MI Developments announces fourth quarter and 2006 results



    AURORA, ON, March 7 /CNW/ - MI Developments Inc. (TSX: MIM.A, MIM.B;
NYSE:   MIM) ("MID" or the "Company") today announced its results for the three
months and year ended December 31, 2006. All figures are in U.S. dollars.

    
    -------------------------------------------------------------------------
    (unaudited, in thousands,
     except per share figures)           REAL ESTATE BUSINESS(1)
                                Three Months Ended           Year Ended
                                    December 31,            December 31,
                          ------------------------- -------------------------
                                 2006         2005         2006         2005
                          ------------ ------------ ------------ ------------
    Revenues              $    46,591  $    40,282  $   184,782  $   151,134
    Net income            $    23,303  $    19,003  $    98,510  $    76,435
    Funds from operations
     ("FFO")(2)           $    33,934  $    28,743  $   138,158  $   113,574
    Diluted FFO
     per share(2)         $      0.70  $      0.60  $      2.86  $      2.35

    -------------------------------------------------------------------------
    (unaudited, in thousands,
     except per share figures)              MID CONSOLIDATED(1)
                                Three Months Ended           Year Ended
                                    December 31,            December 31,
                          ------------------------- -------------------------
                                 2006         2005         2006         2005
                          ------------ ------------ ------------ ------------
    Revenues
      Real Estate
       Business           $    46,591  $    40,282  $   184,782  $   151,134
      Magna Entertainment
       Corp. ("MEC")(3)       132,875      126,297      710,923      619,107
      Eliminations             (7,033)      (3,809)     (29,249)      (7,017)
                          ------------ ------------ ------------ ------------
                          $   172,433  $   162,770  $   866,456  $   763,224
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income (loss)
      Real Estate
       Business           $    23,303  $    19,003  $    98,510  $    76,435
      MEC - continuing
       operations              (7,598)     (21,778)     (49,077)     (60,897)
      Eliminations                598       (1,455)        (505)      (7,031)
                          ------------ ------------ ------------ ------------
      Income (loss) from
       continuing
       operations              16,303       (4,230)      48,928        8,507
      MEC - discontinued
       operations(4)           12,213       (1,909)      10,942       (1,948)
                          ------------ ------------ ------------ ------------
                          $    28,516  $    (6,139) $    59,870  $     6,559
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Diluted earnings
     (loss) per share from
      continuing
      operations          $      0.34  $     (0.09) $      1.01  $      0.18
    Diluted earnings
     (loss) per share     $      0.59  $     (0.13) $      1.24  $      0.14

    -------------------------------------------------------------------------
    (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)  MEC's discontinued operations for the years ended December 31, 2006
         and 2005 include the operations of a restaurant and related real
         estate in the United States, the sale of which was completed on
         May 26, 2006, the operations of the Magna Golf Club, the sale of
         which was completed on August 25, 2006, and the operations of the
         Fontana Golf Club, the sale of which was completed on November 1,
         2006. In addition, MEC's discontinued operations for the year ended
         December 31, 2005 include the operations of Flamboro Downs, the sale
         of which was completed on October 19, 2005, and the operations of
         Maryland-Virginia Racing Circuit, Inc., the sale of which was
         completed on September 30, 2005.
    


    REAL ESTATE BUSINESS

    Operating and Development Highlights

    In respect of our core rental portfolio of Magna International Inc.
("Magna") facilities, during the fourth quarter of 2006 we brought on-stream
two expansion projects, representing an aggregate of 60 thousand square feet
of leaseable area, at a cost of $5.6 million.
    For the year ended December 31, 2006, the Real Estate Business brought
753 thousand square feet of leaseable area on-stream with a total cost of
$43.8 million. These projects include 11 separate projects for Magna and the
purchase from a third party of a 343 thousand square foot facility and related
land in Saltillo, Mexico, which facility is leased primarily to a Magna
tenant.
    At December 31, 2006, the Real Estate Business had two properties under
development in Canada. These developments are expansions and renovations to
existing facilities and will add three thousand square feet to the Real Estate
Business' income-producing portfolio when completed. Subsequent to year-end,
the Real Estate Business also commenced a 25 thousand square foot expansion
and related refurbishments to a property in the U.S. The total anticipated
costs related to these projects are approximately $10.8 million, of which
$0.7 million had been incurred as of December 31, 2006.
    At December 31, 2006, the Real Estate Business had 27.5 million square
feet of leaseable area, with annualized lease payments of $159.2 million,
representing a return of 10.6% on the gross carrying value of our
income-producing portfolio.
    Subsequent to year-end, MID acquired all of MEC's interests and rights in
two development real estate properties in return for aggregate cash
consideration of $30.1 million. The acquired lands include a 34 acre parcel of
residential development land in Aurora, Ontario and a 64 acre parcel of excess
land adjacent to MEC's racetrack at Laurel Park in Howard County, Maryland.
MID intends to develop the two properties, either for its own account or as
part of a joint venture arrangement, for residential and, in the case of
Laurel, mixed use purposes.
    "Our strategy always included leveraging the strong and steady cash flows
from our core industrial portfolio to grow our asset base and diversify our
revenue stream," said John Simonetti, Chief Executive Officer. "Our decision
to finance various MEC development projects is consistent with this strategy
and provided a significant positive impact on our 2006 financial results.
Although we continue to focus on our Magna business, given the challenges in
the automotive industry environment and the related slowdown in our
Magna-related developments, we also continue to pursue other areas for growth,
including further opportunities afforded to us by our MEC investment."

    Financial Results for the Three Months Ended December 31, 2006

    For the three months ended December 31, 2006, revenues were
$46.6 million, an increase of 16% over revenues of $40.3 million for the three
months ended December 31, 2005. The higher revenues reflect ongoing
initiatives, including $1.3 million from completed Magna projects coming
on-stream, $0.6 million from contractual rent increases on our existing rental
portfolio and $3.2 million of higher interest and other income earned from the
financing arrangements with MEC and certain of its subsidiaries (the "MEC
Financing Arrangements"). Changes in foreign exchange rates increased revenues
by $1.7 million, while the impact of straight-line and other adjustments
reduced revenues by $0.5 million.
    FFO in the three months ended December 31, 2006 was $33.9 million,
representing an increase of $5.2 million or 18% over FFO for the three months
ended December 31, 2005. This improvement in FFO is due to a $6.3 million
increase in revenue and a decrease in general and administrative expenses of
$1.2 million, partially offset by increases of $0.6 million in net interest
expense and $1.7 million in cash tax expense.
    Net income for the fourth quarter of 2006 of $23.3 million increased by
23% compared to net income of $19.0 million for the fourth quarter of 2005.
The increase resulted from the $6.3 million increase in revenues and a
$1.2 million decrease in general and administrative expenses, partially offset
by increases of $0.9 million in depreciation, $0.6 million in net interest
expense and $0.8 million in income tax expense, as well as a $0.9 million gain
on disposal in the fourth quarter of 2005.
    General and administrative expenses for the fourth quarter of 2005
include (i) $1.9 million of costs incurred in association with the Company's
defence against the oppression application brought by Greenlight Capital, Inc.
and certain of its affiliates ("Greenlight" - see "Greenlight Capital
Litigation" for further details) and (ii) $0.6 million of costs associated
with the Real Estate Business' contribution to a not-for-profit organization
established to assist Hurricane Katrina redevelopment efforts (the "Katrina
Contribution"). Excluding these costs, general and administrative expenses
increased by $1.3 million compared to the fourth quarter of 2005, primarily
due to increased professional fees related to the Company's compliance with
Sarbanes-Oxley legislation, increased salaries and related benefits (including
increased stock option compensation expense) and the strengthening of the euro
and Canadian dollar against the U.S. dollar in the fourth quarter of 2006
compared to the fourth quarter of 2005.
    Net interest expense was $2.1 million in the three months ended
December 31, 2006 ($3.6 million of interest expense less $1.5 million of
interest income) compared to $1.5 million for the three months ended December
31, 2005 ($3.4 million of interest expense less $1.9 million of interest
income).

    Financial Results for the Year Ended December 31, 2006

    For the year ended December 31, 2006, revenues were $184.8 million, an
increase of $33.6 million or 22% over the same period in the prior year. The
higher revenues reflect ongoing initiatives, including $5.7 million from
completed Magna projects coming on-stream, $2.4 million from contractual rent
increases on our existing rental portfolio and $22.2 million of higher
interest and other income earned from the MEC Financing Arrangements. Changes
in foreign exchange rates increased revenues by $3.6 million, while the impact
of straight-line and other adjustments reduced revenues by $0.3 million.
    FFO for the year ended December 31, 2006 of $138.2 million represents a
22% increase over FFO of $113.6 million for the year ended December 31, 2005.
FFO for the year ended December 31, 2005 includes a $3.1 million current tax
recovery (which is offset by an equal future tax expense) related to
accelerated depreciation for which the Real Estate Business qualified with
respect to certain properties acquired prior to January 1, 2005. Excluding
this item, FFO for the year ended December 31, 2006 increased by 25% over FFO
for the year ended December 31, 2005 of $110.5 million. This improvement in
FFO is primarily due to a $33.6 million increase in revenue and a $1.3 million
reduction in general and administrative expenses, partially offset by
increases in net interest expense of $3.9 million and current income tax
expense of $3.4 million.
    Net income for the year ended December 31, 2006 was $98.5 million, an
increase of $22.1 million or 29% over net income of $76.4 million for the
prior year. The change over the prior year was a result of a $33.6 million
increase in revenues, a $1.3 million decrease in general and administrative
expenses, dilution and other gains of $1.9 million and a $1.6 million
reduction in income tax expense, partially offset by increases in depreciation
and amortization of $2.3 million and net interest expense of $3.9 million, as
well as a $10.1 million lower gain on disposal of real estate. Excluding gains
(net of related taxes) from the sale of real estate in both 2006 and 2005, net
income increased by 41% to $98.4 million in 2006 compared to $69.7 million in
2005.
    General and administrative expenses in 2006 were $21.0 million, a
$1.3 million decrease from $22.3 million in 2005. General and administrative
expenses for 2005 include (i) $5.4 million of costs incurred in association
with Greenlight's oppression application and related matters and (ii) $0.6
million of costs associated with the Katrina Contribution. General and
administrative expenses for 2006 include (i) $2.5 million of advisory and
other costs incurred in connection with the Company's evaluation of certain
transactions that, ultimately, were not undertaken and (ii) $0.8 million of
costs related to the Greenlight oppression application, which were offset by a
$1.3 million recovery under the Company's insurance policy. Excluding these
items, general and administrative expenses in 2006 increased by $2.7 million
compared to 2005, from $16.3 million in 2005 to $19.0 million in 2006,
primarily due to increased professional fees related to the Company's
compliance with Sarbanes-Oxley legislation, increased repairs and maintenance
costs, increased salaries and related benefits (including stock option
compensation expense) and the strengthening of the Canadian dollar against the
U.S. dollar.
    Net interest expense was $10.4 million in the year ended December 31,
2006 ($14.4 million of interest expense less $4.0 million of interest income)
compared to $6.5 million for the year ended December 31, 2005 ($12.9 million
of interest expense less $6.4 million of interest income). The Company's
senior unsecured debentures are denominated in Canadian dollars and the
$1.5 million increase in interest expense is due to the strengthening of the
Canadian dollar against the U.S. dollar as well as lower capitalized interest,
which decreased to $0.6 million in 2006 compared to $1.2 million in 2005.
Interest income decreased by $2.4 million compared to the prior year, due to a
reduction in the Real Estate Business' average cash available throughout the
year for short-term investments.
    During the year ended December 31, 2006, the Real Estate Business
recognized $1.9 million of currency translation gains related to the
translation of the Real Estate Business' foreign operations. This gain, which
was previously included in the currency translation adjustment component of
equity, resulted from the weakening of the U.S. dollar and was recognized in
the determination of net income as a result of the Real Estate Business
repatriating funds from certain of its foreign operations. The currency
translation gains of $1.9 million have been excluded from the determination of
the Real Estate Business' FFO.

    Greenlight Capital Litigation

    On August 2, 2005, Greenlight filed an oppression application in the
Ontario Superior Court of Justice against the Company and certain of its
current and former directors and officers. The hearing of the application
concluded on March 1, 2006 and on October 30, 2006, the Ontario Superior Court
of Justice dismissed the oppression application. On November 29, 2006,
Greenlight filed a Notice of Appeal with the Ontario Divisional Court and on
January 30, 2007, Greenlight filed its Appellants' factum. The Company
continues to consider Greenlight's oppression claim to be without merit and,
together with the other respondents, will file a responding factum to
vigorously defend against the appeal.

    MAGNA ENTERTAINMENT CORP.
    -------------------------

    At December 31, 2006, the market value of MID's shareholding in MEC was
$283.4 million, based on the Nasdaq closing price of $4.51 per share for MEC
Class A Subordinate Voting Stock (NASDAQ:   MECA) on the last trading date in
2006.

    MEC Recapitalization Plan

    In November 2006, MEC closed the sale of The Meadows racetrack, which
generated net cash proceeds of $171.8 million and contributed to MEC's fourth
quarter net reduction in bank indebtedness of $33.4 million and repayment of
$116.7 million of debt, including $111.8 million in full repayment of the
bridge loan with MID. In February 2007, MEC sold its interests and rights in
two real estate properties to MID for proceeds of $30.1 million, which were
used by MEC to further pay down debt. MEC is continuing to pursue other
funding sources to further strengthen its balance sheet, which may include
additional non-core asset sales, partnerships and raising equity, any of which
may involve MID.
    Mr. Simonetti stated, "We are pleased that MEC has fully repaid our
bridge loan. However, additional steps need to be taken in order to improve
their financial position. We continue to closely monitor MEC's financial
situation and evaluate alternatives in order to resolve this issue in a way
that is acceptable to all of our stakeholders."

