UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                                 FORM 10-K

         [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended December 31, 2000

                                    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 333-17795

                         WATERFORD GAMING, L.L.C.
          (Exact name of registrant as specified in its charter)

             Delaware                      06-1465402
   (State or other jurisdiction of       (IRS Employer
    incorporation or organization)     Identification No.)

    914 Hartford Turnpike, P.O. Box 715
            Waterford, CT                      06385
  (Address of principal executive offices)   (Zip Code)

Registrant's telephone number, including area code (860) 442-4559

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

Title of each class     Name of each exchange on which registered
     NONE


Securities registered pursuant to Section 12(g) of the Act:
                        NONE
                   (Title of Class)

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

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

                         WATERFORD GAMING, L.L.C.
                            INDEX TO FORM 10-K

PART I.                                                      PAGE

Item 1.   Business                                              1
Item 2.   Properties                                           14
Item 3.   Legal Proceedings                                    14
Item 4.   Submission of Matters to a Vote of Security Holders  14

PART II.

Item 5.   Market for Registrant's Common Equity and
          Related Stockholder Matters                          15
Item 6.   Selected Financial Data                              15
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                  16
Item 7a.  Quantitative and Qualitative Disclosures about
          Market Risk                                          20
Item 8.   Financial Statements and Supplementary Data          21
Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                  21

PART III.

Item 10.  Directors and Executive Officers of the Registrant   21
Item 11.  Executive Compensation                               21
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management                                           22
Item 13.  Certain Relationships and Related Transactions       22

PART IV.

Item 14.  Exhibits, Financial Statement Schedules and
          Reports on Form 8-K                                  23


                                  PART I

ITEM 1. BUSINESS

A.  GENERAL

Certain Forward Looking Statements
----------------------------------

Certain  information  included in this Form 10-K and other materials filed or to
be filed by the Waterford Gaming, L.L.C. (the "Company") with the Securities and
Exchange Commission (the "Commission") (as well as information  included in oral
statements  or  other  written  statements  made or to be  made by the  Company)
contains  forward-looking  statements,  within the meaning of Section 27A of the
Securities Act of 1933, as amended,  and Section 21E of the Securities  Exchange
Act of 1934,  as  amended.  Such  statements  include,  but are not  limited to,
information  relating to the Mohegan Sun Casino (the  "Mohegan  Sun")  including
plans for future expansion and other business development activities,  financing
sources,  the effects of regulation  (including  gaming and tax  regulation) and
competition. Any forward-looking statements included herein do not purport to be
predictions of future events or circumstances. Forward-looking statements can be
identified by, among other things, the use of  forward-looking  terminology such
as  "believes",  "expects",  "may",  "will",  "should",  "seeks",  "pro  forma",
"anticipates",  "intends",  or the  negative of any thereof or other  variations
thereon or comparable  terminology.  Such  forward-looking  information involves
important risks and uncertainties  that could  significantly  affect anticipated
results in the future  and,  accordingly,  such  results  may differ  from those
expressed in any forward-looking statements made by or on behalf of the Company.

The  Company is a special  purpose  company,  formed  solely for the  purpose of
holding its  partnership  in Trading  Cove  Associates  ("TCA"),  a  Connecticut
general partnership and the manager (until January 1, 2000) and developer of the
Mohegan Sun. The Company also invested in certain financial  instruments  issued
by the Mohegan  Tribal  Gaming  Authority  (the  "Authority").  The Company is a
Delaware  limited  liability  company  formed on September  30, 1996.  Waterford
Gaming  Finance Corp.  ("Finance"),  a Delaware  corporation,  is a wholly owned
subsidiary of the Company.  The principal  executive  offices of the Company and
Finance are located at 914 Hartford Turnpike,  Waterford,  Connecticut 06385 and
their telephone number is (860) 442-4559.

                                       1

The Limited  Liability  Company  Agreement of the Company (the  "Agreement")  is
effective until  September 30, 2020 and may be terminated by unanimous  decision
of the members or upon the occurrence of events as stated in the Agreement.  The
Agreement  provides for the property,  affairs and business of the Company to be
managed by a  four-member  Board of Directors  which  consists of two  directors
appointed by Slavik Suites,  Inc.  ("Slavik") and two directors appointed by LMW
Investments,  Inc. ("LMW") (the "Board of Directors"). A quorum for the Board of
Directors  requires  all four  members.  LMW and  Slavik  initially  contributed
capital to the Company  consisting of all of their respective  interests in TCA.
Prior to the offering of the Company's and  Finance's  12-3/4%  senior notes due
November 15, 2003 of which $65,000,000 in aggregate  principal amount was issued
on  November  8, 1996 (the "$65  Million  Senior  Notes"),  Slavik  and LMW were
partners of TCA. In connection with the formation of the Company, Slavik and LMW
each contributed to the Company their interests in TCA in exchange for a 66-2/3%
and 33-1/3% ownership interest,  respectively, of the Company. Upon consummation
of the offering of the $65 Million Senior Notes,  (i) $6,666,667 of the proceeds
were  distributed  directly  to Slavik  for the  purpose  of  redeeming  certain
ownership  interests  in  Slavik,  and  (ii)  $3,333,333  of the  proceeds  were
distributed  to LMW,  which in turn loaned such proceeds to Len and Mark Wolman,
as individuals, who used such funds to purchase certain interests in Slavik. The
Company used $10.6  million of the proceeds from the offering of the $65 Million
Senior Notes to purchase RJH Development Corp.'s ownership interest in TCA. As a
result of these transactions (collectively the "Reorganization"), each of Slavik
and LMW owned 67.7967% and 32.2033% of the Company, respectively. The Company is
a managing general partner of TCA. As a result of the  Reorganization,  the only
two partners of TCA are the Company and Sun Cove Limited ("Sun Cove").

In connection  with the  Company's  and Finance's  issuance on March 17, 1999 of
$125 Million  9-1/2% senior notes payable which mature March 15, 2010 (the "$125
Million Senior Notes"), each of Slavik and LMW have contributed their respective
interests in the Company  concurrently to a Delaware limited liability  company,
Waterford Group, L.L.C. (the "Waterford Group"). Waterford Group is now the sole
member of the Company. Slavik and LMW own Waterford Group in the same respective
interest as they had in the Company and are generally as follows:


     Slavik Suites, Inc.                67.7967%
     LMW Investments, Inc.              32.2033%
                                       ---------
                                       100.0000%
                                       =========

Upon  consummation of the offering of the $125 Million Senior Notes, (i) the $65
Million Senior Notes were redeemed,  (ii) a distribution of $37,050,000 was made
by the Company to its sole  member  Waterford  Group and (iii) $2.0  million was
paid to a former partner of TCA, Leisure Resort Technology, Inc. ("Leisure"), in
satisfaction of a contractual obligation.

Additional capital contributions may be made to the Company by its member. If it
is determined  that the Company  requires  additional  funds,  such funds may be
loaned  to the  Company  by its  member  pursuant  to the terms set forth in the
Agreement;  however,  the  indenture,  between the Company and  Finance,  as the
Issuers,  and State Street Bank and Trust Company, as Trustee,  relating to $125
Million  Senior Notes (the  "Indenture"),  prohibits the Company from  incurring
additional  indebtedness.  The Agreement  also provides that any disputes  which
arise under the  Agreement  and which  remain  unresolved  after 30 days will be
settled through arbitration.

LMW, one of the two members of Waterford  Group, is a development  firm based in
southeastern Connecticut.  LMW is owned by Len Wolman and Mark Wolman. The other
member of Waterford Group, Slavik, is based in Detroit,  Michigan. The Directors
of Slavik are  Del J. Lauria and Len  Wolman.  Mark Wolman and Stephan F. Slavik
will be appointed Directors.

The $125  Million  Senior  Notes  bear  interest  at a rate of 9-1/2% per annum,
payable semi-annually in arrears on March 15 and September 15 which commenced on
September 15, 1999.

The  principal  amount of the $125 Million  Senior Notes is payable on March 15,
2010.  The Company and Finance may elect to redeem the $125 Million Senior Notes
at any  time on or  after  March  15,  2004 at a  redemption  price  equal  to a
percentage (105.182% after March 14, 2004, and declining to 104.318% after March
14, 2005, 103.455% after March 14, 2006, 102.591% after March 14, 2007, 101.727%
after March 14, 2008, 100.864% after March 14, 2009, and to 100% after March 14,
2010) of the principal  amount thereof plus accrued  interest.  The $125 Million
Senior  Notes  provide  that  upon the  occurrence  of a Change of  Control  (as
defined),  the holders thereof will have the option to require the redemption of
the  $125  Million  Senior  Notes  at a  redemption  price  equal to 101% of the
principal amount thereof plus accrued interest.

                                   2

If the Company and Finance have any Company  Excess Cash, as defined,  they must
redeem the $125  Million  Senior Notes (on a  semi-annual  basis on March 15 and
September 15) equal to a percentage (109.500% after March 15, 1999 and declining
to 108.636% after March 14, 2000,  107.773% after March 14, 2001, 106.909% after
March 14, 2002,  106.045%  after March 14, 2003,  105.182% after March 14, 2004,
104.318%  after March 14, 2005,  103.455%  after March 14, 2006,  102.591% after
March 14, 2007,  101.727%  after March 14, 2008,  100.864% after March 14, 2009,
and to 100.000%  after March 14,  2010).  In some  circumstances,  if either the
Company or its partner in TCA  exercises  the option to buy or sell  partnership
interests in TCA,  the Company and Finance  must redeem the $125 Million  Senior
Notes.

The  Indenture  relating  to the $125  Million  Senior  Notes  contains  certain
affirmative and negative covenants  customarily  contained in agreements of this
type,  including  without  limitation,   covenants  that  restrict,  subject  to
specified  exceptions  the Company's and Finance's  ability to (i) borrow money,
(ii) pay dividends on stock or make certain other restricted payments, (iii) use
assets as security in other transactions,  (iv) make investments, (v) sell other
assets or merge with other  companies and (vi) engage in any business  except as
currently  conducted or contemplated or amend their  relationship  with TCA. The
Indenture also provides for customary events of default and the establishment of
a restricted investment fund with a trustee for interest reserves.

The Company has one primary source of revenue: payments from TCA.

Trading Cove Associates
-----------------------

TCA was  organized  on July 27,  1993.  The  primary  purpose of TCA has been to
assist the  Mohegan  Tribe of  Indians  of  Connecticut  (the  "Tribe")  and the
Authority,  an instrumentality  of the Tribe, in obtaining federal  recognition,
negotiate  the  tribal-state  compact  with  the  State of  Connecticut,  obtain
financing for the  development of the Mohegan Sun located on certain Tribal land
in Uncasville,  Connecticut,  negotiate the Amended and Restated Gaming Facility
Management Agreement (the "Management  Agreement") and participate in the design
and  development  of the Mohegan Sun which  commenced  operations on October 12,
1996.  Since the opening of the Mohegan Sun and until  January 1, 2000,  TCA had
overseen the Mohegan  Sun's  day-to-day  operations.  The TCA  partnership  will
terminate on December 31, 2040, or earlier,  in accordance with the terms of the
partnership agreement. The Company has a 50% voting and profits interest in TCA.
The  remaining  50%  interest  is  owned  by  Sun  Cove,  an  affiliate  of  Sun
International Hotels Limited ("Sun International").

Trading Cove Associates - Material Agreements
---------------------------------------------

On  February  7,  1998,  TCA,  the Tribe and the  Authority  finalized  contract
negotiations and are moving forward with a significant  expansion project at the
Mohegan Sun (the "Project").  As a result, TCA and the Authority have terminated
the Management Agreement effective January 1, 2000.

Under the terms of an agreement (the  "Relinquishment  Agreement") TCA continued
to manage the Mohegan Sun under the Management  Agreement until January 1, 2000.
On December 31, 1999 the Management  Agreement  terminated and the Tribe assumed
day-to-day management of the Mohegan Sun. Under this Relinquishment Agreement to
compensate TCA for terminating its rights under the Management Agreement and the
Hotel/Resort Management Agreement,  the Authority has agreed to pay to TCA 5% of
Revenues, as defined,  (the "Relinquishment  Fees") generated by the Mohegan Sun
during the 15-year period commencing on January 1, 2000.



Relinquishment Agreement
------------------------

The  payments  under the  Relinquishment  Agreement  will be divided into senior
relinquishment  payments and junior relinquishment  payments, each of which will
be 2.5% of "Revenues".  Revenues are defined as gross gaming  revenues  (other
than  Class II gaming  revenue,  i.e.  bingo)  and all other  facility  revenues
(including, without limitation, hotel revenues, food and beverage sales, parking
revenues,  ticket revenues and other fees or receipts from the convention/events
center in the expansion and all rental or other receipts from lessees, licensees
and concessionaires operating in the facility but not the gross receipts of such
lessees, licensees and concessionaires).  Revenues exclude revenues generated by
any other expansion of the Mohegan Sun. Senior  relinquishment  payments will be
payable quarterly in arrears  commencing on April 25, 2000 for the quarter ended
March  31,  2000,  and  the  junior  relinquishment  payments  will  be  payable
semi-annually  in arrears  commencing  on July 25, 2000 for the six months ended
June 30, 2000.

                                       3

TCA has  notified  the  Authority  that it does not agree  with the  Authority's
treatment  of  certain  promotional  transactions,  that in  TCA's  opinion  has
resulted  in a  reduction  of  Revenues  on  which  the  Relinquishment  Fees is
calculated.  TCA has  requested  the  Year End  Statements,  as  defined  in the
Relinquishment Agreement, from the Authority.

A summary of relinquishment payments received is as follows:

                           Senior              Junior             Total
                          -----------         -----------        -----------

April 25, 2000            $ 4,947,458         $   ---            $ 4,947,458
July 26, 2000               5,039,048           9,986,506         15,025,554
October 25, 2000            5,457,627             ---              5,457,627
January 25, 2001            5,057,792          10,515,418         15,573,210
                          -----------         -----------        -----------
                           20,501,925          20,501,924         41,003,849
                          ===========         ===========        ===========

The  Relinquishment  Agreement  provides  that  each of the  senior  and  junior
relinquishment  payments  are  subordinated  in right of  payment  to payment of
senior secured obligations  including the Authority's bank credit facility,  and
that the junior  relinquishment  payments are further subordinated to payment of
all other senior  obligations  including the Authority's 8-1/8% Senior Notes due
2006.  The  Relinquishment  Agreement  also  provides  that  all  relinquishment
payments  are  subordinated  in right of payment to an annual  minimum  priority
distribution  to the Tribe from the  operations  of the Mohegan Sun. The minimum
priority  distribution  currently is $14.0 million and will be adjusted annually
to reflect the cumulative increase in the Consumer Price Index.

Under the  Relinquishment  Agreement,  the Authority makes certain covenants for
the benefit of TCA, including the following:

     (1)  Payments to the Tribe.  Except for  payments  of the minimum  priority
distributions  and  reasonable  charges  for  utilities  or  other  governmental
services supplied by the Tribe to the Authority,  the Authority may not make any
distributions  to the  Tribe  or its  members  at any  time  any  relinquishment
payments are outstanding.

     (2)  Affiliate  Transactions.  Except for payments of the minimum  priority
distributions  and  reasonable  charges  for  utilities  or  other  governmental
services  supplied by the Tribe to the Authority,  the Authority agrees to abide
by certain  restrictions on transactions with the Tribe and its members,  all as
set forth in the Relinquishment Agreement.

     (3)  Replacement/Restoration  of the  Mohegan  Sun.  If any  portion of the
Mohegan  Sun's  facilities is damaged by fire or other  casualty,  the Authority
shall replace or restore such facilities to substantially  the same condition as
prior to such casualty,  but only to the extent insurance proceeds are available
to do so. If sufficient insurance proceeds are not available, the Authority will
use  reasonable  efforts  to obtain  the  required  financing,  on  commercially
reasonable terms, to undertake and complete such replacement or restoration.

     (4) Business Purpose.  The Authority has agreed that during the term of the
Relinquishment  Agreement  it will only  engage in the casino  gaming and resort
business (and any incidental  business or activity) and will continue to operate
the Mohegan Sun as currently operated.

Under the  Relinquishment  Agreement,  the Authority and TCA agreed to cooperate
with each other to effect an orderly transition of the operations of the Mohegan
Sun to the  Authority.  Each of the parties also agreed that it will not solicit
any  employee  of the other party or any  affiliate  of the other party for five
years.

TCA has granted to the Authority an exclusive and perpetual license with respect
to trademarks and other similar  rights,  including the "Mohegan Sun" name, used
at or developed for the Mohegan Sun. The Authority has agreed,  however, that it
will only use the word "Sun" in  conjunction  with the Mohegan Sun and  together
with "Mohegan" or "Mohegan Tribe".

With certain  limitations set forth in the  Relinquishment  Agreement,  both the
Tribe and the Authority have waived immunity from  unconsented  suit for certain
enforcement rights of TCA arising under the Relinquishment Agreement.

                                       4

Development Agreement
---------------------

TCA and the Authority entered into a development  services agreement on February
7, 1998. Under this "Development  Agreement",  TCA agreed to oversee the design,
construction,  furnishing,  equipping  and  staffing  of the Project for a $14.0
million  development  fee (the  "Development  Fee"). On May 24, 2000 TCA and the
Authority  agreed  that TCA had  performed  and  completed  all its  obligations
relating to the staffing of the Project and that TCA has no further obligations
relating to the staffing of the the Project.

The Authority wll pay the Development Fee to TCA quarterly  beginning on January
15, 2000 until the Completion Date, as defined in the Development Agreement,  of
the Project  based on  incremental  completion of the Project as of each payment
date. A summary of the  quarterly  Development  Fee payments  received by TCA in
accordance with the terms of the Development Agreement is as follows:


           January 15, 2000                  $ 1,372,000
           April 20, 2000                        896,000
           July 17, 2000                       1,260,000
           October 13, 2000                    1,372,000
           January 23, 2001                      588,000
                                             -----------
                                               5,488,000
                                             ===========

On February 9, 1998 the Development Services Agreement Phase II was entered into
between TCA and Sun International  Management Limited ("SIML").  Pursuant to the
Development  Services  Agreement Phase II, TCA subcontracted  with SIML and SIML
agreed to perform those services  assigned to SIML by TCA in order to facilitate
TCA's  fulfillment  of its duties and  obligations  to the  Authority  under the
Development  Agreement.  TCA  shall  pay to SIML a fee,  as  subcontractor  (the
"Development Services Fee Phase II") equal to 3% of the development costs of the
Project,  less all costs  incurred by TCA in  connection  with the Project.  The
Development  Services Fee Phase II shall be paid in installments due on December
31,  1999 and 2000 and on the  Completion  Date,  as defined in the  Development
Agreement,  with a final payment being made when the actual development costs of
the Project are known. The fee is to be paid from available cash flow of TCA, if
any,  subordinate  to certain  other fees as  described  below under the heading
"Omnibus Termination Agreement".

SIML has further  subcontracted  with Wolman  Construction LLC  ("Construction")
(the  "Local  Construction  Services  Agreement")  to  provide  certain of those
services  assigned  to SIML by TCA.  SIML  shall pay  20.83% of the  Development
Services Fee Phase II as and when SIML receives  payment from TCA.  Construction
has subcontracted with The Slavik Company for 14.30% of its fee.

