Lake City Casino Plans Highlights

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GATEWAY CASINOS INCOME FUND REPORTS RECORD THIRD QUARTER FINANCIAL RESULTS

• On May 1, 2006, the Fund entered into an agreement with a syndicate of Canadian chartered banks to provide total debt financing of $220 million. Funds will be used to provide construction financing for the Burnaby redevelopment and the potential expansion/relocation of the Lake City Casinos in Kamloops, Kelowna and Vernon. The total financing comprises a $30 million revolving credit facility, a $175 million committed construction facility and $15 million committed construction contingency facility.
• The Fund believes that opportunities exist for expansion or relocation of the casinos in Kelowna, Kamloops and Vernon. Preliminary plans for each are detailed below, which are subject to approval by BCLC and the relevant municipalities. The preliminary capital cost for all three projects is estimated to be approximately $50 million which management anticipates will be 100% eligible for FDC. *
• The Vernon Casino is currently located in 12,000 square feet at the Village Green Hotel. It was opened in 1998 and no longer reflects the populations’ expectations. The Fund’s plans envision relocating the facility to a newly developed 300,000 square foot neighborhood shopping center located on Highway 97 in the north end of Vernon. This is a high traffic location in the middle of a new large-scale retail and business park development, convenient to the city population and the North Okanagan trading areas. The new casino is anticipated to be located in 25,000 sq. ft of leased space on the ground floor of a brand new three-story building. The Fund is contemplating a facility with up to 400 slot machines and electronic games, a pub-style restaurant/lounge with stage area to host entertainment and promotional events. During the third quarter of 2006, the Fund finalized negotiations and entered into a long-term lease for the property. The lease has an initial term of ten years, commencing on the date that the building is complete, and provides for two renewal terms of five years each. The project is expected to take between 16 and 18 months to complete.
• Kelowna Casino The Kelowna Casino is located in the Grand Okanagan Resort and Conference Centre. The Casino is currently 21,000 square feet and hosts 342 slot machines and 10 table games. The facility includes limited food and beverage services, including liquor service that was added in the first quarter of 2006. Management believes that the Kelowna market can support a larger facility and is investigating alternatives to approximately double the size of the facility to increase the size of the gaming floor, as well as to provide for enhanced food and beverage services and live entertainment. Preliminary plans envision expanding the casino to approximately 40,000 square feet, which will allow for 600 slot machines and 16 table games, as well as a 6-table poker room, a small entertainment stage and a full service restaurant. Management is working with the owners of the Grand Okanagan to develop the expansion plans. Once final agreements are in place, development and construction of the new space is expected to take 18 to 24 months.
• Kamloops Casino The Kamloops Casino is located within the Executive Inn in downtown Kamloops. The current facility is 14,400 square feet and hosts 300 slot machines and 8 table games. Our initial plans are to build a new 35,000-sq ft freestanding casino with up to 450 slot machines, 10 tables and a 6-table poker room on a 1.24 acre site immediately to the north of the hotel. In addition, we are looking to incorporate a small pub-style restaurant/lounge with stage area into the design. The plan also includes an underground parking garage with approximately 225 designated spaces for casino guests. The land for the new casino was acquired in late September for $2.85 million. The Fund is currently evaluating designers for this project and expects to award a design contract within the fourth quarter of 2006. Development and construction of the new casino is expected to take between 18 and 24 months.
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*What is the Facility Development Fund?
Under the terms of the COSAs with the BCLC, the BCLC deposits a facility development fee (”FDF”), equal to 3% of the total revenue generated from the table games and slot machines at each BC casino, into a trust account managed by the casino operator, for payout of additional compensation based on eligible capital expenditures. When Gateway incurs an eligible expenditure, it submits this to the BCLC for approval and, once approved, can draw the amount of the expenditure from the Facility Development Fund. Any funds not reimbursed accumulate in the facility development fund for future eligible expenditures.

What types of expenditures are eligible for additional compensation from the Facility Development Fund?
In general, all capital expenditures to develop a casino and all capital expenditures that improve the casino are eligible for additional compensation from the Facility Development Fund.