    Financial Results for the Three Months and Year Ended December 31, 2006

    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 operations and results
from discontinued operations. MEC's discontinued operations for the year ended
December 31, 2006 include the operations of a restaurant and related real
estate in the United States, the sale of which was completed on May 26, 2006,
the operations of the Magna Golf Club, the sale of which was completed on
August 25, 2006, and the operations of the Fontana Golf Club, the sale of
which was completed on November 1, 2006. In addition, MEC's discontinued
operations for the year ended December 31, 2005 include the operations of
Flamboro Downs, the sale of which was completed on October 19, 2005, and the
operations of Maryland-Virginia Racing Circuit, Inc., the sale of which was
completed on September 30, 2005.
    MEC's revenues from continuing operations for the three months and year
ended December 31, 2006 increased 5% to $132.9 million and 15% to
$710.9 million, respectively, from the prior year comparable periods. The
increase in revenues in the fourth quarter of 2006 is primarily due to gaming
revenues at the Gulfstream Park casino facility and Remington Park casino
facility (which opened in November 2006 and November 2005, respectively) and
MEC's acquisition of the remaining 70% equity interest of AmTote
International, Inc. on July 26, 2006 (the "AmTote Acquisition"), partially
offset by a reduction in revenues from MEC's California operations, primarily
due to a change in the racing calendar at Golden Gate Fields whereby there
were 12 live race days in the three months ended December 31, 2006 compared to
46 live race days in the three months ended December 31, 2005. The increase in
revenues in the year ended December 31, 2006 is primarily due to the same
factors noted above for the three months ended December 31, 2006, as well as
increased attendance, handle and wagering at Santa Anita Park as a result of
better weather and more effective marketing efforts, increased live race days
at Golden Gate Fields whereby live race days increased from 96 days in 2005 to
106 days in 2006, increased racing revenues at Gulfstream park due to the
opening of the new clubhouse facility and increased wagering revenues at
Laurel Park as a result of additional live race days and increased average
field size.
    Earnings before interest, taxes, depreciation and amortization from MEC's
continuing operations excluding dilution and other gains and the minority
interest impact ("EBITDA") was $7.0 million for the fourth quarter in 2006
compared to a loss of $19.0 million in the prior year. EBITDA was
$15.9 million in the year ended December 31, 2006 compared to a loss of
$33.0 million in the prior year. EBITDA in the three months and year ended
December 31, 2006 were positively impacted by a $115.2 million gain on the
sale of The Meadows and negatively impacted by a $77.4 million non-cash
write-down of long lived assets, $76.2 million of which pertained to Magna
Racino(TM)'s long-lived assets. Excluding these items, EBITDA for the three
months ended December 31, 2006 decreased by $11.8 million and EBITDA for the
year ended December 31, 2006 increased by $11.1 million. The $11.8 million
decrease in EBITDA for the three months ended December 31, 2006 is due to
$19.4 million of increased operating costs and general and administrative
expenses, partially offset by $6.6 million of increased revenues and a $1.1
million reduction in purses, awards and other expenses. The increase in
operating costs and general and administrative expenses is primarily due to
increased operating and marketing costs at Remington Park and Gulfstream Park
for the casino facilities, increased costs resulting from the AmTote
Acquisition, a write-off of deferred development costs in connection with
MEC's Michigan racing licence and costs incurred in MEC's pursuit of the
legalization of alternative gaming in Ohio, a referendum on which was defeated
by the Ohio voters in the November 2006 general election, partially offset by
reduced costs in MEC's California operations resulting from the change in the
racing calendar at Golden Gate Fields discussed above. The $11.1 improvement
in EBITDA for the year ended December 31, 2006 is due to $91.8 million of
increased revenues and $2.9 million of gains on the disposal of real estate in
the first quarter of 2006, partially offset by $39.6 million of increased
purses, awards and other expenses and $44.0 million of increased operating
costs and general and administrative expenses. The increase in operating costs
and general and administrative expenses is primarily due to the same factors
mentioned above for the fourth quarter of 2006 and increased costs associated
with the 10 additional live race days at Golden Gate fields discussed
previously.
    MEC recorded net income of $4.6 million and a net loss of $38.1 million
for the three months and year ended December 31, 2006, respectively, compared
to net losses of $23.7 million and $62.8 million in the three months and year
ended December 31, 2005, respectively. Excluding the $12.2 million of income
and the $1.9 million loss from discontinued operations in the three months
ended December 31, 2006 and 2005, respectively, the $14.2 million decrease in
MEC's net loss in the fourth quarter of 2006 is due to the improvement in
EBITDA discussed above and an increase in MEC's income tax recovery, partially
offset by increased depreciation expense primarily as a result of the opening
of the new clubhouse facility at Gulfstream Park in the first quarter of 2006
and the Remington Park casino facility in November 2005, increased interest
expense on the MEC Financing Arrangements and a decrease in the minority
interest recovery due to the decrease in MEC's net loss before dilution and
other gains and the minority interest impact. Excluding the $10.9 million of
income and the $1.9 million loss from discontinued operations in the years
ended December 31, 2006 and 2005, respectively, the $11.8 million decrease in
net loss in the year ended December 31, 2006 is primarily due to the factors
mentioned above for the fourth quarter of 2006.

    DIVIDENDS
    ---------

    MID's Board of Directors has declared a dividend of $0.15 per share on
MID's Class A Subordinate Voting Shares and Class B Shares for the fourth
quarter ended December 31, 2006. The dividend is payable on or about April 15,
2007 to shareholders of record at the close of business on March 30, 2007.

    CONFERENCE CALL
    ---------------

    A conference call will be held for interested analysts and shareholders
to discuss the fourth quarter's results on March 7, 2007 at 10:30 am EST. The
number to use for this call is 1-800-731-6941. The number for overseas callers
is 416-644-3417. 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 21219949 followed by the number sign) and the
rebroadcast will be available until March 14, 2007.

    ABOUT MID
    ---------

    MID is a real estate operating company engaged in the ownership,
management, leasing, development and acquisition of industrial and commercial
real estate properties located in North America and Europe. Virtually all of
its income-producing properties are under lease to Magna and its subsidiaries.
MID also holds a controlling investment in MEC, a publicly-traded company
that, based on revenues, is North America's number one owner and operator of
horse racetracks, and one of the world's leading suppliers, via simulcasting,
of live 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 Ended           Year Ended
                                    December 31,            December 31,
                          ------------------------- -------------------------
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Net income            $    23,303  $    19,003  $    98,510  $    76,435
    Add back (deduct):
      Depreciation and
       amortization            10,200        9,329       39,225       36,896
      Future income taxes         431        1,044        2,439        6,930
      Gain on disposal of
       real estate, net
       of income tax                -         (633)         (95)      (6,687)
      Dilution and other
       gains                        -            -       (1,921)           -
    -------------------------------------------------------------------------
    Funds from operations $    33,934  $    28,743  $   138,158  $   113,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     funds from operations
     per share            $      0.70  $      0.60  $      2.86  $      2.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of
     shares outstanding
     (thousands)
      Basic                   48,329        48,290       48,301       48,260
      Diluted                 48,386        48,343       48,355       48,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    FORWARD-LOOKING STATEMENTS
    --------------------------

    The contents of this press release may 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 2005,
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, 2005. 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 (Loss)
    (U.S. dollars in thousands, except per share figures)
    (Unaudited)

                                Consolidated          Real Estate Business
                          ------------------------- -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2006         2005         2006         2005
    -------------------------------------------------------------------------
    Revenues
    Rental revenue        $    39,558  $    36,473  $    39,558  $    36,473
    Racing and other
     revenue                  132,875      126,297            -            -
    Interest and other
     income from MEC
     (note 16)                      -            -        7,033        3,809
    -------------------------------------------------------------------------
                              172,433      162,770       46,591       40,282
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards and
     other                     58,727       59,827            -            -
    Operating costs            83,367       68,727            -            -
    General and
     administrative
     (note 16)                 27,564       24,277        5,891        7,110
    Depreciation and
     amortization
     (note 16)                 22,815       18,896       10,200        9,329
    Interest expense, net
     (note 16)                 10,559        9,630        2,142        1,532
    Write-down of MEC's
     long-lived assets
     (note 5)                  77,445            -            -            -
    -------------------------------------------------------------------------
    Operating income
     (loss)                  (108,044)     (18,587)      28,358       22,311
    Gain on disposal of
     business                 115,193            -            -            -
    Gain on disposal of
     real estate                    -          900            -          900
    Dilution and other
     gains                         10            4            -            -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest          7,159      (17,683)      28,358       23,211
    Income tax expense
     (recovery)                (3,733)       1,987        5,055        4,208
    Minority interest          (5,411)     (15,440)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     16,303       (4,230)      23,303       19,003
    Income (loss) from
     discontinued
     operations (note 3)       12,213       (1,909)           -            -
    -------------------------------------------------------------------------
    Net income (loss)     $    28,516  $    (6,139) $    23,303  $    19,003
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     earnings (loss) per
     Class A Subordinate
     Voting or Class B
     Share (note 6)
      - Continuing
         operations       $      0.34  $     (0.09)
      - Discontinued
         operations
         (note 3)                0.25        (0.04)
    -----------------------------------------------
      Total               $      0.59  $     (0.13)
    -----------------------------------------------
    -----------------------------------------------
    Average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands)
     (note 6)
      - Basic                  48,329       48,290
      - Diluted                48,386       48,290
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2006         2005
    -----------------------------------------------
    Revenues
    Rental revenue        $         -  $         -
    Racing and other
     revenue                  132,875      126,297
    Interest and other
     income from MEC
     (note 16)                      -            -
    -----------------------------------------------
                              132,875      126,297
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards and
     other                     58,727       59,827
    Operating costs            83,467       68,727
    General and
     administrative
     (note 16)                 21,390       16,702
    Depreciation and
     amortization
     (note 16)                 12,652        9,569
    Interest expense, net
     (note 16)                 16,194       10,915
    Write-down of MEC's
     long-lived assets
     (note 5)                  77,445            -
    -----------------------------------------------
    Operating income
     (loss)                  (137,000)     (39,443)
    Gain on disposal of
     business                 115,193            -
    Gain on disposal of
     real estate                    -            -
    Dilution and other
     gains                         10            4
    -----------------------------------------------
    Income (loss) before
     income taxes
     and minority interest    (21,797)     (39,439)
    Income tax expense
     (recovery)                (8,788)      (2,221)
    Minority interest          (5,411)     (15,440)
    -----------------------------------------------
    Income (loss) from
     continuing operations     (7,598)     (21,778)
    Income (loss) from
     discontinued
     operations (note 3)       12,213       (1,909)
    -----------------------------------------------
    Net income (loss)     $     4,615  $   (23,687)
    -----------------------------------------------
    -----------------------------------------------
    See accompanying notes



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

                                Consolidated          Real Estate Business
                          ------------------------- -------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2006         2005         2006         2005
    -------------------------------------------------------------------------
    Revenues
    Rental revenue        $   155,533  $   144,117  $   155,533  $   144,117
    Racing and other
     revenue                  710,923      619,107            -            -
    Interest and other
     income from MEC
     (note 16)                      -            -       29,249        7,017
    -------------------------------------------------------------------------
                              866,456      763,224      184,782      151,134
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards and
     other                    345,829      306,268            -            -
    Operating costs           316,005      281,762            -            -
    General and
     administrative
     (note 16)                 97,207       90,337       20,996       22,304
    Depreciation and
     amortization
     (note 16)                 83,695       73,923       39,225       36,896
    Interest expense,
     net (note 16)             42,360       37,576       10,407        6,464
    Write-down of MEC's
     long-lived assets         77,445            -            -            -
    -------------------------------------------------------------------------
    Operating income
     (loss)                   (96,085)     (26,642)     114,154       85,470
    Gain on disposal
     of business              115,193            -            -            -
    Gain on disposal of
     real estate                3,092       10,304          209       10,304
    Dilution and other
     gains (note 11)            2,116           11        1,921            -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes
     and minority interest     24,316      (16,327)     116,284       95,774
    Income tax expense
     (note 12)                 10,471       18,336       17,774       19,339
    Minority interest         (35,083)     (43,170)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing
     operations                48,928        8,507       98,510       76,435
    Income (loss) from
     discontinued
     operations (note 3)       10,942       (1,948)           -            -
    -------------------------------------------------------------------------
    Net income (loss)     $    59,870  $     6,559  $    98,510  $    76,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     earnings (loss) per
     Class A Subordinate
     Voting or Class B
     Share (note 6)
      - Continuing
         operations       $      1.01  $      0.18
      - Discontinued
         operations
         (note 3)                0.23        (0.04)
    -----------------------------------------------
      Total               $      1.24  $      0.14
    -----------------------------------------------
    -----------------------------------------------
    Average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands)
     (note 6)
      - Basic                  48,301       48,260
      - Diluted                48,355       48,319
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2006         2005
    -----------------------------------------------
    Revenues
    Rental revenue        $         -  $         -
    Racing and other
     revenue                  710,923      619,107
    Interest and other
     income from MEC
     (note 16)                      -            -
    -----------------------------------------------
                              710,923      619,107
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards and
     other                    345,829      306,268
    Operating costs           316,105      281,762
    General and
     administrative
     (note 16)                 73,700       64,048
    Depreciation and
     amortization
     (note 16)                 44,607       37,029
    Interest expense,
     net (note 16)             62,971       35,081
    Write-down of MEC's
     long-lived assets         77,445            -
    -----------------------------------------------
    Operating income
     (loss)                  (209,734)    (105,081)
    Gain on disposal
     of business              115,193            -
    Gain on disposal of
     real estate                2,883            -
    Dilution and other
     gains (note 11)              195           11
    -----------------------------------------------
    Income (loss) before
     income taxes
     and minority interest    (91,463)    (105,070)
    Income tax expense
     (note 12)                 (7,303)      (1,003)
    Minority interest         (35,083)     (43,170)
    -----------------------------------------------
    Income (loss) from
     continuing
     operations               (49,077)     (60,897)
    Income (loss) from
     discontinued
     operations (note 3)       10,942       (1,948)
    -----------------------------------------------
    Net income (loss)     $   (38,135) $   (62,845)
    -----------------------------------------------
    -----------------------------------------------
    See accompanying notes