During the design phase,  TCA will assist the Authority in the engagement of the
architect and the construction manager, the preparation of design, construction,
and furnishings budgets, preliminary program evaluation,  design development and
the  approval  of  final  detailed  plans  and  specifications  prepared  by the
architect.  The Authority has agreed to assign to TCA its responsibilities under
any architectural  and/or  engineering  agreements to allow TCA to supervise and
administer directly the duties of the architect and/or engineer thereunder.

The  Development  Agreement  provides  that the design and  construction  of the
Project must comply with all federal and  Connecticut  statutes and  regulations
that   otherwise   would  apply  if  the  Project  were   located   outside  the
jurisdictional boundaries of the Tribe's land.

During the construction  phase,  TCA will be responsible for the  administration
and supervision of the construction manager and the entire construction process.
TCA will act as the Authority's  representative  in connection with construction
contracts  that  are  approved  by the  Authority.  Specifically,  TCA  will  be
responsible  for  overseeing  all persons  performing  work on the Project site,
inspecting  the  progress  of  construction,  determining  completion  dates and
reviewing   contractor  payment  requests   submitted  to  the  Authority.   The
Development Agreement  specifically gives TCA the right to include provisions in
construction  contracts that impose  liquidated  damage payments in the event of
failure to meet construction schedules.

As permitted by the Development Agreement, the Authority has elected to engage a
retail  consultant  to  oversee  the  design  and  construction  of  the  retail
facilities in the Project.  This work will be under the overall  supervision  of
TCA, which will integrate the design and  construction of the retail  facilities
with that of the other components of the Project.

The Development  Agreement requires TCA to implement procedures described in the
Tribal  Employment  Rights  Ordinance.  In  effect,  this  requires  TCA to give
preference  to  business  entities  or persons  which have been  approved by the
Authority in the selection of all contractors,  vendors and suppliers engaged in
the development of the Project. In addition to the staffing of the operations of
the Project,  the  Development  Agreement  requires that TCA give  preference to
qualified  members of the Tribe (and their spouses and children) and  thereafter
to enrolled members of other federally recognized Indian tribes.

The Authority will purchase  equipment,  furniture and  furnishings  required to
operate  the  expanded  facilities  from  vendors  selected by TCA or lease such
equipment,  furniture and  furnishings  on terms arranged by TCA and approved by
the Authority.

The  Development  Agreement  terminates  after the earlier of  completion of the
Project or 10 years.  In  addition,  each party has the right to  terminate  the
Development  Agreement  if there is a default or failure to perform by the other
party.  The  parties  must  submit  disputes  arising  under  the  agreement  to
arbitration  and have agreed that punitive  damages may not be awarded to either
party by any arbitrator.  The Authority has also waived  sovereign  immunity for
the purposes of permitting,  compelling or enforcing  arbitration and has agreed
to be sued by TCA in any court of  competent  jurisdiction  for the  purposes of
compelling  arbitration  or enforcing any  arbitration or judicial award arising
out of the Development  Agreement.  The Development  Agreement  became effective
April 1, 1999.

                                       5

Management Agreement
--------------------

The  Management  Agreement  between TCA and the Tribe was entered into on August
30, 1995. The Tribe had assigned its rights and obligations in this agreement to
the Authority. The Authority and TCA had consented to this assignment.

Until January 1, 2000,  TCA was the exclusive  manager of the Mohegan Sun. Under
the Management  Agreement,  the Tribe had granted to TCA the exclusive right and
obligation  to develop,  manage,  operate and  maintain  the Mohegan Sun and all
other  related   facilities   that  are  owned  by  the  Tribe  or  any  of  its
instrumentalities, including the Authority and to train members of the Tribe and
others in the management of the Mohegan Sun.

Until January 1, 2000 TCA's primary source of revenue was management  fees under
the Management  Agreement (the "Management Fees"). The Management Fees were paid
monthly (the final payment was received by TCA from the Authority on January 25,
2000) and were  calculated in three tiers based upon Net Revenues of the Mohegan
Sun set forth below (in thousands):

                 I                   II               III
           ---------------   ------------------  -----------------
             40% of Net      Revenues in Tier I    Revenues in
           Revenues up to     plus  35% of Net   Tiers I & II plus
                              Revenues between      30% of Net
                                                  Revenues above
           ---------------   ------------------  -----------------

Year 1        $50,546         $50,547-$63,183        $63,183
Year 2        $73,115         $73,116-$91,394        $91,394
Year 3        $91,798         $91,799-$114,747       $114,747
Year 4        $95,693         $95,694-$119,616       $119,616

As defined in the Management Agreement,  "Net Revenues" of the Mohegan Sun means
the amount of the gross  revenues of the facility  less  operating  expenses and
certain  specified  categories of revenue,  such as income from any financing or
refinancing, taxes or charges received from patrons on behalf of and remitted to
a  governmental  entity,  proceeds  from the sale of capital  assets,  insurance
proceeds  and interest on the capital  replacement  reserve.  Net Revenues  also
include Net Gaming Revenues, which are equal to the amount of the "net win" from
Class III Gaming  operations  (i.e.,  the  difference  between  gaming  wins and
losses) less all gaming-related  operational  expenses (excluding the Management
Fees).

In addition, TCA was required to fund $1.2 million per year ($100,000 per month)
from its  Management  Fees  into a  capital  replacement  reserve.  The  capital
replacement reserve is the property of the Authority.

Omnibus Termination Agreement
-----------------------------

On March 18, 1999, the Omnibus Termination  Agreement (the "Omnibus  Termination
Agreement") was entered into by TCA, Sun International,  the Company, SIML, LMW,
Sun Cove,  Slavik and  Construction;  which (i)  terminated  the  memorandum  of
understanding  dated  February  7,  1998;  and (ii)  effective  January  1, 2000
terminated a) the Amended and Restated Omnibus Financing Agreement,  as defined;
b) completion  guarantee and investment  banking and financing  arrangement  fee
agreement (the "Financing  Arrangement  Agreement");  c) the management services
agreement;  d) the organizational and administrative  services agreement; e) the
marketing  services  agreement;  and f) a letter agreement  relating to expenses
dated October 19, 1996.

In consideration  for the termination of such agreements,  TCA will use its cash
to pay the following obligations in the priority set forth below:

      (a) First, to pay all unpaid amounts which may be due under the terminated
          letter  agreement and to pay certain  affiliates of the Company and to
          Sun Cove a percentage of an annual fee of $2.0 million less the actual
          expenses  incurred  by TCA.  Such annual fee shall be payable in equal
          quarterly  installments  beginning  March 31, 2000 and ending December
          31, 2014. For the year ended December 31, 2000 $1,849,506 ($924,753 to
          Sun Cove and $924,753 to  affiliates of the Company) had been paid and
          incurred  by TCA in  terms  of  this  first  priority.  The  contigent
          obligation at December 31, 2000 was $0.

                                       6

      (b) Second,  to return all capital  contributions  made by the partners of
          TCA after September 29, 1995. TCA  anticipates  making monthly capital
          calls to fund expenses related to the development of the Project,  and
          these capital calls will be repaid, based on cash flow, in the quarter
          following the quarter in which the capital call was made. From January
          1, 2000 to December 31, 2000 these  capital  contributions  aggregated
          $2,400,000.  $2,000,000 has been repaid to the partners of TCA, 50% to
          the Company and 50% to Sun Cove.

          As of December 31, 2000,  $400,000 in capital  contributions  remained
          outstanding.

      (c) Third, to pay any accrued  amounts for obligations  performed prior to
          January 1, 2000 under the  Financing  Arrangement  Agreement.  For the
          year  ended   December  31,  2000   $2,977,932   ($2,069,525   to  Sun
          International  and  $908,407 to the  Company)  had been paid by TCA in
          terms of this  third  priority.  No further  obligation  is payable at
          December 31, 2000.

      (d) Fourth,  to make the payments set forth in the  agreement  relating to
          Development  Services  Agreement  Phase II and the Local  Construction
          Services  Agreement.  For the year ended December 31, 2000 $10,807,000
          ($8,555,902 to SIML,  $1,929,191 to  Construction  and $321,907 to The
          Slavik  Company)  had been paid and  incurred  by TCA in terms of this
          fourth  priority.  No  additional  amounts are payable at December 31,
          2000.

      (e) Fifth, to pay Sun  International an annual fee of $5.0 million payable
          in equal quarterly  installments of $1.25 million  beginning March 31,
          2000 and ending  December  31, 2006.  For the year ended  December 31,
          2000 $5.0  million had been paid and  incurred by TCA in terms of this
          fifth  priority.  No  additional  amounts are payable at December  31,
          2000.

     (f)  Sixth,  to pay any accrued  amounts  for  obligations  performed  with
          respect  to periods  prior to  January  1, 2000  under the  management
          services  agreement,  the organizational  and administrative  services
          agreement and the  marketing  services  agreement.  For the year ended
          December 31, 2000 $23,299,200  ($11,649,600 to SIML and $11,649,600 to
          the  Company) had been paid and incurred by TCA in terms of this sixth
          priority.   The  contingent   obligation  at  December  31,  2000  was
          approximately $23,622,000.

      (g) Seventh,  for the period  beginning March 31, 2000 and ending December
          31,  2014,  to pay each of SIML and the  Company  twenty-five  percent
          (25%) of the  relinquishment  payments.  The contingent  obligation at
          December 31, 2000 was approximately $20,502,000.

     (h)  Eighth, to distribute all excess cash.

Notwithstanding  the  foregoing,  on the date TCA  receives  any funds  from Sun
International  or the Company  pursuant to the last sentence of Section 3 of the
Financing Arrangement  Agreement,  TCA shall immediately distribute such amounts
equally to its partners.  On December 30, 1999 TCA received $10,536,543 from Sun
International and the Company, pursuant to the last sentence of Section 3 of the
Financing Arrangement Agreement, and TCA concurrently distributed $10,536,543 to
its partners. The Company received $5,268,272.

In  addition,  TCA  shall not make any  distributions  pursuant  to the  Omnibus
Termination  Agreement  until it has  annually  distributed  to its partners pro
rata,  the amounts  related to its  partners  tax  obligations  as  described in
Section 3.03a(1) of the partnership agreement less twice the amount of all other
funds paid or  distributed  to the  Company  during  such year  pursuant  to the
Omnibus Termination Agreement.

To the extent TCA does not have adequate  cash to make the payments  pursuant to
the Omnibus  Termination  Agreement,  such amounts due shall be deferred without
the accrual of interest until TCA has sufficient cash to pay them.

                                       7

Amended and Restated Omnibus Financing Agreement
------------------------------------------------

Until January 1, 2000 TCA's primary source of revenue was Management Fees. Those
fees were utilized by TCA pursuant to the Amended and Restated Omnibus Financing
Agreement which was terminated effective January 1, 2000.

Pursuant to the terms of the Amended and Restated Omnibus  Financing  Agreement,
upon  receipt  of the  Management  Fees,  TCA was  required  to make a number of
different  types  of  payments  to its  subcontractors.  The  subcontracts  were
primarily with TCA's  partners or their  affiliates.  One of the  considerations
used by the National Indian Gaming  Commission in determining  whether or not to
approve a  management  contract  is  whether  TCA has  provided a portion of the
capital required. Accordingly, TCA agreed to provide or cause to be provided $40
million of capital in the form of the Subordinated  Notes, as defined.  However,
at the time that the subordinated loan was made, the partners of TCA,  including
the  Company's  predecessors-in-interest,  did not  participate  in the  loan in
accordance with their economic interests in TCA. Therefore,  the partners of TCA
agreed that Sun International, who subscribed for almost all of the Subordinated
Notes,  would be entitled to fees for agreeing to participate in the Mohegan Sun
project.  Other  fees  payable  were to  compensate  the  recipients  for  other
subcontracted services provided by them to the Mohegan Sun.

As of December 29, 1999 the Authority had  outstanding  the following  Authority
Subordinated Notes, as defined.

1.   15% subordinated  notes principal amount $40,000,000 due November 2003 (the
     "Subordinated Notes"). The rate of the interest payable by the Authority on
     the  Subordinated  Notes  was 15%  per  annum.  During  1996,  the  Company
     purchased half of the Subordinated Notes owned by Sun International and TCA
     distributed  $850,000 principal amount of Subordinated Notes to each of its
     partners.  As a result of the above transactions,  the Company owned 50% of
     the principal amount of Subordinated Notes.

2.   Completion  guarantee  subordinated  notes principal amount $50,000,000 due
     November 2003 (the "Completion Guarantee  Subordinated Notes"). The rate of
     interest payable by the Authority on the Completion Guarantee  Subordinated
     Notes was the prime rate per annum  announced by Chase  Manhattan Bank from
     "time to time" plus 1% (the "Base Rate"). The Base Rate was set and revised
     at  intervals  of six months.  At December 30, 1999 the Base Rate was 9.25%
     per annum.

     For  purposes  of  points  (c),   (d)  and  (e)  below  the  Company,   Sun
     International and TCA had agreed that the Completion Guarantee Subordinated
     Notes be  split  into  two  principal  amounts  of  $32,500,000  Completion
     Guarantee Subordinated Notes (the "Non-Pik Completion Guarantee Notes") and
     $17,500,000  Completion  Guarantee  Subordinated Notes (the "Pik Completion
     Guarantee Notes").

     During  1997,  1998 and 1999 the Company  purchased  a total of  $7,500,000
     principal  amount  of the  Non-Pik  Completion  Guarantee  Notes  from  Sun
     International.

On December  30, 1999,  the  Authority  paid to the holders of the  Subordinated
Notes,  Non-Pik  Completion  Guarantee Notes and Pik Completion  Guarantee Notes
(collectively  the  "Authority  Subordinated  Notes"),  an amount to satisfy all
obligations  of  such  Authority   Subordinated   Notes.  The  Company  received
$44,403,517 from the Authority.

The following table sets forth the priority of the distribution  from TCA of the
Management Fees to its partners or TCA's subcontractors:

      (a) First, for each fiscal year of the Authority,  up to $2,000,000 of the
          Management  Services  Fee,  as  defined,  was to be  paid  by TCA  for
          expenses.  A portion of the Management Services Fee, as defined,  were
          used  to  pay a  portion  of the  compensation  of  the  officers  and
          directors of the Company.

      (b) Second,  to return capital  contributions  made by the partners of TCA
          after  September  29, 1995.  These  capital  contributions  aggregated
          approximately  $4,272,000.  At  December  31, 1999 the full amount had
          been repaid to the partners, 50% to the Company and 50% to Sun Cove.

      (c) Third, to pay to the Company and Sun  International  every six months,
          beginning  October  31,  1997 an amount  equal to the  product  of (1)
          $2,300,000 and (2) a fraction, the numerator of which was the weighted
          average  principal  amount  of  the  Subordinated   Notes  outstanding
          including  all interest  that was not paid in cash by the Authority on
          any  interest  payment  date,  May  15 and  November  15,  during  the
          applicable  Semi-Annual  Period  (defined  as the  six  month  periods
          ending, respectively,  on April 30 and October 31) and the denominator
          of which was $40,000,000 (the "Subordinated  Notes Fee Amounts").  The
          Company  and  Sun  International  were  entitled  to one  half  of the
          Subordinated Notes Fee Amounts.  For the year ended December 31, 1999,
          $7,463,612 had been paid by TCA in terms of this third  priority.  The
          Subordinated  Notes were  redeemed by the  Authority  on December  30,
          1999.  The  contingent  obligation  due under this third  priority  on
          December 31, 1999 was $1,385,564.

                                       8

      (d) Fourth,  i) to pay every six  months  beginning  October  31,  1997 an
          amount  equal to the product of the number  arrived at by dividing the
          difference   between   (26-1/2%   and  the  Base  Rate)  by  two  (the
          "Multiplier")  and the weighted average of principal amount of Non-Pik
          Completion   Guarantee   Notes   outstanding   during  the  applicable
          Semi-Annual Period (the "Completion Guarantee Notes Fee Amounts"), and
          ii)  payment  of an  amount  equal  to the  Base  Rate on the  Non-Pik
          Completion  Guarantee  Notes  to the  extent  the  Authority  was  not
          permitted to pay interest thereon (the "Deferred  Interest  Amounts").
          This amount was paid  semi-annually  pari passu with the amount  under
          paragraph (d)i) above.

          In addition, when the Authority paid Sun International and the Company
          any amounts relating to the Non-Pik Completion  Guarantee Notes (other
          than  current  interest),  such  amounts  that relate to the  Deferred
          Interest  Amounts  acquired by TCA shall be  immediately  paid over to
          TCA.  On December  30,  1999 the  Authority  paid  $10,536,543  to Sun
          International  and the Company that  related to the Deferred  Interest
          Amounts  acquired by TCA and concurrently  Sun  International  and the
          Company paid over the $10,536,543 to TCA. TCA immediately  distributed
          the $10,536,543 to its partners. The Company received $5,268,272.

          During  September  1997 and on October 12, 1998,  and 1999 the Company
          purchased from Sun International  $2.5 million principal amount of the
          outstanding  first funded Non-Pik  Completion  Guarantee Notes, at the
          purchase  price  equal to the  outstanding  principal  balance  of the
          Non-Pik Completion Guarantee Notes purchased, plus the related accrued
          interest and deferred  interest amounts which had not been paid by TCA
          and  Completion  Guarantee  Notes Fee Amounts  (total  purchase  price
          $2,798,125 for each transaction).

          For the twelve months ended December 31, 1999  $8,612,500  ($1,656,250
          to the Company and $6,956,250 to Sun  International)  had been paid by
          TCA in terms of this fourth priority.

          The Non-Pik Completion  Guarantee Notes were redeemed by the Authority
          on December 30, 1999. The contingent  obligation due under this fourth
          priority (Completion Guarantee Notes Fee Amounts only) on December 31,
          1999 was $934,375.

      (e) Fifth, to pay Sun International every six months beginning October 31,
          1997 an amount equal to the product of the Multiplier and the weighted
          average  of  principal  amount  of  Pik  Completion   Guarantee  Notes
          (including  the  applicable  Pik  Amounts)   outstanding   during  the
          applicable  Semi-Annual  Period.  For the year ended December 31, 1999
          $3,782,082 had been paid by TCA in terms of this fifth priority.

          The Pik Completion  Guarantee  Notes were redeemed by the Authority on
          December  30, 1999.  The  contingent  obligation  due under this fifth
          priority on December 31, 1999 was $657,993.

      (f) Sixth, return of capital contributions made before September 29, 1995.
          These capital contributions  aggregated $6,715,000 (unreturned balance
          as of December 31, 1999 was $0).

      (g) Seventh,  payment of a Development  Services Fee Phase I to SIML equal
          to $8,280,000  constituting  3% of the total  development  costs (less
          land  acquisition  costs) of the  Mohegan Sun plus  $25,000.  SIML had
          subcontracted with certain affiliates of the Company. The fees paid by
          SIML to the  affiliates  of the  Company  were  equal to 20.83% of the
          Development  Services Fee Phase I plus $25,000 (total $1,749,724).  At
          December  31,  1999  and  1998,  $8,305,000  had  been  paid by TCA as
          Development Services Fee Phase I.

