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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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



For the quarterly period ended
December 31, 2003



OR



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



For the transition period from
 to



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)



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



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

INDEX TO FORM 10-Q



|           |  |                                                                                                                       |  |           
|---------- |  | --------------------------------------------------------------------------------------------------------------------- |  | ----------
|           |  |                                                                                                                       |  | PageNumber
|PART I.    |  | FINANCIAL INFORMATION.                                                                                                |  |           
|           |  |                                                                                                                      
|Item 1.    |  | Financial Statements                                                                                                  |  |           
|           |  |                                                                                                                      
|           |  | Condensed Consolidated Balance Sheets as of December 31, 2003 and September 30, 2003 (unaudited)                      |  | 1         
|           |  |                                                                                                                      
|           |  | Condensed Consolidated Statements of Income for the Quarters Ended December 31, 2003 and 2002 (unaudited)             |  | 2         
|           |  |                                                                                                                      
|           |  | Condensed Consolidated Statements of Changes in Capital for the Quarters Ended December 31, 2003 and 2002 (unaudited) |  | 3         
|           |  |                                                                                                                      
|           |  | Condensed Consolidated Statements of Cash Flows for the Quarters Ended December 31, 2003 and 2002 (unaudited)         |  | 4         
|           |  |                                                                                                                      
|           |  | Notes to Condensed Consolidated Financial Statements                                                                  |  | 5-17      
|           |  |                                                                                                                      
|           |  | Report of Independent Accountants                                                                                     |  | 18        
|           |  |                                                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 19-34     
|           |  |                                                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 34-35     
|           |  |                                                                                                                      
|Item 4.    |  | Controls and Procedures                                                                                               |  | 35        
|           |  |                                                                                                                      
|PART II.   |  | OTHER INFORMATION.                                                                                                    |  |           
|           |  |                                                                                                                      
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                      |  | 36        
|           |  |                                                                                                                      
|Signatures |  | Mohegan Tribal Gaming Authority                                                                                       |  | 37        





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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1.Financial Statements



MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)



|                                                 |  |                   |           |   |                    |   |           |  
|------------------------------------------------ |  | ----------------- | --------- | - | ------------------ | - | --------- | -
|                                                 |  | December 31, 2003 |           |   | September 30, 2003 |  
|ASSETS                                           |  |                   |           |   |                    |   |           |  
|Current assets:                                  |  |                   |           |   |                    |   |           |  
|Cash and cash equivalents                        |  | $                 | 96,100    |   |                    | $ | 73,264    |  
|Receivables, net                                 |  |                   | 14,356    |   |                    |   | 13,434    |  
|Due from Tribe                                   |  |                   | 2,460     |   |                    |   | 2,453     |  
|Inventories                                      |  |                   | 14,778    |   |                    |   | 13,822    |  
|Other current assets                             |  |                   | 19,535    |   |                    |   | 15,379    |  
|                                                 |  |                   |           |   |                    |   |           |  
|Total current assets                             |  |                   | 147,229   |   |                    |   | 118,352   |  
|Non-current assets:                              |  |                   |           |   |                    |   |           |  
|Property and equipment, net                      |  |                   | 1,375,042 |   |                    |   | 1,386,338 |  
|Trademark and other intangible assets, net       |  |                   | 129,159   |   |                    |   | 129,375   |  
|Other assets, net                                |  |                   | 22,908    |   |                    |   | 24,446    |  
|                                                 |  |                   |           |   |                    |   |           |  
|Total assets                                     |  | $                 | 1,674,338 |   |                    | $ | 1,658,511 |  
|                                                 |  |                   |           |   |                    |   |           |  
|LIABILITIES AND CAPITAL                          |  |                   |           |   |                    |   |           |  
|Current liabilities:                             |  |                   |           |   |                    |   |           |  
|Current portion of long-term debt                |  | $                 | 1,000     |   |                    | $ | 1,000     |  
|Current portion of relinquishment liability      |  |                   | 92,194    |   |                    |   | 85,865    |  
|Trade payables                                   |  |                   | 29,547    |   |                    |   | 25,670    |  
|Accrued interest payable                         |  |                   | 29,977    |   |                    |   | 22,323    |  
|Other current liabilities                        |  |                   | 90,854    |   |                    |   | 86,642    |  
|                                                 |  |                   |           |   |                    |   |           |  
|Total current liabilities                        |  |                   | 243,572   |   |                    |   | 221,500   |  
|Non-current liabilities:                         |  |                   |           |   |                    |   |           |  
|Long-term debt, net of current portion           |  |                   | 1,086,229 |   |                    |   | 1,101,649 |  
|Relinquishment liability, net of current portion |  |                   | 412,163   |   |                    |   | 419,699   |  
|Other long-term liabilities                      |  |                   | 21,056    |   |                    |   | 14,558    |  
|                                                 |  |                   |           |   |                    |   |           |  
|Total liabilities                                |  |                   | 1,763,020 |   |                    |   | 1,757,406 |  
|                                                 |  |                   |           |   |                    |   |           |  
|Commitments and contingencies (Note 5)           |  |                   |           |   |                    |   |           |  
|Capital:                                         |  |                   |           |   |                    |   |           |  
|Retained deficit                                 |  |                   | (88,563   | ) |                    |   | (98,592   | )
|Accumulated other comprehensive loss             |  |                   | (119      | ) |                    |   | (303      | )
|                                                 |  |                   |           |   |                    |   |           |  
|Total capital                                    |  |                   | (88,682   | ) |                    |   | (98,895   | )
|                                                 |  |                   |           |   |                    |   |           |  
|Total liabilities and capital                    |  | $                 | 1,674,338 |   |                    | $ | 1,658,511 |  
|                                                 |  |                   |           |   |                    |   |           |  



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



1



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands)

(unaudited)



|                                                      |  |                        |         |   |                   |   |         |  
|----------------------------------------------------- |  | ---------------------- | ------- | - | ----------------- | - | ------- | -
|                                                      |  | For the Quarters Ended |        
|                                                      |  | December 31, 2003      |         |   | December 31, 2002 |  
|Revenues:                                             |  |                        |         |   |                   |   |         |  
|Gaming                                                |  | $                      | 274,066 |   |                   | $ | 255,373 |  
|Food and beverage                                     |  |                        | 22,574  |   |                   |   | 21,852  |  
|Hotel                                                 |  |                        | 12,963  |   |                   |   | 12,722  |  
|Retail, entertainment and other                       |  |                        | 24,974  |   |                   |   | 20,666  |  
|                                                      |  |                        |         |   |                   |   |         |  
|Gross revenues                                        |  |                        | 334,577 |   |                   |   | 310,613 |  
|LessPromotional allowances                           |  |                        | (28,579 | ) |                   |   | (27,607 | )
|                                                      |  |                        |         |   |                   |   |         |  
|Net revenues                                          |  |                        | 305,998 |   |                   |   | 283,006 |  
|                                                      |  |                        |         |   |                   |   |         |  
|Operating costs and expenses:                         |  |                        |         |   |                   |   |         |  
|Gaming                                                |  |                        | 156,862 |   |                   |   | 145,011 |  
|Food and beverage                                     |  |                        | 14,265  |   |                   |   | 13,521  |  
|Hotel                                                 |  |                        | 3,725   |   |                   |   | 2,839   |  
|Retail, entertainment and other                       |  |                        | 11,715  |   |                   |   | 9,835   |  
|Advertising, general and administrative               |  |                        | 43,464  |   |                   |   | 41,185  |  
|Depreciation and amortization                         |  |                        | 23,427  |   |                   |   | 23,019  |  
|                                                      |  |                        |         |   |                   |   |         |  
|Total operating costs and expenses                    |  |                        | 253,458 |   |                   |   | 235,410 |  
|                                                      |  |                        |         |   |                   |   |         |  
|Income from operations                                |  |                        | 52,540  |   |                   |   | 47,596  |  
|                                                      |  |                        |         |   |                   |   |         |  
|Other income (expense):                               |  |                        |         |   |                   |   |         |  
|Accretion of discount to the relinquishment liability |  |                        | (7,485  | ) |                   |   | (8,398  | )
|Interest income                                       |  |                        | 34      |   |                   |   | 89      |  
|Interest expense                                      |  |                        | (19,001 | ) |                   |   | (18,918 | )
|Other income (expense), net                           |  |                        | 21      |   |                   |   | (112    | )
|                                                      |  |                        |         |   |                   |   |         |  
|Total other expense                                   |  |                        | (26,431 | ) |                   |   | (27,339 | )
|                                                      |  |                        |         |   |                   |   |         |  
|Net income                                            |  | $                      | 26,109  |   |                   | $ | 20,257  |  
|                                                      |  |                        |         |   |                   |   |         |  



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



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MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(in thousands)

(unaudited)



|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|------------------------------------------------------------ |  | --------------------------------------- | ------- | --------------------------------------- | -------------------- | - | ------- |  | - | -------------------- | - |  | - | ------
|                                                             |  | For the Quarter Ended December 31, 2003 |         | For the Quarter Ended December 31, 2002
|                                                             |  | Capital                                 |         |                                         | Comprehensive Income |   | Capital |  |   | Comprehensive Income
|Retained deficit at October 1                                |  | $                                       | (98,592 | )                                       |                      |   |         |  | $ | (134,277             | ) |  |   |       
|Net income                                                   |  |                                         | 26,109  |                                         |                      | $ | 26,109  |  |   | 20,257               |   |  | $ | 20,257
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Distributions to Tribe                                       |  |                                         | (16,080 | )                                       |                      |   |         |  |   | (12,721              | ) |  |   |       
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Retained deficit at December 31                              |  |                                         | (88,563 | )                                       |                      |   |         |  |   | (126,741             | ) |  |   |       
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Accumulated other comprehensive loss at October 1            |  |                                         | (303    | )                                       |                      |   |         |  |   | (1,090               | ) |  |   |       
|Reclassification of derivative instrument losses to earnings |  |                                         |         |                                         |                      |   | 184     |  |   |                      |   |  |   | 197   
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Other comprehensive income                                   |  |                                         | 184     |                                         |                      |   | 184     |  |   | 197                  |   |  |   | 197   
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Comprehensive income                                         |  |                                         |         |                                         |                      | $ | 26,293  |  |   |                      |   |  | $ | 20,454
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Accumulated other comprehensive loss at December 31          |  |                                         | (119    | )                                       |                      |   |         |  |   | (893                 | ) |  |   |       
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       
|Total capital ending balance at December 31                  |  | $                                       | (88,682 | )                                       |                      |   |         |  | $ | (127,634             | ) |  |   |       
|                                                             |  |                                         |         |                                         |                      |   |         |  |   |                      |   |  |   |       



