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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-K



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



For the fiscal year ended September 30, 2005



OR



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



For the transition period fromto



Commission file number 033-80655



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MOHEGAN TRIBAL GAMING AUTHORITY

(Exact name of registrant as specified in its
charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Connecticut                                                    |  | 06-1436334                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS employer Identification No.)
|                                                               | 
|One Mohegan Sun Boulevard, Uncasville, CT                      |  | 06382                            
|(Address of principal executive offices)                       |  | (Zip Code)                       



(860) 862-8000

(Registrants telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange On Which Registered
|NONE                |  | NONE                                     



Securities
registered pursuant to Section 12(g) of the Act:



Title of Class

NONE



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Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:    Yes ̈No  x



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:    Yes ̈No  x



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days:    Yes  x    No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K: ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of
1934):    Yes ̈No  x



Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act):    Yes ̈No  x



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MOHEGAN TRIBAL GAMING AUTHORITY



INDEX
TO FORM 10-K



|                                                           |  |                                                                                                              |  |           
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----------
|                                                           |  |                                                                                                              |  | PageNumber
|CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS       |  | 1                                                                                                           
|                                                          
|PART I                                                    
|                                                           |  |                                                                                                             
|Item 1.                                                    |  | Business                                                                                                     |  | 2         
|                                                           |  |                                                                                                             
|Item 1A.                                                   |  | Risk Factors                                                                                                 |  | 30        
|                                                           |  |                                                                                                             
|Item 1B.                                                   |  | Unresolved Staff Comments                                                                                    |  | 39        
|                                                           |  |                                                                                                             
|Item 2.                                                    |  | Properties                                                                                                   |  | 39        
|                                                           |  |                                                                                                             
|Item 3.                                                    |  | Legal Proceedings                                                                                            |  | 40        
|                                                           |  |                                                                                                             
|Item 4.                                                    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 40        
|                                                          
|PART II                                                   
|                                                           |  |                                                                                                             
|Item 5.                                                    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 41        
|                                                           |  |                                                                                                             
|Item 6.                                                    |  | Selected Financial Data                                                                                      |  | 41        
|                                                           |  |                                                                                                             
|Item 7.                                                    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 42        
|                                                           |  |                                                                                                             
|Item 7A.                                                   |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 66        
|                                                           |  |                                                                                                             
|Item 8.                                                    |  | Financial Statements and Supplementary Data                                                                  |  | 66        
|                                                           |  |                                                                                                             
|Item 9.                                                    |  | Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure                          |  | 66        
|                                                           |  |                                                                                                             
|Item 9A.                                                   |  | Controls and Procedures                                                                                      |  | 66        
|                                                           |  |                                                                                                             
|Item 9B.                                                   |  | Other Information                                                                                            |  | 67        
|                                                          
|PART III                                                  
|                                                           |  |                                                                                                             
|Item 10.                                                   |  | Directors and Executive Officers of the Registrant                                                           |  | 68        
|                                                           |  |                                                                                                             
|Item 11.                                                   |  | Executive Compensation                                                                                       |  | 71        
|                                                           |  |                                                                                                             
|Item 12.                                                   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 73        
|                                                           |  |                                                                                                             
|Item 13.                                                   |  | Certain Relationships and Related Transactions                                                               |  | 73        
|                                                           |  |                                                                                                             
|Item 14.                                                   |  | Principal Accounting Fees and Services                                                                       |  | 75        
|                                                          
|PART IV                                                   
|                                                           |  |                                                                                                             
|Item 15.                                                   |  | Exhibits, Financial Statement Schedules                                                                      |  | 76        
|                                                           |  |                                                                                                             
|Signatures                                                 |  |                                                                                                              |  | 77        
|                                                           | 
|Supplemental Information                                   |  | 78                                                                                                          
|                                                           | 
|Index to Consolidated Financial Statements                 |  | F-1                                                                                                         
|                                                           | 
|Schedule IIValuation and Qualifying Accounts and Reserves |  | S-1                                                                                                         



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References in this Form 10-K to the Authority and the Tribe are to the Mohegan
Tribal Gaming Authority and the Mohegan Tribe of Indians of Connecticut, respectively. The terms we, us and our refer to the Authority.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



This Form 10-K contains statements about future events, including without limitation, information relating to business development activities, as well as capital spending, financing sources and the effects of
regulation (including gaming and tax regulation) and increased competition. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements, within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements sometimes can be identified by our use of forward-looking words such as may, will, anticipate, estimate,
expect, or intend and similar expressions. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may
differ materially from those expressed in any forward-looking statements made by us or on our behalf. You should review carefully all of the information in this Form 10-K, including the consolidated financial statements.



In addition to the risk factors described under Part I. Item 1A.
Risk Factors, the following important factors, among others, could affect our future financial condition or results of operations, causing actual results to differ materially from those expressed in the forward-looking statements:



| |  |  | increased competition (including the legalization or expansion of gaming in New England, New York, New Jersey or Pennsylvania);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | the financial performance of Mohegan Sun, Pocono Downs and the Pocono Downs off-track wagering (OTW) facilities;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | our ability to obtain a gaming license in Pennsylvania and develop a gaming facility at Pocono Downs on time and within budget;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to implement successfully our diversification strategy;
| | - |  | -------------------------------------------------------------------



| |  |  | our dependence on existing management;
| | - |  | --------------------------------------



| |  |  | the local, regional, national or global economic climate;
| | - |  | ---------------------------------------------------------



| |  |  | our leverage and ability to meet our debt service obligations;
| | - |  | --------------------------------------------------------------



| |  |  | changes in federal or state tax laws or the administration of such laws;
| | - |  | ------------------------------------------------------------------------



| |  |  | changes in gaming laws or regulations (including the limitation, denial or suspension of licenses required under gaming laws and regulations); and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the continued availability of financing.
| | - |  | ----------------------------------------



These factors and the other risk factors discussed in this Form 10-K are not necessarily all of the important factors that could cause our actual results
to differ materially from those expressed in any of the forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. The forward-looking statements included in this Form 10-K are
made only as of the date of this Form 10-K. We cannot assure you that any projected results or events will be achieved. We do not have and do not undertake any obligation to publicly update any forward-looking statements to reflect subsequent events
or circumstances.



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PART I



Item 1. Business.



Overview



The Mohegan Tribe of Indians of Connecticut, or the Tribe, is a federally
recognized Indian tribe with an approximately 405-acre reservation situated in southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, or IGRA, federally recognized Indian tribes are permitted
to conduct full-scale casino gaming operations on tribal lands, subject to, among other things, the negotiation of a gaming compact with the state in which they operate. The Tribe and the State of Connecticut have entered into such a compact, the
Mohegan Compact, which has been approved by the United States Secretary of the Interior. We were established as an instrumentality of the Tribe, with the exclusive power to conduct and regulate gaming activities on tribal lands and the nonexclusive
authority to conduct such activities elsewhere. Our gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Through our subsidiary, Downs Racing,
L.P., we also own Mohegan Sun at Pocono Downs, or Pocono Downs, a harness racing facility located in Plains Township, Pennsylvania, as well as five Pennsylvania off-track wagering, or OTW, facilities. We are governed by a nine-member Management
Board, whose members also comprise the Mohegan Tribal Council (the governing body of the Tribe). Any change in the composition of the Mohegan Tribal Council results in a corresponding change in our Management Board.



Our mailing address is One Mohegan Sun Boulevard, Uncasville, CT 06382 and
our telephone number is (860) 862-8000. Our website is located at www.mtga.com. Through our website, we make available, free of charge, our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K,
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) under the Securities Exchange Act of 1934. These reports are available as soon as reasonably practicable after we electronically file these materials with, or
furnish them to, the SEC.



Mohegan Sun



In October 1996, we opened a gaming and entertainment
complex known as Mohegan Sun. Mohegan Sun is located on a 240-acre site on the Tribes reservation overlooking the Thames River with direct access from Interstate 395 and Connecticut Route 2A via a four-lane access road constructed by us.
Mohegan Sun is approximately 125 miles from New York City and approximately 100 miles from Boston, Massachusetts. In fiscal year 2002, we completed a major expansion of Mohegan Sun known as Project Sunburst. The first phase of Project Sunburst, the
Casino of the Sky, which included increased gaming, restaurant and retail space and an entertainment arena, opened in September 2001. The remaining components, including an approximately 1,200-room luxury hotel and approximately 100,000 square feet
of convention space, were fully opened in June 2002.



Mohegan
Sun operates in an approximately 3.0 million square foot facility, which includes the following two casinos:



Casino of the Earth



The Casino of the Earth has approximately 179,500 square feet of gaming space and offers:



| |  |  | approximately 3,800 slot machines and 200 table games (including blackjack, roulette, craps and baccarat);
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | food and beverage amenities, including the Uncas American Indian Grill, a 285-seat full-service restaurant and bar opened in July 2005, three full-service themed fine dining
restaurants, with a fourth area featuring cuisine from all three themes, a 610-seat buffet, a ten-station food court featuring international and domestic cuisine and multiple service bars, all operated by us, for a current total of approximately
1,700 restaurant seats;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | an approximately 10,000 square foot, 410-seat lounge featuring live entertainment seven days a week;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | an approximately 11,000 square foot simulcasting race book facility; and
| | - |  | ------------------------------------------------------------------------



| |  |  | four retail shops providing shopping opportunities ranging from Mohegan Sun logo souvenirs to cigars.
| | - |  | -----------------------------------------------------------------------------------------------------



Casino of the Sky



The Casino of the Sky has approximately 119,000 square feet of gaming space and offers:



| |  |  | approximately 2,400 slot machines and 105 table games (including blackjack, roulette, craps and baccarat);
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | food and beverage amenities, including two full-service restaurants, two quick-service restaurants, a 24-hour coffee shop, a 320-seat buffet, a six station food court featuring
international and domestic cuisine and five lounges and bars operated by us, as well as four full-service and three quick-service restaurants operated by third parties, for a total of approximately 2,600 restaurant seats;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mohegan After Dark, consisting of a nightclub, a lounge and a pub, which are all operated by a third party;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the Mohegan Sun Arena with seating for up to 10,000;
| | - |  | ----------------------------------------------------



| |  |  | a 350-seat Cabaret;
| | - |  | -------------------



| |  |  | the Shops at Mohegan Sun containing 29 different retail shops, seven of which we own;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | an approximately 1,200-room luxury hotel;
| | - |  | -----------------------------------------



| |  |  | an approximately 20,000 square foot spa operated by a third party;
| | - |  | ------------------------------------------------------------------



| |  |  | approximately 100,000 square feet of convention space; and
| | - |  | ----------------------------------------------------------



| |  |  | a child care facility and an arcade style entertainment area operated by a third party.
| | - |  | ---------------------------------------------------------------------------------------



Mohegan Sun has parking spaces for approximately 13,000 guests and 3,100 employees. In addition, we operate the Mohegan Sun
gasoline and convenience center, an approximately 4,000 square foot, 20-pump facility located adjacent to Mohegan Sun.



Connecticut Sun



In January 2003, we formed a wholly-owned subsidiary, the Mohegan Basketball Club LLC, or MBC, for the purpose of holding a membership in the Womens
National Basketball Association, or WNBA, and owning and operating a professional basketball team in the WNBA. MBC entered into a membership agreement with the WNBA permitting it to operate the Connecticut Sun basketball team. The team plays its
home games in the Mohegan Sun Arena.



Mohegan Sun at
Pocono Downs



On January 25, 2005, we and our
wholly owned subsidiary, Mohegan Commercial Ventures PA, LLC, or MCV-PA, acquired all of the partnership interests in Downs Racing, L.P., Mill Creek Land, L.P., Backside, L.P. and Northeast Concessions, L.P., or the Pocono Downs entities, from
subsidiaries of Penn National Gaming, Inc. Downs Racing, L.P. owns Pocono Downs, a harness racing facility located on approximately 400 acres in Plains Township, Pennsylvania as well as five Pennsylvania OTWs located in Carbondale, East Stroudsburg,
Erie, Hazleton and Lehigh Valley (Allentown). The Pocono Downs harness racing facility is currently one of only two harness racetracks in Pennsylvania and one of only four thoroughbred and harness racing facilities in the state. It has a 5/8 mile
all-weather, lighted track with seating for approximately 3,500 and parking capacity for approximately 6,500. Harness racing has been conducted at Pocono Downs since 1965, and in 2005, the track



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held 143 live racing days. The Lehigh Valley (Allentown) OTW is a 28,000 square-foot facility and is the largest OTW in the state of Pennsylvania. The
approximately $280 million purchase price was funded through draws on our bank credit facility, subsequently refinanced through the issuance of senior notes and senior subordinated notes discussed in Certain Indebtedness.



We completed the 2005 harness racing season at Pocono Downs and we expect to
continue the harness racing activities at Pocono Downs, with the 2006 racing season from April to November 2006. We also are conducting year round pari-mutuel wagering activities at Pocono Downs and the OTW facilities. In addition, as a result of
our acquisition of Pocono Downs, we have the right to apply for a Pennsylvania Category One Slot Machine License, which, if approved, would initially permit the installation and operation of up to 3,000 slot machines at Pocono Downs. Downs Racing,
L.P. submitted an application for a conditional Category One Slot Machine License with the Pennsylvania Gaming Control Board, or PGCB, on December 8, 2005. Downs Racing, L.P. will submit an application for a permanent Category One Slot Machine
License on or before December 28, 2005. Upon receipt of a conditional or permanent license, we would be required to pay a one-time $50 million fee to the Commonwealth of Pennsylvania.



A minimum of 1,500 slot machines are required, and a maximum of 3,000 slot
machines are permitted, to be in operation within 18 months of the issuance of the slot machine license. Under certain circumstances, we may be permitted to install up to a total of 5,000 slot machines.



On June 22, 2005, the Pennsylvania Supreme Court unanimously upheld
substantially all of the Pennsylvania Race Horse Development and Gaming Act, or the Pennsylvania Gaming Act. Following the Pennsylvania Supreme Courts decision, the PGCB has begun the process of issuing final licensing regulations. Published
reports indicate that the PGCB is expected to begin approving conditional Category One Slot Machine Licenses in June 2006.



On July 21, 2005, we announced plans for the development of a proposed 400,000 square foot gaming and entertainment facility to be constructed on the
existing grounds of Pocono Downs. The plans provide for approximately 2,000 slot machines, 3 full-service restaurants, a 300 seat buffet, a 15,000 square foot food court, several bars and lounges, an 18,000 square foot nightclub, a Kids
Quest center, 20,000 square feet of retail space, new parking facilities and an enhanced employee services area.



Construction of the new facility will begin upon the issuance of a conditional Category One Slot Machine License by the PGCB. The new facility is expected
to open approximately 14 months from the beginning of construction. Estimated cost of construction for the new facility is between $140 million and $160 million.



In addition to the development of the new gaming and entertainment facility, we plan to make significant improvements and
additions to the existing Pocono Downs Clubhouse and Grandstand, including a new simulcast facility, improvements to the Grandstand for the installation of approximately 1,000 slot machines (upon receipt of a conditional Category One Slot Machine
License) and a new 10,000 square foot food court. These improvements are estimated to cost approximately $47.0 million. Construction began in September 2005 and is estimated to be completed by the spring of 2006.



Other Diversification Projects



The Tribe has determined that it is in its long-term best interest to pursue
diversification of its business interests, both directly and through us. As a result, from time to time, we and the Tribe receive and evaluate various business opportunities. These opportunities primarily include the management or ownership of, or
investment in, other gaming enterprises through direct investments, acquisitions, joint venture arrangements and loan transactions. In addition to the developments described below, we and the Tribe are currently exploring other opportunities,
although there is no assurance that we or the Tribe will continue to pursue any of these other opportunities or that any of them will be consummated.



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Cowlitz Project



In July 2004, we formed Mohegan Ventures-Northwest, LLC, or Mohegan Ventures-NW, one of two members in Salishan-Mohegan LLC,
or Salishan-Mohegan. Salishan-Mohegan was formed to participate in the development and management of a casino to be located in Clark County, Washington, or the Cowlitz Project. The proposed casino will be owned by the Cowlitz Indian Tribe. Both
Mohegan Ventures-NW and Salishan-Mohegan were designated as our unrestricted subsidiaries, which are not required to be guarantors of our debt obligations.



In September 2004, Salishan-Mohegan entered into development and management agreements with the Cowlitz Indian Tribe regarding the Cowlitz Project. Under
the terms of the development agreement, Salishan-Mohegan administers and oversees the planning, designing, development, construction, and furnishing, as well as providing assistance with the financing, of the Cowlitz Project. The development
agreement provides for certain development fees of 3% of total Project Costs, as defined in the development agreement, which are payable to Mohegan VenturesNW through Salishan-Mohegan pursuant to the operating agreement. The management
agreement is for a period of seven years commencing with the opening of the planned casino, during which Salishan-Mohegan will manage, operate and maintain the planned casino. The management agreement provides for a management fee of 24% of Net
Revenues, as defined in the management agreement, which approximates net income earned from the Cowlitz Project. Pursuant to the operating agreement, management fees will be allocated to the members of Salishan-Mohegan based on their respective
membership percentages. Development of the Cowlitz Project is subject to certain governmental and regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of Washington and the United States Department of the
Interior accepting land into trust on behalf of the Cowlitz Indian Tribe. The management agreement is subject to approval by the National Indian Gaming Commission, or the NIGC.



Menominee Project



In October 2004, we entered into a management agreement with the Menominee Indian Tribe of Wisconsin, or the Menominee Tribe, and the Menominee Kenosha
Gaming Authority. The terms of the management agreement grant us the exclusive right and obligation to manage, operate and maintain a planned casino and destination resort to be located in Kenosha, Wisconsin, or the Menominee Project, for a period
of seven years commencing with the opening of the planned casino, in consideration of a management fee of 13.4% of Net Revenues, as defined in the management agreement, which approximates net income earned from the Menominee Project. The management
agreement is subject to approval by the NIGC.



Strategy



Our overall strategy is to profit from expanding demand in the gaming market
in the northeastern United States as well as to diversify the Tribes business interests in the gaming industry outside of Mohegan Sun, as discussed above. Mohegan Suns initial success has resulted primarily from patronage from guests
residing within 100 miles of Mohegan Sun, which represents our primary market. We have also enjoyed additional patronage from guests residing within a 100 to 200 mile radius of Mohegan Sun, which represents our secondary market. Based upon Mohegan
Suns results and experience, we believe the gaming market in the northeastern United States continues to be strong. After the completion of Project Sunburst in 2002, we have developed Mohegan Sun into a full-scale entertainment and destination
resort, which has led to increases in the number of guests and lengthened the duration of their stays at our facility.



Market and Competition from Other Gaming Operations



Mohegan Sun and Foxwoods Resort Casino, or Foxwoods, are the only two legally authorized gaming operations offering both traditional slot machines and
table games in New England. Foxwoods, operated by the Mashantucket Pequot Tribe under procedures approved by the United States Department of the Interior, is located approximately 10 miles from Mohegan Sun and is currently the largest gaming
facility in the United States in terms



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of total gaming positions. Based on the size and success of Foxwoods and the rapid growth of Mohegan Sun, we believe that the gaming market in New England
and the remaining northeastern United States remains underserved.



The existing gaming industry in the northeastern United States is highly competitive. Mohegan Sun currently competes primarily with Foxwoods, which has been in operation for approximately thirteen years and may have greater financial
resources and operating experience than us. In addition, Foxwoods has offered certain amenities to its guests for a significantly longer duration than Mohegan Sun, such as hotel accommodations and convention center services.



Since the completion of the Project Sunburst expansion in June 2002,
including our approximately 1,200-room luxury hotel, we have broadened Mohegan Suns target market beyond day-trip customers to include guests making overnight stays at the resort. Consequently, Mohegan Sun now competes more directly for
customers with casinos in Atlantic City, New Jersey. Many of these casinos have greater resources, operating experience and name recognition than Mohegan Sun.



Under current law, outside of Atlantic City, New Jersey, full-scale commercial casino gaming in the northeastern United States may be conducted only by
federally recognized Indian tribes operating under federal Indian gaming laws or on cruise ships in international waters. In recent years, there has been an increase in the number of Indian tribes seeking to engage in commercial casino gaming,
including full-scale commercial casinos, in the northeastern United States and in the number of individual groups seeking to obtain federal recognition as Indian tribes so that they may engage in commercial casino gaming in the northeastern United
States. Under federal law, after obtaining federal recognition and before gaming operations may commence, a tribe must, among other things, have land taken into trust by the federal government, negotiate a gaming compact with the state in which they
intend to engage in commercial casino gaming, adopt a tribal gaming ordinance and construct a facility. A tribe may also need to negotiate a gaming management agreement and obtain funding to construct a facility. As described below, many Indian
tribes and individual groups seeking to gain federal recognition as Indian tribes are pursuing commercial casino gaming in the northeastern United States.



A number of states, including Maine, Massachusetts, Rhode Island, Pennsylvania and New York, have considered legalizing one or more forms of commercial
casino gaming in one or more locations. In July 2004, Pennsylvania legalized commercial slot machine gaming, the impetus for our acquisition of Pocono Downs in January 2005. We now also face existing and potential competition in the immediate
Pennsylvania gaming market. Based on internal analysis of the existing and potential gaming market in the northeastern United States, we believe that competition from other commercial casino gaming operations will continue to increase in the future.



We are unable to predict whether any of the efforts by other
federally recognized Indian tribes or individual groups attempting to gain federal recognition as Indian tribes or legalization of commercial casino gaming by non-Indians will lead to the establishment of additional commercial casino gaming
operations in the northeastern United States. If established, we are uncertain of the impact such commercial casino gaming operations will have on our operations and our ability to meet our financial obligations.



Mohegan Sun



The following is an assessment of the competitive prospects in Connecticut
and the northeastern United States affecting Mohegan Sun:



Connecticut



Currently, only the Tribe
and the Mashantucket Pequot Tribe are authorized to conduct commercial casino gaming in Connecticut. As required by their individual Memorandum of Understanding, or MOU, with the State of Connecticut, the Tribe and the Mashantucket Pequot Tribe make
monthly payments to the State of Connecticut based on a portion of the revenues from their slot machines. Pursuant to the terms of an exclusivity clause in each



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MOU, the payments will terminate if there is any change in state law that permits operation of slot machines or other commercial casino games or if any other
person lawfully operates slot machines or other commercial casino games within the State of Connecticut (except those consented to by the Tribe and the Mashantucket Pequot Tribe).



In February 2005, the Mashantucket Pequot Tribe announced its plans to undertake a three-year, $700.0 million expansion at
Foxwoods, which will add over two million square feet to the facility and will include an 825-room hotel tower, a 21,000 square foot spa, a 5,000-seat theater, a 50,000 square foot ballroom, a 2,900 car parking garage, 145,000 square feet of meeting
and convention space, four retail stores, two nightclubs, three lounges, four restaurants and additional business meeting and reception space. In addition, the expansion will include 50,000 square feet of gaming space and will accommodate an
additional 1,500 slot machines and 45 table games. Groundbreaking activities occurred in November 2005, and the facility is scheduled to open in the summer of 2008. In May 2005, the Mashantucket Pequot Tribe completed the construction of two golf
courses and a 50,000 square foot clubhouse and is continuing construction on eight golf villas and a golf academy, which are expected to be completed in 2005.



In June 2002, the Bureau of Indian Affairs, or BIA, granted federal recognition to the Historic Eastern Pequot Tribe by combining the individual
applications of the Eastern Pequot Tribe and the Paucatuck Eastern Pequot Tribe. On January 28, 2004, the Schaghticoke Tribe of Kent, Connecticut was granted federal recognition by the BIA. The Historic Eastern Pequot Tribe and the Schaghticoke
Tribe had announced intentions to develop casinos in southeastern and western Connecticut, respectively. The State of Connecticut and several other groups formally appealed each of the BIAs recognition decisions to the Interior Board of Indian
Appeals, or IBIA. On May 13, 2005, the IBIA overturned the federal recognition of the Historic Eastern Pequot Tribe and the Schaghticoke Tribe. The recognition decisions were remanded to the United States Secretary of the Interior for
reconsideration. On October 12, 2005, the BIA upon reconsideration denied the federal recognition of these two Indian tribes.



In 2004, the BIA made final determinations denying federal recognition for another Connecticut tribe, the Golden Hill Paugussett Tribe located in
Colchester and Trumbull, Connecticut, and for the Hassanamisco Band of the Nipmuc Tribe officially based in Massachusetts. The Hassanamisco Band could pursue land claims in Connecticut if granted federal recognition based upon a significant
historical presence within the boundaries of the State of Connecticut. If the Hassanamisco Band were ever to receive federal recognition, it could attempt to develop a casino in northeastern Connecticut near the Connecticut/Massachusetts border. The
Hassanamisco Band also has publicized the existence of financial backers for the construction of gaming facilities. These tribes appealed the final determinations to the IBIA in September 2004. In October 2004, the IBIA agreed to accept the
Hassanamisco Bands appeal for federal recognition, but rejected the Golden Hill Paugussetts request to reconsider the denial of its federal recognition.



Rhode Island



Commercial casino gaming does not exist in Rhode Island, although the states two pari-mutuel facilities, Lincoln Greyhound Park and Newport Grand,
offer approximately 4,700 video slot machines.



On
July 19, 2005, BLB Investors, LLC, or BLB, announced the completion of its acquisition of Lincoln Park in Lincoln, Rhode Island. An announced $125.0 million expansion is expected to add themed bars, upscale restaurants, a 350 seat buffet, a
2,000 seat entertainment venue and approximately 160,000 square feet to increase video slot machines at the site from 3,000 to 4,750, which has been approved by the Rhode Island legislature.



In addition to approving the increase in video slots machines at Lincoln
Park, the Rhode Island legislature has approved the addition of 800 video slot machines at Newport Grand. In order to gain the approval for the additional video slot machines, among other things, Newport Grand must complete a $20.0 million project
for improvements and expansion to the current facilities, including a 90-room hotel.



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The Narragansett Indian Tribe of Rhode Island, with a reservation in Charlestown, is the only federally
recognized Indian Tribe in Rhode Island. However, under specific terms of the Narragansett Land Claims Settlement Act with the federal government, the Narragansett Tribe is prohibited from opening a gaming facility under IGRA. Accordingly, the
Narragansett Tribe may only open a gaming facility approved under state law. In 2005, the Narragansett Tribe and an affiliate of Harrahs Entertainment announced their continued pursuit of a license to operate a casino in West Warwick, Rhode
Island. At this time, it is unclear if such efforts will succeed.



There are several pending federal recognition petitions from other Rhode Island groups. It is not clear if, or when, federal recognition for these groups will be achieved.



New York



Mohegan Sun also currently faces competition from several casinos and gaming facilities located on Indian tribal lands in New York, and to a lesser extent
from racetracks in New York that operate video lottery terminals, or VLTs. New York has six federally recognized tribes located in the central, northern and western parts of the state. Three of these tribes, the Oneida Nation of New York, the Seneca
Nation and the St. Regis Mohawk Tribe of New York, currently engage in casino gaming. In addition to these three tribes, other Indian tribes have announced potential casino projects, which if completed, will add significant casino space and hotel
rooms to the northeastern United States gaming market. In addition, racetracks located in Monticello, Saratoga Springs, Farmington and Buffalo, New York currently operate an aggregate of approximately 5,100 VLTs.



In October 2001, the New York State Legislature approved legislation that
permitted as many as six gaming operations by Indian tribes in New York, in addition to the Oneida Nations Turning Stone Casino and St. Regis Akwesasne Mohawk Casino already in operation. This legislation approved the use of traditional slot
machines, rather than VLTs, where the possession and use of traditional slot machines is authorized pursuant to a tribal-state compact. Up to three of these additional casinos may be owned by the Seneca Nation and the three others may be located in
either Ulster County or Sullivan County. However, a 2005 United States Supreme Court decision regarding the legality of adding additional land for casino development purposes into reservation lands has called into question the viability of certain
Indian land claims in New York.



The Seneca Nation opened one
of the additional gaming operations, the Seneca Niagara Casino, in December 2002 in Niagara Falls, New York. In May 2004, the Seneca Nation opened its second facility, an approximately 125,000 square foot facility on its reservation in Salamanca,
New York. The Seneca Nation may also operate one additional gaming facility in western New York pursuant to an approved gaming compact negotiated with the Governor of New York. The October 2001 legislation also authorizes the Governor of New York to
negotiate and execute tribal-state compacts for the remaining three gaming operations with yet to be determined tribes for sites in Ulster and Sullivan counties. The development and management of these additional Indian gaming projects are
contingent upon various regulatory approvals, including receipt of approvals from the BIA.



Summarized below is the status of current and potential gaming operations by federally recognized tribes in the State of New York:



| |  |  | Oneida NationThe Oneida Nation of New York operates Turning Stone Casino Resort on its reservation near Syracuse, New York, approximately 270 miles from Mohegan Sun. We
believe that Turning Stone Casino Resort currently has approximately 2,100 VLTs, 100 table games, 20 tables for live poker and 350 hotel rooms. We believe the Oneida Nation has also completed an approximately $308 million expansion effort at Turning
Stone, which includes, among other things, the addition of approximately 400 hotel rooms and suites and 30,000 square feet of gaming space. Turning Stone currently draws customers primarily from the Syracuse market. In June 2004, the New York State
Supreme Court ruled that the Oneida Gaming Compact with the State of New York was invalid because it had not been approved by the state legislature. According to news reports, the NIGC has advised the Oneida Nation that if its compact dispute with
the State of New York is not resolved, it may face enforcement actions.
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| |  |  | St. Regis Mohawk TribeOn November 2, 2005, in a letter to the BIA, the St. Regis Mohawk Tribe formally abandoned plans for a $500.0 million casino at Kutshers
Resort and Country Club in the Catskills (withdrawing its fee to trust application) in favor of a proposed casino at Monticello Raceway, owned by Empire Resorts, Inc., also in the Catskills. The Mohawks application for a Monticello Raceway
casino had been approved by the BIA in April 2000. According to the BIA, the 2000 approval is still valid. The application is subject to Governor Patakis approval.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Seneca NationThe Seneca Nation reached an agreement with the Governor of New York for a gaming compact that allows the Seneca Nation to operate three casinos, which was
approved by the United States Department of the Interior. The Seneca Nation opened one of these three casinos in Niagara Falls in December 2002, in accordance with certain provisions of IGRA that allow gaming on Seneca aboriginal tribal lands. This
casino offers full-scale gaming similar to that offered at Mohegan Sun, however, we do not draw a significant number of customers from the Niagara Falls market. We believe that the Niagara Falls facility has approximately 2,900 slot machines and
approximately 110 table games. A temporary facility opened on the Seneca Nation reservation in Salamanca, New York in May 2004, which we believe features approximately 1,800 slot machines and 25 table games. The Seneca Nation began construction on a
permanent Salamanca facility in October 2005, which is projected to have 220 hotel rooms and approximately 64,500 square feet of gaming, including at least 2,100 slot machines. The Seneca Nation plans to locate the third casino permitted under its
state compact in Buffalo, New York, with construction of the 100,000 square foot facility beginning in December 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cayuga Indian Nation of New York and Seneca-Cayuga Tribe of OklahomaIn April 2004, the Cayuga Indian Nation of New York, a federally recognized Indian tribe without a
reservation, received approval of their land into trust application from the Eastern Area Office of the BIA. The Cayuga Tribe requested that the United States take approximately 30 acres of land located adjacent to the Monticello Raceway into trust
for the benefit of the Cayuga Tribe for the purposes of conducting gaming. If approved by the BIA, the Cayuga Tribe, in conjunction with Empire Resorts, Inc. as its developer and manager, intends to construct and operate a $700 million casino resort
at the site.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On November 12, 2004, Governor Pataki announced that an agreement had been reached with the Seneca-Cayuga Tribe of Oklahoma. The terms of the agreement would have included a
settlement of the Tribes land claim and an agreement to negotiate a Class III compact for a gaming facility to be located in the Catskills. The agreement was subject to the approval of federal and state legislatures. The settlement agreement
expired on September 1, 2005 without requisite approvals.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



On June 28, 2005, the U.S. Court of Appeals for the Second Circuit overturned a $247.9 million judgment jointly awarded to the Cayuga Indian Nation of New York and the Seneca-Cayuga Tribe of Oklahoma and
dismissed the Cayuga Indian land claim, ruling that the tribes waited too long to reclaim title to 64,015 acres of ancestral land that rim the north end of Cayuga Lake. According to published reports, the ruling jeopardizes both tribes
attempts to proceed with casino projects in the Catskills. On September 8, 2005, the U.S. Court of Appeals for the Second Circuit denied reconsideration of its ruling.



| |  |  | Stockbridge-Munsee Community, Band of Mohican Indians of WisconsinIn December 2004, the Stockbridge-Munsee Community, Band of Mohican Indians of Wisconsin and Governor Pataki
approved an agreement that would settle the tribes land claims against the state and permit the tribe to develop and operate a casino in the Catskills. The agreement was subject to the approval of federal and state legislatures. The settlement
agreement expired on September 1, 2005 without requisite approvals.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Oneida Tribe of Indians of WisconsinIn December 2004, the Oneida Tribe of Indians of Wisconsin and Governor Pataki approved an agreement that would settle the tribes
land claim against the state and permit the tribe to develop and operate a casino in the Catskills. The agreement was subject to the approval of federal and state legislatures. The settlement agreement expired on September 1, 2005 without
requisite approvals.
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| |  |  | Shinnecock TribeThe Shinnecock Tribe has announced that it intends to construct an approximately 65,000 square-foot commercial casino gaming facility adjacent to its
reservation in Long Island, New York. The Shinnecock Tribe is recognized by the State of New York, but has yet to receive recognition from the BIA. The Shinnecock Tribe has a pending federal recognition petition. On November 7, 2005, a federal
district court in New York found that the Shinnecock Tribe met all the legal requirements to be considered a federally recognized tribe and remanded the case for consideration of other issues, including the Shinnecocks land claims. Although
the federal district court found that the Shinnecock Tribe met the requirements for federal recognition, necessary approvals from the BIA still must be obtained and a 2005 United States Supreme Court decision has called into question the validity of
adding land for casino development purposes into original reservation lands. Accordingly, the Shinnecock Tribes proposed casino project cannot move forward until the underlying issues regarding federal recognition and land claim status are
resolved.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Other tribes also may be attempting to
develop various forms of gaming operations in the state of New York. In addition, there are several pending federal recognition petitions from other New York groups, but we believe none are being actively considered by the BIA for federal
recognition. It is not clear if or when federal recognition for these groups will be achieved.



In June 2005, MGM Mirage announced a definitive agreement to develop and manage a slot parlor at the Aqueduct horse racing track in Queens, New York, to open by mid-2006. The facility will have approximately 4,500
video lottery terminals. The agreement is subject to state approval. Also, in June 2005, Yonkers Raceway, in Yonkers, New York, began a significant renovation and expansion, which will feature approximately 5,500 video slot machines. The project is
expected to take 10 to 12 months to complete.



Currently, there
are no non-Indian casinos operating in the State of New York, and the establishment of non-Indian commercial casino operations would require the approval of two successive state legislatures, followed by the voters in a statewide referendum.
However, gambling boats began operating cruises to nowhere out of the New York City and Long Island areas in January 1998. To date, New York has not prohibited gambling boat operations and only a small number of operators have applied
for licenses for offshore gambling cruises. These cruises to nowhere, during which casino gaming activities are conducted on board once the boat is in international waters, are permitted under federal law unless prohibited by the state
from which they operate. Due to the difference in the gaming experience, we do not believe that the cruises to nowhere are significant competition to Mohegan Sun.



Massachusetts



In October 2005, the Massachusetts State Senate approved legislation that would allow up to 2,000 slot machines at each of the states four
racetracks. The Massachusetts House of Representatives declined to vote on the legislation prior to the November adjournment date. The Governor of Massachusetts has publicly announced that he would veto the legislation if approved.



The Wampanoag Tribe of Gay Head (Aquinnah) of Massachusetts, located on the
island of Marthas Vineyard, is currently the only federally recognized Indian tribe in Massachusetts. The Wampanoag Tribe has announced plans to open a high-stakes bingo facility in southeastern Massachusetts, and although no state compact
would be required, significant hurdles, including local government approval, still remain. To date no such facility has been constructed. The Wampanoag Tribe also has proposed developing a casino in southeastern Massachusetts.



A separate band of the Nipmuc Tribe, the Chaubanagungamaug Band, also
submitted a petition for federal recognition. In June 2004, the BIA made a final determination denying federal recognition to the tribe. In October 2004, the IBIA agreed to accept the Chaubanagungamaug Bands appeal on the final determination.



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On July 25, 2005, a federal district court judge in Washington D.C approved an agreement between the
Mashpee Wampanoag Indians and the BIA that requires the government to make a tentative finding on the tribes application for formal recognition by March 31, 2006, and a final decision by March 31, 2007. If these tribes were to
receive federal recognition, they would likely attempt to develop a casino in Massachusetts. A number of other petitions for federal recognition are pending in Massachusetts, but we believe potential recognition of these pending petitions is several
years away, if at all.



New Jersey



In the state of New Jersey, Mohegan Sun primarily competes for overnight
customers with casinos located in Atlantic City. The Atlantic City gaming market currently consists of twelve casino properties, with a total of approximately 14,000 hotel rooms and 1.4 million square feet of gaming space, containing
approximately 42,000 slot machines and 1,400 table games. These properties include the Borgata, a casino resort complex completed in the summer of 2003 and the first new casino in Atlantic City in 13 years. The property features a 40 story hotel
with approximately 2,000 rooms and suites, a 135,000 square foot casino, restaurants, retail shops, a spa and pool, and entertainment venues.



Several proposed developments and expansions of casino, hotel, retail and entertainment space have also commenced or been completed in Atlantic City. Some
of these recent projects are listed below:



| |  |  | In November 2004, Aztar Corporation completed an expansion of its Tropicana Atlantic City property to include an additional 500 hotel rooms and a 200,000 square foot retail, dining
and entertainment complex.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In August 2004, Boyd Gaming and MGM Mirage announced a planned $200 million expansion of their jointly owned Borgata Hotel and Casino. The expansion will add an additional 500,000
square feet to the facility, including more gaming, retail and restaurant space, two additional nightclubs and a larger spa. In October 2004, Boyd Gaming and MGM Mirage announced an additional expansion, to begin during the first phase of its
initial expansion and to be completed in mid-2007. The additional expansion will include a new hotel tower, containing approximately 200 luxury time-share condominiums and approximately 600 guest rooms, a new spa, two swimming pools and additional
meeting room space.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In mid-2004, Harrahs Entertainment Inc. began construction on The Pier at Caesars, a $145 million upscale retail, dining, and entertainment facility located on the Atlantic
City Boardwalk. The facility will be attached to the Caesars Atlantic City by skywalk and is scheduled to open in early 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the state legislature has considered adding slot machines or VLTs at the state racetracks. There are no federally recognized Indian tribes in
the state and no petitions for recognition are being actively considered by the BIA.



Maine



There are
no full-scale casino gaming operations allowed in Maine other than one cruise boat that operates out of Maine and provides casino gaming off-shore. There are four federally recognized tribes in Maine, one of which, the Penobscot Tribe, operates a
high stakes bingo facility in Old Town, in east central Maine. The Penobscot Tribe and the Passamaquoddy Tribe are attempting to gain approval for full-scale casino operations at various locations in Maine; however, to date these efforts have been
unsuccessful. None of the other federally recognized tribes in Maine have negotiated a tribal-state compact or otherwise taken significant steps of developing casino operations.



On November 4, 2005, Penn National Gaming, Inc. opened a temporary slot machine facility in Bangor, Maine, featuring
475 slot machines, with plans to construct a $71.0 million permanent facility that would have a total of approximately 1,500 slot machines. The permanent facility is scheduled to open in the fall of 2007.



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New Hampshire



There are no casinos allowed in New Hampshire and no significant initiatives currently underway to legalize commercial
casino gaming. Over the past several years, a number of legislative initiatives to expand legalized gambling activities in New Hampshire have been defeated. There are no federally recognized Indian tribes in the state and no petitions for
recognition pending.



Vermont



There are no casinos allowed in Vermont and no significant legislative
initiatives currently underway to allow commercial casino gaming. There are no federally recognized tribes in Vermont, but a petition for federal recognition is pending from the St. Francis/Sokoki Band of Abenakis in Swanton. On November 10,
2005, the BIA made proposed findings to deny federal recognition to the Abenaki Indians due to the failure to meet necessary criteria for federal recognition.



Mohegan Sun at Pocono Downs



The following is an assessment of the competitive prospects in Pennsylvania and the northeastern United States affecting Pocono Downs:



In July 2004, Pennsylvania Governor Ed Rendell signed the Pennsylvania Race
Horse and Development and Gaming Act, or the Pennsylvania Gaming Act, permitting up to 61,000 slot machines at 14 locations throughout the state. The Pennsylvania Gaming Act authorized slot machines at seven harness and thoroughbred racetracks, and
five stand-alone slot facilities. Each of the facilities may initially install up to 3,000 slot machines and can be expanded to up to 5,000 slot machines after six months of operation and upon gaining the approval of the PGCB. In addition, the
legislation authorized two resort facilities with up to 500 slot machines. The Pennsylvania Gaming Act also includes prohibitions against locating facilities in close proximity to other operations, including, among other things, a prohibition
against locating another harness or thoroughbred facility with slots or a stand-alone slot facility within 20 linear miles of Pocono Downs, and a prohibition against locating a resort facility within 15 linear miles of Pocono Downs.



In addition to Pocono Downs, there are two thoroughbred racetracks,
Philadelphia Park located in Bensalem (approximately 115 miles southeast of Pocono Downs) and Penn National Race Course in Grantville (located approximately 85 miles southwest of Pocono Downs), and one harness racetrack, the Meadows located in
Meadow Lands, near Pittsburgh (approximately 300 miles from Pocono Downs), currently operating. The Pennsylvania State Horse Racing Commission, or the Harness Racing Commission, also has approved a racing license for MTR Gaming to build a
thoroughbred racetrack in Summit Township, near Erie (approximately 325 miles from Pocono Downs) and the Harness Racing Commission has approved a harness racing license for Harrahs Entertainment, Inc, which has partnered with Chester Downs and
Marina, LLC, to build a harness racetrack in Chester, approximately 115 miles from Pocono Downs. The Harness Racing Commission has not yet selected the proposed or existing property for the fourth and final new racing license permitted in
Pennsylvania. However, under the Pennsylvania Gaming Act, unless the developer of a proposed horse racetrack had received approval for a racing license within the 18 months immediately preceding the passage of the act, the licensee is not permitted
to obtain a slot license.



Under the Pennsylvania Gaming Act,
the PGCB will select the location of the five stand-alone slot facilities, so long as at least two of the stand-alone slot parlors are located in Philadelphia and one is located in Pittsburgh. The remaining two facilities will be selected by the
PGCB from the list of applicants who submit applications for a slot license. There have been several news reports of proposed locations for the two remaining stand-alone slot facilities, outside of Philadelphia and Pittsburgh. We cannot predict
which owners of any of these proposed sites will receive gaming licenses or, accordingly, where any of the licensed facilities will be located or what impact, if any, they will have on our future Pocono Downs operations.



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The reports include the following proposed locations:



| |  |  | In November 2005, Matzel Development announced plans for a $3 billion entertainment and gambling complex at the Pocono Manor resort in Monroe County. The first phase of Matzel
Developments plan will cost $1.2 billion and include a 25 story hotel and casino with 750 rooms and up to 5,000 slot machines, a 300,000 square-foot retail and restaurant plaza, a 50,000 square-foot convention center, a 20,000 square-foot spa,
a 1,800 seat indoor theater and an 18-hole golf course surrounding a 12-acre lake. The second phase would include another hotel, convention center, condominiums and single-family homes. Pocono Manor is located approximately 40 miles from Pocono
Downs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2004, businessman Louis DeNaples purchased Mount Airy Lodge in Mount Pocono for approximately $25 million. The property is the location of a former resort facility and
includes approximately 210 acres of land, which reportedly will be used for a new resort and casino complex. Although we are not aware of any official announcement from Mr. DeNaples regarding the proposed use or development of the property,
newspaper reports have indicated that the site could be a potential location for a stand-alone slot facility with 2,400 to 3,000 machines and 200 hotel rooms. If approved, reported plans call for the facility to open in late 2006 or early 2007.
Mount Pocono is located approximately 40 miles from Pocono Downs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | BethWorks Now has partnered with Las Vegas Sands, Inc, owners of the Venetian Resort and Casino in Las Vegas to acquire 135 acres of property in Bethlehem. The group has indicated
that the plans for the property include a casino, 400,000-600,000 square feet of retail space and between 1,000-2,000 homes. The property is located approximately 70 miles from Pocono Downs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Isle of Capri Casinos, Inc. of Biloxi Miss. reportedly has been considering sites in the Lehigh Valley to locate a stand-alone slot facility. These sites are located approximately
60 miles from Pocono Downs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Mashantucket Pequot Tribe reportedly is working with a local developer on a proposal for a slot facility to be located near the interchange of Interstate 78 and Pennsylvania
Route 412 in Bethlehem. Bethlehem is located approximately 70 miles from Pocono Downs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Caesars Pocono Resorts, owned by Starwood Hotels, which operates four resorts in the Pocono Mountains, also reportedly has expressed an interest in one of the two slot licenses
available for resort facilities. The closest of the four Caesars resorts is 40 miles from Pocono Downs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the other slot facilities in Pennsylvania, Pocono Downs may face competition from up to three full scale casino gaming operations by Indian
tribes in the Catskill Mountains of New York. The Catskills are approximately 90 miles from Pocono Downs. Pocono Downs also could face competition from Tioga Downs Racetrack in Nichols, New York, approximately 100 miles from Pocono Downs. Tioga
Downs Racetrack currently is undergoing a $35.0 million renovation, which, once completed, will offer approximately 750 video lottery terminal machines to its gaming and harness racing customers. A newly-constructed 90,000 square foot grandstand
will house a 19,000 square foot casino floor.



Mohegan Tribe of Indians of
Connecticut



General



The Tribe has lived in a cohesive community for hundreds of years in what is
today southeastern Connecticut, and became a federally recognized Indian tribe in 1994. The Tribe currently has approximately 1,658 members including 1,000 adult voting members. The Tribe historically has cooperated with the United States and is
proud of the fact that members of the Tribe have fought on the side of the United States in every war from the Revolutionary War to Operation Iraqi Freedom. The Tribe believes that this philosophy of cooperation exemplifies its approach to
developing Mohegan Sun and pursuing diversification of its business interests.



Although the Tribe is a sovereign entity, it has sought to work with, and to gain the support of, local communities in establishing Mohegan Sun. For example, the Tribe settled its claim to extensive tracts of land



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that had been guaranteed by various treaties in consideration for certain arrangements in the Mohegan Compact. As a result, local residents and businesses
whose property values had been clouded by this dispute were able to gain clear title to their property. In addition, the Tribe has been sensitive to the concerns of the local community in developing Mohegan Sun. This philosophy of cooperation has
enabled the Tribe to build a solid alliance among local, state and federal officials to achieve its goal of building Mohegan Sun.



Governance of the Tribe



The Tribes Constitution provides for the governance of the Tribe by a Tribal Council consisting of nine members, and a Council of Elders consisting
of seven members. The registered voters of the Tribe elect all members of the Tribal Council and the Council of Elders. As the result of an amendment to the Tribes Constitution in September 2003, the members of both the Council of Elders and
the Tribal Council will be elected on a staggered term basis. Effective with the election for the Council of Elders held in October 2004, three elected members of the Council of Elders serve two-year terms which expire in October 2006 and four
elected members of the Council of Elders serve four-year terms which expire in October 2008. Similarly, effective with the Tribal Council election held in August 2005, four elected Tribal Council members serve two-year terms and five elected Tribal
Council members serve four-year terms. Thereafter, elected members of both the Council of Elders and the Tribal Council shall serve four-year terms. Members of the Tribal Council must be at least 21 when elected, and members of the Council of Elders
must be at least 55 when elected. The members of the Tribal Council are the same individuals who serve on our Management Board.



The Tribes Constitution vests all legislative and executive powers of the Tribe in the Tribal Council, with the exception of the enrollment of
Tribal members and cultural duties, which are vested in the Council of Elders. The powers of the Tribal Council include the power to establish an executive branch departmental structure with agencies and subdivisions and to delegate appropriate
powers to such agencies and sub-divisions.



The Tribe may amend
the provisions of its Constitution that established us and the Gaming Disputes Court, which is described below. Such an amendment requires the approval of two-thirds of the members of the Tribal Council and must be ratified by a vote of a two-thirds
majority of all votes cast, with at least 40% of the registered voters of the Tribe voting. In addition, the Tribes Constitution currently prohibits the Tribe from enacting any law that would impair the obligations of contracts entered into in
furtherance of the development, construction, operation and promotion of gaming on Tribal lands. An amendment to this provision requires the affirmative vote of 75% of all registered voters of the Tribe. Prior to the enactment of any such amendment
by the Tribal Council, any non-Tribal party will have the opportunity to seek a ruling from the Appellate Branch of the Gaming Disputes Court that the proposed amendment would constitute an impermissible impairment of contract.



The Council of Elders acts in the capacity of an appellate court of final
review and may hear appeals of any case or controversy arising under the Tribes Constitution, except those matters related to Mohegan Sun, which are required to be submitted to the Gaming Disputes Court.



Gaming Disputes Court



The Tribal Council has established the Gaming Disputes Court by Tribal
ordinance and vested it with exclusive jurisdiction over all disputes related to gaming at Mohegan Sun and over appeals of certain final decisions issued by the Tribes administrative agencies. The Gaming Disputes Court is composed of a
Trial Division and an Appellate Branch. A single judge presides over cases at the trial level. Trial Division decisions can be appealed to the Appellate Branch where cases are presided over by three judges, one of whom will be the Chief Judge, and
none of whom will have presided at the Trial Division over the specific case being heard. Decisions of the Appellate Branch are final, and no further appeal is available.



The Gaming Disputes Court has jurisdiction over all disputes or controversies related to gaming between any person or entity
and us or the Tribe. The Gaming Disputes Court also has jurisdiction over certain appeals



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arising out of tribal agency regulatory powers, including licensing actions. The Tribe has adopted the substantive law of the State of Connecticut as the
applicable law of the Gaming Disputes Court to the extent that such law is not in conflict with Mohegan Tribal Law. Also, the Tribe has adopted all of Connecticuts rules of civil and appellate procedure and professional and judicial conduct to
govern the Gaming Disputes Court.



Judges of the Gaming
Disputes Court are chosen by the Tribal Council from a publicly available list of eligible retired federal judges and Connecticut Attorney Trial Referees, who are appointed by the Chief Justice of the Connecticut Supreme Court, each of whom must
remain licensed to practice law in the State of Connecticut.



Judges are selected sequentially as cases are filed with the clerk of the Gaming Disputes Court. The Chief Judge of the Gaming Disputes Court, who serves as the Gaming Disputes Courts administrative superintendent, is chosen by the
Tribal Council from the list of eligible judges and serves a five-year term. The remaining judges may serve an unlimited term on the bench. Judges of the Gaming Disputes Court are subject to discipline and removal for cause pursuant to the rules of
the Gaming Disputes Court. The Chief Judge is vested with the sole authority to revise the rules of the Gaming Disputes Court. Judges are compensated by the Tribe at an agreed rate of pay commensurate with their duties and responsibilities. Such
rate cannot be diminished during a judges tenure.



Below
is a description of certain information regarding judges currently serving on the Gaming Disputes Court:



Paul M. Guernsey, Chief Judge. Age: 55. Judge Guernsey has served on the Gaming Disputes Court since 1996. He was appointed Acting Chief Judge in
November 1999 and appointed as Chief Judge in January 2000. Judge Guernsey has also served as Fact Finder for the New London Judicial District from 1990 to 1992 and as State of Connecticut Attorney Trial Referee, Judicial District of New London,
since 1992.



F. Owen Eagan, Judge. Age: 74. Judge Eagan
was appointed to the Gaming Disputes Court in 1996. He served as U.S. Magistrate Judge from 1975 to 1996 and was formerly Assistant U.S. Attorney for the District of Connecticut and U.S. Attorney for the District of Connecticut. He is currently an
adjunct law faculty member at Western New England School, a position he has held since 1978.



