UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended DecemberMarch 31, 20082009

OR

For the transition period from                      to                     

Commission file number 033-80655

MOHEGAN TRIBAL GAMING AUTHORITY

(Exact name of registrant as specified in its charter)

(860) 862-8000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

MOHEGAN TRIBAL GAMING AUTHORITY

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

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

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands)

(unaudited)

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

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(in thousands)

(unaudited)

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

MOHEGAN TRIBAL GAMING AUTHORITY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

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

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION:

The Mohegan Tribe of Indians of Connecticut (the “Mohegan Tribe” or the “Tribe”) established the Mohegan Tribal Gaming Authority (the “Authority”) in July 1995 with the exclusive power to conduct and regulate gaming activities for the Tribe on Tribal lands and the non-exclusive authority to conduct such activities elsewhere. The Tribe is a federally recognized Indian tribe with an approximately 507-acre reservation situated in Southeastern Connecticut, adjacent to Uncasville, Connecticut. Under the Indian Gaming Regulatory Act of 1988, federally recognized Indian tribes are permitted to conduct full-scale casino gaming operations on tribal land, subject to, among other things, the negotiation of a compact with the affected state. The Tribe and the State of Connecticut have entered into such a compact (the “Mohegan Compact”), which has been approved by the United States Secretary of the Interior. The Authority is primarily engaged in the ownership, operation and development of gaming facilities. In October 1996, the Authority opened a gaming and entertainment complex known as Mohegan Sun. The Authority is governed by a nine-member Management Board, whose members also comprise the Mohegan Tribal Council (the governing body of the Tribe). Any change in the composition of the Tribal Council results in a corresponding change in the Authority’s Management Board.

The following subsidiaries are wholly ownedwholly-owned by the Authority: Mohegan Basketball Club, LLC (“MBC”),; Mohegan Golf, LLC (“Mohegan Golf”),; Mohegan Commercial Ventures PA, LLC (“MCV-PA”),; Mohegan Ventures-Northwest, LLC (“Mohegan Ventures-NW”),; Mohegan Ventures Wisconsin, LLC (“MVW”),; and MTGA Gaming, LLC (“MTGA Gaming”). MBC owns and operates a professional basketball team in the Women’s National Basketball Association (“WNBA”), the Connecticut Sun, and owns approximately 3.6% of the membership interestsinterest in WNBA, LLC. Mohegan Golf owns and operates the Mohegan Sun Country Club at Pautipaug (“Mohegan Sun Country Club”) golf course in Southeastern Connecticut.

MCV-PA holds a 0.01% general partnership interest in Downs Racing, L.P., Backside, L.P., Mill Creek Land, L.P., and Northeast Concessions, L.P. (collectively, the “Pocono Downs Entities”), while the Authority holds a 99.99% limited partnership interest in each such entity. Downs Racing, L.P., (“Downs Racing”) owns and operates Mohegan Sun at Pocono Downs (“Pocono Downs”), a gaming and entertainment facility offering slot machines and harness racing in Plains Township, Pennsylvania, and several off-track wagering (“OTW”) facilities located elsewhere in Pennsylvania. The Authority views Mohegan Sun and the properties owned by the Pocono Downs Entities as separate operating segments.

Mohegan Ventures-NW and the Tribe hold 49.15% and 7.85% membership interests in Salishan-Mohegan, LLC (“Salishan-Mohegan”), respectively, formed with an unrelated third partythird-party to participate in a proposed development and management of a casino to be owned by the federally recognized Cowlitz Indian Tribe of Washington (the “Cowlitz Tribe”) and to be located in Clark County, Washington (the “Cowlitz Project”).

MVW and Mohegan Ventures, LLC (“MV”), a wholly ownedwholly-owned subsidiary of the Tribe, hold 85.4% and 14.6% membership interests in Wisconsin Tribal Gaming, LLC (“WTG”), respectively, formed to participate in a proposed development of a casino to be owned by the federally recognized Menominee Indian Tribe of Wisconsin (the “Menominee Tribe”) and to be located in Kenosha, Wisconsin (the “Menominee Project”).

MTGA Gaming and the Tribe hold 49% and 51% membership interests in Mohegan Gaming & Hospitality, LLC (“MG&H”), respectively. MG&H was formed to evaluate and pursue new business opportunities on behalf of the Authority and the Tribe. MG&H holds a 100% membership interest in Mohegan Resorts, LLC (“Mohegan Resorts”), which in turn. It is anticipated that certain of the Authority’s and the Tribe’s future diversification efforts will be conducted, either directly or indirectly, through MG&H and Mohegan Resorts. Mohegan Resorts currently holds a 100% membership interest in Mohegan Resorts Mass, LLC, formed to evaluate potential gaming opportunities in the Commonwealth of Massachusetts. As of March 31, 2009, Mohegan Resorts also holdsheld a 100% membership interest in Mohegan Resorts Kansas, LLC, formed in connection with an effort, ended in

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

interest in Mohegan Resorts Kansas, LLC (“MRK”), formed in connection with an effort, ended in September 2008, to secure a gaming license for the development of a gaming facility in the State of Kansas. It is anticipated that certain of the Authority’s and the Tribe’s future diversification efforts will be conducted, directly or indirectly, through MG&H and Mohegan Resorts.MRK was dissolved on May 5, 2009.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments) considered necessary for a fair statement of the results for the interim period, have been included. Operating results for the three months and six months ended DecemberMarch 31, 20082009 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2009.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Authority’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008. In addition, certain amounts in the 2008 condensed consolidated financial statements have been reclassified to conform to the 2009 presentation.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Authority and its majority and wholly ownedwholly-owned subsidiaries and entities. In accordance with the Financial Accounting Standard Board (the “FASB”) Interpretation No. 46(R), “Consolidation of Variable Interest Entities (revised December 2003)—an interpretation of ARB No. 51” (“FIN 46”), the accounts of Salishan-Mohegan are consolidated into the accounts of Mohegan Ventures-NW, and the accounts of MG&H, Mohegan Resorts and its subsidiaries are consolidated into the accounts of MTGA Gaming, as Mohegan Ventures-NW and MTGA Gaming are deemed to be the primary beneficiaries. In consolidation, all intercompany balances and transactions are eliminated.

Receivables

Accounts receivable consists primarily of casino receivables, which representrepresents credit extended to approved casino customers, and hotel and other non-gaming receivables. The Authority maintains an allowance for doubtful accounts, which is based on management’s estimate of the amount expected to be uncollectible considering historical experience, the information management obtains regarding the creditworthiness of the customer and all other available information. Future business or economic trends could affect the collectibility of these receivables.

Receivables from affiliates, which are recorded in other assets, net, in the accompanying condensed consolidated balance sheets, consist primarily of reimbursable costs and expenses incurredadvanced by WTG on behalf of the Menominee Tribe for the Menominee Project and Salishan-Mohegan on behalf of the Cowlitz Tribe for the Cowlitz Project andProject. The WTG receivables are payable upon the receipt of necessary financing for the Menominee Project. development of the proposed casino. As of September 30, 2008, the Authority had fully reserved the WTG receivables, and as of March 31, 2009, the WTG receivables remain fully reserved.

