MI Developments announces 2008 second quarter results and departure of CEO



    AURORA, ON, Aug. 8 /CNW/ - MI Developments Inc. (TSX: MIM.A, MIM.B; NYSE:  
MIM) ("MID" or the "Company") today announced its results for the three and
six months ended June 30, 2008. All figures are in U.S. dollars.

    
    -------------------------------------------------------------------------
                                        REAL ESTATE BUSINESS(1)
                                 Three months              Six months
                                ended June 30,            ended June 30,
    (in thousands,        ------------------------- -------------------------
     except per share         2008         2007         2008         2007
     figures)             ------------ ------------ ------------ ------------

    Revenues              $    55,299  $    46,082  $   109,334  $    90,840
    Net income            $    26,268  $    21,492  $    57,252  $    45,163
    Funds from operations
     ("FFO")(2)           $    38,960  $    31,282  $    82,857  $    65,485
    Diluted FFO per
     share(2)             $      0.83  $      0.64  $      1.77  $      1.35
    -------------------------------------------------------------------------

                                          MID CONSOLIDATED(1)
                                 Three months              Six months
                                ended June 30,            ended June 30,
    (in thousands,        ------------------------- -------------------------
     except per share         2008         2007         2008         2007
     figures)             ------------ ------------ ------------ ------------

    Revenues
      Real Estate
       Business           $    55,299  $    46,082  $   109,334  $    90,840
      Magna Entertainment
       Corp. ("MEC")(3)       167,390      168,031      398,218      422,248
      Eliminations             (8,643)      (5,082)     (16,751)      (9,944)
                          ------------ ------------ ------------ ------------
                          $   214,046  $   209,031  $   490,801  $   503,144
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income (loss)
      Real Estate
       Business           $    26,268  $    21,492  $    57,252  $    45,163
      MEC - continuing
       operations                  39        5,476       (7,334)      40,972
      Eliminations                 54      (18,431)         320      (53,275)
                          ------------ ------------ ------------ ------------
      Income from
       continuing
       operations              26,361        8,537       50,238       32,860
      MEC - discontinued
       operations(4)            1,680         (982)     (15,600)      (2,022)
                          ------------ ------------ ------------ ------------
                          $    28,041  $     7,555  $    34,638  $    30,838
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings per
     share from
     continuing
     operations           $      0.56  $      0.18  $      1.07  $      0.68
    Diluted earnings
     per share            $      0.60  $      0.16  $      0.74  $      0.64
    -------------------------------------------------------------------------
    (1) Transactions between the Real Estate Business and MEC have not been
        eliminated in the presentation of each segment's results of
        operations. However, the effects of transactions between these two
        segments are eliminated in the consolidated results of operations of
        the Company.

    (2) FFO and diluted FFO per share are measures widely used by analysts
        and investors in evaluating the operating performance of real estate
        companies. However, FFO does not have a standardized meaning under
        Canadian generally accepted accounting principles ("GAAP") and
        therefore may not be comparable to similar measures presented by
        other companies. Please refer to "Reconciliation of Non-GAAP to GAAP
        Financial Measures" below.

    (3) Excludes revenues from MEC's discontinued operations.

    (4) Discontinued operations represent MEC's discontinued operations, net
        of certain related consolidation adjustments. MEC's discontinued
        operations for the three-month and six-month periods ended June 30,
        2008 and 2007 include the operations of Remington Park, Thistledown,
        Portland Meadows, Great Lakes Downs and Magna Racino(TM).
    -------------------------------------------------------------------------
    


    DEPARTURE OF CHIEF EXECUTIVE OFFICER
    ------------------------------------
    MID also announced today that, following a transition period, John
Simonetti will depart as MID's Chief Executive Officer and as a member of the
Board of Directors. The Board will commence a search for a replacement to fill
the CEO role.
    Mr. Simonetti stated, "I have been with MID since the time of its
spin-off from Magna International in 2003. My experience has been rewarding,
but also extremely challenging. Over the past three years, I have spent an
enormous amount of time and energy dealing with issues relating to how our
company is structured and operated and our investment in MEC. It's been
frustrating that, despite these efforts, we haven't been able to broker a
compromise solution among our shareholders. Accordingly, I thought it best
that I leave MID and return to Magna. I wish my management and Board
colleagues all the best, and will be working to transition my responsibilities
in the near term."
    MID's Chairman, Frank Stronach, stated, "On behalf of the Board, I would
like to thank John for his tremendous efforts at MID since its inception as a
public company. I am confident that he will make a very positive contribution
in his new role at Magna."

    REORGANIZATION PROPOSAL
    -----------------------
    On March 31, 2008, MID received a reorganization proposal on behalf of
various shareholders of MID, including entities affiliated with the Stronach
Trust (the "Stronach Group"), MID's controlling shareholder. The principal
components of the reorganization proposal are set out in MID's press release
dated March 31, 2008, which can be found on the Company's website at
www.midevelopments.com and on SEDAR at www.sedar.com. MID's Board of Directors
mandated a special committee of independent directors (the "MID Special
Committee") to review the proposal and make recommendations to the Board.
    The proposal contemplated MID calling by May 30, 2008 a special meeting
of shareholders to consider the reorganization and closing the transaction no
later than July 30, 2008. On May 30, 2008, MID called a special meeting of
shareholders to be held on July 24, 2008.
    In early June 2008, at the direction of the MID Special Committee, MID
management commenced discussions with a number of MID Class A shareholders,
including those shareholders (owning in aggregate more than 50% of the
outstanding Class A Subordinate Voting Shares) that supported the original
reorganization proposal announced on March 31, 2008. The discussions are
intended to develop a consensus on how to best amend and structure the
proposed reorganization. As a result of these discussions, on June 27, 2008,
MID announced that the special meeting discussed above was being postponed.
    As of the date of this press release, no consensus has been reached with
respect to amending the reorganization proposal. As a result, MID intends to
continue to explore a range of alternatives in respect of its MEC investment.
These alternatives include, without limitation, examining an amended
reorganization proposal and evaluating whether or to what extent MID might
participate in a recapitalization or restructuring of MEC. MID is not subject
to any restrictions regarding future investments in MEC.
    Any potential transactions with MEC would be subject to review by the MID
Special Committee and the approval of the MID Board. Neither the MID Special
Committee nor the MID Board has made any decisions or recommendations with
respect to the reorganization proposal or any other transaction relating to
MEC. There can be no assurance that the transaction contemplated by the
reorganization proposal, or any other transaction relating to MEC, will be
completed.
    At June 30, 2008, $4.3 million of advisory and other costs had been
incurred in connection with the reorganization proposal, which costs are
included in the Real Estate Business' "general and administrative expenses" on
the Company's unaudited interim consolidated statements of income (loss) for
the three and six months ended June 30, 2008.

    MEC LIQUIDITY AND GOING CONCERN
    -------------------------------
    In September 2007, following a strategic review, MEC announced a debt
elimination plan (the "MEC Debt Elimination Plan") designed to eliminate MEC's
net debt by December 31, 2008 and provide funding for MEC's operations. The
MEC Debt Elimination Plan contemplated generating aggregate proceeds of
approximately $600 to $700 million through: (i) the sale of certain real
estate, racetracks and other assets; (ii) the sale of, or entering into
strategic transactions involving, MEC's other racing, gaming and technology
operations; and (iii) a possible future equity issuance by MEC, likely in
2008.
    To address MEC's short-term liquidity concerns and provide it with
sufficient time to implement the MEC Debt Elimination Plan, MID made available
a bridge loan of up to $80.0 million (subsequently increased to $110.0 million
as discussed below) to MEC (the "MEC Bridge Loan"). The MEC Debt Elimination
Plan also contemplated a $20.0 million private placement to Fair Enterprise
Limited, a company that forms part of an estate planning vehicle for the
family of Mr. Frank Stronach (the Company's Chairman and the Chairman and
Chief Executive Officer of MEC), of MEC Class A Stock, which closed in October
2007.
    Given that the sale of MEC assets under the MEC Debt Elimination Plan
continues to take longer than originally contemplated, on May 23, 2008, the
maturity date of the MEC Bridge Loan and the deadline for repayment of at
least $100.0 million under the Gulfstream Park project financing facility were
extended from May 31, 2008 to August 31, 2008. At the same time, the maximum
commitment under the MEC Bridge Loan was increased from $80.0 million to
$110.0 million, and MEC was given the ability to re-borrow the $21.5 million
previously repaid from proceeds of asset sales.
    Whether the MEC Debt Elimination Plan will be successful is not
determinable at this time. To date, MEC has generated aggregate asset sale
proceeds under the MEC Debt Elimination Plan of $37.7 million, of which $26.0
million has been used to make repayments under the MEC Bridge Loan. Although
MEC continues to take steps to implement its plan, MEC does not expect to
execute the MEC Debt Elimination Plan on the originally contemplated time
schedule, if at all. Furthermore, MEC has advised MID that, given the
potential impact on MEC's financial position of the MID reorganization
proposal, and pending determination of whether it will proceed and an
evaluation of any amended terms, MEC is in the process of reconsidering
whether to sell certain of the assets originally identified for disposition
under the MEC Debt Elimination Plan.
    MID management expects that MEC will be unable at August 31, 2008 to
repay the MEC Bridge Loan or make the required $100.0 million repayment under
the Gulfstream Park project financing facility. Furthermore, MID management
expects that MEC will again need to seek extensions from existing lenders,
including MID, and additional funds in the short-term from one or more
possible sources, which may include MID. If MEC is unable to repay its
obligations when due or satisfy required covenants in its debt agreements,
substantially all of its current and long-term debt will also become due on
demand as a result of cross-default provisions within loan agreements, unless
MEC is able to obtain waivers, modifications or extensions. The availability
of any required waivers, modifications, extensions or additional funds is not
assured and, if available, the terms thereof are not yet determinable. If MEC
is unsuccessful in its efforts, it could be required to liquidate assets in
the fastest manner possible to raise funds, seek protection from its creditors
in one or more ways, or be unable to continue as a going concern. Accordingly,
MEC's ability to continue as a going concern is in substantial doubt.

    GREENLIGHT LITIGATION
    ---------------------
    On July 10, 2008, the Ontario Divisional Court dismissed the appeal by
Greenlight Capital, Inc. and certain of its affiliates ("Greenlight") of the
October 2006 decision of the Ontario Superior Court of Justice dismissing
Greenlight's oppression application against the Company and certain of its
current and former directors and officers (the "Greenlight Litigation"). The
appeal hearing took place in April 2008.

    REAL ESTATE BUSINESS FINANCIAL RESULTS
    --------------------------------------

    Operating Highlights

    In respect of our core rental portfolio of Magna International Inc.
("Magna") facilities, during the second quarter of 2008 we brought on-stream
one expansion project in Austria, representing approximately one thousand
square feet of leaseable area, at a cost of $0.1 million.
    At June 30, 2008, the Real Estate Business had four minor projects under
development: two in Canada and one in each of Mexico and Germany. These
projects commenced in the first six months of 2008 and will add an aggregate
of 67 thousand square feet of leaseable area to the Real Estate Business'
income-producing portfolio. The total anticipated cost of these projects is
approximately $12.4 million, of which $6.2 million had been incurred at June
30, 2008.
    At June 30, 2008, the Real Estate Business had 27.2 million square feet
of leaseable area, with annualized lease payments of $185.2 million,
representing a return of 10.8% on the gross carrying value of our
income-producing portfolio.

    Three Months Ended June 30, 2008

    Revenues were $55.3 million in the second quarter of 2008, a 20% increase
from revenues of $46.1 million in the second quarter of 2007. The higher
revenues are due to a $5.7 million increase in rental revenues and a $3.5
million increase in interest and other income earned from increased borrowings
under the financing arrangements with MEC. The higher rental revenues are
primarily due to foreign exchange, which had a $3.8 million positive impact as
the U.S. dollar continued to weaken against the foreign currencies in which
the Real Estate Business operates. Contractual rent increases and Magna
projects coming on-stream also had a higher than normal impact, increasing
revenues by $1.7 million and $0.7 million, respectively. These positive
contributions to rental revenues were partially offset by a negative
contribution of $0.7 million from disposals, vacancies and re-leasing of
income-producing properties, resulting primarily from activities related to
Magna's plant rationalization strategy.
    FFO for the second quarter of 2008 was $39.0 million ($0.83 per share)
compared to $31.3 million ($0.64 per share) in the prior year period,
representing an increase of 25% (30% on a per share basis). This increase in
FFO is due to a $9.2 million increase in revenues, partially offset by
increases of $0.7 million in each of general and administrative expenses and
net interest expense and $0.1 million in current income tax expense (excluding
current income taxes associated with disposal gains in 2007).
    General and administrative expenses in the second quarter of 2008
increased by $0.7 million to $9.8 million from $9.1 million in the second
quarter of 2007. General and administrative expenses for the second quarter of
2008 include $4.3 million of advisory and other costs incurred in connection
with the reorganization proposal. General and administrative expenses for the
second quarter of 2007 include (i) $2.1 million of advisory and other costs
incurred in connection with the Company's evaluation of certain transactions
relating to its continuing assessment of its relationship with MEC that,
ultimately, were not undertaken and (ii) $2.0 million of costs associated with
the Company's contribution of land to a not-for-profit organization to assist
Hurricane Katrina redevelopment efforts (the "Hurricane Katrina donation").
Excluding these items, general and administrative expenses for the second
quarter of 2008 were $5.5 million compared to $5.0 million in the second
quarter of 2007. This increase from the prior period is primarily due to the
impact of foreign exchange and increased salaries and benefits.
    Net interest expense was $2.6 million in the second quarter of 2008
($3.9 million of interest expense less $1.3 million of interest income)
compared to $1.9 million in the second quarter of 2007 ($3.7 million of
interest expense less $1.8 million of interest income). The $0.5 million
reduction in interest income is due primarily to a decline in interest rates
the Real Estate Business earns on its excess cash balances and there being
less cash available for short-term investment. Interest expense increased by
$0.3 million, primarily due to foreign exchange as the Company's senior
unsecured debentures are denominated in Canadian dollars.
    The Real Estate Business' income tax expense for the second quarter of
2008 was $4.7 million, representing an effective tax rate of 15.3% compared to
an effective tax rate for the second quarter of 2007 of 18.2%. The income tax
expense for the second quarter of 2007 includes $0.4 million related to a
$1.4 million gain on disposal of real estate. Excluding this item, the Real
Estate Business' effective tax rate for the second quarter of 2007 was 17.7%.
This 2.4% decrease in the adjusted effective tax rate is primarily due to (i)
reductions in the statutory tax rates from 2007 to 2008 in Canada and Germany
and (ii) changes in the mix of taxable income earned in the various countries
in which the Real Estate Business operates.
    Net income of $26.3 million for the second quarter of 2008 increased by
22% compared to net income of $21.5 million for the second quarter of 2007.
The $4.8 million increase in net income is due primarily to a $9.2 million
increase in revenues, partially offset by a negative contribution of
$2.5 million from increases of $0.7 million in each of general and
administrative expenses and net interest expense and $1.1 million in
depreciation and amortization (due primarily to the impact of foreign
exchange). Net income was also negatively impacted by a $0.5 million
write-down of long-lived assets and a currency translation loss of $0.1
million recognized in the second quarter of 2008 as well as a $1.4 million
gain on disposal of real estate recognized in the second quarter of 2007.

    Six Months Ended June 30, 2008

    Revenues were $109.3 million in the first six months of 2008, a 20%
increase from revenues of $90.8 million in the first six months of 2007. The
higher revenues are due to a $11.7 million increase in rental revenues and a
$6.8 million increase in interest and other income earned from increased
borrowings under the financing arrangements with MEC. The higher rental
revenues are primarily due to foreign exchange, which had an $8.2 million
positive impact as the U.S. dollar continued to weaken against the foreign
currencies in which the Real Estate Business operates. Contractual rent
increases and Magna projects coming on-stream also had a higher than normal
impact, increasing revenues by $3.2 million and $1.3 million, respectively.
These positive contributions to rental revenues were partially offset by a
negative contribution of $1.2 million from disposals, vacancies and re-leasing
of income-producing properties, resulting primarily from activities related to
Magna's plant rationalization strategy.
    FFO for the first six months of 2008 was $82.9 million ($1.77 per share)
compared to $65.5 million ($1.35 per share) in the prior year period.
Excluding a $3.9 million lease termination fee paid by Magna in conjunction
with a lease termination at the end of the first quarter of 2008 and its
related income tax effect, FFO for the first six months of 2008 was $80.3
million ($1.71 per share), representing a 23% increase from FFO (27% on a per
share basis) for the first six months of 2007. This increase in FFO is due to
an $18.5 million increase in revenue, partially offset by increases of $0.7
million in general and administrative expenses, $1.9 million in net interest
expense and $1.1 million in current income tax expense (excluding current
income taxes associated with disposal gains in 2007).
    General and administrative expenses increased to $14.4 million for the
six months ended June 30, 2008 from $13.6 million in the prior year period.
General and administrative expenses for the first six months of 2008 include
(i) $4.3 million of advisory and other costs incurred in connection with the
reorganization proposal and (ii) a net $0.4 million recovery (primarily under
the Company's insurance policy) of costs incurred in connection with the
Greenlight Litigation. General and administrative expenses for the first six
months of 2007 include (i) $2.1 million of advisory and other costs incurred
in connection with the Company's evaluation of certain transactions relating
to its continuing assessment of its relationship with MEC that, ultimately
were not undertaken, (ii) $2.0 million of costs associated with the Company's
Hurricane Katrina donation and (iii) $0.2 million of costs incurred in
connection with the Greenlight Litigation. Excluding these items, general and
administrative expenses for the first six months of 2008 were $10.5 million
compared to $9.3 million for the first six months of 2007. The increase from
the prior period was primarily due to the impact of foreign exchange and
increased salaries and benefits.
    Net interest expense was $5.4 million in the six months ended June 30,
2008 ($8.1 million of interest expense less $2.7 million of interest income)
compared to $3.5 million for the six months ended June 30, 2007 ($7.2 million
of interest expense less $3.7 million of interest income). The $1.0 million
reduction in interest income is due primarily to a decline in interest rates
the Real Estate Business earns on its excess cash balances and there being
less cash available for short-term investment. Interest expense increased by
$1.0 million, primarily due to foreign exchange as the Company's senior
unsecured debentures are denominated in Canadian dollars.
    In the six months ended June 30, 2008, the Real Estate Business' income
tax expense was $13.2 million, representing an effective tax rate of 18.7%,
which is consistent with the effective tax rate for the six months ended
June 30, 2007. The income tax expense for the first six months of 2008
includes $1.3 million of income tax expense in relation to the $3.9 million
lease termination fee discussed previously. The income tax expense for the
first six months of 2007 includes $0.4 million related to the $1.4 million
gain on disposal of real estate. Excluding these items, the Real Estate
Business' effective tax rate was 17.9% for the first six months of 2008
compared to 18.5% for the first six months of 2007. This 0.6% decrease in the
adjusted effective tax rate is primarily due to (i) reductions in the
statutory tax rates from 2007 to 2008 in Canada and Germany and (ii) changes
in the mix of taxable income earned in the various countries in which the Real
Estate Business operates.
    Net income of $57.3 million for the first six months of 2008 increased by
27% compared to net income of $45.2 million for the first six months of 2007.
A positive contribution of $21.6 million arose from an $18.5 million increase
in revenues and a $3.1 million increase in other net gains. These amounts were
partially offset by a negative contribution of $7.6 million from increases of
$0.7 million in general and administrative expenses, $2.2 million in
depreciation and amortization (due primarily to the impact of foreign
exchange), $1.9 million in net interest expense and $2.8 million in income tax
expense. Net income was also negatively impacted by the $0.5 million
write-down of long-lived assets discussed previously, as well as the $1.4
million gain on disposal of real estate recognized in the first six months of
2007.