Frank A. Manfredi, Judge. Age: 53. Judge Manfredi was appointed to the Gaming Disputes Court in 2001. He has been a partner at Cotter, Greenfield, Manfredi & Lanes, P.C. since 1983. Judge Manfredi has
also served as State of Connecticut Attorney Trial Referee since 1993, State of Connecticut Attorney Fact Finder since 1992 and Town Attorney for the Town of Preston since 1988.



Thomas B. Wilson, Judge. Age: 65. Judge Wilson was appointed to the Gaming Disputes Court in 1996. Judge Wilson
served as a partner and director at Suisman, Shapiro, Wool, Brennan & Gray, P.C. from 1967-2003. Judge Wilson has also served as State Attorney Trial Referee since 1988 and as Town Attorney for the Town of Ledyard from 1971 to 1979, 1983 to
1991 and 1995 to the present.



Workers Compensation
Department



Effective September 1, 2004, the
Tribal Council established a Workers Compensation Department that oversees a self-administered workers compensation program for employees of the Tribe and us. Prior to the formation of this department, we participated in the State of Connecticut
workers compensation program. Duties of the Workers Compensation Department, including judgment on claims, are performed by two commissioners employed by the Tribe.



Below is a description of certain information regarding the commissioners serving in the Workers Compensation Department:



Giancarlo Rossi, Chief Commissioner. Mr. Rossi
was appointed Chief Commissioner of the Tribes Workers Compensation Department in September 2004. Mr. Rossi is a practicing attorney with over 20 years of workers compensation experience in Connecticut.



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Louis M. Pacelli, Commissioner. Mr. Pacelli was appointed Commissioner of the Tribes
Workers Compensation Department in September 2004. Mr. Pacelli is a partner in the law firm of Grillo and Pacelli, LLC in East Haven, Connecticut and has practiced general law, including workers compensation matters, for over 20 years in
Connecticut.



Mohegan Tribal Gaming Authority



We were established by the Tribe in July 1995 with the exclusive power to
conduct and regulate gaming activities on tribal lands for the Tribe and the non-exclusive authority to conduct such activities elsewhere. We are governed by a nine-member Management Board, consisting of the nine members of the Tribal Council (the
governing body of the Tribe). Any change in the composition of the Tribal Council results in a corresponding change in our Management Board. See Mohegan Tribe of Indians of Connecticut and Part III. Item 10. Directors
and Executive Officers of the Registrant.



We have three
major functions. The first major function is to direct the operation, management and promotion of gaming enterprises on tribal lands and all related activities. The second major function is to regulate gaming activities on tribal lands. Our
Management Board has appointed an independent Director of Regulation to be responsible for the regulation of gaming activities at Mohegan Sun. The Director of Regulation serves at the will of the Management Board and ensures the integrity of the
gaming operation through the promulgation and enforcement of appropriate regulations. The Director of Regulation and his staff also are responsible for performing background investigations and licensing of non-gaming employees as well as vendors
seeking to provide non-gaming products or services within the casino. Pursuant to the Mohegan Compact, the State of Connecticut is responsible for performing background investigations and licensing of gaming employees as well as gaming vendors
seeking to provide gaming products or services within the casino. The third major function is to identify and evaluate various diversification opportunities in conjunction with the Tribe. These opportunities primarily include the management and
ownership of, or investments in, other gaming enterprises through direct investment, acquisition, joint venture arrangements and loan transactions.



Government Regulation



General



We are subject to certain federal, state and tribal laws applicable to both commercial relationships with Indians generally and to Indian gaming and the
management and financing of Indian casinos specifically. In addition, we are subject to federal and state laws applicable to the gaming industry generally and to the distribution of gaming equipment. The following description of the regulatory
environment in which gaming takes place and in which we operate is only a summary and not a complete recitation of all applicable law. Moreover, since this regulatory environment is susceptible to changes in public policy considerations, it is
impossible to predict how particular provisions will be interpreted from time to time or whether they will remain intact. Changes in such laws could have a material adverse impact on our operations. See Risk Factors.



Tribal Law and Legal Systems



Applicability of State and Federal Law



Federally recognized Indian tribes are independent governments, subordinate
to the United States, with sovereign powers, except as those powers may have been limited by treaty or by the United States Congress. The power of Indian tribes to enact their own laws to regulate gaming derives from the exercise of this tribal
sovereignty. Indian tribes maintain their own governmental systems and often their own judicial systems. Indian tribes have the right to tax persons and enterprises conducting business on tribal lands, and also have the right to require licenses and
to impose other forms of regulations and regulatory fees on persons and businesses operating on their lands.



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Absent the consent of the Tribe or action of the United States Congress, the laws of the State of
Connecticut do not apply to us or the Tribe. Under the federal law that recognizes the Tribe, the Tribe consented to, among other things, the extension of Connecticut criminal law and Connecticut state traffic controls over Mohegan Sun.



Waiver of Sovereign Immunity; Jurisdiction; Exhaustion of Tribal
Remedies



Indian tribes enjoy sovereign immunity from
unconsented suit similar to that of the states and the United States. In order to sue an Indian tribe (or an agency or instrumentality of an Indian tribe, such as us), the tribe must have effectively waived its sovereign immunity with respect to the
matter in dispute. Further, in most commercial disputes with Indian tribes, the jurisdiction of the federal courts, which are courts of limited jurisdiction, may be difficult or impossible to obtain. A commercial dispute is unlikely to present a
federal question, and some courts have ruled that an Indian tribe as a party is not a citizen of any state for purposes of establishing diversity jurisdiction in the federal courts. State courts also may lack jurisdiction over suits brought by
non-Indians against Indian tribes in Connecticut. The remedies available against an Indian tribe also depend, at least in part, upon the rules of comity requiring initial exhaustion of remedies in tribal tribunals and, as to some judicial remedies,
the tribes consent to jurisdictional provisions contained in the disputed agreements. The United States Supreme Court has held that, where a tribal court exists, jurisdiction in that forum first must be exhausted before any dispute can be
heard properly by federal courts which otherwise would have jurisdiction. Where a dispute as to the jurisdiction of the tribal forum exists, the tribal court first must rule as to the limits of its own jurisdiction.



In connection with most of our contractual arrangements, including our
outstanding indebtedness, we, the Tribe, MBC and the Pocono Downs entities (since it is unclear as a matter of law whether the Pocono Downs entities would be deemed to possess sovereign immunity) agreed to waive our and their respective sovereign
immunity from unconsented suit to permit any court of competent jurisdiction to (1) enforce and interpret the terms of our applicable outstanding indebtedness, and award and enforce the award of damages owing as a consequence of a breach
thereof, whether such award is the product of litigation, administrative proceedings, or arbitration; (2) determine whether any consent or approval of the Tribe or us has been granted improperly or withheld unreasonably; (3) enforce any
judgment prohibiting the Tribe or us from taking any action, or mandating or obligating the Tribe or us to take any action, including a judgment compelling the Tribe or us to submit to binding arbitration; and (4) adjudicate any claim under the
Indian Civil Rights Act of 1968, 25 U.S.C. 1302 (or any successor statute).



The Indian Gaming Regulatory Act of 1988



Regulatory Authority



The operation of casinos and of all gaming on Indian land is subject to IGRA, which is administered by the NIGC, an independent agency within the United States Department of the Interior, which exercises primary federal regulatory
responsibility over Indian gaming. The NIGC has exclusive authority to issue regulations governing tribal gaming activities, approve tribal ordinances for regulating Class II and Class III Gaming (as described below), approve management agreements
for gaming facilities, conduct investigations and generally monitor tribal gaming. Certain responsibilities under IGRA (such as the approval of per capita distribution plans to tribal members and the approval of transfer of lands into trust status
for gaming) are retained by the BIA. The BIA also has responsibility to review and approve land leases and other agreements relating to Indian lands. Criminal enforcement is the exclusive responsibility of the United States Department of Justice,
except to the extent such enforcement responsibility is shared with the State of Connecticut under the Mohegan Compact and under the federal law that recognizes the Tribe.



The NIGC is empowered to inspect and audit all Indian gaming facilities, to conduct background checks on all persons
associated with Class II Gaming, to hold hearings, issue subpoenas, take depositions, adopt regulations and assess fees and impose civil penalties for violations of IGRA. IGRA also prohibits illegal gaming on Indian land and theft from Indian gaming
facilities. The NIGC has adopted rules implementing specific



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provisions of IGRA, which govern, among other things, the submission and approval of tribal gaming ordinances or resolutions and require an Indian tribe to
have the sole proprietary interest in and responsibility for the conduct of any gaming. Tribes are required to issue gaming licenses only under articulated standards, to conduct or commission financial audits of their gaming enterprises, to perform
or commission background investigations for primary management officials and key employees and to maintain their facilities in a manner that adequately protects the environment and the public health and safety. These rules also set out review and
reporting procedures for tribal licensing of gaming operation employees.



Additionally, the NIGC established the Minimum Internal Control Standards, or MICS, that require each tribe or its designated tribal government body or agency to establish and implement tribal MICS by February 4,
2000. We established and implemented tribal MICS on February 4, 2000. As of September 30, 2005, we believe we were in material compliance with the tribal MICS.



Tribal Ordinances



Under IGRA, except to the extent otherwise provided in a tribal-state compact, Indian tribal governments have primary regulatory authority over Class III
Gaming on land within a tribes jurisdiction. Therefore, our gaming operations, and persons engaged in gaming activities, are guided by and subject to the provisions of the Tribes ordinances and regulations regarding gaming.



IGRA requires that the NIGC review tribal gaming ordinances and authorizes
the NIGC to approve such ordinances only if they meet specific requirements relating to (1) the ownership, security, personnel background, record keeping and auditing of a tribes gaming enterprises; (2) the use of the revenues from
such gaming; and (3) the protection of the environment and the public health and safety. The Tribe adopted its gaming ordinance in July 1994, and the NIGC approved the gaming ordinance in November 1994.



Classes of Gaming



IGRA classifies games that may be conducted on Indian lands into three
categories. Class I Gaming includes social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as part of, or in connection with, tribal ceremonies or celebrations. Class II
Gaming includes bingo, pull-tabs, lotto, punch boards, tip jars, certain non-banked card games (if such games are played legally elsewhere in the state), instant bingo and other games similar to bingo, if those games are played at the same
location where bingo is played. Class III Gaming includes all other forms of gaming, such as slot machines, video casino games (e.g., video blackjack and video poker), so-called table games (e.g., blackjack, craps and
roulette) and other commercial gaming (e.g., sports betting and pari-mutuel wagering).



Class I Gaming on Indian lands is within the exclusive jurisdiction of the Indian tribes and is not subject to IGRA. Class II Gaming is permitted on Indian lands if (1) the state in which the Indian lands lie
permits such gaming for any purpose by any person, organization or entity; (2) the gaming is not otherwise specifically prohibited on Indian lands by federal law; (3) the gaming is conducted in accordance with a tribal ordinance or
resolution which has been approved by the NIGC; (4) an Indian tribe has sole proprietary interest and responsibility for the conduct of gaming; (5) the primary management officials and key employees are tribally licensed; and
(6) several other requirements are met. Class III Gaming is permitted on Indian lands if the conditions applicable to Class II Gaming are met and, in addition, the gaming is conducted in conformance with the terms of a tribal-state compact (a
written agreement between the tribal government and the government of the state within whose boundaries the tribes lands lie).



With the growth of the Internet and other modern advances, computers and other technology aids are increasingly used to conduct specific kinds of gaming.
The United States Congress has considered legislation that limits and/or prohibits gaming conducted over the Internet. The use of technology to conduct gaming operations and a states ability to regulate such activity have been the subject of
several court cases in the past few years with no clear resolution of the issue.



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Tribal-State Compacts



IGRA requires states to negotiate in good faith with Indian tribes that seek to enter into tribal-state compacts for the
conduct of Class III Gaming. Such tribal-state compacts may include provisions for the allocation of criminal and civil jurisdiction between the state and the Indian tribe necessary for the enforcement of such laws and regulations, taxation by the
Indian tribe of gaming activities in amounts comparable to those amounts assessed by the state for comparable activities, remedies for breach of compacts, standards for the operation of gaming and maintenance of the gaming facility, including
licensing and any other subjects that are directly related to the operation of gaming activities. While the terms of tribal-state compacts vary from state to state, compacts within one state tend to be substantially similar. Tribal-state compacts
usually specify the types of permitted games, establish technical standards for gaming, set maximum and minimum machine payout percentages, entitle the state to inspect casinos, require background investigations and licensing of casino employees and
may require the tribe to pay a portion of the states expenses for establishing and maintaining regulatory agencies. Some tribal-state compacts are for set terms, while others are for indefinite duration.



IGRA provides that if an Indian tribe and state fail to successfully
negotiate a tribal-state compact, the United States Department of the Interior may approve gaming procedures pursuant to which Class III gaming may be conducted on Indian lands. The Mohegan Compact, approved by the United States Secretary of the
Interior in 1994, does not have a specific term and will remain in effect until terminated by written agreement of both parties, or the provisions are modified as a result of a change in applicable law. Our gaming operations are subject to the
requirements and restrictions contained in the Mohegan Compact which authorizes the Tribe to conduct most forms of Class III Gaming.



Tribal-state compacts have been the subject of litigation in a number of states, including, but not limited to, Alabama, California, Florida, Kansas,
Michigan, Mississippi, New Mexico, New York, Oklahoma, Oregon, South Dakota, Texas, Washington and Wisconsin. Tribes frequently seek to enforce the constitutionality of the provision of IGRA which entitles tribes to bring suit in federal court
against a state that fails to negotiate a tribal-state compact in good faith. The United States Supreme Court resolved this issue by holding that the Indian Commerce Clause does not grant Congress authority to abrogate sovereign immunity granted to
the states under the Eleventh Amendment. Accordingly, IGRA does not grant jurisdiction over a state that did not consent to be sued.



There has been litigation in a number of states challenging the authority of state governors, under state law, to enter into tribal-state compacts without
legislative approval. Federal courts have upheld such authority in Louisiana and Mississippi. The highest state courts of Arizona, Kansas, Michigan, New Mexico, New York and Rhode Island have held that the governors of those states did not have
authority to enter into such compacts without the consent or authorization of the legislatures of those states. In the New Mexico and Kansas cases, the courts held that the authority to enter into such compacts is a legislative function under their
respective state constitutions. The court in the New Mexico case also held that state law does not permit casino-style gaming.



In Connecticut, there has been no litigation challenging the governors authority to enter into tribal-state compacts. If such a suit were filed,
however, the Tribe does not believe that the precedent in the New Mexico or Kansas cases would apply. The Connecticut Attorney General has issued a formal opinion, which states that existing [state] statutes provide the Governor with the
authority to negotiate and execute the . . . [Mohegan] Compact. Thus, the Attorney General declined to follow the Kansas case. In addition, the United States Court of Appeals for the Second Circuit has held, in a case brought by the
Mashantucket Pequot Tribe, that Connecticut law authorizes casino gaming. After execution of the Mohegan Compact, the Connecticut Legislature passed a law requiring that future gaming compacts be approved by the legislature, but that law does not
apply to previously executed compacts such as the Mohegan Compact.



Possible Changes in Federal Law



Several bills
have been introduced in the United States Congress, which would amend IGRA. While there have been a number of technical amendments to the law, to date there have been no material changes to IGRA. Any amendment of IGRA could change the regulatory
environment and requirements within which the Tribe could conduct gaming.



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Pennsylvania Racing Regulation



Our harness racing operations at Pocono Downs are subject to extensive
regulation under the Pennsylvania Racing Act. Under that law, the Harness Racing Commission, is responsible for, among other things:



| |  |  | granting permission annually to maintain racing licenses and schedule races;
| | - |  | ----------------------------------------------------------------------------



| |  |  | approving, after a public hearing, the opening of additional OTWs and racetracks;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | approving simulcasting activities;
| | - |  | ----------------------------------



| |  |  | licensing all officers, directors, racing officials and certain other employees of a company; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | approving all contracts entered into by a company affecting racing, pari-mutuel wagering, phone/internet wagering and OTW operations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



As in most states, the regulations and oversight applicable to our operations
in Pennsylvania are intended primarily to safeguard the legitimacy of the sport and its freedom from inappropriate or criminal influences. The Harness Racing Commission has broad authority to regulate in the best interests of racing and may, to that
end, disapprove the involvement of certain personnel in our operations, deny approval of certain acquisitions following their consummation or withhold permission for a proposed OTW site for a variety of reasons, including community opposition. The
Pennsylvania legislature also has reserved the right to revoke the power of the Harness Racing Commission to approve additional OTWs and could, at any time, terminate pari-mutuel wagering as a form of legalized gaming in Pennsylvania or subject such
wagering to additional restrictive regulation or taxation.



We
have obtained permission from the Harness Racing Commission to conduct live racing at Pocono Downs and to operate the five OTWs that we own. The Harness Racing Commission can refuse to grant permission to continue to operate existing facilities.



Material Agreements



The following is a summary of the material terms of several of our and
the Tribes material agreements. This summary does not restate these agreements in their entirety. We urge you to read these agreements because they, and not these summaries, define our rights and obligations and the rights and obligations of
the Tribe. Copies of these agreements are included as exhibits to this Form 10-K.



Gaming Compact with the State of Connecticut



In April 1994, the Tribe and the State of Connecticut entered into a gaming compact to authorize and regulate the Tribes conduct of gaming on the Tribes land in Connecticut. The Mohegan Compact has a
perpetual term and is substantively similar to the procedures that govern gaming operations of the Mashantucket Pequot Tribe in Connecticut and provide, among other things, as follows:



(1) The Tribe is authorized to conduct on its reservation those Class III gaming activities specifically
enumerated in the Mohegan Compact or amendments thereto. The forms of Class III gaming authorized under the Mohegan Compact include (a) specific types of games of chance, (b) video facsimiles of such authorized games of chance (i.e., slot
machines), (c) off-track pari-mutuel betting on animal races, (d) pari-mutuel betting, through simulcasting, on animal races and (e) certain other types of pari-mutuel betting on games and races conducted at the gaming facility (some
types of which currently are, together with off-track pari-mutuel telephone betting on animal races, under a moratorium).



(2) The Tribe must establish standards of operations and management of all gaming operations in order to protect the public interest,
ensure the fair and honest operation of gaming activities and maintain the integrity of all Class III gaming activities conducted on the Tribes lands. The first of such standards was set forth in the Mohegan Compact and approved by the State
of Connecticut gaming agency. State of Connecticut gaming agency approval is required for any revision to such standards. The Tribe must supervise the implementation of these standards by regulation through a Tribal gaming agency.



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(3) Criminal law enforcement matters relating to Class III gaming activities are under
the concurrent jurisdiction of the State of Connecticut and the Tribe.



(4) All gaming employees must obtain and maintain a gaming employee license issued by the State of Connecticut gaming agency.



(5) Any enterprise providing gaming services or gaming equipment to the Tribe is required to hold a valid, current gaming services
registration issued by the State of Connecticut gaming agency.



(6) The State of Connecticut annually assesses the Tribe for the costs attributable to its regulation of the Tribes gaming operations and for the provision of law enforcement at the Tribes gaming facility.



(7) Net revenues from the Tribes gaming
operations may be applied only for purposes related to Tribal government operations and general welfare, Tribal economic development, charitable contributions and payments to local governmental agencies.



(8) Tribal ordinances and regulations governing health and
safety standards at the gaming facilities may be no less rigorous than the applicable laws and regulations of the State of Connecticut.



(9) Service of alcoholic beverages within any gaming facility is subject to regulation by the State of Connecticut.



(10) The Tribe waives any defense which it may have by
virtue of sovereign immunity with respect to any action brought in United States District Court to enforce the Mohegan Compact.



In May 1994, the Tribe and the State of Connecticut entered into a MOU which sets forth certain matters regarding the implementation of the Mohegan
Compact. The MOU stipulates that a portion of the revenues earned on slot machines must be paid to the State of Connecticut. This payment is known as the slot win contribution. For each 12-month period commencing July 1, 1995, the slot win
contribution shall be the lesser of (a) 30% of gross revenues from slot machines, or (b) the greater of (i) 25% of gross revenues from slot machines or (ii) $80.0 million. The slot win contribution payments will not be required
if the State of Connecticut legalizes any other gaming operations with slot machines or other commercial casino games within the State of Connecticut except those operations consented to by the Tribe and the Mashantucket Pequot Tribe.



Agreement with the Town of Montville



On June 16, 1994, the Tribe and the Town of Montville entered into an
agreement whereby the Tribe agreed to pay to the town $500,000 annually to minimize the impact on the town resulting from the decreased tax revenues on reservation land held in trust. The Tribe assigned its rights and obligations in the agreement
with the Town of Montville to us.



Land Lease from the
Tribe to the Authority



Mohegan Sun is located upon
land that is held in trust for the Tribe by the United States. We entered into a land lease with the Tribe under which the Tribe leases to us the property and all buildings, improvements and related facilities constructed or installed on the
property. The lease was approved by the Secretary of the Interior on, and became effective as of, September 29, 1995. Summarized below are several key provisions of this lease. See also Part I. Item 2. Properties.



Term



The term of the lease is 25 years with an option, exercisable by us, to extend the term for one additional 25-year period.
Upon the termination of the lease, we will be required to surrender to the Tribe possession of the property and improvements, excluding any equipment, furniture, trade fixtures or other personal property.



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Rent and Other Operating Expenses



We are required to pay to the Tribe a nominal annual rental fee. For any period when the Tribe or another agency or
instrumentality of the Tribe is not the tenant under the lease, the rent will be eight percent of the tenants gross revenues from the premises. We are responsible for the payment of all costs of owning, operating, constructing, maintaining,
repairing, replacing and insuring the leased property.



Use
of Leased Property



We may use the leased property and
improvements solely for the construction and operation of Mohegan Sun, unless prior approval is obtained from the Tribe for any proposed alternative use. Similarly, no construction or alteration of any building or improvement located on the leased
property by us may be made unless complete and final plans and specifications have been approved by the Tribe. Following foreclosure of any mortgage on our interest under the lease or any transfer of such interest to the holder of such mortgage in
lieu of foreclosure, the leased property and improvements may be used for any lawful purpose, subject only to applicable codes and governmental regulations; provided, however, that a non-Indian holder of the leased property may not conduct gaming
operations on the property.



Permitted Mortgages and Rights
of Permitted Mortgages



We may not mortgage, pledge or
otherwise encumber our leasehold estate in the leased property except to a holder of a permitted mortgage. Under the lease, a permitted mortgage includes the leasehold mortgage securing our obligations under the new credit facility
granted by us that provides, among other things, that (1) the Tribe will have the right to notice of, and to cure, any default by us, (2) the Tribe will have the right to prior notice of an intention by the holder to foreclose on the
permitted mortgage and the right to purchase the mortgage in lieu of any foreclosure and (3) the permitted mortgage is subject and subordinated to any and all access and utility easements granted by the Tribe under the lease. As provided in the
lease, each holder of a permitted mortgage has the right to notice of any default by us under the lease and the opportunity to cure such default within any applicable cure period.



Default Remedies



We will be in default under the lease if, subject to the notice provisions, we fail to make lease payments or to comply with our covenants under the lease
or if we pledge, encumber or convey our interest in the lease in violation of the terms of the lease. Following a default, the Tribe may, with approval from the United States Secretary of the Interior, terminate the lease unless a permitted mortgage
remains outstanding with respect to the leased property. In that case, the Tribe may not (1) terminate the lease or our right to possession of the leased property, (2) exercise any right of re-entry, (3) take possession of and/or
relet the leased property or any portion thereof or (4) enforce any other right or remedy which may materially and adversely affect the rights of the holder of the permitted mortgage, unless the default triggering such rights was a monetary
default which such holder failed to cure after notice.



Priority Distribution Agreement with the Tribe



On August 1, 2001, we entered into a priority distribution agreement with the Tribe, which obligates us to make monthly payments to the Tribe to the extent of our net cash flows, as defined in the priority distribution agreement. The
priority distribution agreement, which has a perpetual term, also clarifies and records the terms pursuant to which we made such payments to the Tribe prior to the effective date of the priority distribution agreement. The priority distribution
agreement obligates us to make monthly priority distribution payments to the Tribe in a maximum aggregate amount of $14.0 million per calendar year, adjusted annually in accordance with the formula specified in the priority distribution agreement to
reflect the effects of inflation. However, payments pursuant to the priority distribution agreement do not reduce our obligation to make payments for governmental services provided by the Tribe or any payments under any other agreements with the
Tribe to the extent that such



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agreements are permitted under the bank credit facility. See Certain IndebtednessBank Credit Facility. The monthly payments under the
priority distribution agreement are our limited obligations payable only to the extent of our net cash flows and are not secured by a lien or encumbrance on any of our assets or property.



Relinquishment Agreement with Trading Cove Associates



General



In February 1998, we entered into the relinquishment agreement with TCA,
under which we and TCA agreed to terminate the management agreement with TCA. This termination occurred on December 31, 1999. On January 1, 2000, we assumed the day-to-day management of Mohegan Sun. To compensate TCA for terminating its
management rights, we agreed to pay to TCA five percent of revenues, as defined in the relinquishment agreement, generated by Mohegan Sun during the 15-year period commencing on January 1, 2000 and ending on December 31, 2014.



Relinquishment Payments



The payments under the relinquishment agreement are divided into senior
relinquishment payments and junior relinquishment payments, each of which are 2.5% of revenues (as defined in the relinquishment agreement). Senior relinquishment payments are payable quarterly in arrears and commenced on April 25, 2000 and the
junior relinquishment payments are payable semi-annually in arrears and commenced on July 25, 2000. Under the relinquishment agreement, revenues are defined as gross gaming revenues (other than Class II gaming revenue) and all other facility
revenues (including hotel revenues, room service, food and beverage sales, parking revenues, ticket revenues and other fees or receipts from the Mohegan Sun Arena and convention center and all rental or other receipts from the lessees, licensees and
concessionaires, but not the gross receipts of such lessees, licensees and concessionaires) and proceeds of business interruption insurance.



Subordination of Relinquishment Payments/Priority Distribution to the Tribe



The relinquishment agreement provides that each of the senior and junior relinquishment payments are subordinated in right
to payment of senior secured obligations, which includes the bank credit facility and capital lease obligations, and that the junior relinquishment payments are further subordinated to payment of all other senior obligations, including our senior
notes. The relinquishment agreement also provides that all relinquishment payments are subordinated in right of payment to the minimum priority distribution payment, as defined in the relinquishment agreement, from us to the Tribe to the extent then
due.



Trademarks



In connection with the relinquishment agreement, TCA granted to us an
exclusive, irrevocable, perpetual, world-wide and royalty-free license with respect to trademarks and other similar rights including the Mohegan Sun name, used at or developed for Mohegan Sun. We agreed, however, that we will only use
the word Sun in conjunction with Mohegan Sun and Project Sunburst facilities and together with Mohegan or Mohegan Tribe. In January 2003, we received a waiver from TCA to also use the word Sun in
connection with our WNBA franchise Connecticut Sun. We capitalized $130.0 million of the relinquishment liability in connection with the trademark value of the Mohegan Sun brand name.



Pocono Downs Purchase Agreement



On October 14, 2004, we entered into a purchase agreement with subsidiaries of Penn National Gaming, Inc., pursuant to
which we acquired Pocono Downs, a standardbred harness racing facility located on approximately 400 acres in Plains Township, Pennsylvania as well as five Pennsylvania OTWs located in Carbondale, East Stroudsburg, Erie, Hazleton and Lehigh Valley
(Allentown) for a purchase price of approximately $280.0 million. The purchase agreement provides us with post-closing termination rights in the event of certain materially adverse legislative or regulatory events. See Risk
FactorsRisks Related to Our Pocono Downs Operations, for more information on these rights.



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Management and Development Agreements with Other Tribes



Cowlitz Project



In September 2004, Salishan-Mohegan entered into development and management
agreements with the Cowlitz Indian Tribe regarding the Cowlitz Project. Under the terms of the development agreement, Salishan-Mohegan administers and oversees the planning, designing, development, construction, and furnishing, as well as provide
assistance with the financing, of the Cowlitz Project and the agreement provides for certain development fees of 3% of total Project Costs, as defined in the development agreement, which are payable to Mohegan VenturesNW through
Salishan-Mohegan pursuant to the operating agreement. The management agreement is for a period of seven years commencing with the opening of the planned casino, during which Salishan-Mohegan will manage, operate and maintain the planned casino. The
management agreement provides for a management fee of 24% of Net Revenues, as defined in the management agreement, which approximates net income earned from the Cowlitz Project. Pursuant to the operating agreement, management fees will be allocated
to the members of Salishan-Mohegan based on their respective membership percentages. Development of the Cowlitz Project is subject to certain governmental and regulatory approvals, including, but not limited to, negotiating a gaming compact with the
State of Washington and the United States Department of the Interior accepting land into trust on behalf of the Cowlitz Indian Tribe. The management agreement is subject to approval by the National Indian Gaming Commission, or the NIGC.



Menominee Project



In October 2004, we entered into a management agreement with the Menominee
Indian Tribe of Wisconsin, or the Menominee Tribe, and the Menominee Kenosha Gaming Authority. According to the management agreement, we were granted the exclusive right and obligation to manage, operate and maintain a planned casino and destination
resort to be located in Kenosha, Wisconsin, or the Menominee Project, for a period of seven years commencing with the opening of the planned casino, in consideration of a management fee of 13.4% of Net Revenues, as defined in the management
agreement, which approximates net income earned from the Menominee Project. The management agreement is subject to approval by the NIGC.



Land Purchase Options



Upon formation of Salishan-Mohegan, Salishan Company contributed land purchase options related to property to be assigned to the Cowlitz Indian Tribe for
purposes of the Cowlitz Project, upon (1) receipt of necessary financing for the development of the proposed casino and (2) the underlying property being taken into trust by the United States Department of the Interior. Pursuant to
amendments made to the option agreements in May 2005, the land purchase options permit Salishan-Mohegan to purchase land at specified closing dates no later than December 2005 and April 2006 for remaining payments of approximately $7.5 million and
$3.2 million, respectively. Under the option agreements, Salishan-Mohegan is also required to make extension payments on the aggregate agreed-upon net purchase price at an annual rate of 6.5%, with an aggregate total of $2.4 million payable on the
closing date in April 2006 or the applicable portion upon termination of the option agreements.



Certain Indebtedness



The following is a summary of the material terms of our material debt obligations. This summary does not restate in entirety the terms of the agreements under which we incurred the indebtedness. We urge you to read these agreements
because they, and not these summaries, define our rights and obligations, and, in some cases, those of the Tribe. These agreements are included as exhibits to this Form 10-K.



Bank Credit Facility



We have a $450.0 million revolving bank credit facility from a syndicate of financial institutions and commercial banks, with Bank of America, N.A.
serving as administrative agent. The maximum aggregate



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principal amount available for borrowing includes amounts under letters of credit. As of September 30, 2005, the amount under letters of credit totaled
approximately $584,000, of which no amount was drawn. The revolving loan has no mandatory amortization provision and is payable in full on March 31, 2008. We have $449.4 million available for borrowing under the bank credit facility as of
September 30, 2005 (without taking into account covenants under the line of credit discussed below).



The bank credit facility is collateralized by a lien on substantially all of our assets, including the assets of the Pocono Downs entities, and a
leasehold mortgage on the land and improvements which comprise Mohegan Sun. We will also be required to pledge additional assets as we or our restricted subsidiaries acquire them. In addition, our obligations under the bank credit facility are
guaranteed by MBC, MCV-PA, and the Pocono Downs entities. The bank credit facility subjects us to a number of restrictive covenants, including financial covenants. These financial covenants relate to, among other things, our permitted total debt and
senior debt leverage ratios, our minimum fixed charge coverage ratio and our maximum capital expenditures. The bank credit facility includes non-financial covenants by us and the Tribe of the type customarily found in loan agreements for similar
transactions including requirements that:



| |  |  | the Tribe preserve its existence as a federally recognized Indian tribe;
| | - |  | ------------------------------------------------------------------------



| |  |  | the Tribe causes us to continually operate Mohegan Sun in compliance with all applicable laws; and
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | except under specific conditions, limit us from selling or disposing of our assets, limit the transfer of the Authoritys assets to non-guarantor subsidiaries, limit the
incurrence by us of other debt or contingent obligations and limit our ability to extend credit, make investments or commingle our assets with assets of the Tribe.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of September 30, 2005, we and the Tribe were in compliance with all of our and their respective covenant
requirements in the bank credit facility.



At our option, each
advance of loan proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month London Inter-Bank Offered Rate, or LIBOR, plus in either case, the applicable spread at the time
each loan is made. We also pay commitment fees for the unused portion of the revolving loan on a quarterly basis equal to the applicable spread for commitment fees times the average daily unused commitment for that calendar quarter. Applicable
spreads are based on our total leverage ratio, as defined in the bank credit facility. The applicable spread for base rate advances will be between 0.50% and 1.25%, and the applicable spread for LIBOR rate advances will be between 1.75% and 2.50%.
The applicable spread for commitment fees will be between 0.375% and 0.50%. The base rate is the higher of Bank of Americas announced prime rate or the federal funds rate plus 0.50%. Interest on LIBOR loans is payable at the end of each
applicable interest period or quarterly in arrears, if earlier. Interest on base rate advances will be payable quarterly in arrears. As of September 30, 2005, we had no base rate loans and no LIBOR rate loans outstanding. The applicable spread
for commitment fees was 0.50% as of September 30, 2005.



1999 81/8% Senior Notes



On March 3, 1999, we issued $200.0 million senior notes with fixed
interest payable at a rate of 81/8% per annum, or the 1999 senior notes. Interest on the 1999 senior notes
is payable semi-annually on January 1 and July 1. The 1999 senior notes mature on January 1, 2006. The 1999 senior notes are our uncollateralized general obligations and rank pari passu in right of payment with all our current and
future uncollateralized senior indebtedness. Borrowings under the bank credit facility and capital lease obligations are collateralized by first priority liens on substantially all of our assets. As a result, upon any distribution to creditors in a
bankruptcy, liquidation or reorganization or similar proceeding relating to us or the Tribe, the holders of collateralized debt may be paid in full in cash before any payment may be made with respect to the 1999 senior notes. The 1999 senior notes
rank equally in right of payment with the 2005 senior notes described below and 50% of our payment obligations under the relinquishment agreement that are then due and owing, and rank senior to the remaining 50% of our payment obligations under the
relinquishment agreement that are then due and owing, the



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2001 senior subordinated notes, the 2002 senior subordinated notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes, and the 2005
senior subordinated notes described below. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 1999 senior notes.



In August 2004, we completed a cash tender offer and consent solicitation to repurchase any or all of our outstanding 1999 senior notes. As part of the
tender offer, we solicited and received requisite consents to certain proposed amendments to the indentures governing the 1999 senior notes which eliminated substantially all of the restrictive covenants thereunder. The aggregate principal amount of
1999 senior notes tendered was $186.0 million. An aggregate principal amount of $14.0 million of the 1999 senior notes remain outstanding as of September 30, 2005.



2005 61/8% Senior Notes



On February 8, 2005, we issued $250.0 million senior notes with fixed
interest payable at a rate of 61/8% per annum, or the 2005 senior notes. The 2005 senior notes mature on
February 15, 2013. The first call date for the 2005 senior notes is February 15, 2009. Interest on the 2005 senior notes is payable semi-annually on February 15 and August 15. The 2005 senior notes are our uncollateralized
general obligations, which are effectively subordinated to all of our existing and future senior secured indebtedness, including the bank credit facility. The 2005 senior notes rank equally in right of payment with the 1999 senior notes, and, in a
liquidation, bankruptcy or similar proceeding, 50% of our payment obligations under the relinquishment agreement that are then due and owing. The 2005 senior notes rank senior to the 2001 senior subordinated notes, the 2002 senior subordinated
notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes, the 2005 senior subordinated notes, and the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing. MBC, MCV-PA and the
Pocono Downs entities are guarantors of the 2005 senior notes.



2001 83/8% Senior Subordinated Notes



On July 26, 2001, we issued $150.0 million senior subordinated notes with fixed interest payable at a rate of 83/8% per annum, or the 2001 senior subordinated notes. Interest on the 2001 senior subordinated notes is payable
semi-annually on January 1 and July 1. The 2001 senior subordinated notes mature on July 1, 2011. The first call date for the 2001 senior subordinated notes is July 1, 2006. The 2001 senior subordinated notes are our
uncollateralized general obligations and are subordinated to the bank credit facility, the 1999 senior notes and 2005 senior notes, and, in a liquidation, bankruptcy or similar proceeding, 50% of our payment obligations under the relinquishment
agreement that are then due and owing. The 2001 senior subordinated notes rank equally with the 2002 senior subordinated notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes, the 2005 senior subordinated notes, and the
remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2001 senior subordinated notes.



In August 2004, we completed a cash tender offer and consent solicitation to
repurchase any or all of our outstanding 2001 senior subordinated notes. As part of the tender offer, we solicited and received requisite consents to certain proposed amendments to the indentures governing the 2001 senior subordinated notes, which
eliminated substantially all of the restrictive covenants thereunder. The aggregate principal amount of 2001 senior subordinated notes tendered was $133.7 million. An aggregate principal amount of $16.3 million of the 2001 senior subordinated notes
remain outstanding as of September 30, 2005.



2002
8% Senior Subordinated Notes



On February 20,
2002, we issued $250.0 million senior subordinated notes with fixed interest payable at a rate of 8% per annum, or the 2002 senior subordinated notes. Interest on the 2002 senior subordinated notes is payable semi-annually on April 1 and
October 1. The 2002 senior subordinated notes mature on April 1, 2012. The first call date for the 2002 senior subordinated notes is April 1, 2007. The 2002 senior subordinated notes are



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our uncollateralized general obligations and are subordinated to the bank credit facility,the 1999 senior notes and 2005 senior notes, and, in a liquidation,
bankruptcy or similar proceeding, 50% of our payment obligations under the relinquishment agreement that are then due and owing. The 2002 senior subordinated notes rank equally with the 2001 senior subordinated notes, the 2003 senior subordinated
notes, the 2004 senior subordinated notes, the 2005 senior subordinated notes, and the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors
of the 2002 senior subordinated notes.



2003 63/8% Senior Subordinated Notes



On July 9, 2003, we issued $330.0 million senior subordinated notes with fixed interest payable at a rate of
63/8% per annum, or the 2003 senior subordinated notes. Interest on the 2003 senior subordinated notes is payable semi-annually on January 15 and July 15. The 2003 senior subordinated notes mature on July 15,
2009. The 2003 senior subordinated notes are our uncollateralized general obligations and are subordinated to the bank credit facility, the 1999 senior notes and 2005 senior notes, and, in a liquidation, bankruptcy or similar proceeding, 50% of our
payment obligations under the relinquishment agreement that are then due and owing. The 2003 senior subordinated notes rank equally with the 2001 senior subordinated notes, the 2002 senior subordinated notes, the 2004 senior subordinated notes, the
2005 senior subordinated notes, and the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2003 senior subordinated notes.



2004 71/8% Senior Subordinated Notes



On August 3, 2004, we issued $225.0 million senior subordinated notes with fixed interest payable at a rate of
71/8% per annum, or the 2004 senior subordinated notes. The 2004 senior subordinated notes mature on August 15, 2014. The first call date for the 2004 senior subordinated notes is August 15, 2009. Interest on the
2004 senior subordinated notes is payable semi-annually on February 15 and August 15. The 2004 senior subordinated notes are our uncollateralized general obligations and are subordinated to the bank credit facility, the 1999 senior notes
and 2005 senior notes, and, in a liquidation, bankruptcy or similar proceeding, 50% of our payment obligations under the relinquishment agreement that are then due and owing. The 2004 senior subordinated notes rank equally with the 2001 senior
subordinated notes, the 2002 senior subordinated notes, the 2003 senior subordinated notes, the 2005 senior subordinated notes, and the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing. MBC,
MCV-PA and the Pocono Downs entities are guarantors of the 2004 senior subordinated notes.



2005 67/8% Senior Subordinated Notes



On February 8, 2005, we issued $150.0 million senior subordinated notes with fixed interest payable at a rate of
67/8% per annum, or the 2005 senior subordinated notes. The 2005 senior subordinated notes mature on February 15, 2015. The first call date for the 2005 senior subordinated notes is February 15, 2010. Interest on
the 2005 senior subordinated notes is payable semi-annually on February 15 and August 15. The 2005 senior subordinated notes are uncollateralized general obligations of the Authority and are subordinated to the bank credit facility, the
1999 senior notes, the 2005 senior notes and in a liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment obligations under the relinquishment agreement that are then due and owing. The 2005 senior subordinated notes rank
equally with the 2001 senior subordinated notes, the 2002 senior subordinated notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes and the remaining 50% of the Authoritys payment obligations under the relinquishment
agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2005 Senior Subordinated Notes.



The senior and senior subordinated note indentures contain certain financial and non-financial covenants with which we and the Tribe must comply. The
financial covenants include, among other things, limitations on restricted payments and the incurrence of indebtedness, while the non-financial covenants include, among other



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things, reporting obligations, compliance with laws and regulations and our continued existence. As of September 30, 2005, both we and the Tribe were in
compliance with all respective covenant requirements in the senior and senior subordinated note indentures.



WNBA Promissory Note



We and MBC are parties to a membership agreement with WNBA, LLC, or the membership agreement. The membership agreement sets forth the terms and conditions
pursuant to which MBC acquired a membership in the WNBA and the right to own and operate a professional basketball team in the WNBA. We guaranteed the obligations of MBC under the membership agreement.



In consideration for this acquisition, MBC paid $2.0 million (with funds
advanced from us) and issued a promissory note to the WNBA, or the WNBA Note, for $8.0 million that accrues interest at an annual rate equal to three-month LIBOR plus 1.5%. We guaranteed the obligations of MBC under the WNBA Note. Pursuant to the
WNBA Note, principal payments of $1.0 million, subject to adjustment for certain revenue thresholds, and interest payments are required to be paid to the WNBA on each anniversary of the WNBA Note through January 2011. As of September 30, 2005,
a principal amount of $6.0 million was outstanding on the WNBA Note.



Line of Credit



We have a $25.0 million
revolving loan agreement with Bank of America (formerly Fleet National Bank), or the line of credit. Each advance accrues interest on the basis of one-month LIBOR, plus the applicable spread, determined at the time the advance is made on the basis
of the Authoritys Leverage Ratio, as defined in the line of credit. Borrowings under the line of credit are uncollateralized obligations. The line of credit expires in March 2006. The line of credit subjects us to certain covenants, including
a covenant to maintain at least $25.0 million available for borrowing under the bank credit facility. As of September 30, 2005, we were in compliance with all covenant requirements of the line of credit. As of September 30, 2005, we had no
amounts drawn under the line of credit, and therefore had $25.0 million available for borrowing.



Note and Mortgage Payables



Upon formation of Salishan-Mohegan, Salishan Company contributed, among other things, land with a mortgage payable of $2.6 million and land purchase
options with a note payable of $1.0 million. The mortgage payable bears interest due on a monthly basis at an annual rate of 9.5%, with the principal balance payable in full on March 28, 2006. The note payable, including accrued interest of
$150,000, was repaid at maturity on December 31, 2004. Any and all amounts paid by Salishan-Mohegan, including interest payments, pursuant to these agreements are reimbursable by the Cowlitz Indian Tribe provided certain events occur, as
prescribed in the development agreement between Salishan-Mohegan and the Cowlitz Indian Tribe.



Letters of Credit



We maintain uncollateralized letters of credit to satisfy potential workers compensation liabilities, overdue amounts for purses due horsemen at Pocono Downs and overdue pari-mutuel wagering tax liabilities that may arise. The letters
of credit expire(d) on August 31, 2006, November 15, 2005 and January 25, 2006, respectively. As of September 30, 2005, no amounts were drawn on the letters of credit.



Environmental Matters



The site on which Mohegan Sun is located formerly was occupied by United Nuclear Corporation, a naval products manufacturer
of, among other things, nuclear reactor fuel components. United Nuclear Corporations facility was officially decommissioned on June 8, 1994 when the Nuclear Regulatory Commission confirmed that all licensable quantities of such nuclear
material had been removed from the site and that any residual contamination from such material was remediated according to the Nuclear Regulatory Commission approved decommissioning plan.



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From 1991 through 1993, United Nuclear Corporation commissioned environmental audits and soil sampling
programs which detected, among other things, volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and groundwater. The Connecticut Department of Environmental Protection, or DEP, reviewed the environmental audits and reports
and established cleanup requirements for the site. In December 1994, the DEP approved United Nuclear Corporations remedial plan, which determined that groundwater remediation was unnecessary because although the groundwater beneath the site
was contaminated, it met the applicable groundwater criteria given the classification of the groundwater under the site. In addition, extensive remediation of contaminated soils and additional investigation were completed to achieve the DEPs
cleanup criteria and demonstrate that the remaining soils complied with applicable cleanup criteria. Initial construction at the site also involved extensive soil excavation. According to the data gathered in a 1995 environmental report commissioned
by United Nuclear Corporation, remediation is complete and is consistent with the applicable Connecticut cleanup requirements. The DEP has reviewed and approved the cleanup activities at the site, and, as part of the DEPs approval, United
Nuclear Corporation was required to perform post-closure groundwater monitoring at the site to ensure the adequacy of the cleanup. In addition, under the terms of United Nuclear Corporations environmental certification and indemnity agreement
with the Department of the Interior (which took the former United Nuclear Corporation land into trust for the Tribe), United Nuclear Corporation agreed to indemnify the Department of the Interior for environmental actions and expenses based on acts
or conditions existing or occurring as a result of United Nuclear Corporations activities on the property.



We are not currently incurring, and did not incur in the fiscal years ended September 30, 2005, 2004 and 2003, any material costs related to
compliance with environmental requirements with respect to the sites former use by the United Nuclear Corporation. Notwithstanding the foregoing, no assurance can be given that any existing environmental studies reveal all environmental
liabilities, or that future laws, ordinances or regulations will not impose any material environmental liability, or that a material environmental condition does not otherwise currently exist.



Prior to acquiring the Pocono Downs entities, we conducted an extensive
environmental investigation of the Pocono Downs facilities. In the course of that work, we identified several recognized environmental conditions at the Pocono Downs facility for which corrective actions are necessary to bring the property into
compliance with applicable laws and regulations. We have prepared and begun to implement a comprehensive plan to mitigate and resolve these conditions. Under the terms of our corrective action plans and as included in the Pocono Downs purchase
agreement, the sellers will be responsible for the costs of the remedial actions up to $1.0 million, and we will be responsible for all environmental costs in excess of $1.0 million but less than or equal to $2.0 million. The sellers also have
agreed to indemnify us for up to $10.0 million of additional costs in excess of $2.0 million that we may incur as a result of the environmental condition of the Pocono Downs facilities prior to the closing. The total cost of remediation is estimated
to be approximately $1.6 million at September 30, 2005.



Employees and
Labor Relations



As of September 30, 2005, Mohegan
Sun employed approximately 8,900 full-time employees, and 1,700 seasonal and part-time employees. Pursuant to the Tribal Employment Rights Ordinance, when recruiting and hiring personnel, except with respect to key personnel, Mohegan Sun is
obligated to give preference first to qualified members of the Tribe and then to enrolled members of other Indian tribes. See Certain Relationships and Related Transactions. None of Mohegan Suns employees are covered by collective
bargaining agreements.



As of September 30, 2005, Pocono
Downs employed approximately 200 full time employees, and 300 seasonal and part-time employees. Certain of our Pocono Downs employees are represented under collective bargaining agreements between Downs Racing, the International Union of Operating
Engineers Local Union 542C (Local Union 542C) and Teamsters Local No. 401 (Local No. 401). The agreement with Local Union 542C expires on March 31, 2007 and relates to equipment and heavy equipment operators.
The agreement with Local No. 401 expires on December 31, 2006 and relates to truck drivers and maintenance employees.



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Item 1A. Risk Factors



In
connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, set forth below are cautionary statements identifying important factors that could cause actual events or results to differ materially from any
forward-looking statements made by or on behalf of us, whether oral or written. We wish to ensure that any forward-looking statements are accompanied by meaningful cautionary statements in order to maximize to the fullest extent possible the
protections of the safe harbor established in the Private Securities Litigation Reform Act of 1995. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors that could
cause actual events or results to differ materially from our forward-looking statements. Refer also to Cautionary Note Regarding Forward-Looking Statements on page 1 of this Form 10-K.



Risks Related to Our Business



Our substantial indebtedness could affect adversely our financial
condition.



We currently have and will
continue to have a significant amount of indebtedness. As of September 30, 2005, we had outstanding debt totaling $1.24 billion. In addition, as of September 30, 2005, we had borrowing capacity under the bank credit facility of up to
$449.4 million, of which no amounts were drawn.



Our
substantial indebtedness could have significant adverse effects on our business. Such adverse effects include, but are not limited to, the following:



| |  |  | make it more difficult for us to satisfy our debt service obligations;
| | - |  | ----------------------------------------------------------------------



| |  |  | increase our vulnerability to adverse economic and industry conditions;
| | - |  | -----------------------------------------------------------------------



| |  |  | require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working
capital, capital expenditures and other general operating requirements;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business and the gaming industry, which may place us at a disadvantage compared to our competitors with
stronger liquidity positions, thereby hurting our results of operations and ability to meet our debt service obligations with respect to our outstanding indebtedness; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit, along with the financial and other restrictive covenants in our outstanding indebtedness, our ability to borrow additional funds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



An entitys ability to enforce their rights against us is limited by
our sovereign immunity and that of the Tribe and MBC.



Although we, the Tribe, and MBC each have sovereign immunity and may not be sued without our and their respective consents, we, the Tribe, and MBC each have granted a limited waiver of sovereign immunity and consent to suit in connection
with some of our outstanding indebtedness. Because it is unclear as a matter of law whether the Pocono Downs entities would be deemed to possess sovereign immunity, each of them has granted a similar waiver. Each such waiver includes suits against
us to enforce our obligation to repay certain outstanding indebtedness. Generally, waivers of sovereign immunity have been held to be enforceable against Indian tribes. In the event that any waiver of sovereign immunity is held to be ineffective, an
entity could be precluded from judicially enforcing their rights and remedies. With limited exceptions, we, the Tribe, MBC and the Pocono Downs entities have not waived sovereign immunity from private civil suits, including violations of the federal
securities laws. For this reason, an entity may not have any remedy against us, the Tribe, MBC or the Pocono Downs entities for violations of federal securities laws.



Disputes may be brought in a federal or state court that has jurisdiction over the matter. However, federal courts may not
exercise jurisdiction over disputes not arising under federal law, and state courts may not exercise



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jurisdiction over disputes arising on the Mohegan reservation. In addition, the Tribes Constitution has established a special court, the Gaming
Disputes Court, to rule on disputes with respect to Mohegan Sun. The federal and state courts, under the doctrines of comity and exhaustion of tribal remedies, may be required to (1) defer to the jurisdiction of the Gaming Disputes Court or
(2) require that any plaintiff exhaust its remedies in the Gaming Disputes Court before bringing any action in federal or state court. Thus, there may be no federal or state court forum with respect to a dispute.



The Tribes Constitution currently has a provision that prohibits the
Tribe from enacting any law that would impair the obligations of contracts entered into in furtherance of the development, construction, operation and promotion of gaming on Tribal lands. However, this provision could be amended by the Tribes
registered voters to impair the obligation of such contracts.



Any rights as a creditor are limited to our assets and those of MBC and the Pocono Downs entities.



Any rights as a creditor in a bankruptcy, liquidation or reorganization or similar proceeding would be limited to our assets and the assets of MBC and the
Pocono Downs entities, and would not encompass the assets of our other subsidiaries that are not guarantors, the Tribe or its other affiliates.



We, the Tribe, MBC and the Pocono Downs entities may not be subject to the federal bankruptcy laws, which could impair the ability of our creditors to
be repaid from the sale of our assets if we are unwilling or unable to meet our debt service obligations.



We, the Tribe, MBC and the Pocono Downs entities may not be subject to the federal bankruptcy laws. No assurance can be given that, if an event of default
occurs, a forum will be available to creditors other than the Gaming Disputes Court. In such court, there are presently no guiding precedents for the interpretation of Tribal law. Any execution of a judgment of the Gaming Disputes Court or any other
court on Tribal lands will require the cooperation of the Tribes officials in the exercise of their police powers. Thus, to the extent that a judgment of the Gaming Disputes Court must be executed on Tribal lands, the practical realization of
any benefit of such a judgment will be dependent upon the willingness and ability of Tribal officials to carry out such judgment. In addition, the land on which Mohegan Sun is located is owned by the United States in trust for the Tribe, and our
creditors and the creditors of the Tribe may not foreclose upon or obtain title to the land.