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



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MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                                                    |  |                        |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                    |  | For the Quarters Ended |        
|                                                                                                                    |  | December 31, 2003      |         |   | December 31, 2002 |  
|Cash flows provided by (used in) operating activities:                                                              |  |                        |         |   |                   |   |         |  
|Net income                                                                                                          |  | $                      | 26,109  |   |                   | $ | 20,257  |  
|Adjustments to reconcile net income to net cash flows provided by operating activities:                             |  |                        |         |   |                   |   |         |  
|Depreciation and amortization                                                                                       |  |                        | 23,427  |   |                   |   | 23,019  |  
|Accretion of discount to the relinquishment liability                                                               |  |                        | 7,485   |   |                   |   | 8,398   |  
|Cash paid for accretion of discount to the relinquishment liability                                                 |  |                        | (4,199  | ) |                   |   | (4,542  | )
|Change in fair value of derivative instruments                                                                      |  |                        |        |   |                   |   | (3,378  | )
|Loss on disposition of assets                                                                                       |  |                        | 30      |   |                   |   | 113     |  
|Provision for losses on receivables                                                                                 |  |                        | 348     |   |                   |   | 262     |  
|Amortization of debt issuance costs                                                                                 |  |                        | 1,742   |   |                   |   | 1,915   |  
|Amortization of deferred gain on sale of derivative instruments                                                     |  |                        | (199    | ) |                   |   | (167    | )
|Reclassification of derivative instrument losses to earnings                                                        |  |                        | 184     |   |                   |   | 197     |  
|Changes in operating assets and liabilities:                                                                        |  |                        |         |   |                   |   |         |  
|Increase in receivables                                                                                             |  |                        | (1,247  | ) |                   |   | (442    | )
|(Increase) decrease in inventories                                                                                  |  |                        | (956    | ) |                   |   | 430     |  
|Increase in other assets                                                                                            |  |                        | (3,857  | ) |                   |   | (14,987 | )
|Increase (decrease) in trade payables                                                                               |  |                        | 3,877   |   |                   |   | (444    | )
|Increase in other current liabilities                                                                               |  |                        | 13,207  |   |                   |   | 13,705  |  
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Net cash flows provided by operating activities                                                                     |  |                        | 65,951  |   |                   |   | 44,336  |  
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Cash flows provided by (used in) investing activities:                                                              |  |                        |         |   |                   |   |         |  
|Purchases of property and equipment, net of change in construction payables of $(1,341) and $(16,627), respectively |  |                        | (13,268 | ) |                   |   | (19,156 | )
|Proceeds from asset sales                                                                                           |  |                        |        |   |                   |   | 27      |  
|Issuance of third-party loans                                                                                       |  |                        | (254    | ) |                   |   | (500    | )
|Payments received on tenant loans                                                                                   |  |                        | 24      |   |                   |   | 22      |  
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Net cash flows used in investing activities                                                                         |  |                        | (13,498 | ) |                   |   | (19,607 | )
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Cash flows provided by (used in) financing activities:                                                              |  |                        |         |   |                   |   |         |  
|Prior bank credit facility repayments                                                                               |  |                        |        |   |                   |   | (25,000 | )
|Bank Credit Facility borrowings  revolving loan                                                                    |  |                        | 7,000   |   |                   |   |        |  
|Bank Credit Facility repayments  revolving loan                                                                    |  |                        | (16,000 | ) |                   |   |        |  
|Line of credit borrowings                                                                                           |  |                        | 34,000  |   |                   |   | 25,000  |  
|Line of credit repayments                                                                                           |  |                        | (34,000 | ) |                   |   | (25,000 | )
|Principal portion of relinquishment liability payments                                                              |  |                        | (4,493  | ) |                   |   | (3,630  | )
|Distributions to Tribe                                                                                              |  |                        | (16,080 | ) |                   |   | (12,721 | )
|Capitalized debt issuance costs                                                                                     |  |                        | (33     | ) |                   |   | (9      | )
|Decrease in other long-term liabilities                                                                             |  |                        | (11     | ) |                   |   | (59     | )
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Net cash flows used in financing activities                                                                         |  |                        | (29,617 | ) |                   |   | (41,419 | )
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                                |  |                        | 22,836  |   |                   |   | (16,690 | )
|Cash and cash equivalents at beginning of period                                                                    |  |                        | 73,264  |   |                   |   | 85,017  |  
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Cash and cash equivalents at end of period                                                                          |  | $                      | 96,100  |   |                   | $ | 68,327  |  
|                                                                                                                    |  |                        |         |   |                   |   |         |  
|Supplemental disclosures:                                                                                           |  |                        |         |   |                   |   |         |  
|Cash paid during the period for interest                                                                            |  | $                      | 11,805  |   |                   | $ | 15,106  |  



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



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



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. 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 the Mohegan Sun Casino (Mohegan Sun). The Authority is governed by a
nine-member Management Board, consisting of the same nine members as those 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 the Authoritys
Management Board.



The Authority has a wholly owned subsidiary,
the Mohegan Basketball Club LLC (MBC), which owns and operates a professional basketball team in the Womens National Basketball Association (WNBA), the Connecticut Sun. MBC owns approximately 3.9% of the membership
interests in WNBA, LLC.



NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:



The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. In accordance with Rule 10-01, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete
consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. In
the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair statement of the results for the interim period have been included. Operating results for the quarter ended December
31, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2004.



The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the year ended September 30, 2003. In addition, certain amounts in the 2003 condensed consolidated financial statements have been reclassified to conform to the 2004 presentation.



Principles of Consolidation



The condensed consolidated financial statements include the accounts of the
Authority and its wholly owned subsidiary, MBC. In consolidation, all intercompany balances and transactions have been eliminated.



New Accounting Pronouncements



In January 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46, Consolidation of Variable Interest
Entitiesan interpretation of ARB No. 51 (FIN 46). FIN 46 provides an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, regarding the consolidation of variable interest
entities and the corresponding improvement in the financial reporting by enterprises involved with these entities. In December 2003, the FASB deferred the latest date by which FIN 46 must be applied by the Authority for variable interest entities
acquired prior to January 31, 2003, to the first annual reporting period beginning after December 15, 2004. FIN 46 is currently effective for all variable interest entities created or acquired after January 31, 2003, of which the Authority has none.
The Authority does not believe the adoption of this standard for variable interest entities acquired prior to January 31, 2003 will affect the Authoritys financial position, results of operations or cash flows.



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



NOTE 3FINANCING FACILITIES:



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



|                                                 |  |                   |           |   |                    |   |           |  
|------------------------------------------------ |  | ----------------- | --------- | - | ------------------ | - | --------- | -
|                                                 |  | December 31, 2003 |           |   | September 30, 2003 |  
|Bank Credit Facility                             |  | $                 | 157,000   |   |                    | $ | 166,000   |  
|81/8%
Senior Notes                               |  |                   | 200,000   |   |                    |   | 200,000   |  
|1999 83/4% Senior Subordinated Notes             |  |                   | 5,241     |   |                    |   | 5,241     |  
|2001 83/8% Senior Subordinated Notes             |  |                   | 150,000   |   |                    |   | 150,000   |  
|2002 8% Senior Subordinated Notes                |  |                   | 250,000   |   |                    |   | 250,000   |  
|2003 63/8% Senior Subordinated Notes             |  |                   | 330,000   |   |                    |   | 330,000   |  
|WNBA Promissory Note                             |  |                   | 8,000     |   |                    |   | 8,000     |  
|                                                 |  |                   |           |   |                    |   |           |  
|Subtotal                                         |  |                   | 1,100,241 |   |                    |   | 1,109,241 |  
|Deferred gain on derivative instruments sold     |  |                   | 2,305     |   |                    |   | 2,504     |  
|Fair market value of derivative instruments held |  |                   | (15,317   | ) |                    |   | (9,096    | )
|                                                 |  |                   |           |   |                    |   |           |  
|Total debt                                       |  | $                 | 1,087,229 |   |                    | $ | 1,102,649 |  
|                                                 |  |                   |           |   |                    |   |           |  



Bank Credit Facility



The Authority has a loan agreement for up to $391.0
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 $291.0
million and a $100.0 million term loan, both of which mature on March 31, 2008. The Authority may seek to increase the size of the Bank Credit Facility, so long as, among other things, the aggregate principal amount is not in excess of $500.0
million. The maximum aggregate principal amount of $500.0 million includes amounts available under letters of credit. As of December 31, 2003, amounts available under outstanding letters of credit totaled $350,000, of which no amount was drawn
(refer to Letters of Credit below). Pursuant to the terms of the Bank Credit Facility, the term loan shall reduce automatically by one-twelfth of the initial principal balance, or $8.3 million, beginning on June 30, 2005 and continuing
each quarter thereafter. The revolving loan has no mandatory amortization provisions and is payable in full on March 31, 2008. The Authority had $233.7 million available for borrowing under the revolving loan as of December 31, 2003.



The Bank Credit Facility is collateralized by a lien on substantially all of
the Authoritys assets and a leasehold mortgage on the land and improvements which comprise Mohegan Sun. In addition, the Authoritys obligations under the Bank Credit Facility are guaranteed by MBC. Refer to Note 7 for condensed
consolidating financial information of the Authority and MBC. The Bank Credit Facility subjects the Authority to a number of restrictive covenants, including financial covenants. These financial covenants relate to, among other things, the
Authoritys permitted total debt and senior debt leverage ratios, its minimum fixed charge coverage ratio and its maximum capital expenditures. The Bank Credit Facility includes non-financial covenants by the Tribe and the Authority 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 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



As of December 31, 2003, 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 (LIBOR), plus in either
case, the applicable spread, which is based on the Authoritys Total Leverage Ratio, as defined in the Bank Credit Facility at the time each loan is made. The applicable spread for base rate advances shall be between 0.50% and 1.25%, and the
applicable spread for LIBOR rate advances shall be between 1.75% and 2.50%. 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 shall be payable at the end of each
applicable interest period or quarterly, if earlier. Interest on base rate advances shall be payable quarterly. As of December 31, 2003, the Authority had no base rate loans. All outstanding advances are based on one-month LIBOR plus the applicable
spread. As of December 31, 2003, one-month LIBOR was 1.12% and the applicable spread was 2.50%. Accrued interest on the Bank Credit Facility was $87,000 and $64,000 at December 31, 2003 and September 30, 2003, respectively.



81/8% Senior Notes



On March 3, 1999, the Authority issued $200.0 million Senior Notes with
fixed interest payable at a rate of 8.125% per annum (the 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 Senior Notes is payable semi-annually on January 1 and July 1. The Senior Notes mature on January 1, 2006. The 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 other 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 Senior Notes. The Senior Notes rank equally in right of payment with 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 1999 Senior Subordinated Notes, the 2001 Senior Subordinated Notes, the 2002 Senior
Subordinated Notes and the 2003 Senior Subordinated Notes. MBC is a guarantor of the Senior Notes. Refer to Note 7 for condensed consolidating financial information of the Authority and MBC. As of December 31, 2003 and September 30, 2003, accrued
interest on the Senior Notes was $8.1 million and $4.1 million, respectively.



1999 83/4% Senior Subordinated Notes



On March 3, 1999, the Authority issued $300.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.75% per annum (the 1999 Senior Subordinated Notes). The proceeds from this
financing were used to extinguish or defease existing debt, pay transaction costs and fund initial costs related to Project Sunburst. Interest on the 1999 Senior Subordinated Notes is payable semi-annually on January 1 and July 1. The 1999 Senior
Subordinated Notes mature on January 1, 2009. The first call date for the 1999 Senior Subordinated Notes was January 1, 2004. The 1999 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the
Bank Credit Facility, the 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 1999 Senior Subordinated Notes rank
equally with 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 and the 2003 Senior Subordinated Notes.
MBC is a guarantor of the 1999 Senior Subordinated Notes. Refer to Note 7 for condensed consolidating financial information of the Authority and MBC. In July 2003, the Authority completed a cash tender offer and consent solicitation to repurchase
all of its outstanding 1999 Senior



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Subordinated Notes. The aggregate principal amount tendered of the 1999 Senior Subordinated Notes was $294.8 million. As part of the tender offer, the
Authority received consent to certain proposed amendments to the indenture governing the 1999 Senior Subordinated Notes. An aggregate principal amount of $5.2 million of the 1999 Senior Subordinated Notes remained outstanding as of December 31,
2003. As of December 31, 2003 and September 30, 2003, accrued interest on the 1999 Senior Subordinated Notes was $229,000 and $115,000, respectively.



