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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q


/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended 06/30/03
or

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

For the transition period from_______ to________

Commission file number 333-17795

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


DELAWARE 06-1465402
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)


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


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

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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No.



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



Page
Number

PART I -- FINANCIAL INFORMATION

Item 1 -- Financial Statements

Report of Independent Accountants 1
Financial Information 2
Condensed Balance Sheets of Waterford Gaming, L.L.C. as of
June 30, 2003 (unaudited) and December 31, 2002
(restated) 3
Condensed Statements of Income of Waterford Gaming, L.L.C.
for the three and six month periods ended June 30, 2003
(unaudited) and June 30, 2002 (unaudited and restated) 4
Condensed Statements of Changes in Member's Deficiency of
Waterford Gaming, L.L.C. for the six month periods ended
June 30, 2003 (unaudited) and June 30, 2002
(unaudited and restated) 5
Condensed Statements of Cash Flows of Waterford Gaming, L.L.C.
for the six month periods ended June 30, 2003(unaudited)
and June 30, 2002 (unaudited and restated) 6
Notes to Condensed Financial Statements for Waterford
Gaming, L.L.C. (unaudited) 7

Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 3 -- Quantitative and Qualitative Disclosures about
Market Risk 29
Item 4 -- Controls and Procedures 29

PART II -- OTHER INFORMATION

Item 1 -- Legal Proceedings 30
Item 2 -- Changes in Securities 31
Item 3 -- Defaults upon Senior Securities 32
Item 4 -- Submission of Matters to a Vote of Security Holders 32
Item 5 -- Other Information 32
Item 6 -- Exhibits and Reports on Form 8-K 33
Signatures 35
Certifications 36


PART I -- FINANCIAL INFORMATION

Item 1 -- Financial Statements


REPORT OF INDEPENDENT ACCOUNTANTS


To the Member of Waterford Gaming, L.L.C.

We have reviewed the accompanying condensed balance sheet of Waterford Gaming,
L.L.C. (the "Company") as of June 30, 2003, and the related condensed statements
of income, for each of the three-month and six-month periods ended June 30, 2003
and 2002 (as restated), and the related condensed statements of changes in
member's deficiency and cash flows for each of the six-month periods ended June
30, 2003 and 2002 (as restated). These interim financial statements are the
responsibility of the Company's management.

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

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

We previously audited in accordance with auditing standards generally accepted
in the United States of America, the balance sheet as of December 31, 2002, and
the related statements of income, of changes in member's deficiency and of cash
flows for the year then ended (not presented herein), and in our report dated
March 18, 2003, except for Notes 1 through 5 and 8 as to which the date is May
30, 2003, we expressed an unqualified opinion in those financial statements
(with an explanatory paragraph indicating that the Company has restated those
financial statements to give effect to a restatement by its equity investee). In
our opinion, the information set forth in the accompanying condensed balance
sheet as of December 31, 2002 (after the restatement described in Note 8 to the
accompanying condensed interim financial statements) is fairly stated in all
material respects in relation to the balance sheet from which it has been
derived.

PricewaterhouseCoopers, LLP
July 24, 2003

1






FINANCIAL INFORMATION

The unaudited condensed interim financial information as of June 30, 2003 and
2002, and for each of the three-month and six-month periods ended June 30, 2003
and 2002 included in this report was reviewed by PricewaterhouseCoopers, LLP,
independent public accountants, in accordance with the professional standards
and procedures established for such reviews by the American Institute of
Certified Public Accountants.

2






Waterford Gaming, L.L.C.

Condensed Balance Sheets

June 30, 2003 (Unaudited) and December 31, 2002




June 30, December 31,
2003 2002
------------- -------------
(Restated -
Note 8)

ASSETS

Current assets
Cash and cash equivalents $ 2,351,679 $ 4,658,602
Restricted investments 6,687,821 10,344,130
Other current assets 62,450 7,965
------------- -------------
Total current assets 9,101,950 15,010,697
------------- -------------
Trading Cove Associates-equity investment 11,853,316 11,972,338
Beneficial interest-Leisure Resort
Technology, Inc. 4,352,597 4,540,039
Deferred financing costs, net of accumulated
amortization of $21,577 and $1,391,838 at
June 30, 2003 and December 31, 2002,
respectively 3,821,454 2,643,338
Fixed assets, net of accumulated depreciation
of $47,612 and $42,222 at June 30, 2003
and December 31, 2002, respectively 6,306 11,696
------------- -------------
Total assets $ 29,135,623 $ 34,178,108
============= =============
LIABILITIES AND MEMBER'S DEFICIENCY

