##### Table of Contents

---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



---



FORM 10-Q



---



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



For the quarterly period ended June 30, 2005



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



---



MOHEGAN TRIBAL GAMING AUTHORITY

(Exact name of registrant as specified in its charter)



---



|                                                              |  |                                 
|------------------------------------------------------------- |  | --------------------------------
|Connecticut                                                   |  | 06-1436334                      
|(State or other jurisdiction ofincorporation or organization) |  | (IRS EmployerIdentification 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)



---



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



---



---

##### 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 June 30, 2005 and September 30, 2004 (unaudited)                                          |  | 1         
|            |  |                                                                                                                                      
|            |  | Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended June 30, 2005 and 2004 (unaudited)             |  | 2         
|            |  |                                                                                                                                      
|            |  | Condensed Consolidated Statements of Changes in Capital for the Three Months and Nine Months Ended June 30, 2005 and 2004 (unaudited) |  | 3         
|            |  |                                                                                                                                      
|            |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2005 and 2004 (unaudited)                          |  | 4         
|            |  |                                                                                                                                      
|            |  | Notes to the Condensed Consolidated Financial Statements                                                                              |  | 5-23      
|            |  |                                                                                                                                      
|            |  | Report of Independent Registered Public Accounting Firm                                                                               |  | 24        
|            |  |                                                                                                                                      
|Item 2.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                 |  | 25-48     
|            |  |                                                                                                                                      
|Item 3.     |  | Quantitative and Qualitative Disclosures About Market Risk                                                                            |  | 48-49     
|            |  |                                                                                                                                      
|Item 4.     |  | Controls and Procedures                                                                                                               |  | 49        
|            |  |                                                                                                                                      
|PART II.    |  | OTHER INFORMATION                                                                                                                     |  |           
|            |  |                                                                                                                                      
|Item 1.     |  | Legal Proceedings                                                                                                                     |  | 50        
|            |  |                                                                                                                                      
|Item 6.     |  | Exhibits                                                                                                                              |  | 50        
|            |  |                                                                                                                                      
|Signatures. |  | Mohegan Tribal Gaming Authority                                                                                                       |  | 51        



---

##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------



MOHEGAN TRIBAL GAMING AUTHORITY



CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)



|                                                 |  |              |           |   |                   |   |           |  
|------------------------------------------------ |  | ------------ | --------- | - | ----------------- | - | --------- | -
|                                                 |  | June 30,2005 |           |   | September 30,2004 |  
|ASSETS                                           |  |              |           |   |                   |   |           |  
|Current assets:                                  |  |              |           |   |                   |   |           |  
|Cash and cash equivalents                        |  | $            | 77,596    |   |                   | $ | 60,794    |  
|Receivables, net                                 |  |              | 16,578    |   |                   |   | 13,230    |  
|Inventories                                      |  |              | 16,010    |   |                   |   | 15,181    |  
|Other current assets                             |  |              | 12,919    |   |                   |   | 9,185     |  
|                                                 |  |              |           |   |                   |   |           |  
|Total current assets                             |  |              | 123,103   |   |                   |   | 98,390    |  
|                                                 |  |             
|Non-current assets:                              |  |              |           |   |                   |   |           |  
|Property and equipment, net                      |  |              | 1,328,853 |   |                   |   | 1,328,132 |  
|Goodwill                                         |  |              | 39,459    |   |                   |   |          |  
|Other intangible assets, net                     |  |              | 340,578   |   |                   |   | 127,550   |  
|Notes receivable from affiliate, net             |  |              | 8,155     |   |                   |   | 2,760     |  
|Other assets, net                                |  |              | 29,077    |   |                   |   | 22,873    |  
|                                                 |  |              |           |   |                   |   |           |  
|Total assets                                     |  | $            | 1,869,225 |   |                   | $ | 1,579,705 |  
|                                                 |  |              |           |   |                   |   |           |  
|LIABILITIES AND CAPITAL                          |  |              |           |   |                   |   |           |  
|Current liabilities:                             |  |              |           |   |                   |   |           |  
|Current portion of long-term debt                |  | $            | 36,699    |   |                   | $ | 23,272    |  
|Current portion of relinquishment liability      |  |              | 98,496    |   |                   |   | 88,530    |  
|Trade payables                                   |  |              | 21,504    |   |                   |   | 25,710    |  
|Accrued interest payable                         |  |              | 33,982    |   |                   |   | 18,504    |  
|Other current liabilities                        |  |              | 106,378   |   |                   |   | 96,142    |  
|                                                 |  |              |           |   |                   |   |           |  
|Total current liabilities                        |  |              | 297,059   |   |                   |   | 252,158   |  
|                                                 |  |             
|Non-current liabilities:                         |  |              |           |   |                   |   |           |  
|Long-term debt, net of current portion           |  |              | 1,230,235 |   |                   |   | 1,003,051 |  
|Relinquishment liability, net of current portion |  |              | 350,041   |   |                   |   | 383,493   |  
|Other long-term liabilities                      |  |              | 183       |   |                   |   | 197       |  
|                                                 |  |              |           |   |                   |   |           |  
|Total liabilities                                |  |              | 1,877,518 |   |                   |   | 1,638,899 |  
|                                                 |  |              |           |   |                   |   |           |  
|Minority interest                                |  |              | 2,100     |   |                   |   | 1,845     |  
|                                                 |  |             
|Commitments and contingencies (Note 6)           |  |              |           |   |                   |   |           |  
|                                                 |  |             
|Capital:                                         |  |              |           |   |                   |   |           |  
|Retained deficit                                 |  |              | (10,393   | ) |                   |   | (61,039   | )
|                                                 |  |              |           |   |                   |   |           |  
|Total capital                                    |  |              | (10,393   | ) |                   |   | (61,039   | )
|                                                 |  |              |           |   |                   |   |           |  
|Total liabilities and capital                    |  | $            | 1,869,225 |   |                   | $ | 1,579,705 |  
|                                                 |  |              |           |   |                   |   |           |  



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



1



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands)

(unaudited)



|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|----------------------------------------------------- |  | ------------------------------------- | ------- | - | ------------------------------------- | - | ------- | ------------------------------------ |  | - | ------------------------------------ | - |  | - | --------- | -
|                                                      |  | For theThree MonthsEndedJune 30, 2005 |         |   | For theThree MonthsEndedJune 30, 2004 |   |         | For theNine MonthsEndedJune 30, 2005 |  |   | For theNine MonthsEndedJune 30, 2004 |  
|Revenues:                                             |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Gaming                                                |  | $                                     | 309,325 |   |                                       | $ | 280,274 |                                      |  | $ | 881,917                              |   |  | $ | 828,234   |  
|Food and beverage                                     |  |                                       | 23,650  |   |                                       |   | 22,267  |                                      |  |   | 66,812                               |   |  |   | 66,213    |  
|Hotel                                                 |  |                                       | 12,845  |   |                                       |   | 12,857  |                                      |  |   | 36,330                               |   |  |   | 37,812    |  
|Retail, entertainment and other                       |  |                                       | 29,380  |   |                                       |   | 24,062  |                                      |  |   | 79,378                               |   |  |   | 69,830    |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Gross revenues                                        |  |                                       | 375,200 |   |                                       |   | 339,460 |                                      |  |   | 1,064,437                            |   |  |   | 1,002,089 |  
|Less-Promotional allowances                           |  |                                       | (32,677 | ) |                                       |   | (27,561 | )                                    |  |   | (89,841                              | ) |  |   | (79,665   | )
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Net revenues                                          |  |                                       | 342,523 |   |                                       |   | 311,899 |                                      |  |   | 974,596                              |   |  |   | 922,424   |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Operating costs and expenses:                         |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Gaming                                                |  |                                       | 174,268 |   |                                       |   | 156,442 |                                      |  |   | 502,595                              |   |  |   | 464,601   |  
|Food and beverage                                     |  |                                       | 10,958  |   |                                       |   | 10,790  |                                      |  |   | 32,806                               |   |  |   | 32,045    |  
|Hotel                                                 |  |                                       | 4,249   |   |                                       |   | 3,615   |                                      |  |   | 11,780                               |   |  |   | 11,047    |  
|Retail, entertainment and other                       |  |                                       | 9,825   |   |                                       |   | 8,565   |                                      |  |   | 24,247                               |   |  |   | 30,973    |  
|Advertising, general and administrative               |  |                                       | 49,369  |   |                                       |   | 45,845  |                                      |  |   | 141,860                              |   |  |   | 132,022   |  
|Corporate expenses                                    |  |                                       | 2,847   |   |                                       |   | 860     |                                      |  |   | 8,310                                |   |  |   | 3,348     |  
|Depreciation and amortization                         |  |                                       | 22,307  |   |                                       |   | 24,301  |                                      |  |   | 65,877                               |   |  |   | 71,302    |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Total operating costs and expenses                    |  |                                       | 273,823 |   |                                       |   | 250,418 |                                      |  |   | 787,475                              |   |  |   | 745,338   |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Income from operations                                |  |                                       | 68,700  |   |                                       |   | 61,481  |                                      |  |   | 187,121                              |   |  |   | 177,086   |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Other income (expense):                               |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Accretion of discount to the relinquishment liability |  |                                       | (6,867  | ) |                                       |   | (7,485  | )                                    |  |   | (20,600                              | ) |  |   | (22,455   | )
|Interest income                                       |  |                                       | 189     |   |                                       |   | 23      |                                      |  |   | 416                                  |   |  |   | 174       |  
|Interest expense                                      |  |                                       | (23,423 | ) |                                       |   | (20,407 | )                                    |  |   | (64,875                              | ) |  |   | (60,076   | )
|Loss on early extinguishment of debt                  |  |                                       |        |   |                                       |   |        |                                      |  |   | (280                                 | ) |  |   | (248      | )
|Other expense, net                                    |  |                                       | (325    | ) |                                       |   | (797    | )                                    |  |   | (1,140                               | ) |  |   | (845      | )
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Total other expense                                   |  |                                       | (30,426 | ) |                                       |   | (28,666 | )                                    |  |   | (86,479                              | ) |  |   | (83,450   | )
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Income before minority interest                       |  |                                       | 38,274  |   |                                       |   | 32,815  |                                      |  |   | 100,642                              |   |  |   | 93,636    |  
|Minority interest                                     |  |                                       | 237     |   |                                       |   |        |                                      |  |   | 432                                  |   |  |   |          |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  
|Net income                                            |  | $                                     | 38,511  |   |                                       | $ | 32,815  |                                      |  | $ | 101,074                              |   |  | $ | 93,636    |  
|                                                      |  |                                       |         |   |                                       |   |         |                                      |  |   |                                      |   |  |   |           |  



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



2



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(in thousands)

(unaudited)



|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|------------------------------------------------------------ |  | --------------- | ------- | - | --------------------------------- | - | ---- | ------------ |  | - | ------- | -
|                                                             |  | RetainedDeficit |         |   | AccumulatedOtherComprehensiveLoss |   |      | TotalCapital | 
|Balances, March 31, 2005                                     |  | $               | (31,831 | ) |                                   | $ |     |              |  | $ | (31,831 | )
|Net income                                                   |  |                 | 38,511  |   |                                   |   |      |              |  |   | 38,511  |  
|Distributions to Tribe                                       |  |                 | (17,073 | ) |                                   |   |      |              |  |   | (17,073 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|Balances, June 30, 2005                                      |  | $               | (10,393 | ) |                                   | $ |     |              |  | $ | (10,393 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|                                                             |  |                 |        
|Balances, September 30, 2004                                 |  | $               | (61,039 | ) |                                   | $ |     |              |  | $ | (61,039 | )
|Net income                                                   |  |                 | 101,074 |   |                                   |   |      |              |  |   | 101,074 |  
|Distributions to Tribe                                       |  |                 | (50,428 | ) |                                   |   |      |              |  |   | (50,428 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|Balances, June 30, 2005                                      |  | $               | (10,393 | ) |                                   | $ |     |              |  | $ | (10,393 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|                                                             |  |                 |        
|                                                             |  | RetainedDeficit |         |   | AccumulatedOtherComprehensiveLoss |   |      | TotalCapital | 
|Balances, March 31, 2004                                     |  | $               | (70,175 | ) |                                   | $ |     |              |  | $ | (70,175 | )
|Net income                                                   |  |                 | 32,815  |   |                                   |   |      |              |  |   | 32,815  |  
|Distributions to Tribe                                       |  |                 | (16,306 | ) |                                   |   |      |              |  |   | (16,306 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|Balances, June 30, 2004                                      |  | $               | (53,666 | ) |                                   | $ |     |              |  | $ | (53,666 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|                                                             |  |                 |        
|Balances, September 30, 2003                                 |  | $               | (98,592 | ) |                                   | $ | (303 | )            |  | $ | (98,895 | )
|Net income                                                   |  |                 | 93,636  |   |                                   |   |      |              |  |   | 93,636  |  
|Reclassification of derivative instrument losses to earnings |  |                 |         |   |                                   |   | 303  |              |  |   | 303     |  
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|Total comprehensive income                                   |  |                 |         |   |                                   |   |      |              |  |   | 93,939  |  
|Distributions to Tribe                                       |  |                 | (48,710 | ) |                                   |   |      |              |  |   | (48,710 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  
|Balances, June 30, 2004                                      |  | $               | (53,666 | ) |                                   | $ |     |              |  | $ | (53,666 | )
|                                                             |  |                 |         |   |                                   |   |      |              |  |   |         |  



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



3



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                                             |  |                          |          |   |              |   |          |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------------ | -------- | - | ------------ | - | -------- | -
|                                                                                                             |  | For the NineMonths Ended |         
|                                                                                                             |  | June 30,2005             |          |   | June 30,2004 |  
|Cash flows provided by (used in) operating activities:                                                       |  |                          |          |   |              |   |          |  
|Net income                                                                                                   |  | $                        | 101,074  |   |              | $ | 93,636   |  
|Adjustments to reconcile net income to net cash flows provided by operating activities:                      |  |                          |          |   |              |   |          |  
|Depreciation and amortization                                                                                |  |                          | 65,877   |   |              |   | 71,302   |  
|Accretion of discount to the relinquishment liability                                                        |  |                          | 20,600   |   |              |   | 22,455   |  
|Cash paid for accretion of discount to the relinquishment liability                                          |  |                          | (17,785  | ) |              |   | (19,625  | )
|Loss on early extinguishment of debt                                                                         |  |                          | 280      |   |              |   | 248      |  
|Payment of tender costs                                                                                      |  |                          |         |   |              |   | (229     | )
|Net loss on disposition of assets                                                                            |  |                          | 1,145    |   |              |   | 845      |  
|Provision for losses on notes and accounts receivable                                                        |  |                          | 2,008    |   |              |   | 489      |  
|Amortization of debt issuance costs                                                                          |  |                          | 2,351    |   |              |   | 4,854    |  
|Amortization of net deferred (gain) loss on settlement of derivative instruments                             |  |                          | 609      |   |              |   | (276     | )
|Reclassification of derivative instrument losses to earnings                                                 |  |                          |         |   |              |   | 303      |  
|Minority interest                                                                                            |  |                          | (432     | ) |              |   |         |  
|Changes in operating assets and liabilities:                                                                 |  |                          |          |   |              |   |          |  
|(Increase) decrease in receivables                                                                           |  |                          | (4,057   | ) |              |   | 2,905    |  
|Increase in inventories                                                                                      |  |                          | (764     | ) |              |   | (1,039   | )
|Increase in other assets                                                                                     |  |                          | (3,543   | ) |              |   | (358     | )
|Decrease in trade payables                                                                                   |  |                          | (5,487   | ) |              |   | (3,553   | )
|Increase in other current liabilities                                                                        |  |                          | 19,944   |   |              |   | 8,119    |  
|                                                                                                             |  |                          |          |   |              |   |          |  
|Net cash flows provided by operating activities                                                              |  |                          | 181,820  |   |              |   | 180,076  |  
|                                                                                                             |  |                          |          |   |              |   |          |  
|Cash flows provided by (used in) investing activities:                                                       |  |                          |          |   |              |   |          |  
|Purchases of property and equipment, net of change in construction payables of $774 and $(741), respectively |  |                          | (34,736  | ) |              |   | (26,187  | )
|Acquisition of Pocono Downs, net of cash acquired of $875                                                    |  |                          | (280,114 | ) |              |   |         |  
|Proceeds from asset sales                                                                                    |  |                          | 165      |   |              |   | 82       |  
|Increase in notes receivable from affiliate                                                                  |  |                          | (4,800   | ) |              |   |         |  
|Issuance of third-party loans                                                                                |  |                          | (1,600   | ) |              |   | (654     | )
|Payments received on third-party loans                                                                       |  |                          | 343      |   |              |   | 147      |  
|                                                                                                             |  |                          |          |   |              |   |          |  
|Net cash flows used in investing activities                                                                  |  |                          | (320,742 | ) |              |   | (26,612  | )
|                                                                                                             |  |                          |          |   |              |   |          |  
|Cash flows provided by (used in) financing activities:                                                       |  |                          |          |   |              |   |          |  
|Bank Credit Facility borrowingsrevolving loan                                                               |  |                          | 680,000  |   |              |   | 62,000   |  
|Bank Credit Facility repaymentsrevolving loan                                                               |  |                          | (764,000 | ) |              |   | (121,000 | )
|Bank Credit Facility borrowingsterm loan                                                                    |  |                          | 58,333   |   |              |   |         |  
|Bank Credit Facility repaymentsterm loan                                                                    |  |                          | (150,000 | ) |              |   | (8,334   | )
|Line of credit borrowings                                                                                    |  |                          | 339,360  |   |              |   | 99,000   |  
|Line of credit repayments                                                                                    |  |                          | (325,290 | ) |              |   | (99,000  | )
|Proceeds from the issuance of long-term debt                                                                 |  |                          | 400,000  |   |              |   |         |  
|Payments on long-term debt                                                                                   |  |                          | (2,000   | ) |              |   | (6,241   | )
|Minority interest contribution                                                                               |  |                          | 229      |   |              |   |         |  
|Principal portion of relinquishment liability payments                                                       |  |                          | (26,301  | ) |              |   | (22,602  | )
|Distributions to Tribe                                                                                       |  |                          | (50,428  | ) |              |   | (48,710  | )
|Capitalized debt issuance costs                                                                              |  |                          | (7,764   | ) |              |   | (39      | )
|Proceeds (payments) from the settlement of derivative instruments                                            |  |                          | 3,598    |   |              |   | (5,147   | )
|Decrease in other long-term liabilities                                                                      |  |                          | (13      | ) |              |   | (11      | )
|                                                                                                             |  |                          |          |   |              |   |          |  
|Net cash flows provided by (used in) financing activities                                                    |  |                          | 155,724  |   |              |   | (150,084 | )
|                                                                                                             |  |                          |          |   |              |   |          |  
|Net increase in cash and cash equivalents                                                                    |  |                          | 16,802   |   |              |   | 3,380    |  
|Cash and cash equivalents at beginning of period                                                             |  |                          | 60,794   |   |              |   | 73,264   |  
|                                                                                                             |  |                          |          |   |              |   |          |  
|Cash and cash equivalents at end of period                                                                   |  | $                        | 77,596   |   |              | $ | 76,644   |  
|                                                                                                             |  |                          |          |   |              |   |          |  
|Supplemental disclosures:                                                                                    |  |                          |          |   |              |   |          |  
|Cash paid during the period for interest                                                                     |  | $                        | 47,403   |   |              | $ | 46,242   |  
|Acquisition: Pocono Downs                                                                                    |  |                          |          |   |              |   |          |  
|Fair value of assets acquired, including cash of $875                                                        |  | $                        | 285,915  |   |              | $ |         |  
|Cash paid                                                                                                    |  |                          | 280,989  |   |              |   |         |  
|                                                                                                             |  |                          |          |   |              |   |          |  
|Fair value of liabilities assumed                                                                            |  | $                        | 4,926    |   |              | $ |         |  
|                                                                                                             |  |                          |          |   |              |   |          |  



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



4



---

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



As of June 30, 2005, the Authority has the following wholly owned subsidiaries: Mohegan Basketball Club LLC (MBC), Mohegan Ventures-Northwest,
LLC (Mohegan Ventures-NW), Mohegan Commercial Ventures PA, LLC (MCV-PA), Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P., and Northeast Concessions, L.P. MBC owns and operates a professional basketball team in the
Womens National Basketball Association (WNBA), the Connecticut Sun, and owns approximately 3.9% of the membership interests in WNBA, LLC. Mohegan Ventures-NW holds a 54.15% membership interest in Salishan-Mohegan LLC
(Salishan-Mohegan), formed with an unrelated third party to participate in the development and management of a casino to be owned by the Cowlitz Indian Tribe and located in Clark County, Washington (the Cowlitz Project).
MCV-PA holds a 0.01% general partnership interest in Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P., and Northeast Concessions, L.P. (collectively, the Pocono Downs entities), while the Authority holds the remaining 99.99%
limited partnership interest. The Pocono Downs entities own and operate the Pocono Downs harness racing and OTW facilities in Pennsylvania. The Authority views Mohegan Sun and properties owned by the Pocono Downs entities as separate operating
segments.



