HOLLYWOOD PARK INC/NEW/ - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the fiscal year ended December 31, 1995

Commission file number 0-10619

HOLLYWOOD PARK, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 95-3667491
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

1050 South Prairie Avenue, Inglewood, California 90301
(Address of Principal Executive Offices) (Zip Code)

(310) 419-1500
(Registrant's Telephone Number, Including Area Code)

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

Title of each class and name of each exchange on which registered

Hollywood Park, Inc.
Common Stock, $.10 par value
Depositary Shares

NASDAQ National Market Issues

Indicate by check mark whether 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, and (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [_]

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 26, 1996 was $206,889,568 based on a closing price of $9.75
per common share and $9.625 per depositary share (convertible preferred).

The number of outstanding shares of the registrant's common stock, as of the
close of business on March 26, 1996: 18,504,798.

Hollywood Park, Inc.

Table of Contents

Part I

Item 1. Description of Business............................... 1
General..................................... 1
Casino Operations........................... 3
Racing Operations........................... 4
Attendance and Pari-mutuel Handle........... 7
Expansion Plans............................. 9
Other Uses of Property...................... 10
Government Regulation....................... 10
Casino Operations...................... 11
Racing Operations...................... 12
Competition................................. 13
Federal Income Tax Matters.................. 15
Employees................................... 16
Other....................................... 17
Item 2. Properties............................................ 17
Item 3. Legal Proceedings..................................... 18
Item 4. Submission of Matters to a Vote of Security Holders... 18

Part II

Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.......................... 19
Dividend History............................. 19
Item 6. Selected Financial Data................................ 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......... 22
Item 8. Financial Statements................................... 27
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......... 28

Part III

Item 10. Directors and Executive Officers of the Registrant.... 28
Directors Deferred Compensation Plan......... 31
Compensation Committee Interlocks and Insider
Participation............................... 32
Item 11. Executive Compensation................................ 32
Report on Repricing of Options/SAR's......... 33
Pension Plan................................. 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................ 34
Item 13. Certain Relationships and Related Transactions........ 35

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.......................................... 32
Signatures............................................ 36

PART I

ITEM 1. DESCRIPTION OF BUSINESS
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GENERAL Hollywood Park, Inc. (the "Company" or "Hollywood Park") is a gaming,
sports and entertainment company engaged in the operation of thoroughbred and
greyhound racing facilities, the ownership, and as of November 17, 1995, the
operation of a card club casino, and the development of other gaming, sports and
entertainment opportunities. The Company is the successor to the Hollywood Park
Turf Club, organized in 1938, incorporated in 1981 under the name Hollywood Park
Realty Enterprises, Inc., and in 1992, as part of a restructuring, renamed
Hollywood Park, Inc. The Company owns and operates the Hollywood Park race
track, a premier thoroughbred racing facility located in California. In 1994,
the Company acquired Sunflower Racing, Inc. ("Sunflower") a greyhound and
thoroughbred racing facility located in Kansas, and Turf Paradise, Inc. ("Turf
Paradise") a thoroughbred racing facility located in Arizona. The Hollywood
Park Casino ("Casino") located at the Hollywood Park race track, was opened on
July 1, 1994. The Crystal Park Hotel and Casino ("Crystal Park"), located in
California is currently under construction and is anticipated to open in the
fourth quarter of 1996, under a third party lease (see Expansion Plans, Crystal
Park Hotel and Casino).

Management's strategic plan is to build on the reputation of the Hollywood Park
name, to grow its core horse racing business, and to broaden the scope of its
activities to include other gaming, sports and entertainment attractions. The
Hollywood Park race track is located in the Los Angeles metropolitan area, which
is home to approximately 14 million people. The Company intends to capitalize
on this strategic advantage by more fully utilizing its 378 acres of land in
Inglewood, to provide a multi-faceted entertainment experience. The Company
intends to identify and pursue opportunities in other types of gaming by taking
advantage of its experience and contacts in the horse racing business, and by
building a strong gaming oriented management team. The Company is evaluating
potential acquisitions of additional card clubs and properties in California and
other jurisdictions that the Company believes have a favorable gaming
environment.

On March 19, 1996, the Company and Boomtown, Inc. ("Boomtown") (a publicly held
company) signed a letter of intent (the "Letter of Intent") to enter into a
merger agreement, whereby each share of Boomtown's common stock would be
converted into 0.625 shares of Hollywood Park's common stock. A wholly owned
subsidiary of Hollywood Park would be merged with and into Boomtown, as a result
of which Boomtown would become a wholly owned subsidiary of Hollywood Park. An
estimated 5,774,000 shares of Hollywood Park common stock would be issued.
Boomtown owns and operates land-based dockside and riverboat gaming operations
in Verdi and Las Vegas, Nevada; Biloxi, Mississippi and Harvey, Louisiana,
together with offering a total of 130,000 square feet of casino space,
approximately 4,500 slot machines and 175 gaming tables, associated hotel
accommodations and other entertainment amenities. Before this merger can be
consummated, the following conditions, among others, must be met: the
negotiation and execution of a definitive merger agreement; procurement of all
required governmental and regulatory consents or approvals, and the licensing of
Hollywood Park's executive officers with the Gaming Commissions in Nevada,
Mississippi, Louisiana, and any other jurisdictions; the availability of
sufficient financing to fund the repurchase of Boomtown's outstanding debentures
if put to Boomtown; and no material adverse changes in business, financial
condition, results of operations or properties of either party after the
execution of a definitive agreement. (Also see Expansion Plans Boomtown, Inc.)

The Hollywood Park Casino was opened in mid-1994 under a third party leasing
arrangement with Pacific Casino Management ("PCM"). In 1994, under the
California Gaming Registration Act, it was the position of the California
Attorney General (the "Attorney General") that, as a publicly traded company
Hollywood Park was not eligible to register as an operator of a card club, but
could lease the site to a registered operator unaffiliated with the Company. On
August 3, 1995, Senate Bill ("SB") 100 was enacted into law, allowing Hollywood
Park (and all other pari-mutuel wagering facilities, which are public companies)
to operate a card club on the same premises as the race track, at least until
January 1, 1999. Thereafter, the provisions of SB 100 are repealed unless prior
to January 1, 1999, the California legislature enacts a comprehensive scheme for
the regulation of gaming under the jurisdiction of a gaming control commission.
With the passage of SB

1

100, as of November 17, 1995, Hollywood Park acquired PCM and now operates the
gaming floor and related activities, previously operated by PCM.

The Hollywood Park Casino is unrivaled in the state of California with a variety
of distinctive characteristics: the only non-Indian facility in California that
offers pari-mutuel wagering complete with bet runners, which allows card players
to place pari-mutuel wagers without interruption of their games, including
wagering on simulcast racing from the Royal Hong Kong Jockey Club; one of the
most advanced closed circuit television systems in the industry; the cleanest
air of any card club due to the installation of a state-of-the-art "CosaTron"
air filtration system; a quiet and elegant VIP player lounge; and a full service
health club with massage therapists. The Casino is topped off with a 30 foot
per letter red neon sign, visible from all aircraft approaching the Los Angeles
International Airport, which is located only three miles from Hollywood Park.
The Casino also sponsors special entertainment events, including live concerts
and championship Thai Kick Boxing.

During its first 18 months of operations, the Hollywood Park Casino has been
able to attract a significant portion of the southern California High End Poker
market ($15 to $30 limit and above), which the Company believes it should be
able to maintain and increase with the planned High End Poker expansion. The
expansion will offer 20 or more gaming tables in a private setting to include: a
sports video wall, private self service and bet runner pari-mutuel wagering,
cage and transaction windows, and a lavish buffet. In 1996, the Casino has
plans for expanded poker tournaments, and already is drawing some of the most
famous championship players. Expansion of the high stakes California games was
recently completed, which doubled the area's playing capacity, and Hollywood
Park management is aggressively working towards expanding the California games'
player base. With the acquisition of the gaming floor operations, under
Hollywood Park's management, plans are in place to introduce several new casual
or user-friendly games, to attract first time players.

The Hollywood Park race track is located in Inglewood, California and for the
past 57 years has been ranked among the country's most distinguished
thoroughbred racing facilities. Pari-mutuel commissions for 1995 were
comparable to 1994's results even with five fewer live race days in 1995.
Simulcast racing (Hollywood Park receives live transmission of races from other
race tracks) continues to grow, though it generates lower commissions for the
track than does live on-track racing. The growth in off-track (Hollywood Park's
live race signal sent to other sites) and simulcast commissions in 1995,
exceeded declines in on-track pari-mutuel commissions. Pari-mutuel wagering is
offered at the Casino, with 44 wagering windows and bet runners allowing for
uninterrupted card play. Although an accurate count of the number of patrons
who wager on races in the Casino is not possible, the Company believes there is
a direct relationship between daily Casino gaming revenues and racing, with an
even stronger relationship between live on-track racing and Casino gaming
revenues.

On November 17, 1995, Hollywood Park acquired PCM and assumed operations of the
gaming floors and related activities at the Casino. PCM was dissolved upon the
Company acquiring substantially all of its assets, property, business and
liabilities. The acquisition was accounted for under the purchase method of
accounting. The purchase price of PCM's net assets was $2,640,000 payable
solely in shares of Hollywood Park common stock, payable in three installments
as follows: (i) 135,164 shares of Hollywood Park common stock, having a value of
$1,600,000, issued on November 17, 1995; (ii) shares of Hollywood Park common
stock, having a value of $540,000 to be issued on November 17, 1996; and (iii)
shares of Hollywood Park common stock, having a value of $500,000 to be issued
on November 17, 1997, provided that Hollywood Park may elect to accelerate the
payments. The shares still to be issued will be valued at the average market
price of the Company's common stock for the ten trading days immediately
preceding the payment date. Virtually all of the approximately $21,592,000 of
excess acquisition cost over the recorded value of the net assets acquired, was
allocated to goodwill to be amortized on a straight line basis over 40 years.

On March 23, 1994, the Company finalized the transaction to acquire Sunflower, a
greyhound and thoroughbred racing facility located in Kansas City, Kansas.
Sunflower, operating as the Woodlands, became a wholly owned subsidiary of
Hollywood Park, with the transaction accounted for under the

2

purchase method of accounting. The acquisition price was $15,000,000; paid for
with 591,715 shares of Hollywood Park common stock, with a then market price of
$25.35 per share. For financial reporting purposes, the transaction was valued
at $19.00 per Hollywood Park common share, based on the size of the block of
shares issued in the acquisition relative to the current trading volume.
Immediately following the acquisition, the Company contributed $5,000,000 in
cash to Sunflower to repay a portion of the subordinated debt Sunflower owed to
Mr. Hubbard, Chief Executive Officer of the Company, in return for more
favorable terms on the balance of the subordinated debt. Of the approximately
$6,625,000 of restated excess acquisition cost over the recorded value of the
net assets acquired, $1,153,000 was allocated to the racing facility lease and
management agreement Sunflower has with The Racing Association of Kansas East
("TRAK East") and will be amortized over the remaining lease period of 20 years,
with the balance of $5,472,000 allocated to goodwill to be amortized over 40
years.

