MI Developments announces fourth quarter and 2007 results



    AURORA, ON, March 5 /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, 2007. All figures are in
U.S. dollars.

    
    -------------------------------------------------------------------------
    (in thousands,
     except per share
     figures)                            REAL ESTATE BUSINESS(1)
                              Three months ended           Year ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2007         2006         2007         2006
                          ------------ ------------ ------------ ------------

    Revenues              $    51,391  $    46,591  $   189,547  $   184,782
    Net income            $    37,735  $    23,303  $   110,311  $    98,510
    Funds from operations
     ("FFO")(2)           $    39,403  $    33,934  $   142,180  $   138,158
    Diluted FFO per
     share(2)             $      0.84  $      0.70  $      2.96  $      2.86

    -------------------------------------------------------------------------

    (in thousands,
     except per share
     figures)                             MID CONSOLIDATED(1)
                              Three months ended           Year ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2007         2006         2007         2006
                          ------------ ------------ ------------ ------------
    Revenues
      Real Estate
       Business           $    51,391  $    46,591  $   189,547  $   184,782
      Magna Entertainment
       Corp. ("MEC")(3)       117,846      102,557      627,584      582,982
      Eliminations             (7,203)      (7,033)     (22,539)     (29,249)
                          ------------ ------------ ------------ ------------
                          $   162,034  $   142,115  $   794,592  $   738,515
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income (loss)
      Real Estate
       Business           $    37,735  $    23,303  $   110,311  $    98,510
      MEC - continuing
       operations             (25,553)      (5,183)     (15,432)     (45,821)
      Eliminations               (178)        (178)     (55,269)      (3,626)
                          ------------ ------------ ------------ ------------
      Income (loss) from
       continuing
       operations              12,004       17,942       39,610       49,063
      Discontinued
       operations(4)             (515)      10,574         (101)      10,807
                          ------------ ------------ ------------ ------------
                          $    11,489  $    28,516  $    39,509  $    59,870
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Diluted earnings
     (loss) per share
     from continuing
     operations           $      0.25  $      0.37  $      0.82  $      1.02
    Diluted earnings
     (loss) per share     $      0.24  $      0.59  $      0.82  $      1.24
    -------------------------------------------------------------------------
    (1) Transactions between the Real Estate Business and MEC have not been
        eliminated in the presentation of each segment's results of
        operations. However, the effects of transactions between these two
        segments are eliminated in the consolidated results of operations of
        the Company.

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

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

    (4) Discontinued operations represent MEC's discontinued operations, net
        of certain related consolidation adjustments. MEC's discontinued
        operations for the three-month periods and years ended December 31,
        2007 and 2006 include the operations of Remington Park, Thistledown,
        Portland Meadows and Great Lakes Downs. MEC's discontinued operations
        for 2006 also 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.
    -------------------------------------------------------------------------
    

    REAL ESTATE BUSINESS OPERATING HIGHLIGHTS
    -----------------------------------------
    In respect of our core rental portfolio of Magna International Inc.
("Magna") facilities, during the fourth quarter of 2007 we brought on-stream
two expansion projects, representing an aggregate of 39 thousand square feet
of leaseable area, at a cost of $5.5 million. For the year ended December 31,
2007, the Real Estate Business brought on-stream four expansion projects for
Magna, representing an aggregate of 67 thousand square feet of leaseable area,
at a total cost of $16.3 million.
    At December 31, 2007, the Real Estate Business had two properties in
Germany under development for Magna. These expansions to existing facilities
commenced in the fourth quarter of 2007 and will add an aggregate of
85 thousand square feet of leaseable area to the Real Estate Business'
income-producing portfolio. The total anticipated cost of these projects is
approximately $12.1 million, of which $9.5 million had been incurred at
December 31, 2007. Subsequent to year-end, we commenced two additional
expansion projects for Magna, one in each of Germany and Mexico, representing
an aggregate of 57 thousand square feet of leaseable area, at an estimated
total cost of $6.6 million.
    At December 31, 2007, the Real Estate Business had 27.3 million
square feet of leaseable area, with annualized lease payments of
$177.2 million, representing a return of 10.6% on the gross carrying value of
our income-producing portfolio.
    "2007 was a challenging and somewhat disappointing year for our real
estate business," said John Simonetti, Chief Executive Officer. "Primarily due
to the impact of foreign exchange, we achieved record results. However, the
underlying growth of our core rental portfolio of Magna facilities has
stalled. Despite the challenges in the automotive industry, Magna is well
positioned to grow and so I remain hopeful that we will be able to
re-establish a strong and active working relationship with them."

    REAL ESTATE BUSINESS FINANCIAL RESULTS
    --------------------------------------
    Three Months Ended December 31, 2007

    For the three months ended December 31, 2007, revenues were
$51.4 million, an increase of 10% from revenues of $46.6 million for the
three months ended December 31, 2006. The higher revenues are due to a
$4.6 million increase in rental revenues and a $0.2 million increase in
interest and other income earned from the financing arrangements with MEC. The
higher rental revenues are primarily due to foreign exchange, which had a
$4.0 million positive impact as the U.S. dollar continued to weaken against
most foreign currencies in which the Real Estate Business operates. Magna
projects coming on-stream and contractual rent increases also increased
revenues by $0.6 million and $0.3 million, respectively. These positive
contributions to rental revenues were partially offset by the impact of
disposals and vacancies of income-producing properties, resulting primarily
from activities related to Magna's plant rationalization strategy.
    FFO in the three months ended December 31, 2007 was $39.4 million
compared to $33.9 million in the prior year period, representing an increase
of 16%. The $5.5 million increase in FFO is due to the $4.8 million increase
in revenues and reductions of $1.1 million in general and administrative
expenses and $0.1 million in current income tax expense, partially offset by a
$0.5 million increase in net interest expense.
    General and administrative expenses in the fourth quarter of 2007
decreased by $1.1 million to $4.8 million from $5.9 million in the fourth
quarter of 2006, primarily due to a reduction in professional fees related to
the Company's compliance with Sarbanes-Oxley legislation (first implemented in
2006) and reduced stock-based compensation expense.
    Net interest expense was $2.7 million in the three months ended
December 31, 2007 ($4.3 million of interest expense less $1.6 million of
interest income) compared to $2.2 million in the three months ended December
31, 2006 ($3.7 million of interest expense less $1.5 million of interest
income). Foreign exchange increased interest expense by $0.6 million, as the
Company's senior unsecured debentures (the "Debentures") are denominated in
Canadian dollars.
    During the three months ended December 31, 2007, the Real Estate Business
recognized $7.1 million of currency translation gains. These gains, which were
previously included in the "accumulated other comprehensive income" component
of shareholders' equity, were recognized in the determination of net income as
a result of the Real Estate Business repatriating funds from certain of its
foreign operations. These gains have been excluded from the determination of
the Real Estate Business' FFO.
    In the three months ended December 31, 2007, the Real Estate Business'
income tax expense was $2.3 million, representing an effective tax rate of
5.8%. This amount is net of $3.8 million of future tax recoveries realized
from a reduction in future tax rates (primarily in Canada) and changes in tax
legislation in certain countries in which the Real Estate Business operates.
Excluding these future tax recoveries and the currency translation gains
discussed previously, which are not subject to tax, the Real Estate Business'
income tax expense for the fourth quarter of 2007 was $6.1 million,
representing an effective tax rate of 18.6% compared to 17.8% for the fourth
quarter of 2006. As the jurisdictions in which the Real Estate Business
operates have different rates of taxation, income tax expense is influenced by
the proportion of income earned in each particular country. The 0.8% increase
in the effective tax rate is primarily due to changes in the overall mix of
taxable income earned in the various countries in which the Real Estate
Business operates.
    Net income increased 62% to $37.7 million compared to $23.3 million for
the prior year period. Positive contributions of $15.7 million resulted from a
$4.8 million increase in revenues, reductions of $1.1 million in general and
administrative expenses and $2.7 million in income tax expense, and
$7.1 million of currency translation gains. These amounts were partially
offset by a $0.8 million increase in depreciation and amortization (driven
primarily by the weakening of the U.S. dollar) and a $0.5 million increase in
net interest expense.

    Year Ended December 31, 2007

    For the year ended December 31, 2007, revenues were $189.5 million
compared to $184.8 million in 2006. Rental revenues increased by
$11.5 million, but were offset by a $6.7 million reduction in interest and
other income from MEC. The higher rental revenues include $2.7 million from
completed Magna projects coming on-stream, $1.4 million from contractual rent
increases and a $8.9 million positive impact from foreign exchange. The impact
of Magna plant rationalizations and other items had a $1.5 million negative
impact on rental revenues. The reduction of interest and other income from MEC
is due primarily to the repayment of the bridge loan between a subsidiary of
MID (the "MID Lender") and MEC (the "2005 MEC Bridge Loan") in November 2006.
    FFO in the year ended December 31, 2007 of $142.2 million represents a 3%
increase from the prior year's FFO of $138.2 million. The $4.0 million
increase in FFO is due to the $4.8 million increase in revenues and a
$2.3 million reduction in net interest expense, partially offset by increases
of $1.8 million in general and administrative expenses and $1.3 million in
current income tax expense.
    General and administrative expenses increased by $1.8 million from
$21.0 million in the prior year to $22.8 million for 2007. 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 incurred in association with the Company's defence against the
oppression application brought by Greenlight Capital, Inc. and certain of its
affiliates (the "Greenlight Litigation" - see "GREENLIGHT CAPITAL LITIGATION"
for further details), which were offset by a $1.3 million recovery of such
costs under the Company's insurance policy. General and administrative
expenses for 2007 include (i) $2.2 million of advisory and other costs
incurred in connection with the Company's evaluation of certain transactions
relating to its continuing assessment of its relationship with MEC that,
ultimately, were not undertaken, (ii) $2.0 million of costs associated with
the Company's contribution of land to a not-for-profit organization to assist
Hurricane Katrina relief efforts, and (iii) $0.3 million of costs associated
with the Company's defence against the Greenlight Litigation. Excluding these
items, general and administrative expenses decreased from $19.0 million in the
prior year to $18.3 million in 2007, primarily due to reductions in
professional fees related to the Company's compliance with Sarbanes-Oxley
legislation, repairs and maintenance costs and stock-based compensation
expense, partially offset by increased salaries and related benefits.
    Net interest expense was $8.0 million in 2007 ($15.4 million of interest
expense less $7.4 million of interest income) compared to $10.4 million in
2006 ($14.4 million of interest expense less $4.0 million of interest income).
The $3.4 million increase in interest income is due primarily to the Real
Estate Business having more cash available for short-term investment as a
result of MEC repaying the 2005 MEC Bridge Loan in November 2006. Foreign
exchange increased interest expense by $0.9 million, as the Company's
Debentures are denominated in Canadian dollars.
    During 2007, the Real Estate Business recognized a $1.5 million gain on
the disposal of one property previously held for sale and two income-producing
properties, compared to a $0.2 million gain on the sale of two
income-producing properties in 2006.
    The Real Estate Business recognized $7.7 million of net currency
translation gains in 2007 compared to $1.9 million in 2006. These gains, which
were previously included in the "accumulated other comprehensive income"
component of shareholders' equity, were recognized in the determination of net
income as a result of the Real Estate Business repatriating funds from certain
of its foreign operations.
    The Real Estate Business' income tax expense for 2007 was $16.0 million,
representing an effective tax rate of 12.7% compared to an effective tax rate
of 15.3% for 2006. The income tax expense for 2007 includes (i) $5.4 million
of future tax recoveries realized from a reduction in future tax rates
(primarily in Canada) and changes in tax legislation in certain countries in
which the Real Estate Business operates, (ii) a $1.1 million current tax
recovery due primarily to a favourable tax reassessment received in 2007 in
relation to land sold in a prior year, and (iii) $0.4 million of income tax
expense related to the gain on disposal of real estate. The income tax expense
for 2006 includes (i) a $2.1 million future tax recovery from a reduction in
the Canadian future tax rate, and (ii) $0.1 million of income tax expense
related to the gain on disposal of real estate. Excluding these items and the
currency translation gains discussed previously, which are not subject to tax,
the Real Estate Business' effective tax rate was 18.9% for 2007 compared to
17.3% for 2006. This 1.6% increase in the effective tax rate is primarily due
to changes in the mix of taxable income earned in the various countries in
which the Real Estate Business operates.
    Net income for 2007 of $110.3 million increased by 12% compared to net
income of $98.5 million for 2006. A positive contribution of $15.9 million
arose from increases of $4.8 million in revenues, $1.3 million in the gain on
disposal of real estate and $5.8 million in dilution and other gains, as well
as reductions of $2.3 million in net interest expense and $1.7 million in
income tax expense. These amounts were partially offset by a negative
contribution of $4.1 million from increases of $1.8 million in general and
administrative expenses and $2.3 million in depreciation and amortization
(driven primarily by the weakening of the U.S. dollar).

    MAGNA ENTERTAINMENT CORP. DEBT ELIMINATION PLAN AND FINANCING
    -------------------------------------------------------------
    On September 13, 2007, MID announced that the MID Lender had agreed to
provide a bridge loan of up to $80.0 million to MEC, which matures on May 31,
2008 (the "MEC Bridge Loan"). The MEC Bridge Loan, together with a private
placement of $20.0 million of MEC's Class A Subordinate Voting Stock ("MEC
Class A Stock") to Fair Enterprise Limited ("FEL"), a company that forms part
of an estate planning vehicle for the family of Mr. Frank Stronach (the
Company's Chairman and the Chairman and Interim Chief Executive Officer of
MEC), is intended to provide short-term funding to MEC as it implements its
debt elimination plan announced on September 13, 2007 (the "MEC Debt
Elimination Plan"). The MEC Debt Elimination Plan contemplates MEC raising
approximately $600 to $700 million from the sale of certain real estate,
racetracks and other assets and a possible future equity issuance by MEC, the
proceeds of which are to be used to repay debt, including the MEC Bridge Loan.
MID also announced amendments to its project financing facilities with MEC
including, among other things, requiring repayment of at least $100.0 million
under the Gulfstream Park project financing facility on or prior to May 31,
2008.
    The sale of MEC assets under the MEC Debt Elimination Plan has taken
longer than originally contemplated and, accordingly, MID management expects
that MEC will likely be unable at May 31, 2008 to repay the MEC Bridge Loan or
make the required $100.0 million repayment under the Gulfstream Park project
financing facility. Furthermore, it is likely that MEC will need to seek
extensions from existing lenders and additional funds in the short-term from
one or more possible sources, which may include the Company. The availability
of such extensions or additional funds is not assured and, if available, the
terms thereof are not yet determinable.
    "It is critical that MEC remains focused on selling assets and
eliminating debt as well as turning around its loss operations," said John
Simonetti. "In addition to being a secured lender, MID also owns a significant
and controlling equity stake in MEC and we maintain our belief that their real
estate holdings and overall asset base retain considerable value despite these
uncertain times. Accordingly, we continue to evaluate the possibility of
providing further assistance to allow MEC more time to implement its debt
elimination plan."