      (h) Eighth, payment of a monthly Management Services Fee (less the amounts
          paid  pursuant to paragraph (a) above) equal to the lesser of i) 1% of
          the gross  revenues  of the  Mohegan  Sun or ii) 25% of the sum of the
          Excess Cash (as defined in the  partnership  agreement  of TCA) of TCA
          plus 25% of the Organizational and Administrative Fee, as defined, and
          the Marketing and Casino  Operations Fee, as defined.  After deducting
          operating expenses which were the following  amounts;  $2.0 million if
          the Mohegan Sun's EBITDA (defined as the Mohegan Sun's net income plus
          depreciation,  amortization,  management fee expense, interest expense
          and other non-cash charges less interest income) was $200.0 million or
          less, $3.0 million if the Mohegan Sun's EBITDA was greater than $200.0
          million but less than $225.0  million and $4.0  million if the Mohegan
          Sun's EBITDA was greater  than $225.0  million the  remaining  amounts
          were  distributed in equal amounts to SIML and the Company.  A portion
          of  the  Management  Services Fee  was  used  to  pay  portion  of the
          compensation of the officers and directors of the Company.

                                        9

          For the twelve months ended December 31, 1999  $6,219,147  ($3,109,574
          to SIML, $1,444,874 to affiliates of the Company and $1,664,699 to the
          Company) had been paid by TCA in terms of this eighth priority.

          The contingent  obligation due under this eighth  priority on December
          31, 1999 was $0.

      (i) Ninth,   payment  of  a  fee  to  Sun   International   of  $5,520,000
          constituting 2% of the total  development costs (less land acquisition
          costs) of the Mohegan  Sun. At December 31, 1999  $5,520,000  had been
          paid by TCA in terms of this ninth priority.

      (j) Tenth,  distribution  of amount equal to the state and federal  income
          tax liability of TCA as if it were an individual paying federal income
          tax and the higher of Michigan or Connecticut state income taxes. This
          amount was paid 50% to Sun Cove and 50% to the Company. For the twelve
          months  ended  December  31, 1999  $2,381,541  had been paid by TCA in
          terms of this tenth priority.

      (k) Eleventh,  payment of the Organizational and Administrative Fee to the
          Company and the Marketing and Casino Operations Fee to SIML which fees
          were paid in equal  amounts to the Company  and SIML.  These fees were
          each equal to 1.5% of the gross  revenues  of the  Mohegan  Sun if the
          Mohegan Sun's fiscal year ending  September 30 gross revenues  equaled
          or exceeded  $300 million and 2% of the gross  revenues of the Mohegan
          Sun if the  Mohegan  Sun's  fiscal  year  ending  September  30  gross
          revenues equaled or exceeded $400 million. For the year ended December
          31, 1999  $28,504,418,  50% to the  Company and 50% to SIML,  had been
          paid by TCA in terms of this eleventh priority.

          The contingent obligation due under this eleventh priority on December
          31, 1999 was $46,920,954.

      (l) Twelfth,  all excess cash  distributed  50% to Sun Cove and 50% to the
          Company.  For the twelve  months  ended  December 31, 1999 $0 had been
          distributed by TCA in terms of this twelfth priority.

The Mohegan Tribal Gaming Authority
-----------------------------------

The Tribe is a federally  recognized  Indian  tribe with a 390-acre  reservation
located in southeastern Connecticut. The Tribe established the Authority on July
15, 1995 with the exclusive power to conduct and regulate gaming  activities for
the Tribe.  Under the Indian Gaming Regulatory Act of 1988, as amended ("IGRA"),
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 tribal state compact with the affected state. The Tribe and the
State of  Connecticut  have entered into such a compact (the "Mohegan  Compact")
that has been approved by the U.S.  Secretary of the Interior.  The Authority is
governed by a management board (the "Management  Board"),  which consists of the
nine members of the Tribal Council (the governing body of the Tribe).

Under  the  terms of the  Relinquishment  Agreement  on  December  31,  1999 the
Management  Agreement  terminated  and on  January  1,  2000 the  Tribe  assumed
day-to-day management of the Mohegan Sun.

The Authority has established the Mohegan Tribal Gaming  Commission (the "Gaming
Commission"),  which is  responsible  for the regulation of the Mohegan Sun. The
Gaming  Commission  ensures the  integrity of the gaming  operation  through the
promulgation and enforcement of appropriate  regulations.  The Gaming Commission
is responsible  for  performing  background  investigations  into gaming license
applicants and for issuance and revocation of gaming licenses. The Tribe and the
Authority have entered into a land lease  ("Lease")  pursuant to which the Tribe
is leasing to the  Authority  the land on which the Mohegan Sun is located  (the
"Site"). The Site is part of the Tribe's 390-acre reservation which was acquired
and is held in trust for the Tribe by the  United  States  of  America  with the
Tribe retaining perpetual rights to the use of the Site.

                                       10

The Mohegan Sun
---------------

The  Mohegan  Sun opened on  October  12,  1996,  as a  full-service  gaming and
entertainment complex on a 240-acre site overlooking the Thames River at a total
cost of  approximately  $303.0  million.  The Mohegan  Sun conveys a  historical
northeastern Indian theme through architectural  features and the use of natural
design elements such as timber,  stone,  and water. The Mohegan Sun is comprised
of four  quadrants and reflects a seasonal  theme - Winter,  Spring,  Summer and
Fall - emphasizing  the  importance of seasonal  changes to Mohegan Tribal life.
The  Mohegan  Sun is one of two  legally  authorized  gaming  operations  in New
England  offering both  traditional  slot machines and table games.  The 634,500
square foot facility includes  approximately 176,500 square feet of gaming space
"Casino of the Earth",  approximately  3,031 slot  machines,  approximately  153
table games (including blackjack,  roulette, craps, baccarat, Spanish 21 and let
it ride),  approximately 42 poker tables, and a 9,000 square foot simulcast race
book facility.  Food and beverage  amenities include the 680-seat buffet,  three
full-service  themed fine  dining  restaurants,  a 24-hour  coffee  shop,  a New
York-style  delicatessen,  a nine-station food court featuring international and
domestic  cuisine  and  multiple  full  and  floor  service  bars for a total of
approximately 1,888 restaurant seats. The 350-seat,  10,000 square foot Wolf Den
Lounge  located in the center of the casino hosts  musical  entertainment  seven
days a week.  Larger events are currently  held in the temporary  Uncas Pavilion
constructed  on the  grounds of the Mohegan  Sun,  including  entertainment  and
casino  marketing  activities.  Six retail shops  covering  2,276 square feet of
retail space provide shopping  opportunities  ranging from Mohegan Sun souvenirs
to clothing to cigars. For non-gaming entertainment, the Mohegan Sun also offers
an  arcade-type  recreation  area  and a child  care  facility  operated  by New
Horizons  Kids Quest,  Inc. The Mohegan Sun has parking  spaces for 7,500 guests
and for 2,700  employees.  The  Authority  also  operates a  4,000-square  foot,
16-pump service station and convenience store.

On  October  12,  2000,  the  Authority  announced  it  would  discontiue  bingo
operations in order to build a 650-unit smoke-free slot area.

The Mohegan Sun Expansion
-------------------------

The Project will include  approximately 115,000 square feet of additional gaming
space  "Casino of the Sky",  a luxury  hotel  with  approximately  1,200  rooms,
approximately  100,000  square feet of convention  space,  the Mohegan Sun Arena
with seating for up to 10,000,  approximately  6,000  additional  guest  parking
spaces, specialty retail shops and third party operated, branded restaurants. On
October 13, 2000, the Tribal Council approved a formal resolution increasing the
Project budget to $960.0 million (excluding capitalized  interest),  from $800.0
million.  The  Authority , in  conjunction  with the Tribe,  has  increased  the
Project budget to $960.0 million for three  reasons:  (1) expected  increases in
Project labor costs because of the extreme  competitive  nature of the Northeast
construction labor market; (2) enhanced Project scope such as an increase in the
number of slot  machines  scheduled  to be placed on the gaming  floor;  and (3)
quality  improvements  to the hotel.  As a result of the increase to the Project
budget, the Authority  anticipates seeking to issue an additional $150.0 million
in additional subordinated notes or a term loan. The Authority, based on current
market conditions,  anticipates  securing such financing after January 2001. The
remainder of the  increase  will be funded by  internally  generated  funds.  In
addition to the  financing  provided by the  Authority's  senior  notes,  senior
subordinated notes and the bank credit facility, the Tribe has set aside, with a
trustee,  a $40 million,  fully-funded  construction  reserve  account  that, in
certain  circumstances,  will be used to pay  costs in  excess  of the  approved
Project budget.



The following is a summary of certain physical  attributes of Mohegan Sun before
and after expansion:

<TABLE>

<S>
                           <C>       <C>      <C>   <C>    <C>         <C>   <C>      <C>    <C>          <C>
                            Casino                                            Retail         Convention    Guest
                             Space   Slot     Table Poker  Restaurant  Hotel  Space    Event   Space      Parking
                           (sq. ft.) Machines Games Tables  Seats      Rooms (sq.ft.) Seating (sq. ft.)    Spaces
                           --------- -------- ----- ------ ----------  ----- -------  ------- ---------   -------
Resort before expansion
  (September 30, 2000)....  176,500   3,031    153   42      1,888       0     2,276   1,800        0      7,500
Resort after expansion
  (estimated).............  291,500   6,227    233   42      2,976     1,200 130,000  10,000   100,000    13,500


</TABLE>

Under the  Development  Agreement,  TCA will  oversee the  planning,  design and
construction  of the Project and will  receive  compensation  of $14 million for
such services.

                                    11




The Mohegan Sun - Competition
-----------------------------

The gaming industry is highly  competitive.  The Mohegan Sun currently  competes
primarily with the Foxwoods Resort Casino and, to a lesser extent,  with casinos
in Atlantic  City,  New  Jersey.  Foxwoods  is  approximately  10 miles from the
Mohegan Sun and is the largest gaming  facility in the United States in terms of
total  gaming  positions.  It is owned and operated by the  Mashantucket  Pequot
Tribe under a separate compact with the State of Connecticut.  Foxwoods has been
in operation for nearly nine years.

Mohegan Sun's current market area is predominantly for day-trip customers.  When
the Project is  completed,  the  Authority  intends to broaden its market beyond
day-trip  customers to include  patrons  making  overnight or extended  stays at
Mohegan Sun. At that time,  the  Authority  will begin to compete for  customers
more  directly  with  casinos in  Atlantic  City,  New  Jersey.  Despite the new
overnight  amenities that will be available to guests visiting  Mohegan Sun, the
Mohegan Sun  management  believes that  ninety-five  percent of the daily guests
visiting Mohegan Sun will arrive by car or bus and visit for one day.

Currently,   outside  of  Atlantic  City,  New  Jersey,  casino  gaming  in  the
northeastern  United  States is conducted  only by federally  recognized  Indian
tribes  operating  under the federal Indian gaming law. The Oneida Indian Nation
currently   operates   Turning  Stone  Casino   Resort  in  Verona,   New  York,
approximately  270 miles from  Mohegan  Sun. The St. Regis Mohawk Tribe opened a
casino  in  Hogansburg,  New  York on the  Canadian  border  in April  1999.  In
addition, at least two other federally recognized tribes in New England are each
seeking to establish gaming operations.  Several other tribes in New England are
seeking  federal  recognition  and  have  announced  plans to  establish  gaming
operations.  A number of states,  including Connecticut in 1995, have considered
legalizing casino gaming by non-Indians in one or more locations.  The Authority
cannot  predict  whether any of these other tribes or other  efforts to legalize
casino gaming will be  successful  in  establishing  gaming  operations,  and if
established,  whether  such gaming  operations  will have a  materially  adverse
effect on the operations of the Authority.

The Mohegan Sun - Seasonality
-----------------------------

The gaming industry in Connecticut  experiences seasonal fluctuations,  with the
heaviest  gaming  activity at the Mohegan Sun  occurring  during the period from
July through October.

The Mohegan Sun - Employees and Labor Relations
-----------------------------------------------

As of September 30, 2000, the Mohegan Sun employed approximately 5,495 full time
employees and 707 seasonal and part-time employees.  When recruiting  personnel,
the Mohegan Sun is obligated to give  preference  first to qualified  members of
the Tribe  (and  qualified  spouses  and  children  of members of the Tribe) and
second to members  of other  federally  recognized  Indian  tribes.  None of the
Mohegan Sun's employees are covered by collective bargaining agreements.

The Mohegan Sun - Material Agreements
-------------------------------------

The Mohegan Compact
-------------------

In April  1994,  the Tribe and the State of  Connecticut  entered  into a gaming
compact to authorize  and regulate the Tribe's  conduct of gaming on the Tribe's
lands. This agreement provides, among other things, as follows:

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

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

                                       12

 (3) Law  enforcement  matters  relating to Class III gaming  activities will be
     under the jurisdiction of the State of Connecticut and the Tribe.

 (4) All gaming  employees  must obtain and maintain a gaming  license issued by
     the state gaming agency.

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

  (6)The  State of  Connecticut  will  annually  assess  the Tribe for the costs
     attributable to the State's regulation of the Tribe's gaming operations and
     for the provision of law enforcement at the Tribe's gaming facilities.

 (7) Net revenues from the Tribe's gaming operations may be applied only for the
     certain  purposes  related  to Tribe  operations  and  welfare,  charitable
     contributions and payments to local governmental agencies.

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

 (9) Service of alcoholic  beverages  within the Tribe's  gaming  facilities  is
     subject to regulation by the State of Connecticut.

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

In  addition,  along  with the  Mohegan  Compact,  the  Tribe  and the  State of
Connecticut entered into a memorandum of understanding providing for the payment
of a  portion  of  the  Authority's  slot  machine  revenues  to  the  State  of
Connecticut.  Commencing  July 1, 1995, for each fiscal year such payment to the
State of  Connecticut  must 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.  These payments will not be required if there is a change in
the law to permit the operation of  commercial  casino games by any other person
in the State of Connecticut,  other than the  Mashantucket  Pequot Tribe and the
Tribe. The Authority's financial statements reflect expenses associated with the
slot win  contribution  totalling  $135.1  million,  $121.1  million  and $102.3
million  for  the  fiscal  years  ended   September  30, 2000,  1999  and  1998,
respectively.

Agreement with the Town of Montville
------------------------------------

In June 1994, the Tribe and the  neighboring  town of Montville  entered into an
agreement  whereby  the Tribe makes  annual  payments of $500,000 to the town to
minimize the impact to Montville  resulting  from the  decreased tax revenues on
the land taken into trust for the Tribe's reservation.  The Tribe also agreed to
pay Montville $3.0 million for  infrastructure  improvements to the town's water
system and to pay for its use of the Town's  disposal and wastewater  collection
and  treatment  systems.  Finally,  the Tribe agreed to make payments in lieu of
taxes to the Town on  lands  that the  Tribe  acquires  outside  of its  current
reservation.  The Tribe has  assigned  its  rights  and  obligations  under this
agreement to the Authority.  As of September 30, 2000, the Town of Montville had
billed and received payment for  approximately  $2.9 million of the $3.0 million
obligation.

The information  concerning Sun  International,  the Tribe and the Authority has
been derived from publicly filed information.

                                    13

Item 2.   PROPERTIES

The Company does not have an interest in real property.

Item 3.   LEGAL PROCEEDINGS

As derived from  publicly  filed  information,  the  Authority is a defendant in
certain litigations incurred in the normal course of business. In the opinion of
the  Authority's  management,  based on the  advise of  counsel,  the  aggregate
liability, if any, arising from such litigation will not have a material adverse
effect on the Authority's financial condition or results of operations.

On January 6, 1998, Leisure Resort Technology,  Inc.  ("Leisure") and defendants
Waterford Gaming,  L.L.C., Trading Cove Associates,  LMW Investments,  Inc., and
Slavik Suites,  Inc.  settled a prior lawsuit brought by Leisure.  In connection
with this  settlement,  Leisure and Trading Cove Associates,  Waterford  Gaming,
L.L.C., LMW Investments, Inc., and Slavik Suites, Inc. entered into a settlement
and release  agreement.  Pursuant  to this  settlement  and  release  agreement,
Waterford Gaming,  L.L.C.  bought out Leisure's  beneficial  interest in Trading
Cove Associates.

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman  and Mark  Wolman  (collectively,  the  "Defendants").  The matter is
pending in the Judicial  District of Middlesex at Middletown,  Connecticut.  The
complaint  alleged  breach  of  fiduciary  duties,  fraudulent   non-disclosure,
violation  of  Connecticut   Statutes  Section  42-110a,  et  seq.,  and  unjust
enrichment in connection  with the  negotiation  by certain of the Defendants of
the settlement and release agreement.  The complaint also brought a claim for an
accounting.  The complaint seeks  unspecified  legal and equitable  damages.  On
February 29, 2000, Defendants filded a Motion to Strike and a Motion for Summary
Judgement, each with respect to all claims. The Court granted Defendants' Motion
to Strike in part and  denied  Defendants'  Motion  for  Summary  Judgement,  on
October 13, 2000.  The Court's order  dismissed the claim for an accounting  and
the claim under  Connecticut  Statutes Section  42-110a,  et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites, Inc., Len Wolman and Mark Wolman.

On November 15, 2000, the Company and its co-defendants  answered the complaint.
In addition,  the Company and Trading Cove Associates asserted counterclaims for
breach of the  settlement  and  release  agreement  and  breach  of the  implied
covenant of good faith against Leisure and its president, Lee Tyrol.

The Company believes that it has meritorious  defenses and intends to vigorously
contest the claims in this action and to assert all available  defenses.  At the
present time,  the Company is unable to express an opinion on the  likelihood of
an  unfavorable  outcome  or to give an  estimate  of the  amount  or  range  of
potential loss to the Company as a result of this litigation due to the disputed
issues of law and/or facts on which the outcome of this  litigation  depends and
due to the infancy of both the action and discovery in the action.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the Company's  security  holders for a vote for the
fiscal year ended December 31, 2000.

                                       14

                                  PART II

Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
          MATTERS

Not applicable.