    MAGNA ENTERTAINMENT CORP. FINANCIAL RESULTS
    -------------------------------------------
    MEC's racetracks operate for prescribed periods each year. As a result,
racing revenues and operating results for any quarter will not be indicative
of MEC's revenues and operating results for the year. MEC's results have been
restated to distinguish between results from continuing and discontinued
operations. MEC's discontinued operations for the three-month and six-month
periods ended June 30, 2008 and 2007 include the operations of Remington Park,
Thistledown, Portland Meadows, Great Lakes Downs and Magna Racino(TM).
    MEC's revenues from continuing operations for the second quarter of 2008
decreased marginally to $167.4 million from $168.0 million in the prior year
period, primarily due to (i) lower handle and wagering on the 2008
Preakness(R) and lower average daily attendance and handle at both Laurel Park
and Pimlico (collectively "MJC") and (ii) five fewer live race days at Golden
Gate Fields with a change in the racing calendar, which shifted live race days
to the third and fourth quarters of 2008. These negative factors were
partially offset by (i) increased revenues in MEC's Florida operations,
primarily due to the offering of simulcasting after the live race meet ended,
which was not available in the prior year period, (ii) higher revenues at
Santa Anita Park from increased special events and facility rentals and (iii)
increased housing unit sales at MEC's European residential housing
development. MEC's revenues from continuing operations for the six months
ended June 30, 2008 decreased 6% to $398.2 million from $422.2 million in the
prior year period, primarily due to (i) the net loss of eight live race days
at Santa Anita Park due to heavy rain and track drainage issues with the new
synthetic racing surface that was installed in the fall of 2007 and (ii) the
same factors impacting revenues for the second quarter of 2008.
    Earnings before interest, taxes, depreciation and amortization from MEC's
continuing operations excluding real estate disposal gains, other gains and
losses and the minority interest impact ("EBITDA") for the three-month and
six-month periods ended June 30, 2008 were $5.2 million and $19.1 million,
respectively, compared to $3.9 million and $28.5 million, respectively, in the
comparable prior year periods. EBITDA for the second quarter of 2008 increased
by $1.3 million compared to the second quarter of 2007, due to reductions of
$2.2 million in general and administrative expenses and $0.5 million in
operating costs, partially offset by a $0.6 million reduction in revenues and
a $0.9 million increase in purses, awards and other costs. The reduction in
general and administrative expenses is primarily attributable to several of
MEC's racetracks incurring lower general and administrative expenses as a
result of cost reduction initiatives. EBITDA loss for first six months of 2008
decreased by $9.4 million compared to the first six months of 2007, due to a
$24.0 million reduction in revenues and a $5.0 million write-down of
long-lived assets in the first quarter of 2008 related to real estate held for
sale in Dixon, California, partially offset by reductions of $13.7 million in
purses, awards and other costs, $3.3 million in operating costs and $2.6
million in general and administrative expenses for reasons discussed above.
The reduction in purses, awards and other costs is due primarily to decreased
wagering at Santa Anita Park, MJC, Golden Gate Fields and The Meadows for
reasons discussed previously. The reduction in operating costs is due
primarily to fewer live race days at both Santa Anita Park and Golden Gate
Fields, cost reduction initiatives in MEC's corporate and other operations and
a decrease in the proportion of PariMax operating costs included in MEC's
results of operations, primarily due to the formation of the HRTV LLC joint
venture in April 2007.
    MEC recorded net income of $1.0 million for the second quarter of 2008
compared to $3.7 million in the second quarter of 2007. For the six months
ended June 30, 2008, MEC recorded a net loss of $24.4 million compared to net
income of $37.3 million in the prior year period. MEC's results of operations
for the second quarter of 2008 include a $24.3 million gain on the disposal of
225 acres of excess real estate located in Ebreichsdorf, Austria to a
subsidiary of Magna for a purchase price of 20.0 million euros ($31.5
million), net of transaction costs. MEC's results of operations in the second
quarter of 2007 include a gain of $17.6 million on the sale of its interests
and rights in a 205-acre parcel of land to MID, in return for cash
consideration of approximately $24.0 million (which has no related minority
interest impact and is eliminated from MID's consolidated results). Excluding
these items, the $9.4 million reduction in net income is due primarily to
increases of $2.2 million in depreciation and amortization and $5.3 million in
net interest expense and a $9.0 million reduction in the minority interest
recovery, partially offset by the $1.3 million increase in EBITDA discussed
above, a $3.5 million reduction in income tax expense and a $2.7 million
increase in income from discontinued operations. The increase in depreciation
and amortization is due primarily to increased depreciation (i) on phase two
of the slots facility at Gulfstream Park, (ii) on fixed assets as a result of
new totalisator equipment at MEC's wholly-owned subsidiary AmTote
International, Inc. being placed into service under new contract arrangements
and (iii) on new synthetic racing surfaces installed in the fall of 2007 at
Santa Anita Park and Golden Gate Fields. The increase in net interest expense
is primarily attributable to increased amounts outstanding under the MEC
Bridge Loan and the Gulfstream Park project financing facility. MEC's results
of operations in the first six months of 2007 include $48.7 million of gains
on the disposal of real estate (which have no related minority interest impact
and are eliminated from MID's consolidated results) related to the sale of
MEC's interests and rights in three real estate properties to MID in return
for cash consideration of approximately $79.0 million. Excluding these items
and the $24.3 million disposal gain in 2008 discussed above, the $37.4 million
increase in net loss is due primarily to the $9.4 million reduction in EBITDA
discussed above, increases of $4.6 million in depreciation and amortization
and $10.1 million in net interest expense for the reasons discussed previously
and a $13.4 million increase in the loss from discontinued operations. The
increase in the loss from discontinued operations is due primarily to $32.3
million ($17.4 million net of minority interest) pertaining to long-lived
assets of Magna Racino(TM) ($29.2 million) and instant racing machines at
Portland Meadows ($3.1 million).

    DIVIDENDS
    ---------
    MID's Board of Directors declared a dividend of $0.15 per share on MID's
Class A Subordinate Voting Shares and Class B Shares for the second quarter
ended June 30, 2008. The dividend is payable on or about September 15, 2008 to
shareholders of record at the close of business on August 29, 2008.
    Unless indicated otherwise, MID has designated the entire amount of all
past and future taxable dividends paid in 2006, 2007 and 2008 to be an
"eligible dividend" for purposes of the Income Tax Act (Canada), as amended
from time to time. Please contact your tax advisor if you have any questions
with regard to the designation of eligible dividends.

    CONFERENCE CALL
    ---------------
    A conference call will be held for interested analysts and shareholders
to discuss the second quarter's results on August 8, 2008 at 10:30 am EST. The
number to use for this call is 1-800-814-3911. The number for overseas callers
is 416-915-5763. Please call 10 minutes prior to the start of the conference
call. MID will also webcast the conference call at www.midevelopments.com. The
conference call will be chaired by John D. Simonetti, Chief Executive Officer.
    For anyone unable to listen to the scheduled call, the rebroadcast
numbers will be: North America - 1-877-289-8525 and Overseas - 416-640-1917
(reservation number is 21278696 followed by the number sign) and the
rebroadcast will be available until August 15, 2008.

    ABOUT MID
    ---------
    MID is a real estate operating company focusing primarily on the
ownership, leasing, management, acquisition and development of a predominantly
industrial rental portfolio for Magna and its subsidiaries in North America
and Europe. MID also acquires land that it intends to develop for mixed-use
and residential projects. MID holds a controlling interest in MEC, North
America's number one owner and operator of horse racetracks, based on revenue,
and one of the world's leading suppliers, via simulcasting, of live horse
racing content to the growing inter-track, off-track and account wagering
markets.

    
    RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES
    REAL ESTATE BUSINESS
    RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)


                                  Three Months              Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                              2008         2007         2008         2007
    -------------------------------------------------------------------------
    Net income             $   26,268  $    21,492  $    57,252  $    45,163
    Add back (deduct):
      Depreciation and
       amortization            11,356       10,216       22,403       20,147
      Future income tax
       expense                    781          587        2,647        1,855
      Write-down of
       long-lived assets          450            -          450            -
      Gain on disposal of
       real estate, net of
       income tax                   -       (1,013)           -       (1,028)
      Currency translation
       loss (gains)               105            -          105         (652)
    -------------------------------------------------------------------------
    Funds from
     operations           $    38,960  $    31,282  $    82,857  $    65,485
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     funds from
     operations per
     share                $      0.83  $      0.64  $      1.77  $      1.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of
     shares outstanding
     (thousands)
      Basic                    46,708       48,369       46,708       48,360
      Diluted                  46,708       48,419       46,708       48,416
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    FORWARD-LOOKING STATEMENTS
    --------------------------
    The contents of this press release contain statements that, to the extent
they are not recitations of historical fact, constitute "forward-looking
statements" within the meaning of applicable securities legislation, including
the United States Securities Act of 1933 and the United States Securities
Exchange Act of 1934. Forward-looking statements may include, among others,
statements regarding the Company's future plans, goals, strategies,
intentions, beliefs, estimates, costs, objectives, economic performance or
expectations, or the assumptions underlying any of the foregoing. Words such
as "may", "would", "could", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate" and similar
expressions are used to identify forward-looking statements. Forward-looking
statements should not be read as guarantees of future performance or results
and will not necessarily be accurate indications of whether or the times at or
by which such future performance will be achieved. Undue reliance should not
be placed on such statements. Forward-looking statements are based on
information available at the time and/or management's good faith assumptions
and analyses made in light of our perception of historical trends, current
conditions and expected future developments, as well as other factors we
believe are appropriate in the circumstances, and are subject to known and
unknown risks, uncertainties and other unpredictable factors, many of which
are beyond the Company's control, that could cause actual events or results to
differ materially from such forward-looking statements. Important factors that
could cause such differences include, but are not limited to, the risks set
forth in the "Risk Factors" section in MID's Annual Information Form for 2007,
filed on SEDAR at www.sedar.com and attached as Exhibit 1 to MID's Annual
Report on Form 40-F for the year ended December 31, 2007, which investors are
strongly advised to review. The "Risk Factors" section also contains
information about the material factors or assumptions underlying such
forward-looking statements. Forward-looking statements speak only as of the
date the statement was made and unless otherwise required by applicable
securities laws, MID expressly disclaims any intention and undertakes no
obligation to update or revise any forward-looking statements contained in
this press release to reflect subsequent information, events or circumstances
or otherwise.


    
    Consolidated Statements of Income
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)

                         Consolidated (notes 1, 18)      Real Estate Business
                         -------------------------- -------------------------
                                         (restated
    Three Months Ended                    - note 4)
     June 30,                    2008         2007         2008         2007
    -------------------------------------------------------------------------
    Revenues
    Rental revenue        $    46,656  $    41,000  $    46,656  $    41,000
    Racing and other
     revenue                  167,390      168,031            -            -
    Interest and other
     income from MEC
     (note 18)                      -            -        8,643        5,082
    -------------------------------------------------------------------------
                              214,046      209,031       55,299       46,082
    -------------------------------------------------------------------------
    Operating costs and
     expenses
    Purses, awards and
     other                     73,195       72,319            -            -
    Operating costs            73,440       73,976            -            -
    General and
     administrative
     (notes 3, 18)             25,368       27,075        9,787        9,069
    Depreciation and
     amortization              22,411       19,124       11,356       10,216
    Interest expense, net      11,073        9,270        2,606        1,895
    Write-down of
     long-lived assets
     (note 8)                     450            -          450            -
    -------------------------------------------------------------------------
    Operating income (loss)     8,109        7,267       31,100       24,902
    Gain on disposal of
     real estate (note 18)     24,340        1,357            -        1,357
    Other losses
     (notes 12, 13)              (548)           -         (105)           -
    -------------------------------------------------------------------------
    Income before income
     taxes and minority
     interest                  31,901        8,624       30,995       26,259
    Income tax expense          5,178        8,741        4,727        4,767
    Minority interest             362       (8,654)           -            -
    -------------------------------------------------------------------------
    Income from continuing
     operations                26,361        8,537       26,268       21,492
    Income (loss) from
     discontinued
     operations (note 4)        1,680         (982)           -            -
    -------------------------------------------------------------------------
    Net income            $    28,041  $     7,555  $    26,268  $    21,492
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings (loss) per
      Class A Subordinate
       Voting or Class B
       Share (note 7)
       -  Continuing
           operations     $      0.56  $      0.18
       -  Discontinued
           operations
           (note 4)              0.04        (0.02)
    -----------------------------------------------
    Total                 $      0.60  $      0.16
    -----------------------------------------------
    -----------------------------------------------

    Average number of
     Class A
      Subordinate Voting
       and Class B Shares
       outstanding during
       the period
       (in thousands)
       (note 7)
       -  Basic                46,708       48,369
       -  Diluted              46,708       48,419
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                         --------------------------
                                         (restated
    Three Months Ended                    - note 4)
     June 30,                    2008         2007
    -----------------------------------------------
    Revenues
    Rental revenue       $          -  $         -
    Racing and other
     revenue                  167,390      168,031
    Interest and other
     income from MEC
     (note 18)                      -            -
    -----------------------------------------------
                              167,390      168,031
    -----------------------------------------------
    Operating costs and
     expenses
    Purses, awards and
     other                     73,195       72,319
    Operating costs            73,440       73,976
    General and
     administrative
     (note 18)                 15,540       17,786
    Depreciation and
     amortization              11,099        8,938
    Interest expense, net      17,161       11,803
    Write-down of
     long-lived assets
     (note 8)                       -            -
    -----------------------------------------------
    Operating income (loss)   (23,045)     (16,791)
    Gain on disposal of
     real estate (note 18)     24,340       17,587
    Other losses
     (notes 12, 13)              (443)           -
    -----------------------------------------------
    Income before income
     taxes and minority
     interest                     852          796
    Income tax expense            451        3,974
    Minority interest             362       (8,654)
    -----------------------------------------------
    Income from continuing
     operations                    39        5,476
    Income (loss) from
     discontinued
     operations (note 4)          934       (1,813)
    -----------------------------------------------
    Net income           $        973  $     3,663
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Income (Loss)
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)

                         Consolidated (notes 1, 15)     Real Estate Business
                         -------------------------- -------------------------
                                         (restated
                                          - note 4)
    Six Months Ended
     June 30,                    2008         2007         2008         2007
    -------------------------------------------------------------------------
    Revenues
    Rental revenue        $    92,583  $    80,896  $    92,583  $    80,896
    Racing and other
     revenue                  398,218      422,248            -            -
    Interest and other
     income from MEC
     (note 18)                      -            -       16,751        9,944
    -------------------------------------------------------------------------
                              490,801      503,144      109,334       90,840
    -------------------------------------------------------------------------

    Operating costs and
     expenses
    Purses, awards and
     other                    195,333      209,006            -            -
    Operating costs           148,775      152,105            -            -
    General and
     administrative
     (notes 3, 18)             44,508       48,374       14,414       13,655
    Depreciation and
     amortization              44,355       37,550       22,403       20,147
    Interest expense,
     net                       22,289       18,690        5,407        3,548
    Write-down of
     long-lived assets
     (notes 6, 8)               5,450            -          450            -
    -------------------------------------------------------------------------
    Operating income
     (loss)                    30,091       37,419       66,660       53,490
    Gain on disposal of
     real estate
     (note 18)                 24,340        1,382            -        1,382
    Other gains, net
     (notes 12, 13, 18,
     19)                        5,357          656        3,787          652
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         59,788       39,457       70,447       55,524
    Income tax expense         15,500       13,049       13,195       10,361
    Minority interest          (5,950)      (6,452)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     50,238       32,860       57,252       45,163
    Loss from discontinued
     operations (note 4)      (15,600)      (2,022)           -            -
    -------------------------------------------------------------------------
    Net income (loss)     $    34,638  $    30,838  $    57,252  $    45,163
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings (loss) per
      Class A Subordinate
       Voting or Class B
       Share (note 7)
      -  Continuing
          operations      $      1.07  $      0.68
      -  Discontinued
          operations
          (note 4)              (0.33)       (0.04)
    -----------------------------------------------
    Total                 $      0.74  $      0.64
    -----------------------------------------------
    -----------------------------------------------

    Average number of
     Class A
      Subordinate Voting
       and Class B Shares
       outstanding during
       the period
       (in thousands)
       (note 7)
      -  Basic                 46,708       48,360
      -  Diluted               46,708       48,416
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                        ---------------------------
                                         (restated
                                          - note 4)
    Six Months Ended
     June 30,                    2008         2007
    -----------------------------------------------
    Revenues
    Rental revenue        $         -  $         -
    Racing and other
     revenue                  398,218      422,248
    Interest and other
     income from MEC
     (note 18)                      -            -
    -----------------------------------------------
                              398,218      422,248
    -----------------------------------------------

    Operating costs and
     expenses
    Purses, awards and
     other                    195,333      209,006
    Operating costs           148,775      152,105
    General and
     administrative
     (note 18)                 30,060       32,634
    Depreciation and
     amortization              22,039       17,464
    Interest expense,
     net                       33,900       23,820
    Write-down of
     long-lived assets
     (notes 6, 8)               5,000            -
    -----------------------------------------------
    Operating income
     (loss)                   (36,889)     (12,781)
    Gain on disposal of
     real estate
     (note 18)                 24,340       48,654
    Other gains, net
     (notes 12, 13, 18,
     19)                        1,570            4
    -----------------------------------------------
    Income (loss) before
    income taxes and
     minority interest        (10,979)      35,877
    Income tax expense          2,305        1,357
    Minority interest          (5,950)      (6,452)
    -----------------------------------------------
    Income (loss) from
     continuing operations     (7,334)      40,972
    Loss from discontinued
     operations (note 4)      (17,109)      (3,705)
    -----------------------------------------------
    Net income (loss)     $   (24,443) $    37,267
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Comprehensive Income
    (U.S. dollars in thousands)
    (Unaudited)
                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Net income            $    28,041  $     7,555  $    34,638  $    30,838
    Other comprehensive
     income (loss):
      Change in fair value
       of interest rate
       swaps, net of taxes
       and minority
       interest (note 12)         361            3           29          (56)
      Foreign currency
       translation
       adjustment, net of
       minority interest
       (note 12)                  552       24,485       35,723       38,848
      Recognition of
       foreign currency
       translation loss
       (gain) in net
       income (note 12)           105            -          105         (652)
    -------------------------------------------------------------------------
    Comprehensive income  $    29,059  $    32,043  $    70,495  $    68,978
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes

    Consolidated Statements of Changes in Deficit
    (U.S. dollars in thousands)
    (Unaudited)

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Deficit, beginning of
     period               $   (58,845) $   (53,084) $   (58,436) $   (69,112)
    Net income                 28,041        7,555       34,638       30,838
    Dividends                  (7,006)      (7,256)     (14,012)     (14,511)
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (37,810) $   (52,785) $   (37,810) $   (52,785)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



    Consolidated Statements of Cash Flows
    (U.S. dollars in thousands)
    (Unaudited)

                         Consolidated (notes 1, 18)     Real Estate Business
                         -------------------------- -------------------------
                                         (restated
    Three Months Ended                    - note 4)
    June 30,                     2008         2007         2008         2007
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Income from continuing
     operations           $    26,361  $     8,537  $    26,268  $    21,492
    Items not involving
     current cash flows
     (note 15)                  2,189        9,910       11,368        9,804
    Changes in non-cash
     balances (note 15)        (8,685)      15,018        3,638          390
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                19,865       33,465       41,274       31,686
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (19,623)     (29,055)      (8,541)     (30,350)
    Proceeds on disposal
     of real estate and
     fixed assets, net         31,460        5,556            -        4,556
    Decrease (increase) in
     other assets                (580)         (40)        (192)          60
    Loan advances to MEC,
     net                            -            -      (31,966)      (6,405)
    Loan repayments from
     MEC                            -            -       21,785        1,854
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
     activities                11,257      (23,539)     (18,941)     (30,285)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              15,341          741            -            -
    Repayment of bank
     indebtedness             (17,875)     (15,000)           -            -
    Issuance of long-term
     debt, net                  3,013        3,865            -            -
    Repayment of
     long-term debt            (5,809)     (15,953)        (117)         (98)
    Loan advances from
     MID, net                       -            -            -            -
    Loan repayments to MID          -            -            -            -
    Dividends paid            (14,012)     (14,511)     (14,012)     (14,511)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (19,342)     (40,858)     (14,129)     (14,609)
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents        (866)       2,177         (887)       2,163
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations     10,914      (28,755)       7,344      (11,045)
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                 3,465         (105)           -            -
    Cash used in investing
     activities                (4,075)      (2,552)           -            -
    Cash used in financing
     activities               (11,765)          (3)           -            -
    -------------------------------------------------------------------------
    Net cash flows used
     in discontinued
     operations               (12,375)       (2,660)          -            -
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the period                (1,461)     (31,415)       7,344      (11,045)
    Cash and cash
     equivalents,
     beginning of period      187,213      234,822      139,900      159,028
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                   185,752      203,407      147,244      147,983
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     period                    (8,171)     (10,814)           -            -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, of
     continuing operations
     end of period        $   177,581  $   192,593  $   147,244  $   147,983
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 4)
    June 30,                     2008         2007
    -----------------------------------------------

    OPERATING ACTIVITIES
    Income from continuing
     operations           $        39  $     5,476
    Items not involving
     current cash flows
     (note 15)                 (8,212)     (17,294)
    Changes in non-cash
     balances (note 15)       (12,394)      14,606
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (20,567)       2,788
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (11,082)     (22,587)
    Proceeds on disposal
     of real estate and
     fixed assets, net         31,460       24,664
    Decrease (increase) in
     other assets                (388)        (100)
    Loan advances to MEC,
     net                            -            -
    Loan repayments from
     MEC                            -            -
    -----------------------------------------------
    Cash provided by
     (used in) investment
     activities                19,990        1,977
    -----------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              15,341          741
    Repayment of bank
     indebtedness             (17,875)     (15,000)
    Issuance of long-term
     debt, net                  3,013        3,865
    Repayment of
     long-term debt            (5,692)     (15,855)
    Loan advances from
     MID, net                  31,827        6,402
    Loan repayments to MID    (20,219)        (361)
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities                 6,395      (20,208)
    -----------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents          21           14
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations      5,839      (15,429)
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                 2,762         (893)
    Cash used in investing
     activities                (4,075)      (2,552)
    Cash used in financing
     activities               (13,331)      (1,496)
    -----------------------------------------------
    Net cash flows used
     in discontinued
     operations               (14,644)      (4,941)
    -----------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the period                (8,805)     (20,370)
    Cash and cash
     equivalents,
     beginning of period       47,313       75,794
    -----------------------------------------------
    Cash and cash
     equivalents, end of
     period                    38,508       55,424
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     period                    (8,171)     (10,814)
    -----------------------------------------------
    Cash and cash
     equivalents, of
     continuing operations
     end of period
                          $    30,337  $    44,610
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Cash Flows
    (U.S. dollars in thousands)
    (Unaudited)

                         Consolidated (notes 1, 18)     Real Estate Business
                         -------------------------- -------------------------
                                         (restated
    Six Months Ended                      - note 4)
    June 30,                     2008         2007         2008         2007
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    50,238  $    32,860  $    57,252  $    45,163
    Items not involving
     current cash flows
     (note 15)                 25,820       31,460       23,504       20,755
    Changes in non-cash
     balances (note 15)       (11,724)      (8,530)       8,310        8,087
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                64,334       55,790       89,066       74,005
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Property and fixed
     asset additions          (37,152)     (45,679)      (13,058)    (98,874)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net               32,952        8,330            -        5,394
    Decrease (increase)
     in other assets           (1,280)      (1,035)        (149)          58
    Loan advances to MEC,
     net                            -            -      (52,000)     (16,683)
    Loan repayments from
     MEC                            -            -       24,263        2,360
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
     activities                (5,480)     (38,384)     (40,944)    (107,745)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              38,468       15,741            -            -
    Repayment of bank
     indebtedness             (40,469)     (21,515)           -            -
    Issuance of long-term
     debt                       8,416        4,140            -            -
    Repayment of long-term
     debt                      (9,110)     (29,649)        (232)        (189)
    Loan advances from
     MID, net                       -            -            -            -
    Loan repayments to MID          -            -            -            -
    Issuance of shares              -        1,058            -        1,058
    Dividends paid            (14,012)     (14,511)     (14,012)     (14,511)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (16,707)     (44,736)     (14,244)     (13,642)
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents       2,499        3,406        2,421        3,499
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations     44,646      (23,924)      36,299      (43,883)
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                 3,023          (15)           -            -
    Cash used in investing
     activities                (4,983)      (3,227)           -            -
    Cash used in financing
     activities               (11,794)     (19,682)           -            -
    -------------------------------------------------------------------------
    Net cash flows used in
     discontinued
     operations               (13,754)     (22,924)           -            -
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the period         30,892      (46,848)      36,299      (43,883)
    Cash and cash
     equivalents,
     beginning of period      154,860      250,255      110,945      191,866
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                   185,752      203,407      147,244      147,983
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     period                    (8,171)     (10,814)           -            -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, of
     continuing
     operations end of
     period               $   177,581  $   192,593  $   147,244  $   147,983
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                         --------------------------
                                         (restated
    Six Months Ended                      - note 4)
    June 30,                     2008         2007
    -----------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    (7,334) $    40,972
    Items not involving
     current cash flows
     (note 15)                  4,480      (39,003)
    Changes in non-cash
    balances (note 15)        (20,316)     (16,446)
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (23,170)     (14,477)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Property and fixed
     asset additions          (24,094)     (36,206)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net               32,952       90,550
    Decrease (increase)
     in other assets           (1,131)      (1,093)
    Loan advances to MEC,
     net                            -            -
    Loan repayments from
     MEC                            -            -
    -----------------------------------------------
    Cash provided by
     (used in) investment
     activities                 7,727       53,251
    -----------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              38,468       15,741
    Repayment of bank
     indebtedness             (40,469)     (21,515)
    Issuance of long-term
     debt                       8,416        4,140
    Repayment of long-term
     debt                      (8,878)     (29,460)
    Loan advances from
     MID, net                  50,901       16,329
    Loan repayments to MID    (22,434)        (716)
    Issuance of shares              -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities                26,004      (15,481)
    -----------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents          78          (93)
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations     10,639       23,200
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                 1,600       (1,612)
    Cash used in investing
     activities                (4,983)      (3,227)
    Cash used in financing
     activities               (12,663)     (21,326)
    -----------------------------------------------
    Net cash flows used in
     discontinued
     operations               (16,046)     (26,165)
    -----------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the period         (5,407)      (2,965)
    Cash and cash
     equivalents,
     beginning of period       43,915       58,389
    -----------------------------------------------
    Cash and cash
     equivalents, end of
     period                    38,508       55,424
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     period                    (8,171)     (10,814)
    -----------------------------------------------
    Cash and cash
     equivalents, of
     continuing
     operations end of
     period               $    30,337  $    44,610
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Balance Sheets
    (Refer to note 1 - Basis of Presentation)
    (U.S. dollars in thousands)
    (Unaudited)

                         Consolidated (notes 1, 18)     Real Estate Business
                         -------------------------- -------------------------
                                        (restated -
                                        notes 4, 5)
                               June       December       June       December
    As at                    30, 2008     31, 2007     30, 2008     31, 2007
    -------------------------------------------------------------------------
    ASSETS
    Current assets:
      Cash and cash
       equivalents        $   177,581  $   145,619  $   147,244  $   110,945
      Restricted cash
       (note 18)               12,673       32,722          940        4,458
      Accounts receivable      44,333       39,958        7,064        7,425
      Loans receivable
       from MEC, net
       (note 18)                    -            -      170,630      139,168
      Due from MID
       (note 18)                    -            -            -            -
      Income taxes
       receivable                 473        1,631          473          402
      Prepaid expenses and
       other                   24,654       17,173        1,055        1,206
      Assets held for sale
       (note 5)                     -        1,493            -            -
      Discontinued
       operations (note 4)     33,131       24,724            -            -
    -------------------------------------------------------------------------
                              292,845      263,320      327,406      263,604
    Real estate
     properties, net
     (note 8)               2,239,495    2,225,154    1,573,113    1,561,921
    Fixed assets, net          79,606       86,196          360          445
    Racing licences           109,868      109,868            -            -
    Other assets                7,627        6,213        1,248          879
    Loans receivable from
     MEC (note 18)                  -            -       96,725       97,589
    Deferred rent
     receivable                14,622       14,898       14,622       14,898
    Future tax assets          44,682       45,118        5,406        5,497
    Assets held for sale
     (note 5)                  27,343       38,647            -            -
    Discontinued
     operations (note 4)       82,547      110,927            -            -
    -------------------------------------------------------------------------
                          $ 2,898,635  $ 2,900,341  $ 2,018,880  $ 1,944,833
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY

    Current liabilities:

      Bank indebtedness
       (note 9)           $    37,213  $    39,214  $         -  $         -
      Accounts payable and
       accrued liabilities    111,330      140,473       19,294       16,678
      Income taxes payable     15,696       13,040       15,062       13,040
      Loan payable to MID,
       net (note 18)                -            -            -            -
      Due to MEC (note 18)          -            -          941        4,464
      Long-term debt due
       within one year
       (note 9)                15,037       11,142        3,949          488
      Deferred revenue          6,004        6,189        3,232        2,078
      Liabilities related
       to assets held for
       sale (note 5)                -          171            -            -
      Discontinued
       operations (note 4)     43,593       47,981            -            -
    -------------------------------------------------------------------------
                              228,873      258,210       42,478       36,748

    Long-term debt
     (note 9)                  86,017       96,326        2,716        6,646
    Senior unsecured
     debentures, net          258,818      267,578      258,818      267,578
    Note obligations, net     218,006      216,050            -            -
    Loan payable to MID,
     net (note 18)                  -            -            -            -
    Other long-term
     liabilities               27,096       24,105            -            -
    Future tax liabilities    134,821      130,885       51,057       48,257
    Minority interest         137,422      156,359            -            -
    Liabilities related
     to assets held for
     sale (note 5)                876          876            -            -
    Discontinued
     operations (note 4)       14,501       14,492            -            -
    -------------------------------------------------------------------------
                            1,106,430    1,164,881      355,069      359,229
    -------------------------------------------------------------------------
    Shareholders' equity:
    Share capital
     (note 10)              1,524,440    1,524,440
    Contributed surplus
     (note 11)                 27,779       27,517
    Deficit                   (37,810)     (58,436)
    Accumulated other
     comprehensive income
     (note 12)                277,796      241,939
    -------------------------------------------------------------------------
                            1,792,205    1,735,460    1,663,811    1,585,604
    -------------------------------------------------------------------------
                          $ 2,898,635  $ 2,900,341  $ 2,018,880  $ 1,944,833
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                         --------------------------
                                        (restated -
                                        notes 4, 5)
                               June       December
    As at                    30, 2008     31, 2007
    -----------------------------------------------
    ASSETS
    Current assets:
      Cash and cash
       equivalents        $    30,337  $    34,674
      Restricted cash
       (note 18)               11,733       28,264
      Accounts receivable      37,269       32,533
      Loans receivable
       from MEC, net
       (note 18)                    -            -
      Due from MID
       (note 18)                  941        4,464
      Income taxes
       receivable                   -        1,229
      Prepaid expenses and
       other                   23,676       16,335
      Assets held for sale
       (note 5)                     -        1,493
      Discontinued
       operations (note 4)     33,131       24,724
    -----------------------------------------------
                              137,087      143,716
    Real estate
     properties, net
     (note 8)                 721,683      718,620
    Fixed assets, net          79,246       85,751
    Racing licences           109,868      109,868
    Other assets (note 3)       6,379        5,334
    Loans receivable from
     MEC (note 18)                  -            -
    Deferred rent
     receivable                     -            -
    Future tax assets          39,276       39,621
    Assets held for sale
     (note 5)                  27,343       38,647
    Discontinued
     operations (note 4)       82,607      110,999
    -----------------------------------------------
                          $ 1,203,489  $ 1,252,556
    -----------------------------------------------
    -----------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY

    Current liabilities:

      Bank indebtedness
       (note 9)           $    37,213  $    39,214
      Accounts payable and
       accrued liabilities     92,036      124,140
      Income taxes payable        634            -
      Loan payable to MID,
       net (note 18)          170,215      137,002
      Due to MEC (note 18)          -            -
      Long-term debt due
       within one year
       (note 9)                11,088       10,654
      Deferred revenue          2,772        4,339
      Liabilities related
       to assets held for
       sale (note 5)                -          171
      Discontinued
       operations (note 4)     44,002       48,378
    -----------------------------------------------
                              357,960      363,898

    Long-term debt
     (note 9)                  83,301       89,680
    Senior unsecured
     debentures, net                -            -
    Note obligations, net     218,006      216,050
    Loan payable to MID,
     net (note 18)             67,299       67,107
    Other long-term
     liabilities               27,096       24,105
    Future tax liabilities     82,433       81,297
    Minority interest         137,422      156,359
    Liabilities related
     to assets held for
     sale (note 5)                876          876
    Discontinued
     operations (note 4)       39,838       40,635
    -----------------------------------------------
                            1,014,231    1,040,007
    -----------------------------------------------
    Shareholders' equity:
    Share capital
     (note 10)
    Contributed surplus
     (note 11)
    Deficit
    Accumulated other
     comprehensive income
     (note 12)
    -----------------------------------------------
                              189,258      212,549
    -----------------------------------------------
                          $ 1,203,489  $ 1,252,556
    -----------------------------------------------
    -----------------------------------------------

    Commitments and contingencies (note 19)
    See accompanying notes



    Notes to Interim Consolidated Financial Statements

    (All amounts in U.S. dollars and all tabular amounts in thousands unless
    otherwise noted)
    (All amounts as at June 30, 2008 and December 31, 2007 and for the three-
    month and six-month periods ended June 30, 2008 and 2007 are unaudited)

    1.  BASIS OF PRESENTATION

    The unaudited interim consolidated financial statements include the
    accounts of MI Developments Inc. and its subsidiaries (collectively,
    "MID" or the "Company"). MID is a real estate operating company that
    currently owns, leases, manages and develops a predominantly industrial
    rental portfolio leased primarily to Magna International Inc. and its
    automotive operating units ("Magna").  MID also acquires land that it
    intends to develop for mixed-use and residential projects. The Company
    also holds a controlling interest in Magna Entertainment Corp. ("MEC"),
    an owner and operator of horse racetracks and a supplier of live racing
    content to the inter-track, off-track and account wagering markets. At
    June 30, 2008, the Company owned approximately 54% of MEC's total equity,
    representing approximately 96% of the total voting power of its
    outstanding stock. MEC's results are consolidated with the Company's
    results, with outside ownership accounted for as a minority interest.

    (a) Magna Entertainment Corp.

        The results of operations and the financial position of MEC have been
        included in the unaudited interim consolidated financial statements
        on a going concern basis, which contemplates the realization of MEC's
        assets and the discharge of MEC's liabilities in the normal course of
        business for the foreseeable future. MEC has incurred a net loss
        before minority interest recovery of $45.0 million for the six months
        ended June 30, 2008, and net losses before minority interest recovery
        of $68.8 million, $65.4 million and $107.4 million for the years
        ended December 31, 2007, 2006 and 2005, respectively. At June 30,
        2008, MEC had a working capital deficiency of $220.9 million and
        $230.6 million of debt scheduled to mature in the 12-month period
        ending June 30, 2009, including (i) amounts owing under MEC's $40.0
        million senior secured revolving credit facility with a Canadian
        financial institution (the "MEC Credit Facility"), which is scheduled
        to mature on August 15, 2008 (note 9), (ii) amounts owing under a
        bridge loan (the "MEC Bridge Loan") of up to $110.0 million
        (initially up to $80.0 million) from a wholly-owned subsidiary of MID
        (the "MID Lender"), which is scheduled to mature on August 31, 2008
        (note 18) and (iii) MEC's obligation to repay $100.0 million of
        indebtedness under the Gulfstream Park project financing facility
        with the MID Lender by August 31, 2008 (note 18). Accordingly, MEC's
        ability to continue as a going concern is in substantial doubt and is
        dependent on MEC generating cash flows that are adequate to sustain
        the operations of the business, renewing or extending current
        financing arrangements and meeting its obligations with respect to
        secured and unsecured creditors, none of which is assured. If MEC is
        unable to repay its obligations when due or satisfy required
        covenants in its debt agreements, substantially all of its current
        and long-term debt will also become due on demand as a result of
        cross-default provisions within loan agreements, unless MEC is able
        to obtain waivers, modifications or extensions. The availability of
        such waivers, modifications or extensions is not assured and, if
        available, the terms thereof are not yet determinable. On September
        12, 2007, MEC's Board of Directors approved a debt elimination plan
        (the "MEC Debt Elimination Plan") designed to eliminate MEC's net
        debt by December 31, 2008 by generating funds from the sale of assets
        (notes 4 and 5), entering into strategic transactions involving
        certain of MEC's racing, gaming and technology operations, and a
        possible future equity issuance. The success of the MEC Debt
        Elimination Plan is not assured. To address short-term liquidity
        concerns and provide sufficient time to implement the MEC Debt
        Elimination Plan, MEC arranged $100.0 million of funding in September
        2007, comprised of (i) a $20.0 million private placement of MEC's
        Class A Subordinate Voting Stock ("MEC Class A Stock") to Fair
        Enterprise Limited ("FEL"), a company that forms part of an estate
        planning vehicle for the family of Mr. Frank Stronach, the Company's
        Chairman and the Chairman and Chief Executive Officer of MEC,
        completed in October 2007; and (ii) the MEC Bridge Loan. Although
        MEC continues to take steps to implement the MEC Debt Elimination
        Plan, MEC does not expect to execute its plan on the originally
        contemplated time schedule, if at all. Furthermore, MEC has advised
        MID that, given the potential impact on MEC's financial position of
        the MID reorganization proposal (note 3), and pending determination
        of whether it will proceed and an evaluation of any amended terms,
        MEC is in the process of reconsidering whether to sell certain of the
        assets originally identified for disposition under the MEC Debt
        Elimination Plan. As a result, MEC has needed and will again need to
        seek extensions from existing lenders and additional funds in the
        short-term from one or more possible sources, which may include the
        Company. The availability of such extensions and additional funds is
        not assured and, if available, the terms thereof are not yet
        determinable. These unaudited interim consolidated financial
        statements do not give effect to any adjustments to recorded amounts
        and their classification which would be necessary should MEC be
        unable to continue as a going concern and, therefore, be required to
        realize its assets and discharge its liabilities in other than the
        normal course of business and at amounts different from those
        reflected in the unaudited interim consolidated financial statements.