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

The Salishan-Mohegan receivables are payable upon: (1) the receipt of necessary financing for the development of the proposed casino, and (2) the related property being taken into trust by the United States Department of the Interior. DueIn May 2008, the Bureau of Indian Affairs (“BIA”) published a Final Environmental Impact Statement (“EIS”) for the Cowlitz Project site. In February 2009, the United States Supreme Court issued a decision in a case involving the State of Rhode Island and the Narragansett Indian Tribe, which held that the Secretary of the Interior may exercise his authority to acquire trust title to land for an Indian tribe under the Indian Reorganization Act only if the tribe was “under federal jurisdiction” when the Indian Reorganization Act was enacted on June 18, 1934 (Carcieri v. Salazar, 555 U.S.(2009)) (the “Carcieri decision”). Since the trust land application for the Cowlitz Project requires action by the Secretary of the Interior under the Indian Reorganization Act, theCarcieri decision may delay action on that application until the BIA and the United States Department of the Interior determine whether the Cowlitz Tribe was under federal jurisdiction at that time, and an adverse decision may lead to a rejection of the trust land application. The Cowlitz Tribe did not receive federal recognition until 2000, so the tribe must establish that it was under federal jurisdiction in 1934 by separate means. In April 2009, the United States House Resources Committee held a hearing on the impact of theCarcieri decision, and along with Senate Indian Affairs Committee, will reportedly consider new congressional legislation to authorize the Secretary of the Interior to take land into trust for any federally recognized Indian tribe. The Authority believes that the Cowlitz Tribe, as a federally-recognized but landless tribe, will ultimately be able to establish its reservation and that casino gaming will be permitted on such lands; however, we can provide no assurance in this regard.

In light of the aforementioned and due to the inherent uncertainty in the

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

development of the Cowlitz Project, the Authority maintains a reserve for doubtful collection of the Salishan- MoheganSalishan-Mohegan receivables, which is based on management’s estimate of the probability that the receivables will be collected. While certain events described above, including the publication of the Final EIS for the Cowlitz Project site, are generally positive steps in furtherance of the project, other events, including theCarcieri decision, may ultimately delay or prevent the completion of the project. However, considered collectively, these events have not materially changed the Authority’s current interest in or assessment of the Cowlitz Project, and the Authority continues to maintain a reserve for doubtful collection of the Salishan-Mohegan receivables. Future complications in the receipt of financing, the relevant land being taken into trust or other matters affecting the Cowlitz Project could affect the collectibility of the receivables.

Base Jackpots

Base jackpots represent the fixed minimum amount of slot machine payouts for a specific combination. The WTG receivablesAuthority charges base jackpots to revenues when established. These amounts are payable uponrecorded in other current liabilities in the receipt of necessary financing for the development of the proposed casino. As of September 30, 2008, the Authority had fully reserved the WTG receivables, and as of December 31, 2008, the WTG receivables remain fully reserved.accompanying condensed consolidated balance sheets.

New Accounting Pronouncements

OnIn March 2008, the FASB issued Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”)—an amendment to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 161 requires enhanced disclosures for derivative instruments and hedging activities, including disclosures regarding how: (i) an entity uses derivative instruments; (ii) derivative instruments and related hedged items are accounted for under SFAS 133; and (iii) derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The Authority adopted the provisions of SFAS 161 effective January 1, 2009. Since SFAS 161 requires only additional disclosures concerning derivatives and hedging activities, the adoption of SFAS 161 did not affect the presentation of the Authority’s financial position, results of operations or cash flows. See Note 3 for the Authority’s disclosures regarding derivative instruments and hedging activities.

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States of America. SFAS 162 became effective in November 2008 following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The adoption of SFAS 162 did not have a material impact on the Authority’s financial position, results of operations or cash flows.

In October 1, 2008, the Authority adopted the provisions of the FASB Statement of Financial Accounting Standards (“SFAS”)SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) for financial assets and liabilities. The Authority did not adopt the provisions of SFAS No. 157 that relate to non-financial assets pursuant to FASB Staff Position (“FSP”) SFAS No. 157-2, “Effective Date of FASB Statement No. 157.” The major categories of assets that are measured at fair value for which the Authority has not applied the provisions of SFAS No. 157 include the measurement of fair value in the first step of a goodwill impairment test under SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 157 clarifies how companies are required to use a fair value measure for recognition and disclosure by establishing a common definition of fair value, a framework for measuring fair value, and expanding disclosures about fair value measurements. The adoption of SFAS No. 157 for financial assets and liabilities did not have a material impact on the Authority’s results of operations or financial position.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”) and SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 141(R) requires the acquiring entity in a business combination to record all assets acquired and liabilities assumed at their respective acquisition-date fair values and changes in other practices under SFAS 141. SFAS 141(R) also requires additional disclosure of information surrounding a business combination, such that users of the entity’s financial statements can fully understand the nature and financial impact of the business combination. SFAS 160 requires entities to report non-controlling (minority) interests in subsidiaries as equity in the consolidated financial statements. The Authority is required to adopt SFAS 141(R) and SFAS 160 simultaneously in its fiscal year beginning October 1, 2009. The provisions of SFAS 141(R) will only impact the Authority if it is party to a business combination after the pronouncement has been adopted. The Authority is currently evaluating the potential impact, if any, that SFAS 160 may have on its financial position, results of operations and cash flows.

In March 2008,April 2009, the FASB issued three final FSPs: FSP SFAS No. 161,157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP SFAS 157-4”); FSP SFAS No. 115-2 and No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS 115-2 and 124-2”); and FSP SFAS No. 107-1 and Accounting Principles Board (“APB”) 28-1, “Interim Disclosures About Fair Value of Financial Instruments” (“FSP SFAS 107-1 and APB 28-1”). FSP SFAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP SFAS 157-4 re-emphasizes that regardless of market conditions the fair value measurement is an exit price concept as defined under SFAS 157. FSP SFAS 157-4 clarifies and includes additional factors to consider in determining whether there has been a significant decrease in market activity for an asset or liability and provides additional clarification on estimating fair value when the market activity for an asset or liability has significantly declined. The scope of FSP SFAS 157-4 does not include assets and liabilities measured under level 1 inputs. FSP SFAS 115-2 and 124-2 provides a new other-than-temporary impairment model for debt securities only, which shifts the focus from an entity’s intent to hold until recovery to its intent to sell. FSP SFAS 107-1, which amends SFAS No. 107, “Disclosures about DerivativeFair Value of Financial Instruments, and Hedging Activities” (“SFAS 161”)—an amendment of SFAS” requires publicly-traded companies, as defined in APB Opinion No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”). SFAS 161 requires enhanced disclosures for derivative instruments and hedging activities, including disclosures regarding how: (i) an entity uses derivative instruments; (ii) derivative instruments and related hedged items are accounted for under SFAS 133; and (iii) derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Authority does not believe the adoption of this standard will have a material impact on its financial position, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles28, “Interim Financial Reporting,” to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

provide disclosures on the fair value of financial instruments in interim financial statements. All three FSPs are effective for interim and annual periods ending after June 15, 2009, with Generally Accepted Accounting Principles.”early adoption permitted for periods ending after March 15, 2009. The Authority is currently evaluatingdoes not believe the potentialadoption of these FSPs will have a material impact if any, that SFAS 162 may have on its financial position, results of operations andor cash flows.

NOTE 3—FINANCING FACILITIES:

Financing facilities consist of the following (in thousands):

Bank Credit Facility

OnIn December 10, 2008, the Authority entered intoamended its bank credit facility pursuant to a Third Amended and Restated Loan Agreement (the “Bank Credit Facility”) providing. The Bank Credit Facility provides for up to $850.0 million of borrowing capacity from a syndicate of 23 financial institutions and commercial banks, with Bank of America, N.A., serving as Administrative Agent. The Bank Credit Facility includes term loans in the amount of $150.0 million, which amortize at a rate of $750,000 per quarter beginning December 31, 2008 and continuecontinuing through March 31, 2010. If the term loans are not fully repaid prior to June 30, 2010, the amortization rate under the Bank Credit Facility increases to $30.0 million per quarter beginning June 30, 2010, with an automatic and permanent reduction of the revolving loan,loans, subsequent to the amortization of the term loans. The maturity date of the Bank Credit Facility is March 9, 2012, upon which all remaining balances outstanding on the term loans and revolving loans are payable. Proceeds from the Bank Credit Facility may be used to repay the 6 ³/8% $330.0 million Senior Subordinated Notes at maturity on July 15, 2009, and it is the Authority’s intent to utilize the Bank Credit Facility for this purpose.