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 consolidated 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 and the nine
months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2005.



The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto
included in the Authoritys Annual Report on Form 10-K for



5



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



the year ended September 30, 2004. In addition, certain amounts in the 2004 condensed consolidated financial statements have been reclassified to conform to
the 2005 presentation.



Principles of Consolidation



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



New Accounting Pronouncements



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



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



NOTE 3ACQUISITION OF POCONO DOWNS ENTITIES



On January 25, 2005, the Authority and its wholly owned subsidiary, MCV-PA,
completed their acquisition of all the partnership interests in the Pocono Downs entities for approximately $281.0 million in cash. The Pocono Downs entities own Pocono Downs, a harness racing facility in Plains, Pennsylvania, and five OTW
facilities also located in Pennsylvania. The results of operations for the Pocono Downs entities are included in the accompanying condensed consolidated financial statements from the date of acquisition through June 30, 2005.



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



The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition, which were estimated by
management with assistance from a third party valuation firm. The right to obtain a Category One Slot Machine License was determined to be an intangible asset with an indefinite life



6



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



apart from goodwill. Certain other intangible assets were identified in the valuation process, but were not separated from goodwill due to immateriality of
the amounts. The goodwill and intangible asset noted below, which are not subject to amortization, will be assessed periodically for impairment pursuant to FASB Statement No. 142, Goodwill and Other Intangible Assets.



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



Unaudited financial
information for the three months ended June 30, 2005 and pro forma financial information for the three months ended June 30, 2004 and nine months ended June 30, 2005 and 2004, as though the acquisition of the Pocono Downs entities had occurred on
October 1, 2004, is as follows:



|             |  |                            |         |                           |   |         |  |      |         |  |   |        
|------------ |  | -------------------------- | ------- | ------------------------- | - | ------- |  | ---- | ------- |  | - | -------
|             |  | Three Months EndedJune 30, |         | Nine Months EndedJune 30,
|             |  | 2005                       |         | 2004                      |   | 2005    |  | 2004
|             |  | (in thousands)             |         | (in thousands)           
|Net revenues |  | $                          | 342,523 |                           | $ | 321,931 |  | $    | 983,266 |  | $ | 947,327
|Net income   |  |                            | 38,511  |                           |   | 33,939  |  |      | 101,162 |  |   | 95,211 



NOTE 4FINANCING FACILITIES:



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



|                                                 |  |              |           |   |                   |   |           |  
|------------------------------------------------ |  | ------------ | --------- | - | ----------------- | - | --------- | -
|                                                 |  | June 30,2005 |           |   | September 30,2004 |  
|Bank Credit Facility                             |  | $            | 4,000     |   |                   | $ | 179,667   |  
|1999 81/8% Senior Notes                          |  |              | 13,970    |   |                   |   | 13,970    |  
|2005 61/8% Senior Notes                          |  |              | 250,000   |   |                   |   |          |  
|2001 83/8% Senior Subordinated Notes             |  |              | 16,345    |   |                   |   | 16,345    |  
|2002 8% Senior Subordinated Notes                |  |              | 250,000   |   |                   |   | 250,000   |  
|2003 63/8% Senior Subordinated Notes             |  |              | 330,000   |   |                   |   | 330,000   |  
|2004 71/8% Senior Subordinated Notes             |  |              | 225,000   |   |                   |   | 225,000   |  
|2005 67/8% Senior Subordinated Notes             |  |              | 150,000   |   |                   |   |          |  
|WNBA Promissory Note                             |  |              | 6,000     |   |                   |   | 7,000     |  
|Line of Credit                                   |  |              | 19,155    |   |                   |   | 5,086     |  
|MortgageSalishan-Mohegan                        |  |              | 2,550     |   |                   |   | 2,550     |  
|Note PayableSalishan-Mohegan                    |  |              |          |   |                   |   | 1,000     |  
|                                                 |  |              |           |   |                   |   |           |  
|Subtotal                                         |  |              | 1,267,020 |   |                   |   | 1,030,618 |  
|Net deferred loss on derivative instruments sold |  |              | (86       | ) |                   |   | (4,295    | )
|                                                 |  |              |           |   |                   |   |           |  
|Total debt                                       |  | $            | 1,266,934 |   |                   | $ | 1,026,323 |  
|                                                 |  |              |           |   |                   |   |           |  



7



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



Bank Credit Facility



The Authority has a loan agreement for up to $450.0 million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A.
serving as administrative agent (the Bank Credit Facility). The Bank Credit Facility is comprised of a revolving loan of up to $450.0 million, which matures on March 31, 2008. The maximum aggregate principal amount available for
borrowing includes amounts under certain letters of credit. As of June 30, 2005, the amount under these letters of credit totaled $334,070, of which no amount was drawn (refer to Letters of Credit below). The revolving loan has no
mandatory amortization provisions and is payable in full at maturity. The Authority had $445.7 million available for borrowing under the Bank Credit Facility as of June 30, 2005 (without taking into account covenants under the Line of Credit
described below).



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



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



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



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



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



At the Authoritys option, each advance of loan proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month London Inter-Bank Offered Rate (LIBOR),
plus in either case, the applicable spread at the time each loan is made. The Authority also pays commitment fees for the unused portion of the revolving loan on a quarterly basis equal to the applicable spread for commitment fees times the average
daily unused commitment for that calendar quarter. Applicable spreads are based on the Authoritys Total Leverage Ratio, as defined in the Bank Credit Facility. The applicable spread for base rate advances is between 0.50% and 1.25%, and the
applicable spread for LIBOR rate advances is between 1.75% and 2.50%. The applicable spread for commitment fees is between 0.375% and 0.50%. The base rate is the higher of Bank of Americas announced prime rate or the federal funds rate plus
0.50%. Interest on LIBOR loans is payable at the end of each applicable interest period or quarterly in arrears, if earlier. Interest on base rate advances is payable quarterly in arrears. As of June 30, 2005, the Authority had $4.0 million in base
rate loans and no LIBOR rate loans outstanding. The base rate loans outstanding at June 30, 2005 were based on the banks prime rate of 6.25% plus an applicable spread of 1.25%. The applicable spread for commitment fees was 0.50% as of June 30,
2005. Accrued interest, including commitment fees, on the Bank Credit Facility was $186,000 as of September 30, 2004. There was no accrued interest on the Bank Credit Facility as of June 30, 2005.



8



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



1999 81/8% Senior Notes



In March 1999, the Authority issued $200.0 million Senior Notes with fixed interest payable at a rate of 8.125% per annum (the 1999 Senior Notes). The proceeds from this financing were used to extinguish
or defease existing debt, pay transaction costs and fund initial costs related to the major expansion of Mohegan Sun known as Project Sunburst. Interest on the 1999 Senior Notes is payable semi-annually on January 1 and July 1. The 1999 Senior Notes
mature on January 1, 2006. The 1999 Senior Notes are uncollateralized general obligations of the Authority and rank pari passu in right of payment with all current and future uncollateralized senior indebtedness of the Authority. Borrowings under
the Bank Credit Facility and any capital lease obligations are collateralized by first priority liens on substantially all of the assets of the Authority. As a result, upon any distribution to creditors in a bankruptcy, liquidation or reorganization
or similar proceeding relating to the Authority or the Tribe, the holders of collateralized debt may be paid in full in cash before any payment may be made with respect to the 1999 Senior Notes. The 1999 Senior Notes rank equally in right of payment
with the 2005 Senior Notes and 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing, and rank senior to the remaining 50% of the Authoritys payment obligations under the Relinquishment
Agreement that are then due and owing, the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes and the 2005 Senior Subordinated Notes. MBC, MCV-PA and the Pocono
Downs entities are guarantors of the 1999 Senior Notes. Refer to Note 9 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries.



In August 2004, the Authority completed a cash tender offer and consent
solicitation to repurchase any or all of its outstanding 1999 Senior Notes. As part of the tender offer, the Authority solicited and received requisite consents to certain proposed amendments to the indentures governing the 1999 Senior Notes which
eliminated substantially all of the restrictive covenants thereunder. The aggregate principal amount of 1999 Senior Notes tendered was $186.0 million. An aggregate principal amount of $14.0 million of the 1999 Senior Notes remain outstanding as of
June 30, 2005. As of June 30, 2005 and September 30, 2004, accrued interest on the 1999 Senior Notes was $567,000 and $200,000, respectively.



2005 61/8% Senior Notes



On February 8, 2005, the Authority issued $250.0
million Senior Notes with fixed interest payable at a rate of 6.125% per annum (the 2005 Senior Notes). The net proceeds from this financing were used to repay amounts outstanding under the Bank Credit Facility and to pay fees and
expenses associated with the issuance. The 2005 Senior Notes mature on February 15, 2013. The first call date for the 2005 Senior Notes is February 15, 2009. Interest on the 2005 Senior Notes is payable semi-annually on February 15 and August 15,
with the first interest payment scheduled for August 15, 2005. The 2005 Senior Notes are uncollateralized general obligations of the Authority, which are effectively subordinated to all of the existing and future senior secured indebtedness of the
Authority, including the Bank Credit Facility. The 2005 Senior Notes rank equally in right of payment with the 1999 Senior Notes and 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing, and
rank senior to the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing, the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes,
the 2004 Senior Subordinated Notes and the 2005 Senior Subordinated Notes. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2005 Senior Notes. Refer to Note 9 for condensed consolidating financial information of the Authority, its
guarantor subsidiaries and its non-guarantor subsidiaries. As of June 30, 2005, accrued interest on the 2005 Senior Notes was $6.0 million.



9



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



2001 83/8% Senior Subordinated Notes



In July 2001, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.375% per annum (the 2001 Senior Subordinated Notes). The proceeds from this financing
were used to pay transaction costs, pay down $90.0 million on the prior bank credit facility and fund costs related to Project Sunburst. Interest on the 2001 Senior Subordinated Notes is payable semi-annually on January 1 and July 1. The 2001 Senior
Subordinated Notes mature on July 1, 2011. The first call date for the 2001 Senior Subordinated Notes is July 1, 2006. The 2001 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank
Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and in a liquidation, bankruptcy or similar proceeding 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2001 Senior
Subordinated Notes rank equally with the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations
under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2001 Senior Subordinated Notes. Refer to Note 9 for condensed consolidating financial information of the Authority, its
guarantor subsidiaries and its non-guarantor subsidiaries.



In
August 2004, the Authority completed a cash tender offer and consent solicitation to repurchase any or all of its outstanding 2001 Senior Subordinated Notes. As part of the tender offer, the Authority solicited and received requisite consents to
certain proposed amendments to the indentures governing the 2001 Senior Subordinated Notes, which eliminated substantially all of the restrictive covenants thereunder. The aggregate principal amount of 2001 Senior Subordinated Notes tendered was
$133.7 million. An aggregate principal amount of $16.3 million of the 2001 Senior Subordinated Notes remain outstanding as of June 30, 2005. Accrued interest on the 2001 Senior Subordinated Notes was $684,000 and $280,000, as of June 30, 2005 and
September 30, 2004, respectively.



2002 8% Senior Subordinated Notes



In February 2002, the Authority issued $250.0 million
Senior Subordinated Notes with fixed interest payable at a rate of 8.0% per annum (the 2002 Senior Subordinated Notes). The proceeds from this financing were used to pay transaction costs and pay down $243.0 million on the prior bank
credit facility. Interest on the 2002 Senior Subordinated Notes is payable semi-annually on April 1 and October 1. The 2002 Senior Subordinated Notes mature on April 1, 2012. The first call date for the 2002 Senior Subordinated Notes is April 1,
2007. The 2002 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and, in a liquidation, bankruptcy or similar
proceeding, 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2002 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2003 Senior Subordinated Notes,
the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are
guarantors of the 2002 Senior Subordinated Notes. Refer to Note 9 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of June 30, 2005 and September 30, 2004, accrued
interest on the 2002 Senior Subordinated Notes was $5.0 million and $10.0 million, respectively.



2003 63/8% Senior Subordinated Notes



In July 2003, the Authority issued $330.0 million Senior Subordinated Notes
with fixed interest payable at a rate of 6.375% per annum (the 2003 Senior Subordinated Notes). The proceeds from this financing were used



10



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



to repurchase substantially all of the outstanding $300.0 million 8.75% Senior Subordinated Notes issued in March 1999 and to pay fees and expenses
associated with the issuance. Interest on the 2003 Senior Subordinated Notes is payable semi-annually on January 15 and July 15. The 2003 Senior Subordinated Notes mature on July 15, 2009. The 2003 Senior Subordinated Notes are uncollateralized
general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and, in a liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment obligations under the
Relinquishment Agreement that are then due and owing. The 2003 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes
and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2003 Senior Subordinated Notes. Refer to Note 9 for
condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of June 30, 2005 and September 30, 2004, accrued interest on the 2003 Senior Subordinated Notes was $9.6 million and
$4.4 million, respectively.



2004 71/8% Senior Subordinated Notes



In August 2004, the Authority issued $225.0 million Senior Subordinated Notes with fixed interest payable at a rate of
7.125% per annum (the 2004 Senior Subordinated Notes). The net proceeds from this financing, together with $130.0 million of availability under the Bank Credit Facility, were used to repurchase the outstanding 2001 Senior Subordinated
Notes and the outstanding 1999 Senior Notes tendered in the tender offers described above and to pay fees and expenses associated with the issuance. The 2004 Senior Subordinated Notes mature on August 15, 2014. The first call date for the 2004
Senior Subordinated Notes is August 15, 2009. Interest on the 2004 Senior Subordinated Notes is payable semi-annually on February 15 and August 15, with the first interest payment made on February 15, 2005. The 2004 Senior Subordinated Notes are
uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and, in a liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment
obligations under the Relinquishment Agreement that are then due and owing. The 2004 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2005
Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2004 Senior Subordinated
Notes. Refer to Note 9 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries. As of June 30, 2005 and September 30, 2004, accrued interest on the 2004 Senior Subordinated
Notes was $6.1 million and $2.6 million, respectively.



2005 67/8% Senior Subordinated Notes



On February 8, 2005, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of
6.875% per annum (the 2005 Senior Subordinated Notes). The net proceeds from this financing were used to repay amounts outstanding under the Bank Credit Facility and to pay fees and expenses associated with the issuance. The 2005 Senior
Subordinated Notes mature on February 15, 2015. The first call date for the 2005 Senior Subordinated Notes is February 15, 2010. Interest on the 2005 Senior Subordinated Notes is payable semi-annually on February 15 and August 15, with the first
interest payment scheduled for August 15, 2005. The 2005 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 1999 Senior Notes, the 2005 Senior Notes and in a
liquidation, bankruptcy or similar proceeding, 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and owing. The 2005 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes,
the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes,



11



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



the 2004 Senior Subordinated Notes and the remaining 50% of the Authoritys payment obligations under the Relinquishment Agreement that are then due and
owing. MBC, MCV-PA and the Pocono Downs entities are guarantors of the 2005 Senior Subordinated Notes. Refer to Note 9 for condensed consolidating financial information of the Authority, its guarantor subsidiaries and its non-guarantor subsidiaries.
As of June 30, 2005, accrued interest on the 2005 Senior Subordinated Notes was $4.0 million.



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



WNBA Promissory Note



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



In consideration for this acquisition, MBC paid $2.0 million (with funds
advanced from the Authority) and issued a promissory note to the WNBA (the WNBA Note) for $8.0 million that accrues interest at an annual rate equal to three-month LIBOR plus 1.5%. The Authority guaranteed the obligations of MBC under
the WNBA Note. Pursuant to the WNBA Note, principal payments of $1.0 million, subject to adjustment for certain revenue thresholds, and interest payments are required to be paid to the WNBA on each anniversary of the WNBA Note. As of June 30, 2005
and September 30, 2004, accrued interest on the WNBA Note was $114,000 and $134,000, respectively.



Line of Credit



The
Authority has a $25.0 million revolving loan agreement with Bank of America (formerly Fleet National Bank) (the Line of Credit). Each advance accrues interest on the basis of one-month LIBOR, plus the applicable spread, determined at the
time the advance is made on the basis of the Authoritys Leverage Ratio as defined in the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations of the Authority. The Line of Credit expires in March 2006. The Line
of Credit subjects the Authority to certain covenants, including a covenant to maintain at least $25.0 million available for borrowing under the Bank Credit Facility. As of June 30, 2005, the Authority was in compliance with all covenant
requirements in the Line of Credit. As of June 30, 2005, the Authority had $5.8 million available for borrowing under the Line of Credit. The interest rate in effect at June 30, 2005 on the outstanding $19.2 million principal balance on the Line of
Credit was 4.78%, comprised of a one-month LIBOR of 3.28%, plus an applicable spread of 1.50%.



Note and Mortgage Payables



In July 2004, the Authoritys wholly owned subsidiary, Mohegan Ventures-NW, formed a limited liability company, Salishan-Mohegan, with Salishan Company, LLC (Salishan Company), an unrelated third party. Upon formation of
Salishan-Mohegan, Salishan Company contributed, among other things, land with a mortgage payable of $2.6 million and land purchase options with a note payable of $1.0 million. The mortgage payable bears interest due on a monthly basis at an annual
rate of 9.5%, with the principal balance payable in full on March 28, 2006. The note payable, including accrued interest of $150,000, was repaid at maturity on



12



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



December 31, 2004. There was no accrued interest on the mortgage payable as of June 30, 2005 and September 30, 2004. Any and all amounts paid by
Salishan-Mohegan, including interest payments, pursuant to these agreements are reimbursable by the Cowlitz Indian Tribe provided certain events occur, as prescribed in the development agreement between Salishan-Mohegan and the Cowlitz Indian Tribe.



Derivative Instruments



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



On March 10, 2005, the Authority entered into two interest rate swap agreements, each based on six-month LIBOR plus a spread of 116 basis points and each
hedging $50 million of the 2005 Senior Notes. On March 23, 2005, the Authority entered into three additional interest rate swap agreements, which were also based on LIBOR plus spreads of 87 to 91 basis points and hedging $50.0 million, $75.0 million
and $25.0 million of the 2005 Senior Notes. Under these agreements, the Authority would have made payments on the variable interest rate provided by the derivative instrument and received payments equal to the fixed interest rate on the debt being
hedged. These interest rate swap agreements qualified for hedge accounting in accordance with SFAS 133, as amended, and were designated as fair value hedges. In the quarter ended June 30, 2005, the Authority terminated these instruments for an
aggregate gain of $3.6 million. The $3.6 million gain was deferred and added to the carrying value of the 2005 Senior Notes being hedged and is being amortized and recorded as an offset to interest expense over the remaining term of the 2005 Senior
Notes. For the quarter and nine months ended June 30, 2005, the Authority recorded amortization of $47,000 on the deferred gain to interest expense. The Authority expects to record $466,000 as an offset to interest expense over the next twelve
months.