Item 6.   SELECTED FINANCIAL DATA

<TABLE>
                                    For the Year Ended
                                    ------------------
<S>
                               <C>                  <C>                  <C>                  <C>              <C>
                                                                                                                  For the period
                                                                                                                 September 30, 1996
                                                                                                               (date of commencement
                                                                                                                 of operations) to
                                    2000                 1999                 1998                 1997           December 31, 1996
                               --------------       --------------       --------------       --------------       --------------


OPERATING RESULTS
  Interest and dividend
   income                      $   1,894,738        $   6,144,502        $   4,873,323        $   4,592,208        $     623,213
  Subordinated notes fee
   income-Trading Cove
    Associates                       692,782            3,731,806            3,229,253            2,732,530              ---
  Completion guarantee notes
   fee income-Trading Cove
    Associates                       215,625              903,438              467,500              ---                  ---
  Management services income-
   Trading Cove Associates           ---                1,664,699            3,584,313              ---                  ---
  Organizational and
   administrative fee income-
    Trading Cove Associates       11,649,600           14,252,209            4,231,768              ---                  ---
                               --------------       --------------       --------------       --------------       --------------
  Total revenue                   14,452,745           26,696,654           16,386,157            7,324,738              623,213
                               --------------       --------------       --------------       --------------       --------------
  Total expenses                 (13,490,367)         (24,789,253)          (9,576,278)          (9,340,510)          (1,355,985)

  Equity in (loss)income
   of Trading Cove Associates       (574,002)           6,115,300             (482,869)             834,643             (384,826)
                               --------------       --------------       --------------       --------------       --------------
  Net income (loss)            $     388,376        $   8,022,701        $   6,327,010        $  (1,181,129)       $  (1,117,598)
                               ==============       ==============       ==============       ==============       ==============
OTHER DATA:
  Interest expense             $  11,641,049        $  19,045,076        $   7,837,552        $   8,687,704        $   1,220,104
  Net cash used in
   operating activities            1,556,537              ---                  ---                5,835,475              ---
  Net cash provided by
   operating activities              ---               21,753,116            2,561,515              ---                   33,064
  Net cash used in
   investing activities           14,557,877              ---                  ---                  ---               51,345,292
  Net cash provided by
   investing activities              ---               18,920,350            1,020,625            9,043,282              ---
  Net cash used in
   financing activities           40,199,182              ---                1,031,555            3,816,560              ---
  Net cash provided by
   financing activities              ---               16,880,807              ---                  ---               52,152,740

YEAR-END STATUS:
  Total current assets         $  34,708,598        $  72,724,437        $   6,459,361        $   9,980,267        $  16,737,416
  Trading Cove Associates-
   equity investment               7,944,454            9,041,568            8,662,198           10,384,292           12,682,469
  Beneficial interest-Leisure
   Resort Technology, Inc.         5,296,019            5,674,009            4,191,909              ---                  ---
  Investment in 15%
   subordinated notes
    receivable                       ---                  ---               32,059,517           27,742,146           25,965,897
  Investment in completion
   guarantee subordinated
    notes receivable                 ---                  ---                5,075,000            2,548,162              ---
  Deferred financing costs net
   of accumulated amortization     3,377,066            3,781,051            3,339,780            2,702,744            2,788,529
  Fixed assets net of
   accumulated depreciation           33,256               44,036              ---                  ---                  ---
                               --------------       --------------       --------------       --------------       --------------
  Total assets                 $  51,359,393        $  91,265,101        $  59,787,765        $  53,357,611        $  58,174,311
                               ==============       ==============       ==============       ==============       ==============

  Total current liabilities    $   3,481,637        $   3,576,539        $   1,037,887        $   1,081,043        $   1,273,614
  12-3/4% senior notes
   payable                           ---                  ---               61,471,000           61,471,000           65,000,000
  9-1/2% senior notes
   payable                       119,691,000          122,159,000              ---                  ---                  ---
                               --------------       --------------       --------------       --------------       --------------
  Total liabilities            $ 123,172,637        $ 125,735,539        $  62,508,887        $  62,552,043        $  66,273,614
                               ==============       ==============       ==============       ==============       ==============

</TABLE>

                                       15



Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


Certain Risk Factors
--------------------

Lack of Operations; Dependence on the Mohegan Sun

The Company does not conduct any business  operations  other than in  connection
with its role as a managing general partner of TCA and activities  incidental to
the issuance of the $125 Million  Senior Notes and the making of restricted  and
temporary  investments.  The Company is prohibited by the terms of the Indenture
from engaging in any other business activities.  The Company intends to fund its
operating, debt service and capital needs primarily from cash flows from TCA.

TCA's major sources of revenues are  Relinquishment  Fees and  Development  Fee.
There  can be no  assurance  that the  Mohegan  Sun will  continue  to  generate
sufficient  revenues for the  Authority to be  profitable or to service its debt
obligations,  or to pay Relinquishment  Fees and Development Fee. The Company is
entirely  dependent upon the performance of the Mohegan Sun, which is subject to
matters over which the Authority, TCA and the Company have no control including,
without  limitation,   general  economic  conditions,  effects  of  competition,
political,  regulatory  and  other  factors,  and the  actual  number  of gaming
customers and the amount wagered.

Although  TCA  is  entitled  to  a  $14.0  million  development  fee  under  the
Development  Agreement,  it has  entered  into a  subcontract  with SIML who has
subcontracted  with affiliates of the Company to provide certain of the services
required  by such  agreement  and is to pay such  subcontractors  a  development
services fee and incur  expenses equal to 3% of the total cost of the expansion,
excluding capitalized  interest.  Based upon the estimated cost of the expansion
of $960  million,  excluding  capitalized  interest,  such fees and expenses are
expected to be  approximately  $28.8 million.  Such fees are only payable to the
extent of available cash flow. Thus,  ultimately TCA may pay more in development
services fees and expenses to its subcontractors  than it will receive under the
Development  Agreement.  Although the Authority has passed a resolution that the
total costs of the expansion cannot exceed $960 million,  excluding  capitalized
interest,  the actual costs of the  expansion  may exceed such  amounts.  If the
total costs of the expansion increase,  then the total development  services fee
and expenses paid by TCA will increase  proportionately,  which reduces the cash
flow distributable to the Company.

While the Company expects its future  operating cash flows will be sufficient to
cover its  expenses,  including  interest  costs,  the  Company  cannot give any
assurance that it will be able to do so.

Overview of Current and Future Cash Flows
-----------------------------------------

The Company  expects to fund its operating,  debt service and capital needs from
cash flows from the Company's share of payments from TCA, and from the Company's
available  cash.  Based  upon  the  Company's   anticipated  future  operations,
management  believes  that  available  cash flow will be  sufficient to meet the
Company's  anticipated  requirements  for  future  operating  expenses,   future
scheduled  payments of principal  and interest on the $125 Million  Senior Notes
and additional  investments  in TCA that may be required in connection  with the
Project. No assurance,  however,  can be given that the operating cash flow will
be sufficient for that purpose.

The following discussion should be read in conjunction with, and is qualified in
its  entirety  by, the  Company's  financial  statements  and the notes  thereto
included elsewhere herein.

Sources of Revenues
-------------------

The Company has one primary  source of revenue:  payments  from TCA. The Company
anticipates  regular  payments  from TCA based on the results of the Mohegan Sun
and Relinquishment Fees and Development Fee payments by the Authority.

Distributions on the Company's partnership interest in TCA
----------------------------------------------------------

For the year ended December 31, 2000, the Company  received  $9,788,007 from TCA
and $3,770,000 was due from TCA which  represents the Company's  share under the
Omnibus  Termination  Agreement of approximately  $41,004,000 in  Relinquishment
Fees earned by TCA pursuant to the Relinquishment  Agreement for the same period
and  $5,488,000  in  Development  Fee earned by TCA pursuant to the  Development
Agreement for the same period. For the year ended December 31, 1999, the Company
received  $21,879,716 from TCA and $1,216,019 was due from TCA, which represents
the Company's share under the Amended and Restated Omnibus  Financing  Agreement
of  approximately  $59,521,000  in net  Management  Fees  earned by TCA from the
Authority pursuant to the terms of the Management Agreement for the same period.

On December 30, 1999 TCA received  $10,536,543  from Sun  International  and the
Company, pursuant to the last sentence of Section 3 of the Financing Arrangement
Agreement,  and TCA concurrently  distributed  $10,536,543 to its partners.  The
Company received $5,268,272.

                                       16

Payments on the Authority Subordinated Notes
--------------------------------------------

On  December  30,  1999,  the  Authority  paid to the  holders of the  Authority
Subordinated  Notes,  an amount to satisfy  all  obligations  of such  Authority
Subordinated Notes. The Company received $44,403,517 from the Authority.

Results of Operations
---------------------

Comparison of Operating Results for the Twelve Months Ended
-----------------------------------------------------------
December 2000 and 1999
----------------------

Total  revenue for the twelve  months ended  December  31, 2000 was  $14,452,745
compared with  $26,696,654  for the twelve months ended December 31, 1999.  This
decrease  was  primarily  attributable  to the  termination  of  the  Management
Agreement and the commencement of the Relinquishment Agreement and payment under
the  Development  Agreement,  and by the  termination  of the Omnibus  Financing
Agreement and the commencement of the Omnibus  Termination  Agreement on January
1, 2000.  Subordinated  notes fee income - Trading Cove Associates  decreased by
$3,039,024,  completion  guarantee  notes fee income - Trading  Cove  Associates
decreased  by $687,813,  management  services  income - Trading Cove  Associates
decreased by  $1,664,699  and  organizational  and  administrative  fee income -
Trading Cove  Associates  decreased by $2,602,609 as a result of the termination
of the Management Agreement and the commencement of the Relinquishment Agreement
and payment  under the  Development  Agreement,  and by the  termination  of the
Omnibus  Financing  Agreement and the  commencement  of the Omnibus  Termination
Agreement on January 1, 2000 as detailed above under "Trading Cove  Associates -
Material  Agreements".  In addition,  interest and dividend income  decreased by
$4,249,764  primarily  attributable to the repayment on December 30, 1999 by the
Authority of the Authority Subordinated Notes.

Total  expenses for the twelve  months ended  December 31, 2000 was  $13,490,367
compared with the  $24,789,253  for the twelve  months ended  December 31, 1999.
Interest expense decreased by $7,404,027 and amortization on deferred  financing
costs decreased by $3,269,920 due primarily to the redemption of the $65 Million
Senior  Notes and the  issuance of the $125 Million  Senior  Notes,  general and
administrative  costs  increased  by  $216,522  (primarily  attributable  to  an
increase  in legal and other  expenses  related to the  defense  of the  Leisure
litigation,  as  detailed  under  Part  I:  Item 3 Legal  Proceedings,  totaling
approximately   $395,200,   an  increase  in  credit   agency   rating  cost  of
approximately  $12,500,  and partially offset by a decrease in filing expense of
approximately  $14,200,  by a  decrease  in other  legal  fees of  approximately
$62,000,  by a decrease  in federal  and state  payroll  taxes of  approximately
$15,700 and by a decrease in accounting  fees of  approximately  $90,900 (during
the years ended December 31, 2000 and 1999 the Company paid  accounting  fees to
an  affiliate  totalling $0 and $95,000,  respectively)),  12-3/4%  senior notes
tender  expense  decreased by $702,486 due to the  redemption of the $65 Million
Senior  Notes and to an over  accrual  of  $90,000 at  December  31,  1999 and a
decrease in amortization of beneficial interest Leisure Resort Technology,  Inc.
of $139,910 due to the increase in the period over which the asset is amortized.

Equity in (loss) income of Trading Cove  Associates  for the twelve months ended
December 31, 2000 was $(574,002)  compared with $6,115,300 for the twelve months
ended December 31, 1999, as a result of the decrease in income from Trading Cove
Associates of approximately $6,962,600 due to the timing of payments pursuant to
the Omnibus  Termination  Agreement and the Omnibus Financing Agreement and by a
decrease in amortization of interests purchased of approximately $273,100 due to
the increase in the period over which the interests purchased is amortized.

As a result of the  foregoing  factors,  the Company  experienced  net income of
$388,376 for the twelve months ended  December 31, 2000 compared with net income
of $8,022,701 for the twelve months ended December 31, 1999.


                                    17

Comparison of operating results for the years ended December 31,
----------------------------------------------------------------
1999 and 1998
-------------

Total revenue for the twelve  months ended  December 31, 1999,  was  $26,696,654
compared with  $16,386,157  for the twelve months ended December 31, 1998.  This
increase was primarily  attributable to a substantial increase in gross revenues
and  profitability  of the Mohegan Sun which resulted in higher  Management Fees
paid to TCA,  an  increase  in  subordinated  notes fee  income -  Trading  Cove
Associates,  as detailed  under point (c) of the table set forth in Item 1 above
under  "Amended and  Restated  Omnibus  Financing  Agreement",  of $502,553,  an
increase in completion guarantee notes fee income - Trading Cove Associates,  as
detailed  under point (d) of the table set forth in Item 1 above under  "Amended
and Restated Omnibus Financing Agreement", of $435,938, a decrease in management
services  income - Trading Cove  Associates,  as detailed under point (h) of the
table set forth in Item 1 above under  "Amended and Restated  Omnibus  Financing
Agreement",  of $1,919,614 and an increase in organizational  and administrative
fee income - Trading Cove  Associates,  as detailed under point (k) of the table
set  forth  in  Item 1 above  under  "Amended  and  Restated  Omnibus  Financing
Agreement", of $10,020,441.  In addition, interest and dividend income increased
by $1,271,179.

Total  expenses for the year ended  December 31, 1999 was  $24,789,253  compared
with $9,576,278 for the year ended December 31, 1998. Interest expense increased
by  $11,207,524,  and  amortization  on deferred  financing  costs  increased by
$3,093,086  due to the  redemption  of the  $65  Million  Senior  Notes  and the
issuance of the $125 Million  Senior  Notes,  general and  administrative  costs
increased  by  $637,399,  (primarily  attributable  to an increase in  executive
payroll  and  associated  federal  and  state  payroll  taxes  of  approximately
$690,000,  a decrease in accounting  fees of  approximately  $55,200 (during the
twelve months ended December 31, 1999 and 1998 the Company paid  accounting fees
to an affiliate  totaling  approximately  $95,000 and  $146,300,  respectively),
filing expense increased by approximately $15,600,  copying and printing expense
increased by approximately $2,000, trustee and disbursement agent fees increased
by  approximately  $3,600,  dues and  subscriptions  increased by  approximately
$1,600,  by a decrease in legal fees of approximately  $25,100 and by a decrease
in insurance  expense of  approximately  $1,000),  an increase in 12-3/4% senior
notes  tender  expense of $612,486,  a decrease in  amortization  of  beneficial
interest - Leisure Resort  Techology,  Inc. of $347,402,  due to the increase in
the period over which the asset is amortized and by an increase in  depreciation
of $9,882.

Equity in income (loss) of Trading Cove  Associates  for the twelve months ended
December 31, 1999 was $6,115,300  compared with $(482,869) for the twelve months
ended December 31, 1998, as a result of the increase in income from Trading Cove
Associates of $5,778,791  due to the timing of payments  pursuant to the Amended
and Restated  Omnibus  Financing  Agreement and by a decrease in amortization of
interests purchased of $819,378 due to the increase in the period over which the
interests purchased is amortized.

As a result of the  foregoing  factors,  the Company  experienced  net income of
$8,022,701  for the year ended  December  31, 1999  compared  with net income of
$6,327,010 for the year ended December 31, 1998.

                                    18
Liquidity and Capital Resources
-------------------------------

The initial capital of the Company consists of the partnership  interests in TCA
contributed  by Slavik and LMW in forming the Company.  In  connection  with the
offering of the $65 Million Senior Notes, the Company used  approximately  $25.1
million to purchase from Sun International  $19.2 million in principal amount of
Subordinated  Notes plus accrued and unpaid interest and Subordinated  Notes Fee
Amounts. In addition, TCA distributed approximately $850,000 in principal amount
of Subordinated  Notes to the Company.  During September 1997 and on October 12,
1998 and 1999, the Company purchased from Sun International $2.5 million Non-Pik
Completion  Guarantee  Notes  plus  accrued  and  unpaid  interest  and  Non-Pik
Completion Guarantee Fee Amounts (total cost approximately $2.8 million for each
transaction).

On January 6, 1998 the Company paid  $5,000,000 to Leisure  whereby Leisure gave
up its beneficial  interest in 5% of the  Organizational  and Administrative Fee
and Excess Cash of TCA and any other claims it may have had against the Company,
TCA and TCA's partners and former partner.

In connection  with the offering of the $125 Million  Senior Notes,  the Company
used  approximately  $72 million to  repurchase  its $65 Million  Senior  Notes,
distributed  approximately  $37 million to its new parent,  Waterford  Group and
paid the final $2 million to Leisure.

On  December  30,  1999,  the  Authority  paid to the  holders of the  Authority
Subordinated  Notes,  an amount to satisfy  all  obligations  of such  Authority
Subordinated Notes. The Company received $44,403,517 from the Authority.

On December 30, 1999, TCA distributed  $10,536,543 to its partners.  The Company
received $5,268,272.

On  January  4,  2000 in  accordance  with the  terms of the  Indenture  and the
Security  and Control  Agreement  dated as of March 17, 1999 between the Company
and Finance and State Street Bank and Trust Company, $15,000,000 was transferred
to restricted investments ("Interest Reserve Account").

On  January  4, 2000 also in  accordance  with the terms of the  Indenture,  the
Company  distributed  $34,671,789 to its sole member Waterford Group. On January
11,  2000,  on April 13, 2000,  on June 12,  2000,  and on December 27, 2000 the
Company distributed $2,557,545,  $132,869, $330,400, and $38,579,  respectively,
to Waterford  Group as a tax  distribution,  in accordance with the terms of the
Indenture.

For the twelve  months  ended  December  31,  2000 and 1999,  net cash (used in)
provided by operating  activities (as shown in the Statements of Cash Flows) was
$(1,556,537) and $21,753,116, respectively.

Current assets decreased from $72,724,437 at December 31, 1999 to $34,708,598 at
December 31, 2000. The decrease was caused primarily by the distributions to the
Company's   sole   member   Waterford   Group  of   approximately   $37,731,000,
approximately  $1,557,000  of cash used in  operations,  the  redemption of $125
Million Senior Notes in the principal  amount of  $2,468,000,  and offset by the
payment of fees and  distributions  by TCA in terms of the  Omnibus  Termination
Agreement.

Current  liabilities  decreased  from  $3,576,539,   at  December  31,  1999  to
$3,481,637 at December 31, 2000.  The decrease was primarily  attributable  to a
decrease in accrued  interest on senior notes payable of  approximately  $69,000
and by a decrease  in  accrued  expenses  of  approximately  $25,900  (primarily
attributable  to an  increase  in the amount due under Len  Wolman's  employment
agreement of approximately $39,900 , an increase in the amount due for legal and
other expenses related to the defense of the Leisure litigation of approximately
$72,100,  and offset by the over accrual of deferred  financing costs of $40,000
and 12-3/4% senior notes tender expense of $90,000 at December 31, 1999).

For the twelve  months  ended  December  31,  2000 and 1999,  net cash (used in)
provided by investing  activities  (as shown in the Statements of Cash Flows was
$(14,557,877)  and  $18,920,350,  respectively.  The net cash used in  investing
activities  in  2000  was  primarily  the  result  of  contributions  to  TCA of
$1,200,000 (to fund certain development  expenses in connection with the Project
at the Mohegan Sun), the (purchases) and sales of restricted  investments-net of
approximately  $(15,081,000)  (principally  due to the  funding of the  Interest
Reserve Account in the amount of $15 million on January 4, 2000),  and offset by
distributions  from TCA of  approximately  $1,723,000.  The net cash provided by
investing  activities in 1999 was primarily the result of the  redemption by the
Authority  of the  Authority  Subordinated  Notes  in the  principal  amount  of
$27,500,000,   the  (purchases)  and  sales  of  temporary   investments-net  of
$2,045,430  (primarily due to the redemption of the $65 Million Senior Notes and
the  issuance  of the $125  Million  Senior  Notes),  distributions  from TCA of
$6,335,930 and offset by the payment to Leisure of $2 million,  contributions to
TCA of $600,000 (to fund certain  development  expenses in  connection  with the
Project  at  the  Mohegan  Sun),  the   (purchases)   and  sales  of  restricted
investments-net of approximately  $(11,807,000)  (principally due to the funding
of the Interest  Reserve Account in the amount of  approximately  $12 million on
March  17,  1999),   the  purchase  from  Sun   International  of  an  Authority
Subordinated  Note in the  principal  amount of $2.5 million and the purchase of
fixed assets for approximately $54,000.