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

                                Three Months Ended           Year Ended
                                    December 31,            December 31,
                          ------------------------- -------------------------
                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
    Deficit, beginning
     of period            $   (89,904) $   (86,055) $   (99,527) $   (79,932)
    Net income (loss)          28,516       (6,139)      59,870        6,559
    Costs associated with
     capital transactions
     of subsidiaries             (475)         (89)        (475)         (89)
    Dividends                  (7,249)      (7,244)     (28,980)     (26,065)
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (69,112) $   (99,527) $   (69,112) $   (99,527)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes



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

                                Consolidated          Real Estate Business
                          ------------------------- -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2006         2005         2006         2005
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    16,303  $    (4,230) $    23,303  $    19,003
    Items not involving
     current cash flows
     (note 14)                (29,087)         382        6,838        8,147
    Changes in non-cash
     balances (note 14)        18,052       15,456       (1,729)      (1,887)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                 5,268       11,608       28,412       25,263
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (23,670)     (85,939)      (3,004)     (18,751)
    Proceeds on disposal
     of real estate and
     fixed assets, net          2,950        1,517            -        1,517
    Proceeds on disposal
     of business, net
     (note 4)                 171,777            -            -            -
    Decrease (increase) in
     other assets               2,462       (1,027)          33            -
    Loan advances to MEC
     (note 16)                      -            -      (23,963)     (81,109)
    Loan repayments from
     MEC (note 16)                  -            -      113,400            -
    -------------------------------------------------------------------------
    Cash provided by
     (used in)
     investment activities    153,519      (85,449)      86,466      (98,343)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Net increase
     (decrease) in
     bank indebtedness        (33,414)       1,960            -            -
    Issuance of
     long-term debt               448          209            -            -
    Repayment of
     long-term debt            (3,410)      (4,449)         (92)         (84)
    Loan advances from
     MID, net (note 16)             -            -            -            -
    Loan repayments to
     MID (note 16)                  -            -            -            -
    Issuance of shares            316            -          316            -
    Costs associated with
     capital  transactions
     of subsidiaries             (475)         (89)        (475)         (89)
    Dividends paid             (7,249)      (7,244)      (7,249)      (7,244)
    -------------------------------------------------------------------------
    Cash provided by
     (used in)
     financing activities     (43,784)      (9,613)      (7,500)      (7,417)
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on
     cash and cash
     equivalents                  957       (2,520)         557       (2,042)
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations    115,960      (85,974)     107,935      (82,539)
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                 2,671       (6,145)           -            -
    Cash provided by
     (used in) investing
     activities                16,554       28,840            -            -
    Cash provided by
     (used in) financing
     activities                     -       (4,673)           -            -
    -------------------------------------------------------------------------
    Net cash flows
     provided by
     discontinued
     operations                19,225       18,022            -            -
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the period        135,185      (67,952)     107,935      (82,539)
    Cash and cash
     equivalents,
     beginning of period      115,070      225,412       83,931      188,021
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period               $   250,255  $   157,460  $   191,866  $   105,482
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2006         2005
    -----------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    (7,598) $   (21,778)
    Items not involving
     current cash flows
     (note 14)                (34,190)      (8,394)
    Changes in non-cash
     balances (note 14)        19,943       17,813
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (21,845)     (12,359)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (20,666)     (67,188)
    Proceeds on disposal
     of real estate and
     fixed assets, net          2,950            -
    Proceeds on disposal
     of business, net
     (note 4)                 171,777            -
    Decrease (increase) in
     other assets               2,429       (1,027)
    Loan advances to MEC
     (note 16)                      -            -
    Loan repayments from
     MEC (note 16)                  -            -
    -----------------------------------------------
    Cash provided by
     (used in)
     investment activities    156,490      (68,215)
    -----------------------------------------------
    FINANCING ACTIVITIES
    Net increase
     (decrease) in
     bank indebtedness        (33,414)       1,960
    Issuance of
     long-term debt               448          209
    Repayment of
     long-term debt            (3,318)      (4,365)
    Loan advances from
     MID, net (note 16)        22,664       79,813
    Loan repayments to
     MID (note 16)           (113,400)           -
    Issuance of shares              -            -
    Costs associated with
     capital  transactions
     of subsidiaries                -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in)
     financing activities    (127,020)      77,617
    -----------------------------------------------
    Effect of exchange
     rate changes on
     cash and cash
     equivalents                  400         (478)
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations      8,025       (3,435)
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                 2,671       (6,145)
    Cash provided by
     (used in) investing
     activities                16,554       28,840
    Cash provided by
     (used in) financing
     activities                     -       (4,673)
    -----------------------------------------------
    Net cash flows
     provided by
     discontinued
     operations                19,225       18,022
    -----------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the period         27,250       14,587
    Cash and cash
     equivalents,
     beginning of period       31,139       37,391
    -----------------------------------------------
    Cash and cash
     equivalents, end of
     period               $    58,389  $    51,978
    -----------------------------------------------
    -----------------------------------------------
    See accompanying notes



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

                                Consolidated          Real Estate Business
                          ------------------------- -------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2006         2005         2006         2005
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    48,928  $     8,507  $    98,510  $    76,435
    Items not involving
     current cash flows
     (note 14)                  2,761       27,269       24,971       31,250
    Changes in non-cash
     balances (note 14)            38       13,659       (7,385)       2,380
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                51,727       49,435      116,096      110,065
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions         (126,490)    (218,199)     (35,898)     (67,556)
    Acquisition of
     business, net of cash
     acquired (note 2)         (9,347)           -            -            -
    Proceeds on disposal
     of business, net
     (note 4)                 171,777            -            -            -
    Proceeds on disposal
     of real estate
     and fixed assets, net     20,927       32,436        8,921       26,633
    Decrease (increase) in
     other assets                 220       (1,451)        (834)        (191)
    Loan advances to
     MEC (note 16)                  -            -      (93,771)    (161,884)
    Loan repayments from
     MEC (note 16)                  -            -      116,800            -
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
     activities                57,087     (187,214)      (4,782)    (202,998)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Net increase
     (decrease) in bank
     indebtedness             (20,785)       2,760            -            -
    Issuance of long-term
     debt                      12,582          197            -            -
    Repayment of long-term
     debt                     (16,175)     (15,912)        (359)        (312)
    Loan advances from
     MID, net (note 16)             -            -            -            -
    Loan repayments to
     MID (note 16)                  -            -            -            -
    Issuance of shares          1,171        2,611        1,171        2,611
    Costs associated with
     capital transactions
     of subsidiaries             (475)         (89)        (475)         (89)
    Dividends paid            (28,980)     (26,065)     (28,980)     (26,065)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (52,662)     (36,498)     (28,643)     (23,855)
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents       3,709       (5,463)       3,713       (6,604)
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations     59,861     (179,740)      86,384     (123,392)
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in)
     operating activities       1,372       (8,502)           -            -
    Cash provided by
     investing activities      63,989       35,149            -            -
    Cash provided by
     (used in) financing
     activities               (32,427)      20,863            -            -
    -------------------------------------------------------------------------
    Net cash flows
     provided by
     discontinued
     operations                32,934       47,510            -            -
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the year           92,795     (132,230)      86,384     (123,392)
    Cash and cash
     equivalents,
     beginning of year        157,460      289,690      105,482      228,874
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     year                 $   250,255  $   157,460  $   191,866  $   105,482
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2006         2005
    -----------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $   (49,077) $   (60,897)
    Items not involving
     current cash flows
     (note 14)                (16,918)      (6,273)
    Changes in non-cash
     balances (note 14)         5,884       12,572
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (60,111)     (54,598)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (90,592)    (150,643)
    Acquisition of
     business, net of cash
     acquired (note 2)         (9,347)           -
    Proceeds on disposal
     of business, net
     (note 4)                 171,777            -
    Proceeds on disposal
     of real estate
     and fixed assets, net     12,006        5,803
    Decrease (increase) in
     other assets               1,054       (1,493)
    Loan advances to
     MEC (note 16)                  -            -
    Loan repayments from
     MEC (note 16)                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) investment
     activities                84,898     (146,333)
    -----------------------------------------------
    FINANCING ACTIVITIES
    Net increase
     (decrease) in bank
     indebtedness             (20,785)       2,760
    Issuance of long-term
     debt                      12,582          197
    Repayment of long-term
     debt                     (15,816)     (15,600)
    Loan advances from
     MID, net (note 16)        89,513      156,085
    Loan repayments to
     MID (note 16)           (116,800)           -
    Issuance of shares              -            -
    Costs associated with
     capital transactions
     of subsidiaries                -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities               (51,306)     143,442
    -----------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents          (4)       1,141
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations    (26,523)     (56,348)
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in)
     operating activities       1,372       (8,502)
    Cash provided by
     investing activities      63,989       35,149
    Cash provided by
     (used in) financing
     activities               (32,427)      20,863
    -----------------------------------------------
    Net cash flows
     provided by
     discontinued
     operations                32,934       47,510
    -----------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents
     during the year            6,411       (8,838)
    Cash and cash
     equivalents,
     beginning of year         51,978       60,816
    -----------------------------------------------
    Cash and cash
     equivalents, end of
     year                 $    58,389  $    51,978
    -----------------------------------------------
    -----------------------------------------------
    See accompanying notes



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

                                Consolidated          Real Estate Business
                          ------------------------- -------------------------
                                       (restated -
                                       notes 3 & 4)
                          December 31, December 31, December 31, December 31,
    As at                        2006         2005         2006         2005
    -------------------------------------------------------------------------

    ASSETS

    Current assets:
      Cash and cash
       equivalents        $   250,255  $   157,460  $   191,866  $   105,482
      Restricted cash
       (note 16)               40,708       39,104        6,514       13,649
      Accounts receivable      43,740       46,189        7,749        8,291
      Loan receivable
       from MEC (note 16)           -            -        3,108       74,725
      Due from MID
       (note 16)                    -            -            -            -
      Income taxes
       receivable               1,934        3,825        1,354        3,429
      Prepaid expenses and
       other (note 16)         16,044        9,382          966          317
      Assets held for
       sale (note 4)                -        2,719            -            -
      Discontinued
       operations (note 3)          -        2,723            -            -
    -------------------------------------------------------------------------
                              352,681      261,402      211,557      205,893
    Real estate
     properties, net
     (note 7)               2,188,774    2,191,774    1,348,621    1,308,658
    Fixed assets, net          93,406       63,014          554          576
    Racing licences           109,868      109,868            -            -
    Other assets, net
     (note 16)                 11,711       15,044        3,061        2,437
    Loans receivable
     from MEC (note 16)             -            -      182,876      118,145
    Deferred rent
     receivable                13,818       14,031       13,818       14,031
    Future tax assets          52,038       53,501        7,277        8,886
    Assets held for
     sale (note 4)                  -       76,593            -            -
    Discontinued
     operations (note 3)            -       86,359            -            -
    -------------------------------------------------------------------------
                          $ 2,822,296  $ 2,871,586  $ 1,767,764  $ 1,658,626
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND
     SHAREHOLDERS' EQUITY

    Current liabilities:
      Bank indebtedness
       (note 8)           $     6,515  $    30,260  $         -  $         -
      Accounts payable
       and accrued
       liabilities            157,274      164,676       13,317       21,724
      Income taxes payable      7,083        9,212        7,083        8,991
      Loan payable to
       MID (note 16)                -            -            -            -
      Due to MEC (note 16)          -            -        6,648       13,668
      Long-term debt due
       within one year         86,155       32,731          378          349
      Deferred revenue
       (note 16)                8,311       11,198        2,451        5,702
      Liabilities related
       to assets held for
       sale (note 4)                -        2,991            -            -
      Discontinued
       operations (note 3)          -       15,609            -            -
    -------------------------------------------------------------------------
                              265,338      266,677       29,877       50,434

    Long-term debt
     (note 8)                  99,850      144,637        5,991        6,366
    Senior unsecured
     debentures               226,596      226,398      226,596      226,398
    Note obligations          215,830      213,357            -            -
    Loans payable to
     MID (note 16)                  -            -            -            -
    Other long-term
     liabilities               15,787        1,702            -            -
    Future tax liabilities    141,491      148,961       46,090       44,979
    Minority interest         180,108      203,925            -            -
    Liabilities related to
     assets held for sale
     (note 4)                       -       24,746            -            -
    Discontinued
     operations (note 3)            -       55,729            -            -
    -------------------------------------------------------------------------
                            1,145,000    1,286,132      308,554      328,177
    -------------------------------------------------------------------------