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. Also 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. These interest rate swap agreements qualified for hedge accounting in accordance with SFAS 133, as amended,
and were designated as fair value hedges. In the quarter ended March 31, 2004, the Authority sold these instruments for an aggregate loss of $5.1 million. The $5.1 million loss was deferred and added to the carrying value of the respective notes
being hedged and is being amortized and recorded in interest expense over the remaining term of the respective notes, as adjusted for the tender of substantially all of the 2001 Senior Subordinated Notes in August 2004. For the quarter and nine
months ended June 30, 2005, the Authority recorded amortization of $234,000 and $701,000, respectively, on the deferred loss to interest expense. The Authority expects to record $935,000 to interest expense over the next twelve months.



In February 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. In March 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, as adjusted for the tender of substantially all of the 2001 Senior Subordinated Notes in August 2004. For the quarter and nine months
ended June 30, 2005, the Authority recorded amortization of $4,000 and $11,000, respectively, on the deferred gain to interest expense and expects to record $14,000 over the next twelve months as an offset to interest expense.



13



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



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 1999 Senior Notes and two instruments each hedging $50.0 million of the 1999 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 1999 Senior Notes and is being
amortized and recorded as a reduction to interest expense over the remaining term of the 1999 Senior Notes, as adjusted for the tender of substantially all of the 1999 Senior Notes in August 2004. For the quarter and nine months ended June 30, 2005,
the Authority recorded amortization of $12,000 and $35,000, respectively, as an offset to interest expense and expects to record approximately $23,000 as an offset to interest expense over the next six months.



Letters of Credit



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



NOTE 5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 June 30, 2005 and 2004, the Authority incurred $4.3 million and $3.8 million, respectively, and for the nine months ended June 30,
2005 and 2004, incurred $12.8 million and $11.5 million, respectively, of expenses for such services. The Tribe, either through itself or one of its limited liability companies, has entered into various land lease agreements with the Authority for
access, parking and related purposes for Mohegan Sun. The Authority expensed $65,000 for each of the quarters ended June 30, 2005 and 2004, respectively, relating to these land lease agreements. For the nine months ended June 30, 2005 and 2004,
expenses for the land lease agreements totaled $196,000 respectively.



The Authority purchases the majority of its utilities, including electricity, gas, water and sewer, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. The Authority incurred costs of $3.9 million and $4.0 million
for such utilities during the quarters ended June 30, 2005 and 2004, respectively. For each of the nine months ended June 30, 2005 and 2004, the Authority incurred costs of $12.4 million and $12.6 million, respectively.



NOTE 6COMMITMENTS AND CONTINGENCIES:



The Mohegan Compact



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



The
Authority reflected expenses associated with the Slot Win Contribution totaling $55.1 million and $52.2 million for each of the quarters ended June 30, 2005 and 2004, respectively. For the nine months ended June 30,



14



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



2005 and 2004, the expenses associated with the Slot Win Contribution totaled $157.4 million and $152.7 million, respectively. As of June 30, 2005 and
September 30, 2004, outstanding Slot Win Contribution payments to the State of Connecticut totaled $17.6 million and $17.8 million, respectively.



Priority Distribution Agreement



In August 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 $4.0 million and $3.9 million for the quarters ended June 30, 2005 and 2004, respectively. For the nine months ended June 30, 2005 and 2004, these payments totaled $11.8 million and $11.6 million, respectively.



ACLS of New England, Inc.



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



The Authority also entered into a co-investment and
escrow agreement with the Mashantucket Pequot Tribal Nation (MPTN) and ACLS. Under the terms of those agreements, the Authority and MPTN may, under certain circumstances, become the joint owners of the laundry facility and be jointly and
severally obligated to repay a term loan which is secured by a mortgage on the laundry facility. The term of the agreements is for ten years and, if the Authority and MPTN become obligated to repay the term loan, the maximum potential future
payments (undiscounted) the Authority and MPTN could be required to make is approximately $6.4 million.



Land Purchase Options



Upon formation of Salishan-Mohegan, Salishan Company contributed land purchase options related to property to be assigned to the Cowlitz Indian Tribe for
purposes of the Cowlitz Project, upon (1) receipt of necessary financing for the development of the proposed casino and (2) the underlying property being taken into trust by the United States Department of the Interior. Pursuant to amendments made
to the option agreements in May 2005, the land purchase options permit Salishan-Mohegan to purchase land at specified closing dates no later than December 2005 and April 2006 for remaining payments of $7.5 million and $3.2 million, respectively.



15



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



Under the option agreements, Salishan-Mohegan also is required to make extension payments on the aggregate agreed-upon net purchase price at an annual rate
of 6.5%, with applicable portions payable on the respective closing dates or termination of the option agreements.



Environmental Contingencies



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



Horsemens Agreement



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



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



Erie OTW Settlement Agreement



As of December 31, 2004, Penn National Gaming Inc., the former owner of the Pocono Downs entities, entered into an agreement to sell all of the assets
associated with the OTW facility located in Erie, Pennsylvania to MTR Gaming Group, Inc. (MTR) and Presque Isle Downs Inc. (PID and collectively with MTR, Presque Isle) for $7.0 million. Penn National Gaming Inc.
assigned its rights under this agreement to the Authoritys subsidiary, Downs Racing, L.P., upon the Authoritys acquisition of the Pocono Downs entities. Accordingly, Downs Racing, L.P. will be required to convey the Erie OTW facility for
such price if and when either of the following two conditions occur: (1) there is commencement by any of the Presque Isle entities of pari-mutuel wagering in Erie, Pennsylvania or (2) there is receipt by any Presque Isle entity of revenue from slot
machine operations in Erie, Pennsylvania.



Litigation



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



16



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



NOTE 7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 after the
Relinquishment Date and continue at the end of each three-month period thereafter until January 25, 2015. Junior Relinquishment Payments commenced on July 25, 2000, twenty-five days following the end of the first six-month period after the
Relinquishment Date and continue at the end of each six-month period thereafter until January 25, 2015. Each Senior Relinquishment Payment and Junior Relinquishment Payment is an amount equal to 2.5% of the Revenues generated by Mohegan Sun over the
immediately preceding three-month or six-month payment period, as the case may be. Revenues are defined in the Relinquishment Agreement as gross gaming revenues (other than Class II gaming revenue) and all other facility revenues
(including, without limitation, hotel revenues, room service, food and beverage sales, ticket revenues, fees or receipts from convention/events center and all rental or other receipts from lessees and concessionaires, but not the gross receipts of
such lessees, licenses and concessionaires).



In the event of
any bankruptcy, liquidation or reorganization or similar proceeding relating to the Authority, the Relinquishment Agreement provides that each of the Senior and Junior Relinquishment Payments then due and owing are subordinated in right to payment
of senior secured obligations, which include the Bank Credit Facility and capital lease obligations, and that the Junior Relinquishment Payments then due and owing are further subordinated to payment of all other senior obligations, including the
Authoritys 1999 Senior Notes and 2005 Senior Notes. The Relinquishment Agreement also provides that all relinquishment payments are subordinated in right of payment to the minimum priority distribution payments, which are monthly payments
required to be made by the Authority to the Tribe, to the extent then due. The Authority, in accordance with SFAS 5, 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 June 30, 2005, the carrying amount of the relinquishment
liability was $448.5 million as compared to $472.0 million at September 30, 2004. The decrease during the nine months ended June 30, 2005 is due to $44.1 million in relinquishment payments, offset by $20.6 million for the accretion of discount to
the relinquishment liability. Of the $44.1 million in relinquishment payments, $26.3 million represents payment of principal and $17.8 million represents payment of the accretion of discount to the relinquishment liability. During the nine months
ended June 30, 2004, the Authority paid $42.2 million in relinquishment payments, consisting of $22.6 million in principal amounts and $19.6 million for the payment of the accretion of discount to the relinquishment liability. The accretion of
discount to the relinquishment liability resulted from the impact of the discount for the time value of money. At June 30, 2005 and September 30, 2004, relinquishment payments earned but unpaid were $26.5 million and $18.3 million, respectively.



17



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



NOTE 8SEGMENT REPORTING



The Authority currently owns and operates the Mohegan Sun property in Connecticut and, after the acquisition of the Pocono
Downs entities in January 2005, operates the harness racetrack at Pocono Downs and five OTW facilities in Pennsylvania. All of the Authoritys revenues are derived from these operations. The Authoritys executive officers review and assess
the performance of the operating results and determine the proper allocation of resources to Mohegan Sun and the Pocono Downs entities on a separate basis. The Authority, therefore, believes that it has two operating segments, one comprised solely
of Mohegan Sun and another, referred to as Pocono Downs herein, comprised of the operations of the Pocono Downs entities. The two operating segments are also separate reporting segments due to the differing nature of their operations.
The following tables provide financial information on each segment (in thousands):



|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|----------------------------------------------------- |  | ---------------------------------- | --------- | - | --------------------------------- | - | --------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                      |  | For the Three Months EndedJune 30, |           |   | For the Nine Months EndedJune 30, |  
|                                                      |  | 2005                               |           |   | 2004                              |   |           | 2005 |  |   | 2004    |  
|Net revenues:                                         |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Mohegan Sun                                           |  | $                                  | 332,215   |   |                                   | $ | 311,899   |      |  | $ | 958,044 |   |  | $ | 922,424 |  
|Pocono Downs                                          |  |                                    | 10,308    |   |                                   |   |          |      |  |   | 16,552  |   |  |   |        |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Total                                                 |  | $                                  | 342,523   |   |                                   | $ | 311,899   |      |  | $ | 974,596 |   |  | $ | 922,424 |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Income from operations:                               |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Mohegan Sun                                           |  | $                                  | 71,338    |   |                                   | $ | 62,341    |      |  | $ | 195,040 |   |  | $ | 180,434 |  
|Pocono Downs                                          |  |                                    | 209       |   |                                   |   |          |      |  |   | 391     |   |  |   |        |  
|Corporate expenses                                    |  |                                    | (2,847    | ) |                                   |   | (860      | )    |  |   | (8,310  | ) |  |   | (3,348  | )
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Total                                                 |  |                                    | 68,700    |   |                                   |   | 61,481    |      |  |   | 187,121 |   |  |   | 177,086 |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Accretion of discount to the relinquishment liability |  |                                    | (6,867    | ) |                                   |   | (7,485    | )    |  |   | (20,600 | ) |  |   | (22,455 | )
|Interest income                                       |  |                                    | 189       |   |                                   |   | 23        |      |  |   | 416     |   |  |   | 174     |  
|Interest expense                                      |  |                                    | (23,423   | ) |                                   |   | (20,407   | )    |  |   | (64,875 | ) |  |   | (60,076 | )
|Loss on early extinguishment of debt                  |  |                                    |          |   |                                   |   |          |      |  |   | (280    | ) |  |   | (248    | )
|Other expense, net                                    |  |                                    | (325      | ) |                                   |   | (797      | )    |  |   | (1,140  | ) |  |   | (845    | )
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Income before minority interest                       |  |                                    | 38,274    |   |                                   |   | 32,815    |      |  |   | 100,642 |   |  |   | 93,636  |  
|Minority interest                                     |  |                                    | 237       |   |                                   |   |          |      |  |   | 432     |   |  |   |        |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Net income                                            |  | $                                  | 38,511    |   |                                   | $ | 32,815    |      |  | $ | 101,074 |   |  | $ | 93,636  |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|                                                      |  |                                    |          
|                                                      |  | For the Nine Months EndedJune 30,  |           |   |                                   |   |           |      | 
|                                                      |  | 2005                               |           |   | 2004                              |   |           |      |  |   |         |  
|Capital expenditures:                                 |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Mohegan Sun                                           |  | $                                  | 33,411    |   |                                   | $ | 25,446    |      |  |   |         |   |  |   |         |  
|Pocono Downs                                          |  |                                    | 2,099     |   |                                   |   |          |      |  |   |         |   |  |   |         |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Total                                                 |  | $                                  | 35,510    |   |                                   | $ | 25,446    |      |  |   |         |   |  |   |         |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|                                                      |  |                                    |           |  
|                                                      |  | June 30,2005                       |           |   | September 30,2004                 |   |           |      |  |   |         |  
|Total assets:                                         |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|Mohegan Sun                                           |  | $                                  | 1,568,217 |   |                                   | $ | 1,571,215 |      |  |   |         |   |  |   |         |  
|Pocono Downs (including goodwill of $39,459)          |  |                                    | 287,103   |   |                                   |   |          |      |  |   |         |   |  |   |         |  
|Other                                                 |  |                                    | 13,905    |   |                                   |   | 8,490     |      |  |   |         |   |  |   |         |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  
|                                                      |  | $                                  | 1,869,225 |   |                                   | $ | 1,579,705 |      |  |   |         |   |  |   |         |  
|                                                      |  |                                    |           |   |                                   |   |           |      |  |   |         |   |  |   |         |  



18



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



NOTE 9CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:



The Authoritys outstanding public debt, comprised of substantially all
of its senior and senior subordinated notes, is fully and unconditionally guaranteed by MBC, MCV-PA and the Pocono Downs entities. Separate financial statements and other disclosures concerning MBC, MCV-PA and the Pocono Downs entities are not
presented below because the Authority believes that they are not material to investors. Condensed consolidating financial statement information for the Authority, MBC, MCV-PA, the Pocono Downs entities and the non-guarantor subsidiaries as of June
30, 2005 and September 30, 2004 and for the quarter and nine months ended June 30, 2005 and 2004, is as follows (in thousands):



CONDENSED CONSOLIDATING BALANCE SHEETS



|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|------------------------------------------------ |  | ------------------------ | --------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------------------ | - |  | ----------------- | -------- | - |  | - | --------- | -
|                                                 |  | As of June 30, 2005      |          
|                                                 |  | Authority                |           |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Consolidating/EliminatingAdjustments |   |  | ConsolidatedTotal |         
|ASSETS                                           |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Property and equipment, net                      |  | $                        | 1,292,473 |   |                       | $ | 32,530  |                           |  | $ | 3,850                                |   |  | $                 |         |   |  | $ | 1,328,853 |  
|Intercompany receivables                         |  |                          | 305,283   |   |                       |   |        |                           |  |   |                                     |   |  |                   | (305,283 | ) |  |   |          |  
|Other intangible assets, net                     |  |                          | 119,691   |   |                       |   | 220,887 |                           |  |   |                                     |   |  |                   |          |   |  |   | 340,578   |  
|Other assets, net                                |  |                          | 148,666   |   |                       |   | 41,095  |                           |  |   | 10,033                               |   |  |                   |         |   |  |   | 199,794   |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total assets                                     |  | $                        | 1,866,113 |   |                       | $ | 294,512 |                           |  | $ | 13,883                               |   |  | $                 | (305,283 | ) |  | $ | 1,869,225 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|LIABILITIES AND CAPITAL                          |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total current liabilities                        |  | $                        | 282,956   |   |                       | $ | 9,317   |                           |  | $ | 4,786                                |   |  | $                 |         |   |  | $ | 297,059   |  
|Long-term debt, net of current portion           |  |                          | 1,225,235 |   |                       |   | 5,000   |                           |  |   |                                     |   |  |                   |         |   |  |   | 1,230,235 |  
|Relinquishment liability, net of current portion |  |                          | 350,041   |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 350,041   |  
|Intercompany payables                            |  |                          |          |   |                       |   | 297,316 |                           |  |   | 7,967                                |   |  |                   | (305,283 | ) |  |   |          |  
|Other long-term liabilities                      |  |                          | 183       |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 183       |  
|Investment in subsidiaries                       |  |                          | 17,723    |   |                       |   |        |                           |  |   |                                     |   |  |                   | (17,723  | ) |  |   |          |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities                                |  |                          | 1,876,138 |   |                       |   | 311,633 |                           |  |   | 12,753                               |   |  |                   | (323,006 | ) |  |   | 1,877,518 |  
|Minority interest in subsidiary                  |  |                          |          |   |                       |   |        |                           |  |   | 2,100                                |   |  |                   |         |   |  |   | 2,100     |  
|Total capital                                    |  |                          | (10,025   | ) |                       |   | (17,121 | )                         |  |   | (970                                 | ) |  |                   | 17,723   |   |  |   | (10,393   | )
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities and capital                    |  | $                        | 1,866,113 |   |                       | $ | 294,512 |                           |  | $ | 13,883                               |   |  | $                 | (305,283 | ) |  | $ | 1,869,225 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|                                                 | 
|                                                 |  | As of September 30, 2004 |          
|                                                 |  | Authority                |           |   | MBC                   |   |         | Non-GuarantorSubsidiaries |  |   | Consolidating/EliminatingAdjustments |   |  | ConsolidatedTotal |         
|ASSETS                                           |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Property and equipment, net                      |  | $                        | 1,324,106 |   |                       | $ | 176     |                           |  | $ | 3,850                                |   |  | $                 |         |   |  | $ | 1,328,132 |  
|Intercompany receivables                         |  |                          | 8,930     |   |                       |   |        |                           |  |   |                                     |   |  |                   | (8,930   | ) |  |   |          |  
|Other assets, net                                |  |                          | 238,383   |   |                       |   | 8,550   |                           |  |   | 4,640                                |   |  |                   |         |   |  |   | 251,573   |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total assets                                     |  | $                        | 1,571,419 |   |                       | $ | 8,726   |                           |  | $ | 8,490                                |   |  | $                 | (8,930   | ) |  | $ | 1,579,705 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|LIABILITIES AND CAPITAL                          |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total current liabilities                        |  | $                        | 245,848   |   |                       | $ | 2,021   |                           |  | $ | 4,289                                |   |  | $                 |         |   |  | $ | 252,158   |  
|Long-term debt, net of current portion           |  |                          | 997,051   |   |                       |   | 6,000   |                           |  |   |                                     |   |  |                   |         |   |  |   | 1,003,051 |  
|Relinquishment liability, net of current portion |  |                          | 383,493   |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 383,493   |  
|Intercompany payables                            |  |                          |          |   |                       |   | 6,206   |                           |  |   | 2,724                                |   |  |                   | (8,930   | ) |  |   |          |  
|Other long-term liabilities                      |  |                          | 197       |   |                       |   |        |                           |  |   |                                     |   |  |                   |         |   |  |   | 197       |  
|Investment in subsidiaries                       |  |                          | 5,553     |   |                       |   |        |                           |  |   |                                     |   |  |                   | (5,553   | ) |  |   |          |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities                                |  |                          | 1,632,142 |   |                       |   | 14,227  |                           |  |   | 7,013                                |   |  |                   | (14,483  | ) |  |   | 1,638,899 |  
|Minority interest in subsidiary                  |  |                          |          |   |                       |   |        |                           |  |   | 1,845                                |   |  |                   |         |   |  |   | 1,845     |  
|Total capital                                    |  |                          | (60,723   | ) |                       |   | (5,501  | )                         |  |   | (368                                 | ) |  |                   | 5,553    |   |  |   | (61,039   | )
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  
|Total liabilities and capital                    |  | $                        | 1,571,419 |   |                       | $ | 8,726   |                           |  | $ | 8,490                                |   |  | $                 | (8,930   | ) |  | $ | 1,579,705 |  
|                                                 |  |                          |           |   |                       |   |         |                           |  |   |                                      |   |  |                   |          |   |  |   |           |  