An additional 55,574 shares of Hollywood Park common stock were issued to Mr.
Richard Boushka, a former Sunflower shareholder, as required by the agreement of
merger, because the market price of Hollywood Park common stock 180 days after
closing, was more than 10% less than the market price on the closing date of the
acquisition. The agreement of merger also provided that under certain
circumstances the former Sunflower shareholders were entitled to receive
additional shares of Hollywood Park common stock. As of March 23, 1995, the
former Sunflower shareholders transferred their rights to such additional
consideration to Hollywood Park for nominal consideration, and have no further
entitlements to additional consideration.

On June 22, 1994, riverboat gaming officially opened in Missouri, with the
largest boat located within 10 miles of Sunflower. On November 8, 1994,
Missouri voters authorized the use of games of chance on riverboats, including
slot machines, which were placed into play on December 9, 1994. Riverboat
gaming continued to have a very significant negative impact on Sunflower's 1995
financial results and is expected to continue to have such impact.

If the Kansas Legislature does not approve other forms of gaming at Sunflower
including slot machines, it is probable that Sunflower's assets will suffer an
impairment that will require a significant asset write-down that will have a
materially adverse effect on the Company's consolidated financial statements.

Kansas Senate Concurrent Resolution 1621 was introduced on February 15, 1996.
After amendment, the final bill would have required a change to the state of
Kansas' constitution to allow for casino gaming in Kansas. Senate Concurrent
Resolution 1621 was defeated on March 21, 1996.

Kansas Senate Bill 712 was introduced into the Senate Federal and State Affairs
committee on February 15, 1996. This legislation would allow electronic games of
chance at race tracks. As of the date of this filing it remains in committee.

Kansas Senate Bill 754 was introduced into the Senate Federal and State Affairs
committee on March 15, 1996 and would authorize race tracks to operate certain
games, including bingo, keno, pull tabs, and on-line lottery games utilizing a
horse or greyhound racing theme. On March 29, 1996, Senate Bill 754 passed out
of committee with a favorable recommendation. As of the date of this filing, a
Senate floor debate has not been scheduled.

Kansas House Concurrent Resolution 5056 ("Resolution 5056") was introduced on
the floor of the House of Representatives on March 28, 1996, to amend the
constitution of the state of Kansas through a statewide election in November to
allow for electronic games of chance to be operated at licensed pari-mutuel
facilities, including Sunflower. Resolution 5056 has been referred to the House
Federal and State Affairs committee where it remains as of the date of this
filing. Resolution 5056 would require a 2/3rds majority of both houses to go to
ballot.

The current Kansas State Legislative session ends on April 5, 1996. The veto
session commences on April 24, 1996, and continues until all scheduled business
is concluded.

On August 11, 1994, the shareholders of Turf Paradise approved the Agreement of
Merger, entered into on March 30, 1994, by Hollywood Park and Turf Paradise and
as amended on May 27, 1994, pursuant to which Turf Paradise became a wholly
owned subsidiary of Hollywood Park. Turf Paradise owns and operates a
thoroughbred race track in Phoenix, Arizona. The transaction was accounted for
under the pooling of interests method of accounting, with approximately $627,000
of merger related costs expensed, in total, by both the Company and Turf
Paradise. In connection with the merger, the Company issued a total of
1,498,016 shares of Hollywood Park common stock, valued as of the date of
issuance, at approximately $33,800,000. Each share of Turf Paradise common
stock was valued at $13.00 and was converted to approximately 0.577 shares of
Hollywood Park common stock, which had a then fair market value of $22.53 based
on the weighted average of all trades on the NASDAQ National Market System for
the twenty trading days up to and including August 10, 1994.

Hollywood Park has three active wholly owned subsidiaries: (i) Hollywood Park
Operating Company, which has two wholly owned subsidiaries, Hollywood Park Food
Services, Inc. and Hollywood Park Fall Operating Company; (ii) Sunflower Racing,
Inc., which has one wholly owned subsidiary, Sunflower Food and Beverage, Inc.;
and (iii) Turf Paradise, Inc. The Hollywood Park Casino is a division of
Hollywood Park, Inc.

CASINO OPERATIONS Patrons in the Casino pay a fee for seats at gaming tables,
or for each hand played. Approximate per hour collection rates per table for
conventional poker are, $75 for low limit and $240 for high limit, and for the
California games, $140 for low limit and $700 for high limit. Players bet
solely against each other; the operator of the card club does not participate in
the wagers made nor in the outcome of any of the games played. Revenues are
also derived from food and beverage sales, gift shop sales and health club
operations.

The Hollywood Park Casino was opened in mid-1994 under a third party leasing
arrangement with PCM. In 1994 under the California Gaming Registration Act, it
was the position of the California Attorney General that as a publicly traded
company, Hollywood Park was not eligible to register as an operator of a card
club, but could lease the site to a registered operator unaffiliated with the
Company. On August 3, 1995, SB 100 was

3

enacted into law. SB 100 does the following: (a) allows for a publicly traded
racing association, or a subsidiary thereof, (hereafter the "Racing
Association") to operate a gaming club on the premises of its race track; (b)
requires the officers, directors and 5.0% or more shareholders of a Racing
Association (excluding institutional investors) to be licensed by the Attorney
General; (c) provisionally licenses a Racing Association and its officers,
directors, and 5.0% shareholders to operate a gaming club on the premises of its
race track pending licenses pursuant to sub-paragraph (b) above; (d) allows a
Racing Association and its officers, directors and 5.0% or more shareholders to
have an interest in gaming activities located outside of California that are not
legal in California. Pursuant to the authority provided by SB 100, the Company
acquired PCM and commenced operating the Hollywood Park Casino effective
November 17, 1995. The provisions of SB 100 are repealed effective January 1,
1999, unless prior thereto the California legislature enacts a comprehensive
scheme for the regulation of gaming under the jurisdiction of a gaming control
commission.

RACING OPERATIONS With pari-mutuel wagering, patrons bet against each other in
a pool rather than against the operator of the facility or with pre-set odds.
At the Hollywood Park and Turf Paradise race tracks, the Company operates all
aspects of racing, while under Kansas State racing laws Sunflower is not granted
any race days and does not generate any pari-mutuel commissions. The Kansas
Racing Commission granted Sunflower the facility ownership and manager licenses;
with all race days until the year 2014 granted to TRAK East, a Kansas not-for-
profit corporation. Sunflower has an agreement with TRAK East to provide the
physical race tracks along with management and consulting services for twenty-
five years with options to renew for one or more successive five year terms.
The Agreement and Restatement of Lease and Management Agreement was entered into
as of September 14, 1989.

Hollywood Park Race Track Hollywood Park conducts two live on-track
- -------------------------
thoroughbred horse race meets per year. Race dates must be applied for on an
annual basis from the California Horse Racing Board (the "CHRB"). The 1995
Spring/Summer Meet ran for 13 weeks, for a total of 67 race days. The Autumn
Meeting ran for six weeks, for a total of 30 race days (race days include three
charity days per meet). Live races run Wednesday through Sunday, usually with
nine live races a day. The Company also sends the signal of its live races off-
track to other locations including: fairgrounds, other race tracks, hotels and
casinos. In total, the Company simulcasts its live races to 79 sites in 36
states and three countries. The Company also accepts the simulcast signal from
live races conducted at other race tracks, including the four other local
southern California tracks, which has helped to mitigate the seasonality of the
Company's horse racing business by allowing for year round operations. In
addition, the July 1994, passage of Assembly Bill ("AB") 1418 allowed for
unrestricted simulcasting between northern and southern California. Previous
legislation limited such simulcasting to races with purses of at least $20,000.
With the passage of AB 1418, Hollywood Park's 1994 Autumn Meeting was the first
meet with concurrent simulcasting of races from northern California, allowing
patrons pari-mutuel wagering opportunities approximately every 15 minutes.
Although the Company has seen a shift from pari-mutuel wagers placed on its live
races, both on-track and off-track, to wagers placed on northern California
simulcast races, for which the Company receives a lower commission rate, the net
effect of expanded simulcasting upon pari-mutuel commissions has to date been
positive. With the Company's limited operating experience under AB 1418, there
can be no assurance that this effect will continue to be positive.

As of March 1, 1996, there were numerous bills relating to horse racing and
pari-mutuel wagering pending in the California Legislature. The majority of
these bills are "spot" bills at the present time and are not sufficiently
detailed to allow for meaningful analysis. The Company intends during the 1996
legislative session however, to pursue and support legislation that would reduce
state license fees as well as expand off-track sites within California, although
it is too early in the legislative session to assess the prospects of these
bills.

Hollywood Park derives revenues from a share of the pari-mutuel handle at rates
fixed by the state of California, admission fees and concession sales. The
approximate pari-mutuel commission rates are fixed as follows:

-On-track - 6.4% of wagers placed at Hollywood Park on its live races

-Off-track - 4.4% of wagers placed on live Hollywood Park races simulcast
to California locations other

4

than northern California

-Off-track - 1.25% of wagers placed on live Hollywood Park races simulcast
to northern California

-Off-track - 1.7% of wagers placed on live Hollywood Park races simulcast
out-of-state

-Simulcast - 2.0% of wagers placed at Hollywood Park on races simulcast
from live races conducted at other sites, except northern California

-Simulcast - 5.6% of wagers placed at Hollywood Park on races simulcast
from live races conducted in northern California

-Simulcast - 3.9% of wagers placed on races simulcast from northern
California, when Hollywood Park is conducting a live meet, and
simulcasting the northern California signal to its off-track sites

Sunflower operating as the Woodlands TRAK East conducts live greyhound and
- ------------------------------------
horse racing and accepts simulcasts of both. Live greyhound racing runs from
January 1 through December 31, with a brief seven day period without racing from
December 18 through 26. Greyhounds generally run Wednesday through Monday, with
evening performances every day except Sunday and matinee performances on
Wednesday, Friday, Saturday and Sunday. During 1995, TRAK East conducted 398
live greyhound performances over 292 race days. Usually there are 13 races per
performance, except for Sunday when there are 15 races. Horses ran live from
August 11, 1995 through October 15, 1995, racing Wednesday through Sunday, for a
total of 45 race days. TRAK East accepts greyhound simulcasting year round from
Southland Greyhound Park, Derby Land and Jacksonville Greyhound, Wednesday
through Sunday. Simulcasts from various other horse race tracks are also
accepted year round. The pari-mutuel commissions earned by TRAK East are set by
the state of Kansas. The following percentages represent the final net
commission retained by TRAK East:

Live greyhounds and horses 12.76%
Greyhound simulcasts 10.75%
Horse simulcasts 10.44%

Sunflower does not directly earn pari-mutuel commissions, but instead TRAK East
pays Sunflower a lease and management fee equal to earnings, net of not less
than $450,000 in 1994 and $500,000 thereafter. Amounts retained by TRAK East
are for distribution to charities. Presently, the charity payments have been
suspended pending the outcome of current Kansas legislative gaming issues
relating to Sunflower's ability to offer slot machine gaming. If legislation is
passed which allows Sunflower to operate slot machines then, as of May 1996, the
charity payments are to resume. If such legislation is not passed, Sunflower's
charity agreement with TRAK East will be re-evaluated.

