MI Developments announces 2007 second quarter results



    AURORA, ON, Aug. 10 /CNW/ - MI Developments Inc. (TSX: MIM.A, MIM.B;
NYSE:   MIM) ("MID" or the "Company") today announced its results for the three
and six months ended June 30, 2007. All figures are in U.S. dollars.

    
                                        REAL ESTATE BUSINESS(1)
                                  Three months              Six months
                                 ended June 30,            ended June 30,
    (in thousands,        ------------------------- -------------------------
     except per share         2007         2006         2007         2006
     figures)             ------------ ------------ ------------ ------------

    Revenues              $    46,082  $    46,578  $    90,840  $    90,317
    Net income            $    21,492  $    29,167  $    45,163  $    51,339
    Funds from operations
     ("FFO")(2)           $    31,282  $    36,047  $    65,485  $    69,263
    Diluted FFO per
     share(2)             $      0.64  $      0.75  $      1.35  $      1.43
    -------------------------------------------------------------------------

                                           MID CONSOLIDATED(1)
                                  Three months              Six months
                                 ended June 30,            ended June 30,
    (in thousands,        ------------------------- -------------------------
     except per share         2007         2006         2007         2006
     figures)             ------------ ------------ ------------ ------------

    Revenues
      Real Estate
       Business           $    46,082  $    46,578  $    90,840  $    90,317
      Magna Entertainment
       Corp. ("MEC")(3)       203,688      183,225      487,877      463,115
      Eliminations             (5,082)      (7,528)      (9,944)     (13,924)
                          ------------ ------------ ------------ ------------
                          $   244,688  $   222,275  $   568,773  $   539,508
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income (loss)
      Real Estate
       Business           $    21,492  $    29,167  $    45,163  $    51,339
      MEC - continuing
       operations               3,663      (16,239)      37,267      (13,321)
      Eliminations            (17,600)         153      (51,592)        (355)
                          ------------ ------------ ------------ ------------
      Income (loss)
       from continuing
       operations               7,555       13,081       30,838       37,663
      MEC - discontinued
       operations(4)                -          581            -          501
                          ------------ ------------ ------------ ------------
                          $     7,555  $    13,662  $    30,838  $    38,164
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Diluted earnings per
     share from con-
     tinuing operations   $      0.16  $      0.27  $      0.64  $      0.78
    Diluted earnings per
     share                $      0.16  $      0.28  $      0.64  $      0.79
    -------------------------------------------------------------------------

    (1) Transactions between the Real Estate Business and MEC have not been
        eliminated in the presentation of each segment's results of
        operations. However, the effects of transactions between these two
        segments are eliminated in the consolidated results of operations of
        the Company.

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

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

    (4) MEC's discontinued operations for the three and six months ended
        June 30, 2006 include the operations of a restaurant and related real
        estate in the United States, the sale of which was completed on
        May 26, 2006, the operations of the Magna Golf Club, the sale of
        which was completed on August 25, 2006, and the operations of the
        Fontana Golf Club, the sale of which was completed on November 1,
        2006.
    

    REAL ESTATE BUSINESS OPERATING HIGHLIGHTS
    -----------------------------------------
    The Real Estate Business did not have any projects come on-stream during
the second quarter of 2007. Four expansion projects under development for
Magna International Inc. ("Magna"), three in Canada and one in the U.S.,
continued in the second quarter representing 64 thousand square feet of
leaseable area with a budgeted cost of $16.7 million of which $12.7 million
had been spent by June 30th. At June 30, 2007, the Real Estate Business had
27.1 million square feet of leaseable area, with annualized lease payments of
$165.0 million, representing a return of 10.6% on the gross carrying value of
our income- producing portfolio.
    During the quarter, we did not receive any new projects. Magna continues
to review its global manufacturing footprint, which may result in additional
facilities owned by MID being rationalized. For this, and other reasons, the
pace of Magna-related construction projects may continue to be slow.
    In addition, during the second quarter of 2007, the Real Estate Business
acquired all of MEC's interest and rights in a 205 acre parcel of land located
in Bonsall, California, to be held for future development, for cash
consideration of approximately $24.0 million. The property currently houses
the San Luis Rey Downs Thoroughbred Training Facility operated by MEC. MID has
agreed to lease the property to MEC on a triple-net basis for nominal rent
while MID pursues the necessary entitlements and other approvals to permit the
development of the property. The term of the lease is three years, subject to
early termination by either party on four months written notice.

    MAGNA ENTERTAINMENT CORP. STRATEGIC REVIEW
    ------------------------------------------
    MEC announced yesterday that it has retained Greenbrook Capital Partners
Inc. to conduct a strategic review of its operations. The strategic review
will be led by Greenbrook's Senior Partner, Tom Hodgson, a former President
and Chief Executive Officer of MEC. Greenbrook expects to make its report to
MEC's Board of Directors by early September. In the meantime and with
immediate effect, MEC's Board of Directors has approved the following actions:

    
    -   relinquishing MEC's racing license for the Romulus, Michigan
        location;
    -   terminating MEC's development plans for Dixon Downs and listing the
        property for sale;
    -   ceasing racing at its Austrian racetrack, Magna Racino(TM), at the
        close of the current meet, which ends in November. MEC intends to
        promptly evaluate other uses for the real estate, together with its
        existing facilities and significant infrastructure, with the
        intention of realizing the highest and best value for this property;
        and
    -   listing for sale MEC's 450 acre property in Ocala, Florida and
        800 acre property in Porter, New York.
    

    MEC expects the strategic review by Greenbrook to lead to further
substantial initiatives to reduce debt and improve profits.
    "We recognize that our relationship with MEC has been a topic of debate
with some of our shareholders for some time now," said John Simonetti, Chief
Executive Officer. "However, before we can entertain a transaction that may
change this relationship, many factors need to be considered, including that
MEC must drastically improve its operating performance and financial position.
We expect that the MEC strategic review will be a positive step in this
regard."

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

    Three Months Ended June 30, 2007

    For the three months ended June 30, 2007, revenues were $46.1 million, a
decrease of 1% from revenues of $46.6 million for the three months ended
June 30, 2006. The lower revenues are due to a $2.4 million reduction of
interest and other income earned from the financing arrangements with certain
subsidiaries of MEC (the "MEC Financing Arrangements"), partially offset by a
$1.9 million increase in rental revenues. The reduction of interest and other
income from MEC is due to MEC's repayment in full of the $112.0 million bridge
loan (the "MEC Bridge Loan") in November 2006, partially offset by additional
income from increased levels in the MEC Financing Arrangements. The higher
rental revenues include $0.7 million from completed Magna projects which came
on-stream in 2006 and $0.4 million from contractual rent increases on our
existing rental portfolio. Changes in foreign exchange rates increased rental
revenues by $1.9 million while the impact of straight-line and other
adjustments reduced revenues by $0.6 million.
    FFO in the three months ended June 30, 2007 was $31.3 million,
representing a decrease of 13% from FFO of $36.0 million for the three months
ended June 30, 2006. This decrease in FFO is due to a $0.5 million decrease in
revenue and a $5.5 million increase in general and administrative expenses
(discussed below), partially offset by decreases of $1.0 million in net
interest expense and $0.3 million in current income tax expense.
    Net income for the second quarter of 2007 of $21.5 million decreased by
26% compared to net income of $29.2 million for the second quarter of 2006.
The decrease from the prior year resulted from decreases of $0.5 million in
revenues and $1.9 million of dilution and other gains and increases of
$5.5 million in general and administrative expenses, $0.5 million in
depreciation and amortization and $1.6 million in income tax expense,
partially offset by a $1.0 million reduction in net interest expense and a
$1.4 million gain on disposal of real estate in the second quarter of 2007.
    General and administrative expenses for the second quarter of 2007
include (i) $2.1 million of advisory and other costs incurred in connection
with the Company's evaluation of certain transactions relating to its
continuing assessment of its relationship with MEC, which ultimately were not
undertaken, (ii) $2.0 million of costs associated with the Company's
contribution to a not-for-profit organization established by Magna to assist
Hurricane Katrina redevelopment efforts (the "Hurricane Katrina donation"),
and (iii) $0.1 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 (see "GREENLIGHT CAPITAL LITIGATION" for further
details). General and administrative expenses for the second quarter of 2006
include a $0.7 million recovery under the Company's insurance policy of costs
incurred in association with the Company's defence against the Greenlight
Capital Litigation. Excluding these items, general and administrative expenses
increased by $0.6 million from $4.3 million in the second quarter of 2006 to
$4.9 million in the second quarter of 2007, primarily due to increased
salaries and related benefits and the weakening of the U.S. dollar in the
second quarter of 2007 compared to the second quarter of 2006. These increases
in costs were partially offset by a reduction in professional fees related to
the Company's compliance with Sarbanes-Oxley legislation.
    Net interest expense was $1.9 million in the three months ended June 30,
2007 ($3.7 million of interest expense less $1.8 million of interest income)
compared to $2.9 million for the three months ended June 30, 2006
($3.6 million of interest expense less $0.7 million of interest income). The
decrease in net interest expense is due primarily to increased interest
income, as the Real Estate Business had more cash available for short-term
investment as a result of MEC repaying the MEC Bridge Loan in November 2006.
    In the second quarter of 2007, the Real Estate Business realized a gain
of $1.4 million on the disposal of an income-producing property in Europe.
    During the three months ended June 30, 2006, the Real Estate Business
recognized $1.9 million of currency translation gains related to the
translation of the Real Estate Business' foreign operations. This gain, which
was previously included in the accumulated comprehensive income component of
equity, resulted from the weakening of the U.S. dollar and was recognized in
the determination of net income as a result of the Real Estate Business
repatriating funds from certain of its foreign operations. The currency
translation gain of $1.9 million has been excluded from the determination of
the Real Estate Business' FFO.