        The uncertainty regarding MEC's ability to continue as a going
        concern does not impact the realization of the Company's assets and
        discharge of its liabilities in the normal course of its real estate
        business. MID's real estate business has not guaranteed any of MEC's
        indebtedness.

        MEC's racing business is seasonal in nature and racing revenues and
        operating results for any quarter will not be indicative of the
        racing revenues and operating results for the year. MEC's racing
        operations have historically operated at a loss in the second half of
        the year, with the third quarter typically generating the largest
        operating loss. This seasonality has resulted in large quarterly
        fluctuations in MEC's revenues and operating results.

    (b) Consolidated Financial Statements

        The unaudited interim consolidated financial statements have been
        prepared in U.S. dollars following Canadian generally accepted
        accounting principles ("GAAP") and the accounting policies as set out
        in the annual consolidated financial statements for the year ended
        December 31, 2007, except as disclosed in note 2.

        The unaudited interim consolidated financial statements do not
        conform in all respects to the requirements of generally accepted
        accounting principles for annual financial statements. Accordingly,
        these unaudited interim consolidated financial statements should be
        read in conjunction with the annual consolidated financial statements
        for the year ended December 31, 2007.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments necessary to present
        fairly the financial position at June 30, 2008 and 2007, and the
        results of operations and cash flows for the three-month and six-
        month periods ended June 30, 2008 and 2007.

        Financial data and related measurements are presented on the
        consolidated statements of income (loss), consolidated statements of
        cash flows, and consolidated balance sheets in two categories, "Real
        Estate Business" and "Magna Entertainment Corp.", which correspond to
        the Company's reporting segments as described in note 17 to the
        unaudited interim consolidated financial statements. Transactions and
        balances between the "Real Estate Business" and "Magna Entertainment
        Corp." segments have not been eliminated in the presentation of each
        segment's financial data and related measurements. However, the
        effects of transactions between these two segments, which are further
        described in note 18, are eliminated in the consolidated results of
        operations and financial position of the Company.

        The Company has reclassified certain prior period amounts to reflect
        the restatement for MEC's discontinued operations (note 4), assets
        held for sale (note 5) and reverse stock split (notes 13 and 19).

    2.  ACCOUNTING CHANGES

    (a) Financial Instruments - Disclosure and Presentation

        In December 2006, the Canadian Institute of Chartered Accountants
        (the "CICA") issued additional disclosure and presentation standards
        for financial instruments in Handbook Sections 3862, "Financial
        Instruments - Disclosures", and 3863, "Financial Instruments -
        Presentation", which replace Handbook Section 3861, "Financial
        Instruments - Disclosure and Presentation".  The Company has adopted
        these new standards effective January 1, 2008.  Handbook Section 3862
        requires increased disclosure relating to the risks associated with
        financial instruments and the Company's approach to managing those
        risks. Handbook Section 3863 maintains the presentation requirements
        of Handbook Section 3861.

        Certain disclosures regarding the Company's consolidated financial
        instruments were previously made in notes 1, 2, 9, 10, 11, 18 and 23
        to the annual consolidated financial statements for the year ended
        December 31, 2007 and do not differ materially at June 30, 2008,
        except as disclosed in notes 9, 14, 16 and 19 to the unaudited
        interim consolidated financial statements. The additional disclosures
        required by Handbook Section 3862 have been made in notes 14 and 16
        to the unaudited interim consolidated financial statements.  The
        adoption of Handbook Section 3863 did not have any impact on the
        Company's unaudited interim consolidated financial statements.


    (b) Capital Disclosures

        The CICA issued Handbook Section 1535, "Capital Disclosures", in
        December 2006, which requires that the Company disclose its
        objectives, policies and processes for managing capital (which it
        must define), as well as certain quantitative data. Handbook Section
        1535 also requires the disclosure of any externally-imposed capital
        requirements, whether the entity has complied with them and, if not,
        the consequences of such non-compliance. The Company adopted the
        requirements of Handbook Section 1535 on January 1, 2008 and the
        required disclosures are contained in note 14 to the unaudited
        interim consolidated financial statements.

    (c) Going Concern

        In June 2007, the CICA amended Handbook Section 1400, "General
        Standards of Financial Statement Presentation", to include going
        concern requirements.  The amendments require management to make an
        assessment of an entity's ability to continue as a going concern and
        to disclose material uncertainties related to events or conditions
        that may cast doubt upon the entity's ability to continue as a going
        concern. In doing so, management must take into account information
        about the future, which is at least, but not limited to, 12 months
        from the balance sheet date. The Company's adoption on January 1,
        2008 of the amendments to Handbook Section 1400 did not have any
        impact on the Company's unaudited interim consolidated financial
        statements or the disclosure contained in note 1 to the unaudited
        interim consolidated financial statements.

    3.  SHAREHOLDER PROPOSAL

    On March 31, 2008, MID received a reorganization proposal on behalf of
    various shareholders of MID, including entities affiliated with the
    Stronach Trust (the "Stronach Group"), MID's controlling shareholder
    (note 18). The principal components of the reorganization proposal are
    set out in MID's press release dated March 31, 2008, which can be found
    on the Company's website at www.midevelopments.com and on SEDAR at
    www.sedar.com. MID's Board of Directors (the "Board") mandated a special
    committee of independent directors (the "MID Special Committee") to
    review the proposal and make recommendations to the Board.

    The proposal contemplated MID calling by May 30, 2008 a special meeting
    of shareholders to consider the reorganization and closing the
    transaction no later than July 30, 2008. On May 30, 2008, MID called a
    special meeting of shareholders to be held on July 24, 2008.

    In early June 2008, at the direction of the MID Special Committee, MID
    management commenced discussions with a number of MID Class A
    shareholders, including those shareholders (owning in aggregate more than
    50% of the outstanding Class A Subordinate Voting Shares) that supported
    the original reorganization proposal announced on March 31, 2008. The
    discussions are intended to develop a consensus on how to best amend and
    structure the proposed reorganization. As a result of these discussions,
    on June 27, 2008, MID announced that the special meeting discussed above
    was being postponed.

    Given that no consensus has yet been reached with respect to amending the
    reorganization proposal, MID intends to continue to explore a range of
    alternatives in respect of its MEC investment. These alternatives
    include, without limitation, examining an amended reorganization proposal
    and evaluating whether or to what extent MID might participate in a
    recapitalization or restructuring of MEC. MID is not subject to any
    restrictions regarding future investments in MEC.

    Any potential transactions with MEC would be subject to review by the MID
    Special Committee and the approval of the MID Board. Neither the MID
    Special Committee nor the MID Board has made any decisions or
    recommendations with respect to the reorganization proposal or any other
    transaction relating to MEC. There can be no assurance that the
    transaction contemplated by the reorganization proposal, or any other
    transaction relating to MEC, will be completed.

    The unaudited interim consolidated financial statements do not reflect
    any adjustments that may be required should the reorganization proposal,
    or any other transaction relating to MEC, be completed.

    At June 30, 2008, $4.3 million of advisory and other costs had been
    incurred in connection with the reorganization proposal, which costs are
    included in the Real Estate Business' "general and administrative
    expenses" on the Company's unaudited interim consolidated statements of
    income (loss) for the three and six months ended June 30, 2008.

    4.  DISCONTINUED OPERATIONS

    In connection with the MEC Debt Elimination Plan, MEC announced its
    intention to sell Great Lakes Downs in Michigan, Thistledown in Ohio and
    its interest in Portland Meadows in Oregon. MEC also announced its
    intention to explore the sale of Remington Park, a horseracing and gaming
    facility in Oklahoma City.

    In September 2007, MEC engaged a U.S. investment bank to assist in
    soliciting potential purchasers and managing the sale process for certain
    assets covered by the MEC Debt Elimination Plan. In October 2007, the
    U.S. investment bank began marketing Thistledown and Remington Park for
    sale and initiated a program to locate potential buyers. However, MEC has
    since taken over the sales process from the U.S. investment bank and is
    currently in discussions with potential buyers of these assets.

    In October 2007, the Great Lakes Downs property was listed for sale with
    a real estate broker. The race meet at that facility concluded on
    November 4, 2007 and the facility was then closed. In order to facilitate
    the sale of this property, MEC re-acquired Great Lakes Downs from
    Richmond Racing Co., LLC in December 2007 pursuant to a prior existing
    option right. In July 2008, MEC completed the sale of Great Lakes Downs
    to The Little River Band of Ottawa Indians for $5.0 million in cash less
    customary closing adjustments. The net sale proceeds of $4.5 million were
    used subsequent to quarter-end to partially repay the MEC Bridge Loan
    (note 18).

    In November 2007, MEC began marketing its interest in Portland Meadows
    for sale and is currently in discussions with potential buyers for this
    asset.

    In March 2008, MEC committed to a plan to sell Magna Racino(TM). MEC has
    initiated a program to locate potential buyers and has begun marketing
    the assets for sale through a real estate agent.

    MEC's results of operations related to discontinued operations for the
    three-month and six-month periods ended June 30, 2008 and 2007, and MEC's
    assets and liabilities related to discontinued operations as at June 30,
    2008 and December 31, 2007, are shown in the following tables:


                                    Three Months               Six Months
                                   Ended June 30,            Ended June 30,
                                 2008         2007         2008         2007
                          ------------------------- -------------------------
    Revenues              $    35,835  $    35,657  $    65,590  $    65,629
    Costs and expenses         34,014       36,167       63,283       66,477
    -------------------------------------------------------------------------
                                1,821         (510)       2,307         (848)
    Depreciation and
     amortization                   -        1,738          605        3,502
    Interest expense, net         470        1,022        1,550        2,161
    Write-down of
     long-lived assets
     (note 6)                       -            -       32,294            -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest          1,351       (3,270)     (32,142)      (6,511)
    Income tax recovery          (385)        (162)        (385)        (162)
    Minority interest             802       (1,295)     (14,648)      (2,644)
    -------------------------------------------------------------------------
    MEC's income (loss)
     from discontinued
     operations                   934       (1,813)     (17,109)      (3,705)
    -------------------------------------------------------------------------
    Eliminations (note 18)        746          831        1,509        1,683
    -------------------------------------------------------------------------
    Consolidated income
     (loss) from
     discontinued
     operations           $     1,680  $      (982) $   (15,600) $    (2,022)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                           June     December
    As at                                              30, 2008     31, 2007
    -------------------------------------------------------------------------
    ASSETS
    Current assets:
      Cash and cash equivalents                     $     8,171  $     9,241
      Restricted cash                                    13,175        7,069
      Accounts receivable                                 4,505        6,602
      Prepaid expenses and other                          3,283        1,812
      Real estate properties, net                         3,997            -
    -------------------------------------------------------------------------
                                                         33,131       24,724
    -------------------------------------------------------------------------
    Real estate properties, net                          57,040       81,035
    Fixed assets, net                                    11,935       16,295
    Other assets                                             85          122
    Future tax assets                                    13,547       13,547
    -------------------------------------------------------------------------
                                                         82,607      110,999
    -------------------------------------------------------------------------
    MEC's assets related to discontinued operations     115,738      135,723
    -------------------------------------------------------------------------
    Eliminations (note 18)                                  (60)         (72)
    -------------------------------------------------------------------------
    Consolidated assets related to discontinued
     operations                                     $   115,678  $   135,651
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current liabilities:
      Accounts payable and accrued liabilities      $    27,302  $    21,446
      Income taxes payable                                3,515        3,182
      Long-term debt due within one year                 11,632       22,096
      Long-term debt                                         91            -
      Loan payable to MID                                   409          397
      Deferred revenue                                    1,053        1,257
    -------------------------------------------------------------------------
                                                         44,002       48,378
    -------------------------------------------------------------------------
    Long-term debt                                            -          115
    Loan payable to MID, net                             25,337       26,143
    Other long-term liabilities                             954          830
    Future tax liabilities                               13,547       13,547
    -------------------------------------------------------------------------
                                                         39,838       40,635
    -------------------------------------------------------------------------
    MEC's liabilities related to discontinued
     operations                                          83,840       89,013
    -------------------------------------------------------------------------
    Eliminations (note 18)                              (25,746)     (26,540)
    -------------------------------------------------------------------------
    Consolidated liabilities related to
     discontinued operations                        $    58,094  $    62,473
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    5.  ASSETS HELD FOR SALE

    (a) In November and December 2007, MEC entered into sale agreements for
        three parcels of excess real estate comprising approximately 825
        acres in Porter, New York, subject to the completion of due diligence
        by the purchasers and customary closing conditions. The sale of one
        parcel was completed in December 2007 for cash consideration of $0.3
        million, net of transaction costs, and the sales of the two remaining
        parcels were completed in January 2008 for total cash consideration
        of $1.5 million, net of transaction costs.  At December 31, 2007, the
        two parcels of excess real estate for which the sale had not been
        completed were included in MEC's "assets held for sale" on the
        Company's consolidated balance sheet. The net proceeds received on
        closing were used to repay a portion of the MEC Bridge Loan (note
        18).

    (b) On December 21, 2007, MEC entered into an agreement to sell 225 acres
        of excess real estate located in Ebreichsdorf, Austria to a
        subsidiary of Magna, a related party, for a purchase price of 20.0
        million euros ($31.5 million), net of transaction costs. The closing
        of the transaction occurred in April 2008 and MEC used 7.5 million
        euros of the net proceeds to repay a portion of a 15.0 million euro
        term loan facility with a European financial institution and the
        remaining portion of the net proceeds to repay $19.8 million of the
        MEC Bridge Loan (note 18).

    (c) On August 9, 2007, MEC announced its intention to sell a real estate
        property located in Dixon, California. In addition, in March 2008,
        MEC committed to a plan to sell excess real estate in
        Oberwaltersdorf, Austria. MEC is marketing these properties for sale
        and has listed them with real estate brokers. On August 9, 2007, MEC
        also announced its intention to sell a real estate property located
        in Ocala, Florida. MEC is marketing this property for sale and is in
        negotiations with a potential buyer. Under the terms of the MEC
        Bridge Loan, MEC is required to use the net proceeds from the sale of
        these properties, after repayment of certain prior ranking
        indebtedness of MEC, to pay down principal amounts outstanding under
        the MEC Bridge Loan and the amount of such net proceeds will
        permanently reduce the committed amount of the MEC Bridge Loan.

    (d) The MEC Debt Elimination Plan also contemplates the sale of real
        estate properties located in Aventura and Hallandale, Florida, both
        adjacent to Gulfstream Park, and Anne Arundel County, Maryland,
        adjacent to Laurel Park. MEC has also announced that it intends to
        explore selling its membership interests in the mixed-use
        developments at Gulfstream Park racetrack in Florida and Santa Anita
        Park racetrack in California that it is pursuing under joint venture
        arrangements with Forest City Enterprises, Inc. ("Forest City") and
        Caruso Affiliated ("Caruso"), respectively. MEC has also announced
        that it intends to explore other strategic transactions involving
        other racing, gaming and technology operations. These potential
        transactions may include: partnerships or joint ventures in respect
        of the existing gaming facility at Gulfstream Park; partnerships or
        joint ventures in respect of potential alternative gaming operations
        at other MEC racetracks that currently do not have gaming operations;
        and transactions involving MEC's technology operations, which may
        include one or more of the assets that comprise MEC's PariMax
        business.

        At June 30, 2008, all of the criteria required to classify an asset
        as held for sale, or operations as discontinued operations (note 4),
        in accordance with GAAP were not met in relation to the assets and
        operations described in the preceding paragraph and, accordingly,
        these assets and operations continue to be classified as held and in
        use.

    MEC's assets classified as held for sale and corresponding liabilities,
    related to the transactions described in sections (a), (b) and (c) above,
    at June 30, 2008 and December 31, 2007, are shown in the table below.


                                                                 (restated -
                                                                   note 5(c))
                                                           June     December
    As at                                              30, 2008     31, 2007
    -------------------------------------------------------------------------
    ASSETS
    Current assets:
      Real estate properties, net
       Porter, New York                             $         -  $     1,493
    -------------------------------------------------------------------------
    Real estate properties, net
      Dixon, California (note 6)                         14,139       19,139
      Ocala, Florida                                      8,407        8,407
      Oberwaltersdorf, Austria                            4,797        4,482
      Ebreichsdorf, Austria                                   -        6,619
    -------------------------------------------------------------------------
                                                         27,343       38,647
    -------------------------------------------------------------------------
                                                    $    27,343  $    40,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES
    Current liabilities
      Future tax liabilities                        $         -  $       171
    -------------------------------------------------------------------------
    Future tax liabilities                                  876          876
    -------------------------------------------------------------------------
                                                    $       876  $     1,047
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.  WRITE-DOWN OF MEC'S LONG-LIVED ASSETS

    When long-lived assets are identified as held for sale, the carrying
    value is reduced, if necessary, to the estimated net realizable value.
    Net realizable value is evaluated at each interim reporting period based
    on discounted net future cash flows of the assets and, if appropriate,
    appraisals and/or estimated net sales proceeds from pending offers.

    Write-downs relating to long-lived assets have been recognized as
    follows:

    -------------------------------------------------------------------------
                                    Three Months               Six Months
                                   Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Assets Held For Sale
     (note 5)
      Dixon,
      California(i)       $         -  $         -  $     5,000  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Discontinued Operations
     (note 4)
      Magna
      Racino(TM)(ii)      $         -  $         -  $    29,195  $         -
    Portland Meadows(iii)           -            -        3,099            -
    -------------------------------------------------------------------------
                          $         -  $         -  $    32,294  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1)   As a result of significant weakness in the Northern California real
          estate market and the U.S. financial market, MEC recorded an
          impairment charge of $5.0 million related to the Dixon, California
          real estate property in the six months ended June 30, 2008, which
          represents the excess of the carrying value of the asset over the
          estimated net realizable value.