If the Kansas Legislature does not approve other forms of gaming at Sunflower
including slot machines, it is probable that Sunflower's assets will suffer an
impairment that will require a significant asset write-down that will have a
materially adverse effect on the Company's consolidated financial statements.

Kansas Senate Concurrent Resolution 1621 was introduced on February 15, 1996.
After amendment, the final bill would have required a change to the state of
Kansas' constitution to allow for casino gaming in Kansas. Senate Concurrent
Resolution 1621 was defeated on March 21, 1996.

Kansas Senate Bill 712 was introduced into the Senate Federal and State Affairs
committee on February 15, 1996. This legislation would allow electronic games
of chance at race tracks. As of the date of this filing it remains in
committee.

Kansas Senate Bill 754 was introduced into the Senate Federal and State Affairs
committee on March 15, 1996 and would authorize race tracks to operate certain
games, including bingo, keno, pull tabs, and on-line lottery games utilizing a
horse or greyhound racing theme. On March 29, 1996, Senate Bill 754 passed out
of committee with a favorable recommendation. As of the date of this filing, a
Senate floor debate has not been scheduled.

Kansas House Concurrent Resolution 5056 ("Resolution 5056") was introduced on
the floor of the House of Representatives on March 28, 1996, to amend the
constitution of the state of Kansas through a statewide election in November to
allow for electronic games of chance to be operated at licensed pari-mutuel
facilities, including Sunflower. Resolution 5056 has been referred to the House
Federal and State Affairs committee where it remains as of the date of this
filing. Resolution 5056 would require a 2/3rds majority of both houses to go to
ballot.

The current Kansas State Legislative session ends on April 5, 1996. The veto
session commences on April 24, 1996, and continues until all scheduled business
is concluded.

Turf Paradise Turf Paradise has one continuous live thoroughbred meet that
- -------------
starts in September and runs through May. In 1995, Turf Paradise raced live for
the period January 1 through May 23, operated as a simulcast facility starting
September 8, and resumed live racing on September 30, running through December
31. Along with running live thoroughbreds, Turf Paradise also offers two
quarter horse races a day during the first two months of the live meet, and a
limited number of arabian races in the spring. Live racing is primarily
conducted Friday through Tuesday, with live races sent to 32 off-track sites in
Arizona. The live racing signal is also transmitted to 33 out of state hubs,
from which the signal is further disseminated to sites including: New York, New
Jersey, Pennsylvania, Nevada and Canada. On Monday and Tuesday, Turf Paradise
generally conducts 12 live races and does not accept simulcasts from other race
tracks. Friday through Sunday, Turf Paradise generally conducts 9 to 10 live
races and accepts simulcasts from other race tracks, for a total of
approximately 17 to 20 races per day. Wednesday and Thursday Turf Paradise
generally operates as a simulcast facility, usually accepting 16 to 18 races
from northern and southern California. During the period from late May to early
September, Turf Paradise operates as a simulcast facility for Arizona's Prescott
Downs and Coconino County Fair.

At Turf Paradise, the state of Arizona fixes the pari-mutuel commissions for on-
track, and within the state, off-track racing as follows:

5

Win, Place, Two-Horse Three or More
Show Pool Horse Pool
----------- --------- -------------

On-track daily handle up to $1 million 9.0% 9.5% 11.5%
On-track daily handle above $1 million 7.5% 8.0% 10.0%
Off-track in state handle up to $175,000 12.0% 13.0% 17.0%
Off-track in state handle above $175,000 9.0% 9.5% 11.5%

Turf Paradise also receives approximately 2.0% to 3.5% of the out of state off-
track pari-mutuel handle wagered on its live races. When operating as a
simulcast facility for the smaller northern Arizona race tracks, Turf Paradise
receives approximately 2.0% to 3.8% of the pari-mutuel handle generated at Turf
Paradise. Turf Paradise also receives any unclaimed pari-mutuel winnings, which
totaled approximately $346,000 in 1995 while at Hollywood Park, the unclaimed
pari-mutuel winnings are turned over to the state of California. Along with the
pari-mutuel commission rates earned, Turf Paradise presently receives an
additional 1% of all in-state handle as reimbursement for capital improvements
made to the track in prior years. In 1995, Turf Paradise was reimbursed
approximately $851,000 for such capital improvements. The capital improvement
credit is scheduled to expire in 1997. In 1995, Turf Paradise also received a
hardship tax credit of $119,000 to offset the cost of pari-mutuel commissions
paid to the state of Arizona, based on the reduction of in-state handle caused
by the advent of Indian gaming.

ATTENDANCE AND PARI-MUTUEL HANDLE The following tables summarize key operating
statistics for the period 1991 through 1995. The acquisition of Turf Paradise
was accounted for under the pooling of interests method of accounting with the
historical results for Turf Paradise presented for the periods before the
acquisition. Before the acquisition, Turf Paradise had a fiscal year end of
June 30, and the 1991 through 1993 statistics are for the years ended June 30.

LIVE THOROUGHBRED AND GREYHOUND MEETS BY RACE TRACK, (in thousands, except race
days, performances, and per capita)

HOLLYWOOD PARK 1995 1994 1993 1992 1991
-------- --------- --------- ---------- -----------

Race days 97 102 99 101(a) 99
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Attendance
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On-track 1,056 1,191 1,175 1,094 1,701
Off-track (b) 1,431 1,642 1,695 1,672 1,029(c)
-------- -------- -------- -------- --------
2,487 2,833 2,870 2,766 2,730
======== ======== ======== ======== ========
Average daily attendance
- ------------------------
On-track 10.9 11.7 11.9 10.8 17.2
Off-track 14.8 16.1 17.1 16.6 10.4
-------- -------- -------- -------- --------
25.7 27.8 29.0 27.4 27.6
======== ======== ======== ======== ========
Pari-mutuel handle
- ------------------
On-track $185,218 $229,667 $245,383 $245,337 $402,310
Off-track 252,959 309,465 340,756 346,480 219,362
Off-track (out of state) 223,856 181,072 127,257 67,238 49,722
-------- -------- -------- -------- --------
$662,033 $720,204 $713,396 $659,055 $671,394
======== ======== ========= ======== ========
Pari-mutuel handle per capita
- -----------------------------
On-track $ 175 $ 193 $ 209 $ 224 $ 237
Off-track (b) 177 188 201 207 213
-------- -------- -------- -------- --------
$ 352 $ 381 $ 410 $ 431 $ 450
======== ======== ========= ======== ========
===================================================================================================================================

TRAK EAST AT SUNFLOWER Greyhound Thoroughbred
----------------------------- ---------------------------
1995 1994 (d) 1995 1994 (d)
------- -------- ------ --------

Race days 294 231 49 62
Performances 424 332 -- --
Attendance 533 621 47 86
Average daily attendance 1.8 2.7 1.0 1.4
Pari-mutuel handle - on-track $47,406 $74,941 $2,844 $6,274
Pari-mutuel handle per capita $ 89 $ 121 $ 61 $ 73
Pari-mutuel handle - off-track $ 0 $ 0 $ 807 $ 0

6

==============================================================================================================

TURF PARADISE (e) 1995 1994 1993 1992 1991
-------- -------- -------- -------- ---------

Race days 171 185 177 169 166
- ---------
Attendance
- ----------
On-track 426 419 424 462 521
Off-track 208 253 233 159 0
-------- ------- ------- ------- -------
634 672 657 621 521
======== ======= ======= ======= =======
Average daily attendance
- ------------------------
On-track 2.5 2.3 2.4 2.7 3.1
Off-track 1.2 1.4 1.3 0.9 0.0
-------- ------- ------- ------- -------
3.7 3.7 3.7 3.6 3.1
======== ======= ======= ======= =======
Pari-mutuel handle
- ------------------
On-track $ 28,524 $35,046 $42,065 $58,634 $70,958
Off-track 26,078 31,945 33,995 27,012 0
Off-track (out of state) 56,905 29,503 14,611 6,726 0
-------- ------- ------- ------- -------
$111,507 $96,494 $90,671 $92,372 $70,958
======== ======= ======= ======= =======
Pari-mutuel handle per capita
- -----------------------------
On-track $ 67 $ 84 $ 99 $ 127 $ 136
Off-track 125 126 146 170 0
-------- ------- ------- ------- -------
$ 192 $ 210 $ 245 $ 297 $ 136
======== ======= ======= ======= =======

SIMULCAST THOROUGHBRED AND GREYHOUND MEETS BY RACE TRACK (in thousands, except
race days and per capita)

HOLLYWOOD PARK 1995 1994 1993 1992 1991(f)
-------- -------- -------- -------- ---------

- ----------
Race days
- ---------
Thoroughbred meets -
southern California 183 179 176 18 0

Quarter Horse meets 152 141 138 90 71
Harness meets 41 40 103 12 0

Attendance
- ------------------------------
Thoroughbred meets - southern 948 931 833 850 462
California
Quarter Horse meets 61 58 63 43 40
Harness meets 16 16 36 47 0
1,025 1,005 932 940 502
Average daily attendance
- ------------------------------
Thoroughbred meets - southern 5.2 5.2 4.7 4.6 5.1
California
Quarter Horse meets 0.4 0.4 0.5 0.5 0.6
Harness meets 0.4 0.4 0.3 0.4 0.0
-------- ------- ------- ------- -------
6.0 6.0 5.5 5.5 5.7
======== ======= ======= ======= =======
Pari-mutuel handle
- -----------------------------
Thoroughbred meets - southern $218,625 $209,837 $183,303 $194,770 $105,055
California
Thoroughbred meets - northern 141,065 63,480 6,765 0 0
California (g)
Quarter Horse meets 22,793 18,754 14,349 9,978 8,350
Harness meets 4,391 3,948 7,630 10,524 0
-------- ------- ------- ------- -------
$386,874 $296,019 $212,047 $215,272 $113,405
======== ======= ======= ======= =======

Pari-mutuel handle per capita
- -----------------------------
Thoroughbred meets - southern $ 231 $ 225 $ 220 $ 229 $ 227
California
Quarter Horse meets 374 323 228 232 209
Harness meets 274 247 212 224 0
-------- ------- ------- ------- -------
$ 879 $ 795 $ 660 $ 685 $ 436
======== ======= ======= ======= =======