As of DecemberMarch 31, 2008,2009, the amount under lettersLetters of creditCredit issued pursuant to the Bank Credit Facility totaled $7.2$6.9 million, of which no amount was drawn (refer to “Letters of Credit” below). Inclusive of term loans and letters of credit, which reduce borrowing availability under the Bank Credit Facility, the Authority had approximately $462.8$499.1 million of borrowing capacity under the Bank Credit Facility as of DecemberMarch 31, 2008,2009, without taking into account covenants under the Bank Credit Facility and the Authority’s Line of Credit and note indentures. Considering restrictive financial covenants under the Bank Credit Facility and note indentures, the amount of additional borrowings the Authority could incur under the Bank Credit Facility in conjunction with its current permitted borrowings (which includes the ability to repay the 6 ³/8% $330.0 million Senior Subordinated Notes at maturity on July 15, 2009 with proceeds from the Bank Credit Facility) approximated $49.4$145.3 million as of DecemberMarch 31, 2008.2009.

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

At the Authority’s option, each advance of loan proceeds accrues interest on the basis of a Base Rate or on the basis of a one-month, two-month, three-month, six-month or twelve-month Eurodollar Rate, plus in either case, the Applicable Rate based on either the applicable pricing period as set forth in the Bank Credit Facility or the Authority’s total leverage ratio, depending on whether any term loans remain outstanding at the time each loan is made (as each term is defined under the Bank Credit Facility). The Authority also pays commitment fees for the unused portion of the revolving loans on a quarterly basis equal to the product obtained by multiplying the Applicable Rate for commitment fees by the average daily unused commitment for that calendar quarter. The Applicable Rate for Base Rate loans is between 2.25% and 3.25% if any term loans remain outstanding, and between 0.75% and 2.25% after the term loans are fully repaid. The Applicable Rate for Eurodollar Rate loans is between 3.50% and 4.50% if any term loans remain outstanding, and between 2.00% and 3.50% after the term loans are fully repaid. The Applicable Rate for commitment fees is 0.50% if any term loans remain outstanding, and between 0.20% and 0.50% after the term loans are fully repaid. The Base Rate is the higher of Bank of America’s announced Prime Rate, the LIBOR Rate for one-month contracts plus 1.25% or the Federal Funds Rate plus 0.50%. Interest on Base Rate loans is payable quarterly in arrears. Interest on Eurodollar Rate loans is payable at the end of each applicable interest period or quarterly in arrears, if earlier. As of DecemberMarch 31, 2008,2009, the Authority had $379.3$5.0 million Base Rate loans and $337.5 million Eurodollar Rate loans and nooutstanding. The Base Rate loans outstanding.outstanding at March 31, 2009 were based on Bank of America’s Prime Rate of 3.25% plus an Applicable Rate of 2.25%. The Eurodollar Rate loans outstanding at DecemberMarch 31, 20082009 were comprised of: (1) $149.3$148.5 million in term loans based on a one-month Eurodollar Rate of 0.46%0.52% plus an Applicable Rate of 3.50%; and (2) $216.0$189.0 million in revolving loans based on a one-month Eurodollar Rate of 1.83% plus an Applicable Rate of 3.50%; and (3) $14.0 million in revolving loans based on a one-month Eurodollar Rate of 1.20%0.56% plus an Applicable Rate of 3.50%. The Applicable Rate for commitment fees was 0.50% as of DecemberMarch 31, 2008.2009. Accrued interest, including commitment fees, on the Bank Credit Facility was $803,000$513,000 and $89,000 as of DecemberMarch 31, 20082009 and September 30, 2008, respectively.

The Bank Credit Facility is collateralized by a lien on substantially all of the Authority’s assets, including the assets that comprise Pocono Downs and a leasehold mortgage on the land previously taken into trust by the federal government and improvements which comprise Mohegan Sun. The Authority also will be required to pledge additional assets as collateral for the Bank Credit Facility as it or its guarantor subsidiaries acquire them. The Authority’s obligations under the Bank Credit Facility are fully and unconditionally guaranteed, on a joint and several basis, by MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming. The Bank Credit Facility subjects the Authority to a number of restrictive covenants, including financial covenants. These financial covenants relate to, among other things, the Authority’s permitted total debt and senior debt leverage ratios, minimum fixed charge coverage ratio and maximum capital expenditures.

The Bank Credit Facility includes non-financial covenants by the Authority and the Tribe of the type customarily found in loan agreements for similar transactions including requirements that:

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

As a result of the declines in business volumes and the uncertainties in the current financial markets, the Authority has undertaken a series of steps to reduce expenditures, including the suspension of construction on

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

several elements of the Earth Expansion and Property Infrastructure components of Project Horizon, in an effort to ensure continued compliance with its financial covenants. The Authority also has implemented a company-wide cost containment program that became effective on February 1, 2009. This programwhich includes, among other things, employee salary rollbacks, suspension of all annual and merit-based compensation increases, reduction in work hours, suspension of employer-matching 401(k) contributions and funding of other contributions to the Mohegan Retirement and 401(k) Plan. In addition, the Authority implemented a number of other cost containment initiatives to reduce operating expenses, including reductions in advertising expenditures, certain marketing programs, hours of operation in certain food and beverage and retail outlets and reductions in most other operating cost categories.

The Authority continues to monitor revenues and expenditures to ensure continued compliance with applicable covenants and may need to implement additional cost containment measures based upon recentfuture operating results. If the Authority is unable to sufficiently offset declines in its revenues or if it is not able to execute the initiatives outlined above, it may not be able to satisfy its financial covenants under the Bank Credit Facility. In such event, the Authority would need to obtain waivers or amendments under its Bank Credit Facility; however, no assurance can be made that the Authority would be able to obtain such waivers or amendments. If the Authority is unable to obtain such waivers or amendments, it would be in default under its Bank Credit Facility, which may result in cross-defaults under its senior notes and senior subordinated notes. If such defaults or cross-defaults were to occur, it would allow the Authority’s lenders to exercise their rights and remedies as defined under their respective agreements, including thetheir right to accelerate the outstanding indebtedness. If such acceleration were to occur, the Authority cannot provide any assurance that it would be able to obtain the financing necessary to repay such accelerated indebtedness.

As of DecemberMarch 31, 2008,2009, the Authority and the Tribe were in compliance with all of their respective covenant requirements under the Bank Credit Facility.

2005 6 ¹/8% Senior Notes

In February 2005, the Authority issued $250.0 million Senior Notes with fixed interest payable at a rate of 6.125% per annum (the “2005 Senior Notes”). The net proceeds from this financing were used to repay amounts outstanding under the then existing bank credit facility and to pay fees and expenses associated with the issuance. The 2005 Senior Notes mature on February 15, 2013. The first call date for the 2005 Senior Notes iswas February 15, 2009. Interest on the 2005 Senior Notes is payable semi-annually on February 15^th and August 15^th. The 2005 Senior Notes are uncollateralized general obligations of the Authority, which are effectively subordinated to all of the existing and future senior secured indebtedness of the Authority, including the Bank Credit Facility. The 2005 Senior Notes rank equally in right of payment with the Authority’s Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing and rank senior to the Authority’s Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing, the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes and the 2005 Senior Subordinated Notes. The 2005 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming are guarantors of the 2005 Senior Notes.Gaming. Refer to Note 8 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the 2005 Senior Notes was $5.7 million and $1.9 million, respectively.million.

