----

| x | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|---------------------------------------------------------------------------------------------------|

|   | OR |
|--------|----|

| o | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|----------------------------------------------------------------------------------------------------|

| Delaware(State      or other jurisdictionof      incorporation or organization)                      |   | 95-2078752(I.R.S.      EmployerIdentification      Number) |
|------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|
|                                                                                                 |   |                                                       |
| 1330      Post Oak Blvd., Suite 2000Houston,      Texas(Address      of Principal Executive Offices) |   | 77056(Zip      Code)                                       |

----

|                                              | TABLE      OF CONTENTS                                                                                                             |   |
|---------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                              |                                                                                                                               | Page   |
| PART      I. –      FINANCIAL INFORMATION   |                                                                                                                               |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| Item      1.                                      | Financial      Statements (unaudited):                                                                                             |   |
|                                              | Condensed Consolidated Balance      Sheets                                                                                         |   |
|                                              | Condensed Consolidated Statements of      Operations                                                                               |   |
|                                              | Condensed Consolidated Statements of Cash      Flows                                                                               |   |
|                                              | Notes to Unaudited Condensed Consolidated      Financial Statements                                                                |   |
|                                              |                                                                                                                               |   |
| Item      2.                                      | Management's Discussion and Analysis of Financial Condition      and      Results of      Operations |
|                                              |                                                                                                                               |   |
| Item      3.                                      | Quantitative and      Qualitative Disclosures About Market Risk                                                                    |   |
|                                              |                                                                                                                               |   |
| Item      4.                                      | Controls and Procedures                                                                                                            |   |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| PART II. – OTHER      INFORMATION           |                                                                                                                               |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| Item 1.                                           | Legal Proceedings                                                                                                                  |   |
| Item      1A.                                     | Risk Factors                                                                                                                       |   |
| Item      2.                                      | Unregistered Sales of Equity Securities      and Use of Proceeds                                                                   |   |
| Item      3.                                      | Defaults Upon Senior Securities                                                                                                    |   |
| Item      4.                                      | Submission of Matter to a Vote of Security      Holders                                                                            |   |
| Item      6.                                      | Exhibits                                                                                                                           |   |
| Signatures                                        |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
|                                              |                                                                                                                               |   |
| APPENDIX A – GLOSSARY OF      DEFINED TERMS |                                                                                                                               |

----

| MAXXAM      INC. AND SUBSIDIARIES                                                                                                                                                                                                                                                                                   |              |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|
| CONDENSED CONSOLIDATED BALANCE      SHEETS                                                                                                                                                                                                                                                                          |              |
| (In      millions of dollars, except share information)                                                                                                                                                                                                                                                             |              |
|                                                                                                                                                                                                                                                                                                                |              |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                | June      30,2008 |   |   | December      31,2007 |   |
|                                                                                                                                                                                                                                                                                                                | (Unaudited)       |   |
|                                                                                                                                                                                                                                                                                                                |              |   |   |   |   |   |
| Assets                                                                                                                                                                                                                                                                                                              |              |   |   |   |   |   |
| Current      assets:                                                                                                                                                                                                                                                                                                |              |   |   |   |   |   |
|        Cash and cash equivalents                                                                                                                                                                                                                                                                               |              | $ | 56.0 |   |   | $ | 67.8 |   |
|        Marketable securities and other short-term investments                                                                                                                                                                                                                                                  |              |   | 3.4 |   |   |   | 25.0 |   |
|        Receivables:                                                                                                                                                                                                                                                                                            |              |   |   |   |   |   |   |   |
|           Trade, net of allowance for doubtful accounts of $0.4 and $0.5,      respectively                                                                                                                                                                                                     |              |   | 2.3 |   |   |   | 3.0 |   |
|           Other                                                                                                                                                                                                                                                                                 |              |   | 1.7 |   |   |   | 1.6 |   |
|        Inventories:                                                                                                                                                                                                                                                                                            |              |   |   |   |   |   |   |   |
|           Lumber                                                                                                                                                                                                                                                                                |              |   | 1.0 |   |   |   | - |   |
|           Real estate                                                                                                                                                                                                                                                                           |              |   | 3.8 |   |   |   | 3.9 |   |
|        Prepaid expenses and other current assets                                                                                                                                                                                                                                                               |              |   | 2.7 |   |   |   | 2.9 |   |
|        Restricted cash                                                                                                                                                                                                                                                                                         |              |   | 1.8 |   |   |   | 2.3 |   |
|              Total current assets                                                                                                                                                                                                                                                |              |   | 72.7 |   |   |   | 106.5 |   |
| Property,      plant and equipment, net of accumulated depreciation of$104.6   and      $99.1, respectively                                                                                                                                                                                          |              |   | 216.1 |   |   |   | 219.8 |   |
| Real      estate inventory                                                                                                                                                                                                                                                                                          |              |   | 54.4 |   |   |   | 52.7 |   |
| Deferred      income taxes                                                                                                                                                                                                                                                                                          |              |   | 94.7 |   |   |   | 94.7 |   |
| Deferred      financing costs                                                                                                                                                                                                                                                                                       |              |   | 4.5 |   |   |   | 4.9 |   |
| Long-term      receivables and other assets                                                                                                                                                                                                                                                                         |              |   | 6.5 |   |   |   | 6.7 |   |
| Long-term      investments and restricted cash of $3.6                                                                                                                                                                                                                                                              |              |   | 20.9 |   |   |   | 33.6 |   |
|                                                                                                                                                                                                                                                                                                                |              | $ | 469.8 |   |   | $ | 518.9 |   |
| Liabilities      and Stockholders’      Deficit                                                                                                                                                                                                                                                               |              |   |   |   |   |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                           |              |   |   |   |   |   |   |   |
|        Accounts payable                                                                                                                                                                                                                                                                                        |              | $ | 3.8 |   |   | $ | 6.5 |   |
|        Accrued interest                                                                                                                                                                                                                                                                                        |              |   | 0.9 |   |   |   | 0.9 |   |
|        Accrued compensation and related benefits                                                                                                                                                                                                                                                               |              |   | 5.3 |   |   |   | 2.3 |   |
|        Accrued development costs                                                                                                                                                                                                                                                                               |              |   | 1.2 |   |   |   | 1.6 |   |
|        Accrued other taxes                                                                                                                                                                                                                                                                                     |              |   | 2.9 |   |   |   | 1.3 |   |
|        Deferred revenue                                                                                                                                                                                                                                                                                        |              |   | 1.9 |   |   |   | 0.7 |   |
|        Other accrued liabilities                                                                                                                                                                                                                                                                               |              |   | 13.2 |   |   |   | 14.0 |   |
|        Short-term borrowings and current maturities of long-term    debt                                                                                                                                                                                                                                       |              |   | 5.9 |   |   |   | 5.3 |   |
|              Total current liabilities                                                                                                                                                                                                                                           |              |   | 35.1 |   |   |   | 32.6 |   |
| Long-term      debt, less current maturities                                                                                                                                                                                                                                                                        |              |   | 208.1 |   |   |   | 211.2 |   |
| Accrued      pension and other postretirement benefits                                                                                                                                                                                                                                                              |              |   | 7.0 |   |   |   | 7.0 |   |
| Other      noncurrent liabilities                                                                                                                                                                                                                                                                                   |              |   | 41.7 |   |   |   | 45.1 |   |
| Losses      in excess of investment in Debtors                                                                                                                                                                                                                                                                      |              |   | 484.2 |   |   |   | 484.2 |   |
|              Total liabilities                                                                                                                                                                                                                                                   |              |   | 776.1 |   |   |   | 780.1 |   |
| Commitments      and contingencies (see Note 8)                                                                                                                                                                                                                                                                     |              |   |   |   |   |   |   |   |
| Stockholders’      deficit:                                                                                                                                                                                                                                                                                   |              |   |   |   |   |   |   |   |
|   Preferred      stock, $0.50 par value; $0.75 liquidation preference; 2,500,000      shares          authorized; Class A $0.05 Non-Cumulative Participating Convertible      Preferred          Stock; 668,964 shares issued and 668,119 shares      outstanding |              |   | 0.3 |   |   |   | 0.3 |   |
|                                                                                                                                                                                                                                                                                                                |              |   |   |   |   |   |   |   |
|        Common stock, $0.50 par value; 13,000,000 shares authorized; 10,063,359      shares          issued; 4,561,237 and  5,248,717 shares outstanding,      respectively                                                                                                       |              |   | 5.0 |   |   |   | 5.0 |   |
|        Additional capital                                                                                                                                                                                                                                                                                      |              |   | 225.3 |   |   |   | 225.3 |   |
|        Accumulated deficit                                                                                                                                                                                                                                                                                     |              |   | (369.5 | ) |   |   | (342.9 | ) |
|        Accumulated other comprehensive income (loss)                                                                                                                                                                                                                                                           |              |   | 0.4 |   |   |   | (1.2 | ) |
|        Treasury stock, at cost (shares held; preferred – 845; common – 5,502,122      and          4,814,642, respectively)                                                                                                                                                    |              |   | (167.8 | ) |   |   | (147.7 | ) |
|              Total stockholders’      deficit                                                                                                                                                                                                                              |              |   | (306.3 | ) |   |   | (261.2 | ) |
|                                                                                                                                                                                                                                                                                                                |              | $ | 469.8 |   |   | $ | 518.9 |   |