TRAK EAST AT SUNFLOWER (H) Greyhound Thoroughbred
---------------------------------- ----------------------------------
1995 1994 1995 1994
----------- ------------ ----------- ------------

Race days -- -- 278 218
Performances 284 220 -- --
Pari-mutuel handle $ 10,871 $ 7,162 $ 29,600 $ 24,010

7

================================================================================================
TURF PARADISE (i) 1995 1994 1993
----------- ------------ -----------

Pari-mutuel handle $55,093 $46,549 $22,766

_____
(a) Hollywood Park was closed for four of the historically highest revenue
producing days due to civil unrest.
(b) Off-track attendance is for sites within California only. Attendance figures
are not available for sites located out of state. Per capita off-track figures
are based on handle within California only.
(c) AB 944 was enacted in September 1991, allowing for the simulcasting of live
races from Hollywood Park to local southern California racing facilities of
Santa Anita, Fairplex Park and Los Alamitos.
(d) The 1994 results are as of the date of acquisition, March 23, 1994.
(e) Turf Paradise simulcasts races from other tracks concurrently with live on-
track racing. Prior to 1993 Turf Paradise did not maintain separate pari-mutuel
data for live racing and simulcast racing.
(f) There were fewer simulcast days in 1991 because AB 944, allowing for
simulcasting between local area tracks was not enacted until mid-September 1991.
(g) In July 1994, AB 1418 was enacted allowing for unrestricted simulcasting
between northern and southern California. The previous law, AB 854, passed in
September 1993, allowed for northern and southern California simulcasting with
purses of at least $20,000. Northern California simulcasts run concurrently with
Hollywood Park's live race meets; therefore, there is no attendance data.
(h) TRAK East conducts concurrent live on-track greyhound and horse racing, and
simulcasts both greyhounds and horses; therefore, attendance figures are not
available for simulcast racing.
(i) Turf Paradise conducts concurrent live on-track racing and simulcast racing;
therefore, attendance figures are not available for simulcast racing. Turf
Paradise did not maintain separate live on-track and simulcast pari-mutuel data
prior to 1993.

EXPANSION PLANS During 1995, the Company continued to pursue its expansion
strategy, including examining California card club opportunities, a state-of-
the-art football stadium and other gaming, sports and entertainment
opportunities.

Boomtown, Inc. On March 19, 1996, the Company and Boomtown, (a publicly held
- --------------
company) executed a letter of intent relating to the strategic combination of
the Company with Boomtown by way of a merger with a wholly owned subsidiary of
the Company (the "Merger"), with Boomtown becoming a wholly owned subsidiary of
the Company. The Letter of Intent contemplates the conversion of all
outstanding shares of common stock of Boomtown into shares of common stock of
the Company, based upon an exchange ratio of 0.625 shares of the Company's
common stock for each share of Boomtown's common stock. An estimated 5,774,000
shares of Hollywood Park common stock would be issued in the Merger.

The Letter of Intent contemplates that four members of Boomtown's Board of
Directors would be added to the Company's Board of Directors, and that such
former Boomtown directors would be nominated by the Company for re-election to
the Board for at least the first three annual stockholders meetings following
the Merger. The Company's Board would have no more than eleven members during
such three-year period, and the Executive Committee of the Company's Board of
Directors would be comprised of five persons, two of whom would be nominated by
Boomtown.

Boomtown owns and operates land-based, dockside and riverboat gaming operations
in Verdi, Nevada ("Boomtown Reno"), Las Vegas, Nevada ("Boomtown Las Vegas"),
Biloxi, Mississippi ("Boomtown Biloxi") and Harvey, Louisiana ("Boomtown New
Orleans"). Boomtown's properties offer hotel accommodations, gaming and other
entertainment amenities to primarily middle income, value oriented customers.
The Boomtown properties incorporate an "old west" theme through the use of
western memorabilia in their interior decor, country/western music and western
dress of their employees.

Boomtown Reno has been operating for over a quarter century and is located seven
miles west of Reno on Interstate 80, the major highway connecting northern
California and Reno. Boomtown Reno's customer base is primarily drawn from
Interstate 80 traffic. Boomtown Reno offers its guests a 40,000 square foot
casino, including 1,433 slot machines and 43 table games, a 122-room hotel, a
16-acre truck stop, a full-service recreational vehicle park, a service station,
a mini-mart and other related amenities. In addition, Boomtown Reno offers a
35,000 square foot family entertainment center featuring a dynamic motion
theater, an indoor 18-hole western-themed miniature golf course, a restaurant
and a replica of an 1800's Ferris Wheel.

8

Boomtown Las Vegas commenced operations in May 1994 on a 56-acre site at the
interchange of Blue Diamond Road and Interstate 15, the principal thoroughfare
connecting southern California to Las Vegas. Boomtown Las Vegas is four miles
from the exit for Circus, Circus' Excalibur and Luxor sites and MGM. Boomtown
Las Vegas includes a 30,000 square foot casino with 1,100 slot machines and 28
gaming tables, 300 hotel rooms, a full-service recreational vehicle park, a 600-
seat Opera House Dinner Theater and a replica of an old mine where customers can
pan for real gold.

Boomtown Biloxi, a limited partnership majority owned and controlled by
Boomtown, occupies nine acres on Biloxi, Mississippi's back bay. Boomtown
Biloxi is located one-half mile from Interstate 110, the main highway connecting
Interstate 10 (the main thoroughfare connecting New Orleans and Mobile, Alabama)
and the Gulf of Mexico. The facility, which commenced operations in July 1994,
consists of a land-based facility which houses non-gaming operating space and a
33,000 square foot casino constructed on a 400 x 100 foot barge permanently
moored to the land-based building. The casino offers 985 slot machines, 42
table games and other gaming amenities including restaurants, a western dance
hall/cabaret and a 20,000 square foot family entertainment center.

Boomtown New Orleans, a limited partnership majority owned and controlled by
Boomtown, commenced operations in August 1994 on a 50 acre site in Harvey,
Louisiana, approximately ten miles form the French Quarter of New Orleans.
Gaming operations are conducted from a 250 foot replica of a paddle wheel
riverboat, offering 865 slot machines and 51 table games in a 30,000 square foot
casino. The land-based facility adjacent to the riverboat dock is composed of a
western-themed 88,000 square foot entertainment center and a western
saloon/dance hall.

Boomtown is actively seeking to expand its operations into jurisdictions that
have legalized casino gaming at sites that are near interstate highways or major
thoroughfares near major population or tourist centers. Boomtown is currently
exploring a project in Switzerland, Indiana through a joint venture with Hilton
Gaming Corporation. The gaming license application for this project is pending.

The Letter of Intent further contemplates that the parties will negotiate and
execute a definitive merger agreement which will contain customary
representations and warranties, and which will provide for reciprocal "no-shop"
obligations (subject to each Board's fiduciary duties) and for a break up fee of
$5,000,000 payable by either party under certain conditions.

The consummation of the Merger is subject to, among other things, (i)
negotiation and execution of the definitive merger agreement, (ii) approval by
the respective stockholders and Boards of Directors of the Company and Boomtown,
(iii) receipt of "fairness opinions" from the respective investment bankers
representing the Company and Boomtown, (iv) receipt of requisite regulatory
approvals and gaming licenses, (v) availability of sufficient financing to fund
future gaming projects and to fund the repurchase of Boomtown's outstanding
notes if "put" to Boomtown by the holders as a consequence of the Merger, and
(vi) the execution of certain employment agreements with the officers of
Boomtown. Subject to satisfaction or waiver of such conditions, the parties
currently anticipate working towards a consummation of the Merger by December
31, 1996, but in no event later than June 30, 1997.

Crystal Park Hotel and Casino Construction has begun on the Crystal Park Hotel
- -----------------------------
and Casino, California's first hotel and casino, with an expected opening during
fourth quarter 1996. Crystal Park is expected to open with 100 gaming tables,
with no limits on the number of gaming tables that can be added. It is expected
that the hotel will open with approximately 150 rooms with additional rooms
available if needed. The Casino and hotel will also include a gift shop, a full
service health club complete with a pool, state-of-the-art air filtration
system, and a family-style restaurant.

On July 14, 1995, the Company and Compton Entertainment, Inc. ("CEI") executed
an Amended and Restated Agreement Respecting Pyramid Casino (the "Crystal Park
Agreement") (subsequently changed to Crystal Park Hotel and Casino), finalizing
the terms concerning the development, ownership and operation of a card club in
the City of Compton (the "City"). CEI and each of its officers, directors and
shareholders have been licensed

9

by the City to own and operate a card club. CEI entered into an Amended and
Restated Disposition and Development Agreement (the "DDA") with the City to
lease or purchase land located within the City as the card club site. Under the
terms of the Crystal Park Agreement, on August 3, 1995, the Company paid CEI
$2,000,000 for the real property rights or assignment of the DDA to Hollywood
Park. On August 3, 1995 the Company paid CEI an additional $500,000 to exercise
the five year right to purchase CEI's City gaming license. If at the end of the
five year term of the option to purchase the City gaming license, Hollywood Park
is not able to own and operate a card club at the Compton site, CEI can elect to
either negotiate a new lease, or acquire Hollywood Park's rights to the card
club site for a purchase price as determined by the Agreement. Upon opening the
card club, Hollywood Park will pay CEI up to an additional $2,500,000, under
certain conditions detailed in the Agreement. As required by the DDA, on August
2, 1995, Hollywood Park paid approximately $2,006,000 to the City to purchase
the Convention Center located at the Compton site to house the card club
operations and entered into a 50 year lease with the City for the hotel and
parking parcels at the same site. Initial improvements made by Hollywood Park to
construct, install and equip the Hotel and Casino will be credited against the
annual base rent. No cash rent payments are expected to be made until after the
nineteenth year of the lease.

If the Crystal Park Hotel and Casino opens under current California law, which
does not allow publicly traded companies, such as Hollywood Park, to operate a
card club (other than on the same property as the race track), the Company will
enter into a 60 month lease with CEI. Under the terms of the lease, as the
landlord, Hollywood Park would build and furnish a card club suitable for CEI to
operate. Hollywood Park would not be responsible for any segment of the daily
operations. CEI would pay the Company monthly rent of 2.65% of Hollywood Park's
total investment in the card club. If there is a change in California law,
allowing the Company to operate card clubs at sites other than its race track
property, Hollywood Park would operate the card club in partnership with CEI,
with Hollywood Park owning 67% of the business, which will be subject to the
partnership described below.

CEI has received all of the required City gaming licenses necessary for
operation of Crystal Park, and has filed the required documents with the
California Attorney General, who is currently reviewing the application for a
state of California gaming registration.

Hollywood Park, DeBartolo Entertainment and Leo Chu have formed a 40%/40%/20%,
respectively, partnership to build and operate (per the terms and conditions
outlined above) the Crystal Park Hotel and Casino.