    (ii)  As a result of the classification of Magna Racino(TM) as
          discontinued operations, MEC recorded an impairment charge,
          included in discontinued operations, of $29.2 million in six months
          ended June 30, 2008, which represents the excess of the carrying
          value of the assets over the estimated net realizable value.

    (iii) In June 2003, the Oregon Racing Commission ("ORC") adopted
          regulations that permitted wagering through instant racing
          terminals as a form of pari-mutuel wagering at Portland Meadows
          (the "Instant Racing Rules"). In September 2006, the ORC granted a
          request by Portland Meadows to offer instant racing under its 2006-
          2007 race meet licence. In June 2007, the ORC, acting under the
          advice of the Oregon Attorney General, temporarily suspended and
          began proceedings to repeal the Instant Racing Rules.  In September
          2007, the ORC denied a request by Portland Meadows to offer instant
          racing under its 2007-2008 race meet licence. In response to this
          denial, MEC requested the holding of a contested case hearing,
          which took place in January 2008. On February 27, 2008, the Office
          of Administrative Hearings released a proposed order in MEC's
          favour, approving instant racing as a legal form of wager at
          Portland Meadows. However, on April 25, 2008, the ORC issued an
          order rejecting that recommendation.  Based primarily on the ORC's
          order to reject the Office of Administrative Hearings'
          recommendation, MEC recorded an impairment charge of $3.1 million,
          included in discontinued operations, in the six months ended June
          30, 2008 related to the instant racing terminals and build-out of
          the instant racing facility.

    7.  EARNINGS (LOSS) PER SHARE

    Diluted earnings (loss) per share for the three-month and six-month
    periods ended June 30, 2008 and 2007 are computed as follows:

    -------------------------------------------------------------------------
                                    Three Months               Six Months
                                   Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                          - note 4)                 - note 4)
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Income from continuing
     operations           $    26,361  $     8,537  $    50,238  $    32,860
    Income (loss) from
     discontinued
     operations                 1,680         (982)     (15,600)      (2,022)
    -------------------------------------------------------------------------
    Net income            $    28,041  $     7,555  $    34,638  $    30,838
    -------------------------------------------------------------------------
    Weighted average number
     of Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (thousands)               46,708       48,369       46,708       48,360
    Stock options (thousands)       -           50            -           56
    -------------------------------------------------------------------------
                               46,708       48,419       46,708       48,416
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per Class A Subordinate
     Voting or Class B Share
      - from continuing
         operations       $      0.56  $      0.18  $      1.07  $      0.68
      - from discontinued
         operations              0.04        (0.02)       (0.33)       (0.04)
    -------------------------------------------------------------------------
                          $      0.60  $      0.16  $      0.74  $      0.64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The computation of diluted earnings (loss) per share for the three-month
    and six-month periods ended June 30, 2008 excludes the effect of the
    potential exercise of 516,544 (2007 - nil) options to acquire Class A
    Subordinate Voting Shares of the Company because the effect would be
    anti-dilutive.

    8.  REAL ESTATE PROPERTIES

    (a) Real estate properties consist of:
                                                                  (restated -
                                                                  notes 4, 5)
                                                          June      December
    As at                                               30, 2008     31, 2007
    -------------------------------------------------------------------------
    Real Estate Business

    Revenue-producing properties
      Land                                          $   234,116  $   226,269
      Buildings, parking lots and roadways - cost     1,482,107    1,444,241
      Buildings, parking lots and
       roadways - accumulated depreciation             (375,895)    (345,825)
    -------------------------------------------------------------------------
                                                      1,340,328    1,324,685
    -------------------------------------------------------------------------
    Development properties
      Land and improvements                             226,119      226,248
      Properties under development                        6,139        9,541
    -------------------------------------------------------------------------
                                                        232,258      235,789
    -------------------------------------------------------------------------
    Properties held for sale                                527        1,447
    -------------------------------------------------------------------------
                                                      1,573,113    1,561,921
    -------------------------------------------------------------------------

    MEC

    Revenue-producing racetrack properties
      Land and improvements                             164,865      164,856
      Buildings - cost                                  550,790      544,543
      Buildings - accumulated depreciation             (125,041)    (113,620)
      Construction in progress                           51,419       42,666
    -------------------------------------------------------------------------
                                                        642,033      638,445
    -------------------------------------------------------------------------
    Under-utilized racetrack real estate                 76,128       76,130
    -------------------------------------------------------------------------
    Revenue-producing non-racetrack properties
      Land and improvements                                 183        2,015
      Buildings - cost                                    3,446        2,123
      Buildings - accumulated depreciation                 (107)         (93)
    -------------------------------------------------------------------------
                                                          3,522        4,045
    -------------------------------------------------------------------------
                                                        721,683      718,620
    -------------------------------------------------------------------------
    Eliminations (note 18)                              (55,301)     (55,387)
    -------------------------------------------------------------------------
    Consolidated                                    $ 2,239,495  $ 2,225,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) During the three months ended June 30, 2008, the Real Estate Business
        determined that the plan of sale criteria under generally accepted
        accounting principles was no longer met for one property included in
        "properties held for sale" at December 31, 2007, as the Company
        intends to lease the property to a third party tenant. Accordingly,
        the property, consisting of land and a vacant building with an
        aggregate carrying value of $1.3 million, has been reclassified into
        "revenue-producing properties" at June 30, 2008.

    (c) During the three months ended June 30, 2008, the Real Estate Business
        determined that one property included in "revenue-producing
        properties" at December 31, 2007 is expected to be sold after the
        existing lease expires in September 2008. Accordingly, the property,
        consisting of land and a vacant building with an aggregate carrying
        value of $0.5 million (net of a $0.5 million write-down to the
        property's estimated net realizable value in the three months ended
        June 30, 2008), has been reclassified into "properties held for
        sale" at June 30, 2008.

    9.  BANK INDEBTEDNESS AND LONG-TERM DEBT

    (a) During the six months ended June 30, 2008, the maturity date of the
        $40.0 million MEC Credit Facility was extended from March 31, 2008 to
        July 30, 2008 (subject to certain acceleration provisions that are no
        longer applicable). Subsequent to quarter-end, the maturity date was
        further extended to August 15, 2008. Borrowings under the MEC Credit
        Facility are available by way of U.S. dollar loans and letters of
        credit, each bearing interest at the U.S. base rate plus 5.0% or the
        London Interbank Offered Rate ("LIBOR") plus 6.0%. Loans under the
        MEC Credit Facility are collateralized by a first charge on the
        assets of Golden Gate Fields and a second charge on the assets of
        Santa Anita Park, and are guaranteed by certain of MEC's
        subsidiaries. At June 30, 2008, MEC had borrowed $36.5 million
        (December 31, 2007 - $34.9 million) under the MEC Credit Facility and
        had issued letters of credit totalling $3.4 million (December 31,
        2007 - $4.3 million), such that $0.1 million was unused and
        available. The weighted average interest rate on the borrowings
        outstanding under the MEC Credit Facility at June 30, 2008 was 8.5%
        (December 31, 2007 - 11.0%).

    (b) At December 31, 2007, MEC's wholly-owned subsidiary AmTote
        International, Inc. ("AmTote") had three financing arrangements with
        a U.S. financial institution: (i) a $3.0 million revolving credit
        facility to finance working capital requirements (the "AmTote Credit
        Facility"), (ii) a $4.2 million term loan (the "AmTote Term Loan")
        and (iii) a term loan of up to $10.0 million to finance up to 80% of
        eligible capital costs related to tote service contracts (the "AmTote
        Equipment Term Loan"). The AmTote Credit Facility, AmTote Term Loan
        and AmTote Equipment Term Loan were scheduled to mature on May 1,
        2008, May 11, 2011 and May 11, 2012, respectively, but on April 30,
        2008, the maturity dates were amended to May 30, 2008 for the AmTote
        Credit Facility and May 30, 2009 for both term loan facilities. On
        May 30, 2008, the AmTote Credit Facility was fully repaid and
        terminated. Borrowings under the AmTote Term Loan and the AmTote
        Equipment Term Loan bear interest at LIBOR plus 3.0%. Both term loan
        facilities are collateralized by a first charge on AmTote's assets
        and a pledge of the stock of AmTote. At June 30, 2008, $2.8 million
        and $2.6 million (December 31, 2008 - $3.3 million and $2.0 million)
        were outstanding under the AmTote Term Loan and the AmTote Equipment
        Term Loan, respectively. As a result of the amendments to the
        maturity dates, amounts outstanding under the AmTote Term Loan and
        the AmTote Equipment Term Loan are reflected in MEC's "long-term debt
        due within one year" on the Company's unaudited interim consolidated
        balance sheet at June 30, 2008.

    (c) Two of MEC's wholly-owned subsidiaries that own and operate Pimlico
        Race Course and Laurel Park had borrowings of $9.0 million
        outstanding at June 30, 2008 under term loan credit facilities with a
        U.S. financial institution. At June 30, 2008, MEC was not in
        compliance with one of the financial covenants contained in those
        credit agreements. MEC obtained a waiver from the lender on August 5,
        2008 for this financial covenant breach at June 30, 2008 and the loan
        facilities were amended to temporarily modify this financial covenant
        as at September 30, 2008.

        One of these MEC subsidiaries, Pimlico Racing Association, Inc., has
        a revolving term loan facility with the same U.S. financial
        institution that permits the prepayment of outstanding principal
        without penalty. This facility matures on December 1, 2013, bears
        interest at either the U.S. prime rate or LIBOR plus 2.6% per annum
        and is collateralized by deeds of trust on land, buildings and
        improvements and security interests in all other assets of the
        subsidiary and certain affiliates of The Maryland Jockey Club
        ("MJC"). At June 30, 2008, there were no drawings on this facility.
        On August 5, 2008, the revolving term loan facility was amended to
        reduce the maximum undrawn availability from $7.7 million to
        $4.5 million.

    (d) One of MEC's European wholly-owned subsidiaries had a bank term loan
        with a European financial institution of up to 3.5 million euros
        bearing interest at the Euro Overnight Index Average Rate plus 3.8%
        per annum (7.8% at June 30, 2008). At June 30, 2008, there was a
        nominal amount outstanding under this bank term loan facility, which
        was fully repaid when the facility expired on July 31, 2008.

    10. SHARE CAPITAL

    Changes in the Company's Class A Subordinate Voting Shares and Class B
    Shares are shown in the following table:

                             Class A Subordinate
                                Voting Shares             Class B Shares
                          ------------------------- -------------------------
                                            Stated                    Stated
                               Number        Value       Number        Value
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2006     47,782,908  $ 1,559,476      547,413  $    17,866
    Issued on exercise of
     stock options             38,456        1,303            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     March  31, 2007 and
     June 30, 2007         47,821,364    1,560,779      547,413       17,866
    Shares purchased for
     cancellation            (485,700)     (15,853)           -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     September  30, 2007   47,335,664    1,544,926      547,413       17,866
    Shares purchased for
     cancellation          (1,175,100)     (38,352)           -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2007,
     March 31, 2008 and
     June 30, 2008         46,160,564  $ 1,506,574      547,413  $    17,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                     Total
                           ------------------------
                                            Stated
                               Number        Value
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2006     48,330,321  $ 1,577,342
    Issued on exercise of
     stock options             38,456        1,303
    -----------------------------------------------
    Shares issued and
     outstanding,
     March  31, 2007 and
     June 30, 2007         48,368,777    1,578,645
    Shares purchased for
     cancellation            (485,700)     (15,853)
    -----------------------------------------------
    Shares issued and
     outstanding,
     September  30, 2007   47,883,077    1,562,792
    Shares purchased for
     cancellation          (1,175,100)     (38,352)
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2007,
     March 31, 2008 and
     June 30, 2008         46,707,977  $ 1,524,440
    -----------------------------------------------
    -----------------------------------------------




    Pursuant to the terms of a normal course issuer bid program for which the
    Company received approval from the Toronto Stock Exchange ("TSX") on
    September 29, 2006, the Company was authorized, from October 4, 2006 to
    October 3, 2007, to purchase for cancellation, through the facilities of
    the TSX and the New York Stock Exchange ("NYSE"), up to 3,257,895 Class A
    Subordinate Voting Shares, being 10% of the Public Float, as such term is
    defined by the TSX.

    Pursuant to the terms of a normal course issuer bid program for which the
    Company received approval from the TSX on October 2, 2007, the Company is
    authorized, during the 12-month period commencing October 8, 2007 and
    ending October 7, 2008, to purchase for cancellation, through the
    facilities of the TSX and the NYSE, up to 2,531,354 Class A Subordinate
    Voting Shares, being 10% of the Public Float.

    During 2007, the Company purchased an aggregate of 1,660,800 Class A
    Subordinate Voting Shares for cancellation under these programs. The
    price that MID pays for shares purchased pursuant to the bids is the
    market price at the time of acquisition. No shares have been purchased
    thus far for cancellation in 2008 and the Company remains authorized to
    purchase for cancellation up to 1,696,654 Class A Subordinate Voting
    Shares under the normal course issuer bid program ending October 7, 2008.

    11. CONTRIBUTED SURPLUS

    Changes in the Company's contributed surplus are shown in the following
    table:

                                    Three Months               Six Months
                                   Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Contributed surplus,
     beginning of period  $    27,648  $     2,547  $    27,517  $     2,667
    Stock-based
     compensation                 131          127          262          252
    Transfer to share
     capital on exercise
     of stock options               -            -            -         (245)
    -------------------------------------------------------------------------
    Contributed surplus,
     end of period        $    27,779  $     2,674  $    27,779  $     2,674
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. ACCUMULATED OTHER COMPREHENSIVE INCOME

    Changes in the Company's accumulated other comprehensive income are shown
    in the following table:

                                Three Months               Six Months
                               Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income,
     beginning of period  $   276,778  $   176,205  $   241,939  $   166,553
    Change in fair value
     of interest rate swaps,
     net of taxes and
     minority interest            361            3           29          (56)
    Foreign currency
     translation
     adjustment, net of
     minority interest (i)        552       24,485       35,723       34,848
    Recognition of foreign
     currency translation
     translation loss
     (gain) in net income
     (loss) (ii)                  105            -          105         (652)
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income,
     end of period (iii)  $   277,796  $   200,693  $   277,796  $   200,693
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)   During the three-month and six-month periods ended June 30, 2008
          and 2007, the Company reported unrealized foreign currency
          translation net gains related to its self-sustaining operations
          having functional currencies other than the U.S. dollar. The gain
          in the three months ended June 30, 2008 is primarily due to the
          strengthening against the U.S. dollar of the Canadian dollar. The
          gain from the appreciation of the euro against the U.S. dollar in
          the six months ended June 30, 2008 was partially offset by
          unrealized foreign currency translation losses related to the
          reporting of the Company's Canadian operations due to the weakening
          of the Canadian dollar against the U.S. dollar during this period.
          The gain in the three and six months ended June 30, 2007 is
          primarily due to the strengthening against the U.S. dollar of the
          euro and the Canadian dollar.

    (ii)  Included in the Real Estate Business' "other losses" and "other
          gains, net" for the three and six months ended June 30, 2008,
          respectively, is a $0.1 million currency translation loss (six
          months ended June 30, 2007 - $0.7 million gain) realized from
          capital transactions that gave rise to a reduction in the net
          investment in certain foreign operations.

    (iii) Accumulated other comprehensive income consists of:

                                                           June     December
    As at                                              30, 2008     31, 2007
    -------------------------------------------------------------------------
    Foreign currency translation adjustment, net of
     minority interest                              $ 278,189    $   242,369
    Fair value of interest rate swaps, net of
     taxes and minority interest                         (393)          (430)
    -------------------------------------------------------------------------
                                                    $ 277,796    $   241,939
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    13. STOCK-BASED COMPENSATION

    (a) On August 29, 2003, MID's Board of Directors approved the Incentive
        Stock Option Plan (the "MID Plan"), which allows for the grant of
        stock options or stock appreciation rights to directors, officers,
        employees and consultants. Amendments to the MID Plan were approved
        by the Company's shareholders at the May 11, 2007 Annual and Special
        Meeting, and became effective on June 6, 2007. At December 31, 2007,
        a maximum of 2.61 million MID Class A Subordinate Voting Shares are
        available to be issued under the MID Plan.

        MID has granted stock options to certain directors and officers to
        purchase MID's Class A Subordinate Voting Shares. Such options have
        generally been granted with 1/5th of the options vesting on the date
        of grant and the remaining options vesting over a period of four
        years at a rate of 1/5th on each anniversary of the date of grant.
        Options expire on the tenth anniversary of the date of grant, subject
        to earlier cancellation in the events specified in the stock option
        agreement entered into by MID with each recipient of options.

        A reconciliation of the changes in stock options outstanding is
        presented below:


                                     2008                     2007
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                                             Price                     Price
                               Number      (Cdn. $)      Number      (Cdn. $)
    -------------------------------------------------------------------------
    Stock options
     outstanding,
     January 1                516,544        35.09      465,000        36.08
    Exercised                       -            -      (38,456)       32.19
    -------------------------------------------------------------------------
    Stock options
     outstanding, March 31    516,544        35.09      426,544        36.43
    Expired                   (10,000)       41.17            -            -
    -------------------------------------------------------------------------
    Stock options
     outstanding, June 30     506,544        34.97      426,544        36.43
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stock options
     exercisable, June 30     316,544        34.45      216,544        34.92
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The Company estimates the fair value of stock options granted at the
        date of grant using the Black-Scholes option valuation model. The
        Black-Scholes option valuation model was developed for use in
        estimating the fair value of freely traded options, which are fully
        transferable and have no vesting restrictions. In addition, this
        model requires the input of subjective assumptions, including
        expected dividend yields, future stock price volatility and expected
        time until exercise. Although the assumptions used reflect
        management's best estimates, they involve inherent uncertainties
        based on market conditions outside of the Company's control. Because
        the Company's outstanding stock options have characteristics that are
        significantly different from those of traded options, and because
        changes in any of the assumptions can materially affect the fair
        value estimate, in management's opinion, the existing models do not
        necessarily provide the only measure of the fair value of the
        Company's stock options.

        Effective November 3, 2003, MID established a Non-Employee Director
        Share-Based Compensation Plan (the "DSP"), which provides for a
        deferral of up to 100% of each outside director's total annual
        remuneration from the Company, at specified levels elected by each
        director, until such director ceases to be a director of the Company.
        The amounts deferred are reflected by notional deferred share units
        ("DSUs") whose value reflects the market price of the Company's Class
        A Subordinate Voting Shares at the time that the particular payment
        (s) to the director is determined. The value of a DSU will appreciate
        or depreciate with changes in the market price of the Class A
        Subordinate Voting Shares. The DSP also takes into account any
        dividends paid on the Class A Subordinate Voting Shares. Effective
        January 1, 2005, all directors were required to receive at least 50%
        of their Board and Committee compensation fees (excluding Special
        Committee fees, effective January 1, 2006) in DSUs. On January 1,
        2008, the DSP was amended such that this 50% minimum requirement is
        only applicable to Board retainer fees. Under the DSP, when a
        director leaves the Board, the director receives a cash payment at an
        elected date equal to the value of the accrued DSUs at such date.
        There is no option under the DSP for directors to receive Class A
        Subordinate Voting Shares in exchange for DSUs.

