation and may be subject to liability for environmental damage, which could materially adversely affect our financial results. We may not be able to sell or otherwise monetize some of our non-core 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. 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. Risks Relating to Our Securities 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 could decrease as a result of our issuing additional shares as consideration for future acquisitions. 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. We have no current plans to pay dividends and may never pay dividends. Our debt securities are subject to risks associated with debt financing.

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1093273--3/16/2006--MAGNA_ENTERTAINMENT_CORP