Restrictions in the bank credit facility and the indentures to which we are a party may impose limits on our ability to pursue our business strategies.



The bank credit facility and the indentures to which we are a party contain
customary operating and financial restrictions that limit our discretion on various business matters. These restrictions include covenants limiting our ability to:



| |  |  | incur additional indebtedness;
| | - |  | ------------------------------



| |  |  | pay dividends or make other distributions;
| | - |  | ------------------------------------------



| |  |  | make certain investments;
| | - |  | -------------------------



| |  |  | use assets as security in other transactions;
| | - |  | ---------------------------------------------



| |  |  | sell certain assets or merge with or into another person;
| | - |  | ---------------------------------------------------------



| |  |  | grant liens;
| | - |  | ------------



| |  |  | make capital expenditures; and
| | - |  | ------------------------------



| |  |  | enter into transactions with affiliates.
| | - |  | ----------------------------------------



These restrictions may, among other things, reduce our flexibility in planning for, or reacting to, changes in our business and the gaming industry in
general and thereby may negatively impact our financial condition, results of operations and our ability to meet our debt service obligations.



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The bank credit facility also requires us to maintain a fixed charge coverage ratio and not to exceed
certain ratios of senior leverage and total leverage, as defined in the bank credit facility. If these ratios are not maintained or are exceeded, as applicable, it may be impossible for us to borrow additional funds to meet our obligations.



Additionally, our failure to comply with covenants in our debt
instruments could result in an event of default which, if not cured or waived, could have a material adverse effect on us and could result in the acceleration of all then-outstanding amounts of such debt and an inability to make debt service
payments.



A downturn in the regional economy could impact
negatively our financial performance.



Primarily all
Mohegan Sun and Pocono Downs patrons arrive via automobile and are assumed to work or live in the northeastern United States and northeastern Pennsylvania, respectively. Moderate or severe economic downturns or adverse conditions in the northeastern
United States or northeastern Pennsylvania may affect negatively our financial performance. During periods of economic contraction, our revenues may decrease while some of our costs remain fixed, resulting in decreased earnings. This is because the
gaming and other leisure activities that we offer are discretionary expenditures and participation in such activities may decline during economic downturns because consumers have less disposable income. Even an uncertain economic outlook may affect
adversely consumer spending in our gaming operations and related facilities, because consumers spend less in anticipation of a potential economic downturn. Accordingly, our business, assets, financial condition and results of operations could be
affected adversely if the regional economic conditions or outlook weaken.



The loss of a key management member could have a material adverse effect on us, Mohegan Sun and the Pocono Downs entities.



Our success depends in large part on the continued service of key management personnel, particularly William J. Velardo,
Chief Executive Officer of the Authority, Leo M. Chupaska, Chief Financial Officer of the Authority, Mitchell Grossinger Etess, President and Chief Executive Officer of Mohegan Sun, Jeffrey E. Hartmann, Executive Vice President and Chief Operating
Officer of Mohegan Sun, and Robert J. Soper, President and Chief Executive Officer of the Pocono Downs entities. The loss of the services of one or more of these individuals or other key personnel could have a material adverse effect on our
business, operating results and financial condition. The key management personnel, excluding Mr. Chupaska and Mr. Soper, currently are retained pursuant to five-year employment agreements which expire on December 31, 2009 and include
a provision for automatic renewal for an additional term of five years. The Management Board has approved an employment agreement with Mr. Chupaska, however the agreement is currently in the process of being executed. Mr. Soper and the
Management Board are currently in the process of finalizing the terms of a new employment agreement.



We may be subject to material environmental liability as a result of possibly incomplete remediation of known environmental hazards and the existence
of unknown environmental hazards.



Our properties and
operations are subject to a wide range of environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use, management and disposal of hazardous and non-hazardous materials and wastes, and the cleanup
of contamination. Noncompliance with such laws and regulations, and past or future activities resulting in environmental releases, could cause us to incur substantial costs, including cleanup costs, fines and penalties, investments to retrofit or
upgrade our facilities and programs, or could affect our operations.



The site on which Mohegan Sun is located was formerly occupied by United Nuclear Corporation, a naval products manufacturer of, among other things, nuclear reactor fuel components. Prior to the decommissioning of United Nuclear Corporation
facilities on the site, extensive remediation of contaminated soils and additional investigations were completed. The site currently meets federal and state remediation requirements.



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Prior to acquiring the Pocono Downs entities, we conducted an extensive environmental investigation of
the Pocono Downs facilities. In the course of that work, we identified several recognized environmental conditions at the Pocono Downs facility for which corrective actions are necessary to bring the property into compliance with applicable laws and
regulations. We have prepared and begun to implement a comprehensive plan to mitigate and resolve these conditions. Under the terms of our corrective action plans and as included in the Pocono Downs purchase agreement, the sellers will be
responsible for the costs of the remedial actions up to $1.0 million, and we will be responsible for all environmental costs in excess of $1.0 million but less than or equal to $2.0 million. The sellers also have agreed to indemnify us for up to
$10.0 million of additional costs in excess of $2.0 million that we may incur as a result of the environmental condition of the Pocono Downs facilities prior to closing.



Notwithstanding the foregoing, we cannot assure you that:



| |  |  | the various environmental reports or any other existing environmental studies prepared with respect to these sites revealed all environmental liabilities;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any prior owners or tenants did not create any material environmental condition not known to us;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | future laws, ordinances or regulations will not impose any material environmental liability;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | a material environmental condition does not otherwise exist on any site; or
| | - |  | ---------------------------------------------------------------------------



| |  |  | the amounts that the sellers have agreed to pay to indemnify us for any losses we may suffer as a result of environmental liabilities at the Pocono Downs facilities will be
sufficient to make us whole for any such losses.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Any of the above could have a material adverse effect upon our future operating results and ability to meet our debt service obligations.



Risks Related to Mohegan Sun



Mohegan Suns failure to generate sufficient cash flows could prevent us from fulfilling our debt service obligations.



We currently rely primarily on cash flows generated by gaming operations at
Mohegan Sun to meet our debt service obligations. Our financial condition and operations are subject to many financial, economic, political, competitive and regulatory factors beyond our control. If Mohegan Sun is unable to generate sufficient cash
flows, we may be unable to meet our debt service obligations with respect to our outstanding indebtedness. We could be required to, among other things, reduce or delay planned capital expenditures, dispose of some of our assets and/or seek to
restructure some or all of our debt. We cannot assure you that any of these alternatives could be effected on satisfactory terms, if at all, and if effected, would not have a material adverse effect on our results of operations.



If we are not able to compete successfully, we may not be able to generate
sufficient cash flows to fund our operations or service our debt.



The following summarizes the material risks we face as a result of existing and potential competition that may affect our results of operations at Mohegan Sun. A more extensive discussion of the competitive landscape affecting Mohegan Sun
can be found under Market and Competition from Other Gaming Operations. In addition, our harness racing, and potential slot machine, operations at Pocono Downs are subject to competition in Pennsylvania and southeastern New York, as
described below under Risks Related to Our Recent Acquisition of Pocono Downs.



We face intense competition in our target market from Foxwoods Resort Casino.



The existing gaming industry in the northeastern United States is highly competitive. Mohegan Sun primarily competes with
Foxwoods, operated by the Mashantucket Pequot Tribe. Foxwoods is approximately ten



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miles from Mohegan Sun and is the largest gaming facility in the United States in terms of total gaming positions. Foxwoods has been in operation for
approximately thirteen years and may have greater financial resources and operating experience than us. In addition, Foxwoods has offered certain amenities to its guests for a significantly longer duration than Mohegan Sun, such as hotel
accommodations and convention center services.



In February
2005, the Mashantucket Pequot Tribe announced its plans to undertake a three-year, $700.0 million expansion at Foxwoods, which will add over two million square feet to the facility and will include an 825-room hotel tower, a 21,000 square foot spa,
a 5,000-seat theater, a 50,000 square foot ballroom, a 2,900 car parking garage, 145,000 square feet of meeting and convention space, four retail stores, two nightclubs, three lounges, four restaurants and additional business meeting and reception
space. In addition, the expansion will include 50,000 square feet of gaming space and will accommodate an additional 1,500 slot machines and 45 table games. Groundbreaking activities occurred in November 2005, and the facility is scheduled to open
in the summer of 2008. In May 2005, the Mashantucket Pequot Tribe completed the construction of two golf courses and a 50,000 square foot clubhouse, and is continuing construction on eight golf villas and a golf academy, which are expected to be
completed by the end of 2005.



In addition to Foxwoods, we
also face competition from existing casino gaming operations elsewhere in the northeastern United States.



Since the completion of the Project Sunburst expansion in 2002, we have broadened Mohegan Suns target market beyond day-trip customers to include
guests making overnight stays at the resort. Consequently, Mohegan Sun now competes more directly for customers with casinos in Atlantic City, New Jersey. Many of these casinos have greater resources, operating experience and name recognition than
Mohegan Sun. Moreover, public announcements, including those by Boyd Gaming and MGM, indicate that several Atlantic City properties are undergoing renovation and expansion, which could make them more attractive destinations and divert potential
customers from Mohegan Sun.



Mohegan Sun also currently faces
competition from several casinos and gaming facilities located on Indian tribal lands in New York, and to a lesser extent from racetracks in New York that operate video lottery terminals, or VLTs. New York has six federally recognized tribes located
in the central, northern and western parts of the state. Three of these tribes, the Oneida Nation of New York, the Seneca Nation and the St. Regis Mohawk Tribe of New York, currently engage in casino gaming. In addition to these three tribes, other
Indian tribes have announced potential casino projects, which, if completed, will add significant casino space and hotel rooms to the northeastern United States gaming market. In addition, racetracks located in Monticello, Saratoga Springs,
Farmington and Buffalo, New York currently operate an aggregate of approximately 5,100 VLTs.



New market entrants in the northeastern United States could adversely affect our operations and our ability to meet our financial obligations.



Under current law, outside of Atlantic City, New Jersey, full-scale commercial casino gaming in the northeastern United
States may be conducted only by federally recognized Indian tribes operating under federal Indian gaming laws or on cruise ships in international waters. In recent years, there has been an increase in the number of Indian tribes seeking to engage in
commercial casino gaming, including full-scale commercial casinos, in the northeastern United States and in the number of individual groups seeking to obtain federal recognition as Indian tribes so that they may engage in commercial casino gaming in
the northeastern United States. Under federal law, after obtaining federal recognition and before full scale commercial casino gaming operations may commence, a tribe must, among other things, have land taken into trust by the federal government,
negotiate a gaming compact with the state in which they intend to engage in commercial casino gaming, adopt a tribal gaming ordinance and construct a facility. A tribe may also need to negotiate a gaming management agreement and obtain financing to
construct a facility. Many Indian tribes and individual groups seeking to gain federal recognition as Indian tribes are pursuing commercial casino gaming in the northeastern United States. These efforts are ongoing in Connecticut, Maine,
Massachusetts, New York and Rhode Island.



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In addition, a number of states, including Maine, Massachusetts, Rhode Island and New York, have
considered or are considering legalization of one or more forms of commercial casino gaming by non-Indians in one or more locations. Based on internal analysis of the existing and potential gaming market in the northeastern United States, we believe
that competition from other commercial casino gaming operations will continue to increase in the future. We are unable to predict whether any of the efforts discussed above by other federally recognized Indian tribes, individual groups attempting to
gain federal recognition as Indian tribes or legalization of commercial casino gaming by non-Indians will lead to the establishment of additional commercial casino gaming operations in the northeastern United States. If established, we are uncertain
of the impact such commercial casino gaming operations will have on our operations and our ability to meet our financial obligations.



Because the gaming industry in the State of Connecticut has experienced seasonal fluctuations in the past, we also may experience seasonal variations
in our revenue and operating results that could affect adversely our cash flows.



The gaming industry in the State of Connecticut has experienced seasonal fluctuations, with the heaviest gaming activity occurring between May and August. Similarly, the heaviest gaming activity has occurred at
Mohegan Sun between May and August. As a result of these seasonal fluctuations, we likely will continue to experience seasonal variations in our quarterly revenue and operating results that could result in decreased cash flows during periods in
which gaming activity is relatively low. These variations in quarterly revenue and operating results could affect adversely our overall financial condition.



Negative conditions affecting, and the seasonal nature of, the lodging industry may have an adverse affect on our revenue and cash flows.



We depend on the revenue generated from the hotel at
Mohegan Sun, together with the revenue generated from the other portions of Mohegan Sun, to meet our debt obligations and fund our operations. Revenue generated from the operation of the hotel is subject primarily to conditions affecting our gaming
operations, but is also subject to the lodging industry in general, and, as a result, our cash flows and financial performance may be affected not only by the conditions in the gaming industry, but also by those in the lodging industry. Some of
these conditions are as follows:



| |  |  | changes in the local, regional or national economic climate;
| | - |  | ------------------------------------------------------------



| |  |  | changes in local conditions such as an oversupply of hotel properties;
| | - |  | ----------------------------------------------------------------------



| |  |  | decreases in the level of demand for hotel rooms and related services;
| | - |  | ----------------------------------------------------------------------



| |  |  | the attractiveness of our hotel to consumers and competition from comparable hotels;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | cyclical over-building in the hotel industry;
| | - |  | ---------------------------------------------



| |  |  | changes in travel patterns;
| | - |  | ---------------------------



| |  |  | changes in room rates and increases in operating costs due to inflation and other factors; and
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | the periodic need to repair and renovate the hotel.
| | - |  | ---------------------------------------------------



Adverse changes in these conditions could affect adversely our hotels financial performance and results of operations.



In addition, the hotel industry is seasonal in nature, which means that our
hotel may experience a decrease in the number of guests and amount of revenue during particular periods during the year where there is limited travel. As a result, our hotels revenues may not be stable throughout the year and may cause our
financial performance to be affected adversely during these periods.



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Our obligations under the relinquishment agreement could affect adversely our financial condition and
prevent us from fulfilling our debt service obligations.



Pursuant to the terms of the relinquishment agreement, we are required, among other things, to pay TCA five percent of the revenues (as defined in the relinquishment agreement) generated by Mohegan Sun during the 15-year period which
commenced on January 1, 2000. During the fiscal year ended September 30, 2005, we paid $70.6 million in relinquishment payments. As of September 30, 2005, relinquishment payments earned but unpaid were $19.2 million.



This obligation consumes a significant portion of our operating cash flows
that might otherwise be available to, among other things, reduce indebtedness and fund working capital, capital expenditures and other general operating requirements and thereby affect our ability to meet our debt service obligations. As a result,
our flexibility in planning for, or reacting to, changes in our business and the gaming industry in general is reduced. This may place us at a disadvantage compared to our competitors that do not have such an obligation.



Risks Related to the Indian Gaming Industry



Gaming is a highly regulated industry and changes in the law could have a
material adverse effect on the Tribes and our ability to conduct gaming, and thus on our ability to meet our debt service obligations.



Gaming on the Tribes reservation is regulated extensively by federal, state and tribal regulatory bodies, including the NIGC and agencies of the
State of Connecticut, such as the Department of Revenue Services Division of Special Revenue, the State Police and the Department of Consumer Protections Division of Liquor Control. As is the case with any casino, changes in applicable
laws and regulations could limit or materially affect the types of gaming that may be conducted, or services provided, by us and the revenues realized therefrom.



Currently, the operation of all gaming on Indian lands is subject to IGRA. Over the past several years, legislation has been
introduced in the United States Congress with the intent of modifying a variety of perceived problems with IGRA. Virtually all of the proposals that have been considered seriously would be prospective in effect and contain clauses that would
grandfather existing Indian gaming operations such as Mohegan Sun. Legislation also has been proposed, however, which would have the effect of repealing many of the key provisions of IGRA and prohibiting the continued operation of particular classes
of gaming on Indian reservations in states where such gaming is not otherwise allowed on a commercial basis. While none of the substantive proposed amendments to IGRA have been enacted, we cannot predict the effects of future legislative acts. In
the event that Congress passes prohibitory legislation that does not include any grandfathering exemption for existing tribal gaming operations, and if such legislation is sustained in the courts against tribal challenge, our ability to meet our
debt service obligations would be materially and adversely affected.



In addition, under federal law, gaming on Indian land is dependent on the permissibility under state law of specific forms of gaming or similar activities. If the State of Connecticut were to make various forms of gaming illegal or against
public policy, such action may have an adverse effect on our ability to conduct our gaming operations. In fact, in January 2003, the State of Connecticut repealed its Las Vegas nights statute, but the state attorney general opined that the repeal
did not affect the two existing Indian gaming compacts. Connecticut currently permits, among other things, a state lottery, jai alai fronton betting, greyhound racing and off-track betting parlors.



A change in our, MBCs or the Pocono Downs enties current
tax-exempt status could have a material adverse effect on our ability to meet our debt service obligations.



Based on current interpretation of the Internal Revenue Code of 1986, as amended, or the Code, we, the Tribe, MBC and the Pocono Downs entities are not
subject to federal income taxes. However, we cannot assure you that the United States Congress will not reverse or modify the exemption for Indian tribes from federal income taxation.



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Efforts have been made in the United States Congress over the past several years to amend the Code to
provide for taxation of the net income of tribal business entities. These efforts have included a House of Representatives bill that would have taxed gaming income earned by Indian tribes as unrelated business income subject to corporate tax rates.
Although no such legislation has been enacted, such legislation could be passed in the future. A change in the tax law could have a material adverse effect on our financial performance.



Risks Related to Our Pocono Downs Operations



Our inability to obtain a slot machine license in Pennsylvania could adversely affect our liquidity or financial position
or cause us to incur significant losses.



One of our
primary motives in acquiring Pocono Downs was to obtain a Category One slot machine license in Pennsylvania to operate slot machines at Pocono Downs. Subject to certain conditions contained in our purchase agreement relating to the Pocono Downs
entities, by July 1, 2006, if either our application for a Category One Slot Machine License has been denied or is not issued by the PGCB as a direct result of the conduct of the sellers (or certain of its related entities), or no conditional
or permanent gaming licenses have been issued by the PGCB, we have the right to require the sellers (or certain of its related entities) to repurchase the interests in the Pocono Downs entities. This right will expire upon the approval by the PGCB
of Penn National Racecourse for a conditional or permanent Category One Slot Machine License, so long as it has not been sold to a third party unaffiliated with the Pocono Downs sellers. If we are not able to obtain such a slot machine license for
any other reason, we may be forced to sell the business to another buyer or operate it, without a slot machine license, as the business is presently conducted, either of which could subject us to significant losses.



If we are not able to develop a slot machine facility at Pocono Downs on
time or on budget, we may not be able to achieve our operating projections for the Pocono Downs acquisition.



We anticipate total costs to develop a temporary and permanent slot machine facility at Pocono Downs of approximately $47 million and $160 million,
respectively, in addition to a slot machine license fee of $50.0 million. Our estimates assume that we have obtained a Category One license in time to open the temporary facility and begin construction of a permanent facility in 2006; however, if we
are not able to obtain the license on time, our projected openings for both facilities may be delayed and we may be exposed to higher than expected costs. Failure to complete the slot machine facilities within budget or on schedule could prevent us
from achieving our operating projections and, accordingly, may have a material adverse effect on our financial condition, results of operations or liquidity.



Delays in the hiring of staff, the issuance of final regulations or the adoption of other policies relating to the Pennsylvania Gaming Control Board
could result in delays in the issuance of the Category One licenses, including our own, which in turn, could delay our planned expansion of the Pocono Downs site.



The PGCB, which will oversee slot machine operations in the Commonwealth of Pennsylvania, was established pursuant to the
Pennsylvania Gaming Act enacted in July 2004. The PGCB has not yet been fully staffed and has not yet issued final regulations implementing the provisions of the Pennsylvania Gaming Act. Published reports indicate that the PGCB recently delayed its
projected schedule for issuing Category One conditional licenses by January or February 2006 to June 2006 at the earliest.



It has been reported that there may be attempts to amend the Pennsylvania Gaming Act in future legislative sessions, including a bill introduced by
certain members of the state House of Representatives on December 6, 2005, that would nullify the Pennsylvania Gaming Act. News reports indicate that Governor Rendell would veto this bill if approved by the state legislature. As with any gaming
operation, changes in applicable laws or regulations could limit or materially affect the types of gaming we may conduct, or the services we may provide, at Pocono Downs. In addition, several legal challenges have been filed in both state and
federal court challenging various provisions of the Pennsylvania Gaming Act. If any legislation or legal challenges were to succeed, our ability to develop and operate a gaming site at Pocono Downs could be adversely affected.



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Construction difficulties may delay our projected openings and could prevent us from achieving our
operating projections.



Construction projects like this
one are inherently subject to significant development and construction risks, all of which could cause unanticipated delays or cost increases. These include the following:



| |  |  | regulatory approvals;
| | - |  | ---------------------



| |  |  | labor disputes;
| | - |  | ---------------



| |  |  | shortage of material and skilled labor;
| | - |  | ---------------------------------------



| |  |  | weather interference;
| | - |  | ---------------------



| |  |  | engineering problems;
| | - |  | ---------------------



| |  |  | environmental problems;
| | - |  | -----------------------



| |  |  | fire, flood and other natural disasters; and
| | - |  | --------------------------------------------



| |  |  | geological, construction, demolition, excavation and/or equipment problems.
| | - |  | ---------------------------------------------------------------------------



If Pocono Downs is not able to compete successfully with existing and potential competitors, we may not be able to generate sufficient cash flows to
fulfill our debt service obligations relating to the acquisition and our development activities.



The Pennsylvania Gaming Act authorizes slot machines at seven harness and thoroughbred racetracks, and five stand-alone slot facilities. Each of the
facilities may initially install up to 3,000 slot machines and can be expanded to up to 5,000 slot machines after six months of operation and upon gaining the approval of the PGCB. In addition, the Pennsylvania Gaming Act authorizes two resort
facilities with up to 500 slot machines. The Pennsylvania Gaming Act also includes prohibitions against locating facilities in close proximity to other operations, including, among other things, a prohibition against locating another harness or
thoroughbred facility with slots or a standalone slot facility within 20 linear miles of Pocono Downs, and a prohibition against locating a resort facility within 15 linear miles of Pocono Downs.



In addition to Pocono Downs, there are two thoroughbred racetracks,
Philadelphia Park located in Bensalem (approximately 115 miles southeast of Pocono Downs) and Penn National Race Course in Grantville (located approximately 85 miles southwest of Pocono Downs) and one harness racetrack, the Meadows located in Meadow
Lands, near Pittsburgh (approximately 300 miles from Pocono Downs) currently operating. In addition, the Pennsylvania State Horse Racing Commission has approved a racing license for MTR Gaming to build a thoroughbred racetrack in Summit Township,
near Erie (approximately 325 miles from Pocono Downs), and the Harness Racing Commission has approved a harness racing license for Harrahs Entertainment Inc., which has partnered with Chester Downs and Marina, LLC, to build a harness racetrack
in Chester, approximately 115 miles from Pocono Downs. The Harness Racing Commission has not yet selected the proposed or existing property for the fourth and final new racing license permitted in Pennsylvania. However, under the Pennsylvania Gaming
Act, unless the developer of a proposed horse racetrack had received approval for a racing license within the 18 months immediately preceding the passage of the Pennsylvania Gaming Act, the licensee would not be permitted to obtain a slot license.



Under the Pennsylvania Gaming Act, the PGCB will select the
location of the five stand-alone slot facilities, so long as at least two of the stand-alone slot parlors are located in Philadelphia and one is located in Pittsburgh. The remaining two facilities will be selected by the PGCB from the list of
applicants who submit applications for a slot license. There have been several reports of proposed locations for the two remaining stand-alone slot facilities to be located outside of Philadelphia and Pittsburgh, with some reports indicating that
one could be located less than 40 miles from Pocono Downs. We cannot predict which owners of any of these proposed sites will receive gaming licenses or, accordingly, where any of the licensed facilities will be located or what impact, if any, they
will have on our planned Pocono Downs operations.



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In addition to the other slot facilities in Pennsylvania, Pocono Downs may face competition from up to
three full scale casino gaming operations by Indian tribes in the Catskill Mountains of New York. The Catskills are approximately 90 miles from Pocono Downs. Pocono Downs could also face competition from Tioga Downs Racetrack in Nichols, New York,
approximately 100 miles from Pocono Downs. Tioga Downs Racetrack is currently undergoing a $35.0 million renovation, which, once completed, will offer approximately 750 video lottery terminal machines to its gaming and harness racing customers. A
newly-constructed 90,000 square foot grandstand will house a 19,000 square foot casino floor.



We are uncertain of the impact these racetracks and potential commercial casino gaming operations will have on our operations and our ability to meet our financial obligations.



We may experience difficulties in integrating the Pocono Downs operations.



The integration of a new business involves risks which
may be costly and may adversely affect us. These risks include, among others:



| |  |  | the need to divert more management resources to integration than we planned, which may adversely affect, among other things, our ability to manage our existing business;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the failure to retain key employees of the Pocono Downs business may result in an inability to replace them on favorable terms with employees of equal skill;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulties in coordinating geographically separated organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | acquiring liabilities or adverse operating issues that we failed to discover through our diligence prior to the acquisition that, if in excess of the indemnification obligations of
the sellers, could result in unforeseen costs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our operations of the Pocono Downs business subject us to regulation by Pennsylvanias State Harness Racing Commission and, if we obtain a license, gaming authorities.



As owners and operators of the Pocono Downs harness racing facility and
off-track-wagering operations in Pennsylvania, we are subject to extensive state regulation by the Harness Racing Commission and other state regulatory bodies such as the liquor control board. If we obtain a slot machine license, we also will become
subject to further state regulation by the PGCB. Applicable rules and regulations may require that we obtain a variety of registrations, permits and approvals to conduct our operations. Regulatory bodies may, for any reason set forth in the
applicable legislation, rules and regulations, limit, condition, suspend, deny or revoke a license to conduct our operations as we intend to conduct them. We cannot assure you that we will be able to obtain all registrations, permits, approvals or
licenses necessary to conduct our business in Pennsylvania as we intend to conduct it or that, if obtained, we will be able to renew them as required. Any of these events, or any changes in applicable laws or regulations, could have a material
adverse effect on our business, financial condition and results of operations.



Item 1B. Unresolved Staff Comments.



Not applicable.



Item 2. Properties.



Mohegan
Sun is located on 240 acres of the Tribes approximately 405-acre reservation just outside of Uncasville, Connecticut, approximately one mile from the interchange of Interstate 395 and Connecticut Route 2A. The land located in southeastern
Connecticut upon which Mohegan Sun is situated is held in trust for the Tribe by the United States. Mohegan Sun has its own exit from Route 2A, giving patrons direct access to Interstate 395 and Interstate 95, the main highways connecting Boston,
Providence and New York City. By highway, Mohegan Sun is approximately 125 miles from New York City, New York, 100 miles from Boston, Massachusetts, 45 miles from Hartford, Connecticut and 50 miles from Providence, Rhode Island.



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We have a lease with the Tribe for land on which Mohegan Sun is located. The initial term of the lease is
25 years, with an option to renew for one additional 25-year term provided that we are not in default under the lease. The lease also provides that all improvements constructed on the site will become the property of the Tribe. The lease is a net
lease requiring that we assume all costs of operating, constructing, maintaining, repairing, replacing and insuring the leased property, in addition to the payment of a nominal annual rental fee.



We have entered into various lease agreements for properties adjacent to
Mohegan Sun. The properties are owned by MTIC Acquisitions, L.L.C., a Connecticut limited liability company controlled by the Tribe. The properties are used for providing access and/or parking for Mohegan Sun.



In connection with the purchase of the Pocono Downs entities, we acquired
Pocono Downs, a harness racing facility located on approximately 400 acres of land in Plains Township, Pennsylvania. The harness racing facility is currently one of only two harness racetracks in Pennsylvania and one of only four thoroughbred and
harness racing facilities in the state. It has a 5/8 mile all-weather, lighted track with seating for approximately 3,500 and parking capacity for approximately 6,500. In addition, we also acquired the OTW facilities located in Carbondale, Erie and
Lehigh Valley (Allentown), and we lease the East Stroudsburg and Hazleton facilities. The Lehigh Valley (Allentown) OTW is a 28,000 square-foot facility and is the largest OTW in the Commonwealth of Pennsylvania.



Prior to our acquisition of the Pocono Downs entities, Penn National Gaming
Inc., the former owner of the Pocono Downs entities, entered into an agreement to sell all of the assets associated with the OTW facility located in Erie, Pennsylvania to MTR Gaming Group, Inc., or MTR, and Presque Isle Downs Inc., and collectively
with MTR, Presque Isle, for $7.0 million. Penn National Gaming Inc. assigned its rights under this agreement to our subsidiary, Downs Racing, L.P., upon our acquisition of the Pocono Downs entities. Accordingly, Downs Racing, L.P. will be required
to convey the Erie OTW facility for such price if and when either of the following two conditions occur: (1) there is commencement by any of the Presque Isle entities of pari-mutuel wagering in Erie, Pennsylvania or (2) there is receipt by
any Presque Isle entity of revenue from slot machine operations in Erie, Pennsylvania.



Salishan-Mohegan, a majority-owned subsidiary of Mohegan Ventures-NW, owns a parcel of land in Clark County, Washington for the purposes of developing a casino to be owned by the Cowlitz Indian Tribe. Mohegan
Ventures-NW is a wholly-owned subsidiary of the Authority. The land is encumbered by a $2.6 million mortgage payable and certain lease agreements with the existing tenant on the property. Salishan-Mohegan also has options to purchase other parcels
of land next to the owned land, which would also be used for casino development purposes. The rights to the land and land purchase options shall be assigned to the Cowlitz Indian Tribe upon: (1) receipt of necessary financing for the
development of the proposed casino; and (2) the underlying property being taken into trust by the United States Department of the Interior.



We do not own, lease or have any interest in any other property.



Item 3. Legal Proceedings.



We are a defendant in litigation incurred in our normal course of business. We believe that, based on the advice of counsel, the aggregate liability, if any, arising from such litigation will not have a material adverse effect on our
financial position, results of operations or cash flows.



Item 4. Submission of Matters to a Vote of Security Holders.



None.



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##### Table of Contents

PART II



Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



We have not issued or sold any equity securities.



Item 6. Selected Financial Data



The selected financial data shown below for the fiscal years ended September 30, 2005, 2004 and 2003 and as of September 30, 2005 and 2004, have been derived from our audited consolidated financial statements included in this Form
10-K. The selected financial data set forth below for the fiscal years ended September 30, 2002 and 2001 and as of September 30, 2003, 2002 and 2001 have been derived from our audited financial statements for those years, which are not
included in this Form 10-K. The financial information shown below should be read in conjunction with our consolidated financial statements and related notes beginning on page F-1 of this Form 10-K, the section entitled Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations and the other financial and statistical data included in this Form 10-K. Unless otherwise indicated, dollar amounts shown in the following table are in
thousands.



|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|---------------------------------------------------------- |  | ------------------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                           |  | As of or for the Fiscal Years Ended September 30, |          
|                                                           |  | 2005                                              |           |   | 2004 |   |           | 2003 |  |   | 2002      |      |  | 2001 |          
|Operating Results:                                         |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Gross revenues                                             |  | $                                                 | 1,456,753 |   |      | $ | 1,367,933 |      |  | $ | 1,280,440 |      |  | $    | 1,121,060 |   |  | $ | 859,608   |  
|Promotional allowances                                     |  |                                                   | (125,148  | ) |      |   | (111,007  | )    |  |   | (102,952  | )    |  |      | (88,167   | ) |  |   | (71,372   | )
|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Net revenues                                               |  | $                                                 | 1,331,605 |   |      | $ | 1,256,926 |      |  | $ | 1,177,488 |      |  | $    | 1,032,893 |   |  | $ | 788,236   |  
|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Income from operations (1)                                 |  | $                                                 | 139,364   |   |      | $ | 246,617   |      |  | $ | 241,333   |      |  | $    | 213,680   |   |  | $ | 267,935   |  
|Total other expense (2)                                    |  |                                                   | (116,211  | ) |      |   | (143,748  | )(3) |  |   | (145,648  | )(4) |  |      | (113,648  | ) |  |   | (53,403   | )
|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Income from continuing operations before minority interest |  |                                                   | 23,153    |   |      |   | 102,869   |      |  |   | 95,685    |      |  |      | 100,032   |   |  |   | 214,532   |  
|Minority interest                                          |  |                                                   | 514       |   |      |   | 18        |      |  |   |          |      |  |      |          |   |  |   |          |  
|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Income from continuing operations                          |  |                                                   | 23,667    |   |      |   | 102,887   |      |  |   | 95,685    |      |  |      | 100,032   |   |  |   | 214,532   |  
|Loss from discontinued operations                          |  |                                                   |          |   |      |   |          |      |  |   |          |      |  |      |          |   |  |   | (591      | )
|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Net income                                                 |  | $                                                 | 23,667    |   |      | $ | 102,887   |      |  | $ | 95,685    |      |  | $    | 100,032   |   |  | $ | 213,941   |  
|                                                           |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Other Data:                                                |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Interest expense, net of capitalized interest              |  | $                                                 | 88,011    |   |      | $ | 78,970    |      |  | $ | 83,492    |      |  | $    | 76,635    |   |  | $ | 20,375    |  
|Capital expenditures                                       |  | $                                                 | 50,991    |   |      | $ | 30,680    |      |  | $ | 30,277    |      |  | $    | 224,743   |   |  | $ | 728,742   |  
|Net cash flows provided by operating activities            |  | $                                                 | 248,304   |   |      | $ | 214,776   |      |  | $ | 195,484   |      |  | $    | 183,699   |   |  | $ | 201,338   |  
|                                                           |  |                                                   |           |   |     
|Balance Sheet Data:                                        |  |                                                   |           |   |      |   |           |      |  |   |           |      |  |      |           |   |  |   |           |  
|Total assets                                               |  | $                                                 | 1,856,868 |   |      | $ | 1,579,705 |      |  | $ | 1,658,511 |      |  | $    | 1,714,055 |   |  | $ | 1,554,693 |  
|Long-term debt and capital lease obligations               |  | $                                                 | 1,226,348 |   |      | $ | 1,003,051 |      |  | $ | 1,101,649 |      |  | $    | 1,052,173 |   |  | $ | 908,000   |  

---

|(1) | Total operating costs and expenses included in income from operations includes non-cash relinquishment liability reassessment charges of $123.6 million and $3.9 million for the 2005
and 2004 fiscal years and non-cash relinquishment liability reassessment credits of $22.7 million, $19.6 million and $74.4 million for the 2003, 2002 and 2001 fiscal years. A discussion of this charge and our accounting for the relinquishment
liability may be found under Notes 2 and 13 to our audited consolidated financial statements beginning on page F-1 of this Form 10-K.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | For the fiscal years ended September 30, 2005, 2004, 2003, 2002, and 2001, total other expense includes $27.5 million, $29.9 million, $33.6 million, $36.3 million and $35.8
million, respectively, for the accretion of discount to the relinquishment liability to reflect the impact of the time value of money. A discussion of our accounting for the relinquishment liability may be found under Notes 2 and 13 to our audited
consolidated financial statements beginning on page F-1 of this Form 10-K.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes a loss on extinguishment of debt of $34.1 million. The loss is comprised of a tender premium of $31.0 million, a write-off of unamortized debt issuance costs of $3.5
million and other transaction costs of approximately $1.1 million, offset by a net gain of $1.5 million from the recognition of the remaining net deferred gain on the sale of related derivative instruments.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes a loss on extinguishment of debt of $27.4 million. The loss is comprised of a tender premium of $22.8 million, a write-off of unamortized debt issuance costs of $4.4
million and other transaction costs of approximately $200,000.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations



The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes beginning on page
F-1 of this Annual Report on Form 10-K and Item 6. Selected Financial Data and Part I. Item 1. Business.



Overview



The Tribe and the Authority



The Mohegan Tribe of Indians of Connecticut, or the Tribe, is a federally recognized Indian tribe with an approximately 405-acre reservation situated in
southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, federally recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal lands, subject to, among other
things, the negotiation of a gaming compact with the state in which they operate. The Tribe and the State of Connecticut have entered into such a compact, the Mohegan Compact, which has been approved by the United States Secretary of the Interior.
We were established as an instrumentality of the Tribe, with the exclusive power to conduct and regulate gaming activities on tribal lands and the nonexclusive authority to conduct such activities elsewhere. Our gaming operation at Mohegan Sun is
one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Through our subsidiary, Downs Racing, L.P., we also own Mohegan Sun at Pocono Downs, or Pocono Downs, a harness racing facility
located in Plains, Pennsylvania, as well as five Pennsylvania OTW facilities. We are governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council (the governing body of the Tribe). Any change in the composition
of the Mohegan Tribal Council results in a corresponding change in our Management Board.



Mohegan Sun



In
October 1996, we opened a gaming and entertainment complex known as Mohegan Sun. Mohegan Sun is located on a 240-acre site on the Tribes reservation overlooking the Thames River with direct access from Interstate 395 and Connecticut Route 2A
via a four-lane access road constructed by us. Mohegan Sun is approximately 125 miles from New York City and approximately 100 miles from Boston, Massachusetts. In fiscal year 2002, we completed a major expansion of Mohegan Sun known as Project
Sunburst. The first phase of Project Sunburst, the Casino of the Sky, which included increased gaming, restaurant and retail space and an entertainment arena, opened in September 2001. The remaining components, including an approximately 1,200-room
luxury hotel and approximately 100,000 square feet of convention space, were fully opened in June 2002.



Mohegan Sun operates in an approximately 3.0 million square foot facility, which includes the following two casinos:



Casino of the Earth



The Casino of the Earth has approximately 179,500 square feet of gaming
space and offers:



| |  |  | approximately 3,800 slot machines and 200 table games (including blackjack, roulette, craps and baccarat);
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | food and beverage amenities, including the Uncas American Indian Grill, a 285-seat full-service restaurant and bar opened in July 2005, three full-service themed fine dining
restaurants, with a fourth area featuring cuisine from all three themes, a 610-seat buffet, a ten-station food court featuring international and domestic cuisine and multiple service bars, all operated by us, for a current total of approximately
1,700 restaurant seats;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an approximately 10,000 square foot, 410-seat lounge featuring live entertainment seven days a week;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | an approximately 11,000 square foot simulcasting race book facility; and
| | - |  | ------------------------------------------------------------------------



| |  |  | four retail shops providing shopping opportunities ranging from Mohegan Sun logo souvenirs to cigars.
| | - |  | -----------------------------------------------------------------------------------------------------



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##### Table of Contents

Casino of the Sky



The Casino of the Sky has approximately 119,000 square feet of gaming space and offers:



| |  |  | approximately 2,400 slot machines and 105 table games (including blackjack, roulette, craps and baccarat);
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | food and beverage amenities, including two full-service restaurants, two quick-service restaurants, a 24-hour coffee shop, a 320-seat buffet, a six station food court featuring
international and domestic cuisine and five lounges and bars operated by us, as well as four full-service and three quick-service restaurants operated by third parties, for a total of approximately 2,600 restaurant seats;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mohegan After Dark, consisting of a nightclub, a lounge and a pub, which are all operated by a third party;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | the Mohegan Sun Arena with seating for up to 10,000;
| | - |  | ----------------------------------------------------



| |  |  | a 350-seat Cabaret;
| | - |  | -------------------



| |  |  | the Shops at Mohegan Sun containing 29 different retail shops, seven of which we own;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | an approximately 1,200-room luxury hotel;
| | - |  | -----------------------------------------



| |  |  | an approximately 20,000 square foot spa operated by a third party;
| | - |  | ------------------------------------------------------------------



| |  |  | approximately 100,000 square feet of convention space; and
| | - |  | ----------------------------------------------------------



| |  |  | a child care facility and an arcade style entertainment area operated by a third party.
| | - |  | ---------------------------------------------------------------------------------------



Mohegan Sun has parking spaces for approximately 13,000 guests and 3,100 employees. In addition, we operate the Mohegan Sun
gasoline and convenience center, an approximately 4,000 square foot, 20-pump facility located adjacent to Mohegan Sun.



Connecticut Sun



In January 2003, we formed a wholly-owned subsidiary, the Mohegan Basketball Club LLC, or MBC, for the purpose of holding a membership in the Womens
National Basketball Association, or WNBA, and owning and operating a professional basketball team in the WNBA. MBC entered into a membership agreement with the WNBA permitting it to operate the Connecticut Sun basketball team. The team plays its
home games in the Mohegan Sun Arena.



Mohegan Sun at
Pocono Downs



On January 25, 2005, we and our
wholly owned subsidiary, Mohegan Commercial Ventures PA, LLC, acquired all of the partnership interests in Downs Racing, L.P., Mill Creek Land, L.P., Backside, L.P. and Northeast Concessions, L.P., or the Pocono Downs entities, from subsidiaries of
Penn National Gaming, Inc. Downs Racing, L.P. owns Pocono Downs, a harness racing facility located on approximately 400 acres in Plains Township, Pennsylvania as well as five Pennsylvania OTWs located in Carbondale, East Stroudsburg, Erie,
Hazleton and Lehigh Valley (Allentown). The Pocono Downs harness racing facility is currently one of only two harness racetracks in Pennsylvania and one of only four thoroughbred and harness racing facilities in the state. It has a 5/8 mile
all-weather, lighted track with seating for approximately 3,500 and parking capacity for approximately 6,500. Harness racing has been conducted at Pocono Downs since 1965, and in 2005, the track held 143 live racing days. The Lehigh Valley
(Allentown) OTW is a 28,000 square-foot facility and is the largest OTW in the state of Pennsylvania. The approximately $280 million purchase price was funded through draws on our bank credit facility, subsequently refinanced through the issuance of
senior notes and senior subordinated notes discussed in Liquidity, Capital Resources and Capital SpendingExternal Sources of Liquidty.



We completed the 2005 harness racing season at Pocono Downs and we expect to continue the harness racing activities at Pocono Downs, with the 2006
racing season from April to November 2006. We are also



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conducting year round pari-mutuel wagering activities at Pocono Downs and the OTW facilities. In addition, as a result of our acquisition of Pocono Downs, we
have the right to apply for a Pennsylvania Category One Slot Machine License, which, if approved, would initially permit the installation and operation of up to 3,000 slot machines at Pocono Downs. Downs Racing, L.P. submitted an application for a
conditional Category One Slot Machine License with the Pennsylvania Gaming Control Board, or PGCB, on December 8, 2005. Downs Racing, L.P. will submit an application for a permanent Category One Slot Machine License on or before
December 28, 2005. Upon receipt of a conditional or permanent license, we would be required to pay a one-time $50 million fee to the Commonwealth of Pennsylvania.



A minimum of 1,500 slot machines are required, and a maximum of 3,000 slot machines are permitted, to be in operation within
18 months of the issuance of the slot machine license. Under certain circumstances, we may be permitted to install up to a total of 5,000 slot machines.



On June 22, 2005, the Pennsylvania Supreme Court unanimously upheld substantially all of the Pennsylvania Race Horse Development and Gaming Act, or
the Pennsylvania Gaming Act. Following the Pennsylvania Supreme Courts decision, the PGCB has begun the process of issuing final licensing regulations. Public reports indicate that the PGCB is expected to begin approving conditional Category
One Slot Machine Licenses in June 2006.



On July 21, 2005,
we announced plans for the development of a proposed 400,000 square foot gaming and entertainment facility to be constructed on the existing grounds of Pocono Downs. The plans provide for approximately 2,000 slot machines, 3 full-service
restaurants, a 300 seat buffet, a 15,000 square foot food court, several bars and lounges, an 18,000 square foot nightclub, a Kids Quest center, 20,000 square feet of retail space, new parking facilities and an enhanced employee
services area.



Construction of the new facility will begin
upon the issuance of a conditional Category One Slot Machine License by the PGCB. The new facility is expected to open approximately 14 months from the beginning of construction. Estimated cost of construction for the new facility is between $140
million and $160 million.



In addition to the development of
the new gaming and entertainment facility, we plan to make significant improvements and additions to the existing Pocono Downs Clubhouse and Grandstand, including a new simulcast facility, improvements to the Grandstand for the installation of
approximately 1,000 slot machines (upon receipt of a conditional Category One Slot Machine License) and a new 10,000 square foot food court. These improvements are estimated to cost approximately $47.0 million. Construction began in September 2005
and is estimated to be completed by the spring of 2006.



Other Diversification Projects



The
Tribe has determined that it is in its long-term best interest to pursue diversification of its business interests, both directly and through us. As a result, from time to time, we and the Tribe receive and evaluate various business opportunities.
These opportunities primarily include the management or ownership of, or investment in, other gaming enterprises through direct investments, acquisitions, joint venture arrangements and loan transactions. In addition to the developments described
below, we and the Tribe are currently exploring other opportunities, although there is no assurance that we or the Tribe will continue to pursue any of these other opportunities or that any of them will be consummated.



Cowlitz Project



In July 2004, we formed Mohegan Ventures-Northwest, LLC, or Mohegan
Ventures-NW, one of two members in Salishan-Mohegan LLC, or Salishan-Mohegan. Salishan-Mohegan was formed to participate in the development and management of a casino to be located in Clark County, Washington, or the Cowlitz Project. The proposed
casino will be owned by the Cowlitz Indian Tribe. Both Mohegan Ventures-NW and Salishan-Mohegan were designated as our unrestricted subsidiaries, which are not required to be guarantors of our debt obligations.



44



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In September 2004, Salishan-Mohegan entered into development and management agreements with the Cowlitz
Indian Tribe regarding the Cowlitz Project. Under the terms of the development agreement, Salishan-Mohegan administers and oversees the planning, designing, development, construction, and furnishing, as well as providing assistance with the
financing, of the Cowlitz Project. The development agreement provides for certain development fees of 3% of total Project Costs, as defined in the development agreement, which are payable to Mohegan VenturesNW through Salishan-Mohegan pursuant
to the operating agreement. The management agreement is for a period of seven years commencing with the opening of the planned casino, during which Salishan-Mohegan will manage, operate and maintain the planned casino. The management agreement
provides for a management fee of 24% of Net Revenues, as defined in the management agreement, which approximates net income from the Cowlitz Project. Pursuant to the operating agreement, management fees will be allocated to the members of
Salishan-Mohegan based on their respective membership percentages. Development of the Cowlitz Project is subject to certain governmental and regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of
Washington and the United States Department of the Interior accepting land into trust on behalf of the Cowlitz Indian Tribe. The management agreement is subject to approval by the National Indian Gaming Commission, or the NIGC.



Menominee Project



In October 2004, we entered into a management agreement with the Menominee
Indian Tribe of Wisconsin, or the Menominee Tribe, and the Menominee Kenosha Gaming Authority. The terms of the management agreement grant us the exclusive right and obligation to manage, operate and maintain a planned casino and destination resort
to be located in Kenosha, Wisconsin, or the Menominee Project, for a period of seven years commencing with the opening of the planned casino, in consideration of a management fee of 13.4% of Net Revenues, as defined in the management agreement,
which approximates net income earned from the Menominee Project. The management agreement is subject to approval by the NIGC.



Explanation of Key Financial Statement Captions



Gross revenues



Our gross revenues are derived primarily from the following four sources:



| |  |  | gaming revenues, which include revenues from slot machines, table games, keno, live harness racing at Pocono Downs and racebook (including pari-mutuel wagering revenues from our
racebook at Mohegan Sun and our Pennsylvania OTWs);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | food and beverage revenues;
| | - |  | ---------------------------



| |  |  | hotel revenues; and
| | - |  | -------------------



| |  |  | retail, entertainment and other revenues, which include revenues from the Mohegan Sun managed retail shops and the Mohegan Sun Arena.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



Our largest component of revenues is gaming revenues, which is recognized as
gaming wins less gaming losses, and is comprised primarily of revenues from our slot machines and table games at Mohegan Sun. Revenues from slot machines are the largest component of our gaming revenues. Gross slot revenues, also referred to as
gross slot win, represent all amounts played in the slot machines reduced by both (1) the winnings paid out and (2) all amounts we deposit into the slot machines to ensure sufficient coins in each machine to pay out the winnings. Pursuant
to the Mohegan Compact, we report gross slot revenues and other statistical information related to slot machine operations to the State of Connecticut. On a monthly basis, we also post this information on our website at www.mtga.com.



Other commonly used terms in the discussion of revenues from
slot machines include progressive slot machines, progressive jackpots, net slot revenues, slot handle, gross slot hold percentage and net slot hold percentage. Progressive slot machines retain a portion of each amount wagered and aggregate these
amounts with similar amounts from other slot machines in order to create one-time winnings that are substantially larger than those paid in the ordinary course of play. We refer to such aggregated amounts as progressive jackpots. Wide-area



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##### Table of Contents

progressive jackpot amounts are paid by a third party vendor and we remit a weekly payment to the vendor based on a percentage of the slot handle for each
wide-area progressive slot machine. We accrue in-house progressive jackpot amounts until paid, and such accrued amounts are deducted from gross slot revenues, along with wide-area progressive jackpot amounts, to arrive at net slot revenues, also
referred to as net slot win. Net slot revenues are included in gaming revenues in the accompanying consolidated statements of income. Slot handle is the total amount wagered by patrons on slot machines during the period. Gross slot hold percentage
is the gross slot win as a percentage of slot handle. Net slot hold percentage is the net slot win as a percentage of slot handle.



Commonly used terms in the discussion of revenues from table games include table games revenues, table games drop and table games hold percentage. Table
games revenues represents the closing table games inventory plus table games drop and credit slips for coins, chips or tokens returned to the casino cage, less opening table games inventory, discounts provided on patron losses, free bet coupons and
chip fills to the tables. Table games drop is the total amount of cash, free bet coupons, cash advance drafts, customer deposit withdrawals, safekeeping withdrawals and credit issued at the table contained in the locked container at each gaming
table. Table games hold percentage is the table games revenues as a percentage of table games drop.



Revenues from food and beverages, hotel, retail, entertainment events and other services are recognized at the time the service is performed. Minimum
rental revenues that we receive pursuant to our rental lease agreements for the Shops at Mohegan Sun are recognized on a straight-line basis over the terms of the leases. Percentage rents are recognized in the period in which the tenants exceed
their respective percentage rent thresholds.



Promotional
allowances



We operate a voluntary program for our
guests at Mohegan Sun, without membership fees, called the Mohegan Sun Players Club. This program provides complimentary food, beverages, hotel, retail, entertainment and other services to guests based on points that are awarded for
guests gaming activities. These points may be used to purchase, among other things, items at the retail stores and restaurants located within Mohegan Sun, including the Shops at Mohegan Sun and the Mohegan Sun gasoline and convenience center.
Points also may be used to purchase hotel services and tickets to entertainment events held at Mohegan Sun facilities. The retail value of points are included in gross revenues when redeemed at Mohegan Sun operated facilities and then deducted as
promotional allowances to arrive at net revenues.



We also have
ongoing promotional programs which offer coupons to our guests for the purchase of food, beverage, hotel and retail amenities offered within Mohegan Sun. The retail value of items or services purchased with coupons at Mohegan Sun operated facilities
is included in gross revenues and the respective coupon value is deducted as promotional allowances to arrive at net revenues.



Gaming expenses



The largest component of gaming expenses is the portion of gross slot revenues which must be paid to the State of Connecticut. We refer to this payment as
the slot win contribution. For each 12-month period commencing July 1, 1995, the slot win contribution is the lesser of (a) 30% of gross slot revenues, or (b) the greater of (i) 25% of gross slot revenues or (ii) $80.0
million. Gaming expenses also include, among other things, expenses associated with operation of slot machines, table games, keno, live harness racing at Pocono Downs and racebook, certain marketing expenses, and promotional expenses for the Mohegan
Sun Players Club points and coupons redeemed at the hotel, restaurants and retail outlets owned by Mohegan Sun, as well as third party tenant restaurants and the Shops at Mohegan Sun.



Income from operations



We calculate income from operations as net revenues less total operating
costs and expenses. Income from operations represents only those amounts that relate to our consolidated operations and excludes minority interest, accretion of discount to the relinquishment liability, interest income, interest expense, loss on
early extinguishment of debt, write-off of debt issuance costs and other non-operating income and expenses.