----

| MAXXAM      INC. AND SUBSIDIARIES                                        |   |
|--------------------------------------------------------------------------|--------|
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| CONDENSED CONSOLIDATED STATEMENTS OF      OPERATIONS                     |   |
| (In      millions of dollars, except share and per share    information) |   |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                     |   | Three      Months EndedJune      30, |   |   | Six      Months EndedJune      30, |   |
|                                                                     |   |   2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                                     |   | (Unaudited) |   |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales:                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Real estate                                                  |   | $ | 9.7 |   |   | $ | 12.8 |   |   | $ | 18.6 |   |   | $ | 24.4 |    |
|        Racing                                                       |   |   | 10.7 |   |   |   | 10.5 |   |   |   | 23.5 |   |   |   | 23.2 |   |
|        Forest products, net of discounts                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4.4 |   |
|        Corporate                                                    |   |   | 2.9 |   |   |   | - |   |   |   | 2.9 |   |   |   | - |   |
|                                                                     |   |   | 23.3 |   |   |   | 23.3 |   |   |   | 45.0 |   |   |   | 52.0 |   |
| Costs      and expenses:                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Cost of sales and operations:                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          Real estate                                      |   |   | 5.0 |   |   |   | 5.7 |   |   |   | 9.2 |   |   |   | 11.0 |   |
|          Racing                                           |   |   | 10.7 |   |   |   | 9.6 |   |   |   | 21.7 |   |   |   | 20.4 |   |
|          Forest products                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4.3 |   |
|          Corporate                                             |   |   | 4.1 |   |   |   | - |   |   |   | 4.1 |   |   |   | - |   |
|        Selling, general and administrative expenses                 |   |   | 5.5 |   |   |   | 8.8 |   |   |   | 16.3 |   |   |   | 18.8 |   |
|        Gains on sales of other assets                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (0.1 | ) |
|        Depreciation, depletion and amortization                     |   |   | 3.1 |   |   |   | 3.5 |   |   |   | 5.9 |   |   |   | 8.0 |   |
|                                                                     |   |   | 28.4 |   |   |   | 27.6 |   |   |   | 57.2 |   |   |   | 62.4 |   |
| Operating      loss:                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Real estate                                                  |   |   | (1.7 | ) |   |   | - |   |   |   | (2.9 | ) |   |   | (0.6 | ) |
|        Racing                                                       |   |   | (2.7 | ) |   |   | (1.8 | ) |   |   | (3.5 | ) |   |   | (2.4 | ) |
|        Forest products                                              |   |   | (0.5 | ) |   |   | (0.5 | ) |   |   | (1.0 | ) |   |   | (3.5 | ) |
|        Corporate                                                    |   |   | (0.2 | ) |   |   | (2.0 | ) |   |   | (4.8 | ) |   |   | (3.9 | ) |
|                                                                     |   |   | (5.1 | ) |   |   | (4.3 | ) |   |   | (12.2 | ) |   |   | (10.4 | ) |
| Other      income (expense):                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Investment, interest and other income (expense)              |   |   | (3.2 | ) |   |   | 1.8 |   |   |   | (5.8 | ) |   |   | 3.0 |   |
|        Interest expense                                             |   |   | (4.0 | ) |   |   | (4.0 | ) |   |   | (8.1 | ) |   |   | (11.1 | ) |
|        Amortization of deferred financing costs                     |   |   | (0.2 | ) |   |   | (0.2 | ) |   |   | (0.3 | ) |   |   | (0.5 | ) |
| Loss      before income taxes                                            |   |   | (12.5 | ) |   |   | (6.7 | ) |   |   | (26.4 | ) |   |   | (19.0 | ) |
| Provision      for income taxes                                          |   |   | (0.2 | ) |   |   | - |   |   |   | (0.2 | ) |   |   | - |   |
| Net      loss                                                            |   | $ | (12.7 | ) |   | $ | (6.7 | ) |   | $ | (26.6 | ) |   | $ | (19.0 | ) |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      loss per common and common equivalent share                   |   | $ | (2.78 | ) |   | $ | (1.28 | ) |   | $ | (5.50 | ) |   | $ | (3.62 | ) |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted      loss per common and common equivalent share                 |   | $ | (2.78 | ) |   | $ | (1.28 | ) |   | $ | (5.50 | ) |   | $ | (3.62 | ) |
|                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding - Basic                         |   |   | 4,561,237 |   |   |   | 5,251,226 |   |   |   | 4,836,984 |   |   |   | 5,253,267 |   |

----

| MAXXAM      INC. AND SUBSIDIARIES                                                                                      |   |
|------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                   |   |   |   |   |   |   |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH      FLOWS                                                                   |   |
| (In      millions of dollars)                                                                                          |   |
|                                                                                                                   |   |   |   |   |   |   |
|                                                                                                                   |   | Six      Months EndedJune      30, |   |
|                                                                                                                   |   | 2008 |   |   | 2007 |   |
|                                                                                                                   |   | (Unaudited) |   |
|                                                                                                                   |   |   |   |   |   |   |
| Cash      flows from operating activities:                                                                             |   |   |   |   |   |   |
|        Net loss                                                                                                   |   | $ | (26.6 | ) |   | $ | (19.0 | ) |
|        Adjustments to reconcile net loss to net cash used for    operating      activities:   |   |   |   |   |   |   |   |   |
|           Depreciation, depletion and amortization                                                 |   |   | 5.9 |   |   |   | 8.0 |   |
|           Non-cash stock-based compensation expense                                                |   |   | (1.6 | ) |   |   | (0.4 | ) |
|           Gains on sales of other assets                                                           |   |   | - |   |   |   | (0.1 | ) |
|           Net losses (gains) from marketable securities                                            |   |   | 6.9 |   |   |   | (0.6 | ) |
|           Amortization of deferred financing costs                                                 |   |   | 0.3 |   |   |   | 0.5 |   |
|           Equity income of unconsolidated affiliates, net of    dividends                          |   |   | (0.1 | ) |   |   | (0.4 | ) |
|           Increase (decrease) in cash resulting from changes in:                                   |   |   |   |   |   |   |   |   |
|              Receivables                                                            |   |   | 0.6 |   |   |   | 8.5 |   |
|              Inventories                                                            |   |   | (0.9 | ) |   |   | 0.8 |   |
|              Prepaid expenses and other assets                                      |   |   | 0.2 |   |   |   | 0.8 |   |
|              Accounts payable                                                       |   |   | (2.7 | ) |   |   | 0.4 |   |
|              Accrued income taxes                                                   |   |   | (0.3 | ) |   |   | (0.1 | ) |
|              Other accrued liabilities                                              |   |   | 3.0 |   |   |   | (2.1 | ) |
|              Accrued interest                                                       |   |   | - |   |   |   | 2.7 |   |
|         Long-term      assets and long-term liabilities                        |   |   | (1.8 | ) |   |   | (4.4 | ) |
|         Other                                                                  |   |   | - |   |   |   | (0.3 | ) |
|                  Net cash used for operating activities         |   |   | (17.1 | ) |   |   | (5.7 | ) |
|                                                                                                                   |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                                                             |   |   |   |   |   |   |   |   |
|        Net proceeds from the disposition of property and    investments                                           |   |   | - |   |   |   | 0.1 |   |
|        Maturities of marketable securities and other investments                                                  |   |   | 11.6 |   |   |   | 105.6 |   |
|        Sales of marketable securities and other investments                                                       |   |   | 26.5 |   |   |   | 53.2 |   |
|        Purchases of marketable securities and other investments                                                   |   |   | (9.1 | ) |   |   | (150.8 | ) |
|        Net proceeds from restricted cash                                                                          |   |   | 0.6 |   |   |   | 0.7 |   |
|        Capital expenditures                                                                                       |   |   | (2.1 | ) |   |   | (1.9 | ) |
|        Decrease in cash due to deconsolidation of Debtors                                                         |   |   | - |   |   |   | (1.1 | ) |
|        Contribution to joint venture                                                                              |   |   | - |   |   |   | (0.6 | ) |
|                 Net cash provided by investing activities            |   |   | 27.5 |   |   |   | 5.2 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                             |   |   |   |   |   |   |   |   |
|        Principal payments on long-term debt                                                                       |   |   | (2.5 | ) |   |   | (2.3 | ) |
|        Borrowings under revolving and short-term creditfacilities                                                 |   |   | - |   |   |   | 2.2 |   |
|        Treasury stock purchases                                                                                   |   |   | (20.1 | ) |   |   | (0.2 | ) |
|        Net proceeds from refundable deposits                                                                      |   |   | 0.4 |   |   |   | 0.7 |   |
|                 Net cash provided by (used for) financing activities |   |   | (22.2 | ) |   |   | 0.4 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                                              |   |   | (11.8 | ) |   |   | (0.1 | ) |
| Cash      and cash equivalents at beginning of the period                                                              |   |   | 67.8 |   |   |   | 34.8 |   |
| Cash      and cash equivalents at end of the period                                                                    |   | $ | 56.0 |   |   | $ | 34.7 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |
| Supplemental      disclosure of cash flow information:                                                                 |   |   |   |   |   |   |   |   |
|        Interest paid                                                                                              |   | $ | 8.1 |   |   | $ | 8.4 |   |