2001 83/8% Senior Subordinated Notes



On July 26, 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 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 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 1999 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the
Relinquishment Agreement that are then due and owing. MBC is a guarantor of the 2001 Senior Subordinated Notes. Refer to Note 7 for condensed consolidating financial information of the Authority and MBC. As of December 31, 2003 and September 30,
2002, accrued interest on the 2001 Senior Subordinated Notes was $6.3 million and $3.1 million, respectively.



2002 8% Senior Subordinated Notes



On February 20, 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 fund costs related to Project Sunburst. 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 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 1999 Senior Subordinated Notes,
the 2001 Senior Subordinated Notes, the 2003 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC is a guarantor of the 2002 Senior
Subordinated Notes. Refer to Note 7 for condensed consolidating financial information of the Authority and MBC. As of December 31, 2003 and September 30, 2003, accrued interest on the 2002 Senior Subordinated Notes was $5.0 million and $10.0
million, respectively.



2003 63/8% Senior Subordinated
Notes



On July 9, 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 1999
Senior Subordinated Notes 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, with the first interest payment paid on January 15, 2004. 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 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 remaining 1999 Senior Subordinated Notes, the 2001 Senior
Subordinated Notes, the 2002 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC is a guarantor of the 2003 Senior Subordinated Notes. Refer
to Note 7 for condensed consolidating financial information of the Authority and MBC. In November 2003, the



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Authority completed an offer to exchange the 2003 Senior Subordinated Notes for a new issue of substantially identical debt securities registered under the
Securities Act of 1933, as amended, with all outstanding notes being exchanged. As of December 31, 2003 and September 30, 2003, accrued interest on the 2003 Senior Subordinated Notes was $10.1 million and $4.8 million, respectively.



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 limitations on restricted payments and the incurrence of indebtedness, while the non-financial covenants include reporting obligations,
compliance with laws and regulations and the Authoritys continued existence. As of December 31, 2003, 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 in January 2003, 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, are required to be
paid to the WNBA on each anniversary of the WNBA Note. Interest payments are also due on each anniversary date. As of December 31, 2003 and September 30, 2003, accrued interest on the WNBA Note was $203,000 and $150,000, respectively. Refer to Note
7 for condensed consolidating financial information of the Authority and MBC.



Line of Credit



The Authority has a $25.0
million revolving loan agreement with Fleet National Bank (the Line of Credit). At the Authoritys option, each advance shall bear interest at either the banks variable Prime Rate or on the basis of seven or thirty day LIBOR,
plus the applicable margin pursuant to the terms of the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations of the Authority. The Line of Credit expires in June 2004. 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 December 31, 2003 , the Authority was in compliance with all covenant requirements in the Line of Credit. As of
December 31, 2003 and September 30, 2003, no amounts were outstanding under the Line of Credit.



Derivative Instruments



The Authority is considered an end user of derivative instruments and engages in derivative transactions for risk management purposes only.



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Derivative instruments held by the Authority at December 31, 2003 are as follows (in thousands):



|                                                                   |  |               |  |               |         |                    |   |         |  
|------------------------------------------------------------------ |  | ------------- |  | ------------- | ------- | ------------------ | - | ------- | -
|                                                                   |  | Maturity Date |  | NotionalValue |         | EstimatedFairValue |  
|Interest rate swaps on 2001 senior subordinated notes due 2011     |  |               |  |               |         |                    |   |         |  
|Six-month LIBOR plus 363 basis points                              |  | July 1, 2011  |  | $             | 35,000  |                    | $ | 122     |  
|Six-month LIBOR plus 364 basis points                              |  | July 1, 2011  |  |               | 35,000  |                    |   | 95      |  
|Interest rate swaps on 2003 senior subordinated notes due 2009     |  |               |  |               |         |                    |   |         |  
|Six-month LIBOR plus 297 basis points                              |  | July 15, 2009 |  |               | 82,500  |                    |   | (2,858  | )
|Six-month LIBOR plus 297 basis points                              |  | July 15, 2009 |  |               | 82,500  |                    |   | (2,812  | )
|Six-month LIBOR plus 297 basis points                              |  | July 15, 2009 |  |               | 82,500  |                    |   | (2,829  | )
|Six-month LIBOR plus 298 basis points                              |  | July 15, 2009 |  |               | 82,500  |                    |   | (2,770  | )
|                                                                   |  |               |  |               |         |                    |   |         |  
|Total                                                              |  |               |  | $             | 400,000 |                    | $ | (11,052 | )
|                                                                   |  |               |  |               |         |                    |   |         |  
|Less: Accrued interest settlement earned on derivative instruments |  |               |  |               |         |                    |   | (4,265  | )
|                                                                   |  |               |  |               |         |                    |   |         |  
|Total                                                              |  |               |  |               |         |                    | $ | (15,317 | )
|                                                                   |  |               |  |               |         |                    |   |         |  



Six-month LIBOR was
1.22% on December 31, 2003.



On July 10, 2003, the Authority
entered into four interest rate swap agreements, each based on six-month LIBOR plus spreads of 297 to 298 basis points and each hedging $82.5 million of the 2003 Senior Subordinated Notes. On July 29, 2003, the Authority entered into two other
interest rate swap agreements, each based on six- month LIBOR plus spreads of 363 to 364 basis points and each hedging $35.0 million of the 2001 Senior Subordinated Notes. Under these agreements, the Authority makes payments on the variable interest
rate provided by the derivative instrument and receives 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. The carrying values of the 2003 and 2001 Senior Subordinated Notes have been adjusted for the fair market value liabilities of the interest rate swap agreements of $14.5 million and $781,000, respectively, as of
December 31, 2003. The Authority has classified the aggregate fair market value liability of $15.3 million into its current and non-current components on the consolidated balance sheet, which resulted in $5.6 million recorded to other current assets
and $20.9 million recorded to other long-term liabilities. A cumulative estimate of $4.3 million for accrued interest settlements earned on these derivative instruments through December 31, 2003 has been recorded as an offset to interest expense and
is included in other current assets in the condensed consolidated balance sheet.



On February 25, 2003, the Authority entered into two interest rate swap agreements, each based on six-month LIBOR plus spreads of 388 basis points and 387.5 basis points, respectively, and each hedging $75.0 million
of the 2001 Senior Subordinated Notes. These interest rate swap agreements qualified for hedge accounting and were designated as fair value hedges. On March 10, 2003, the Authority sold these instruments for a gain of $1.1 million. The $1.1 million
gain was deferred and added to the carrying value of the 2001 Senior Subordinated Notes and is being amortized and recorded as a reduction in interest expense over the remaining term of the 2001 Senior Subordinated Notes. For the year ended December
31, 2003, the Authority recorded amortization of $32,000 as an offset to interest expense and expects to record approximately $129,000 as an offset to interest expense over the next twelve months.



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



In September 2002, the Authority modified an interest rate swap and interest rate collar agreement,
which were designated as cash flow hedges. The resulting fair market value liability at the date of modification is being reclassified from other comprehensive loss to interest expense over the original terms of the derivative instruments. For the
quarter ended December 31, 2003, the Authority reclassified approximately $184,000 of the fair market value liability into interest expense and expects to reclassify approximately $119,000 of the fair market value liability into interest expense
over the next twelve months.



In August 2002, the Authority
entered into three interest rate swap agreements, each based on six-month LIBOR plus a spread of 437 basis points with one instrument hedging $100.0 million of the Senior Notes and two instruments each hedging $50.0 million of the Senior Notes.
These interest rate swap agreements qualified for hedge accounting and were designated as fair value hedges. During September 2002, the Authority sold these agreements for a gain of $2.2 million. The $2.2 million gain was deferred and added to the
carrying value of the Senior Notes and is being amortized and recorded as a reduction to interest expense over the remaining term of the Senior Notes. For the quarter ended December 31, 2003, the Authority recorded amortization of $167,000 as an
offset to interest expense and expects to record approximately $669,000 as an offset to interest expense over the next twelve months.



The aggregate fair market value change of the Authoritys derivative instruments not accounted for under hedge accounting was $3.4 million, recorded
as an offset to interest expense for the quarter ended December 31, 2002. There was no change in the aggregate fair market value on the Authoritys derivative instruments recorded as an offset to interest expense for the quarter ended December
31, 2003. The Authority also recorded a reduction to interest expense of $2.2 million and $1.2 million for the quarters ended December 31, 2003 and 2002, respectively, related to actual and estimated accrued interest settlements on the
Authoritys derivative instruments.



Letters of Credit



The Authority maintains letters of credit in order to satisfy potential
workers compensation liabilities that may arise. The Authority has available a $250,000 uncollateralized letter of credit that will expire in August 2004. The Authority also has a $100,000 uncollateralized letter of credit that expires in
March 2004. As of December 31, 2003, no amounts were drawn on the letters of credit.



NOTE 4RELATED PARTY TRANSACTIONS:



The
Tribe provides governmental and administrative services to the Authority in conjunction with the operation of Mohegan Sun. During the quarters ended December 31, 2003 and 2002, the Authority incurred $3.4 million and $3.3 million, respectively, of
expenses for such services. 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. For the quarters ended December 31,
2003 and 2002, the Authority expensed $53,000 and $70,000, respectively, relating to these land lease agreements.



The Authority purchases its utilities from an entity owned by the Tribe, the Mohegan Tribal Utility Authority, including electricity, gas, water and
sewer. During the quarters ended December 31, 2003 and 2002, the Authority incurred costs of $4.5 million and $4.1 million, respectively, for such utilities.



NOTE 5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



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



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 $50.3 million and $46.1 million for the quarters ended December 31,
2003 and 2002, respectively. As of December 31, 2003, outstanding Slot Win Contribution payments to the State of Connecticut totaled $16.5 million.



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, also clarifies and records the terms
pursuant to which the Authority made such payments to the Tribe prior to the effective date of the Priority Distribution Agreement. The Priority Distribution Agreement 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 and are not secured by a lien or encumbrance on any assets or property of the Authority. The Authoritys condensed consolidated financial statements reflect payments associated with the Priority Distribution
Agreement of $3.8 million and $3.7 million for quarters ended December 31, 2003 and December 31, 2002, respectively.



Radio Station Guarantee



The Authority has an agreement with Citadel Broadcasting Company (Citadel) to operate the radio station WMOS on the premises of Mohegan Sun.
The term of the agreement shall expire on the earliest of (a) the closing of or the acquisition of the station by the Authority at any time for any reason, or (b) if the Federal Communications Commission revokes or refuses to renew the license of
the station or the license is otherwise cancelled for any reason or (c) three years after the commencement date. Either party may, upon notice to the other given not less than 120 days prior to the expiration of the initial term, extend the
agreement for up to two additional one-year terms. In the event WMOSs annual net revenue is less than $600,000, the Authority agrees to reimburse Citadel $600,000 less the actual net revenue. Citadel will retain 100% of WMOSs annual net
revenues between $600,000 and $750,000, and the Authority will share one-half of annual net revenues that exceed $750,000. Amounts to be reimbursed are assessed monthly, but payments are calculated on a cumulative annual basis. The maximum potential
future payments (undiscounted) the Authority could be required to make under the initial term of the agreement is $250,000. If both additional one-year renewal options were exercised, the maximum potential future payments (undiscounted) the
Authority could be required to make under the renewal options is $1.4 million, which includes a 9% increase during each of the one-year renewal periods. No payments were required for the quarters ended December 31, 2003 and 2002.