    Six Months Ended June 30, 2007

    For the six months ended June 30, 2007, revenues were $90.8 million, an
increase of 1% over revenues of $90.3 million in the six months ended June 30,
2006. The higher revenues are due to a $4.5 million increase in rental
revenues, partially offset by a $4.0 million reduction of interest and other
income from MEC. The higher rental revenues include $1.7 million from
completed Magna projects which came on-stream in 2006 and $0.8 million from
contractual rent increases on our existing rental portfolio. Changes in
foreign exchange rates increased rental revenues by $2.6 million and the
impact of straight-line and other adjustments reduced revenues by
$0.6 million. The reduction of interest and other income from MEC is due to
MEC's repayment in full of the MEC Bridge Loan in November 2006, partially
offset by additional income from increased levels in the MEC Financing
Arrangements.
    FFO in the six months ended June 30, 2007 of $65.5 million represents a
5% decrease from FFO for the six months ended June 30, 2006 of $69.3 million.
The decrease in FFO is due to increases of $5.4 million in general and
administrative expenses and $0.7 million of current income tax expense,
partially offset by a $0.5 million increase in revenue and a $1.8 million
reduction in net interest expense.
    Net income for the six months ended June 30, 2007 of $45.2 million
decreased by 12% compared to net income of $51.3 million for the six months
ended June 30, 2006. The decrease from the prior year resulted from a
$1.3 million reduction in dilution and other gains and increases of $5.4
million in general and administrative expenses, $1.0 million in depreciation
and amortization and $2.1 million in income tax expense, partially offset by a
$1.8 million reduction in net interest expense and increases of $0.5 million
in revenues and $1.4 million in the gain on disposal of real estate.
    General and administrative expenses for the first six months of 2007
include (i) $2.1 million of advisory and other costs incurred in connection
with the Company's evaluation of certain transactions relating to its
continuing assessment of its relationship with MEC, which ultimately were not
undertaken, (ii) $2.0 million of costs associated with the Company's Hurricane
Katrina donation, and (iii) $0.2 million of costs associated with the
Company's defence against the Greenlight Capital Litigation. General and
administrative expenses for the first six months of 2006 include $0.6 million
of costs incurred in association with the Company's defence against the
Greenlight Capital Litigation, which were offset by a $1.3 million recovery of
such costs under the Company's insurance policy. Excluding these items,
general and administrative expenses increased by $0.4 million to $9.3 million
in the six months ended June 30, 2007 from $8.9 million in the prior year,
primarily due to increased salaries and related benefits and the weakening of
the U.S. dollar in the first six months of 2007 compared to the first six
months of 2006. These increases in costs were partially offset by a reduction
in repairs and maintenance costs and reduced professional fees related to the
Company's compliance with Sarbanes-Oxley legislation.
    During the six months ended June 30, 2006, the Real Estate business
recognized a $1.3 million gain on the disposal of two income-producing
properties.
    Net interest expense was $3.5 million in the six months ended June 30,
2007 ($7.2 million of interest expense less $3.7 million of interest income)
compared to $5.3 million for the six months ended June 30, 2006 ($7.0 million
of interest expense less $1.7 million of interest income). The decrease in net
interest expense is due primarily to increased interest income, as the Real
Estate Business had more cash available for short-term investment as a result
of MEC repaying the MEC Bridge Loan in November 2006.
    In the six months ended June 30, 2007, the Real Estate Business
recognized a $1.4 million gain on the disposal of two income-producing
properties, compared to a nominal gain on the sale of a property held for sale
in the six months ended June 30, 2006.
    During the six months ended June 30, 2007, the Real Estate Business
recognized $0.7 million of net currency translation gains related to the
translation of the Real Estate Business' foreign operations compared to
similar gains of $1.9 million in the first six months of 2006. These gains,
which were previously included in the accumulated comprehensive income
component of 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.

    MAGNA ENTERTAINMENT CORP. FINANCIAL RESULTS
    -------------------------------------------
    At June 30, 2007, the market value of MID's shareholding in MEC was
$183.5 million, based on the Nasdaq closing price of $2.92 per share for MEC
Class A Subordinate Voting Stock (NASDAQ:   MECA) on that date.
    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 and
six months ended June 30, 2006 include the operations of a restaurant and
related real estate in the United States, the sale of which was completed on
May 26, 2006, the operations of the Magna Golf Club, the sale of which was
completed on August 25, 2006, and the operations of the Fontana Golf Club, the
sale of which was completed on November 1, 2006.
    MEC's revenues from continuing operations for the three and six months
ended June 30, 2007 increased 11% to $203.7 million and 5% to $487.9 million,
respectively, from the prior year comparable periods. The increase in revenues
in the second quarter of 2007 is primarily due to the opening of casino
operations at Gulfstream Park in November 2006 and expanded casino operations
in March 2007, ten additional live race days at Golden Gate Fields in the
second quarter of 2007 due to a change in the racing calendar, increased
revenues from MEC's acquisition in July 2006 of the remaining 70% equity
interest of AmTote International, Inc. (the "AmTote Acquisition") and
increased revenues at XpressBet(R) due to a 31% increase in handle, partially
offset by a reduction in handle and attendance at Thistledown and four fewer
live race days at Lone Star Park in the second quarter of 2007. The increase
in revenues in the six months ended June 30, 2007 is primarily due to the same
factors noted above for the second quarter of 2007 except that revenues were
also negatively impacted by there being four fewer live race days at Golden
Gate Fields and one fewer live race days at Santa Anita Park in the first six
months of 2007 as well as lower attendance and wagering at Laurel Park and
Pimlico due to inclement weather in the first quarter of 2007.
    Earnings before interest, taxes, depreciation and amortization from MEC's
continuing operations excluding real estate disposal; gains, dilution and
other gains and the minority interest impact ("EBITDA") for the three and six
months ended June 30, 2007 was $3.4 million and $27.7 million, respectively,
compared to $1.7 million and $26.9 million, respectively, in the prior year.
The increase in EBITDA for the second quarter of 2007 is due to the increase
in revenues of $20.5 million , partially offset by increases of $5.0 million
in purses, awards and other expenses, $11.1 million in operating costs and
$2.6 million in general and administrative expenses. The increase in purses,
awards and other expenses and operating costs are primarily due to increased
expenses related to the opening of the casino facility at Gulfstream Park in
November 2006 and the expanded casino facility in March 2007. Increases in
operating costs and general and administrative expenses were also driven by
increased costs in MEC's PariMax operations resulting from the AmTote
Acquisition. The increase in EBITDA for the six months ended June 30, 2007 is
due to the increase in revenues of $24.8 million , partially offset by
increases of $4.1 million in purses, awards and other expenses, $17.4 million
in operating costs and $2.5 million in general and administrative expenses.
The increases in purses, awards and other expenses, operating costs and
general and administrative expenses are primarily due to the same factors
noted above for the second quarter of 2007.
    MEC recorded net income of $3.7 million and $37.3 million for the three
and six months ended June 30, 2007, respectively, compared to net losses of
$15.7 million and $12.8 million in the three and six months ended June 30,
2006, respectively. Excluding the $0.6 million of income from discontinued
operations in the three months ended June 30, 2006, the improvement in MEC's
net income in the second quarter of 2007 is due primarily to the improvement
in EBITDA discussed above, a $3.2 million reduction in interest expense and a
$17.6 million gain on the sale of the 205 acre parcel of land located in
Bonsall, California to MID discussed earlier, partially offset by a
$0.7 million increase in income tax expense and a $1.6 million reduction in
the minority interest recovery. The $3.2 million reduction in interest expense
is due to the repayment of the MEC Bridge Loan in the fourth quarter of 2006,
reduced borrowings under MEC's $40.0 million senior secured revolving credit
facility with a bank (the "MEC Credit Facility") and the repayment of other
debt during 2006 from the proceeds of various asset sales, partially offset by
increased borrowings under the MEC Financing Arrangements. Excluding the
$0.5 million of income from discontinued operations in the six months ended
June 30, 2007, the improvement in MEC's net income in the first six months of
2007 is primarily due to improvement in EBITDA discussed above, a $4.1 million
reduction in interest expense and $45.8 million of increased gains on the sale
of real estate. The increase in the gains on disposal of real estate is driven
by $48.7 million of gains recognized in the first six months of 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.

    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 second
quarter ended June 30, 2007. The dividend is payable on or about September 15,
2007 to shareholders of record at the close of business on August 31, 2007.
    MID has designated the entire amount of all past and future taxable
dividends paid in 2006 and 2007 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 filed an oppression application in the
Ontario Superior Court of Justice against the Company and certain of its
current and former directors and officers. 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. 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 second quarter's results on August 10, 2007 at 11:00 am EST.
The number to use for this call is 1-800-587-1893. The number for overseas
callers is 416-915-5763. Please call 10 minutes prior to the start of the
conference call. MID will also webcast the conference call at
www.midevelopments.com. The conference call will be chaired by John D.
Simonetti, Chief Executive Officer.

    For anyone unable to listen to the scheduled call, the rebroadcast
numbers will be: North America - 1-877-289-8525 and Overseas - 416-640-1917
(reservation number is 21242161 followed by the number sign) and the
rebroadcast will be available until August 17, 2007.

    ABOUT MID
    ---------
    MID is a real estate operating company engaged in the ownership,
management, leasing, development and acquisition of industrial and commercial
real estate properties located in North America and Europe. Virtually all of
its income-producing properties are under lease to Magna and its subsidiaries.
MID also holds a controlling investment in MEC, a publicly-traded company
that, based on revenues, is North America's number one owner and operator of
horse racetracks, and one of the world's leading suppliers, via simulcasting,
of live racing content to the growing inter-track, off-track and account
wagering markets.