----

NOTES TO UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS

|   | Potential      Impact on the Company and Certain Related  Entities |
|--------|--------------------------------------------------------------------|

|   | Level      2 - Observable inputs other than Level 1 prices such as quoted prices for      similar assets or liabilities; quoted prices in markets that are not      active; or other inputs that are observable or can be corroborated by      observable market data for substantially the full term of the assets or      liabilities. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3 - Unobservable inputs that are supported by little or no market activity      and that are significant to the fair value of the assets or      liabilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |   | Fair      Value Measurements as ofJune      30, 2008 |   |
|-------------------------------------|--------|------------------------------------------------------|--------|
|                                |   | Total                                                |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |
| Description:                        |   |                                                 |   |   |   |   |   |   |   |   |   |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |
|        Short-term investments  |   | $                                                    | 3.4    |   |   | $ | 3.4 |   |   | $ | - |   |   | $ | - |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Auction rate securities |   |                                                 | 5.2    |   |   |   | - |   |   |   | - |   |   |   | 5.2 |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          Total       |   | $                                                    | 8.6    |   |   | $ | 3.4 |   |   | $ | - |   |   | $ | 5.2 |   |

----

|                                                                                              |   | Auction      Rate Securities |   |
|---------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                              |   |                         |   |
| Carrying      value as of January 1, 2008                                                         |   | $                            | 11.5   |   |
| Settlements                                                                                       |   |                         | (2.6   | ) |
| Impairment      charge included in the   Consolidated      Statement of Operations |   |                         | (3.7   | ) |
| Carrying      value as of June 30, 2008                                                           |   | $                            | 5.2    |   |

|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |        Total                             |   |                    |        Reportable                                          |   |   |   |                                                                                          |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|---------------------------------------------------------------------------------|--------|--------|---------------------------------------|--------|-----------|---------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------|---------------------------------------------------------------------------|----------------------|---------|-----------------------------------------------|--------|-------------------------|-----------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                      | Reportable      Segments |                                                                            |   |   |                                  |   |      |                                                                      |                   Excluding |                |                                                                      |        Segments |    |                                          |   |                    |
|                                                                                                                                      | Real      Estate         |                                                                            | Racing |   | MGI                                   |   | Corporate |                                                                      |                                                                                    |        Debtors |                                                                      |                 | Debtors |                                          |   | Consolidated      Total |
|                                                                                                                                      |                     |        (In millions of  dollars)                                           |
| Investment,      interest and   other      income for the   three      months ended:                        |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |
|          June 30, 2008                                                                                                     | $                        |          (1.2)                     |   | $      |       - |   | $         |             - |                                                                                    | $                   |        (2.0)                           | (1)                  | $       |       (3.2)     |   | $                       |                                                            | (2)    |   | $      |              (3.2)           |
|          June 30, 2007                                                                                                     |                     |            1.0           |   |   |     0.1           |   |      |             - |                                                                                    |                |          0.7                 |                 |    |        1.8 |   |                    |                                                            | (2)    |   |   |                1.8 |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Investment,      interest and   other      income for the   six      months ended:                          |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |
|          June 30, 2008                                                                                                     | $                        |          (1.0)                     |   | $      |       - |   | $         |             - |                                                                                    | $                   |        (4.8)                           | (1)                  | $       |       (5.8)     |   | $                       |                                                            | (2)    |   | $      |              (5.8)           |
|          June 30, 2007                                                                                                     |                     |            1.2           |   |   |     0.1           |   |      |             - |                                                                                    |                |          1.5                 |                 |    |        2.8 |   |                    |           0.2 | (3)    |   |   |                3.0 |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Selling,      general and   administrative      expense   for      the three months   ended: |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |
|          June 30, 2008                                                                                                     | $                        |            3.9           |   | $      |     2.2           |   | $         |          0.5                 |                                                                                    | $                   |        (1.1)                           | (4)                  | $       |        5.5 |   | $                       |                                                            | (2)    |   | $      |                5.5 |
|          June 30, 2007                                                                                                     |                     |            4.0           |   |   |     2.3           |   |      |          0.5                 |                                                                                    |                |          2.0                 | (4)                  |    |        8.8 |   |                    |                                                            | (2)    |   |   |                8.8 |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Selling,      general and   administrative      expense   for      the six months ended:                    |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |
|          June 30, 2008                                                                                                     | $                        |            7.4           |   | $      |     4.4           |   | $         |          1.0                 |                                                                                    | $                   |          3.5                 | (4)                  | $       |      16.3            |   | $                       |                                                            | (2)    |   | $      |              16.3            |
|          June 30, 2007                                                                                                     |                     |            7.9           |   |   |     4.4           |   |      |          1.2                 |                                                                                    |                |          3.8                 | (4)                  |    |      17.3            |   |                    |           1.5 | (3)    |   |   |              18.8            |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Operating      loss for the   three      months ended:                                                                     |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |
|          June 30, 2008                                                                                                     | $                        |          (1.7)                     |   | $      |   (2.7)                     |   | $         |        (0.5)                           |                                                                                    | $                   |        (0.2)                           |                 | $       |       (5.1)     |   | $                       |                                                            | (2)    |   | $      |              (5.1)           |
|          June 30, 2007                                                                                                     |                     |              - |   |   |   (1.8)                     |   |      |        (0.5)                           |                                                                                    |                |        (2.0)                           |                 |    |       (4.3)     |   |                    |                                                            | (2)    |   |   |              (4.3)           |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Operating      loss for the   six      months ended:                                                                       |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |
|          June 30, 2008                                                                                                     | $                        |          (2.9)                     |   | $      |   (3.5)                     |   | $         |        (1.0)                           |                                                                                    | $                   |        (4.8)                           |                 | $       |     (12.2)                |   | $                       |                                                            | (2)    |   | $      |            (12.2)                      |
|          June 30, 2007                                                                                                     |                     |          (0.6)                     |   |   |   (2.4)                     |   |      |        (1.2)                           |                                                                                    |                |        (3.9)                           |                 |    |       (8.1)     |   |                    |          (2.3)     | (3)    |   |   |            (10.4)                      |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Interest      expense for the   three      months ended (5):                                                               |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |
|          June 30, 2008                                                                                                     | $                        |          (4.2)                     |   | $      |       - |   | $         |             - |                                                                                    | $                   |             - |                 | $       |       (4.2)     |   | $                       |                                                            | (2)    |   | $      |              (4.2)           |
|          June 30, 2007                                                                                                     |                     |          (4.2)                     |   |   |       - |   |      |             - |                                                                                    |                |             - |                 |    |       (4.2)     |   |                    |                                                            | (2)    |   |   |              (4.2)           |
|                                                                                                                                      |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |                                                            |   |   |   |                                                                                          |
| Interest      expense for the   six      months ended (5):                                                                 |                     |                                                                            |   |   |                                  |   |      |                                                                      |                                                                                    |                |                                                                      |                 |    |                                          |   |                    |
|          June 30, 2008                                                                                                     | $                        |          (8.4)                     |   | $      |       - |   | $         |             - |                                                                                    | $                   |             - |                 | $       |       (8.4)     |   | $                       |                                                            | (2)    |   | $      |              (8.4)           |
|          June 30, 2007                                                                                                     |                     |          (8.5)                     |   |   |       - |   |      |             - |                                                                                    |                |             - |                 |    |       (8.5)     |   |                    |          (3.1)     | (3)    |   |   |            (11.6)                      |