                                   19



The Company  anticipates that up to $3,300,000 in additional  investments in TCA
(as of December 31, 2000,  $2,200,000  had been invested in TCA) may be required
by the Company in connection with the Project at the Mohegan Sun.

For the years ended  December  31, 2000 and 1999 net cash (used in)  provided by
financing   activities   (as  shown  in  the   Statements  of  Cash  Flows)  was
$(40,199,182)  and  $16,880,807,  respectively.  The net cash used in  financing
activities in 2000 was  primarily  the result of the  redemption of $125 Million
Senior Notes in the principal  amount of  $2,468,000  and  distributions  to the
Company's  sole member of  approximately  $37,731,000.  The net cash provided by
financing  activities  in 1999 was  primarily  the result of the issuance of the
$125  Million   Senior  Notes,   in  the  principal   amount  of   $125,000,000,
contributions  by members of $49,000,  and offset by the  redemption  of the $65
Million Senior Notes in the principal amount of $61,471,000,  deferred financing
costs of  approximately  $4,035,000  (primarily due to the costs associated with
the issuance of the $125 Million Senior Notes) and by  distributions  to members
of approximately $39,821,000.

The Company and Finance are required to make a mandatory redemption on September
15 and March 15, of each year,  which began  September 15, 1999, of $125 Million
Senior Notes using any Company Excess Cash, as defined in the  Indenture,  which
the Company and Finance may have as of the preceding August 1 and February 1. On
August 1, 1999 the Company and Finance had Company  Excess  Cash,  as defined in
the  Indenture,  available for mandatory  redemption of the $125 Million  Senior
Notes totaling approximately  $8,983,000,  and accordingly on September 15, 1999
the Company and Finance made a mandatory redemption of $125 Million Senior Notes
in the principal  amount of $2,841,000 at the  redemption  price of 109.50%.  On
February 1, 2000 the Company and Finance had Company  Excess Cash, as defined in
the  Indenture,  available for mandatory  redemption of the $125 Million  Senior
Notes totaling approximately  $8,276,000,  and accordingly on March 15, 2000 the
Company and Finance made a mandatory  redemption of $125 Million Senior Notes in
the  principal  amount of  $2,277,000 at the  redemption  price of 108.636%.  On
August 1, 2000 the Company and Finance  had  Company  Excess  Cash,  as defined,
available for mandatory  redemption of the $125 Million  Senior Notes,  totaling
approximately $5,902,000,  and accordingly on Septmeber 15, 2000 the Company and
Finance  made a  mandatory  redemption  of  $125  Million  Senior  Notes  in the
principal amount of $191,000 at the redemption price of 108.636%. On February 1,
2001 the Company and Finance had Company Excess Cash, as defined,  available for
mandatory  redemption of the $125 Million  Senior Notes  totaling  approximately
$6,173,000  and  accordingly  on March 15, 2001 the  Company and Finance  made a
mandatory redemption of the $125 Million Senior Notes in the principal amount of
$452,000 at the redemption price of 107.773%.

The Company  expects to fund its operating,  debt service and capital needs from
cash flows from the Company's share of payments from TCA, and from the Company's
available  cash.  Based  upon  the  Company's   anticipated  future  operations,
management  believes  that  available  cash flow will be  sufficient to meet the
Company's  anticipated  requirements  for  future  operating  expenses,   future
scheduled  payments of principal  and interest on the $125 Million  Senior Notes
and additional  investments  in TCA that may be required in connection  with the
Project. No assurance,  however,  can be given that the operating cash flow will
be sufficient for that purpose.


Item 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk  represents the risk of changes in value of a financial  instrument,
derivative or non-derivative,  caused by fluctuations in interest rates, foreign
exchange  rates  and  equity  prices.  Changes  in  these  factors  could  cause
fluctuations in earnings and cash flows.

For fixed rate debt,  changes in interest rates generally affect the fair market
value  of the  debt  instrument,  but not  earnings  or cash  flows.  Therefore,
interest  rate risk and  changes  in the fair  market  value of fixed  rate debt
should not have a  significant  impact on earnings or cash flows until such debt
is refinanced,  if necessary.  For variable rate debt, changes in interest rates
generally  do not impact the fair market  value of the debt  instrument,  but do
affect  future  earnings  and cash flows.  The Company did not have any variable
rate debt  outstanding  at December 31, 2000 and 1999.  The fair market value of
the  Company's  long-term  debt at December 31, 2000 and 1999 is estimated to be
approximately $118,494,000 and $120,300,000,  respectively,  based on the quoted
market price for the same issue.

The Company is exposed to market risks from  fluctuations  in interest rates and
the  effects  of those  fluctuations  on  market  values of the  Company's  cash
equivalents and restricted  investments.  Cash equivalents  generally consist of
overnight investments while the restricted  investments at December 31, 2000 are
generally comprised of an investment in a Federal National Mortgage  Association
Discount  Note which was  purchased at a discount of 6.30% and matured  March 8,
2001 and at December 31, 1999 are  principally  comprised of an  investment in a
Federal Home Loan Mortgage Corp. Discount Note which was purchased at a discount
of 5.46% and matured March 14, 2000.  These  investments  are not  significantly
exposed to interest  rate risk,  except to the extent  that  changes in interest
rates will ultimately  affect the amount of interest income earned and cash flow
from these investments.

The Company does not currently  have any  derivative  financial  instruments  in
place to manage interest costs, but that does not mean that the Company will not
use them as a means to manage interest rate risk in the future.

The  Company  does  not use  foreign  currency  exchange  forward  contracts  or
commodity  contracts  and  does  not  have  foreign  currency  exposure  in  its
operations.

                                       20

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements on Page 25

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

None.

                                 Part III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following  tables set forth certain  information with respect to persons who
are  members  of the Board of  Directors  of the  Company  or who are  executive
officers of the Company.

Name                     Age                   Position

Len Wolman               46             Chairman of the Board and Chief
                                        Executive Officer
Alan Angel               44             Chief Financial Officer
Del J. Lauria            52             Director and Secretary
Mark Wolman              43             Director

Len Wolman.  Mr.  Wolman has been the Chairman of the Board of Directors and the
Chief  Executive of the Company  since its  formation.  Mr. Wolman is a managing
partner of TCA.  Since 1986,  Mr.  Wolman has been the  Chairman of the Board of
Directors and the Chief  Executive  Officer of the Waterford  Hotel Group,  Inc.
Under  Mr.  Wolman,  Waterford  Hotel  Group,  Inc.  has  grown  from one  hotel
management  contract to 27  properties  in ten states.  Mr.  Wolman was actively
involved in the  development,  construction and operation of the Mohegan Sun and
is actively involved in the development and construction of the expansion to the
Mohegan Sun. Mr. Wolman was instrumental in the formation of the relationship of
TCA and the Tribe and had been  actively  working  with the Tribe in  connection
with obtaining federal  recognition,  acquiring the site for the Mohegan Sun and
obtaining  the  financing to construct the Mohegan Sun. Mr. Wolman has served as
President and Chief Executive Officer of Finance since its inception. Mr. Wolman
is a Director  and Officer of Slavik  Suites,  Inc.,  one of  Waterford  Group's
members.  Mr.  Wolman is the brother of Mark Wolman.  Mr.  Wolman's wife and Mr.
Angel's wife are sisters.

Alan Angel. Mr. Angel became Chief Financial  Officer of the Company in January,
1999.  Since  1997,  Mr.  Angel has been the Chief  Financial  Officer of Mystic
Suites,  L.L.C. Mystic Suites,  L.L.C is a commercial  development firm based in
eastern  Connecticut which currently holds an ownership  interest in a number of
hotels  managed by the  Waterford  Hotel  Group,  Inc.  Prior to joining  Mystic
Suites,  L.L.C., Mr. Angel resided in South Africa and served as Chief Financial
Officer of Rowan & Angel cc. Mr. Angel is a certified  public  accountant  and a
chartered accountant.  Mr. Angel has over 20 years of accounting experience. Mr.
Angel's wife and Mr. Len Wolman's wife are sisters.

Del J. Lauria.  Mr.  Lauria  became a Director of the Company,  Chief  Financial
Officer and  Secretary  upon its  formation.  Mr.  Lauria was succeeded as Chief
Financial  Officer in January  1999 by Mr.  Alan  Angel.  Mr.  Lauria is also an
Officer and Director of the Waterford  Hotel Group,  Inc. and is Executive  Vice
President and Director of Slavik Suites, Inc. Mr. Lauria first joined the Slavik
Organization in 1980 as the Chief Financial  Officer of its real estate property
management  division.  The Slavik  Organization  is an affiliated  group of full
service real estate companies first  established in Michigan in the early 1950s.
Mr. Lauria  rapidly  advanced at the Slavik  Organization  and  currently  holds
various key managerial  positions  within the  enterprise.  Prior to joining the
Slavik  Organization,  Mr. Lauria was associated  with the  accounting  firm now
known as Deloitte & Touche and is a certified public accountant.  Mr. Lauria has
served as Treasurer and Secretary of Finance since its inception.

Mark Wolman. Mr. Wolman became a Director of the Company upon its formation. Mr.
Wolman is the president of Wolman Homes, Inc. d/b/a Wolman Construction.  Wolman
Homes,  Inc. is a commercial  development and construction firm based in eastern
Connecticut.  Mr.  Wolman has been working with the Mohegan Tribe since 1992 and
had been  instrumental  in assisting  the Mohegan Tribe in obtaining a number of
governmental  approvals in connection with the  development and  construction of
the Mohegan Sun. Mr. Wolman will be appointed a Director of Slavik Suites,  Inc.
Mr. Wolman is the brother of Len Wolman.

Stephan F. Slavik,  Sr. Mr.  Slavik,  Sr. passed away on December 12, 2000.  The
late Mr.  Slavik,  Sr. was a Director of the Company  since its  formation.  Mr.
Slavik,  Sr. was the President of Slavik  Suites,  Inc. and the Chief  Operating
Officer of the Slavik Organization. Mr. Stephan F. Slavik, age 54 years, will be
appointed a Director of the Company.  Mr. Slavik is a son of the late Stephan F.
Slavik,  Sr. Mr. Slavik is the President of Michigan based Slavik Builders.  Mr.
Slavik has over 30 years of experience with all phases of land planning, product
design,  estimating  and  site  construction  in  single  family,  multiple  and
commercial  design/build  developments.  Mr. Slavik will be appointed a Director
and an Officer  of Slavik  Suites,  Inc.  Mr.  Slavik is the  brother of Richard
Slavik.  Mr. Richard  Slavik,  age 50, will be appointed a Vice President of the
Company.  Mr.  Richard  Slavik is a son of the late Stephan F.  Slavik,  Sr. Mr.
Richard Slavik is Chief  Operating  Officer of the  Fourmidable  Group,  Inc., a
Michigan based real estate management firm. Mr. Richard Slavik has over 20 years
of constructing and operating commercial residential real estate experience. Mr.
Richard  Slavik  will be  appointed  as an Officer of Slavik  Suites,  Inc.  Mr.
Richard Slavik is the brother of Stephan F. Slavik.

Item 11.  EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to the Directors of
the Company.

  Name                      Year Ended              Salary
 ------                    ------------            --------
Len Wolman (1)                2000                 $660,037
                              1999                 $165,000
                              1998                 $    ---

Del Lauria                    2000                 $    ---
                              1999                 $165,000
                              1998                 $    ---



Stephan F. Slavik, Sr.        2000                 $    ---
                              1999                 $165,000
                              1998                 $    ---

Mark Wolman                   2000                 $    ---
                              1999                 $165,000
                              1998                 $    ---

From January 1, 2000, the Company's Directors have also received compensation as
part of the  operating  expenses of TCA as detailed  under point a) of the table
set forth above under "Omnibus Termination  Agreement" and until January 1, 2000
the Company's Directors received  compensation as part of the operating expenses
and  Management  Services Fee of TCA as detailed under points (a) and (h) of the
table set forth above under "Amended and Restated Omnibus Financing  Agreement".
The  Company  does  not  have a  compensation  committee,  and all  compensation
decisions are made by the Board of Directors.

 (1) As detailed in Item 13, Mr. Len Wolman has an employment  contract with the
     Company.  For the year  ended  2000  $660,037  was paid to Mr.  Len  Wolman
     pursuant to the employment  contract.  For the years ended 1999 and 1998 no
     compensation was paid to Len Wolman pursuant to the employment contract.

                                    21

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company's sole member is Waterford Group, L.L.C.

The following table sets forth the beneficial ownership interest in
Waterford Group, L.L.C.

Name of                            % Ownership
Beneficial Owner                  in the Company
----------------                  --------------

LMW Investments, Inc. (1)            32.2033%
Slavik Suites, Inc. (2)              67.7967%
                                    ---------
                                    100.0000%
                                    =========

(1)  LMW  Investments,  Inc.  is owned 50% by Mr. Len Wolman and 50% by Mr. Mark
     Wolman.  The address for LMW  Investments,  Inc. is 914 Hartford  Turnpike,
     P.O. Box 715, Waterford, Connecticut 06385.

(2)  Messrs. Len and Mark Wolman each own approximately 11.9% of the outstanding
     shares of Slavik Suites,  Inc. The address for Slavik Suites, Inc. is 32605
     West 12 Mile Road, Suite 350, Farmington Hills, Michigan 48334.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Len  Wolman,  the  Company's  Chairman of the Board of  Directors  and Chief
Executive Officer is a managing partner of TCA.

Pursuant to the  Development  Services  Agreement Phase I, dated as of September
29,  1995,  between  TCA and SIML,  TCA  shall pay SIML a fee ("the  Development
Services Fee Phase I") equal to $8,280,000 (3% of the total development costs of
the Mohegan Sun,  exclusive of land acquisition  costs) plus $25,000 for expense
reimbursement.  Pursuant to a subcontract,  Construction  will receive 20.83% of
the  Development  Services Fee Phase I plus $25,000 (total  approximately  $1.75
million).  Construction  is owned 50% by Mr. Len  Wolman  (the  Company's  Chief
Executive  Officer and Chairman of the Board of  Directors)  and 50% by Mr. Mark
Wolman  (a  member  of  the  Company's  Board  of  Directors).   Pursuant  to  a
subcontract, Construction will pay The Slavik Company $250,000 of Construction's
approximately  $1.75 million.  Del J. Lauria (the Company's Secretary and member
of the Company's Board of Directors),  Stephan F. Slavik and Richard Slavik have
a financial  interest in The Slavik  Company.  For the year ended  December  31,
1998,  Construction received $1,749,724 and The Slavik Company received $250,000
respectively,  of  their  share of the  Development  Services  Fee  Phase I on a
cumulative basis.

On February 9, 1998 the Development Services Agreement Phase II was entered into
between TCA and SIML.  Pursuant to the Development  Services Agreement Phase II,
TCA  subcontracted  with SIML and SIML agreed to perform those services assigned
to SIML by TCA in  order to  facilitate  TCA's  fulfillment  of its  duties  and
obligations to the Authority under the Development  Agreement.  TCA shall pay to
SIML a fee, as subcontractor (the "Development  Services Fee Phase II") equal to
3% of the development  costs of the Project  exclusive of capitalized  interest,
less all costs incurred by TCA in connection  with the Project.  The Development
Services Fee Phase II shall be paid in installments due on December 31, 1999 and
2000 and on the Completion Date, as defined in the Development Agreement, with a
final  payment being made when the actual  development  costs of the Project are
known.  The payment of the  Development  Services Fee Phase II will be made from
available  cash  flow,  if any,  in  accordance  with  the  Omnibus  Termination
Agreement. SIML has further subcontracted with certain affiliates of the Company
to provide certain of those services  assigned to SIML by TCA. SIML shall pay to
to  those  affiliates  of the  Company  approximately  20%  of the  Developoment
Services Fee Phase II as and when SIML  receives  payment if any,  from TCA. For
the year ended  December  31, 2000,  Construction  received  $1,929,191  and The
Slavik Company received $321,907, of their share of the Development Services Fee
Phase II on a cumulative basis.

The Company paid amounts to an affiliate for accounting  services totaling,  $0,
$95,200,  and $146,300  respectively,  during the years ended December 31, 2000,
1999 and 1998.

On September 28, 1998, the Company entered into an employment agreement with Mr.
Len Wolman.  The  employment  agreement  provides  for a base  annual  salary of
$250,000  reduced by any  amounts Mr.  Wolman  receives as a salary from TCA for
such period. Pursuant to such employment agreement, the Company shall pay to Mr.
Wolman an amount equal to 0.05% of the revenues of the Mohegan Sun including the
expansion to the extent Mr.  Wolman has not  received  such amounts from TCA. On
and after  January  1,  2004,  the  Company  shall pay to Mr.  Wolman  incentive
compensation  based on the revenues of the Mohegan Sun, including the expansion,
as a percentage  (ranging  from .00% to .10%) to be  determined  using a formula
attached  to  the  employment   agreement  which  compares  actual  revenues  to
predetermined  revenue targets. For the year ended December 31, 2000 the Company
paid and incurred  $660,037  pursuant to the employment  agreement.  No payments
were made pursuant to the employment agreement during 1999 and 1998.

In 2000, approximately $976,000 was paid to the principals and affiliates of the
Company as part of TCA's  operating  expenses.  In 1999 and 1998,  approximately
$756,000 and $690,000,  respectively, was paid to the principals and affliliates
of the Company as part of TCA's operating expenses, including the payment of Mr.
Len Wolman's  salary and bonus.  In addition,  for the years ended  December 31,
1999 and 1998,  $6,219,147  ($3,109,573 to SIML,  $1,444,875 to the Directors of
the Company and $1,664,699 to the Company) and  $8,771,643  ($4,385,822 to SIML,
$280,212 to the Directors of the Company,  $521,296 to affiliates of the Company
and  $3,584,313  to the  Company),  respectively,  had been  incurred  by TCA in
monthly management services fees.

For the year ended  December  31, 1999,  the Company  paid the  Directors of the
Company $660,000 as salaries for various services provided to the Company.

Waterford  Group,  Slavik  and the other  principals  of  Waterford  Group  have
interests  in and may acquire  interests in hotels in  southeastern  Connecticut
which have or may have  arrangements with the Mohegan Sun to reserve and provide
hotel rooms to patrons of the Mohegan Sun.