    MAGNA ENTERTAINMENT CORP. FINANCIAL RESULTS
    -------------------------------------------
    At December 31, 2007, the market value of MID's shareholding in MEC was
$60.9 million, based on the Nasdaq closing price of $0.97 per share for MEC
Class A Subordinate Voting Stock (NASDAQ:   MECA).
    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
three-month periods and years ended December 31, 2007 and 2006 include the
operations of Remington Park, Thistledown, Portland Meadows and Great Lakes
Downs. In addition, MEC's discontinued operations for 2006 also 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.
    MEC's revenues from continuing operations for the three months ended
December 31, 2007 increased 15% to $117.9 million from $102.6 million in the
prior year period. The increase in revenues in the fourth quarter of 2007 is
primarily due to (i) changes in the racing calendars at Golden Gate Fields and
Santa Anita Park, which resulted in an additional 25 and 5 live race days,
respectively, in the fourth quarter of 2007 compared to the prior year period,
and (ii) increased wagering revenues at Gulfstream Park with the introduction
of year round simulcasting operations in 2007. MEC's revenues from continuing
operations for the year ended December 31, 2007 increased 8% to $627.6 million
from $583.0 million in the prior year, primarily due to (i) the opening of
casino operations at Gulfstream Park in November 2006 and expanded casino
operations in March 2007, and (ii) increased revenues from AmTote
International, Inc. ("AmTote") as MEC completed the acquisition of the
remaining 70% equity interest in AmTote in July 2006 (the "AmTote
Acquisition"), partially offset by reduced revenues from fewer total live race
days in 2007.
    Earnings before interest, taxes, depreciation and amortization from MEC's
continuing operations excluding write-downs of long-lived assets, real estate
and business disposal gains, dilution and other gains (losses) and the
minority interest impact ("EBITDA") for the fourth quarter of 2007 was a loss
of $17.2 million compared to an EBITDA loss of $28.6 million in the prior year
period. EBITDA for the year ended December 31, 2007 was a loss of
$16.2 million compared to an EBITDA loss of $27.0 million in the prior year.
The EBITDA loss for the fourth quarter of 2007 decreased by $11.4 million
compared to the fourth quarter of 2006, due to a $15.3 million increase in
revenues and reductions of $0.5 million in operating costs and $0.9 million in
general and administrative expenses, partially offset by a $5.3 million
increase in purses, awards and other costs associated with the increase in
revenues. The EBITDA loss for the year ended December 31, 2007 decreased by
$10.8 million compared to 2006, due to a $44.6 million increase in revenues,
partially offset by increases of $7.4 million in purses, awards and other
costs, $23.2 million in operating costs (driven by the increased operating
costs at Gulfstream Park for the new casino facility) and $3.2 million in
general and administrative expenses. The increase in purses, awards and other
costs is due primarily to the opening of the casino facility at Gulfstream
Park in November 2006 and the expanded casino facility in March 2007,
partially offset by reduced costs from lower wagering at certain tracks due to
fewer live race days and the increased intercompany elimination (as a result
of the AmTote Acquisition) of tote fees paid by MEC's racetracks to AmTote.
The increase in general and administrative expenses is primarily attributable
to MEC's technology operations resulting from the AmTote Acquisition,
partially offset by a reduction in general and administrative expenses at
several of MEC's racetracks as a result of cost reduction initiatives.
    MEC recorded a net loss of $26.8 million for the fourth quarter of 2007
compared to net income of $4.6 million in the same period in 2006. For the
year ended December 31, 2007, MEC recorded a net loss of $18.8 million
compared to a net loss of $38.1 million in 2006. MEC's results of operations
for 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). Excluding these items, the $6.3 million
decrease in MEC's net loss in the fourth quarter of 2007 is due primarily to
(i) the $11.4 million reduction in EBITDA loss discussed above, and (ii) a
$15.2 million increase in the minority interest recovery, partially offset by
(i) increases of $1.2 million in depreciation and amortization and
$0.7 million of net interest expense, (ii) a $3.5 million dilution loss
recorded by the Company in association with the equity investment by FEL
discussed previously, (iii) a $4.1 million reduction in the income tax
recovery, and (iv) an $11.1 million reduction in income from discontinued
operations. Excluding the gain on the sale of The Meadows and write-downs of
MEC's long-lived assets, the $58.4 million reduction in MEC's net loss in 2007
is due to (i) the $10.8 million reduction in EBITDA loss discussed above, (ii)
a $6.7 million reduction in net interest expense, (iii) $45.9 million of
increased gains on the sale of real estate, and (iv) a $14.7 million increase
in the minority interest recovery, partially offset by (i) a $2.1 million
reduction in depreciation and amortization, (ii) a $3.7 million increase in
the dilution loss recorded by the Company, (iii) a $2.9 million reduction in
the income tax recovery, and (iv) an $11.0 million reduction in income from
discontinued operations. The lower net interest expense is primarily
attributable to the repayment of the 2005 MEC Bridge Loan in the fourth
quarter of 2006, reduced borrowings under MEC's $40.0 million senior secured
revolving credit facility and the repayment of other debt during 2006 from the
proceeds of various asset sales, partially offset by increased borrowings
under the Gulfstream Park project financing facility and the MEC Bridge Loan
and $2.2 million less of capitalized interest. The increase in the gains on
disposal of real estate is driven by $48.8 million of gains (which are
eliminated from MID's consolidated results) recognized in 2007 related to the
sale of MEC's interests and rights in three real estate properties to MID, in
return for cash consideration of approximately $79.0 million.

    NORMAL COURSE ISSUER BID
    ------------------------
    Pursuant to the terms of two successive normal course issuer bid
programs, the Company purchased for cancellation, through the facilities of
the Toronto Stock Exchange ("TSX") and the New York Stock Exchange,
1,660,800 Class A Subordinate Voting Shares in 2007 (1,175,100 shares in the
fourth quarter) for cash consideration of approximately $52.1 million ($36.7
million in the fourth quarter) at a weighted average price per share of Cdn.
$31.13 (Cdn. $30.53 in the fourth quarter). The price that MID pays for shares
purchased pursuant to the bids is the market price at the time of acquisition.
    Pursuant to the terms of the Company's current normal course issuer bid
program, for which TSX approval was received on October 2, 2007, the Company
is authorized, during the 12-month period commencing October 8, 2007 and
ending October 7, 2008, to purchase for cancellation up to 2,531,354 Class A
Subordinate Voting Shares, being 10% of the Public Float (as such term is
defined by the TSX). To date, no shares have been purchased for cancellation
in 2008 and the Company remains authorized to purchase for cancellation up to
1,696,654 Class A Subordinate Voting Shares under the current bid program.
Depending upon future price movements and other factors, MID believes that its
Class A Subordinate Voting Shares may from time to time represent an
attractive investment alternative for MID and a desirable use of any available
funds.

    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, 2007. The dividend is payable on or about April 15,
2008 to shareholders of record at the close of business on March 28, 2008.
    MID has designated the entire amount of all past and future taxable
dividends paid in 2006, 2007 and 2008 to be an "eligible dividend" for
purposes of the Income Tax Act (Canada), as amended from time to time unless
indicated otherwise. Please contact your tax advisor if you have any questions
with regard to the designation of eligible dividends.

    GREENLIGHT CAPITAL LITIGATION
    -----------------------------
    On August 2, 2005, Greenlight Capital, Inc. and certain of its affiliates
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. The Company expects the appeal
hearing to take place in late April 2008. The Company continues to consider
Greenlight's oppression claim to be without merit and, together with the other
respondents, will vigorously defend against the appeal.

    CONFERENCE CALL
    ---------------
    A conference call will be held for interested analysts and shareholders
to discuss the fourth quarter's results on March 5, 2008 at 10:30 am EST. The
number to use for this call is 1-800-731-5774. The number for overseas callers
is 416-644-3421. 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 21263516 followed by the number sign) and the
rebroadcast will be available until March 12, 2008.

    ABOUT MID
    ---------
    MID is a real estate operating company focusing primarily on the
ownership, leasing, management, acquisition and development of a predominantly
industrial rental portfolio for Magna and its subsidiaries in North America
and Europe. MID also acquires land that it intends to develop for mixed-use
and residential projects. MID holds a controlling interest in MEC, North
America's number one owner and operator of horse racetracks, based on revenue,
and one of the world's leading suppliers, via simulcasting, of live horse
racing content to the growing intertrack, 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,
                          ------------------------- -------------------------
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net income            $    37,735  $    23,303  $   110,311  $    98,510
    Add back (deduct):
      Depreciation and
       amortization            10,960       10,200       41,541       39,225
      Future income tax
       expense (recovery)      (2,225)         431         (864)       2,439
      Gain on disposal of
       real estate, net of
       income tax                   -            -       (1,089)         (95)
      Dilution and other
       gains                   (7,067)           -       (7,719)      (1,921)
    -------------------------------------------------------------------------
    Funds from operations $    39,403  $    33,934  $   142,180  $   138,158
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     funds from operations
     per share            $      0.84  $      0.70  $      2.96  $      2.86
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of
     shares outstanding
     (thousands)
      Basic                    47,249       48,329       48,073       48,301
      Diluted                  47,249       48,386       48,083       48,355
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    FORWARD-LOOKING STATEMENTS
    --------------------------
    The contents of this press release contain statements that, to the extent
they are not recitations of historical fact, constitute "forward-looking
statements" within the meaning of applicable securities legislation, including
the United States Securities Act of 1933 and the United States Securities
Exchange Act of 1934. Forward-looking statements may include, among others,
statements regarding the Company's future plans, goals, strategies,
intentions, beliefs, estimates, costs, objectives, economic performance or
expectations, or the assumptions underlying any of the foregoing. Words such
as "may", "would", "could", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate" and similar
expressions are used to identify forward-looking statements. Forward-looking
statements should not be read as guarantees of future performance or results
and will not necessarily be accurate indications of whether or the times at or
by which such future performance will be achieved. Undue reliance should not
be placed on such statements. Forward-looking statements are based on
information available at the time and/or management's good faith assumptions
and analyses made in light of our perception of historical trends, current
conditions and expected future developments, as well as other factors we
believe are appropriate in the circumstances, and are subject to known and
unknown risks, uncertainties and other unpredictable factors, many of which
are beyond the Company's control, that could cause actual events or results to
differ materially from such forward-looking statements. Important factors that
could cause such differences include, but are not limited to, the risks set
forth in the "Risk Factors" section in MID's Annual Information Form for 2006,
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, 2006. The "Risk Factors"
section also contains information about the material factors or assumptions
underlying such forward-looking statements. In addition, while it was expected
that the MEC Bridge Loan would be repaid through the sale of MEC assets as
part of the MEC Debt Elimination Plan, the sale of such assets has taken
longer than originally contemplated and, accordingly, MEC may be unable to
repay the MEC Bridge Loan, which could have a material adverse effect on MID's
financial condition. 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 (notes 1, 16)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenues
    Rental revenue        $    44,188  $    39,558  $    44,188  $    39,558
    Racing and other
     revenue                  117,846      102,557            -            -
    Interest and other
     income from MEC
     (note 16)                      -            -        7,203        7,033
    -------------------------------------------------------------------------
                              162,034      142,115       51,391       46,591
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                 49,422       44,085            -            -
    Operating costs            67,411       67,838            -            -
    General and
     administrative
     (note 16)                 23,427       25,222        4,780        5,891
    Depreciation and
     amortization              23,497       21,542       10,960       10,200
    Interest expense, net      11,299       10,669        2,660        2,142
    Write-down of MEC's
     long-lived assets
     (note 5)                    (136)      77,445            -            -
    -------------------------------------------------------------------------
    Operating income (loss)   (12,886)    (104,686)      32,991       28,358
    Gain on disposal of
     business                       -      115,193            -            -
    Gain on disposal of
     real estate (note 16)          -            -            -            -
    Dilution and other
     gains (losses), net
     (notes 11, 16)             3,600           10        7,067            -
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         (9,286)      10,517       40,058       28,358
    Income tax expense
     (recovery) (note 12)      (2,361)      (3,733)       2,323        5,055
    Minority interest         (18,929)      (3,692)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     12,004       17,942       37,735       23,303
    Income (loss) from
     discontinued
     operations (note 3)         (515)      10,574            -            -
    -------------------------------------------------------------------------
    Net income (loss)     $    11,489  $    28,516  $    37,735  $    23,303
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     earnings (loss) per
     Class A Subordinate
     Voting or Class B
     Share (note 6)
      - Continuing
         operations       $      0.25  $      0.37
      - Discontinued
         operations
         (note 3)               (0.01)        0.22
    -----------------------------------------------
    Total                 $      0.24  $      0.59
    -----------------------------------------------
    -----------------------------------------------
    Average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands)
     (note 6)
      - Basic                  47,249       48,329
      - Diluted                47,249       48,386
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2007         2006
    -----------------------------------------------
    Revenues
    Rental revenue        $         -  $         -
    Racing and other
     revenue                  117,846      102,557
    Interest and other
     income from MEC
     (note 16)                      -            -
    -----------------------------------------------
                              117,846      102,557
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                 49,422       44,085
    Operating costs            67,411       67,938
    General and
     administrative
     (note 16)                 18,199       19,154
    Depreciation and
     amortization              12,580       11,373
    Interest expense, net      16,091       15,428
    Write-down of MEC's
     long-lived assets
     (note 5)                    (136)      77,445
    -----------------------------------------------
    Operating income (loss)   (45,721)    (132,866)
    Gain on disposal of
     business                       -      115,193
    Gain on disposal of
     real estate (note 16)         22            -
    Dilution and other
     gains (losses), net
     (notes 11, 16)            (3,467)          10
    -----------------------------------------------
    Income (loss) before
     income taxes and
     minority interest        (49,166)     (17,663)
    Income tax expense
     (recovery) (note 12)      (4,684)      (8,788)
    Minority interest         (18,929)      (3,692)
    -----------------------------------------------
    Income (loss) from
     continuing operations    (25,553)      (5,183)
    Income (loss) from
     discontinued
     operations (note 3)       (1,273)       9,798
    -----------------------------------------------
    Net income (loss)     $   (26,826) $     4,615
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



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

                         Consolidated (notes 1, 16)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenues
    Rental revenue        $   167,008  $   155,533  $   167,008  $   155,533
    Racing and other
     revenue                  627,584      582,982            -            -
    Interest and other
     income from MEC
     (note 16)                      -            -       22,539       29,249
    -------------------------------------------------------------------------
                              794,592      738,515      189,547      184,782
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                290,495      283,100            -            -
    Operating costs           282,896      259,608            -            -
    General and
     administrative
     (note 16)                 97,001       90,456       22,797       20,996
    Depreciation and
     amortization              83,178       78,807       41,541       39,225
    Interest expense, net      40,356       42,734        8,065       10,407
    Write-down of MEC's
     long-lived assets
     (note 5)                   1,308       77,445            -            -
    -------------------------------------------------------------------------
    Operating income (loss)      (642)     (93,635)     117,144      114,154
    Gain on disposal of
     business                       -      115,193            -            -
    Gain on disposal of
     real estate (note 16)      1,478        3,092        1,478          209
    Dilution and other gains
     (losses), net
     (notes 11, 16)             4,256        2,116        7,719        1,921
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest          5,092       26,766      126,341      116,284
    Income tax expense
     (recovery) (note 12)      12,978       10,471       16,030       17,774
    Minority interest         (47,496)     (32,768)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     39,610       49,063      110,311       98,510
    Income (loss) from
     discontinued
     operations (note 3)         (101)      10,807            -            -
    -------------------------------------------------------------------------
    Net income (loss)     $    39,509  $    59,870  $   110,311  $    98,510
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     earnings per Class A
     Subordinate Voting or
     Class B Share (note 6)
      - Continuing
         operations       $      0.82  $      1.02
      - Discontinued
         operations
         (note 6)                   -         0.22
    -----------------------------------------------
    Total                 $      0.82  $      1.24
    -----------------------------------------------
    -----------------------------------------------
    Average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands)
     (note 6)
      - Basic                  48,073       48,301
      - Diluted                48,083       48,355
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2007         2006
    -----------------------------------------------
    Revenues
    Rental revenue        $         -  $         -
    Racing and other
     revenue                  627,584      582,982
    Interest and other
     income from MEC
     (note 16)                      -            -
    -----------------------------------------------
                              627,584      582,982
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                290,495      283,100
    Operating costs           282,896      259,708
    General and
     administrative
     (note 16)                 70,419       67,171
    Depreciation and
     amortization              41,809       39,694
    Interest expense, net      53,281       60,027
    Write-down of MEC's
     long-lived assets
     (note 5)                   1,308       77,445
    -----------------------------------------------
    Operating income (loss)  (112,624)    (204,163)
    Gain on disposal of
     business                       -      115,193
    Gain on disposal of
     real estate (note 16)     48,776        2,883
    Dilution and other gains
     (losses), net
     (notes 11, 16)            (3,463)         195
    -----------------------------------------------
    Income (loss) before
     income taxes and
     minority interest        (67,311)     (85,892)
    Income tax expense
     (recovery) (note 12)      (4,383)      (7,303)
    Minority interest         (47,496)     (32,768)
    -----------------------------------------------
    Income (loss) from
     continuing operations    (15,432)     (45,821)
    Income (loss) from
     discontinued
     operations (note 3)       (3,330)       7,686
    -----------------------------------------------
    Net income (loss)     $   (18,762) $   (38,135)
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