----

|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |   Total                             |                    |   | Reportable                                                                      |   |   |   |                                                                                    |
|-----------------------------------------------------------------------------------------------------------------------|--------------------------|-----------------------------------------|--------|--------|-----------------------------|-----------|--------|---------------------------------------------|---------------------------------------------------------|--------|---------------------------------------------------------------------|----------|--------|-----------------------------------------------|-------------------------|--------|---------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------------------|
|                                                                                                                  | Reportable      Segments |                                    |   |   |                        |      |   |                                        |            Excluding           |   |                                                                | Segments |   |                                          |                    |   |
|                                                                                                                  | Real      Estate         | Racing                                  |   | MGI    |                        | Corporate |   |                                        |              Debtors |   |                                                                | Debtors  |   |                                          | Consolidated      Total |
|                                                                                                                  |                     |        (In millions of dollars)    |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Depreciation,      depletion and   amortization      for the   three      months ended: |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |
|          June 30, 2008                                                                                 | $                        |       2.5 |   | $      |     0.5 |      | $      |        - |                                                    | $      |          0.1           |     | $      |        3.1 |                    | $      |                                                                            | (2)    |   | $      |               3.1 |
|          June 30, 2007                                                                                 |                     |       3.1 |   |   |     0.4 |      |   |        - |                                                    |   |            - |     |   |        3.5 |                    |   |                                                                            | (2)    |   |   |               3.5 |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Depreciation,      depletion and   amortization      for the   six      months ended:   |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |
|          June 30, 2008                                                                                 | $                        |       4.9 |   | $      |     0.9 |      | $      |        - |                                                    | $      |          0.1           |     | $      |        5.9 |                    | $      |                                                                            | (2)    |   | $      |               5.9 |
|          June 30, 2007                                                                                 |                     |       6.2 |   |   |     0.8 |      |   |        - |                                                    |   |          0.1           |     |   |        7.1 |                    |   |           0.9                 | (3)    |   |   |               8.0 |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Loss      before income taxes for   the      three months ended:                                       |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |
|          June 30, 2008                                                                                 | $                        |     (7.1)           |   | $      |   (2.7)           |      | $      |   (0.5)                           |                                                    | $      |        (2.2)                     | (6)      | $      |     (12.5)                |                    | $      |                                                                            | (2)    |   | $      |           (12.5)                      |
|          June 30, 2007                                                                                 |                     |     (3.2)           |   |   |   (1.7)           |      |   |   (0.5)                           |                                                    |   |        (1.3)                     |     |   |       (6.7)     |                    |   |                | (2)    |   |   |             (6.7)           |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Loss      before income taxes for   the      six months ended:                                         |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |
|          June 30, 2008                                                                                 | $                        |   (12.3)                      |   | $      |   (3.5)           |      | $      |   (1.0)                           |                                                    | $      |        (9.6)                     | (6)      | $      |     (26.4)                |                    | $      |                                                                            | (2)    |   | $      |           (26.4)                      |
|          June 30, 2007                                                                                 |                     |     (7.9)           |   |   |   (2.3)           |      |   |   (1.2)                           |                                                    |   |        (2.4)                     |     |   |     (13.8)                |                    |   |          (5.2)                     | (3)    |   |   |           (19.0)                      |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Capital      expenditures   for      the three months   ended:                          |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |
|         June 30, 2008                                                                                       | $                        |       0.4 |   | $      |     1.2 |      | $      |        - |                                                    | $      |            - |     | $      |        1.6 |                    | $      |                                                                            | (2)    |   | $      |               1.6 |
|         June 30, 2007                                                                                       |                     |       0.3 |   |   |     1.2 |      |   |        - |                                                    |   |            - |     |   |        1.5 |                    |   |                                                                            | (2)    |   |   |               1.5 |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Capital      expenditures   for      the six months   ended:                            |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |
|          June 30, 2008                                                                                 | $                        |       0.5 |   | $      |     1.6 |      | $      |        - |                                                    | $      |            - |     | $      |        2.1 |                    | $      |                                                                            | (2)    |   | $      |               2.1 |
|          June 30, 2007                                                                                 |                     |       0.4 |   |   |     1.4 |      |   |        - |                                                    |   |          0.1           |     |   |        1.9 |                    |   |              - | (3)    |   |   |               1.9 |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
| Total      assets as of:                                                                                              |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |
|          June 30, 2008                                                                                 | $                        |   274.3                       |   | $      |   36.6            |      | $      |        - |                                                    | $      |      158.9                                 |     | $      |    469.8                       |                    | $      |                                                                            | (2)    |   | $      |           469.8                       |
|          December 31, 2007                                                                             |                     |   281.5                       |   |   |   36.0            |      |   |        - |                                                    |   |      201.4                                 |     |   |    518.9                       |                    |   |                                                                            | (2)    |   |   |           518.9                       |
|                                                                                                                  |                     |                                    |   |   |                        |      |   |                                        |                                                    |   |                                                                |     |   |                                          |                    |   |                                                                            |   |   |   |                                                                                    |

| (1) | Includes      a $3.7 million impairment charge for the three months ended June 30, 2008      and a $5.5 million impairment charge for the six months ended June 30,      2008 related to the Company’s investment  portfolio. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | As      a result of the deconsolidation of the Debtors, their data is not included      in the consolidated results of operations for the three months ended June      30, 2008 and June 30, 2007 or in consolidated total assets as of June 30,      2008 or December 31, 2007. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | These      amounts are for the period from January 1, 2007 through January 18,      2007. |
|-----|-------------------------------------------------------------------------------------------|

| (4) | Includes a benefit related to      stock-based compensation in the amount of $3.4 million and $0.9 million      for the three months ended June 30, 2008 and 2007, respectively and $1.6      million and $0.4 million for the six months ended June 30, 2008 and 2007,      respectively. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Interest      expense includes amortization of deferred financing  costs. |
|-----|---------------------------------------------------------------------------|

| (6) | Includes      a $1.2 million loss related to the sale of lumber to  MRC. |
|-----|--------------------------------------------------------------------------|