19



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF INCOME



|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|----------------------------------------------------- |  | ---------------------------------------- | ------- | - | ------------------------- | - | ------- | ------------------------- |  | - | -------------------------------------- | - |  | ----------------- | ------ | - |  | - | ------- | -
|                                                      |  | For the Three Months ended June 30, 2005 |        
|                                                      |  | Authority                                |         |   | GuarantorSubsidiaries     |   |         | Non-GuarantorSubsidiaries |  |   | Consolidating/ Eliminating Adjustments |   |  | ConsolidatedTotal |       
|Net revenues                                          |  | $                                        | 331,131 |   |                           | $ | 11,698  |                           |  | $ |                                       |   |  | $                 | (306   | ) |  | $ | 342,523 |  
|Operating costs and expenses:                         |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Gaming & other operations                             |  |                                          | 190,816 |   |                           |   | 8,790   |                           |  |   |                                       |   |  |                   | (306   | ) |  |   | 199,300 |  
|Advertising, general and administrative               |  |                                          | 48,733  |   |                           |   | 2,767   |                           |  |   | 716                                    |   |  |                   |       |   |  |   | 52,216  |  
|Depreciation and amortization                         |  |                                          | 21,080  |   |                           |   | 1,227   |                           |  |   |                                       |   |  |                   |       |   |  |   | 22,307  |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Total operating costs and expenses                    |  |                                          | 260,629 |   |                           |   | 12,784  |                           |  |   | 716                                    |   |  |                   | (306   | ) |  |   | 273,823 |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Income (loss) from operations                         |  |                                          | 70,502  |   |                           |   | (1,086  | )                         |  |   | (716                                   | ) |  |                   |       |   |  |   | 68,700  |  
|Accretion of discount to the relinquishment liability |  |                                          | (6,867  | ) |                           |   |        |                           |  |   |                                       |   |  |                   |       |   |  |   | (6,867  | )
|Interest expense                                      |  |                                          | (18,180 | ) |                           |   | (5,243  | )                         |  |   |                                       |   |  |                   |       |   |  |   | (23,423 | )
|Loss on interests in subsidiaries                     |  |                                          | (6,613  | ) |                           |   |        |                           |  |   |                                       |   |  |                   | 6,613  |   |  |   |        |  
|Other income (expense), net                           |  |                                          | (331    | ) |                           |   | 1       |                           |  |   | 194                                    |   |  |                   |       |   |  |   | (136    | )
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Income (loss) before minority interest                |  |                                          | 38,511  |   |                           |   | (6,328  | )                         |  |   | (522                                   | ) |  |                   | 6,613  |   |  |   | 38,274  |  
|Minority interest                                     |  |                                          |        |   |                           |   |         |                           |  |   | 237                                    |   |  |                   |       |   |  |   | 237     |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Net income (loss)                                     |  | $                                        | 38,511  |   |                           | $ | (6,328  | )                         |  | $ | (285                                   | ) |  | $                 | 6,613  |   |  | $ | 38,511  |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|                                                      | 
|                                                      |  | For the Nine Months ended June 30, 2005  |        
|                                                      |  | Authority                                |         |   | GuarantorSubsidiaries (1) |   |         | Non-GuarantorSubsidiaries |  |   | Consolidating/ Eliminating Adjustments |   |  | ConsolidatedTotal |       
|Net revenues                                          |  | $                                        | 956,675 |   |                           | $ | 18,326  |                           |  | $ |                                       |   |  | $                 | (405   | ) |  | $ | 974,596 |  
|Operating costs and expenses:                         |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Gaming & other operations                             |  |                                          | 558,011 |   |                           |   | 13,822  |                           |  |   |                                       |   |  |                   | (405   | ) |  |   | 571,428 |  
|Advertising, general and administrative               |  |                                          | 143,808 |   |                           |   | 4,912   |                           |  |   | 1,450                                  |   |  |                   |       |   |  |   | 150,170 |  
|Depreciation and amortization                         |  |                                          | 63,715  |   |                           |   | 2,162   |                           |  |   |                                       |   |  |                   |       |   |  |   | 65,877  |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Total operating costs and expenses                    |  |                                          | 765,534 |   |                           |   | 20,896  |                           |  |   | 1,450                                  |   |  |                   | (405   | ) |  |   | 787,475 |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Income (loss) from operations                         |  |                                          | 191,141 |   |                           |   | (2,570  | )                         |  |   | (1,450                                 | ) |  |                   |       |   |  |   | 187,121 |  
|Accretion of discount to the relinquishment liability |  |                                          | (20,600 | ) |                           |   |        |                           |  |   |                                       |   |  |                   |       |   |  |   | (20,600 | )
|Interest expense                                      |  |                                          | (55,812 | ) |                           |   | (9,063  | )                         |  |   |                                       |   |  |                   |       |   |  |   | (64,875 | )
|Loss on early extinguishment of debt                  |  |                                          | (280    | ) |                           |   |        |                           |  |   |                                       |   |  |                   |       |   |  |   | (280    | )
|Loss on interests in subsidiaries                     |  |                                          | (12,231 | ) |                           |   |        |                           |  |   |                                       |   |  |                   | 12,231 |   |  |   |        |  
|Other income (expense), net                           |  |                                          | (1,142  | ) |                           |   | 2       |                           |  |   | 416                                    |   |  |                   |       |   |  |   | (724    | )
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Income (loss) before minority interest                |  |                                          | 101,074 |   |                           |   | (11,629 | )                         |  |   | (1,034                                 | ) |  |                   | 12,231 |   |  |   | 100,642 |  
|Minority interest                                     |  |                                          |        |   |                           |   |         |                           |  |   | 432                                    |   |  |                   |       |   |  |   | 432     |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  
|Net income (loss)                                     |  | $                                        | 101,074 |   |                           | $ | (11,629 | )                         |  | $ | (602                                   | ) |  | $                 | 12,231 |   |  | $ | 101,074 |  
|                                                      |  |                                          |         |   |                           |   |         |                           |  |   |                                        |   |  |                   |        |   |  |   |         |  

---

|(1) | Period from date of inception (January 25, 2005) to June 30, 2005 for Pocono Downs entities and MCV-PA.
|--- | -------------------------------------------------------------------------------------------------------



20



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|----------------------------------------------------- |  | ---------------------------------------- | ------- | - | --- | - | ------ | ------------------------------------ |  | - | ----------------- | - |  | - | ------- | -
|                                                      |  | For the Three Months ended June 30, 2004 |        
|                                                      |  | Authority                                |         |   | MBC |   |        | Consolidating/EliminatingAdjustments |  |   | ConsolidatedTotal |  
|Net revenues                                          |  | $                                        | 310,530 |   |     | $ | 1,581  |                                      |  | $ | (212              | ) |  | $ | 311,899 |  
|Operating costs and expenses:                         |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Gaming & other operations                             |  |                                          | 178,465 |   |     |   | 1,159  |                                      |  |   | (212              | ) |  |   | 179,412 |  
|Advertising, general and administrative               |  |                                          | 45,796  |   |     |   | 909    |                                      |  |   |                  |   |  |   | 46,705  |  
|Depreciation and amortization                         |  |                                          | 23,061  |   |     |   | 1,240  |                                      |  |   |                  |   |  |   | 24,301  |  
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Total operating costs and expenses                    |  |                                          | 247,322 |   |     |   | 3,308  |                                      |  |   | (212              | ) |  |   | 250,418 |  
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Income (loss) from operations                         |  |                                          | 63,208  |   |     |   | (1,727 | )                                    |  |   |                  |   |  |   | 61,481  |  
|Accretion of discount to the relinquishment liability |  |                                          | (7,485  | ) |     |   |       |                                      |  |   |                  |   |  |   | (7,485  | )
|Interest expense                                      |  |                                          | (20,360 | ) |     |   | (47    | )                                    |  |   |                  |   |  |   | (20,407 | )
|Loss on interests in subsidiaries                     |  |                                          | (1,774  | ) |     |   |       |                                      |  |   | 1,774             |   |  |   |        |  
|Other expense, net                                    |  |                                          | (774    | ) |     |   |       |                                      |  |   |                  |   |  |   | (774    | )
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Net income (loss)                                     |  | $                                        | 32,815  |   |     | $ | (1,774 | )                                    |  | $ | 1,774             |   |  | $ | 32,815  |  
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|                                                      | 
|                                                      |  | For the Nine Months ended June 30, 2004  |        
|                                                      |  | Authority                                |         |   | MBC |   |        | Consolidating/EliminatingAdjustments |  |   | ConsolidatedTotal |  
|Net revenues                                          |  | $                                        | 921,044 |   |     | $ | 1,599  |                                      |  | $ | (219              | ) |  | $ | 922,424 |  
|Operating costs and expenses:                         |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Gaming & other operations                             |  |                                          | 537,312 |   |     |   | 1,573  |                                      |  |   | (219              | ) |  |   | 538,666 |  
|Advertising, general and administrative               |  |                                          | 133,872 |   |     |   | 1,498  |                                      |  |   |                  |   |  |   | 135,370 |  
|Depreciation and amortization                         |  |                                          | 69,597  |   |     |   | 1,705  |                                      |  |   |                  |   |  |   | 71,302  |  
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Total operating costs and expenses                    |  |                                          | 740,781 |   |     |   | 4,776  |                                      |  |   | (219              | ) |  |   | 745,338 |  
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Income (loss) from operations                         |  |                                          | 180,263 |   |     |   | (3,177 | )                                    |  |   |                  |   |  |   | 177,086 |  
|Accretion of discount to the relinquishment liability |  |                                          | (22,455 | ) |     |   |       |                                      |  |   |                  |   |  |   | (22,455 | )
|Interest expense                                      |  |                                          | (59,925 | ) |     |   | (151   | )                                    |  |   |                  |   |  |   | (60,076 | )
|Loss on early extinguishment of debt                  |  |                                          | (248    | ) |     |   |       |                                      |  |   |                  |   |  |   | (248    | )
|Loss on interests in subsidiaries                     |  |                                          | (3,327  | ) |     |   |       |                                      |  |   | 3,327             |   |  |   |        |  
|Other income (expense), net                           |  |                                          | (672    | ) |     |   | 1      |                                      |  |   |                  |   |  |   | (671    | )
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  
|Net income (loss)                                     |  | $                                        | 93,636  |   |     | $ | (3,327 | )                                    |  | $ | 3,327             |   |  | $ | 93,636  |  
|                                                      |  |                                          |         |   |     |   |        |                                      |  |   |                   |   |  |   |         |  



21



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|----------------------------------------------------------- |  | --------------------------------------- | -------- | - | ------------------------- | - | -------- | ------------------------- |  | - | ------------------------------------ | - | ----------------- | - | - |  | - | -------- | -
|                                                            |  | For the Nine Months Ended June 30, 2005 |         
|                                                            |  | Authority                               |          |   | GuarantorSubsidiaries (1) |   |          | Non-GuarantorSubsidiaries |  |   | Consolidating/EliminatingAdjustments |   | ConsolidatedTotal |  
|Net cash flows provided by operating activities             |  | $                                       | 179,014  |   |                           | $ | 2,720    |                           |  | $ | 86                                   |   |                   | $ |  |  | $ | 181,820  |  
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Purchase of property and equipment                          |  |                                         | (32,561  | ) |                           |   | (2,175   | )                         |  |   |                                     |   |                   |   |  |  |   | (34,736  | )
|Acquisition of Pocono Downs                                 |  |                                         |         |   |                           |   | (280,114 | )                         |  |   |                                     |   |                   |   |  |  |   | (280,114 | )
|Other cash flows provided by (used in) investing activities |  |                                         | (1,102   | ) |                           |   | 10       |                           |  |   | (4,800                               | ) |                   |   |  |  |   | (5,892   | )
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Net cash flows used in investing activities                 |  |                                         | (33,663  | ) |                           |   | (282,279 | )                         |  |   | (4,800                               | ) |                   |   |  |  |   | (320,742 | )
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Cash flows provided by (used in) financing activities:      |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Bank Credit Facility borrowingsrevolving loan              |  |                                         | 680,000  |   |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | 680,000  |  
|Bank Credit Facility repaymentsrevolving loan              |  |                                         | (764,000 | ) |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | (764,000 | )
|Bank Credit Facility borrowingsterm loan                   |  |                                         | 58,333   |   |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | 58,333   |  
|Bank Credit Facility repaymentsterm loan                   |  |                                         | (150,000 | ) |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | (150,000 | )
|Line of credit borrowings                                   |  |                                         | 339,360  |   |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | 339,360  |  
|Line of credit repayments                                   |  |                                         | (325,290 | ) |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | (325,290 | )
|Proceeds from the issuance of long-term debt                |  |                                         | 400,000  |   |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | 400,000  |  
|Distributions to Tribe                                      |  |                                         | (50,428  | ) |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | (50,428  | )
|Principal portion of relinquishment liability payments      |  |                                         | (26,301  | ) |                           |   |         |                           |  |   |                                     |   |                   |   |  |  |   | (26,301  | )
|Other cash flows provided by (used in) financing activities |  |                                         | (290,665 | ) |                           |   | 280,001  |                           |  |   | 4,714                                |   |                   |   |  |  |   | (5,950   | )
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Net cash flows provided by (used in) financing activities   |  |                                         | (128,991 | ) |                           |   | 280,001  |                           |  |   | 4,714                                |   |                   |   |  |  |   | 155,724  |  
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Net decrease in cash and cash equivalents                   |  |                                         | 16,360   |   |                           |   | 442      |                           |  |   |                                     |   |                   |   |  |  |   | 16,802   |  
|Cash and cash equivalents at beginning of period            |  |                                         | 60,406   |   |                           |   | 388      |                           |  |   |                                     |   |                   |   |  |  |   | 60,794   |  
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  
|Cash and cash equivalents at end of period                  |  | $                                       | 76,766   |   |                           | $ | 830      |                           |  | $ |                                     |   |                   | $ |  |  | $ | 77,596   |  
|                                                            |  |                                         |          |   |                           |   |          |                           |  |   |                                      |   |                   |   |   |  |   |          |  

---

|(1) | Period from date of inception (January 25, 2005) to June 30, 2005 for Pocono Downs entities and MCV-PA.
|--- | -------------------------------------------------------------------------------------------------------



22



---

##### Table of Contents

MOHEGAN TRIBAL GAMING AUTHORITY



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(unaudited)



|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|----------------------------------------------------------- |  | --------------------------------------- | -------- | - | --- | - | ------ | ------------------------------------ |  | ----------------- | - |  | - | -------- | -
|                                                            |  | For the Nine Months Ended June 30, 2004 |         
|                                                            |  | Authority                               |          |   | MBC |   |        | Consolidating/EliminatingAdjustments |  | ConsolidatedTotal |  
|Net cash flows provided by (used in) operating activities   |  | $                                       | 181,450  |   |     | $ | (1,374 | )                                    |  | $                 |  |  | $ | 180,076  |  
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Purchases of property and equipment                         |  |                                         | (26,150  | ) |     |   | (37    | )                                    |  |                   |  |  |   | (26,187  | )
|Other cash flows used in investing activities               |  |                                         | (425     | ) |     |   |       |                                      |  |                   |  |  |   | (425     | )
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Net cash flows used in investing activities                 |  |                                         | (26,575  | ) |     |   | (37    | )                                    |  |                   |  |  |   | (26,612  | )
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Cash flows provided by (used in) financing activities:      |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Bank Credit Facility borrowingsrevolving loan              |  |                                         | 62,000   |   |     |   |       |                                      |  |                   |  |  |   | 62,000   |  
|Bank Credit Facility repaymentsrevolving loan              |  |                                         | (121,000 | ) |     |   |       |                                      |  |                   |  |  |   | (121,000 | )
|Bank Credit Facility repaymentsterm loan                   |  |                                         | (8,334   | ) |     |   |       |                                      |  |                   |  |  |   | (8,334   | )
|Line of credit borrowings                                   |  |                                         | 99,000   |   |     |   |       |                                      |  |                   |  |  |   | 99,000   |  
|Line of credit repayments                                   |  |                                         | (99,000  | ) |     |   |       |                                      |  |                   |  |  |   | (99,000  | )
|Distributions to Tribe                                      |  |                                         | (48,710  | ) |     |   |       |                                      |  |                   |  |  |   | (48,710  | )
|Principal portion of relinquishment liability payments      |  |                                         | (22,602  | ) |     |   |       |                                      |  |                   |  |  |   | (22,602  | )
|Other cash flows provided by (used in) financing activities |  |                                         | (12,288  | ) |     |   | 850    |                                      |  |                   |  |  |   | (11,438  | )
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Net cash flows provided by (used in) financing activities   |  |                                         | (150,934 | ) |     |   | 850    |                                      |  |                   |  |  |   | (150,084 | )
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents        |  |                                         | 3,941    |   |     |   | (561   | )                                    |  |                   |  |  |   | 3,380    |  
|Cash and cash equivalents at beginning of period            |  |                                         | 72,690   |   |     |   | 574    |                                      |  |                   |  |  |   | 73,264   |  
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  
|Cash and cash equivalents at end of period                  |  | $                                       | 76,631   |   |     | $ | 13     |                                      |  | $                 |  |  | $ | 76,644   |  
|                                                            |  |                                         |          |   |     |   |        |                                      |  |                   |   |  |   |          |  



23



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Management Board of the

Mohegan Tribal Gaming Authority:



We have reviewed the accompanying condensed consolidated balance sheet of the Mohegan Tribal Gaming Authority
and its subsidiaries (the Authority) as of June 30, 2005, and the related condensed consolidated statements of income and of changes in capital for each of the three-month and nine-month periods ended June 30, 2005 and 2004
and the condensed consolidated statements of cash flows for the nine-month periods ended June 30, 2005 and 2004. These interim financial statements are the responsibility of the Authoritys management.



We conducted our review in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 the standards of the Public Company Accounting Oversight Board (United States), 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 the
standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of September 30, 2004, 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 10, 2004 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, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

|                                    
|------------------------------------
|                                    
|/s/ PricewaterhouseCoopers LLP      
|Hartford, Connecticut August 5, 2005



24



---

##### 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 or expansion of gaming in New England, New York, New Jersey and Pennsylvania), the financial performance of Mohegan Sun, Pocono Downs and the off-track wagering facilities
(OTWs), dependence on existing management, potential adverse changes in local, regional, national or global economic climates, our leverage and ability to meet our debt service obligations, changes in federal or state tax laws or the administration
of such laws, changes in gaming laws or regulations (including the limitation, denial or suspension of licenses required under gaming laws and regulations), and the continued availability of financing. Additional information concerning potential
factors that could affect our financial results is included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004, 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 or will occur.



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. We were established as an instrumentality of the Tribe, with the exclusive power to conduct and regulate gaming activities on tribal lands and the nonexclusive authority to conduct such activities elsewhere. Our
gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Through our subsidiary, Downs Racing L.P., we also own Mohegan Sun at Pocono Downs as
announced in July 2005, or Pocono Downs, a harness racing facility located in Plains, Pennsylvania, as well as five Pennsylvania OTW facilities. We are governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal
Council (the governing body of the Tribe). Any change in the composition of the Mohegan Tribal Council results in a corresponding change in our Management Board.



Mohegan Sun



In October 1996, we opened a gaming and entertainment complex known as Mohegan Sun. Mohegan Sun is located on a 240-acre site on the Tribes
reservation overlooking the Thames River with direct access from Interstate 395 and Connecticut Route 2A via a four-lane access road constructed by us. Mohegan Sun is



25



---

##### Table of Contents

approximately 125 miles from New York City and approximately 100 miles from Boston, Massachusetts. In fiscal year 2002, we completed a major expansion of
Mohegan Sun known as Project Sunburst. The first phase of Project Sunburst, the Casino of the Sky, which included increased gaming, restaurant and retail space and an entertainment arena, opened in September 2001. The remaining components, including
an approximately 1,200-room luxury hotel and approximately 100,000 square feet of convention space, were fully opened in June 2002.



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



Casino of the Earth



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



| |  |  | approximately 3,810 slot machines and 200 table games (including blackjack, roulette, craps and baccarat);
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | food and beverage amenities, including the Uncas American Indian Grill, a 300-seat full-service restaurant and bar opened in July 2005, three full-service themed fine dining
restaurants, with a fourth area featuring cuisine from all three themes, a 610-seat buffet, a ten-station food court featuring international and domestic cuisine and multiple service bars, all operated by us, for a current total of approximately
1,700 restaurant seats;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



Casino of the Sky



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



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



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



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



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



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



| |  |  | the Shops at Mohegan Sun containing 29 different retail shops, six 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.



