BASIS OF PRESENTATION:

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 instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying 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 accompanying year-end condensed consolidated balance sheet 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 management's opinion, all adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Authority's operating results for the interim period, have been included. The Authority's operating results for the three months and nine months ended June 30, 2011 are not necessarily indicative of results for the fiscal year ending September 30, 2011.

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, 2010. The Authority's operating results for the three months and nine months ended June 30, 2011 reflect an adjustment of $3.7 million to reduce cash and cash equivalents and slot revenues that were incorrectly recorded during fiscal 2005, 2006 and 2007, and interim periods within those fiscal years. Because amounts involved were not material to the Authority’s financial statements in any individual prior period, and the cumulative amount is not material to estimated operating results for the fiscal year ending September 30, 2011, the Authority recorded the cumulative effect of correcting these items during the three months ended June 30, 2011. In addition, certain amounts in the accompanying 2010 condensed consolidated financial statements have been reclassified to conform to 2011 presentation.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Authority and its majority and wholly-owned subsidiaries and entities. In accordance with authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”) pertaining to consolidation of variable interest entities, 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 were eliminated.

Fair Value of Financial Instruments

The fair value amounts presented below are reported to satisfy disclosure requirements pursuant to authoritative guidance issued by the FASB pertaining to disclosures about fair values of financial instruments and are not necessarily indicative of amounts that the Authority could realize in a current market transaction.

The Authority applies the following fair value hierarchy, which prioritizes the inputs utilized to measure fair value into three levels:


•	Level 1—Quoted prices for identical assets or liabilities in active markets;


•	Level 2—Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets or valuations based on models where the significant inputs are observable or can be corroborated by observable market data; and


•	Level 3—Valuations based on models where the significant inputs are unobservable. The unobservable inputs reflect the Authority's estimates or assumptions that market participants would utilize in pricing such assets or liabilities.

The Authority's assessment of the significance of a particular input requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy.

The carrying amount of cash and cash equivalents, receivables, trade payables and promissory notes approximates fair value. The estimated fair value of the Authority's financing facilities and notes were as follows (in thousands):



	June 30, 2011
	Carrying Value		Fair Value
Bank Credit Facility	$	479,000	$	461,636
2009 11¹/2% Second Lien Senior Secured Notes	$	193,502	$	205,376
2005 6 ¹/8% Senior Unsecured Notes	$	250,000	$	207,970
2001 8³/8% Senior Subordinated Notes	$	2,010	$	1,634
2002 8% Senior Subordinated Notes	$	250,000	$	203,283
2004 7¹/8% Senior Subordinated Notes	$	225,000	$	154,548
2005 6⁷/8% Senior Subordinated Notes	$	150,000	$	100,407

The estimated fair values of the Authority's financing facilities and notes were based on quoted market prices or prices of similar instruments on or about June 30, 2011.

Severance

In September 2010, the Authority implemented cost containment initiatives in an effort to better align operating costs with market and business conditions, including a workforce reduction in Uncasville, Connecticut. The costs associated with related post-employment severance benefits were expensed at the time the termination was communicated to the employees. Severance for the three months and nine months ended June 30, 2011 resulted from adjustments to the initial estimates utilized under the workforce reduction plan. Cash payments commenced in September 2010 and are anticipated to be completed in March 2012. The Authority does not anticipate incurring any additional severance charges in connection with this workforce reduction, other than charges that may arise from adjustments to the initial estimates utilized under the plan. The following table presents a reconciliation of the related severance liability by business segment (in thousands):



	Mohegan Sun			Corporate			Total
Balance, March 31, 2011	$	1,618		$	9		$	1,627
Adjustments	(11		)	—			(11		)
Cash payments	(830		)	(9		)	(839		)
Balance, June 30, 2011	$	777		$	—		$	777

Balance, September 30, 2010	$	9,801		$	35		$	9,836
Adjustments	242			2			244
Cash payments	(9,266		)	(37		)	(9,303		)
Balance, June 30, 2011	$	777		$	—		$	777

Long-Term Receivables

Long-term receivables consist primarily of receivables from affiliates and tenants.

Receivables from affiliates, which are included in other assets, net, in the accompanying condensed consolidated balance sheets, consist primarily of reimbursable costs and expenses advanced by Salishan-Mohegan on behalf of the Cowlitz Tribe for the Cowlitz Project and WTG on behalf of the Menominee Tribe for the Menominee Project. 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. Due to the uncertainty in the development of the Cowlitz Project, the Authority maintains a reserve for doubtful collection of the Salishan-Mohegan receivables, which is based on the Authority's estimate of the probability that the receivables will be collected. The Authority assesses the reserve for doubtful collection of the Salishan-Mohegan receivables on a quarterly basis. Future developments in the receipt of financing, the relevant land being taken into trust or other matters affecting the Cowlitz Project could affect the collectability of the Salishan-Mohegan receivables. In fiscal 2008, the WTG receivables were fully reserved, and, in fiscal 2010, WTG ceased advancing development expenses on behalf of the Menominee Tribe for the Menominee Project. A portion of the WTG receivables is payable upon the receipt of necessary financing for the development of the proposed casino, subject to certain conditions.