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Accretion of discount to the relinquishment liability and reassessment of relinquishment liability



In February 1998, we entered into a relinquishment
agreement with TCA. The relinquishment agreement provides that we will make certain payments to TCA out of, and determined as a percentage of, revenues (as defined in the relinquishment agreement) generated by Mohegan Sun over a 15-year period. In
accordance with Statement of Financial Accounting Standards, or SFAS, No. 5, Accounting for Contingencies, or SFAS 5, we have recorded a relinquishment liability of the estimated present value of our obligations under the
relinquishment agreement. We reassess projected revenues (and consequently the relinquishment liability) (i) annually in conjunction with our budgeting process and (ii) when necessary to account for material increases or decreases in
projected revenues over the relinquishment period. Further, we record a quarterly accretion to the relinquishment liability to reflect the impact of the time value of money. Since there is a high level of estimates and judgments used with respect to
calculating the relinquishment liability, future events that affect such estimates and judgments may cause the actual relinquishment liability to differ significantly from the estimate. In addition, we have capitalized $130.0 million of this
relinquishment liability in connection with the trademark value of the Mohegan Sun brand name. Under SFAS No. 142, Goodwill and Other Intangible Assets, or SFAS 142, the Mohegan Sun trademark is no longer subject to amortization
because it has been deemed to have an indefinite useful life. SFAS 142, however, requires the trademark to be evaluated at least annually for impairment by applying a fair-value test and, if impairment occurs, the amount of impaired trademark must
be written off immediately. Refer to Notes 2 and 13 to our consolidated financial statements for a further discussion of how we account for the relinquishment liability.



Results of Operations



Summary Operating Results



We currently own and operate the Mohegan Sun property in Connecticut and, after the acquisition of the Pocono Downs entities in January 2005, a harness
racetrack at Pocono Downs and five OTW facilities in Pennsylvania. All of our revenues are derived from these operations. Our executive officers review and assess the performance of the operating results and determine the proper allocation of
resources to Mohegan Sun and the Pocono Downs entities on a separate basis. We therefore believe that we have two operating segments, one comprised solely of Mohegan Sun and another, referred to as Pocono Downs, comprised of the
operations of the Pocono Downs entities. The two operating segments are also separate reporting segments due to the differing nature of their operations. See Note 16 to the consolidated financial statements for financial information about the
segments. The following tables summarize our results from operations on a property basis (in thousands):



|                        |  |                                          |           |   |           |   |           |           |  |   |                 |   |  |                     |          |   |  |   |        |   |  |       |   |  |       |  
|----------------------- |  | ---------------------------------------- | --------- | - | --------- | - | --------- | --------- |  | - | --------------- | - |  | ------------------- | -------- | - |  | - | ------ | - |  | ----- | - |  | ----- | -
|                        |  | For the Fiscal Years Ended September 30, |          
|                        |  | 2005                                     |           |   | 2004      |   |           | 2003      |  |   | Dollar Variance |   |  | Percentage Variance |         
|                        |  |                                          |           |   | 05 vs. 04 |   |           | 04 vs. 03 |  |   | 05 vs. 04       |   |  | 04 vs. 03           |         
|Net revenues:           |  |                                          |           |   |           |   |           |           |  |   |                 |   |  |                     |          |   |  |   |        |   |  |       |   |  |       |  
|Mohegan Sun             |  | $                                        | 1,305,686 |   |           | $ | 1,256,926 |           |  | $ | 1,177,488       |   |  | $                   | 48,760   |   |  | $ | 79,438 |   |  | 3.9   | % |  | 6.7   | %
|Pocono Downs (1)        |  |                                          | 25,919    |   |           |   |          |           |  |   |                |   |  |                     | 25,919   |   |  |   |       |   |  |      |   |  |      |  
|                        |  |                                          |           |   |           |   |           |           |  |   |                 |   |  |                     |          |   |  |   |        |   |  |       |   |  |       |  
|Total                   |  | $                                        | 1,331,605 |   |           | $ | 1,256,926 |           |  | $ | 1,177,488       |   |  | $                   | 74,679   |   |  | $ | 79,438 |   |  | 5.9   | % |  | 6.7   | %
|                        |  |                                          |           |   |           |   |          
|Income from operations: |  |                                          |           |   |           |   |           |           |  |   |                 |   |  |                     |          |   |  |   |        |   |  |       |   |  |       |  
|Mohegan Sun             |  | $                                        | 150,914   |   |           | $ | 251,455   |           |  | $ | 243,749         |   |  | $                   | (100,541 | ) |  | $ | 7,706  |   |  | -40.0 | % |  | 3.2   | %
|Pocono Downs (1)        |  |                                          | (67       | ) |           |   |          |           |  |   |                |   |  |                     | (67      | ) |  |   |       |   |  |      |   |  |      |  
|Corporate expenses      |  |                                          | (11,483   | ) |           |   | (4,838    | )         |  |   | (2,416          | ) |  |                     | (6,645   | ) |  |   | (2,422 | ) |  | 137.4 | % |  | 100.2 | %
|                        |  |                                          |           |   |           |   |           |           |  |   |                 |   |  |                     |          |   |  |   |        |   |  |       |   |  |       |  
|Total                   |  | $                                        | 139,364   |   |           | $ | 246,617   |           |  | $ | 241,333         |   |  | $                   | (107,253 | ) |  | $ | 5,284  |   |  | -43.5 | % |  | 2.2   | %
|                        |  |                                          |           |   |           |   |          
|Net income              |  | $                                        | 23,667    |   |           | $ | 102,887   |           |  | $ | 95,685          |   |  | $                   | (79,220  | ) |  | $ | 7,202  |   |  | -77.0 | % |  | 7.5   | %

---

|(1) | Acquired January 25, 2005
|--- | -------------------------



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The important factors and trends that most contributed to our operating performance for the fiscal years
ended September 30, 2005, 2004 and 2003, were experienced or initiated at Mohegan Sun. These are as follows:



| |  |  | the strengthening of the Mohegan Sun brand awareness in the Northeast gaming market, which is reflected in our table games and slot revenue growth rates for the fiscal years ended
September 30, 2005 and 2004;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | successful marketing programs and promotional events designed to increase targeted patron visitation;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the optimization of hotel occupancy rates through extending offers to Players Club members which led to higher gaming and non-gaming revenues;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | efficiencies achieved through the optimization of the Mohegan Sun labor force;
| | - |  | ------------------------------------------------------------------------------



| |  |  | the continuation of a cost reduction program initiated in fiscal year 2004 which targets expenditures that grow at substantially faster rates than net revenues, such as employee
medical insurance costs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the closing of our poker room in September 2003 for the purpose of adding approximately 260 slot machines, which led to increased revenue per square foot and a higher operating
margin partially due to the use of cashless gaming technology; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the non-cash relinquishment liability reassessment charge of $123.6 million in fiscal year 2005, which significantly increased our operating costs and expenses from those in fiscal
year 2004.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Net revenues for the fiscal year
ended September 30, 2005 increased primarily as a result of the growth of 6.8% in gaming revenues and 4.8% in non-gaming revenues at Mohegan Sun and the addition of $22.9 million in harness racing and off-track wagering revenues from Pocono
Downs and the OTWs acquired in January 2005. The increase in net revenues was partially offset by an increase in promotional allowances discussed in Promotional Allowances for the fiscal year ended September 30, 2005 compared
to the prior fiscal year.



Net revenues for the fiscal year
ended September 30, 2004 increased as a result of continued growth in both gaming and non-gaming revenues due primarily to continued expansion in public awareness of Mohegan Suns gaming and non-gaming offerings and amenities, evidenced by
the increase in patronage to our Mohegan Sun casino. Additionally, the increased patronage resulted in an increase in the redemption of Mohegan Sun Players Club points in the outlets we own at Mohegan Sun, resulting in increased promotional
allowances for the fiscal year ended September 30, 2004 compared to the prior fiscal year, which offsets the increase in the gross gaming and non-gaming revenues.



Income from operations for the fiscal year ended September 30, 2005 decreased significantly as compared to the prior
fiscal year as a result of a $123.6 million non-cash relinquishment liability reassessment charge, as more fully described in Operating Costs and Expenses. The reassessment charge had the effect of substantially increasing
operating costs and expenses, which was partially offset by the increase in net revenues.



Income from operations for the fiscal year ended September 30, 2004 compared to the prior fiscal year, increased primarily as a result of the growth in net revenues, offset substantially by the increase in gaming
expenses and a relinquishment liability reassessment charge of $3.9 million for the fiscal year ended September 30, 2004, which had the effect of increasing operating expenses, compared to a $22.7 million relinquishment liability reassessment
credit for the prior fiscal year, which had the effect of reducing operating expenses.



Net income for the fiscal year ended September 30, 2005 compared to the prior fiscal year decreased primarily due to the decrease in income from operations resulting from the reassessment of the relinquishment
liability discussed above, and an increase in interest expense of $9.0 million offset by a decrease of $33.9 million in the loss on early extinguishment of debt due to refinancings discussed in Other Income (Expense).



Net income for the fiscal year ended September 30, 2004 compared to
the prior fiscal year increased primarily as a result of the increase in income from operations and decreases in the accretion of discount to the



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relinquishment liability and in interest expense, partially offset by an increase in the loss on early extinguishment of debt related to the refinancings in
fiscal years 2004 and 2003 as more fully described in Other Income (Expense).



Gross Revenues



Gross revenues consisted of the following (in thousands):



|                                |  |                                          |           |      |           |           |  |                 |           |  |                     |        |   |           |   |        |   |  |      |   |  |      |  
|------------------------------- |  | ---------------------------------------- | --------- | ---- | --------- | --------- |  | --------------- | --------- |  | ------------------- | ------ | - | --------- | - | ------ | - |  | ---- | - |  | ---- | -
|                                |  | For the Fiscal Years Ended September 30, |          
|                                |  | 2005                                     |           | 2004 |           | 2003      |  | Dollar Variance |           |  | Percentage Variance |       
|                                |  |                                          |           |      | 05 vs. 04 |           |  | 04 vs. 03       |           |  | 05 vs. 04           |        |   | 04 vs. 03 |  
|Gaming                          |  | $                                        | 1,202,196 |      | $         | 1,125,145 |  | $               | 1,061,376 |  | $                   | 77,051 |   |           | $ | 63,769 |   |  | 6.8  | % |  | 6.0  | %
|Food and beverage               |  |                                          | 92,180    |      |           | 89,850    |  |                 | 87,040    |  |                     | 2,330  |   |           |   | 2,810  |   |  | 2.6  | % |  | 3.2  | %
|Hotel                           |  |                                          | 50,058    |      |           | 52,035    |  |                 | 52,370    |  |                     | (1,977 | ) |           |   | (335   | ) |  | -3.8 | % |  | -0.6 | %
|Retail, entertainment and other |  |                                          | 112,319   |      |           | 100,903   |  |                 | 79,654    |  |                     | 11,416 |   |           |   | 21,249 |   |  | 11.3 | % |  | 26.7 | %
|                                |  |                                          |           |      |           |           |  |                 |           |  |                     |        |   |           |   |        |   |  |      |   |  |      |  
|Total                           |  | $                                        | 1,456,753 |      | $         | 1,367,933 |  | $               | 1,280,440 |  | $                   | 88,820 |   |           | $ | 87,493 |   |  | 6.5  | % |  | 6.8  | %
|                                |  |                                          |           |      |           |           |  |                 |           |  |                     |        |   |           |   |        |   |  |      |   |  |      |  



The table below
summarizes the percentage of gross revenues from each of our four revenue sources:



|                                |  |                                          |   |  |       |   |  |       |  
|------------------------------- |  | ---------------------------------------- | - |  | ----- | - |  | ----- | -
|                                |  | For the Fiscal Years Ended September 30, |  
|                                |  | 2005                                     |   |  | 2004  |   |  | 2003  |  
|Gaming                          |  | 82.5                                     | % |  | 82.2  | % |  | 82.9  | %
|Food and beverage               |  | 6.3                                      | % |  | 6.6   | % |  | 6.8   | %
|Hotel                           |  | 3.5                                      | % |  | 3.8   | % |  | 4.1   | %
|Retail, entertainment and other |  | 7.7                                      | % |  | 7.4   | % |  | 6.2   | %
|                                |  |                                          |   |  |       |   |  |       |  
|Total                           |  | 100.0                                    | % |  | 100.0 | % |  | 100.0 | %
|                                |  |                                          |   |  |       |   |  |       |  



The following table
presents data related to our gaming revenues (in millions, except where noted):



|                                                    |  |                                          |        |   |           |   |        |           |  |   |                 |   |  |                     |      |   |  |   |     |   |  |      |   |  |      |  
|--------------------------------------------------- |  | ---------------------------------------- | ------ | - | --------- | - | ------ | --------- |  | - | --------------- | - |  | ------------------- | ---- | - |  | - | --- | - |  | ---- | - |  | ---- | -
|                                                    |  | For the Fiscal Years Ended September 30, |       
|                                                    |  | 2005                                     |        |   | 2004      |   |        | 2003      |  |   | Dollar Variance |   |  | Percentage Variance |     
|                                                    |  |                                          |        |   | 05 vs. 04 |   |        | 04 vs. 03 |  |   | 05 vs. 04       |   |  | 04 vs. 03           |     
|Slot handle                                         |  | $                                        | 10,182 |   |           | $ | 10,294 |           |  | $ | 9,654           |   |  | $                   | (112 | ) |  | $ | 640 |   |  | -1.1 | % |  | 6.6  | %
|Gross slot revenues                                 |  | $                                        | 861    |   |           | $ | 833    |           |  | $ | 777             |   |  | $                   | 28   |   |  | $ | 56  |   |  | 3.4  | % |  | 7.2  | %
|Net slot revenues                                   |  | $                                        | 834    |   |           | $ | 809    |           |  | $ | 757             |   |  | $                   | 25   |   |  | $ | 52  |   |  | 3.1  | % |  | 6.9  | %
|Weighted average number of slot machines (in units) |  |                                          | 6,233  |   |           |   | 6,224  |           |  |   | 6,122           |   |  |                     | 9    |   |  |   | 102 |   |  | 0.1  | % |  | 1.7  | %
|Gross slot hold percentage                          |  |                                          | 8.5    | % |           |   | 8.1    | %         |  |   | 8.0             | % |  |                     | 0.4  | % |  |   | 0.1 | % |  | 4.9  | % |  | 1.3  | %
|Gross slot win per unit per day (in dollars)        |  | $                                        | 379    |   |           | $ | 366    |           |  | $ | 347             |   |  | $                   | 13   |   |  | $ | 19  |   |  | 3.6  | % |  | 5.5  | %
|Table games drop                                    |  | $                                        | 2,086  |   |           | $ | 1,952  |           |  | $ | 1,834           |   |  | $                   | 134  |   |  | $ | 118 |   |  | 6.9  | % |  | 6.4  | %
|Table games revenues                                |  | $                                        | 334    |   |           | $ | 306    |           |  | $ | 283             |   |  | $                   | 28   |   |  | $ | 23  |   |  | 9.2  | % |  | 8.1  | %
|Weighted average number of table games (in units)   |  |                                          | 294    |   |           |   | 285    |           |  |   | 261             |   |  |                     | 9    |   |  |   | 24  |   |  | 3.2  | % |  | 9.2  | %
|Table games hold percentage (1)                     |  |                                          | 16.0   | % |           |   | 15.7   | %         |  |   | 15.4            | % |  |                     | 0.3  | % |  |   | 0.3 | % |  | 1.9  | % |  | 1.9  | %
|Table games revenue per unit per day (in dollars)   |  | $                                        | 3,114  |   |           | $ | 2,938  |           |  | $ | 2,974           |   |  | $                   | 176  |   |  | $ | (36 | ) |  | 6.0  | % |  | -1.2 | %

---

|(1) | Table games hold percentage is relatively predictable over long periods of time, but can fluctuate significantly over shorter periods
|--- | -------------------------------------------------------------------------------------------------------------------------------------



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Gaming revenues for the fiscal year ended September 30, 2005 compared to the prior fiscal year
increased due to continued growth in table games revenues and net slot revenues and the addition of $22.9 million in harness racing and off-track wagering revenues as a result of the operations of Pocono Downs and the OTWs acquired in January 2005.
The increase in table games revenues and net slot revenues resulted primarily from the strengthened awareness of the Mohegan Sun brand in the northeastern United States gaming market. We exceeded the Connecticut slot revenue market growth rate for
the fiscal year ended September 30, 2005 of 2.9%. The State of Connecticut reported slot revenues of $1.68 billion and $1.63 billion for the fiscal years ended September 30, 2005 and 2004, respectively.



Gaming revenues for the fiscal year ended September 30, 2004 compared to
the prior fiscal year increased due to continued growth in net slot revenues and table games revenues. The increase in net slot revenues and table games revenues resulted primarily from the continued awareness of the Mohegan Sun brand in the
northeastern United States gaming market. Table games drop for the fiscal year ended September 30, 2004 increased at a lower rate compared to the prior year due primarily to increased competition. We exceeded the Connecticut slot revenue market
growth rate for the fiscal year ended September 30, 2004 of 4.3%. The State of Connecticut reported slot revenues of $1.63 billion and $1.56 billion for the fiscal years ended September 30, 2004 and 2003, respectively.



Food and beverage revenues for the fiscal year ended September 30, 2005
compared to the prior fiscal year increased primarily as a result of the addition of $1.9 million in food and beverage revenues associated with the operation of the food and beverage outlets at the Pocono Downs properties. Mohegan Sun experienced a
slight increase in food and beverage revenues due to a 5.8% increase in beverage revenues due to increased visitation at the casino, offset by a 0.4% decrease in food revenues due to the closure of the Mohegan Territory and Chiefs Deli
restaurants in the Casino of the Earth for renovation purposes for part of the fiscal year. The new Uncas American Indian Grill opened to the public in July 2005 in the space formerly occupied by these restaurants. The average price per meal at
Mohegan Sun was $13.09 and $13.05 for the fiscal years ended September 30, 2005 and 2004, respectively.



Food and beverage revenues for the fiscal year ended September 30, 2004 compared to the prior fiscal year increased primarily as a result of an
increase in average price per meal at Mohegan Sun of 5.7%, partially offset by a decrease in the number of meals served, or food covers. The average price per meal was $13.05 and $12.35 for the fiscal years ended September 30, 2004 and 2003,
respectively.



The following table presents data related to our
hotel revenues:



|                                    |  |                                          |         |   |           |   |         |           |  |   |                 |   |  |                     |        |   |  |   |        |   |  |       |   |  |       |  
|----------------------------------- |  | ---------------------------------------- | ------- | - | --------- | - | ------- | --------- |  | - | --------------- | - |  | ------------------- | ------ | - |  | - | ------ | - |  | ----- | - |  | ----- | -
|                                    |  | For the Fiscal Years Ended September 30, |        
|                                    |  | 2005                                     |         |   | 2004      |   |         | 2003      |  |   | Dollar Variance |   |  | Percentage Variance |       
|                                    |  |                                          |         |   | 05 vs. 04 |   |         | 04 vs. 03 |  |   | 05 vs. 04       |   |  | 04 vs. 03           |       
|Rooms occupied                      |  |                                          | 398,600 |   |           |   | 375,100 |           |  |   | 335,900         |   |  |                     | 23,500 |   |  |   | 39,200 |   |  | 6.3   | % |  | 11.7  | %
|Average daily room rate (ADR)       |  | $                                        | 118     |   |           | $ | 132     |           |  | $ | 149             |   |  | $                   | (14    | ) |  | $ | (17    | ) |  | -10.6 | % |  | -11.4 | %
|Occupancy rate                      |  |                                          | 93      | % |           |   | 87      | %         |  |   | 78              | % |  |                     | 6      | % |  |   | 9      | % |  | 6.9   | % |  | 11.5  | %
|Revenue per available room (REVPAR) |  | $                                        | 110     |   |           | $ | 115     |           |  | $ | 116             |   |  | $                   | (5     | ) |  | $ | (1     | ) |  | -4.3  | % |  | -0.9  | %



Hotel revenues
decreased for the fiscal year ended September 30, 2005 compared to the prior fiscal year as a result of a decrease in ADR partially offset by an increase in occupancy rate. In 2005, Mohegan Sun continued to optimize hotel room availability to
Players Club members, which led to the decreases in REVPAR and ADR. The optimization of hotel inventory to rated casino patrons is believed to have contributed to growth in gaming and non-gaming revenues that exceeds the decline in hotel
revenues.



Hotel revenues decreased for the fiscal year ended
September 30, 2004 compared to the prior fiscal year as a result of decreases in ADR and REVPAR offset by an increase in rooms occupied. The increase in rooms occupied and occupancy rate was due primarily to an increase in promotional programs
directed to our casino patrons, which management believes yields a greater gaming revenue contribution than group and transient hotel



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patrons. Although the promotional programs extended to casino patrons provide lower room rates, reflected in the decrease in ADR and REVPAR during the fiscal
year ended September 30, 2004, the increased hotel occupancy is believed to contribute to growth in gaming, food and beverage, and retail, entertainment and other revenues that exceeds the declines in hotel revenues.



Retail, entertainment and other revenues increased for the fiscal year ended
September 30, 2005 compared to the prior fiscal year, principally as the result of an $8.8 million, or 17.3%, increase in retail revenues primarily driven by a $6.0 million increase in fuel revenues due to the substantial increase in the price
per gallon of fuel at the Mohegan Sun gasoline and convenience center. The increase in retail revenues and an increase in miscellaneous other revenues of $6.7 million, which include increases in rental revenues associated with the third party tenant
restaurants and retail outlets at Mohegan Sun and the addition of certain other revenues as a result of the operation of the Pocono Downs properties, is partially offset by a decrease in entertainment revenues of 12.0%, or $4.1 million, due to a
decrease of 11.3% in the average price per ticket resulting from a change in the mix of Mohegan Sun Arena events in fiscal year 2005.



Retail, entertainment and other revenues increased for the fiscal year ended September 30, 2004 compared to the prior fiscal year primarily as a
result of increased entertainment revenues of 94.8%, or $16.8 million. This increase in entertainment revenues was primarily the result of a substantial increase in the number of event tickets sold and the average ticket price at the Mohegan Sun
Arena due primarily to a larger number of star headliner performances. Tickets sold for Mohegan Sun Arena events increased by 30.3% and average ticket price per event increased by 27.5% for the fiscal year ended September 30, 2004. Retail and
other revenues increased by $4.5 million for the year ended September 30, 2004 as a result of a $2.6 million increase in gasoline revenues at the Mohegan Sun gasoline and convenience center and a $1.9 million increase in rental revenues
associated with the third party tenant restaurants and retail outlets in the Casino of the Sky, along with retail revenues from our stores.



Promotional Allowances



The retail value of providing promotional allowances at Mohegan Sun is included in revenues as follows (in thousands):



|                                |  |                                          |         |      |           |         |           |                 |         |           |                     |        |           |   |        |   |  |      |   |  |       |  
|------------------------------- |  | ---------------------------------------- | ------- | ---- | --------- | ------- | --------- | --------------- | ------- | --------- | ------------------- | ------ | --------- | - | ------ | - |  | ---- | - |  | ----- | -
|                                |  | For the Fiscal Years Ended September 30, |        
|                                |  | 2005                                     |         | 2004 |           | 2003    |           | Dollar Variance |         |           | Percentage Variance |       
|                                |  |                                          |         |      | 05 vs. 04 |         | 04 vs. 03 |                 |         | 05 vs. 04 |                     |        | 04 vs. 03 |  
|Food and beverage               |  | $                                        | 44,757  |      | $         | 43,393  |           | $               | 44,713  |           | $                   | 1,364  |           | $ | (1,320 | ) |  | 3.1  | % |  | -3.0  | %
|Hotel                           |  |                                          | 16,292  |      |           | 14,166  |           |                 | 16,514  |           |                     | 2,126  |           |   | (2,348 | ) |  | 15.0 | % |  | -14.2 | %
|Retail, entertainment and other |  |                                          | 64,099  |      |           | 53,448  |           |                 | 41,725  |           |                     | 10,651 |           |   | 11,723 |   |  | 19.9 | % |  | 28.1  | %
|                                |  |                                          |         |      |           |         |           |                 |         |           |                     |        |           |   |        |   |  |      |   |  |       |  
|Total                           |  | $                                        | 125,148 |      | $         | 111,007 |           | $               | 102,952 |           | $                   | 14,141 |           | $ | 8,055  |   |  | 12.7 | % |  | 7.8   | %
|                                |  |                                          |         |      |           |         |           |                 |         |           |                     |        |           |   |        |   |  |      |   |  |       |  



The estimated cost of
providing promotional allowances at Mohegan Sun is included in operating costs and expenses, primarily gaming, as follows (in thousands):



|                                |  |                                          |         |      |           |        |           |                 |        |           |                     |        |           |   |        |   |  |      |   |  |      |  
|------------------------------- |  | ---------------------------------------- | ------- | ---- | --------- | ------ | --------- | --------------- | ------ | --------- | ------------------- | ------ | --------- | - | ------ | - |  | ---- | - |  | ---- | -
|                                |  | For the Fiscal Years Ended September 30, |        
|                                |  | 2005                                     |         | 2004 |           | 2003   |           | Dollar Variance |        |           | Percentage Variance |       
|                                |  |                                          |         |      | 05 vs. 04 |        | 04 vs. 03 |                 |        | 05 vs. 04 |                     |        | 04 vs. 03 |  
|Food and beverage               |  | $                                        | 44,877  |      | $         | 42,837 |           | $               | 43,839 |           | $                   | 2,040  |           | $ | (1,002 | ) |  | 4.8  | % |  | -2.3 | %
|Hotel                           |  |                                          | 7,731   |      |           | 5,916  |           |                 | 6,257  |           |                     | 1,815  |           |   | (341   | ) |  | 30.7 | % |  | -5.4 | %
|Retail, entertainment and other |  |                                          | 49,372  |      |           | 42,496 |           |                 | 32,459 |           |                     | 6,876  |           |   | 10,037 |   |  | 16.2 | % |  | 30.9 | %
|                                |  |                                          |         |      |           |        |           |                 |        |           |                     |        |           |   |        |   |  |      |   |  |      |  
|Total                           |  | $                                        | 101,980 |      | $         | 91,249 |           | $               | 82,555 |           | $                   | 10,731 |           | $ | 8,694  |   |  | 11.8 | % |  | 10.5 | %
|                                |  |                                          |         |      |           |        |           |                 |        |           |                     |        |           |   |        |   |  |      |   |  |      |  



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Promotional allowances for the fiscal year ended September 30, 2005 compared to the prior fiscal
year increased primarily due to the increase in redemption of retail, entertainment and other complimentaries at Mohegan Sun. The increase in retail, entertainment and other promotional allowances was due primarily to increases in Players Club
points and coupons redeemed at Mohegan Sun managed retail outlets, including the Mohegan Sun gasoline and convenience center.



Promotional allowances for the fiscal year ended September 30, 2004 compared to the prior fiscal year increased due to higher retail, entertainment
and other complimentaries offset by lower hotel complimentaries consistent with the decrease in ADR and lower food and beverage complimentaries due to the decrease in meals served. The increase in retail, entertainment and other promotional
allowances was due primarily to higher entertainment complimentaries resulting from higher attendance and retail prices of tickets for events at the Mohegan Sun Arena. Increases in Players Club points and coupons redeemed at Mohegan Sun
managed retail outlets, including the Mohegan Sun gasoline and convenience center, also contributed to the increase in retail, entertainment and other promotional allowances.



Operating Costs and Expenses



Operating costs and expenses consisted of the following (in thousands):



|                                        |  |                                          |           |      |           |           |  |           |                 |           |                     |   |           |   |  |   |        |  |        |   |  |       |  
|--------------------------------------- |  | ---------------------------------------- | --------- | ---- | --------- | --------- |  | --------- | --------------- | --------- | ------------------- | - | --------- | - |  | - | ------ |  | ------ | - |  | ----- | -
|                                        |  | For the Fiscal Years Ended September 30, |          
|                                        |  | 2005                                     |           | 2004 |           | 2003      |  |           | Dollar Variance |           | Percentage Variance |  
|                                        |  |                                          |           |      | 05 vs. 04 |           |  | 04 vs. 03 |                 | 05 vs. 04 |                     |   | 04 vs. 03 |  
|Gaming                                  |  | $                                        | 684,640   |      | $         | 631,498   |  | $         | 603,555         |           |                     | $ | 53,142    |   |  | $ | 27,943 |  | 8.4    | % |  | 4.6   | %
|Food and beverage                       |  |                                          | 45,216    |      |           | 43,264    |  |           | 39,206          |           |                     |   | 1,952     |   |  |   | 4,058  |  | 4.5    | % |  | 10.4  | %
|Hotel                                   |  |                                          | 16,114    |      |           | 15,440    |  |           | 14,137          |           |                     |   | 674       |   |  |   | 1,303  |  | 4.4    | % |  | 9.2   | %
|Retail, entertainment and other         |  |                                          | 35,442    |      |           | 41,870    |  |           | 38,482          |           |                     |   | (6,428    | ) |  |   | 3,388  |  | -15.4  | % |  | 8.8   | %
|Advertising, general and administrative |  |                                          | 186,805   |      |           | 175,907   |  |           | 168,946         |           |                     |   | 10,898    |   |  |   | 6,961  |  | 6.2    | % |  | 4.1   | %
|Corporate expenses                      |  |                                          | 11,465    |      |           | 4,838     |  |           | 2,416           |           |                     |   | 6,627     |   |  |   | 2,422  |  | 137.0  | % |  | 100.2 | %
|Pre-opening costs and expenses          |  |                                          | 1,257     |      |           |          |  |           |                |           |                     |   | 1,257     |   |  |   |       |  |       |   |  |      |  
|Depreciation and amortization           |  |                                          | 87,678    |      |           | 93,595    |  |           | 92,123          |           |                     |   | (5,917    | ) |  |   | 1,472  |  | -6.3   | % |  | 1.6   | %
|Relinquishment liability reassessment   |  |                                          | 123,624   |      |           | 3,897     |  |           | (22,710         | )         |                     |   | 119,727   |   |  |   | 26,607 |  | 3072.3 | % |  | 117.2 | %
|                                        |  |                                          |           |      |           |           |  |           |                 |           |                     |   |           |   |  |   |        |  |        |   |  |       |  
|Total                                   |  | $                                        | 1,192,241 |      | $         | 1,010,309 |  | $         | 936,155         |           |                     | $ | 181,932   |   |  | $ | 74,154 |  | 18.0   | % |  | 7.9   | %
|                                        |  |                                          |           |      |           |           |  |           |                 |           |                     |   |           |   |  |   |        |  |        |   |  |       |  



Gaming costs and
expenses increased for the fiscal year ended September 30, 2005 compared to the prior fiscal year primarily as a result of increased costs related to a higher amount of complimentaries provided to casino patrons, the reimbursement of gift cards
and complimentaries redeemed at tenant retail outlets and the addition of $15.8 million in gaming expenses associated with harness racing and OTW operations at the Pocono Downs properties. Slot win contribution payments to the State of Connecticut
totaled $215.2 million and $208.2 million for the fiscal years ended September 30, 2005 and 2004, respectively.



Gaming costs and expenses for the fiscal year ended September 30, 2004 compared to the prior fiscal year increased primarily as a result of increased
marketing efforts, including costs incurred for special promotional events, and an increase in the slot win contribution payments to the State of Connecticut. We recorded expenses associated with the slot win contribution payments to the State of
Connecticut of $208.2 million and $194.3 million for the fiscal years ended September 30, 2004 and 2003, respectively. Additionally, the increased patronage resulted in an increase in the redemption of Mohegan Sun Players Club points in
the outlets owned by



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Mohegan Sun, and, to a lesser extent, the third party tenant restaurants and third party tenants at the Shops at Mohegan Sun, resulting in increased costs
allocated to gaming expenses. These increases in gaming costs and expenses were partially offset by a decrease in direct gaming labor costs. Efficiencies achieved in gaming operations caused gaming costs and expenses as a percentage of gaming
revenues to decrease from 56.9% for the fiscal year ended September 30, 2003 to 56.1% for the fiscal year ended September 30, 2004.



Food and beverage costs and expenses increased for the fiscal year ended September 30, 2005 compared to the prior fiscal year due to the addition of
$1.9 million in expenses associated with the operation of the food and beverage outlets at the Pocono Downs properties. Food and beverage expenses at Mohegan Sun increased slightly as a result of higher direct labor and other operating costs
commensurate with the growth in food and beverage revenues, offset by a higher amount of food and beverage costs allocated to gaming costs and expenses for food and beverage complimentaries provided to casino patrons.



Food and beverage costs and expenses for the fiscal year ended
September 30, 2004 compared to the prior fiscal year increased due to higher cost of goods sold due to price increases. The increase in cost of goods sold was slightly offset by a decrease in direct labor costs in the food and beverage
departments.



Hotel costs and expenses increased for the fiscal
year ended September 30, 2005 compared to the prior fiscal year primarily as a result of higher labor and other operating costs related to the increase in occupied rooms, partially offset by increased hotel complimentaries for the fiscal year
ended September 30, 2005 resulting in higher hotel costs and expenses recorded in gaming costs and expenses as compared to the prior fiscal year ended September 30, 2004.



Hotel costs and expenses for the fiscal year ended September 30, 2004 compared to the prior fiscal year increased
primarily as a result of increased labor costs related to the increase in the amount of rooms occupied in the fiscal year ended September 30, 2004.



Retail, entertainment and other costs and expenses decreased for the fiscal year ended September 30, 2005 compared to the prior fiscal year primarily
due to a decrease in entertainment expenses associated with a change in the mix of Arena events and an increase in retail and entertainment complimentaries provided to patrons at Mohegan Sun for the fiscal year ended September 30, 2005,
resulting in a higher amount of retail, entertainment and other costs and expenses being recorded in gaming costs and expenses than in fiscal year ended September 30, 2004, offset by an increase in the cost of fuel and number of gallons of fuel
sold at the Mohegan Sun gasoline and convenience center. Lower costs for live entertainment contributed to retail, entertainment and other costs and expenses as a percentage of retail, entertainment and other revenues decreasing from 41.5% for the
fiscal year ended September 30, 2004 to 31.6% for the fiscal year ended September 30, 2005.



Retail, entertainment and other costs and expenses increased for the fiscal year ended September 30, 2004 compared to the prior fiscal year,
primarily as a result of higher entertainment costs associated with a change in the type of entertainers and events during the fiscal year ended September 30, 2004. During fiscal year 2004, we continued efforts to increase attendance by
offering a larger number of star headliner performers at a greater cost to us. This increase was partially offset by a substantial increase in entertainment complimentaries, which resulted in a higher amount of entertainment costs and expenses being
allocated to gaming costs and expenses than in the fiscal year ended September 30, 2003. The increase during the fiscal year ended September 30, 2004 also was attributable to a higher cost of gasoline sold at our gasoline and convenience
center. Despite the increases mentioned above, improvements in the pricing of shows and related costs contributed to retail, entertainment and other costs and expenses as a percentage of retail, entertainment and other revenues decreasing from 48.3%
for the fiscal year ended September 30, 2003 to 41.5% for the fiscal year ended September 30, 2004.



Advertising, general and administrative costs and expenses increased for the fiscal year ended September 30, 2005 compared to the prior fiscal year
primarily as a result of increased labor, maintenance and other costs necessary to support Mohegan Sun operations, approximately $2.0 million in expenses relating to the



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release of a new series of television commercials for Mohegan Sun that began airing in the northeastern market during the second quarter of fiscal 2005 and
the addition of $4.7 million in advertising, general and administrative costs and expenses associated with the operation of our Pocono Downs properties.



Advertising, general and administrative costs and expenses for the fiscal year ended September 30, 2004 compared to the prior fiscal year increased
as a result of increased labor costs for advertising, general and administrative departments, in addition to an increase in facility maintenance costs, offset by decreases in advertising and promotional costs.



Corporate costs and expenses increased for the fiscal years ended
September 30, 2005 and 2004 compared to the prior fiscal years primarily as a result of increased labor and professional costs associated with the continued formation of the Authoritys corporate structure and expenses incurred in
complying with the Sarbanes-Oxley Act of 2002.



Pre-opening
costs and expenses of $1.3 million for the fiscal year ended September 30, 2005 were comprised of personnel, consulting and other costs associated with the development plans for Mohegan Sun at Pocono Downs, as described in
OverviewMohegan Sun at Pocono Downs. There were no pre-opening costs and expenses for the fiscal years ended September 30, 2004 and 2003.



Depreciation and amortization for the fiscal year ended September 30, 2005 decreased primarily due to an increase in
fully depreciated assets and the timing of placement of new capital assets into service.



Depreciation and amortization for the fiscal year ended September 30, 2004 compared to the prior fiscal year increased primarily due to the termination of certain Connecticut Sun player contracts and the
resulting write-off of $1.0 million for the reduction in the value of the player roster value intangible asset, in addition to the placement of new capital assets into service relating to casino renovations completed during the first quarter of
fiscal 2004.



Relinquishment liability reassessment for the
fiscal year ended September 30, 2005 increased significantly compared to the reassessment in the prior fiscal year, with a corresponding impact on our operating expenses. The relinquishment liability reassessment charge in fiscal year 2005 was
the result of our review of current revenue forecasts, including the estimated timing and extent of future competition, which led to increased revenue projections for the period in which the relinquishment agreement applies, as more fully described
below.



Our accounting policy is to reassess the relinquishment
liability at least annually in conjunction with our budgeting process or when necessary upon an event which, in our estimation, would materially increase or decrease projected revenues over the relinquishment period. On May 13, 2005, the IBIA
overturned the federal recognition of the Historic Eastern Pequot Tribe and the Schaghticoke Tribe of Kent, Connecticut. These decisions were remanded to the United States Secretary of the Interior for reconsideration. We concluded this ruling was
not substantive enough to warrant a reassessment of the relinquishment liability at that time. However, on October 12, 2005, the BIA upon reconsideration denied the federal recognition of these two Indian tribes which had expressed interest in
building casinos in the close proximity of Mohegan Sun in Connecticut. As a result of this decision and other developments involving the revaluation of the impact of potential competition in the northeastern United States gaming market, we concluded
that it was appropriate to increase our projected revenues at Mohegan Sun over the remaining period to which the relinquishment agreement applies by approximately $3.2 billion. This increase in projected revenues substantially increased the related
relinquishment liability, resulting in a non-cash relinquishment liability charge of $123.6 million for the fiscal year ended September 30, 2005.



Relinquishment liability reassessment for the fiscal year ended September 30, 2004 had the effect of increasing operating expenses compared to the
reassessment in the prior fiscal year, which had the effect of reducing operating expenses. The relinquishment liability reassessment charge in fiscal year 2004 was the result



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of our review of current revenue forecasts, including the estimated timing and extent of future competition, which led to increased revenue projections for
the near future but reduced overall revenue projections for the period to which the relinquishment agreement applies.



Other Income (Expense)



Other income (expense) consisted of the following (in thousands):



|                                                          |  |                                          |          |   |           |   |          |           |  |   |                 |   |  |                     |        |   |  |   |        |   |  |       |   |  |        |  
|--------------------------------------------------------- |  | ---------------------------------------- | -------- | - | --------- | - | -------- | --------- |  | - | --------------- | - |  | ------------------- | ------ | - |  | - | ------ | - |  | ----- | - |  | ------ | -
|                                                          |  | For the Fiscal Years Ended September 30, |         
|                                                          |  | 2005                                     |          |   | 2004      |   |          | 2003      |  |   | Dollar Variance |   |  | Percentage Variance |       
|                                                          |  |                                          |          |   | 05 vs. 04 |   |          | 04 vs. 03 |  |   | 05 vs. 04       |   |  | 04 vs. 03           |       
|Accretion of discount to the relinquishment liability (1) |  | $                                        | (27,466  | ) |           | $ | (29,939  | )         |  | $ | (33,592         | ) |  | $                   | 2,473  |   |  | $ | 3,653  |   |  | -8.3  | % |  | -10.9  | %
|Interest income                                           |  |                                          | 673      |   |           |   | 232      |           |  |   | 269             |   |  |                     | 441    |   |  |   | (37    | ) |  | 190.1 | % |  | -13.8  | %
|Interest expense, net of capitalized interest             |  |                                          | (88,011  | ) |           |   | (78,970  | )         |  |   | (83,492         | ) |  |                     | (9,041 | ) |  |   | 4,522  |   |  | 11.4  | % |  | -5.4   | %
|Loss on early extinguishment of debt                      |  |                                          | (280     | ) |           |   | (34,138  | )         |  |   | (27,396         | ) |  |                     | 33,858 |   |  |   | (6,742 | ) |  | -99.2 | % |  | 24.6   | %
|Write-off of debt issuance costs                          |  |                                          |         |   |           |   |         |           |  |   | (403            | ) |  |                     |       |   |  |   | 403    |   |  |      |   |  | -100.0 | %
|Other expense, net (2)                                    |  |                                          | (1,127   | ) |           |   | (933     | )         |  |   | (1,034          | ) |  |                     | (194   | ) |  |   | 101    |   |  | 20.8  | % |  | -9.8   | %
|                                                          |  |                                          |          |   |           |   |          |           |  |   |                 |   |  |                     |        |   |  |   |        |   |  |       |   |  |        |  
|Total                                                     |  | $                                        | (116,211 | ) |           | $ | (143,748 | )         |  | $ | (145,648        | ) |  | $                   | 27,537 |   |  | $ | 1,900  |   |  | -19.2 | % |  | -1.3   | %
|                                                          |  |                                          |          |   |           |   |          |           |  |   |                 |   |  |                     |        |   |  |   |        |   |  |       |   |  |        |  

---

|(1) | Our accretion of the discount to the relinquishment liability reflects the impact of the time value of money, discounted to present value.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents primarily a loss on disposal of property and equipment.
|--- | ------------------------------------------------------------------



Interest expense, net of capitalized interest, increased for the fiscal year ended September 30, 2005 compared to the prior fiscal year primarily as
the result of an increase in weighted average outstanding debt. Weighted average outstanding debt increased to $1.21 billion for the fiscal year ended September 30, 2005 from $1.09 billion for the fiscal year ended September 30, 2004 due
to the acquisition of Pocono Downs for approximately $280.0 million in January 2005. The weighted average interest rate was approximately 7.3% for the fiscal years ended September 30, 2005 and 2004.



Interest expense, net of capitalized interest, for the fiscal year ended
September 30, 2004 compared to the prior fiscal year decreased primarily as the result of reduced weighted average debt outstanding. Weighted average debt outstanding decreased to $1.09 billion for the year ended September 30, 2004, from
$1.15 billion for the year ended September 30, 2003, due to lower average principal amounts borrowed and outstanding from our bank credit facilities. The weighted average interest rate was approximately 7.3% for the fiscal years ended
September 30, 2004 and 2003.



Loss on early extinguishment
of debt associated with the repayment of our term loan under the bank credit facility was $280,000 for the fiscal year ended September 30, 2005. Loss on early extinguishment of debt in fiscal year 2004 was related to the refinancing of $186.0
million of our outstanding 81/8% senior notes due 2006 and $133.7 million of our outstanding 83/8% senior subordinated notes due 2011. The loss also includes the redemption of our remaining $5.2 million 83/4% senior subordinated notes due 2009. Loss on early extinguishment of debt in fiscal year 2003 was associated with
the refinancing of our $300.0 million 83/4% senior subordinated notes due 2009.



Write-off of debt issuance costs for the fiscal year ended September 30, 2003 was related to the repayment of the entire outstanding indebtedness
under the previous credit facility in March 2003. There was no write-off of debt issuance costs for the fiscal years ended September 30, 2005 and 2004.



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Seasonality



The gaming industry in Connecticut is seasonal in nature, with the heaviest gaming activity often occurring at Mohegan Sun between May and August.
Additionally, live harness racing activity at Pocono Downs is seasonal, with the racing season commencing in April and ending in November. Accordingly, the results of operations for the fiscal year ended September 30, 2005 are not necessarily
indicative of the operating results for interim periods.



Liquidity, Capital
Resources and Capital Spending



Our cash flows consisted
of the following (in thousands):



|                                                     |  |                                  |          |           |      |   |           |      |  |           |                 |   |           |                     |          |   |  |   |         |   |  |        |   |  |       |  
|---------------------------------------------------- |  | -------------------------------- | -------- | --------- | ---- | - | --------- | ---- |  | --------- | --------------- | - | --------- | ------------------- | -------- | - |  | - | ------- | - |  | ------ | - |  | ----- | -
|                                                     |  | Fiscal Years Ended September 30, |         
|                                                     |  | 2005                             |          |           | 2004 |   |           | 2003 |  |           | Dollar Variance |   |           | Percentage Variance |         
|                                                     |  |                                  |          | 05 vs. 04 |      |   | 04 vs. 03 |      |  | 05 vs. 04 |                 |   | 04 vs. 03 |                    
|Net cash provided by operating activities            |  | $                                | 248,304  |           |      | $ | 214,776   |      |  | $         | 195,484         |   |           | $                   | 33,528   |   |  | $ | 19,292  |   |  | 15.6   | % |  | 9.9   | %
|Net cash used in investing activities                |  |                                  | (336,546 | )         |      |   | (32,237   | )    |  |           | (59,288         | ) |           |                     | (304,309 | ) |  |   | 27,051  |   |  | 944.0  | % |  | -45.6 | %
|Net cash provided by (used in) financing activities  |  |                                  | 99,873   |           |      |   | (195,009  | )    |  |           | (147,949        | ) |           |                     | 294,882  |   |  |   | (47,060 | ) |  | -151.2 | % |  | 31.8  | %
|                                                     |  |                                  |          |           |      |   |           |      |  |           |                 |   |           |                     |          |   |  |   |         |   |  |        |   |  |       |  
|Net increase (decrease) in cash and cash equivalents |  | $                                | 11,631   |           |      | $ | (12,470   | )    |  | $         | (11,753         | ) |           | $                   | 24,101   |   |  | $ | (717    | ) |  | -193.3 | % |  | 6.1   | %
|                                                     |  |                                  |          |           |      |   |           |      |  |           |                 |   |           |                     |          |   |  |   |         |   |  |        |   |  |       |  



As of
September 30, 2005 and September 30, 2004, we held cash and cash equivalents of $72.4 million and $60.8 million, respectively. Due to the cash-based nature of our business, operating cash flow levels tend to follow trends in our operating
income, excluding the effects of non-cash charges, such as depreciation and amortization and relinquishment liability reassessments. The increase in cash provided by operating activities for the fiscal year ended September 30, 2005 is
attributable primarily to the increase in operating income after adjustments for non-cash items.



Operating activities are a significant source of our cash flows. We use our cash flows provided by operating activities primarily to meet our working
capital requirements, provide funding for our maintenance capital expenditures, reduce our debt, provide distributions to the Tribe, provide payments under the relinquishment agreement and, from time to time, make investments. While we do not
believe that there is any trend or a likely event that would adversely impact the level of our cash flows provided by operating activities, there are numerous potential factors which may cause a substantial reduction in the amount of such cash
flows, including, but not limited to, the following:



| |  |  | increased competition in the gaming industry, including the legalization or expansion of gaming in New England, New York, New Jersey and Pennsylvania, which may result in a
substantial decrease in revenue;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | downturn in the economy and lack of consumer confidence, which would result in reduced spending on discretionary items such as gaming activities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an infrastructure or transportation disruption, such as the closure of Interstate 95 through Connecticut, for an extended period of time; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an act of terrorism in the United States of America.
| | - |  | ----------------------------------------------------



In addition to cash generated by operating activities, we have relied on external sources of liquidity to meet our investing requirements. The increase in
cash provided by financing activities for the fiscal year ended September 30, 2005 is attributable primarily to the issuance of debt to fund the approximately $280.0 million in acquisition costs for the Pocono Downs entities. The increase in
cash used in investing activities for the fiscal year ended September 30, 2005 is attributable primarily to the acquisition of the Pocono Downs entities for $280.1 million, net of cash received of $875,000.



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External Sources of Liquidity



Notes. We financed the purchase of the Pocono Downs entities and
previously financed much of the costs of construction of Mohegan Sun with the net proceeds raised from the issuance of notes and borrowings under our bank credit facilities. As of September 30, 2005, we had $14.0 million outstanding in
81/8% senior notes due January 1, 2006, or the 1999 senior notes; $16.3 million outstanding in 83/8% senior subordinated notes due July 1, 2011 and first callable July 1, 2006, or
the 2001 senior subordinated notes; $250.0 million outstanding in 8% senior subordinated notes due April 1, 2012 and first callable April 1, 2007, or the 2002 senior subordinated notes; $330.0 million outstanding in 63/8% senior subordinated notes due July 15, 2009 and callable at any time, or the 2003 senior subordinated notes; $225.0 million outstanding in 71/8% senior subordinated notes due August 15, 2014 and
first callable on August 15, 2009, or the 2004 senior subordinated notes; $250.0 million outstanding in 61/8% senior notes due February 15, 2013 and first callable February 15, 2009, or the 2005 senior notes; and
$150.0 million outstanding in 67/8% senior subordinated notes due February 15, 2015 and first callable February 15, 2010, or the 2005 senior subordinated notes. MBC, MCV-PA and the Pocono Downs entities
are guarantors of each of these notes. Refer to Note 8 to our consolidated financial statements in this Form 10-K for a further discussion of these notes.



On February 8, 2005, we issued the 2005 senior notes. The net proceeds
from this financing were used to repay amounts outstanding under the bank credit facility and to pay fees and expenses associated with the issuance. The 2005 senior notes mature on February 15, 2013. The first call date for the 2005 senior
notes is February 15, 2009. Interest on the 2005 senior notes is payable semi-annually on February 15 and August 15. The 2005 senior notes are our uncollateralized general obligations, which are effectively subordinated to all of our
existing and future senior secured indebtedness, including the bank credit facility. The 2005 senior notes rank equally in right of payment with the 1999 senior notes and 50% of our payment obligations under the relinquishment agreement that are
then due and owing, and rank senior to the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing, the 2001 senior subordinated notes, the 2002 senior subordinated notes, the 2003 senior subordinated
notes, the 2004 senior subordinated notes and the 2005 senior subordinated notes (as referred to below).



On February 8, 2005, we issued the 2005 senior subordinated notes. The net proceeds from this financing were used to repay amounts outstanding under
the bank credit facility and to pay fees and expenses associated with the issuance. The 2005 senior subordinated notes mature on February 15, 2015. The first call date for the 2005 senior subordinated notes is February 15, 2010. Interest
on the 2005 senior subordinated notes is payable semi-annually on February 15 and August 15. The 2005 senior subordinated notes are our uncollateralized general obligations and are subordinated to the bank credit facility, the 1999 senior
notes, the 2005 senior notes and in a liquidation, bankruptcy or similar proceeding, 50% of our payment obligations under the relinquishment agreement that are then due and owing. The 2005 senior subordinated notes rank equally with the 2001 senior
subordinated notes, the 2002 senior subordinated notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes and the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing.



In October 2004, Standard and Poors Ratings
Services downgraded the credit rating on our senior subordinated debt from BB- to B+, primarily to reflect an increase in our ratio of debt to earnings related to the additional financings needed to fund the Pocono Downs acquisition and subsequent
development plans. Moodys Investors Services maintained its rating of Ba3 on our senior subordinated debt following our announcement of the Pocono Downs acquisition.



Bank Credit Facility. We have a $450.0 million revolving bank credit facility from a syndicate of financial
institutions and commercial banks, with Bank of America, N.A. serving as administrative agent, or the bank credit facility. The maximum aggregate principal amount available for borrowing includes amounts under letters of credit. As of
September 30, 2005, the amount under letters of credit totaled $584,000, of which no amount was drawn. The revolving loan has no mandatory amortization provisions and is payable in full on March 31, 2008.

We have $449.4 million available for borrowing under the bank credit facility as of September 30, 2005 (without taking into account covenants under the line of
credit discussed below).



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The bank credit facility is collateralized by a lien on substantially all of our assets, including the
assets of the Pocono Downs entities, and a leasehold mortgage on the land and improvements which comprise Mohegan Sun. We will also be required to pledge additional assets as we or our restricted subsidiaries acquire them. In addition, our
obligations under the bank credit facility are guaranteed by MBC, MCV-PA and the Pocono Downs entities. The bank credit facility subjects us to a number of restrictive covenants, including financial covenants. These financial covenants relate to,
among other things, our permitted total debt and senior debt leverage ratios, our minimum fixed charge coverage ratio and our maximum capital expenditures. The bank credit facility includes non-financial covenants by us and the Tribe of the type
customarily found in loan agreements for similar transactions including requirements that:



| |  |  | the Tribe preserve its existence as a federally recognized Indian tribe;
| | - |  | ------------------------------------------------------------------------



| |  |  | the Tribe cause us to continually operate Mohegan Sun in compliance with all applicable laws; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | except under specific conditions, limit us from selling or disposing of our assets, limit the transfer of the Authoritys assets to non-guarantor subsidiaries, limit the
incurrence by us of other debt or contingent obligations and limit our ability to extend credit, make investments or commingle our assets with assets of the Tribe.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of September 30, 2005, we and the Tribe were in compliance with all of our and their respective covenant
requirements in the bank credit facility.