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

2001 8 ³/8% Senior Subordinated Notes

In July 2001, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.375% per annum (the “2001 Senior Subordinated Notes”). The proceeds from this financing were used to pay transaction costs, pay down $90.0 million on the then existing bank credit facility and fund costs related to

MOHEGAN TRIBAL GAMING AUTHORITY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

Project Sunburst. Interest on the 2001 Senior Subordinated Notes is payable semi-annually on January 1^st and July 1^st. The 2001 Senior Subordinated Notes mature on July 1, 2011. The first call date for the 2001 Senior Subordinated Notes was July 1, 2006. The 2001 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 2005 Senior Notes, and in a liquidation, bankruptcy or similar proceeding, the Authority’s Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2001 Senior Subordinated Notes rank equally with the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the Authority’s Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. MBC is a guarantor of theThe 2001 Senior Subordinated Notes.Notes are fully and unconditionally guaranteed, on a joint and several basis, by MBC. Refer to Note 8 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities.

In August 2004, the Authority completed a cash tender offer and consent solicitation to repurchase any or all of its outstanding 2001 Senior Subordinated Notes. As part of the tender offer, the Authority solicited and received requisite consents to certain proposed amendments to the indentures governing the 2001 Senior Subordinated Notes, which eliminated substantially all of the restrictive covenants thereunder. The aggregate principal amount of the 2001 Senior Subordinated Notes tendered was $133.7 million.

In March 2009, the Authority repurchased and extinguished an additional principal amount of $14.3 million of its outstanding 2001 Senior Subordinated Notes. The aggregate amount paid for this purchase was approximately $6.1 million, which represented a purchase price of approximately $5.8 million and accrued interest of $273,000. The Authority realized a gain on early extinguishment of debt in connection with this transaction totaling approximately $8.5 million, which is recorded in the accompanying condensed consolidated statements of income for the three months and six months ended March 31, 2009. An aggregate principal amount of $16.3approximately $2.0 million of the 2001 Senior Subordinated Notes remainremains outstanding as of DecemberMarch 31, 2008.2009. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the 2001 Senior Subordinated Notes was $684,000$42,000 and $342,000, respectively.

The Authority or its affiliates may, from time to time, seek to purchase or otherwise retire the Authority’s remaining 2001 Senior Subordinated Notes or other indebtedness for cash in open market purchases, privately negotiated transactions or otherwise, to reduce the amount of the Authority’s outstanding indebtedness. Any such transactions will depend on prevailing market conditions, the Authority’s liquidity, contractual restrictions and other factors.

2002 8% Senior Subordinated Notes

In February 2002, the Authority issued $250.0 million Senior Subordinated Notes with fixed interest payable at a rate of 8.000% per annum (the “2002 Senior Subordinated Notes”). The proceeds from this financing were used to pay transaction costs and pay down $243.0 million on the then existing bank credit facility. Interest on the 2002 Senior Subordinated Notes is payable semi-annually on April 1^st and October 1^st. The 2002 Senior Subordinated Notes mature on April 1, 2012. The first call date for the 2002 Senior Subordinated Notes was April 1, 2007. The 2002 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 2005 Senior Notes, and in a liquidation, bankruptcy or similar proceeding, the Authority’s Senior Relinquishment Payment obligations under

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(unaudited)

the Relinquishment Agreement that are then due and owing. The 2002 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the Authority’s Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2002 Senior Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming are guarantors of the 2002 Senior Subordinated Notes.Gaming. Refer to Note 8 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the 2002 Senior Subordinated Notes was $5.0 million and $10.0 million, respectively.million.

2003 6 ³/8% Senior Subordinated Notes

In July 2003, the Authority issued $330.0 million Senior Subordinated Notes with fixed interest payable at a rate of 6.375% per annum (the “2003 Senior Subordinated Notes”). The proceeds from this financing were used to repurchase substantially all of the outstanding $300.0 million 8.75% Senior Subordinated Notes issued in March 1999 and to pay fees and expenses associated with the issuance. Interest on the 2003 Senior Subordinated Notes is payable semi-annually on January 15^th and July 15^th. The 2003 Senior Subordinated Notes mature on July 15, 2009. The Authority has the option of repaying the 2003 Senior Subordinated Notes at maturity with

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(unaudited)

proceeds from the Bank Credit Facility, and it is the Authority’s intent to utilize the Bank Credit Facility for this purpose. In accordance with SFAS No. 6, “Classification of Short-Term Obligations Expected to Be Refinanced” (“SFAS No. 6”), the Authority has classified the 2003 Senior Subordinated Notes as long-term debt for financial reporting purposes based on the Authority’s intent and ability to refinance this debt on a long-term basis through the use of proceeds from the Bank Credit Facility. The 2003 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 2005 Senior Notes, and in a liquidation, bankruptcy or similar proceeding, the Authority’s Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2003 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2002 Junior Subordinated Notes, the 2004 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the Authority’s Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2003 Senior Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming are guarantors of the 2003 Senior Subordinated Notes.Gaming. Refer to Note 8 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the 2003 Senior Subordinated Notes was $9.6 million and $4.4 million, respectively.million.

2004 7 ¹/8% Senior Subordinated Notes

In August 2004, the Authority issued $225.0 million Senior Subordinated Notes with fixed interest payable at a rate of 7.125% per annum (the “2004 Senior Subordinated Notes”). The net proceeds from this financing, together with $130.0 million of availability under the then existing bank credit facility, were used to repurchase substantially all of the outstanding 2001 Senior Subordinated Notes and substantially all of the outstanding 1999 Senior Notes tendered in the tender offers described above and to pay fees and expenses associated with the issuance. The 2004 Senior Subordinated Notes mature on August 15, 2014. The first call date for the 2004 Senior Subordinated Notes is August 15, 2009. Interest on the 2004 Senior Subordinated Notes is payable semi-annually on February 15^th and August 15^th. The 2004 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 2005 Senior Notes, and in a liquidation, bankruptcy or similar proceeding, the Authority’s Senior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2004 Senior Subordinated Notes rank equally with

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the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2005 Senior Subordinated Notes and the Authority’s Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2004 Senior Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming are guarantors of the 2004 Senior Subordinated Notes.Gaming. Refer to Note 8 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the 2004 Senior Subordinated Notes was $6.0 million and $2.0 million, respectively.million.

2005 6 ⁷/8% Senior Subordinated Notes

In February 2005, the Authority issued $150.0 million Senior Subordinated Notes with fixed interest payable at a rate of 6.875% per annum (the “2005 Senior Subordinated Notes”). The net proceeds from this financing were used to repay amounts outstanding under the then existing bank credit facility and to pay fees and expenses associated with the issuance. The 2005 Senior Subordinated Notes mature on February 15, 2015. The first call date for the 2005 Senior Subordinated Notes is February 15, 2010. Interest on the 2005 Senior Subordinated Notes is payable semi-annually on February 15^th and August 15^th. The 2005 Senior Subordinated Notes are uncollateralized general obligations of the Authority and are subordinated to the Bank Credit Facility, the 2005 Senior Notes, and in a liquidation, bankruptcy or similar proceeding, the Authority’s Senior

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(unaudited)

Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2005 Senior Subordinated Notes rank equally with the 2001 Senior Subordinated Notes, the 2002 Senior Subordinated Notes, the 2003 Senior Subordinated Notes, the 2004 Senior Subordinated Notes and the Authority’s Junior Relinquishment Payment obligations under the Relinquishment Agreement that are then due and owing. The 2005 Senior Subordinated Notes are fully and unconditionally guaranteed, on a joint and several basis, by MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming are guarantors of the 2005 Senior Subordinated Notes.Gaming. Refer to Note 8 for condensed consolidating financial information of the Authority and its guarantor subsidiaries and non-guarantor entities. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the 2005 Senior Subordinated Notes was $3.9 million and $1.3 million, respectively.million.