26



---

##### Table of Contents

Connecticut Sun



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



Mohegan Sun at Pocono Downs



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



We are continuing the harness racing activities at
Pocono Downs, with the 2005 racing season continuing from April to November 2005, and the pari-mutuel wagering activities at the OTW facilities. In addition, as a result of our acquisition of Pocono Downs, we have the right to apply for a
Pennsylvania Category One Slot Machine License, which, if approved, would initially permit the installation and operation of up to 3,000 slot machines at Pocono Downs. Upon receipt of such license, we would be required to pay a one-time $50 million
fee to the Commonwealth of Pennsylvania.



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



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



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



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



In addition to the development of the new gaming and entertainment facility, we plan to make significant improvements and additions to the existing Pocono
Downs clubhouse and grandstand, including a new simulcast



27



---

##### Table of Contents

facility, improvements to the grandstand to include approximately 1,000 slot machines (to be operated upon the approval of our conditional Category One Slot
Machine License) and a new 10,000 square foot food court. These improvements are estimated to cost up to $47 million with construction scheduled to begin in September 2005. Construction is estimated to take approximately six months to complete.



We expect to draw the bulk of our customers at the slot
machine facility from the 50-mile radius surrounding Pocono Downs. As a result, as more fully described below under Competition from Other Gaming Operations, we anticipate our primary competition for customers will come from other
potential slot machine operations in Pennsylvania and potential Indian Gaming operations in southeastern New York, primarily in the Catskill Mountain region.



Other Diversification Projects



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



Cowlitz Project



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



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



Menominee Project



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



28



---

##### Table of Contents

Competition from Other Gaming Operations



Our gaming operation at Mohegan Sun is one of only two legally authorized
gaming operations in New England offering traditional slot machines and table games, with the other operation being our sole gaming competitor in Connecticut, Foxwoods Resort Casino, or Foxwoods. We also currently face competition from several
casinos and gaming facilities located on Indian tribal lands in the state of New York and racinos in the state of Rhode Island, as well as potential competition from planned casino projects announced by other Indian tribes and non-Indians in the
northeastern United States. Following our acquisition of the Pocono Downs entities in January 2005, we now also face existing and potential competition in the Pennsylvania gaming market. Please refer to Part I. Item 1. BusinessMarket and
Competition from Other Gaming Operations in our Annual Report on Form 10-K for the fiscal year ended September 30, 2004 for further detail regarding our current and projected competition from other gaming operations.



Recent Competitive Developments



The following discussion highlights changes in our competitive landscape
that have occurred since September 30, 2004. Based on our internal preliminary estimates, we do not anticipate that any of the following developments will have a material impact on our revenues for the near future.



Connecticut



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



In May 2005, the Mashantucket Pequot Tribe completed the
construction of two golf courses and a 50,000 square foot clubhouse and is continuing construction on eight golf villas and a golf academy, which are expected to be completed later in 2005.



On May 13, 2005, the United States Interior Board of Indian Appeals, or IBIA,
overturned the federal recognition of the Historic Eastern Pequot Tribe and the Schaghticoke Tribe of Kent, Connecticut. Reports indicate the IBIA noted several irregularities in the decision made by the Bureau of Indian Affairs, or BIA, including
the use of state recognition to fulfill criteria in the tribal petitions. The recognition decisions have been remanded to the United States Secretary of the Interior for reconsideration. A decision by the BIA on the recognition of the tribes is
expected no later than October 2005. The Historic Eastern Pequot Tribe and the Schaghticoke Tribe had announced intentions to develop casinos in southeastern and western Connecticut, respectively.



Rhode Island



On July 19, 2005, BLB investors, LLC, or BLB, announced the completion of
its acquisition of Lincoln Park in Lincoln, Rhode Island. In addition, BLB reached an agreement with the State of Rhode Island that, among other things, guaranteed their tax rate for up to 15 years. An announced $125.0 million expansion is expected
to add approximately 175,000 square feet to increase video slot machines at the site from 3,000 to 4,750, which has been approved by the Rhode Island legislature.



In addition to approving the increase in video slots machines at Lincoln Park, the Rhode Island legislature has approved the
addition of 800 video slot machines and guaranteed the tax rate for up to 10 years at Newport



29



---

##### Table of Contents

Grand Jai Alai. In order to gain the approval for the additional video slot machines, among other things, Newport Grand Jai Alai must complete a $20.0
million project for improvements and expansion to the current facilities, including a 90-room hotel.



In 2005, the Narragansett Tribe and an affiliate of Harrahs Entertainment announced their continued pursuit of a license to operate a casino in West
Warwick, Rhode Island. At this time, it is unclear if such efforts will meet with success.



New York



The New York
state legislature passed a law in October 2001 authorizing as many as six gaming operations by Indian tribes in New York. Three of these operations may be located in the Catskill Mountains in Ulster County and/or Sullivan County. However, a 2005
United States Supreme Court decision has called into question the viability of certain Indian land claims in New York.



In June 2005, Governor George Pataki submitted a bill to the New York State Legislature that would approve the terms of a land claim settlement agreement
between the state and the Akwesasne Mohawk Indian Tribe and permit the development of a casino in Monticello, New York. The bill included a settlement with the tribe that would allow the St. Regis Akwesasne Mohawks and Caesars Entertainment
Inc. to build a 742-room hotel and 134,000 square foot casino at the Kutshers Sports Academy property in the Catskills. At this time, the bill has not yet been approved by the legislature.



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



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



Pennsylvania



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



In addition
to Pocono Downs, there are two thoroughbred racetracks, Philadelphia Park located in Bensalem (approximately 115 miles southeast of Pocono Downs) and Penn National Race Course in Grantville (located approximately 85 miles southwest of Pocono Downs),
and one harness racetrack, the Meadows located in Meadow Lands, near Pittsburgh (approximately 325 miles from Pocono Downs), currently operating. In addition, the Pennsylvania State Horse Racing Commission has approved a racing license for MTR
Gaming to build a thoroughbred racetrack in Summit Township, near Erie (approximately 325 miles from Pocono Downs) and the



30



---

##### Table of Contents

Pennsylvania State Harness Racing Commission has approved a harness racing license for Harrahs Entertainment, Inc, which has partnered with Chester
Downs and Marina, LLC, to build a harness racetrack in Chester, approximately 115 miles from Pocono Downs. The Harness Racing Commission also has conducted hearings on competing proposals for a license for a new harness racetrack in Mahoning
Township and South Beaver Township (approximately 280 and 300 miles from Pocono Downs, respectively). It has been reported that the Horse Racing Commission has received as many as five applications from proposed developers/property owners for the
fourth and final new racing license permitted in Pennsylvania. However, under the Pennsylvania Gaming Act unless the developer of a proposed horse racetrack had received approval for a racing license within the 18 months immediately preceding the
passage of the Pennsylvania Gaming Act, the licensee would not be permitted to obtain a Category One Slot Machine License.



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



The reports include the following proposed locations:



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



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



| |  |  | Dr. Joseph Mattioli, owner of Pocono Raceway, a NASCAR racetrack located approximately 35 miles from Pocono Downs in Long Pond, has announced his intentions to seek one of the
available licenses to operate a stand-alone slot facility. Dr. Mattioli has reportedly proposed a $300 million casino complex on the Pocono Raceway property that would include a slot parlor, convention hall, shops and restaurants adjacent to the
racetrack. It also has been reported that if Dr. Mattioli is unable to obtain a stand-alone slot license, he will seek a resort license and will scale back the development plans for the Long Pond property.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Isle of Capri Casinos, Inc. of Biloxi Miss., operators of, among other things, casinos and riverboats in Mississippi, Iowa, Nevada, Missouri, Colorado and Louisiana, has reportedly
been looking at sites in Lehigh Valley to locate a stand-alone slot facility. These sites are located approximately 60 miles from Pocono Downs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



31



---

##### Table of Contents

| |  |  | On July 15, 2005, Matzel Development, a New Jersey developer, announced that it has agreed with Pocono Manor to develop 3,000 acres around the Pocono Manor resort in Monroe County,
with plans to build a $1.5 billion slots parlor complex complete with a water park, shopping center and a train station for service to New York City. The deal is contingent on the granting to Matzel Development of a stand-alone slot license for up
to 5,000 slot machines. Pocono Manor is located approximately 40 miles from Pocono Downs.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the other slot facilities in Pennsylvania, Pocono Downs may face competition from full scale casino gaming operations by Indian Tribes in
the Catskill Mountains of New York. The Catskills are approximately 90 miles from Pocono Downs.



Explanation of Key Financial Statement Captions



Gross revenues



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



| |  |  | gaming revenues, which include revenues from slot machines, table games, keno, live harness racing at Pocono Downs and racebook (including pari-mutuel wagering revenues from our
racebook at Mohegan Sun and our Pennsylvania OTWs acquired on January 25, 2005);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



Our largest component of revenues is gaming revenues, which is recognized as
gaming wins less gaming losses, and is comprised primarily of revenues from our slot machines and table games at Mohegan Sun. Revenues from slot machines are the largest component of our gaming revenues. Gross slot revenues, also referred to as
gross slot win, represent all amounts played in the slot machines reduced by both (1) the winnings paid out and (2) all amounts we deposit into the slot machines to ensure sufficient coins in each machine to pay out the winnings. Pursuant to the
Mohegan Compact, we report gross slot revenues and other statistical information related to slot machine operations to the State of Connecticut. On a monthly basis, we also post this information on our website at www.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 a portion of each amount wagered and aggregate these
amounts with similar amounts from other slot machines in order to create one-time winnings that are substantially larger than those paid in the ordinary course of play. We refer to such aggregated amounts as progressive jackpots. Wide-area
progressive jackpot amounts are paid by a third party vendor and we remit a weekly payment to the vendor based on a percentage of the slot handle for each wide-area progressive slot machine. We accrue in-house progressive jackpot amounts until paid,
and such accrued amounts are deducted from gross slot revenues, along with wide-area progressive jackpot amounts, to arrive at net slot revenues, also referred to as net slot win. Net slot revenues are included in gaming revenues in the accompanying
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 revenues represents the closing table games inventory plus table games drop and credit slips for coins, chips
or tokens returned to the casino cage, less opening table



32



---

##### Table of Contents

games inventory, discounts provided on patron losses, free bet coupons and chip fills to the tables. Table games drop is the total amount of cash, free bet
coupons, cash advance drafts, customer deposit withdrawals, safekeeping withdrawals and credit issued at the table contained in the locked container at each gaming table. Table games hold percentage is the table games revenues as a percentage of
table games drop.



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



Promotional allowances



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



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



Gaming expenses



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



Income from operations



We calculate income from operations as net revenues
less total operating costs and expenses. Income from operations represents only those amounts that relate to our consolidated operations and excludes minority interest, accretion of discount to the relinquishment liability, interest income, interest
expense, loss on early extinguishment of debt 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 a relinquishment agreement with TCA. The relinquishment agreement provides that we will make certain payments to TCA out
of, and determined as a percentage of, revenues (as defined in the relinquishment agreement) generated by Mohegan Sun over a 15-year period. In accordance with Statement of Financial Accounting Standards, or SFAS, No. 5 Accounting for
Contingencies, or SFAS 5, we have recorded a relinquishment liability of the estimated present value of our obligations under the



33



---

##### Table of Contents

relinquishment agreement. We reassess projected revenues (and consequently the relinquishment liability) (i) annually in conjunction with our budgeting
process and (ii) when necessary to account for material increases or decreases in projected revenues over the relinquishment period. Further, we record a quarterly accretion to the relinquishment liability to reflect the impact of the time value of
money. Since there is a high level of estimates and judgments used with respect to calculating the relinquishment liability, future events that affect such estimates and judgments may cause the actual relinquishment liability to differ significantly
from the estimate. In addition, we have capitalized $130.0 million of this relinquishment liability in connection with the trademark value of the Mohegan Sun brand name. Under SFAS No. 142 Goodwill and Other Intangible Assets, or SFAS
142, the Mohegan Sun trademark is no longer subject to amortization because it has been deemed to have an indefinite useful life. SFAS 142, however, requires the trademark to be evaluated at least annually for impairment by applying a fair-value
test and, if impairment occurs, the amount of impaired trademark must be written off immediately. Refer to Note 7 to our condensed consolidated financial statements for a further discussion of how we account for the relinquishment liability.



Results of Operations



Summary Operating Results



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



|                        |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|----------------------- |  | ----------------------------------- | ------- | - | ---------------------------------- | - | ------- | -------------- |  | - | ------------------ | - |  | ----- | - |  | ---- | ------- | - | -------------- | - | ------- | ------------------ |  | - | ------ | - |  | ----- | -
|                        |  | For the Three Months Ended June 30, |         |   | For the Nine Months Ended June 30, |  
|                        |  | 2005                                |         |   | 2004                               |   |         | DollarVariance |  |   | PercentageVariance |   |  | 2005  |   |  | 2004 |         |   | DollarVariance |   |         | PercentageVariance | 
|Net revenues:           |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|Mohegan Sun             |  | $                                   | 332,215 |   |                                    | $ | 311,889 |                |  | $ | 20,326             |   |  | 6.5   | % |  | $    | 958,044 |   |                | $ | 922,424 |                    |  | $ | 35,620 |   |  | 3.9   | %
|Pocono Downs            |  |                                     | 10,308  |   |                                    |   |        |                |  |   | 10,308             |   |  |      |   |  |      | 16,552  |   |                |   |        |                    |  |   | 16,552 |   |  |      |  
|                        |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|Total                   |  | $                                   | 342,523 |   |                                    | $ | 311,889 |                |  | $ | 30,634             |   |  | 9.8   | % |  | $    | 974,596 |   |                | $ | 922,424 |                    |  | $ | 52,172 |   |  | 5.7   | %
|Income from operations: |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|Mohegan Sun             |  | $                                   | 71,338  |   |                                    | $ | 62,341  |                |  | $ | 8,997              |   |  | 14.4  | % |  | $    | 195,040 |   |                | $ | 180,434 |                    |  | $ | 14,606 |   |  | 8.1   | %
|Pocono Downs            |  |                                     | 209     |   |                                    |   |        |                |  |   | 209                |   |  |      |   |  |      | 391     |   |                |   |        |                    |  |   | 391    |   |  |      |  
|Corporate expenses      |  |                                     | (2,847  | ) |                                    |   | (860    | )              |  |   | (1,987             | ) |  | 231.0 | % |  |      | (8,310  | ) |                |   | (3,348  | )                  |  |   | (4,962 | ) |  | 148.2 | %
|                        |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|Total                   |  | $                                   | 68,700  |   |                                    | $ | 61,481  |                |  | $ | 7,219              |   |  | 11.7  | % |  | $    | 187,121 |   |                | $ | 177,086 |                    |  | $ | 10,035 |   |  | 5.7   | %
|                        |  |                                     |         |   |                                    |   |         |               
|Net income              |  | $                                   | 38,511  |   |                                    | $ | 32,815  |                |  | $ | 5,696              |   |  | 17.4  | % |  | $    | 101,074 |   |                | $ | 93,636  |                    |  | $ | 7,438  |   |  | 7.9   | %



The important factors
and trends at Mohegan Sun which most contributed to our operating performance for the quarter and nine month periods ended June 30, 2005 and 2004 are as follows:



| |  |  | the strengthening of the Mohegan Sun brand awareness in the Northeast gaming market, which is reflected in our table games and slot revenue growth rates for the quarter and nine
months ended June 30, 2005;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



34



---

##### Table of Contents

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



Net revenues for the
quarter and nine months ended June 30, 2005 increased primarily as a result of the continued growth in gaming revenues at Mohegan Sun and the addition of $9.0 million and $14.6 million in harness racing and off-track wagering revenues for the
quarter and nine months ended June 30, 2005, respectively, as a result of the operations of Pocono Downs and the OTW facilities acquired in January 2005. The increase in revenues was partially offset by an increase in promotional allowances
discussed below for the quarter and nine months ended June 30, 2005 compared to the same period in the prior year.



Income from operations for the quarter and nine months ended June 30, 2005 increased as compared to the same periods in the prior year, primarily as a
result of the growth in net revenues. These increases were partially offset by increases in operating costs and expenses of 9.3% and 5.7% for the quarter and nine months ended June 30, 2005, respectively. These increases in operating costs and
expenses were due primarily to the increases in gaming expenses and advertising, general and administrative expenses discussed below. Our operating margin, or income from operations as a percentage of net revenues, improved to 20.1% for the quarter
ended June 30, 2005 from 19.7% for the same period in the prior year, due partially to the increases in productivity and implementation of cost reduction programs at Mohegan Sun mentioned above.



Net income for the quarter and nine months ended June 30, 2005 increased
primarily due to the increase in income from operations offset by an increase in interest expense as a result of the increase in weighted average outstanding debt compared to the same period in the prior year.