At our option, each
advance of loan proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month London Inter-Bank Offered Rate, or LIBOR, plus in either case, the applicable spread at the time
each loan is made. We also pay commitment fees for the unused portion of the revolving loan on a quarterly basis equal to the applicable spread for commitment fees times the average daily unused commitment for that calendar quarter. Applicable
spreads are based on our total leverage ratio, as defined in the bank credit facility. The applicable spread for base rate advances is between 0.50% and 1.25%, and the applicable spread for LIBOR rate advances is between 1.75% and 2.50%. The
applicable spread for commitment fees is between 0.375% and 0.50%. The base rate is the higher of Bank of Americas announced prime rate or the federal funds rate plus 0.50%. Interest on LIBOR loans is payable at the end of each applicable
interest period or quarterly in arrears, if earlier. Interest on base rate advances will be payable quarterly in arrears. As of September 30, 2005, we had no amounts outstanding in base rate loans and no amounts outstanding in LIBOR rate loans.
The applicable spread for commitment fees was 0.50% as of September 30, 2005.



Line of Credit. We have a $25.0 million revolving loan agreement with Bank of America (formerly Fleet National Bank), or the line of credit. Each advance accrues interest on the basis of one-month LIBOR, plus
the applicable spread, determined at the time the advance is made on the basis of the Authoritys Leverage Ratio, as defined in the line of credit. Borrowings under the line of credit are our uncollateralized obligations. The line of credit
expires in March 2006. The line of credit subjects us to certain covenants, including a covenant to maintain at least $25.0 million available for borrowing under the bank credit facility. As of September 30, 2005, we were in compliance with all
covenant requirements in the line of credit. As of September 30, 2005 we had no amounts drawn on the line of credit, and therefore had $25.0 million available for borrowing.



Capital Expenditures



Capital Expenditures Incurred



Capital expenditures totaled $51.0 million for the fiscal year ended September 30, 2005, compared to $30.7 million for the fiscal year ended
September 30, 2004. These capital expenditures were an aggregate of the following:



| |  |  | Property maintenance capital expenditures at Mohegan Sun totaled $45.4 million and $29.6 million for the fiscal years ended September 30, 2005 and 2004,
respectively. For the fiscal year ended
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | September 30, 2005, these expenditures were primarily for the general maintenance of the Mohegan Sun facility and construction of the Uncas American
Indian Grill, which was completed at a total cost of $7.3 million and opened to the public in July 2005. For the fiscal year ended September 30, 2004, these expenditures included $7.3 million in renovations and the purchase of equipment to add
slot machines to gaming space formerly used for poker operations and the purchase of equipment to add slot machines to the keno gaming area and to add 14 new table games in the Casino of the Earth.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cumulative Project Sunburst capital expenditures totaled $1.06 billion, including $63.5 million in capitalized interest. During the 2004 fiscal year, Project Sunburst capital
expenditures totaled $748,000, with no amounts recorded as capitalized interest. There were no capital expenditures relating to Project Sunburst in the 2005 fiscal year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capital expenditures for the Thames and Indian Summer parking garages totaled $359,000 for the fiscal year ended September 30, 2004. There were no capital expenditures relating
to the Thames and Indian Summer parking garages in the fiscal year ended September 30, 2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capital expenditures at Pocono Downs totaled $5.1 million from the date of acquisition in January 2005 to September 30, 2005 and were comprised primarily of expenditures for
the development of the planned slot machine facility and the Clubhouse and Grandstand improvements, including $21,000 in capitalized interest.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capital expenditures for the corporate function of the Authority were $476,000 for the fiscal year ended September 30, 2005, which were primarily for the establishment of
temporary offices for corporate employees. There were no capital expenditures for the corporate function in the fiscal year ended September 30, 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Expected Future Capital Expenditures



We anticipate capital expenditures at Mohegan Sun to be approximately $51.0 million for the 2006 fiscal year, comprised
primarily of anticipated maintenance capital expenditures, customer relationship management software, slot machine replacements and information systems enhancements. We anticipate capital expenditures for the Pocono Downs racetrack site to be
approximately $115.7 million for the 2006 fiscal year, comprised primarily of design fees and construction costs for the planned slot machine facility and Clubhouse and Grandstand improvements, in addition to the $50.0 million slot machine license
fee discussed below.



We anticipate that we will spend between
approximately $140.0 million and $160.0 million in total on the construction, furnishing and equipping of the new slot machine facility and $47.0 million in total improvements and additions to the existing Clubhouse and Grandstand, in addition to
paying a one-time $50.0 million fee to the Commonwealth of Pennsylvania upon receipt of a conditional or permanent Category One Slot Machine License.



Sources of Funding for Capital Expenditures



We will rely primarily on cash generated from operations to finance capital expenditures at Mohegan Sun. Capital expenditures for Pocono Downs, as
described above, are expected to be funded through draws on our bank credit facility.



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##### Table of Contents

Interest Expense



For the years ended September 30, 2005, 2004 and 2003, we incurred the following in interest expense, net of capitalized interest (in thousands):



|                                                                       |  |                                          |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                       |  | For the Fiscal Years Ended September 30, |       
|                                                                       |  | 2005                                     |        |   | 2004 |   |        | 2003 | 
|New bank credit facility                                               |  | $                                        | 7,337  |   |      | $ | 6,850  |      |  | $ | 4,690  |  
|Old bank credit facility                                               |  |                                          |       |   |      |   |       |      |  |   | 4,628  |  
|1999 81/8% senior notes                                                |  |                                          | 1,219  |   |      |   | 13,730 |      |  |   | 16,250 |  
|2005 61/8% senior notes                                                |  |                                          | 9,826  |   |      |   |       |      |  |   |       |  
|1999 83/4% senior subordinated notes                                   |  |                                          |       |   |      |   | 134    |      |  |   | 20,446 |  
|2001 83/8% senior subordinated notes                                   |  |                                          | 1,431  |   |      |   | 10,697 |      |  |   | 12,563 |  
|2002 8% senior subordinated notes                                      |  |                                          | 20,000 |   |      |   | 20,000 |      |  |   | 20,000 |  
|2003 63/8% senior subordinated notes                                   |  |                                          | 20,979 |   |      |   | 21,037 |      |  |   | 4,792  |  
|2004 71/8% senior subordinated notes                                   |  |                                          | 16,031 |   |      |   | 2,583  |      |  |   |       |  
|2005 67/8% senior subordinated notes                                   |  |                                          | 6,617  |   |      |   |       |      |  |   |       |  
|WNBA note                                                              |  |                                          | 271    |   |      |   | 205    |      |  |   | 150    |  
|Line of credit                                                         |  |                                          | 504    |   |      |   | 179    |      |  |   | 316    |  
|Change in fair value of derivative instruments                         |  |                                          |       |   |      |   |       |      |  |   | (2,994 | )
|Interest settlementderivative instruments                             |  |                                          |       |   |      |   | (2,552 | )    |  |   | (4,082 | )
|Reclassification of derivative instrument losses to earnings           |  |                                          |       |   |      |   | 303    |      |  |   | 787    |  
|Amortization of deferred (gain) loss on sale of derivative instruments |  |                                          | 711    |   |      |   | (117   | )    |  |   | (741   | )
|Amortization of debt issuance costs                                    |  |                                          | 3,106  |   |      |   | 5,921  |      |  |   | 6,687  |  
|Capitalized interest                                                   |  |                                          | (21    | ) |      |   |       |      |  |   |       |  
|                                                                       |  |                                          |        |   |      |   |        |      |  |   |        |  
|Total interest expense, net of capitalized interest                    |  | $                                        | 88,011 |   |      | $ | 78,970 |      |  | $ | 83,492 |  
|                                                                       |  |                                          |        |   |      |   |        |      |  |   |        |  



Sufficiency of Resources



We believe that existing cash balances, financing
arrangements and operating cash flows will provide us with sufficient resources to meet our existing debt obligations, relinquishment payments, foreseeable capital expenditure requirements with respect to current operations and distributions to the
Tribe for at least the next twelve months. Distributions to the Tribe are anticipated to total $72.5 million and $75.0 million for fiscal year 2006 and 2007, respectively. We expect future investments in Pocono Downs related to the payment of a
one-time slot machine license fee, improvements to the existing facility and the development of a slot machine facility at Pocono Downs will be funded through our bank credit facility. As of September 30, 2005, we had $449.4 million available
for borrowing under the bank credit facility (without taking into account covenants under the line of credit).



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##### Table of Contents

Contractual Obligations and Commitments



Our future payment obligations related to our debt and certain other material contractual obligations and the timing of
those payments are set forth below.



|                                        |  |       |           |                        |   |           |  |           |         |                   |   |         |  |   |          
|--------------------------------------- |  | ----- | --------- | ---------------------- | - | --------- |  | --------- | ------- | ----------------- | - | ------- |  | - | ---------
|                                        |  |       |           | Payments due by period
|Contractual Obligations (in
thousands)  |  | Total |           | Less than1 year (1)    |   | 1-3 years |  | 3-5 years |         | More than 5 years
|Long-term debt (2)                      |  | $     | 1,243,865 |                        | $ | 17,520    |  | $         | 2,000   |                   | $ | 332,000 |  | $ | 892,345  
|Interest payments on long-term debt (3) |  |       | 591,431   |                        |   | 85,090    |  |           | 168,690 |                   |   | 147,405 |  |   | 190,246  
|Cowlitz Project obligations (4)         |  |       | 13,065    |                        |   | 13,065    |  |           |        |                   |   |        |  |   |         
|Pocono Downs obligations (5)            |  |       | 627       |                        |   | 627       |  |           |        |                   |   |        |  |   |         
|                                        |  |       |           |                        |   |           |  |           |         |                   |   |         |  |   |          
|Total                                   |  | $     | 1,848,988 |                        | $ | 116,302   |  | $         | 170,690 |                   | $ | 479,405 |  | $ | 1,082,591
|                                        |  |       |           |                        |   |           |  |           |         |                   |   |         |  |   |          

---

|(1) | Amounts represent obligations expected to be incurred from October 1, 2005 to September 30, 2006.
|--- | -------------------------------------------------------------------------------------------------

|(2) | Long-term debt includes maturities scheduled as of September 30, 2005 for our senior notes and senior subordinated notes, amounts required to be paid pursuant to the bank
credit facility and our other debt agreements, but excludes interest payments. Refer to Note 8 to our consolidated financial statements in this Annual Report on Form 10-K.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes interest payments expected to be paid on long-term debt as of September 30, 2005, pursuant to respective debt agreements. Refer to Note 8 to our consolidated financial
statements in this Annual Report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Cowlitz Project obligations include land purchase option payments of $10.7 million and related extension payments of $2.4 million to be paid in the 2006 fiscal year. Refer to Note
15 to our consolidated financial statements in this Annual Report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Pocono Downs obligations include a requirement under the purchase agreement dated October 14, 2004 to remediate certain environmental matters at the Pocono Downs racetrack
site. The total cost of the remediation is estimated at $1.6 million, for which the former owner, Penn National Gaming, Inc., is liable for the first $1.0 million of the total cost. These costs are expected to be incurred in the 2006 fiscal year.
Refer to Note 12 of the consolidated financial statements in this Annual Report on Form 10-K.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the contractual obligations described above, we have certain other contractual commitments as of September 30, 2005 that require
payments during the periods described below. The calculation of the estimated payments in the table below are based, in large part, on projections of future revenues over an extended period of time, as well as other factors that are indicated more
fully in the footnotes to the following table. Since there are estimates and judgments used with respect to calculating these liabilities, future events that affect such estimates and judgments may cause the actual payments to differ from the
estimates set forth below. The amounts included in the table are estimates and, while some agreements are perpetual in term, for the purposes of calculating these amounts, we have assumed that the table contains information for only ten years.



|                                       |  |                        |         |           |   |           |  |            |         |  |   |          
|-------------------------------------- |  | ---------------------- | ------- | --------- | - | --------- |  | ---------- | ------- |  | - | ---------
|                                       |  | Payments due by period
|Contractual Commitments (in
thousands) |  | Less than1 year (1)    |         | 1-3 years |   | 3-5 years |  | 5-10 years
|Slot Win Contributions (2)             |  | $                      | 220,767 |           | $ | 440,212   |  | $          | 432,533 |  | $ | 1,200,110
|Relinquishment commitments (3)         |  |                        | 73,549  |           |   | 146,657   |  |            | 144,099 |  |   | 336,248  
|Priority distributions (4)             |  |                        | 16,433  |           |   | 35,220    |  |            | 38,609  |  |   | 113,564  
|Town of Montville commitment (5)       |  |                        | 500     |           |   | 1,000     |  |            | 1,000   |  |   | 2,500    
|                                       |  |                        |         |           |   |           |  |            |         |  |   |          
|Total                                  |  | $                      | 311,249 |           | $ | 623,089   |  | $          | 616,241 |  | $ | 1,652,422
|                                       |  |                        |         |           |   |           |  |            |         |  |   |          

---

|(1) | Amounts represent payment commitments from October 1, 2005 to September 30, 2006.
|--- | ---------------------------------------------------------------------------------

|(2) | Slot win contributions are a portion of the gross slot revenues that must be paid by us to the State of Connecticut pursuant to the Mohegan Compact. The slot win contribution is the
lesser of (a) 30% of gross slot revenues, or (b) the greater of (i) 25% of gross slot revenues or (ii) $80.0 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Relinquishment payments are made by us to TCA under a relinquishment agreement. Relinquishment payments are five percent of revenues, as defined in the relinquishment agreement.
Refer to Note 13 to our consolidated financial statements in this Annual Report on Form 10-K.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Priority distributions are monthly payments required to be made by us to the Tribe pursuant to the priority distribution agreement. Refer to Note 12 to our consolidated financial
statements in this Annual Report on Form 10-K. The payments are calculated based on net cash flows and are limited to a maximum amount of $14.0 million pursuant to the priority distribution agreement, as adjusted annually based on the Consumer Price
Index, or CPI. For the purposes of calculating these amounts, we have assumed that we will pay the maximum amount in each of the years covered by the table, as adjusted by an annual CPI adjustment of 4.70%.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | We have an agreement with the Town of Montville to pay the town an annual payment of $500,000 to minimize the impact on the town resulting from the decreased tax revenues on
reservation land held in trust.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical Accounting Policies
and Estimates



Management has identified the following
critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. The preparation of our consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.
On an on-going basis, management evaluates those estimates, including those related to asset impairment, relinquishment liability, accruals for unredeemed Players Club points, self-insurance, compensation and related benefits, revenue
recognition, allowance for doubtful accounts, contingencies and litigation. These estimates are based on the information that is currently available to us and on various other assumptions that management believes to be reasonable under the
circumstances. Actual results could vary from those estimates.



We believe that the following critical accounting policies affect significant judgments and estimates used in the preparation of our consolidated financial statements:



Revenue Recognition



We recognize gaming revenues as gaming wins less gaming losses. Revenues from food and beverage, hotel, retail, entertainment and other services are
recognized at the time the service is performed. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases. Percentage rents are recognized in the period in which the tenants exceed their respective
percentage rent thresholds.



Allowance for Doubtful
Accounts



We maintain an allowance for doubtful
accounts for estimated losses resulting from the inability of our patrons to make required payments, which results in bad debt expense. Management determines the adequacy of this allowance by continually evaluating individual patron receivables,
considering the patrons financial condition, credit history and current economic conditions. If the financial condition of patrons were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required.



We also maintain allowances for doubtful accounts
for receivables from affiliates, which consists primarily of reimbursable costs and expenses incurred by Salishan-Mohegan for the development of a casino in Clark County, Washington to be owned by the Cowlitz Indian Tribe. Due to the inherent
uncertainty in the development of this casino project, the reserve for these receivables is based on our estimate of the probability that the receivables will be collected. Future complications in the receipt of financing, the relevant land being
taken into trust or other matters affecting the development of the casino could affect the collectibility of the receivables.



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Unredeemed Players Club Points



We maintain an accrual for unredeemed Players Club points, as more
fully described under Explanation of Key Financial Statement CaptionsPromotional Allowances. The accrual is based on the estimated cost of the points expected to be redeemed as of the respective balance sheet date. Management
determines the adequacy of this accrual by periodically evaluating the historical redemption experience and projected trends related to this accrual.



Self-insurance Accruals



We are self-insured up to certain limits for costs associated with workers compensation and employee medical coverage. Insurance claims and reserves
include accruals of estimated settlements for known claims, as well as accruals of estimates of incurred but not reported claims. In estimating these costs, we consider historical loss experience and make judgments about the expected levels of costs
per claim. We also use information provided by independent consultants to assist in the determination of estimated accruals. These claims are accounted for based on estimates of the undiscounted claims, including those claims incurred but not
reported. We believe the use of these estimates to account for these liabilities provides a consistent and effective way to measure these accruals; however, changes in health care costs, accident frequency and severity and other factors can
materially affect the estimate for these liabilities. We continually monitor the potential changes in future estimates, evaluate insurance accruals and make adjustments when necessary.



Derivative Instruments



We use derivative instruments, including interest rate caps, collars and swaps in our strategy to manage interest rate risk
associated with the variable interest rate on our bank credit facility and the fixed interest rates on our senior notes and senior subordinated notes. Our objective in managing interest rate risk is to achieve the lowest possible cost of debt and
manage volatility in the effective cost of debt. We do not believe there is any material risk exposure with respect to the derivative instruments we currently hold. We continually monitor risk exposures from derivative instruments held and make the
appropriate adjustments to manage these risks within managements established limits. We account for our derivative instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, or
SFAS 133, which requires that all derivative instruments be recorded on the consolidated balance sheet at fair value. In order to qualify for hedge accounting in accordance with SFAS 133, the underlying hedged item must expose us to risks associated
with market fluctuations and the financial instrument used must be designated as a hedge and must reduce our exposure to market fluctuation throughout the hedge period. If these criteria are not met, a change in the market value of the financial
instrument is recognized as a gain or loss and is recorded as a component to interest expense in the period of change. We exclude the change in the time value of money when assessing the effectiveness of the hedging relationship. All derivatives are
evaluated quarterly.



Relinquishment Liability



In accordance with SFAS 5, we have recorded a
relinquishment liability of the estimated present value of our obligations under the relinquishment agreement. We reassess the relinquishment liability (i) annually in conjunction with our budgeting process or (ii) when necessary to
account for material increases or decreases in projected revenues over the relinquishment period. If the reassessment causes an overall increase to the projected revenues over the relinquishment period, the relinquishment liability will be increased
by five percent of such increase in revenues, discounted at our risk-free rate of investment (an incremental layer). If the reassessment causes an overall decrease to the projected revenues over the relinquishment period, the relinquishment
liability will be decreased by five percent of such decrease in revenues, discounted based upon a weighted-average discount rate (a decremental layer). The weighted-average discount rate is defined as the average discount rate used to discount all
the previous incremental layers weighted by the amount of each such incremental layer. Further, we record a quarterly accretion to the relinquishment liability to reflect the impact of the time value of money. Since there is a high level of
estimates and judgments used with respect to calculating this liability, future events that affect such estimates and judgments may cause the actual liability to differ significantly from the estimate.



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Property and Equipment



Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets (other
than land) using the straight-line basis. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the improvements. Useful life estimates of asset categories are as follows:



|                                |  |          
|------------------------------- |  | ---------
|Buildings and land improvements |  | 40 years 
|                                | 
|Furniture and equipment         |  | 3-7 years



The costs of
significant improvements are capitalized. Costs of normal repairs and maintenance are charged to expense as incurred. Gains or losses on disposition of property and equipment are included in the determination of net income.



In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the carrying value of our assets is reviewed when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred
based on current and future levels of income and expected future cash flows as well as other factors, then an impairment loss is recognized in the consolidated statement of income.



Capitalized Interest



The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is
incurred specifically for a project, interest is capitalized on amounts expended on the project using the weighted-average cost of our outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or
development activity is suspended for more than a brief period.



Goodwill



In accordance with SFAS
No. 142, Goodwill and Other Intangible Assets, the goodwill associated with the acquisition of the Pocono Downs entities is not subject to amortization but will be tested at least annually for impairment by comparing the fair value
of the recorded assets to their carrying amount. If the carrying amount of the goodwill exceeds its fair value, an impairment loss will be recognized immediately.



Intangible Assets



Our trademark for Mohegan Sun is no longer subject to amortization as it has been deemed to have an indefinite useful life. The trademark is evaluated
periodically for impairment by applying a fair-value based test and, if impairment occurs, the amount of impaired trademark will be written off immediately. The intangible assets associated with the acquisitions of the Pocono Downs entities and the
WNBA franchise are also assessed periodically for impairment pursuant to appropriate accounting standards.



Litigation



We are subject to various claims and legal actions in the ordinary course of business. Some of these matters relate to personal injuries to customers and
damage to customers personal assets. Management estimates guest claims expense and accrues for such liabilities based upon historical experience in other current liabilities in our accompanying consolidated balance sheets.



Impact of Inflation



Absent changes in competitive and economic conditions or in specific prices affecting the hospitality and gaming industry,
we do not expect that inflation will have a significant impact on our operations. Changes in specific prices, such as fuel and transportation prices, relative to the general rate of inflation may have a material adverse effect on the hospitality and
gaming industry in general.



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New Accounting Pronouncements



In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assetsan amendment of APB Opinion
No. 29, or FAS 153. FAS 153 amends Opinion 29 to eliminate the exception for on monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial
substance. FAS 153 is effective for fiscal years beginning after June 15, 2005. We do not believe the adoption of this standard will have a material impact on our financial position, results of operations or cash flows.



In May 2005, the FASB issued SFAS No. 154, Accounting Changes and
Error Correctionsa replacement of APB Opinion No. 20 and FASB Statement No. 3, or FAS 154. FAS 154 requires retrospective application to prior periods financial statements of changes in accounting principles, subject to
certain practicability provisions, but does not change the guidance in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. FAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe the adoption of this standard will have a material impact on our financial position, results of operations or cash flows.



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Item 7A. Quantitative and Qualitative Disclosures about Market Risk



Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk associated with our bank credit facility in which interest will accrue on the basis of a base rate formula or a LIBOR-based formula, plus applicable spreads. As of
September 30, 2005, we had no amounts drawn under the bank credit facility. See Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsExternal Sources of Liquidity for further
information relating to the terms and conditions of the bank credit facility.



We attempt to manage our interest rate risk through a controlled mix of our long-term fixed rate borrowings and variable rate borrowings and the use of derivative instruments, including interest rate swaps, in
accordance with established policies and procedures. We do not hold or issue financial instruments, including derivative instruments, for speculative or trading purposes. Refer to Note 7 of the consolidated financial statements included in this Form
10-K for discussion on derivative instrument transactions in fiscal year 2005. No derivative instruments were held as of September 30, 2005.



The following table provides information as of September 30, 2005 about our current financial instruments (debt obligations) that are sensitive to
changes in interest rates. The table presents principal payments and related weighted-average interest rates by expected maturity dates. Weighted-average variable rates are based on implied forward rates in respective yield curves, which should not
be considered to be precise indicators of actual future interest rates. Fair values for variable-rate debt instruments are considered to approximate their carrying amounts and fair values for fixed-rate debt instruments, which are publicly traded,
are based on quoted market prices as of September 30, 2005.



|                                           |  |                        |        |   |       |   |       |            |  |   |       |   |  |      |         |   |            |   |       |   |  |   |         |   |  |   |           |   |  |   |          
|------------------------------------------ |  | ---------------------- | ------ | - | ----- | - | ----- | ---------- |  | - | ----- | - |  | ---- | ------- | - | ---------- | - | ----- | - |  | - | ------- | - |  | - | --------- | - |  | - | ---------
|                                           |  | Expected Maturity Date |        |   | Total |   |       | Fair Value
|                                           |  | 2006                   |        |   | 2007  |   |       | 2008       |  |   | 2009  |   |  | 2010 |         |   | Thereafter |   |       |  
|                                           |  | (in thousands)         |        |   |       |   |       |           
|Liabilities                                |  |                        |        |   |       |   |       |           
|Long-Term Debt(including current portion): |  |                        |        |   |       |   |       |            |  |   |       |   |  |      |         |   |            |   |       |   |  |   |         |   |  |   |           |   |  |   |          
|Fixed Rate                                 |  | $                      | 16,520 |   |       | $ |      |            |  | $ |      |   |  | $    | 330,000 |   |            | $ |      |   |  | $ | 891,345 |   |  | $ | 1,237,865 |   |  | $ | 1,262,444
|Average interest rate                      |  |                        | 8.3    | % |       |   |      |            |  |   |      |   |  |      | 6.4     | % |            |   |      |   |  |   | 7.1     | % |  |   | 6.9       | % |  |   |          
|                                           |  |                        |        |   |       |   |       |           
|Variable Rate                              |  | $                      | 1,000  |   |       | $ | 1,000 |            |  | $ | 1,000 |   |  | $    | 1,000   |   |            | $ | 1,000 |   |  | $ | 1,000   |   |  | $ | 6,000     |   |  | $ | 6,000    
|Average interest rate                      |  |                        | 5.3    | % |       |   | 6.3   | %          |  |   | 6.3   | % |  |      | 6.3     | % |            |   | 6.4   | % |  |   | 6.4     | % |  |   | 6.2       | % |  |   |          



Item 8. Financial Statements and Supplementary Data



Our consolidated financial statements and notes thereto, referred to in Item 15(A)(1) of this Form 10-K, are filed as part of this report and appear in this Form 10-K beginning on page F-1.



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item 9A. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with, or furnished to the SEC, pursuant to the Securities Exchange Act of 1934, as amended, or the
Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of disclosure controls and procedures in Rule 13a-15(e) and 15d-15(e) of the Exchange Act.



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As of September 30, 2005, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of disclosure controls and procedures. Based on the foregoing evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.



Changes in Internal Control over Financial Reporting



There was no change in our internal control over financial reporting during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.



Item 9B. Other Information



None.



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PART III



Item 10. Directors and Executive Officers of the Registrant



We are governed by a nine-member Management Board, consisting of the nine members of the Tribal Council. Any change in the composition of the Tribal
Council results in a corresponding change in our Management Board. The members and their terms are as follows: Bruce S. Bozsum, Ralph James Gessner, Jr., Mark W. Hamilton, Marilynn R. Malerba and William Quidgeon, Jr. each will serve four-year terms
expiring in October 2009, while Mark F. Brown, Roland J. Harris, Roberta J. Harris-Payne and Allison D. Johnson each will serve two-year terms expiring in October 2007. Upon expiration of their respective terms, the eligible voters of the Tribe may
reelect current Tribal Council members who choose to run for reelection or elect new Tribal Council members. See Part I. Item 1. BusinessMohegan Tribe of Indians of Connecticut and Part I. Item 1.
BusinessMohegan Tribal Gaming Authority.



Management Board and Executive Officers



The following table provides information with respect to (i) the members of the Management Board and (ii) each of the executive officers of Mohegan Tribal Gaming Authority, Mohegan Sun and the Pocono Downs entities.



|                          |  |     |  |                                                                   
|------------------------- |  | --- |  | ------------------------------------------------------------------
|Name                      |  | Age |  | Position                                                          
|Bruce S. Bozsum           |  | 45  |  | Chairman and Member, Management Board                             
|Marilynn R. Malerba       |  | 52  |  | Vice Chairwoman and Member, Management Board                      
|Roberta J. Harris-Payne   |  | 55  |  | Corresponding Secretary and Member, Management Board (1)          
|Allison D. Johnson        |  | 35  |  | Recording Secretary and Member, Management Board (1)              
|William Quidgeon, Jr.     |  | 43  |  | Treasurer and Member, Management Board (1)                        
|Mark F. Brown             |  | 48  |  | Member, Management Board (1)                                      
|Roland J. Harris          |  | 58  |  | Member, Management Board                                          
|Mark W. Hamilton          |  | 52  |  | Member, Management Board (1)                                      
|Ralph James Gessner, Jr   |  | 36  |  | Member, Management Board                                          
|William J. Velardo        |  | 50  |  | Chief Executive Officer, Mohegan Tribal Gaming Authority          
|Leo M. Chupaska           |  | 57  |  | Chief Financial Officer, Mohegan Tribal Gaming Authority          
|Mitchell Grossinger Etess |  | 47  |  | President and Chief Executive Officer, Mohegan Sun                
|Jeffrey E. Hartmann       |  | 43  |  | Executive Vice President and Chief Operating Officer, Mohegan Sun 
|Robert J. Soper           |  | 33  |  | President and Chief Executive Officer of the Pocono Downs entities

---

|(1) | Designates a member of the Audit Committee.
|--- | -------------------------------------------



Bruce S. BozsumMr. Bozsum was first seated on the Tribal Council and the Management Board effective October 4, 2004. He was re-elected
in October 2005, at which time he was elected Chairman of the Management Board. Mr. Bozsum previously served as the Manager of Cultural and Community Programs for the Tribe from 2000 to 2004, and was responsible for educational outreach
programs, the annual Wigwam Festival and Cultural Week. Previously, he worked as a Floor Supervisor for the Tribes High Stakes Bingo operation.



Marilynn R. MalerbaMs. Malerba was first seated on the Tribal Council and the Management Board and was elected Vice-Chairwoman of the
Management Board in October 2005. Ms. Malerba served as the Director and later Executive Director of the Tribes Health and Human Services Department from 1997 until 2005. Ms. Malerba was responsible for the development of the
programs that directly benefit the Tribes membership. Prior to her employment with the Tribe, Ms. Malerba held director and manager positions with Lawrence & Memorial Hospital in New London, Connecticut, and currently serves on
its Board of Directors.



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Roberta J. Harris-PayneMs. Harris-Payne was first seated on the Tribal Council and the
Management Board in October 2005. Ms. Harris-Payne served as a Career Development Coordinator within the Tribal government and as a Tribal Employments Rights Ordinance commissioner from August 2004 to October 2005. Ms. Harris-Payne worked
in the Human Resources Department at Mohegan Sun, from 2000 to 2004, serving as a Preference/Employment Specialist. Ms. Harris-Payne is the sister of Roland J. Harris.



Allison D. JohnsonMs. Johnson was seated on the Tribal Council and the Management Board in October 2005.
Ms. Johnson served as a Human Resources Manager and Human Resource Generalist for the Tribal government from June 2003 to October 2005. Ms. Johnson worked in the Human Resource department at Mohegan Sun from 2000 to 2003, serving as
Benefits Manager prior to her employment with the Tribe. Ms. Johnson has held management positions in commercial leasing and retail sales and support. Ms. Johnson served as an Alternate Commissioner for the Tribal Employment Rights
Commission. She is a graduate of San Diego Miramar College in California with a degree in liberal arts.



William Quidgeon, Jr.Mr. Quidgeon was first seated on the Tribal Council and the Management Board in October 2005, after serving in several
capacities for the Tribal government and the Mohegan Sun. Mr. Quidgeon served as Senior Project Manager for the Mohegan Tribal Development Department from 1999 to 2005 where he was responsible for renovations and construction within the casino
and Tribal government. Prior to his work for the Tribe, Mr. Quidgeon worked as Facilities Manager at Mohegan Sun. He also served as Board Chairman of Mohegan Information Technology Group, a limited liability company majority-owned by the Tribe.



Mark F. BrownMr. Brown has been a member of the
Tribal Council and the Management Board since October 1995. He served as Chairman of the Management Board and the Tribal Council from October 2000 until October 2005. Mr. Brown worked with the Tribes historian during the period in which
the Tribe was working to obtain federal recognition and also served on the Tribal Constitutional Review Board from 1993 to 1995. Mr. Brown served as a law enforcement officer for over twelve years. Prior to his work in law enforcement,
Mr. Brown was involved in retail sales and management.



Roland J. HarrisMr. Harris has been a member of the Tribal Council and the Management Board since October 1995. He served as Chairman of the Management Board and the Tribal Council from October 1995 until October 2000.
Mr. Harris was the founder of the firm Harris and Clark, Inc., Civil Engineers, Land Surveyors and Land Planners. Mr. Harris has served as First Selectman and CEO of the Town of Griswold, Connecticut, and also as its Planning and Zoning
Commissioner. He has also served as Deputy Chief of the Griswold Fire Department and as Fire Marshal and Inspector of the Town of Griswold. Prior to assuming the Chairmanship of the Management Board in 1995, Mr. Harris served as the Tribal
Planner. Mr. Harris is the brother of Roberta J. Harris-Payne.



Mark W. HamiltonMr. Hamilton served as Mohegan Suns General Counsel/Vice President for nine years prior to being seated on the Tribal Council and the Management Board in October 2005. As General
Counsel, he was responsible for reviewing and approving contractual agreements, establishing guidelines and procedures for legal issues related to operations, patrons, vendors and regulating agencies, overseeing the legal staff and budget
preparation. Prior to his employment with Mohegan Sun, Mr. Hamilton worked as an attorney in a private practice.



Ralph James Gessner, Jr.Mr. Gessner brings nine years of casino experience to his first term on the Management Board. Prior to being seated
on the Tribal Council and the Management Board in October 2005, Mr. Gessner served as Executive Host at Mohegan Sun beginning in 1997, was promoted to Manager and then Director of Executive Hosts and finally to Vice President of Casino
Marketing. Prior to his work at Mohegan Sun, Mr. Gessner worked as a marketing associate for a food service company after graduating from the University of Southwestern Louisiana with a bachelors degree in hotel and restaurant management.



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William J. VelardoMr. Velardo currently serves as Chief Executive Officer of the Authority
and has 29 years of experience in the casino and hotel industry. Mr. Velardo was named Chief Executive Officer of the Mohegan Tribal Gaming Authority in August 2004 after having served as Mohegan Suns President and Chief Executive Officer
from October 1999 to August 2004. Previously, Mr. Velardo served as its Executive Vice President and General Manager from October 1995 to October 1999. Prior to his employment with the Authority, Mr. Velardo was Chief Operating Officer for
River City, a riverboat gaming venture in New Orleans, Louisiana. From 1991 to 1994, Mr. Velardo served as Senior Vice President, Casino Operations at Trump Plaza Hotel and Casino in New Jersey. Mr. Velardo participated in the opening of
the Mirage in Las Vegas, Nevada, a casino, where he served as Vice President, Table Games from 1989 to 1991. Mr. Velardo also worked as Assistant Casino Manager and Pit Manager at Caesars Tahoe and Caesars Palace casinos.



Leo M. ChupaskaMr. Chupaska was named Chief
Financial Officer of the Authority in August 2004. Prior to this position, Mr. Chupaska served as Chief Financial Officer of the Tribe from September 1996 through August 2004, and was a member of the Financial Advisory Committee of the
Authoritys Audit Committee. Prior to joining the Tribe, Mr. Chupaska served as Director of Financial Services for Lawrence and Memorial Hospital in New London, Connecticut. Mr. Chupaska is a certified public accountant.



Mitchell Grossinger EtessMr. Etess was named President and
Chief Executive Officer of Mohegan Sun in August 2004. Prior to that, Mr. Etess served as Executive Vice President of Marketing of the Authority. Mr. Etess served as the Authoritys Executive Vice President of Marketing from October
1999 to August 2004 and served as its Senior Vice President of Marketing from November 1995 to October 1999. Prior to his employment with Mohegan Sun, Mr. Etess was Vice President of Marketing at Players Island and, from 1989 to 1994, was
Senior Vice President of Marketing and Hotel Operations at Trump Plaza Hotel and Casino. Prior thereto, Mr. Etess held various management positions in the hospitality and advertising industries.



Jeffrey E. HartmannMr. Hartmann was named Executive Vice
President and Chief Operating Officer of Mohegan Sun in August 2004. Prior to that, Mr. Hartmann served as Executive Vice President, Finance and the Chief Financial Officer of the Authority. Mr. Hartmann has 14 years of experience in the
casino and hotel industry. Mr. Hartmann served as the Authoritys Executive Vice President of Finance and Chief Financial Officer from October 1999 through August 2004 and served as its Senior Vice President of Finance and Chief Financial
Officer from December 1996 to October 1999. Prior to joining the Authority, Mr. Hartmann worked for Foxwoods from August 1991 to December 1996, including as Vice President of Finance for Foxwoods Management Company. Mr. Hartmann was
employed by Coopers & Lybrand, LLP, an independent public accounting firm, as an Audit Manager from 1984 to 1991. Mr. Hartmann is a certified public accountant.



Robert J. SoperMr. Soper has served as the President and Chief Executive Officer of the Pocono Downs entities
since January 2005. Prior to assuming this position, Mr. Soper served as Senior Vice President of Administration at Mohegan Sun from 2001 to 2005 and Senior Attorney for the Tribe from 1997 to 2001.



Audit Committee



We have a separately-designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee is comprised of members from the Management Board. All members of our Audit Committee are able to read and understand fundamental financial statements, including a
balance sheet, income statement and cash flow statement. The Management Board has determined that none of its members, and accordingly no member of the Audit Committee, is a financial expert, meaning that no person has past employment experience in
finance or accounting, requisite professional certification in accounting or any other comparable experience or background, which results in the individuals financial sophistication, including being or having been a chief executive officer,
chief financial officer or other senior officer with financial oversight responsibilities. However, the Audit Committee is advised on financial matters through a Financial Advisory Committee, comprised of one or more financial experts independent
from the Authority.



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Code of Ethics



We have adopted a code of ethics that applies to all of our executive officers, including our principal executive officer
and principal financial and accounting officer. Our code of ethics is available on our website at www.mtga.comunder Corporate Governance.



If we make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the code of ethics to
our principal executive or principal financial and accounting officer, we will disclose the nature of such amendment or waiver on our website and in a report on Form 8-K.



Item 11. Executive Compensation



Compensation of the Management Board



We do not directly compensate the individual members of the Management Board. The Tribe compensates members of the Management Board for the services they render as members of the Tribal Council and as members of the Management Board. The
members of the Management Board, in place prior to the newly elected members in October 2005, received the following amounts for their services as members of the Management Board for fiscal year 2005: Mark F. Brown, $80,000; Peter J. Schultz,
$73,000; Jayne G. Fawcett, $70,000; Roland J. Harris, $70,000; Glenn R. LaVigne, $69,000; Maynard L. Strickland, $70,000; Shirley M. Walsh, $69,000; Christine Damon-Murtha, $59,000; and Bruce S. Bozsum, $50,000. In addition, the Tribe pays life
insurance premiums on behalf of each member elected to the Management Board prior to January 1, 2004, to maintain life insurance on each member in the amount of $500,000.



Compensation of Executive Officers



William J. Velardo, Mitchell Grossinger Etess and Robert J. Soper, Chief Executive Officers of the Authority, Mohegan Sun
and Mohegan Sun at Pocono Downs, respectively, set the compensation for relevant executive officers other than themselves and the Chief Financial Officer of the Authority and the Chief Operating Officer of Mohegan Sun. The compensation of our Chief
Executive Officers, excluding Mr. Soper, and our Chief Operating Officer has been determined in accordance with their employment agreements, which were approved by the Management Board in March 2004. A description of the existing agreements is
provided below. The Management Board has approved an employment agreement with Leo M.Chupaska, Chief Financial Officer of the Authority, however the agreement is currently in the process of being executed. Robert J. Soper, President and Chief
Executive Officer of Mohegan Sun at Pocono Downs, is currently being compensated under an employment agreement approved by Mr. Velardo in October 2001. However, Mr. Soper and the Management Board are currently in the process of finalizing
the terms of a new employment agreement.



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The following table sets forth the compensation paid to the Chief Executive Officer of the Authority and
each of the other four most highly compensated executive officers for fiscal year 2005, referred to collectively as the named executive officers:



SUMMARY COMPENSATION TABLE



|                                                                                    |  |              |        |  |                     |                           |                             |     |                       |  |                                  |                    |  |                             |                    |  |     |                 |     |  |     |          
|----------------------------------------------------------------------------------- |  | ------------ | ------ |  | ------------------- | ------------------------- | --------------------------- | --- | --------------------- |  | -------------------------------- | ------------------ |  | --------------------------- | ------------------ |  | --- | --------------- | --- |  | --- | ---------
|                                                                                    |  | FiscalYear   |        |  | Annual Compensation |                           | All Other Compensation(1)  
|                                                                                    |  |              | Salary |  | Bonus               |                           | Other AnnualCompensation(2) |     | LifeInsurance         |  | 401(k) PlanMatchingContributions |                    |  | RetirementPlanContributions
|William J. Velardo Chief Executive Officer,Mohegan Tribal Gaming Authority          |  | 200520042003 |        |  | $$$                 | 1,142,0001,115,000978,000 |                             | $$$ | 373,000325,000309,000 |  | $$$                              | 29,00028,00028,000 |  | $$$                         | 63,00064,00064,000 |  | $$$ | 9,3006,2006,000 | (3) |  | $$$ | 600600600
|                                                                                    |  |              |        |  |                     |                           |                            
|Mitchell Grossinger Etess President and Chief Executive Officer,Mohegan Sun         |  | 200520042003 |        |  | $$$                 | 771,000666,000573,000     |                             | $$$ | 273,000214,000188,000 |  | $$$                              | 13,00013,00013,000 |  | $$$                         | 30,00030,00030,000 |  | $$$ | 6,3006,2006,000 |     |  | $$$ | 600600600
|                                                                                    |  |              |        |  |                     |                           |                            
|Jeffrey E. Hartmann Executive Vice President andChief Operating Officer,Mohegan Sun |  | 200520042003 |        |  | $$$                 | 712,000648,000542,000     |                             | $$$ | 255,000207,000178,000 |  | $$$                              | 11,00011,00011,000 |  | $$$                         | 24,00024,00024,000 |  | $$$ | 6,3006,2006,000 |     |  | $$$ | 600600600
|                                                                                    |  |              |        |  |                     |                           |                            
|Leo M. Chupaska Chief Financial Officer,Mohegan Tribal Gaming Authority             |  | 200520042003 | (4)    |  | $$$                 | 372,00014,000            |                             | $$$ | 369,000             |  | $$$                              |                 |  | $$$                         | 1,000            |  | $$$ | 6,200400       |     |  | $$$ | 600600  
|                                                                                    |  |              |        |  |                     |                           |                            
|Robert J. Soper President and Chief Executive Officer,Mohegan Sun at Pocono Downs   |  | 200520042003 |        |  | $$$                 | 307,000204,000201,000     |                             | $$$ | 50,00045,00041,000    |  | $$$                              |                 |  | $$$                         |                 |  | $$$ | 6,3006,1006,000 |     |  | $$$ | 600600600

---

|(1) | Represents our payment of premiums on life insurance policies for which the employee is the owner and beneficiary, employer matching contributions to our 401(k) plan and our
contributions on the employees behalf to a non-contributory defined contribution plan, or the Retirement Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents our reimbursement for the payment of income taxes pertaining to certain life insurance benefits for our chief executive officers and executive vice president.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes 401(k) catch-up contribution of $3,000.
|--- | ------------------------------------------------

|(4) | Represents compensation paid from date of hire through September 30, 2004.
|--- | --------------------------------------------------------------------------



Employment Agreements



On March 31, 2004, we entered into amended and restated employment agreements with each of William J. Velardo, Mitchell
Grossinger Etess and Jeffrey E. Hartmann. The term of each agreement runs until December 31, 2009, with automatic renewal for an additional term of five years unless either we or the employee provide notice to the other of an intention to
terminate. Under the employment agreements, commencing on March 31, 2004, each of Messrs. Velardo, Etess and Hartmann were entitled to their then current annual salary, subject to an annual increase on each subsequent January 1, of no less
than five percent. Each employee is also entitled to receive an annual bonus of not less than 331/3% of the base salary in effect for the period for which the annual bonus is paid.



Each employment agreement provides that, if the employee is terminated for
cause or if the employee terminates his employment voluntarily, then the employee will not be entitled to any further compensation. If the employee is terminated other than for cause, then the employee will be entitled to receive, at termination, a
severance payment equal to his annual salary plus an annual bonus equal to 100% of his annual salary from the date of termination to the expiration date of the employment agreement.



These employment agreements further provide that the applicable employee may not, without our prior written consent, compete
with us in specified states in the northeastern United States during the term of his



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employment and for a one-year period following a termination for cause or a voluntary termination of employment. Also, during this period, the applicable
employee may not hire or solicit our other employees or encourage any such employees to leave employment with us. Under these employment agreements, the applicable employee may not disclose any of our confidential information while employed by us or
thereafter. This confidentiality obligation will survive the termination of such employees employment and employment agreement.



On October 4, 2001, we entered into an employment agreement with Robert J. Soper. Under the employment agreement, Mr. Soper was entitled to
receive a base salary of $178,500. The employment agreement provides that if he is terminated for cause, then he will not be entitled to any further compensation. If he voluntarily terminates his employment and provides the required 60-day written
notice, then we will pay his base salary for 60 days following his resignation, so long as he remains in compliance with all of the other covenants under the agreement. If he is terminated other than for cause, then he will receive his base salary
for a one year period and a lump sum payment of $25,000 for relocation expenses.



The employment agreement for Mr. Soper further provides that he may not, without our prior written consent, compete with us in specified states in the northeastern United States during the term of his employment
and for a one-year period following termination of his employment. Also, during this period, he may not hire or solicit our other employees or encourage any such employees to leave employment with us. Under this employment agreement, he may not
disclose any of our confidential information while employed by us or thereafter.



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



We have no outstanding equity securities.



Item 13. Certain Relationships and Related Transactions



Transactions with Management and Others



Two new Management Board members, Mark Hamilton and James Gessner, Jr. were employees of the Authority prior to their seating as Management Board members on October 3, 2005. Both members resigned from their
positions at the Authority prior to being seated. The total compensation provided by the Authority to Mark Hamilton and James Gessner Jr. for fiscal year 2005 was approximately $190,000 and $110,000, respectively.



Services Provided by the Tribe to the Authority



The Tribe provides governmental and administrative services to us in
conjunction with the operation of Mohegan Sun. During the fiscal years ended September 30, 2005, 2004 and 2003, we incurred $17.0 million, $15.4 million and $13.1 million, respectively, of expenses for such services.



The Mohegan Tribal Utility Authority was established by the Tribe in 1996 to
provide utility services to the Tribe, its affiliated entities, which include us and other tenants located on the reservation. We purchase utilities, including electricity, gas, water and sewer, from the Mohegan Tribal Utility Authority. During the
fiscal years ended September 30, 2005, 2004 and 2003, we incurred costs of $16.5 million, $16.7 million and $16.7 million, respectively, for these utilities.



The Tribe provides services through its Development Department for projects related to Mohegan Sun. We incurred $10.6
million, $3.6 million and $1.0 million of such expenditures associated with the Tribes Development Department for the fiscal years ended September 30, 2005, 2004 and 2003, respectively.



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Leases by the Authority to the Tribe



We have a lease agreement with Little People, LLC (an entity owned by the
Tribe), whereby Little People, LLC leases retail space located in the Shops at Mohegan Sun from us. The lease term expires on September 30, 2006 and may be renewed on a monthly basis. Little People, LLC is not obligated to pay any rent. We
reimburse the Tribe for sales where patron Players Club points are utilized. We reimbursed the Tribe for patron Players Club points in the amounts of $299,000, $244,000 and $244,000, for fiscal years ended September 30, 2005, 2004
and 2003, respectively.



Leases by the Tribe to the
Authority



We lease the land on which Mohegan Sun is
located from the Tribe pursuant to a long-term lease. We are required to pay to the Tribe a nominal annual rental fee under the lease. The lease has an initial term of 25 years and is renewable for an additional 25-year term upon expiration.



The Tribe, through MTIC Acquisitions, LLC, a Connecticut
limited liability company owned by the Tribe, has entered into various land lease agreements with us for access, parking and related purposes for Mohegan Sun. For each of the fiscal years ended September 30, 2005, 2004 and 2003, we incurred
$262,000 relating to these land lease agreements.



Distributions by the Authority to the Tribe



In September 2001, the Tribe issued gaming authority priority distribution payment public improvement bonds series 2001, or the series 2001 bonds. In December 2003, the Tribe issued gaming authority priority distribution payment public
improvement bonds series 2003, or the series 2003 bonds. We have no obligations to make any payments under the series 2001 bonds or series 2003 bonds. Debt service on the series 2001 bonds and series 2003 bonds is paid by the Tribe from 95% of
amounts received from us under the August 2001 priority distribution agreement. The priority distribution agreement obligates us to make monthly priority distribution payments to the Tribe in a maximum aggregate amount of $14.0 million per calendar
year, adjusted annually in accordance with the formula specified in the priority distribution agreement to reflect the effects of inflation. However, payments pursuant to the priority distribution agreement do not reduce our obligations to make
payments pursuant to invoices for governmental services provided by the Tribe or any payments under any other agreements with the Tribe to the extent that such agreements are permitted under the bank credit facility. The priority distribution
payments are limited obligations payable only to the extent of our net cash flows, as defined in the priority distribution agreement, and are not secured by a lien or encumbrance on any of our assets or property. The remaining 5% of each priority
distribution payment is remitted to the Tribe free and clear of any lien. We made payments associated with the priority distribution agreement of $15.8 million for the fiscal year ended September 30, 2005, $15.4 million for the fiscal year
ended September 30, 2004 and $15.1 million for the fiscal year ended September 30, 2003. Our payment obligation under the relinquishment agreement is subordinated in right of payment to the minimum distribution payment as defined in the
relinquishment agreement, from us to the Tribe to the extent then due.



In compliance with the restrictive covenants of our bank credit facility and indentures, we distributed to the Tribe $51.7 million, $49.6 million and $44.9 million, net of $15.8 million, $15.4 million and $15.1 million relating to priority
distribution payments for the fiscal years ended September 30, 2005, 2004 and 2003, respectively.



Mohegan Tribal Employment Rights Ordinance



On September 25, 1995, the Tribe adopted the Mohegan Tribal Employment Rights Ordinance, or the TERO, which sets forth hiring and contracting
preference requirements for employers and entities conducting business on Tribal land or working on behalf of the Tribe. Pursuant to the TERO, an employer is required to give hiring, promotion, training, retention and other employment-related
preferences to Native Americans who meet the minimum qualifications for the applicable employment position. However, this preference requirement does not apply to key employees, as such persons are defined in the TERO.



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Similarly, any entity awarding a contract to be performed on Tribal land or on behalf of the Tribe must
give preference, first to certified Mohegan entities and second to other certified Indian entities. This contracting preference is conditioned upon the bid by the preferred certified entity being within 5% of the lowest bid by a non-certified entity
(unless the preferred certified entitys bid exceeds $100,000 of the lowest bid by a non-certified entity). The TERO establishes procedures and requirements for certifying Mohegan entities and other Indian entities. Certification is based
largely on the level of ownership and control exercised by the members of the Tribe or other Indian tribes, as the case may be, over the entity bidding on a contract.



As of September 30, 2005, approximately 117 of our employees were members of the Tribe.



Item 14. Principal Accounting Fees and Services



The following table sets forth the aggregate fees paid or accrued for professional services rendered by PricewaterhouseCoopers LLP for the audit of our annual financial statements for fiscal year 2005 and fiscal year
2004 and the aggregate fees paid or accrued for audit-related services and all other services rendered by PricewaterhouseCoopers LLP for fiscal year 2005 and fiscal year 2004.



|                   |  |                 |           |                 |   |        
|------------------ |  | --------------- | --------- | --------------- | - | -------
|                   |  | Fiscal Year2005 |           | Fiscal Year2004
|Audit fees         |  | $               | 863,943   |                 | $ | 628,235
|Audit-related fees |  |                 | 248,823   |                 |   | 76,733 
|Tax fees           |  |                 | 6,150     |                 |   | 60,125 
|All other fees     |  |                 |          |                 |   |       
|                   |  |                 |           |                 |   |        
|Total              |  | $               | 1,118,916 |                 | $ | 765,093
|                   |  |                 |           |                 |   |        



The category of
Audit fees includes fees for our annual audit, quarterly reviews and services rendered in connection with regulatory filings with the SEC, such as the issuance of comfort letters and consents.



The category of Audit-related fees includes employee benefit plan
audits, internal control reviews and accounting consultation.



The category of Tax fees includes consultation related to corporate development activities.