----

|                                                                                             |   | June      30,2008 |   |   | December      31,2007 |   |
|--------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|-----------------------|--------|
|                                                                                             |   |              |   |   |                  |   |
| Current:                                                                                         |   |              |   |   |                  |   |
|        Cash and cash equivalents                                                            |   | $                 | 56.0   |   |                  | $      | 67.8 |   |
|        Marketable securities - auction rate securities                                      |   |              | -      |   |                  |   | 5.5 |   |
|        Marketable securities - other                                                        |   |              | 3.4    |   |                  |   | 19.5 |   |
|        Restricted cash                                                                      |   |              | 1.8    |   |                  |   | 2.3 |   |
|           Total current                                                      |   |              | 61.2   |   |                  |   | 95.1 |   |
|                                                                                             |   |              |   |   |                  |   |   |   |
| Non-Current:                                                                                     |   |              |   |   |                  |   |   |   |
|        Marketable securities - auction rate securities                                      |   |              | 5.2    |   |                  |   | 6.0 |   |
|        Investments in limited partnerships                                                  |   |              | 12.1   |   |                  |   | 24.0 |   |
|        Restricted cash                                                                      |   |              | 3.6    |   |                  |   | 3.6 |   |
|           Total non-current                                                  |   |              | 20.9   |   |                  |   | 33.6 |   |
|                                                                                             |   |              | 82.1   |   |                  |   | 128.7 |   |
| Less:  restricted      amounts                                                         |   |              | (5.4   | )      |                  |   | (5.9 | ) |
| Total      unrestricted cash, cash equivalents, marketable securities and other      investments |   | $                 | 76.7   |   |                  | $      | 122.8 |   |

----

|                                         |   | June      30, 2008(1) |   |
|----------------------------------------------|--------|-----------------------|--------|
|                                         |   | CarryingValue         |   |   | AggregateFair      Value |   |   | Net      Gainsin      AOCL |   |   | Net      Lossesin      AOCL |   |
|                                         |   |                  |   |   |   |   |   |   |   |   |   |   |
| Auction      rate securities                 |   | $                     | 5.2    |   |   | $ | 5.2 |   |   | $ | - |   |   | $ | - |   |
| Equity      securities and other investments |   |                  | 3.4    |   |   |   | 3.4 |   |   |   | 0.4 |   |   |   | - |   |
|           Total          |   | $                     | 8.6    |   |   | $ | 8.6 |   |   | $ | 0.4 |   |   | $ | - |   |

|  (1) | There      were no investments in a continuous unrealized loss position for 12 months      or longer. |
|-----------|-------------------------------------------------------------------------------------------------------|

|                                                       |   | December      31, 2007 |   |
|------------------------------------------------------------|--------|------------------------|--------|
|                                                       |   | CarryingValue          |   |   | AggregateFair      Value |   |   | Net      Gainsin      AOCL |   |   | Net      Lossesin      AOCL |   |
|                                                       |   |                   |   |   |   |   |   |   |   |   |   |   |
| Debt      securities with maturities of less than one year |   | $                      | 6.3    |   |   | $ | 6.3 |   |   | $ | - |   |   | $ | - |   |
| Auction      rate securities                               |   |                   | 11.5   |   |   |   | 11.5 |   |   |   | - |   |   |   | - |   |
| Equity      securities and other investments               |   |                   | 13.2   |   |   |   | 13.2 |   |   |   | 0.4 |   |   |   | (1.7 | ) |
|           Total                        |   | $                      | 31.0   |   |   | $ | 31.0 |   |   | $ | 0.4 |   |   | $ | (1.7 | ) |

----

| 5. | Debt |
|----|------|

|                                                                                                                              |   | June      30,2008 |   |   | December      31,2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|-----------------------|--------|
|                                                                                                                              |   |              |   |   |                  |   |
| 7.56%      Lakepointe Notes due June 8, 2021                                                                                      |   | $                 | 110.9  |   |                  | $      | 111.8 |   |
| 7.03%      Motel Notes due May 1, 2018                                                                                            |   |              | 42.5   |   |                  |   | 43.3 |   |
| 6.08%      Beltway Notes due November 9, 2024                                                                                     |   |              | 27.6   |   |                  |   | 27.9 |   |
| 7.12%      Palmas Notes due December 20, 2030                                                                                     |   |              | 28.0   |   |                  |   | 28.2 |   |
| Other      notes and contracts, primarily secured by receivables, buildings, real      estate   and      equipment |   |              | 5.0    |   |                  |   | 5.3 |   |
|         Total principal outstanding                                                                                     |   |              | 214.0  |   |                  |   | 216.5 |   |
|                                                                                                                              |   |              |   |   |                  |   |   |   |
| Less:  Short-term      borrowings and current maturities                                                                |   |              | (5.9   | )      |                  |   | (5.3 | ) |
|                                                                                                                              |   | $                 | 208.1  |   |                  | $      | 211.2 |   |

----

|                                                                         | Pension      Benefits            |   |   | Medical/Life                   |   |   | Pension      Benefits |   |   | Medical/Life |   |
|------------------------------------------------------------------------------|----------------------------------|--------|--------|--------------------------------|--------|--------|-----------------------|--------|--------|--------------|--------|
|                                                                         | Three      Months Ended June 30, |   |   | Six      Months Ended June 30, |   |
|                                                                         |                             | 2008   |   |                           | 2007   |   |                  | 2008   |   |         | 2007   |   |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                                         |                             |   |   |                           |   |   |                  |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Components      of net periodic       benefit costs:                    |                             |   |   |                           |   |   |                  |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |
|        Service cost                                                     |                             | $      | -      |                           |   | $      | -                     |   |   | $            | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|        Interest cost                                                    |                             |   | 0.4    |                           |   |   | 0.5                   |   |   |         | 0.1    |   |   |   | - |   |   |   | 0.9 |   |   |   | 1.0 |   |   |   | 0.1 |   |   |   | - |   |
|        Expected return on assets                                        |                             |   | (0.5   | )                              |   |   | (0.5                  | )      |   |         | -      |   |   |   | - |   |   |   | (1.1 | ) |   |   | (1.0 | ) |   |   | - |   |   |   | - |   |
|        Recognized net actuarial loss                                    |                             |   | -      |                           |   |   | -                     |   |   |         | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|        Amortization of prior          service costs |                             |   | -      |                           |   |   | -                     |   |   |         | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|        Net periodic benefit costs                                       |                             |   | (0.1   | )                              |   |   | -                     |   |   |         | 0.1    |   |   |   | - |   |   |   | (0.2 | ) |   |   | - |   |   |   | 0.1 |   |   |   | - |   |
|        Curtailments, settlements and other                              |                             |   | -      |                           |   |   | -                     |   |   |         | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|          Adjusted net periodic benefit costs                  |                             | $      | (0.1   | )                              |   | $      | -                     |   |   | $            | 0.1    |   |   | $ | - |   |   | $ | (0.2 | ) |   | $ | - |   |   | $ | 0.1 |   |   | $ | - |   |

----

|                          |   | Six      Months EndedJune      30, |
|-------------------------------|--------|------------------------------------|
|                          |   |                               | 2008 |   | 2007 |
|                          |   |                               |   |   |   |
| Expected      volatility      |   |                               | 25% |   | 30% |
| Expected      dividends       |   |                               | - |   | - |
| Expected      term (in years) |   |                               |          7.31 |   |          7.33 |
| Risk-free      rate           |   |                               | 3.3% |   | 4.9% |

|                              |   | Options |      |   | WeightedAverageExercise      Price |   |   | Weighted      AverageRemainingContractual      Term(in      years) |   |   | AggregateIntrinsic      Value(in      millions) |   |
|-----------------------------------|--------|---------|-----------|--------|------------------------------------|--------|--------|--------------------------------------------------------------------|--------|--------|-------------------------------------------------|--------|
|                              |   |    |      |   |                               |   |   |                                                               |   |   |                                            |   |
| Balance      at January 1, 2008   |   |    | 1,019,086 |   |                               | $      | 24.11  |                                                               |   |   |                                            |   |   |   |
| Granted                           |   |    | 2,400     |   |                               |   | 28.50  |                                                               |   |   |                                            |   |   |   |
| Exercised                         |   |    | -         |   |                               |   |   |                                                               |   |   |                                            |   |   |   |
| Forfeited      or expired         |   |    | (55,056   | )      |                               |   | 49.56  |                                                               |   |   |                                            |   |   |   |
| Balance      at June 30, 2008     |   |    | 966,430   |   |                               | $      | 22.67  |                                                               |   |   | 5.11                                            |   |   | $ | 5.7 |   |
| Exercisable      at June 30, 2008 |   |    | 720,020   |   |                               | $      | 20.79  |                                                               |   |   | 4.14                                            |   |   | $ | 5.5 |   |