Gross Revenues



Gross revenues consisted of the following (in thousands):



|                                |  |                                     |         |      |                                    |                |  |   |                    |   |  |      |   |      |   |                |  |   |                    |  |   |        |   |  |      |  
|------------------------------- |  | ----------------------------------- | ------- | ---- | ---------------------------------- | -------------- |  | - | ------------------ | - |  | ---- | - | ---- | - | -------------- |  | - | ------------------ |  | - | ------ | - |  | ---- | -
|                                |  | For the Three Months Ended June 30, |         |      | For the Nine Months Ended June 30, |               
|                                |  | 2005                                |         | 2004 |                                    | DollarVariance |  |   | PercentageVariance |   |  | 2005 |   | 2004 |   | DollarVariance |  |   | PercentageVariance | 
|Gaming                          |  | $                                   | 309,325 |      | $                                  | 280,274        |  | $ | 29,051             |   |  | 10.4 | % |      | $ | 881,917        |  | $ | 828,234            |  | $ | 53,683 |   |  | 6.5  | %
|Food and beverage               |  |                                     | 23,650  |      |                                    | 22,267         |  |   | 1,383              |   |  | 6.2  | % |      |   | 66,812         |  |   | 66,213             |  |   | 599    |   |  | 0.9  | %
|Hotel                           |  |                                     | 12,845  |      |                                    | 12,857         |  |   | (12                | ) |  | -0.1 | % |      |   | 36,330         |  |   | 37,812             |  |   | (1,482 | ) |  | -3.9 | %
|Retail, entertainment and other |  |                                     | 29,380  |      |                                    | 24,062         |  |   | 5,318              |   |  | 22.1 | % |      |   | 79,378         |  |   | 69,830             |  |   | 9,548  |   |  | 13.7 | %
|                                |  |                                     |         |      |                                    |                |  |   |                    |   |  |      |   |      |   |                |  |   |                    |  |   |        |   |  |      |  
|Total                           |  | $                                   | 375,200 |      | $                                  | 339,460        |  | $ | 35,740             |   |  | 10.5 | % |      | $ | 1,064,437      |  | $ | 1,002,089          |  | $ | 62,348 |   |  | 6.2  | %
|                                |  |                                     |         |      |                                    |                |  |   |                    |   |  |      |   |      |   |                |  |   |                    |  |   |        |   |  |      |  



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



|                                |  |                                    |   |  |                                   |   |  |       |   |  |       |  
|------------------------------- |  | ---------------------------------- | - |  | --------------------------------- | - |  | ----- | - |  | ----- | -
|                                |  | For the Three Months EndedJune 30, |   |  | For the Nine Months EndedJune 30, |  
|                                |  | 2005                               |   |  | 2004                              |   |  | 2005  |   |  | 2004  |  
|Gaming                          |  | 82.5                               | % |  | 82.5                              | % |  | 82.8  | % |  | 82.6  | %
|Food and beverage               |  | 6.3                                | % |  | 6.6                               | % |  | 6.3   | % |  | 6.6   | %
|Hotel                           |  | 3.4                                | % |  | 3.8                               | % |  | 3.4   | % |  | 3.8   | %
|Retail, entertainment and other |  | 7.8                                | % |  | 7.1                               | % |  | 7.5   | % |  | 7.0   | %
|                                |  |                                    |   |  |                                   |   |  |       |   |  |       |  
|Total                           |  | 100.0                              | % |  | 100.0                             | % |  | 100.0 | % |  | 100.0 | %
|                                |  |                                    |   |  |                                   |   |  |       |   |  |       |  



35



---

##### Table of Contents

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



|                                                    |  |                                     |       |   |                                    |   |       |                |  |   |                    |   |  |      |   |  |      |       |   |                |   |       |                    |  |   |     |   |  |      |  
|--------------------------------------------------- |  | ----------------------------------- | ----- | - | ---------------------------------- | - | ----- | -------------- |  | - | ------------------ | - |  | ---- | - |  | ---- | ----- | - | -------------- | - | ----- | ------------------ |  | - | --- | - |  | ---- | -
|                                                    |  | For the Three Months Ended June 30, |       |   | For the Nine Months Ended June 30, |  
|                                                    |  | 2005                                |       |   | 2004                               |   |       | DollarVariance |  |   | PercentageVariance |   |  | 2005 |   |  | 2004 |       |   | DollarVariance |   |       | PercentageVariance | 
|Slot handle                                         |  | $                                   | 2,536 |   |                                    | $ | 2,578 |                |  | $ | (42                | ) |  | -1.6 | % |  | $    | 7,434 |   |                | $ | 7,519 |                    |  | $ | (85 | ) |  | -1.1 | %
|Gross slot revenues                                 |  | $                                   | 220   |   |                                    | $ | 209   |                |  | $ | 11                 |   |  | 5.3  | % |  | $    | 629   |   |                | $ | 611   |                    |  | $ | 18  |   |  | 2.9  | %
|Net slot revenues                                   |  | $                                   | 214   |   |                                    | $ | 203   |                |  | $ | 11                 |   |  | 5.4  | % |  | $    | 611   |   |                | $ | 593   |                    |  | $ | 18  |   |  | 3.0  | %
|Weighted average number of slot machines (in units) |  |                                     | 6,213 |   |                                    |   | 6,252 |                |  |   | (39                | ) |  | -0.6 | % |  |      | 6,242 |   |                |   | 6,216 |                    |  |   | 26  |   |  | 0.4  | %
|Gross slot hold percentage                          |  |                                     | 8.7   | % |                                    |   | 8.1   | %              |  |   | 0.6                | % |  | 7.4  | % |  |      | 8.5   | % |                |   | 8.1   | %                  |  |   | 0.4 | % |  | 4.9  | %
|Gross slot win per unit per day (in dollars)        |  | $                                   | 390   |   |                                    | $ | 367   |                |  | $ | 23                 |   |  | 6.3  | % |  | $    | 370   |   |                | $ | 359   |                    |  | $ | 11  |   |  | 3.1  | %
|Table games drop                                    |  | $                                   | 505   |   |                                    | $ | 472   |                |  | $ | 33                 |   |  | 7.0  | % |  | $    | 1,525 |   |                | $ | 1,441 |                    |  | $ | 84  |   |  | 5.8  | %
|Table games revenues                                |  | $                                   | 84    |   |                                    | $ | 75    |                |  | $ | 9                  |   |  | 12.0 | % |  | $    | 249   |   |                | $ | 228   |                    |  | $ | 21  |   |  | 9.2  | %
|Weighted average number of table games (in units)   |  |                                     | 295   |   |                                    |   | 292   |                |  |   | 3                  |   |  | 1.0  | % |  |      | 291   |   |                |   | 283   |                    |  |   | 8   |   |  | 2.8  | %
|Table games hold percentage (1)                     |  |                                     | 16.5  | % |                                    |   | 15.9  | %              |  |   | 0.6                | % |  | 3.8  | % |  |      | 16.3  | % |                |   | 15.8  | %                  |  |   | 0.5 | % |  | 3.2  | %
|Table games revenue per unit per day (in dollars)   |  | $                                   | 3,114 |   |                                    | $ | 2,815 |                |  | $ | 299                |   |  | 10.6 | % |  | $    | 3,126 |   |                | $ | 2,943 |                    |  | $ | 183 |   |  | 6.2  | %

---

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



Gaming revenues for the quarter and nine months ended June 30, 2005 compared
to the same period in the prior year increased primarily due to continued growth in table games revenues and net slot revenues and the addition of $9.0 million and $14.6 million in harness racing and off-track wagering revenues, respectively, as a
result of the operations of Pocono Downs and the OTW facilities acquired in January 2005. The increase in table games revenues and net slot revenues resulted primarily from the strengthened awareness of the Mohegan Sun brand in the Northeast United
States gaming market.



Food and beverage revenues for the
quarter ended June 30, 2005 compared to the same period in the prior year increased as a result of a 2.6% increase in the number of meals served, or food covers, at Mohegan Sun despite the closure of two restaurants in the Casino of the Earth
(subsequently replaced with the new Uncas American Indian Grill, which opened in July 2005). The addition of food and beverage revenues associated with the operation of the food and beverage outlets at the Pocono Downs properties also contributed to
the increase for the quarter. This increase was offset by a decrease in the average price per meal at Mohegan Sun to $12.98 for the quarter ended June 30, 2005 from $13.16 for the quarter ended June 30, 2004.



Food and beverage revenues for the nine months ended June 30, 2005 increased
slightly as a result of an increase in the average price per meal to $13.19 for the nine months ended June 30, 2005 from $13.15 for the nine months ended June 30, 2004, as well as the addition of food and beverage revenues associated with the
operation of the food and beverage outlets at the Pocono Downs properties. These increases were offset by a 2.1% decrease in food covers at Mohegan Sun due to a shift in patron visitation to our tenant outlets from outlets owned by Mohegan Sun
during the first two quarters of fiscal 2005 and the closure of two Mohegan Sun owned restaurants in the Casino of the Earth as described above.



36



---

##### Table of Contents

The following table presents data related to our hotel revenues:



|                                    |  |                                     |         |   |                                    |   |        |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|----------------------------------- |  | ----------------------------------- | ------- | - | ---------------------------------- | - | ------ | -------------- |  | - | ------------------ | - |  | ----- | - |  | ---- | ------- | - | -------------- | - | ------- | ------------------ |  | - | ------ | - |  | ----- | -
|                                    |  | For the Three Months Ended June 30, |         |   | For the Nine Months Ended June 30, |  
|                                    |  | 2005                                |         |   | 2004                               |   |        | DollarVariance |  |   | PercentageVariance |   |  | 2005  |   |  | 2004 |         |   | DollarVariance |   |         | PercentageVariance | 
|Rooms occupied                      |  |                                     | 102,796 |   |                                    |   | 92,199 |                |  |   | 10,597             |   |  | 11.5  | % |  |      | 292,902 |   |                |   | 272,769 |                    |  |   | 20,133 |   |  | 7.4   | %
|Average daily room rate (ADR)       |  | $                                   | 117     |   |                                    | $ | 131    |                |  | $ | (14                | ) |  | -10.7 | % |  | $    | 117     |   |                | $ | 131     |                    |  | $ | (14    | ) |  | -10.7 | %
|Occupancy rate                      |  |                                     | 96.1    | % |                                    |   | 86.2   | %              |  |   | 9.9                | % |  | 11.5  | % |  |      | 91.2    | % |                |   | 84.7    | %                  |  |   | 6.5    | % |  | 7.7   | %
|Revenue per available room (REVPAR) |  | $                                   | 112     |   |                                    | $ | 113    |                |  | $ | (1                 | ) |  | -0.9  | % |  | $    | 107     |   |                | $ | 111     |                    |  | $ | (4     | ) |  | -3.6  | %



Hotel revenues
decreased for the quarter and nine months ended June 30, 2005 compared to the same period in the prior year as a result of a decrease in ADR partially offset by an increase in occupancy rate. The increase in occupancy rate for the quarter and nine
months ended June 30, 2005 was due primarily to a higher utilization of the Mohegan Sun hotel by Players Club members. The Players Club program extended to casino patrons provides lower room rates, which is reflected in the decrease in
REVPAR and an 11.7% and 11.5% decrease in ADR for rooms provided to these patrons in the quarter and nine months ended June 30, 2005, respectively. The increased hotel occupancy tends to contribute to growth in gaming, food and beverage and retail,
entertainment and other revenues that more than offsets the declines in ADR and REVPAR.



Retail, entertainment and other revenues increased for the quarter and nine months ended June 30, 2005 compared to the same period in the prior year primarily as a result of increased retail and other revenues of
28.9%, or $4.6 million for the quarter ended June 30, 2005 and 22.1%, or $10.6 million, for the nine months ended June 30, 2005. Retail and other revenues increased due to increases in the price per gallon of gasoline and number of gallons of
gasoline sold at the Mohegan Sun gasoline and convenience center, as well as increases in retail revenues from our stores and rental revenues associated with third party tenant outlets at Mohegan Sun. The increase in retail and other revenues for
the nine months ended June 30, 2005 is partially offset by a decrease in entertainment revenues of 4.7%, or $1.0 million, due to a decrease of 5.1% in the average price per ticket to Mohegan Sun Arena events.



Promotional Allowances



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



|                                |  |                                     |        |      |                                    |                |  |                    |       |  |      |   |      |   |                |  |                    |        |  |   |        |  |      |  
|------------------------------- |  | ----------------------------------- | ------ | ---- | ---------------------------------- | -------------- |  | ------------------ | ----- |  | ---- | - | ---- | - | -------------- |  | ------------------ | ------ |  | - | ------ |  | ---- | -
|                                |  | For the Three Months Ended June 30, |        |      | For the Nine Months Ended June 30, |               
|                                |  | 2005                                |        | 2004 |                                    | DollarVariance |  | PercentageVariance |       |  | 2005 |   | 2004 |   | DollarVariance |  | PercentageVariance |       
|Food and beverage               |  | $                                   | 11,725 |      | $                                  | 10,776         |  | $                  | 949   |  | 8.8  | % |      | $ | 32,214         |  | $                  | 31,812 |  | $ | 402    |  | 1.3  | %
|Hotel                           |  |                                     | 4,103  |      |                                    | 3,314          |  |                    | 789   |  | 23.8 | % |      |   | 11,694         |  |                    | 10,340 |  |   | 1,354  |  | 13.1 | %
|Retail, entertainment and other |  |                                     | 16,849 |      |                                    | 13,471         |  |                    | 3,378 |  | 25.1 | % |      |   | 45,933         |  |                    | 37,513 |  |   | 8,420  |  | 22.4 | %
|                                |  |                                     |        |      |                                    |                |  |                    |       |  |      |   |      |   |                |  |                    |        |  |   |        |  |      |  
|Total                           |  | $                                   | 32,677 |      | $                                  | 27,561         |  | $                  | 5,116 |  | 18.6 | % |      | $ | 89,841         |  | $                  | 79,665 |  | $ | 10,176 |  | 12.8 | %
|                                |  |                                     |        |      |                                    |                |  |                    |       |  |      |   |      |   |                |  |                    |        |  |   |        |  |      |  



37



---

##### Table of Contents

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



|                                |  |                                     |        |      |                                    |                |  |                    |       |  |      |   |      |   |                |  |                    |        |  |   |       |  |      |  
|------------------------------- |  | ----------------------------------- | ------ | ---- | ---------------------------------- | -------------- |  | ------------------ | ----- |  | ---- | - | ---- | - | -------------- |  | ------------------ | ------ |  | - | ----- |  | ---- | -
|                                |  | For the Three Months Ended June 30, |        |      | For the Nine Months Ended June 30, |               
|                                |  | 2005                                |        | 2004 |                                    | DollarVariance |  | PercentageVariance |       |  | 2005 |   | 2004 |   | DollarVariance |  | PercentageVariance |       
|Food and beverage               |  | $                                   | 11,646 |      | $                                  | 10,747         |  | $                  | 899   |  | 8.4  | % |      | $ | 32,857         |  | $                  | 31,432 |  | $ | 1,425 |  | 4.5  | %
|Hotel                           |  |                                     | 1,993  |      |                                    | 1,363          |  |                    | 630   |  | 46.2 | % |      |   | 5,656          |  |                    | 4,366  |  |   | 1,290 |  | 29.5 | %
|Retail, entertainment and other |  |                                     | 13,454 |      |                                    | 10,230         |  |                    | 3,224 |  | 31.5 | % |      |   | 35,390         |  |                    | 28,820 |  |   | 6,570 |  | 22.8 | %
|                                |  |                                     |        |      |                                    |                |  |                    |       |  |      |   |      |   |                |  |                    |        |  |   |       |  |      |  
|Total                           |  | $                                   | 27,093 |      | $                                  | 22,340         |  | $                  | 4,753 |  | 21.3 | % |      | $ | 73,903         |  | $                  | 64,618 |  | $ | 9,285 |  | 14.4 | %
|                                |  |                                     |        |      |                                    |                |  |                    |       |  |      |   |      |   |                |  |                    |        |  |   |       |  |      |  



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



Operating Costs and Expenses



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



|                                        |  |                                     |         |      |                                    |                |  |   |                    |   |  |       |   |      |   |                |  |   |                    |  |   |        |   |  |       |  
|--------------------------------------- |  | ----------------------------------- | ------- | ---- | ---------------------------------- | -------------- |  | - | ------------------ | - |  | ----- | - | ---- | - | -------------- |  | - | ------------------ |  | - | ------ | - |  | ----- | -
|                                        |  | For the Three Months Ended June 30, |         |      | For the Nine Months Ended June 30, |               
|                                        |  | 2005                                |         | 2004 |                                    | DollarVariance |  |   | PercentageVariance |   |  | 2005  |   | 2004 |   | DollarVariance |  |   | PercentageVariance | 
|Gaming                                  |  | $                                   | 174,268 |      | $                                  | 156,442        |  | $ | 17,826             |   |  | 11.4  | % |      | $ | 502,595        |  | $ | 464,601            |  | $ | 37,994 |   |  | 8.2   | %
|Food and beverage                       |  |                                     | 10,958  |      |                                    | 10,790         |  |   | 168                |   |  | 1.6   | % |      |   | 32,806         |  |   | 32,045             |  |   | 761    |   |  | 2.4   | %
|Hotel                                   |  |                                     | 4,249   |      |                                    | 3,615          |  |   | 634                |   |  | 17.5  | % |      |   | 11,780         |  |   | 11,047             |  |   | 733    |   |  | 6.6   | %
|Retail, entertainment and other         |  |                                     | 9,825   |      |                                    | 8,565          |  |   | 1,260              |   |  | 14.7  | % |      |   | 24,247         |  |   | 30,973             |  |   | (6,726 | ) |  | -21.7 | %
|Advertising, general and administrative |  |                                     | 49,369  |      |                                    | 45,845         |  |   | 3,524              |   |  | 7.7   | % |      |   | 141,860        |  |   | 132,022            |  |   | 9,838  |   |  | 7.5   | %
|Corporate expenses                      |  |                                     | 2,847   |      |                                    | 860            |  |   | 1,987              |   |  | 231.0 | % |      |   | 8,310          |  |   | 3,348              |  |   | 4,962  |   |  | 148.2 | %
|Depreciation and amortization           |  |                                     | 22,307  |      |                                    | 24,301         |  |   | (1,994             | ) |  | -8.2  | % |      |   | 65,877         |  |   | 71,302             |  |   | (5,425 | ) |  | -7.6  | %
|                                        |  |                                     |         |      |                                    |                |  |   |                    |   |  |       |   |      |   |                |  |   |                    |  |   |        |   |  |       |  
|Total                                   |  | $                                   | 273,823 |      | $                                  | 250,418        |  | $ | 23,405             |   |  | 9.3   | % |      | $ | 787,475        |  | $ | 745,338            |  | $ | 42,137 |   |  | 5.7   | %
|                                        |  |                                     |         |      |                                    |                |  |   |                    |   |  |       |   |      |   |                |  |   |                    |  |   |        |   |  |       |  



Gaming costs and
expenses increased for the quarter and nine months ended June 30, 2005 compared to the same period in the prior year primarily as a result of increased costs related to a higher amount of complimentaries provided to casino patrons, which results in
a higher amount of expenses allocated to gaming from the other cost centers, the reimbursement of gift cards and complimentaries redeemed at tenant retail outlets and the addition of gaming expenses associated with harness racing and OTW operations
at the Pocono Downs properties.



Food and beverage costs and
expenses increased slightly for the quarter and nine months ended June 30, 2005 compared to the same period in the prior year due to the addition of expenses associated with the operation of the food and beverage outlets at the Pocono Downs
properties, offset by a decrease in food and beverage expenses at Mohegan Sun due to a higher amount of food and beverage costs allocated to gaming costs and expenses for food and beverage complimentaries provided to casino patrons.



Hotel costs and expenses increased for the quarter and nine months ended June
30, 2005 compared to the same period in the prior year primarily as a result of higher operating costs related to the increase in rooms



38



---

##### Table of Contents

occupied and hotel beautification projects, partially offset by increased hotel complimentaries for the quarter and nine months ended June 30, 2005 resulting
in a higher amount of hotel costs and expenses being recorded in gaming costs and expenses than in the quarter and nine months ended June 30, 2004.



Retail, entertainment and other costs and expenses increased for the quarter ended June 30, 2005 compared to the same period in the prior year primarily
due to an increase in the cost of gasoline and number of gallons of gasoline sold at the Mohegan Sun gasoline and convenience center and an increase in entertainment expenses associated with the nature of events at the Mohegan Sun Arena during the
quarter, offset by higher entertainment complimentaries and a gas coupon program provided to patrons at Mohegan Sun for the quarter ended June 30, 2005, resulting in a higher amount of retail, entertainment and other costs and expenses being
recorded in gaming costs and expenses than in the quarter ended June 30, 2004.



Retail, entertainment and other costs and expenses decreased for the nine months ended June 30, 2005 compared to the same period in the prior year primarily due to a decrease in entertainment expenses associated with
a change in the mix of Arena events and an increase in retail and entertainment complimentaries provided to patrons at Mohegan Sun for the nine months ended June 30, 2005, resulting in a higher amount of retail, entertainment and other costs and
expenses being recorded in gaming costs and expenses than in the nine months ended June 30, 2004, offset by an increase in the cost of gasoline and number of gallons of gasoline sold at the Mohegan Sun gasoline and convenience center.



Advertising, general and administrative costs and expenses increased for the
quarter and nine months ended June 30, 2005 compared to the same period in the prior year primarily as a result of increased labor costs, approximately $2.0 million in one-time expenses relating to the release of a new series of television
commercials that began airing in the northeastern market during the second quarter of fiscal 2005 and the addition of advertising, general and administrative costs and expenses associated with the operation of our Pocono Downs properties.



Corporate costs and expenses increased for the quarter and
nine months ended June 30, 2005 compared to the same period in the prior year primarily as a result of increased labor and professional costs related to our new corporate function and expenses incurred in complying with the Sarbanes-Oxley Act of
2002.



Depreciation and amortization for the quarter and nine
months ended June 30, 2005 decreased primarily due to an increase in fully depreciated assets and the timing of placement of new capital assets into service.