Current liabilities
Accrued expenses and accounts payable $ 1,164,455 $ 111,996
Accrued interest on senior notes payable 742,708 3,021,196
------------- -------------
Total current liabilities 1,907,163 3,133,192
------------- -------------
9.50% senior notes payable --- 108,007,000
8.625% senior notes payable 155,000,000 ---
------------- -------------
Total liabilities 156,907,163 111,140,192
------------- -------------
Contingencies

Member's deficiency (127,771,540) (76,962,084)
------------- -------------
Total liabilities and
member's deficiency $ 29,135,623 $ 34,178,108
============= =============


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

3






Waterford Gaming, L.L.C.

Condensed Statements of Income

For the Three Month and Six Month Periods ended June 30, 2003 and 2002
(Unaudited)




For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
-------------- -------------- ------------- -------------
(Restated - (Restated -
Note 8) Note 8)

Expenses
Interest expense $ 9,797,752 $ 2,645,821 $ 12,681,055 $ 5,648,861
Salaries - related parties 224,522 204,599 435,685 391,668
General and administrative 114,284 131,117 212,977 245,465
9.50% senior notes tender expense 495,962 --- 495,962 ---
Amortization of beneficial interest -
Leisure Resort Technology, Inc. 94,239 94,239 187,442 187,442
Amortization on deferred financing costs 2,573,199 91,716 2,664,915 183,432
Depreciation 2,695 2,695 5,390 5,390
-------------- ------------- ------------- -------------

Total expenses 13,302,653 3,170,187 16,683,426 6,662,258
-------------- ------------- ------------- -------------

Interest and dividend income 30,423 131,820 83,026 326,547
Equity in income of
Trading Cove Associates 7,106,875 5,420,387 13,529,185 10,252,165
------------- ------------- ------------- -------------

Net income (loss) $ (6,165,355) $ 2,382,020 $ (3,071,215) $ 3,916,454
============== ============= ============= =============



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

4






Waterford Gaming, L.L.C.

Condensed Statements of Changes in Member's Deficiency


For the Six Month Periods ended June 30, 2003 and 2002
(Unaudited)




For the Six Months Ended June 30, 2003



Balance, January 1, 2003 - (Restated - Note 8) $ (76,962,084)

Distributions (47,738,241)

Net loss (3,071,215)
-------------
Balance, June 30, 2003 $(127,771,540)
=============


For the Six Months Ended June 30, 2002
(Restated - Note 8)



Balance, January 1, 2002 $ (70,474,832)

Distributions (3,342,762)

Net income 3,916,454
-------------
Balance, June 30, 2002 $ (69,901,140)
=============



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

5



Waterford Gaming, L.L.C.

Condensed Statements of Cash Flows

For the Six Month Periods ended June 30, 2003 and 2002
(Unaudited)




2003 2002
------------ -------------
(Restated -
Note 8)

Cash flows from operating activities
Net income (loss) $ (3,071,215) $ 3,916,454
------------ -------------
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating
activities
Amortization 2,852,357 370,874
Depreciation 5,390 5,390
Equity in income of
Trading Cove Associates (13,529,185) (10,252,165)
Operating distributions from
Trading Cove
Associates 13,898,207 9,978,604
Changes in operating assets and
liabilities
Increase in other current assets (54,485) (42,243)
Increase (decrease) in accrued
expenses and accounts payable 407,952 (22,248)
Decrease in accrued interest on
senior notes payable (2,278,488) (112,757)
------------ -------------
Total adjustments 1,301,748 (74,545)
------------ -------------
Net cash (used in) provided by
operating activities (1,769,467) 3,841,909
------------ -------------
Cash flows from investing activities
Contributions to Trading Cove Associates (450,000) (600,000)
Distributions from Trading Cove Associates 200,000 950,000
Deferred financing costs (3,198,524) ---
Sales and (purchases) of restricted
investments - net 3,656,309 445,859
------------ -------------
Net cash provided by
investing activities 207,785 795,859
------------ -------------
Cash flows from financing activities
Redemption of 9.50% senior notes (108,007,000) (4,031,000)
Proceeds from 8.625% senior notes issuance 155,000,000 ---
Distributions to member (47,738,241) (3,342,762)
------------ -------------
Net cash used in
financing activities (745,241) (7,373,762)
------------ -------------
Net decrease in cash and cash equivalents (2,306,923) (2,735,994)