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.



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



The Authority also entered into a co-investment agreement with the Mashantucket Pequot Tribal Nation
(MPTN) and ACLS. Under the terms of the co-investment agreement, the Authority and MPTN are guarantors of a term loan entered into between ACLS and Citizens Bank of Connecticut. The term of the co-investment agreement is for ten years
and, in the event of default by ACLS, the maximum potential future payments (undiscounted) the Authority could be required to make is approximately $6.4 million.



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 6TCA AGREEMENTS:



Relinquishment Agreement



In February 1998, the Authority and Trading Cove Associates
(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 following 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 following 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).



In the event of any bankruptcy, liquidation or reorganization or similar proceeding relating to the Authority or 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 include 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 the Authoritys 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, Accounting for Contingencies, has recorded a relinquishment
liability of the estimated present value of its obligations under the Relinquishment Agreement.



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 December 31, 2003, the carrying amount of the relinquishment liability was $504.4 million as compared to $505.6 million at September 30, 2003. The decrease during the quarter ended
December 31, 2003 is due to $8.7 million in relinquishment payments, offset by $7.5 million for the accretion of discount to the relinquishment liability. Of the $8.7 million in relinquishment payments, $4.5 million represents payment of principal
and $4.2 million represents payment of the accretion of discount to the relinquishment liability. During the quarter ended December 31, 2002, the Authority paid $8.2 million in relinquishment payments, consisting of $3.6 million in principal amounts
and $4.6 million for the payment of the accretion of discount to the



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MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



relinquishment liability. The accretion of discount to the relinquishment liability resulted from the impact of the discount for the time value of money. At
December 31, 2003, relinquishment payments earned but unpaid were $25.4 million.



NOTE 7CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:



The Authoritys outstanding public debt, comprised of its senior and senior subordinated notes, is fully and unconditionally guaranteed by MBC. Separate financial statements and other disclosures concerning MBC
are not presented below because the Authority believes that they are not material to investors. Condensed consolidating statements of income and cash flows for the quarter ended December 31, 2002 are not presented below due to the formation of MBC
in January 2003. Condensed consolidating financial statement information for the Authority and MBC, as of December 31, 2003 and September 30, 2003 and for the quarter ended December 31, 2003, is as follows (in thousands):



CONDENSED CONSOLIDATING BALANCE SHEETS



|                                                 |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|------------------------------------------------ |  | ----------------------- | --------- | - | --- | - | ------ | ------------------------ |  | - | ----------------- | - |  | - | --------- | -
|                                                 |  | As of December 31, 2003 |          
|                                                 |  | Authority               |           |   | MBC |   |        | ConsolidatingAdjustments |  |   | ConsolidatedTotal |  
|ASSETS                                           |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Property and equipment, net                      |  | $                       | 1,374,830 |   |     | $ | 212    |                          |  | $ |                  |   |  | $ | 1,375,042 |  
|Other assets, net                                |  |                         | 292,948   |   |     |   | 10,343 |                          |  |   | (3,995            | ) |  |   | 299,296   |  
|                                                 |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total assets                                     |  | $                       | 1,667,778 |   |     | $ | 10,555 |                          |  | $ | (3,995            | ) |  |   | 1,674,338 |  
|                                                 |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|LIABILITIES AND CAPITAL                          |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total current liabilities                        |  |                         | 241,528   |   |     |   | 6,039  |                          |  |   | (3,995            | ) |  |   | 243,572   |  
|Long-term debt, net of current portion           |  |                         | 1,079,229 |   |     |   | 7,000  |                          |  |   |                  |   |  |   | 1,086,229 |  
|Relinquishment liability, net of current portion |  |                         | 412,163   |   |     |   |       |                          |  |   |                  |   |  |   | 412,163   |  
|Other long-term liabilities                      |  |                         | 21,056    |   |     |   |       |                          |  |   |                  |   |  |   | 21,056    |  
|Investment in subsidiary                         |  |                         | 2,484     |   |     |   |       |                          |  |   | (2,484            | ) |  |   |          |  
|                                                 |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total liabilities                                |  |                         | 1,756,460 |   |     |   | 13,039 |                          |  |   | (6,479            | ) |  |   | 1,763,020 |  
|Total capital                                    |  |                         | (88,682   | ) |     |   | (2,484 | )                        |  |   | 2,484             |   |  |   | (88,682   | )
|                                                 |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total liabilities and capital                    |  |                         | 1,667,778 |   |     | $ | 10,555 |                          |  | $ | (3,995            | ) |  | $ | 1,674,338 |  
|                                                 |  |                         |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  



14



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



|                                                 |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|------------------------------------------------ |  | ------------------------ | --------- | - | --- | - | ------ | ------------------------ |  | - | ----------------- | - |  | - | --------- | -
|                                                 |  | As of September 30, 2003 |          
|                                                 |  | Authority                |           |   | MBC |   |        | ConsolidatingAdjustments |  |   | ConsolidatedTotal |  
|ASSETS                                           |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Property and equipment, net                      |  | $                        | 1,386,130 |   |     | $ | 208    |                          |  | $ |                  |   |  | $ | 1,386,338 |  
|Other assets, net                                |  |                          | 265,199   |   |     |   | 10,492 |                          |  |   | (3,518            | ) |  |   | 272,173   |  
|                                                 |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total assets                                     |  | $                        | 1,651,329 |   |     | $ | 10,700 |                          |  | $ | (3,518            | ) |  | $ | 1,658,511 |  
|                                                 |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|LIABILITIES AND CAPITAL                          |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total current liabilities                        |  |                          | 219,500   |   |     |   | 5,518  |                          |  |   | (3,518            | ) |  |   | 221,500   |  
|Long-term debt, net of current portion           |  |                          | 1,094,649 |   |     |   | 7,000  |                          |  |   |                  |   |  |   | 1,101,649 |  
|Relinquishment liability, net of current portion |  |                          | 419,699   |   |     |   |       |                          |  |   |                  |   |  |   | 419,699   |  
|Other long-term liabilities                      |  |                          | 14,558    |   |     |   |       |                          |  |   |                  |   |  |   | 14,558    |  
|Investment in subsidiary                         |  |                          | 1,818     |   |     |   |       |                          |  |   | (1,818            | ) |  |   |          |  
|                                                 |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total liabilities                                |  |                          | 1,750,224 |   |     |   | 12,518 |                          |  |   | (5,336            | ) |  |   | 1,757,406 |  
|Total capital                                    |  |                          | (98,895   | ) |     |   | (1,818 | )                        |  |   | 1,818             |   |  |   | (98,895   | )
|                                                 |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  
|Total liabilities and capital                    |  | $                        | 1,651,329 |   |     | $ | 10,700 |                          |  | $ | (3,518            | ) |  | $ | 1,658,511 |  
|                                                 |  |                          |           |   |     |   |        |                          |  |   |                   |   |  |   |           |  



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



CONDENSED CONSOLIDATING STATEMENT OF INCOME



|                                                      |  |                                         |         |   |     |   |      |                           |  |                    |     |  |   |         |  
|----------------------------------------------------- |  | --------------------------------------- | ------- | - | --- | - | ---- | ------------------------- |  | ------------------ | --- |  | - | ------- | -
|                                                      |  | For the Quarter Ended December 31, 2003 |        
|                                                      |  | Authority                               |         |   | MBC |   |      | Consolidating Adjustments |  | Consolidated Total |    
|Net revenues                                          |  | $                                       | 305,996 |   |     | $ | 2    |                           |  | $                  |    |  | $ | 305,998 |  
|Operating costs and expenses:                         |  |                                         |         |   |     |   |      |                           |  |                    |     |  |   |         |  
|Gaming and other operations                           |  |                                         | 186,380 |   |     |   | 187  |                           |  |                    |    |  |   | 186,567 |  
|Advertising, general and administrative               |  |                                         | 43,268  |   |     |   | 196  |                           |  |                    |    |  |   | 43,464  |  
|Depreciation and amortization                         |  |                                         | 23,195  |   |     |   | 232  |                           |  |                    |    |  |   | 23,427  |  
|                                                      |  |                                         |         |   |     |   |      |                           |  |                    |     |  |   |         |  
|Total operating costs and expenses                    |  |                                         | 252,843 |   |     |   | 615  |                           |  |                    |    |  |   | 253,458 |  
|                                                      |  |                                         |         |   |     |   |      |                           |  |                    |     |  |   |         |  
|Income (loss) from operations                         |  |                                         | 53,153  |   |     |   | (613 | )                         |  |                    |    |  |   | 52,540  |  
|Accretion of discount to the relinquishment liability |  |                                         | (7,485  | ) |     |   |     |                           |  |                    |    |  |   | (7,485  | )
|Interest expense                                      |  |                                         | (18,948 | ) |     |   | (53  | )                         |  |                    |    |  |   | (19,001 | )
|Equity interest                                       |  |                                         | (666    | ) |     |   |     |                           |  |                    | 666 |  |   |        |  
|Other income, net                                     |  |                                         | 55      |   |     |   |     |                           |  |                    |    |  |   | 55      |  
|                                                      |  |                                         |         |   |     |   |      |                           |  |                    |     |  |   |         |  
|Net income (loss)                                     |  | $                                       | 26,109  |   |     | $ | (666 | )                         |  | $                  | 666 |  | $ | 26,109  |  
|                                                      |  |                                         |         |   |     |   |      |                           |  |                    |     |  |   |         |  



CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS



|                                                          |  |                                         |         |   |     |   |      |                           |  |                    |   |  |   |         |  
|--------------------------------------------------------- |  | --------------------------------------- | ------- | - | --- | - | ---- | ------------------------- |  | ------------------ | - |  | - | ------- | -
|                                                          |  | For the Quarter Ended December 31, 2003 |        
|                                                          |  | Authority                               |         |   | MBC |   |      | Consolidating Adjustments |  | Consolidated Total |  
|Net cash flows provided by (used in) operating activities |  | $                                       | 66,253  |   |     | $ | (302 | )                         |  | $                  |  |  | $ | 65,951  |  
|                                                          |  |                                         |         |   |     |   |      |                           |  |                    |   |  |   |         |  
|Net cash flows used in investing activities               |  |                                         | (13,478 | ) |     |   | (20  | )                         |  |                    |  |  |   | (13,498 | )
|                                                          |  |                                         |         |   |     |   |      |                           |  |                    |   |  |   |         |  
|Net cash flows provided by (used in) financing activities |  |                                         | (30,117 | ) |     |   | 500  |                           |  |                    |  |  |   | (29,617 | )
|                                                          |  |                                         |         |   |     |   |      |                           |  |                    |   |  |   |         |  
|Net increase in cash and cash equivalents                 |  |                                         | 22,658  |   |     |   | 178  |                           |  |                    |  |  |   | 22,836  |  
|Cash and cash equivalents at beginning of period          |  |                                         | 72,690  |   |     |   | 574  |                           |  |                    |  |  |   | 73,264  |  
|                                                          |  |                                         |         |   |     |   |      |                           |  |                    |   |  |   |         |  
|Cash and cash equivalents at end of period                |  | $                                       | 95,348  |   |     | $ | 752  |                           |  | $                  |  |  | $ | 96,100  |  
|                                                          |  |                                         |         |   |     |   |      |                           |  |                    |   |  |   |         |  



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##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



NOTE 8SUBSEQUENT EVENTS:



In January 2004, the Authority used the remaining proceeds from its offering of $330.0 million 63/8% Senior Subordinated Notes in July 2003 to redeem its outstanding $5.2 million 1999 Senior Subordinated Notes. The
notes were redeemed at a price of 104.375% per $1,000 principal amount redeemed, or $5.5 million in aggregate, including a premium of $229,000 and accrued interest of $19,000.