                                    22

                                    Part IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

               Exhibit No.    Description
                 3.1          Certificate of Formation, as amended, of Waterford
                              Gaming, LLC (i)
                 3.2          Certificate of Incorporation of Waterford Gaming
                              Finance Corp. (i)
                 3.3          Bylaws of Waterford Gaming Finance
                              Corp. (i)
                 4.1          Indenture, dated as of November 8, 1996, between
                              Waterford Gaming, L.L.C. and Waterford Gaming
                              Finance Corp., the issuers, and Fleet National
                              Bank, as trustee, relating to $65,000,000 12-3/4%
                              Senior Notes due 2003. (i)
                 4.1.1        First Supplemental Indenture, dated as of March 4,
                              1999, among Waterford Gaming, L.L.C. and Waterford
                              Gaming Finance, Corp., as issuers, and State
                              Street Bank and Trust Company, as trustee,
                              relating to $65,000,000 12-3/4% Senior Notes due
                              2003.  (vi)
                 4.2          Indenture, dated as of March 17, 1999, among
                              Waterford Gaming, L.L.C. and Waterford Gaming
                              Finance Corp., as issuers, and State Street Bank
                              and Trust Company, as trustee, relating to
                              $125,000,000 9-1/2% Senior Notes
                              due 2010.  (vi)
                 4.3          Security and Control Agreement, dated as of March
                              17, 1999, among Waterford Gaming, L.L.C. and
                              Waterford Gaming Finance Corp., as pledgors and
                              State Street Bank and Trust Company, as securities
                              intermediary.  (vi)
                 4.4          Specimen Form of 9-1/2% Senior Notes due 2010
                              (included in Exhibit 4.2).  (vi)
                 10.1         Omnibus Financing Agreement, dated as of September
                              21, 1995, between Trading Cove Associates and Sun
                              International Hotels Limited. (i)
                 10.2         First Amendment to the Omnibus Financing
                              Agreement, dated as of October 19, 1996, among
                              Trading Cove Associates, Sun International Hotels
                              Limited and Waterford Gaming, L.L.C. (i)
                 10.2.1       Amended and Restated Omnibus Financing Agreement
                              dated September 10, 1997 (ii)
                 10.2.2       Omnibus Termination Agreement, dated as of March
                              18, 1999, among Sun International Hotels Limited,
                              Trading Cove Associates, Waterford Gaming, L.L.C.,
                              Sun International Management Limited, LMW
                              Investments, Inc., Sun Cove Limited, Slavik
                              Suites, Inc., and Wolman Construction, L.L.C.(vi)
                 10.3         Amended and Restated Partnership Agreement of
                              Trading Cove Associates, dated as of September 21,
                              1994, among Sun Cove Limited, RJH Development
                              Corp., Leisure Resort Technology, Inc., Slavik
                              Suites , Inc., and LMW Investments, Inc. (i)
                 10.4         First Amendment to Amended and Restated
                              Partnership Agreement of Trading Cove Associates,
                              dated as of October 22, 1996, among Sun Cove
                              Limited, Slavik Suites, Inc., RJH Development
                              Corp., LMW Investments, Inc. and Waterford Gaming,
                              L.L.C. (i)
                 10.5         Purchase Agreement, dated as of March 10, 1999,
                              among Waterford Gaming, L.L.C., Waterford Gaming
                              Finance Corp., Bear, Stearns & Co., Inc., Merrill
                              Lynch, Pierce, Fenner and Smith Inc. and Salomon
                              Smith Barney. (vi)
                 10.5.1       Agreement with Respect to Redemption or Repurchase
                              of Subordinated Notes, dated September 10, 1997
                              (ii)
                 10.6         Amended and Restated Limited Liability Company
                              Agreement of Waterford Gaming, L.L.C., dated as of
                              March 17, 1999 by Waterford Group, L.L.C.  (vi)
                 10.7         Note Purchase Agreement, dated as of October 19,
                              1996, among Sun International Hotels Limited,
                              Waterford Gaming, L.L.C. and Trading Cove
                              Associates. (i)
                 10.8         Note Purchase Agreement, dated as of September 29,
                              1995, between the Mohegan Tribal Gaming Authority
                              and Sun International Hotels Limited relating to
                              the Subordinated Notes. (i)
                 10.9         Management Agreement, dated as of July 28, 1994,
                              between the Mohegan Tribe of Indians of
                              Connecticut and Trading Cove Associates. (i)
                 10.10        Management Services Agreement, dated September 10,
                              1997. (ii)
                 10.11        Development Services Agreement, dated September
                              10, 1997. (ii)
                 10.12        Subdevelopment Services Agreement, dated September
                              10, 1997. (ii)
                 10.13        Completion Guarantee and Investment Banking and
                              Financing Arrangement Fee Agreement, dated
                              September 10, 1997. (ii)

                                       23

                 10.14        Settlement and Release Agreement, dated January 6,
                              1998, by and among Leisure Resort Technology,
                              Inc., Lee R. Tyrol, Trading Cove Associates,
                              Slavik Suites, Inc., LMW Investments, Inc., RJH
                              Development Corp., Waterford Gaming, L.L.C. and
                              Sun Cove Limited.  (iii)
                 10.15        Waiver and Acknowledgment of Noteholder. (iv)
                 10.16        Relinquishment Agreement, dated February 7, 1998,
                              between the Mohegan Tribal Gaming Authority and
                              Trading Cove Associates.  (v)
                 10.17        Development Services Agreement, dated February 7,
                              1998, between the Mohegan Tribal Gaming Authority
                              and Trading Cove Associates.  (v)
                 10.18        Agreement, dated September 28, 1998, by and among,
                              Waterford Gaming, L.L.C., Slavik Suites, Inc., LMW
                              Investments, Inc., Len Wolman, Mark Wolman,
                              Stephan F. Slavik, Sr. and Del J. Lauria (Len
                              Wolman's Employment Agreement).  (v)
                 10.19        Agreement Relating to Development Services, dated
                              as of February 9, 1998, between Trading Cove
                              Associates and Sun International Management
                              Limited.  (vi)
                 10.20        Local Construction Services Agreement, dated as of
                              February 9, 1998 between Sun International
                              Management Limited and Wolman Construction,
                              L.L.C. (vi)
                 10.21        Escrow Deposit Agreement, dated as of the 3rd day
                              of March 1999, by and among the Mohegan Tribal
                              Gaming Authority and First Union National Bank, as
                              Defeasance Agent.  (vi)
                 21.1         Subsidiaries of Waterford Gaming,
                              L.L.C. (i)
                 21.2         Subsidiaries of Waterford Gaming Finance Corp. (i)


(i)      Incorporated by reference to the Registrant's  Registration  Statement
         on Form S-4,  Securities and Exchange  Commission  (the  "Commission")
         File No. 333-17795, declared effective on May 15, 1997.

(ii)     Incorporated by reference to the Registrant's Quarterly Report on Form
         10-Q for the period  ended  September  30, 1997,  Commission  File No.
         333-17795, as accepted by the Commission on November 14, 1997.

(iii)    Incorporated  by reference to the  Registrant's  Annual Report on Form
         10-K for the fiscal year ended December 31, 1997,  Commission File No.
         333-17795, as accepted by the Commission on March 30, 1998.

(iv)     Incorporated by reference to the Registrant's Quarterly Report on Form
         10-Q  for the  period  ended  March  31,  1998,  Commission  File  No.
         333-17795, as accepted by the Commission on May 14, 1998.

(v)      Incorporated by reference to the Registrant's Quarterly Report on Form
         10-Q for the period  ended  September  30, 1998,  Commission  File No.
         333-17795, as accepted by the Commission on November 13, 1998.

(vi)     Incorporated by reference to the Registrant's Quarterly Report on Form
         10-Q  for the  period  ended  March  31,  1999,  Commission  File  No.
         333-17795 as accepted by the Commission on May 17, 1999.


                                       24

            (b)     Financial Statement Schedules

INDEX TO FINANCIAL STATEMENTS

        Report of Independent Accountants                               F-1
        Financial Statements:
                Balance Sheets as of December 31, 2000 and 1999         F-2
        Statements of Operations for the years ended
                December 31, 2000, 1999 and 1998                        F-3
        Statements of Changes in Member's Deficiency for the
                years ended December 31, 2000, 1999 and 1998            F-4
        Statements of Cash Flows for the years ended
                December 31, 2000, 1999 and 1998                        F-5
        Notes to Financial Statements                                   F-6

                                       25

                       REPORT OF INDEPENDENT ACCOUNTANTS


TO THE MEMBER OF
WATERFORD GAMING, L.L.C.



In our opinion,  the accompanying  balance sheets and the related  statements of
operations,  changes in member's deficiency and of cash flows present fairly, in
all material respects,  the financial position of Waterford Gaming,  L.L.C. (the
"Company")  at December 31, 2000 and  December 31, 1999,  and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America.  These financial statements are the responsibility
of the  Company's  management;  our  responsibility  is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America  which  require  that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP



March 15, 2001

                                      F-1

                            Waterford Gaming, L.L.C.

                                 Balance Sheets

                           December 31, 2000 and 1999
                            -------------------------


                                                2000              1999
                                            ------------      ------------


        ASSETS

Current assets
   Cash and cash equivalents               $  4,024,021       $ 60,337,617
   Restricted investments                    26,888,081         11,807,092
   Due from Trading Cove Associates           3,770,000            492,907
   Other assets                                  26,496             86,821
                                           ------------       ------------
 Total current assets                        34,708,598         72,724,437
                                           ------------       ------------

Trading Cove Associates-equity
  investment                                  7,944,454          9,041,568
Beneficial interest-Leisure Resort
  Technology, Inc.                            5,296,019          5,674,009
Deferred  financing  costs,
  net of  accumulated  amortization  of
  $658,110  and $294,125 at December 31,
  2000 and 1999, respectively                 3,377,066          3,781,051
Fixed assets, net of accumulated
  depreciation of $20,662 and $9,882 at
  December 31, 2000 and 1999, respectively       33,256             44,036
                                           ------------       ------------
 Total assets                              $ 51,359,393       $ 91,265,101
                                           ============       ============


        LIABILITIES AND MEMBERS' DEFICIENCY

Current liabilities
   Accrued expenses                        $    133,614       $    159,480
   Accrued interest on senior notes
     payable                                  3,348,023          3,417,059
                                           ------------       ------------

 Total current liabilities                    3,481,637          3,576,539
                                           ------------       ------------

9-1/2% senior notes payable                 119,691,000        122,159,000
                                           ------------       ------------

 Total liabilities                          123,172,637        125,735,539
                                           ------------       ------------

Contingencies                                   ---                ---

Members' deficiency                         (71,813,244)       (34,470,438)
                                           ------------       ------------
 Total liabilities and members'
 deficiency                                $ 51,359,393       $ 91,265,101
                                           ============       ============


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

                                       F-2

<TABLE>

                            Waterford Gaming, L.L.C.

                            Statements of Operations

              For the Years Ended December 31, 2000, 1999 and 1998
                           --------------------------


<S>                                      <C>               <C>              <C>
                                              2000              1999              1998
                                          ------------      ------------      ------------

Revenue
   Interest and dividend income           $  1,894,738      $  6,144,502      $  4,873,323
   Subordinated notes fee income-
     Trading Cove Associates                   692,782         3,731,806         3,229,253
   Completion guarantee notes fee
     income-Trading Cove Associates            215,625           903,438           467,500
   Management services income-
     Trading Cove Associates                   ---             1,664,699         3,584,313
   Organizational and administrative
     fee income-Trading Cove
      Associates                            11,649,600        14,252,209         4,231,768
                                          ------------      ------------      ------------
        Total revenue                       14,452,745        26,696,654        16,386,157
                                          ------------      ------------      ------------
Expenses
   Interest expense                         11,641,049        19,045,076         7,837,552
   Salaries-related parties                    660,037           660,000           ---
   General and administrative                  526,526           310,004           332,605
   12-3/4% senior notes tender expense         (90,000)          612,486           ---
   Amortization of beneficial interest-
     Leisure Resort Technology, Inc.           377,990           517,900           865,302
   Amortization on deferred financing
     costs                                     363,985         3,633,905           540,819
   Depreciation                                 10,780             9,882           ---
                                          -------------     ------------      ------------
        Total expenses                      13,490,367        24,789,253         9,576,278
                                          ------------      ------------      ------------
                                               962,378         1,907,401         6,809,879
   Equity in (loss) income of
    Trading Cove Associates                   (574,002)        6,115,300          (482,869)
                                          ------------      ------------      ------------
        Net income                        $    388,376      $  8,022,701      $  6,327,010
                                          ============      ============      ============

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

</TABLE>

                                       F-3



                            Waterford Gaming, L.L.C.

                  Statements of Changes in Members' Deficiency

              For the Years Ended December 31, 2000, 1999 and 1998
                           --------------------------



<TABLE>
<S>
                                     <C>                   <C>                    <C>                    <C>
                                     Slavik Suites Inc.    LMW Investments Inc.   Waterford Group, LLC       Total
                                     ------------------    -------------------    --------------------   --------------

Balance, January 1,1998              $      (6,154,626)    $       (3,039,806)                           $  (9,194,432)

Contributions                                   99,186                 47,114                                  146,300

Net income                                   4,289,504              2,037,506                                6,327,010
                                     ------------------    -------------------                            -------------
Balance, December 31, 1998                  (1,765,936)              (955,186)                              (2,721,122)

Contributions,
January 1- March 17                             33,220                 15,780                                   49,000

Distributions,
January 1- March 17                         (1,277,787)              (606,945)                              (1,884,732)

Net loss,
January 1-March 17                          (5,043,441)            (2,395,625)                              (7,439,066)

Transfer of interest                         8,053,944              3,941,976     $       (11,995,920)               0

Distributions,
March 17- December 31                          ---                    ---                 (37,936,285)     (37,936,285)

Net income,
March 17- December 31                          ---                    ---                  15,461,767       15,461,767

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

Balance, December 31, 1999                     ---                    ---                 (34,470,438)     (34,470,438)


Distributions                                  ---                    ---                 (37,731,182)     (37,731,182)

Net income                                     ---                    ---                     388,376          388,376
                                       ---------------    --------------------    --------------------    -------------

Balance, December 31, 2000             $       ---        $           ---         $       (71,813,244)    $(71,813,244)
                                       ===============    ====================    ====================    =============

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

</TABLE>

                                       F-4




                            Waterford Gaming, L.L.C.

                            Statements of Cash Flows

               For the years ended December 31,2000, 1999 and 1998

                           --------------------------
<TABLE>
<S>
                                               <C>              <C>             <C>
                                                   2000             1999            1998
                                               ------------     ------------    ------------

Cash flows from operating activities
   Net income                                  $    388,376     $  8,022,701       6,327,010
                                               ------------     ------------    ------------
   Adjustments to reconcile net income
     to net cash (used in) provided by
     operating activities
        Amortization                                741,975        4,151,805       1,406,121
        Depreciation                                 10,780            9,882         ---
        Equity in loss (income) of Trading
          Cove Associates                           574,002       (6,115,300)        482,869
        Changes in operating assets
          and liabilities
            Decrease (increase) in accrued
              interest receivable-15%
              subordinated notes receivable         ---           12,059,517      (4,317,371)
            Decrease (increase)in accrued
              interest receivable-completion
              guarantee subordinated notes
              receivable                            ---               75,000         (27,500)
            (Increase) decrease in due from
              Trading Cove Associates            (3,277,093)       1,118,381      (1,317,365)
            Decrease (increase) in other
              assets                                 60,325          (67,522)         50,907
            Increase (decrease) in accrued
              expenses                               14,134           84,308         (43,156)
            (Decrease) increase in accrued
              interest on senior notes
              payable                               (69,036)       2,414,344         ---
                                               ------------     ------------    ------------
                  Total adjustments              (1,944,913)      13,730,415      (3,765,495)
                                               ------------     ------------    ------------
                  Net cash (used in)provided
                    by operating activities      (1,556,537)      21,753,116       2,561,515
                                               ------------     ------------    ------------

   Cash flows from investing activities
     Beneficial interest-Leisure
       Resort Technology, Inc.                      ---           (2,000,000)     (5,057,211)
     Release of cash in escrow                      ---               ---          5,000,000
     Contributions to Trading Cove
       Associates                                (1,200,000)        (600,000)       (400,000)
     Distributions from Trading Cove
       Associates                                 1,723,112        6,335,930       1,639,225
     Sales and (purchases) of
       temporary investments-net                    ---            2,045,430       2,337,949
     (Purchases) and sales of
       restricted investments-net               (15,080,989)     (11,807,092)        ---
     Purchase of completion guarantee
       guarantee subordinated note
       receivable                                   ---           (2,798,125)     (2,798,125)
     Return on investment in completion
       guarantee subordinated notes
       receivable                                   ---              298,125         298,787
     Redemption of completion guarantee
       subordinated notes receivable                ---            7,500,000         ---
     Redemption of 15% subordinated notes
       receivable                                   ---           20,000,000         ---
     Fixed assets                                   ---              (53,918)        ---
                                               ------------     ------------    ------------
                Net cash (used in) provided
                  by investing activities       (14,557,877)      18,920,350       1,020,625
                                               ------------     ------------    ------------

   Cash flows from financing activities
     Redemption of 12-3/4% senior
       notes                                        ---          (61,471,000)        ---
     Proceeds from 9-1/2% senior notes
       issuance                                     ---          125,000,000         ---
     Redemption of 9-1/2% senior notes           (2,468,000)      (2,841,000)        ---
     Deferred financing costs                       ---           (4,035,176)     (1,177,855)
     Contributions by members                       ---               49,000         146,300
     Distributions to member                    (37,731,182)     (39,821,017)        ---
                                               ------------     ------------    ------------

                Net cash (used in)
                  provided by
                  financing activities          (40,199,182)      16,880,807      (1,031,555)
                                               ------------     ------------    ------------

   Net (decrease) increase in cash              (56,313,596)      57,554,273       2,550,585

   Cash and cash equivalents at
     beginning of year                           60,337,617        2,783,344         232,759
                                               ------------     ------------    ------------
   Cash and cash equivalents at
     end of year                               $  4,024,021     $ 60,337,617     $ 2,783,344
                                               ============     ============    ============
   Supplemental disclosure of cash
     flow information:
       Cash paid during the year
         for interest                          $ 11,710,084     $ 16,630,732     $ 7,837,552
                                               ============     ============    ============
   Supplemental disclosure of
     non-cash financing activities:
       Deferred financing costs (overaccrued)
       funded through accrued expenses         $    (40,000)    $     40,000         ---
                                               ============     ============    ============

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

</TABLE>


                                      F-5

                            WATERFORD GAMING, L.L.C.

                          NOTES TO FINANCIAL STATEMENTS
                           --------------------------


ORGANIZATION, MEMBERSHIP AGREEMENT, CHANGE OF OWNERSHIP AND MEMBER ALLOCATIONS:

Waterford Gaming, L.L.C. (the "Company"),  a Delaware limited liability company,
was formed on September  30, 1996.  The Company  initially  acquired and owns an
interest in Trading Cove Associates ("TCA") a Connecticut  general  partnership,
and  invested in certain  financial  instruments  issued by the  Mohegan  Tribal
Gaming  Authority  (the  "Authority").  The  Company is  governed  by a board of
managers pursuant to the limited liability company agreement (the  "Agreement").
In connection  with the Company's  and the  Company's  wholly- owned  subsidiary
Waterford  Gaming  Finance  Corp.  ("Finance")  issuance of $125 million  9-1/2%
senior  notes  payable  which mature  March 15, 2010 (the "$125  Million  Senior
Notes"),  each of Slavik  Suites,  Inc.  ("Slavik")  and LMW  Investments,  Inc.
("LMW") have contributed  their respective  interests in the Company as of March
17, 1999 to a Delaware Limited Liability Company,  Waterford Group,  L.L.C. (the
"Waterford  Group").  Waterford  Group is now the sole  member  of the  Company.
Slavik and LMW own Waterford Group in the same  respective  interest as they had
in the Company and are generally as follows:

         Slavik Suites, Inc.                     67.7967%
         LMW Investments, Inc.                   32.2033%
                                                ---------
                                                100.0000%
                                                =========

The  Agreement is effective  until  September  30, 2020 and may be terminated by
unanimous decision of the member or any other event as stated in the Agreement.