    Consolidated Statements of Comprehensive Income
    (Refer to note 2 - Accounting Changes)
    (U.S. dollars in thousands)
    (Unaudited)

                              Three months ended           Year ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net income            $    11,489  $    28,516  $    39,509  $    59,870
    Other comprehensive
     income (loss):
      Change in fair value
       of interest rate
       swaps, net of
       taxes and minority
       interest (note 11)        (337)           -         (584)           -
      Foreign currency
       translation
       adjustment, net of
       minority interest
       (note 11)               25,326       11,018      106,043       61,360
      Recognition of
       foreign currency
       translation gain in
       net income (note 11)    (7,067)           -       (7,719)      (1,921)
      Reversal of foreign
       currency translation
       gain related to
       shares purchased
       for cancellation
       (note 9)               (16,576)           -      (22,354)           -
    -------------------------------------------------------------------------
    Comprehensive income  $    12,835  $    39,534  $   114,895  $   119,309
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



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

                              Three months ended           Year ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Deficit, beginning of
     period               $   (62,858) $   (89,904) $   (69,112) $   (99,527)
    Net income                 11,489       28,516       39,509       59,870
    Costs associated with
     capital transactions
     of subsidiaries                -         (475)           -         (475)
    Dividends                  (7,067)      (7,249)     (28,833)     (28,980)
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (58,436) $   (69,112) $   (58,436) $   (69,112)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



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

                         Consolidated (notes 1, 16)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2007         2006         2007         2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    12,004  $    17,942  $    37,735  $    23,303
    Items not involving
     current cash flows
     (note 14)                 (7,248)     (28,728)         969        6,838
    Changes in non-cash
     balances (note 14)        13,093       17,545       (3,882)      (1,729)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                17,849        6,759       34,822       28,412
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (35,610)     (22,622)      (9,883)      (3,004)
    Proceeds on disposal
     of business, net               -      171,777            -            -
    Proceeds on disposal
     of real estate and
     fixed assets, net          2,439        2,950            -            -
    Decrease in other
     assets                       934        2,462           45           33
    Loan advances to MEC,
     net                            -            -      (27,147)     (23,963)
    Loan repayments from
     MEC                            -            -        1,139      113,400
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
     activities               (32,237)     154,567      (35,846)      86,466
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              32,891        1,015            -            -
    Repayment of bank
     indebtedness             (19,617)     (34,429)           -            -
    Issuance of long-term
     debt, net                 15,409          448            -            -
    Repayment of long-term
     debt                     (22,374)      (3,416)        (115)         (92)
    Loan advances from MID,
     net                            -            -            -            -
    Loan repayments to MID          -            -            -            -
    Issuance of shares              -          316            -          316
    Shares purchased for
     cancellation             (40,236)           -      (40,236)           -
    Minority investment in
     subsidiary                19,581            -            -            -
    Costs associated with
     capital transactions
     of subsidiaries                -         (475)           -         (475)
    Dividends paid             (7,067)      (7,249)      (7,067)      (7,249)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (21,413)     (43,790)     (47,418)      (7,500)
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents       1,183          957        1,140          557
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations    (34,618)     118,493      (47,302)     107,935
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                (1,924)       1,180            -            -
    Cash provided by
     (used in) investing
     activities                  (970)      15,506            -            -
    Cash provided by
     (used in) financing
     activities                     1            6            -            -
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     discontinued
     operations                (2,893)      16,692            -            -
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the period               (37,511)     135,185      (47,302)     107,935
    Cash and cash
     equivalents,
     beginning of period      192,371      115,070      158,247       83,931
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                   154,860      250,255      110,945      191,866
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     period                    (9,078)     (10,636)           -            -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, of
     continuing operations
     end of period        $   145,782  $   239,619  $   110,945  $   191,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     December 31,                2007         2006
    -----------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $   (25,553) $    (5,183)
    Items not involving
     current cash flows
     (note 14)                 (6,960)     (34,713)
    Changes in non-cash
     balances (note 14)        17,497       19,436
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (15,016)     (20,460)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (25,727)     (19,618)
    Proceeds on disposal
     of business, net               -      171,777
    Proceeds on disposal
     of real estate and
     fixed assets, net          2,460        2,950
    Decrease in other
     assets                       889        2,429
    Loan advances to MEC,
     net                            -            -
    Loan repayments from
     MEC                            -            -
    -----------------------------------------------
    Cash provided by
     (used in) investment
     activities               (22,378)     157,538
    -----------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              32,891        1,015
    Repayment of bank
     indebtedness             (19,617)     (34,429)
    Issuance of long-term
     debt, net                 15,409          448
    Repayment of long-term
     debt                     (22,259)      (3,324)
    Loan advances from MID,
     net                       25,884       22,664
    Loan repayments to MID       (434)    (111,800)
    Issuance of shares              -            -
    Shares purchased for
     cancellation                   -            -
    Minority investment in
     subsidiary                19,581            -
    Costs associated with
     capital transactions
     of subsidiaries                -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities                51,455     (125,426)
    -----------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents          43          400
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     continuing operations     14,104       12,052
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                (2,639)       1,286
    Cash provided by
     (used in) investing
     activities                  (970)      15,506
    Cash provided by
     (used in) financing
     activities                  (704)      (1,594)
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     discontinued
     operations                (4,313)      15,198
    -----------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the period                 9,791       27,250
    Cash and cash
     equivalents,
     beginning of period       34,124       31,139
    -----------------------------------------------
    Cash and cash
     equivalents, end of
     period                    43,915       58,389
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     period                    (9,078)     (10,636)
    -----------------------------------------------
    Cash and cash
     equivalents, of
     continuing operations
     end of period        $    34,837  $    47,753
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



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

                         Consolidated (notes 1, 16)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2007         2006         2007         2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $    39,610  $    49,063  $   110,311  $    98,510
    Items not involving
     current cash flows
     (note 14)                 24,208           93       31,873       24,971
    Changes in non-cash
     balances (note 14)        12,893          593        6,681       (7,385)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                76,711       49,749      148,865      116,096
    -------------------------------------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions         (108,218)    (117,464)    (115,839)     (35,898)
    Acquisition of
     business, net of
     cash acquired                  -       (9,347)           -            -
    Proceeds on disposal
     of business, net               -      171,777            -            -
    Proceeds on disposal
     of real estate and
     fixed assets, net         14,298       20,927        6,321        8,921
    Decrease (increase)
     in other assets             (797)         220           99         (834)
    Loan advances to MEC,
     net                            -            -      (54,610)     (93,771)
    Loan repayments from
     MEC                            -            -        5,564      116,800
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
     activities               (94,717)      66,113     (158,465)      (4,782)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              73,831       19,144            -            -
    Repayment of bank
     indebtedness             (41,132)     (39,929)           -            -
    Issuance of long-term
     debt, net                 19,754       12,582            -            -
    Repayment of long-term
     debt                     (73,991)     (16,159)        (413)        (359)
    Loan advances from MID,
     net                            -            -            -            -
    Loan repayments to MID          -            -            -            -
    Issuance of shares          1,058        1,171        1,058        1,171
    Shares purchased for
     cancellation             (52,072)           -      (52,072)           -
    Minority investment in
     subsidiary                19,581            -            -            -
    Costs associated with
     capital transactions
     of subsidiaries                -         (475)           -         (475)
    Dividends paid            (28,833)     (28,980)     (28,833)     (28,980)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (81,804)     (52,646)     (80,260)     (28,643)
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents       9,102        3,709        8,939        3,713
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used) in
     continuing operations    (90,708)      66,925      (80,921)      86,384
    -------------------------------------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                  (241)       3,350            -            -
    Cash provided by
     (used in) investing
     activities                (4,417)      54,963            -            -
    Cash used in financing
     activities                   (29)     (32,443)           -            -
    -------------------------------------------------------------------------
    Net cash flows
     provided by (used in)
     discontinued
     operations                (4,687)      25,870            -            -
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the year                 (95,395)      92,795      (80,921)      86,384
    Cash and cash
     equivalents,
     beginning of year        250,255      157,460      191,866      105,482
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     year                     154,860      250,225      110,945      191,866
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     year                      (9,078)     (10,636)           -            -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents of
     continuing
     operations, end of
     year                 $   145,782  $   239,619  $   110,945  $   191,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Year Ended                            - note 3)
     December 31,                2007         2006
    -----------------------------------------------
    OPERATING ACTIVITIES
    Income (loss) from
     continuing
     operations           $   (15,432) $   (45,821)
    Items not involving
     current cash flows
     (note 14)                (55,861)     (22,929)
    Changes in non-cash
     balances (note 14)         6,190        6,439
    -----------------------------------------------
    Cash provided by
     (used in) operating
     activities               (65,103)     (62,311)
    -----------------------------------------------
    INVESTMENT ACTIVITIES
    Real estate and fixed
     asset additions          (81,860)     (81,566)
    Acquisition of
     business, net of
     cash acquired                  -       (9,347)
    Proceeds on disposal
     of business, net               -      171,777
    Proceeds on disposal
     of real estate and
     fixed assets, net         95,712       12,006
    Decrease (increase)
     in other assets             (896)       1,054
    Loan advances to MEC,
     net                            -            -
    Loan repayments from
     MEC                            -            -
    -----------------------------------------------
    Cash provided by
     (used in) investment
     activities                12,956       93,924
    -----------------------------------------------
    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              73,831       19,144
    Repayment of bank
     indebtedness             (41,132)     (39,929)
    Issuance of long-term
     debt, net                 19,754       12,582
    Repayment of long-term
     debt                     (73,578)     (15,800)
    Loan advances from MID,
     net                       52,361       77,294
    Loan repayments to MID     (1,564)    (111,800)
    Issuance of shares              -            -
    Shares purchased for
     cancellation                   -            -
    Minority investment in
     subsidiary                19,581            -
    Costs associated with
     capital transactions
     of subsidiaries                -            -
    Dividends paid                  -            -
    -----------------------------------------------
    Cash provided by
     (used in) financing
     activities                49,253      (58,509)
    -----------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents         163           (4)
    -----------------------------------------------
    Net cash flows
     provided by (used) in
     continuing operations     (2,731)     (26,900)
    -----------------------------------------------
    DISCONTINUED OPERATIONS
    Cash provided by
     (used in) operating
     activities                (3,297)       3,572
    Cash provided by
     (used in) investing
     activities                (4,417)      54,963
    Cash used in financing
     activities                (4,029)     (25,224)
    -----------------------------------------------
    Net cash flows
     provided by (used in)
     discontinued
     operations               (11,743)      33,311
    -----------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents during
     the year                 (14,474)       6,411
    Cash and cash
     equivalents,
     beginning of year         58,389       51,978
    -----------------------------------------------
    Cash and cash
     equivalents, end of
     year                      43,915       58,389
    Less: cash and cash
     equivalents of
     discontinued
     operations, end of
     year                      (9,078)     (10,636)
    -----------------------------------------------
    Cash and cash
     equivalents of
     continuing
     operations, end of
     year                 $    34,837  $    47,753
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



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

                         Consolidated (notes 1, 16)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
                                      - notes 3, 4)
                             December     December     December     December
    As at                    31, 2007     31, 2006     31, 2007     31, 2006
    -------------------------------------------------------------------------
    ASSETS
    Current assets:
      Cash and cash
       equivalents        $   145,782  $   239,619  $   110,945  $   191,866
      Restricted cash
       (note 16)               32,722       35,575        4,458        6,514
      Accounts receivable      43,136       39,801        7,425        7,749
      Loans receivable
       from MEC, net
       (note 16)                    -            -      139,168        3,108
      Due from MID
       (note 16)                    -            -            -            -
      Income taxes
       receivable                 402        1,934          402        1,354
      Prepaid expenses and
       other                   17,317       15,486        1,206          966
      Assets held for sale
       (note 4)                 1,493            -            -            -
      Discontinued
       operations (note 3)     21,239       20,266            -            -
    -------------------------------------------------------------------------
                              262,091      352,681      263,604      211,557
    Real estate properties,
     net (note 7)           2,271,577    2,114,760    1,561,921    1,348,621
    Fixed assets, net          90,960       80,998          445          554
    Racing licences           109,868      109,868            -            -
    Other assets                6,229       11,637          879        3,061
    Loans receivable from
     MEC (note 16)                  -            -       97,589      182,876
    Deferred rent
     receivable                14,898       13,818       14,898       13,818
    Future tax assets          58,665       49,665        5,497        7,277
    Assets held for sale
     (note 4)                  34,165       36,063            -            -
    Discontinued operations
     (note 3)                  50,659       50,433            -            -
    -------------------------------------------------------------------------
                          $ 2,899,112  $ 2,819,923  $ 1,944,833  $ 1,767,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current liabilities:
      Bank indebtedness
       (note 8)           $    39,214  $     6,515  $         -  $         -
      Accounts payable and
       accrued liabilities    147,067      143,760       16,678       13,317
      Income taxes payable     14,993        7,083       13,040        7,083
      Loan payable to MID,
       net (note 16)                -            -            -            -
      Due to MEC (note 16)          -            -        4,464        6,648
      Long-term debt due
       within one year
       (note 8)                33,215       86,125          488          378
      Deferred revenue          6,189        6,424        2,078        2,451
      Liabilities related
       to assets held for
       sale (note 4)              171            -            -            -
      Discontinued
       operations (note 3)     16,132       15,431            -            -
    -------------------------------------------------------------------------
                              256,981      265,338       36,748       29,877
    Long-term debt (note 8)    96,326       99,712        6,646        5,991
    Senior unsecured
     debentures, net          267,578      226,596      267,578      226,596
    Note obligations, net     216,050      215,830            -            -
    Loan payable to MID,
     net (note 16)                  -            -            -            -
    Other long-term
     liabilities               24,175       15,079            -            -
    Future tax liabilities    144,432      138,071       48,257       46,090
    Minority interest         156,359      180,108            -            -
    Liabilities related to
     assets held for sale
     (note 4)                     876        1,047            -            -
    Discontinued operations
     (note 3)                     875          846            -            -
    -------------------------------------------------------------------------
                            1,163,652    1,142,627      359,229      308,554
    -------------------------------------------------------------------------
    Shareholders' equity:
    Share capital (note 9)  1,524,440    1,577,342
    Contributed surplus
     (note 10)                 27,517        2,667
    Deficit                   (58,436)     (69,112)
    Accumulated
     comprehensive income
     (note 11)                241,939      166,399
    -------------------------------------------------------------------------
                            1,735,460    1,677,296    1,585,604    1,459,210
    -------------------------------------------------------------------------
                          $ 2,899,112  $ 2,819,923  $ 1,944,833  $ 1,767,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
                                      - notes 3, 4)
                             December     December
    As at                    31, 2007     31, 2006
    -----------------------------------------------
    ASSETS
    Current assets:
      Cash and cash
       equivalents        $    34,837  $    47,753
      Restricted cash
       (note 16)               28,264       29,061
      Accounts receivable      35,711       32,052
      Loans receivable
       from MEC, net
       (note 16)                    -            -
      Due from MID
       (note 16)                4,464        6,648
      Income taxes
       receivable                   -          580
      Prepaid expenses and
       other                   16,479       14,746
      Assets held for sale
       (note 4)                 1,493            -
      Discontinued
       operations (note 3)     21,239       20,266
    -----------------------------------------------
                              142,487      151,106
    Real estate properties,
     net (note 7)             765,043      771,080
    Fixed assets, net          90,515       80,444
    Racing licences           109,868      109,868
    Other assets                5,350       12,881
    Loans receivable from
     MEC (note 16)                  -            -
    Deferred rent
     receivable                     -            -
    Future tax assets          53,168       42,388
    Assets held for sale
     (note 4)                  34,165       36,063
    Discontinued operations
     (note 3)                  50,731       51,851
    -----------------------------------------------
                          $ 1,251,327  $ 1,255,681
    -----------------------------------------------
    -----------------------------------------------
    LIABILITIES AND
     SHAREHOLDERS' EQUITY
    Current liabilities:
      Bank indebtedness
       (note 8)           $    39,214  $     6,515
      Accounts payable and
       accrued liabilities    130,734      130,443
      Income taxes payable      1,953            -
      Loan payable to MID,
       net (note 16)          137,002        2,823
      Due to MEC (note 16)          -            -
      Long-term debt due
       within one year
       (note 8)                32,727       85,747
      Deferred revenue          4,339        4,211
      Liabilities related
       to assets held for
       sale (note 4)              171            -
      Discontinued
       operations (note 3)     16,529       15,716
    -----------------------------------------------
                              362,669      245,455
    Long-term debt (note 8)    89,680       93,721
    Senior unsecured
     debentures, net                -            -
    Note obligations, net     216,050      215,830
    Loan payable to MID,
     net (note 16)             67,107      151,449
    Other long-term
     liabilities               24,175       15,079
    Future tax liabilities     94,844       91,981
    Minority interest         156,359      180,108
    Liabilities related to
     assets held for sale
     (note 4)                     876        1,047
    Discontinued operations
     (note 3)                  27,018       32,273
    -----------------------------------------------
                            1,038,778    1,026,943
    -----------------------------------------------
    Shareholders' equity:
    Share capital (note 9)
    Contributed surplus
     (note 10)
    Deficit
    Accumulated
     comprehensive income
     (note 11)
    -----------------------------------------------
                              212,549      228,738
    -----------------------------------------------
                          $ 1,251,327  $ 1,255,681
    -----------------------------------------------
    -----------------------------------------------