17



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##### Table of Contents

REPORT OF INDEPENDENT ACCOUNTANTS



To the
Management Board of

Mohegan Tribal Gaming Authority:



We have reviewed the accompanying condensed consolidated balance sheet of Mohegan Tribal Gaming Authority (the Authority) and its subsidiary
as of December 31, 2003, and the related condensed consolidated statements of income, of changes in capital, and of cash flows for each of the three-month periods ended December 31, 2003 and 2002. These interim financial statements are the
responsibility of the Authoritys management.



We
conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial
statements for them to be in conformity with accounting principles generally accepted in the United States of America.



We previously audited in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of
September 30, 2003, and the related consolidated statements of income, of changes in capital and of cash flows for the year then ended (not presented herein), and in our report dated November 13, 2003 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 2003, is fairly stated in all material respects in relation to the consolidated balance sheet
from which it has been derived.



/s/ PricewaterhouseCoopers LLP

Hartford, CT

January 27, 2004



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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



Some information included in this Quarterly Report on Form 10-Q and other materials filed by us with the Securities and Exchange Commission, or the SEC,
contain 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. Such statements include 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. These statements can sometimes 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 or on behalf of us. These risks and uncertainties include, but are not limited to, those relating
to increased competition (including the legalization of expanded gaming in Connecticut, New York, Massachusetts, Maine and Rhode Island), changes in interest rates, dependence on existing management, leverage and debt service, regional, domestic or
global economic conditions, changes in federal tax laws or the administration of such laws, changes in gaming laws or regulation and the availability of financing for development and operations. Additional information concerning potential factors
that could affect our financial results are included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2003, as well as our other reports and filings with the SEC. The forward-looking statements included in this Quarterly
Report on Form 10-Q are made only as of the date of this report. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances. We can not assure you that projected results or
events will be achieved.



The following discussion and analysis
should be read in conjunction with our condensed consolidated financial statements and the related notes beginning on page 1 of this Quarterly Report on Form 10-Q.



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.
The Tribe established us as an instrumentality of the Tribe, with the exclusive power to conduct and regulate gaming activities on tribal lands. Our gaming operation is one of only two legally authorized gaming operations in New England offering
traditional slot machines and table games. We are governed by a nine-member Management Board, consisting of the nine members of 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.



Competition from Other Gaming Operations



Our gaming operation is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games, with the other operation being our primary competitor in Connecticut, Foxwoods Resort Casino. We
also currently face competition from several casinos and gaming facilities located on Indian tribal lands in the state of New York, as well as potential competition from planned casino projects announced by other Indian tribes in the northeastern
United States. Please refer to Part I. Item 1. BusinessMarket and Competition from Other Gaming Operations in our Form 10-K for the fiscal year ended September 30, 2003 for further detail regarding our current and projected
competition from other gaming operations.



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##### Table of Contents

Recent Developments



On January 27, 2004, the board of directors for MGM Mirage and Wembley plc, or Wembley, announced an agreement on the terms
of a cash acquisition by MGM Mirage of Wembley, which is expected to be completed by the third quarter of 2004. Wembley owns and operates the pari-mutuel facility, Lincoln Park, in Rhode Island. Lincoln Park currently offers approximately 2,300
video slot machines to the New England gaming market. The acquisition is subject to requisite court and shareholder approval, the completion of a Lincoln Park reorganization and receipt of necessary regulatory approvals. Currently, we generate
approximately 5% of our gaming revenues from Rhode Island. We do not anticipate a material impact on our revenues due to the change in Lincoln Park ownership.



On January 28, 2004, the Schaghticoke Tribe of Kent, Connecticut was granted federal recognition by the Department of the Interior Bureau of Indian
Affairs, or BIA. The State of Connecticut has announced their intention to appeal the BIAs recognition decision through a formal appeals board, the Department of the Interior Board of Indian Appeals. The Schaghticoke Tribe has expressed an
intention to develop a casino in western Connecticut. Based on our internal estimates, we do not anticipate that federal recognition of the Schaghticoke Tribe of Kent, Connecticut will have a material impact on our revenues for the foreseeable
future.



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 Routes I-395 and 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. We completed a major expansion of Mohegan Sun known as Project Sunburst in fiscal year 2002. 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 the majority of an approximately 1,200-room luxury hotel and approximately 100,000 square feet of convention
space, opened in April 2002 with substantial completion of construction occurring in June 2002.



As of December 31, 2003, 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 176,500 square feet of gaming
space and offers:



| |  | approximately 3,850 slot machines and 170 table games (including, but not limited to, blackjack, roulette, craps and baccarat);
| | - | -------------------------------------------------------------------------------------------------------------------------------



| |  | food and beverage amenities, including three full-service themed fine dining restaurants with a fourth area featuring cuisine from all three themes, a 610-seat buffet, a New York
style delicatessen, a 24-hour coffee shop, a ten-station food court featuring international and domestic cuisine and multiple service bars for a total of approximately 1,800 restaurant seats;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  | an approximately 9,000 square foot simulcasting race book facility; and
| | - | -----------------------------------------------------------------------



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



20



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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 110 table games (including, but not limited to, 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 2,200 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 300-seat Cabaret;
| | - | -------------------



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



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



| |  | 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 recreation 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.



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 and racebook (also poker revenue for the quarter ended December 31, 2002, which was prior to the
closing of our poker room in September 2003);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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##### Table of Contents

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



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



The table below summarizes the Authoritys percentage of gross revenues
from each of these sources:



|                                |  |                                     |   |  |      |  
|------------------------------- |  | ----------------------------------- | - |  | ---- | -
|                                |  | For the Quarters Ended December 31, |  
|                                |  | 2003                                |   |  | 2002 |  
|Gaming                          |  | 82                                  | % |  | 82   | %
|Food and beverage               |  | 7                                   | % |  | 7    | %
|Hotel                           |  | 4                                   | % |  | 4    | %
|Retail, entertainment and other |  | 7                                   | % |  | 7    | %
|                                |  |                                     |   |  |      |  
|Total                           |  | 100                                 | % |  | 100  | %
|                                |  |                                     |   |  |      |  



Revenues



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. 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. We report gross
slot revenues to the State of Connecticut pursuant to the Mohegan Compact. On a monthly basis, we post gross slot win and other statistical information relating to slot operations reported to the State of Connecticut on our website at
www.mohegansun.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 some 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. We refer to such aggregated amounts as progressive jackpots.
Wide-area progressive jackpot amounts are paid by a third party vendor and we remit a weekly payment to the vendor. In-house progressive jackpot amounts are accrued by us 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 condensed 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 revenue represents the closing table games inventory plus table games drop and credit slips for cash, chips or tokens returned to the casino cage, less opening table
games inventory, discounts provided on patron losses, free bet coupons and 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.



22



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##### Table of Contents

Promotional allowances



We operate a voluntary program for our guests, 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 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. Promotional expenses related to redemption of points at third party
retail outlets at the Shops at Mohegan Sun are included in gaming expenses.



We also have ongoing promotional programs which offer coupons to our guests for the purchase of food, beverage, retail and other amenities offered within Mohegan Sun. The retail value of items 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.



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



|                                |  |                                     |        |      |   |       
|------------------------------- |  | ----------------------------------- | ------ | ---- | - | ------
|                                |  | For the Quarters Ended December 31,
|                                |  | 2003                                |        | 2002
|Food and beverage               |  | $                                   | 11,317 |      | $ | 11,257
|Hotel                           |  |                                     | 4,029  |      |   | 4,622 
|Retail, entertainment and other |  |                                     | 13,233 |      |   | 11,728
|                                |  |                                     |        |      |   |       
|Total                           |  | $                                   | 28,579 |      | $ | 27,607
|                                |  |                                     |        |      |   |       



The estimated cost of
providing these promotional allowances is charged to gaming expenses as follows (in thousands):



|                                |  |                                     |        |      |   |       
|------------------------------- |  | ----------------------------------- | ------ | ---- | - | ------
|                                |  | For the Quarters Ended December 31,
|                                |  | 2003                                |        | 2002
|Food and beverage               |  | $                                   | 7,158  |      | $ | 7,179 
|Hotel                           |  |                                     | 1,680  |      |   | 1,620 
|Retail, entertainment and other |  |                                     | 9,212  |      |   | 9,130 
|                                |  |                                     |        |      |   |       
|Total                           |  | $                                   | 18,050 |      | $ | 17,929
|                                |  |                                     |        |      |   |       



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 expenses associated with slot operations, table games, keno and racebook expenses, certain marketing expenses, and



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promotional expenses for the Mohegan Sun Players Club points redeemed at outlets owned by Mohegan Sun, as well as third party tenant restaurants and
the Shops at Mohegan Sun. Gaming expenses for the quarter ended December 31, 2002 also included expenses associated with poker operations.



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 operations and excludes accretion of discount to the relinquishment liability, interest income, interest expense, and other non-operating income and expenses.



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



In February 1998, we entered into the relinquishment agreement with
Trading Cove Associates, or 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 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. We adopted SFAS No. 142 Goodwill and Other Intangible Assets, or SFAS 142, on October 1, 2001. Under SFAS 142, the Mohegan Sun trademark is no longer subject
to amortization as 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 based test and, if impairment occurs, the amount of impaired
trademark must be written off immediately. With the adoption of SFAS 142, we no longer record amortization of the trademark. Refer to Note 6 to our condensed consolidated financial statements for a further discussion of how the relinquishment
liability and related reassessments are calculated.



Results of
Operations



Comparison of Operating Results for the
Quarters Ended December 31, 2003 and 2002:



Net
revenues for the quarter ended December 31, 2003 increased by $23.0 million, or 8.1%, to $306.0 million from $283.0 million for the quarter ended December 31, 2002. This increase was attributable primarily to our continued growth in both gaming and
non-gaming revenues, which is partially the result of a 5.8% increase in customer visitation to the casino over the same period in the prior year.



Gaming revenues for the quarter ended December 31, 2003 increased by $18.7 million, or 7.3%, to $274.1 million from $255.4 million for the quarter ended
December 31, 2002. This increase was primarily due to a 9.4% increase in net slot revenues and a 7.1% increase in table game revenues.



Slot handle for the quarter ended December 31, 2003 increased by $117.0 million, or 5.0%, to $2.46 billion from $2.34 billion for the same period in the
prior year. Gross slot revenues for the quarter ended December 31, 2003 increased by $17.3 million to $201.1 million from $183.8 million for the quarter ended December 31, 2002. We exceeded the Connecticut slot revenue market growth for the quarter
ended December 31, 2003, as we experienced an increase in gross slot revenues of 9.4% over the same period in the prior year. The State of Connecticut reported slot revenues of $387.1 million and $365.9 million for the quarters ended December 31,
2003 and 2002, respectively, representing an increase of 5.8%. Gross slot hold percentage for the quarter ended December 31, 2003 was 8.2% compared to 7.8% for the same period in the prior year. Gross slot win per unit per day was $356 and $322 for
the quarters ended December 31, 2003 and 2002, respectively.