The senior and senior subordinated note indentures contain certain financial and non-financial covenants with which the Authority and the Tribe must comply. The financial covenants include, among other things, limitations on restricted payments and the incurrence of indebtedness, while the non-financial covenants include, among other things, reporting obligations, compliance with laws and regulations and the Authority’s continued existence.existence of the Authority. As of DecemberMarch 31, 2008,2009, both the Authority and the Tribe were in compliance with all of their respective covenant requirements inunder the senior and senior subordinated note indentures.

WNBA Promissory Note

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

In consideration for this acquisition, MBC paid $2.0 million, with funds advanced from the Authority, and issued a promissory note to the WNBA (the “WNBA Note”) for $8.0 million. The WNBA Note accrues interest at an annual rate equal to a three-month Eurodollar Rate plus 1.50%. The Authority guaranteed the obligations of MBC under the WNBA Note. Pursuant to the WNBA Note, principal payments of $1.0 million, subject to adjustment for certain revenue thresholds and interest payments are required to be paid to the WNBA on each

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(unaudited)

anniversary date of the WNBA Note. The WNBA Note is scheduled to mature in January 2011, but will mature no later than January 2013. As of DecemberMarch 31, 20082009 and September 30, 2008, the principal balance outstanding on the WNBA Note was $2.0 million and $3.0 million.million, respectively. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the WNBA Note was $131,000$9,000 and $94,000, respectively.

Line of Credit

TheAs of March 31, 2009, the Authority hashad a $25.0 million revolving loan agreement with Bank of America, N.A. (the “Line of Credit”). Each advance accrues interest on the basis of a one-month Eurodollar Rate or Prime Rate, plus the Applicable Margin determined on the basis of the Authority’s Leverage Ratio, as each term is defined under the Line of Credit. Borrowings under the Line of Credit are uncollateralized obligations of the Authority. The Authority has commenced discussions with Bank of America to extend the maturity date of the Line of Credit, which matures on March 31, 2009. The Line of Credit subjects the Authority to certain covenants, including a covenant to maintain at least $25.0 millionthe Line of Credit commitment amount available for borrowing under the Bank Credit Facility. As of DecemberMarch 31, 2008,2009, the Authority was in compliance with all covenant requirements under the Line of Credit and had $25.0$10.6 million of borrowing capacity thereunder. As of DecemberMarch 31, 20082009 and September 30, 2008, there was no accrued interest on the Line of Credit.

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The Line of Credit was amended in May 2009 to extend the maturity date from May 14, 2009 to May 14, 2010 and reduce the commitment from $25.0 million to $18.0 million.

Letters of Credit

As of DecemberMarch 31, 2008,2009, the Authority maintained five uncollateralized letters of credit, three of which are maintained to satisfy potential workers’ compensation liabilities, pari-mutuel wagering tax liabilities of the Pocono Downs Entities and potential contractor and subcontractor liabilities relating to Project Horizon, and two of which are related to road work at the Pocono Downs facilities. The letters of credit expire on various dates from AprilMay 2009 through JanuaryApril 2010, subject to renewals. As of DecemberMarch 31, 2008,2009, no amounts were drawn on the letters of credit.

Salishan-Mohegan Bank Credit Facility

In October 2006, Salishan-Mohegan entered into a $25.0 million revolving loan agreement with Bank of America, N.A. (the “Salishan Credit Facility”), which matures on September 30, 2009. The revolving loan has no mandatory amortization provisions and is payable in full at maturity. At the option of Salishan-Mohegan, each advance of loan proceeds accrues interest on the basis of a Base Rate or on the basis of a one-month, two-month, three-month or six-month Eurodollar Rate, plus a spread of 1.25% for Base Rate loans and an Applicable Rate, as defined under the Salishan Credit Facility, of 2.25% for Eurodollar Rate loans. The Base Rate is the higher of Bank of America’s announced Prime Rate or the Federal Funds Rate plus 0.50%. The Salishan Credit Facility is collateralized by a lien on substantially all of the existing and future assets of Salishan-Mohegan. The obligations of Salishan-Mohegan under the Salishan Credit Facility also are guaranteed by the Tribe. The Salishan Credit Facility subjects Salishan-Mohegan to a number of restrictive covenants, including financial and non-financial covenants customarily found in loan agreements for similar transactions.

As of DecemberMarch 31, 2008,2009, Salishan-Mohegan had $22.3$22.5 million in Eurodollar Rate loans and no Base Rate loans outstanding. The Eurodollar Rate loans outstanding at DecemberMarch 31, 20082009 were comprised of: (1) $19.3$19.5 million in loans based on a one-month Eurodollar Rate of 0.47%0.52% plus an Applicable Rate of 2.25%, and (2) $3.0 million in loans based on a one-month Eurodollar Rate of 0.96%0.55% plus an Applicable Rate of 2.25%. The Applicable Rate for commitment fees was 0.50% as of DecemberMarch 31, 2008.2009. As of DecemberMarch 31, 2008,2009, Salishan-Mohegan had $2.7$2.5 million of borrowing capacity under the Salishan Credit Facility. As of DecemberMarch 31, 20082009 and September 30, 2008, accrued interest on the Salishan Credit Facility was $8,000$10,000 and $11,000, respectively.

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(unaudited)

Derivative Instruments

The Authority is considered an “end user” of derivative instruments and engages in derivative transactions, from time to time, for risk management purposes only. There were no derivative instruments held by the Authority as of DecemberMarch 31, 20082009 and September 30, 2008.

Interest rate swap agreements hedging on currently outstanding debt instruments of the Authority, which qualified for hedge accounting in accordance with SFAS 133 and were designated as fair value hedges, were sold in prior fiscal years for a net aggregate gain of $1.7 million. The $1.7 million net aggregateThis gain was deferred and added to the carrying value of the respective notes being hedged and is being amortized and recorded to interest expense over the remaining term of the respective notes. For each of the three months ended DecemberMarch 31, 20082009 and 2007,2008, the Authority recorded amortization of $114,000, and for each of the six months ended March 31, 2009 and 2008, the Authority recorded amortization of $228,000, to interest expense related to the sale of these derivative instruments. The Authority expects to record $11,000$234,000 to offset interest expense over the next 12 months.

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(unaudited)

NOTE 4—RELATED PARTYRELATED-PARTY TRANSACTIONS:

The Tribe provides governmental and certain administrative services to the Authority in conjunction with the operation of Mohegan Sun. During the three months ended DecemberMarch 31, 20082009 and 2007,2008, the Authority incurred $7.0$2.5 million and $6.0$5.9 million, respectively, and for the six months ended March 31, 2009 and 2008, the Authority incurred $9.6 million and $11.9 million, respectively, of expenses for such services.

The Authority purchases the majority of its utilities, including electricity, gas, water and waste water services, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. The Authority incurred $6.3 million for such utilities during each ofDuring the three months ended DecemberMarch 31, 2009 and 2008, the Authority incurred $4.7 million and 2007.$6.9 million, respectively, and for the six months ended March 31, 2009 and 2008, the Authority incurred $11.0 million and $13.2 million, respectively, for such utilities.