During  December 1999, the Company  received a payment on notes it held due from
the Authority and a distribution  from TCA. As  contemplated in the $125 Million
Senior Notes offering ("the Offering"),  the Company  distributed  approximately
$34,672,000  to Waterford  Group during  January 2000.  In  connection  with the
Offering the Company  distributed  $37,050,000  to Waterford  Group during March
1999. In addition tax distributions totaling approximately  $3,946,000 were made
by the Company during 2000 and 1999.

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

        Accounting Method

          The accrual  method of  accounting is used in the  preparation  of the
          financial statements and the partnership income tax returns.

        Cash and Cash Equivalents

          Cash and cash  equivalents  represent  cash  and  short-term,  hightly
          liquid  investments with original  maturities of three months or less.

        Restricted Investments

          Restricted  investments at December 31, 2000 are principally comprised
          of an investment in a Federal National Mortgage  Association  Discount
          Note which was  purchased at a discount of 6.30% and matures  March 8,
          2001  and  at  December  31,1999  are  principally   comprised  of  an
          investment in a Federal Home Loan Mortgage  Corp.  Discount Note which
          was purchased at a discount of 5.46% and matures  March 14, 2000.  The
          investment  represents  a  restricted  investment  fund  that has been
          established  with a trustee in terms of the $125 Million  Senior Notes
          indenture  and is  reported  at  cost  plus  accrued  interest,  which
          approximates market.

        Trading Cove Associates - Equity Investment

          The Trading Cove  Associates  - equity  investment  is  accounted  for
          utilizing the equity method. Included in the investment is $10,600,000
          which  represents the purchase  price paid to a corporation  for their
          12.5%  interest  in TCA.  This  amount was  initially  amortized  on a
          straight-line  basis over a 7-year term,  which represents the term of
          the management agreement between TCA and the Authority,  through March
          1999.  As a  result  of  the  Relinquishment  Agreement,  as  defined,
          becoming  effective the remaining  balance will be amortized  over 189
          months beginning April 1999.

        Deferred Financing Costs

          All costs  incurred  with the issuance of the  Company's and Finance's
          $125 Million  Senior Notes,  were  capitalized  and are amortized on a
          straight-line  basis over the 11-year term of the $125 Million  Senior
          Notes.

        Fixed Assets

          Fixed  Assets are  stated at cost.  Depreciation  is  charged  against
          income over the estimated life of the fixed assets. The estimated life
          is five years for furniture and fixtures and leasehold improvements.

        Income Taxes

          The Company,  as a limited liability company,  files federal and state
          partnership  income tax returns which  indicate each member's share of
          taxable income or loss to be reported on each member's tax return.  As
          a result,  no  provision  for federal and state  income taxes has been
          made in the accompanying financial statements.

        Concentration of Credit Risk

          The Company has one primary source of revenue:  payments from TCA. The
          Company anticipates regular payments from TCA based upon the operating
          results of the  Authority  and the  related  Relinquishment  Fees,  as
          defined, and Development Fees, as defined,  paid and to be paid by the
          Authority.   Financial  instruments,  which  potentially  subject  the
          Company to a concentration of credit risk, principally consist of cash
          in excess of the financial institutions' insurance limits. The Company
          invests available cash with high credit quality institutions.

        Fair Value of Financial Instruments

          Fair  values  generally  represent  estimates  of  amounts  at which a
          financial  instrument could be exchanged  between willing parties in a
          current  transaction other than forced  liquidation.  However, in many
          instances,  current  exchange  prices are not available for certain of
          the Company's financial instruments,  since no active market generally
          exists for such financial instruments.

          Fair value  estimates are  subjective and are dependent on a number of
          significant  assumptions,  based on  management's  judgment  regarding
          future expected loss  experience,  current economic  conditions,  risk
          characteristics of various financial  instruments,  and other factors.
          In addition,  technical pronouncements allow a wide range of valuation
          techniques,  therefore, comparisons between entities, however similar,
          may be difficult.



        Use of Estimates

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial  statements,  as well as the reported amounts of
          revenues and expenses  during the  reporting  period.  Actual  results
          could differ from those estimates.

                                      F-6

2.   TRADING COVE ASSOCIATES - EQUITY INVESTMENT:

     TCA was organized on July 27, 1993. The primary  purpose of TCA has been to
     assist the Mohegan  Tribe of Indians of  Connecticut  (the "Tribe") and the
     Authority,   an   instrumentality   of  the  Tribe,  in  obtaining  federal
     recognition,   negotiate  the  tribal-state   compact  with  the  State  of
     Connecticut, obtain financing for the development of the Mohegan Sun Casino
     (the  "Mohegan   Sun")  located  on  certain  Tribal  land  in  Uncasville,
     Connecticut, negotiated the Amended and Restated Gaming Facility Management
     Agreement (the  "Management  Agreement")  and  participated  in the design,
     development and construction of the Mohegan Sun, which commenced operations
     on October  12,  1996.  Since the  opening of the  Mohegan  Sun,  and until
     January 1, 2000 TCA had overseen the Mohegan Sun's day-to-day operations.

     TCA will terminate on December 31, 2040, or earlier, in accordance with the
     terms of the partnership  agreement.  On November 8, 1996, certain partners
     of TCA  withdrew  and,  concurrently,  consented  to the  admission  of the
     Company  as a partner to TCA.  Also,  on  November  8,  1996,  the  Company
     acquired  an  additional  interest  (12.5%) in TCA from a  corporation  for
     $10,600,000.  The Company has a 50% voting and profits interest in TCA. The
     remaining  50%  interest  is owned by Sun Cove  Limited  ("Sun  Cove"),  an
     affiliate of Sun International  Hotels Limited ("Sun  International").

     As of December 31, 2000,  1999 and 1998 the following  summary  information
     relates to Trading Cove  Associates.  Total revenues and net income are for
     the years ended December 31, 2000, 1999 and 1998.

<TABLE>

<S>
                                            <C>              <C>              <C>
                                                2000             1999             1998
                                            ------------     ------------     ------------

Total assets                                $ 21,452,587     $  8,634,840     $  8,720,632
Total liabilities                            (15,872,938)      (1,741,019)      (4,011,858)
                                            ------------     ------------     ------------
Partners' capital                           $  5,579,649     $  6,893,821     $  4,708,774
                                            ============     ============     ============

Total revenue                               $ 46,072,404     $ 72,179,041     $ 53,766,834
                                            ============     ============     ============

Net (loss) income                           $   (267,948)    $ 13,656,908     $  2,099,326
                                            ============     ============     ============



                                                2000             1999             1998
                                            ------------     ------------     ------------
Company's interest:
  Trading Cove Associates -
   equity investment, beginning
   of year                                  $  9,041,568     $  8,662,198     $ 10,384,292
  Contributions                                1,200,000          600,000          400,000
  Distributions                               (1,723,112)      (6,335,930)      (1,639,225)
                                            ------------     ------------     ------------
                                               8,518,456        2,926,268        9,145,067
                                            ------------     ------------     ------------
(Loss)income from Trading Cove
  Associates                                    (133,974)       6,828,454        1,049,663
Amortization of interests
  purchased                                     (440,028)        (713,154)      (1,532,532)
                                            ------------     ------------     ------------
Equity in (loss) income of
  Trading Cove Associates                       (574,002)       6,115,300         (482,869)
                                            ------------     ------------     ------------
Trading Cove Associates -
  equity investment, end of year            $  7,944,454     $  9,041,568     $  8,662,198
                                            ============     ============     ============

</TABLE>


Trading Cove Associates - Material Agreements
---------------------------------------------

On  February  7,  1998,  TCA,  the Tribe and the  Authority  finalized  contract
negotiations and are moving forward with a significant  expansion project at the
Mohegan Sun (the "Project").  As a result, TCA and the Authority have terminated
the Management Agreement effective January 1, 2000.

Under the terms of an agreement (the  "Relinquishment  Agreement") TCA continued
to manage the Mohegan Sun under the Management  Agreement until January 1, 2000.
On December 31, 1999 the Management  Agreement  terminated and the Tribe assumed
day-to-day management of the Mohegan Sun. Under this Relinquishment Agreement to
compensate TCA for terminating its rights under the Management Agreement and the
Hotel/Resort Management Agreement,  the Authority has agreed to pay to TCA 5% of
Revenues, as defined,  (the "Relinquishment  Fees") generated by the Mohegan Sun
during the 15-year period commencing on January 1, 2000.

                                      F-7

Relinquishment Agreement
------------------------

The  payments  under the  Relinquishment  Agreement  will be divided into senior
relinquishment  payments and junior relinquishment  payments, each of which will
be 2.5% of Revenues.  Revenues are defined as gross gaming  revenues (other than
Class II gaming revenue, i.e. bingo) and all other facility revenues (including,
without limitation,  hotel revenues,  food and beverage sales, parking revenues,
ticket revenues and other fees or receipts from the convention/events  center in
the  expansion  and all rental or other  receipts  from  lessees,  licensees and
concessionaires  operating in the  facility  but not the gross  receipts of such
lessees, licensees and concessionaires).  Revenues exclude revenues generated by
any other expansion of the Mohegan Sun. Senior  relinquishment  payments will be
payable quarterly in arrears  commencing on April 25, 2000 for the quarter ended
March  31,  2000,  and  the  junior  relinquishment  payments  will  be  payable
semi-annually  in arrears  commencing  on July 25, 2000 for the six months ended
June 30, 2000, assuming sufficient funds are available after satisfaction of the
Tribe's senior obligations.

For the  year  ended  December  31,  2000 the  Relinquishment  Fees  earned  was
$41,003,849. A summary of relinquishment payments received is as follows:


                               Senior             Junior             Total
                            ------------       ------------       ------------

   April 25, 2000           $  4,947,458       $    ---           $  4,947,458
   July 26, 2000               5,039,048          9,986,506         15,025,554
   October 25, 2000            5,457,627            ---              5,457,627
   January 25, 2001            5,057,792         10,515,418         15,573,210
                            ------------       ------------       ------------
                            $ 20,501,925       $ 20,501,924       $ 41,003,849
                            ============       ============       ============

TCA has  notified  the  Authority  that it does not agree  with the  Authority's
treatment  of  certain  promotional  transactions,  that in TCA's  opinion,  has
resulted in a reduction in Revenues on which  relinquishment fees is calculated.
TCA has  requested  the Year End  Statements,  as defined in the  Relinquishment
Agreement, from the Authority.

Development Agreement
---------------------

TCA and the Authority entered into a development  services agreement on February
7, 1998. Under this "Development  Agreement",  TCA agreed to oversee the design,
construction,  furnishing,  equipping  and  staffing  of the Project for a $14.0
million  development  fee (the  "Development  Fee"). On May 24, 2000 TCA and the
Authority  agreed  that TCA had  performed  and  completed  all its  obligations
relating to the staffing of the Project and that TCA has no further  obligations
relating to the staffing of the Project.

The Authority will pay the Development Fee to TCA quarterly beginning on January
15, 2000 until the Completion Date, as defined in the Development Agreement,  of
the Project  based on  incremental  completion of the Project as of each payment
date. A summary of the  quarterly  Development  Fee payments  received by TCA in
accordance with the terms of the Development Agreement is as follows:



            January 15, 2000                  $  1,372,000
            April 20, 2000                         896,000
            July 17, 2000                        1,260,000
            October 13, 2000                     1,372,000
            January 23, 2001                       588,000
                                              ------------
                                              $  5,488,000
                                              ============

On February 9, 1998 the Development Services Agreement Phase II was entered into
between TCA and SIML.  Pursuant to the Development  Services Agreement Phase II,
TCA subcontracted  with Sun International  Management  Limited ("SIML") and SIML
agreed to perform those services  assigned to SIML by TCA in order to facilitate
TCA's  fulfillment  of its duties and  obligations  to the  Authority  under the
Development Agreement. TCA shall pay to SIML a Development Services Fee Phase II
equal to 3% of the development costs of the Project,  less all costs incurred by
TCA in connection with the Project.  The Development Services Fee Phase II shall
be paid in installments  due on December 31, 1999 and 2000 and on the Completion
Date, as defined in the Development  Agreement,  with a final payment being made
when the actual  development  costs of the Project  are known.  The fee is to be
paid from available cash flow of TCA, if any,  subordinate to certain other fees
as described below under the heading "Omnibus Termination Agreement".

SIML has further subcontracted with Wolman Construction L.L.C.  ("Construction")
(the  "Local  Construction  Services  Agreement")  to  provide  certain of those
services  assigned  to SIML by TCA.  SIML  shall pay  20.83% of the  Development
Services Fee Phase II as and when SIML receives  payment from TCA.  Construction
has subcontracted with The Slavik Company for 14.30% of its fee.

                                       F-8

Management Agreement
--------------------

The  Management  Agreement  between TCA and the Tribe was entered into on August
30, 1995. The Tribe had assigned its rights and obligations in this agreement to
the Authority. The Authority and TCA had consented to this assignment.


Until January 1, 2000,  TCA was the exclusive  manager of the Mohegan Sun. Under
the Management  Agreement,  the Tribe had granted to TCA the exclusive right and
obligation  to develop,  manage,  operate and  maintain  the Mohegan Sun and all
other  related   facilities   that  are  owned  by  the  Tribe  or  any  of  its
instrumentalities, including the Authority and to train members of the Tribe and
others in the management of the Mohegan Sun.

Until January 1, 2000 TCA earned a management fee from the Authority pursuant to
the Management  Agreement (the "Management Fees"). The Management Fees were paid
monthly (the final payment was received by TCA from the Authroity on January 25,
2000) and were  calculated in three tiers based upon net revenues of the Mohegan
Sun set forth below (in thousands):

                          I                    II                 III

                   --------------       ------------------    -----------------
                     40% of Net         Revenues in Tier I       Revenues in
                   Revenues up to         plus 35% of Net     Tiers I & II plus
                                         Revenues between        30% of Net
                                                               Revenues above
                   --------------        ----------------     -----------------
     Year 1              $50,546        $50,547-$63,183            $63,183
     Year 2              $73,115        $73,116-$91,394            $91,394
     Year 3              $91,798        $91,799-$114,747          $114,747
     Year 4              $95,693        $95,694-$119,616          $119,616


     In addition,  TCA was  required to fund $1.2 million per year  ($100,00 per
     month) from its Management  Fees into a capital  replacement  reserve.  The
     capital replacement reserve is the property of the Authority.


Omnibus  Termination  Agreement
-------------------------------


On March 18, 1999, the Omnibus Termination  Agreement (the "Omnibus  Termination
Agreement") was entered into by TCA, Sun International,  the Company, SIML, LMW,
Sun Cove,  Slavik and  Construction;  which (i)  terminated  the  memorandum  of
understanding  dated  February  7,  1998;  and (ii)  effective  January  1, 2000
terminated  a)  the  Amended  and  Restated  Omnibus  Financing  Agreement;   b)
completion  guarantee  and  investment  banking and  financing  arrangement  fee
agreement (the "Financing  Arrangement  Agreement");  c) the management services
agreement;  d) the organizational and administrative  services agreement; e) the
marketing  services  agreement;  and f) a letter agreement  relating to expenses
dated October 19, 1996.

In consideration  for the termination of such agreements,  TCA will use its cash
(primarily  cash from payments from the  Authority for  Relinquishment  Fees and
Developkment  Fee) to pay the  following  obligations  in the priority set forth
below:

                                       F-9



      (a) First, to pay all unpaid amounts which may be due under the terminated
          letter  agreement and to pay certain  affiliates of the Company and to
          Sun Cove a percentage of an annual fee of $2.0 million less the actual
          expenses  incurred  by TCA.  Such annual fee shall be payable in equal
          quarterly  installments  beginning  March 31, 2000 and ending December
          31, 2014. For the year ended December 31,2000 $1,849,506  ($924,753 to
          Sun Cove and $924,753 to  affiliates of the Company) had been paid and
          incurred  by TCA in  terms  of this  first  priority.  The  contingent
          obligation at December 31,2000 was $0.

       (b)Second,  to return all capital  contributions  made by the partners of
          TCA after September 29, 1995. TCA  anticipates  making monthly capital
          calls to fund expenses related to the development of the Project,  and
          these capital calls will be repaid, based on cash flow, in the quarter
          following the quarter in which the capital call was made. From January
          1, 2000 to December 31, 2000 these  capital  contributions  aggregated
          $2,400,000.  $2,000,000 has been repaid to the partners of TCA, 50% to
          the Company and 50% to Sun Cove.

          As of December 31, 2000,  $400,000 in capital  contributions  remained
          outstanding.

      (c) Third, to pay any accrued  amounts for obligations  performed prior to
          January 1, 2000 under the  Financing  Arrangement  Agreement.  For the
          year  ended   December  31,  2000   $2,977,932   ($2,069,525   to  Sun
          International  and  $908,407 to the  Company)  had been paid by TCA in
          terms of this  third  priority.  No further  obligation  is payable at
          December 31,2000.

      (d) Fourth,  to make the payments set forth in the  agreement  relating to
          Development  Services  Agreement  Phase II and the Local  Construction
          Services  Agreement.  For the year ended December 31, 2000 $10,807,000
          ($8,555,902 to SIML,  $1,929,191 to  Construction  and $321,907 to The
          Slavik  Company)  had been paid and  incurred  by TCA in terms of this
          fourth  priority.  No  additional  amounts  are  payable  at  December
          31,2000.


      (e) Fifth, to pay Sun  International an annual fee of $5.0 million payable
          in equal quarterly  installments of $1.25 million  beginning March 31,
          2000 and ending  December  31, 2006.  For the year ended  December 31,
          2000 $5.0  million had been paid and incurred by TCA in terms of this
          fifth  priority.  No  additional  amounts are payable at December  31,
          2000.

      (f) Sixth,  to pay any accrued  amounts  for  obligations  performed  with
          respect  to periods  prior to  January  1, 2000  under the  management
          services  agreement,  the organizational  and administrative  services
          agreement and the  marketing  services  agreement.  For the year ended
          December 31, 2000 $23,299,200  ($11,649,600 to SIML and $11,649,600 to
          the  Company) had been paid and incurred by TCA in terms of this sixth
          priority.   The  contingent   obligation  at  December  31,  2000  was
          approximately $23,622,000.

      (g) Seventh,  for the period  beginning March 31, 2000 and ending December
          31,  2014,  to pay each of SIML and the  Company  twenty-five  percent
          (25%) of the  relinquishment  payments.  The contingent  obligation at
          December 31, 2000 was approximately $20,502,000.

     (h)  Eighth, to distribute all excess cash.


In  addition,  TCA  shall not make any  distributions  pursuant  to the Omnibus
Termination  Agreement  until it has  annually  distributed  to its partners pro
rata,  the amounts  related to its  partners  tax  obligations  as  described in
Section 3.03a(1) of the partnership agreement less twice the amount of all other
funds paid or  distributed  to the  Company  during  such year  pursuant  to the
Omnibus Termination Agreement.

To the extent TCA does not have adequate  cash to make the payments  pursuant to
the Omnibus  Termination  Agreement,  such amounts due shall be deferred without
the accrual of interest until TCA has sufficient cash to pay them.