Hollywood Park Stadium The Company is currently in negotiations concerning the
- ----------------------
building and operation of a state-of-the-art football stadium on its Inglewood
property. The Company has not entered into any definitive agreements concerning
this project. Discussions are under way with potential tenants, including
various football franchises of the National Football League, local college
sports departments and Major League Soccer. The current plans call for a 65,000
seat stadium, expandable to 83,000 seats for Superbowls and other special
events, with approximately 200 luxury suites, with the potential to open in
September 1998. Any decisions to begin construction on the stadium would be
dependent upon, among other things, the execution of definitive agreements with
a National Football League team and the National Football League, the
availability of project financing with acceptable terms and the attainment of
the necessary permits and certifications, for which there can be no assurance.

Acting on behalf of the City of Inglewood, the City of Inglewood Planning
Commission approved the development of a football stadium at Hollywood Park on
December 6, 1995. Two petitions for writs of mandamus were filed in Los Angeles
County Superior Court against the City of Inglewood to challenge the stadium
approval. The Company has been named as the Real Party in Interest in both
actions. The first, The Coalition For Responsible Development In Inglewood, et
----------------------------------------------------------
al. v. City of Inglewood (Case No. BS 037268), contends that the stadium
- ------------------------
approval should be voided for the City of Inglewood's alleged failure to comply
with requirements of the California Environmental Quality Act. The first action
is tentatively set for hearing on May 22, 1996. The second, which has been
dismissed, Nzinga Owolo, et al. v. City of Inglewood (Case No. BS 037286) was
-----------------------------------------
filed by various petitioners in propria persona, and also contends the stadium
approval should

10

be voided for the City of Inglewood's alleged failure to comply with
requirements of the California Environmental Quality Act. While it is still
early in the proceedings the Company believes that there are meritorious
defenses to the claims raised in the remaining lawsuit.

The environmental impact report for the Hollywood Park Stadium was certified by
the City of Inglewood Planning Commission on December 6, 1995.

Hollywood Park Arena The Company is in the initial stages of evaluating a
- --------------------
proposed arena, where the Los Angeles Lakers basketball and the Los Angeles
Kings hockey teams would play. Presently, these teams play across the street
from the Inglewood property. Hollywood Park would supply the land for the
proposed arena and receive lease payments and net parking revenues. The
proposed arena would be financed and built by the lessee.

Other related retail and entertainment facilities may be included with
development of either the arena or stadium.

Palm Springs Card Club The Company is a 50% partner with DeBartolo
- ----------------------
Entertainment, in a 30 table Casino and Night Club to be located in Palm
Springs, California. Hollywood Park and DeBartolo Entertainment will be
landlord in a third party leasing arrangement. The Palm Springs site is
expected to open late fourth quarter 1996. The partnership is expected to incur
costs of approximately $1,000,000, with the bulk of the construction costs to be
the responsibility of the site's restaurateur (still to be determined).

Without legislation to expand the types of gaming which could be offered at the
Palm Springs casino, the Palm Springs site is not expected to generate material
income, due to the nearby Indian Reservation with full casino gaming.

Other Expansion On October 27, 1995, Hollywood Park finalized the purchase of
- ---------------
approximately 38 acres, adjacent to the Inglewood property from Texaco
Exploration and Production, Inc. The total purchase price was approximately
$7,500,000, with $3,359,000 paid on October 27, 1995, and the balance is due on
September 1, 1996.

On August 15, 1995, the Company purchased approximately six acres with a hotel,
adjacent to the Inglewood property, for $3,400,000. The hotel was subsequently
demolished to clear the site for the proposed stadium or other development
projects.

OTHER USES OF PROPERTY On October 24, 1995, the Forum Parking Agreement was
executed, covering the one year period from October 1, 1995 through September
30, 1996. For a minimum annual rent of $1,200,000, compared to $1,800,000 per
the prior agreement, patrons attending events at the Forum can park at Hollywood
Park. The October 24, 1995, Forum Parking Agreement is for a shorter time
period than the prior Forum Agreement, which covered twelve years, to provide
flexibility regarding the proposed stadium development and other cross marketing
benefits.

An oil and gas well has been located on the Hollywood Park property since 1981,
and had been operated under a lease between the Company and the well operator,
Casex Co. (the "Operator"). As of January 10, 1995, the Company amended the oil
and gas lease, such that the lessee now utilizes approximately 2.0 acres of
land, with a base rent of 4.0% of net profits from oil and gas production, or a
minimum $30,000 per annum. The Operator performed various redrilling activities
throughout 1995 and as of March 21, 1996, was producing approximately 160
barrels of oil per day. The amended lease stipulates that the Operator must
produce a minimum of 100 barrels of oil or gas equivalent per day for 180
consecutive days over a 270 consecutive day period beginning April 15, 1996, or
operations will be terminated, and the site will be cleaned up to the Company's
specifications, with the Operator responsible for all clean-up costs. Drilling
for new reserves is a highly speculative activity and there can be no assurance
of finding such a reserve.

11

The Company is subject to state and local laws and regulations, ordinances and
similar provisions relating to zoning and other matters that may have the effect
of restricting the uses to which the Company's land and other assets may be put
to use. Any additional development of the Company's land, including the
expansion plans described above, would require approval of such items as
environmental impact reports and similar certifications. There can be no
assurance that other requisite approvals will be obtained.

GOVERNMENT REGULATION The ownership and operation of gaming establishments and
horse racing facilities are subject to extensive state and local regulation.
The Hollywood Park Casino is subject to the registration and regulatory control
of the California Attorney General and the City of Inglewood. Hollywood Park,
Sunflower and Turf Paradise race tracks are subject to licensing and regulatory
control by the California Horse Racing Board, the Kansas Racing Commission and
the Arizona Racing Commission, respectively.

Casino Operations Pursuant to the California Gaming Registration Act (the
- -----------------
"Gaming Registration Act"), the operator of a card club is required to be
registered by the Attorney General and licensed by the City of Inglewood.
Gaming registrations issued by the Attorney General are not transferable. To
obtain a state gaming registration, operators of a card club, their directors,
officers, and certain of their stockholders, are required to submit detailed
information including personal and financial data, to the Attorney General.
With the August 3, 1995, passage and implementation of SB 100, pari-mutuel
wagering facilities that are public companies, including Hollywood Park, were
allowed to own and operate a card club on the same premises as the race track,
at least until January 1, 1999. Thereafter the provisions of SB 100 are
repealed unless prior to January 1, 1999, the California legislature enacts a
comprehensive scheme for the regulation of gaming under the jurisdiction of a
gaming control commission. On September 15, 1995, the Attorney General granted
Hollywood Park a provisional registration under SB 100. A permanent
registration will not be granted until the California Department of Justice
completes the background investigations of Hollywood Park's corporate officers
and directors (the Attorney General is unable to provide an estimated date of
completion of the investigations). Currently annual gaming registration
renewals are required.

The Attorney General has broad discretion to deny gaming registration and may
impose reasonably necessary conditions upon the granting of a gaming
registration. Grounds for denial include: felony convictions, criminal acts,
convictions involving dishonesty, illegal gambling activities, false statements
on a gaming application, and having a financial interest in businesses or
organizations that engage in gaming activities that are illegal under California
law, unless the investor has held a California gaming registration for five
consecutive years before the investment, or unless the investor is a publicly
traded racing association, a wholly owned subsidiary thereof, or an officer,
director, or 5% shareholder of either. In addition, the Attorney General
possesses broad authority to suspend or revoke a gaming registration on several
grounds, including the commission of any act that would constitute grounds for
denial of a gaming application. Other grounds for suspension or revocation of a
gaming registration include violation of any federal, state or local gambling
law, failure to take reasonable steps to prevent dishonest acts or illegal
activities on the premises of the card club, failure to cooperate with the
Attorney General in its oversight of the card club and failure to comply with
any condition of registration. Any owner, operator or manager of a card club
may also be subject to significant fines for violations of the Gaming
Registration Act or any regulation thereunder.

Changes of information in a registration application must be promptly reported
to the Attorney General. In addition, transfer of any ownership interest in a
gaming establishment must be reported to the Attorney General within ten days.
The Attorney General may refuse to allow a change in ownership for any reason
that would constitute grounds for suspension, revocation or denial of a gaming
registration. The Gaming Registration Act also grants municipalities the right
to require employees of gaming establishments to be licensed. The City of
Inglewood has exercised this right.

On March 16, 1993, the City of Inglewood adopted Ordinance No. 93-05 (the
"Inglewood Ordinance") to establish the necessary regulatory framework to
implement the card club initiative approved by Inglewood voters in 1992. The
Inglewood Ordinance provides for a single card club located at Hollywood Park
and allows a publicly-traded corporation to be the owner and operator thereof.
In order to operate the card club, the operator must be licensed by the City of
Inglewood and obtain a card club operations certificate. The

12

application for the license must include detailed information, including
personal and financial data, concerning the operator of the card club, its
officers, directors and certain key employees and beneficial owners of at least
10% of such operator's voting securities. The City of Inglewood will conduct a
background suitability check on all applicants for a license to own and operate
the card club, and a license will be issued only upon a finding that such
issuance will best protect the public health, safety, morals, good order and
welfare of the residents of the City of Inglewood. The City of Inglewood has
complete discretion to determine the suitability of a prospective licensee and
to grant the license. On September 12, 1995, the Inglewood City Council approved
Hollywood Park's application for a gaming license, subject to certain conditions
which were met on November 17, 1995. On March 1, 1996, the City of Inglewood
notified Hollywood Park that the preliminary Operations Certificate
authorization was extended through May 4, 1996. This initial city gaming license
will be valid for five years unless revoked, suspended or surrendered, and is
renewable annually thereafter. The card club operating certificate is valid so
long as the license is valid and no physical or procedural changes are made with
respect to the card club, card club site or operations of the card club.

In addition to requiring the licensing of the card club operator, the Inglewood
Ordinance also requires all employees of a card club to have a valid
registration card from the City of Inglewood. The Inglewood Ordinance also
provides that each (i) "pointholder" (defined in the Inglewood Ordinance as an
individual having an interest in the ownership, division of profits or revenue
of a card club, whether directly, or indirectly through a partnership, joint
venture, closely held corporation or as a beneficial owner of at least 10% of
the voting stock of a publicly-traded corporation), and (ii) "key management
employee" (defined in the Inglewood Ordinance as every individual with the power
to direct operations and employees, or with apparent or actual authority to
direct the counting of the revenue, of a card club) must obtain a permit from
the City of Inglewood. The pointholders and key management employees are also
subject to a background suitability check by the City of Inglewood before a
permit will be issued. The license to operate the card club may be suspended or
revoked if a pointholder or key management employee fails to obtain a permit.
Without the prior consent and permission of the City of Inglewood, a pointholder
may not transfer or sell an interest, or allow an investment, in the ownership,
division of profits or revenue of the card club to any person who is, or by
reason of such transaction would become, a pointholder. However, a purchase of
capital stock by the operator of a card club would not constitute such a
transfer, unless such purchase was by a pointholder. The licensing requirements
of the Inglewood Ordinance apply to all stockholders of a card club operator,
including the Company (if licensed as a card club operator by the City of
Inglewood) and no waiver from such suitability requirement or transfer
restrictions are provided for institutional or other investors who purchase for
investment purposes only.