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

                                  Three months              Six months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                              2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net income            $    21,492  $    29,167  $    45,163  $    51,339
    Add back (deduct):
      Depreciation and
       amortization            10,216        9,740       20,147       19,111
      Future income taxes         587         (939)       1,855          739
      Gain on disposal of
       real estate, net of
       income tax              (1,013)           -       (1,028)          (5)
      Dilution and other
       gains                        -       (1,921)        (652)      (1,921)
    -------------------------------------------------------------------------
    Funds from operations $    31,282  $    36,047  $    65,485  $    69,263
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     funds from operations
     per share            $      0.64  $      0.75  $      1.35  $      1.43
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Average number of
     shares outstanding
     (thousands)
      Basic                    48,369       48,290       48,360       48,290
      Diluted                  48,419       48,343       48,416       48,345
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    FORWARD-LOOKING STATEMENTS
    --------------------------
    The contents of this press release may contain statements that, to the
extent they are not recitations of historical fact, constitute "forward-
looking statements" within the meaning of applicable securities legislation,
including the United States Securities Act of 1933 and the United States
Securities Exchange Act of 1934. Forward-looking statements may include, among
others, statements regarding the Company's future plans, goals, strategies,
intentions, beliefs, estimates, costs, objectives, economic performance or
expectations, or the assumptions underlying any of the foregoing. Words such
as "may", "would", "could", "will", "likely", "expect", "anticipate",
"believe", "intend", "plan", "forecast", "project", "estimate" and similar
expressions are used to identify forward-looking statements. Forward-looking
statements should not be read as guarantees of future performance or results
and will not necessarily be accurate indications of whether or the times at or
by which such future performance will be achieved. Undue reliance should not
be placed on such statements. Forward-looking statements are based on
information available at the time and/or management's good faith assumptions
and analyses made in light of our perception of historical trends, current
conditions and expected future developments, as well as other factors we
believe are appropriate in the circumstances, and are subject to known and
unknown risks, uncertainties and other unpredictable factors, many of which
are beyond the Company's control, that could cause actual events or results to
differ materially from such forward-looking statements. Important factors that
could cause such differences include, but are not limited to, the risks set
forth in the "Risk Factors" section in MID's Annual Information Form for 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. 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, 14)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Three Months Ended                    - note 3)
     June 30,                    2007         2006         2007         2006
    -------------------------------------------------------------------------

    Revenues
    Rental revenue         $   41,000   $   39,050   $   41,000   $   39,050
    Racing and other
     revenue                  203,688      183,225            -            -
    Interest and other
     income from MEC
     (note 14)                      -            -        5,082        7,528
    -------------------------------------------------------------------------
                              244,688      222,275       46,082       46,578
    -------------------------------------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                 89,558       84,530            -            -
    Operating costs            90,641       79,559            -            -
    General and
     administrative            29,338       21,894        9,069        3,555
    Depreciation and
     amortization              20,856       20,110       10,216        9,740
    Interest expense, net       9,467       10,375        1,895        2,859
    -------------------------------------------------------------------------
    Operating income (loss)     4,828        5,807       24,902       30,424
    Gain on disposal of
     real estate (note 14)      1,357            -        1,357            -
    Dilution and other
     gains (note 9)                 -        1,925            -        1,921
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest          6,185        7,732       26,259       32,345
    Income tax expense
     (note 10)                  8,579        6,242        4,767        3,178
    Minority interest          (9,949)     (11,591)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations      7,555       13,081       21,492       29,167
    Income from
     discontinued
     operations (note 3)            -          581            -            -
    -------------------------------------------------------------------------
    Net income (loss)      $    7,555   $   13,662   $   21,492   $   29,167
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings per Class A
     Subordinate Voting or
     Class B Share (note 4)
      - Continuing
        operations         $     0.16   $     0.27
      - Discontinued
        operations (note 3)         -         0.01
    -----------------------------------------------
    Total                  $     0.16   $     0.28
    -----------------------------------------------
    -----------------------------------------------

    Basic and diluted
     average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period
     (in thousands) (note 4)
      - Basic                  48,369       48,290
      - Diluted                48,419       48,343
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Three Months Ended                    - note 3)
     June 30,                    2007         2006
    -----------------------------------------------

    Revenues
    Rental revenue         $        -   $        -
    Racing and other
     revenue                  203,688      183,225
    Interest and other
     income from MEC
     (note 14)                      -            -
    -----------------------------------------------
                              203,688      183,225
    -----------------------------------------------
    Operating costs
     and expenses
    Purses, awards
     and other                 89,558       84,530
    Operating costs            90,641       79,559
    General and
     administrative            20,049       17,457
    Depreciation and
     amortization              10,676       10,427
    Interest expense, net      12,825       16,022
    -----------------------------------------------
    Operating income (loss)   (20,061)     (24,770)
    Gain on disposal of
     real estate (note 14)     17,587            -
    Dilution and other
     gains (note 9)                 -            4
    -----------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         (2,474)     (24,766)
    Income tax expense
     (note 10)                  3,812        3,064
    Minority interest          (9,949)     (11,591)
    -----------------------------------------------
    Income (loss) from
     continuing operations      3,663      (16,239)
    Income from
     discontinued
     operations (note 3)            -          581
    -----------------------------------------------
    Net income (loss)      $    3,663   $  (15,658)
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



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

                         Consolidated (notes 1, 14)     Real Estate Business
                         --------------------------  ------------------------
                                         (restated
    Six Months Ended                      - note 3)
     June 30,                    2007         2006         2007         2006
    -------------------------------------------------------------------------

    Revenues
    Rental revenue         $   80,896   $   76,393   $   80,896   $   76,393
    Racing and other
     revenue                  487,877      463,115            -            -
    Interest and other
     income from MEC
     (note 14)                      -            -        9,944       13,924
    -------------------------------------------------------------------------
                              568,773      539,508       90,840       90,317
    -------------------------------------------------------------------------
    Operating costs and
     expenses
    Purses, awards and
     other                    241,055      236,995            -            -
    Operating costs           182,382      164,961            -            -
    General and
     administrative            52,525       43,692       13,655        8,212
    Depreciation and
     amortization              41,040       39,608       20,147       19,111
    Interest expense, net      19,180       20,632        3,548        5,340
    -------------------------------------------------------------------------
    Operating income (loss)    32,591       33,620       53,490       57,654
    Gain on disposal of
     real estate (note 14)      1,382        2,892        1,382            9
    Dilution and other
     gains (note 9)               656        2,078          652        1,921
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         34,629       38,590       55,524       59,584
    Income tax expense
     (note 10)                 12,887       10,557       10,361        8,245
    Minority interest          (9,096)      (9,630)           -            -
    -------------------------------------------------------------------------
    Income (loss) from
     continuing operations     30,838       37,663       45,163       51,339
    Income from
     discontinued
     operations (note 3)            -          501            -            -
    -------------------------------------------------------------------------
    Net income (loss)      $   30,838   $   38,164   $   45,163   $   51,339
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     earnings per Class A
     Subordinate Voting or
     Class B Share (note 4)
      - Continuing
        operations         $     0.64   $     0.78
      - Discontinued
        operations (note 3)         -         0.01
    -----------------------------------------------
      Total                $     0.64   $     0.79
    -----------------------------------------------
    -----------------------------------------------

    Average number of
     Class A Subordinate
     Voting and Class B
     Shares outstanding
     during the period (in
     thousands) (note 4)
      - Basic                  48,360       48,290
      - Diluted                48,416       48,344
    -----------------------------------------------
    -----------------------------------------------


                          Magna Entertainment Corp.
                          -------------------------
                                         (restated
    Six Months Ended                      - note 3)
     June 30,                    2007         2006
    -----------------------------------------------

    Revenues
    Rental revenue         $        -   $        -
    Racing and other
     revenue                  487,877      463,115
    Interest and other
     income from MEC
     (note 14)                      -            -
    -----------------------------------------------
                              487,877      463,115
    -----------------------------------------------
    Operating costs and
     expenses
    Purses, awards and
     other                    241,055      236,995
    Operating costs           182,382      164,961
    General and
     administrative            36,785       34,238
    Depreciation and
     amortization              20,966       20,560
    Interest expense, net      25,981       30,040
    -----------------------------------------------
    Operating income (loss)   (19,292)     (23,679)
    Gain on disposal of
     real estate (note 14)     48,654        2,883
    Dilution and other
     gains (note 9)                 4          157
    -----------------------------------------------
    Income (loss) before
     income taxes and
     minority interest         29,366      (20,639)
    Income tax expense
     (note 10)                  1,195        2,312
    Minority interest          (9,096)      (9,630)
    -----------------------------------------------
    Income (loss) from
     continuing operations     37,267      (13,321)
    Income from
     discontinued
     operations (note 3)            -          501
    -----------------------------------------------
    Net income (loss)      $   37,267   $  (12,820)
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes



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

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

    Net income            $     7,555  $    13,662  $    30,838  $    38,164
    Other comprehensive
     income (loss):
      Change in fair value
       of interest rate
       swaps, net of taxes
       and minority
       interest (note 9)            3            -          (56)           -
      Foreign currency
       translation
       adjustment, net of
       minority interest
       (note 9)                24,485       40,006       38,848       54,061
      Recognition of
       foreign currency
       translation gain in
       net income (note 9)          -       (1,921)        (652)      (1,921)
    -------------------------------------------------------------------------
    Comprehensive income  $    32,043  $    51,747  $    68,978  $    90,304
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes



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

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------

    Deficit, beginning
     of period            $   (53,084) $   (82,269) $   (69,112) $   (99,527)
    Net income                  7,555       13,662       30,838       38,164
    Dividends                  (7,256)      (7,243)     (14,511)     (14,487)
    -------------------------------------------------------------------------
    Deficit, end of
     period               $   (52,785) $   (75,850) $   (52,785) $   (75,850)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes


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

                                   Consolidated         Real Estate Business
                            -----------------------  ------------------------
                                         (restated
                                          - note 3)
    Three Months
    Ended June 30,               2007         2006         2007         2006
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $    7,555   $   13,081   $   21,492   $   29,167
    Items not involving
     current cash flows
     (note 12)                 10,315        6,594        9,804        3,046
    Changes in non-cash
     balances (note 12)        15,491         (181)         390       (5,601)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities                33,361       19,494       31,686       26,612
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITIES
    Property and fixed
     asset additions          (31,607)     (41,436)     (30,350)     (17,385)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net                5,556        6,980        4,556        5,592
    Decrease (increase) in
     other assets                 (40)      (1,210)          60         (277)
    Loan advances to MEC            -            -       (6,405)     (18,834)
    Loan repayments from MEC        -            -        1,854        1,800
    -------------------------------------------------------------------------
    Cash used in investment
     activities               (26,091)     (35,666)     (30,285)     (29,104)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness                 741            -            -            -
    Repayment of bank
     indebtedness             (15,000)      (5,500)           -            -
    Issuance of long-term
     debt                       3,865        5,207            -            -
    Repayment of long-term
     debt                     (15,956)      (6,527)         (98)         (90)
    Loan advances from MID,
     net                            -            -            -            -
    Loan repayments to MID          -            -            -            -
    Dividends paid            (14,511)     (14,487)     (14,511)     (14,487)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (40,861)     (21,307)     (14,609)     (14,577)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents           2,176        1,906        2,163        2,051
    -------------------------------------------------------------------------
    Net cash flows used in
     continuing operations    (31,415)     (35,573)     (11,045)     (15,018)
    -------------------------------------------------------------------------

    DISCONTINUED OPERATIONS
    Cash provided by
     operating activities           -          319            -            -
    Cash provided by
     investing activities           -        1,524            -            -
    Cash used in financing
     activities                     -           (1)           -            -
    -------------------------------------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -        1,842            -            -
    -------------------------------------------------------------------------
    Net decrease in cash and
     cash equivalents during
     the period               (31,415)     (33,731)     (11,045)     (15,018)
    Cash and cash
     equivalents, beginning
     of period                234,822      137,945      159,028       81,748
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $  203,407   $  104,214   $  147,983   $   66,730
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                            Magna Entertainment Corp.
                            ------------------------
                                         (restated
                                          - note 3)
    Three Months
    Ended June 30,               2007         2006
    ------------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $    3,663   $  (16,239)
    Items not involving
     current cash flows
     (note 12)                (16,846)       5,433
    Changes in non-cash
     balances (note 12)        15,079        4,078
    ------------------------------------------------
    Cash provided by
     (used in) operating
     activities                 1,896       (6,728)
    ------------------------------------------------

    INVESTMENT ACTIVITIES
    Property and fixed
     asset additions          (25,139)     (24,051)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net               24,664        1,388
    Decrease (increase) in
     other assets                (100)        (933)
    Loan advances to MEC            -            -
    Loan repayments from MEC        -            -
    ------------------------------------------------
    Cash used in investment
     activities                  (575)     (23,596)
    ------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness                 741            -
    Repayment of bank
     indebtedness             (15,000)      (5,500)
    Issuance of long-term
     debt                       3,865        5,207
    Repayment of long-term
     debt                     (15,858)      (6,437)
    Loan advances from MID,
     net                        6,402       18,444
    Loan repayments to MID     (1,854)      (1,800)
    Dividends paid                  -            -
    ------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (21,704)       9,914
    ------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents              13         (145)
    ------------------------------------------------
    Net cash flows used in
     continuing operations    (20,370)     (20,555)
    ------------------------------------------------

    DISCONTINUED OPERATIONS
    Cash provided by
     operating activities           -          319
    Cash provided by
     investing activities           -        1,524
    Cash used in financing
     activities                     -           (1)
    ------------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -        1,842
    ------------------------------------------------
    Net decrease in cash and
     cash equivalents during
     the period               (20,370)     (18,713)
    Cash and cash
     equivalents, beginning
     of period                 75,794       56,197
    ------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $   55,424   $   37,484
    ------------------------------------------------
    ------------------------------------------------

    See accompanying notes



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

                                   Consolidated         Real Estate Business
                            -----------------------  ------------------------
                                         (restated
                                          - note 3)
    Six Months
    Ended June 30,               2007         2006         2007         2006
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $   30,838   $   37,663   $   45,163   $   51,339
    Items not involving
     current cash flows
     (note 12)                 32,274       28,076       20,755       11,166
    Changes in non-cash
     balances (note 12)        (7,344)     (27,122)       8,087       (7,784)
    -------------------------------------------------------------------------
    Cash provided by
     (used in)
     operating activities      55,768       38,617       74,005       54,721
    -------------------------------------------------------------------------

    INVESTMENT ACTIVITIES
    Property and fixed
     asset additions          (48,906)     (83,117)     (98,874)     (26,305)
    Proceeds on disposal of
     real estate properties
     and fixed assets, net      8,330       14,225        5,394        5,822
    Decrease (increase) in
     other assets              (1,035)      (1,804)          58         (957)
    Loan advances to MEC            -            -      (16,683)     (62,124)
    Loan repayments from MEC        -            -        2,360        1,800
    -------------------------------------------------------------------------
    Cash provided by
     (used in) investment
      activities              (41,611)     (70,696)    (107,745)     (81,764)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              15,741            -            -            -
    Repayment of bank
     indebtedness             (21,515)      (5,500)           -            -
    Issuance of long-term
     debt                       4,140        5,207            -            -
    Repayment of long-term
     debt                     (49,331)     (10,173)        (189)        (176)
    Loan advances from MID,
     net                            -            -            -            -
    Loan repayments to MID          -            -            -            -
    Issuance of shares          1,058            -        1,058            -
    Dividends paid            (14,511)     (14,487)     (14,511)     (14,487)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (64,418)     (24,953)     (13,642)     (14,663)
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents           3,413        2,757        3,499        2,954
    -------------------------------------------------------------------------
    Net cash flows used in
     continuing operations    (46,848)     (54,275)     (43,883)     (38,752)
    -------------------------------------------------------------------------

    DISCONTINUED OPERATIONS
    Cash provided by
     operating activities           -        5,378            -            -
    Cash provided by
     investing activities           -        1,379            -            -
    Cash used in financing
     activities                     -       (5,728)           -            -
    -------------------------------------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -        1,029            -            -
    -------------------------------------------------------------------------
    Net decrease in cash and
     cash equivalents during
     the period               (46,848)     (53,246)     (43,883)     (38,752)
    Cash and cash
     equivalents, beginning
     of period                250,255      157,460      191,866      105,482
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $  203,407   $  104,214   $  147,983   $   66,730
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                            Magna Entertainment Corp.
                            ------------------------
                                         (restated
                                          - note 3)
    Six Months
    Ended June 30,               2007         2006
    ------------------------------------------------

    OPERATING ACTIVITIES
    Income (loss) from
     continuing operations $   37,267   $  (13,321)
    Items not involving
     current cash flows
     (note 12)                (38,103)      19,329
    Changes in non-cash
     balances (note 12)       (15,260)     (20,565)
    ------------------------------------------------
    Cash provided by
     (used in) operating
     activities               (16,096)     (14,557)
    ------------------------------------------------

    INVESTMENT ACTIVITIES
    Property and fixed
     asset additions          (39,433)     (56,812)
    Proceeds on disposal
     of real estate
     properties and fixed
     assets, net               90,550        8,403
    Decrease (increase) in
     other assets              (1,093)        (847)
    Loan advances to MEC            -            -
    Loan repayments from MEC        -            -
    ------------------------------------------------
    Cash provided by
    (used in) investment
     activities                50,024      (49,256)
    ------------------------------------------------

    FINANCING ACTIVITIES
    Proceeds from bank
     indebtedness              15,741            -
    Repayment of bank
     indebtedness             (21,515)      (5,500)
    Issuance of long-term
     debt                       4,140        5,207
    Repayment of long-term
     debt                     (49,142)      (9,997)
    Loan advances from MID,
     net                       16,329       60,577
    Loan repayments to MID     (2,360)      (1,800)
    Issuance of shares              -            -
    Dividends paid                  -            -
    ------------------------------------------------
    Cash provided by
     (used in) financing
     activities               (36,807)      48,487
    ------------------------------------------------
    Effect of exchange rate
     changes on cash and
     cash equivalents             (86)        (197)
    ------------------------------------------------
    Net cash flows used in
     continuing operations     (2,965)     (15,523)
    ------------------------------------------------

    DISCONTINUED OPERATIONS
    Cash provided by
     operating activities           -        5,378
    Cash provided by
     investing activities           -        1,379
    Cash used in financing
     activities                     -       (5,728)
    ------------------------------------------------
    Net cash flows provided
     by discontinued
     operations (note 3)            -        1,029
    ------------------------------------------------
    Net decrease in cash and
     cash equivalents during
     the period                (2,965)     (14,494)
    Cash and cash
     equivalents, beginning
     of period                 58,389       51,978
    ------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $   55,424   $   37,484
    ------------------------------------------------
    ------------------------------------------------

    See accompanying notes


    Consolidated Balance Sheets
    (Refer to note 1 - Basis of Presentation)
    (U.S. dollars in thousands)
    (Unaudited)
                           Consolidated (notes 1, 14)   Real Estate Business
                           -------------------------  -----------------------
                              June 30, December 31,     June 30, December 31,
    As at                        2007         2006         2007         2006
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash
       equivalents         $  203,407   $  250,255   $  147,983   $  191,866
      Restricted cash
       (note 14)               27,314       40,708        5,553        6,514
      Accounts receivable      46,746       43,740        7,213        7,749
      Loan receivable from
       MEC (note 14)                -            -        3,609        3,108
      Due from MID (note 14)        -            -            -            -
      Income taxes
       receivable                  13        1,934           13        1,354
      Prepaid expenses and
       other                   20,937       16,044        1,120          966
    -------------------------------------------------------------------------
                              298,417      352,681      165,491      211,557