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Table games drop for the quarter ended December 31, 2003 increased by $46.4 million, or 10.6%, to $485.5
million from $439.1 million for the quarter ended December 31, 2002. Table games revenues for the quarter ended December 31, 2003 increased by $5.1 million, or 7.1%, to $76.2 million from $71.1 million for the same period in the prior year. Table
games revenue per unit per day was $3,060 and $3,023 for the quarters ending December 31, 2003 and 2002, respectively. Table games hold percentage was 15.7% for the quarter ended December 31, 2003 compared to 16.2% for the same period in the prior
year. Table games hold percentage is relatively predictable over long periods of time, but can fluctuate significantly over shorter periods.



Food and beverage revenues for the quarter ended December 31, 2003 increased by $722,000, or 3.3%, to $22.6 million from $21.9 million for the quarter
ended December 31, 2002. This increase was attributable primarily to a higher average sale per meal served in the quarter ended December 31, 2003 of $13.38 as compared to the quarter ended December 31, 2002 of $12.77.



Hotel revenues for the quarter ended December 31, 2003 increased by $241,000,
or 1.9%, to $13.0 million from $12.7 million for the quarter ended December 31, 2002. Rooms occupied for the quarter ended December 31, 2003 increased by 18,000 rooms, or 23.3%, to 93,000 rooms from 75,000 rooms for the quarter ended December 31,
2002. The average daily room rate, or ADR, was $133, with an occupancy rate of 86% for the quarter ended December 31, 2003 compared to an ADR of $161 and an occupancy rate of 70% for the quarter ended December 31, 2002. The substantial increase in
our occupancy rate was due to an increase in promotional programs providing lower room rates, which is evident in our decrease in ADR. Revenue per available room, or REVPAR, was $114 for the quarter ended December 31, 2003 compared to $113 for the
quarter ended December 31, 2002. The increased hotel occupancy contributed to growth in gaming, food and beverage, and retail, entertainment and other revenues for the quarter ended December 31, 2003.



Retail, entertainment and other revenues increased by $4.3 million, or 20.8%,
to $25.0 million for the quarter ended December 31, 2003 from $20.7 million for the quarter ended December 31, 2002. Retail and other revenues increased by $1.1 million, or 7.5%, while entertainment revenues increased by $3.2 million, or 59.2%, for
the quarter ended December 31, 2003 as compared to the same period in the prior year. The increase in entertainment revenues was attributable primarily to a 43.1% increase in the number of arena tickets sold in the quarter ended December 31, 2003
compared to the quarter ended December 31, 2002. The increase in ticket sales was also the result of a 21.7% increase in the number of events held at the Mohegan Sun Arena and a higher number of star entertainers performing at the arena for the
quarter ended December 31, 2003. The increase in retail and other revenues for the quarter ended December 31, 2003 was attributable to an increase in rental revenue associated with the third party tenant restaurants and retail outlets in the Casino
of the Sky, along with increased patronage to our stores and the Mohegan Sun gasoline and convenience center.



Promotional allowances for the quarter ended December 31, 2003 increased by $972,000, or 3.5%, to $28.6 million from $27.6 million for the quarter ended
December 31, 2002. The increase was due primarily to a $835,000 increase in entertainment complimentaries related to the larger number of arena events during the quarter.



Total operating costs and expenses for the quarter ended December 31, 2003 increased by $18.1 million, or 7.7%, to $253.5
million from $235.4 million for the quarter ended December 31, 2002. The increase was attributable to additional operating costs and expenses associated with supporting the $23.0 million increase in net revenues and a $2.3 million increase in
advertising, general and administrative expenses. Additional increases occurred in costs related to employee medical insurance costs and reimbursement of holiday shopping coupons redeemed at third party tenant outlets.



Gaming costs and expenses for the quarter ended December 31, 2003 increased
by $11.9 million, or 8.2%, to $156.9 million from $145.0 million for the quarter ended December 31, 2002. The increase was



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due primarily to increased casino marketing efforts including holiday promotional costs, increased employee medical insurance costs and an increase in the
slot win contribution payments to the State of Connecticut. We recorded expenses associated with the slot win contribution of $50.3 million and $46.1 million for the quarters ended December 31, 2003 and 2002, respectively. The increases in gaming
costs and expenses mentioned above were partially offset by a decrease in direct gaming labor costs.



Food and beverage costs and expenses for the quarter ended December 31, 2003 increased by $800,000, or 5.5%, to $14.3 million from $13.5 million for the
quarter ended December 31, 2002. The increase was due primarily to increased labor costs, including employee medical insurance costs, in addition to higher cost of goods sold associated with supporting the increase in food and beverage revenues.



Hotel costs and expenses for the quarter ended December 31,
2003 increased by $886,000, or 31.2%, to $3.7 million from $2.8 million for the quarter ended December 31, 2002. The increase was primarily attributable to increased labor costs to support the increased hotel room occupancy in the quarter ended
December 31, 2003.



Retail, entertainment and other costs and
expenses for the quarter ended December 31, 2003 increased by $1.9 million, or 19.1%, to $11.7 million from $9.8 million for the quarter ended December 31, 2002. This increase was attributable to higher entertainment costs associated with the
increase in the number of arena events and the production of larger-scale events during the quarter ended December 31, 2003. There were 28 events in the Mohegan Sun Arena during the quarter ended December 31, 2003 compared to 23 events during the
quarter ended December 31, 2002. The increase was also attributable to higher labor costs and cost of goods sold supporting the increase in retail revenues from our retail outlets and the Mohegan Sun gasoline and convenience center.



Advertising, general and administrative costs and expenses for the quarter
ended December 31, 2003 increased by $2.3 million, or 5.5%, to $43.5 million from $41.2 million for the quarter ended December 31, 2002. The increase was due primarily to increased labor costs necessary to facilitate operations, including higher
employee benefit costs, which were partially offset by a decrease in workers compensation insurance costs during the quarter ended December 31, 2003.



Depreciation and amortization for the quarter ended December 31, 2003 increased by $408,000, or 1.8%, to $23.4 million from $23.0 million for the quarter
ended December 31, 2002. The increase was due primarily to the amortization of intangible assets of $216,000 for the quarter ended December 31, 2003. There was no amortization expense relating to these assets for the quarter ended December 31, 2002,
as they were related to our purchase of a WNBA franchise in January 2003.



Income from operations for the quarter ended December 31, 2003 increased by $4.9 million, or 10.4%, to $52.5 million from $47.6 million for the quarter ended December 31, 2002. This increase was due to the increase in
net revenues, offset substantially by the increase in total operating costs and expenses as described above.



Accretion of discount to the relinquishment liability for the quarter ended December 31, 2003 decreased by $900,000, or 10.9%, to $7.5 million from $8.4
million for the quarter ended December 31, 2002. Our accretion of the discount to the relinquishment liability reflects the impact of the time value of money, discounted to present value.



Interest income for the quarter ended December 31, 2003 decreased by $55,000, or 61.8%, to $34,000 from $89,000 for the
quarter ended December 31, 2002. The decrease in interest income resulted principally from a decrease in the weighted-average invested cash and cash equivalents and a decrease in the weighted-average interest rate. The weighted-average invested cash
and cash equivalents were $9.6 million and $21.0 million for the quarters ended December 31, 2003 and December 31, 2002, respectively. The weighted-average interest rate for invested cash was 1.4% for the quarter ended December 31, 2003 compared to
1.7% for the quarter ended December 31, 2002. We invest in deposits that can be redeemed on demand and investments having maturities of not more than three months from the date of acquisition.



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Interest expense for the quarter ended December 31, 2003 increased by $83,000, or 0.4%, to $19.0 million
from $18.9 million for the quarter ended December 31, 2002. The weighted average outstanding debt was $1.1 billion for each of the quarters ended December 31, 2003 and December 31, 2002. The weighted-average interest rate for the quarter ended
December 31, 2003 was 6.8% compared to 6.6% for the quarter ended December 31, 2002. The increase in our weighted-average interest rate was due primarily to a $3.4 million favorable change in fair value related to derivative instruments for the
quarter ended December 31, 2002. We did not record a change in fair value related to derivative instruments as a component of interest expense in the quarter ended December 31, 2003. Interest expense for the quarters ended December 31, 2003 and
December 31, 2002 also includes $2.2 million and $1.2 million, respectively, in interest settlements expected to be received on derivative instruments held, which we record as reductions to interest expense.



Net income for the quarter ended December 31, 2003 increased by $5.8 million,
or 28.9%, to $26.1 million from $20.3 million for the quarter ended December 31, 2002. The increase is primarily due to the increase in income from operations and the decrease in accretion of discount to the relinquishment liability as described
above.



Seasonality



The gaming industry in Connecticut is seasonal in nature with the heaviest
gaming activity occurring at Mohegan Sun between May and August. Accordingly, the results of operations for the quarter ended December 31, 2003 are not necessarily indicative of the operating results for other interim periods or a full fiscal year.



Liquidity, Capital Resources and Capital Spending



As of December 31, 2003, we held cash and cash equivalents of $96.1 million,
an increase of $22.8 million from $73.3 million as of September 30, 2003. Cash provided by operating activities was $66.0 million for the quarter ended December 31, 2003, an increase of $21.7 million, or 49.0%, from $44.3 million for the quarter
ended December 31, 2002. The increase in cash provided by operating activities is attributable primarily to an increase in net income after adjustments for non-cash items and lower working capital requirements.



Operating activities are a significant source of our cash flows. In addition
to cash generated by operating activities, we have relied on external sources of liquidity to meet our investing requirements. We primarily use our cash flows provided by operating activities to meet our working capital requirements and to reduce
our leverage. While we do not believe that there is any trend or a likelihood of an 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 cash flows, including, but not limited to, the following:



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



| |  | increased competition in the gaming industry, including the legalization or expansion of gaming in Connecticut, New York, Massachusetts, Maine and Rhode Island, which may result in
a substantial decrease in revenue; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



External Sources of Liquidity



Notes. We previously financed much of the costs of construction and initial operations with the net proceeds raised from the issuance of notes. As
of December 31, 2003, we had $200.0 million outstanding in 81/8% senior notes due January 1, 2006, or the senior notes; $5.2 million outstanding in 83/4% senior subordinated
notes due July 1, 2009 and first callable January 1, 2004, or the 1999 senior subordinated notes; $150.0 million outstanding in 83/8% senior subordinated notes due January 1, 2011 and first callable



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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; and $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. MBC
is a guarantor of each of these notes. Refer to Note 3 to our condensed consolidated financial statements in this Form 10-Q for a further discussion of these notes.



In November 2003, we completed an offer to exchange the 2003 senior subordinated notes for a new issue of substantially
identical debt securities registered under the Securities Act of 1933, as amended, with all outstanding notes being exchanged.



In July 2003, we completed a cash tender offer and consent solicitation to repurchase all of our outstanding 1999 senior subordinated notes. The aggregate
principal amount tendered of the 1999 senior subordinated notes was $294.8 million, leaving a remaining aggregate principal amount of $5.2 million outstanding. In January 2004, we used the remaining proceeds from our offering of the 2003 senior
subordinated notes to redeem our outstanding $5.2 million 1999 senior subordinated notes. The notes were redeemed at a price of 104.375% per $1,000 principal amount redeemed, or $5.5 million in aggregate, including a premium of $229,000 and accrued
interest of $19,000.