        A reconciliation of the changes in DSUs outstanding is presented
        below:

                                                           2008         2007
        ---------------------------------------------------------------------
        DSUs outstanding, January 1                      41,452       27,319
        Granted                                           6,012        4,241
        ---------------------------------------------------------------------
        DSUs outstanding, March 31                       47,464       31,560
        Granted                                           5,579        3,025
        ---------------------------------------------------------------------
        DSUs outstanding, June 30                        53,043       34,585
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the three and six months ended June 30, 2008, the Real Estate
        Business recognized stock-based compensation expense of $0.1 million
        (2007 - $0.2 million) and $0.3 million (2007 - $0.5 million),
        respectively, which includes a $9 thousand net recovery (2007 - $0.1
        million expense) and a $24 thousand net expense (2007 - $0.3 million
        expense), respectively, pertaining to DSUs.

    (b) Subsequent to quarter-end, MEC completed a reverse stock split
        whereby every twenty shares of MEC Class A Stock and MEC Class B
        Stock have been consolidated into one share of MEC Class A Stock and
        MEC Class B Stock, respectively (note 19(n)). In addition, the number
        of, and exercise price for, all MEC stock options were adjusted to
        reflect the 1:20 consolidation. Accordingly, all of the disclosures
        below pertaining to MEC's long-term incentive plan, performance share
        awards and options to purchase shares have been restated as of June
        30, 2008 and for all retroactive periods to reflect the effect of the
        reverse stock split.

        MEC has a long-term incentive plan (the "MEC Plan"), adopted in 2000
        and amended in 2007, which allows for the grant of non-qualified
        stock options, incentive stock options, stock appreciation rights,
        restricted stock, bonus stock and performance shares to MEC's
        directors, officers, employees, consultants, independent contractors
        and agents. A maximum of 440 thousand shares of MEC Class A Stock
        are available to be issued under the MEC Plan, of which 390 thousand
        are available for issuance pursuant to stock options and tandem stock
        appreciation rights and 50 thousand are available for issuance
        pursuant to any other type of award under the MEC Plan.

        Under a 2005 incentive compensation program (the "MEC Program"), MEC
        awarded performance shares of MEC Class A Stock to certain of MEC's
        officers and key employees. The number of shares of MEC Class A
        Stock underlying the 2005 Performance Share Awards was based either
        on a percentage of a guaranteed bonus or a percentage of total 2005
        compensation divided by the market value of the stock on the date the
        MEC Program was approved by the Compensation Committee of MEC's Board
        of Directors. The 2005 Performance Share Awards vested over a six or
        eight month period to December 31, 2005 and were distributed, subject
        to certain conditions, in two equal instalments. The first
        distribution date occurred in March 2006 and the second distribution
        date occurred in March 2007.

        For 2006, MEC continued the MEC Program as described in the preceding
        paragraph. The program was similar in all respects except that the
        performance shares granted in 2006 vested over a 12-month period to
        December 31, 2006 and were distributed, subject to certain
        conditions, prior to March 31, 2007.

        Accordingly, for the six months ended June 30, 2007, MEC issued 8,737
        of these vested performance share awards with a stated value of $0.6
        million and 324 performance share awards were forfeited. No
        performance share awards remain to be issued under the 2005 and 2006
        incentive compensation arrangements subsequent to March 31, 2007.
        MEC did not continue its performance share award program subsequent
        to 2006.

        During the three and six months ended June 30, 2008, MEC issued
        21,687 shares (six months ended June 30, 2007 - 1,547) of MEC Class A
        Stock with a stated value of $0.2 million (six months ended June 30,
        2007 - $0.1 million) to MEC's directors in payment of services
        rendered. As a result, the Company recognized a dilution loss of $0.4
        million in the three-month period (included in "other losses") and
        six-month period (included in "other gains, net") ended June 30, 2008
        (six months ended June 30, 2007 - $4 thousand dilution gain included
        in "other gains, net").

        MEC grants stock options ("MEC Stock Options") to certain directors,
        officers, key employees and consultants to purchase shares of MEC
        Class A Stock. All MEC Stock Options give the grantee the right to
        purchase MEC Class A Stock at a price no less than the fair market
        value of such stock at the date of grant. Generally, MEC Stock
        Options under the MEC Plan vest over a period of two to six years
        from the date of grant at rates of 1/7th to 1/3rd per year and expire
        on or before the tenth anniversary of the date of grant, subject to
        earlier cancellation upon the occurrence of certain events specified
        in the stock option agreements entered into by MEC with each
        recipient of MEC Stock Options.

        A reconciliation of the changes in MEC Stock Options outstanding is
        presented below:

                                      2008                     2007
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                               Number      Price $       Number      Price $
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding,
     January 1                247,500       116.40      245,250       121.60
    Forfeited or expired      (10,000)      111.20       (8,300)      134.80
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding, March 31    237,500       116.60      236,950       121.20
    Forfeited or expired         (550)      133.20       (1,250)      114.20
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding, June 30     236,950       116.55      235,700       121.40
    -------------------------------------------------------------------------
    MEC Stock Options
     exercisable, June 30     217,902       119.80      217,583       121.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The fair value of MEC Stock Options granted is estimated at the date
        of grant using the Black-Scholes option valuation model, which
        requires the use of subjective assumptions and may not necessarily
        provide the only measure of the fair value of MEC Stock Options (as
        described further in note 13(a)).

        During the three and six months ended June 30, 2008, MEC recognized
        total stock-based compensation expense of $0.2 million (2007 - $0.1
        million) and $0.2 (2007 - $0.3 million), respectively, relating to
        performance share awards, director compensation and stock options
        under the MEC Plan.

    14. CAPITAL MANAGEMENT AND LIQUIDITY

    The capital resources managed by the Company include:

    -  cash and cash equivalents;

    -  credit facilities;

    -  long-term debt;

    -  additional borrowing capacity; and

    -  shareholders' equity.

    Each of the Company's reportable segments (note 17) has different capital
    management objectives.

    Real Estate Business

    The Real Estate Business' objectives when managing capital include
    ensuring that there are adequate capital resources to sustain operations
    and maintaining a capital structure that allows the Real Estate Business
    to take advantage of suitable investment opportunities as they arise.
    The Real Estate Business monitors its capital based on its ratio of debt
    to total capitalization, which it regards as a measure of its ability to
    access additional capital as required.

    The Real Estate Business must also comply with the terms of its debt
    agreements, including its $50.0 million unsecured revolving credit
    facility (the "MID Credit Facility") and the trust indenture for its Cdn.
    $265.0 million senior unsecured debentures (the "Debentures"), which
    include the following limitations:

    -  secured indebtedness not to exceed 15% of net tangible assets;

    -  funded debt not to exceed 40% of total capitalization; and

    -  total interest coverage of no less than 3:1.

    At June 30, 2008 and December 31, 2007, the Company had no borrowings
    under the MID Credit Facility, which expires on December 21, 2008, but
    had issued letters of credit totalling $0.3 million.

    As at June 30, 2008, the Real Estate Business' debt to total
    capitalization was 14% (December 31, 2007 - 15%) and the Real Estate
    Business was in compliance with all of its covenants. The outstanding
    total debt at June 30, 2008 was $265.5 million (December 31, 2007 -
    $274.7 million), which is comprised of $258.8 million (December 31, 2007
    - $267.6 million) of the Debentures and $6.7 million (December 31, 2007 -
    $7.1 million) of mortgages payable on two properties. The Real Estate
    Business' total capitalization at June 30, 2008 was $1.93 billion
    (December 31, 2007 - $1.86 billion).

    The Real Estate Business generated cash flows from operating activities
    of $89.5 million in the six months ended June 30, 2008 and had cash and
    cash equivalents of $147.2 million at June 30, 2008.

    The Real Estate Business' strategy for managing its liquidity needs
    includes (i) using its cash resources and cash flows from operating
    activities, (ii) drawing on the MID Credit Facility if and as needed and
    (iii) accessing additional capital by issuing debt, equity or a
    combination of securities as required to finance its operations and
    capital expenditures. The capital requirements to finance additional
    acquisition and development activity will depend on the availability of
    suitable investment opportunities and related funding sources.

    As disclosed in note 3, MID is reviewing the reorganization proposal and
    is also continuing to explore a range of alternatives in respect of its
    MEC investment, including evaluating whether or to what extent MID might
    participate in a recapitalization or restructuring of MEC. The
    participation by MID in any such transaction could result in a
    significant increase in the Company's financial leverage, change the risk
    profile of the Real Estate Business and/or limit its financial
    flexibility to take advantage of certain investment opportunities. In
    addition, if the Real Estate Business' funded debt were to exceed 40% of
    its total capitalization as a result of these changes, the Company might
    be required to repay the Debentures and potentially pay a prepayment
    premium determined in accordance with the terms of the applicable trust
    indenture, as described in note 11 to the annual consolidated financial
    statements for the year ended December 31, 2007.

    MEC

    MEC's capital is monitored by its separate Board of Directors and
    management team based on its level of net debt. MEC must also comply with
    the terms of its debt agreements. Many of these debt arrangements are
    obligations of individual MEC business units and require compliance with
    numerous financial and other covenants. As at June 30, 2008, MEC's net
    debt was $586.1 million (December 31, 2007 - $564.5 million) and MEC was
    in compliance with all of its covenants except as disclosed in note 9.
    MID's Real Estate Business has not guaranteed any of MEC's indebtedness.

    Under the MEC Debt Elimination Plan (note 1), MEC's capital management
    objective is to significantly reduce or eliminate its net debt by
    generating funds from the sale of assets (notes 4 and 5), entering into
    strategic transactions involving certain of MEC's racing, gaming and
    technology operations, and a possible future equity issuance. These
    proceeds are to be used to fund MEC's operations and applied to eliminate
    MEC's net debt, including amounts owed to the MID Lender (note 18).
    Although MEC continues to take steps to implement its plan, MEC does not
    expect to execute the MEC Debt Elimination Plan on the originally
    contemplated time schedule, if at all. In order for MEC to fund its
    ongoing operations and provide sufficient time to implement the MEC Debt
    Elimination Plan, MEC will again need to seek extensions from existing
    lenders, including the Company, the availability of which is not yet
    determinable.

    As discussed in note 1, MEC's ability to continue as a going concern is
    in substantial doubt and is dependent on MEC generating cash flows that
    are adequate to sustain the operations of the business, renewing or
    extending current financing arrangements and meeting its obligations with
    respect to secured and unsecured creditors, none of which is assured. If
    MEC is unable to repay its obligations when due or satisfy required
    covenants in its debt agreements, substantially all of its current and
    long-term debt will also become due on demand as a result of cross-
    default provisions within its loan agreements, unless MEC is able to
    obtain waivers, modifications or extensions. The availability of such
    waivers, modifications or extensions is not assured and, if available,
    the terms thereof are not yet determinable.

    15. DETAILS OF CASH FROM OPERATING ACTIVITIES

    (a) Items not involving current cash flows:

                                Three Months               Six Months
                               Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                          - note 4)                 - note 4)
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Real Estate Business
    Straight-line rent
     adjustment           $       (91) $       145  $       (34) $       237
    Interest and other
     income from MEC           (1,442)         (75)      (2,528)        (143)
    Stock-based
     compensation expense         122          207          286          537
    Depreciation and
     amortization              11,356       10,216       22,403       20,147
    Write-down of
     long-lived assets            450            -          450            -
    Gain on disposal of
     real estate                    -       (1,357)           -       (1,382)
    Future income taxes           781          587        2,647        1,855
    Other losses (gains)          105            -          105         (652)
    Other                          87           81          175          156
    -------------------------------------------------------------------------
                               11,368        9,804       23,504       20,755
    -------------------------------------------------------------------------
    MEC
    Stock-based compensation
     expense                      187           70          231          272
    Interest expense with MID       -           75            -           75
    Depreciation and
     amortization              11,099        8,938       22,039       17,464
    Amortization of debt
     issuance costs             2,638          434        5,150          852
    Write-down of MEC's
     long-lived assets              -            -        5,000            -
    Gain on disposal of real
     estate                   (24,340)     (17,587)     (24,340)     (48,654)
    Other losses (gains)          443            -       (1,570)          (4)
    Future income taxes           (79)        (190)       1,562       (1,568)
    Minority interest             362       (8,654)      (5,950)      (6,452)
    Other                       1,478         (380)       2,358         (988)
    -------------------------------------------------------------------------
                               (8,212)     (17,294)       4,480      (39,003)
    -------------------------------------------------------------------------
    Eliminations (note 18)       (967)      17,400       (2,164)      49,708
    -------------------------------------------------------------------------
    Consolidated          $     2,189  $     9,910  $    25,820  $    31,460
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Changes in non-cash balances:

                                Three Months               Six Months
                               Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                          - note 4)                 - note 4)
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Real Estate Business
    Accounts receivable   $     2,564  $     1,136  $       741  $       694
    Loans receivable from
     MEC, net                    (274)           -         (333)           -
    Prepaid expenses and
     other                       (398)         123          129           45
    Accounts payable and
     accrued liabilities        1,143       (2,408)       4,980        2,060
    Income taxes                1,293        2,468        1,619        5,015
    Deferred revenue            1,896         (929)       1,174          273
    -------------------------------------------------------------------------
                                3,638          390        8,310        8,087
    -------------------------------------------------------------------------
    MEC
    Restricted cash            13,924       20,558       16,531       18,630
    Accounts receivable        20,096       24,581       (1,242)      (6,174)
    Prepaid expenses and
     other                     (3,008)         (23)      (7,217)      (3,984)
    Accounts payable and
     accrued liabilities      (39,861)     (31,303)     (28,695)     (26,746)
    Income taxes                   92        3,708        1,541        1,516
    Loans Payable to MID,
     net                          274            -          333            -
    Deferred revenue           (3,911)      (2,915)      (1,567)         312
    -------------------------------------------------------------------------
                              (12,394)      14,606      (20,316)     (16,446)
    -------------------------------------------------------------------------
    Eliminations (note 18)         71           22          282         (171)
    -------------------------------------------------------------------------
    Consolidated          $    (8,685) $    15,018  $   (11,724) $    (8,530)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    16. FINANCIAL INSTRUMENTS

    (a) Interest Rate Risk

        The Company's consolidated results of operations are primarily
        exposed to interest rate risk on its credit facilities and MEC's
        variable-rate long-term debt. Based on the balances of these
        financial liabilities outstanding as at June 30, 2008, a 50 basis
        point change in annual interest rates, with all other variables held
        constant, would have impacted consolidated "interest expense, net"
        for the six months ended June 30, 2008 by approximately $2.4 million.

        The Company is also exposed to interest rate risk on short-term
        investments with maturities of up to three months from the date of
        acquisition that are included in "cash and cash equivalents" and
        "restricted cash" on the Company's consolidated balance sheets. The
        balance of the Company's short-term investments fluctuates depending
        on the timing of the Company's operating cash flows, capital
        expenditures and other liquidity requirements. Assuming the balance
        of short-term investments at June 30, 2008 were outstanding
        throughout the entire six months then ended, a 50 basis point change
        in annual interest rates, with all other variables held constant,
        would have impacted consolidated "interest expense, net" by
        approximately $0.3 million for the six months ended June 30, 2008.

        MEC occasionally utilizes interest rate swap contracts to hedge
        exposure to interest rate fluctuations on variable rate debt. At
        March 31, 2008, MEC had four interest rate swap contracts outstanding
        in connection with a LIBOR-based term loan facility described in note
        18(c) to the annual consolidated financial statements for the year
        ended December 31, 2007. Based on the interest rate swap contracts in
        place at June 30, 2008, a 50 basis point change in interest rates
        would have impacted other comprehensive income (excluding related
        minority interest and tax effects) by approximately $0.6 million for
        the six months ended June 30, 2008.

    (b) Currency Risk

        The Company is structured such that its foreign operations are self-
        sustaining. As a result, the Company's currency risk associated with
        financial instruments is limited as its financial assets and
        liabilities are generally denominated in the functional currency of
        the subsidiary that holds the financial instrument. However, the Real
        Estate Business' corporate operations, which utilize the Canadian
        dollar as the functional currency, have exposure to U.S. dollar and
        euro denominated financial assets and liabilities. Similarly, MEC's
        operations, which utilize the U.S. dollar as the functional currency,
        have exposure to Canadian dollar denominated financial liabilities.
        Based on the balance of these financial instruments at June 30, 2008,
        a 5% change in exchange rates between the Canadian dollar and the
        relevant currencies at June 30, 2008 would not have had a material
        impact on the Company's consolidated net income for the six months
        ended June 30, 2008.

    (c) Credit Risk

        MEC, in the normal course of business, settles wagers for racetracks
        that it does not operate or manage and is thereby exposed to credit
        risk. However, these receivables are generally not a significant
        portion of the Company's total assets and are comprised of a large
        number of accounts. At June 30, 2008, MEC's "accounts receivable"
        included on the Company's consolidated balance sheet are net of an
        allowance for doubtful accounts of $1.8 million (December 31, 2007 -
        $1.8 million), which is estimated based on a review of specific
        customer balances and related historical collection experience. For
        the three and six months ended June 30, 2008, MEC incurred a bad debt
        expense of $0.2 million (2007 - $31 thousand) and $0.3 million (2007
        - $0.3 million), respectively.

    17. SEGMENTED INFORMATION

    The Company's reportable segments reflect how the Company is organized
    and managed by senior management. The Company's operations are segmented
    in the Company's internal financial reports between wholly-owned
    operations (Real Estate Business) and publicly-traded operations (MEC).
    The segregation of operations between wholly-owned and publicly-traded
    operations recognizes the fact that, in the case of the Real Estate
    Business, the Company's Board of Directors and executive management have
    direct responsibility for the key operating, financing and resource
    allocation decisions, whereas, in the case of MEC, such responsibility
    resides with MEC's separate Board of Directors and executive management.

    The Company's reporting segments are as follows:

    Real Estate Business

    At June 30, 2008, the Real Estate Business owns real estate assets in
    Canada, Austria, the United States, Germany, Mexico, the Czech Republic,
    the United Kingdom, Spain and Poland. Substantially all of these real
    estate assets are leased to, or are under development for subsequent
    lease to, Magna's automotive operating units. The Real Estate Business
    also owns certain properties that are being held for future development
    or sale.