The Authority has entered intois a tenant under a land lease agreement with the Tribe for access to Mohegan Sun. The Authority expensed $12,000 relating to this land lease agreement forFor each of the three months ended DecemberMarch 31, 2009 and 2008, the Authority expensed $12,000, and 2007.for each of the six months ended March 31, 2009 and 2008, the Authority expensed $24,000, relating to this land lease agreement.

In July 2008, the Authority entered into a new land lease agreement with the Tribe, replacing the then existing land lease agreement, relating tofor property located adjacent to the Tribe’s reservation that is used byfor Mohegan Sun’s employees forSun employee parking. The new agreement requires the Authority to make monthly payments equaling $75,000 until maturity on June 30, 2018. The Authority has classified this lease as a capital lease for financial reporting purposes due to the existence of a bargain purchase option at the expiration of the lease. The Authority expensed $53,000 and $106,000 relating to the prior land lease agreement during the three months and six months ended DecemberMarch 31, 2007.2008, respectively.

In September 1995, the Tribe adopted the Mohegan Tribal Employment Rights Ordinance, as amended from time to time (the “TERO”), which sets forth hiring and contracting preference requirements for employers and entities conducting business on Tribal lands on or adjacent to the Mohegan Reservation. Pursuant to the TERO, the Authority and other covered employers are required to give hiring, promotion, training, retention and other employment-related preferences to Native Americans who meet the minimum qualifications for the applicable employment position. However, this preference requirement does not apply to key employees as such persons are defined inunder the TERO.

Similarly, any entity awarding a contract or subcontract valued up to $200,000 to be performed on Tribal lands must give preference, first, to certified Mohegan entities submitting commercially responsible bids, and

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(unaudited)

second, to other certified Native American entities. This contracting preference is conditioned upon the bid by the preferred certified entity being within 5% of the lowest bid by a non-certified entity. Contracts in excess of $200,000 are awarded to the lowest commercially responsible bidder, on a competitive basis, with preference to certified Mohegan entities and then other certified Native American entities in the event of a matching bid. The TERO establishes procedures and requirements for certifying Mohegan entities and other Native American entities. Certification is based largely on the level of ownership and control exercised by the members of the Tribe or other Native American tribes, as the case may be, over the entity bidding on a contract.

NOTE 5—COMMITMENTS AND CONTINGENCIES:

Slot Win Contribution and e-Bonus Escrow

In May 1994, the Tribe and the State of Connecticut entered into a Memorandum of Understanding (“MOU”), which sets forth certain matters regarding implementation of the Mohegan Compact. The MOU stipulates that a portion of revenues earned on slot machines must be paid to the State of Connecticut (“Slot Win Contribution”). Slot Win Contribution payments are not required if the State of Connecticut legalizes any other gaming operations with slot machines or other commercial casino table games within the State of Connecticut, except those

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(unaudited)

consented to by the Tribe and the Mashantucket Pequot Tribe (the “MPT”). For each 12-month period commencing July 1, 1995, Slot Win Contribution payments shall be the lesser of: (a) 30% of gross revenues from slot machines, or (b) the greater of (i) 25% of gross revenues from slot machines or (ii) $80.0 million.

In 2006, the State of Connecticut asserted that Slot Win Contribution payments are required in connection with free promotional slot plays, such as the Authority’s “e-Bonus” and the MPT’s “Free Play” programs. In December 2006, the State of Connecticut filed suit against the MPT seeking a declaratory judgment that patrons’ “Free Play” at Foxwoods Resort Casino constitutes as a “wager” for purposes of calculating Slot Win Contribution payments.slot win contribution payments from MPT. In October 2007, the Tribe entered into an agreement with the State of Connecticut to escrow, on a monthly basis, an amount equal to 25% of the value of all “e-Bonus”e-Bonus plays by patrons at Mohegan Sun. As a result, during the three months ended DecemberMarch 31, 20082009 and 2007,2008, the Authority reflected $1.1 million and $2.1 million, respectively, and for the six months ended March 31, 2009 and 2008, the Authority reflected $2.4 million and $2.3 million, respectively, of expenses associated with the “e-Bonus”e-Bonus escrow agreement, which are included in the Authority’s Slot Win Contribution, totaling $1.3 million and $186,000, respectively.Contribution. Pursuant to the escrow agreement, escrowed funds or a portion thereof associated with “prizes” paid for “e-Bonus”e-Bonus plays, plus interest thereon, will either be forwarded to the State of Connecticut or returned to the Authority, pending the outcome of the dispute between the Tribe and the State of Connecticut and its lawsuit against the MPT. As of DecemberMarch 31, 20082009 and September 30, 2008, the e-Bonus escrow with the State of Connecticut totaled $8.0$8.8 million and $6.2 million, respectively.

The Authority reflected expenses associated with the combined Slot Win Contribution and e-Bonus escrow totaling $50.1$48.8 million and $52.3$55.7 million for the three months ended DecemberMarch 31, 2009 and 2008, respectively. For the six months ended March, 31, 2009 and 2007,2008, the expenses associated with the combined Slot Win Contribution and e-Bonus totaled $98.9 million and $108.0 million, respectively. As of DecemberMarch 31, 20082009 and September 30, 2008, the combined outstanding Slot Win Contribution and e-Bonus escrow payments to the State of Connecticut totaled $16.0$17.0 million and $17.5 million, respectively.

Pennsylvania Gaming Tax

Downs Racing holds a Category One slot machine license issued by the Pennsylvania Gaming Control Board (the “PGCB”) for the operation of slot machines at Pocono Downs. This license permits Downs Racing to install and operate up to 3,000 slot machines at Pocono Downs. However, under certain circumstances, Downs

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(unaudited)

Racing may install and operate up to a total of 5,000 slot machines. After the satisfaction of certain regulatory conditions and payment of a $50.0 million one-time slot machine license fee to the PGCB in October 2006, Downs Racing opened Phase I of its gaming and entertainment facility in November 2006.

The Race Horse Development and Gaming Act of 2004 (the “Pennsylvania Gaming Act”) stipulates that holders of Category One slot machine licenses must pay a portion of gross slot revenues to the PGCB on a daily basis (“Pennsylvania Gaming Tax”), which includes local share assessments to be paid to the cities and municipalities hosting Pocono Downs and amounts to be paid to the Pennsylvania Harness Horsemen’s Association, Inc., (the “PHHA”). The Pennsylvania Gaming Tax payable to the PGCB on a daily basis is currently 55% of gross slot revenues. In additionrevenues, 2% of which is subject to the daily Pennsylvania Gaming Tax,a $10.0 million minimum annual threshold. Downs Racing must pay, on an annual basis, to the PGCB, amounts necessary to ensure that the host cities and municipalities receive an annual minimum of $10.0 million from the local share assessments. The local share assessments are equal to the greater of 2% of annual gross slot revenues or $10.0 million. The amounts to be paid to the PHHA are 12% of gross slot revenues. Downs Racing maintains a $5.0 million escrow deposit in the name of the Commonwealth of Pennsylvania for Pennsylvania Gaming Tax payments to the PGCB, which is included in other assets, net, in the accompanying condensed consolidated balance sheets.

The Authority reflected expenses associated with the Pennsylvania Gaming Tax totaling $28.7$30.7 million and $23.7$23.3 million for the three months ended DecemberMarch 31, 2009 and 2008, respectively. For the six months ended March 31, 2009 and 2007,2008, the expenses associated with the Pennsylvania Gaming tax totaled $59.3 million and $47.0 million, respectively. As of DecemberMarch 31, 20082009 and September 30, 2008, outstanding Pennsylvania Gaming Tax payments to the PGCB totaled $7.1$1.8 million and $5.2 million, respectively.