Cash and cash equivalents at beginning
of period 4,658,602 3,570,949
------------ -------------
Cash and cash equivalents at end of period $ 2,351,679 $ 834,955
============ =============
Supplemental disclosure of cash flow information:

Cash paid during the period for interest $ 14,959,542 $ 5,761,617
============ =============
Supplemental disclosure of non-cash financing activities:
Deferred financing costs funded through
accrued expenses $ 644,507 $ ---
============ =============



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

6



WATERFORD GAMING, L.L.C.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)


Note 1. Basis of Presentation:

The unaudited condensed interim financial statements have been prepared in
accordance with the policies described in Waterford Gaming, L.L.C.'s (the
"Company") 2002 audited financial statements and should be read in conjunction
with the Company's 2002 audited financial statements within the Company's Annual
Report for the fiscal year ended December 31, 2002 on Form 10-K/A as filed with
the Securities and Exchange Commission (the "Commission") on June 4, 2003. The
condensed balance sheet at December 31, 2002, contained herein, was derived from
audited financial statements, but does not include all disclosures contained in
the Form 10-K/A and required by accounting principles generally accepted in the
United States of America. The unaudited condensed interim financial statements
include normal and recurring adjustments which are, in the opinion of
management, necessary to present a fair statement of financial position as of
June 30, 2003, the results of income for each of the three-month and six-month
periods ended June 30, 2003 and 2002, and statements of member's deficiency and
of cash flows for each of the six-month periods ended June 30, 2003 and 2002.
Results of income for the period are not necessarily indicative of the results
to be expected for the full year.

In June 2003, the Company with its wholly-owned subsidiary Waterford Gaming
Finance Corp. ("Finance") issued $155 Million 8.625% Senior Notes due 2012 (the
"8.625% Senior Notes") in connection with the redemption of the Company's and
Finance's $125 million 9.50% Senior Notes due 2010 (the "$125 Million Senior
Notes"). In March 1999, the Company together with Finance had issued the $125
Senior Notes in connection with the redemption of the Company's and Finance's
$65 Million 12.75% Senior Notes due 2003 (the $65 Million Senior Notes").

In connection with the $125 Million Senior Notes offering, the Company
distributed $37,050,000 to Waterford Group, L.L.C. ("Waterford Group") during
March 1999. During December 1999, the Company received a payment on notes it
held due from the Mohegan Tribal Gaming Authority (the "Authority") and a
distribution from Trading Cove Associates ("TCA" or "Trading Cove"). As
contemplated in the $125 Million Senior Notes offering, the Company distributed
approximately $34,672,000 to Waterford Group during January 2000. In connection
with the 8.625% Senior Notes offering, the Company distributed approximately
$44,500,000 to Waterford Group during June 2003.

Certain amounts in the 2002 financial statements have been reclassified to
conform with the 2003 presentation. See Note 8 to these condensed financial
statements.


Note 2. Trading Cove Associates - Equity Investment:

As of June 30, 2003 and 2002, the following summary information relates to TCA.
Total revenues and net income are for the six-month periods ended June 30, 2003
and 2002:


2002
2003 (As restated)
------------- -------------


Total current assets $ 24,796,048 $ 21,560,253
============= =============
Total assets $ 27,348,669 $ 24,339,792
Total liabilities (10,501,159) (10,952,721)
------------- -------------
Partners' capital $ 16,847,510 $ 13,387,071
============= =============
Total revenue $ 35,606,925 $ 26,893,801
============= =============
Net income $ 29,998,397 $ 23,444,358
============= =============
Company's interest:
Trading Cove Associates -
equity investment, beginning
of period $ 11,972,338 $ 10,639,562
Contributions 450,000 600,000
Distributions (14,098,207) (10,928,604)
------------- -------------
(1,675,869) 310,958
------------- -------------
Income from Trading Cove
Associates 13,749,199 10,472,179
Amortization of interests
purchased (220,014) (220,014)
------------- -------------
Equity in income of
Trading Cove Associates 13,529,185 10,252,165
------------- -------------
Trading Cove Associates -
equity investment, end of period $ 11,853,316 $ 10,563,123
============= =============

7


Note 3. Beneficial Interest - Leisure Resort Technology, Inc.:

On January 6, 1998, pursuant to the settlement and release agreement described
in Note 7 below, the Company paid $5,000,000 to Leisure Resort Technology, Inc.
("Leisure") and, among other things, Leisure (a) gave up its beneficial interest
of 5 percent in certain fees and excess cash flows, as defined, of TCA and (b)
any other claims it may have had against the Company, TCA and TCA's partners and
former partner.

On August 6, 1997, Leisure, a former partner of TCA, filed a lawsuit against
TCA, Kerzner Investments Connecticut, Inc. (formerly Sun Cove Limited, "Kerzner
Investments"), RJH Development Corp. (a former partner of TCA), the Company and
its owners, claiming breach of contract, breach of fiduciary duties and other
matters in connection with the development of the Mohegan Sun Casino (the
"Mohegan Sun") by TCA.

In connection with the settlement of all matters related to such suit, pursuant
to the settlement and release agreement, the Company agreed to acquire Leisure's
interests in TCA. As a result of this acquisition, Leisure no longer has the
right to 5% of the Organizational and Administrative Fee, as defined in the
Organizational and Administrative Services Agreement, and 5% of TCA's Excess
Cash as defined in TCA's partnership agreement, and the Company is now entitled
to such fees and such cash.

On March 17, 1999, the $65 Million Senior Notes were retired, and on March 18,
1999, the Company paid an additional $2,000,000 to Leisure pursuant to the
settlement and release agreement. On January 7, 2000, Leisure filed a complaint
against the Company and certain other defendants relating to the settlement and
release agreement. For a description of the complaint, see Note 7 to these
condensed financial statements.

Until March 17, 1999, the payments made to Leisure pursuant to the settlement
and release agreement and associated costs were amortized on a straight-line
basis over the remaining term of the Management Agreement (defined below). As a
result of the Relinquishment Agreement (defined below) becoming effective, the
remaining balance will be amortized over 189 months beginning March 18, 1999.
Accumulated amortization at June 30, 2003 and December 31, 2002 amounts to
$2,704,614 and $2,517,172, respectively.



Note 4. $155 Million 8.625% Senior Notes Payable:

On June 11, 2003, the Company and Finance issued the 8.625% Senior Notes.
Payment of the principal of, and interest on, the 8.625% Senior Notes is pari
passu in right of payment with all of the Company's and Finance's senior debt,
and effectively subordinate in right of payment to all of the Company's and
Finance's existing and future collateralized and subordinated debts.

The 8.625% Senior Notes bear interest at a rate of 8.625% per annum, payable
semi-annually in arrears on March 15 and September 15 of each year, commencing
September 15, 2003. The principal amount due on the 8.625% Senior Notes is
payable on September 15, 2012.

The Company and Finance may elect to redeem all or any of the 8.625% Senior
Notes at any time on or after September 15, 2008 at a redemption price equal to
a percentage of the principal amount of notes being redeemed plus accrued
interest. Such percentage is set forth in the following table:



If notes are redeemed Percentage
- --------------------- ----------

after September 14, 2008 but
on or before September 14, 2009 103.551%
after September 14, 2009 but
on or before September 14, 2010 102.537%
after September 14, 2010
but on or before September 14, 2011 101.522%
after September 14, 2011 but
on or before September 14, 2012 100.507%
after September 14, 2012 100.000%




The 8.625% Senior Notes provide that upon the occurrence of a Change of Control
(as defined in the indenture governing the 8.625% Senior Notes (the
"Indenture")), the holders thereof will have the option to require the
redemption of the 8.625% Senior Notes at a redemption price equal to 101% of the
principal amount thereof plus accrued interest.