----

|                                                                |   | Three      Months EndedJune      30, |      |   | Six      Months EndedJune      30, |   |
|---------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|------------------------------------|--------|
|                                                                |   | 2008                                 |      |   | 2007                               |   |   | 2008      (1) |   |   | 2007 |   |
|                                                                |   |                                 |      |   |                               |   |   |   |   |   |   |   |
| Weighted      average number of common shares outstanding-basic(2): |   |                                 | 4,561,237 |   |                               |   | 5,251,226 |   |   |   | 4,836,984 |   |   |   | 5,253,267 |   |
|                                                                |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Effect of dilution(3):                                  |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Conversion of Class A Preferred Stock                   |   |                                 | -         |   |                               |   | - |   |   |   | - |   |   |   | - |   |
|        Exercise of stock options                               |   |                                 | -         |   |                               |   | - |   |   |   | - |   |   |   | - |   |
|                                                                |   |                                 |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of common shares outstanding-diluted   |   |                                 | 4,561,237 |   |                               |   | 5,251,226 |   |   |   | 4,836,984 |   |   |   | 5,253,267 |   |

|  (1) | In      the second quarter of 2008, a mathematical error was discovered in the      calculation of the weighted average shares outstanding for the first      quarter of 2008.  As a result, EPS for the three months ended      March 31, 2008 was reported as a loss of $2.58 per share, rather than a      loss of $2.72 per share. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (2) | In      March 2008, MAXXAM Parent purchased 687,480 shares of its Common Stock      from two affiliated institutional holders in a privately negotiated      transaction for an aggregate cost of $20.1  million. |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  (3) | The      Company had a loss for the three and six months ended June 30, 2008 and      2007.  The Class A Preferred Stock and options were therefore      not included in the computation of earnings per share for the period as      the effect would be anti-dilutive.  If the Company was required      to include dilutive shares in its per share calculations, the number of      dilutive shares of Class A Preferred Stock for the three and six months      ended June 30, 2008 and 2007 would be 668,119 and 668,119, respectively,      and the number of dilutive options for the three months ended June 30,      2008 and 2007 would be 278,247 and 281,757, respectively, and the number      of dilutive options for the six months ended June 30, 2008 and 2007 would      be 139,124 and 140,879,respectively. |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | Three      Months EndedJune      30, |   |   | Six      Months EndedJune      30, |   |
|---------------------------------------------------------------|--------|--------------------------------------|--------|--------|------------------------------------|--------|
|                                                          |   | 2008                                 |   |   | 2007                               |   |   | 2008 |   |   | 2007 |   |
|                                                          |   |                                 |   |   |                               |   |   |   |   |   |   |   |
| Net      loss                                                 |   | $                                    | (12.7  | )      |                               | $      | (6.7 | ) |   | $ | (26.6 | ) |   | $ | (19.0 | ) |
| Other      comprehensive loss:                                |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Unrealized gain on available-for-sale investments |   |                                 | 0.2    |   |                               |   | 0.2 |   |   |   | 0.2 |   |   |   | 0.2 |   |
|        Total comprehensive loss                          |   | $                                    | (12.5  | )      |                               | $      | (6.5 | ) |   | $ | (26.4 | ) |   | $ | (18.8 | ) |

| ITEM 2. | MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS |
|---------|-------------------------------------------------------------------------------------------------------|

----

|                                                                                            | Three      Months EndedJune      30, |   |   | Six      Months EndedJune      30, |       |
|-------------------------------------------------------------------------------------------------|--------------------------------------|--------|--------|------------------------------------|------------|
|                                                                                            |                                 | 2008   |   |                               |  2007 |   |   | 2008 |   |   | 2007(1) |   |
|                                                                                            | (In      millions of dollars)        |
|                                                                                            |                                 |   |   |                               |       |   |   |   |   |   |   |   |
| Sales                                                                                           |                                 | $      | 23.3   |                               |       | $ | 23.3 |   |   | $ | 45.0 |   |   | $ | 47.6 |   |
| Costs      and expenses                                                                         |                                 |   | (28.4  | )                                  |       |   | (27.6 | ) |   |   | (57.2 | ) |   |   | (55.7 | ) |
| Operating      loss                                                                             |                                 |   | (5.1   | )                                  |       |   | (4.3 | ) |   |   | (12.2 | ) |   |   | (8.1 | ) |
| Other      income (expense)                                                                     |                                 |   | (3.2   | )                                  |       |   | 1.8 |   |   |   | (5.8 | ) |   |   | 2.9 |   |
| Interest      expense, including amortization of deferred   financing      costs |                                 |   | (4.2   | )                                  |       |   | (4.2 | ) |   |   | (8.4 | ) |   |   | (8.5 | ) |
| Loss      before income taxes                                                                   |                                 |   | (12.5  | )                                  |       |   | (6.7 | ) |   |   | (26.4 | ) |   |   | (13.7 | ) |
| Provision      for income taxes                                                                 |                                 |   | (0.2   | )                                  |       |   | - |   |   |   | (0.2 | ) |   |   | - |   |
| Net      loss                                                                                   |                                 | $      | (12.7  | )                                  |       | $ | (6.7 | ) |   | $ | (26.6 | ) |   | $ | (13.7 | ) |
|                                                                                            |                                 |   |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |
| Revenues      by segment as a percentage of total:                                              |                                 |   |   |                               |       |   |   |   |   |   |   |   |   |   |   |   |
|        Real estate                                                                         |                                 |   | 41.6%  |                               |       |   | 54.9% |   |   |   | 41.3% |   |   |   | 51.3% |   |
|        Racing                                                                              |                                 |   | 45.9%  |                               |       |   | 45.1% |   |   |   | 52.2% |   |   |   | 48.7% |   |
|        Corporate                                                                           |                                 |   | 12.5%  |                               |       |   | - |   |   |   | 6.5% |   |   |   | - |   |
|                                                                                            |                                 |   | 100.0% |                               |       |   | 100.0% |   |   |   | 100.0% |   |   |   | 100.0% |   |

| (1) | Excludes      sales of $4.4 million, operating losses of $2.3 million and net losses of      $5.2 million related to the Debtors for the period from January 1, 2007      through January 18, 2007. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                           |   | Three      Months EndedJune      30, |   |   | Six      Months EndedJune      30, |   |
|----------------------------------------------------------------|--------|--------------------------------------|--------|--------|------------------------------------|--------|
|                                                           |   | 2008                            |   |   | 2007                               |   |   |  2008 |   |   | 2007 |   |
|                                                           |   | (In      millions of dollars)        |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |
| Sales:                                                         |   |                                 |   |   |                               |   |   |   |   |   |   |   |
|        Real estate:                                       |   |                                 |   |   |                               |   |   |   |   |   |   |   |
|          Fountain Hills                         |   | $                                    | 0.9    |   |                               | $      | 2.3 |   |   | $ | 1.4 |   |   | $ | 4.9 |   |
|          Mirada                                 |   |                                 | 0.5    |   |                               |   | 1.4 |   |   |   | 0.5 |   |   |   | 1.4 |   |
|          Palmas                                 |   |                                 | 0.1    |   |                               |   | 0.1 |   |   |   | 0.2 |   |   |   | 0.2 |   |
|             Total                |   |                                 | 1.5    |   |                               |   | 3.8 |   |   |   | 2.1 |   |   |   | 6.5 |   |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Resort, commercial and other:                      |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|          Fountain Hills                         |   |                                 | 0.8    |   |                               |   | 0.9 |   |   |   | 1.8 |   |   |   | 2.1 |   |
|          Palmas                                 |   |                                 | 2.7    |   |                               |   | 3.4 |   |   |   | 5.4 |   |   |   | 6.5 |   |
|          Commercial lease properties            |   |                                 | 4.6    |   |                               |   | 4.6 |   |   |   | 9.2 |   |   |   | 9.2 |   |
|          Other                                  |   |                                 | 0.1    |   |                               |   | 0.1 |   |   |   | 0.1 |   |   |   | 0.1 |   |
|             Total                |   |                                 | 8.2    |   |                               |   | 9.0 |   |   |   | 16.5 |   |   |   | 17.9 |   |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Total sales                                        |   | $                                    | 9.7    |   |                               | $      | 12.8 |   |   | $ | 18.6 |   |   | $ | 24.4 |   |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Operating      income (loss):                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Fountain Hills                                     |   | $                                    | (0.3   | )      |                               | $      | 0.5 |   |   | $ | (1.2 | ) |   | $ | 0.7 |    |
|        Mirada                                             |   |                                 | (0.1   | )      |                               |   | 0.7 |   |   |   | (0.2 | ) |   |   | 0.6 |   |
|        Palmas                                             |   |                                 | (3.8   | )      |                               |   | (3.2 | ) |   |   | (6.8 | ) |   |   | (6.1 | ) |
|        Commercial lease properties                        |   |                                 | 3.2    |   |                               |   | 2.6 |   |   |   | 6.5 |   |   |   | 5.2 |   |
|        Other                                              |   |                                 | (0.7   | )      |                               |   | (0.6 | ) |   |   | (1.2 | ) |   |   | (1.0 | ) |
|          Total operating income (loss)          |   | $                                    | (1.7   | )      |                               | $      | - |   |   | $ | (2.9 | ) |   | $ | (0.6 | ) |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Investment,      interest and other income:                    |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Equity in earnings from real estate joint ventures |   | $                                    | 0.1    |   |                               | $      | 0.4 |   |   | $ | 0.1 |   |   | $ | 0.4 |   |
|        Other                                              |   |                                 | (1.3   | )      |                               |   | 0.6 |   |   |   | (1.1 | ) |   |   | 0.8 |   |
|                                                           |   | $                                    | (1.2   | )      |                               | $      | 1.0 |   |   | $ | (1.0 | ) |   | $ | 1.2 |   |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                          |   | $                                    | (4.2   | )      |                               | $      | (4.2 | ) |   | $ | (8.4 | ) |   | $ | (8.5 | ) |
|                                                           |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income taxes                                  |   | $                                    | (7.1   | )      |                               | $      | (3.2 | ) |   | $ | (12.3 | ) |   | $ | (7.9 | ) |