Receivables from tenants, which are primarily included in other assets, net, in the accompanying condensed consolidated balance sheets, consist primarily of funds loaned to various tenants at Mohegan Sun and Mohegan Sun at Pocono Downs. Loan terms range between three and ten years. The Authority maintains a reserve for doubtful collection of receivables from tenants, which is based on the Authority's estimate of the amount expected to be uncollectible considering historical experience, creditworthiness of the related tenant and all other available information.

The following table presents a reconciliation of long-term receivables and the related reserves for doubtful collection of these long-term receivables (in thousands):



	Long-Term Receivables
	Affiliates (1)		Tenants			Total
Balance, March 31, 2011	$	44,903	$	1,412		$	46,315
Additions:
Issuance of affiliate advances and tenant loans	888		—			888
Deductions:
Payments received	—		(63		)	(63		)
Balance, June 30, 2011	$	45,791	$	1,349		$	47,140

Balance, September 30, 2010	$	43,205	$	2,468		$	45,673
Additions:
Issuance of affiliate advances and tenant loans	2,586		—			2,586
Deductions:
Payments received	—		(186		)	(186		)
Other	—		(933		)	(933		)
Balance, June 30, 2011	$	45,791	$	1,349		$	47,140

__________


(1)	Includes interest receivable of $17.8 million, $17.2 million and $15.8 million as of June 30, 2011, March 31, 2011 and September 30, 2010, respectively. The WTG receivables no longer accrue interest pursuant to a release and reimbursement agreement entered into in September 2010.



	Reserves for Doubtful Collection of Long-Term Receivables
	Affiliates		Tenants			Total
Balance, March 31, 2011	$	19,716	$	85		$	19,801
Additions:
Charges to bad debt expense	258		—			258
Deductions:
Adjustments	—		(4		)	(4		)
Balance, June 30, 2011	$	19,974	$	81		$	20,055

Balance, September 30, 2010	$	19,215	$	149		$	19,364
Additions:
Charges to bad debt expense	759		—			759
Deductions:
Adjustments	—		(68		)	(68		)
Balance, June 30, 2011	$	19,974	$	81		$	20,055

New Accounting Standards

In June 2011, the FASB issued revised guidance pertaining to reporting of comprehensive income. The revised guidance allows an entity the option of presenting the total of comprehensive income, components of net income and components of other comprehensive income, either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The revised guidance is effective retrospectively for annual periods, and interim periods within those annual periods, beginning after December 15, 2011. The Authority does not expect this adoption to impact its financial position, results of operations or cash flows.

In July 2010, the FASB issued guidance pertaining to disclosures about the credit quality of financing receivables and allowance for credit losses. The new guidance is effective for interim and annual periods ending on or after December 15, 2010. The Authority adopted this guidance in its first quarter of fiscal 2011, and its adoption did not impact the Authority's financial position, results of operations or cash flows.

In June 2009, the FASB issued guidance pertaining to the elimination of the concept of a qualifying special purpose entity. The new guidance also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying the enterprise that has the power to direct the activities of the variable interest entity and the obligation to absorb losses or the right to receive benefits of the variable interest entity. Additionally, the new guidance provides more timely and useful information about an enterprise's involvement with a variable interest entity. The new guidance is effective for annual periods beginning on or after November 15, 2009. The Authority adopted this guidance in its first quarter of fiscal 2011, and its adoption did not impact the Authority's financial position, results of operations or cash flows.

In April 2010, the FASB issued guidance pertaining to accruals for casino jackpot liabilities. The new guidance clarifies that an entity should not accrue jackpot liabilities (or portions thereof) before a jackpot is won if the entity can avoid paying such jackpot. The new guidance specifies that jackpots should be accrued and charged to revenue when the entity has the obligation to pay such jackpot and applies to both base and progressive jackpots and requires a cumulative-effect adjustment to opening retained earnings in the period of adoption. The new guidance is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2010. The Authority does not expect this adoption to materially impact its financial position, results of operations or cash flows.

In January 2010, the FASB issued amended guidance pertaining to fair value measurements and disclosures. The amended guidance requires additional disclosures about significant unobservable inputs and transfers within Level 1 and 2 measurements. This guidance is effective for interim and annual periods beginning on or after December 15, 2009. The Authority adopted this guidance in its first quarter of fiscal 2010, and its adoption did not impact the Authority's financial position, results of operations or cash flows. The amended guidance also requires enhanced disclosure of activities within Level 3 fair value measurements. Those disclosures are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2010. The Authority does not expect this adoption to impact its financial position, results of operations or cash flows.