Racing Operations The California Horse Racing Board has jurisdiction and
- -----------------
supervision over all horse race meets in the state of California. Licenses
granted by the CHRB to conduct horse race meets are of material importance to
the business of the Company. Such licenses must be applied for and obtained
annually by the Company to conduct both the Spring/Summer and Autumn Meeting
race meets. The CHRB has the authority, when granting each license, to vary the
number of weeks allotted and the time of the year in which such allocation
falls. The CHRB may, at its discretion, refuse to issue a license to a race
track operator such as Hollywood Park with a financial interest in another
licensed race track operation or in the conduct of horse racing meets by any
other person at any other race track in the state of California. Although no
future assurance can be given, the Company has applied for and received a
license to conduct thoroughbred horse race meets every year since 1938, except
for 1942 and 1943 due to wartime activities.

As the recipient of a California racing license, Hollywood Park is required to
pay the net proceeds of three designated charity days held during each of its
live race meets up to and including the 1994 Spring/Summer Meet to a charitable
distributing agent approved by the CHRB. As of the 1994 Autumn Meeting, the
charity day payments were changed to the net proceeds from the charity days not
to exceed 2/10 of 1% of the total live on-track handle for the respective race
meet. For 1995, the Company was required to have a total of six charity days,
and will pay approximately $370,000 to the distributing agent.

The Kansas Racing Commission granted Sunflower the facility ownership and
manager licenses; with all race days until the year 2014 granted to TRAK East, a
Kansas not-for-profit corporation. Sunflower has an

13

agreement with TRAK East to provide the physical race tracks along with
management and consulting services for twenty-five years with options to renew
for one or more successive five year terms. The Agreement and Restatement of
Lease and Management Agreement was entered into as of September 14, 1989.
Sunflower has guaranteed that the minimum net revenues to be retained by TRAK
East, from operations of the race track facilities, will not be less than
$450,000 in 1994, and not less than $500,000 from 1995 forward. Net revenues
retained by TRAK East are for distribution to charities. Presently, the charity
payments have been suspended pending the outcome of current Kansas legislative
gaming issues relating to Sunflower's ability to offer slot machine gaming. If
legislation is passed which allows Sunflower to operate slot machines then, as
of May 1996 the charity payments are to resume. If such legislation is not
passed Sunflower's charity day agreement with TRAK East will be re-evaluated.

If the Kansas Legislature does not approve other forms of gaming at Sunflower
including slot machines, it is probable that Sunflower's assets will suffer an
impairment that will require a significant asset write-down that will have a
materially adverse effect on the Company's consolidated financial statements.

Kansas Senate Concurrent Resolution 1621 was introduced on February 15, 1996.
After amendment, the final bill would have required a change to the state of
Kansas' constitution to allow for casino gaming in Kansas. Senate Concurrent
Resolution 1621 was defeated on March 21, 1996.

Kansas Senate Bill 712 was introduced into the Senate Federal and State Affairs
committee on February 15, 1996. This legislation would allow electronic games of
chance at race tracks. As of the date of this filing it remains in committee.

Kansas Senate Bill 754 was introduced into the Senate Federal and State Affairs
committee on March 15, 1996 and would authorize race tracks to operate certain
games, including bingo, keno, pull tabs, and on-line lottery games utilizing a
horse or greyhound racing theme. On March 29, 1996, Senate Bill 754 passed out
of committee with a favorable recommendation. As of the date of this filing, a
Senate floor debate has not scheduled.

Kansas House Concurrent Resolution 5056 ("Resolution 5056") was introduced on
the floor of the House of Representatives on March 28, 1996, to amend the
constitution of the state of Kansas through a statewide election in November to
allow for electronic games of chance to be operated at licensed pari-mutuel
facilities, including Sunflower. Resolution 5056 has been referred to the House
Federal and State Affairs committee where it remains as of the date of this
filing. Resolution 5056 would require a 2/3rds majority of both houses to go to
ballot.

The current Kansas State Legislature session ends on April 5, 1996. The veto
session commences on April 24, 1996, and continues until all scheduled business
is concluded.

The Arizona Racing Commission issues live racing permits that are valid for
three years, and off-track permits are granted on a year to year basis. In May
1994, Turf Paradise received a three year live racing permit from the Arizona
Racing Commission. The permit covers the race years of 1994/1995, 1995/1996,
1996/1997. The permit does not specify the number of race days, but does
specify that live racing may be conducted between the first week of September
through the third week of May. The management of Turf Paradise determines the
number of race days; however, for Turf Paradise to qualify for simulcasting on
days when there is no live racing, there must be live racing at least five days
a week.

COMPETITION The Hollywood Park Casino competes for players directly with card
clubs in neighboring cities, including three card clubs within approximately 12
miles of the Inglewood property, as well as card clubs located on Native
American reservations, where such card clubs are authorized by federal gaming
regulations. These include several reservations in San Bernardino County,
approximately 100 miles from Hollywood Park. The Casino also faces competition
from casinos in Las Vegas and other gaming venues. Other municipalities may, in
the future, propose ballot initiatives similar to the card club initiative
passed in Inglewood which, if approved by voters, could lead to the
establishment of additional card clubs in direct competition with Hollywood
Park. Currently, under SB 100, as of January 1, 1996, there is a three year
moratorium on public votes or referendums to approve the enactment of any city
ordinance to allow additional card clubs, and prohibits the amendment of any
existing ordinances.

Horse racing at Hollywood Park competes for patrons with a wide variety of live
sporting events and cultural activities. There are numerous professional and
collegiate sporting events available in southern California. The race track
also competes with Las Vegas casinos and other gaming venues. The state of
California sponsors a lottery, which the Company believes has had a negative
impact on racing revenues. Although no local race tracks operate live
thoroughbred meets concurrently with Hollywood Park, the Company believes its
operations have been adversely impacted by the proliferation of additional
racing opportunities both in California and outside the state. These
opportunities have made it more difficult for Hollywood Park to attract quality
thoroughbreds, particularly during the spring and summer months when demand for
such horses is greatest. The Company believes that the simulcast legislation,
which since September 1991 has allowed southern California race tracks to accept
pari-mutuel wagers on each others' simulcasts, and the July 1994 passage of AB
1418 removing all restrictions on simulcasts between northern and southern
California, have had a positive impact on the Company's overall revenues,
primarily as the result of a significant increase in off-track and simulcast
racing revenues, although on-track attendance and pari-mutuel handle have
declined. No assurance can be given that such a decline in on-track attendance
and pari-mutuel wagering will not continue or that the Company will continue to
benefit from simulcast wagering in the future.

Sunflower is confronted with intense competition for patrons from riverboat
gaming, complete with slot machines, on the nearby Missouri River. On June 22,
1994, riverboat gaming officially opened on the Missouri River, with the largest
boat located within 10 miles of Sunflower. On November 8, 1994, Missouri voters
authorized the use of games of chance on riverboats, including slot machines,
which were placed into play on December 9, 1994. The introduction of riverboat
gaming in Missouri has had a very significant negative impact on Sunflower's
financial results and is expected to continue to have such an impact.

14

Turf Paradise's primary competition is from local Indian Casinos with Las Vegas-
style gaming. Twenty of the twenty-one tribes in Arizona are either already
involved in gaming or in the planning stages. Currently, there are eleven
operating casinos with a combined total of approximately 3,500 slot machines,
and a total of 38 additional authorized gaming sites. There are three
functioning casinos within 60 miles of Turf Paradise; with the closest
approximately 28 miles away. The proposed Salt River Indian Casino, near
Scottsdale, would be located approximately 20 miles from Turf Paradise, although
the proposed opening date for this casino has yet to be determined due to a
decision by the Governor of Arizona and the State Department of Gaming which
would not allow for the installation of slot machines and video lottery
terminals at the future Salt River facility. The Governor's decision also
applies to any other tribal casinos which are operated by a tribe, that was not
in possession of a signed gaming compact by May 1995. The Salt River tribe has
entered into litigation with the State of Arizona regarding the Governor's
decision. The outcome of this litigation is yet to be decided, and there is no
certainty as to when the case will come under review. To date, the Company
believes that the present level of casino gaming in Arizona has been a material
and significant deterrent to future growth of in-state pari-mutuel handle.

Along with casino gaming, Turf Paradise also competes with a state run lottery,
year round greyhound pari-mutuel racing and simulcasts from Prescott Downs to
the same off-track sites Turf Paradise sends its live races.

Presently the Company is not aware of any pending legislation related to gaming
on behalf of race tracks or the state lottery for the 1996 Arizona legislative
session.

FEDERAL INCOME TAX MATTERS Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards ("SFAS") 109 Accounting for Income
---------------------
Taxes, whereby deferred tax assets and liabilities are recognized for the future
- -----
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

As of December 31, 1995, the Company had a federal regular net operating loss
carryforward of approximately $2,600,000 that, in general, is available to
offset future taxable income and will not expire until 2010. In addition, as of
December 31, 1995, the Company had approximately $468,000 of general business
tax credits and $585,000 of alternative minimum tax credits available to reduce
future federal income taxes, although in either case, the tax credits generally
cannot reduce federal taxes paid below the calculated amount of alternative
minimum tax. The general business tax credits expire as follows: 1999 -
$425,000; 2000 - $43,000. The alternative minimum tax credits do not expire.
The Company's use of its tax credit carryforwards is subject to certain
limitations imposed by Section 383 of the Internal Revenue Code and by the
separate return limitation year rules of the consolidated return regulations.
Although Management currently expects that such limitations will not prevent the
Company from fully utilizing the benefits of its tax credits, it is possible
that such limitations could defer or reduce the Company's use of its general
business tax credit and alternative minimum tax credit carryforwards.

EMPLOYEES The Hollywood Park Casino employs approximately 1,500 employees.
Presently, all Casino employees are non-union, with the exception of the
approximately 500 culinary employees working in the Casino, who are represented
by Hotel Employees & Restaurant Employees, Local 11. Negotiations for a
collective bargaining agreement between the Company and those employees have
commenced, however it is too soon to predict the outcome of those negotiations.
If negotiations reach an impasse the Casino food and beverage employees have the
right to engage in a strike or other job action.