Other Income (Expense)



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



|                                                          |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|--------------------------------------------------------- |  | ----------------------------------- | ------- | - | ---------------------------------- | - | ------- | -------------- |  | - | ------------------ | - |  | ----- | - |  | ---- | ------- | - | -------------- | - | ------- | ------------------ |  | - | ------ | - |  | ----- | -
|                                                          |  | For the Three Months Ended June 30, |         |   | For the Nine Months Ended June 30, |  
|                                                          |  | 2005                                |         |   | 2004                               |   |         | DollarVariance |  |   | PercentageVariance |   |  | 2005  |   |  | 2004 |         |   | DollarVariance |   |         | PercentageVariance | 
|Accretion of discount to the relinquishment liability (1) |  | $                                   | (6,867  | ) |                                    | $ | (7,485  | )              |  | $ | 618                |   |  | -8.3  | % |  | $    | (20,600 | ) |                | $ | (22,455 | )                  |  | $ | 1,855  |   |  | -8.3  | %
|Interest income                                           |  |                                     | 189     |   |                                    |   | 23      |                |  |   | 166                |   |  | 721.7 | % |  |      | 416     |   |                |   | 174     |                    |  |   | 242    |   |  | 139.1 | %
|Interest expense                                          |  |                                     | (23,423 | ) |                                    |   | (20,407 | )              |  |   | (3,016             | ) |  | 14.8  | % |  |      | (64,875 | ) |                |   | (60,076 | )                  |  |   | (4,799 | ) |  | 8.0   | %
|Loss on early extinguishment of debt                      |  |                                     |        |   |                                    |   |        |                |  |   |                   |   |  |      |   |  |      | (280    | ) |                |   | (248    | )                  |  |   | (32    | ) |  | 12.9  | %
|Other expense, net (2)                                    |  |                                     | (325    | ) |                                    |   | (797    | )              |  |   | 472                |   |  | -59.2 | % |  |      | (1,140  | ) |                |   | (845    | )                  |  |   | (295   | ) |  | 34.9  | %
|                                                          |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  
|Total                                                     |  | $                                   | (30,426 | ) |                                    | $ | (28,666 | )              |  | $ | (1,760             | ) |  | 6.1   | % |  | $    | (86,479 | ) |                | $ | (83,450 | )                  |  | $ | (3,029 | ) |  | 3.6   | %
|                                                          |  |                                     |         |   |                                    |   |         |                |  |   |                    |   |  |       |   |  |      |         |   |                |   |         |                    |  |   |        |   |  |       |  

---

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

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



39



---

##### Table of Contents

Interest expense increased for the quarter and nine months ended June 30, 2005 compared to the same
period in the prior year primarily as the result of an increase in weighted average outstanding debt. Weighted average outstanding debt increased to $1.29 billion from $1.07 billion for the quarter ended June 30, 2005, and $1.19 billion from $1.10
billion for the nine months ended June 30, 2005, due to the acquisition of Pocono Downs for approximately $280.0 million in January 2005. The weighted average interest rate for the quarter ended June 30, 2005 was 7.3% compared to 7.6% for the
quarter ended June 30, 2004. The weighted average interest rate was 7.3% for the nine months ended June 30, 2005 and 2004, respectively. The decrease in our weighted average interest rate for the quarter ended June 30, 2005 was primarily the result
of lower interest rates on our fixed rate debt.



Loss on early
extinguishment of debt associated with the repayment of our term loan under the bank credit facility was $280,000 for the nine months ended June 30, 2005. Loss on early extinguishment of debt associated with the tender of our remaining $5.2 million
83/4% senior subordinated notes was $248,000 in the nine months ended June 30, 2004.



Seasonality



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



Liquidity, Capital Resources and Capital Spending



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



|                                                    |  |                                    |          |   |      |   |          |                |  |   |                    |   |  |         |  
|--------------------------------------------------- |  | ---------------------------------- | -------- | - | ---- | - | -------- | -------------- |  | - | ------------------ | - |  | ------- | -
|                                                    |  | For the Nine Months Ended June 30, |         
|                                                    |  | 2005                               |          |   | 2004 |   |          | DollarVariance |  |   | PercentageVariance |  
|Net cash provided by operating activities           |  | $                                  | 181,820  |   |      | $ | 180,076  |                |  | $ | 1,744              |   |  | 1.0     | %
|Net cash used in investing activities               |  |                                    | (320,742 | ) |      |   | (26,612  | )              |  |   | (294,130           | ) |  | 1,105.3 | %
|Net cash provided by (used in) financing activities |  |                                    | 155,724  |   |      |   | (150,084 | )              |  |   | 305,808            |   |  | -203.8  | %
|                                                    |  |                                    |          |   |      |   |          |                |  |   |                    |   |  |         |  
|Net increase in cash and cash equivalents           |  | $                                  | 16,802   |   |      | $ | 3,380    |                |  | $ | 13,422             |   |  | 397.1   | %
|                                                    |  |                                    |          |   |      |   |          |                |  |   |                    |   |  |         |  



As of June 30, 2005
and September 30, 2004, we held cash and cash equivalents of $77.6 million and $60.8 million, respectively. Due to the cash-based nature of our business, operating cash flow levels tend to follow trends in our operating income excluding the effects
of non-cash charges, such as depreciation and amortization. The increase in cash provided by operating activities for the nine months ended June 30, 2005 is attributable primarily to the increase in operating income after adjustments for non-cash
items.



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



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



40



---

##### Table of Contents

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



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



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



In addition to cash generated by operating activities, we have relied on external sources of liquidity to meet our investing requirements. The increase in
cash provided by financing activities for the nine months ended June 30, 2005 is attributable primarily to the issuance of debt to fund the approximately $281.0 million in acquisition costs for the Pocono Downs entities. The increase in cash used in
investing activities for the nine months ended June 30, 2005 is attributable primarily to the acquisition of the Pocono Downs entities for $280.1 million, net of cash received of $875,000.



External Sources of Liquidity



Notes. We financed the purchase of the Pocono Downs entities and
previously financed much of the costs of construction of Mohegan Sun with the net proceeds raised from the issuance of notes and borrowings under our bank credit facilities. As of June 30, 2005, we had $14.0 million outstanding in 81/8% senior notes due January 1, 2006, or the 1999 senior notes; $16.3 million outstanding in 83/8% senior subordinated notes due July 1, 2011 and first callable July 1, 2006, or the 2001 senior subordinated
notes; $250.0 million outstanding in 8% senior subordinated notes due April 1, 2012 and first callable April 1, 2007, or the 2002 senior subordinated notes; $330.0 million outstanding in 63/8% senior subordinated notes due July 15, 2009 and callable at any time, or the 2003 senior subordinated notes; $225.0 million outstanding in 71/8% senior subordinated notes due August 15, 2014 and first callable on August 15, 2009, or the 2004 senior
subordinated notes; $250.0 million outstanding in 61/8% senior notes due February 15, 2013 and first callable
February 15, 2009, or the 2005 senior notes; and $150.0 million outstanding in 67/8% senior subordinated notes
due February 15, 2015 and first callable February 15, 2010, or the 2005 senior subordinated notes. MBC, MCV-PA and the Pocono Downs entities are guarantors of each of these notes. Refer to Note 4 to our condensed consolidated financial statements in
this Form 10-Q for a further discussion of these notes.



On February 8, 2005, we issued $250.0 million senior notes with fixed interest payable at a rate of 61/8% per annum. The net proceeds from this financing were used to repay amounts outstanding under the bank credit facility and to pay fees and expenses
associated with the issuance. The 2005 senior notes mature on February 15, 2013. The first call date for the 2005 senior notes is February 15, 2009. Interest on the 2005 senior notes is payable semi-annually on February 15 and August 15, with the
first interest payment scheduled for August 15, 2005. The 2005 senior notes are our uncollateralized general obligations, which are effectively subordinated to all of our existing and future senior secured indebtedness, including the bank credit
facility. The 2005 senior notes rank equally in right of payment with the 1999 senior notes and 50% of our payment obligations under the relinquishment agreement that are then due and owing, and rank senior to the remaining 50% of our payment
obligations under the relinquishment agreement that are then due and owing, the 2001 senior subordinated notes, the 2002 senior subordinated notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes and the 2005 senior
subordinated notes (as referred to below).



On February
8, 2005, we issued $150.0 million senior subordinated notes with fixed interest payable at a rate of 67/8% per
annum. The net proceeds from this financing were used to repay amounts outstanding under the bank credit facility and to pay fees and expenses associated with the issuance. The 2005 senior subordinated notes mature on February 15, 2015. The first
call date for the 2005 senior subordinated notes is February 15, 2010. Interest on the 2005 senior subordinated notes is payable semi-annually on February 15 and August 15, with the first interest payment scheduled for August 15, 2005. The 2005
senior subordinated notes are our uncollateralized general obligations and are subordinated to the bank credit facility, the 1999 senior notes, the 2005 senior notes and in a liquidation, bankruptcy or similar proceeding, 50% of our payment
obligations under



41



---

##### Table of Contents

the relinquishment agreement that are then due and owing. The 2005 senior subordinated notes rank equally with the 2001 senior subordinated notes, the 2002
senior subordinated notes, the 2003 senior subordinated notes, the 2004 senior subordinated notes and the remaining 50% of our payment obligations under the relinquishment agreement that are then due and owing.



Bank Credit Facility. We have a loan agreement for up to $450.0
million from a syndicate of financial institutions and commercial banks, with Bank of America, N.A. serving as administrative agent, or the bank credit facility. The bank credit facility is comprised of a revolving loan of up to $450.0 million which
matures on March 31, 2008. The maximum aggregate principal amount available for borrowing includes amounts under certain letters of credit. As of June 30, 2005, the amount under these letters of credit totaled $334,070, of which no amount was drawn.
The revolving loan has no mandatory amortization provisions and is payable in full on March 31, 2008. We have $445.7 million available for borrowing under the bank credit facility as of June 30, 2005 (without taking into account covenants under the
line of credit discussed below).



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



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



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



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



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



At our option, each advance of loan
proceeds accrues interest on the basis of a base rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month London Inter-Bank Offered Rate (LIBOR), plus in either case, the applicable spread at the time each
loan is made. We also pay commitment fees for the unused portion of the revolving loan on a quarterly basis equal to the applicable spread for commitment fees times the average daily unused commitment for that calendar quarter. Applicable spreads
are based on our total leverage ratio, as defined in the bank credit facility. The applicable spread for base rate advances is between 0.50% and 1.25%, and the applicable spread for LIBOR rate advances is between 1.75% and 2.50%. The applicable
spread for commitment fees is between 0.375% and 0.50%. The base rate is the higher of Bank of Americas announced prime rate or the federal funds rate plus 0.50%. Interest on LIBOR loans is payable at the end of each applicable interest period
or quarterly in arrears, if earlier. Interest on base rate advances is payable quarterly in arrears. As of June 30, 2005, we had $4.0 million in base rate loans and no amounts outstanding in LIBOR rate loans. The base rate loans outstanding at June
30, 2005 were based on the banks prime rate of 6.25% plus an applicable spread of 1.25%. The applicable spread for commitment fees was 0.50% as of June 30, 2005.



Line of Credit. We have a $25.0 million revolving loan agreement with Bank of America (formerly Fleet National Bank),
or the line of credit. Each advance accrues interest on the basis of one-month LIBOR, plus the



42



---

##### Table of Contents

applicable spread, determined at the time the advance is made on the basis of the Authoritys Leverage Ratio, as defined in the Line of Credit.
Borrowings under the line of credit are our uncollateralized obligations. The line of credit expires in March 2006. The line of credit subjects us to certain covenants, including a covenant to maintain at least $25.0 million available for borrowing
under the bank credit facility. As of June 30, 2005, we were in compliance with all covenant requirements in the line of credit. The interest rate in effect at June 30, 2005 on the outstanding $19.2 million principal balance on the line of credit
was 4.78%, comprised of a one-month LIBOR of 3.28%, plus an applicable spread of 1.50%. As of June 30, 2005, we had $5.8 million available for borrowing under the line of credit.



Capital Expenditures



Capital Expenditures Incurred



Capital expenditures totaled $35.5 million for the nine months ended June 30, 2005, compared to $25.4 million for the nine months ended June 30, 2004.
These capital expenditures were an aggregate of the following:



| |  |  | Property maintenance capital expenditures at Mohegan Sun totaled $33.4 million and $24.3 million for the nine months ended June 30, 2005 and 2004, respectively. For the nine months
ended June 30, 2005, these expenditures were for the general maintenance of the Mohegan Sun facility and construction of the Uncas American Indian Grill discussed below. For the nine months ended June 30, 2004, these expenditures included $7.3
million in renovations and the purchase of equipment to add slot machines to gaming space formerly used for poker operations and the purchase of equipment to add slot machines to our keno gaming area and to add 14 new table games in the Casino of
the Earth.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cumulative Project Sunburst capital expenditures totaled $1.06 billion, including $63.5 million in capitalized interest. During the quarter ended June 30, 2004 capital expenditures
totaled $748,000, with no amounts recorded as capitalized interest. There were no capital expenditures relating to Project Sunburst in the nine months ended June 30, 2005.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Capital expenditures at Pocono Downs totaled $2.1 million from the date of acquisition in January 2005 to June 30, 2005 and were comprised primarily of design fees for the planned
slot machine facility.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Expected Future
Capital Expenditures



We anticipate capital expenditures
at Mohegan Sun to be approximately $52.0 million for the 2005 fiscal year, comprised of approximately $7.3 million for the construction of the Uncas American Indian Grill which was completed in July 2005 and maintenance capital expenditures. We also
anticipate that we will spend up to $140.0 to $160.0 million on the construction, furnishing and equipping of a new slot machine facility at Pocono Downs and an additional $47.0 million on improvements and additions to the existing clubhouse and
grandstand, in addition to paying a one-time $50.0 million fee to the Commonwealth of Pennsylvania upon receipt of a conditional Category One Slot Machine License. In fiscal year 2005, we expect to incur approximately $10.0 million in capital
expenditures at Pocono Downs, comprised primarily of design and construction fees for the clubhouse and grandstand improvements and design fees for the planned slot machine facility.



Sources of Funding for Capital Expenditures



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



43



---

##### Table of Contents

Interest Expense



For the quarters ended June 30, 2005 and 2004, we incurred the following in interest expense (in thousands):



|                                                                           |  |                                    |        |                                   |   |        |  |      |        |  |   |        |  
|-------------------------------------------------------------------------- |  | ---------------------------------- | ------ | --------------------------------- | - | ------ |  | ---- | ------ |  | - | ------ | -
|                                                                           |  | For the Three MonthsEnded June 30, |        | For the Nine MonthsEnded June 30, |  
|                                                                           |  | 2005                               |        | 2004                              |   | 2005   |  | 2004 |       
|Bank credit facility                                                       |  | $                                  | 956    |                                   | $ | 1,424  |  | $    | 6,528  |  | $ | 4,989  |  
|1999 81/8% senior notes                                                    |  |                                    | 284    |                                   |   | 4,063  |  |      | 935    |  |   | 12,187 |  
|2005 61/8% senior notes                                                    |  |                                    | 3,828  |                                   |   |       |  |      | 5,997  |  |   |       |  
|1999 83/4% senior subordinated notes                                       |  |                                    |       |                                   |   |       |  |      |       |  |   | 134    |  
|2001 83/8% senior subordinated notes                                       |  |                                    | 342    |                                   |   | 3,141  |  |      | 1,089  |  |   | 9,422  |  
|2002 8% senior subordinated notes                                          |  |                                    | 5,000  |                                   |   | 5,000  |  |      | 15,000 |  |   | 15,000 |  
|2003 63/8% senior subordinated notes                                       |  |                                    | 5,259  |                                   |   | 5,259  |  |      | 15,720 |  |   | 15,778 |  
|2004 71/8% senior subordinated notes                                       |  |                                    | 4,008  |                                   |   |       |  |      | 12,023 |  |   |       |  
|2005 67/8% senior subordinated notes                                       |  |                                    | 2,578  |                                   |   |       |  |      | 4,039  |  |   |       |  
|WNBA note                                                                  |  |                                    | 69     |                                   |   | 47     |  |      | 194    |  |   | 151    |  
|Line of credit                                                             |  |                                    | 167    |                                   |   | 20     |  |      | 390    |  |   | 86     |  
|Interest settlementderivative instruments                                 |  |                                    | 13     |                                   |   |       |  |      |       |  |   | (2,552 | )
|Reclassification of derivative instrument losses to earnings               |  |                                    |       |                                   |   |       |  |      |       |  |   | 303    |  
|Amortization of net deferred (gain) loss on sale of derivative instruments |  |                                    | 172    |                                   |   | 40     |  |      | 609    |  |   | (276   | )
|Amortization of debt issuance costs                                        |  |                                    | 747    |                                   |   | 1,413  |  |      | 2,351  |  |   | 4,854  |  
|                                                                           |  |                                    |        |                                   |   |        |  |      |        |  |   |        |  
|Total interest expense                                                     |  | $                                  | 23,423 |                                   | $ | 20,407 |  | $    | 64,875 |  | $ | 60,076 |  
|                                                                           |  |                                    |        |                                   |   |        |  |      |        |  |   |        |  



Sufficiency of
Resources



We believe that existing cash balances,
financing arrangements and operating cash flows will provide us with sufficient resources to meet our existing debt obligations, relinquishment payments, foreseeable capital expenditure requirements with respect to current operations and
distributions to the Tribe for at least the next twelve months. Distributions to the Tribe are anticipated to total $67.5 million and $70.0 million for fiscal year 2005 and 2006, respectively. We expect future investments in Pocono Downs related to
the payment of a one-time slot machine license fee, improvements to the existing facility and the development of a slot machine facility at Pocono Downs will be funded through our bank credit facility. As of June 30, 2005 we had $445.7 million
available for borrowing under the bank credit facility (without taking into account covenants under the line of credit).



Contractual Obligations and Commitments



Our future payment obligations as of June 30, 2005 related to our material debt and certain other contractual obligations and the timing of those payments
are set forth below.



|                                      |  |                        |           |                     |   |           |  |           |        |                  |   |         |  |   |        
|------------------------------------- |  | ---------------------- | --------- | ------------------- | - | --------- |  | --------- | ------ | ---------------- | - | ------- |  | - | -------
|                                      |  | Payments due by period
|Contractual Obligations(in thousands) |  | Total                  |           | Less than 1year (1) |   | 1-3 years |  | 3-5 years |        | More than 5years
|Long-term debt (2)                    |  | $                      | 1,267,020 |                     | $ | 19,155    |  | $         | 18,520 |                  | $ | 336,000 |  | $ | 893,345
|Cowlitz Project obligations (3)       |  |                        | 10,663    |                     |   |          |  |           | 10,663 |                  |   |        |  |   |       
|Pocono Downs obligation (4)           |  |                        | 575       |                     |   |          |  |           | 575    |                  |   |        |  |   |       
|                                      |  |                        |           |                     |   |           |  |           |        |                  |   |         |  |   |        
|Total                                 |  | $                      | 1,278,258 |                     | $ | 19,155    |  | $         | 29,758 |                  | $ | 336,000 |  | $ | 893,345
|                                      |  |                        |           |                     |   |           |  |           |        |                  |   |         |  |   |        

---

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



44



---

##### Table of Contents

|(2) | Long-term debt includes maturities scheduled as of June 30, 2005 for our senior and senior subordinated notes, amounts required to be paid pursuant to the bank credit facility and
our other debt agreements, but excludes interest payments. Refer to Note 4 to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Cowlitz Project obligations include land purchase option payments of $10.7 million to be paid in the 2006 fiscal year, excluding interest payments. Refer to Note 6 to our condensed
consolidated financial statements in this Quarterly Report on Form 10-Q.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Pocono Downs obligations include a requirement under the purchase agreement dated October 14, 2004 to remediate certain environmental matters at the Pocono Downs racetrack site. The
total cost of the remediation is estimated at $1.6 million, for which the former owner of Pocono Downs, Penn National Gaming, Inc., is liable for the first $1.0 million of the total cost. These costs are expected to be incurred in the 2006 fiscal
year. Refer to Note 6 of the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion on these environmental matters.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition to the contractual obligations described above, we have certain other contractual commitments as of June 30,
2005 that require payments during the periods described below. The calculation of the estimated payments in the table below are based, in large part, on projections of future revenues over an extended period of time, as well as other factors 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.



|                                       |  |                        |         |           |   |           |  |            |         |  |   |          
|-------------------------------------- |  | ---------------------- | ------- | --------- | - | --------- |  | ---------- | ------- |  | - | ---------
|                                       |  | Payments due by period
|Contractual Commitments (in
thousands) |  | Less than 1year (1)    |         | 1-3 years |   | 3-5 years |  | 5-10 years
|Slot Win Contribution (2)              |  | $                      | 220,818 |           | $ | 435,573   |  | $          | 337,684 |  | $ | 884,492  
|Relinquishment commitments (3)         |  |                        | 72,543  |           |   | 137,548   |  |            | 106,636 |  |   | 279,310  
|Priority distributions (4)             |  |                        | 15,726  |           |   | 32,825    |  |            | 34,824  |  |   | 96,624   
|Town of Montville commitment (5)       |  |                        | 500     |           |   | 1,000     |  |            | 1,000   |  |   | 2,500    
|                                       |  |                        |         |           |   |           |  |            |         |  |   |          
|Total                                  |  | $                      | 309,587 |           | $ | 606,946   |  | $          | 480,144 |  | $ | 1,262,926
|                                       |  |                        |         |           |   |           |  |            |         |  |   |          

---

|(1) | Amounts represent payment commitments from October 1, 2004 to September 30, 2005.
|--- | ---------------------------------------------------------------------------------

|(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, although the agreement is perpetual
in term.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Relinquishment payments are made by us to TCA under a relinquishment agreement. Relinquishment payments are five percent of revenues, as defined in the relinquishment agreement. 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 7 to our condensed consolidated financial statements in this Quarterly
Report on 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 6 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%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



---

##### Table of Contents

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



Critical Accounting Policies
and Estimates



Management has identified the following
critical accounting policies that affect our more significant judgments and estimates used in the preparation of our 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 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 are recognized on a straight-line basis over the terms of the related leases. Percentage rents are
recognized in the period in which the tenants exceed their respective percentage rent thresholds.