    Shareholders' equity:
    Share capital (note 9)  1,577,342    1,575,909
    Contributed surplus
     (note 10)                  2,667        2,112
    Deficit                   (69,112)     (99,527)
    Currency translation
     adjustment (note 11)     166,399      106,960
    -------------------------------------------------------------------------
                            1,677,296    1,585,454    1,459,210    1,330,449
    -------------------------------------------------------------------------
                          $ 2,822,296  $ 2,871,586  $ 1,767,763  $ 1,658,626
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                       (restated -
                                       notes 3 & 4)
                          December 31, December 31,
    As at                        2006         2005
    -----------------------------------------------

    ASSETS

    Current assets:
      Cash and cash
       equivalents        $    58,389  $    51,978
      Restricted cash
       (note 16)               34,194       25,455
      Accounts receivable      35,991       37,898
      Loan receivable
       from MEC (note 16)           -            -
      Due from MID
       (note 16)                6,648       13,668
      Income taxes
       receivable                 580          396
      Prepaid expenses and
       other (note 16)         15,304        9,065
      Assets held for
       sale (note 4)                -        2,719
      Discontinued
       operations (note 3)          -        2,723
    -----------------------------------------------
                              151,106      143,902
    Real estate
     properties, net
     (note 7)                 845,191      887,259
    Fixed assets, net          92,852       62,438
    Racing licences           109,868      109,868
    Other assets, net
     (note 16)                 14,276       19,904
    Loans receivable
     from MEC (note 16)             -            -
    Deferred rent
     receivable                     -            -
    Future tax assets          44,761       44,615
    Assets held for
     sale (note 4)                  -       76,593
    Discontinued
     operations (note 3)            -       86,359
    -----------------------------------------------
                          $ 1,258,054  $ 1,430,938
    -----------------------------------------------
    -----------------------------------------------

    LIABILITIES AND
     SHAREHOLDERS' EQUITY

    Current liabilities:
      Bank indebtedness
       (note 8)           $     6,515  $    30,260
      Accounts payable
       and accrued
       liabilities            143,957      142,952
      Income taxes payable          -          221
      Loan payable to
       MID (note 16)            3,108       74,725
      Due to MEC (note 16)          -            -
      Long-term debt due
       within one year         85,777       32,382
      Deferred revenue
       (note 16)                6,098        6,789
      Liabilities related
       to assets held for
       sale (note 4)                -        2,991
      Discontinued
       operations (note 3)          -       15,609
    -----------------------------------------------
                              245,455      305,929
    Long-term debt
     (note 8)                  93,859      138,271
    Senior unsecured
     debentures                     -            -
    Note obligations          215,830      213,357
    Loans payable to
     MID (note 16)            182,876      118,145
    Other long-term
     liabilities               15,787        1,702
    Future tax liabilities     95,401      103,982
    Minority interest         180,108      203,925
    Liabilities related to
     assets held for sale
     (note 4)                       -       24,746
    Discontinued
     operations (note 3)            -       55,729
    -----------------------------------------------
                            1,029,316    1,165,786
    -----------------------------------------------
    Shareholders' equity:
    Share capital (note 9)
    Contributed surplus
     (note 10)
    Deficit
    Currency translation
     adjustment (note 11)
    -----------------------------------------------
                              228,738      265,152
    -----------------------------------------------
                          $ 1,258,054  $ 1,430,938
    -----------------------------------------------
    -----------------------------------------------
    Commitments and contingencies (note 17)

    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 December 31, 2006 and 2005 and for the three-month
    periods and years ended December 31, 2006 and 2005 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
        owns, leases, manages and develops a predominantly industrial rental
        portfolio leased primarily to Magna International Inc. and its
        automotive operating units ("Magna"). The Company also holds an
        investment 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. The Company
        owns approximately 58% 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 these 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 net losses
        before minority interest recovery of $65.4 million and $107.4 million
        for the years ended December 31, 2006 and 2005, respectively, and has
        a working capital deficiency of $94.3 million as at December 31,
        2006. 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, renew or
        extend current financing arrangements and maintain its obligations
        with respect to secured and unsecured creditors, none of which is
        assured. During the year ended December 31, 2006, MEC completed
        asset sale transactions for proceeds totalling $269.4 million. On
        February 7, 2007, MID acquired all of MEC's interests and rights in
        two real estate properties, a 34 acre parcel of residential
        development land in Aurora, Ontario and a 64 acre parcel of excess
        land adjacent to MEC's racetrack at Laurel Park in Howard County,
        Maryland, in return for cash consideration of Cdn. $12.0 million
        ($10.1 million) and $20.0 million, respectively (note 18). MEC is
        continuing to pursue other funding sources, which may include further
        asset sales, partnerships and raising capital through equity
        offerings, any of which may involve MID. The success of these efforts
        is not determinable at this time. These unaudited interim
        consolidated financial statements do not give effect to any
        adjustments which would be necessary should MEC be unable to continue
        as a going concern and, therefore, be required to realize its assets
        and discharge its liabilities in other than the normal course of
        business and at amounts different from those reflected in the
        accompanying 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 business.

        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 and the accounting policies set out in the
        annual consolidated financial statements for the year ended
        December 31, 2005.

        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 2005 annual consolidated financial
        statements.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments, which consist only of
        normal and recurring adjustments, necessary to present fairly the
        financial position at December 31, 2006 and 2005 and the results of
        operations and cash flows for the three-month periods and years ended
        December 31, 2006 and 2005.

        Financial data and related measurements are presented on the
        unaudited interim consolidated statements of income (loss), unaudited
        interim consolidated statements of cash flows, and unaudited interim
        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 15 to the unaudited interim
        consolidated financial statements. Transactions and balances between
        the "Real Estate Business" and "Magna Entertainment Corp." 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 16,
        are eliminated in the consolidated results of operations and
        financial position of the Company.

        The Company has reclassified certain prior period amounts to conform
        to the current period's presentation. Prior period amounts have also
        been adjusted to reflect the restatement for discontinued operations
        of MEC (note 3) and changes in assets held for sale by MEC (note 4).

    2.  BUSINESS ACQUISITION

    On August 22, 2003, MEC Maryland Investments Inc. ("MEC Maryland"), a
    wholly-owned subsidiary of MEC, acquired a 30% interest in AmTote
    International, Inc. ("AmTote") for a total cash purchase price, including
    transaction costs, of $4.3 million. At the same time, MEC Maryland was
    also granted options to acquire the remaining 70% of AmTote.

    On July 26, 2006, MEC Maryland acquired the remaining 70% equity interest
    of AmTote for a total cash purchase price of $9.3 million, including
    transaction costs of $0.1 million, net of cash acquired of $5.5 million.

    AmTote is a provider of totalisator services to the North American
    pari-mutuel industry with service contracts with over 70 North American
    racetracks and other wagering entities.

    The purchase price has been allocated to the assets and liabilities
    acquired as follows:

    -------------------------------------------------------------------------
    Non-cash working capital                                     $     1,203
    Fixed assets                                                      12,008
    Other assets                                                         127
    Goodwill                                                             683
    Long-term debt                                                    (1,470)
    Other long-term liabilities                                         (980)
    Future tax liabilities                                            (2,224)
    -------------------------------------------------------------------------
    Net assets acquired and total purchase price,
     net of cash acquired                                        $     9,347
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The purchase price for this acquisition is preliminary and may be
    adjusted further as a result of obtaining additional information
    regarding preliminary estimates of fair values made at the date of
    purchase.

    3.  DISCONTINUED OPERATIONS

    (a) On November 1, 2006, a wholly-owned subsidiary of MEC completed the
        sale of the Fontana Golf Club located in Oberwaltersdorf, Austria to
        a subsidiary of Magna, a related party, for a sale value of
        30.0 million euros ($38.3 million), which included cash consideration
        of 13.2 million euros ($16.9 million), net of transaction costs, and
        16.8 million euros ($21.4 million) of debt assumed by Magna. MEC
        recognized a gain on disposition of $20.9 million.

    (b) On August 25, 2006, a wholly-owned subsidiary of MEC completed the
        sale of the Magna Golf Club located in Aurora, Ontario to Magna, a
        related party, for cash consideration of Cdn. $51.8 million
        ($46.4 million), net of transaction costs. MEC recognized an
        impairment loss of $1.2 million at the date of disposition equal to
        the excess of MEC's carrying value of the assets disposed over their
        fair values at the date of disposition. Of the sale proceeds,
        Cdn. $32.6 million ($29.3 million) was used to pay all amounts owing
        under certain loan agreements with Bank Austria Creditanstalt AG
        related to the Magna Golf Club.

    (c) On May 26, 2006, MEC completed the sale of a restaurant and related
        real estate in the United States and received cash consideration of
        $2.0 million, net of transaction costs, and recognized a gain on
        disposition of $1.5 million. MEC was required to use the net proceeds
        from this transaction to repay principal amounts outstanding under
        its senior secured credit facility (the "MEC Credit Facility" -
        note 8).

    (d) On August 16, 2005, MEC and Great Canadian Gaming Corporation
        ("GCGC") entered into a share purchase agreement under which GCGC
        acquired all of the outstanding shares of Ontario Racing Inc.
        ("ORI"), a wholly-owned subsidiary of MEC that owned and operated
        Flamboro Downs, a standardbred racetrack and site holder for slot
        machines operated by the Ontario Lottery and Gaming Corporation,
        located in Hamilton, Ontario, Canada. Regulatory approval for this
        sale transaction was obtained on October 17, 2005, and MEC completed
        the transaction on October 19, 2005. On closing, GCGC paid
        $23.6 million and Cdn. $50.7 million ($43.1 million) in cash and also
        assumed ORI's existing debt.

        As required under GAAP, MEC's long-lived assets and racing licenses
        are tested for impairment on an annual basis or whenever events or
        changes in circumstances indicate that the carrying value may not be
        recoverable. The sale transaction described above established fair
        values of certain assets of Flamboro Downs and, accordingly, MEC
        performed impairment testing of these assets at June 30, 2005. Based
        on this analysis, MEC recognized a non-cash impairment loss on
        Flamboro Downs' racing license of $15.0 million.

    (e) On August 18, 2005, three subsidiaries of MEC entered into a share
        purchase agreement with Colonial Downs, L.P. ("Colonial LP") pursuant
        to which Colonial LP purchased all of the outstanding shares of
        Maryland-Virginia Racing Circuit, Inc. ("MVRC"). MVRC was an indirect
        subsidiary of MEC that managed the operations of Colonial Downs, a
        thoroughbred and standardbred horse racetrack located in New Kent,
        Virginia, pursuant to a management agreement with Colonial LP, the
        owner of Colonial Downs. Regulatory approval for the sale of MVRC was
        obtained on September 28, 2005, and MEC completed the transaction on
        September 30, 2005. On closing, MEC received cash consideration of
        $6.8 million, net of transaction costs, and a one-year interest-
        bearing note in the principal amount of $3.0 million, which was
        repaid during the year ended December 31, 2006. MEC recognized a gain
        on disposition of $9.8 million.

    MEC's results of operations related to discontinued operations for the
    three-month periods and years ended December 31, 2006 and 2005, and MEC's
    assets and liabilities related to discontinued operations as at
    December 31, 2005, are shown in the following tables:

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2006         2005         2006         2005
    -------------------------------------------------------------------------
    Revenues              $       684  $     5,388  $    14,593  $    42,710
    Costs and expenses            621       (5,708)      11,205       32,786
    -------------------------------------------------------------------------
                                   63         (320)       3,388        9,924
    Depreciation and
     amortization                 109          770        2,156        3,765
    Interest expense, net         106          394        2,040        3,872
    Impairment loss
     recorded on
     disposition                    -        2,671        1,202       14,961
    -------------------------------------------------------------------------
    Loss before undernoted       (152)      (4,155)      (2,010)     (12,674)
    Gain on disposition        20,892            -       22,387        9,837
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         20,740       (4,155)      20,377       (2,837)
    Income tax expense
     (recovery)                  (160)        (894)       1,653          492
    Minority interest           8,687       (1,352)       7,782       (1,381)
    -------------------------------------------------------------------------
    Income (loss) from
     discontinued
     operations           $    12,213  $    (1,909) $    10,942  $    (1,948)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    As at                                                  December 31, 2005
    -------------------------------------------------------------------------
    ASSETS

    Current assets:
      Accounts receivable                                        $     1,777
      Income taxes receivable                                              3
      Prepaid expenses and other                                         943
    -------------------------------------------------------------------------
                                                                       2,723
    -------------------------------------------------------------------------
    Real estate properties, net                                       73,106
    Fixed assets, net                                                  4,437
    Other assets, net                                                    974
    Future tax assets                                                  7,842
    -------------------------------------------------------------------------
                                                                      86,359
    -------------------------------------------------------------------------
                                                                 $    89,082
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES

    Current liabilities:
      Accounts payable and accrued liabilities                   $     3,709
      Income taxes payable                                             4,192
      Long-term debt due within one year                               5,651
      Deferred revenue                                                 2,057
    -------------------------------------------------------------------------
                                                                      15,609
    -------------------------------------------------------------------------
    Long-term-debt                                                    44,559
    Other long-term liabilities                                       11,170
    -------------------------------------------------------------------------
                                                                      55,729
    -------------------------------------------------------------------------
                                                                 $    71,338
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4.  ASSETS HELD FOR SALE

    (a) On November 3, 2005, MEC announced that one of its subsidiaries that
        owns approximately 157 acres of under-utilized real estate located in
        Palm Beach County, Florida had entered into an agreement to sell the
        real property for $51.0 million. The proposed sale was subject to
        the completion of due diligence by the purchaser by April 3, 2006 and
        a closing by April 28, 2006. Accordingly, the under-utilized real
        estate was classified as "assets held for sale" on the Company's
        unaudited interim consolidated balance sheet at December 31, 2005.
        On April 3, 2006, MEC announced the termination of the sale agreement
        and, as such, the purchaser did not proceed with the proposed sale as
        stipulated in the agreement. It has been determined that the plan of
        sale criteria under generally accepted accounting principles is no
        longer met in relation to this property and, accordingly, the
        property has been reclassified to reflect the carrying amount of the
        property in MEC's "real estate properties, net" on the Company's
        unaudited interim consolidated balance sheet as at December 31, 2005,
        rather than in "assets held for sale".