All above audit services, audit-related services and tax services were pre-approved by the Audit Committee, which concluded that the provision of such
services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firms independence in the conduct of its auditing functions. The Audit Committees outside auditor independence policy provides for pre-approval of all
services performed by the outside auditors.



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PART IV



Item 15. Exhibits, Financial Statement Schedules



A(1). Financial Statements



The following financial statements and reports appear in this Form 10-K beginning on page F-2 and are incorporated by reference in Part II, Item 8:



Report of Independent Registered Public Accounting Firm



Consolidated Balance Sheets of the Mohegan Tribal Gaming
Authority as of September 30, 2005 and 2004



Consolidated Statements of Income of the Mohegan Tribal Gaming Authority for the Fiscal Years Ended September 30, 2005, 2004 and 2003



Consolidated Statements of Changes in Capital of the Mohegan Tribal Gaming Authority for the Fiscal Years Ended September 30, 2005,
2004 and 2003



Consolidated Statements of
Cash Flows of the Mohegan Tribal Gaming Authority for the Fiscal Years Ended September 30, 2005, 2004 and 2003



Notes to Consolidated Financial Statements of the Mohegan Tribal Gaming Authority



A(2). Financial Statement Schedules



The following schedule appears on page S-1 of this Form 10-K and is
incorporated by reference herein:



Schedule
IIValuation and Qualifying Accounts and Reserves for the Fiscal Years Ended September 30, 2005, 2004 and 2003



Schedules other than that listed above are omitted because they are not required or are not applicable, or the required information is shown in the
consolidated financial statements or notes to the consolidated financial statements.



A (3). Exhibits



The exhibits to this
Form 10-K are listed on the exhibit index, which appears elsewhere herein and is incorporated herein by reference.



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Mohegan Tribal Gaming Authority has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 9, 2005.



MOHEGAN TRIBAL GAMING AUTHORITYBy:

/s/    BRUCE S.
BOZSUMBruce S. Bozsum Chairman, Management Board




Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Mohegan Tribal Gaming Authority and in the capacities indicated on December 9, 2005.



|                                                      |  |                                                                                                      
|----------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------
|Signature                                             |  | Title                                                                                                
|                                                      | 
|/s/    BRUCE S. BOZSUMBruce S. Bozsum                 |  | Chairman and Member, Management Board                                                                
|                                                      | 
|/s/    MARILYNN R.
MALERBAMarilynn R.
Malerba         |  | Vice Chairman and Member, Management Board                                                           
|                                                      | 
|/s/    WILLIAM J.
VELARDOWilliam J.
Velardo           |  | Chief Executive Officer, Mohegan Tribal Gaming Authority (Principal Executive Officer)               
|                                                      | 
|/s/    LEO M. CHUPASKALeo M. Chupaska                 |  | Chief Financial Officer, Mohegan Tribal Gaming Authority (Principal Financial and Accounting Officer)
|                                                      | 
|/s/    ALLISON D.
JOHNSONAllison D.
Johnson           |  | Recording Secretary and Member, Management Board                                                     
|                                                      | 
|/s/    ROBERTA J.
HARRIS-PAYNERoberta J.
Harris-Payne |  | Corresponding Secretary and Member, Management Board                                                 
|                                                      | 
|/s/    MARK F. BROWNMark F. Brown                     |  | Member, Management Board                                                                             
|                                                      | 
|/s/    RALPH JAMES GESSNER
JR.Ralph James Gessner
Jr. |  | Member, Management Board                                                                             
|                                                      | 
|/s/    ROLAND J.
HARRISRoland J.
Harris               |  | Member, Management Board                                                                             
|                                                      | 
|/s/    WILLIAM QUIDGEON
JR.William Quidgeon
Jr.       |  | Treasurer and Member, Management Board                                                               
|                                                      | 
|/s/    MARK W.
HAMILTONMark W.
Hamilton               |  | Member, Management Board                                                                             



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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.



The registrant has not sent an annual report or proxy statement to security
holders. The registrant will not be sending an annual report or proxy statement to its security holders subsequent to the filing of this Form 10-K.



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                                                              |  |    
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ---
|Report of Independent Registered Public Accounting Firm                                                                                       |  | F-2
|                                                                                                                                              | 
|Consolidated Balance Sheets of Mohegan Tribal Gaming Authority as of September 30, 2005 and 2004                                              |  | F-3
|                                                                                                                                              | 
|Consolidated Statements of Income of Mohegan Tribal Gaming Authority for the Fiscal Years Ended September 30, 2005, 2004 and 2003             |  | F-4
|                                                                                                                                              | 
|Consolidated Statements of Changes in Capital of Mohegan Tribal Gaming Authority for the Fiscal Years Ended September 30, 2005, 2004 and 2003 |  | F-5
|                                                                                                                                              | 
|Consolidated Statements of Cash Flows of Mohegan Tribal Gaming Authority for the Fiscal Years Ended September 30, 2005, 2004 and 2003         |  | F-6
|                                                                                                                                              | 
|Notes to Consolidated Financial Statements of Mohegan Tribal Gaming Authority                                                                 |  | F-7



F-1



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Management Board

of the Mohegan Tribal Gaming Authority:



In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Mohegan Tribal Gaming Authority and its
subsidiaries (the Authority) at September 30, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2005 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Authoritys management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



/s/    PricewaterhouseCoopers LLP



Hartford, Connecticut

December 7, 2005



F-2



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                 |  |                   |           |   |                   |   |           |  
|------------------------------------------------ |  | ----------------- | --------- | - | ----------------- | - | --------- | -
|                                                 |  | September 30,2005 |           |   | September 30,2004 |  
|ASSETS                                           |  |                   |           |   |                   |   |           |  
|Current assets:                                  |  |                   |           |   |                   |   |           |  
|Cash and cash equivalents                        |  | $                 | 72,425    |   |                   | $ | 60,794    |  
|Receivables, net                                 |  |                   | 15,528    |   |                   |   | 13,230    |  
|Inventories                                      |  |                   | 15,926    |   |                   |   | 15,181    |  
|Other current assets                             |  |                   | 12,193    |   |                   |   | 9,185     |  
|                                                 |  |                   |           |   |                   |   |           |  
|Total current assets                             |  |                   | 116,072   |   |                   |   | 98,390    |  
|Non-current assets:                              |  |                   |           |   |                   |   |           |  
|Property and equipment, net                      |  |                   | 1,322,691 |   |                   |   | 1,328,132 |  
|Goodwill                                         |  |                   | 39,459    |   |                   |   |          |  
|Other intangible assets, net                     |  |                   | 340,567   |   |                   |   | 127,550   |  
|Receivables from affiliates, net                 |  |                   | 9,484     |   |                   |   | 2,760     |  
|Other assets, net                                |  |                   | 28,595    |   |                   |   | 22,873    |  
|                                                 |  |                   |           |   |                   |   |           |  
|Total assets                                     |  | $                 | 1,856,868 |   |                   | $ | 1,579,705 |  
|                                                 |  |                   |           |   |                   |   |           |  
|LIABILITIES AND CAPITAL                          |  |                   |           |   |                   |   |           |  
|Current liabilities:                             |  |                   |           |   |                   |   |           |  
|Current portion of long-term debt                |  | $                 | 17,532    |   |                   | $ | 23,272    |  
|Current portion of relinquishment liability      |  |                   | 90,410    |   |                   |   | 88,530    |  
|Trade payables                                   |  |                   | 22,840    |   |                   |   | 25,710    |  
|Accrued interest payable                         |  |                   | 23,067    |   |                   |   | 18,504    |  
|Other current liabilities                        |  |                   | 116,569   |   |                   |   | 96,142    |  
|                                                 |  |                   |           |   |                   |   |           |  
|Total current liabilities                        |  |                   | 270,418   |   |                   |   | 252,158   |  
|Non-current liabilities:                         |  |                   |           |   |                   |   |           |  
|Long-term debt, net of current portion           |  |                   | 1,226,348 |   |                   |   | 1,003,051 |  
|Relinquishment liability, net of current portion |  |                   | 462,078   |   |                   |   | 383,493   |  
|Other long-term liabilities                      |  |                   | 336       |   |                   |   | 197       |  
|                                                 |  |                   |           |   |                   |   |           |  
|Total liabilities                                |  |                   | 1,959,180 |   |                   |   | 1,638,899 |  
|Minority interest                                |  |                   | 2,560     |   |                   |   | 1,845     |  
|Commitments and contingencies (Notes 12 and 15)  |  |                   |           |   |                   |   |           |  
|Capital:                                         |  |                   |           |   |                   |   |           |  
|Retained deficit                                 |  |                   | (104,872  | ) |                   |   | (61,039   | )
|                                                 |  |                   |           |   |                   |   |           |  
|Total capital                                    |  |                   | (104,872  | ) |                   |   | (61,039   | )
|                                                 |  |                   |           |   |                   |   |           |  
|Total liabilities and capital                    |  | $                 | 1,856,868 |   |                   | $ | 1,579,705 |  
|                                                 |  |                   |           |   |                   |   |           |  



The accompanying notes
are an integral part of these consolidated financial statements.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONSOLIDATED STATEMENTS OF INCOME

(in thousands)



|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|---------------------------------------------- |  | ----------------------------------- | --------- | - | ----------------------------------- | - | --------- | ----------------------------------- |  | - | --------- | -
|                                               |  | For the Year EndedSeptember 30,2005 |           |   | For the Year EndedSeptember 30,2004 |   |           | For the Year EndedSeptember 30,2003 | 
|Revenues:                                      |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Gaming                                         |  | $                                   | 1,202,196 |   |                                     | $ | 1,125,145 |                                     |  | $ | 1,061,376 |  
|Food and beverage                              |  |                                     | 92,180    |   |                                     |   | 89,850    |                                     |  |   | 87,040    |  
|Hotel                                          |  |                                     | 50,058    |   |                                     |   | 52,035    |                                     |  |   | 52,370    |  
|Retail, entertainment and other                |  |                                     | 112,319   |   |                                     |   | 100,903   |                                     |  |   | 79,654    |  
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Gross revenues                                 |  |                                     | 1,456,753 |   |                                     |   | 1,367,933 |                                     |  |   | 1,280,440 |  
|                                               |  |                                     |          
|LessPromotional allowances                    |  |                                     | (125,148  | ) |                                     |   | (111,007  | )                                   |  |   | (102,952  | )
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Net revenues                                   |  |                                     | 1,331,605 |   |                                     |   | 1,256,926 |                                     |  |   | 1,177,488 |  
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Operating costs and expenses:                  |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Gaming                                         |  |                                     | 684,640   |   |                                     |   | 631,498   |                                     |  |   | 603,555   |  
|Food and beverage                              |  |                                     | 45,216    |   |                                     |   | 43,264    |                                     |  |   | 39,206    |  
|Hotel                                          |  |                                     | 16,114    |   |                                     |   | 15,440    |                                     |  |   | 14,137    |  
|Retail, entertainment and other                |  |                                     | 35,442    |   |                                     |   | 41,870    |                                     |  |   | 38,482    |  
|Advertising, general and administrative        |  |                                     | 186,805   |   |                                     |   | 175,907   |                                     |  |   | 168,946   |  
|Corporate expenses                             |  |                                     | 11,465    |   |                                     |   | 4,838     |                                     |  |   | 2,416     |  
|Pre-opening costs and expenses                 |  |                                     | 1,257     |   |                                     |   |          |                                     |  |   |          |  
|Depreciation and amortization                  |  |                                     | 87,678    |   |                                     |   | 93,595    |                                     |  |   | 92,123    |  
|Relinquishment liability reassessment          |  |                                     | 123,624   |   |                                     |   | 3,897     |                                     |  |   | (22,710   | )
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Total operating costs and expenses             |  |                                     | 1,192,241 |   |                                     |   | 1,010,309 |                                     |  |   | 936,155   |  
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Income from operations                         |  |                                     | 139,364   |   |                                     |   | 246,617   |                                     |  |   | 241,333   |  
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Other income (expense):                        |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Accretion of relinquishment liability discount |  |                                     | (27,466   | ) |                                     |   | (29,939   | )                                   |  |   | (33,592   | )
|Interest income                                |  |                                     | 673       |   |                                     |   | 232       |                                     |  |   | 269       |  
|Interest expense, net of capitalized interest  |  |                                     | (88,011   | ) |                                     |   | (78,970   | )                                   |  |   | (83,492   | )
|Loss on early extinguishment of debt           |  |                                     | (280      | ) |                                     |   | (34,138   | )                                   |  |   | (27,396   | )
|Write-off of debt issuance costs               |  |                                     |          |   |                                     |   |          |                                     |  |   | (403      | )
|Other income (expense), net                    |  |                                     | (1,127    | ) |                                     |   | (933      | )                                   |  |   | (1,034    | )
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Total other expense                            |  |                                     | (116,211  | ) |                                     |   | (143,748  | )                                   |  |   | (145,648  | )
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Income before minority interest                |  |                                     | 23,153    |   |                                     |   | 102,869   |                                     |  |   | 95,685    |  
|Minority interest                              |  |                                     | 514       |   |                                     |   | 18        |                                     |  |   |          |  
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  
|Net income                                     |  | $                                   | 23,667    |   |                                     | $ | 102,887   |                                     |  | $ | 95,685    |  
|                                               |  |                                     |           |   |                                     |   |           |                                     |  |   |           |  



The accompanying notes
are an integral part of these consolidated financial statements.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(in thousands)



|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|------------------------------------------------------------- |  | --------------- | -------- | - | --------------------------------- | - | ------ | ------------- |  | - | -------- | -
|                                                              |  | RetainedDeficit |          |   | AccumulatedOtherComprehensiveLoss |   |        | Total Capital | 
|Balances, September 30, 2002                                  |  | $               | (134,277 | ) |                                   | $ | (1,090 | )             |  | $ | (135,367 | )
|Net income                                                    |  |                 | 95,685   |   |                                   |   |        |               |  |   | 95,685   |  
|Reclassification of derivative instrument losses to earnings  |  |                 |          |   |                                   |   | 787    |               |  |   | 787      |  
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Total comprehensive income                                    |  |                 |          |   |                                   |   |        |               |  |   | 96,472   |  
|Distributions to Tribe                                        |  |                 | (60,000  | ) |                                   |   |        |               |  |   | (60,000  | )
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Balances, September 30, 2003                                  |  | $               | (98,592  | ) |                                   | $ | (303   | )             |  | $ | (98,895  | )
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Net income                                                    |  |                 | 102,887  |   |                                   |   |        |               |  |   | 102,887  |  
|Reclassification of derivative instrument losses to earnings  |  |                 |          |   |                                   |   | 303    |               |  |   | 303      |  
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Total comprehensive income                                    |  |                 |          |   |                                   |   |        |               |  |   | 103,190  |  
|Distributions to Tribe                                        |  |                 | (65,017  | ) |                                   |   |        |               |  |   | (65,017  | )
|Capital adjustment from majority-owned subsidiary transaction |  |                 | (317     | ) |                                   |   |        |               |  |   | (317     | )
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Balances, September 30, 2004                                  |  | $               | (61,039  | ) |                                   | $ |       |               |  | $ | (61,039  | )
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Net income                                                    |  |                 | 23,667   |   |                                   |   |        |               |  |   | 23,667   |  
|Distributions to Tribe                                        |  |                 | (67,500  | ) |                                   |   |        |               |  |   | (67,500  | )
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  
|Balances, September 30, 2005                                  |  | $               | (104,872 | ) |                                   | $ |       |               |  | $ | (104,872 | )
|                                                              |  |                 |          |   |                                   |   |        |               |  |   |          |  





The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ------------------ | - | -------- | ------------------ |  | - | -------- | -
|                                                                                                                              |  | For the Fiscal Years Ended |         
|                                                                                                                              |  | September 30, 2005         |          |   | September 30, 2004 |   |          | September 30, 2003 | 
|Cash flows provided by (used in) operating activities:                                                                        |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Net income                                                                                                                    |  | $                          | 23,667   |   |                    | $ | 102,887  |                    |  | $ | 95,685   |  
|Adjustments to reconcile net income to net cash flows provided by operating activities:                                       |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Depreciation and amortization                                                                                                 |  |                            | 87,678   |   |                    |   | 93,595   |                    |  |   | 92,123   |  
|Accretion of discount to the relinquishment liability                                                                         |  |                            | 27,466   |   |                    |   | 29,939   |                    |  |   | 33,592   |  
|Relinquishment liability reassessment                                                                                         |  |                            | 123,624  |   |                    |   | 3,897    |                    |  |   | (22,710  | )
|Cash paid for accretion of discount to the relinquishment liability                                                           |  |                            | (28,085  | ) |                    |   | (30,852  | )                  |  |   | (34,277  | )
|Loss on early extinguishment of debt                                                                                          |  |                            | 280      |   |                    |   | 34,138   |                    |  |   | 27,396   |  
|Payment of tender offer costs                                                                                                 |  |                            |         |   |                    |   | (32,192  | )                  |  |   | (23,044  | )
|Change in fair value of derivative instruments                                                                                |  |                            |         |   |                    |   |         |                    |  |   | (2,994   | )
|Net loss on disposition of assets                                                                                             |  |                            | 1,131    |   |                    |   | 933      |                    |  |   | 1,040    |  
|Provision for losses on receivables                                                                                           |  |                            | 2,286    |   |                    |   | 710      |                    |  |   | 1,223    |  
|Amortization of debt issuance costs                                                                                           |  |                            | 3,106    |   |                    |   | 5,921    |                    |  |   | 6,687    |  
|Write-off of debt issuance costs                                                                                              |  |                            |         |   |                    |   |         |                    |  |   | 403      |  
|Amortization of net deferred (gain) loss on settlement of derivative instruments                                              |  |                            | 711      |   |                    |   | (117     | )                  |  |   | (741     | )
|Reclassification of derivative instrument losses to earnings                                                                  |  |                            |         |   |                    |   | 303      |                    |  |   | 787      |  
|Minority interest                                                                                                             |  |                            | (514     | ) |                    |   | (18      | )                  |  |   |         |  
|Changes in operating assets and liabilities, net of acquisition of Pocono Downs:                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|(Increase) decrease in receivables                                                                                            |  |                            | (2,948   | ) |                    |   | 1,551    |                    |  |   | (2,634   | )
|(Increase) decrease in inventories                                                                                            |  |                            | (680     | ) |                    |   | (1,359   | )                  |  |   | 492      |  
|Increase in other assets                                                                                                      |  |                            | (3,326   | ) |                    |   | (1,071   | )                  |  |   | (4,157   | )
|Increase (decrease) in trade payables                                                                                         |  |                            | (4,003   | ) |                    |   | 40       |                    |  |   | 12,260   |  
|Increase in other current liabilities                                                                                         |  |                            | 17,911   |   |                    |   | 6,471    |                    |  |   | 14,353   |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Net cash flows provided by operating activities                                                                               |  |                            | 248,304  |   |                    |   | 214,776  |                    |  |   | 195,484  |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Cash flows provided by (used in) investing activities:                                                                        |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Purchases of property and equipment, net of change in construction payables of $(1,772), $(1,232) and $(27,463), respectively |  |                            | (49,219  | ) |                    |   | (31,912  | )                  |  |   | (57,740  | )
|Investment in WNBA franchise (See Note 14)                                                                                    |  |                            |         |   |                    |   |         |                    |  |   | (2,259   | )
|Acquisition of Pocono Downs, net of cash acquired of $875                                                                     |  |                            | (280,114 | ) |                    |   |         |                    |  |   |         |  
|Proceeds from asset sales                                                                                                     |  |                            | 186      |   |                    |   | 108      |                    |  |   | 1,094    |  
|Issuance of loans and advances to affiliates                                                                                  |  |                            | (6,262   | ) |                    |   |         |                    |  |   |         |  
|Issuance of third-party loans                                                                                                 |  |                            | (1,600   | ) |                    |   | (654     | )                  |  |   | (500     | )
|Payments received on third-party loans                                                                                        |  |                            | 463      |   |                    |   | 221      |                    |  |   | 117      |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Net cash flows used in investing activities                                                                                   |  |                            | (336,546 | ) |                    |   | (32,237  | )                  |  |   | (59,288  | )
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Cash flows provided by (used in) financing activities:                                                                        |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Prior bank credit facility borrowings                                                                                         |  |                            |         |   |                    |   |         |                    |  |   | 35,000   |  
|Prior bank credit facility repayments                                                                                         |  |                            |         |   |                    |   |         |                    |  |   | (286,000 | )
|Bank Credit Facility borrowingsrevolving loan                                                                                |  |                            | 750,000  |   |                    |   | 290,000  |                    |  |   | 206,000  |  
|Bank Credit Facility repaymentsrevolving loan                                                                                |  |                            | (838,000 | ) |                    |   | (268,000 | )                  |  |   | (140,000 | )
|Bank Credit Facility borrowingsterm loan                                                                                     |  |                            | 58,333   |   |                    |   |         |                    |  |   | 100,000  |  
|Bank Credit Facility repaymentsterm loan                                                                                     |  |                            | (150,000 | ) |                    |   | (8,334   | )                  |  |   |         |  
|Line of credit borrowings                                                                                                     |  |                            | 474,900  |   |                    |   | 208,923  |                    |  |   | 67,000   |  
|Line of credit repayments                                                                                                     |  |                            | (479,985 | ) |                    |   | (203,837 | )                  |  |   | (67,000  | )
|Proceeds from the issuance of long-term debt                                                                                  |  |                            | 400,000  |   |                    |   | 225,000  |                    |  |   | 330,000  |  
|Payments on long-term debt                                                                                                    |  |                            | (2,000   | ) |                    |   | (325,925 | )                  |  |   | (294,759 | )
|Minority interest contributions (distributions), net                                                                          |  |                            | 729      |   |                    |   | (2,517   | )                  |  |   |         |  
|Principal portion of relinquishment liability payments                                                                        |  |                            | (42,540  | ) |                    |   | (36,525  | )                  |  |   | (28,633  | )
|Distributions to Tribe                                                                                                        |  |                            | (67,500  | ) |                    |   | (65,017  | )                  |  |   | (60,000  | )
|Capitalized debt issuance costs                                                                                               |  |                            | (7,801   | ) |                    |   | (3,709   | )                  |  |   | (10,570  | )
|Net proceeds (payments) from the settlement of derivative instruments                                                         |  |                            | 3,598    |   |                    |   | (5,146   | )                  |  |   | 1,072    |  
|Increase (decrease) in other long-term liabilities                                                                            |  |                            | 139      |   |                    |   | 78       |                    |  |   | (59      | )
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Net cash flows provided by (used in) financing activities                                                                     |  |                            | 99,873   |   |                    |   | (195,009 | )                  |  |   | (147,949 | )
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                                          |  |                            | 11,631   |   |                    |   | (12,470  | )                  |  |   | (11,753  | )
|Cash and cash equivalents at beginning of year                                                                                |  |                            | 60,794   |   |                    |   | 73,264   |                    |  |   | 85,017   |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Cash and cash equivalents at end of year                                                                                      |  | $                          | 72,425   |   |                    | $ | 60,794   |                    |  | $ | 73,264   |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Supplemental disclosures:                                                                                                     |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Cash paid during the year for interest                                                                                        |  | $                          | 80,882   |   |                    | $ | 75,282   |                    |  | $ | 84,716   |  
|                                                                                                                              |  |                            |         
|Acquisition: Pocono Downs                                                                                                     |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Fair value of assets acquired, including cash of $875                                                                         |  | $                          | 285,915  |   |                    | $ |         |                    |  | $ |         |  
|Cash paid                                                                                                                     |  |                            | 280,989  |   |                    |   |         |                    |  |   |         |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  
|Fair value of liabilities assumed                                                                                             |  | $                          | 4,926    |   |                    | $ |         |                    |  | $ |         |  
|                                                                                                                              |  |                            |          |   |                    |   |          |                    |  |   |          |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1ORGANIZATION AND BASIS OF PRESENTATION:



The
Mohegan Tribe of Indians of Connecticut (the Tribe) established the Mohegan Tribal Gaming Authority (the Authority) in July 1995 with the exclusive power to conduct and regulate gaming activities for the Tribe on Tribal lands
and the non-exclusive authority to conduct such activities elsewhere. The Tribe is a federally recognized Indian tribe with an approximately 405-acre reservation located in southeastern Connecticut. Under the Indian Gaming Regulatory Act of 1988,
federally recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal land, subject to, among other things, the negotiation of a compact with the affected state. The Tribe and the State of Connecticut have entered
into such a compact (the Mohegan Compact), which has been approved by the United States Secretary of the Interior. The Authority is primarily engaged in the ownership, operation and development of gaming facilities. On October 12,
1996, the Authority opened a casino known as Mohegan Sun. On January 25, 2005, the Authority purchased Pocono Downs, a harness racing facility now known as Mohegan Sun at Pocono Downs, and five off-track wagering (OTW) facilities
located in Pennsylvania. The Authority is governed by a nine-member Management Board, consisting of the same nine members as those of the Mohegan Tribal Council (the governing body of the Tribe). Any change in the composition of the Tribal Council
results in a corresponding change in the Authoritys Management Board.



The Authority has the following wholly owned subsidiaries: Mohegan Basketball Club LLC (MBC), Mohegan Ventures-Northwest, LLC (Mohegan Ventures-NW), and Mohegan Commercial Ventures PA, LLC
(MCV-PA). MBC owns and operates a professional basketball team in the Womens National Basketball Association (WNBA), the Connecticut Sun, and owns approximately 3.6% of the membership interests in WNBA, LLC. Mohegan
Ventures-NW holds a 54.15% membership interest in Salishan-Mohegan LLC (Salishan-Mohegan), formed with an unrelated third party to participate in the development and management of a casino to be owned by the Cowlitz Indian Tribe and
located in Clark County, Washington (the Cowlitz Project). MCV-PA holds a 0.01% general partnership interest in Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P., and Northeast Concessions, L.P. (collectively, the Pocono
Downs entities), while the Authority holds the remaining 99.99% limited partnership interest. The Pocono Downs entities own and operate Mohegan Sun at Pocono Downs and the OTW facilities in Pennsylvania. The Authority views Mohegan Sun and the
properties owned by the Pocono Downs entities as separate operating segments.



NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:



Principles of Consolidation



The consolidated financial statements include the accounts of the Authority and its wholly owned subsidiaries. In accordance with the Financial Accounting Standard Board (FASB) Interpretation No. 46, Consolidation of
Variable Interest Entitiesan interpretation of ARB No. 51 (FIN 46), the accounts of Salishan-Mohegan are consolidated into the accounts of Mohegan Ventures-NW as it is deemed to be the primary beneficiary. In
consolidation, all intercompany balances and transactions have been eliminated.



Cash and Cash Equivalents



The Authority classifies as cash and cash equivalents deposits that can be redeemed on demand and investments with a maturity of three months or less when purchased. Cash equivalents are carried at cost, which approximates market value.



Receivables



Accounts receivable consists primarily of casino receivables, which
represent credit extended to approved casino customers, and hotel and other non-gaming receivables. The Authority maintains an allowance for



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



doubtful accounts which is based on managements estimate of the amount expected to be uncollectible considering historical experience and the
information management obtains regarding the creditworthiness of the customer. Future business or economic trends could affect the collectibility of these receivables.



Receivables from affiliates consist primarily of reimbursable costs and expenses incurred by Salishan-Mohegan for the
development of a casino in La Center, Washington to be owned by the Cowlitz Indian Tribe (see Note 15). The receivables are payable upon (1) the receipt of necessary financing for the development of the proposed casino and (2) the related
property being taken into trust by the United States Department of the Interior. Due to the inherent uncertainty in the development of this casino project, the Authority maintains a reserve for doubtful collection of these receivables, which is
based on managements estimate of the probability that the receivables will be collected. Future complications in the receipt of financing, the relevant land being taken into trust or other matters affecting the development of the casino could
affect the collectibility of the receivables.



Inventories



Inventories are stated at the lower of cost or market and
consist principally of food and beverage, retail, hotel and operating supplies. Cost is determined using an average cost method. The Authority reduces the carrying value of slow moving inventory to net realizable value, which is based on
managements estimate of the amount of inventory that may not be used in future casino operations considering the length of time items are held in inventory and information management obtains regarding the plans to utilize this inventory.
Future business trends could affect the timely use of inventories.



Property and Equipment



Property and equipment
are stated at cost. Depreciation is provided over the estimated useful lives of the assets (other than land) using the straight-line basis. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the
improvements. Useful life estimates of asset categories are as follows:



|                                |  |          
|------------------------------- |  | ---------
|Buildings and land improvements |  | 40 years 
|                                | 
|Furniture and equipment         |  | 3-7 years



The costs of
significant improvements are capitalized. Costs of normal repairs and maintenance are charged to expense as incurred. Gains or losses on disposition of property and equipment are included in the determination of net income.



In accordance with Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144), the carrying value of the Authoritys assets is reviewed when events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment loss has occurred based on current and future levels of income and expected future cash flows as well as other
factors, then an impairment loss is recognized in the Consolidated Statement of Income. The Authority believes no such impairment exists at September 30, 2005.



Capitalized Interest



The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. When no debt is
incurred specifically for a project, interest is capitalized on amounts



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



expended on the project using the weighted-average cost of the Authoritys outstanding borrowings. Capitalization of interest ceases when the project is
substantially complete or development activity is suspended for more than a brief period.



Goodwill



In accordance
with SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), the goodwill associated with the acquisition of the Pocono Downs entities (see Note 3) is not subject to amortization but will be tested at least
annually for impairment by comparing the fair value of the recorded assets to their carrying amount. If the carrying amount of the goodwill exceeds its fair value, an impairment loss will be recognized immediately. The Authority assessed the
goodwill for impairment and determined there was no impairment of goodwill at September 30, 2005.



Other Intangible Assets



In connection with the Relinquishment Agreement (see Note 13), Trading Cove Associates (TCA) granted the Authority an exclusive, irrevocable,
perpetual, world-wide and royalty-free license with respect to trademarks and other similar rights, including the Mohegan Sun name used at or developed for Mohegan Sun. The trademarks were appraised by an independent valuation firm to
have a value of $130.0 million. The independent valuation firm used the Income ApproachRelief from Royalty Method. The balance of the trademark is as follows (in thousands):



|                         |  |                     |         |   |      |   |         |  
|------------------------ |  | ------------------- | ------- | - | ---- | - | ------- | -
|                         |  | As of September 30, |        
|                         |  | 2005                |         |   | 2004 |  
|Trademark                |  | $                   | 130,000 |   |      | $ | 130,000 |  
|Accumulated amortization |  |                     | (10,308 | ) |      |   | (10,308 | )
|                         |  |                     |         |   |      |   |         |  
|Trademark, net           |  | $                   | 119,692 |   |      | $ | 119,692 |  
|                         |  |                     |         |   |      |   |         |  



In accordance with
SFAS 142, the Mohegan Sun trademark is no longer subject to amortization over its estimated useful life as it has been deemed to have an indefinite useful life. However, SFAS 142 requires the trademark to be evaluated at least annually for
impairment by applying a fair-value based test and, if impairment occurs, the amount of the impaired trademark must be written off immediately. The Authority applied the fair value test as of September 30, 2005 and determined that no impairment
existed.



In January 2005, the Authority and its wholly owned
subsidiary, MCV-PA, acquired all the partnership interests in the Pocono Downs entities. As part of the acquisition, the Authority gained the right to obtain a Category One Slot Machine License, which was determined by management, with the
assistance from a third party valuation firm, to be an intangible asset with an indefinite useful life and a fair value of $214.0 million (see Note 3). The third party valuation firm used the Income ApproachExcess Earnings Method. This
intangible asset will be assessed at least annually for impairment pursuant to SFAS 142. The Authority applied the fair value test as of September 30, 2005 and determined that no impairment existed.



In January 2003, MBC acquired a membership in the WNBA and the right to own
and operate a professional basketball team in the WNBA. As part of the acquisition, management, with the assistance of an independent valuation firm, estimated a fair value for the player roster value, which is recorded as an intangible asset on the
accompanying consolidated balance sheet, and the remainder of the acquisition cost has been recorded as franchise value, which is also included on the accompanying consolidated balance sheet. These assets are being amortized on a straight-line basis
over their estimated useful lives. Refer to Note 14 for further



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



discussion regarding the Authoritys accounting for these assets. The Authority recorded write-offs of $700,000 and $1.0 million of the player roster
value intangible asset in fiscal years 2005 and 2004, respectively, due to the termination of certain Connecticut Sun player contracts included on the original player roster. The loss is included in depreciation and amortization expense in the
accompanying consolidated statements of income.



Deferred
Financing Costs



Debt issuance costs incurred in
connection with the issuance of long-term debt are capitalized and amortized to interest expense based on the related debt agreements using the effective interest method or the straight-line method, which approximates the effective interest method.
The unamortized amounts are included in other assets in the accompanying consolidated balance sheets.



Unredeemed Players Club Points



The Authority maintains an accrual for unredeemed Players Club points. The accrual is based on the estimated cost of the points expected to be
redeemed as of the respective balance sheet date. Management determines the adequacy of this accrual by periodically evaluating the historical redemption experience and projected trends related to this accrual. Actual results could differ from those
estimates.



Self-insurance Accruals



The Authority is self-insured up to certain limits for costs associated with
workers compensation and employee medical coverage. Liabilities for insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates of incurred but not reported claims. These accruals
are included in other current liabilities in the accompanying consolidated balance sheet. In estimating these costs, the Authority considers historical loss experience and makes judgments about the expected levels of costs per claim. The Authority
also uses information provided by independent consultants to assist in the determination of estimated accruals. These claims are accounted for based on estimates of the undiscounted claims, including those claims incurred but not reported. The
Authority believes the use of these estimates to account for these liabilities provides a consistent and effective way to measure these accruals; however, changes in health care costs, accident frequency and severity and other factors can materially
affect the estimate for these liabilities. The Authority continually monitors the potential changes in future estimates, evaluates insurance accruals and makes adjustments when necessary.



Relinquishment Liability



The Authority, in accordance with SFAS No. 5, Accounting for Contingencies (SFAS 5), has recorded a relinquishment liability
of the estimated present value of its obligations under the Relinquishment Agreement (see Note 13). The Authority reassesses projected revenues (and consequently the relinquishment liability) (i) annually in conjunction with the
Authoritys budgeting process or (ii) when necessary to account for material increases or decreases in projected revenues over the relinquishment period. If the reassessment causes an overall increase to the projected revenues over the
relinquishment period, the relinquishment liability will be increased by five percent of such increases in revenues, discounted at the Authoritys risk-free rate of investment (an incremental layer). If the reassessment causes an overall
decrease to the projected revenues over the relinquishment period, the relinquishment liability will be decreased by five percent of such decrease in revenues, discounted based upon a weighted-average discount rate (a decremental layer). The
weighted-average discount rate is defined as the average discount rate used to discount all previous incremental layers weighted by the amount of each such incremental layer. Further, the Authority records accretion to the relinquishment liability



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



to reflect the impact of the time value of money. Since there is a high level of estimates and judgments used with respect to calculating the relinquishment
liability, future events that affect such estimates and judgments may cause the actual liability to differ significantly from the estimate.



Fair Value of Financial Instruments



The fair value amounts presented below are reported to satisfy the disclosure requirements of SFAS No. 107, Disclosures about Fair Values of
Financial Instruments (SFAS 107) and are not necessarily indicative of the amounts that the Authority could realize in a current market exchange.



The carrying amount of cash and cash equivalents, promissory notes, mortgages and bank financing facilities approximate fair
value. The fair value of the Authoritys other financing facilities is as follows (in millions):



|                                     |  |                     |       |      |   |      
|------------------------------------ |  | ------------------- | ----- | ---- | - | -----
|                                     |  | As of September 30,
|                                     |  | 2005                |       | 2004
|1999 81/8% Senior Notes              |  | $                   | 14.1  |      | $ | 15.0 
|2005 61/8% Senior Notes              |  | $                   | 248.8 |      | $ |     
|2001 83/8% Senior Subordinated Notes |  | $                   | 17.4  |      | $ | 18.6 
|2002 8% Senior Subordinated Notes    |  | $                   | 263.8 |      | $ | 276.3
|2003 63/8% Senior Subordinated Notes |  | $                   | 330.0 |      | $ | 342.4
|2004 71/8% Senior Subordinated Notes |  | $                   | 232.9 |      | $ | 235.7
|2005 67/8% Senior Subordinated Notes |  | $                   | 153.0 |      | $ |     



The estimated fair
value of the Authoritys other financing facilities was based on quoted market prices on or about September 30, 2005.



Revenue Recognition



The Authority recognizes gaming revenue as gaming wins less gaming losses. Revenues from food and beverage, hotel, retail, entertainment and other
services are recognized at the time the service is performed. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases. Percentage rents are recognized in the period in which the tenants exceed their
respective percentage rent thresholds.



Promotional
Allowances



The Authority operates the Mohegan Sun
complimentary program in which food and beverage, hotel, retail, entertainment and other services are provided to guests based on points that are earned through the Mohegan Sun Players Club. The retail value of these complimentary items is
included in gross revenues and then deducted as promotional allowances, except for the redemption at third party tenant restaurants and the Shops at Mohegan Sun, which are charged directly to gaming expenses.



The Authority also has ongoing promotional programs which offer coupons to
its guests for the purchase of food, beverages, hotel and retail amenities offered at Mohegan Sun. The retail value of items or services purchased with coupons at Mohegan Sun operated facilities is included in gross revenues and the respective
coupon value is deducted as promotional allowances to arrive at net revenues.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The retail value of providing such promotional allowances was included in revenues as follows (in
thousands):



|                                |  |                                         |         |      |   |         |  |   |        
|------------------------------- |  | --------------------------------------- | ------- | ---- | - | ------- |  | - | -------
|                                |  | For the Fiscal Years EndedSeptember 30,
|                                |  | 2005                                    |         | 2004 |   | 2003   
|Food and beverage               |  | $                                       | 44,757  |      | $ | 43,393  |  | $ | 44,713 
|Hotel                           |  |                                         | 16,292  |      |   | 14,166  |  |   | 16,514 
|Retail, entertainment and other |  |                                         | 64,099  |      |   | 53,448  |  |   | 41,725 
|                                |  |                                         |         |      |   |         |  |   |        
|Total                           |  | $                                       | 125,148 |      | $ | 111,007 |  | $ | 102,952
|                                |  |                                         |         |      |   |         |  |   |        



The estimated cost of
providing such promotional allowances was included in operating costs and expenses, primarily gaming, as follows (in thousands):



|                                |  |                                         |         |      |   |        |  |   |       
|------------------------------- |  | --------------------------------------- | ------- | ---- | - | ------ |  | - | ------
|                                |  | For the Fiscal Years EndedSeptember 30,
|                                |  | 2005                                    |         | 2004 |   | 2003  
|Food and beverage               |  | $                                       | 44,877  |      | $ | 42,837 |  | $ | 43,839
|Hotel                           |  |                                         | 7,731   |      |   | 5,916  |  |   | 6,257 
|Retail, entertainment and other |  |                                         | 49,372  |      |   | 42,496 |  |   | 32,459
|                                |  |                                         |         |      |   |        |  |   |       
|Total                           |  | $                                       | 101,980 |      | $ | 91,249 |  | $ | 82,555
|                                |  |                                         |         |      |   |        |  |   |       



The Authority records
free or discounted food and beverage and other services in accordance with Emerging Issues Task Force Issue No. 01-9 Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendors Products. The
Authority offers cash inducements and discounts on patron losses in certain circumstances that result in a reduction to gaming revenues. The offsets to gaming revenues were $4.4 million, $1.0 million, and $930,000 relating to discounts provided on
patron losses for fiscal years ending September 30, 2005, 2004 and 2003, respectively, and $266,000, $281,000 and $306,000 relating to Players Club points redeemed for cash for the fiscal years ended September 30, 2005, 2004 and
2003, respectively.



Gaming Expenses



Gaming expenses primarily include the slot win contribution, which the
Authority is required to pay to the State of Connecticut (see Note 12), expenses associated with operation of slot machines, table games, keno, live harness racing at Pocono Downs and racebook, certain marketing expenses, and promotional expenses
for the Mohegan Sun Players Club points and coupons redeemed at the hotel, restaurants and retail outlets owned by Mohegan Sun, as well as third party tenant restaurants and the Shops at Mohegan Sun. Gaming expenses for the fiscal year ended
September 30, 2003 also included expenses associated with poker operations, which closed in September 2003.



Advertising



The Authority expenses the production costs of advertising the first time the advertising takes place. Prepaid rental fees associated with billboard
advertising are capitalized and amortized over the term of the related rental agreement. Total advertising costs for the fiscal years ended September 30, 2005, 2004 and 2003 were $39.8 million, $37.3 million and $37.7 million, respectively.
Prepaid advertising on the Authoritys balance sheet at September 30, 2005 and 2004 was $43,000 and $112,000, respectively.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Corporate Expenses



Corporate expenses represent unallocated payroll costs, professional fees and various other expenses not directly related to
the Authoritys operations at Mohegan Sun or Pocono Downs. In addition, corporate expenses include the costs associated with the Authoritys evaluation and pursuit of new business opportunities, which are expensed as incurred until
development of a specific project has become probable.



Pre-Opening Costs and Expenses



For the fiscal
year ended September 30, 2005, pre-opening costs and expenses consisted primarily of direct incremental personnel, consulting and other costs associated with the development of a permanent and temporary slot machine facility at Mohegan Sun at
Pocono Downs. Construction of the temporary facility began in September 2005. In accordance with the American Institute of Certified Public Accountants Statement of Position 98-5, Reporting on the Costs of Start-Up Activities,
pre-opening costs and expenses were expensed as incurred.



Derivative Instruments



The Authority uses
derivative instruments, including interest rate caps, collars and swaps in its strategy to manage interest rate risk associated with the variable interest rate on its bank credit facility and the fixed interest rates on the Authoritys senior
notes and senior subordinated notes. The Authoritys objective in managing interest rate risk is to achieve the lowest possible cost of debt for the Authority, and to manage volatility in the effective cost of debt. The Authority continually
monitors risk exposures from derivative instruments held and makes the appropriate adjustments to manage these risks within managements established limits. The Authority accounts for its derivative instruments in accordance with SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), which requires that all derivative instruments be recorded on the consolidated balance sheet at fair value.



In order for derivative instruments to qualify for hedge accounting in
accordance with SFAS 133, the underlying hedged item must expose the Authority to risks associated with market fluctuations and the financial instrument used must be designated as a hedge and must reduce the Authoritys exposure to market
fluctuation throughout the hedge period. If these criteria are not met, a change in the market value of the financial instrument is recognized as a gain or loss and is recorded as a component of interest expense in the period of change. The
Authority excludes the change in the time value of money when assessing the effectiveness of the hedging relationship. All derivatives are evaluated quarterly.



Derivative instruments entered into by the Authority which qualify for hedge accounting are designated as either a fair value hedge or a cash flow
hedge:



| |  |  | A fair value hedge is a hedge of the fair value of a recognized asset or liability. For fair value hedge transactions, changes in fair value of the derivative instrument are
generally offset in the consolidated income statement by changes in the fair value of the item being hedged. Gains and losses on these hedges are capitalized as part of the original debt instrument and, upon termination, are amortized and recorded
as a component of interest expense over the remaining term of the item being hedged.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A cash flow hedge is a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability. For cash flow hedge
transactions, changes in the fair value of the derivative instrument are reported in other comprehensive income. The gains and losses on cash flow hedge transactions reported in other comprehensive income are reclassified to earnings in the periods
in which earnings are affected by the variability of the cash flows of the hedged item.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Net interest paid or received pursuant to derivative instruments is included as a component of
interest expense in the period. Pending interest settlements earned on derivative instruments held at the end of a period are also included as a component of interest expense and in the accompanying consolidated balance sheet. In addition, current
and long-term portions of the fair value of derivative instruments held are separately recorded in the accompanying consolidated balance sheet. The current portion is based on estimated interest settlements for the subsequent one-year period for
derivative instruments held and the long-term portion is based on estimated interest settlements through the remaining maturity of the instruments. These estimates are based on forward-looking LIBOR curves at the consolidated balance sheet date.



Income Taxes



The Tribe is a sovereign Indian nation with independent legal jurisdiction
over its people and its lands. Like other sovereign governments, the Tribe and its entities, including the Authority, are not subject to federal, state or local income taxes.



Managements Use of Estimates



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and judgements that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The most significant
estimates included in the accompanying consolidated financial statements relate to the relinquishment liability, the liability associated with unredeemed Players Club points and employee medical coverage and workers compensation
self-insurance reserves. Actual results could differ from those estimates.



Reclassifications



Certain amounts in the fiscal year 2004 and 2003 consolidated financial statements have been reclassified to conform to the fiscal year 2005 presentation.



New Accounting Pronouncements



In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assetsan amendment of APB Opinion
No. 29 (FAS 153). FAS 153 amends Opinion 29 to eliminate the exception for on monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. FAS 153 is effective for fiscal years beginning after June 15, 2005. The Authority does not believe the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.



In May 2005, the FASB issued SFAS 154, Accounting
Changes and Error Correctionsa replacement of APB Opinion No. 20 and FASB Statement No. 3 (FAS 154). FAS 154 requires retrospective application to prior periods financial statements of changes in accounting
principle, subject to certain practicability provisions, but does not change the guidance in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. FAS 154 is
effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Authority does not believe the adoption of this standard will have a material impact on its financial position, results of
operations or cash flows.



NOTE 3ACQUISITION OF POCONO DOWNS ENTITIES:



On January 25, 2005, the Authority and its wholly
owned subsidiary, MCV-PA, completed their acquisition of all the partnership interests in the Pocono Downs entities for approximately $281.0 million in cash. The Pocono Downs entities own Mohegan Sun at Pocono Downs, a harness racing facility in
Plains, Pennsylvania,



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



and five OTW facilities also located in Pennsylvania. The results of operations for the Pocono Downs entities are included in the accompanying consolidated
financial statements from the date of acquisition through September 30, 2005.



As a result of the acquisition of the harness racing facility, the Authority has the right to apply for a Pennsylvania Category One slot machine license, which, if approved, would initially permit the installation and
operation of up to 3,000 slot machines at Mohegan Sun at Pocono Downs. The purchase agreement for the Pocono Downs entities includes a provision that would generally require the seller to repurchase all the partnerships interests in the entities, at
the election of the Authority, if a Category One license has not been issued or has been denied to the Authority by July 1, 2006 as a result of the conduct of the seller or if no conditional or permanent licenses have been issued in
Pennsylvania by July 1, 2006.



The following table
summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition, which were estimated by management with assistance from a third party valuation firm. The right to obtain a Category One slot machine license was
determined to be an intangible asset with an indefinite life apart from goodwill. Certain other intangible assets were identified in the valuation process, but were not separated from goodwill due to immateriality of the amounts.



|                                                    |  |                     |         |  
|--------------------------------------------------- |  | ------------------- | ------- | -
|                                                    |  | At January 25, 2005 |        
|                                                    |  | (in thousands)      |        
|Current assets                                      |  | $                   | 1,086   |  
|Property and equipment                              |  |                     | 31,370  |  
|Right to obtain a Category One slot machine license |  |                     | 214,000 |  
|Goodwill                                            |  |                     | 39,459  |  
|                                                    |  |                     |         |  
|Total assets acquired                               |  |                     | 285,915 |  
|Current liabilities                                 |  |                     | (4,926  | )
|                                                    |  |                     |         |  
|Total liabilities assumed                           |  |                     | (4,926  | )
|                                                    |  |                     |         |  
|Net assets acquired                                 |  | $                   | 280,989 |  
|                                                    |  |                     |         |  



Unaudited pro forma
financial information for the fiscal years ended September 30, 2005 and 2004, as though the acquisition of the Pocono Downs entities had occurred on October 1, 2003, is as follows:



|             |  |                                         |           |      |   |          
|------------ |  | --------------------------------------- | --------- | ---- | - | ---------
|             |  | For the fiscal year ended September 30,
|             |  | 2005                                    |           | 2004
|             |  | (in thousands)                         
|Net revenues |  | $                                       | 1,340,275 |      | $ | 1,291,074
|Net income   |  |                                         | 23,937    |      |   | 104,462  



NOTE 4CASH AND CASH
EQUIVALENTS:



At September 30, 2005 and 2004, the
Authority had cash and cash equivalents of $72.4 million and $60.8 million, respectively, of which $3.2 million, as of September 30, 2005, was invested in deposits that could be redeemed on demand and investments with original maturities of
less than three months when purchased. No amounts were invested as of September 30, 2004. For reporting purposes, cash and cash equivalents include all operating cash and in-house funds.



The Authority recorded approximately $1.8 million of outstanding checks in
excess of cash deposits held at or in transit to one of the Authoritys banking institutions as accounts payable in the accompanying consolidated balance sheet at September 30, 2004. This balance of outstanding checks was funded through
the Authoritys bank line of credit when presented for payment.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 5RECEIVABLES, NET:



Components of receivables, net are as follows (in thousands):



|                                |  |                     |        |   |      |   |        |  
|------------------------------- |  | ------------------- | ------ | - | ---- | - | ------ | -
|                                |  | As of September 30, |       
|                                |  | 2005                |        |   | 2004 |  
|Gaming                          |  | $                   | 9,896  |   |      | $ | 8,450  |  
|Hotel                           |  |                     | 2,471  |   |      |   | 1,226  |  
|Other                           |  |                     | 5,595  |   |      |   | 5,636  |  
|                                |  |                     |        |   |      |   |        |  
|Subtotal                        |  |                     | 17,962 |   |      |   | 15,312 |  
|Allowance for doubtful accounts |  |                     | (2,434 | ) |      |   | (2,082 | )
|                                |  |                     |        |   |      |   |        |  
|Receivables, net                |  | $                   | 15,528 |   |      | $ | 13,230 |  
|                                |  |                     |        |   |      |   |        |  



NOTE 6PROPERTY AND EQUIPMENT,
NET:



Components of property and equipment, net are as
follows (in thousands):



|                                  |  |                     |           |   |      |   |           |  
|--------------------------------- |  | ------------------- | --------- | - | ---- | - | --------- | -
|                                  |  | As of September 30, |          
|                                  |  | 2005                |           |   | 2004 |  
|Land                              |  | $                   | 43,906    |   |      | $ | 32,431    |  
|Land improvements                 |  |                     | 48,317    |   |      |   | 44,148    |  
|Buildings and improvements        |  |                     | 1,257,948 |   |      |   | 1,234,685 |  
|Furniture and equipment           |  |                     | 354,920   |   |      |   | 335,451   |  
|Construction in process           |  |                     | 13,616    |   |      |   | 3,512     |  
|                                  |  |                     |           |   |      |   |           |  
|Subtotal                          |  |                     | 1,718,707 |   |      |   | 1,650,227 |  
|Less: accumulated depreciation    |  |                     | (396,016  | ) |      |   | (322,095  | )
|                                  |  |                     |           |   |      |   |           |  
|Total property and equipment, net |  | $                   | 1,322,691 |   |      | $ | 1,328,132 |  
|                                  |  |                     |           |   |      |   |           |  



For the fiscal years
ended September 30, 2005, 2004 and 2003 depreciation expense totaled $86.5 million, $91.7 million and $91.5 million, respectively. Capitalized interest totaled $21,000 for the fiscal year ended September 30, 2005. There was no capitalized
interest for the fiscal years ended September 30, 2004 and 2003, respectively.