    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, 2007 and 2006 and for the three-month
    periods and years ended December 31, 2007 and 2006 are unaudited)

    1. BASIS OF PRESENTATION

    The unaudited interim consolidated financial statements include the
    accounts of MI Developments Inc. and its subsidiaries (collectively,
    "MID" or the "Company"). MID is a real estate operating company that
    currently owns, leases, manages and develops a predominantly industrial
    rental portfolio leased primarily to Magna International Inc. and its
    automotive operating units ("Magna"). MID also acquires land that it
    intends to develop for mixed- use and residential projects. The Company
    also holds a controlling interest in Magna Entertainment Corp. ("MEC"),
    an owner and operator of horse racetracks and a supplier of live racing
    content to the inter-track, off-track and account wagering markets. At
    December 31, 2007, the Company owned approximately 54% of MEC's total
    equity, representing approximately 96% of the total voting power of its
    outstanding stock (note 16). MEC's results are consolidated with the
    Company's results, with outside ownership accounted for as a minority
    interest.

    (a) Magna Entertainment Corp.

        The results of operations and the financial position of MEC have been
        included in the unaudited interim consolidated financial statements
        on a going concern basis, which contemplates the realization of MEC's
        assets and the discharge of MEC's liabilities in the normal course of
        business for the foreseeable future. MEC has incurred net losses
        before minority interest recovery of $68.8 million, $65.4 million and
        $107.4 million for the years ended December 31, 2007, 2006 and 2005,
        respectively. At December 31, 2007, MEC had a working capital
        deficiency of $220.2 million and $209.4 million of debt scheduled to
        mature in 2008, including amounts owing under (i) MEC's $40.0 million
        senior secured revolving credit facility with a Canadian financial
        institution (the "MEC Credit Facility"), which is scheduled to mature
        on March 31, 2008 (note 8), (ii) a bridge loan (the "MEC Bridge
        Loan") of up to $80.0 million from a wholly-owned subsidiary of MID
        (the "MID Lender"), which is scheduled to mature on May 31, 2008
        (note 16), and (iii) MEC's obligation to repay $100.0 million of
        indebtedness under the Gulfstream Park project financing facility
        with the MID Lender by May 31, 2008 (note 16). Accordingly, MEC's
        ability to continue as a going concern is in substantial doubt and is
        dependent on MEC generating cash flows that are adequate to sustain
        the operations of the business, renewing or extending current
        financing arrangements and meeting its obligations with respect to
        secured and unsecured creditors, none of which is assured. If MEC is
        unable to repay its obligations when due, other current and long-term
        debt will also become due on demand as a result of cross-default
        provisions within loan agreements, unless MEC is able to obtain
        waivers or extensions. On September 12, 2007, MEC's Board of
        Directors approved a debt elimination plan (the "MEC Debt Elimination
        Plan") designed to eliminate MEC's net debt by December 31, 2008 by
        generating funds from the sale of assets (notes 3 and 4), entering
        into strategic transactions involving certain of MEC's racing, gaming
        and technology operations, and a possible future equity issuance. The
        success of the MEC Debt Elimination Plan is not assured. To address
        short-term liquidity concerns and provide sufficient time to
        implement the MEC Debt Elimination Plan, MEC arranged $100.0 million
        of funding, comprised of (i) a $20.0 million private placement of
        MEC's Class A Subordinate Voting Stock ("MEC Class A Stock") to Fair
        Enterprise Limited ("FEL"), a company that forms part of an estate
        planning vehicle for the family of Mr. Frank Stronach, the Company's
        Chairman and the Chairman and Interim Chief Executive Officer of MEC
        (note 16); and (ii) the MEC Bridge Loan. Although MEC continues to
        implement the MEC Debt Elimination Plan, the sale of assets under the
        MEC Debt Elimination Plan is taking longer than originally
        contemplated. As a result, MEC will likely need to seek additional
        funds in the short-term from one or more possible sources, which may
        include the Company. The availability of such additional funds is not
        assured and, if available, the terms thereof are not yet
        determinable. These consolidated financial statements do not give
        effect to any adjustments to recorded amounts and their
        classification which would be necessary should MEC be unable to
        continue as a going concern and, therefore, be required to realize
        its assets and discharge its liabilities in other than the normal
        course of business and at amounts different from those reflected in
        the unaudited interim consolidated financial statements.

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

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

    (b) Consolidated Financial Statements

        The unaudited interim consolidated financial statements have been
        prepared in U.S. dollars following Canadian generally accepted
        accounting principles ("GAAP") and the accounting policies as set out
        in the annual consolidated financial statements for the year ended
        December 31, 2006, except as disclosed in note 2.

        The unaudited interim consolidated financial statements do not
        conform in all respects to the requirements of generally accepted
        accounting principles for annual financial statements. Accordingly,
        these unaudited interim consolidated financial statements should be
        read in conjunction with the annual consolidated financial statements
        for the year ended December 31, 2006.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments necessary to present
        fairly the financial position at December 31, 2007 and 2006, and the
        results of operations and cash flows for the three-month periods and
        years ended December 31, 2007 and 2006.

        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." segments
        have not been eliminated in the presentation of each segment's
        financial data and related measurements. However, the effects of
        transactions between these two segments, which are further described
        in note 16, are eliminated in the consolidated results of operations
        and financial position of the Company.

        The Company has reclassified certain prior period amounts to reflect
        the restatement for MEC's discontinued operations (note 3) and MEC's
        assets held for sale (note 4).

    2.  ACCOUNTING CHANGES

    The Canadian Institute of Chartered Accountants ("CICA") issued four new
    standards in January 2005 (which have since been further amended) in
    Handbook Sections 1530, "Comprehensive Income", 3855, "Financial
    Instruments - Recognition and Measurement", 3861, "Financial Instruments
    - Disclosure and Presentation", and 3865, "Hedges". These standards
    provide guidance for the recognition, classification and measurement of
    financial instruments in financial statements as follows:

    -   All financial instruments, including derivatives, are to be included
        on a company's balance sheet and measured either at their fair values
        or, under certain circumstances, at cost or amortized cost. The
        standards also specify when unrealized gains and losses as a result
        of changes in fair values are to be recognized in the consolidated
        statement of income (loss).

    -   Existing requirements for hedge accounting are extended to provide
        comprehensive guidance on how hedge accounting should be performed.

    -   Certain unrealized gains and losses arising from changes in fair
        value of financial instruments will be temporarily recorded outside
        the consolidated statement of income (loss) in "other comprehensive
        income (loss)".

    The CICA requires these new standards be adopted on a prospective basis
    for annual and interim periods in the first fiscal year beginning on or
    after October 1, 2006. In accordance with the prescribed transitional
    provisions, the Company adopted these standards effective January 1, 2007
    without restatement of prior periods, except to classify the "currency
    translation adjustment" component of shareholders' equity as a component
    of "accumulated other comprehensive income".

    Under the new standards, all of the Company's consolidated financial
    assets must be classified as "held for trading", "held to maturity",
    "loans and receivables" or "available for sale" and all of the Company's
    consolidated financial liabilities must be classified as "held for
    trading" or "other financial liabilities". All of the Company's
    consolidated financial instruments are initially measured at fair value,
    with subsequent measurements dependent on the classification of each
    financial instrument.

    "Held for trading" financial assets, which include "cash and cash
    equivalents" and "restricted cash", are measured at fair value and all
    gains and losses are included in net income in the period in which they
    arise. "Loans and receivables", which include "accounts receivable" and
    certain "other assets", are recorded at amortized cost. The Company does
    not currently have any consolidated financial assets classified as "held
    to maturity" or "available for sale".

    "Other financial liabilities", which include "bank indebtedness",
    "accounts payable and accrued liabilities", "dividends payable", current
    and non-current portions of "long-term debt", "senior unsecured
    debentures, net", "note obligations, net" and certain "other long-term
    liabilities", are recorded at amortized cost. The Company does not have
    any consolidated financial liabilities classified as "held for trading".

    These standards had the following impact on the Company's unaudited
    interim consolidated financial statements upon adoption:

                                                                    Increase
    As at January 1, 2007                                          (Decrease)
    -------------------------------------------------------------------------
    Assets
      Real Estate Business - other assets -
       deferred financing costs(i)                               $    (2,216)
      MEC - other assets - deferred financing costs -
       continuing operations(i)                                       (7,871)
      MEC - other assets - deferred financing costs -
       discontinued operations(i)                                     (1,320)
      MEC - other assets - interest rate swaps(iii)                      439
      Eliminations - other assets                                      5,626
    -------------------------------------------------------------------------
    Consolidated assets                                          $    (5,342)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
      Real Estate Business - senior unsecured debentures(i)      $    (2,216)
      MEC - long-term debt due within one year(i)                        (23)
      MEC - note obligations(i)                                       (3,542)
      MEC - loans payable to MID - continuing operations(i)           (4,306)
      MEC - loans payable to MID - discontinued operations(i)         (1,320)
      MEC - future tax liabilities(iii)                                  176
      MEC - minority interest(iii)                                       109
      Eliminations - loans payable to MID - continuing operations      4,306
      Eliminations - loans payable to MID -
       discontinued operations                                         1,320
    -------------------------------------------------------------------------
    Consolidated liabilities                                          (5,496)
    -------------------------------------------------------------------------
    Shareholders' equity
      MEC - accumulated other comprehensive income(ii),(iii)             154
    -------------------------------------------------------------------------
    Consolidated shareholders' equity                                    154
    -------------------------------------------------------------------------
    Consolidated liabilities and shareholders' equity            $    (5,342)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)    Deferred Financing Costs

           As permitted by the new standards, the Company's policy for the
           treatment of financing costs related to the issuance of debt is to
           present debt instruments on the consolidated balance sheet net of
           the related financing costs, with the net balance accreting to the
           face value of the debt over its term. Prior to January 1, 2007,
           the Company included deferred financing costs on the consolidated
           balance sheet in "other assets".

    (ii)   Other Comprehensive Income (Loss) and Accumulated Other
           Comprehensive Income

           The new standards require the presentation of a new statement of
           comprehensive income, which is comprised of net income, the net
           unrealized foreign exchange gain or loss for the period related to
           the Company's net investment in foreign operations and changes in
           unrealized gains or losses related to cash flow hedges, with any
           such changes required to be accumulated on the consolidated
           balance sheet in "accumulated other comprehensive income" as a
           separate component of shareholders' equity.

    (iii)  Hedging Derivative Financial Instruments

           The new standards require all hedging derivative financial
           instruments to be recognized on the consolidated balance sheet at
           fair value.

           The types of hedging relationships that qualify for hedge
           accounting have been specified under the new standards but do not
           have an impact on the Company's policies or criteria for the use
           of financial instruments and hedge accounting. A description of
           the Company's policies for the use of derivative financial
           instruments is included in notes 1 and 20 to the Company's
           consolidated financial statements for the year ended December 31,
           2006. The new standards did not impact the accounting for the
           Company's use of derivative financial instruments at January 1,
           2007, except as discussed below for interest rate swaps.

           Interest Rate Swaps
           MEC occasionally utilizes interest rate swap contracts as hedging
           instruments to hedge exposure to interest rate fluctuations on its
           variable rate debt. These swap contracts are accounted for using
           hedge accounting, with the fair value of the hedging instrument
           being recognized on the consolidated balance sheet. To the extent
           that changes in the fair value of the hedging instrument offset
           changes in the fair value of the hedged item, they are recorded in
           "other comprehensive income (loss)" and "accumulated other
           comprehensive income". Any portion of the change in fair value of
           the hedging instrument that does not offset changes in the fair
           value of the hedged item (the ineffectiveness of the hedge) is
           recorded directly in the consolidated statement of income (loss).

           For hedges that are discontinued before the end of the original
           hedge term, the unrealized gain or loss in "accumulated other
           comprehensive income" is amortized in the consolidated statement
           of income (loss) over the remaining term of the original hedge. If
           the hedged item is sold or settled, the entire unrealized gain or
           loss is recognized in the consolidated statement of income (loss).

           On January 1, 2007, MEC's interest rate swaps were measured and
           recognized as an asset with a fair value of $439 thousand with a
           related future tax liability of $176 thousand and minority
           interest liability of $109 thousand, resulting in a net amount of
           $154 thousand being recorded in opening "accumulated other
           comprehensive income". This amount was reclassified to the
           consolidated statement of income (loss) during the year ended
           December 31, 2007.

    3.  BUSINESS ACQUISITION AND DISPOSALS

    (a) Acquisition of AmTote

        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                                                  12,691
        Other assets                                                     127
        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
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    (b) Divestiture of The Meadows

        On November 14, 2006, MEC completed the sale of all of the
        outstanding shares of Washington Trotting Association, Inc., Mountain
        Laurel Racing, Inc. and MEC Pennsylvania Racing, Inc., each an MEC
        wholly-owned subsidiary through which MEC owned and operated The
        Meadows, MEC's standardbred racetrack in Pennsylvania, to PA Meadows,
        LLC, a company jointly owned by William Paulos and William Wortman,
        controlling shareholders of Millennium Gaming, Inc., and a fund
        managed by Oaktree Capital Management, LLC (together, "Millennium-
        Oaktree"). On closing, MEC received cash consideration of
        $171.8 million, net of transaction costs of $3.2 million, and a
        $25.0 million holdback note payable to MEC over a five-year period,
        subject to offset for certain indemnification obligations (the
        "Meadows Holdback Note"). Under the terms of the Meadows Holdback
        Note, MEC agreed to release the security requirement for the holdback
        amount, defer subordinate payments under the Meadows Holdback Note,
        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.
        The parties also entered into a racing services agreement whereby MEC
        pays $50 thousand per annum and continues to operate, for its own
        account, the racing operations at The Meadows until at least July
        2011. On December 12, 2007, Cannery Casino Resorts, LLC, the parent
        company of Millennium-Oaktree, announced it had entered into an
        agreement to sell Millennium-Oaktree to Crown Limited. If the deal is
        consummated, either party to the racing services agreement will have
        the option to terminate the arrangement.