    (b) On November 9, 2005, MEC announced that it had entered into a share
        purchase agreement (the "Initial SPA") with 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") providing for the acquisition by Millennium-Oaktree of all
        of the outstanding shares of Washington Trotting Association, Inc.,
        Mountain Laurel Racing, Inc., and MEC Pennsylvania Racing, Inc.
        (collectively, "The Meadows Entities"), each MEC wholly-owned
        subsidiaries through which MEC owned and operated The Meadows, MEC's
        standardbred racetrack in Pennsylvania.

        On July 26, 2006, MEC announced that it had entered into an amended
        share purchase agreement that modified the Initial SPA with respect
        to the sale of The Meadows as a result of regulatory requirements
        relating to the approval of the issuance of a gaming licence by the
        Pennsylvania Gaming Control Board, as well as significant changes in
        the economic and regulatory environment in Pennsylvania since the
        date of the Initial SPA, including regulations adopted by the
        Pennsylvania Department of Revenue in respect of the amount of local
        share assessment taxes payable to North Strabane Township and
        Washington County. The $225.0 million purchase price in the Initial
        SPA, which included a $39.0 million holdback note, was reduced to
        $200.0 million, with 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"). With
        respect to the Meadows Holdback Note, MEC agreed to release the
        security requirement for the holdback amount, defer subordinate
        payments under the holdback, defer receipt of holdback payments until
        the opening of the permanent casino at The Meadows and defer receipt
        of holdback payments to the extent of available cash flows as
        defined in the terms of the Meadows Holdback Note, in exchange for
        Millennium-Oaktree providing an additional $25.0 million of equity
        support for PA Meadows, LLC. Concurrently with entering into the
        amended share purchase agreement, the parties entered into a racing
        services agreement whereby MEC will pay $50 thousand per annum and
        will continue to operate, for its own account, the racing operations
        at The Meadows for at least five years.

        On November 14, 2006, MEC completed the sale of The Meadows and
        received cash consideration of $171.8 million, net of transaction
        costs of $3.2 million, and the Meadows Holdback Note. MEC recognized
        a $115.2 million gain on this sale transaction. 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
        indemnification obligations and as payments are received.

        MEC was required to use the proceeds from the sale of The Meadows to
        fully repay the bridge loan between a subsidiary of MID (the "MID
        Lender") and MEC (the "MEC Bridge Loan" - note 16), to permanently
        pay down $39.0 million of the principal amount outstanding under the
        MEC Credit Facility (note 8), to repay $2.0 million of the BE&K Loan
        (as defined in note 8) and to place $15.0 million into escrow with
        the MID Lender (note 16).

        MEC's assets classified as held for sale and corresponding
        liabilities as at December 31, 2005, restated as described in
        note 4(a), are shown in the table below.

        As at                                              December 31, 2005
        ---------------------------------------------------------------------
        ASSETS

        Current assets:
          Restricted cash                                        $       443
          Accounts receivable                                            450
          Income taxes receivable                                        857
          Prepaid expenses and other                                     969
        ---------------------------------------------------------------------
                                                                       2,719
        ---------------------------------------------------------------------
        Real estate properties, net                                   16,154
        Fixed assets, net                                              1,576
        Racing licence                                                58,266
        Other assets, net                                                200
        Future tax assets                                                397
        ---------------------------------------------------------------------
                                                                      76,593
        ---------------------------------------------------------------------
                                                                 $    79,312
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        LIABILITIES

        Current liabilities:
          Accounts payable and accrued liabilities               $     2,679
          Deferred revenue                                               312
        ---------------------------------------------------------------------
                                                                       2,991
        ---------------------------------------------------------------------
        Future tax liabilities                                        24,746
        ---------------------------------------------------------------------
                                                                 $    27,737
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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

    MEC's long-lived assets, which consist of fixed assets and real estate
    properties, are tested for recoverability whenever events or changes in
    circumstances indicate that the carrying value may not be recoverable. If
    such events or changes in circumstances are present, the recoverability
    of the long-lived assets is assessed by determining whether the carrying
    value of such assets can be recovered through projected undiscounted cash
    flows. If the sum of expected future cash flows, undiscounted and without
    interest charges, is less than net book value, the excess of the net book
    value over the estimated fair value, based on discounted future cash
    flows and appraisals, is charged to operations in the period in which
    such impairment is determined.

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

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2006         2005         2006         2005
    -------------------------------------------------------------------------
    Magna Racino(TM)(i)   $    76,166  $         -  $    76,166  $         -
    Development
     property(ii)               1,279            -        1,279            -
    -------------------------------------------------------------------------
                          $    77,445  $         -  $    77,445  $         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)  Magna Racino(TM)'s long-lived assets were tested for impairment upon
         completion of its 2007 business plan. An expected present value
         approach of estimated future cash flows, including a probability-
         weighted approach in considering the likelihood of possible
         outcomes, and external valuation reports were used to determine the
         fair value of the long-lived assets. Based on this analysis, a non-
         cash impairment charge of $76.2 million was required of the long-
         lived assets in the three months and year ended December 31, 2006.

    (ii) On February 7, 2007, MID acquired all of MEC's interests and rights
         in a 34 acre parcel of residential development land in Aurora,
         Ontario for cash consideration of Cdn. $12.0 million ($10.1 million)
         (note 18). Based on this transaction, which established a fair value
         for the land, MEC recognized a non-cash impairment loss of
         $1.3 million related to this parcel of residential development land
         in the three months and year ended December 31, 2006.

    6.  EARNINGS (LOSS) PER SHARE

    Diluted earnings (loss) per share for the three-month periods and years
    ended December 31, 2006 and 2005 are computed as follows:

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2006         2005         2006         2005
    -------------------------------------------------------------------------
    Income (loss) from
     continuing
     operations           $    16,303  $    (4,230) $    48,928  $     8,507
    Income (loss) from
     discontinued
     operations                12,213       (1,909)      10,942       (1,948)
    -------------------------------------------------------------------------
    Net income (loss)     $    28,516  $    (6,139) $    59,870  $     6,559
    -------------------------------------------------------------------------
    Weighted average
     number of Class A
     Subordinate Voting
     and Class B Shares
     outstanding during
     the period (thousands)    48,329       48,290       48,301       48,260
    Stock options
     (thousands)                   57            -           54           59
    -------------------------------------------------------------------------
                               48,386       48,290       48,355       48,319
    -------------------------------------------------------------------------
    Diluted earnings
     (loss) per Class A
     Subordinate Voting
     or Class B Share
      - from continuing
         operations       $      0.34  $     (0.09) $      1.01  $      0.18
      - from discontinued
         operations              0.25        (0.04)        0.23        (0.04)
    -------------------------------------------------------------------------
                          $      0.59  $     (0.13) $      1.24  $      0.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The computation of diluted earnings (loss) per share for the three-month
    period and year ended December 31, 2006 excludes the effect of the
    potential exercise of 155,000 options to acquire Class A Subordinate
    Voting Shares of the Company because the effect would be anti-dilutive.
    The computation of diluted earnings (loss) per share for the three-month
    period ended December 31, 2005 excludes the effect of the potential
    exercise of 390,000 options to acquire Class A Subordinate Voting Shares
    of the Company because the effect would be anti-dilutive.

    7.  REAL ESTATE PROPERTIES

    Real estate properties consist of:

                                                                 (restated -
                                                                 notes 3 & 4)
    As at December 31,                                     2006         2005
    -------------------------------------------------------------------------
    Real Estate Business

    Income-producing properties under
     operating leases
      Land                                          $   206,990  $   192,873
      Buildings, parking lots and roadways - cost     1,298,073    1,198,488
      Buildings, parking lots and roadways
       - accumulated depreciation                      (274,931)    (220,895)
    -------------------------------------------------------------------------
                                                      1,230,132    1,170,466
    -------------------------------------------------------------------------
    Development properties
      Land and improvements                             115,910      100,457
      Properties under development                          648       13,863
    -------------------------------------------------------------------------
                                                        116,558      114,320
    -------------------------------------------------------------------------
    Properties held for sale                              1,931       23,872
    -------------------------------------------------------------------------
                                                      1,348,621    1,308,658
    -------------------------------------------------------------------------


    MEC

    Revenue-producing racetrack properties
      Land and improvements                             208,355      206,873
      Buildings - cost                                  631,495      495,018
      Buildings - accumulated depreciation             (177,538)     (91,005)
      Construction in progress                           19,024      119,247
    -------------------------------------------------------------------------
                                                        681,336      730,133
    -------------------------------------------------------------------------
    Under-utilized racetrack properties                  96,951       96,303
    -------------------------------------------------------------------------
    Development properties
      Land and improvements                              45,737       45,332
      Properties under development                       11,308        3,155
    -------------------------------------------------------------------------
                                                         57,045       48,487
    -------------------------------------------------------------------------
    Revenue-producing non-racetrack properties
      Land and improvements                               6,521        6,187
      Buildings - cost                                    3,410        3,723
      Buildings - accumulated depreciation                  (72)         (74)
    -------------------------------------------------------------------------
                                                          9,859        9,836
    -------------------------------------------------------------------------
    Properties held for sale                                  -        2,500
    -------------------------------------------------------------------------
                                                        845,191      887,259
    -------------------------------------------------------------------------
    Eliminations (note 16)                               (5,038)      (4,143)
    -------------------------------------------------------------------------
    Consolidated                                    $ 2,188,774  $ 2,191,774
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the three months and year ended December 31, 2006, the Real Estate
    Business determined that the plan of sale criteria under generally
    accepted accounting principles was no longer met for four properties
    included in "properties held for sale" above at December 31, 2005.
    Accordingly, three parcels of vacant land with an aggregate carrying
    value of $19.8 million have been reclassified into "Land and
    improvements" and one property consisting of land and a vacant building
    with an aggregate carrying value of $1.8 million (net of $0.3 million of
    additional depreciation expense recognized) has been reclassified into
    "Revenue-producing properties under operating leases" above at
    December 31, 2006.

    8.  BANK INDEBTEDNESS AND LONG-TERM DEBT

    Real Estate Business

    The Real Estate Business has an unsecured senior revolving credit
    facility in the amount of $50.0 million. The credit facility is available
    by way of U.S. or Canadian dollar loans or letters of credit. The credit
    facility expires on December 21, 2007, unless extended with the consent
    of both parties. Interest on drawn amounts is calculated based on an
    applicable margin determined by the Real Estate Business' ratio of funded
    debt to earnings before interest, income tax expense, depreciation and
    amortization. Currently, the Company is subject to the lowest applicable
    margin available, with drawn amounts incurring interest at the London
    Interbank Offered Rate ("LIBOR") or bankers' acceptance rates plus 1.0%,
    or the U.S. base or Canadian prime rate. The credit facility contains
    negative and affirmative financial and operating covenants. At
    December 31, 2006, the Company was in compliance with all of these
    covenants. At December 31, 2006, the Company had no borrowings under the
    facility, but the Company had issued letters of credit totalling
    $0.3 million.

    MEC

    (a) The MEC Credit Facility is available by way of U.S. dollar loans and
        letters of credit for general corporate purposes. 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 subsidiaries of MEC.

        On July 26, 2006, MEC amended the MEC Credit Facility by increasing
        the maximum permitted borrowings under such facility for general
        corporate purposes to $50.0 million and providing for an additional
        $14.0 million to finance MEC's purchase of the remaining 70% equity
        interest of AmTote (note 2), in return for which the bank received a
        first-ranking security interest over the shares of AmTote. On
        November 14, 2006, as required under the amended MEC Credit Facility,
        MEC permanently reduced the outstanding borrowings by repaying
        $39.0 million from proceeds on the sale of The Meadows (note 4), such
        that the remaining maximum permitted borrowings was $25.0 million. On
        December 22, 2006, MEC further amended the MEC Credit Facility to
        extend the maturity date to March 30, 2007, to make an additional
        $15.0 million available, to revise certain financial performance
        covenants and to increase the applicable interest rate. With the
        additional amount available, the maximum permitted borrowings under
        the MEC Credit Facility is $40.0 million.

        At December 31, 2006, MEC had no borrowings under the MEC Credit
        Facility (December 31, 2005 - $27.3 million) but had issued letters
        of credit totalling $24.7 million (December 31, 2005 - $21.7 million)
        such that $15.3 million was unused and available. The loans under the
        MEC Credit Facility bear interest at either the U.S. base rate plus
        5% or LIBOR plus 6%. The weighted average interest rate on the loans
        outstanding under the credit facility as at December 31, 2005 was
        9.3%.