Allowance for Doubtful Accounts



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



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 materially from those estimates.



Self-insurance Accruals



We are self-insured up to certain limits for costs associated with workers compensation and employee medical coverage. Insurance claims and reserves
include accruals of estimated settlements for known claims, as well as accruals of estimates of incurred but not reported claims. In estimating these costs, we consider historical loss experience and make judgments about the expected levels of costs
per claim. We also use information provided by independent consultants to assist in the determination of estimated accruals. These claims are accounted for based on estimates of the undiscounted claims, including those claims incurred but not
reported. We believe the use of these estimates to account for these liabilities provides a consistent and effective way to



46



---

##### Table of Contents

measure these accruals; however, changes in health care costs, accident frequency and severity and other factors can materially affect the estimate for these
liabilities. We continually monitor the potential changes in future estimates, evaluate insurance accruals and make adjustments when necessary.



Derivative Instruments



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



Relinquishment Liability



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



Goodwill



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



Intangible Assets



Our trademark for Mohegan Sun is no longer subject to amortization as it has been deemed to have an indefinite useful life. The trademark is evaluated
periodically for impairment by applying a fair-value based test and, if impairment occurs, the amount of impaired trademark will be written off immediately. The intangible



47



---

##### Table of Contents

assets associated with the acquisitions of the Pocono Downs entities and 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 other current
liabilities in our accompanying condensed consolidated balance sheets.



Impact of Inflation



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



New Accounting Pronouncements



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



In May 2005, the FASB issued Statement of Financial Accounting Standards No.
154, Accounting Changes and Error Correctionsa replacement of APB Opinion No. 20 and FASB Statement No. 3 or FAS 154. FAS 154 requires retrospective application to prior periods financial statements of changes in accounting
principle, subject to certain practicability provisions, but does not change the guidance in APB Opinion No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. FAS 154 is
effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe the adoption of this standard will have a material impact on 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 bank credit facility in which interest will accrue on the basis of a base rate formula or a LIBOR-based formula, plus applicable spreads. As of June 30,
2005, we had $4.0 million outstanding under the bank credit facility. See Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsLiquidity, Capital Resources and Capital SpendingExternal
Sources of Liquidity for further information relating to the terms and conditions of the bank credit facility.



We attempt to manage our interest rate risk through a controlled mix of our long-term fixed rate borrowings and variable rate borrowings and the use of
derivative instruments, including interest rate swaps, in accordance with established policies and procedures. We do not hold or issue financial instruments, including derivative instruments, for speculative or trading purposes.



On March 10, 2005, we entered into two interest rate swap agreements, each
based on six-month LIBOR plus a spread of 116 basis points and each hedging $50 million of the 2005 senior notes. On March 23, 2005, we



48



---

##### Table of Contents

entered into three additional interest rate swap agreements, which also were based on six-month LIBOR plus spreads of 87 to 91 basis points and hedging $50
million, $75.0 million and $25.0 million of the 2005 senior notes. Under these agreements, we would have made payments on the variable interest rate provided by the derivative instrument and would have received payments equal to the fixed interest
rate on the debt being hedged. These instruments were terminated during the quarter ended June 30, 2005.



The following table provides information as of June 30, 2005 about our current financial instruments (debt obligations) 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. 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 June 30, 2005.



Expected Maturity Date



|                                            |  |                |        |   |      |   |        |      |  |   |       |   |  |      |       |   |            |   |         |       |  |   |            |   |  |   |           |   |  |   |          
|------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ------- | ----- |  | - | ---------- | - |  | - | --------- | - |  | - | ---------
|                                            |  | Remaining2005  |        |   | 2006 |   |        | 2007 |  |   | 2008  |   |  | 2009 |       |   | Thereafter |   |         | Total |  |   | Fair Value
|                                            |  | (in thousands)
|Liabilities                                 |  |                |        |   |      |   |        |      |  |   |       |   |  |      |       |   |            |   |         |       |  |   |            |   |  |   |           |   |  |   |          
|Long-Term Debt (including current portion): |  |                |        |   |      |   |        |      |  |   |       |   |  |      |       |   |            |   |         |       |  |   |            |   |  |   |           |   |  |   |          
|Fixed Rate                                  |  | $              |       |   |      | $ | 16,520 |      |  | $ |      |   |  | $    |      |   |            | $ | 330,000 |       |  | $ | 891,345    |   |  | $ | 1,237,865 |   |  | $ | 1,279,998
|Average interest rate                       |  |                |       |   |      |   | 8.3    | %    |  |   |      |   |  |      |      |   |            |   | 6.4     | %     |  |   | 7.1        | % |  |   | 6.9       | % |  |   |          
|Variable Rate                               |  | $              | 19,155 |   |      | $ | 1,000  |      |  | $ | 1,000 |   |  | $    | 5,000 |   |            | $ | 1,000   |       |  | $ | 2,000      |   |  | $ | 29,155    |   |  | $ | 29,155   
|Average interest rate                       |  |                | 4.8    | % |      |   | 5.2    | %    |  |   | 5.9   | % |  |      | 6.7   | % |            |   | 6.1     | %     |  |   | 6.2        | % |  |   | 5.3       | % |  |   |          



|Item 4. | Control and Procedures
|------- | ----------------------



Evaluation of Disclosure Controls and Procedures



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



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



Changes in Internal Control over Financial Reporting



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



49



---

##### Table of Contents

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------



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



|Item 6. | Exhibits.
|------- | ---------



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



50



---

##### 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: August 10, 2005 |  |  |  | By:                             |  | /s/    MARK F. BROWN     
|                      |  |  |  |                                 |  |                           |  | Mark F. Brown                               
|                      |  |  |  |                                 |  |                           |  | Chairman and Member, Management Board       
|                      |  |  | 
|Date: August 10, 2005 |  |  |  | By:                             |  | /s/    WILLIAM J.
VELARDO
|                      |  |  |  |                                 |  |                           |  | William J. Velardo                          
|                      |  |  |  |                                 |  |                           |  | Chief Executive Officer,                    
|                      |  |  |  |                                 |  |                           |  | Mohegan Tribal Gaming Authority             
|                      |  |  |  |                                 |  |                           |  | (Principal Executive Officer)               
|                      |  |  | 
|Date: August 10, 2005 |  |  |  | By:                             |  | /s/    LEO M. CHUPASKA   
|                      |  |  |  |                                 |  |                           |  | Leo M. Chupaska                             
|                      |  |  |  |                                 |  |                           |  | Chief Financial Officer,                    
|                      |  |  |  |                                 |  |                           |  | Mohegan Tribal Gaming Authority             
|                      |  |  |  |                                 |  |                           |  | (Principal Financial and Accounting Officer)



51



---

##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                  
|3.1         |  | Constitution of the Mohegan Tribe of Indians of Connecticut, as amended (filed as Exhibit 3.1 to the Authoritys Registration Statement on Form S-4, filed with the SEC on November 1,
2004 (the 2004 Form S-4), and incorporated by reference herein).                                                    
|            | 
|3.2         |  | Ordinance No. 95-2 of the Tribe for Gaming on Tribal Lands, enacted on July 15, 1995 (filed as Exhibit 3.2 to the Authoritys Amendment No. 1 to the Authoritys Registration
Statement on Form S-1, filed with the SEC on February 29, 1996 (the 1996 Forms S-1), and incorporated by reference herein).  
|            | 
|3.3         |  | Articles of Organization of Mohegan Basketball Club LLC, dated as of January 27, 2003 (filed as Exhibit 3.3 to the Authoritys Registration Statement on Form S-4, filed with the SEC on
September 23, 2003 (the 2003 Form S-4), and incorporated by reference herein).                                    
|            | 
|3.4         |  | Operating Agreement of Mohegan Basketball Club LLC, a Mohegan Tribe of Indians of Connecticut limited liability company, dated as of January 24, 2003 (filed as Exhibit 3.4 to the 2003 Form
S-4, and incorporated by reference herein).                                                                     
|            | 
|3.5         |  | Certificate of Organization of Mohegan Commercial Ventures PA, LLC, dated as of January 6, 2005, as amended (filed as Exhibit 3.5 to the Authoritys Registration Statement on Form S-4,
filed with the SEC on June 7, 2005 (the 2005 Senior Subordinated Form S-4), and incorporated by reference herein).
|            | 
|3.6         |  | Operating Agreement of Mohegan Commercial Ventures PA, LLC, a Commonwealth of Pennsylvania limited liability company, dated as of December 15, 2004 (filed as Exhibit 3.6 to the 2005 Senior
Subordinated Form S-4, and incorporated by reference herein).                                                   
|            | 
|3.7         |  | Certificate of Limited Partnership of Downs Racing, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.7 to the 2005 Senior Subordinated Form S-4, and incorporated by reference
herein).                                                                                                     
|            | 
|3.8         |  | Amended and Restated Limited Partnership Agreement of Downs Racing, L.P., dated as of January 25, 2005 (filed as Exhibit 3.8 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                                
|            | 
|3.9         |  | Certificate of Limited Partnership of Backside, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.9 to the 2005 Senior Subordinated Form S-4, and incorporated by reference
herein).                                                                                                         
|            | 
|3.10        |  | Amended and Restated Limited Partnership Agreement of Backside, L.P., dated as of January 25, 2005 (filed as Exhibit 3.10 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                                   
|            | 
|3.11        |  | Certificate of Limited Partnership of Mill Creek Land, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.11 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                                 
|            | 
|3.12        |  | Amended and Restated Limited Partnership Agreement of Mill Creek Land, L.P., dated as of January 25, 2005 (filed as Exhibit 3.12 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                            
|            | 
|3.13        |  | Certificate of Limited Partnership of Northeast Concessions, L.P., dated as of January 7, 2005, as amended (filed as Exhibit 3.13 to the 2005 Senior Subordinated Form S-4, and incorporated by
reference herein).                                                                                           
|            | 
|3.14        |  | Amended and Restated Limited Partnership Agreement of Northeast Concessions, L.P., dated as of January 25, 2005 (filed as Exhibit 3.14 to the 2005 Senior Subordinated Form S-4, and
incorporated by reference herein).                                                                                      



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4.1         |  | Relinquishment Agreement, dated February 7, 1998, by and among the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut and Trading Cove Associates (filed as Exhibit
10.14 to the Authoritys Form 10-K405 for the fiscal year ended September 30, 1998, filed with the SEC on December 29, 1998, and incorporated by reference herein).                                                                                                                                                                                                                                    
|            | 
|4.2         |  | Indenture, dated March 3, 1999, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and First Union National Bank, as Trustee, relating to the 81/8% Senior Notes Due 2006 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.3 to the Authoritys
Registration Statement on Form S-4, filed with the SEC on April 21, 1999 (the 1999 Form S-4), and incorporated by reference herein).                                                                                                                                                                 
|            | 
|4.3         |  | Supplemental Indenture, dated as of January 27, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC, the other Subsidiary Guarantors (as defined in the Indenture)
and Wachovia Bank, National Association (formerly known as First Union National Bank), as Trustee, relating to the 81/8% Senior Notes Due 2006 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.3 to the Authoritys Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed with the SEC on August 8, 2003 (the June 2003
10-Q), and incorporated by reference herein).
|            | 
|4.4         |  | Second Supplemental Indenture, dated as of July 28, 2004, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC and Wachovia Bank, National Association (formerly known as
First Union National Bank), as Trustee, relating to the 81/8% Senior Notes Due 2006 of the Mohegan Tribal Gaming
Authority (filed as Exhibit 4.4 to the Authoritys Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed with the SEC on August 16, 2004 (the June 2004 10-Q), and incorporated by reference
herein).                                                          
|            | 
|4.5         |  | Form of Global 81/8% Senior Note Due 2006 of the
Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.3 to the 1999 Form S-4, and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 
|4.6         |  | Indenture, dated as of July 26, 2001, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and State Street Bank and Trust Company, as Trustee, relating to
the 83/8% Senior Subordinated Notes Due 2011 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.9 to the
Authoritys Registration Statement on Form S-4, File No. 333-69472, filed with the SEC on September 14, 2001 (the 2001 Form S-4), and incorporated by reference herein).                                                                                                            
|            | 
|4.7         |  | Supplemental Indenture, dated as of January 27, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC, the other Subsidiary Guarantors (as defined in the Indenture)
and the State Street Bank and Trust Company, as Trustee, relating to the 83/8% Senior Subordinated Notes Due
2011 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.12 to the June 2003 10-Q, and incorporated by reference herein).                                                                                                                                                        
|            | 
|4.8         |  | Second Supplemental Indenture, dated as of July 28, 2004, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC and U.S. Bank National Association (as successor to State
Street Bank and Trust Company), as Trustee, relating to the 83/8% Senior Subordinated Notes Due 2011 of the
Mohegan Tribal Gaming Authority (filed as exhibit 4.9 to the June 2004 10-Q and incorporated by reference herein).                                                                                                                                                                        
|            | 
|4.9         |  | Form of Global 83/8% Senior Subordinated Notes Due
2011 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.9 to the 2001 Form S-4, and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|4.10        |  | Indenture, dated as of February 20, 2002, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut and State Street Bank and Trust Company, as Trustee, relating
to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.12 to the Authoritys Registration Statement on Form S-4, filed with the SEC on March 27, 2002 (the 2002 Form S-4), and
incorporated by reference herein).                                                                                                                                  



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.11        |  | Supplemental Indenture, dated as of January 27, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Basketball Club LLC, the other Subsidiary Guarantors (as defined in the Indenture)
and the State Street Bank and Trust Company, as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.16 to the June 2003 10-Q, and incorporated by reference
herein).                                                                                                                                      
|            | 
|4.12        |  | Amended and Restated Supplemental Indenture, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC and U.S. Bank National Association (as
successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as exhibit 4.14 to the Authoritys Quarterly Report on Form 10-Q for the quarter
ended December 31, 2004, filed with the SEC on February 14, 2005 (the December 2004 10-Q), and incorporated by reference herein).
|            | 
|4.13        |  | Supplemental Indenture No. 2, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC and U.S. Bank National Association (as successor to State
Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.15 to the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                  
|            | 
|4.14        |  | Supplemental Indenture No. 3, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined in the Indenture), and U.S. Bank National
Association (as successor to State Street Bank and Trust Company), as Trustee, relating to the 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.16 to the December 2004 10-Q, and incorporated by
reference herein).                                                                                                                     
|            | 
|4.15        |  | Form of Global 8% Senior Subordinated Notes Due 2012 of the Mohegan Tribal Gaming Authority (contained in the Indenture filed as Exhibit 4.12 to the 2002 Form S-4, and incorporated by
reference herein).                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|4.16        |  | Indenture, dated as of July 9, 2003, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Mohegan Basketball Club LLC and U.S. Bank National Association, as
Trustee, relating to the 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed
as Exhibit 4.19 to the June 2003 10-Q, and incorporated by reference herein).                                                                                                                                                                                   
|            | 
|4.17        |  | Supplemental Indenture No. 1, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, Mohegan Basketball Club LLC and U.S. Bank National Association, as Trustee, relating to
the 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to
the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                                     
|            | 
|4.18        |  | Supplemental Indenture No. 2, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined in the Indenture), and U.S. Bank National
Association, as Trustee, relating to the 63/8% Senior Subordinated Notes Due 2009 of the Mohegan Tribal Gaming
Authority (filed as Exhibit 4.21 to the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                        
|            | 
|4.19        |  | Form of Global 63/8% Senior Subordinated Notes Due
2009 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2003 10-Q, and incorporated by reference herein).                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|4.20        |  | Indenture, dated as of August 3, 2004, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, Mohegan Basketball Club LLC and U.S. Bank National Association,
as Trustee, relating to the 71/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming Authority
(filed as Exhibit 4.19 to the June 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                 



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                             
|4.21        |  | Supplemental Indenture No. 1, dated as of January 25, 2005, among the Mohegan Tribal Gaming Authority, the Subsidiary Guarantors (as defined in the Indenture), and U.S. Bank National
Association, as Trustee, relating to the 71/8% Senior Subordinated Notes Due 2014 of the Mohegan Tribal Gaming
Authority (filed as Exhibit 4.25 to the December 2004 10-Q, and incorporated by reference herein).
|            | 
|4.22        |  | Form of Global 71/8% Senior Subordinated Notes Due
2014 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.20 to the June 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                                                     
|            | 
|4.23        |  | Indenture, dated as of February 8, 2005, among the Mohegan Tribal Gaming Authority, the Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined in the Indenture) and
U.S. Bank National Association, as Trustee, relating to the 67/8% Senior Subordinated Notes Due 2015 (filed as
Exhibit 4.28 to the December 2004 10-Q, and incorporated by reference herein).              
|            | 
|4.24        |  | Form of Global 67/8% Senior Subordinated Notes Due
2015 of the Mohegan Tribal Gaming Authority (filed as Exhibit 4.29 to the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                                                 
|            | 
|4.25        |  | Indenture, dated as of February 8, 2005, among the Mohegan Tribal Gaming Authority, The Mohegan Tribe of Indians of Connecticut, the Subsidiary Guarantors (as defined in the Indenture) and
Wachovia Bank, National Association, as Trustee, relating to the 61/8% Senior Notes Due 2013 (filed as Exhibit
4.31 to the December 2004 10-Q, and incorporated by reference herein).                      
|            | 
|4.26        |  | Form of Global 61/8% Senior Notes Due 2013 of the
Mohegan Tribal Gaming Authority (filed as Exhibit 4.32 to the December 2004 10-Q, and incorporated by reference herein).                                                                                                                                                                                                                              
|            | 
|31.1        |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith).                                                                                                                                                                                                                                                                                                                     
|            | 
|31.2        |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith).                                                                                                                                                                                                                                                                                                                     
|            | 
|32.1        |  | Section 1350 Certification of Chief Executive Officer (filed herewith).                                                                                                                                                                                                                                                                                                                                 
|            | 
|32.2        |  | Section 1350 Certification of Chief Financial Officer (filed herewith).