----

|                                                  |   | Three      Months EndedJune      30, |   |   | Six      Months EndedJune      30, |   |
|-------------------------------------------------------|--------|--------------------------------------|--------|--------|------------------------------------|--------|
|                                                  |   | 2008                                 |   |   | 2007                               |   |   | 2008 |   |   | 2007 |   |
|                                                  |   | (In      millions of dollars)        |   |
|                                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |
| Number      of live racing days:                      |   |                                 |   |   |                               |   |   |   |   |   |   |   |
|        Sam Houston Race Park                     |   |                                 | 6      |   |                               |   | 7 |   |   |   | 47 |   |   |   | 46 |   |
|        Valley Race Park                          |   |                                 | 5      |   |                               |   | 8 |   |   |   | 71 |   |   |   | 70 |   |
|                                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Handle:                                               |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Sam Houston Race Park:                    |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|          On-track handle               |   | $                                    | 32.0   |   |                               | $      | 32.8 |   |   | $ | 63.0 |   |   | $ | 63.6 |   |
|          Off-track handle              |   |                                 | 6.0    |   |                               |   | 11.9 |   |   |   | 72.7 |   |   |   | 83.8 |   |
|            Total             |   | $                                    | 38.0   |   |                               | $      | 44.7 |   |   | $ | 135.7 |   |   | $ | 147.4 |   |
|                                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Valley Race Park:                         |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|          On-track handle               |   | $                                    | 4.0    |   |                               | $      | 4.3 |   |   | $ | 9.8 |   |   | $ | 9.8 |   |
|          Off-track handle              |   |                                 | 0.3    |   |                               |   | 0.3 |   |   |   | 3.0 |   |   |   | 2.9 |   |
|            Total             |   | $                                    | 4.3    |   |                               | $      | 4.6 |   |   | $ | 12.8 |   |   | $ | 12.7 |   |
|                                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Sales:                                                |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Sam Houston Race Park:                    |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|          Gross pari-mutuel commissions |   | $                                    | 7.1    |   |                               | $      | 7.6 |   |   | $ | 15.9 |   |   | $ | 16.5 |   |
|          Concert revenues              |   |                                 | 0.8    |   |                               |   | 0.3 |   |   |   | 0.8 |   |   |   | 0.3 |   |
|          Other revenues                |   |                                 | 1.7    |   |                               |   | 1.5 |   |   |   | 3.8 |   |   |   | 3.4 |   |
|            Total             |   |                                 | 9.6    |   |                               |   | 9.4 |   |   |   | 20.5 |   |   |   | 20.2 |   |
|        Valley Race Park:                         |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|          Gross pari-mutuel commissions |   |                                 | 0.9    |   |                               |   | 1.0 |   |   |   | 2.4 |   |   |   | 2.4 |   |
|          Other revenues                |   |                                 | 0.2    |   |                               |   | 0.1 |   |   |   | 0.6 |   |   |   | 0.6 |   |
|            Total             |   |                                 | 1.1    |   |                               |   | 1.1 |   |   |   | 3.0 |   |   |   | 3.0 |   |
|        Total sales                               |   | $                                    | 10.7   |   |                               | $      | 10.5 |   |   | $ | 23.5 |   |   | $ | 23.2 |   |
|                                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss:                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|        Sam Houston Race Park                     |   | $                                    | (2.5   | )      |                               | $      | (1.2 | ) |   | $ | (3.1 | ) |   | $ | (1.5 | ) |
|        Valley Race Park                          |   |                                 | (0.2   | )      |                               |   | (0.3 | ) |   |   | (0.3 | ) |   |   | (0.5 | ) |
|        Other                                     |   |                                 | -      |   |                               |   | (0.3 | ) |   |   | (0.1 | ) |   |   | (0.4 | ) |
|          Total operating loss          |   | $                                    | (2.7   | )      |                               | $      | (1.8 | ) |   | $ | (3.5 | ) |   | $ | (2.4 | ) |
|                                                  |   |                                 |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income taxes                         |   | $                                    | (2.7   | )      |                               | $      | (1.7 | ) |   | $ | (3.5 | ) |   | $ | (2.3 | ) |

----

|                                                 |   | Three      Months EndedJune      30, |   |    | Six      Months EndedJune      30, |   |
|------------------------------------------------------|--------|--------------------------------------|--------|---------|------------------------------------|--------|
|                                                 |   |  2008                           |   |    |  2007                         |   |   | 2008 |   |   | 2007 |   |
|                                                 |   | (In      millions of dollars)        |   |
|                                                 |   |                                 |   |    |                               |   |   |   |   |   |   |   |
|                                                 |   |                                 |   |    |                               |   |   |   |   |   |   |   |
| Revenue                                              |   | $                                    | 2.9    |    |                               | $      | - |   |   | $ | 2.9 |   |   | $ | - |   |
| Cost      of goods sold                              |   |                                 | (4.1   | )       |                               |   | - |   |   |   | (4.1 | ) |   |   | - |   |
| Loss      on lumber sale                             |   |                                 | (1.2   | )       |                               |   | - |   |   |   | (1.2 | ) |   |   | - |   |
| Corporate      expenses                              |   |                                 | (2.4   | )       |                               |   | (2.9 | ) |   |   | (5.2 | ) |   |   | (4.3 | ) |
| Stock-based      compensation                        |   |                                 | 3.4    |    |                               |   | 0.9 |   |   |   | 1.6 |   |   |   | 0.4 |   |
| Operating      loss                                  |   |                                 | (0.2   | )       |                               |   | (2.0 | ) |   |   | (4.8 | ) |   |   | (3.9 | ) |
| Investment,      interest and other income (expense) |   |                                 | (2.0   | )  |                               |   | 0.7 |   |   |   | (4.8 | ) |   |   | 1.5 |   |
| Income      (loss) before income taxes               |   | $                                    | (2.2   | )  |                               | $      | (1.3 | ) |   | $ | (9.6 | ) |   | $ | (2.4 | ) |