    Real estate properties,
     net (note 5)           2,252,423    2,188,774    1,481,397    1,348,621
    Fixed assets, net          89,176       93,406          528          554
    Racing licences           109,868      109,868            -            -
    Other assets                7,393       11,711          887        3,061
    Loans receivable from
     MEC (note 14)                  -            -      197,056      182,876
    Deferred rent receivable   14,321       13,818       14,321       13,818
    Future tax assets          49,827       52,038        6,100        7,277
    -------------------------------------------------------------------------
                           $2,821,425   $2,822,296   $1,865,780   $1,767,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Bank indebtedness
       (note 6)            $      741   $    6,515   $        -   $        -
      Accounts payable and
       accrued liabilities    135,911      157,274       20,121       13,317
      Income taxes payable     11,871        7,083       11,180        7,083
      Loan payable to MID
       (note 14)                    -            -            -            -
      Due to MEC (note 14)          -            -        5,556        6,648
      Long-term debt due
       within one year         51,432       86,155          431          378
      Deferred revenue          8,546        8,311        2,796        2,451
    -------------------------------------------------------------------------
                              208,501      265,338       40,084       29,877

    Long-term debt (note 6)    90,434       99,850        6,347        5,991
    Senior unsecured
     debentures, net          246,047      226,596      246,047      226,596
    Note obligations, net     214,143      215,830            -            -
    Loans payable to MID,
     net                            -            -            -            -
    Other long-term
     liabilities               16,717       15,787            -            -
    Future tax liabilities    143,561      141,491       49,104       46,090
    Minority interest         172,795      180,108            -            -
    -------------------------------------------------------------------------
                            1,092,198    1,145,000      341,582      308,554
    -------------------------------------------------------------------------

    Shareholders' equity:
    Share capital (note 7)  1,578,645    1,577,342
    Contributed surplus
     (note 8)                   2,674        2,667
    Deficit                   (52,785)     (69,112)
    Accumulated
     comprehensive income
     (note 9)                 200,693      166,399
    -------------------------------------------------------------------------
                            1,729,227    1,677,296    1,524,198    1,459,210
    -------------------------------------------------------------------------
                           $2,821,425   $2,822,296   $1,865,780   $1,767,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                            Magna Entertainment Corp.
                            -------------------------
                              June 30, December 31,
    As at                        2007         2006
    -----------------------------------------------
    ASSETS

    Current assets:
      Cash and cash
       equivalents         $   55,424   $   58,389
      Restricted cash
       (note 14)               21,761       34,194
      Accounts receivable      39,533       35,991
      Loan receivable from
       MEC (note 14)                -            -
      Due from MID (note 14)    5,556        6,648
      Income taxes
       receivable                   -          580
      Prepaid expenses and
       other                   19,826       15,304
    -----------------------------------------------
                              142,100      151,106

    Real estate properties,
     net (note 5)             826,529      845,191
    Fixed assets, net          88,648       92,852
    Racing licences           109,868      109,868
    Other assets                6,506       14,276
    Loans receivable from
     MEC (note 14)                  -            -
    Deferred rent receivable        -            -
    Future tax assets          43,727       44,761
    -----------------------------------------------
                           $1,217,378   $1,258,054
    -----------------------------------------------
    -----------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Bank indebtedness
       (note 6)            $      741   $    6,515
      Accounts payable and
      accrued liabilities     115,790      143,957
      Income taxes payable        691            -
      Loan payable to MID
       (note 14)                3,609        3,108
      Due to MEC (note 14)          -            -
      Long-term debt due
       within one year         51,001       85,777
      Deferred revenue          6,157        6,098
    -----------------------------------------------
                              177,989      245,455

    Long-term debt (note 6)    84,087       93,859
    Senior unsecured
     debentures, net                -            -
    Note obligations, net     214,143      215,830
    Loans payable to MID,
     net                      191,247      182,876
    Other long-term
     liabilities               16,717       15,787
    Future tax liabilities     93,126       95,401
    Minority interest         172,795      180,108
    -----------------------------------------------
                              950,104    1,029,316
    -----------------------------------------------
    Shareholders' equity:
    Share capital (note 7)
    Contributed surplus
     (note 8)
    Deficit
    Accumulated
     comprehensive income
     (note 9)
    -----------------------------------------------
                              267,274      228,738
    -----------------------------------------------
                           $1,217,378   $1,258,054
    -----------------------------------------------
    -----------------------------------------------
    Commitments and contingencies (note 15)

    See accompanying notes


    Notes to Interim Consolidated Financial Statements
    (All amounts in U.S. dollars and all tabular amounts in thousands unless
    otherwise noted)
    (All amounts as at June 30, 2007 and 2006 and for the three-month and
    six-month periods ended June 30, 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"). The Company also holds an
    investment in Magna Entertainment Corp. ("MEC"), an owner and operator of
    horse racetracks and a supplier of live racing content to the
    inter-track, off-track and account wagering markets. The Company owns
    approximately 58% of MEC's total equity, representing approximately 96%
    of the total voting power of its outstanding stock. MEC's results are
    consolidated with the Company's results, with outside ownership accounted
    for as a minority interest.

    (a) Magna Entertainment Corp.

        The results of operations and the financial position of MEC have been
        included in these unaudited interim consolidated financial statements
        on a going concern basis, which contemplates the realization of MEC's
        assets and the discharge of MEC's liabilities in the normal course of
        business for the foreseeable future. MEC has incurred net losses
        before minority interest recovery of $65.4 million, $107.4 million
        and $97.5 million for the years ended December 31, 2006, 2005 and
        2004, respectively, and has a working capital deficiency of
        $35.9 million at June 30, 2007. Accordingly, MEC's ability to
        continue as a going concern is in substantial doubt and is dependent
        on MEC generating cash flows that are adequate to sustain the
        operations of the business, renew or extend current financing
        arrangements and meet its obligations with respect to secured and
        unsecured creditors, none of which is assured. During the six months
        ended June 30, 2007, MEC sold all of its interests and rights in four
        real estate properties to MID for aggregate proceeds of approximately
        $89.1 million (note 14). MEC is continuing to pursue other funding
        sources, which may include further asset sales, partnerships and
        raising capital through equity offerings, any of which may involve
        MID. The success of these efforts is not determinable at this time
        (see note 16(b)). These unaudited interim consolidated financial
        statements do not give effect to any adjustments which would be
        necessary should MEC be unable to continue as a going concern and,
        therefore, be required to realize its assets and discharge its
        liabilities in other than the normal course of business and at
        amounts different from those reflected in the accompanying unaudited
        interim consolidated financial statements.

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

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

    (b) Consolidated Financial Statements

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

        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, except as disclosed in note 2.

        In the opinion of management, the unaudited interim consolidated
        financial statements reflect all adjustments necessary to present
        fairly the financial position at June 30, 2007 and 2006, and the
        results of operations and cash flows for the three-month and six-
        month periods ended June 30, 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 13 to the unaudited interim
        consolidated financial statements. Transactions and balances between
        the "Real Estate Business" and "Magna Entertainment Corp." have not
        been eliminated in the presentation of each segment's financial data
        and related measurements. However, the effects of transactions
        between these two segments, which are further described in note 14,
        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(b)).

    2. ACCOUNTING CHANGES

    The Canadian Institute of Chartered Accountants issued three new
    standards in January 2005 (which have since been further amended) in
    Handbook Sections 1530, "Comprehensive Income", 3855, "Financial
    Instruments - Recognition and Measurement", 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
        comprehensively specify 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".

    These new standards are required to 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 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 measurement depending 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", and "note obligations, net" are recorded at amortized
    cost. The Company does not currently 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(i)                (9,191)
      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(i)                                   (5,626)
      MEC - future tax liabilities(iii)                                  176
      MEC - minority interest(iii)                                       109
      Eliminations - loans payable to MID                              5,626
    -------------------------------------------------------------------------
      Consolidated liabilities                                        (5,496)
    -------------------------------------------------------------------------
    Shareholders' equity
      MEC - accumulated 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 and Accumulated 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. Similarly,
          these changes are required to be accumulated on the consolidated
          balance sheet in a separate component of shareholders' equity,
          "accumulated comprehensive income".

    (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 Company's consolidated balance sheet. To the extent
        that changes in the fair value of the hedging instrument offsets
        changes in the fair value of the hedged item, they are recorded in
        "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 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 comprehensive
        income. This amount is expected to be reclassified to the
        consolidated statement of income over the year ended December 31,
        2007.

    3. BUSINESS DISPOSALS

    (a) 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 for at least
        five years.

        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 a subsidiary of MID (the "MID
        Lender") and MEC (the "MEC Bridge Loan" - note 14), to permanently
        pay down $39.0 million of the principal amount outstanding under
        MEC's senior secured credit facility (the "MEC Credit Facility" -
        note 6), to repay $2.0 million of the BE&K Loan (as defined in
        note 14) and to place $15.0 million into escrow with the MID Lender
        (note 14).


    (b) Discontinued Operations

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

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

        (iii) 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 6).