MOHEGAN TRIBAL GAMING AUTHORITY

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PGCB Regulatory Fees

In addition to the Pennsylvania Gaming Tax described above, holders of slot machine licenses also are required to reimburse the PGCB for administrative and operating expenses incurred. The assessment of this amount on Downs Racing and other slot facility operators is yet to be finalized. Based upon an estimate of Pocono Downs gross slot revenues compared to current and future licensees in the Commonwealth of Pennsylvania, Downs Racing is recording expenses associated with this reimbursement at a rate of 1.5% of gross slot revenues. This rate has been approved by the PGCB, which receives corresponding payments on a weekly basis from Downs Racing. The Authority reflected expenses associated with thisthe regulatory fee assessment totaling $808,000$881,000 and $614,000$589,000 for the three months ended DecemberMarch 31, 2009 and 2008, respectively. For the six months ended March 31, 2009 and 2007,2008, the expenses associated with the regulatory fee assessment totaled $1.7 million and $1.2 million, respectively. As of DecemberMarch 31, 2008 and2009, there were no outstanding regulatory fee payments to the PGCB. As of September 30, 2008, outstanding regulatory fee payments to the PGCB totaled $34,000 and $73,000, respectively.$73,000. Additionally, in order to fund current operations of the PGCB, two loans in the amount of $36.0 million and $22.6 million were granted to the PGCB and a $7.0 million payment was made to the PGCB by current licensees from gaming tax funds received by the Commonwealth of Pennsylvania. The loans and the $7.0 million payment were used to cover expenses incurred by the PGCB from inception to June 30, 2008, and are anticipated to be repaid in total by slot machine licensees once all approved gaming facilities are open. Each licensee’s share of these costs will be proportionally allocated based on each licensee’s gross slot revenues. In January 2007, Downs Racing made a prepayment to the PGCB of $800,000 for a portion of its incurred expenses, which is recorded in other current assets in the accompanying condensed consolidated balance sheets.

Priority Distribution

In August 2001, the Authority and the Tribe entered into an agreement (the “Priority Distribution Agreement”), which obligates the Authority to make monthly payments to the Tribe to the extent of the Authority’s net cash flow, as defined inunder the Priority Distribution Agreement. The Priority Distribution

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Agreement, which has a perpetual term, limits the maximum aggregate payments by the Authority to the Tribe in each calendar year to $14.0 million, as adjusted annually in accordance with a formula specified in the Priority Distribution Agreement to reflect the effects of inflation. However, payments pursuant to the Priority Distribution Agreement do not reduce the Authority’s obligations to make payments to reimburse the Tribe for governmental services provided by the Tribe or any payments under any other agreements with the Tribe. The monthly payments under the Priority Distribution Agreement are limited obligations of the Authority payable only to the extent of its net cash flow, as defined inunder the Priority Distribution Agreement, and are not secured by a lien or encumbrance on any assets or propertyproperties of the Authority. The Authority’s condensed consolidated financial statements reflectAuthority reflected payments associated with the Priority Distribution Agreement of $4.4$4.5 million and $4.2$4.4 million for the three months ended DecemberMarch 31, 2009 and 2008, respectively. For the six months ended March 31, 2009 and 2007,2008, payments associated with the Priority Distribution Agreement totaled $8.9 million and $8.6 million, respectively.

Agreement with the Town of Montville

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

ACLS of New England, Inc.

The Authority has a 10-year laundry service agreement with ACLS of New England, Inc., (“ACLS”). The Authority has an option to renew the agreement for one additional 10-year term after its expiration in October 2012. Under the laundry service agreement, the Authority is required to pay an agreed upon rate for laundry

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(unaudited)

services, adjusted annually for the Consumer Price Index and unusual increases in energy costs. Additionally, the Authority has made a $500,000 loan to ACLS to develop the laundry service facility. Pursuant to the terms of the loan, interest accrues based on the exercise of the renewal options or other certain circumstances. In the event that circumstances occur where interest accrues, interest will accrue at an annual rate of 5% commencing from the date of the advance.

The Authority also entered into co-investment and escrow agreements with the MPT and ACLS. Under the terms of those agreements, the Authority and the MPT may, under certain circumstances, become joint owners of the laundry facility and consequently be jointly and severally obligated to repay a term loan, which is secured by a mortgage on the laundry facility. The terms of the agreements are 10 years, and should the Authority and the MPT become obligated to repay the term loan, the maximum potential future principal payments (undiscounted) that the Authority and the MPT could be required to make are approximately $2.9$2.7 million as of DecemberMarch 31, 2009.

Pocono Downs Purchase Settlement

In August 2006, the Authority entered into an amendment to the purchase agreement for Pocono Downs with the seller, a subsidiary of Penn National Gaming, Inc. Pursuant to the amendment, in exchange for the Authority’s agreement to modify certain provisions of the purchase agreement, including the elimination of the Authority’s post-closing termination rights, the Authority agreed to receive an aggregate refund of $30.0 million of the original purchase price for the Pocono Downs Entities, payable in five annual installments of $7.0 million, $7.0 million, $6.5 million, $6.0 million and $3.5 million in November 2007, 2008, 2009, 2010 and 2011, respectively. The Authority received the $7.0 million installments due in November 2007 and 2008.

In March 2009, the parties entered into an agreement to accelerate the remaining $16.0 million outstanding refund payment due to the Authority and discount the amount of such balance to approximately $13.1 million,

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which the Authority received in March 2009. The Authority incurred a non-cash loss in connection with this transaction totaling approximately $1.6 million, which is recorded in other income (expense), net, in the accompanying condensed consolidated statements of income for the three months and six months ended March 31, 2009.

Pennsylvania Property Tax

A final settlement was reached in June 2007 between the various parties involved in a dispute with Downs Racing relating to certain property tax assessments in Wilkes-Barre, Pennsylvania. Based on the settlement, Downs Racing is required to make agreed upon payments to the Wilkes-Barre Area School District for each tax year through the year 2015 totaling $18.2 million.

Project Horizon Suspension

OnIn September 22, 2008, the Authority announced the suspension of the hotel, retail and parking garage elements of the Earth Expansion component of Project Horizon due to a slowdown in its business volumes and uncertainties in the financial markets as a result ofresulting from the ongoing national economic recession. As of DecemberMarch 31, 2008,2009, the Authority has incurred approximately $71.9$79.1 million on the suspended elements of the Earth Expansion relating to excavation and foundation work for the planned podium and hotel tower, as well as professional fees for design and architectural work. Incurred costs will remain on the Authority’s respective condensed consolidated balance sheets as long as these elements remain suspended. While theThe Authority plans to re-evaluate the feasibility of the suspended elements of Project Horizon at the end of fiscal 2009, ityear 2009. However, the Authority can provide no assurancesassurance as to if or when the suspended elements will resume. The specific factors that the Authority will consider in determining the feasibility of the suspended elements include its financial performance, cash flow projections expected to be realized from the project, estimated total project costs, ability to obtain financing, economic conditions, industry trends and competition. The following information summarizes the contingencies with respect to the suspended elements of the Earth Expansion component of Project Horizon:

Severance

The Authority may terminateterminated certain construction-related employees due to the suspension of Project Horizon. The costs associated with such post-employment severance benefits will beare expensed at the time the termination is communicated to employees. The Authority incurred $586,000$5,000 and $591,000 of expenses for such costs for the three months and six months ended DecemberMarch 31, 2008.2009, respectively.