----

|                                            | Three      Months EndedJune      30,                                                              |   |   | Six      Months EndedJune      30, |             |
|-------------------------------------------------|---------------------------------------------------------------------------------------------------|--------|--------|------------------------------------|------------------|
|                                            |                                                                                              | 2008   |   |                               | 2007   |   |   | 2008 |   |   | 2007 |   |
|                                            |                   (In millions of dollars) |   |
|                                            |                                                                                              |   |   |                               |             |   |   |   |   |   |   |   |
| Operating      loss                             |                                                                                              | $      | (0.5   | )                                  |             | $ | (0.5 | ) |   | $ | (1.0 | ) |   | $ | (1.2 | ) |
| Loss      before income taxes    |                                                                                              |   | (0.5   | )                                  |             |   | (0.5 | ) |   |   | (1.0 | ) |   |   | (1.2 | ) |

----

|                                                                                                                                          | Real      Estate              |   |   | Racing |   |   | MGI    |   |   | Corporate |   |   | Total  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|
|                                                                                                                                          | (In      millions of dollars) |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |
| Debt and credit facilities   (excluding intercompany   notes)                                                   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |
| Short-term      borrowings and       current maturities of       long-term debt:                                                    |                          |   |   |   |   |   |   |   |   |      |   |   |   |
|        June 30, 2008                                                                                                                     |                          | $      | 5.8    |   |   | $      | 0.1    |   |   | $         | -      |   |   | $      | - |   |   | $ | 5.9 |   |
|        December 31, 2007                                                                                                                 |                          |   | 5.2    |   |   |   | 0.1    |   |   |      | -      |   |   |   | - |   |   |   | 5.3 |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Long-term      debt, excluding  current      maturities and  discounts:                                                   |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
|        June 30, 2008                                                                                                                     |                          | $      | 207.3  |   |   | $      | 0.8    |   |   | $         | -      |   |   | $      | - |   |   | $ | 208.1 |   |
|        December 31, 2007                                                                                                                 |                          |   | 210.4  |   |   |   | 0.8    |   |   |      | -      |   |   |   | - |   |   |   | 211.2 |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Cash, cash equivalents,        marketable securities        and other investments                                         |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |
|        June 30, 2008                                                                                                                     |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
|        Current restricted amounts                                                                                                        |                          | $      | 0.1    |   |   | $      | 1.7    |   |   | $         | -      |   |   | $      | - |   |   | $ | 1.8 |   |
|        Other current amounts                                                                                                             |                          |   | 7.0    |   |   |   | 2.9    |   |   |      | -      |   |   |   | 49.5 |   |   |   | 59.4 |   |
|                                                                                                                                          |                          |   | 7.1    |   |   |   | 4.6    |   |   |      | -      |   |   |   | 49.5 |   |   |   | 61.2 |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
|        Long-term unrestricted investments                                                                                                |                          |   | 1.6    |   |   |   | -      |   |   |      | -      |   |   |   | 15.7 |   |   |   | 17.3 |   |
|        Long-term restricted         amounts                                                                               |                          |   | 3.6    |   |   |   | -      |   |   |      | -      |   |   |   | - |   |   |   | 3.6 |   |
|                                                                                                                                          |                          | $      | 12.3   |   |   | $      | 4.6    |   |   | $         | -      |   |   | $      | 65.2 |   |   | $ | 82.1 |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Changes in cash and cash   equivalents                                                                                         |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Capital      expenditures for the six months ended:                                                                                           |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
|        June 30, 2008                                                                                                                     |                          | $      | 0.5    |   |   | $      | 1.6    |   |   | $         | -      |   |   | $      | - |   |   | $ | 2.1 |   |
|        June 30, 2007                                                                                                                     |                          |   | 0.4    |   |   |   | 1.4    |   |   |      | -      |   |   |   | 0.1 |   |   |   | 1.9 |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Net      proceeds from dispositions of property       and investments for the six months ended:                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |
|        June 30, 2008                                                                                                                     |                          | $      | -      |   |   | $      | -      |   |   | $         | -      |   |   | $      | - |   |   | $ | - |   |
|        June 30, 2007                                                                                                                     |                          |   | 0.1    |   |   |   | -      |   |   |      | -      |   |   |   | - |   |   |   | 0.1 |   |
|                                                                                                                                          |                          |   |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Borrowings      (repayments) of debt and credit facilities,       net of financing costs for the six months ended:                       |                          |   |   |   |   |   |   |   |   |
|        June 30, 2008                                                                                                                     |                          | $      | (2.5   | )      |   | $      | -      |   |   | $         | -      |   |   | $      | - |   |   | $ | (2.5 | ) |
|        June 30, 2007                                                                                                                     |                          |   | (2.2   | )      |   |   | (0.1   | )      |   |      | -      |   |   |   | - |   |   |   | (2.3 | ) |
| Dividends      and advances, including interest paid       and tax sharing payments received (paid)       for the six months ended: |                          |
|        June 30, 2008                                                                                                                     |                          | $      | 6.6    |   |   | $      | 4.0    |   |   | $         | -      |   |   | $      | (10.6 | ) |   | $ | - |   |
|        June 30, 2007                                                                                                                     |                          |   | 1.1    |   |   |   | 2.5    |   |   |      | -      |   |   |   | (3.6 | ) |   |   | - |   |

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|   | Level      2 - Observable inputs other than Level 1 prices such as quoted prices for      similar assets or liabilities; quoted prices in markets that are not      active; or other inputs that are observable or can be corroborated by      observable market data for substantially the full term of the assets or      liabilities. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3 - Unobservable inputs that are supported by little or no market activity      and that are significant to the fair value of the assets or      liabilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                |   | Fair      Value Measurements as ofJune      30, 2008 |   |
|-------------------------------------|--------|------------------------------------------------------|--------|
|                                |   | Total                                                |   |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |
| Description:                        |   |                                                 |   |   |   |   |   |   |   |   |   |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |
|        Short-term investments  |   | $                                                    | 3.4    |   |   | $ | 3.4 |   |   | $ | - |   |   | $ | - |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Auction rate securities |   |                                                 | 5.2    |   |   |   | - |   |   |   | - |   |   |   | 5.2 |   |
|                                |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          Total       |   | $                                                    | 8.6    |   |   | $ | 3.4 |   |   | $ | - |   |   | $ | 5.2 |   |

|                                                                                              |   | Auction      Rate Securities |   |
|---------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
|                                                                                              |   |                         |   |
| Carrying      value as of January 1, 2008                                                         |   | $                            | 11.5   |   |
| Settlements                                                                                       |   |                         | (2.6   | ) |
| Impairment      charge included in the   Consolidated      Statement of Operations |   |                         | (3.7   | ) |
| Carrying      value as of June 30, 2008                                                           |   | $                            | 5.2    |   |

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

 CONTROLS AND PROCEDURES

PART II.  OTHER INFORMATION

ITEM1
LEGAL PROCEEDINGS

.

|   | The      bankruptcy cases of the Debtors could result in claims against or have      other adverse impacts on the Company and its  affiliates. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

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UNREGISTERED SALES OF EQUITY SECURITIES AND USEOF PROCEEDS

ITEM3

ITEM4

----

ITEM6

| *  | 10.1 | MAXXAM      Inc. Revised Capital Accumulation Plan of 1988 (As Amended and Restated      December 2007) |
|---------|------|---------------------------------------------------------------------------------------------------------|

|        * | 10.2 | Revised      form of Deferred Compensation Agreement for executive officers of the      Company |
|---------------|------|-------------------------------------------------------------------------------------------------|

|        * | 10.3 | Revised      form of Deferred Fee Agreement for non-employee directors of the      Company |
|---------------|------|--------------------------------------------------------------------------------------------|

|   | 10.4 | Term      Sheet Regarding Global Settlement and Plan Support among MRC, Marathon,      the  Palco Debtors, the Company, MGHI, and MGI (incorporated      herein by reference to Exhibit 10.1 to the Company’s Current Report on      Form 8-K, filed on May 5,2008) |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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SIGNATURES

|   |   | MAXXAMINC. |
|--------|--------|------------|

| Date:           August      8, 2008 | By:    | /S/      M.      EMILY MADISON                                                                   |
|--------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|                                                                                       |   | M.      Emily MadisonVice      President, Finance(Principal      Accounting Officer andPrincipal      Financial Officer)  |

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APPENDIX A

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