        MEC recognized a $115.2 million gain on this sale transaction in the
        fourth quarter of 2006. Based on the indemnification obligations and
        other terms pertaining to the Meadows Holdback Note, the Meadows
        Holdback Note will be recognized in the consolidated financial
        statements upon the settlement of the indemnification obligations and
        as payments are received.

        MEC was required to use the proceeds from the sale of The Meadows to
        fully repay the bridge loan between the MID Lender and MEC (the "2005
        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 16) and to place $15.0 million into escrow with the MID Lender
        (note 16).

    (c) Discontinued Operations

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

              In September 2007, MEC engaged a U.S. investment bank to assist
              in soliciting potential purchasers and managing the sale
              process for certain assets covered by the MEC Debt Elimination
              Plan. In October 2007, the U.S. investment bank began marketing
              Thistledown and Remington Park for sale and initiated an active
              program to locate potential buyers.

              In October 2007, the Great Lakes Downs property was listed for
              sale with a real estate broker. The race meet at that facility
              concluded on November 4, 2007 and the facility was then closed.
              In order to facilitate the sale of this property, MEC re-
              acquired Great Lakes Downs from Richmond Racing Co., LLC in
              December 2007 pursuant to a prior existing option right.

              In November 2007, MEC began marketing its interest in Portland
              Meadows for sale and an active program to locate a potential
              buyer was initiated.

        (ii)  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. Based on the exchange amount, MEC
              recognized a gain on disposition of $20.9 million at the date
              of disposition.

        (iii) 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 and exchange amount 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.

        (iv)  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 at the date of disposition of $1.5 million.
              MEC was required to use the net proceeds from this transaction
              to repay principal amounts outstanding under the MEC Credit
              Facility (note 8).

        MEC's results of operations related to discontinued operations
        for the three-month periods and years ended December 31, 2007 and
        2006, and MEC's assets and liabilities related to discontinued
        operations as at December 31, 2007 and 2006, are shown in the
        following table:

                                Three Months Ended             Year Ended
                                    December 31,              December 31,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Revenues              $    28,860  $    31,002  $   122,200  $   142,534
    Costs and expenses         30,056       33,028      121,320      136,860
    -------------------------------------------------------------------------
                              (1,196)       (2,026)         880        5,674
    Depreciation and
     amortization                 515        1,388        3,976        7,069
    Interest expense, net         652          872        2,794        4,984
    Impairment loss recorded
     on disposition                 -            -            -        1,202
    -------------------------------------------------------------------------
    Loss before undernoted     (2,363)      (4,286)      (5,890)      (7,581)
    Gain on disposition             -       20,892            -       22,387
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         (2,363)      16,606       (5,890)      14,806
    Income tax expense
     (recovery)                     -         (160)           -        1,653
    Minority interest          (1,090)       6,968       (2,560)       5,467
    -------------------------------------------------------------------------
    MEC's income (loss) from
     discontinued operations   (1,273)       9,798       (3,330)       7,686
    -------------------------------------------------------------------------
    Eliminations (note 16)        758          776        3,229        3,121
    -------------------------------------------------------------------------
    Consolidated income
     (loss) from dis-
     continued operations  $     (515) $    10,574  $      (101) $    10,807
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                    December 31, December 31,
        As at                                              2007         2006
        ---------------------------------------------------------------------
        ASSETS
        Current assets:
          Cash and cash equivalents                 $     9,078  $    10,636
          Restricted cash                                 7,069        5,133
          Accounts receivable                             3,424        3,939
          Prepaid expenses and other                      1,668          558
        ---------------------------------------------------------------------
                                                         21,239       20,266
        ---------------------------------------------------------------------
        Real estate properties, net                      39,094       38,048
        Fixed assets, net                                11,531       12,408
        Other assets                                        106        1,395
        ---------------------------------------------------------------------
                                                         50,731       51,851
        ---------------------------------------------------------------------
        MEC's assets related to
         discontinued operations                         71,970       72,117
        ---------------------------------------------------------------------
        Eliminations (note 16)                              (72)      (1,418)
        ---------------------------------------------------------------------
        Consolidated assets related to
         discontinued operations                    $    71,898  $    70,699
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        LIABILITIES
        Current liabilities:
          Accounts payable and accrued liabilities  $    14,852  $    13,514
          Long-term debt due within one year                 23           30
          Loan payable to MID                               397          285
          Deferred revenue                                1,257        1,887
        ---------------------------------------------------------------------
                                                         16,529       15,716
        ---------------------------------------------------------------------
        Long-term-debt                                      115          138
        Loan payable to MID, net                         26,143       31,427
        Other long-term liabilities                         760          708
        ---------------------------------------------------------------------
                                                         27,018       32,273
        ---------------------------------------------------------------------
        MEC's liabilities related to
         discontinued operations                         43,547       47,989
        ---------------------------------------------------------------------
        Eliminations (note 16)                          (26,540)     (31,712)
        ---------------------------------------------------------------------
        Consolidated liabilities related
         to discontinued operations                 $    17,007  $    16,277
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    4.  ASSETS HELD FOR SALE

    (a) In November and December 2007, MEC entered into sale agreements for
        three parcels of excess real estate comprising approximately
        825 acres in Porter, New York, subject to the completion of due
        diligence by the purchasers and customary closing conditions. These
        sale transactions were completed on December 28, 2007, January 7,
        2008 and January 10, 2008, for total cash consideration of
        $1.8 million, net of transaction costs. At December 31, 2007, the two
        parcels of real estate for which the sale had not been completed are
        included in MEC's "assets held for sale" on the Company's
        consolidated balance sheets. The net proceeds received on closing
        were used to repay a portion of the MEC Bridge Loan (note 16)
        subsequent to year-end.

    (b) On December 21, 2007, MEC entered into an agreement to sell 225 acres
        of excess real estate located in Ebreichsdorf, Austria to a
        subsidiary of Magna, a related party, for a purchase price of
        20.0 million euros ($29.4 million), subject to customary closing
        adjustments. The closing of the transaction is expected to occur by
        the end of the first quarter of 2008 following the satisfaction of
        customary closing conditions, including the receipt of all necessary
        regulatory approvals. MEC is required to use 7.5 million euros of the
        net proceeds to be received on closing to repay a portion of a
        15.0 million euro term loan facility (note 8) and to use the
        remaining portion of the net proceeds to repay a portion of the MEC
        Bridge Loan (note 16).

    (c) On August 9, 2007, MEC announced its intention to sell real estate
        properties located in Dixon, California and Ocala, Florida. MEC has
        initiated an active program to locate potential buyers for these
        properties and has listed the properties for sale.

        Under the terms of the MEC Bridge Loan, MEC is required to use the
        net proceeds from the sale of these properties to pay down principal
        amounts outstanding under the MEC Bridge Loan and the amount of such
        net proceeds will permanently reduce the committed amount of the MEC
        Bridge Loan.

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

        At December 31, 2007, all of the criteria required to classify an
        asset as held for sale, or operations as discontinued operations
        (note 3), in accordance with GAAP were not met in relation to the
        assets and operations described in the preceding paragraph and,
        accordingly, these assets and operations continue to be classified as
        held and in use.

        MEC's assets classified as held for sale and corresponding
        liabilities, related to the transactions described in sections (a),
        (b) and (c) above, at December 31, 2007 and 2006, are shown in the
        table below.

                                                    December 31, December 31,
        As at                                              2007         2006
        ---------------------------------------------------------------------
        ASSETS
        Current assets:
          Real estate properties, net
            Porter, New York                        $     1,493  $         -
        ---------------------------------------------------------------------
        Real estate properties, net
          Dixon, California                              19,139       18,711
          Ocala, Florida                                  8,407        8,427
          Ebreichsdorf, Austria                           6,619        5,935
          Porter, New York                                    -        2,990
        ---------------------------------------------------------------------
                                                         34,165       36,063
        ---------------------------------------------------------------------
                                                    $    35,658  $    36,063
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        LIABILITIES
        Current liabilities:
          Future tax liabilities                    $       171  $         -
        ---------------------------------------------------------------------
        Future tax liabilities                              876        1,047
        ---------------------------------------------------------------------
                                                    $     1,047  $     1,047
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    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,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Porter, New York(i)   $      (136) $         -  $     1,308  $         -
    Magna Racino(TM)(ii)            -       76,166            -       76,166
    Development
     property(iii)                  -        1,279            -        1,279
    -------------------------------------------------------------------------
                          $      (136) $    77,445  $     1,308  $    77,445
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)    In connection with entering into sale agreements for three parcels
           of real estate in Porter, New York (note 4), MEC recognized a non-
           cash impairment loss of $1.3 million, which represents the excess
           of the carrying value over the fair value of this real estate,
           less selling costs.

    (ii)   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.

    (iii)  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 16). 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, 2007 and 2006 are computed as follows:

                                Three Months Ended             Year Ended
                                    December 31,              December 31,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Income from continuing
     operations           $    12,004  $    17,942  $    39,610  $    49,063
    Income (loss) from
     discontinued operations     (515)      10,574         (101)      10,807
    -------------------------------------------------------------------------
    Net income            $    11,489  $    28,516  $    39,509  $    59,870
    -------------------------------------------------------------------------
    Weighted average
     number of Class A
      Subordinate Voting
       and Class B Shares
       outstanding during
       the period (thousands)  47,249       48,329       48,073       48,301
    Stock options (thousands)       -           57           10           54
    -------------------------------------------------------------------------
                               47,249       48,386       48,083       48,355
    -------------------------------------------------------------------------
    Diluted earnings (loss)
     per Class A
      Subordinate Voting
       or Class B Share
      - from continuing
       operations         $      0.25  $      0.37  $      0.82  $      1.02
      - from discontinued
       operations               (0.01)        0.22            -         0.22
    -------------------------------------------------------------------------
                          $      0.24  $      0.59  $      0.82  $      1.24
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The computation of diluted earnings per share for the three-month period
    and year ended December 31, 2007 excludes the effect of the potential
    exercise of 516,544 (2006 - 155,000) and 361,544 (2006 - 155,000)
    options, respectively, to acquire Class A Subordinate Voting Shares of
    the Company because the effect would be anti-dilutive.

    7.  REAL ESTATE PROPERTIES

                                                                  (restated -
                                                                  notes 3, 4)
                                                    December 31, December 31,
    As at                                                  2007         2006
    -------------------------------------------------------------------------
    Real Estate Business
    Revenue-producing properties
      Land                                          $   226,269  $   206,990
      Buildings, parking lots and roadways - cost     1,444,241    1,298,073
      Buildings, parking lots and roadways
       - accumulated depreciation                      (345,825)    (274,931)
    -------------------------------------------------------------------------
                                                      1,324,685    1,230,132
    -------------------------------------------------------------------------
    Development properties
      Land and improvements                             226,248      115,910
      Properties under development                        9,541          648
    -------------------------------------------------------------------------
                                                        235,789      116,558
    -------------------------------------------------------------------------
    Properties held for sale                              1,447        1,931
    -------------------------------------------------------------------------
                                                      1,561,921    1,348,621
    -------------------------------------------------------------------------
    MEC
    Revenue-producing racetrack properties
      Land and improvements                             178,843      197,838
      Buildings - cost                                  640,451      592,351
      Buildings - accumulated depreciation             (193,046)    (165,891)
      Construction in progress                           43,140       25,202
    -------------------------------------------------------------------------
                                                        669,388      649,500
    -------------------------------------------------------------------------
    Under-utilized racetrack real estate                 87,128       91,016
    -------------------------------------------------------------------------
    Development land and improvements                         -       20,705
    -------------------------------------------------------------------------
    Revenue-producing non-racetrack properties
      Land and improvements                               6,498        6,521
      Buildings - cost                                    2,122        3,410
      Buildings - accumulated depreciation                  (93)         (72)
    -------------------------------------------------------------------------
                                                          8,527        9,859
    -------------------------------------------------------------------------
                                                        765,043      771,080
    -------------------------------------------------------------------------
    Eliminations (note 16)                              (55,387)      (4,941)
    -------------------------------------------------------------------------
    Consolidated                                    $ 2,271,577  $ 2,114,760
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in the Real Estate Business' revenue-producing properties above
    at December 31, 2006 was a property which has been reclassified into
    development properties during the year ended December 31, 2007. The net
    book value of the property at December 31, 2007 is $7.2 million
    (December 31, 2006 - $5.2 million). During the year ended December 31,
    2007, the Real Estate Business and Magna entered into discussions to
    terminate the lease on this property, retroactive to May 31, 2007, as the
    Real Estate Business is seeking to redevelop the property for residential
    purposes. The Real Estate Business anticipates paying Magna approximately
    $2.0 million to terminate the lease and the anticipated termination
    payment has been included in the Real Estate Business' "real estate
    properties, net" and "accounts payable and accrued liabilities" at
    December 31, 2007 on the Company's unaudited interim consolidated balance
    sheet.

    Included in the Real Estate Business' properties under development above
    at December 31, 2007 are $8.2 million of costs paid to Magna as
    reimbursement for expenditures incurred by Magna in relation to
    expansions on two of the Real Estate Business' revenue-producing
    properties.

    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 that is available by way of U.S.
    or Canadian dollar loans or letters of credit. The credit facility
    expires on December 21, 2008, 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 ("EBITDA"). 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, in
    each case 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, 2007, the Company was in compliance with all
    of these covenants. At December 31, 2007, the Company had no borrowings
    under the facility, but had issued letters of credit totalling
    $0.3 million.

    MEC

    MEC's bank indebtedness consists of the following short-term bank loans:

                                                   December 31,  December 31,
    As at                                                  2007         2006
    -------------------------------------------------------------------------
    MEC Credit Facility(a)                          $    34,891  $         -
    SAC Credit Facility(b)                                3,499        6,515
    AmTote Credit Facility(c)                               824            -
    -------------------------------------------------------------------------
                                                    $    39,214  $     6,515
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (a) During the year ended December 31, 2007, MEC extended the maturity
        date of the $40.0 million MEC Credit Facility from March 30, 2007 to
        January 31, 2008 and modified a financial performance maintenance
        covenant relating to EBITDA. The maturity date was further extended
        to March 31, 2008 subsequent to year-end. Borrowings under the MEC
        Credit Facility are available by way of U.S. dollar loans and letters
        of credit, with borrowings bearing interest at the U.S. base rate
        plus 5.0% or LIBOR plus 6.0%. Loans under the MEC Credit Facility are
        collateralized by a first charge on the assets of Golden Gate Fields
        and a second charge on the assets of Santa Anita Park, and are
        guaranteed by certain of MEC's subsidiaries. At December 31, 2007,
        MEC had borrowed $34.9 million (December 31, 2006 - nil) under the
        MEC Credit Facility and had issued letters of credit totalling
        $4.3 million (December 31, 2006 - $24.7 million), such that
        $0.8 million (December 31, 2006 - $15.3 million) was unused and
        available. The weighted average interest rate on the borrowings
        outstanding under the MEC Credit Facility at December 31, 2007 was
        11.0%.

    (b) On October 2, 2007, MEC's wholly-owned subsidiary, The Santa Anita
        Companies, Inc. ("SAC"), which owns and operates Santa Anita Park,
        amended and extended its term and revolving loan agreements with a
        U.S. financial institution. The amendments included reducing the
        amount available under the revolving loan (the "SAC Credit Facility")
        from $10.0 million to $7.5 million, requiring the aggregate
        outstanding principal under the SAC Credit Facility to be fully
        repaid for a period of 60 consecutive days during each year,
        increasing the amount available under the term loan from
        $60.0 million to $67.5 million, reducing the monthly principal
        repayments under the term loan to $375 thousand, extending the
        maturity date for both facilities from October 8, 2007 to October 31,
        2012 and modifying certain financial covenants.