NOTE 7OTHER CURRENT ASSETS AND OTHER CURRENT LIABILITIES:



Components of other current assets are as follows (in thousands):



|                                    |  |                     |        |      |   |      
|----------------------------------- |  | ------------------- | ------ | ---- | - | -----
|                                    |  | As of September 30,
|                                    |  | 2005                |        | 2004
|Prepaid expenses                    |  | $                   | 5,185  |      | $ | 4,829
|Non-qualified deferred compensation |  |                     | 7,008  |      |   | 4,356
|                                    |  |                     |        |      |   |      
|Total other current assets          |  | $                   | 12,193 |      | $ | 9,185
|                                    |  |                     |        |      |   |      



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Components of other current liabilities are as follows (in thousands):



|                                               |  |                     |         |      |   |       
|---------------------------------------------- |  | ------------------- | ------- | ---- | - | ------
|                                               |  | As of September 30,
|                                               |  | 2005                |         | 2004
|Accrued payroll and related taxes and benefits |  | $                   | 47,193  |      | $ | 40,849
|Slot win contribution payable (Note 12)        |  |                     | 18,738  |      |   | 17,792
|Miscellaneous other current liabilities        |  |                     | 50,638  |      |   | 37,501
|                                               |  |                     |         |      |   |       
|Total other current liabilities                |  | $                   | 116,569 |      | $ | 96,142
|                                               |  |                     |         |      |   |       



NOTE 8FINANCING FACILITIES:



Financing facilities, as described below, consisted of
the following (in thousands):



|                                                        |  |                     |           |      |   |           |  
|------------------------------------------------------- |  | ------------------- | --------- | ---- | - | --------- | -
|                                                        |  | As of September 30, |          
|                                                        |  | 2005                |           | 2004 |  
|Bank Credit Facility                                    |  | $                   |          |      | $ | 179,667   |  
|1999 81/8% Senior Notes                                 |  |                     | 13,970    |      |   | 13,970    |  
|2005 61/8% Senior Notes                                 |  |                     | 250,000   |      |   |          |  
|2001 83/8% Senior Subordinated Notes                    |  |                     | 16,345    |      |   | 16,345    |  
|2002 8% Senior Subordinated Notes                       |  |                     | 250,000   |      |   | 250,000   |  
|2003 63/8% Senior Subordinated Notes                    |  |                     | 330,000   |      |   | 330,000   |  
|2004 71/8% Senior Subordinated Notes                    |  |                     | 225,000   |      |   | 225,000   |  
|2005 67/8% Senior Subordinated Notes                    |  |                     | 150,000   |      |   |          |  
|WNBA Promissory Note                                    |  |                     | 6,000     |      |   | 7,000     |  
|Line of Credit                                          |  |                     |          |      |   | 5,086     |  
|MortgageSalishan-Mohegan                               |  |                     | 2,550     |      |   | 2,550     |  
|Note PayableSalishan-Mohegan                           |  |                     |          |      |   | 1,000     |  
|                                                        |  |                     |           |      |   |           |  
|Subtotal                                                |  | $                   | 1,243,865 |      | $ | 1,030,618 |  
|Net deferred gain (loss) on derivative instruments sold |  |                     | 15        |      |   | (4,295    | )
|                                                        |  |                     |           |      |   |           |  
|Total debt                                              |  | $                   | 1,243,880 |      | $ | 1,026,323 |  
|                                                        |  |                     |           |      |   |           |  



Maturities of the
Authoritys debt as of September 30, 2005 are as follows (in thousands):



|            |  |                           |          
|----------- |  | ------------------------- | ---------
|Fiscal Year |  | Long-Term Debt Maturities
|2006        |  | $                         | 17,520   
|2007        |  |                           | 1,000    
|2008        |  |                           | 1,000    
|2009        |  |                           | 331,000  
|2010        |  |                           | 1,000    
|Thereafter  |  |                           | 892,345  
|            |  |                           |          
|Total       |  | $                         | 1,243,865
|            |  |                           |          



Old Bank Credit Facility



On March 25, 2003, the Authority repaid the entire
$251.0 million outstanding under its reducing, revolving, collateralized credit facility (the Old Bank Credit Facility). As of March 25, 2003, the Old Bank Credit Facility was terminated and related unamortized debt issuance costs
of $403,000 were written off.



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Bank Credit Facility



As of September 30, 2005, the Authority has a loan agreement for up to $450.0 million from a syndicate of financial institutions and commercial
banks, with Bank of America, N.A. serving as administrative agent (the Bank Credit Facility). The Bank Credit Facility is comprised of a revolving loan of up to $450.0 million, which matures on March 31, 2008. The maximum aggregate
principal amount available for borrowing includes amounts under letters of credit. As of September 30, 2005, the amount under letters of credit totaled $584,000, of which no amount was drawn (refer to Letters of Credit below). The
revolving loan has no mandatory amortization provisions and is payable in full at maturity. The Authority had $449.4 million available for borrowing under the Bank Credit Facility as of September 30, 2005 (without taking into account covenants
under the Line of Credit described below).



In October 2004,
the Authority received the requisite consent of its lenders to Amendment No. 3 to its Bank Credit Facility. Amendment No. 3, among other things, provided for an increase in the total loan commitment from $382.7 million to $600.0 million,
which included the $450.0 million revolving loan and a $150.0 million term loan, and permitted the Authority to make the Pocono Downs acquisition and certain other investments planned for Pocono Downs. Amendment No. 3 also modified certain
provisions of the loan agreement, including the Authoritys covenants relating to total leverage ratio requirements.



On February 8, 2005, the Authority used the net proceeds from the issuance of the 2005 Senior Notes and the 2005 Senior Subordinated Notes, described
below, as well as cash provided by operating activities, to repay $399.4 million of amounts outstanding under the Bank Credit Facility, which included a $136.4 million payment to extinguish the remaining balance on the term loan and a $263.0 million
payment to reduce amounts outstanding on the revolving loan. As a result of these payments, the total commitment under the Bank Credit Facility was reduced from $600.0 million to $450.0 million.



The Bank Credit Facility is collateralized by a lien on substantially all of
the Authoritys assets, including the assets of the Pocono Downs entities, and a leasehold mortgage on the land and improvements which comprise Mohegan Sun. The Authority will also be required to pledge additional assets as collateral for the
Bank Credit Facility as it or its guarantor subsidiaries acquire them. The Authoritys obligations under the Bank Credit Facility are guaranteed by MBC, MCV-PA and the Pocono Downs entities. The Bank Credit Facility subjects the Authority to a
number of restrictive covenants, including financial covenants. These financial covenants relate to, among other things, its permitted total debt and senior debt leverage ratios, its minimum fixed charge coverage ratio and the Authoritys
maximum capital expenditures. The Bank Credit Facility includes non-financial covenants by the Authority and the Tribe of the type customarily found in loan agreements for similar transactions including requirements that:



| |  |  | the Tribe preserve its existence as a federally recognized Indian tribe;
| | - |  | ------------------------------------------------------------------------



| |  |  | the Tribe cause the Authority to continually operate Mohegan Sun in compliance with all applicable laws; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | except under specific conditions, limit the Authority from selling or disposing of its assets, limit the transfer of the Authoritys assets to non-guarantor subsidiaries, limit
the incurrence by the Authority of other debt or contingent obligations and limit the Authoritys ability to extend credit, make investments or commingle its assets with assets of the Tribe.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of September 30, 2005, the Authority and the Tribe were in compliance
with all of their respective covenant requirements in the Bank Credit Facility.



At the Authoritys option, each advance of loan proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month London Inter-Bank Offered
Rate



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(LIBOR), plus in either case, the applicable spread at the time each loan is made. The Authority also pays commitment fees for the unused portion
of the revolving loan on a quarterly basis equal to the applicable spread for commitment fees times the average daily unused commitment for that calendar quarter. Applicable spreads are based on the Authoritys Total Leverage Ratio, as defined
in the Bank Credit Facility. The applicable spread for base rate advances is between 0.50% and 1.25%, and the applicable spread for LIBOR rate advances is between 1.75% and 2.50%. The applicable spread for commitment fees is between 0.375% and
0.50%. The base rate is the higher of Bank of Americas announced prime rate or the federal funds rate plus 0.50%. Interest on LIBOR loans is payable at the end of each applicable interest period or quarterly in arrears, if earlier. Interest on
base rate advances is payable quarterly in arrears. As of September 30, 2005, the Authority had no base rate loans and no LIBOR rate loans outstanding. The applicable spread for commitment fees was 0.50% as of September 30, 2005. Accrued
interest, including commitment fees, on the Bank Credit Facility was $595,000 and $186,000 as of September 30, 2005 and 2004, respectively.



1999 81/8% Senior Notes



In March 1999, the Authority issued $200.0 million
Senior Notes with fixed interest payable at a rate of 8.125% per annum (the 1999 Senior Notes). The proceeds from this financing were used to extinguish or defease existing debt, pay transaction costs and fund initial costs related
to the major expansion of Mohegan Sun known as Project Sunburst. Interest on the 1999 Senior Notes is payable semi-annually on January 1 and July 1. The 1999 Senior Notes mature on January 1, 2006. The 1999 Senior Notes are
uncollateralized general obligations of the Authority and rank pari passu in right of payment with all current and future uncollateralized senior indebtedness of the Authority. Borrowings under the Bank Credit Facility and any capital lease
obligations are collateralized by first priority liens on substantially all of the assets of the Authority. As a result, upon any distribution to creditors in a bankruptcy, liquidation or reorganization or similar proceeding relating to the
Authority or the Tribe, the holders of collateralized debt may be paid in full in cash before any payment may be made with respect to the 1999 Senior Notes. The 1999 Senior Notes rank equally in right of payment with the 2005 Senior Notes and 50% of
the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing, and rank senior to the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing,
the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes and the 2005 Senior Subordinated Notes. MBC, MCV-PA and the Pocono Downs entities are guarantors of the
1999 Senior Notes. Refer to Note 17 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries.



In August 2004, the Authority completed a cash tender offer and consent solicitation to repurchase any or all of its
outstanding 1999 Senior Notes. As part of the tender offer, the Authority solicited and received requisite consents to certain proposed amendments to the indentures governing the 1999 Senior Notes which eliminated substantially all of the
restrictive covenants thereunder. The aggregate principal amount of 1999 Senior Notes tendered was $186.0 million. An aggregate principal amount of $14.0 million of the 1999 Senior Notes remain outstanding as of September 30, 2005. As of
September 30, 2005 and 2004, accrued interest on the 1999 Senior Notes was $284,000 and $200,000, respectively.



2005 61/8% Senior Notes



On February 8, 2005, the Authority issued $250.0 million Senior Notes with fixed interest payable at a rate of
6.125% per annum (the 2005 Senior Notes). The net proceeds from this financing were used to repay amounts outstanding under the Bank Credit Facility and to pay fees and expenses associated with the issuance. The 2005 Senior Notes
mature on February 15, 2013. The first call date for the 2005 Senior Notes is February 15, 2009. Interest on the 2005 Senior Notes is payable semi-annually on February 15 and August 15. The 2005



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Senior Notes are uncollateralized general obligations of the Authority, which are effectively subordinated to all of the existing and future senior secured
indebtedness of the Authority, including the Bank Credit Facility. The 2005 Senior Notes rank equally in right of payment with the 1999 Senior Notes and 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then
due and owing, and rank senior to the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing, the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior
Subordinated Notes, the 2004 Senior Subordinated Notes and the 2005 Senior Subordinated Notes. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2005 Senior Notes. Refer to Note 17 for condensed consolidating financial information of
the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of September 30, 2005, accrued interest on the 2005 Senior Notes was $1.9 million.



2001 83/8% Senior Subordinated Notes



In
July 2001, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.375% per annum (the 2001 Senior Subordinated Notes). The proceeds from this financing were used to pay transaction
costs, pay down $90.0 million on the prior bank credit facility and fund costs related to Project Sunburst. Interest on the 2001 Senior Subordinated Notes is payable semi-annually on January 1 and July 1. The 2001 Senior Subordinated Notes
mature on July 1, 2011. The first call date for the 2001 Senior Subordinated Notes is July 1, 2006. The 2001 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit
Facility, the 1999 Senior Notes, the 2005 Senior Notes and in a liquidation, bankruptcy or similar proceeding 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2001 Senior
Subordinated Notes rank equally with the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations
under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2001 Senior Subordinated Notes. Refer to Note 17 for condensed consolidating financial information of the Authority, its
guarantor subsidiaries and its non-guarantor subsidiaries.



In
August 2004, the Authority completed a cash tender offer and consent solicitation to repurchase any or all of its outstanding 2001 Senior Subordinated Notes. As part of the tender offer, the Authority solicited and received requisite consents to
certain proposed amendments to the indentures governing the 2001 Senior Subordinated Notes, which eliminated substantially all of the restrictive covenants thereunder. The aggregate principal amount of 2001 Senior Subordinated Notes tendered was
$133.7 million. An aggregate principal amount of $16.3 million of the 2001 Senior Subordinated Notes remain outstanding as of September 30, 2005. Accrued interest on the 2001 Senior Subordinated Notes was $342,000 and $280,000 as of
September 30, 2005 and September 30, 2004, respectively.



2002 8%
Senior Subordinated Notes



In February 2002, the Authority
issued $250.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.0% per annum (the 2002 Senior Subordinated Notes). The proceeds from this financing were used to pay transaction costs and pay down $243.0
million on the prior bank credit facility. Interest on the 2002 Senior Subordinated Notes is payable semi-annually on April 1 and October 1. The 2002 Senior Subordinated Notes mature on April 1, 2012. The first call date for the 2002
Senior Subordinated Notes is April 1, 2007. The 2002 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and, in a
liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2002 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes,
the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC,
MCV-PA and the Pocono Downs entities are guarantors of the 2002 Senior Subordinated Notes. Refer to Note 17 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of
September 30, 2005 and September 30, 2004, accrued interest on the 2002 Senior Subordinated Notes was $10.0 million.



2003 63/8% Senior Subordinated
Notes



In July 2003, the Authority issued $330.0
million Senior Subordinated Notes with fixed interest payable at a rate of 6.375% per annum (the 2003 Senior Subordinated Notes). The proceeds from this financing were used to repurchase substantially all of the outstanding $300.0
million 8.75% Senior Subordinated Notes issued in March 1999 and to pay fees and expenses associated with the issuance. Interest on the 2003 Senior Subordinated Notes is payable semi-annually on January 15 and July 15. The 2003 Senior
Subordinated Notes mature on July 15, 2009. The 2003 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and, in a
liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2003 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes,
the 2002 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA
and the Pocono Downs entities are guarantors of the 2003 Senior Subordinated Notes. Refer to Note 17 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of
September 30, 2005 and 2004, accrued interest on the 2003 Senior Subordinated Notes was $4.4 million.



2004 71/8% Senior Subordinated
Notes



In August 2004, the Authority issued
$225.0 million Senior Subordinated Notes with fixed interest payable at a rate of 7.125% per annum (the 2004 Senior Subordinated Notes). The net proceeds from this financing, together with $130.0 million of availability under the
Bank Credit Facility, were used to repurchase the outstanding 2001 Senior Subordinated Notes and the outstanding 1999 Senior Notes tendered in the tender offers described above and to pay fees and expenses associated with the issuance. The 2004
Senior Subordinated Notes mature on August 15, 2014. The first call date for the 2004 Senior Subordinated Notes is August 15, 2009. Interest on the 2004 Senior Subordinated Notes is payable semi-annually on February 15 and
August 15. The 2004 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and, in a liquidation, bankruptcy or similar
proceeding, 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2004 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes,
the 2003 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are
guarantors of the 2004 Senior Subordinated Notes. Refer to Note 17 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of September 30, 2005 and 2004, accrued
interest on the 2004 Senior Subordinated Notes was $2.0 million and $2.6 million, respectively.



2005 67/8% Senior Subordinated Notes



On February 8, 2005, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 6.875% per annum
(the 2005 Senior Subordinated Notes). The net proceeds from this financing were used to repay amounts outstanding under the Bank Credit Facility and to pay fees and expenses



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



associated with the issuance. The 2005 Senior Subordinated Notes mature on February 15, 2015. The first call date for the 2005 Senior Subordinated Notes
is February 15, 2010. Interest on the 2005 Senior Subordinated Notes is payable semi-annually on February 15 and August 15. The 2005 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are
subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and in a liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and
owing. The 2005 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes and the remaining 50% of the Authoritys
payment obligations under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2005 Senior Subordinated Notes. Refer to Note 17 for condensed consolidating financial information of
the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of September 30, 2005, accrued interest on the 2005 Senior Subordinated Notes was $1.3 million.



The senior and senior subordinated note indentures contain certain financial and non-financial covenants with which the
Authority and the Tribe must comply. The financial covenants include, among other things, limitations on restricted payments and the incurrence of indebtedness, while the non-financial covenants include, among other things, reporting obligations,
compliance with laws and regulations and the Authoritys continued existence. As of September 30, 2005, both the Authority and the Tribe were in compliance with all of their respective covenant requirements in the senior and senior
subordinated note indentures.



WNBA Promissory Note



The Authority and MBC are parties to a membership agreement with WNBA, LLC
(the Membership Agreement). The Membership Agreement sets forth the terms and conditions pursuant to which MBC acquired a membership in the WNBA and the right to own and operate a professional basketball team in the WNBA. The Authority
guaranteed the obligations of MBC under the Membership Agreement.



In consideration for this acquisition, MBC paid $2.0 million (with funds advanced from the Authority) and issued a promissory note to the WNBA (the WNBA Note) for $8.0 million that accrues interest at an annual rate equal to
three-month LIBOR plus 1.5%. The Authority guaranteed the obligations of MBC under the WNBA Note. Pursuant to the WNBA Note, principal payments of $1.0 million, subject to adjustment for certain revenue thresholds, and interest payments are required
to be paid to the WNBA on each anniversary of the WNBA Note through January 2011. As of September 30, 2005 and 2004, accrued interest on the WNBA Note was $191,000 and $134,000, respectively. Refer to Note 14 for a further discussion of the
Authoritys investment in a WNBA franchise.



Line of Credit



The Authority has a $25.0 million revolving loan
agreement with Bank of America (formerly Fleet National Bank) (the Line of Credit). Each advance accrues interest on the basis of one-month LIBOR, plus the applicable spread, determined at the time the advance is made on the basis of the
Authoritys Leverage Ratio as defined in the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations of the Authority. The Line of Credit expires in March 2006. The Line of Credit subjects the Authority to certain
covenants, including a covenant to maintain at least $25.0 million available for borrowing under the Bank Credit Facility. As of September 30, 2005, the Authority was in compliance with all covenant requirements in the Line of Credit. As of
September 30, 2005, the Authority had $25.0 million available for borrowing under the Line of Credit.



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note and Mortgage Payables



In July 2004, the Authoritys wholly owned subsidiary, Mohegan Ventures-NW, formed a limited liability company,
Salishan-Mohegan, with Salishan Company, LLC (Salishan Company), an unrelated third party. Upon formation of Salishan-Mohegan, Salishan Company contributed, among other things, land with a mortgage payable of $2.6 million and land
purchase options with a note payable of $1.0 million. The mortgage payable bears interest due on a monthly basis at an annual rate of 9.5%, with the principal balance payable in full on March 28, 2006. The note payable, including accrued
interest of $150,000, was repaid at maturity on December 31, 2004. There was no accrued interest on the mortgage payable as of September 30, 2005 and 2004. Any and all amounts paid by Salishan-Mohegan, including interest payments, pursuant
to these agreements are reimbursable by the Cowlitz Indian Tribe provided certain events occur, as prescribed in the development agreement between Salishan-Mohegan and the Cowlitz Indian Tribe.



Derivative Instruments



The Authority is considered an end user of derivative instruments and engages in derivative transactions from
time to time for risk management purposes only. There were no derivative instruments held by the Authority as of September 30, 2005.



On March 10, 2005, the Authority entered into two interest rate swap agreements, each based on six-month LIBOR plus a spread of 116 basis points and
each hedging $50 million of the 2005 Senior Notes. On March 23, 2005, the Authority entered into three additional interest rate swap agreements, which were also based on LIBOR plus spreads of 87 to 91 basis points and hedging $50.0 million,
$75.0 million and $25.0 million of the 2005 Senior Notes. Under these agreements, the Authority would have made payments on the variable interest rate provided by the derivative instrument and received payments equal to the fixed interest rate on
the debt being hedged. These interest rate swap agreements qualified for hedge accounting in accordance with SFAS 133, as amended, and were designated as fair value hedges. In the quarter ended June 30, 2005, the Authority terminated these
instruments for an aggregate gain of $3.6 million. The $3.6 million gain was deferred and added to the carrying value of the 2005 Senior Notes being hedged and is being amortized and recorded as an offset to interest expense over the remaining term
of the 2005 Senior Notes. For the fiscal year ended September 30, 2005, the Authority recorded amortization of $163,000 on the deferred gain to interest expense. The Authority expects to record $466,000 as an offset to interest expense over the
next twelve months.



Other interest rate swap agreements
hedging currently outstanding debt instruments of the Authority which qualified for hedge accounting in accordance with FAS 133 and were designated as fair value hedges were sold in prior fiscal years for a net aggregate loss of $1.9 million. The
$1.9 million net aggregate loss was deferred and added to the carrying value of the respective notes being hedged and is being amortized and recorded to interest expense over the remaining term of the respective notes. For the fiscal year ended
September 30, 2005, the Authority recorded amortization of $875,000 on the net deferred loss to interest expense. The Authority expects to record $910,000 to interest expense over the next twelve months.



The aggregate fair market value change in all of the Authoritys
derivative instruments was $3.0 million for the fiscal year ended September 30, 2003, which has been recorded as an offset to interest expense in the Authoritys consolidated statements of income. There was no change in the aggregate fair
market value of the Authoritys derivative instruments recorded as an offset to or as a component of interest expense for the fiscal years ended September 30, 2005 and 2004, respectively, as all derivative instruments qualified for hedge
accounting. The Authority recorded a reduction to interest expense of $2.6 million and $4.1 million for the fiscal years ended September 30, 2004 and 2003, respectively, related to interest settlements on the Authoritys derivative
instruments.



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Letters of Credit



The Authority maintains uncollateralized letters of credit to satisfy potential workers compensation liabilities, overdue amounts for purses due
horsemen at Pocono Downs and overdue pari-mutuel wagering tax liabilities that may arise. The letters of credit expire(d) on August 31, 2006, November 15, 2005 and January 25, 2006, respectively. As of September 30, 2005, no
amounts were drawn on the letters of credit.



NOTE 9LEASES:



The Authority leases space to certain tenants in the
Shops at Mohegan Sun and certain other Mohegan Sun outlets. The Authority also leases, to third parties, the rights to utilize the Authoritys antenna on the Arena. Minimum future rental income and expenses on non-cancelable leases expected to
be incurred by the Authority is as follows (in thousands):



|                             |  |                                  |       |      |   |       |  |      |       |      |   |            |  |       |       |  |   |       |  |   |       
|---------------------------- |  | -------------------------------- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ---------- |  | ----- | ----- |  | - | ----- |  | - | ------
|                             |  | Fiscal Year Ending September 30,
|                             |  | 2006                             |       | 2007 |   | 2008  |  | 2009 |       | 2010 |   | Thereafter |  | Total
|Minimum Future Rental Income |  | $                                | 3,139 |      | $ | 2,311 |  | $    | 2,285 |      | $ | 2,403      |  | $     | 2,380 |  | $ | 4,134 |  | $ | 16,652



The Authority is
liable under various operating leases for equipment and buildings for the Pocono Downs properties, which expire in various years through 2020. Total rental expense under these agreements was $235,000 for the period from the date of acquisition to
September 30, 2005. Minimum future rental expense on non-cancelable leases expected to be incurred by the Authority is as follows (in thousands):



|                              |  |                                  |     |      |   |      |  |      |     |      |   |            |  |       |     |  |   |       |  |   |      
|----------------------------- |  | -------------------------------- | --- | ---- | - | ---- |  | ---- | --- | ---- | - | ---------- |  | ----- | --- |  | - | ----- |  | - | -----
|                              |  | Fiscal Year Ending September 30,
|                              |  | 2006                             |     | 2007 |   | 2008 |  | 2009 |     | 2010 |   | Thereafter |  | Total
|Minimum Future Rental Expense |  | $                                | 348 |      | $ | 345  |  | $    | 346 |      | $ | 325        |  | $     | 328 |  | $ | 2,886 |  | $ | 4,578



The Authority also has
loaned funds to tenants related to the Shops at Mohegan Sun and certain other Mohegan Sun outlets. As of September 30, 2005 and 2004, outstanding tenant loans were $3.4 million and $2.3 million, respectively. These loans mature in periods
between three and ten years. These amounts have been included in other assets in the accompanying consolidated balance sheets.



NOTE 10RELATED PARTY TRANSACTIONS:



The Tribe provides governmental and administrative services to the Authority in conjunction with the operation of Mohegan Sun. During the fiscal years
ended September 30, 2005, 2004 and 2003, the Authority incurred $17.0 million, $15.4 million and $13.1 million, respectively, of expenses for such services.



The Authority leases the land on which Mohegan Sun is located from the Tribe pursuant to a long-term lease. The Authority is
required to pay to the Tribe a nominal annual rental fee under the lease (see Note 12). The lease has an initial term of 25 years and it is renewable for an additional 25-year term upon expiration.



The Tribe, through one of its limited liability companies, has entered into
various land lease agreements with the Authority for access, parking and related purposes for Mohegan Sun. The Authority expensed $262,000 relating to these land lease agreements for each of the fiscal years ended September 30, 2005, 2004 and
2003.



The Authority purchases the majority of its utilities,
including electricity, gas, water and sewer, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. During the fiscal years ended September 30, 2005, 2004 and 2003, the Authority incurred costs of $16.5 million, $16.7
million and $16.7 million, respectively, for such utilities.



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Tribe provides services through its Development Department for projects related to Mohegan Sun.
The Authority incurred $10.6 million, $3.6 million and $1.0 million of such expenses associated with the Tribes Development Department for the fiscal years ended September 30, 2005, 2004 and 2003, respectively.



The Authority and Little People, LLC (an entity owned by the Tribe) have a
lease agreement, whereby Little People, LLC leases retail space located in the Shops at Mohegan Sun from the Authority. The lease term expires on September 30, 2006 and may be renewed on a monthly basis. Little People, LLC is not obligated to
pay any rent. The Authority reimburses the Tribe for sales where patron Players Club points are utilized. The Authority reimbursed the Tribe for patron Players Club points in the amounts of $299,000, $244,000 and $244,000 for fiscal
years ended September 30, 2005, 2004 and 2003, respectively.



On September 25, 1995, the Tribe adopted the Mohegan Tribal Employment Rights Ordinance (the TERO), which sets forth hiring and contracting preference requirements for employers and entities conducting business on Tribal
land or working on behalf of the Tribe. Pursuant to the TERO, an employer is required to give hiring, promotion, training, retention and other employment-related preferences to Native Americans who meet the minimum qualifications for the applicable
employment position. However, this preference requirement does not apply to key employees, as such persons are defined in the TERO.



Similarly, any entity awarding a contract to be performed on Tribal land or on behalf of the Tribe must give preference, first to certified Mohegan
entities and second to other certified Indian entities. This contracting preference is conditioned upon the bid by the preferred certified entity being within 5% of the lowest bid by a non-certified entity (unless the preferred certified
entitys bid exceeds $100,000 of the lowest bid by a non-certified entity). The TERO establishes procedures and requirements for certifying Mohegan entities and other Indian entities. Certification is based largely on the level of ownership and
control exercised by the members of the Tribe or other Indian tribes, as the case may be, over the entity bidding on a contract.



As of September 30, 2005, approximately 117 employees of the Authority were members of the Tribe.



The Authority engaged McFarland Johnson, Inc. for surveying, civil
engineering and professional design services. Roland Harris, a current member and a former Chairman of the Management Board and the Tribal Council, was a consultant for this firm pursuant to a consulting agreement which expired in May 2001. For the
fiscal year ended September 30, 2003, the Authority incurred $83,000 for such services provided by McFarland Johnson. No such services were performed for each of the fiscal years ended September 30, 2005 and 2004. McFarland Johnson
formerly conducted business as Harris and Clark, Inc. The Authority believes that the terms of this engagement were comparable to those that would pertain to an arms length engagement with an unaffiliated firm.



NOTE 11EMPLOYEE BENEFIT PLANS:



The Authority maintains a retirement savings plan for its employees
under Section 401(k) and section 401(a) of the Internal Revenue Code (the Mohegan Retirement and 401(k) Plan). The 401(k) portion of the plan allows employees of the Authority to defer up to the lesser of the maximum amount
prescribed by the Internal Revenue Code or 25% of their income on a pre-tax basis, through contributions to the 401(k) Plan. The Authority matches 100% of the eligible employees contributions up to a maximum of 3% of their individual earnings.
Contributions to the retirement portion of the plan by the Authority are discretionary and are allocated to eligible employee accounts based on a rate of $0.30 per qualified hour worked. Employees become eligible for the Mohegan Retirement and
401(k) plan after 90 days of employment and become fully vested after seven years of credited service. For the fiscal years ended September 30, 2005, 2004 and 2003, the Authority has contributed $9.1 million, $8.5 million and $8.1 million, net
of forfeitures, to the Mohegan Retirement and 401(k) Plan, respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Authority, together with the Tribe, maintains a Non-Qualified Deferred Compensation Plan (the
Deferred Compensation Plan) for certain key employees. This plan allows participants to defer up to 100% of their pre-tax income to the plan. For the fiscal years ended September 30, 2005, 2004 and 2003, employee contributions, net
of withdrawals and changes in fair value of investments, totaled $198,000, $1.3 million and $921,000, respectively.



NOTE 12COMMITMENTS AND CONTINGENCIES:



The Mohegan Compact



In May 1994, the Tribe and the State of Connecticut entered into a Memorandum of Understanding (MOU) which sets forth certain matters
regarding implementation of the Mohegan Compact. The MOU stipulates that a portion of the revenues earned on slot machines must be paid to the State of Connecticut (Slot Win Contribution). The Slot Win Contribution payments will not be
required if the State of Connecticut legalizes any other gaming operations with slot machines or other commercial casino table games within Connecticut, except those consented to by the Tribe and the Mashantucket Pequot Tribe. For each 12-month
period commencing July 1, 1995, the Slot Win Contribution shall be the lesser of (a) 30% of gross revenues from slot machines, or (b) the greater of (i) 25% of gross revenues from slot machines or (ii) $80.0 million.



The Authority reflected expenses associated with the Slot Win
Contribution totaling $215.2 million, $208.2 million and $194.3 million for the fiscal years ended September 30, 2005, 2004 and 2003, respectively. As of September 30, 2005 and 2004, outstanding Slot Win Contribution payments to the State
of Connecticut totaled $18.7 million and $17.8 million, respectively.



Priority Distribution Agreement



On
August 1, 2001, the Authority and the Tribe entered into an agreement (the Priority Distribution Agreement), which obligates the Authority to make monthly payments to the Tribe to the extent of the Authoritys net cash flow, as
defined in the Priority Distribution Agreement. The Priority Distribution Agreement, which has a perpetual term, limits the maximum aggregate payments by the Authority to the Tribe in each calendar year to $14.0 million, as adjusted annually in
accordance with the formula specified in the Priority Distribution Agreement to reflect the effects of inflation. However, payments pursuant to the Priority Distribution Agreement do not reduce the Authoritys obligations to make payments to
reimburse the Tribe for governmental services provided by the Tribe or any payments under any other agreements with the Tribe. The monthly payments under the Priority Distribution Agreement are limited obligations of the Authority payable only to
the extent of its net cash flow and are not secured by a lien or encumbrance on any assets or property of the Authority. The Authoritys consolidated financial statements reflect payments associated with the Priority Distribution Agreement of
$15.8 million, $15.4 million and $15.1 million for the fiscal years ended September 30, 2005, 2004 and 2003, respectively.



Agreement with the Town of Montville



On June 16, 1994, the Tribe and the Town of Montville (the Town) entered into an agreement whereby the Tribe agreed to pay to the Town an
annual payment of $500,000 to minimize the impact on the Town resulting from the decreased tax revenues on reservation land held in trust. The Tribe assigned its right and obligations in the agreement with the Town to the Authority.



Land Lease from the Tribe to the Authority



The land upon which Mohegan Sun is situated is held in trust for the Tribe
by the United States. The Tribe and the Authority have entered into a land lease under which the Tribe leases to the Authority the property and



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



all buildings, improvements and related facilities constructed or installed on the property. The lease was approved by the Secretary of the Interior on
September 29, 1995. Summarized below are several key provisions of this lease.



Term



The term of the
lease is 25 years with an option, exercisable by the Authority, to extend the term for one additional 25-year period. Upon the termination of the lease, the Authority will be required to surrender to the Tribe possession of the property and
improvements, excluding any equipment, furniture, trade fixtures or other personal property.



Rent and Other Operating Expenses



The Authority is required to pay to the Tribe a nominal annual rental fee. For any period when the Tribe or another agency or instrumentality of the Tribe is not the tenant under the lease, the rent will be 8% of the
tenants gross revenues from the premises. The Authority is responsible for the payment of all costs of owning, operating, constructing, maintaining, repairing, replacing and insuring the leased property.



Use of Leased Property



The Authority may use the leased property and improvements solely for the
construction and operation of Mohegan Sun, unless prior approval is obtained from the Tribe for any proposed alternative use. Similarly, no construction or alteration of any building or improvement located on the leased property by the Authority may
be made unless complete and final plans and specifications have been approved by the Tribe. Following foreclosure of any mortgage on the Authoritys interest under the lease or any transfer of such interest to the holder of such mortgage in
lieu of foreclosure, the leased property and improvements may be used for any lawful purpose, subject only to applicable codes and governmental regulations; provided, however, that a non-Indian holder of the leased property may in no event conduct
gaming operations on the property.



Permitted Mortgages and
Rights of Permitted Mortgages



The Authority may not
mortgage, pledge or otherwise encumber its leasehold estate in the leased property except to a holder of a permitted mortgage. Under the lease, a permitted mortgage includes the leasehold mortgage securing the Authoritys
obligations under the Bank Credit Facility granted by the Authority that provides, among other things, that (1) the Tribe will have the right to notice of, and to cure, any default of the Authority, (2) the Tribe will have the right to
prior notice of an intention by the holder to foreclose on the permitted mortgage and the right to purchase the mortgage in lieu of any foreclosure, and (3) the permitted mortgage is subject and subordinated to any and all access and utility
easements granted by the Tribe under the lease.



As provided in
the lease, each holder of a permitted mortgage has the right to notice of any default of the Authority under the lease and the opportunity to cure such default within any applicable cure period.



Default Remedies



The Authority will be in default under the lease if, subject to the notice
provisions, it fails to make lease payments or to comply with its covenants under the lease or if it pledges, encumbers or conveys its interest in the lease in violation of the terms of the lease. Following a default, the Tribe may, with approval
from the Secretary of the Interior, terminate the lease unless a permitted mortgage remains outstanding with respect to the leased property. In that case, the Tribe may not (1) terminate the lease or the Authoritys right to possession of
the leased property, (2) exercise any right of re-entry, (3) take possession of and/or relet the leased property or any



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



portion thereof, or (4) enforce any other right or remedy which may materially and adversely affect the rights of the holder of the permitted mortgage,
unless the default triggering such rights was a monetary default which such holder failed to cure after notice.



ACLS of New England, Inc.



The Authority has a 10-year laundry services agreement with ACLS of New England, Inc. (ACLS). The Authority has an option to renew the
agreement for one additional 10-year term after its expiration in October 2012. Under the laundry services agreement, the Authority will pay an agreed upon rate for laundry services, adjusted annually for the Consumer Price Index and unusual
increases in energy costs. Additionally, the Authority has made a $500,000 loan to ACLS to develop the laundry service facility. Pursuant to the terms of the loan, interest may accrue based on the exercise of the renewal options or other certain
circumstances. In the event that circumstances occur where interest will be accrued, interest shall accrue commencing from the date of the advance at an annual rate of five percent.



The Authority also entered into a co-investment and escrow agreement with the Mashantucket Pequot Tribal Nation
(MPTN) and ACLS. Under the terms of those agreements, the Authority and MPTN may, under certain circumstances, become the joint owners of the laundry facility and be jointly and severally obligated to repay a term loan which is secured
by a mortgage on the laundry facility. The term of the agreements is for ten years and, if the Authority and MPTN become obligated to repay the term loan, the maximum potential future payments (undiscounted) the Authority and MPTN could be required
to make is approximately $4.9 million.



Menominee Project



In October 2004, the Authority entered into a management
agreement with the Menominee Indian Tribe of Wisconsin (the Menominee Tribe) and the Menominee Kenosha Gaming Authority. According to the management agreement, the Authority was granted the exclusive right and obligation to manage,
operate and maintain a planned casino and destination resort to be located in Kenosha, Wisconsin (the Menominee Project) for a period of seven years in consideration of a management fee of 13.4% of Net Revenues, as defined in the
management agreement, which approximates net income earned from the Menominee Project. The management agreement is subject to approval by the National Indian Gaming Commission (the NIGC).



Environmental Contingencies



Prior to acquiring the Pocono Downs entities, the Authority conducted an
extensive environmental investigation of the Pocono Downs facilities. In the course of that work, the Authority identified several recognized environmental conditions at the Pocono Downs facility for which corrective actions are necessary to bring
the property into compliance with applicable laws and regulations. The Authority has prepared and begun to implement a comprehensive plan to mitigate and resolve these conditions. Under the terms of the corrective action plans and as included in the
Pocono Downs Purchase Agreement, the sellers will be responsible for the costs of the remedial actions up to $1.0 million, and the Authority will be responsible for all environmental costs in excess of $1.0 million but less than or equal to $2.0
million. The sellers also have agreed to indemnify the Authority for up to $10.0 million of additional costs in excess of $2.0 million that the Authority may incur as a result of the environmental condition of the Pocono Downs properties prior to
closing. The total cost of remediation is estimated to be approximately $1.6 million at September 30, 2005.



Horsemens Agreement



On January 25, 2005, Downs Racing, L.P. entered into an agreement with the Pennsylvania Harness Horsemens Association Inc. (PHHA),
which represents owners, trainers and drivers at the Pocono Downs harness racing facility. The agreement governs all harness racing events and simulcasting and account wagering conducted at Pocono Downs and the five OTW facilities through
December 31, 2010.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Among other things, the agreement provides for the payment of 4.3% of all pari-mutuel wagering on
racing events held at Pocono Downs to PHHA. This amount comprises the payment of $420,000 in certain operating costs and expenses for the PHHA, with the remainder allocated to purses owed to the horsemen for each racing event. Pocono Downs is also
required to distribute to PHHA 2.5% and 1.1% in fees earned on live races at Pocono Downs simulcast to wagering locations inside and outside Pennsylvania, respectively.



Erie OTW Settlement Agreement



Prior to the Authoritys acquisition of the Pocono Downs entities, Penn National Gaming Inc., the former owner of the
Pocono Downs entities, entered into an agreement to sell all of the assets associated with the OTW facility located in Erie, Pennsylvania to MTR Gaming Group, Inc. (MTR) and Presque Isle Downs Inc. (PID and collectively with
MTR, Presque Isle) for $7.0 million. Penn National Gaming Inc. assigned its rights under this agreement to the Authoritys subsidiary, Downs Racing, L.P., upon the Authoritys acquisition of the Pocono Downs entities.
Accordingly, Downs Racing, L.P. will be required to convey the Erie OTW facility for such price if and when either of the following two conditions occur: (1) there is commencement by any of the Presque Isle entities of pari-mutuel wagering in
Erie, Pennsylvania or (2) there is receipt by any Presque Isle entity of revenue from slot machine operations in Erie, Pennsylvania.



Litigation



The Authority is a defendant in certain litigation incurred in the normal course of business. In the opinion of management, based on the advice of
counsel, the aggregate liability, if any, arising from such litigation will not have a material adverse effect on the Authoritys financial position, results of operations or cash flows.



NOTE 13RELINQUISHMENT AGREEMENT:



In February 1998, the Authority and TCA entered into an agreement (the
Relinquishment Agreement). Effective January 1, 2000 (the Relinquishment Date), the Relinquishment Agreement superseded a then existing management agreement with TCA. The Relinquishment Agreement provides, among other
things, that the Authority will make certain payments to TCA out of, and determined as a percentage of, Revenues (as defined in the Relinquishment Agreement) generated by Mohegan Sun over a 15-year period commencing on the Relinquishment Date. The
payments (Senior Relinquishment Payments and Junior Relinquishment Payments) have separate schedules and priority. Senior Relinquishment Payments commenced on April 25, 2000, twenty-five days following the end of the
first three-month period after the Relinquishment Date and continue at the end of each three-month period thereafter until January 25, 2015. Junior Relinquishment Payments commenced on July 25, 2000, twenty-five days following the end of
the first six-month period after the Relinquishment Date and continue at the end of each six-month period thereafter until January 25, 2015. Each Senior Relinquishment Payment and Junior Relinquishment Payment is an amount equal to 2.5% of the
Revenues generated by Mohegan Sun over the immediately preceding three-month or six-month payment period, as the case may be. Revenues are defined in the Relinquishment Agreement as gross gaming revenues (other than Class II gaming
revenue) and all other facility revenues (including, without limitation, hotel revenues, room service, food and beverage sales, ticket revenues, fees or receipts from convention/events center and all rental or other receipts from lessees and
concessionaires but not the gross receipts of such lessees, licenses and concessionaires).



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In the event of any bankruptcy, liquidation or reorganization or similar proceeding relating to the
Authority, the Relinquishment Agreement provides that each of the Senior and Junior Relinquishment Payments then due and owing are subordinated in right to payment of senior secured obligations, which include the Bank Credit Facility and capital
lease obligations, and that the Junior Relinquishment Payments then due and owing are further subordinated to payment of all other senior obligations, including the Authoritys 1999 Senior Notes and 2005 Senior Notes. The Relinquishment
Agreement also provides that all relinquishment payments are subordinated in right of payment to the minimum priority distribution payments, which are monthly payments required to be made by the Authority to the Tribe, to the extent then due. The
Authority, in accordance with SFAS 5, has recorded a relinquishment liability of the estimated present value of its obligations under the Relinquishment Agreement (see Note 2).



A relinquishment liability of $549.1 million was established at September 30, 1998 based on the present value of the
estimated future Mohegan Sun revenues utilizing the Authoritys risk-free investment rate. At September 30, 2005, the carrying amount of the relinquishment liability was $552.5 million as compared to $472.0 million at September 30,
2004. The increase during the fiscal year ended September 30, 2005 is due to a $123.6 million reassessment adjustment of the relinquishment liability and $27.5 million for the accretion of discount to the relinquishment liability, offset by
$70.6 million in relinquishment payments. Of the $70.6 million in relinquishment payments, $42.5 million represents payment of principal and $28.1 million represents payment of the accretion of discount to the relinquishment liability. During the
fiscal year ended September 30, 2004, the Authority paid $67.4 million in relinquishment payments, consisting of $36.5 million in principal amounts and $30.9 million for the payment of the accretion of discount to the relinquishment liability.
During the fiscal year ended September 30, 2003, the Authority paid $62.9 million in relinquishment payments, consisting of $28.6 million in principal amounts and $34.3 million for the payment of the accretion of discount to the relinquishment
liability. The accretion of the relinquishment liability discount resulted from the impact of the discount for the time value of money. At September 30, 2005 and September 30, 2004, relinquishment payments earned but unpaid were $19.2
million and $18.3 million, respectively.



The relinquishment
liability reassessment adjustment of $123.6 million, $3.9 million and $22.7 million for the fiscal years ended September 30, 2005, 2004 and 2003, respectively, resulted from revised revenue projections as of the end of the current year compared
to estimates of revenue projections as of the end of the prior year on the determination of the relinquishment liability. In fiscal year 2005, the Authority reviewed current revenue forecasts, including estimated timing and extent of future
competition, and significantly increased revenue projections for the period in which the Relinquishment Agreement applies, primarily due to material changes in the Connecticut gaming market subsequent to September 30, 2005. On May 13,
2005, the United States Interior Board of Indian Appeals overturned the federal recognition of the Historic Eastern Pequot Tribe and the Schaghticoke Tribe of Kent, Connecticut. These decisions were remanded to the United States Secretary of the
Interior for reconsideration. The Authority concluded this ruling was not substantive enough to warrant a reassessment of the relinquishment liability at that time. However, on October 12, 2005, the Bureau of Indian Affairs upon reconsideration
denied the federal recognition of these two Indian tribes which had expressed interest in building casinos in the close proximity of Mohegan Sun in Connecticut. As a result of this decision and other developments involving the revaluation of the
impact to future Mohegan Sun revenues from potential competition in the Northeast gaming market, the Authority concluded events had occurred which are projected to increase revenues at Mohegan Sun over the remaining relinquishment period by
approximately $3.2 billion and, therefore, substantially increase the related relinquishment liability, causing the Authority to account for a non-cash relinquishment liability charge of $123.6 million for the quarter ended September 30, 2005.
In fiscal year 2004, the Authority reviewed current revenue forecasts, including the estimated timing and extent of future competition, and increased revenue projections for the near future but reduced overall revenue projections for the period in
which the Relinquishment Agreement applies. In fiscal year 2003, the Authority reduced revenue projections for the period in which the Relinquishment Agreement applies, due to uncertainties involving



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



economic market conditions that have affected the Authoritys revenues and future competition from potential additional Native American and commercial
casinos in the northeastern gaming market.



NOTE 14INVESTMENT IN WNBA
FRANCHISE:



On January 27, 2003, the Authority
created a wholly owned subsidiary, MBC, for the purpose of acquiring a membership in the WNBA and the right to own and operate a professional basketball team in the WNBA. On January 28, 2003, the Authority and MBC entered into the Membership
Agreement with WNBA, LLC. The Membership Agreement set forth the terms and conditions pursuant to which MBC acquired a membership in the WNBA and the right to own and operate a professional basketball team in the WNBA. The Authority guaranteed the
obligations of MBC under the Membership Agreement. MBC is a full and unconditional guarantor of the Authoritys outstanding indebtedness under the Bank Credit Facility and senior and senior subordinated notes. Refer to Note 17 for condensed
consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries.



In consideration for this acquisition, MBC paid $2.0 million (with funds advanced from the Authority) and issued the WNBA Note for $8.0 million that
accrues interest at an annual rate equal to three-month LIBOR plus 1.5%. The Authority guaranteed the obligations of MBC under the WNBA Note. Pursuant to the WNBA Note, principal payments of $1.0 million, subject to adjustment for certain revenue
thresholds, and interest payments are required to be paid on each anniversary of the WNBA Note.



MBC recorded an aggregate investment of $10.3 million for the acquisition, of which $10.0 million represents the purchase price and $259,000 pertains to
capitalized purchase costs. As part of the acquisition, management, with the assistance of an independent valuation firm estimated the fair value of the player roster at approximately $4.8 million, and the remaining $5.5 million was recorded as
franchise value. The player roster value is being amortized over seven years. As of September 30, 2005 and 2004, accumulated amortization on the player roster value was $1.1 million and $836,000, respectively. The franchise value is being
amortized over thirty years. As of September 30, 2005 and 2004, accumulated amortization on the franchise value was $488,000 and $305,000, respectively. For the fiscal year ended September 30, 2005, 2004 and 2003, amortization expense
associated with these intangible assets totaled $1.1 million, $1.8 million and $1.8 million, respectively, including charges of $700,000 and $1.0 million related to write-offs of certain player contracts included on the original player roster, in
the fiscal year ended September 30, 2005 and 2004, respectively. The Authority expects to incur $584,000 in amortization expense for each of the next four years and $315,000 in the fifth year related to these assets.



In connection with MBCs purchase of a membership in the WNBA, MBC has
an approximately 3.6% ownership position in WNBA, LLC, which is being accounted for under the cost method. Under the Limited Liability Company Agreement of WNBA, LLC, if at any time WNBA, LLCs board of governors determines that additional
funds are necessary or desirable for the WNBA, LLCs or any league entitys general business, the board of governors may require additional cash capital contributions. In that circumstance, each member of the league shall be obligated to
contribute to WNBA, LLC an amount of cash equal to that members proportionate share of ownership. Pursuant to the WNBA Note, the principal payment due on the WNBA Note after any such contribution made by MBC will be reduced by the contribution
amount. Through September 30, 2005, there were no cash capital contributions required by WNBA, LLC.



NOTE 15MOHEGAN VENTURES-NORTHWEST, LLC:



On July 23, 2004, the Authority formed Mohegan Ventures-NW as a wholly owned unrestricted subsidiary of the Authority. As an unrestricted subsidiary, Mohegan Ventures-NW is not required to be a guarantor of the
Authoritys debt obligations. Mohegan Ventures-NW holds a 54.15% membership interest in Salishan-Mohegan,



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



formed with Salishan Company, an unrelated third party, to participate in the development and management of a casino to be located in Clark County,
Washington. The proposed casino (the Cowlitz Project) will be owned by the Cowlitz Indian Tribe, of which the sole member of Salishan Company is an affiliate. Salishan-Mohegan also has been designated as an unrestricted subsidiary of the
Authority.



Upon formation of Salishan-Mohegan, Salishan
Company contributed, among other things, land and land purchase options related to property to be assigned to the Cowlitz Indian Tribe for purposes of the Cowlitz Project. In accordance with the development agreement between Salishan-Mohegan and the
Cowlitz Indian Tribe, described below, the rights to these assets shall be assigned to the Cowlitz Indian Tribe at cost upon (1) receipt of necessary financing for the development of the proposed casino and (2) the underlying property
being taken into trust by the United States Department of the Interior. Pursuant to amendments made to the option agreements in May 2005, the land purchase options permit Salishan-Mohegan to purchase land at specified closing dates no later than
December 2005 and April 2006 for remaining payments of $7.5 million and $3.2 million, respectively. Under the option agreements, Salishan-Mohegan also is required to make extension payments on the aggregate agreed-upon net purchase price at an
annual rate of 6.5%, with an aggregate total of $2.4 million payable on the closing date in April 2006 or the applicable portion upon termination of the option agreements. As of September 30, 2005 and 2004, accrued extension payments on the
land purchase options was $2.1 million and $568,000, respectively.



Pursuant to the development agreement described below, the notes receivable contributed to Salishan-Mohegan and amounts paid by Salishan-Mohegan subsequent to formation related to the development of the Cowlitz Project are reimbursable to
Salishan-Mohegan by the Cowlitz Indian Tribe, subject to appropriate approvals defined in the development agreement. Reimbursements are contingent and payable upon: (1) the receipt of necessary financing for the development of the proposed
casino; and (2) the assignable property being taken into trust by the United States Department of the Interior. Notes receivable bear interest at the Wall Street Journal Prime Rate plus 2%, compounded annually. As of September 30, 2005 and
2004, receivables from the Cowlitz Indian Tribe totaled $11.2 million and $3.5 million, respectively, including accrued interest, offset by a $2.2 million and $690,000 reserve in the consolidated balance sheet, respectively.



On September 21, 2004, Salishan-Mohegan entered into development and
management agreements with the Cowlitz Indian Tribe regarding the Cowlitz Project. Under the terms of the development agreement, Salishan-Mohegan will carry out all activities that are necessary to develop the Cowlitz Project, including advising the
Cowlitz Indian Tribe with its plan to place land into trust by the United States Department of the Interior, assisting the Cowlitz Indian Tribe in the negotiation of a compact with the State of Washington, assisting in the arrangement of financing
for the Cowlitz Project and administering and overseeing the planning, design, development, and construction of the Cowlitz Project. The development agreement provides for development fees of 3% of total Project Costs, as defined in the development
agreement, which are payable to Mohegan Ventures-NW through Salishan-Mohegan pursuant to the Operating Agreement. The management agreement is for a period of seven years, during which Salishan-Mohegan will manage, operate, and maintain the planned
casino. The management agreement provides for a management fee of 24% of Net Revenues, as defined in the management agreement, which approximates net income earned from the Cowlitz Project. Pursuant to the Operating Agreement, management fees will
be allocated to the members of Salishan-Mohegan based on their respective membership percentages. Development of the Cowlitz Project is subject to certain governmental and regulatory approvals, including, but not limited to, negotiating a gaming
compact with the State of Washington and the accepting of land into trust on behalf of the Cowlitz Indian Tribe. The management agreement is subject to approval by the NIGC.