    MEC

    MEC operates or manages seven thoroughbred racetracks, one standardbred
    racetrack and two racetracks that run both thoroughbred and quarter horse
    meets, as well as the simulcast wagering venues at these tracks. Also,
    MEC used to manage the thoroughbred and standardbred racing at Magna
    Racino(TM), but a local operator is now managing meets at that facility.
    Three of the racetracks owned or operated by MEC (two in the United
    States and one in Austria) include casino operations with alternative
    gaming machines. In addition, MEC operates off-track betting ("OTB")
    facilities, a United States based national account wagering business
    known as XpressBet(R) and a European account wagering service known as
    MagnaBet(TM). Under a series of March 2007 agreements with Churchill
    Downs Incorporated ("CDI"), MEC owns a 50% interest in a joint venture,
    TrackNet Media Group, LLC ("TrackNet Media"), a content management
    company formed for distribution of the full breadth of MEC's and CDI's
    horseracing content (note 19). A separate joint venture with CDI, "HRTV,
    LLC", also involves the ownership by each of MEC and CDI of 50% shares in
    HorseRacing TV(R) ("HRTV(R)"), a television network focused on
    horseracing that MEC initially launched on the Racetrack Television
    Network. MEC also owns AmTote, a provider of totalisator services to the
    pari-mutuel industry. To support certain of MEC's thoroughbred
    racetracks, MEC owns and operates thoroughbred training centres in Palm
    Beach County, Florida and in the Baltimore, Maryland area and, under a
    triple-net lease agreement with MID, operates an additional thoroughbred
    training centre situated near San Diego, California. MEC also owns and
    operates production facilities in Austria and in North Carolina for
    StreuFex(TM), a straw-based horse bedding product. In addition to
    racetracks, MEC's real estate portfolio includes a residential
    development in Austria.

    As described in note 1, the Company's consolidated statements of income
    (loss), consolidated statements of cash flows and consolidated balance
    sheets have been arranged to provide detailed, discrete financial
    information on the Real Estate Business and MEC reporting segments.

    18. TRANSACTIONS WITH RELATED PARTIES

    Mr. Frank Stronach, the Company's Chairman, the Chairman of Magna, and
    the Chairman and Chief Executive Officer of MEC, and three other members
    of his family are trustees of the Stronach Trust. The Stronach Trust
    controls the Company through the right to direct the votes attaching to
    66% of the Company's Class B Shares. Magna is controlled by M Unicar Inc.
    ("M Unicar"), a Canadian holding company whose shareholders consist of
    the Stronach Trust, OJSC Russian Machines ("Russian Machines") and
    certain members of Magna's management.  M Unicar indirectly owns Magna
    Class A Subordinate Voting Shares and Class B Shares representing in
    aggregate approximately 71% of the total voting power attaching to all
    Magna's shares. The Stronach Trust indirectly owns the shares carrying
    the majority of the votes of M Unicar. Magna is governed by a board of
    directors on which each of the Stronach Trust and Russian Machines
    (indirectly through M Unicar) has the right to designate an equal number
    of nominees, in addition to Magna's current co-chief executive officers.
    As the Company and Magna may be considered to be under the common control
    of the Stronach Trust, they are considered to be related parties for
    accounting purposes.

    (a) Bridge Loans and Project Financings

        On September 13, 2007, MID announced that the MID Lender had agreed
        to provide MEC with the MEC Bridge Loan of up to $80.0 million
        (subsequently increased to $110.0 million as discussed below). The
        MEC Bridge Loan, together with a $20.0 million private placement of
        MEC Class A Stock to FEL (the "FEL Equity Investment") completed in
        October 2007, is intended to provide short-term funding to MEC as it
        implements the MEC Debt Elimination Plan (note 1). At that time, the
        MID Lender also agreed to amend the MEC Project Financing Facilities
        (as defined below) by, among other things, requiring repayment of at
        least $100.0 million under the Gulfstream Park project financing
        facility on or prior to May 31, 2008 (subsequently extended to August
        31, 2008 as discussed below) and waiving the make-whole payment, if
        applicable, for any repayments made under either of the MEC Project
        Financing Facilities prior to that date. Pursuant to a consulting
        agreement between MID and MEC, which requires MEC to reimburse MID
        for its expenses, MID management has provided assistance to MEC in
        implementing the MEC Debt Elimination Plan.

        (i)  MEC Bridge Loan

             The MEC Bridge Loan, initially of up to $80.0 million, has been
             made available through a non-revolving facility provided by the
             MID Lender. The MEC Bridge Loan proceeds may only be used by MEC
             in accordance with the MEC Debt Elimination Plan and are
             available solely to fund: (i) operations; (ii) payments of
             principal, interest and costs, fees and expenses due under the
             MEC Bridge Loan and the MEC Project Financing Facilities; (iii)
             mandatory payments of interest in connection with permitted debt
             under the MEC Bridge Loan; (iv) mandatory capital expenditures;
             and (v) capital expenditures required pursuant to the terms of
             the joint venture arrangements between MEC and Forest City and
             Caruso (note 19).

             The MEC Bridge Loan initially had a maturity date of May 31,
             2008 and bore interest at a rate per annum equal to LIBOR plus
             10.0% prior to December 31, 2007, at which time the interest
             rate on outstanding and subsequent advances was increased to
             LIBOR plus 11.0% (set at 16.2% at December 31, 2007). On
             February 29, 2008, the interest rate on outstanding and
             subsequent advances under the MEC Bridge Loan was increased by
             a further 1.0% (set at 14.5% at June 30, 2008).

             On May 23, 2008, the maturity date of the MEC Bridge Loan was
             extended from May 31, 2008 to August 31, 2008. At the same time,
             the maximum commitment under the MEC Bridge Loan was increased
             from $80.0 million to $110.0 million, and MEC was given the
             ability to re-borrow the $21.5 million previously repaid from
             proceeds of asset sales (note 5).

             The MEC Bridge Loan is secured by certain assets of MEC,
             including first ranking security over the Dixon, Ocala and
             Thistledown lands, second ranking security over Golden Gate
             Fields and third ranking security over Santa Anita Park. In
             addition, the MEC Bridge Loan is guaranteed by certain MEC
             subsidiaries and MEC has pledged the shares and all other
             interests MEC has in each of the guarantor subsidiaries (or
             provided negative pledges where a pledge was not possible due to
             regulatory constraints or due to a pledge to an existing third
             party lender). The MEC Bridge Loan is cross-defaulted to all
             other obligations of MEC and its subsidiaries to the MID Lender,
             including the MEC Project Financing Facilities.

             The MEC Bridge Loan must be repaid with, and the commitment is
             reduced by, amounts equal to all net proceeds realized by MEC
             from asset sales and issuances of equity (other than the FEL
             Equity Investment) or debt, subject to amounts required to be
             paid to MEC's existing lenders. Amounts repaid subsequent to the
             May 2008 amendments cannot be re-borrowed. During the three and
             six months ended June 30, 2008, $19.8 million and $21.5 million,
             respectively, of the MEC Bridge Loan was repaid from proceeds of
             MEC asset sales (note 5) and subsequent to June 30, 2008, MEC
             repaid a further $4.5 million from its sale of Great Lakes Downs
             (note 5).

             The MID Lender received an arrangement fee of $2.4 million (3%
             of the commitment) at closing and received an additional
             arrangement fee of $0.8 million on February 29, 2008 (1% of the
             then current commitment). In connection with the May 2008
             amendments, the MID Lender received a fee of $1.1 million (1% of
             the increased maximum commitment) and an additional $1.1 million
             on August 1, 2008 (1% of the then current commitment) given that
             the reorganization proposal (note 3) had not been approved by
             that date. The MID Lender also receives an annual commitment fee
             equal to 1% of the undrawn facility. All fees, expenses and
             closing costs incurred by the MID Lender in connection with the
             MEC Bridge Loan and the May 2008 amendments thereto were paid by
             MEC.

             At June 30, 2008, $68.6 million (December 31, 2007 - $36.9
             million) due under the MEC Bridge Loan was included in the Real
             Estate Business' current portion of "loans receivable from MEC,
             net" on the Company's consolidated balance sheet, net of $0.8
             million (December 31, 2007 - $1.4 million) of unamortized
             deferred arrangement fees. MEC's current portion of "loans
             payable to MID, net" on the Company's consolidated balance sheet
             includes borrowings of $68.6 million (December 31, 2007 - $35.9
             million), net of $0.8 million (December 31, 2007 - $2.4 million)
             unamortized deferred financing costs. This net balance will be
             accreted to its face value over the remaining term to maturity
             of the MEC Bridge Loan.

        (ii) MEC Project Financings

             The MID Lender has made available separate project financing
             facilities to Gulfstream Park Racing Association, Inc. ("GPRA")
             and Remington Park, Inc., the wholly-owned subsidiaries of MEC
             that own and/or operate Gulfstream Park and Remington Park,
             respectively, in the amounts of $162.3 million and $34.2
             million, respectively, plus costs and capitalized interest in
             each case as discussed below (together, the "MEC Project
             Financing Facilities"). The MEC Project Financing Facilities
             have a term of 10 years (except as described below for the two
             slot machine tranches of the Gulfstream Park project financing
             facility) from the relevant completion dates for the
             construction projects at Gulfstream Park and Remington Park,
             which occurred in February 2006 and November 2005, respectively.

             The Remington Park project financing and the Gulfstream Park
             project financing contain cross-guarantee, cross-default and
             cross-collateralization provisions. The Remington Park project
             financing is secured by all assets of the borrower (including
             first ranking security over the Remington Park leasehold
             interest), excluding licences and permits, and is guaranteed by
             the MEC subsidiaries that own Gulfstream Park and the Palm
             Meadows Training Center. The security package also includes
             second ranking security over the lands owned by Gulfstream Park
             and second ranking security over the Palm Meadows Training
             Center and the shares of the owner of the Palm Meadows Training
             Center (in each case, behind security granted for the Gulfstream
             Park project financing). In addition, the borrower has agreed
             not to pledge any licences or permits held by it and MEC has
             agreed not to pledge the shares of the borrower or the owner of
             Gulfstream Park. The Gulfstream Park project financing is
             guaranteed by MEC's subsidiaries that own and operate the Palm
             Meadows Training Center and Remington Park and is secured
             principally by security over the lands (or, in the case of
             Remington Park, over the leasehold interest) forming part of the
             operations at Gulfstream Park, the Palm Meadows Training Center
             and Remington Park and over all other assets of Gulfstream Park,
             the Palm Meadows Training Center and Remington Park, excluding
             licences and permits (which cannot be subject to security under
             applicable legislation).

             In July 2006 and December 2006, the Gulfstream Park project
             financing facility was amended to increase the amount available
             from $115.0 million (plus costs and capitalized interest) by
             adding new tranches of up to $25.8 million (plus costs and
             capitalized interest) and $21.5 million (plus costs and
             capitalized interest), respectively. Both tranches were
             established to fund MEC's design and construction of slot
             machine facilities located in the existing Gulfstream Park
             clubhouse building, as well as related capital expenditures and
             start-up costs, including the acquisition and installation of
             slot machines. The new tranches of the Gulfstream Park project
             financing facility both mature on December 31, 2011. Interest
             under the December 2006 tranche was capitalized until May 1,
             2007, at which time monthly blended payments of principal and
             interest became payable to the MID Lender based on a 25-year
             amortization period commencing on such date.  Advances relating
             to the slot machine tranches are made available by way of
             progress draws and there is no make-whole payment associated
             with the new tranches. Also in July 2006, the Gulfstream Park
             project financing facility was further amended to introduce a
             mandatory annual cash flow sweep of not less than 75% of
             Gulfstream Park's total excess cash flow, after permitted
             capital expenditures and debt service, which will be used to
             repay the additional principal amounts being made available
             under the new tranches. The July 2006 and December 2006
             amendments did not affect the fact that the Gulfstream Park
             project financing facility continues to be cross-guaranteed,
             cross-defaulted and cross-collateralized with the Remington Park
             project financing facility. The consideration for the July 2006
             and December 2006 amendments was an arrangement fee of 1% of the
             amount of each new tranche, which amounts are capitalized under
             the Gulfstream Park project financing facility.

             In September 2007, the terms of the Gulfstream Park project
             financing facility were amended such that: (i) MEC was added as
             a guarantor under that facility; (ii) the borrower and all of
             the guarantors agreed to use commercially reasonable efforts to
             implement the MEC Debt Elimination Plan (including the sale of
             specific assets by the time periods listed in the MEC Debt
             Elimination Plan); and (iii) the borrower became obligated to
             repay at least $100.0 million under the Gulfstream Park project
             financing facility on or prior to May 31, 2008.  In
             consideration of these amendments and subject to certain
             conditions, the MID Lender agreed to waive the make-whole
             payment for any repayments made under the MEC Project Financing
             Facilities on or prior to May 31, 2008 and adjust the
             amortization schedule for the Gulfstream Park project financing
             facility following receipt of the $100.0 million repayment,
             provided that (i) repayments under the Gulfstream Park project
             financing facility are first applied to the July 2006 slots
             tranche, then to the December 2006 slots tranche (for each of
             which there is no make-whole payment), and then to the original
             tranche and (ii) no event of default exists under the MEC
             Project Financing Facilities.

             In connection with the May 2008 amendments to the MEC Bridge
             Loan, the MID Lender also agreed to amend the Gulfstream Park
             project financing facility by extending the deadline for
             repayment of at least $100.0 million from May 31, 2008 to August
             31, 2008 (during which time any repayments made under either of
             the MEC Project Financing Facilities will not be subject to a
             make-whole payment).

             Since the relevant completion date (or since inception for the
             July 2006 and December 2006 tranches of the Gulfstream Park
             project financing facility), amounts outstanding under each of
             the MEC Project Financing Facilities bear interest at a fixed
             rate of 10.5% per annum, compounded semi-annually. Prior to
             January 1, 2007, payment of interest was capitalized (except in
             relation to the December 2006 tranche of the Gulfstream Park
             project financing facility, for which the interest
             capitalization period was extended to May 1, 2007). Commencing
             January 1, 2007 (May 1, 2007 for the December 2006 tranche of
             the Gulfstream Park project financing facility), the MID Lender
             receives monthly blended payments of principal and interest
             based on a 25-year amortization period under each of the MEC
             Project Financing Facilities. Since the completion date for
             Remington Park, there has also been in place a mandatory annual
             cash flow sweep of not less than 75% of Remington Park's total
             excess cash flow, after permitted capital expenditures and debt
             service, which is used to pay capitalized interest on the
             Remington Park project financing facility plus a portion of the
             principal under the facility equal to the capitalized interest
             on the Gulfstream Park project financing facility. During the
             three and six months ended June 30, 2008, $1.5 million (2007 -
             $1.2 million) and $1.7 million (2007 - $1.7 million),
             respectively, of such payments were made. During the three
             months ended March 31, 2008, Remington Park agreed to purchase
             80 Class III slot machines from GPRA with funding from the
             Remington Park project financing facility. Accordingly, $1.0
             million was advanced under the existing Remington Park project
             financing facility during the three months ended March 31, 2008.

             At June 30, 2008, there were balances of $171.9 million
             (December 31, 2007 - $172.1 million), and $26.8 million
             (December 31, 2007 - $27.7 million) due under the Gulfstream
             Park project financing facility and the Remington Park project
             financing facility, respectively.  The current portion of the
             MEC Project Financing Facilities included in the Real Estate
             Business' "loans receivable from MEC, net" at June 30, 2008 was
             $102.0 million, including the required $100.0 million repayment
             discussed above. The current and non-current portions of the MEC
             Project Financing Facilities, as reflected in MEC's "loans
             payable to MID, net" on the Company's consolidated balance
             sheet, are $102.0 million (including $0.4 million in MEC's
             "discontinued operations" (note 4)) and $92.6 million (including
             $25.3 million in MEC's "discontinued operations" (note 4)),
             respectively, with the non-current portion being net of $4.1
             million of unamortized deferred financing costs. This net
             balance will be accreted to its face value over the remaining
             terms to maturity of the MEC Project Financing Facilities.

             In connection with the Gulfstream Park project financing
             facility, MEC has placed into escrow (the "Gulfstream Escrow")
             with the MID Lender proceeds from an asset sale which occurred
             in fiscal 2005 and certain additional amounts necessary to
             ensure that any remaining Gulfstream Park construction costs
             (including the settlement of liens on the property) can be
             funded, which escrowed amount has been and will be applied
             against any such construction costs. At June 30, 2008, the
             amount held under the Gulfstream Escrow was $0.9 million
             (December 31, 2007 - $4.5 million). All funds in the Gulfstream
             Escrow are reflected as the Real Estate Business' "restricted
             cash" and "due to MEC" on the Company's consolidated balance
             sheet.

    Approximately $8.6 million of external third party costs have been
    incurred in association with the MEC Bridge Loan and the MEC Project
    Financing Facilities. At the MEC segment level, these costs are
    recognized as deferred financing costs and are being amortized into
    interest expense (of which a portion has been capitalized in the case of
    the MEC Project Financing Facilities) over the respective term of the MEC
    Bridge Loan and each of the MEC Project Financing Facilities. At a
    consolidated level, such costs are charged to "general and
    administrative" expenses in the periods in which they are incurred.

    All interest and fees charged by the Real Estate Business relating to the
    MEC Bridge Loan and the MEC Project Financing Facilities, including any
    capitalization and subsequent amortization thereof by MEC, and any
    adjustments to MEC's related deferred financing costs, are eliminated
    from the Company's consolidated results of operations and financial
    position.

    (b) MEC's Real Estate Sales to Magna

        In April 2008, MEC completed the sale to a subsidiary of Magna of 225
        acres of excess real estate located in Ebreichsdorf, Austria for
        proceeds of 20.0 million euros ($31.5 million), net of transaction
        costs (note 5(b)). MEC recognized a gain in the three and six months
        ended June 30, 2008 of 15.5 million euros ($24.3 million), which is
        included in MEC's "gain on disposal of real estate".

    (c) Magna Lease Terminations

        During the three months ended March 31, 2008, the Real Estate
        Business and Magna completed a lease termination agreement
        (retroactive to May 31, 2007) on a property in the United Kingdom
        that the Real Estate Business is seeking to redevelop for residential
        purposes. In April 2008, the Real Estate Business paid Magna $2.0
        million to terminate the lease, and the termination payment is
        included in the Real Estate Business' "real estate properties, net"
        at June 30, 2008 on the Company's unaudited interim consolidated
        balance sheet. The Real Estate Business had not recognized any
        revenue under the lease of this property since May 31, 2007.

        During the three months ended March 31, 2008, the Real Estate
        Business and Magna also agreed to terminate the lease on a property
        in Canada. In conjunction with the lease termination, Magna agreed to
        pay the Company a fee of $3.9 million, which amount was collected in
        April 2008 and has been recognized by the Real Estate Business in
        "other gains, net" in the Company's unaudited interim consolidated
        financial statements for the six months ended June 30, 2008.