Construction Materials

Certain construction materials purchased for Project Horizon may no longernot be usedutilized if the suspended elements aredo not resumed.resume. The costs of suchassociated with these materials will be expensed at the time such time it ismaterials are determined to no longer have a future benefit or value to the Authority. The Authority has not expensed anyno such costs forduring the three months and six months ended DecemberMarch 31, 2008.

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2009.

Construction and Other Agreements

The Authority has entered into certain construction agreements in connection with Project Horizon whichthat allow for termination of thesuch agreements without cause. In the event of termination of such agreements, the Authority iswill only be obligated to pay only for those costs incurred through the date of termination, and in some cases, certain termination-related costs. The Authority does not anticipate that such termination-related costs will be material.

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The Authority also has entered into certain other agreements in connection with Project Horizon, including service and leasing agreements. The Authority does not anticipate that termination of any of these other agreements will give rise to liabilities that will be material.

The Authority can provide no assurances that any actual costs associated with the termination of agreements resulting from the suspension of Project Horizon will approximate estimated costs or that such costs will occur when anticipated. Costs relating to the termination of agreements will be expensed at such time that the agreements are terminated and when the costs are incurred. The Authority has not incurred anyno such costs forduring the three months and six months ended DecemberMarch 31, 2008.2009.

Construction Insurance

In June 2007, the Authority obtained construction insurance coverage from various insurance carriers in connection with Project Horizon. All premiums have beenwere fully paid through October 6, 2010. As of DecemberJune 1, 2009. Effective January 31, 2008, aggregate outstanding premiums totaled $2.6 million. The2009, the Authority is currently negotiating with itscancelled the workers’ compensation, general liability and umbrella insurance carriers to reduce the coverage period in order to obtainfor Project Horizon and received a refund of premiums paid.paid totaling $2.2 million.

Litigation

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

NOTE 6—RELINQUISHMENT AGREEMENT:

In February 1998, the Authority and Trading Cove Associates (“TCA”) entered into a relinquishment agreement (the “Relinquishment Agreement” or the “Agreement”). Effective January 1, 2000 (the “Relinquishment Date”), the Relinquishment Agreement superseded a then existing management agreement with TCA. The Relinquishment Agreement provides, among other things, that the Authority will make certain payments to TCA out of, and determined as a percentage of, Revenues, as defined inunder the Relinquishment Agreement, generated by Mohegan Sun over a 15-year period commencing on the Relinquishment Date. The payments (“Senior Relinquishment Payments” and “Junior Relinquishment Payments”) have separate schedules and priorities. Senior Relinquishment Payments commenced on April 25, 2000, 25 days following the end of the first three-month period after the Relinquishment Date and continue at the end of each three-month period thereafter until January 25, 2015. Junior Relinquishment Payments commenced on July 25, 2000, 25 days following the end of the first six-month period after the Relinquishment Date and continue at the end of each six-month period thereafter until January 25, 2015. Each Senior Relinquishment Payment and Junior Relinquishment Payment is an amount equal to 2.5% of the Revenues generated by Mohegan Sun over the immediately preceding three-month or six-month payment period, as the case may be. Revenues are defined in the Relinquishment Agreement as gross gaming revenues, other than Class II gaming revenues, and all other

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revenues, as defined, including, without limitation, hotel revenues, room service revenues, food and beverage revenues, ticket revenues, fees or receipts from the convention/events center and all rental revenues or other receipts from lessees and concessionaires but not the gross receipts of such lessees, licenses and concessionaires, derived directly or indirectly from the facilities, as defined. Revenues under the Relinquishment Agreement exclude revenues generated from certain expansion areas of Mohegan Sun, such as the Casino of the Wind, as such areas do not constitute facilities as defined inunder the Relinquishment Agreement.

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In the event of any bankruptcy, liquidation or reorganization or similar proceeding relating to the Authority, the Relinquishment Agreement provides that each of the Senior and Junior Relinquishment Payments then due and owing are subordinated in right to payment of senior secured obligations, which include the Bank Credit Facility and capital lease obligations, and that the Junior Relinquishment Payments then due and owing are further subordinated to payment of all other senior obligations, including the Authority’s 2005 Senior Notes. The Relinquishment Agreement also provides that all relinquishment payments are subordinated in right of payment to the minimum priority distribution payments, which are required monthly payments made by the Authority to the Tribe, to the extent then due. The Authority, in accordance with SFAS No. 5, “Accounting for Contingencies,” has recorded a relinquishment liability of the estimated present value of its obligations under the Relinquishment Agreement.

A relinquishment liability of $549.1 million was established at September 30, 1998 based on the present value of the estimated future Mohegan Sun revenues utilizing the Authority’s risk-free investment rate. At DecemberMarch 31, 2008,2009, the carrying amount of the relinquishment liability was $382.2$363.0 million as compared to $385.4 million at September 30, 2008. The decrease in the relinquishment liability during the threesix months ended DecemberMarch 31, 20082009 is due to $8.3$32.6 million in relinquishment payments,payments. This reduction in the liability was offset by $5.1$10.2 million representing the accretion of discount to the relinquishment liability. During the six months ended March 31, 2008, the Authority paid $39.3 million in relinquishment payments. This reduction in the liability was offset by $13.5 million representing the accretion of discount to the relinquishment liability.

Relinquishment payments consisted of the following (in millions):

The accretion of discount to the relinquishment liability reflects the accretion of the discount to the present value of the relinquishment liability for the impact of the time value of money. At DecemberMarch 31, 20082009 and September 30, 2008, relinquishment payments earned but unpaid were $24.3$14.1 million and $17.4 million, respectively.

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NOTE 7—SEGMENT REPORTING:

As of DecemberMarch 31, 2008,2009, the Authority owns and operates Mohegan Sun, the Connecticut Sun WNBA franchise and the Mohegan Sun Country Club at Pautipaug in Connecticut (the “Connecticut Entities”), and the Pocono Downs Entities. All of the Authority’s revenues are derived from these operations. The Authority’s executive officers review and assess the performance and operating results and determine the proper allocation of resources to the Connecticut Entities and the Pocono Downs Entities on a separate basis. The Authority, therefore, believes that it has two separate operating segments: (i) Mohegan Sun, which includes the operations of the Connecticut Entities, and (ii) Pocono Downs, which is comprised of the operations of the Pocono Downs Entities. The two operating segments are separate reportable segments due to the differing nature of their operations. The following tables provide financial information on each segment (in thousands):

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NOTE 8—SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENT INFORMATION:

As of DecemberMarch 31, 2008,2009, substantially all of the Authority’s outstanding public debt, including its 2005 Senior Notes, 2002 Senior Subordinated Notes, 2003 Senior Subordinated Notes, 2004 Senior Subordinated Notes and 2005 Senior Subordinated Notes, is fully and unconditionally guaranteed, on a joint and several basis, by the following subsidiaries of the Authority: MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming. MBC is the only full and unconditional subsidiary guarantor, on a fulljoint and unconditionalseveral basis, of the 2001 Senior Subordinated Notes. Separate financial statements and other disclosures concerning MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG and MTGA Gaming are not presented below because the Authority believes that the summarized financial information provided below and in Note 7 are adequate for investor analysis of these subsidiaries. Condensed consolidating financial statement information for the Authority, MBC, Mohegan Ventures-NW, MCV-PA, the Pocono Downs Entities, Mohegan Golf, MVW, WTG, MTGA Gaming and the non-guarantor entities, Salishan-Mohegan, MG&H, Mohegan Resorts, and its subsidiaries, as of DecemberMarch 31, 20082009 and September 30, 2008 and for the three months and six months ended DecemberMarch 31, 20082009 and 20072008 is as follows (in thousands):

CONDENSED CONSOLIDATING BALANCE SHEETS

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CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)