        The SAC Credit Facility and term loan are guaranteed by MEC's wholly-
        owned subsidiary, The Los Angeles Turf Club, Incorporated ("LATC"),
        and are collateralized 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. The term loan contains cross-default provisions with
        the MEC Credit Facility. Borrowings under the SAC Credit Facility and
        term loan bear interest at the U.S. prime rate and LIBOR plus 2.0%,
        respectively. At December 31, 2007, MEC had borrowed $66.4 million
        (December 31, 2006 - $64.2 million) under the fully drawn term loan
        and $3.5 million (December 31, 2006 - $6.5 million) under the SAC
        Credit Facility such that $4.0 million (December 31, 2006 -
        $3.5 million) was unused and available. The weighted average interest
        rate on the borrowings outstanding under the SAC Credit Facility at
        December 31, 2007 was 7.3% (December 31, 2006 - 8.3%).

    (c) On May 11, 2007, MEC's wholly-owned subsidiary, AmTote (note 3),
        completed a refinancing of its existing credit facilities with a new
        lender (the "AmTote Lender"). The refinancing included (i) a
        $3.0 million revolving credit facility to finance working capital
        requirements (the "AmTote Credit Facility"), (ii) a $4.2 million term
        loan for the repayment of AmTote's debt outstanding under its
        existing term loan facilities, and (iii) a term loan of up to
        $10.0 million to finance up to 80% of eligible capital costs related
        to tote service contracts (the "AmTote Equipment Term Loan"). The
        AmTote Credit Facility matures on May 1, 2008 and borrowings under
        the facility are available by way of U.S. dollar loans and letters of
        credit, each bearing interest at LIBOR plus 2.8%. The $4.2 million
        term loan matures on May 11, 2011 and the AmTote Equipment Term Loan
        matures on May 11, 2012, with both facilities bearing interest at
        LIBOR plus 3.0%. The AmTote Credit Facility and the two term loan
        facilities are collateralized by a first charge on AmTote's assets
        and a pledge of the stock of AmTote.

        At December 31, 2007, AmTote had borrowed $0.8 million under the
        AmTote Credit Facility, which is included in MEC's "bank
        indebtedness" on the Company's unaudited interim consolidated balance
        sheet, such that $2.2 million was unused and available. At
        December 31, 2007, $3.3 million and $2.0 million was outstanding
        under the $4.2 million term loan facility and the AmTote Equipment
        Term Loan, respectively, which is included in MEC's "long-term debt"
        on the Company's unaudited interim consolidated balance sheet. At
        December 31, 2007, the weighted average interest rates on the
        borrowings under the AmTote Credit Facility, the term loan and the
        AmTote Equipment Term Loan were 7.7%, 7.2% and 7.2%, respectively.

    (d) On July 24, 2007, one of MEC's European subsidiaries amended and
        extended its bank term loan of up to 3.9 million euros by increasing
        the amount available under the bank term loan to 4.0 million euros
        ($5.7 million), bearing interest at the Euro Overnight Index Average
        ("EURONIA") rate plus 3.0% per annum (6.6% at December 31, 2007). See
        note 18 for details of certain amendments that were made subsequent
        to year-end. At December 31, 2007 and 2006, MEC had borrowings of
        2.4 million euros ($3.1 million) and 4.5 million euros
        ($5.9 million), respectively, under this bank term loan.

    (e) On December 16, 2007, another one of MEC's European subsidiaries
        amended its 15.0 million euro ($22.1 million) term loan facility
        which was due to mature on December 31, 2007 by extending the
        maturity to December 31, 2008 with repayments of 7.5 million euros,
        due on each of February 29, 2008 and December 31, 2008. See note 18
        for details of certain amendments that were made subsequent to year-
        end. Borrowings under the term loan bear interest at the three-month
        Euro Interbank Offered Rate plus 2.0% (6.8% at December 31, 2007) and
        are collateralized by a first and second mortgage on land in Austria
        owned by the European subsidiary.

    At December 31, 2007, MEC is in compliance with all of the above noted
    loan agreements and related covenants.

    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, 2005,
     March 31, 2006
     and 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,
     December 31, 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
    Issued on exercise of
     stock options             38,456        1,303            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     March 31, 2007 and
     June 30, 2007         47,821,364    1,560,779      547,413       17,866
    Shares purchased
     for cancellation        (485,700)     (15,853)           -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2007    47,335,664    1,544,926      547,413       17,866
    Shares purchased for
     cancellation          (1,175,100)     (38,352)           -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2007     46,160,564  $ 1,506,574      547,413  $    17,866
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                    Total
                          -------------------------
                                            Stated
                               Number        Value
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2005,
     March 31, 2006
     and June 30, 2006     48,290,321  $ 1,575,909
    Issued on exercise of
     stock options             30,000        1,043
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 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
    Issued on exercise of
     stock options             38,456        1,303
    -----------------------------------------------
    Shares issued and
     outstanding,
     March 31, 2007 and
     June 30, 2007         48,368,777    1,578,645
    Shares purchased
     for cancellation        (485,700)     (15,853)
    -----------------------------------------------
    Shares issued and
     outstanding,
     September 30, 2007    47,883,077    1,562,792
    Shares purchased for
     cancellation          (1,175,100)     (38,352)
    -----------------------------------------------
    Shares issued and
     outstanding,
     December 31, 2007     46,707,977  $ 1,524,440
    -----------------------------------------------
    -----------------------------------------------

    Pursuant to the terms of a normal course issuer bid program for which the
    Company received approval from the Toronto Stock Exchange ("TSX") on
    September 29, 2006, the Company was authorized, from October 4, 2006 to
    October 3, 2007, to purchase for cancellation, through the facilities of
    the TSX and the New York Stock Exchange ("NYSE"), up to 3,257,895 Class A
    Subordinate Voting Shares, being 10% of the Public Float, as such term is
    defined by the TSX. The Company purchased 340,400 and 826,100 Class A
    Subordinate Voting Shares for cancellation for cash consideration of
    $11.7 million and $27.1 million (Cdn. $33.41 and Cdn. $32.92 per share on
    a weighted average basis) during the three months and year ended
    December 31, 2007, respectively, under this program. The Company's
    historical Canadian carrying value of the shares purchased for
    cancellation in excess of the purchase price was $4.3 million and
    $10.6 million, for the three months and year ended December 31, 2007,
    respectively, which has been credited to "contributed surplus" (note 10).
    The aggregate amount of the purchase price and the amount credited to
    "contributed surplus", in excess of the Company's U.S. historical
    reported carrying value of the shares purchased for cancellation, was
    $4.9 million and $10.7 million for the three months and year ended
    December 31, 2007, respectively, and has been charged to "accumulated
    other comprehensive income" (note 11).

    Pursuant to the terms of a normal course issuer bid program for which the
    Company received approval from the TSX on October 2, 2007, the Company is
    authorized, during the 12-month period commencing October 8, 2007 and
    ending October 7, 2008, to purchase for cancellation, through the
    facilities of the TSX and the NYSE, up to 2,531,354 Class A Subordinate
    Voting Shares, being 10% of the Public Float. During the three months and
    year ended December 31, 2007, the Company purchased 834,700 Class A
    Subordinate Voting Shares for cancellation for cash consideration of
    $25.0 million (Cdn. $29.92 per share on a weighted average basis) under
    this program. The Company's historical Canadian carrying value of the
    shares purchased for cancellation in excess of the purchase price was
    $13.9 million, which has been credited to "contributed surplus"
    (note 10). The aggregate amount of the purchase price and the amount
    credited to "contributed surplus", in excess of the Company's U.S.
    historical reported carrying value of the shares purchased for
    cancellation, was $11.7 million and has been charged to "accumulated
    other comprehensive income" (note 11).

    The price that MID pays for shares purchased pursuant to the bids is the
    market price at the time of acquisition.

    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,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Contributed surplus,
     beginning of period  $     9,119  $     2,212  $     2,667  $     2,112
    Carrying value of
     shares purchased for
     cancellation in
     excess of purchase
     price (note 9)            18,265            -       24,487            -
    Stock-based comp-
     ensation                     133          529          608          817
    Transfer to share
     capital on exercise
     of stock options               -          (74)        (245)        (262)
    -------------------------------------------------------------------------
    Contributed surplus,
     end of period        $    27,517  $     2,667  $    27,517  $     2,667
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

                                Three Months Ended            Year Ended
                                    December 31,             December 31,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income,
     beginning of period  $   240,593  $   155,381  $   166,399  $   106,960
    Adjustment for change
     in accounting policy
     related to the fair
     value of interest
     rate swaps (note 2)            -            -          154            -
    Change in fair value
     of interest rate swaps,
     net of taxes and
     minority interest           (337)           -         (584)           -
    Foreign currency
     translation adjustment,
     net of minority
     interest(i)               25,326       11,018      106,043       61,360
    Reversal of foreign
     currency translation
     gain related to shares
     purchased for
     cancellation (note 9)    (16,576)           -      (22,354)           -
    Recognition of foreign
     currency translation
     gain in net income(ii)    (7,067)           -       (7,719)      (1,921)
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income,
     end of period(iii)   $   241,939  $   166,399  $   241,939  $   166,399
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)    During the three-month periods and years ended December 31, 2007
           and 2006, the Company recorded unrealized foreign currency
           translation gains related to its net investments in currencies
           other than the U.S. dollar, primarily due to the strengthening
           against the U.S. dollar of the euro during the three-month periods
           and years ended December 31, 2007 and 2006 and the Canadian dollar
           during the three months and year ended December 31, 2007.

    (ii)   Included in the Real Estate Business' "dilution and other gains"
           is a $7.1 million (2006 - nil) and $7.7 million (2006 - $1.9
           million) currency translation gain for the three months and year
           ended December 31, 2007, respectively, realized from capital
           transactions that gave rise to a reduction in the net investment
           in certain foreign operations.

    (iii)  Accumulated other comprehensive income consists of:

                                                    December 31, December 31,
           As at                                           2007         2006
           ------------------------------------------------------------------
           Foreign currency translation adjustment,
            net of minority interest                $   242,369  $   166,399
           Fair value of interest rate swaps,
            net of taxes and minority interest             (430)           -
           ------------------------------------------------------------------
                                                    $   241,939  $   166,399
           ------------------------------------------------------------------

    12. INCOME TAXES

    The Real Estate Business' income tax expense for the three months and
    year ended December 31, 2007 includes future tax recoveries of
    $3.8 million (2006 - nil) and $5.4 million (2006 - $2.1 million),
    respectively, realized from the reduction in future tax rates and changes
    in tax legislation in a number of countries in which the Real Estate
    Business operates.

    13. STOCK-BASED COMPENSATION

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

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

                                     2007                      2006
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                                             Price                     Price
                               Number      (Cdn. $)      Number      (Cdn. $)
    -------------------------------------------------------------------------
    Stock options
     outstanding, January 1   465,000        36.08      390,000        33.49
    Granted                         -            -       20,000        39.12
    Exercised                 (38,456)       32.19            -            -
    -------------------------------------------------------------------------
    Stock options
     outstanding, March 31
     and June 30              426,544        36.43      410,000        33.77
    Granted                   125,000        32.21            -            -
    Exercised                       -            -      (30,000)       31.85
    Cancelled or forfeited    (35,000)       41.17      (60,000)       35.62
    -------------------------------------------------------------------------
    Stock options
     outstanding,
     September 30             516,544        35.09      320,000        33.60
    Granted                         -            -      155,000        41.17
    Exercised                       -            -      (10,000)       35.62
    -------------------------------------------------------------------------
    Stock options
     outstanding,
     December 31              516,544        35.09      465,000        36.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Stock options
     exercisable,
     December 31              322,544        34.60      243,000        34.21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        The Company estimates the fair value of stock options granted at the
        date of grant using the Black-Scholes option valuation model. The
        Black-Scholes option valuation model was developed for use in
        estimating the fair value of freely traded options, which are fully
        transferable and have no vesting restrictions. In addition, this
        model requires the input of subjective assumptions, including
        expected dividend yields, future stock price volatility and expected
        time until exercise. Although the assumptions used reflect
        management's best estimates, they involve inherent uncertainties
        based on market conditions outside of the Company's control. Because
        the Company's outstanding stock options have characteristics that are
        significantly different from those of traded options, and because
        changes in any of the assumptions can materially affect the fair
        value estimate, in management's opinion, the existing models do not
        necessarily provide the only measure of the fair value of the
        Company's stock options. 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,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Risk-free interest rate         -         3.8%         4.3%         3.8%
    Expected dividend yield         -        1.64%        1.92%        1.65%
    Expected volatility
     of MID's Class A
    Subordinate Voting Shares       -        19.4%        18.9%        19.6%
    Weighted average expected
     life (years)                   -          4.0          4.0          3.9
    Weighted average fair
     value per option granted       -        $6.50        $5.51        $6.41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Effective November 3, 2003, MID established a Non-Employee Director
        Share-Based Compensation Plan (the "DSP"), which provides for a
        deferral of up to 100% of each outside director's total annual
        remuneration from the Company, at specified levels elected by each
        director, until such director ceases to be a director of the Company.
        The amounts deferred are reflected by notional deferred share units
        ("DSUs") whose value reflects the market price of the Company's Class
        A Subordinate Voting Shares at the time that the particular
        payment(s) to the director is determined. The value of a DSU will
        appreciate or depreciate with changes in the market price of the
        Class A Subordinate Voting Shares. The DSP also takes into account
        any dividends paid on the Class A Subordinate Voting Shares.
        Effective January 1, 2005, all directors were required to receive at
        least 50% of their Board and Committee compensation fees (excluding
        Special Committee fees, effective January 1, 2006) in DSUs. On
        January 1, 2008, the DSP was amended such that this 50% minimum
        requirement is only applicable to Board retainer fees. Under the DSP,
        when a director leaves the Board, the director receives a cash
        payment at an elected date equal to the value of the accrued DSUs at
        such date. There is no option under the DSP for directors to receive
        Class A Subordinate Voting Shares in exchange for DSUs. During the
        year ended December 31, 2006, 11,715 DSUs were redeemed by a former
        director for $0.4 million.

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

                                                           2007         2006
    -------------------------------------------------------------------------
    DSUs outstanding, January 1                          27,319       23,092
    Granted                                               4,241        3,984
    -------------------------------------------------------------------------
    DSUs outstanding, March 31                           31,560       27,076
    Granted                                               3,025        3,882
    Redeemed                                                  -      (11,715)
    -------------------------------------------------------------------------
    DSUs outstanding, June 30                            34,585       19,243
    Granted                                               3,568        4,350
    -------------------------------------------------------------------------
    DSUs outstanding, September 30                       38,153       23,593
    Granted                                               3,299        3,726
    -------------------------------------------------------------------------
    DSUs outstanding, December 31                        41,452       27,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three months and year ended December 31, 2007, the Real
        Estate Business recognized stock-based compensation expense of
        $35 thousand (2006 - $0.6 million) and $0.8 million (2006 -
        $1.4 million), respectively, which includes a $0.1 million recovery
        (2006 - $0.1 million expense) and $0.2 million expense (2006 -
        $0.6 million expense), respectively, pertaining to DSUs.