    (d) Sale of MEC Real Estate to Joint Venture

        On April 2, 2008, one of MEC's European wholly-owned subsidiaries,
        Fontana Beteiligungs GmbH ("Fontana"), entered into an agreement to
        sell real estate with a carrying value of 0.2 million euros ($0.3
        million) located in Oberwaltersdorf, Austria to Fontana Immobilien
        GmbH, an entity in which Fontana has a 50% joint venture equity
        interest, for 0.8 million euros ($1.2 million). The purchase price
        was originally payable in instalments according to the sale of
        apartment units by the joint venture and, in any event, was due no
        later than April 2, 2009. On August 1, 2008, Fontana completed the
        sale of its 50% joint venture equity interest in Fontana Immobilien
        GmbH to a related party. The sale price included nominal cash
        consideration equal to Fontana's initial capital contribution and a
        future profit participation in Fontana Immobilien GmbH. Fontana and
        Fontana Immobilien GmbH also agreed to amend the real estate sale
        agreement such that payment of the purchase price to Fontana is
        accelerated to August 7, 2008. This consideration will be recognized
        when received.

    (e) MEC Real Estate Acquired by MID

        During the first quarter of 2007, MID acquired all of MEC's interests
        and rights in three real estate properties to be held for future
        development: a 34 acre parcel in Aurora, Ontario; a 64 acre parcel of
        excess land adjacent to MEC's racetrack at Laurel Park in Howard
        County, Maryland; and a 157 acre parcel (together with certain
        development rights) in Palm Beach County, Florida adjacent to MEC's
        Palm Meadows Training Center. MID paid cash consideration of
        approximately Cdn. $12.0 million ($10.1 million), $20.0 million and
        $35.0 million, respectively, for these interests and rights. In
        addition, MID granted MEC a profit participation right in respect of
        each property, which entitles MEC to receive additional cash proceeds
        equal to 15% of the net proceeds from any sale or development of the
        applicable property after MID achieves a 15% internal rate of return.

        During the second quarter of 2007, MID acquired all of MEC's interest
        and rights in a 205 acre parcel of land located in Bonsall,
        California for cash consideration of approximately $24.0 million.
        The property currently houses the San Luis Rey Downs Thoroughbred
        Training Facility operated by MEC. MID is holding the property for
        future development and has agreed to lease the property to MEC on a
        triple-net basis for nominal rent while MID pursues the necessary
        entitlements and other approvals to permit the development of the
        property. The term of the lease is three years, subject to early
        termination by either party on four months written notice.

        At the Real Estate Business and MEC segment levels, these
        transactions have been recognized at the exchange amount, resulting
        in MEC recognizing a gain in the three and six months ended June 30,
        2007 of $17.6 million and $48.7 million, respectively, included in
        MEC's "gain on disposal of real estate". The effects of these
        transactions are eliminated from the Company's unaudited interim
        consolidated results of operations and financial position, except
        that $0.2 million and $1.8 million of costs incurred by the Real
        Estate Business and MEC in conjunction with these transactions have
        been included in the consolidated "general and administrative"
        expenses in the three and six months ended June 30, 2007,
        respectively.

    (f) Hurricane Katrina Relief Effort

        In October 2005, the Real Estate Business purchased 791 acres of land
        in Simmesport, Louisiana for $2.4 million. In the fourth quarter of
        2005, the Real Estate Business committed to donating approximately 50
        acres of this land to a not-for-profit organization established to
        assist Hurricane Katrina redevelopment efforts with charitable
        funding from Magna and other Canadian sources. In the second quarter
        of 2007, the Real Estate Business committed to donating the remaining
        741 acres of land to the same not-for-profit organization. As a
        result, $2.0 million of costs associated with this further donation
        is included in the Real Estate Business' "general and
        administrative" expenses in the three and six months ended June 30,
        2007. The founding members and officers of the not-for-profit
        organization are officers and employees of MID and Magna.

    19. COMMITMENTS AND CONTINGENCIES

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

    (b) On July 10, 2008, the Ontario Divisional Court dismissed the appeal
        by Greenlight Capital, Inc. and certain of its affiliates of the
        October 2006 decision of the Ontario Superior Court of Justice
        dismissing Greenlight's oppression application against the Company
        and certain of its current and former directors and officers. The
        appeal hearing took place in April 2008.

    (c) MEC generates a substantial amount of its revenues from wagering
        activities and is subject to the risks inherent in the ownership and
        operation of its racetracks. These include, among others, the risks
        normally associated with changes in the general economic climate,
        trends in the gaming industry, including competition from other
        gaming institutions and state lottery commissions, and changes in tax
        laws and gaming laws.

    (d) On May 18, 2007, ODS Technologies, L.P., operating as TVG Network,
        filed a summons against MEC, HRTV, LLC and XpressBet, Inc. seeking an
        order that the defendants be enjoined from infringing certain patents
        relating to interactive wagering systems and an award of damages to
        compensate for the infringement. An Answer to Complaint, Affirmative
        Defences and Counterclaims have been filed on behalf of the
        defendants. The discovery and disposition process is ongoing and the
        final outcome related to this summons is uncertain.

    (e) In addition to the letters of credit issued under the Company's
        credit facilities (notes 9 and 14), the Company had $4.5 million
        (Real Estate Business - $3.4 million; MEC - $1.1 million) of letters
        of credit issued with various financial institutions at June 30, 2008
        to guarantee various construction projects. These letters of credit
        are secured by cash deposits of the Company.

    (f) MEC has provided indemnities related to surety bonds and letters of
        credit issued in the process of obtaining licences and permits at
        certain racetracks and to guarantee various construction projects
        related to activities of its subsidiaries. At June 30, 2008, these
        indemnities amounted to $6.8 million, with expiration dates through
        2009.

    (g) At June 30, 2008, the Company's contractual commitments related to
        construction and development projects outstanding amounted to
        approximately $2.9 million (Real Estate Business - $1.7 million; MEC
        - $1.2 million).

    (h) On March 4, 2007, MEC entered into a series of customer-focused
        agreements with CDI in order to enhance wagering integrity and
        security, to own and operate HRTV(R), to buy and sell horseracing
        content, and to promote the availability of horseracing signals to
        customers worldwide. These agreements involved the formation of a
        joint venture, TrackNet Media, a reciprocal content swap agreement
        and the purchase by CDI from MEC of a 50% interest in HRTV(R).
        TrackNet Media is the vehicle through which MEC and CDI horseracing
        content is made available to third parties, including racetracks, OTB
        facilities, casinos and advance deposit wagering ("ADW") companies.
        TrackNet Media purchases horseracing content from third parties and
        makes it available through the respective MEC and CDI outlets. Under
        the reciprocal content swap agreement, MEC and CDI exchange their
        respective horseracing signals. On March 4, 2007, HRTV, LLC was
        created, with an effective date of April 27, 2007, in order to
        facilitate the sale of 50% of HRTV(R) to CDI. Both MEC and CDI are
        required to make quarterly capital contributions, on an equal basis,
        until October 2009 to fund the operations of HRTV, LLC, however, MEC
        may, under certain circumstances, be responsible for additional
        capital commitments. MEC's share of the required capital
        contributions to HRTV, LLC is expected to be approximately $7.0
        million, of which $3.6 million had been contributed prior to June 30,
        2008.

    (i) On December 8, 2005, legislation authorizing the operation of slot
        machines within existing, licensed Broward County, Florida pari-
        mutuel facilities that had conducted live racing or games during each
        of 2002 and 2003 was passed by the Florida Legislature. On January 4,
        2006, the Governor of Florida signed the legislation into law and,
        subsequently, the Division of Pari-mutuel Wagering developed the
        governing rules and regulations. Prior to the opening of the slots
        facility at Gulfstream Park on November 15, 2006, MEC was awarded a
        gaming licence for slot machine operations at Gulfstream Park in
        October 2006 despite an August 2006 decision rendered by the Florida
        First District Court of Appeals that ruled that a trial is necessary
        to determine whether the constitutional amendment adopting the slots
        initiative was invalid because the petitions bringing the initiative
        forward did not contain the minimum number of valid signatures.
        Previously, a lower court decision had granted summary judgment in
        favour of "Floridians for a Level Playing Field" ("FLPF"), a group in
        which GPRA is a member. Though FLPF pursued various procedural
        options in response to the Florida First District Court of Appeals
        decision, the Florida Supreme Court ruled in late September 2007 that
        the matter was not procedurally proper for consideration by the
        court. Its order effectively remanded the matter to the trial court
        for a trial on the merits. MEC has disclosed that it expects that a
        trial on the merits will likely take an additional year or more to
        fully develop and that it could take as many as three years to
        achieve a full factual record and trial court ruling for an appellate
        court to review. At June 30, 2008, the carrying value of MEC's fixed
        assets related to the slots facility is approximately $27.0 million.
        If the matter is ultimately decided in a manner adverse to MEC, a
        write-down of these fixed assets may be required.

    (j) In May 2005, MEC entered into a Limited Liability Company Agreement
        with Forest City (collectively with MEC, the "Partnership Members")
        concerning the planned development of "The Village at Gulfstream
        Park(TM)". That agreement contemplates the development of a mixed-use
        project consisting of residential units, parking, restaurants,
        hotels, entertainment, retail outlets and other commercial use
        projects on a portion of the Gulfstream Park property. Under the
        Limited Liability Company Agreement, Forest City is required to
        contribute up to a maximum of $15.0 million as an initial capital
        contribution. MEC is obligated to contribute 50% of any equity
        amounts in excess of $15.0 million as and when needed and, to June
        30, 2008, MEC has contributed $4.2 million. At June 30, 2008,
        approximately $55.0 million of net costs have been incurred by The
        Village at Gulfstream Park, LLC, which have been funded by a
        construction loan from a third party bank, as well as equity
        contributions from MEC and Forest City. Included in MEC's "accounts
        payable and accrued liabilities" is an obligation of approximately
        $3.0 million reflecting MEC's unpaid share of equity contributions in
        excess of $15.0 million. If either of the Partnership Members fails
        to make required capital contributions when due, then the other
        Partnership Member may advance such funds to the Limited Liability
        Company, equal to the required capital contributions, as a recourse
        loan or as a capital contribution for which the capital accounts of
        the Partnership Members would be adjusted accordingly. The Limited
        Liability Company Agreement also contemplated additional agreements
        with MEC, including a ground lease, a reciprocal easement agreement,
        a development agreement, a leasing agreement and a management
        agreement, all of which have been executed. Upon the opening of The
        Village at Gulfstream Park(TM), annual cash receipts (adjusted for
        certain disbursements and reserves) will first be distributed to
        Forest City, subject to certain limitations, until the initial
        contribution accounts of the Partnership Members are equal.
        Thereafter, the cash receipts are generally expected to be
        distributed to the Partnership Members equally, provided they
        maintain their equal interest in the partnership. The annual cash
        payments made to Forest City to equalize the Partnership Members'
        initial contribution accounts will not exceed the amount of annual
        ground rent otherwise payable to a subsidiary of MEC.

    (k) On September 28, 2006, certain of MEC's affiliates entered into
        definitive operating agreements with Caruso regarding the proposed
        development of The Shops at Santa Anita on approximately 51 acres of
        excess land surrounding Santa Anita Park. Westfield Corporation
        ("Westfield"), a developer of a neighbouring parcel of land, has
        challenged the manner in which the entitlement process for such
        development has proceeded. On May 16, 2007, Westfield commenced civil
        litigation in the Los Angeles Superior Court in an attempt to
        overturn the Arcadia City Council's approval and granting of
        entitlements related to the construction of The Shops at Santa Anita.
        In addition, on May 21, 2007, Arcadia First! filed a petition against
        the City of Arcadia to overturn the entitlements and named MEC and
        certain of its subsidiaries as parties of interest. The first
        hearings on the merits of the petitioners' claims were heard in May
        2008. On July 23, 2008, the court issued a tentative opinion in
        favour of the petitioners in part, concluding that eleven parts of
        the final environmental impact report were deficient. MEC and Caruso
        are working with the City of Arcadia to determine how to resolve the
        deficiencies in the final environmental impact report. Accordingly,
        development efforts may be delayed or suspended. Under an April 2004
        Letter of Intent, MEC is also exploring the possibility of a joint
        venture with Caruso to develop excess lands surrounding Golden Gate
        Fields. To June 30, 2008, MEC has expended $10.2 million on these
        development initiatives, of which $0.3 million was paid in the six
        months ended June 30, 2008. These amounts have been included in MEC's
        "real estate properties, net" on the Company's consolidated balance
        sheets. Under the terms of these arrangements, MEC may be responsible
        to fund additional costs. However, to June 30, 2008, no such payments
        have been made.

    (l) In November 2006, MEC sold its wholly-owned interest in The Meadows,
        a standardbred racetrack in Pennsylvania, to PA Meadows, LLC, a
        company jointly owned by William Paulos and William Wortman,
        controlling shareholders of Millennium Gaming, Inc., and a fund
        managed by Oaktree Capital Management, LLC (together, "Millennium-
        Oaktree"). On closing, MEC received cash consideration of $171.8
        million, net of transaction costs of $3.2 million, and a $25.0
        million holdback note payable to MEC over a five-year period, subject
        to offset for certain indemnification obligations (the "Meadows
        Holdback Note"). Based on the indemnification obligations and other
        terms pertaining to the Meadows Holdback Note, the Meadows Holdback
        Note will be recognized in the consolidated financial statements upon
        the settlement of the indemnification obligations and as payments are
        received.

        The parties also entered into a racing services agreement whereby MEC
        pays $50 thousand per annum and continues to operate, for its own
        account, the racing operations at The Meadows until at least July
        2011. On December 12, 2007, Cannery Casino Resorts, LLC, the parent
        company of Millennium-Oaktree, announced it had entered into an
        agreement to sell Millennium-Oaktree to Crown Limited. If the deal is
        consummated, either party to the racing services agreement will have
        the option to terminate the arrangement. $5.6 million of the gain
        from the sale of The Meadows was initially deferred and included in
        MEC's "other long-term liabilities" representing the estimated net
        present value of the future operating losses expected over the term
        of the racing services agreement. Such amount is being recognized as
        a reduction of "general and administrative" expenses in MEC's results
        of operations over the term of the racing services agreement.
        Effective January 1, 2008, The Meadows entered into an agreement with
        the Meadows Standardbred Owners Association, which expires on
        December 31, 2009, whereby the horsemen will make contributions to
        subsidize backside maintenance and marketing expenses at The Meadows.
        As a result, the estimated operating losses expected over the
        remaining term of the racing services agreement have been revised,
        resulting in an additional $2.0 million of previously deferred gains
        being recognized in MEC's "other gains, net" for the six months ended
        June 30, 2008.

        Until December 25, 2007, The Meadows participated in a multi-employer
        defined benefit pension plan for which the pension plan's total
        vested liabilities exceeded the plan's assets. The New Jersey Sports
        & Exposition Authority previously withdrew from the pension plan
        effective November 1, 2007. As the only remaining participant in the
        pension plan, The Meadows withdrew from the pension plan effective
        December 25, 2007, which constituted a mass withdrawal. An updated
        actuarial valuation is in the process of being obtained, however,
        based on allocation information provided by the plan, the estimated
        withdrawal liability of The Meadows is approximately $6.2 million.
        This liability may be satisfied by annual payments of approximately
        $0.3 million. As part of the indemnification obligations provided for
        in the Meadows Holdback Note, the mass withdrawal liability that has
        been triggered as a result of The Meadows' withdrawal from the plan
        will be set-off against the amount owing to MEC under the Meadows
        Holdback Note.

    (m) MJC was party to agreements with the Maryland Thoroughbred Horsemen's
        Association and the Maryland Breeders' Association, which expired on
        December 31, 2007, under which the horsemen and the breeders each
        contributed 4.75% of the costs of simulcasting to MJC. Without
        similar arrangements in effect, costs are expected to increase by
        approximately $2.0 million for the year ending December 31, 2008. At
        this time, it is uncertain whether these agreements will be renewed
        on comparable terms.

    (n) On February 12, 2008, MEC received notice from the Nasdaq Stock
        Market ("Nasdaq") advising that, in accordance with Nasdaq
        Marketplace Rule 4450(e)(2), MEC had until August 11, 2008 to regain
        compliance with the minimum bid price required for the continued
        listing of the MEC Class A Stock on Nasdaq, as set forth in Nasdaq
        Marketplace Rule 4450(a)(5). MEC received this notice because the bid
        price of its publicly held MEC Class A Stock closed below the $1.00
        per share minimum for 30 consecutive business days prior to February
        12, 2008.

        In order to provide MEC with flexibility in addressing market-related
        issues affecting its capitalization and to address the Nasdaq
        continuous listing requirements, MEC's Board of Directors adopted a
        resolution, approved by MEC stockholders on May 6, 2008, to amend
        MEC's Certificate of Incorporation to permit a one-time reverse stock
        split of MEC's Class A Stock and MEC Class B Stock, prior to May 6,
        2009, in any whole number consolidated ratio from 1:10 to 1:20. On
        July 3, 2008, MEC announced that its Board of Directors had approved
        a reverse stock split of MEC's Class A Stock and MEC Class B Stock
        utilizing a 1:20 consolidation ratio. The reverse split became
        effective on July 22, 2008. On August 5, 2008, MEC received notice
        from Nasdaq that it had regained compliance with the minimum bid
        continued listing requirement and the matter had been closed.

        As a result of the reverse stock split, every twenty shares of MEC
        Class A Stock and MEC Class B Stock have been consolidated into one
        share of MEC Class A Stock and MEC Class B Stock, respectively. The
        reverse stock split affects all shares of common stock, stock options
        and convertible securities of MEC outstanding prior to the effective
        date. The 58.6 million outstanding shares of MEC Class A Stock (4.4
        million of which were held by MID) and 58.4 million outstanding
        shares of MEC Class B Stock (all of which were held by MID) were
        reduced to 2.9 million shares of MEC Class A Stock (0.2 million of
        which are held by MID) and 2.9 million shares of MEC Class B Stock
        (all of which continue to be held by MID), respectively.

        Because the reverse stock split applies to all issued shares of MEC
        Class A Stock and MEC Class B Stock, it does not alter the relative
        rights and preferences of MID's interest in MEC, nor does it affect
        MID's proportionate equity or voting interest in MEC, except to the
        extent the reverse stock split resulted in fractional shares being
        cashed out.

        As a result of the reverse stock split, the conversion price for
        which each of MEC's $150.0 million of 8.55% convertible subordinated
        notes and $75.0 million of 7.25% convertible subordinated notes are
        convertible into shares of MEC Class A Stock has been adjusted from
        $7.05 and $8.50 per share, respectively, to $141.00 and $170.00 per
        share, respectively.

    (o) On May 8, 2008, one of MEC's wholly-owned subsidiaries, Los Angeles
        Turf Club, Incorporated, commenced civil litigation in the District
        Court in Los Angeles for breach of contract. It is seeking damages in
        excess of $8.4 million from Cushion Track Footing USA, LLC and other
        defendants for failure to install a racing surface at Santa Anita
        Park suitable for the purpose for which it was intended.
    





For further information:

For further information: Richard J. Smith, Executive Vice-President and
Chief Financial Officer, at (905) 726-7507; For teleconferencing questions,
please contact Andrea Sanelli at (905) 726-7504.

Organization Profile

MI DEVELOPMENTS INC.

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