The Hollywood Park race track and corporate office employs approximately 575
full-time employees. The number of seasonal employees varies by race meet due
to differences in staffing needs during live on-track racing as compared to
simulcast racing. In 1995, the number of seasonal employees ranged from
approximately 400 to approximately 1,500. Most race track seasonal employees
are covered by collective bargaining agreements, as are approximately 400 of the
full-time employees.

15

The Company's collective bargaining agreement with Hotel Employees & Restaurant
Employees, Local 11 covering the race track employees expires in April 1996. As
of the filing date negotiations on a new agreement have not yet commenced.

Sunflower has a permanent staff of 41 and a non-union seasonal staff that
fluctuates between approximately 375 and 500.

Turf Paradise has a permanent staff of approximately 150 and a non-union
seasonal staff that fluctuates between approximately 425 and 475.

OTHER Information concerning backlog, sources and availability of raw materials
is not essential to an understanding of the Company's business.

The Company does not engage in material research activities relating to
development of new products or services or improvement of existing products or
services.

Compliance with federal, state and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment have not had a material effect
upon capital expenditures, earnings or the competitive position of the Company.

The Company does not engage in material operations in any foreign country, nor
is a material portion of its sales or revenues derived from customers in any
foreign country.

ITEM 2. PROPERTIES
- ------- ----------

Hollywood Park owns approximately 378 acres in Inglewood, California, which is
located in the heart of the Los Angeles metropolitan area, with a population
base of approximately 14 million; making it the second most populous area in the
United States. The 60,000 square foot Casino is located next to the race track.
The Casino has approximately 140 to 150 tables available for play at any given
time, with ample expansion space in the building that houses the Casino. The
race track consists of the grandstand, clubhouse and Turf Club areas, which can
accommodate 25,000, 6,000 and 2,000 patrons, respectively. The stable area can
accommodate approximately 2,150 horses. There is abundant parking with spaces
for approximately 17,500 vehicles. The race track also houses the executive
offices of the Company.

The proposed Hollywood Park Stadium would be located at the Inglewood property
and along with parking requirements (stadium patrons would have access to race
track parking, though stadium events may fall on the same day as a live on-track
race day) would require 46 acres. Currently the Golf and Sports Center covers
14 acres, two acres are under lease to the Casex Co., Forum parking covers
twelve acres, with the Casino, race track and all other parking covering 245
acres. Presently there are 105 acres available for immediate development.

Sunflower's property, located in Kansas City, Kansas, covers 393 acres, of which
222 acres are currently developed, leaving 171 undeveloped acres. There are 1.6
million people living within 60 miles of Sunflower. The facility has two
separate grandstands, one for greyhound racing and one for live horse racing.
The horse grandstand is closed except for the 49 days of live horse racing each
fall. Both grandstands contain a clubhouse and Turf Club section. The
greyhound grandstand has capacity for 7,832 patrons (both seating and standing)
and the horse grandstand has capacity for 7,157 patrons (both seating and
standing). The facility has 18 greyhound kennels and 26 barns. There is
combined parking available for approximately 6,500 vehicles.

Turf Paradise, located in Phoenix, Arizona, covers approximately 275 acres, with
approximately 100 undeveloped acres, with a surrounding area population of
approximately 2.5 million. The race track contains a grandstand, clubhouse and
Turf Club section; with a combined seating capacity of approximately 7,400.
Overall capacity including both standing and seating is estimated at 16,000.
The stable area has a capacity

16

to board approximately 1,940 horses. Parking is available for 4,200 vehicles.
The Paradise Market opened on March 4, 1995, and is located on 9.5 acres. The
Paradise Market is leased to a third party operator.

ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------

As previously reported by the Company, and described in the Company's Form 10-Q
for the quarter ended September 30, 1995, six purported class actions (the
"Class Actions") are presently pending against the Company and certain of its
directors and officers in the United States District Court, Central District of
California (the "District Court") and consolidated in a single action entitled
In re Hollywood Park Securities Litigation, Master File No. CV-94-6551-ABC
- ------------------------------------------
(GHKx). The plaintiffs in the Class Actions purport to assert violations of the
federal securities laws based upon, among other things, the allegation that the
defendants made overly optimistic statements and projections concerning the
Company.

Counsel for certain plaintiffs in the Class Actions also advised the Company of
such plaintiffs' intention to add or pursue purported derivative claims against
certain of the Company's directors and officers in connection with, among other
things, the matters alleged in the Class Actions. The Company denied all
liability and advised the plaintiffs of its intent to assert various defenses
and to contest vigorously all purported claims and allegations. By order of the
District Court, dated February 27, 1995, the parties engaged in an extensive
mediation process in an effort to settle the Class Actions and all related
potential and threatened claims. After engaging in the court-ordered mediation
process, the parties reached an agreement in principle to settle all pending and
threatened claims, including the Class Actions and the threatened derivative
claims.

On September 15, 1995, the previously threatened derivative action entitled
William R. Barney, Jr. v. Randall D. Hubbard, et al., Case No. 692583 (the
- ----------------------------------------------------
"Derivative Action"), was commenced in the Superior Court of the State of
California for the County of San Diego. The Derivative Action is a purported
stockholder derivative action allegedly brought on behalf of the Company against
certain of the Company's directors and officers, and based, in part, on the
allegation that such directors and officers breached their fiduciary duties in
connection with matters alleged in or relating to the Class Actions.

Under the proposed settlement of the Class Actions, a settlement fund of
$5,800,000 will be created for the benefit of the alleged class of shareholders,
with contributions from the Company and the insurance carrier for the Company's
directors and officers. After giving consideration to an additional cash
payment to be made to the Company from the insurance carrier for the Company's
directors and officers in the settlement of the Derivative Action, the Company's
net settlement payment in the Class Actions is expected to be less than
$2,500,000. The proposed settlement of the Derivative Action provides for a
$2,000,000 payment to the Company from the insurance carrier for the Company's
directors and officers. With $1,000,000 of that amount paid to the plaintiffs'
attorneys as fees, costs and expenses; the remaining $1,000,000 will defray the
Company's payment in the settlement of the Class Actions. The proposed
settlement of the Derivative Action includes provisions enhancing the Company's
financial controls and modifying certain terms to its acquisition of Sunflower.

The Company and all parties have executed definitive settlement agreements. The
proposed settlements have been approved by the Company's Board of Directors, but
remain conditioned upon, among other things, approval by each of the courts in
the Class Actions and in the Derivative Action. On February 26, 1996, the
District Court approved the settlement of the Class Actions and entered its
judgment dismissing the Class Actions. The parties' application for approval of
the settlement of the Derivative Action remains pending. If the settlements are
not approved and consummated for any reason, the Company will assert various
defenses and vigorously defend any and all claims against it relating to such
matters.

The Company also has executed a separate settlement as to all purported claims
against the Company and its directors and officers by the former controlling
shareholder of Turf Paradise. Other former Turf Paradise shareholders will be
entitled to participate in the settlement of the Class Actions, but the former
controlling shareholder of Turf Paradise has agreed to be excluded from that
settlement. The Company does not believe that the settlement amounts to be paid
to the former controlling shareholder of Turf Paradise ($2,750,000) is

17

preferential to the amounts being paid to other Turf Paradise shareholders under
the Class Action. This settlement is conditional on final approval and
consummation of the settlements of the Class and Derivative Actions.

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

During the fourth quarter of 1995 no matters were submitted to a vote of
security holders through the solicitation of proxies or otherwise.

PART II

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

The Company's common stock is listed on the NASDAQ National Market System and is
traded under the name Hollywood Park, Inc., identified by the symbol "HPRK".

The following table sets forth the high and low sales prices per common share of
the Company's common stock on the NASDAQ National Market System for the periods
listed. All sales prices are rounded to the nearest 1/8. The prices shown are
prices between dealers and do not reflect retail markup, markdown or
commissions, nor do they necessarily represent actual transactions.

Price Range
--------------------
High Low
--------------------

1995
- -----------------
First Quarter $13 1/4 $10 3/8
Second Quarter 14 1/4 11 1/2
Third Quarter 14 3/4 11 1/2
Fourth Quarter 11 3/4 9 1/4

1994
- -----------------
First Quarter $30 3/4 $18 1/2
Second Quarter 26 1/2 15 5/8
Third Quarter 24 1/4 13 3/4
Fourth Quarter 14 3/4 9 1/4

There were approximately 3,741 stockholders of record of the Company's common
stock as of March 15, 1996.

DIVIDENDS The Company did not pay any common stock dividends in 1995 or 1994.
Payments of future common stock dividends, would be at the discretion of the
Company's Board of Directors and would depend upon, among other things, future
earnings, operational and capital requirements, the overall financial condition
of the Company and general business conditions. The Board of Directors believes
that reinvestment of cash in its expansion program is in the best interest of
the Company and its shareholders, and does not anticipate paying any cash
dividends on the Company's common stock in the near future.

Cash dividends on the common stock may not be declared, paid or set aside unless
full cumulative dividends have been paid on the Company's $70.00 convertible
preferred stock.

ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------

The following selected financial information for the years 1991 through 1995 was
derived from the consolidated financial statements of the Company, restated to
reflect the results of operations of Turf Paradise, a wholly owned subsidiary,
acquired on August 11, 1994, and accounted for under the pooling of

18

interests method of accounting. Historically, Turf Paradise had a fiscal year
end of June 30, and as such, the selected financial data for the years 1991
through 1993 was restated as a consolidation of Hollywood Park's results for the
year ended December 31, with Turf Paradise's results for the year ended June 30.
The Casino began operations on July 1, 1994, and Sunflower was acquired on March
23, 1994; accounted for under the purchase method of accounting. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the financial
statements and related notes thereto.