    (b) On July 31, 2006, one of MEC's European subsidiaries amended and
        extended its bank term line of credit of 2.5 million euros and its
        bank term loan of 2.9 million euros. The amendments to the agreements
        included converting the two facilities into one bank term loan,
        requiring the repayment of 0.9 million euros on July 31, 2006,
        extending the term to July 31, 2007 and requiring a further repayment
        of 0.7 million euros on January 31, 2007. The bank term loan bears
        interest at the Euro Overnight Index Average rate plus 1.1% per
        annum, which was 4.8% at December 31, 2006. A European subsidiary of
        MEC has provided two first mortgages on real estate as collateral for
        this bank term loan. At December 31, 2006, the amount outstanding
        under the fully drawn bank term loan is 4.5 million euros
        ($5.9 million) and is included in MEC's "long-term debt due within
        one year" on the Company's unaudited interim consolidated balance
        sheet. At December 31, 2005, the amount outstanding under the bank
        term line of credit of 2.5 million euros ($3.0 million) is included
        in MEC's "bank indebtedness" on the Company's unaudited interim
        consolidated balance sheet.

    (c) On December 4, 2006, MEC's wholly-owned subsidiary which owns and
        operates Santa Anita Park, The Santa Anita Companies, Inc. ("SAC),
        entered into a $10.0 million revolving loan arrangement under its
        existing credit facility. The revolving loan agreement matures on
        October 8, 2007. The revolving loan agreement is guaranteed by MEC's
        wholly-owned subsidiary, The Los Angeles Turf Club, Incorporated
        ("LATC"), and is secured by a first deed of trust on Santa Anita Park
        and the surrounding real property, an assignment of the lease between
        LATC and SAC, and a pledge of all of the outstanding capital stock of
        LATC and SAC. At December 31, 2006, MEC had borrowings under the
        revolving loan agreement of $6.5 million such that $3.5 million was
        unused and available. Borrowings under the revolving loan agreement
        bear interest at the U.S. prime rate. The weighted average interest
        rate on the borrowings outstanding under the revolving loan agreement
        at December 31, 2006 was 8.25%.

    (d) On November 17, 2005, a subsidiary of MEC entered into a loan
        agreement with BE&K, Inc. ("BE&K"), the parent company of Suitt
        Construction Co. Inc., the general contractor for the reconstruction
        of the racetrack facilities at Gulfstream Park, for a loan of up to
        $13.5 million (the "BE&K Loan") to assist in the financing of costs
        as a result of additional material and labour costs and changes in
        scope of work related to the reconstruction. The loan agreement was
        amended on June 30, 2006, and the loan amount was increased to
        $16.6 million. The loan matures on April 14, 2007 and may be extended
        at the lender's option to July 31, 2008. The loan bears interest at
        the U.S. prime rate plus 0.4% per annum (December 31, 2006 - 8.65%)
        and may be repaid at any time, in whole or in part, without penalty.
        The BE&K Loan is collateralized by a mortgage over land in Ocala,
        Florida and a guarantee of $5.0 million by MEC. MEC repaid
        $2.0 million upon the sale of The Meadows on November 14, 2006 (note
        4). As at December 31, 2006, $10.6 million was outstanding under the
        BE&K Loan.

    9.  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, 2004     47,642,083  $ 1,554,779      548,238  $    17,893
    Issued on exercise
     of stock options          70,000        2,237            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     March 31, 2005
     and June 30, 2005     47,712,083    1,557,016      548,238       17,893
    Issued on exercise
     of stock options          30,000        1,000            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2005,
     December 31, 2005
     March 31, 2006
     June 30, 2006         47,742,083    1,558,016      548,238       17,893
    Issued on exercise
     of stock options          30,000        1,043            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2006    47,772,083    1,559,059      548,238       17,893
    Issued on exercise
     of stock options          10,000          390            -            -
    Shareholder conversion
     of Class B shares to
     Class A Subordinate
     Voting Shares                825           27         (825)         (27)
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2006     47,782,908  $ 1,559,476      547,413  $    17,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                    Total
                          -------------------------
                                            Stated
                               Number        Value
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2004     48,190,321  $ 1,572,672
    Issued on exercise
     of stock options          70,000        2,237
    -----------------------------------------------
    Shares issued and
     outstanding,
     March 31, 2005
     and June 30, 2005     48,260,321    1,574,909
    Issued on exercise
     of stock options          30,000        1,000
    -----------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2005,
     December 31, 2005
     March 31, 2006
     June 30, 2006         48,290,321    1,575,909
    Issued on exercise
     of stock options          30,000        1,043
    -----------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2006    48,320,321    1,576,952
    Issued on exercise
     of stock options          10,000          390
    Shareholder conversion
     of Class B shares to
     Class A Subordinate
     Voting Shares                  -            -
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2006     48,330,321  $ 1,577,342
    -----------------------------------------------
    -----------------------------------------------

    Pursuant to the terms of a normal course issuer bid for which the Company
    received approval from the Toronto Stock Exchange ("TSX") on May 19,
    2005, the Company was authorized, during the 12-month period commencing
    May 24, 2005 and ending May 23, 2006, to purchase for cancellation up to
    a total of 4,005,956 Class A Subordinate Voting Shares, being 10% of the
    public float (as defined by the TSX) of the Class A Subordinate Voting
    Shares (the "Public Float").

    Pursuant to the terms of a normal course issuer bid for which the Company
    received approval from the TSX on September 29, 2006, the Company may,
    during the 12-month period commencing October 4, 2006 and ending
    October 3, 2007, purchase for cancellation up to a total of 3,257,895
    Class A Subordinate Voting Shares, being 10% of the Public Float. The
    price that MID will pay for shares purchased pursuant to the bid will be
    the market price at the time of acquisition.

    At December 31, 2006, the Company had not purchased any Class A
    Subordinate Voting Shares under the normal course issuer bid.

    10. CONTRIBUTED SURPLUS

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

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2006         2005         2006         2005
    -------------------------------------------------------------------------
    Contributed surplus,
     beginning of period  $     2,212  $     2,025  $     2,112  $     2,387
    Stock-based
     compensation                 529           87          817          351
    Transfer to share
     capital on exercise
     of stock options             (74)           -         (262)        (626)
    -------------------------------------------------------------------------
    Contributed surplus,
     end of period        $     2,667  $     2,112  $     2,667  $     2,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. CURRENCY TRANSLATION ADJUSTMENT

    During the year ended December 31, 2006, the Company recorded an
    unrealized foreign currency translation gain of $59.4 million related to
    its net investments in currencies other than the U.S. dollar. The
    unrealized foreign currency translation gain was primarily due to the
    strengthening of the euro against the U.S. dollar. In addition, included
    in the Real Estate Business' dilution and other gains for the year ended
    December 31, 2006 is a $1.9 million currency translation gain realized
    from capital transactions that gave rise to a reduction in the net
    investment in certain foreign operations.

    During the year ended December 31, 2005, the Company recorded an
    unrealized foreign currency translation loss of $78.3 million related to
    its net investments in currencies other than the U.S. dollar. The loss
    was primarily from the weakening of the euro against the U.S. dollar.

    12. INCOME TAXES

    The Real Estate Business' income tax expense for the year ended
    December 31, 2006 includes a future tax recovery of $2.1 million realized
    from the reduction in the future Canadian tax rate, enacted in June 2006,
    from 36.1% to 33.0%.

    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. At December 31, 2006, a maximum of
        2.65 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.

        Activity in the MID Plan was as follows:

                                          2006                   2005
                                   -------------------- ---------------------
                                              Weighted              Weighted
                                               Average               Average
                                              Exercise              Exercise
                                                 Price                 Price
                                     Number    (Cdn. $)    Number    (Cdn. $)
        ---------------------------------------------------------------------
        Stock options outstanding,
         January 1                  390,000      33.49    490,000      33.16
        Granted                      20,000      39.12          -          -
        Exercised                         -          -    (70,000)     31.85
        ---------------------------------------------------------------------
        Stock options outstanding,
         March 31 and June 30       410,000      33.77    420,000      33.38
        Exercised                   (30,000)     31.85    (30,000)     31.85
        Forfeited                   (60,000)     35.62          -          -
        ---------------------------------------------------------------------
        Stock options outstanding,
         September 30               320,000      33.60    390,000      33.49
        Granted                     155,000      41.17          -          -
        Exercised                   (10,000)     35.62          -          -
        ---------------------------------------------------------------------
        Stock options outstanding,
         December 31                465,000      36.08    390,000      33.49
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Stock options exercisable,
         December 31                243,000      34.21    196,000      33.16
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The fair value of stock options granted was estimated at the date of
        grant using the Black-Scholes option valuation model. The weighted
        average assumptions used in determining the fair value of the MID
        stock options granted are shown in the table below.

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2006         2005         2006         2005
        ---------------------------------------------------------------------
        Risk-free interest
         rate                     3.8%           -          3.8%           -
        Expected dividend
         yield                   1.64%           -         1.65%           -
        Expected
         volatility of
         MID's Class A
         Subordinate
         Voting Stock            19.4%           -         19.6%           -
        Weighted average
         expected life
         (years)                  4.0            -          3.9            -
        Weighted average
         fair value per
         option granted   $      6.50            -  $      6.41            -
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The Black-Scholes option valuation model used by the Company to
        determine fair values 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, which 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 its stock options.

        Subsequent to December 31, 2006, 38,456 stock options with a
        weighted average exercise price of Cdn. $32.19 per stock option
        were exercised.

        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 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
        must receive at least 50% of their Board and Committee compensation
        fees (excluding Special Committee fees, effective January 1, 2006) in
        DSUs. Under the DSP, when a director leaves the Board, the director
        receives a cash payment equal to the value of the accrued DSUs at
        that time. There is no option under the DSP for directors to receive
        Class A Subordinate Voting Shares in exchange for DSUs.

        For the three-month period and year ended December 31, 2006,
        1,894 DSUs and 14,110 DSUs, respectively, were granted pursuant to
        the DSP. A total of 37,202 DSUs have been granted for periods up to
        and including December 31, 2006. During the year ended December 31,
        2006, 11,715 DSUs were redeemed by a former director for
        $0.4 million. As a result, 25,487 DSUs remain outstanding at
        December 31, 2006.

        During the three-month period and year ended December 31, 2006, the
        Real Estate Business recognized stock-based compensation expense of
        $0.6 million (2005 - $0.2 million) and $1.4 million (2005 -
        $1.0 million), respectively, which includes $0.1 million (2005 -
        $0.1 million) and $0.6 million (2005 - $0.7 million), respectively,
        pertaining to DSUs.

    (b) MEC has a Long-term Incentive Plan (the "MEC Plan"), adopted in 2000,
        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
        7.6 million shares of MEC's Class A Subordinate Voting Stock are
        available to be issued under the MEC Plan, of which 6.3 million are
        available for issuance pursuant to stock options and tandem stock
        appreciation rights and 1.3 million are available for issuance
        pursuant to any other type of award under the MEC Plan.

        During 2005, MEC introduced an incentive compensation program (the
        "MEC Program") for certain officers and key employees, which awards
        performance shares of MEC's Class A Subordinate Voting Stock as
        contemplated under the MEC Plan. The number of shares of Class A
        Subordinate Voting Stock underlying the performance share awards is
        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. These performance shares vested over a
        six or eight month period to December 31, 2005 and are distributable,
        subject to certain conditions, in two equal instalments. The first
        distribution date occurred prior to March 31, 2006 and the second
        distribution date is to occur on or about March 31, 2007. During the
        year ended December 31, 2005, 201,863 performance share awards were
        granted under the MEC Program, with a weighted average grant-date
        market value of either $6.26 or Cdn. $7.61 per share (the "2005
        Performance Share Awards"), and 2,392 2005 Performance Share Awards
        were granted with a nominal stated value. At December 31, 2005, there
        were 199,471 vested 2005 Performance Share Awards. During the year
        ended December 31, 2006, 131,751 2005 Performance Share Awards were
        issued with a stated value of $0.8 million, and 4,812 2005
        Performance Share Awards were forfeited. Accordingly, there are
        62,908 vested 2005 Performance Share Awards remaining to be issued
        under the MEC Program.

        For 2006, MEC continued the MEC Program as described in the preceding
        paragraph. The program is similar in all respects except that the
        performance shares granted in 2006 vest over a 12-month period
        to December 31, 2006 and will be distributed, subject to certain
        conditions, on or about March 31, 2007. In the year ended
        December 31, 2006, 161,099 performance share awards were granted
        under the MEC Program with a weighted average grant-date market value
        of either $6.80 or Cdn. $7.63 per share (the "2006 Performance Share
        Awards"), 1,616 2006 Performance Share Awards were issued with a
        nominal stated value, and 42,622 2006 Performance Share Awards were
        forfeited. At December 31, 2006, there were 116,861 vested 2006
        Performance Share Awards.

        In the year ended December 31, 2006, MEC issued 25,896 (2005 -
        14,175; 2004 - 24,000) shares of Class A Subordinate Voting Stock
        with a stated value of $0.2 million (2005 - $0.1 million; 2004 -
        $0.1 million) to MEC's directors in payment of services rendered.

        MEC grants stock options to certain directors, officers, key
        employees and consultants to purchase shares of MEC's Class A
        Subordinate Voting Stock. All of such stock options give the grantee
        the right to purchase Class A Subordinate Voting Stock of MEC at a
        price no less than the fair market value of such stock at the date of
        grant. Generally, 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 options.