    (b) MEC has a Long-term Incentive Plan (the "MEC Plan"), adopted in 2000
        and amended in 2007, which allows for the grant of non-qualified
        stock options, incentive stock options, stock appreciation rights,
        restricted stock, bonus stock and performance shares to MEC's
        directors, officers, employees, consultants, independent contractors
        and agents. A maximum of 9.2 million shares of MEC Class A Stock are
        available to be issued under the MEC Plan, of which 7.8 million are
        available for issuance pursuant to stock options and tandem stock
        appreciation rights and 1.4 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 awarded
        performance shares of MEC Class A Stock (the "2005 Performance Share
        Awards") as contemplated under the MEC Plan. The number of shares of
        MEC Class A Stock underlying the 2005 Performance Share Awards was
        based either on a percentage of a guaranteed bonus or a percentage of
        total 2005 compensation divided by the market value of the stock on
        the date the MEC Program was approved by the Compensation Committee
        of MEC's Board of Directors. The 2005 Performance Share Awards vested
        over a six or eight month period to December 31, 2005 and were
        distributed, subject to certain conditions, in two equal instalments.
        The first distribution date occurred in March 2006 and the second
        distribution date occurred in March 2007. At December 31, 2005, there
        were 199,471 vested 2005 Performance Share Awards outstanding with a
        grant-date market value of either $6.26 or Cdn. $7.61 per share.
        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. At December 31,
        2006, there were 62,908 vested 2005 Performance Share Awards
        outstanding, all of which were issued during the year ended
        December 31, 2007, with a stated value of $0.2 million. Accordingly,
        there are no 2005 Performance Share Awards remaining to be issued at
        December 31, 2007.

        In 2006, MEC continued the MEC Program as described in the preceding
        paragraph. The program was similar in all respects except that the
        performance shares granted in 2006 vested over a 12-month period to
        December 31, 2006 and were distributed, subject to certain
        conditions, prior to March 31, 2007 (the "2006 Performance Share
        Awards"). During the year ended December 31, 2006, 162,556 2006
        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, 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 118,318 vested 2006
        Performance Share Awards outstanding, of which 111,841 2006
        Performance Share Awards were issued during the year ended
        December 31, 2007 with a stated value of $0.4 million, and 6,477 2006
        Performance Share Awards were forfeited. Accordingly, there are no
        2006 Performance Share Awards remaining to be issued at December 31,
        2007. MEC did not continue its performance share award program in
        2007.

        In the year ended December 31, 2007, MEC issued 40,942 (2006 -
        25,896) shares of MEC Class A Stock with a stated value of
        $0.2 million (2006 - $0.2 million) to MEC's directors in payment of
        services rendered.

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

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

                                     2007                      2006
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                               Number      Price $       Number      Price $
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding,
     January 1              4,905,000         6.08    4,827,500         6.14
    Forfeited or expired     (166,000)        6.74            -            -
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding, March 31  4,739,000         6.06    4,827,500         6.14
    Forfeited or expired      (25,000)        5.71      (64,000)        6.80
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding, June 30   4,714,000         6.07    4,763,500         6.13
    Granted                   390,000         3.20            -            -
    Forfeited or expired      (14,000)        5.20            -            -
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding,
     September 30           5,090,000         5.85    4,763,500         6.13
    Granted                         -            -      200,000         5.25
    Forfeited or expired     (140,000)        6.92      (58,500)        7.13
    -------------------------------------------------------------------------
    MEC Stock Options
     outstanding,
     December 31            4,950,000         5.82    4,905,000         6.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    MEC Stock Options
     exercisable,
     December 31            4,406,334         5.99    4,412,968         6.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

                                Three Months Ended             Year Ended
                                    December 31,              December 31,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Risk-free interest rate         -         4.4%         4.2%         4.4%
    Expected dividend yield         -            -            -            -
    Expected volatility of
     MEC Class A Stock              -        51.0%        55.9%        51.0%
    Weighted average
     expected life (years)          -          4.0          5.0          4.0
    Weighted average fair
     value per option granted       -        $2.26        $1.36        $2.26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three months and year ended December 31, 2007, MEC
        recognized total stock-based compensation expense of $1.4 million
        (2006 - $0.3 million) and $0.7 million (2006 - $2.4 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)
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Real Estate Business
    Straight-line rent
     adjustment           $        10  $       115  $       397  $       224
    Stock-based
     compensation
     expense                       35          644          798        1,407
    Depreciation and
     amortization              10,960       10,200       41,541       39,225
    Interest and other
     income from MEC             (833)      (4,629)      (1,132)     (16,505)
    Gain on disposal
     of real estate                 -            -       (1,478)        (209)
    Future income taxes        (2,225)         431         (864)       2,439
    Dilution and
     other gains               (7,067)           -       (7,719)      (1,921)
    Other                          89           77          330          311
    -------------------------------------------------------------------------
                                  969        6,838       31,873       24,971
    -------------------------------------------------------------------------
    MEC
    Stock-based
     compensation
     expense                      653          324        1,388        2,393
    Depreciation and
     amortization              12,580       11,373       41,809       39,694
    Interest expense
     with MID                       -        3,678           75       12,167
    Amortization of debt
     issuance costs             2,341        1,956        3,907        7,193
    Write-down of MEC's
     long-lived assets           (136)      77,445        1,308       77,445
    Gain on disposal
     of business                    -     (115,193)           -     (115,193)
    Gain on disposal of
     real estate                  (22)           -      (48,776)      (2,883)
    Dilution and other
     losses (gains), net        3,467          (10)       3,463         (195)
    Future income taxes        (5,804)     (11,852)      (7,496)     (12,426)
    Minority interest         (18,929)      (3,692)     (47,496)     (32,768)
    Other                      (1,110)       1,258       (4,043)       1,644
    -------------------------------------------------------------------------
                               (6,960)     (34,713)     (55,861)     (22,929)
    -------------------------------------------------------------------------
    Eliminations (note 16)     (1,257)        (853)      48,196       (1,949)
    -------------------------------------------------------------------------
    Consolidated          $    (7,248) $   (28,728) $    24,208  $        93
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (b) Changes in non-cash balances:

                                Three Months Ended             Year Ended
                                    December 31,              December 31,
                          ------------------------- -------------------------
                                         (restated                 (restated
                                          - note 3)                 - note 3)
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Real Estate Business
    Accounts receivable   $    (1,143) $     3,562  $     1,076  $     1,265
    Loans receivable
     from MEC, net               (252)         368         (380)         619
    Prepaid expenses
     and other                    618        1,290         (126)        (656)
    Accounts payable and
     accrued liabilities       (4,525)      (7,092)         861       (4,652)
    Income taxes                1,258          697        5,834         (294)
    Deferred revenue              162         (554)        (584)      (3,667)
    -------------------------------------------------------------------------
                               (3,882)      (1,729)       6,681       (7,385)
    -------------------------------------------------------------------------
    MEC
    Restricted cash           (14,148)      (8,249)         797       (7,632)
    Accounts receivable        (5,942)       2,278         (807)      12,736
    Prepaid expenses
     and other                    458        4,921       (1,823)        (564)
    Accounts payable and
     accrued liabilities       32,186       17,323        4,589        2,295
    Income taxes                2,342        2,333        2,926        1,246
    Loans payable
     to MID, net                  252         (368)         380         (619)
    Deferred revenue            2,349        1,198          128       (1,023)
    -------------------------------------------------------------------------
                               17,497       19,436        6,190        6,439
    -------------------------------------------------------------------------
    Eliminations (note 16)       (522)        (162)          22        1,539
    -------------------------------------------------------------------------
    Consolidated          $    13,093  $    17,545  $    12,893  $       593
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. SEGMENTED INFORMATION

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

    The Company's reporting segments are as follows:

    Real Estate Business

    At December 31, 2007, the Real Estate Business owns real estate assets in
    Canada, Austria, the United States, Germany, Mexico, the United Kingdom,
    the Czech Republic, Spain and Poland. Substantially all of these real
    estate assets are leased to, or are under development for subsequent
    lease to, Magna's automotive operating units. The Real Estate Business
    also owns certain properties that are being held for future development
    or sale.

    MEC

    MEC operates or manages seven thoroughbred racetracks, one standardbred
    racetrack and two racetracks that run both thoroughbred and quarterhorse
    meets, as well as the simulcast wagering venues at these tracks. Also,
    MEC used to manage the thoroughbred and standardbred racing at Magna
    Racino(TM), but now expects that a local operator will manage future
    meets at that facility. Three of the racetracks owned or operated by MEC
    (two in the United States and one in Austria) include casino operations
    with alternative gaming machines. In addition, MEC operates off-track
    betting ("OTB") facilities, a United States based national account
    wagering business known as XpressBet(R) and a European account wagering
    service known as MagnaBet(TM). Under a series of March 2007 agreements
    with Churchill Downs Incorporated ("CDI"), MEC owns a 50% interest in a
    joint venture, TrackNet Media Group, LLC ("TrackNet Media"), a content
    management company formed for distribution of the full breadth of MEC's
    horseracing content (note 17). A separate joint venture with CDI also
    involves the ownership by MEC and CDI of equal (50%) shares in
    HorseRacing TV(TM) ("HRTV(TM)"), a television network focused on
    horseracing that MEC initially launched on the Racetrack Television
    Network. MEC also owns AmTote, a provider of totalisator services to the
    pari-mutuel industry. To support certain of MEC's thoroughbred
    racetracks, MEC owns and operates thoroughbred training centres in Palm
    Beach County, Florida and in the Baltimore, Maryland area and, under a
    triple-net lease agreement with MID (note 16), operates an additional
    thoroughbred training centre situated near San Diego, California. MEC
    also owns and operates production facilities in Austria and in North
    Carolina for StreuFex(TM), a straw-based horse bedding product. In
    addition to racetracks, MEC's real estate portfolio includes a
    residential development in Austria.

    As described in note 1, the Company's unaudited interim 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. Frank Stronach, the Company's Chairman, the Chairman of Magna, and
    the Chairman and Chief Executive Officer of MEC, and three other members
    of his family are trustees of the Stronach Trust. The Stronach Trust
    controls the Company through the right to direct the votes attaching to
    66% of the Company's Class B Shares. The Stronach Trust, together with
    Open Joint Stock Company Russian Machines ("Russian Machines") and
    certain members of Magna's executive management, indirectly holds Magna
    Class B Shares representing approximately 71% of the total voting power
    of all the outstanding shares of Magna. Furthermore, the Stronach Trust
    and Russian Machines each, indirectly, has the right to designate an
    equal number of nominees to the Magna board of directors. As a result,
    Magna may be considered to be effectively controlled, indirectly, by the
    Stronach Trust and Russian Machines. As the Company and Magna may be
    considered to be under the common control of the Stronach Trust, they are
    considered to be related parties for accounting purposes.

    (a) Bridge Loans and Project Financings

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

        (i)   MEC Bridge Loan

              The MEC Bridge Loan of up to $80.0 million has been made
              available through a non-revolving facility provided by the MID
              Lender. The MEC Bridge Loan proceeds may only be used by MEC in
              accordance with the MEC Debt Elimination Plan and are available
              solely to fund: (i) operations; (ii) payments of principal,
              interest and costs, fees and expenses due under the MEC Bridge
              Loan and the MEC Project Financing Facilities; (iii) mandatory
              payments of interest in connection with permitted debt under
              the MEC Bridge Loan; (iv) mandatory capital expenditures; and
              (v) capital expenditures required pursuant to the terms of the
              joint venture arrangements (note 17) between MEC and Forest
              City and Caruso.

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

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

              The MEC Bridge Loan must be repaid with, and the commitment
              will be reduced by, amounts equal to all net proceeds realized
              by MEC from asset sales and issuances of equity (other than the
              FEL Equity Investment) or debt, subject to amounts required to
              be paid to MEC's existing lenders. Amounts repaid cannot be re-
              borrowed.

              The MID Lender received an arrangement fee of $2.4 million (3%
              of the commitment) at closing and received an additional
              arrangement fee of $0.8 million on February 29, 2008 (1% of the
              then current commitment). The MID Lender also receives an
              annual commitment fee equal to 1% of the undrawn facility. All
              fees, expenses and closing costs incurred by the MID Lender in
              connection with the MEC Bridge Loan were paid by MEC.

              Pursuant to the terms of the MEC Bridge Loan, advances after
              January 15, 2008 are subject to the MID Lender being satisfied
              that the MEC Credit Facility will be further extended to at
              least April 30, 2008 or that a satisfactory refinancing of that
              facility has been arranged. As the MEC Credit Facility was
              extended to March 31, 2008 (note 8), the MID Lender waived this
              condition for advances between January 15, 2008 and March 31,
              2008.

              At December 31, 2007, $36.9 million under the MEC Bridge Loan
              was included in the Real Estate Business' current portion of
              "loans receivable from MEC, net" on the Company's unaudited
              interim consolidated balance sheet, net of $1.4 million of
              unamortized deferred arrangement fees. MEC's current portion of
              "loans payable to MID, net" on the Company's unaudited interim
              consolidated balance sheet includes $35.9 million, net of
              $2.4 million unamortized deferred financing costs. This net
              balance is being accreted to its face value over the term to
              maturity of the MEC Bridge Loan.

        (ii)  MEC Project Financings

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

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

              Prior to the relevant completion date, amounts outstanding
              under each of the MEC Project Financing Facilities (other than
              the new tranches of the Gulfstream Park project financing
              facility described below) bore interest at a floating rate
              equal to 2.55% above MID's per annum notional cost of borrowing
              under its floating rate credit facility, compounded monthly.
              Since the relevant completion date (or since inception for the
              new tranches of the Gulfstream Park project financing facility
              described below), amounts outstanding under each of the MEC
              Project Financing Facilities bear interest at a fixed rate of
              10.5% per annum, compounded semi-annually. Prior to January 1,
              2007, payment of interest was capitalized (except in relation
              to the December 2006 tranche of the Gulfstream Park project
              financing facility described below, for which the interest
              capitalization period was 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 months and year
              ended December 31, 2007, $0.7 million ($2006 - $1.6 million)
              and $4.0 million (2006 - $5.0 million), respectively, of such
              payments were made. 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 was extended to May 1, 2007, at which
              time monthly payments commenced).

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

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

              At December 31, 2007, there were balances of $133.5 million
              (December 31, 2006 - $134.8 million), $24.7 million
              (December 31, 2006 - 19.4 million) and $13.9 million
              (December 31, 2006 - nil) due under the initial tranche, the
              July 2006 slots tranche and the December 2006 slots tranche,
              respectively, of the Gulfstream Park project financing
              facility. A balance of $27.7 million (December 31, 2006 -
              $31.7 million) was due under the Remington Park project
              financing facility. The current portion of the MEC Project
              Financing Facilities included in the Real Estate Business'
              "loans receivable from MEC, net" at December 31, 2007 was
              $102.2 million (December 31, 2006 - $3.1 million), including
              the required $100.0 million repayment discussed above. The
              current and non-current portions of the MEC Project Financing
              Facilities of $137.4 million (including $0.4 million in MEC's
              "discontinued operations" (note 3)) and $93.2 million
              (including $26.1 million in MEC's "discontinued operations"
              (note 3)), respectively, as reflected in MEC's "loans payable
              to MID, net" on the Company's unaudited interim consolidated
              balance sheet, are net of $0.7 million and $4.3 million,
              respectively, of unamortized deferred financing costs. These
              net balances are being accreted to their face values over the
              terms to maturity of the MEC Project Financing Facilities.

              Subsequent to year-end, Remington Park agreed to purchase 80
              Class III slot machines from GPRA with funding from the
              Remington Park project financing facility. Accordingly,
              $1.0 million was advanced under the existing Remington Park
              project financing facility subsequent to year-end.

              In connection with the Gulfstream Park project financing
              facility, MEC has placed into escrow (the "Gulfstream Escrow")
              with the MID Lender proceeds from an asset sale which occurred
              in fiscal 2005 and certain additional amounts necessary to
              ensure that any remaining Gulfstream Park construction costs
              (including the settlement of liens on the property) can be
              funded, which escrowed amount has been and will be applied
              against any such construction costs. 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 a loan from BE&K, Inc. ("BE&K"), the parent
              company of Suitt Construction Co. Inc., the general contractor
              for the Gulfstream Park redevelopment project (the "BE&K
              Loan"). At December 31, 2007, the amount held under the
              Gulfstream Escrow (including accrued interest) was $4.5 million
              (December 31, 2006 - $6.5 million). All funds in the Gulfstream
              Escrow are reflected as the Real Estate Business' "restricted
              cash" and "due to MEC" on the Company's unaudited interim
              consolidated balance sheet.