Hollywood Park, Inc.
Selected Financial Data

For the years ended December 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------------------

(in thousands, except per share data)

STATEMENT OF OPERATIONS DATA
Revenues:
Racing operations and other income $ 93,349 $ 98,743 $ 78,985 $80,944 $74,057
Casino operations 37,223 18,581 0 0 0
-------- -------- -------- ------- -------
130,572 117,324 78,985 80,944 74,057
-------- -------- -------- ------- -------
Expenses:
Racing operations and other expenses 79,828 80,839 62,798 63,499 61,133
Casino operations 29,819 15,557 0 0 0
-------- -------- -------- ------- -------
109,647 96,396 62,798 63,499 61,133
-------- -------- -------- ------- -------
Operating income 20,925 20,928 16,187 17,445 12,924
Casino pre-opening and training 0 2,337 850 0 0
expenses
Turf Paradise acquisition costs 0 627 0 0 0
Lawsuit settlement 6,088 0 0 0 0
-------- -------- -------- ------- -------
Income before interest, income taxes,
depreciation and amortization 14,837 17,964 15,337 17,445 12,924
Depreciation and amortization 11,384 9,563 6,402 5,899 5,890
Interest expense 3,922 3,061 1,517 4,883 4,973
-------- -------- -------- ------- -------
Income (loss) before income taxes and
extraordinary item (469) 5,340 7,418 6,663 2,061
Income tax expense 693 1,568 1,025 3,135 255
-------- -------- -------- ------- -------
Income (loss) before extraordinary item (1,162) 3,772 6,393 3,528 1,806
Extraordinary item - Utilization of tax
benefit from net operating loss
carryforwards 0 0 0 1,894 73
-------- -------- -------- ------- -------
Net income (loss) ($1,162) $ 3,772 $ 6,393 $ 5,422 $ 1,879
======== ======== ======== ======= =======
==========================================================================================================

Dividends on convertible preferred stock $ 1,925 $ 1,925 $ 1,718 $ 0 $ 0
-------- -------- -------- ------- -------
Net income (loss) available to
(allocated to) common shareholders
($3,087) $ 1,847 $ 4,675 $ 5,422 $ 1,879
======== ======== ======== ======= =======
Per common share:
Income (loss) before extraordinary
item:
Primary ($0.17) $ 0.10 $ 0.30 $ 0.27 $ 0.14
Fully diluted ($0.17) $ 0.10 $ 0.30 $ 0.27 $ 0.14
Net income (loss):
Primary ($0.17) $ 0.10 $ 0.30 $ 0.41 $ 0.14
Fully diluted ($0.17) $ 0.10 $ 0.30 $ 0.41 $ 0.14
Dividends $ 0.00 $ 0.00 $ 0.00 $ 0.04 $ 0.15

BALANCE SHEET DATA:
Total assets $286,706 $246,573 $176,424 $90,219 $89,777
Other liabilities 105,331 36,518 21,876 34,494 16,047
Long term obligations 15,629 42,800 348 45,538 68,400
Stockholders' equity 165,746 167,255 154,200 10,187 5,330

19

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

RESULTS OF OPERATIONS

Year ended December 31, 1995 compared to the year ended December 31, 1994
-------------------------------------------------------------------------

The 1995 consolidated financial statements include the results of operations at
Hollywood Park, the Casino, Sunflower, and Turf Paradise. The Casino was opened
on July 1, 1994, under a third party leasing arrangement with PCM, under which
PCM operated the gaming floor business and Hollywood Park operated all other
activities. The gaming floor business was acquired from PCM as of November 17,
1995, accounted for under the purchase method of accounting. The 1995 Casino
operating results included ten and a half months of operations under the lease
with PCM, and one and a half months under the Company's direct ownership and
control; 1994's operating results had just six months of Casino activities under
the lease with PCM. Sunflower was a newly acquired subsidiary as of March 31,
1994, accounted for under the purchase method of accounting; therefore, the 1994
statement of operations does not include Sunflower's first quarter results.
Turf Paradise was a newly acquired subsidiary as of August 11, 1994, accounted
for under the pooling of interests method of accounting, and as required under
this method of reporting, the 1994 results have been restated to include the
operating results of Turf Paradise.

Total revenues increased by $13,249,000, or 11.3%, during the year ended
December 31, 1995, as compared to the year ended December 31, 1994. Included in
the 1995 revenues was $20,624,000 of Casino fixed lease rent revenue (of which
PCM paid $12,000,000 in 1995) and $6,032,000 of gaming floor revenue, compared
to $11,745,000 of Casino fixed lease rent revenue in 1994, which covers just six
months of operations, and no gaming floor revenues in 1994. Pari-mutuel
commissions increased by $1,528,000, or 3.0%, primarily due to increased
simulcast racing at both Hollywood Park and Turf Paradise, despite there being
five fewer live race days at Hollywood Park and thirteen fewer live race days at
Turf Paradise. Lease and management fee - Sunflower continued to be severely
negatively impacted by riverboat gaming in Missouri. For the year ended
December 31, 1995, as compared to the year ended December 31, 1994, Sunflower's
total live pari-mutuel handle decreased by $60,385,000, or 54.6%. (See
Government Regulation, Racing Operations.) Casino lease rent revenue of
$20,624,000 was recorded for the year ended December 31, 1995, which included
lease rent of $2,000,000 for each of the six months ended June 30, 1995, per the
First Amended and Restated Lease, which retroactively lowered the monthly lease
rent to $2,000,000 from $3,000,000; and lease rent of $1,500,000 for each month
during the period July 31, 1995 through November 17, 1995, (prorated from
November 1, 1995, through November 17, 1995) per the Second Amended and Restated
Lease, signed in August 1995, which further lowered the monthly rent as of July
1, 1995 to $1,500,000. Also recorded was $500,000 of lease rent related to the
July 1994 valuation allowance. Lease rent recorded for July 1994 was $3,000,000
less a valuation allowance of $1,500,000, but with the April 1995 signing of the
First Amended and Restated Lease monthly lease rent was retroactively lowered to
$2,000,000, generating $500,000 of excess valuation allowance. For the year
ended December 31, 1995, PCM made cash payments of $16,377,000, covering lease
rent, accrued interest on unpaid rent, and for food and beverage service
provided by Hollywood Park. On November 17, 1995, Hollywood Park acquired PCM
and assumed operations of the gaming floors, generating $6,032,000 of Casino -
Gaming revenues through December 31, 1995. Admissions, programs and other racing
income decreased by $758,000, or 4.0%, due primarily to a 37.1% decline in on-
track attendance at Sunflower, five fewer live race days at Hollywood Park, and
thirteen fewer live race days at Turf Paradise. Concession sales declined by
$757,000 or 3.7%, mainly due to a 31.9% decrease in Sunflower's concession
sales, and five fewer live race days at Hollywood Park, and thirteen fewer live
race days at Turf Paradise. Other income increased by $777,000, or 12.3%.
Revenue declines at Hollywood Park due to the cancellation of the Forum Parking
Agreement, were offset primarily due to Casino gift shop and health club sales.
A new Forum Parking Agreement was executed on October 24, 1995, covering the one
year from October 1, 1995, through September 30, 1996, with minimum annual rent
of $1,200,000, compared to $1,800,000 per the prior Forum Parking Agreement. The
new Forum Parking Agreement is for a shorter period than the original Forum
Parking Agreement, which covered twelve years, to provide flexibility regarding
the proposed stadium development and other cross marketing benefits.

20

Total operating expenses, inclusive of $29,819,000 of Casino operating expenses
(representing a month and a half of gaming floor operations and twelve months of
other Casino operations, for which there were no gaming floor expenses and just
six months of comparable other Casino operations activity in 1994) increased by
$13,251,000, or 13.7%, during the year ended December 31, 1995, as compared to
the year ended December 31, 1994. Salaries, wages and employee benefits
increased by $5,874,000, or 15.8%, principally because of wages and benefits
associated with the gaming floor staff (hired November 17, 1995) and the six
additional months of other Casino operations wages in 1995 as compared to the
same period in 1994. Operations of facilities increased by $770,000, or 7.6%,
primarily related to increased insurance costs and Casino operations. Cost of
concession sales increased by $3,311,000, or 15.2%, essentially due to Casino
operations. Professional services increased by $213,000, or 2.8%, primarily due
to legal costs incurred related to the Company's expansion projects, including
the proposed stadium. Rent expense decreased by $517,000, or 28.4%, mainly due
to the conclusion of Hollywood Park's lease on the infield message board.
Utilities increased by $215,000, or 4.6%, due to the full year of Casino
operations in 1995 as compared to just six months of activity in 1994.
Marketing costs decreased by $515,000, or 8.5%, due primarily to savings related
to reductions in advertising for Friday night racing and five fewer live race
days at Hollywood Park. Administrative costs increased by $3,902,000, or 55.5%,
principally because of costs incurred related to the South San Francisco and
Pomona card club initiative campaigns, which were defeated in September and
November, respectively, and costs for other expansion endeavors, including the
proposed stadium and other card clubs. All costs associated with projects in
the evaluation stages are expensed as incurred.

As previously reported by the Company, and described in the Company's Form 10-Q
for the quarter ended September 30, 1995, six purported class actions (the
"Class Actions") are presently pending against the Company and certain of its
directors and officers in the United States District Court, Central District of
California (the "District Court") and consolidated in a single action entitled
In re Hollywood Park Securities Litigation, Master File No. CV-94-6551-ABC
- ------------------------------------------
(GHKx). The plaintiffs in the Class Actions purport to assert violations of the
federal securities laws based upon, among other things, the allegation that the
defendants made overly optimistic statements and projections concerning the
Company. In addition, on September 15, 1995, the previously threatened
derivative action entitled William R. Barney, Jr. v. Randall D. Hubbard, et al.,
----------------------------------------------------
Case No. 692583 (the "Derivative Action"), was commenced in the Superior Court
of the State of California for the County of San Diego. The Derivative Action
is a purported stockholder derivative action allegedly brought on behalf of the
Company against certain of the Company's directors and officers, and based, in
part, on the allegation that such directors and officers breached their
fiduciary duties in connection with matters alleged in or relating to the Class
Actions. (See Item 3. Legal Proceedings.) The Company has entered into
settlement agreements with respect to the Class Actions and the Derivative
Action, which are subject to satisfaction of certain conditions.

The 1994 Casino pre-opening and training costs of $2,337,000 were primarily
related to wages paid during the on-the-job training of staff hired to open the
Casino on July 1, 1994. There were no similar costs in 1995. The Turf Paradise
acquisition costs were a result of the August 11, 1994, acquisition of Turf
Paradise by Hollywood Park; there were no similar costs in 1995.

Depreciation and amortization increased by $1,821,000, or 19.0%, for the year
ended December 31, 1995, as compared to the year ended December 31, 1994. The
increase was mainly due to Casino operations, and costs associated with the
first quarter of 1995 at Sunflower with no corresponding amount in 1994.
Interest expense increased by $860,000, or 28.1%, principally due to an
additional three months of Sunflower interest expense in the 1995 results.
Sunflower's 1994 results are exclusive of the first quarter.

Income tax expense decreased by $875,000, due primarily to the decrease in pre-
tax income in the year ended December 31, 1995 as compared to the year ended
December 31, 1994.

Year ended December 31, 1994 compared to the year ended December 31, 1993
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The 1994 consolidated financial statements include the results of operations at
Hollywood Park, Sunflower, Turf Paradise and the Hollywood Park Casino.
Sunflower was a newly acquired subsidiary, as of March 23,

21

1994, accounted for under the purchase method of accounting and as such, there
are no comparable results of operations in the 1993 figures. Turf Paradise was a
newly acquired subsidiary, as of August 11, 1994, accounted for under the
pooling of interests method of accounting and, accordingly, prior years have
been restated to include the results of operations of Turf Paradise.
Historically, Turf Paradise has reported operations with a fiscal year end of
June 30 and as such, the 1993 results of operations are a consolidation of
Hollywood Park's results for the year ended December 31, 1993, and Turf
Paradise's results for the year ended June 30, 1993. The Casino began operations
on Ju