8



Pursuant to the terms of the Indenture, if the Company and Finance have any
Company Excess Cash, as defined in the Indenture, on February 1 or August 1 of
any year, they must use such Company Excess Cash less all Required IRA True-Up
Payments, as defined in the Indenture, and less any amount set aside for the
payment of accrued and unpaid interest on the interest payment date that
corresponds to the redemption date for which the determination is being made, to
redeem the 8.625% Senior Notes on the March 15 or September 15 following such
dates. Any such redemption will be made at a price equal to a percentage of the
principal amount being redeemed. Such percentage is set forth in the following
table:






If notes are redeemed with Redemption Price (expressed as a percentage
Company Excess Cash of the principal amount being redeemed)
- ------------------------- --------------------------------------------

after September 14, 2003 but
on or before September 14, 2004 108.625%
after September 14, 2004 but
on or before September 14, 2005 107.610%
after September 14, 2005 but
on or before September 14, 2006 106.596%
after September 14, 2006 but
on or before September 14, 2007 105.581%
after September 14, 2007 but
on or before September 14, 2008 104.566%
after September 14, 2008 but
on or before September 14, 2009 103.551%
after September 14, 2009 but
on or before September 14, 2010 102.537%
after September 14, 2010
but on or before September 14, 2011 101.522%
after September 14, 2011 but
on or before September 14, 2012 100.507%
after September 14, 2012 100.000%




On August 1, 2003 the Company and Finance had Company Excess Cash (which totaled
$5,568,186), as defined in the Indenture, and after deducting (i) all Required
IRA True-Up Payments, as defined in the Indenture, (which totaled $0) and (ii)
the amount set aside for the payment of accrued and unpaid interest on the
interest payment date that corresponds to the redemption date for which the
determination is being made (which totaled $3,490,729), the amount available for
a mandatory redemption of the 8.625% Senior Notes totaled $2,077,457, and
accordingly on September 15, 2003 the Company and Finance intends to make a
mandatory redemption of the 8.625% Senior Notes in the principal amount of
$1,912,000 at the redemption price of 108.625%. Such redemption price is
expressed as a percentage of the principal amount being redeemed.

In certain circumstances, if either the Company or Kerzner Investments, the
Company's partner in TCA, exercises the option to buy or sell partnership
interests in TCA, the Company and Finance must redeem the 8.625% Senior Notes.

The Indenture contains certain affirmative and negative covenants customarily
contained in such agreements, including without limitation, covenants that
restrict, subject to specified exceptions the Company's and Finance's ability to
(i) borrow money, (ii) make distributions on its equity interests or certain
other restricted payments, (iii) use assets as security in other transactions,
(iv) make investments, (v) sell other assets or merge with other companies, and
(vi) engage in any business except as currently conducted or contemplated or
amend their relationship with TCA. The Indenture also provides for customary
events of default and the establishment of a restricted investment account with
a trustee for interest reserves ("IRA"). The IRA consists of an amount of funds
equal to the interest payment due on the 8.625% Senior Notes on the following
interest payment date. The IRA will be released and the Company can make a
permitted distribution to Waterford Group once the Leverage Ratio, as defined in
the Indenture, is less than or equal to 3.0 to 1.0.

The fair market value of the Company's long term debt at June 30, 2003 and
December 31, 2002 is estimated to be approximately $161,200,000 and
$111,787,000, respectively, based on the quoted market price for the 8.625%
Senior Notes and the $125 Million Senior Notes, respectively.

9



Note 5. $125 Million 9.50% Senior Notes Payable:

The $125 Million Senior Notes payable at June 30, 2003 and December 31, 2002,
was $0 and $108,007,000, respectively, and consisted of the aggregate principal
amount of the $125 Million Senior Notes issued on March 17, 1999 by the Company
and Finance.

All of the $125 Million Senior Notes were redeemed as part of the Company's and
Finance's 8.625% Senior Notes offering on June 11, 2003.