OMNIBUS FINANCING AGREEMENT
---------------------------

Until January 1, 2000 TCA's primary source of revenue was Management Fees. Those
fees were utilized by TCA pursuant to The Amended and Restated Omnibus Financing
Agreement (the "Omnibus Financing Agreement") which was terminated effective
January 1, 2000.

                                      F-10

3.   BENEFICIAL INTEREST - LEISURE RESORT TECHNOLOGY, INC.:

On January 6, 1998, the Company paid  $5,000,000 to Leisure  Resort  Technology,
Inc.  ("Leisure")  whereby  Leisure  gave up its  beneficial  interest  in 5% of
certain fees and excess cash flows,  as defined,  of TCA and any other claims it
may have had against the Company,  TCA and TCA's partners and former partner. On
August 6, 1997,  Leisure,  a former partner of TCA, had filed a lawsuit  against
TCA, Sun Cove,  former partner of TCA, RJH Development Corp. and the Company and
its owners,  claiming breach of contract,  breach of fiduciary  duties and other
matters in  connection  with the  development  of the  Mohegan  Sun by TCA.  The
Company agreed to acquire Leisure's  contractual  rights and settle all matters.
The  Company  no  longer  has  the  obligation  to  pay  to  Leisure  5% of  the
Organizational  and  Administrative  fee, as defined in the  Organizational  and
Administrative  Services  Agreement,  and 5% of TCA's  Excess Cash as defined in
TCA's partnership  agreement.  The Company is now entitled to such cash flow. On
March 17,  1999,  the Company and  Finances'  $65  million  12-3/4%  senior note
payable (the "$65 Million Senior Notes") were retired and on March 18, 1999, the
Company paid an additional  $2,000,000 to Leisure pursuant to the settlement and
release agreement.

The Leisure  payments plus  associated  costs were amortized on a  straight-line
basis over the remaining term of TCA's  Management  Agreement  through March 17,
1999.  As a result  of the  Relinquishment  Agreement  becoming  effective,  the
remaining  balance will be amortized over 189 months which began March 18, 1999.
Accumulated amortization at December 31, 2000 and 1999 amounts to $1,761,192 and
$1,383,202, respectively.


4.   $125 MILLION 9-1/2% SENIOR NOTES PAYABLE:

On March 17, 1999,  the Company and Finance,  issued $125 Million  Senior Notes.
Payment of the principal  of, and interest on, the $125 Million  Senior Notes is
subordinate  in right of payment  to all of their  existing  and future  secured
debts.

Interest is payable  semi-annually  in arrears on March 15 and September 15 at a
rate of 9-1/2% per annum which commenced on September 15, 1999.

The  principal  amount of the $125 Million  Senior Notes is payable on March 15,
2010.  The Company and Finance may elect to redeem the $125 Million Senior Notes
at any  time on or  after  March  15,  2004 at a  redemption  price  equal  to a
percentage  (105.182% after March 14, 2004 and declining to 104.318% after March
14, 2005, 103.455% after March 14, 2006, 102.591% after March 14, 2007, 101.727%
after March 14, 2008, 100.864% after March 14, 2009, and to 100% after March 14,
2010) of the principal  amount thereof plus accrued  interest.  The $125 Million
Senior  Notes  provide  that  upon the  occurrence  of a Change of  Control  (as
defined),  the holders thereof will have the option to require the redemption of
the  $125  Million  Senior  Notes  at a  redemption  price  equal to 101% of the
principal amount thereof plus accrued interest.



If the Company and Finance have any Company  Excess Cash, as defined,  they must
redeem the $125  Million  Senior Notes (on a  semi-annual  basis on March 15 and
September 15) equal to a percentage (109.500% after March 15, 1999 and declining
to 108.636% after March 14, 2000,  107.773% after March 14, 2001, 106.909% after
March 14, 2002,  106.045%  after March 14, 2003,  105.182% after March 14, 2004,
104.318%  after March 14, 2005,  103.455%  after March 14, 2006,  102.591% after
March 14, 2007,  101.727%  after March 14, 2008,  100.864% after March 14, 2009,
and to 100.000% after March 14, 2010). On August 1, 1999 the Company and Finance
had Company Excess Cash, as defined,  available for mandatory  redemption of the
$125 Million Senior Notes totaling approximately  $8,983,000,and  accordingly on
September  15, 1999 the Company and Finance made a mandatory  redemption of $125
Million  Senior Notes in the principal  amount of  $2,841,000 at the  redemption
price of 109.50%.  On February 1,2000 the Company and Finance had Company Excess
Cash, as defined,  available for mandatory redemption of the $125 Million Senior
Notes totaling approximately  $8,276,000 and accordingly the Company and Finance
made a mandatory redemption of $125 Million Senior Notes in the principal amount
of $2,277,000 at the  redemption  price of 108.636% on March 15, 2000. On August
1, 2000 the Company and Finance had Company  Excess Cash, as defined,  available
for mandatory redemption of the $125 Million Senior Notes totaling  aproximately
$5,902,000, and accordingly on September 15, 2000 the Company and Finance made a
mandatory  redemption of $125 Million  Senior Notes in the  principal  amount of
$191,000 at the  redemption  price of 108.636%.  On February 1, 2001 the Company
and  Finance had Company  Excess  Cash,  as  defined,  available  for  mandatory
redemption of the $125 Million Senior Notes totaling  approximately  $6,173,000,
and  accordingly on March 15, 2001 the Company and Finance will make a mandatory
redemption of $125 Million  Senior Notes in the principal  amount of $452,000 at
the redemption price of 107.773%.  In some circumstances,  if either the Company
or its partner in TCA exercises the option to buy or sell partnership  interests
in TCA, the Company and Finance must redeem the $125 Million Senior Notes.

The  indenture  relating  to the $125  Million  Senior  Notes (the  "Indenture")
contains certain  affirmative and negative  covenants  customarily  contained in
agreements of this type, including without limitation,  covenants that restrict,
subject to specified  exceptions  the  Company's  and  Finance's  ability to (i)
borrow  money,  (ii) pay  dividends  on stock or make certain  other  restricted
payments,  (iii)  use  assets  as  security  in other  transactions,  (iv)  make
investments, (v) sell other assets or merge with other companies and (vi) engage
in any business  except as currently  conducted or  contemplated  or amend their
relationship  with TCA. The  Indenture  also  provides for  customary  events of
default and the establishment of a restricted investment fund with a trustee for
interest reserves.

The fair value of the Company's  long term debt at December  31,2000 and 1999 is
estimated to be approximately $118,494,000 and $120,300,000, respectively, based
on the quoted market price for the same issue.

                                      F-11

5.   RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION:

The following is a reconciliation of net income for financial statement purposes
to net  income  (loss)  for  federal  income tax  purposes  for the years  ended
December 31, 2000, 1999 and 1998.

<TABLE>

<S>
                                 <C>                        <C>                     <C>
                                      For the                   For the                  For the
                                     Year Ended                Year Ended              Year Ended
                                 December 31, 2000          December 31, 1999       December 31, 1998
                                 -----------------          -----------------       -----------------

Financial Statement
 net income                      $         388,376          $       8,022,701       $       6,327,010
Financial statement
 equity in (income) loss
 of Trading Cove Associates
 over tax basis equity in
 (income) loss of Trading
 Cove Associates                         1,184,388                    176,879                 131,018
Other                                        4,682                     (6,603)                 39,999
                                 -----------------          -----------------       -----------------
Federal income tax basis
 net income                      $       1,577,446          $       8,192,977       $       6,498,027
                                 =================          =================       =================

</TABLE>





The following is a reconciliation of members' deficiency for financial statement
purposes to members'  deficiency  for federal income tax purposes as of December
31, 2000, 1999 and 1998.

<TABLE>

<S>
                                        <C>                <C>                <C>
                                            2000               1999               1998
                                        ------------       ------------       -----------

Financial statement members'
 deficiency                             $(71,813,244)      $(34,470,438)      $ (2,721,122)
Adjustment for cumulative
 difference between tax basis
 of Trading Cove Associates-
 equity investment and GAAP
 basis of Trading Cove
 Associates-equity investment                466,913            296,637            132,082
Current year financial
 statement net income over
 (under) federal income tax
 basis net income                          1,189,070            170,276            171,017
                                        ------------       ------------       ------------
Federal income tax basis
 members' deficiency                    $(70,157,261)      $(34,003,525)      $ (2,418,023)
                                        ============       ============       ============

</TABLE>



6. CONTINGENCIES:

LEGAL PROCEEDINGS


On January 6, 1998, Leisure Resort Technology,  Inc.  ("Leisure") and defendants
Waterford Gaming,  L.L.C., Trading Cove Associates,  LMW Investments,  Inc., and
Slavik Suites,  Inc.  settled a prior lawsuit brought by Leisure.  In connection
with this  settlement,  Leisure and Trading Cove Associates,  Waterford  Gaming,
L.L.C., LMW Investments, Inc., and Slavik Suites, Inc. entered into a settlement
and release  agreement.  Pursuant  to this  settlement  and  release  agreement,
Waterford Gaming,  L.L.C.  bought out Leisure's  beneficial  interest in Trading
Cove Associates.

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman  and Mark  Wolman  (collectively,  the  "Defendants").  The matter is
pending in the Judicial  District of Middlesex at Middletown,  Connecticut.  The
complaint  alleged  breach  of  fiduciary  duties,  fraudulent   non-disclosure,
violation  of  Connecticut   Statutes  Section  42-110a,  et  seq.,  and  unjust
enrichment in connection  with the  negotiation  by certain of the Defendants of
the settlement and release agreement.  The complaint also brought a claim for an
accounting.  The complaint seeks  unspecified  legal and equitable  damages.  On
February 29, 2000,  Defendants filed a Motion to Strike and a Motion for Summary
Judgement, each with respect to all claims. The Court granted Defendants' Motion
to Strike in part and  denied  Defendants'  Motion  for  Summary  Judgement,  on
October 13, 2000.  The Court's order  dismissed the claim for an accounting  and
the claim under  Connecticut  Statutes Section  42-110a,  et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites, Inc., Len Wolman and Mark Wolman.

On November 15, 2000, the Company and its co-defendants  answered the complaint.
In addition,  the Company and Trading Cove Associates asserted counterclaims for
breach of the  settlement  and  release  agreement  and  breach  of the  implied
covenant of good faith against Leisure and its president, Lee Tyrol.

The Company believes that it has meritorious  defenses and intends to vigorously
contest the claims in this action and to assert all available  defenses.  At the
present time,  the Company is unable to express an opinion on the likelihood of
an  unfavorable  outcome  or to give an  estimate  of the amount or  range of
potential loss to the Company as a result of this litigation due to the disputed
issues of law and/or facts on which the outcome of this  litigation  depends and
due to the infancy of both the action and discovery in the action.

                                      F-12

7.  RELATED PARTY AGREEMENT AND TRANSACTIONS:

Len Wolman, the Company's Chairman of the Board of Directors and Chief Executive
Officer, is a managing partner of TCA.

Pursuant to the  Development  Services  Agreement Phase I, dated as of September
29,  1995  between  TCA and SIML,  TCA  shall  pay SIML a fee ("the  Development
Services Fee Phase I") equal to $8,280,000 (3% of the total development costs of
the Mohegan Sun,  exclusive of land acquisition  costs) plus $25,000 for expense
reimbursement.  Pursuant to a subcontract,  Construction  will receive 20.83% of
the  Development  Services Fee Phase I plus $25,000 (total  approximately  $1.75
million). Construction is owned 50% by Len Wolman (the Company's Chief Executive
Officer and Chairman of the Board of Directors) and 50% by Mark Wolman (a member
of the Company's  board of Directors).  Pursuant to a subcontract,  Construction
will pay The Slavik  Company  $250,000  of  Construction's  approximately  $1.75
million.  Del J. Lauria (the  Company's  Secretary and a member of the Company's
Board of  Directors)  and the late  Stephan  F.  Slavik,  Sr.  (a  member of the
Company's  Board of Directors until December 12, 2000) and ? Slavik (a member of
the Company's  Board of Directors from date-?) have a financial  interest in The
Slavik  Company.  For the year ended  December 31, 1998,  Construction  received
$1,749,724 and The Slavik Company received $250,000 respectively, of their share
of the Development Services Fee Phase I on a cumulative basis.

On February 9, 1998 the Development Services Agreement Phase II was entered into
between TCA and SIML.  Pursuant to the Development  Services Agreement Phase II,
TCA  subcontracted  with SIML and SIML agreed to perform those services assigned
to SIML by TCA in  order to  facilitate  TCA's  fulfillment  of its  duties  and
obligations to the Authority under the Development  Agreement.  TCA shall pay to
SIML a fee, as subcontractor (the "Development  Services Fee Phase II") equal to
3% of the  development  costs of the Project,  less all costs incurred by TCA in
connection with the Project. The Development Services Fee Phase II shall be paid
in installments due on December 31, 1999 and 2000 and on the Completion Date, as
defined in the Development  Agreement,  with a final payment being made when the
actual  development  costs  of  the  Project  are  known.  The  payment  of  the
Development  Services Fee Phase II will be made from available cash flow if any,
in  accordance  with  the  Omnibus  Termination  Agreement.   SIML  has  further
subcontracted with certain affiliates of the Company to provide certain of those
services  assigned  to SIML by TCA.  SIML shall pay to those  affiliates  of the
Company  approximately 20% of the Development  Services Fee Phase II as and when
SIML receives  payment if any,  from TCA. For the year ended  December 31, 2000,
Construction  received  $1,929,191 and The Slavik Company received $321,907,  of
their share of the Development Service Fee Phase II on a cumulative basis.

The Company paid amounts to an affiliate for  accounting  services  totaling $0,
$95,200 and  $146,300  respectively,  during the years ended  December 31, 2000,
1999, and 1998.

On September 28, 1998, the Company entered into an employment agreement with Len
Wolman.  The employment  agreement provides for a base annual salary of $250,000
reduced by any amounts Mr. Wolman receives as a salary from TCA for such period.
Pursuant to such  employment  agreement,  the Company shall pay to Mr. Wolman an
amount equal to 0.05% of the revenues of the Mohegan Sun including the expansion
to the extent Mr.  Wolman has not  received  such amounts from TCA. On and after
January 1, 2004,  the Company  shall pay to Mr.  Wolman  incentive  compensation
based  on the  revenues  of the  Mohegan  Sun,  including  the  expansion,  as a
percentage  (ranging  from  .00%  to .10 %) to be  determined  using  a  formula
attached  to  the  employment   agreement  which  compares  actual  revenues  to
predetermined  revenue targets. For the year ended December 31, 2000 the Company
paid and incurred  $660,037  pursuant to the employment  agreement.  No payments
were made pursuant to the employment agreement during 1999 and 1998.

In 2000, approximately $976,000 was paid to the principals and affiliates of the
Company as part of TCA's  operating  expenses.  In 1999 and 1998,  approximately
$756,000 and $690,000,  respectively,  was paid to the principals and affiliates
of the Company as part of TCA's operating expenses, including the payment of Mr.
Len Wolman's  salary and bonus.  In addition,  for the years ended  December 31,
1999 and 1998,  $6,219,147  ($3,109,573 to SIML,  $1,444,875 to the Directors of
the Company and $1,664,699 to the Company) and  $8,771,643  ($4,385,822 to SIML,
$280,212 to the Directors of the Company,  $521,296 to affiliates of the Company
and  $3,584,313  to the  Company),  respectively,  had been  incurred  by TCA in
monthly management services fees.

For the year ended  December  31, 1999,  the Company  paid the  Directors of the
Company $660,000 as salaries for various services provided to the Company.

In 1999, the Company  renovated Mr.  Wolman's office space at a cost of $32,413,
of which  $30,000 was paid to Wolman  Homes Inc., a related  party.  Cost of the
improvement is being  depreciated  over five years . Expense for the years ended
December 31, 2000 and 1999 was $6,480 and $5,940, respectively.

Waterford  Group,  Slavik  and the other  principals  of  Waterford  Group  have
interests  in and may acquire  interests in hotels in  southeastern  Connecticut
which have or may have  arrangements with the Mohegan Sun to reserve and provide
hotel rooms to patrons of the Mohegan Sun.

                                      F-13

            (c)     Reports on Form 8-K

            (i)     Form 8-K filed on December 28, 2000

                    Item 5.

                    The Mohegan Tribal Gaming  Authority (the  "Authority")  has
                    filed its  annual  report  on Form  10-K for the year  ended
                    September  30,  2000,  a copy of which has been  filed as an
                    exhibit to this report and is  incorporated  by reference to
                    the  Authority's  electronic  filing of such  report on Form
                    10-K,  Securities and Exchange Commission file reference no.
                    033-80655.

                    Date of Report: December 14, 2000

            (ii)    Form 8-K filed on February 14, 2001

                    Item 5.

                    The Mohegan Tribal Gaming  Authority (the  "Authority")  has
                    filed its  annual  report  on Form  10-K for the year  ended
                    December  31,  2000,  a copy of which  has been  filed as an
                    exhibit to this report and is  incorporated  by reference to
                    the  Authority's  electronic  filing of such  report on Form
                    10-K,  Securities and Exchange Commission file reference no.
                    033-80655.

                    Date of Report: February 13, 2001

            (iii)   Form 8-K/A filed on February 20, 2001

                    Item 5

                    The Mohegan Tribal Gaming Authority (the  ("Authority")  has
                    filed its  quarterly  report  on Form  10-Q for the  quarter
                    ended  December  31, 2000, a copy of which has been filed as
                    an exhibit to this report and is  incorporated by referce to
                    the  Authority's  electronic  filing of such  report on Form
                    10-Q,  Securities and Exchange Commission file reference no.
                    033-80655.

                    Date of Report: February 13, 2001

            (iv)    Form 8-K filed on February 20, 2001

                    Item 5

                    The Mohegan Tribal Gaming  Authority (the  "Authority")  has
                    filed an  amended  quarterly  report on Form  10-Q/A for the
                    quarter  ended  December  31, 2000, a copy of which has been
                    filed as an exhibit to this  report and is  incorporated  by
                    reference  to the  Authority's  electronic  filing  of  such
                    report on Form 10-Q/A,  Securities  and Exchange  Commission
                    file reference no. 033-80655.

                    Date of Report: February 14, 2001



                                       26

     Pursuant to the  requirements  of Section 13 or 15(d) of the Securities and
     Exchange  Act of 1934,  as  amended,  the  registrant  has duly caused this
     report  to be  signed  on its  behalf  by the  undersigned  thereunto  duly
     authorized.



                         WATERFORD GAMING, L.L.C.


Date: March 30, 2001    By: /s/ Len Wolman
                        Len Wolman, Chairman of the Board of Directors,
                        Chief Executive Officer


Date: March 30, 2001    By: /s/ Alan Angel
                        Alan Angel, Chief Financial Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of
the registrant and in capacities indicated on March 30, 2001.

SIGNATURE                      TITLE


/s/ Len Wolman                 Chairman of the Board of Directors,
-----------------              Chief Executive Officer
Len Wolman


/s/ Del J. Lauria              Member of the Board of Directors,
-----------------              Secretary
Del J. Lauria


/s/ Mark Wolman                Member of the Board of Directors
-----------------
Mark Wolman



                                       27