        (iii) 2005 MEC Bridge Loan

              In July 2005, the MID Lender provided MEC with the 2005 MEC
              Bridge Loan of up to $100.0 million, expiring August 31, 2006.
              The amount of available funding under the 2005 MEC Bridge Loan
              was subsequently increased to $119.0 million and the term was
              extended to December 5, 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 2005 MEC Bridge Loan.
              Accordingly, the 2005 MEC Bridge Loan was terminated.

        Approximately $12.7 million of external third party costs have been
        incurred, including $1.3 million and $2.4 million in the three months
        and year ended December 31, 2007, respectively, in association with
        the MEC Bridge Loan, the MEC Project Financing Facilities and the
        2005 MEC Bridge Loan. 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, each of the MEC Project Financing Facilities
        and the 2005 MEC Bridge Loan. 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, the MEC Project Financing Facilities and the
        2005 MEC Bridge Loan, including any capitalization and subsequent
        amortization thereof by MEC, and any adjustments to MEC's related
        deferred financing costs, are eliminated from the Company's
        consolidated results of operations and financial position.

    (b) FEL Equity Investment

        The closing of the FEL Equity Investment occurred on October 29,
        2007. FEL purchased 8,888,888 shares of MEC Class A Stock at a price
        per share of $2.25, with proceeds to MEC of $19.6 million net of
        $0.4 million of transaction costs. The price per share was set at the
        greater of (i) 90% of the volume weighted average price per share of
        MEC Class A Stock on NASDAQ for the five trading days commencing on
        September 13, 2007 (the date of announcement of the FEL Equity
        Investment); and (ii) U.S. $1.91, being 100% of the volume weighted
        average price per share of MEC Class A Stock on NASDAQ for the five
        trading days immediately preceding September 13, 2007. The shares of
        MEC Class A Stock issued pursuant to the subscription agreement were
        issued and sold in a private transaction exempt from registration
        under Section 4(2) of the United States Securities Act of 1933, as
        amended. As a result of the FEL Equity Investment, MID's voting
        interest and equity stake in MEC were reduced from 96.3% and 58.3%,
        respectively, to 95.6% and 53.9%, respectively, and the Company
        recorded a $3.5 million dilution loss in the three months and year
        ended December 31, 2007, which is included in "dilution and other
        gains (losses), net" in the Company's unaudited interim consolidated
        statement of income (loss).

    (c) MEC Real Estate Acquired by MID

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

        During the second quarter of 2007, MID acquired all of MEC's interest
        and rights in a 205 acre parcel of land located in Bonsall,
        California for cash consideration of approximately $24.0 million. The
        property currently houses the San Luis Rey Downs Thoroughbred
        Training Facility operated by MEC. This property is being held by MID
        for future development and MID has agreed to lease the property to
        MEC on a triple-net basis for nominal rent while MID pursues the
        necessary development entitlements and other approvals. The lease
        terminates on June 6, 2010, subject to early termination by either
        party on four months written notice.

        At the Real Estate Business and MEC segment levels, these
        transactions have been recognized at the exchange amount, resulting
        in MEC recognizing a gain in the year ended December 31, 2007 of
        $48.8 million. The effects of these transactions are eliminated from
        the Company's unaudited interim consolidated results of operations
        and financial position, except that $1.7 million of costs incurred by
        the Real Estate Business and MEC in conjunction with these
        transactions have been included in the consolidated "general and
        administrative" expenses in the year ended December 31, 2007.

    (d) Hurricane Katrina Relief Effort

        In October 2005, the Real Estate Business purchased 791 acres of land
        in Simmesport, Louisiana for $2.4 million. In the fourth quarter of
        2005, the Real Estate Business committed to donating approximately 50
        acres of this land to a not-for-profit organization established to
        assist Hurricane Katrina redevelopment efforts with charitable
        funding from Magna and other Canadian sources. In 2007, the Real
        Estate Business donated substantially all of the land to the same
        not-for-profit organization. As a result, for the year ended
        December 31, 2007, $2.0 million of costs, based on the carrying value
        of the land donated, have been included in the Real Estate Business'
        "general and administrative" expenses. The founding members and
        officers of the not-for-profit organization are officers and
        employees of MID and Magna.

    (e) MEC's Sales to Magna

        On December 21, 2007, MEC entered into an agreement to sell 225 acres
        of excess real estate located in Ebreichsdorf, Austria to a
        subsidiary of Magna for a purchase price of 20.0 million euros
        ($29.4 million), subject to customary adjustments. The closing of the
        transaction is expected to occur during the first quarter of 2008
        (note 4(b)). The sale of this property has not been recognized in the
        unaudited interim consolidated financial statements and the property
        is included in MEC's "assets held for sale" on the Company's
        unaudited interim consolidated balance sheet at December 31, 2007.

        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 used the net proceeds from
        this transaction to repay principal amounts outstanding under the MEC
        Credit Facility (note 8).

    (f) MEC's Option to Acquire The Maryland Jockey Club

        On September 24, 2007, MEC exercised its option to acquire the
        remaining voting and equity interests in MJC, pursuant to an
        agreement with certain companies controlled by Joseph De Francis, a
        member of MEC's Board of Directors, and Karin De Francis. Under the
        terms of the option agreement, MEC paid $18.3 million plus interest
        on October 5, 2007. At December 31, 2006, this obligation was
        reflected in MEC's "long-term debt due within one year" on the
        Company's unaudited interim consolidated balance sheet and was
        secured by letters of credit under the MEC Credit Facility (note 8).

    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 and the other
        respondents filed their responding facta in July 2007 and the Company
        expects the appeal hearing to take place in late April 2008. The
        Company continues to consider Greenlight's oppression claim to be
        without merit and, together with the other respondents, will
        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) On May 18, 2007, ODS Technologies, L.P., doing business as TVG
        Network, filed a summons against MEC, HRTV, LLC and XpressBet, Inc.
        seeking an order that the defendants be enjoined from infringing
        certain patents relating to interactive wagering systems and an award
        of damages to compensate for the infringement. An Answer to
        Complaint, Affirmative Defences and Counterclaims have been filed on
        behalf of the defendants. At the present time, the final outcome
        related to this summons is uncertain.

    (e) In addition to the letters of credit issued under the Company's
        credit facilities (note 8), the Company had $4.7 million (Real Estate
        Business - $3.6 million; MEC - $1.1 million) of letters of credit
        issued with various financial institutions at December 31, 2007 to
        guarantee various of its construction projects. These letters of
        credit are secured by cash deposits of the Company.

    (f) MEC has provided indemnities related to surety bonds and letters of
        credit issued in the process of obtaining licences and permits at
        certain racetracks and to guarantee various construction projects
        related to activities of its subsidiaries. At December 31, 2007,
        these indemnities amounted to $6.3 million, with expiration dates
        through 2009.

    (g) At December 31, 2007, the Company's contractual commitments related
        to construction and development projects outstanding amounted to
        approximately $7.8 million (Real Estate Business - $3.6 million;
        MEC - $4.2 million).

    (h) At December 31, 2007, MEC had outstanding interest rate swap
        contracts in connection with SAC's term loan facility (note 8),
        entered into on each of March 1, 2007, April 27, 2007 and July 26,
        2007, with each contract being effective on October 1, 2007 and
        fixing the rate of interest at 7.0%, 7.1% and 7.2% per annum,
        respectively, to October 8, 2009 on a notional amount per contract of
        $10.0 million. Additionally, on October 4, 2007, MEC entered into an
        interest rate swap contact, with an effective date of October 8,
        2009, which fixes the rate of interest at 7.2% per annum to
        October 31, 2012 on a notional amount of $23.4 million.

    (i) On March 4, 2007, MEC entered into a series of customer-focused
        agreements with CDI in order to enhance wagering integrity and
        security, to own and operate HRTV(TM), to buy and sell horseracing
        content, and to promote the availability of horseracing signals to
        customers worldwide. These agreements involved the formation of a
        joint venture, TrackNet Media, a reciprocal content swap agreement
        and the purchase by CDI from MEC of a 50% interest in HRTV(TM).
        TrackNet Media is the vehicle through which MEC and CDI horseracing
        content is made available to third parties, including racetracks, OTB
        facilities, casinos and advance deposit wagering ("ADW") companies.
        TrackNet Media purchases horseracing content from third parties and
        makes it available through the respective MEC and CDI outlets. Under
        the reciprocal content swap agreement, MEC and CDI exchange their
        respective horseracing signals. On March 4, 2007, HRTV, LLC was
        created, with an effective date of April 27, 2007, in order to
        facilitate the sale of 50% of HRTV(TM) to CDI. Both MEC and CDI are
        required to make quarterly capital contributions, on an equal basis,
        until October 2009 to fund the operations of HRTV, LLC, however, MEC
        may, under certain circumstances, be responsible for additional
        capital commitments. MEC's share of the required capital
        contributions to HRTV, LLC is expected to be approximately
        $7.0 million, of which $2.0 million was contributed to December 31,
        2007.

    (j) On November 15, 2006, MEC's wholly-owned subsidiary, GPRA, opened 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 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. On September 27, 2007, the Florida Supreme Court ruled
        that the matter was not procedurally proper for consideration by the
        court. Its order effectively remanded the matter to the trial court
        for a trial on the merits. MEC has disclosed that it expects that a
        trial on the merits will likely take over a year to fully develop and
        that it could take as many as three years to achieve a full factual
        record and trial court ruling for an appellate court to review. At
        December 31, 2007, the carrying value of MEC's fixed assets related
        to the slots facility is approximately $29.6 million. If the matter
        is ultimately decided in a manner adverse to MEC, a write-down of
        these fixed assets may be required.

    (k) In May 2005, MEC entered into a Limited Liability Company Agreement
        with Forest City (collectively with MEC, the "Partnership Members")
        concerning the planned development of "The Village at Gulfstream
        Park(TM)". That agreement contemplates the development of a mixed-use
        project consisting of residential units, parking, restaurants,
        hotels, entertainment, retail outlets and other commercial use
        projects on a portion of the Gulfstream Park property. Under the
        Limited Liability Company Agreement, Forest City is required to
        contribute up to a maximum of $15.0 million as an initial capital
        contribution. MEC is obligated to contribute 50% of any equity
        amounts in excess of $15.0 million as and when needed. However, to
        December 31, 2007, MEC has not made any such contributions. At
        December 31, 2007, approximately $42.3 million of costs have been
        incurred by The Village at Gulfstream Park, LLC, which have been
        funded by a construction loan from a third party bank, as well as
        equity contributions from Forest City. Included in MEC's "accounts
        payable and accrued liabilities" is an obligation of approximately
        $5.8 million reflecting MEC's share of equity contributions in excess
        of $15.0 million. The Limited Liability Company Agreement also
        contemplated additional agreements with MEC, including a ground
        lease, a reciprocal easement agreement, a development agreement, a
        leasing agreement and a management agreement, all of which have been
        executed. Upon the opening of The Village at Gulfstream Park(TM),
        annual cash receipts (adjusted for certain disbursements and
        reserves) will first be distributed to Forest City, subject to
        certain limitations, until the initial contribution accounts of the
        Partnership Members are equal. Thereafter, the cash receipts are
        generally expected to be distributed to the Partnership Members
        equally, provided they maintain their equal interest in the
        partnership. The annual cash payments made to Forest City to equalize
        the Partnership Members' initial contribution accounts will not
        exceed the amount of annual ground rent otherwise payable to a
        subsidiary of MEC.

    (l) On September 28, 2006, certain of MEC's affiliates entered into
        definitive operating agreements with Caruso regarding the proposed
        development of The Shops at Santa Anita on approximately 51 acres of
        excess land surrounding Santa Anita Park. Westfield Corporation
        ("Westfield"), a developer of a neighbouring parcel of land, has
        challenged the manner in which the entitlement process for such
        development has proceeded. On May 16, 2007, Westfield commenced civil
        litigation in the Los Angeles Superior Court in an attempt to
        overturn the Arcadia City Council's approval and granting of
        entitlements related to the construction of The Shops at Santa Anita.
        In addition, on May 21, 2007, Arcadia First! filed a petition against
        the City of Arcadia to overturn the entitlements and named MEC and
        certain of its subsidiaries as parties of interest. If either
        Westfield or Arcadia First! is ultimately successful in its
        challenge, development efforts could potentially be delayed or
        suspended. The first hearings on the merits of the petitioners'
        claims are scheduled for April 2008. Under an April 2004 Letter of
        Intent, MEC is also exploring the possibility of a joint venture with
        Caruso to develop excess lands surrounding Golden Gate Fields. To
        December 31, 2007, MEC has expended $9.9 million on these development
        initiatives, of which $3.6 million was paid in the year ended
        December 31, 2007. These amounts have been included in MEC's "real
        estate properties, net" on the Company's unaudited interim
        consolidated balance sheets. Under the terms of these arrangements,
        MEC may be responsible to fund additional costs. However, to
        December 31, 2007, no such payments have been made.

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

    (n) The Meadows (note 3) used to participate in a multi-employer defined
        benefit pension plan for which the pension plan's total vested
        liabilities exceeded the plan's assets. An updated actuarial
        valuation is in the process of being obtained, however, based on
        allocation information currently provided by the plan, the portion of
        the estimated unfunded liability for vested benefits attributable to
        The Meadows is approximately $3.7 million. Effective November 1,
        2007, the New Jersey Sports & Exposition Authority withdrew from this
        plan and, effective December 25, 2007, The Meadows also withdrew from
        the plan. As part of the indemnification obligations provided for in
        the Meadows Holdback Note (note 3), the withdrawal liability that has
        been triggered as a result of The Meadows' withdrawal from the plan
        will be set-off against the amount owing to MEC under the Meadows
        Holdback Note.

    18. SUBSEQUENT EVENTS

    (a) Effective January 1, 2008, MEC amended its bank term loan of up to
        4.0 million euros (note 8) to reduce the amount available to
        3.5 million euros and increase the interest rate to EURONIA plus 3.8%
        per annum.

    (b) On February 12, 2008, MEC amended its 15.0 million euro term loan
        facility (note 8) such that the first instalment of 7.5 million euros
        previously due on February 29, 2008 was extended until March 15,
        2008.

    (c) On February 12, 2008, MEC received notice from The Nasdaq Stock
        Market advising that, in accordance with Nasdaq Marketplace Rule
        4450(e)(2), MEC has 180 calendar days, or until August 11, 2008, to
        regain compliance with the minimum bid price for MEC Class A Stock
        required for continued listing on the Nasdaq Global Market, as set
        forth in Nasdaq Marketplace Rule 4450(a)(5). MEC received this notice
        because the bid price of the MEC Class A Stock closed below the $1.00
        per share minimum for 30 consecutive business days prior to
        February 12, 2008.

        The notice also states that if, at any time before August 11, 2008,
        the bid price of MEC Class A Stock on the Nasdaq Global Market closes
        at $1.00 per share or more for a minimum of 10 consecutive trading
        days, the Nasdaq staff will provide MEC with written notification
        that it has achieved compliance with its listing requirements.
        However, the notice states that if MEC cannot demonstrate compliance
        with such rule by August 11, 2008 (or such later date as may be
        permitted by Nasdaq), the Nasdaq staff will provide MEC with written
        notification that the MEC Class A Stock will be delisted. During this
        180 calendar day period, MEC Class A Stock will continue to trade on
        the Nasdaq Global Market. This notification has no effect on the
        listing of the MEC Class A Stock on the TSX.
    





For further information:

For further information: Richard Smith, 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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