Note 6. Certain Relationships and Related Transactions

DEVELOPMENT SERVICES AGREEMENT PHASE II AND RELATED AGREEMENTS AND PAYMENTS

On February 9, 1998, TCA and Kerzner International Management Limited ("KIML"),
an affiliate of Kerzner Investments, the Company's partner in TCA, entered into
the Agreement Relating to Development Services (the "Development Services
Agreement Phase II"). Pursuant to the Development Services Agreement Phase II,
TCA subcontracted with KIML, who agreed to perform those services assigned to
KIML by TCA in order to facilitate TCA's fulfillment of its duties and
obligations to the Authority under the Development Agreement. For a summary of
the Development Agreement, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Trading Cove Associates -
Material Agreements --Development Agreement". KIML assigned the Development
Services Agreement Phase II to Kerzner Investments.


Pursuant to the Development Services Agreement Phase II, TCA pays to Kerzner
Investments a fee, as subcontractor (the "Development Services Fee Phase II"),
equal to 3 percent of the development costs of the Project Sunburst expansion at
the Mohegan Sun (the "Project" or "Project Sunburst expansion"), excluding
capitalized interest, less all costs incurred by TCA in connection with the
Project Sunburst expansion. The Development Services Fee Phase II is paid in
installments on December 31, 1999, December 31, 2000 and on the Completion Date,
as defined in the Development Agreement, with the final payment being made when
the actual development costs of the Project Sunburst expansion are known. TCA
pays the Development Services Fee Phase II from available cash flow, if any, in
accordance with the Amended and Restated Omnibus Termination Agreement. The
total of the Development Services Fee Phase II and TCA's costs related to the
development of the Project Sunburst expansion will exceed the related revenue
received by TCA under the Development Agreement by approximately $16 million.

Before KIML assigned the Development Services Agreement Phase II to Kerzner
Investments, it entered into the Local Construction Services Agreement (the
"Local Construction Services Agreement") with Wolman Construction, L.L.C.
("Construction"), an affiliate of the Company, pursuant to which Construction
agreed to provide certain of those services assigned to KIML by TCA pursuant to
the Development Services Agreement Phase II. KIML assigned the Local
Construction Services Agreement to Kerzner Investments.

Pursuant to the Local Construction Services Agreement, Kerzner Investments
agreed to pay to Construction a fee equal to 20.83 percent of the Development
Services Fee Phase II as and when Kerzner Investments receives payment from TCA
in accordance with the Development Services Agreement Phase II.

Pursuant to a letter agreement, Construction has subcontracted with The Slavik
Company, an affiliate of the Company, to provide certain services under the
Local Construction Services Agreement. In exchange for providing such services,
Construction agreed that The Slavik Company would be paid a fee equal to 14.30
percent of its fee under the Local Construction Services Agreement.

On April 26, 2000, July 26, 2000, January 26, 2001 and July 28, 2003 TCA paid
$3,095,000, $1,238,000, $6,474,000 and $9,157,000, respectively, as partial
payment of the Development Services Fee Phase II. Construction received
$644,688, $257,875, $1,348,534 and $1,907,403, respectively, and Construction
paid The Slavik Company $92,190, $36,876, $192,840 and $259,121 on April 26,
2000, July 26, 2000, January 26, 2001 and July 28, 2003, respectively.

After the July 28, 2003 payment of $9,157,000 by TCA to Kerzner Investments,
TCA's accrued liability to Kerzner Investments with respect to the Development
Services Fee Phase II was approximately $848,000.

EMPLOYMENT AGREEMENT WITH MR. LEN WOLMAN

Len Wolman, the Company's Chairman of the Board of Directors and Chief Executive
Officer, is the Company's designated representative to TCA under TCA's
partnership agreement.

On September 28, 1998, the Company entered into an employment agreement with Len
Wolman. The employment agreement provides for a base annual salary of $250,000
reduced by any amounts Mr. Wolman receives as a salary from TCA for such period.
In addition, pursuant to the employment agreement, the Company agreed to pay Mr.
Wolman an amount equal to 0.05 percent of the revenues of the Mohegan Sun
including the Project Sunburst expansion to the extent Mr. Wolman has not
received such amounts from TCA. On and after January 1, 2004, the Company agreed
to pay to Mr. Wolman incentive compensation based on the revenues of the Mohegan
Sun, including the Project Sunburst expansion, as a percentage (ranging from .00
percent to .10 percent) to be determined using a formula attached to the
employment agreement which compares actual revenues to predetermined revenue
targets. For the six-month periods ended June 30, 2003 and 2002 the Company paid
and incurred $435,685 and $391,668, respectively, as an expense pursuant to Len
Wolman's employment agreement.