    MEC's results of operations related to discontinued operations for the
    three and six months ended June 30, 2006 are shown in the following
    table:

                                                   Three Months   Six Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2006         2006
    -------------------------------------------------------------------------
    Revenues                                        $     5,584  $     9,528
    Costs and expenses                                    4,149        6,825
    -------------------------------------------------------------------------
                                                          1,435        2,703
    Depreciation and amortization                           740        1,441
    Interest expense, net                                   684        1,341
    -------------------------------------------------------------------------
    Income (loss) before undernoted items                    11          (79)
    Gain on disposition                                   1,495        1,495
    -------------------------------------------------------------------------
    Income before income taxes and minority interest      1,506        1,416
    Income tax expense                                      513          559
    Minority interest                                       412          356
    -------------------------------------------------------------------------
    Income from discontinued operations             $       581  $       501
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    MEC did not have any assets or liabilities related to discontinued
    operations at June 30, 2007 or December 31, 2006.

    4. EARNINGS PER SHARE

    Diluted earnings (loss) per share for the three-month and six-month
    periods ended June 30, 2007 and 2006 are computed as follows:

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Income from continuing
     operations           $     7,555  $    13,081  $    30,838  $    37,663
    Income from
     discontinued
     operations                     -          581            -          501
    -------------------------------------------------------------------------
    Net income            $     7,555  $    13,662  $    30,838  $    38,164
    -------------------------------------------------------------------------
    Weighted average
     number of Class A
     Subordinate Voting
     and Class B Shares
     outstanding during
     the period
     (thousands)               48,369       48,290       48,360       48,290
    Stock options
     (thousands)                   50           53           56           54
    -------------------------------------------------------------------------
                               48,419       48,343       48,416       48,344
    -------------------------------------------------------------------------
    Diluted earnings
     per Class A
     Subordinate Voting
     or Class B Share
    - from continuing
       operations         $      0.16  $      0.27  $      0.64  $      0.78
    - from discontinued
       operations                   -         0.01            -         0.01
    -------------------------------------------------------------------------
                          $      0.16  $      0.28  $      0.64  $      0.79
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The computation of diluted earnings per share for the three and
    six months ended June 30, 2006 excludes the effect of the potential
    exercise of 20,000 and 16,593 options, respectively, to acquire Class A
    Subordinate Voting Shares of the Company because the effect would be
    anti-dilutive.


    5. REAL ESTATE PROPERTIES
                                                       June        December
    As at                                            30, 2007      31, 2006
    -------------------------------------------------------------------------

    Real Estate Business
    Income-producing properties under
     operating leases
      Land                                          $   210,730  $   206,990
      Buildings, parking lots and roadways - cost     1,340,718    1,298,073
      Buildings, parking lots and roadways
       - accumulated depreciation                      (303,494)    (274,931)
    -------------------------------------------------------------------------
                                                      1,247,954    1,230,132
    -------------------------------------------------------------------------

    Development properties
      Land and improvements                             218,572      115,910
      Properties under development                       12,742          648
    -------------------------------------------------------------------------
                                                        231,314      116,558
    -------------------------------------------------------------------------

    Properties held for sale                              2,129        1,931
    -------------------------------------------------------------------------
                                                      1,481,397    1,348,621
    -------------------------------------------------------------------------

    MEC
    Revenue-producing racetrack properties
      Land and improvements                             197,632      208,355
      Buildings - cost                                  632,559      631,495
      Buildings - accumulated depreciation             (188,043)    (177,538)
      Construction in progress                           43,844       19,024
    -------------------------------------------------------------------------
                                                        685,992      681,336
    -------------------------------------------------------------------------

    Under-utilized racetrack properties                  92,314       96,951
    -------------------------------------------------------------------------

    Development properties
      Land and improvements                              25,312       45,737
      Properties under development                       13,435       11,308
    -------------------------------------------------------------------------
                                                         38,747       57,045
    -------------------------------------------------------------------------

    Revenue-producing non-racetrack properties
      Land and improvements                               6,468        6,521
      Buildings - cost                                    3,088        3,410
      Buildings - accumulated depreciation                  (80)         (72)
    -------------------------------------------------------------------------
                                                          9,476        9,859
    -------------------------------------------------------------------------
                                                        826,529      845,191
    -------------------------------------------------------------------------

    Eliminations (note 14)                              (55,503)      (5,038)
    -------------------------------------------------------------------------

    Consolidated                                    $ 2,252,423  $ 2,188,774
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6. BANK INDEBTEDNESS AND LONG TERM DEBT

    (a) On March 29, 2007, MEC amended the MEC Credit Facility of
        $40.0 million to extend the maturity date from March 30, 2007 to
        June 29, 2007 and to modify a financial performance maintenance
        covenant relating to earnings before interest, income taxes,
        depreciation and amortization. On June 29, 2007, the maturity date
        was extended to October 1, 2007. Borrowings under the MEC Credit
        Facility are available by way of U.S. dollar loans and letters of
        credit and loans under the MEC Credit Facility bear interest at the
        U.S. base rate plus 5% or the London Interbank Offered Rate ("LIBOR")
        plus 6%. Borrowings under the facility are secured by a first charge
        on the assets of Golden Gate Fields and a second charge on the assets
        of Santa Anita Park, and are guaranteed by certain of MEC's
        subsidiaries. At June 30, 2007 and December 31, 2006, MEC had no
        borrowings under the MEC Credit Facility but had issued letters of
        credit totalling $24.7 million, such that $15.3 million was unused
        and available.

    (b) MEC's wholly-owned subsidiary, The Santa Anita Companies, Inc.
        ("SAC"), which owns and operates Santa Anita Park, has a
        $10.0 million revolving loan arrangement under its existing credit
        facility. The revolving loan arrangement matures on October 8, 2007,
        is guaranteed by MEC's wholly-owned subsidiary, The Los Angeles Turf
        Club, Incorporated ("LATC"), and is secured by a first deed of trust
        on Santa Anita Park and the surrounding real property, an assignment
        of the lease between LATC and SAC, and a pledge of all of the
        outstanding capital stock of LATC and SAC. At June 30, 2007, there
        were no borrowings under the revolving loan agreement (December 31,
        2006 - $6.5 million). Borrowings under the revolving loan agreement
        bear interest at the U.S. prime rate. The weighted average interest
        rate on the borrowings outstanding under the revolving loan agreement
        at December 31, 2006 was 8.3%.

    (c) On May 11, 2007, AmTote International, Inc. ("AmTote"), MEC's wholly-
        owned subsidiary, completed a refinancing of its existing credit
        facilities with a new 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 $10.0 million term loan to
        finance up to 80% of eligible capital costs related to tote service
        contracts. The AmTote Credit Facility matures on May 11, 2008 and
        borrowings under the AmTote Credit Facility are available by way of
        U.S. dollar loans and letters of credit, bearing interest at LIBOR
        plus 2.5%. The $4.2 million term loan matures on May 11, 2011 and the
        $10.0 million term loan matures on May 11, 2012, with both facilities
        bearing interest at LIBOR plus 2.8%. The AmTote Credit Facility and
        the two term loan facilities are collateralized by a first charge on
        AmTote's assets and a pledge of stock of AmTote. At June 30, 2007,
        AmTote had borrowed $0.7 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 $2.3 million
        of the AmTote Credit Facility was unused and available. At June 30,
        2007, $3.8 million was outstanding under the $4.2 million term loan
        facility, which is included in MEC's long-term debt on the Company's
        unaudited interim consolidated balance sheet, and there were no
        borrowings under the $10.0 term loan facility. At June 30, 2007, the
        weighted average interest rates on the borrowings under the AmTote
        Credit Facility and the term loan were 7.8% and 8.1%, respectively.

    7. 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,   47,742,083  $ 1,558,016      548,238  $    17,893
      March 31, 2006
      and June 30, 2006
    Issued on exercise of
     stock options             30,000        1,043            -            -
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
    September 30, 2006     47,772,083    1,559,059      548,238       17,893
    Issued on exercise
     of stock options          10,000          390            -            -
    Shareholder conversion
     of Class B shares to
     Class A Subordinate
      Voting Shares               825           27         (825)         (27)
    -------------------------------------------------------------------------
    Shares issued and
     outstanding,
      December 31, 2006    47,782,908    1,559,476      547,413       17,866
    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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    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 may, from October 4, 2006 to October 3,
    2007, purchase for cancellation up to a total of 3,257,895 Class A
    Subordinate Voting Shares, being 10% of the Public Float, as such term is
    defined by the TSX. The price that MID will pay for shares purchased
    pursuant to the bid will be the market price at the time of acquisition.
    To date, the Company has not purchased any Class A Subordinate Voting
    Shares under its normal course issuer bid program.


    8. CONTRIBUTED SURPLUS

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

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Contributed surplus,
     beginning of period  $     2,547  $     2,249  $     2,667  $     2,112
    Stock-based
     compensation                 127           93          252          230
    Transfer to share
     capital on exercise
     of stock options               -            -         (245)           -
    -------------------------------------------------------------------------
    Contributed surplus,
     end of period        $     2,674  $     2,342  $     2,674  $     2,342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    9. ACCUMULATED COMPREHENSIVE INCOME

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

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
    -------------------------------------------------------------------------
    Accumulated
     comprehensive income,
     beginning of period  $   176,205  $   121,015  $   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              3            -          (56)           -
    Foreign currency
     translation
     adjustment, net of
     minority interest(i)      24,485       40,006       34,848       54,061
    Recognition of
     foreign currency
     translation gain in
     net income(ii)                 -       (1,921)        (652)      (1,921)
    -------------------------------------------------------------------------
    Accumulated
     comprehensive income,
     end of period(iii)   $   200,693  $   159,100  $   200,693  $   159,100
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i)   During the three and six months ended June 30, 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 of the euro and the
          Canadian dollar against the U.S. dollar.

    (ii)  Included in the Real Estate Business' "dilution and other gains"
          for the six months ended June 30, 2007 is a $0.7 million currency
          translation gain (three and six months ended June 30, 2006 -
          $1.9 million) realized from capital transactions that gave rise to
          a reduction in the net investment in certain foreign operations.