Bank Credit Facility. We have a
loan agreement for up to $391.0 million 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 bank credit facility is comprised of a revolving
loan of up to $291.0 million and a $100.0 million term loan, both of which mature on March 31, 2008. We may seek to increase the size of the bank credit facility, so long as, among other things, the aggregate principal amount is not in excess of
$500.0 million. The maximum aggregate principal amount of $500.0 million includes amounts available under letters of credit. As of December 31, 2003, the amount available under letters of credit totaled $350,000, of which no amount was drawn.
Pursuant to the terms of the bank credit facility, the term loan shall reduce automatically by one-twelfth of the initial principal balance, or $8.3 million, beginning on June 30, 2005 and continuing each quarter thereafter. The revolving loan has
no mandatory amortization provisions and is payable in full on March 31, 2008. We had $233.7 million available for borrowing under the revolving loan as of December 31, 2003.



The bank credit facility is collateralized by a lien on substantially all of our assets and a leasehold mortgage on the land
and improvements, which comprise Mohegan Sun. In addition, our obligations under the bank credit facility are guaranteed by MBC. 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 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, which is based on our total leverage ratio, as defined in the new bank credit facility, at the time each loan is made. The applicable
spread for base rate advances shall be between 0.50% and 1.25%, and the applicable spread for LIBOR rate advances shall be between 1.75% and 2.50%. 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 shall be payable at the end of each applicable interest period or quarterly, if earlier. Interest on base rate advances shall be payable quarterly. As of December 31, 2003, we had no base rate loans. Outstanding
advances are based on one-month LIBOR plus the applicable spread. As of December 31, 2003, one-month LIBOR was 1.12% and the applicable spread was 2.50%.



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Line of Credit. We have a $25.0 million revolving loan agreement with Fleet National Bank, or the
line of credit. At our option, each advance shall bear interest at either the banks variable Prime Rate or on the basis of seven or thirty day LIBOR, plus the applicable margin pursuant to the terms of the line of credit. Borrowings under the
line of credit are our uncollateralized obligations. The line of credit expires in June 2004 and subjects us to certain covenants, including a covenant to maintain at least $25.0 million available for borrowing under the bank credit facility.



Capital Expenditures



Capital Expenditures Incurred



Capital expenditures totaled $11.9 million for the quarter ended December
31, 2003, compared to $2.5 million for the quarter ended December 31, 2002. These capital expenditures were an aggregate of the following:



| |  | Property maintenance capital expenditures for furniture, fixtures and equipment totaled $11.3 million and $4.2 million for the quarters ended December 31, 2003 and December 31,
2002, respectively. For the quarter ended December 31, 2003, these expenditures included $5.0 million in renovations and the purchase of equipment to add slot machines to gaming space formerly used for poker operations and $1.6 million in
renovations and the purchase of equipment to add slot machines to our keno gaming area.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Cumulative Project Sunburst capital expenditures totaled $1.06 billion, including $63.5 million in capitalized interest, through December 31, 2003. During the quarter ended December
31, 2003, capital expenditures totaled $610,000 with no amounts recorded as capitalized interest. During the quarter ended December 31, 2002, capital expenditures were reduced by $1.7 million due to a revised estimate of capital expenditures
incurred.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Expected Future Capital
Expenditures



During the remainder of fiscal year 2004, we
expect capital expenditures to total $29.6 million, comprised primarily of anticipated maintenance capital expenditures.



Sources of Funding for Capital Expenditures



We will rely primarily on cash generated from operations to finance these capital expenditures.



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Interest Expense



For the quarters ended December 31, 2003 and 2002, we incurred the following in interest expense (in thousands):



|                                                                |  |                                     |        |   |      |   |        |  
|--------------------------------------------------------------- |  | ----------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                |  | For the Quarters Ended December 31, |       
|                                                                |  | 2003                                |        |   | 2002 |  
|Bank credit facility                                            |  | $                                   | 1,766  |   |      | $ |       |  
|Prior credit facility                                           |  |                                     |       |   |      |   | 2,590  |  
|81/8%
senior notes                                              |  |                                     | 4,062  |   |      |   | 4,062  |  
|1999 83/4% senior subordinated notes                            |  |                                     | 115    |   |      |   | 6,563  |  
|2001 83/8% senior subordinated notes                            |  |                                     | 3,141  |   |      |   | 3,141  |  
|2002 8% senior subordinated notes                               |  |                                     | 5,000  |   |      |   | 5,000  |  
|2003 63/8% senior subordinated notes                            |  |                                     | 5,260  |   |      |   |       |  
|WNBA note                                                       |  |                                     | 53     |   |      |   |       |  
|Line of credit                                                  |  |                                     | 62     |   |      |   | 157    |  
|Change in fair value of derivative instruments                  |  |                                     |       |   |      |   | (3,378 | )
|Interest settlementderivative instruments                      |  |                                     | (2,185 | ) |      |   | (1,162 | )
|Reclassification of derivative instrument losses to earnings    |  |                                     | 184    |   |      |   | 197    |  
|Amortization of deferred gain on sale of derivative instruments |  |                                     | (199   | ) |      |   | (167   | )
|Amortization of debt issuance costs                             |  |                                     | 1,742  |   |      |   | 1,915  |  
|                                                                |  |                                     |        |   |      |   |        |  
|Total interest expense                                          |  | $                                   | 19,001 |   |      | $ | 18,918 |  
|                                                                |  |                                     |        |   |      |   |        |  



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, distributions to the Tribe and foreseeable capital expenditure requirements with respect to
current operations for the next twelve months. We are also considering various alternatives for redeeming our senior notes due January 1, 2006, including utilization of our bank credit facility or the issuance of new senior or senior subordinated
notes.



Contractual Obligations and Commitments



Our future payment obligations related to our material debt and certain
other contractual obligations and the timing of those payments are set forth below. Since many of these payment amounts are not fixed, the amounts in the table below are solely estimates, as more fully described in the footnotes to the following
table, and the actual amounts may differ significantly from the estimates set forth below.



|                                       |  |                     |       |           |   |           |  |               |         |  |   |        
|-------------------------------------- |  | ------------------- | ----- | --------- | - | --------- |  | ------------- | ------- |  | - | -------
|Contractual Obligations (in
thousands) |  | Fiscal Year 2004(1) |       | 2-3 years |   | 4-5 years |  | After 5 years
|Long-term debt(2)                      |  | $                   | 1,000 |           | $ | 252,001   |  | $             | 108,999 |  | $ | 738,241
|Construction obligations(3)            |  |                     | 500   |           |   |          |  |               |        |  |   |       
|                                       |  |                     |       |           |   |           |  |               |         |  |   |        
|Total                                  |  | $                   | 1,500 |           | $ | 252,001   |  | $             | 108,999 |  | $ | 738,241
|                                       |  |                     |       |           |   |           |  |               |         |  |   |        



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---

|(1) | Amounts due within fiscal year 2004 represent obligations expected to be incurred from October 1, 2003 to September 30, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(2) | Long-term debt includes scheduled amortization and scheduled maturities for notes payable and amounts required to be paid pursuant to the bank credit facility, but excludes interest
payments. Refer to Note 3 to our condensed consolidated financial statements in this Form 10-Q.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Construction obligations represent the remainder of expenditures we must pay in connection with Project Sunburst, and related construction enhancements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the contractual obligations described above, we have certain
other contractual commitments that will require payments throughout 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 which 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.



|                                       |  |                     |         |           |   |           |  |            |         |  |   |          
|-------------------------------------- |  | ------------------- | ------- | --------- | - | --------- |  | ---------- | ------- |  | - | ---------
|Contractual Commitments (in
thousands) |  | Fiscal Year 2004(1) |         | 2-3 years |   | 4-5 years |  | 6-10 years
|Slot Win Contribution(2)               |  | $                   | 209,061 |           | $ | 398,784   |  | $          | 335,870 |  | $ | 931,910  
|Relinquishment commitments(3)          |  |                     | 68,542  |           |   | 129,963   |  |            | 106,565 |  |   | 295,677  
|Priority distributions(4)              |  |                     | 15,452  |           |   | 31,826    |  |            | 33,307  |  |   | 90,206   
|Town of Montville commitment(5)        |  |                     | 500     |           |   | 1,000     |  |            | 1,000   |  |   | 2,500    
|                                       |  |                     |         |           |   |           |  |            |         |  |   |          
|Total                                  |  | $                   | 293,555 |           | $ | 561,573   |  | $          | 476,742 |  | $ | 1,320,293
|                                       |  |                     |         |           |   |           |  |            |         |  |   |          

---

|(1) | Amounts due within fiscal year 2004 represent payment commitments from October 1, 2003 to September 30, 2004.
|--- | -------------------------------------------------------------------------------------------------------------

|(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. The amounts shown in this table are estimates of the required payments for the next ten years.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Relinquishment payments are made by us to TCA under the relinquishment agreement. Relinquishment payments are five percent of revenues, as defined in the relinquishment agreement.
The amounts shown in this table are estimates of the required payments for the next ten years and have been calculated in accordance with the relinquishment agreement. Refer to Note 6 to our condensed consolidated financial statements in this Form
10-Q for a further discussion of how the relinquishment payments are calculated.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Priority distributions are monthly payments required to be made by us to the Tribe pursuant to the priority distribution agreement. Refer to Note 5 to our condensed consolidated
financial statements for a further discussion of the priority distribution agreement. 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. The amounts included in the table are estimates of the required payments for the next ten years and, while this agreement is perpetual in term, 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 2.30%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The Authority has 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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 condensed consolidated financial statements. The preparation of our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America
requires our 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 condensed 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 in the Shops at Mohegan Sun 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 customers to make required payments, which results in bad debt expense. Management determines the adequacy of this allowance by continually
evaluating individual customer receivables, considering the customers financial condition, credit history and current economic conditions. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.



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 at each 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



We are self-insured up to certain limits for costs
associated with workers compensation, State of Connecticut unemployment and employee medical coverage. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of actuarial 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 actuarial estimates of the undiscounted claims, including those claims incurred but not reported. We believe the use of actuarial methods to account for these liabilities
provides a consistent and effective way to measure these accruals; however, changes in health care costs, state unemployment eligibility laws, 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.





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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,
manage volatility in the effective cost of debt and match debt service requirements to projected cash flows from assets. We do not believe that there is any material risk exposure with respect to derivative instruments we currently hold. We
continually monitor these exposures 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.



Intangible Assets



Our trademark 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 acquisition of the WNBA franchise are 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 the other current liabilities category in our accompanying consolidated balance sheets.



Impact of Inflation



Absent changes in competitive and economic conditions or in specific prices
affecting the hotel and casino 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 hotel and casino industry in general.



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##### Table of Contents

New Accounting Pronouncements



In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entitiesan interpretation of ARB
No. 51, or FIN 46. FIN 46 provides an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, regarding the consolidation of variable interest entities and the corresponding improvement in the
financial reporting by enterprises involved with these entities. In December 2003, the FASB deferred the latest date by which we must apply FIN 46 to the first reporting period beginning after December 15, 2004 for variable interest entities
acquired prior to January 31, 2003. FIN 46 is currently effective for all new variable interest entities created or acquired after January 31, 2003, of which we have none. We do not believe the adoption of this standard for variable interest
entities acquired prior to January 31, 2003 will affect our financial position, results of operations or cash flows.



Item 3. 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 variable rate debt, comprised primarily of our bank credit facility, which accrues interest based on short-term LIBOR rates. The bank credit facility,
along with our other debt obligations, is fully described in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations-Liquidity, Capital Resources and Capital Spending-External Sources of
Liquidity.



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.