        Activity in the MEC Plan was as follows:

                                          2006                   2005
                                   -------------------- ---------------------
                                              Weighted              Weighted
                                               Average               Average
                                              Exercise              Exercise
                                     Number    Price $     Number    Price $
        ---------------------------------------------------------------------
        Stock options
         outstanding,
         January 1                4,827,500       6.14  4,500,500       6.18
        Granted                           -          -    490,000       6.40
        Exercised                         -          -          -          -
        Forfeited and expired             -          -   (145,000)      6.76
        ---------------------------------------------------------------------
        Stock options
         outstanding, March 31    4,827,500       6.14  4,845,500       6.19
        Granted                           -          -    155,000       6.70
        Forfeited and expired       (64,000)      6.80    (88,000)      7.32
        ---------------------------------------------------------------------
        Stock options
         outstanding, June 30     4,763,500       6.13  4,912,500       6.18
        Forfeited and expired             -          -   (150,000)      8.08
        ---------------------------------------------------------------------
        Stock options
         outstanding,
         September 30             4,763,500       6.13  4,762,500       6.12
        Granted                     200,000       5.25     75,000       7.24
        Forfeited and expired       (58,500)      7.13    (10,000)      6.70
        ---------------------------------------------------------------------
        Stock options
         outstanding,
         December 31              4,905,000       6.08  4,827,500       6.14
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Stock options
         exercisable,
         December 31              4,412,968       6.08  3,909,430       6.14
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        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's stock options (as
        described further in note 13(a)). The weighted average assumptions
        used in determining the fair value of the MEC stock options granted
        is shown in the table below. If other assumptions are used, stock-
        based compensation expense could be significantly impacted.

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                                 2006         2005         2006         2005
        ---------------------------------------------------------------------
        Risk-free interest
         rate                     4.4%         4.3%         4.4%         4.0%
        Expected dividend
         yield                      -            -            -            -
        Expected
         volatility of
         MEC's Class A
         Subordinate
         Voting Stock            51.0%        52.7%        51.0%        54.7%
        Weighted average
         expected life
         (years)                  4.0          4.0          4.0          4.0
        Weighted average
         fair value per
         option granted   $      2.94  $      3.28  $      2.94  $      2.94
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        During the three months and year ended December 31, 2006, MEC
        recognized total stock-based compensation expense of $0.3 million
        (2005 - $0.3 million) and $2.4 million (2005 - $1.0 million),
        respectively, relating to performance share awards, director
        compensation and stock options under the MEC Plan.

    14. DETAILS OF CASH FROM OPERATING ACTIVITIES

    (a) Items not involving current cash flows:

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                          - note 3)                 - note 3)
                                 2006         2005         2006         2005
        ---------------------------------------------------------------------
        Real Estate
         Business
        Straight-line
         rent adjustment  $       115  $        52  $       224  $       301
        Stock-based
         compensation
         expense                  644          202        1,407        1,045
        Depreciation and
         amortization          10,200        9,329       39,225       36,896
        Interest income
         from MEC              (4,629)      (1,655)     (16,505)      (3,903)
        Gain on disposal
         of real estate             -         (900)        (209)     (10,304)
        Future income
         taxes                    431        1,044        2,439        6,930
        Dilution and
         other gains                -            -       (1,921)           -
        Other                      77           75          311          285
        ---------------------------------------------------------------------
                                6,838        8,147       24,971       31,250
        ---------------------------------------------------------------------
        MEC
        Stock-based
         compensation
         expense                  324          283        2,393          979
        Depreciation and
         amortization          12,652        9,569       44,607       37,029
        Interest expense
         with MID               4,516          179       15,353          179
        Amortization of
         debt issuance
         costs                  1,994        1,284        7,325        2,631
        Write-down of
         long-lived
         assets                77,445            -       77,445            -
        Gain on disposal
         of business         (115,193)           -     (115,193)           -
        Gain on disposal
         of real estate             -            -       (2,883)           -
        Dilution and
         other gains              (10)          (4)        (195)         (11)
        Future income
         taxes                (11,852)      (5,122)     (12,426)      (2,273)
        Minority interest      (5,411)     (15,440)     (35,083)     (43,170)
        Other                   1,345          857        1,739       (1,637)
        ---------------------------------------------------------------------
                              (34,190)      (8,394)     (16,918)      (6,273)
        ---------------------------------------------------------------------
        Eliminations
         (note 16)             (1,735)         629       (5,292)       2,292
        ---------------------------------------------------------------------
        Consolidated      $   (29,087) $       382  $     2,761  $    27,269
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (b) Changes in non-cash balances:

                              Three Months Ended            Year Ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                          - note 3)                 - note 3)
                                 2006         2005         2006         2005
        ---------------------------------------------------------------------
        Real Estate Business
        Accounts
         receivable       $     3,562  $       535  $     1,265  $     3,142
        Loan receivable
         from MEC                 368         (310)         619         (606)
        Prepaid expenses
         and other              1,290          133         (656)         (95)
        Accounts payable
         and accrued
         liabilities           (7,092)      (2,923)      (4,652)      (8,163)
        Income taxes              697        1,340         (294)       3,750
        Deferred revenue         (554)        (662)      (3,667)       4,352
        ---------------------------------------------------------------------
                               (1,729)      (1,887)      (7,385)       2,380
        ---------------------------------------------------------------------
        MEC
        Restricted cash        (1,774)      (3,885)      (8,314)      (1,378)
        Accounts
         receivable             2,665      (17,087)      14,599       (3,840)
        Prepaid expenses
         and other              4,971        1,923         (992)       1,309
        Accounts payable
         and accrued
         liabilities           11,169       31,085        1,756       13,312
        Income taxes            1,198        3,212        1,246        2,548
        Loan payable
         to MID                  (368)         310         (619)         606
        Deferred revenue        2,082        2,255       (1,792)          15
        ---------------------------------------------------------------------
                               19,943       17,813        5,884       12,572
        ---------------------------------------------------------------------
        Eliminations
         (note 16)               (162)        (470)       1,539       (1,293)
        ---------------------------------------------------------------------
        Consolidated      $    18,052  $    15,456  $        38  $    13,659
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    15. SEGMENTED INFORMATION

    (a) 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 (the 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 management has
        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

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

        MEC

        MEC operates or manages eight thoroughbred racetracks, one
        standardbred racetrack, two racetracks that run both thoroughbred and
        quarterhorse meets and one racetrack that runs both thoroughbred and
        standardbred meets, as well as the simulcast wagering venues at these
        tracks. Three of MEC's racetracks (two in the United States and one
        in Austria) include casino operations with alternative gaming
        machines. In addition, MEC operates off-track betting facilities, a
        United States based national account wagering business known as
        XpressBet(R) and a European account wagering service known as
        MagnaBet(TM). MEC also owns and operates HorseRacing TV(TM), a
        television network focused on horseracing, and AmTote (note 2). In
        April 2006, MEC entered into an agreement with Churchill Downs
        Incorporated ("CDI") and Racing UK Limited to partner in a
        subscription television channel called "Racing World" that broadcasts
        races from MEC's and CDI's racetracks, as well as other North
        American and international racetracks, into the United Kingdom and
        Ireland. To support certain of MEC's thoroughbred racetracks, MEC
        owns and operates three thoroughbred training centres in the United
        States. 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 at
        December 31, 2006 included residential developments in various stages
        of development in Austria, Canada (sold to MID subsequent to year-end
        - note 18) and the United States.

        As described in note 1 to the unaudited interim consolidated
        financial statements, 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.

    16. TRANSACTIONS WITH RELATED PARTIES

    Mr. F. Stronach, the Company's Chairman and the Chairman of Magna and
    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. The
    Stronach Trust also controls Magna through the right to direct the votes
    attaching to 66% of Magna's Class B Shares. As the Company and Magna are
    under the common control of the Stronach Trust, they are considered to be
    related parties for accounting purposes.

    (a) MEC Bridge Loan and Project Financings

        (i)   MEC Bridge Loan

              In July 2005, the MID Lender provided MEC with the MEC Bridge
              Loan of up to $100.0 million expiring August 31, 2006. The MEC
              Bridge Loan bore interest, at MEC's option, at either (i) a
              floating rate equal to the U.S. base rate plus 5.5% per annum
              (with interest paid monthly) or (ii) a fixed rate equal to
              LIBOR plus 6.5% per annum (with interest paid at the relevant
              LIBOR contract maturity), in each case subject to a minimum
              rate of 9.0%. In addition, MEC was subject to an annual
              commitment fee equal to 1.0% of the undrawn facility. The MEC
              Bridge Loan was secured by certain assets of MEC and guaranteed
              by certain subsidiaries of MEC, and was also cross-defaulted to
              all other obligations of MEC and its subsidiaries to MID and
              its subsidiaries.

              The first tranche of $50.0 million under the MEC Bridge Loan
              was available for immediate drawdown by MEC, with the second
              tranche of $25.0 million becoming available in October 2005. In
              February 2006, the MID Lender agreed to make the third tranche
              of the MEC Bridge Loan, in the amount of $25.0 million,
              available to MEC and to waive compliance with a financial
              covenant contained in the MEC Bridge Loan in relation to Golden
              Gate Fields for the period ended December 31, 2005.
              Concurrently, a similar waiver was provided to MEC under the
              MEC Credit Facility (note 8). Upon the third tranche becoming
              available, MEC paid the MID Lender an arrangement fee of
              $0.5 million and, in connection with the waiver, also paid a
              fee of $250 thousand and all of the MID Lender's associated
              costs.

              In July 2006, the maturity date of the MEC Bridge Loan was
              extended from August 31, 2006 to December 5, 2006 in
              anticipation of the final closing of the sale of The Meadows
              (note 4). In connection with the extension of the MEC Bridge
              Loan, the MID Lender received an extension fee of $0.5 million
              (0.5% of the amount of the MEC Bridge Loan). In connection with
              the July 2006 amendments to the MEC Bridge Loan, MEC also
              amended and extended the terms of the MEC Credit Facility
              (note 8).

              In August 2006, the MID Lender waived the requirement for MEC
              to repay a portion of the MEC Bridge Loan from proceeds (net of
              costs and related loan repayments) from the sale of the Magna
              Golf Club and the Fontana Golf Club (note 3) in exchange for
              which the MID Lender received an aggregate fee of $0.3 million
              (1% of total net proceeds).

              In September 2006, the MID Lender agreed to make available to
              MEC $19.0 million of increased funding under the MEC Bridge
              Loan. The funds were to be used by MEC solely to fund
              (i) operations and financing activities (including mandatory
              interest and principal repayments on debt), (ii) maintenance
              capital expenditures and (iii) capital expenditures required
              pursuant to the terms of MEC's joint venture arrangements with
              Forest City Enterprises, Inc. ("Forest City") and Caruso
              Affiliated ("Caruso") (note 17). The MID Lender charged MEC an
              arrangement fee of $0.2 million (1% of the increased funding)
              in connection with the increased financing under the MEC Bridge
              Loan. Pursuant to the terms of the September 2006 amendments,
              and as result of MEC not completing its sale of The Meadows by
              a specified deadline, the interest rate for all amounts under
              the MEC Bridge Loan was increased by 2.5% per annum effective
              November 7, 2006.

              On November 14, 2006, MEC used part of the proceeds received in
              connection with the sale of The Meadows to repay in full the
              MEC Bridge Loan. Accordingly, the MEC Bridge Loan has been
              terminated and the MID Lender has released the security
              provided to it under the facility.

              At December 31, 2006, MID had a $0.1 million balance payable to
              MEC as a result of an excess reimbursement payment made by MEC
              in connection with loan related costs incurred by MID. At
              December 31, 2005, there was a balance receivable of
              $74.7 million under the MEC Bridge Loan, including $0.6 million
              of interest, costs and fees receivable.

        (ii)  MEC Project Financings

              The MID Lender has made available two separate project
              financing facilities to the wholly-owned subsidiaries of MEC
              that own and/or operate Gulfstream Park ($162.3 million plus
              costs and capitalized interest) and Remington Park
              ($34.2 million plus costs and capitalized interest) (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 amended
              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, Palm Meadows and Remington
              Park and over all other assets of Gulfstream Park, Palm Meadows
              and Remington Park, excluding licences and permits (which
              cannot be subject to security under applicable legislation).
              Upon MEC's sale of The Meadows in November 2006 (note 3), that
              property was released as security under the Gulfstream project
              financing facility.

              Prior to the relevant completion date, amounts outstanding
              under each of the MEC Project Financing Facilities bore
              interest at a floating rate equal to 2.55% above MID's per
              annum notional cost of borrowing under its unsecured senior
              revolving floating rate credit facility (note 8), compounded
              monthly. Since the relevant completion date, amounts
              outstanding under each of the MEC Project Financing Facilities
              (including for the new tranches of the Gulfstream Park project
              financing facility described below) 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 described below, for which the
              interest capitalization period is extended). However, since the
              completion date for Remington Park, there has 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-month period and
              year ended December 31, 2006, $1.6 million and $5.0 million,
              respectively, of such amounts were repaid. Commencing
              January 1, 2007, the MID Lender is entitled to receive monthly
              blended payments of principal and interest based on a 25-year
              amortization period under each of the MEC Project Financing
              Facilities (except in relation to the December 2006 tranche of
              the Gulfstream Park project financing facility described below,
              for which the interest capitalization period is extended).

              In June 2006, the MID Lender consented to the release and
              transfer to MEC of up to an aggregate of $10.0 million of funds
              from the subsidiaries that operate the racetracks at Gulfstream
              Park and Remington Park, subject to approval by MID management
              over the amount and timing of such releases. Such funds, which
              would ordinarily be "trapped" at the applicable subsidiaries
              pursuant to the terms of the MEC Project Financing Facilities,
              were in excess of the existing cash requirements of the
              applicable subsidiaries and were used by MEC solely to fund
              payments that were necessary in connection with the operation
              of the business of MEC and that could not be deferred on a
              commercially reasonable basis. The MID Lender received waiver
              fees of $0.1 million (1% of the amounts released from June to
              September 2006), which fees were capitalized under the
              applicable project financing facility.