    (iii) Accumulated comprehensive income consists of:

                                                        June       December
          As at                                       30, 2007     31, 2006
          -------------------------------------------------------------------
          Foreign currency translation adjustment,
           net of minority interest                 $   200,595  $   166,399
          Fair value of interest rate swaps, net
           of taxes and minority interest                    98            -
          -------------------------------------------------------------------
                                                    $   200,693  $   166,399
          -------------------------------------------------------------------
          -------------------------------------------------------------------

    10. INCOME TAXES

    The Real Estate Business' income tax expense for the three and six months
    ended June 30, 2006 includes a future tax recovery of $2.1 million
    realized from the reduction in the future Canadian tax rate, enacted in
    June 2006, from 36.1% to 33.0%.

    11. STOCK-BASED COMPENSATION

    (a) On August 29, 2003, MID's Board of Directors approved the Incentive
        Stock Option Plan (the "MID Plan"), which allows for the grant of
        stock options or stock appreciation rights to directors, officers,
        employees and consultants. At June 30, 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.

        Activity in the MID Plan was as follows:

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

        Stock options
         exercisable,
         June 30              216,544        34.92      204,000        33.39
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        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               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                               2007         2006         2007         2006
        ---------------------------------------------------------------------
        Risk-free interest
         rate                       -            -            -         4.0%
        Expected dividend
         yield                      -            -            -        1.76%
        Expected volatility
         of MID's Class A
         Subordinate Voting
         Stock                      -            -            -        21.3%
        Weighted average
         expected life
         (years)                    -            -            -          3.0
        Weighted average fair
         value per option
         granted                    -            -            -        $5.67
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        In 2007, the Company has committed to grant an aggregate of
        125 thousand stock options to three members of senior management at a
        future date (the "Grant Date") once certain conditions are met. If
        such options are granted, the exercise price will be determined on
        the Grant Date in accordance with the MID Plan. Subsequent to
        June 30, 2007, 35,000 stock options with an exercise price of Cdn.
        $41.17 were forfeited.

        Effective November 3, 2003, MID established a Non-Employee Director
        Share-Based Compensation Plan (the "DSP"), which provides for a
        deferral of up to 100% of each outside director's total annual
        remuneration from the Company, at specified levels elected by each
        director, until such director ceases to be a director of the Company.
        The amounts deferred are reflected by notional DSUs whose value
        reflects the market price of the Company's Class A Subordinate Voting
        Shares at the time that the particular payment(s) to the director is
        determined. The value of a DSU will appreciate or depreciate with
        changes in the market price of the Class A Subordinate Voting Shares.
        The DSP also takes into account any dividends paid on the Class A
        Subordinate Voting Shares. Effective January 1, 2005, all directors
        must receive at least 50% of their Board and Committee compensation
        fees (excluding Special Committee fees, effective January 1, 2006) in
        DSUs. Under the DSP, when a director leaves the Board, the director
        receives a cash payment equal to the value of the accrued DSUs at
        that time. There is no option under the DSP for directors to receive
        Class A Subordinate Voting Shares in exchange for DSUs. During the
        three and six months ended June 30, 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
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        During the three and six months ended June 30, 2007, the Real Estate
        Business recognized stock-based compensation expense of $0.2 million
        (2006 - $0.2 million) and $0.5 million (2006 - $0.5 million),
        respectively, which includes $0.1 million (2006 - $0.1 million) and
        $0.3 million (2006 - $0.3 million), 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's Class A
        Subordinate Voting 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 awards
        performance shares of MEC's Class A Subordinate Voting Stock (the
        "2005 Performance Share Awards") as contemplated under the MEC Plan.
        The number of shares of Class A Subordinate Voting 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 Shares 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 (six months ended June 30, 2006 - 75,907)
        2005 Performance Share Awards were issued with a stated value of
        $0.8 million (six months ended June 30, 2006 - $0.5 million), and
        4,812 2005 Performance Share Awards were forfeited. During the
        six months ended June 30, 2007, 62,908 2005 Performance Share Awards
        were issued with a stated value of $0.2 million. Accordingly, there
        are no 2005 Performance Share Awards remaining to be issued under the
        MEC Program at June 30, 2007.

        In 2006, MEC continued the MEC Program as described in the preceding
        paragraph. The program is similar in all respects except that the
        performance shares granted in 2006 vest over a 12-month period to
        December 31, 2006 and were distributed, subject to certain
        conditions, prior to March 31, 2007 (the "2006 Performance Share
        Awards"). During the year ended December 31, 2006, 161,099 (six
        months ended June 30, 2006 - 161,099) 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 (six
        months ended June 30, 2006 - 1,616) 2006 Performance Share Awards
        were issued with a nominal stated value, and 42,622 (six months ended
        June 30, 2006 - 3,299) 2006 Performance Share Awards were forfeited.
        During the six months ended June 30, 2007, 110,384 2006 Performance
        Share Awards were issued 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
        under the MEC Program at June 30, 2007.

        In the six months ended June 30, 2007, MEC issued 30,941 (six months
        ended June 30, 2006 - 25,896) shares of Class A Subordinate Voting
        Stock with a stated value of $0.1 million (six months ended June 30,
        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's
        Class A Subordinate Voting Stock. All MEC Stock Options give the
        grantee the right to purchase Class A Subordinate Voting Stock of MEC
        at a price no less than the fair market value of such stock at the
        date of grant. Generally, 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.

        Activity in the MEC Plan was as follows:

                                     2007                      2006
                          ------------------------- -------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                                             Price                     Price
                               Number      (Cdn. $)      Number      (Cdn. $)
        ---------------------------------------------------------------------
        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
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        MEC Stock Options
         exercisable,
         June 30            4,351,668         6.07    4,245,415         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 11(a)).

        During the three and six months ended June 30, 2007, MEC recognized
        total stock-based compensation expense of $0.1 million (2006 -
        $0.6 million) and $0.3 million (2006 - $1.7 million), respectively
        relating to performance share awards, director compensation and stock
        options under the MEC Plan.

    12. DETAILS OF CASH FROM OPERATING ACTIVITIES

    (a) Items not involving current cash flows:

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                        (restated                  (restated
                                         - note 3)                 - note 3)
                               2007         2006         2007         2006
        ---------------------------------------------------------------------
        Real Estate
         Business
        Straight-line rent
         adjustment       $       145  $      (104) $       237  $        68
        Stock-based
         compensation
         expense                  207          210          537          498
        Depreciation and
         amortization          10,216        9,740       20,147       19,111
        Interest income
         from MEC                 (75)      (4,018)        (143)      (7,474)
        Gain on disposal
         of real estate        (1,357)           -       (1,382)          (9)
        Future income
         taxes                    587         (939)       1,855          739
        Dilution and
         other gains                -       (1,921)        (652)      (1,921)
        Other                      81           78          156          154
        ---------------------------------------------------------------------
                                9,804        3,046       20,755       11,166
        ---------------------------------------------------------------------
        MEC
        Stock-based
         compensation expense      70          602          272        1,689
        Gain on disposal
         of real estate       (17,587)           -      (48,654)      (2,883)
        Depreciation and
         amortization          10,676       10,427       20,966       20,560
        Interest expense
         with MID                  75        4,018           75        6,626
        Amortization of debt
         issuance costs           471        2,101          926        3,752
        Dilution and other
         gains                      -           (4)          (4)        (157)
        Future income taxes      (190)        (368)      (1,568)        (713)
        Minority interest      (9,949)     (11,591)      (9,096)      (9,630)
        Other                    (412)         248       (1,020)          85
        ---------------------------------------------------------------------
                              (16,846)       5,433      (38,103)      19,329
        ---------------------------------------------------------------------
        Eliminations
         (note 14)             17,357       (1,885)      49,622       (2,419)
        ---------------------------------------------------------------------
        Consolidated      $    10,315  $     6,594  $    32,274  $    28,076
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        (b) Changes in non-cash balances:

                                  Three Months               Six Months
                                 Ended June 30,            Ended June 30,
                          ------------------------- -------------------------
                                        (restated                  (restated
                                         - note 3)                 - note 3)
                               2007         2006         2007         2006
        ---------------------------------------------------------------------
        Real Estate
         Business
        Accounts
         receivable       $     1,136  $    (1,318) $       694  $    (2,206)
        Loan receivable
         from MEC                   -         (878)           -         (389)
        Prepaid expenses
         and other                123       (2,719)          45       (3,143)
        Accounts payable
         and accrued
         liabilities           (2,408)      (4,290)       2,060       (2,076)
        Income taxes            2,468          640        5,015       (1,059)
        Deferred revenue         (929)       2,964          273        1,089
        ---------------------------------------------------------------------
                                  390       (5,601)       8,087       (7,784)
        ---------------------------------------------------------------------
        MEC
        Restricted cash        19,767       19,361       12,433          992
        Accounts receivable    24,031       20,286       (2,397)      (3,236)
        Prepaid expenses
         and other                 (4)       3,978       (4,646)      (3,709)
        Accounts payable and
         accrued liabilities  (29,295)     (39,308)     (22,225)     (11,607)
        Income taxes            3,708        3,362        1,516         (328)
        Loan Payable to MID         -          878            -          389
        Deferred revenue       (3,128)      (4,479)          59       (3,066)
        ---------------------------------------------------------------------
                               15,079        4,078      (15,260)     (20,565)
        ---------------------------------------------------------------------
        Eliminations
         (note 14)                 22        1,342         (171)       1,227
        ---------------------------------------------------------------------
        Consolidated      $    15,491  $      (181) $    (7,344) $   (27,122)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. 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 (the Real Estate Business) and publicly-traded operations
    (MEC). The segregation of operations between wholly-owned and publicly-
    traded operations recognizes the fact that, in the case of the Real
    Estate Business, the Company's 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

    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 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 eight thoroughbred racetracks, one standardbred
    racetrack, two racetracks that run both thoroughbred and quarterhorse
    meets, and one racetrack that runs both thoroughbred and standardbred
    meets, as well as the simulcast wagering venues at these tracks. Three of
    MEC's racetracks (two in the United States and one in Austria) include
    casino operations with alternative gaming machines. In addition, MEC
    operates off-track betting ("OTB") facilities, a United States based
    national account wagering business known as XpressBet(R) and a European
    account wagering service known as MagnaBet(TM). Pursuant to a joint
    venture with Churchill Downs Incorporated ("CDI"), MEC also owns a 50%
    interest in HorseRacing TV(TM) ("HRTV(TM)"), a television network focused
    on horseracing. In April 2006, MEC entered into an agreement with CDI and
    Racing UK Limited to partner in a subscription television channel called
    "Racing World" that broadcasts races from MEC's and CDI's racetracks, as
    well as other North American and international racetracks, into the
    United Kingdom and Ireland. 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 lease agreement with MID (note 14), 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 so as to provide detailed,
    discrete financial information on the Real Estate Business and MEC
    reporting segments.