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MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 16SEGMENT REPORTING:



The Authority currently owns and operates the Mohegan Sun property in Connecticut and, after the acquisition of the Pocono
Downs entities in January 2005, operates the harness racetrack at Pocono Downs and five OTW facilities in Pennsylvania. All of the Authoritys revenues are derived from these operations. The Authoritys executive officers review and assess
the performance of the operating results and determine the proper allocation of resources to Mohegan Sun and the Pocono Downs entities on a separate basis. The Authority, therefore, believes that it has two operating segments, one comprised solely
of Mohegan Sun and another, referred to as Pocono Downs herein, comprised of the operations of the Pocono Downs entities. The two operating segments are also separate reporting segments due to the differing nature of their operations.
The following tables provide financial information on each segment (in thousands):



|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|----------------------------------------------------- |  | --------------------------------------- | --------- | - | ------------------ | - | --------- | ---- |  | - | --------- | -
|                                                      |  | For the Fiscal Year Ended September 30, |          
|                                                      |  | 2005                                    |           |   | 2004               |   |           | 2003 | 
|Net revenues:                                         |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Mohegan Sun                                           |  | $                                       | 1,305,686 |   |                    | $ | 1,256,926 |      |  | $ | 1,177,488 |  
|Pocono Downs                                          |  |                                         | 25,919    |   |                    |   |          |      |  |   |          |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Total                                                 |  | $                                       | 1,331,605 |   |                    | $ | 1,256,926 |      |  | $ | 1,177,488 |  
|                                                      |  |                                         |          
|Income (loss) from operations:                        |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Mohegan Sun                                           |  | $                                       | 150,914   |   |                    | $ | 251,455   |      |  | $ | 243,749   |  
|Pocono Downs                                          |  |                                         | (67       | ) |                    |   |          |      |  |   |          |  
|Corporate expenses                                    |  |                                         | (11,483   | ) |                    |   | (4,838    | )    |  |   | (2,416    | )
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Total                                                 |  |                                         | 139,364   |   |                    |   | 246,617   |      |  |   | 241,333   |  
|                                                      |  |                                         |          
|Accretion of discount to the relinquishment liability |  |                                         | (27,466   | ) |                    |   | (29,939   | )    |  |   | (33,592   | )
|Interest income                                       |  |                                         | 673       |   |                    |   | 232       |      |  |   | 269       |  
|Interest expense, net of capitalized interest         |  |                                         | (88,011   | ) |                    |   | (78,970   | )    |  |   | (83,492   | )
|Loss on early extinguishment of debt                  |  |                                         | (280      | ) |                    |   | (34,138   | )    |  |   | (27,396   | )
|Write-off of debt issuance costs                      |  |                                         |          |   |                    |   |          |      |  |   | (403      | )
|Other expense, net                                    |  |                                         | (1,127    | ) |                    |   | (933      | )    |  |   | (1,034    | )
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Income before minority interest                       |  |                                         | 23,153    |   |                    |   | 102,869   |      |  |   | 95,685    |  
|Minority interest                                     |  |                                         | 514       |   |                    |   | 18        |      |  |   |          |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Net income                                            |  | $                                       | 23,677    |   |                    | $ | 102,887   |      |  | $ | 95,685    |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|                                                      | 
|                                                      |  | For the Fiscal Year Ended September 30, |          
|                                                      |  | 2005                                    |           |   | 2004               |   |           | 2003 | 
|Capital expenditures:                                 |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Mohegan Sun                                           |  | $                                       | 45,367    |   |                    | $ | 30,680    |      |  | $ | 30,277    |  
|Pocono Downs                                          |  |                                         | 5,148     |   |                    |   |          |      |  |   |          |  
|Corporate                                             |  |                                         | 476       |   |                    |   |          |      |  |   |          |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Total                                                 |  | $                                       | 50,991    |   |                    | $ | 30,680    |      |  | $ | 30,277    |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|                                                      |  |                                         |          
|                                                      |  | September 30, 2005                      |           |   | September 30, 2004 |   |           |      | 
|Total assets:                                         |  |                                         |           |   |                    |   |           |      |  |   |           |  
|Mohegan Sun                                           |  | $                                       | 1,525,300 |   |                    | $ | 1,571,215 |      |  |   |           |  
|Pocono Downs (including goodwill of $39,459)          |  |                                         | 289,713   |   |                    |   |          |      |  |   |           |  
|Corporate                                             |  |                                         | 41,855    |   |                    |   | 8,490     |      |  |   |           |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  
|                                                      |  | $                                       | 1,856,868 |   |                    | $ | 1,579,705 |      |  |   |           |  
|                                                      |  |                                         |           |   |                    |   |           |      |  |   |           |  



F-33



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 17CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:



The Authoritys outstanding public debt, comprised of substantially all
of its senior and senior subordinated notes, is fully and unconditionally guaranteed by MBC, MCV-PA and the Pocono Downs entities. Separate financial statements and other disclosures concerning MBC, MCV-PA and the Pocono Downs entities are not
presented below because the Authority believes that they are not material to investors. Condensed consolidating financial statement information for the Authority, MBC, MCV-PA, the Pocono Downs entities and the non-guarantor subsidiaries as of
September 30, 2005 and 2004 and for the fiscal years ended September 30, 2005, 2004 and 2003 is as follows (in thousands):



CONDENSED CONSOLIDATING BALANCE SHEETS



|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|------------------------------------------------ |  | ------------------------ | --------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------------------ | - |  | ----------------- | -------- | - |  | - | --------- | -
|                                                 |  | As of September 30, 2005 |          
|                                                 |  | Authority                |           |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Consolidating/EliminatingAdjustments |   |  | ConsolidatedTotal |         
|ASSETS                                           |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Property and equipment, net                      |  | $                        | 1,283,885 |   |                       | $ | 34,956  |                           |  | $ | 3,850                                |   |  | $                 |         |   |  | $ | 1,322,691 |  
|Intercompany receivables                         |  |                          | 306,993   |   |                       |   |        |                           |  |   |                                     |   |  |                   | (306,993 | ) |  |   |          |  
|Other intangible assets, net                     |  |                          | 119,826   |   |                       |   | 220,741 |                           |  |   |                                     |   |  |                   |          |   |  |   | 340,567   |  
|Other assets, net                                |  |                          | 140,629   |   |                       |   | 41,616  |                           |  |   | 11,365                               |   |  |                   |         |   |  |   | 193,610   |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total assets                                     |  | $                        | 1,851,333 |   |                       | $ | 297,313 |                           |  | $ | 15,215                               |   |  | $                 | (306,993 | ) |  | $ | 1,856,868 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|LIABILITIES AND CAPITAL                          |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total current liabilities                        |  | $                        | 257,199   |   |                       | $ | 7,710   |                           |  | $ | 5,509                                |   |  | $                 |         |   |  | $ | 270,418   |  
|Long-term debt, net of current portion           |  |                          | 1,221,348 |   |                       |   | 5,000   |                           |  |   |                                     |   |  |                   |         |   |  |   | 1,226,348 |  
|Relinquishment liability, net of current portion |  |                          | 462,078   |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 462,078   |  
|Intercompany payables                            |  |                          |          |   |                       |   | 298,570 |                           |  |   | 8,423                                |   |  |                   | (306,993 | ) |  |   |          |  
|Other long-term liabilities                      |  |                          | 336       |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 336       |  
|Investment in subsidiaries                       |  |                          | 14,928    |   |                       |   |        |                           |  |   |                                     |   |  |                   | (14,928  | ) |  |   |          |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities                                |  |                          | 1,955,889 |   |                       |   | 311,280 |                           |  |   | 13,932                               |   |  |                   | (321,921 | ) |  |   | 1,959,180 |  
|Minority interest in subsidiary                  |  |                          |          |   |                       |   |        |                           |  |   | 2,560                                |   |  |                   |         |   |  |   | 2,560     |  
|Total capital                                    |  |                          | (104,556  | ) |                       |   | (13,967 | )                         |  |   | (1,277                               | ) |  |                   | 14,928   |   |  |   | (104,872  | )
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities and capital                    |  | $                        | 1,851,333 |   |                       | $ | 297,313 |                           |  | $ | 15,215                               |   |  | $                 | (306,993 | ) |  | $ | 1,856,868 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|                                                 | 
|                                                 |  | As of September 30, 2004 |          
|                                                 |  | Authority                |           |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Consolidating/EliminatingAdjustments |   |  | ConsolidatedTotal |         
|ASSETS                                           |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Property and equipment, net                      |  | $                        | 1,324,106 |   |                       | $ | 176     |                           |  | $ | 3,850                                |   |  | $                 |         |   |  | $ | 1,328,132 |  
|Intercompany receivables                         |  |                          | 8,930     |   |                       |   |        |                           |  |   |                                     |   |  |                   | (8,930   | ) |  |   |          |  
|Other assets, net                                |  |                          | 238,383   |   |                       |   | 8,550   |                           |  |   | 4,640                                |   |  |                   |         |   |  |   | 251,573   |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total assets                                     |  | $                        | 1,571,419 |   |                       | $ | 8,726   |                           |  | $ | 8,490                                |   |  | $                 | (8,930   | ) |  | $ | 1,579,705 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|LIABILITIES AND CAPITAL                          |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total current liabilities                        |  | $                        | 245,848   |   |                       | $ | 2,021   |                           |  | $ | 4,289                                |   |  | $                 |         |   |  | $ | 252,158   |  
|Long-term debt, net of current portion           |  |                          | 997,051   |   |                       |   | 6,000   |                           |  |   |                                     |   |  |                   |         |   |  |   | 1,003,051 |  
|Relinquishment liability, net of current portion |  |                          | 383,493   |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 383,493   |  
|Intercompany payables                            |  |                          |          |   |                       |   | 6,206   |                           |  |   | 2,724                                |   |  |                   | (8,930   | ) |  |   |          |  
|Other long-term liabilities                      |  |                          | 197       |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 197       |  
|Investment in subsidiaries                       |  |                          | 5,553     |   |                       |   |        |                           |  |   |                                     |   |  |                   | (5,553   | ) |  |   |          |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities                                |  |                          | 1,632,142 |   |                       |   | 14,227  |                           |  |   | 7,013                                |   |  |                   | (14,483  | ) |  |   | 1,638,899 |  
|Minority interest in subsidiary                  |  |                          |          |   |                       |   |        |                           |  |   | 1,845                                |   |  |                   |         |   |  |   | 1,845     |  
|Total capital                                    |  |                          | (60,723   | ) |                       |   | (5,501  | )                         |  |   | (368                                 | ) |  |                   | 5,553    |   |  |   | (61,039   | )
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities and capital                    |  | $                        | 1,571,419 |   |                       | $ | 8,726   |                           |  | $ | 8,490                                |   |  | $                 | (8,930   | ) |  | $ | 1,579,705 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  



F-34



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CONDENSED CONSOLIDATING STATEMENTS OF INCOME



|                                                      |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  
|----------------------------------------------------- |  | -------------------------------------------- | --------- | - | -------------------------- | - | ------- | -------------------------- |  | - | -------------------------------------- | - |  | ------------------ | ------ | - |  | - | --------- | -
|                                                      |  | For the Fiscal Year Ended September 30, 2005 |          
|                                                      |  | Authority                                    |           |   | Guarantor Subsidiaries (1) |   |         | Non-Guarantor Subsidiaries |  |   | Consolidating/ Eliminating Adjustments |   |  | Consolidated Total |       
|Net revenues                                          |  | $                                            | 1,302,039 |   |                            | $ | 30,816  |                            |  | $ |                                       |   |  | $                  | (1,250 | ) |  | $ | 1,331,605 |  
|Operating costs and expenses:                         |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  
|Gaming & other operations                             |  |                                              | 760,504   |   |                            |   | 22,158  |                            |  |   |                                       |   |  |                    | (1,250 | ) |  |   | 781,412   |  
|Advertising, general and administrative               |  |                                              | 189,416   |   |                            |   | 6,915   |                            |  |   | 1,939                                  |   |  |                    |       |   |  |   | 198,270   |  
|Pre-opening costs and expenses                        |  |                                              |          |   |                            |   | 1,257   |                            |  |   |                                       |   |  |                    |       |   |  |   | 1,257     |  
|Depreciation and amortization                         |  |                                              | 84,731    |   |                            |   | 2,947   |                            |  |   |                                       |   |  |                    |       |   |  |   | 87,678    |  
|Relinquishment liability reassessment                 |  |                                              | 123,624   |   |                            |   |        |                            |  |   |                                       |   |  |                    |       |   |  |   | 123,624   |  
|                                                      |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  
|Total operating costs and expenses                    |  |                                              | 1,158,275 |   |                            |   | 33,277  |                            |  |   | 1,939                                  |   |  |                    | (1,250 | ) |  |   | 1,192,241 |  
|                                                      |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  
|Income (loss) from operations                         |  |                                              | 143,764   |   |                            |   | (2,461  | )                          |  |   | (1,939                                 | ) |  |                    |       |   |  |   | 139,364   |  
|Accretion of discount to the relinquishment liability |  |                                              | (27,466   | ) |                            |   |        |                            |  |   |                                       |   |  |                    |       |   |  |   | (27,466   | )
|Interest expense, net of capitalized interest         |  |                                              | (73,202   | ) |                            |   | (14,659 | )                          |  |   | (150                                   | ) |  |                    |       |   |  |   | (88,011   | )
|Loss on interests in subsidiaries                     |  |                                              | (18,024   | ) |                            |   |        |                            |  |   |                                       |   |  |                    | 18,024 |   |  |   |          |  
|Other income (expense), net                           |  |                                              | (1,405    | ) |                            |   | 5       |                            |  |   | 666                                    |   |  |                    |       |   |  |   | (734      | )
|                                                      |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  
|Income (loss) before minority interest                |  |                                              | 23,667    |   |                            |   | (17,115 | )                          |  |   | (1,423                                 | ) |  |                    | 18,024 |   |  |   | 23,153    |  
|Minority interest                                     |  |                                              |          |   |                            |   |        |                            |  |   | 514                                    |   |  |                    |       |   |  |   | 514       |  
|                                                      |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  
|Net income (loss)                                     |  | $                                            | 23,667    |   |                            | $ | (17,115 | )                          |  | $ | (909                                   | ) |  | $                  | 18,024 |   |  | $ | 23,667    |  
|                                                      |  |                                              |           |   |                            |   |         |                            |  |   |                                        |   |  |                    |        |   |  |   |           |  

---

|(1) | Period from date of inception (January 25, 2005) to September 30, 2005 for Pocono Downs entities and MCV-PA.
|--- | ------------------------------------------------------------------------------------------------------------



|                                                      |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  
|----------------------------------------------------- |  | -------------------------------------------- | --------- | - | ---------------------- | - | ------ | ----------------------------- |  | - | -------------------------------------- | - |  | ------------------ | ----- | - |  | - | --------- | -
|                                                      |  | For the Fiscal Year Ended September 30, 2004 |          
|                                                      |  | Authority                                    |           |   | Guarantor Subsidiaries |   |        | Non-GuarantorSubsidiaries (1) |  |   | Consolidating/ Eliminating Adjustments |   |  | Consolidated Total |      
|Net revenues                                          |  | $                                            | 1,254,018 |   |                        | $ | 3,479  |                               |  | $ |                                       |   |  | $                  | (571  | ) |  | $ | 1,256,926 |  
|Operating costs and expenses:                         |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  
|Gaming & other operations                             |  |                                              | 729,495   |   |                        |   | 3,148  |                               |  |   |                                       |   |  |                    | (571  | ) |  |   | 732,072   |  
|Advertising, general and administrative               |  |                                              | 178,699   |   |                        |   | 1,918  |                               |  |   | 128                                    |   |  |                    |      |   |  |   | 180,745   |  
|Depreciation and amortization                         |  |                                              | 91,701    |   |                        |   | 1,894  |                               |  |   |                                       |   |  |                    |      |   |  |   | 93,595    |  
|Relinquishment liability reassessment                 |  |                                              | 3,897     |   |                        |   |       |                               |  |   |                                       |   |  |                    |      |   |  |   | 3,897     |  
|                                                      |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  
|Total operating costs and expenses                    |  |                                              | 1,003,792 |   |                        |   | 6,960  |                               |  |   | 128                                    |   |  |                    | (571  | ) |  |   | 1,010,309 |  
|                                                      |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  
|Income (loss) from operations                         |  |                                              | 250,226   |   |                        |   | (3,481 | )                             |  |   | (128                                   | ) |  |                    |      |   |  |   | 246,617   |  
|Accretion of discount to the relinquishment liability |  |                                              | (29,939   | ) |                        |   |       |                               |  |   |                                       |   |  |                    |      |   |  |   | (29,939   | )
|Interest expense                                      |  |                                              | (78,765   | ) |                        |   | (205   | )                             |  |   |                                       |   |  |                    |      |   |  |   | (78,970   | )
|Loss on early extinguishment of debt                  |  |                                              | (34,138   | ) |                        |   |       |                               |  |   |                                       |   |  |                    |      |   |  |   | (34,138   | )
|Loss on interests in subsidiaries                     |  |                                              | (3,736    | ) |                        |   |       |                               |  |   |                                       |   |  |                    | 3,736 |   |  |   |          |  
|Other income (expense), net                           |  |                                              | (761      | ) |                        |   | 2      |                               |  |   | 58                                     |   |  |                    |      |   |  |   | (701      | )
|                                                      |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  
|Income (loss) before minority interest                |  |                                              | 102,887   |   |                        |   | (3,684 | )                             |  |   | (70                                    | ) |  |                    | 3,736 |   |  |   | 102,869   |  
|Minority interest                                     |  |                                              |          |   |                        |   |        |                               |  |   | 18                                     |   |  |                    |      |   |  |   | 18        |  
|                                                      |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  
|Net income (loss)                                     |  | $                                            | 102,887   |   |                        | $ | (3,684 | )                             |  | $ | (52                                    | ) |  | $                  | 3,736 |   |  | $ | 102,887   |  
|                                                      |  |                                              |           |   |                        |   |        |                               |  |   |                                        |   |  |                    |       |   |  |   |           |  

---

|(1) | Period from date of inception (July 23, 2004) to September 30, 2004.
|--- | --------------------------------------------------------------------



F-35



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                      |  |                                              |           |   |                            |   |        |                                        |  |   |                    |   |  |   |           |  
|----------------------------------------------------- |  | -------------------------------------------- | --------- | - | -------------------------- | - | ------ | -------------------------------------- |  | - | ------------------ | - |  | - | --------- | -
|                                                      |  | For the Fiscal Year Ended September 30, 2003 |          
|                                                      |  | Authority                                    |           |   | Guarantor Subsidiaries (1) |   |        | Consolidating/ Eliminating Adjustments |  |   | Consolidated Total |  
|Net revenues                                          |  | $                                            | 1,174,729 |   |                            | $ | 3,252  |                                        |  | $ | (493               | ) |  | $ | 1,177,488 |  
|Operating costs and expenses:                         |  |                                              |           |   |                            |   |        |                                        |  |   |                    |   |  |   |           |  
|Gaming and other operations                           |  |                                              | 693,052   |   |                            |   | 2,821  |                                        |  |   | (493               | ) |  |   | 695,380   |  
|Advertising, general and administrative               |  |                                              | 169,856   |   |                            |   | 1,506  |                                        |  |   |                   |   |  |   | 171,362   |  
|Depreciation and amortization                         |  |                                              | 91,528    |   |                            |   | 595    |                                        |  |   |                   |   |  |   | 92,123    |  
|Relinquishment liability reassessment                 |  |                                              | (22,710   | ) |                            |   |       |                                        |  |   |                   |   |  |   | (22,710   | )
|                                                      |  |                                              |           |   |                            |   |        |                                        |  |   |                    |   |  |   |           |  
|Total operating costs and expenses                    |  |                                              | 931,726   |   |                            |   | 4,922  |                                        |  |   | (493               | ) |  |   | 936,155   |  
|                                                      |  |                                              |           |   |                            |   |        |                                        |  |   |                    |   |  |   |           |  
|Income (loss) from operations                         |  |                                              | 243,003   |   |                            |   | (1,670 | )                                      |  |   |                   |   |  |   | 241,333   |  
|Accretion of discount to the relinquishment liability |  |                                              | (33,592   | ) |                            |   |       |                                        |  |   |                   |   |  |   | (33,592   | )
|Interest expense                                      |  |                                              | (83,342   | ) |                            |   | (150   | )                                      |  |   |                   |   |  |   | (83,492   | )
|Loss on early extinguishment of debt                  |  |                                              | (27,396   | ) |                            |   |       |                                        |  |   |                   |   |  |   | (27,396   | )
|Loss on interest in subsidiary                        |  |                                              | (1,818    | ) |                            |   |       |                                        |  |   | 1,818              |   |  |   |          |  
|Other income (expense), net                           |  |                                              | (1,170    | ) |                            |   | 2      |                                        |  |   |                   |   |  |   | (1,168    | )
|                                                      |  |                                              |           |   |                            |   |        |                                        |  |   |                    |   |  |   |           |  
|Net income (loss)                                     |  | $                                            | 95,685    |   |                            | $ | (1,818 | )                                      |  | $ | 1,818              |   |  | $ | 95,685    |  
|                                                      |  |                                              |           |   |                            |   |        |                                        |  |   |                    |   |  |   |           |  

---

|(1) | Period from date of inception (January 27, 2003) to September 30, 2003 for MBC.
|--- | -------------------------------------------------------------------------------



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|----------------------------------------------------------- |  | -------------------------------------------- | -------- | - | -------------------------- | - | -------- | -------------------------- |  | - | -------------------------------------- | - |  | ------------------ | -------- | - |  | - | -------- | -
|                                                            |  | For the Fiscal Year Ended September 30, 2005 |         
|                                                            |  | Authority                                    |          |   | Guarantor Subsidiaries (1) |   |          | Non-Guarantor Subsidiaries |  |   | Consolidating/ Eliminating Adjustments |   |  | Consolidated Total |         
|Net cash flows provided by (used in) operating activities   |  | $                                            | 263,369  |   |                            | $ | (15,884  | )                          |  | $ | 819                                    |   |  | $                  |         |   |  | $ | 248,304  |  
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Cash flows provided by (used in) investing activities:      |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Purchases of property and equipment                         |  |                                              | (45,737  | ) |                            |   | (3,482   | )                          |  |   |                                       |   |  |                    |         |   |  |   | (49,219  | )
|Acquisition of Pocono Downs, net of cash acquired of $875   |  |                                              |         |   |                            |   | (280,114 | )                          |  |   |                                       |   |  |                    |         |   |  |   | (280,114 | )
|Other cash flows provided by (used in) investing activities |  |                                              | (307,681 | ) |                            |   |         |                            |  |   | (6,248                                 | ) |  |                    | 306,716  |   |  |   | (7,213   | )
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Net cash flows provided by (used in) investing activities   |  |                                              | (353,418 | ) |                            |   | (283,596 | )                          |  |   | (6,248                                 | ) |  |                    | 306,716  |   |  |   | (336,546 | )
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Cash flows provided by (used in) financing activities:      |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Bank Credit Facility borrowingsrevolving loan              |  |                                              | 750,000  |   |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | 750,000  |  
|Bank Credit Facility repaymentsrevolving loan              |  |                                              | (838,000 | ) |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | (838,000 | )
|Bank Credit Facility borrowingsterm loan                   |  |                                              | 58,333   |   |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | 58,333   |  
|Bank Credit Facility repaymentsterm loan                   |  |                                              | (150,000 | ) |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | (150,000 | )
|Line of credit borrowings                                   |  |                                              | 474,900  |   |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | 474,900  |  
|Line of credit repayments                                   |  |                                              | (479,985 | ) |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | (479,985 | )
|Proceeds from the issuance of long-term debt                |  |                                              | 400,000  |   |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | 400,000  |  
|Principal portion of relinquishment liability payments      |  |                                              | (42,540  | ) |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | (42,540  | )
|Distributions to Tribe                                      |  |                                              | (67,500  | ) |                            |   |         |                            |  |   |                                       |   |  |                    |         |   |  |   | (67,500  | )
|Other cash flows provided by (used in) financing activities |  |                                              | (4,064   | ) |                            |   | 300,016  |                            |  |   | 5,429                                  |   |  |                    | (306,716 | ) |  |   | (5,335   | )
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Net cash flows provided by (used in) financing activities   |  |                                              | 101,144  |   |                            |   | 300,016  |                            |  |   | 5,429                                  |   |  |                    | (306,716 | ) |  |   | 99,873   |  
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Net decrease in cash and cash equivalents                   |  |                                              | 11,095   |   |                            |   | 536      |                            |  |   |                                       |   |  |                    |         |   |  |   | 11,631   |  
|Cash and cash equivalents at beginning of year              |  |                                              | 60,406   |   |                            |   | 388      |                            |  |   |                                       |   |  |                    |         |   |  |   | 60,794   |  
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  
|Cash and cash equivalents at end of year                    |  | $                                            | 71,501   |   |                            | $ | 924      |                            |  | $ |                                       |   |  | $                  |         |   |  | $ | 72,425   |  
|                                                            |  |                                              |          |   |                            |   |          |                            |  |   |                                        |   |  |                    |          |   |  |   |          |  

---

|(1) | Period from date of inception (January 25, 2005) to September 30, 2005 for Pocono Downs entities and MCV-PA.
|--- | ------------------------------------------------------------------------------------------------------------



F-36



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|----------------------------------------------------------- |  | -------------------------------------------- | -------- | - | ---------------------- | - | ------ | ------------------------------ |  | - | -------------------------------------- | - | ------------------ | - | - |  | - | -------- | -
|                                                            |  | For the Fiscal Year Ended September 30, 2004 |         
|                                                            |  | Authority                                    |          |   | Guarantor Subsidiaries |   |        | Non-Guarantor Subsidiaries (1) |  |   | Consolidating/ Eliminating Adjustments |   | Consolidated Total |  
|Net cash flows provided by (used in) operating activities   |  | $                                            | 217,325  |   |                        | $ | (2,398 | )                              |  | $ | (151                                   | ) |                    | $ |  |  | $ | 214,776  |  
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Cash flows used in investing activities:                    |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Purchases of property and equipment                         |  |                                              | (31,874  | ) |                        |   | (38    | )                              |  |   |                                       |   |                    |   |  |  |   | (31,912  | )
|                                                            |  |                                              |          |   |                       
|Other cash flows used in investing activities               |  |                                              | (325     | ) |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | (325     | )
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Net cash flows used in investing activities                 |  |                                              | (32,199  | ) |                        |   | (38    | )                              |  |   |                                       |   |                    |   |  |  |   | (32,237  | )
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Cash flows provided by (used in) financing activities:      |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Bank Credit Facility borrowingsrevolving loan              |  |                                              | 290,000  |   |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | 290,000  |  
|Bank Credit Facility repaymentsrevolving loan              |  |                                              | (268,000 | ) |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | (268,000 | )
|Line of credit borrowings                                   |  |                                              | 208,923  |   |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | 208,923  |  
|Line of credit repayments                                   |  |                                              | (203,837 | ) |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | (203,837 | )
|Proceeds from the issuance of long-term debt                |  |                                              | 225,000  |   |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | 225,000  |  
|Payments on long-term debt                                  |  |                                              | (325,925 | ) |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | (325,925 | )
|                                                            |  |                                              |          |   |                       
|Principal portion of relinquishment liability payments      |  |                                              | (36,525  | ) |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | (36,525  | )
|                                                            |  |                                              |          |   |                       
|Distributions to Tribe                                      |  |                                              | (65,017  | ) |                        |   |       |                                |  |   |                                       |   |                    |   |  |  |   | (65,017  | )
|Other cash flows provided by (used in) financing activities |  |                                              | (22,029  | ) |                        |   | 2,250  |                                |  |   | 151                                    |   |                    |   |  |  |   | (19,628  | )
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Net cash flows provided by (used in) financing activities   |  |                                              | (197,410 | ) |                        |   | 2,250  |                                |  |   | 151                                    |   |                    |   |  |  |   | (195,009 | )
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Net decrease in cash and cash equivalents                   |  |                                              | (12,284  | ) |                        |   | (186   | )                              |  |   |                                       |   |                    |   |  |  |   | (12,470  | )
|Cash and cash equivalents at beginning of year              |  |                                              | 72,690   |   |                        |   | 574    |                                |  |   |                                       |   |                    |   |  |  |   | 73,264   |  
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  
|Cash and cash equivalents at end of year                    |  | $                                            | 60,406   |   |                        | $ | 388    |                                |  | $ |                                       |   |                    | $ |  |  | $ | 60,794   |  
|                                                            |  |                                              |          |   |                        |   |        |                                |  |   |                                        |   |                    |   |   |  |   |          |  

---

|(1) | Period from date of inception (July 23, 2004) to September 30, 2004.
|--- | --------------------------------------------------------------------



|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|------------------------------------------------------------ |  | -------------------------------------------- | -------- | - | -------------------------- | - | ------ | -------------------------------------- |  | ------------------ | - |  | - | -------- | -
|                                                             |  | For the Fiscal Year Ended September 30, 2003 |         
|                                                             |  | Authority                                    |          |   | Guarantor Subsidiaries (1) |   |        | Consolidating/ Eliminating Adjustments |  | Consolidated Total |  
|Net cash flows provided by operating activities              |  | $                                            | 194,696  |   |                            | $ | 788    |                                        |  | $                  |  |  | $ | 195,484  |  
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Cash flows used in investing activities:                     |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Purchases of property and equipment                          |  |                                              | (57,514  | ) |                            |   | (226   | )                                      |  |                    |  |  |   | (57,740  | )
|Other cash flows provided by (used in) investing activities. |  |                                              | 711      |   |                            |   | (2,259 | )                                      |  |                    |  |  |   | (1,548   | )
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Net cash flows used in investing activities                  |  |                                              | (56,803  | ) |                            |   | (2,485 | )                                      |  |                    |  |  |   | (59,288  | )
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Cash flows provided by (used in) financing activities:       |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Prior bank credit facility borrowings                        |  |                                              | 35,000   |   |                            |   |       |                                        |  |                    |  |  |   | 35,000   |  
|Prior bank credit facility repayments                        |  |                                              | (286,000 | ) |                            |   |       |                                        |  |                    |  |  |   | (286,000 | )
|Bank Credit Facility borrowingsrevolving loan               |  |                                              | 206,000  |   |                            |   |       |                                        |  |                    |  |  |   | 206,000  |  
|Bank Credit Facility repaymentsrevolving loan               |  |                                              | (140,000 | ) |                            |   |       |                                        |  |                    |  |  |   | (140,000 | )
|Bank Credit Facility borrowingsterm loan                    |  |                                              | 100,000  |   |                            |   |       |                                        |  |                    |  |  |   | 100,000  |  
|Line of credit borrowings                                    |  |                                              | 67,000   |   |                            |   |       |                                        |  |                    |  |  |   | 67,000   |  
|Line of credit repayments                                    |  |                                              | (67,000  | ) |                            |   |       |                                        |  |                    |  |  |   | (67,000  | )
|Proceeds from the issuance of long-term debt                 |  |                                              | 330,000  |   |                            |   |       |                                        |  |                    |  |  |   | 330,000  |  
|Payments on long-term debt                                   |  |                                              | (294,759 | ) |                            |   |       |                                        |  |                    |  |  |   | (294,759 | )
|Principal portion of relinquishment liability payments       |  |                                              | (28,633  | ) |                            |   |       |                                        |  |                    |  |  |   | (28,633  | )
|Distributions to Tribe                                       |  |                                              | (60,000  | ) |                            |   |       |                                        |  |                    |  |  |   | (60,000  | )
|Other cash flows provided by (used in) financing activities. |  |                                              | (11,828  | ) |                            |   | 2,271  |                                        |  |                    |  |  |   | (9,557   | )
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Net cash flows (used in) financing activities                |  |                                              | (150,220 | ) |                            |   | 2,271  |                                        |  |                    |  |  |   | (147,949 | )
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents         |  |                                              | (12,327  | ) |                            |   | 574    |                                        |  |                    |  |  |   | (11,753  | )
|Cash and cash equivalents at beginning of year               |  |                                              | 85,017   |   |                            |   |       |                                        |  |                    |  |  |   | 85,017   |  
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  
|Cash and cash equivalents at end of year                     |  | $                                            | 72,690   |   |                            | $ | 574    |                                        |  | $                  |  |  | $ | 73,264   |  
|                                                             |  |                                              |          |   |                            |   |        |                                        |  |                    |   |  |   |          |  

---

|(1) | Period from date of inception (January 27, 2003) to September 30, 2003 for MBC.
|--- | -------------------------------------------------------------------------------



F-37



---

##### Table of Contents

SCHEDULE II



MOHEGAN TRIBAL
GAMING AUTHORITY



SCHEDULE IIVALUATION AND
QUALIFYING ACCOUNTS AND RESERVES

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2005, 2004 and 2003

(in thousands)



|                                                      |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|----------------------------------------------------- |  | ---------------------------- | ----- | --------------------------- | - | ---------------------------- |  | -------------------------- | --- | ----------------------- | - | --- |  | - | -----
|                                                      |  | Column A                     |       | Column B                    |   | Column C                     |  | Column D                   |     | Column E               
|                                                      |  | Balance atbeginningof period |       | Charges tocosts andexpenses |   | Charged to otheraccounts (1) |  | Deductionsfromreserves (2) |     | Balances atend ofperiod
|Description:                                          |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Fiscal Year Ended September 30, 2005                  |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Reserves and allowances deducted from asset accounts: |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Reserves for uncollectible accounts                   |  | $                            | 3,013 |                             | $ | 2,286                        |  | $                          |    |                         | $ | 307 |  | $ | 4,992
|                                                      |  |                              |       |                             |  
|Fiscal Year Ended September 30, 2004                  |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Reserves and allowances deducted from asset accounts: |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Reserves for uncollectible accounts                   |  | $                            | 1,949 |                             | $ | 710                          |  | $                          | 594 |                         | $ | 240 |  | $ | 3,013
|                                                      |  |                              |       |                             |  
|Fiscal Year Ended September 30, 2003                  |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Reserves and allowances deducted from asset accounts: |  |                              |       |                             |   |                              |  |                            |     |                         |   |     |  |   |      
|Reserves for uncollectible accounts                   |  | $                            | 1,241 |                             | $ | 1,223                        |  | $                          |    |                         | $ | 515 |  | $ | 1,949

---

|Note | (1):   Refer to Note 15 to the audited consolidated financial statements beginning on page F-1 of this Form 10-K
for a discussion on the amount charged to other accounts in fiscal year 2004.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Note | (2):   Deductions from reserves include the write-off of uncollectible accounts, net of recoveries of accounts
previously written off.
|---- | --------------------------------------------------------------------------------------------------------------------------------------



S-1



---

##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                  
|3.1         |  | Constitution of the Mohegan Tribe of Indians of Connecticut, as amended (filed as Exhibit 3.1 to the Authoritys Registration Statement on Form S-4, filed with the SEC on November 1,
2004 (the 2004 Form S-4), and incorporated by reference herein).                                                    
|            | 
|3.2         |  | Ordinance No. 95-2 of the Tribe for Gaming on Tribal Lands, enacted on July 15, 1995 (filed as Exhibit 3.2 to the Authoritys Amendment No. 1 to the Authoritys Registration
Statement on Form S-1, filed with the SEC on February 29, 1996 (the 1996 Forms S-1), and incorporated by reference herein).  
|            | 
|3.3         |  | Articles of Organization of Mohegan Basketball Club LLC, dated as of January 27, 2003 (filed as Exhibit 3.3 to the Authoritys Registration Statement on Form S-4, filed with the SEC on
September 23, 2003 (the 2003 Form S-4), and incorporated by reference herein).                                    
|            | 
|3.4         |  | Operating Agreement of Mohegan Basketball Club LLC, a Mohegan Tribe of Indians of Connecticut limited liability company, dated as of January 24, 2003 (filed as Exhibit 3.4 to the 2003 Form
S-4, and incorporated by reference herein).                                                                     
|            | 
|3.5         |  | Certificate of Organization of Mohegan Commercial Ventures PA, LLC, dated as of January 6, 2005, as amended (filed as Exhibit 3.5 to the Authoritys Registration Statement on Form S-4,
filed with the SEC on June 7, 2005 (the 2005 Senior Subordinated Form S-4), and incorporated by reference herein).
|            | 
|3.6         |  | Operating Agreement of Mohegan Commercial Ventures PA, LLC, a Commonwealth of Pennsylvania limited liability company, dated as of December 15, 2004 (filed as Exhibit 3.6 to the 2005 Senior
Subordinated Form S-4, and incorporated by reference herein).                                                   
|            | 
|3.7         |  | Certificate of Limited Partnership of Downs Racing, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.7 to the 2005 Senior Subordinated Form S-4, and incorporated by reference
herein).                                                                                                     
|            | 
|3.8         |  | Amended and Restated Limited Partnership Agreement of Downs Racing, L.P., dated as of January 25, 2005 (filed as Exhibit 3.8 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                                
|            | 
|3.9         |  | Certificate of Limited Partnership of Backside, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.9 to the 2005 Senior Subordinated Form S-4, and incorporated by reference
herein).                                                                                                         
|            | 
|3.10        |  | Amended and Restated Limited Partnership Agreement of Backside, L.P., dated as of January 25, 2005 (filed as Exhibit 3.10 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                                   
|            | 
|3.11        |  | Certificate of Limited Partnership of Mill Creek Land, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.11 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                                 
|            | 
|3.12        |  | Amended and Restated Limited Partnership Agreement of Mill Creek Land, L.P., dated as of January 25, 2005 (filed as Exhibit 3.12 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                            
|            | 
|3.13        |  | Certificate of Limited Partnership of Northeast Concessions, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.13 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                           
|            | 
|3.14        |  | Amended and Restated Limited Partnership Agreement of Northeast Concessions, L.P., dated as of January 25, 2005 (filed as Exhibit 3.14 to the 2005 Senior Subordinated Form S-4, and
incorporated by reference herein).                                                                                      



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.1         |  | Relinquishment Agreement, dated February 7, 1998, by and among the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut and Trading Cove Associates (filed as Exhibit
10.14 to the Authoritys Form 10-K405 for the fiscal year ended September 30, 1998, filed with the SEC on December 29, 1998, and incorporated by reference herein).                                                                                                                                                                                                                                    
|            | 
|4.2         |  | Indenture, dated March 3, 1999, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and First Union National Bank, as Trustee, relating to the 81/8% Senior Notes Due 2006 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.3 to the Authoritys Registration Statement on Form S-4, filed with the SEC on April 21, 1999 (the 1999 Form S-4), and incorporated
by reference herein).                                                                                                                                                                 
|            | 
|4.3         |  | Supplemental Indenture, dated as of January 27, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC, the other Subsidiary Guarantors (as defined in the Indenture)
and Wachovia Bank, National Association (formerly known as First Union National Bank), as Trustee, relating to the 81/8% Senior Notes Due 2006 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.3 to the
Authoritys Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the SEC on August 8, 2003 (the June 2003 10-Q), and incorporated by reference herein).
|            | 
|4.4         |  | Second Supplemental Indenture, dated as of July 28, 2004, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC and Wachovia Bank, National Association (formerly known as
First Union National Bank), as Trustee, relating to the 81/8% Senior Notes Due 2006 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.4 to the Authoritys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004, filed with the SEC on August 16, 2004 (the June 2004 10-Q), and incorporated by reference herein).                                                          
|            | 
|4.5         |  | Form of Global 81/8% Senior Note Due 2006 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.3 to
the 1999 Form S-4, and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 
|4.6         |  | Indenture, dated as of July 26, 2001, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and State Street Bank and Trust Company, as Trustee, relating to
the 83/8% Senior Subordinated Notes Due 2011 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.9 to the Authoritys Registration Statement on Form S-4, File No. 333-69472, filed with the SEC on
September 14, 2001 (the 2001 Form S-4), and incorporated by reference herein).                                                                                                            
|            | 
|4.7         |  | Supplemental Indenture, dated as of January 27, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC, the other Subsidiary Guarantors (as defined in the Indenture)
and the State Street Bank and Trust Company, as Trustee, relating to the 83/8% Senior Subordinated Notes Due 2011 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.12 to the June 2003
10-Q, and incorporated by reference herein).                                                                                                                                                        
|            | 
|4.8         |  | Second Supplemental Indenture, dated as of July 28, 2004, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC and U.S. Bank National Association (as successor to
State Street Bank and Trust Company), as Trustee, relating to the 83/8% Senior Subordinated Notes Due 2011 of the Mohegan Tribal Gaming Authority (filed as exhibit 4.9 to the June 2004 10-Q and incorporated by reference
herein).                                                                                                                                                                        
|            | 
|4.9         |  | Form of Global 83/8% Senior Subordinated Notes Due 2011 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as
Exhibit 4.9 to the 2001 Form S-4, and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|4.10        |  | Indenture, dated as of February 20, 2002, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and State Street Bank and Trust Company, as Trustee,
relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.12 to the Authoritys Registration Statement on Form S-4, filed with the SEC on March 27, 2002 (the 2002 Form
S-4), and incorporated by reference herein).                                                                                                                                  



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.11        |  | Supplemental Indenture, dated as of January 27, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC, the other Subsidiary Guarantors (as defined in the Indenture)
and the State Street Bank and Trust Company, as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.16 to the June 2003 10-Q, and incorporated by reference
herein).                                                                                                                                      
|            | 
|4.12        |  | Amended and Restated Supplemental Indenture, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC and U.S. Bank National Association (as
successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as exhibit 4.14 to the Authoritys Quarterly Report on Form 10-Q for the quarter
ended December 31, 2004, filed with the SEC on February 14, 2005 (the December 2004 10-Q), and incorporated by reference herein).
|            | 
|4.13        |  | Supplemental Indenture No. 2, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC and U.S. Bank National Association (as successor to State
Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.15 to the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                  
|            | 
|4.14        |  | Supplemental Indenture No. 3, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined in the Indenture), and U.S. Bank National
Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.16 to the December 2004 10-Q, and incorporated by
reference herein).                                                                                                                     
|            | 
|4.15        |  | Form of Global 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.12 to the 2002 Form S-4, and incorporated by
reference herein).                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|4.16        |  | Indenture, dated as of July 9, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Mohegan Basketball Club LLC and U.S. Bank National Association, as
Trustee, relating to the 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.19 to the June 2003 10-Q, and incorporated by reference
herein).                                                                                                                                                                                   
|            | 
|4.17        |  | Supplemental Indenture No. 1, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC and U.S. Bank National Association, as Trustee, relating to
the 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                                     
|            | 
|4.18        |  | Supplemental Indenture No. 2, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined in the Indenture), and U.S. Bank National
Association, as Trustee, relating to the 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.21 to the December 2004 10-Q, and incorporated by reference
herein).                                                                                                                                                                        
|            | 
|4.19        |  | Form of Global 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2003
10-Q, and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|4.20        |  | Indenture, dated as of August 3, 2004, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Mohegan Basketball Club LLC and U.S. Bank National Association,
as Trustee, relating to the 71/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.19 to the June 2004 10-Q, and incorporated by reference
herein).                                                                                                                                                                                 



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                             
|4.21        |  | Supplemental Indenture No. 1, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined in the Indenture), and U.S. Bank National
Association, as Trustee, relating to the 71/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.25 to the December 2004 10-Q, and incorporated by reference
herein).
|            | 
|4.22        |  | Form of Global 71/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2004
10-Q, and incorporated by reference herein).                                                                                                                                                                                                                     
|            | 
|4.23        |  | Indenture, dated as of February 8, 2005, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined in the Indenture) and
U.S. Bank National Association, as Trustee, relating to the 67/8% Senior Subordinated Notes Due 2015 (filed as Exhibit 4.28 to the December 2004 10-Q, and incorporated by reference herein).              
|            | 
|4.24        |  | Form of Global 67/8% Senior Subordinated Notes Due 2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.29 to the December
2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                                                 
|            | 
|4.25        |  | Indenture, dated as of February 8, 2005, among the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined in the Indenture) and
Wachovia Bank, National Association, as Trustee, relating to the 61/8% Senior Notes Due 2013 (filed as Exhibit 4.31 to the December 2004 10-Q, and incorporated by reference herein).                      
|            | 
|4.26        |  | Form of Global 61/8% Senior Notes Due 2013 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.32 to the December 2004 10-Q,
and incorporated by reference herein).                                                                                                                                                                                                                              
|            | 
|10.1        |  | The Mohegan TribeState of Connecticut Gaming Compact between the Mohegan Tribe of Indians of Connecticut and the State of Connecticut (filed as Exhibit 10.1 to the 1996 Form S-1 and
incorporated herein by reference).                                                                                                                                                                               
|            | 
|10.2        |  | Agreement, dated April 25, 1994, between the Mohegan Tribe of Indians of Connecticut and the State of Connecticut resolving certain land claims (filed as Exhibit 10.2 to the 1996 Form S-1 and
incorporated herein by reference).                                                                                                                                                                      
|            | 
|10.3        |  | Memorandum of Understanding, dated April 25, 1994, between the Mohegan Tribe of Indians of Connecticut and the State of Connecticut regarding implementation of the Compact and the Resolution
Agreement (filed as Exhibit 10.3 to the 1996 Form S-1 and incorporated herein by reference).                                                                                                             
|            | 
|10.4        |  | Agreement, dated June 16, 1994, between the Mohegan Tribe of Indians of Connecticut and the Town of Montville, Connecticut (filed as Exhibit 10.4 to the 1996 Form S-1, and incorporated herein
by reference).                                                                                                                                                                                          
|            | 
|10.5        |  | Land Lease, dated September 29, 1995, between the Mohegan Tribe of Indians of Connecticut and the Mohegan Tribal Gaming Authority (filed as Exhibit 10.5 to the 1996 Form S-1, and incorporated
herein by reference).                                                                                                                                                                                   
|            | 
|10.6        |  | Amendment to the Land Lease, dated February 19, 1999, between the Mohegan Tribe of Indians of Connecticut and the Mohegan Tribal Gaming Authority (filed as Exhibit 10.6 to the 1999 Form
S-4, and incorporated herein by reference).                                                                                                                                                                   
|            | 
|10.7        |  | Defeasance Escrow Deposit Agreement, dated as of March 3, 1999, by and among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and First Union National Bank
(filed as Exhibit 10.11 to the 1999 Form S-4, and incorporated herein by reference).                                                                                                                        
|            | 
|10.8        |  | The Merrill Lynch Non-Qualified Deferred Compensation Plan Trust Agreement, dated September 1, 1998, between the Mohegan Tribal Gaming Authority and Merrill Lynch Trust (filed as Exhibit
10.16 to the 1998 Form 10-K, and incorporated by reference herein). *                                                                                                                                        



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                      
|10.9        |  | Priority Distribution Agreement between the Mohegan Tribal Gaming Authority and the Mohegan Tribe of Indians of Connecticut, dated August 1, 2001 (filed as Exhibit 10.1 to the
Authoritys Quarterly Report on Form 10-Q for the period ended June 30, 2001 (the June 2001 10-Q), and incorporated by reference herein).                                      
|            | 
|10.10       |  | Standard Form of Agreement Between Owner and Construction Manager where the Construction Manager is NOT a Constructor, AIA Document B801/Cma, and Supplemental Conditions, dated July 9, 1999
(filed as Exhibit 10.21 to the 2002 Form 10-K, and incorporated by reference herein).                                                                              
|            | 
|10.11       |  | General Conditions of the Contract for Construction, Construction Manager-Advisor Edition, AIA Document A201/CMa, and Supplementary Conditions to the Agreement Between Owner and Construction
Manager (filed as Exhibit 10.22 to the 2002 Form 10K, and incorporated by reference herein).                                                                      
|            | 
|10.12       |  | Employment Agreement, dated October 4, 2001, by and between the Mohegan Tribal Gaming Authority and Robert Soper (filed as Exhibit 10.23 to the 2001 10-K/A, and incorporated by reference
herein). *                                                                                                                                                            
|            | 
|10.13       |  | Membership Agreement, dated January 28, 2003, by and among WNBA, LLC, the Mohegan Basketball Club LLC, the Mohegan Tribal Gaming Authority and the Mohegan Tribe of Indians of Connecticut
(filed as Exhibit 10.1 to the Form 8-K filed with the SEC on January 30, 2003, and incorporated by reference herein).                                                 
|            | 
|10.14       |  | Amended and Restated Loan Agreement, dated as of March 25, 2003, by and among The Mohegan Tribe of Indians of Connecticut, the Mohegan Tribal Gaming Authority, the Lenders named therein and
Bank of America, N.A., as Administrative Agent (filed as Exhibit 10.1 to the Form 8-K filed with the SEC on March 27, 2003, and incorporated by reference herein). 
|            | 
|10.15       |  | Amendment No. 1 to the Amended and Restated Loan Agreement, dated as of June 26, 2003, by and among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and Bank
of America National Trust and Savings Association (filed as Exhibit 99.1 to the Form 8-K filed with the SEC on July 1, 2003, and incorporated by reference herein).
|            | 
|10.16       |  | Loan Agreement, dated June 27, 2003, between Mohegan Tribal Gaming Authority and Fleet National Bank (filed as Exhibit 10.2 to the June 2003 10-Q, and incorporated by reference
herein).                                                                                                                                                                        
|            | 
|10.17       |  | Revolving Loan Note, dated June 27, 2003, between Mohegan Tribal Gaming Authority and Fleet National Bank (filed as Exhibit 10.3 to the June 2003 10-Q, and incorporated by reference
herein).                                                                                                                                                                   
|            | 
|10.18       |  | Amended and Restated Employment Agreement, dated March 31, 2004, by and between the Mohegan Tribal Gaming Authority and William J. Velardo (filed as Exhibit 10.1 to the March 2004 10-Q, and
incorporated by reference herein). *                                                                                                                               
|            | 
|10.19       |  | Amended and Restated Employment Agreement, dated March 31, 2004, by and between the Mohegan Tribal Gaming Authority and Jeffrey E. Hartmann (filed as Exhibit 10.2 to the March 2004 10-Q,
and incorporated by reference herein). *                                                                                                                              
|            | 
|10.20       |  | Amended and Restated Employment Agreement, dated March 31, 2004, by and between the Mohegan Tribal Gaming Authority and Mitchell Grossinger Etess (filed as Exhibit 10.3 to the March 2004
10-Q, and incorporated by reference herein). *                                                                                                                        
|            | 
|10.21       |  | First Amendment to Loan Agreement, dated June 11, 2004, between Mohegan Tribal Gaming Authority and Fleet National Bank (filed as Exhibit 10.1 to the June 2004 10-Q, and incorporated by
reference herein).                                                                                                                                                     
|            | 
|10.22       |  | Second Amendment to Loan Agreement, dated June 22, 2004, between Mohegan Tribal Gaming Authority and Fleet National Bank (filed as Exhibit 10.2 to the June 2004 10-Q, and incorporated by
reference herein).                                                                                                                                                    



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                               
|10.23       |  | Amendment No. 2 to the Amended and Restated Loan Agreement, dated as of July 28, 2004, by and among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and Bank
of America, N.A., as Administrative Agent (filed as Exhibit 10.1 to the Form 8-K filed with the SEC on July 29, 2004, and incorporated by reference herein).
|            | 
|10.24       |  | Management Agreement between The Cowlitz Indian Tribe and Salishan-Mohegan, LLC, dated September 21, 2004 (filed as Exhibit 10.30 to the Authoritys Registration Statement on Form S-4,
File No. 333-120119, filed with the SEC on November 1, 2004 (the 2004 Form S-4), and incorporated by reference herein).                                        
|            | 
|10.25       |  | Development Agreement between The Cowlitz Indian Tribe and Salishan-Mohegan, LLC, dated September 21, 2004 (filed as Exhibit 10.31 to the 2004 Form S-4, and incorporated by reference
herein).                                                                                                                                                           
|            | 
|10.26       |  | Purchase Agreement by and among PNGI Pocono Corp., PNGI, LLC, and Mohegan Tribal Gaming Authority as of October 14, 2004 (filed as Exhibit 10.2 to the Form 8-K filed with the SEC on October
18, 2004, and incorporated by reference herein).                                                                                                            
|            | 
|10.27       |  | Amendment No. 3 to Amended and Restated Loan Agreement, dated October 14, 2004, by and among the Mohegan Tribe of Indians of Connecticut, the Mohegan Tribal Gaming Authority and Bank of
America, N.A. (filed as Exhibit 10.1 to the Form 8-K filed with the SEC on October 18, 2004, and incorporated by reference herein).                             
|            | 
|10.28       |  | Third Amendment to Loan Agreement, dated August 31, 2004, between Mohegan Tribal Gaming Authority and Fleet National Bank (filed as Exhibit 10.34 to the 2004 Form S-4, and incorporated by
reference herein).                                                                                                                                            
|            | 
|10.29       |  | Management Agreement by and among the Menominee Indian Tribe of Wisconsin, the Menominee Kenosha Gaming Authority and the Mohegan Tribal Gaming Authority, dated October 21, 2004 (filed as
Exhibit 10.35 to the 2004 Form S-4, and incorporated by reference herein).                                                                                    
|            | 
|10.30       |  | Trust Agreement under The Mohegan Retirement and 401(k) Plan dated July 1, 2005 between the Mohegan Tribe of Indians of Connecticut and Merrill Lynch Trust Company, FSB (filed herewith).
*                                                                                                                                                              
|            | 
|31.1        |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).                                                                                                                                                                                                                                                                       
|            | 
|31.2        |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).                                                                                                                                                                                                                                                                       
|            | 
|32.1        |  | Section 1350 Certification of Chief Executive Officer (filed herewith).                                                                                                                                                                                                                                                                                   
|            | 
|32.2        |  | Section 1350 Certification of Chief Financial Officer (filed herewith).                                                                                                                                                                                                                                                                                   

---

|* | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------