              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 to be located in the existing Gulfstream
              Park clubhouse building, as well as related capital
              expenditures and start-up costs, including the acquisition and
              installation of an aggregate of 1,216 slot machines. The new
              tranches of the Gulfstream Park project financing facility both
              mature on December 31, 2011. Interest under the December 2006
              tranche is capitalized until May 1, 2007, following which
              monthly blended payments of principal and interest will be
              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.

              At December 31, 2006, there were balances of $134.8 million
              (December 31, 2005 - $97.1 million) and $19.4 million
              (December 31, 2005 - nil) due under the initial tranche and the
              July 2006 slots tranche, respectively, of the Gulfstream Park
              project financing facility. A balance of $31.7 million
              (December 31, 2005 - $21.0 million) was due under the Remington
              Park project financing facility. The current portion of the MEC
              Project Financing Facilities was $3.1 million at December 31,
              2006.

              In connection with the Gulfstream Park project financing
              facility, MEC has placed into escrow (the "Gulfstream Escrow")
              with the MID Lender $13.0 million of proceeds from an asset
              sale which occurred in fiscal 2005 and certain additional
              amounts necessary to ensure that future 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 such construction costs. In addition,
              in November 2006, MEC deposited into the Gulfstream Escrow
              sufficient proceeds from the sale of The Meadows to repay all
              remaining indebtedness under the BE&K Loan. The MID Lender has
              provided its consent to MEC to access such funds for limited
              purposes other than the repayment of the BE&K Loan on an as-
              needed basis approved by the Company. At December 31, 2006, the
              amount held under the Gulfstream Escrow (including accrued
              interest) was $6.5 million (December 31, 2005 - $13.7 million).
              All funds in the Gulfstream Escrow are reflected as restricted
              cash and due to MEC on the balance sheet of the Real Estate
              Business.

        Approximately $10.2 million of costs have been incurred, including
        $0.5 million and $3.0 million in the three months and year ended
        December 31, 2006, respectively, 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 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 operation and
        financial position.

    (b) Charges and Sales to Magna

        On March 31, 2006, MEC sold a real estate property held for sale and
        located in the United States to Magna. A gain on sale of $2.9 million
        was recognized based on the cash consideration received, net of
        transaction costs, of $5.6 million. MEC was required to use the net
        proceeds from this transaction to repay principal amounts outstanding
        under the MEC Credit Facility (note 8).

        On November 1, 2004, a wholly-owned subsidiary of MEC entered into an
        access agreement with Magna and one of its subsidiaries for their use
        of the golf course and the clubhouse meeting, dining and other
        facilities at the Magna Golf Club in Aurora, Ontario. The agreement
        stipulated an annual fee of Cdn. $5.0 million, retroactive to
        January 1, 2004. On August 25, 2006, the wholly-owned subsidiary of
        MEC completed the sale of the Magna Golf Club to Magna (note 3), at
        which time the access agreement was terminated. During the year ended
        December 31, 2006, $2.9 million (2005-$4.1 million) of revenue has
        been recognized in discontinued operations related to this agreement.

        On November 1, 2004, a wholly-owned subsidiary of MEC entered into an
        access agreement with Magna and one of its subsidiaries for their use
        of the golf course and the clubhouse meeting, dining and other
        facilities at the Fontana Golf Club in Oberwaltersdorf, Austria. The
        agreement stipulated an annual fee of 2.5 million euros, retroactive
        to March 1, 2004. On November 1, 2006, the wholly-owned subsidiary of
        MEC completed the sale of the Fontana Golf Club to a subsidiary of
        Magna (note 3), at which time the access agreement was terminated.
        During the year ended December 31, 2006, $2.6 million (2005 -
        $3.1 million) of revenue has been recognized in discontinued
        operations related to this agreement.

    (c) Charges from Magna

        On August 25, 2006, in conjunction with the sale of the Magna Golf
        Club to Magna (note 3), MEC entered into an access agreement with
        Magna for the use of the Magna Golf Club's golf course and the
        clubhouse meeting, dining and other facilities. The agreement, which
        expires on August 25, 2011, required a payment of $0.3 million.

    (d) MEC Option

        During the year ended December 31, 2006, a subsidiary of MEC extended
        its option agreement with MID to acquire 100% of the shares of the
        MID subsidiary that owns land in Romulus, Michigan for aggregate fees
        of $0.1 million. In November 2006, the option agreement was amended
        to cover only a portion of the lands held by the MID subsidiary and
        the exercise price was reduced accordingly to approximately
        $19.9 million. The option agreement expired on December 15, 2006.
        Upon expiry of this option, MEC expensed approximately $3.0 million
        of deferred development costs incurred in pursuit of the Michigan
        racing license, which expense is included in MEC's operating costs on
        the Company's unaudited interim consolidated statement of income
        (loss).

    (e) Hurricane Katrina Relief Effort

        In October 2005, the Company purchased 791 acres of land in
        Simmesport, Louisiana for $2.4 million. The Company intends to donate
        up to 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. The
        founding members and officers of this not-for-profit organization are
        officers and employees of MID and Magna. At December 31, 2006, the
        Company has accrued a liability of $0.4 million for the estimated
        value of the land to be donated.

    17. 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 August 2, 2005, Greenlight Capital, Inc. and certain of its
        affiliates ("Greenlight") filed an oppression application in the
        Ontario Superior Court of Justice against the Company and certain of
        its current and former directors and officers. The hearing of the
        application concluded on March 1, 2006 and on October 30, 2006, the
        Ontario Superior Court of Justice dismissed the oppression
        application. On November 29, 2006, Greenlight filed a Notice of
        Appeal with the Ontario Divisional Court and on January 30, 2007,
        Greenlight filed its Appellants' factum. The Company continues to
        consider Greenlight's oppression claim to be without merit and,
        together with the other respondents, will file a responding factum to
        vigorously defend against the appeal.

    (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 a racetrack. 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) In addition to the letters of credit issued under the Company's
        credit facilities (see note 8), the Company had $5.3 million (Real
        Estate Business - $3.3 million; MEC - $2.0 million) of letters of
        credit issued with various financial institutions at December 31,
        2006 to guarantee various of its construction projects. These letters
        of credit are secured by cash deposits of the Company.

    (e) 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. As at December 31, 2006,
        these indemnities amounted to $9.4 million with expiration dates
        through 2007.

    (f) At December 31, 2006, the Company's contractual commitments related
        to construction and development projects outstanding amounted to
        approximately $10.9 million (Real Estate Business - $5.2 million;
        MEC - $5.7 million).

    (g) On November 15, 2006, MEC's wholly-owned subsidiary, Gulfstream Park
        Racing Association, Inc. ("GPRA"), opened the slots facility at
        Gulfstream Park and is proceeding with plans to make additional slot
        machines available in 2007. MEC is proceeding with the development of
        the slots facility at Gulfstream Park despite an August 2006 decision
        rendered by the Florida First District Court of Appeals that reversed
        a lower court decision that granted summary judgment in favour of
        "Floridians for a Level Playing Field" ("FLPF"), a group in which
        GPRA is a member. The Appeal Court ruled that a trial is necessary to
        determine whether the constitutional amendment adopting the slots
        initiative, approved by Floridians in the November 2004 election, was
        invalid because the petitions bringing the initiative forward did not
        contain the minimum number of valid signatures. FLPF is challenging
        the decision and has filed an application for a rehearing, a
        rehearing en banc before the full panel of the Florida First District
        Court of Appeals and Certification by the Florida Supreme Court. On
        November 30, 2006, in a split decision, the en banc court affirmed
        the August 2006 panel decision and certified the matter to the
        Florida Supreme Court which stayed the appellate court ruling pending
        its jurisdictional review of the matter. The Florida Supreme Court
        has yet to confirm whether it will hear the matter.

    (h) In October 2003, MEC signed a Letter of Intent to explore the
        possibility of a joint venture between Forest City and various
        affiliates of MEC, anticipating the development of a portion of the
        Gulfstream Park racetrack property. Forest City paid $2.0 million to
        MEC in consideration for its right to work exclusively with MEC on
        this project. This deposit is included in MEC's accounts payable and
        accrued liabilities on the Company's consolidated balance sheets. In
        2005, MEC entered into a Limited Liability Company Agreement with
        Forest City 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.
        Forest City is required to contribute up to a maximum of
        $15.0 million as an initial capital contribution. The $2.0 million
        deposit received to date from Forest City will constitute the final
        $2.0 million of the initial capital contribution. MEC is obligated to
        contribute 50% of any equity amounts in excess of $15.0 million as
        and when needed. To December 31, 2006, MEC has not made any such
        contributions. In the event the development does not proceed, MEC may
        have an obligation to fund a portion of the pre-development costs
        incurred to that point in time. As at December 31, 2006,
        approximately $13.9 million of costs have been incurred by The
        Village of Gulfstream Park, LLC, which have been funded entirely by
        Forest City. The Limited Liability Company Agreement also
        contemplates additional agreements including a ground lease, a
        reciprocal easement agreement, a development agreement, a leasing
        agreement and a management agreement to be executed by MEC in due
        course and upon the satisfaction of certain conditions.

    (i) In April 2004, MEC signed a Letter of Intent to explore the
        possibility of joint ventures between Caruso and certain affiliates
        of MEC to develop certain undeveloped lands surrounding Santa Anita
        Park and Golden Gate Fields racetracks. Upon execution of this Letter
        of Intent, MEC agreed to fund 50% of approved pre-development costs
        in accordance with a preliminary business plan for each of these
        projects, with the goal of entering into operating agreements. As at
        December 31, 2006, MEC has expended $6.3 million on this initiative,
        of which $4.2 million was paid in the year ended December 31, 2006
        (2005 - $1.7 million; 2004 - $0.4 million). These amounts have been
        included in MEC's real estate properties on the Company's unaudited
        interim consolidated balance sheets. Under the terms of the Letter of
        Intent, MEC may be responsible to fund additional costs. To
        December 31, 2006, MEC has not made any such payments. On
        September 28, 2006, certain of MEC's affiliates entered into
        definitive operating agreements with Caruso regarding the proposed
        development of approximately 51 acres of undeveloped land surrounding
        Santa Anita Park.

    (j) A subsidiary of MEC participates in a multi-employer defined benefit
        pension plan for which the pension plan's total vested liabilities
        exceed the plan's assets. Based on allocation information provided by
        the plan, the portion of the estimated unfunded liability for vested
        benefits attributable to MEC's subsidiary is approximately
        $3.7 million. Under specific circumstances, a "withdrawal liability"
        may be triggered by certain actions, including a withdrawal from the
        pension plan, which is not presently intended.

    18. SUBSEQUENT EVENTS

    (a) On January 18, 2007, MEC announced that the 2007 race meet will be
        the last meet that MI Racing, Inc. will run at Great Lakes Downs. For
        the year ended December 31, 2006, Great Lakes Downs incurred a loss
        before income taxes of $1.8 million.

    (b) On February 7, 2007, MID acquired all of MEC's interests and rights
        in two real estate properties to be held for future development, a 34
        acre parcel of residential development land in Aurora, Ontario and a
        64 acre parcel of excess land adjacent to MEC's racetrack at Laurel
        Park in Howard County, Maryland, in return for cash consideration of
        Cdn. $12.0 million ($10.1 million) and $20.0 million, respectively.
        In addition, MEC has been granted a profit participation right in
        respect of each property under which it is entitled to receive 15% of
        net proceeds from any sale or development of the property after MID
        achieves a 15% internal rate of return.

    (c) On February 9, 2007, MEC repaid in full the term loan facility of 15
        million euros ($19.8 million), which matured on that date (note 8).

    (d) On February 21, 2007, MEC filed a shelf registration statement on
        Form S-3 (the "U.S. Registration Statement") with the United States
        Securities and Exchange Commission (the "SEC") and a preliminary
        short form base shelf prospectus (the "Canadian Prospectus") with the
        securities commissions in each of the Provinces in Canada
        (collectively, the "Canadian Securities Commissions"). After the U.S.
        Registration Statement is declared effective by the SEC and the
        Canadian Prospectus receives a final receipt by the Canadian
        Securities Commissions, MEC will be able to offer up to U.S. $500.0
        million of equity securities (including stock, warrants, units and,
        subject to filing a Canadian rights offering circular or prospectus
        with the Canadian Securities Commissions, rights) from time to time
        in one or more public offerings or other offerings.

    (e) Subsequent to the year-end, the Company entered into an agreement to
        sell a property leased to Magna, which provided approximately
        $0.1 million of revenue in 2006. The Company expects the sale to
        close in the first quarter of 2007. The Company has agreed with Magna
        that the lease for this property will be terminated if the Company is
        able to sell the property, although Magna's environmental indemnity
        in favour of the Company will continue for a specified period of
        time. Magna is not paying termination fees associated with the lease
        termination, although Magna has agreed to pay certain costs
        associated with the sale of the property and to transfer tenant
        improvements to the Company.
    





For further information:

For further information: please contact Robert Kunihiro, Executive
Vice-President and Chief Financial Officer, at (905) 726-7507. For
teleconferencing questions, please contact Angie Palmer at (905) 726-7508

Organization Profile

MI DEVELOPMENTS INC.

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