    14. TRANSACTIONS WITH RELATED PARTIES

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

    (a) MEC Project Financings and Bridge Loan

        (i)   MEC Project Financings

              The MID Lender has made available two separate project
              financing facilities to the wholly-owned subsidiaries of MEC
              that own and/or operate Gulfstream Park and Remington Park
              ($162.3 million and $34.2 million, respectively, plus costs and
              capitalized interest 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 and six months
              ended June 30, 2007, $1.2 million and $1.7 million,
              respectively, of such payments were made. Commencing January 1,
              2007, the MID Lender receives monthly blended payments of
              principal and interest based on a 25-year amortization period
              under each of the MEC Project Financing Facilities (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
              an aggregate of 1,221 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.

              At June 30, 2007, there were balances of $134.2 million
              (December 31, 2006 - $134.8 million), $24.2 million
              (December 31, 2006 - 19.4 million) and $12.2 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 $30.1 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 at June 30, 2007 was $3.6 million
              (December 31, 2006 - $3.1 million). The non-current portion of
              the MEC Project Financing Facilities of $191.2 million, as
              reflected in MEC's "loans payable to MID, net" on the Company's
              unaudited interim balance sheet, is net of $5.8 million of
              unamortized deferred financing costs. This net balance is being
              accreted to its face value over the terms to maturity of the
              MEC Project Financing Facilities.

              In connection with the Gulfstream Park project financing
              facility, MEC has placed into escrow (the "Gulfstream Escrow")
              with the MID Lender proceeds from an asset sale which occurred
              in fiscal 2005 and certain additional amounts necessary to
              ensure that any remaining Gulfstream Park construction costs
              (including the settlement of liens on the property) can be
              funded, which escrowed amount has been and will be applied
              against any such construction costs. 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 June 30, 2007, the amount held under the Gulfstream
              Escrow (including accrued interest) was $5.6 million
              (December 31, 2006 - $6.5 million). All funds in the Gulfstream
              Escrow are reflected as restricted cash and due to MEC on the
              balance sheet of the Real Estate Business.

        (ii)  MEC Bridge Loan

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

              In July 2006, the maturity date of the MEC Bridge Loan was
              extended from August 31, 2006 to December 5, 2006 in
              anticipation of MEC's final closing of the sale of The Meadows.
              Further, in September 2006, the MID Lender agreed to make
              available to MEC $19.0 million of increased funding under the
              MEC Bridge Loan. Pursuant to the terms of the September 2006
              amendments, and as result of MEC not completing its sale of The
              Meadows by a specified deadline, the interest rate for all
              amounts under the MEC Bridge Loan was increased by 2.5% per
              annum effective November 7, 2006.

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

        Approximately $10.5 million of costs have been incurred, including
        $0.3 million in the six months ended June 30, 2007, in association
        with the MEC Project Financing Facilities and the 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
        and each of the MEC Project Financing Facilities. At a consolidated
        level, such costs are charged to "general and administrative"
        expenses in the periods in which they are incurred.

        All interest and fees charged by the Real Estate Business relating to
        the MEC Project Financing Facilities and the 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 operation
        and financial position.

    (b) 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 and
        granted MEC a profit participation right in respect of each property
        under which MEC is entitled 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, to be held for future development, for cash consideration
        of approximately $24.0 million. The property currently houses the San
        Luis Rey Downs Thoroughbred Training Facility operated by MEC. MID
        has agreed to lease the property to MEC on a triple-net basis for
        nominal rent while MID pursues the necessary entitlements and other
        approvals to permit the development of the property. The term of the
        lease is three years, subject to early termination by either party on
        four months written notice.

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

    (c) Hurricane Katrina Relief Effort

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

    (d) MEC's Sales to Magna

        On March 31, 2006, MEC sold a real estate property held for sale and
        located in the United States to Magna. A gain on sale of $2.9 million
        was recognized based on the cash consideration received, net of
        transaction costs, of $5.6 million. MEC used the net proceeds from
        this transaction to repay principal amounts outstanding under the MEC
        Credit Facility (note 6).

    15. 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. 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. 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) On May 18, 2007, ODS Technologies, L.P. d/b/a 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.

    (d) 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.

    (e) The Company had $4.5 million (Real Estate Business - $3.5 million;
        MEC - $1.0 million) of letters of credit issued with various
        financial institutions at June 30, 2007 to guarantee various of its
        construction projects. These letters of credit are secured by cash
        deposits of the Company. The Company has also issued $0.2 million of
        letters of credit under the Real Estate Business' $50.0 million
        unsecured senior revolving credit facility and $0.3 million of
        letters of credit under the MEC Credit Facility (note 6).

    (f) MEC has provided indemnities related to surety bonds and letters of
        credit issued in the process of obtaining licences and permits at
        certain racetracks and to guarantee various construction projects
        related to activities of its subsidiaries. At June 30, 2007, these
        indemnities amounted to $5.8 million with expiration dates through
        2008.

    (g) At June 30, 2007, the Company's contractual commitments related to
        construction and development projects outstanding amounted to
        approximately $6.3 million (Real Estate Business - $2.4 million;
        MEC - $3.9 million).

    (h) One of MEC's wholly-owned subsidiaries, SAC, entered into two
        interest rate swap contracts, one on March 1, 2007 and one on
        April 27, 2007, with an effective date of October 9, 2007, which fix
        the rate of interest at 7.0% and 7.1% per annum, respectively, to
        October 9, 2009 on a notional amount per contract of $10.0 million of
        the outstanding balance under SAC's term loan facility.

    (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 Group, LLC ("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 will also purchase
        horseracing content from third parties to be made available through
        the respective MEC and CDI outlets. Under the reciprocal content swap
        agreement, MEC and CDI will 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 $0.8 million has
        been contributed to June 30, 2007.

    (j) On November 15, 2006, MEC's wholly-owned subsidiary, Gulfstream Park
        Racing Association, Inc. ("GPRA"), opened phase one of the slots
        facility at Gulfstream Park with 516 slot machines and on March 20,
        2007, GPRA opened phase two with an additional 705 slot machines.
        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. The Florida Supreme Court has confirmed that it will
        hear the matter and oral arguments are scheduled for September 2007.

    (k) In May 2005, MEC entered into a Limited Liability Company Agreement
        with Forest City Enterprises, Inc. ("Forest City" and, 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 June 30, 2007, MEC has not made any such
        contributions. At June 30, 2007, approximately $17.4 million of costs
        have been incurred by The Village at Gulfstream Park, LLC, which have
        been funded entirely by Forest City. Included in MEC's "accounts
        payable and accrued liabilities" is an obligation of approximately
        $1.2 million reflecting MEC's share of capital contributions in
        excess of $15.0 million. The Limited Liability Company Agreement also
        contemplated additional agreements, 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 such time as 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.

    (l) On September 28, 2006, certain of MEC's affiliates entered into
        definitive operating agreements with Caruso Affiliated ("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. Under an April 2004 Letter of Intent, MEC is also
        exploring the possibility of a joint venture with Caruso to develop
        excess lands surrounding Golden Gate Fields. To June 30, 2007, MEC
        has expended $8.5 million on these initiatives, of which $2.2 million
        was paid in the second quarter of 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 June 30, 2007, no such payments have been made.

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

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

    16. SUBSEQUENT EVENTS

    (a) On July 24, 2007, one of MEC's European subsidiaries amended and
        extended its 3.9 million euro bank term loan by increasing the amount
        available under the bank term loan to 4.0 million euros, bearing
        interest at the Euro Overnight Index Average rate plus 3.0% per
        annum, and extending the term to July 31, 2008.

    (b) On August 9, 2007, MEC announced that its Board of Directors had
        approved a number of actions designed to reduce debt and improve
        profitability. These initiatives include relinquishing MEC's racing
        license in Romulus, Michigan, terminating MEC's development plans for
        Dixon, California and listing the property for sale, ceasing racing
        at Magna Racino(TM) in Austria at the conclusion of its current meet
        in November 2007 and the listing for sale of real estate properties
        in Ocala, Florida and Porter, New York. It is expected that the total
        gross proceeds from these disposals will exceed the aggregate net
        book value of these assets, which was approximately $71.0 million at
        June 30, 2007. MEC also announced that it has retained Greenbrook
        Capital Partners Inc. ("Greenbrook") to conduct a strategic review of
        its operations. The strategic review will be led by Greenbrook's
        Senior Partner, Tom Hodgson, a former President and Chief Executive
        Officer of MEC. Greenbrook expects to make its report to MEC's Board
        of Directors in early September.
    





For further information:

For further information: Richard Smith, Executive Vice-President and
Chief Financial Officer, at (905) 726-7507. For teleconferencing questions,
please contact Louise Galinauskas at (905) 726-7608

Organization Profile

MI DEVELOPMENTS INC.

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