In July 2003, the Authority entered into four interest rate swap agreements, each based on six-month LIBOR plus spreads of 297 to 298 basis points and each hedging $82.5 million of the 2003 Senior Subordinated Notes.
In July 2003, the Authority entered into two other interest rate swap agreements, each based on six-month LIBOR plus spreads of 363 to 364 basis points and each hedging $35.0 million of the 2001 Senior Subordinated Notes. Under these agreements, we
make payments on the variable interest rate described above provided by the derivative instrument and receive payments equal to the fixed interest rate (63/8% and 83/8% for $82.5 million and $35.0 million notional
amounts, respectively) on the debt being hedged.



The following table provides information as of December 31, 2003 about our current financial instruments (debt obligations and interest rate swaps) that are sensitive to changes in interest rates. For debt obligations, the table presents
principal payments and related weighted-average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by contractual maturity dates. Notional amounts are used to
calculate the cash flows to be exchanged under the interest rate swap agreements. 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 December 31,
2003. Fair values for interest rate swaps are based on net present value calculations for projected cash flows under the swap agreements using the implied forward rates.



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|                                           |  |                |       |   |      |   |        |      |  |   |         |   |  |      |        |   |            |   |        |       |  |   |            |   |  |   |         |   |  |   |           |  
|------------------------------------------ |  | -------------- | ----- | - | ---- | - | ------ | ---- |  | - | ------- | - |  | ---- | ------ | - | ---------- | - | ------ | ----- |  | - | ---------- | - |  | - | ------- | - |  | - | --------- | -
|Expected Maturity Date                     | 
|                                           |  | Remaining 2004 |       |   | 2005 |   |        | 2006 |  |   | 2007    |   |  | 2008 |        |   | Thereafter |   |        | Total |  |   | Fair Value |  
|                                           |  | (in thousands) |      
|Liabilities                                |  |                |       |   |      |   |        |      |  |   |         |   |  |      |        |   |            |   |        |       |  |   |            |   |  |   |         |   |  |   |           |  
|                                           |  |                |       |   |      |   |        |     
|Long-Term Debt(including current portion): |  |                |       |   |      |   |        |      |  |   |         |   |  |      |        |   |            |   |        |       |  |   |            |   |  |   |         |   |  |   |           |  
|Fixed Rate                                 |  | $              |      |   |      | $ |       |      |  | $ | 200,000 |   |  | $    |       |   |            | $ |       |       |  | $ | 735,241    |   |  | $ | 935,241 |   |  | $ | 1,007,520 |  
|Average interest rate                      |  |                |      |   |      |   |       |      |  |   | 8.1     | % |  |      |       |   |            |   |       |       |  |   | 7.4        | % |  |   | 7.5     | % |  |   |           |  
|Variable Rate                              |  | $              | 1,000 |   |      | $ | 17,667 |      |  | $ | 34,334  |   |  | $    | 34,334 |   |            | $ | 74,665 |       |  | $ | 3,000      |   |  | $ | 165,000 |   |  | $ | 165,000   |  
|Average interest rate                      |  |                | 2.7   | % |      |   | 4.4    | %    |  |   | 6.0     | % |  |      | 7.0    | % |            |   | 6.3    | %     |  |   | 7.1        | % |  |   | 5.8     | % |  |   |           |  
|                                           |  |                |       |   |      |   |        |     
|Interest Rate Derivatives                  |  |                |       |   |      |   |        |      |  |   |         |   |  |      |        |   |            |   |        |       |  |   |            |   |  |   |         |   |  |   |           |  
|                                           |  |                |       |   |      |   |        |     
|Interest Rate Swaps:                       |  |                |       |   |      |   |        |      |  |   |         |   |  |      |        |   |            |   |        |       |  |   |            |   |  |   |         |   |  |   |           |  
|Fixed to Variable                          |  | $              |      |   |      | $ |       |      |  | $ |        |   |  | $    |       |   |            | $ |       |       |  | $ | 400,000    |   |  | $ | 400,000 |   |  | $ | (15,317   | )
|Average pay rate                           |  |                |      |   |      |   |       |      |  |   |        |   |  |      |       |   |            |   |       |       |  |   | 7.1        | % |  |   | 7.1     | % |  |   |           |  
|Average receive rate                       |  |                |      |   |      |   |       |      |  |   |        |   |  |      |       |   |            |   |       |       |  |   | 6.7        | % |  |   | 6.7     | % |  |   |           |  



Item 4. 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 its 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.



As of December 31, 2003, 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 first fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION:



Item 6. Exhibits and Reports on Form 8-K



|(a) | Exhibits
|--- | --------



The Exhibit Index filed herewith is incorporated herein by reference.



|(b) | Reports on Form 8-K
|--- | -------------------



During the period covered by this report, we filed the following reports on Form 8-K:



| | (1) | On October 1, 2003, we filed two reports on Form 8-K reporting information under Item 5 amending and extending our solicitation of consents from holders of our outstanding $200.0
million principal amount 81/8% senior notes due 2006, $150.0 million principal amount of 83/8% senior subordinated notes due 2011 and $250.0 million principal amount of 8% senior subordinated notes due 2012
to amend the indentures for the notes to conform to certain provisions of the indentures governing the notes to applicable provisions of our 63/8% senior subordinated notes due 2009.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | On October 13, 2003, we filed a report on Form 8-K reporting information under Item 5 announcing that we had commenced an offer to exchange our original 63/8% senior subordinated notes due 2009 which we sold in July 2003 for an equal amount of newly issued 63/8% senior subordinated notes due 2009 that had been registered under the Securities Act and are freely tradable.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | On October 15, 2003, we filed a report on Form 8-K reporting information under Item 12 that we had posted on our website our Slot Machine Statistical Report containing gross slot
machine statistics on a monthly basis for the fiscal years ended September 30, 2003 and 2002.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | On November 12, 2003, we filed a report on Form 8-K reporting information under Item 12 announcing our operating results for the fourth quarter and fiscal year ended September 30,
2003.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | On November 14, 2003, we filed a report on Form 8-K reporting information under Item 5 that we completed our offer to the holders of our $330.0 million aggregate principal amount of
our original 63/8% senior subordinated notes due 2009 to exchange such notes for an equal amount of our newly
issued 63/8% senior subordinated notes due 2009 that are registered under the Securities Act and are freely
tradable.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.



|                        |  |                                 |  |                                                                                                                                             
|----------------------- |  | ------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|                        |  | MOHEGAN TRIBAL GAMING AUTHORITY
|                        |  |                                
|Date: February 11, 2004 |  | By:                             |  | /s/    MARK F. BROWN                                                                                                                        
|                        |  |                                 |  | Mark F. Brown Chairman and Member, Management Board                                                                                         
|                        |  |                                
|Date: February 11, 2004 |  | By:                             |  | /s/    WILLIAM J. VELARDO                                                                                                                   
|                        |  |                                 |  | William J. Velardo President and Chief Executive Officer, Mohegan Sun (Principal Executive Officer)                                         
|                        |  |                                
|Date: February 11, 2004 |  | By:                             |  | /s/    JEFFREY E. HARTMANN                                                                                                                  
|                        |  |                                 |  | Jeffrey E. Hartmann, Executive Vice President, Finance and Chief Financial Officer, Mohegan Sun (Principal Financial and Accounting Officer)





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##### 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 September 23,
2003 (the 2003 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 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).                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|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 September 30, 2003, filed with the SEC on August 8, 2003 (the June
2003 10-Q), and incorporated by reference herein).
|            | 
|4.4         |  | 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).                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 
|4.5         |  | Senior Registration Rights Agreement, dated March 3, 1999, among the Mohegan Tribal Gaming Authority, Salomon Smith Barney Inc., NationsBanc Montgomery Securities, LLC, SG Cowen Securities
Corporation, Bear, Sterns & Co. Inc., BankBoston Robertson Stephens Inc. and Fleet Securities, Inc. (filed as Exhibit 4.5 to the 1999 Form S-4, and incorporated by reference herein).                                                                                                                                                                                                                       
|            | 
|4.6         |  | Indenture, dated as of March 3, 1999, 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 83⁄4% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.6 to the 1999 Form S-4, and incorporated by reference herein).                                                                                                                                                                                                                                        



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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|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 83/4% Senior Subordinated Notes Due
2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.7 to the June 2003 10-Q, and incorporated by reference herein).                                            
|            | 
|4.8         |  | Second Supplemental Indenture, dated as of July 1, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC and U.S. National Bank Association (as successor to State
Street Bank and Trust Company), as Trustee, relating to the 83/4% Senior Subordinated Notes Due 2009 of the
Mohegan Tribal Gaming Authority (filed as Exhibit 4.8 to the June 2003 10-Q, and incorporated by reference herein).                                                           
|            | 
|4.9         |  | Form of Global 83/4% Senior Subordinated Notes Due
2009 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.6 to the 1999 Form S-4 and incorporated by reference herein).                                                                                                                                                                                                                                                                             
|            | 
|4.10        |  | Senior Subordinated Registration Rights Agreement, dated March 3, 1999, among the Mohegan Tribal Gaming Authority, Salomon Smith Barney Inc., NationsBanc Montgomery Securities LLC, SG Cowen
Securities Corporation, Bear, Stearns & Co. Inc., BankBoston Robertson Stephens Inc. and Fleet Securities, Inc. (filed as Exhibit 4.8 to the 1999 Form S-4, and incorporated by reference herein).                                                                                        
|            | 
|4.11        |  | 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).
|            | 
|4.12        |  | 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).                                           
|            | 
|4.13        |  | 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).                                                                                                                                                                                                                                                                            
|            | 
|4.14        |  | Registration Rights Agreement, dated July 26, 2001, among the Mohegan Tribal Gaming Authority, Salomon Smith Barney Inc., Banc of America Securities LLC, Fleet Securities, Inc., SG Cowen
Securities Corporation, Commerzbank Capital Markets Corp., McDonald Investments Inc. and Wells Fargo Brokerage Services, LLC (filed as Exhibit 4.11 to the 2001 Form S-4, and incorporated by reference herein).                                                                             
|            | 
|4.15        |  | 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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|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|4.16        |  | 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).                                                                       
|            | 
|4.17        |  | 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).                                                                                                                                                                                                                                                                                                       
|            | 
|4.18        |  | Registration Rights Agreement, dated February 20, 2002, among the Mohegan Tribal Gaming Authority, Banc of America Securities LLC, Salomon Smith Barney Inc., Fleet Securities, Inc., SG Cowen
Securities Corporation, Commerzbank Securities, McDonald Investments Inc., Wells Fargo Brokerage Services, LLC and Credit Lyonnais Securities (filed as Exhibit 4.14 to the 2002 Form S-4, and incorporated by reference herein).                                                                                 
|            | 
|4.19        |  | 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).                                                                                                                    
|            | 
|4.20        |  | 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).                                                                                                                                                                                                                                                                                                                              
|            | 
|4.21        |  | Registration Rights Agreement, dated as of July 9, 2003, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC, Banc of America Securities LLC, Citigroup Global Markets Inc.,
Fleet Securities, Inc., SG Cowen Securities Corporation, Credit Lyonnais Securities (USA) Inc., The Royal Bank of Scotland plc, Wells Fargo Securities, LLC, McDonald Investments Inc. and Commerzbank Capital Markets Corp. (filed as Exhibit 4.21 to
the June 2003 10-Q, and incorporated by reference herein).
|            | 
|31.1        |  | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|31.2        |  | Certification of Executive Vice President, Finance and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                                                                                                                                       
|            | 
|32.1        |  | Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).                                                                                                                                                                                                                                                                                                                                
|            | 
|32.2        |  | Certification of Executive Vice President, Finance and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).                                                                                                                                                                                                                                                                                                        



42