10


OTHER RELATED PARTY TRANSACTIONS

For the six-month periods ended June 30, 2003 and 2002, approximately $21,000
and $22,900, respectively, was paid and incurred by TCA to the principals and
affiliates of the Company as part of TCA's operating expenses. In addition, for
the six month periods ended June 30, 2003 and 2002, TCA paid and incurred
approximately $458,000 and $0, respectively, to the principals of the Company in
connection with the first priority payments set forth under the section "Trading
Cove Associates Material Agreements - Amended and Restated Omnibus Termination
Agreement".

In 1999, the Company renovated Len Wolman's office space at a cost of $32,413,
of which $30,000 was paid to Wolman Homes Inc., an affiliate of the Company.
Cost of the improvement is being depreciation over five years. Depreciation
expense for each of the six month periods ended June 30, 2003 and 2002 was
$3,240.

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


Note 7. Contingencies:

LEGAL PROCEEDINGS

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

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter has been
transferred to the complex litigation docket and is pending in State Court in
Waterbury, Connecticut. The complaint alleged breach of fiduciary duties,
fraudulent non-disclosure, violation of Connecticut Statutes Section 42-110a, et
seq. and unjust enrichment in connection with the negotiation by certain of the
Defendants of the settlement and release agreement. The complaint also brought a
claim for an accounting. The complaint seeks unspecified legal and equitable
damages.

On February 29, 2000, Defendants filed a Motion to Strike and a Motion for
Summary Judgment, each with respect to all claims. The Court granted Defendants'
Motion to Strike in part and denied Defendants' Motion for Summary Judgment, on
October 13, 2000. The Court's order dismissed the claim for an accounting and
the claim under Connecticut Statutes Section 42-110a, et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites, Inc., Len Wolman and Mark Wolman. In a decision dated August 6,
2001, the Court dismissed all claims against LMW Investments, Inc., Slavik
Suites, Inc., Len Wolman and Mark Wolman.

On November 15, 2000, the Company and its co-defendants answered the complaint.
In addition, the Company and Trading Cove Associates asserted counterclaims for
breach of the settlement and release agreement and breach of the implied
covenant of good faith against Leisure and its president, Lee Tyrol. In a
decision dated June 6, 2001, the Court dismissed the counterclaims against Lee
Tyrol. Leisure moved for summary judgment seeking dismissal of the counter
claims in full. This motion for summary judgment was denied on April 14, 2003.

Discovery has commenced. Pursuant to the current scheduling order, all
depositions of fact witnesses are to be completed by September 15, 2003. A trial
date has not been set.

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

11



Note 8. Restatement, Reclassification and Subsequent Events

The Company has restated its financial statements for each of the fiscal years
1996 through 2002.

The Company is a general partner of TCA and its investment in TCA is accounted
for under the equity method. TCA restated its financial statements as described
below. As the Company accounts for its investment in TCA under the equity
method, the Company's financial statements have been restated to reflect the
changes recorded by TCA. The effect of TCA's restatement on the Company's
financial statements is described below and included in the tables which follows
this note 8.

The restatement is the result of a change by TCA in the way it has historically
recorded certain contractual liabilities to its partners and their affiliates,
recognized certain revenue, and classified certain distributions to its
partners. As described in more detail below, TCA has restated its historical
financial statements to,

i) recognize as an expense certain contractual liabilities owed its partners
and their affiliates for prior services performed under contract when
payment of such liabilities became probable pursuant to Statement of
Financial Accounting Standard No. 5 ("SFAS 5"), as opposed to when such
expenses were paid or payable (these expenses were previously disclosed as
contingent obligations);

ii) recognize as revenue junior relinquishment fees from the Authority pursuant
to the Relinquishment Agreement (defined below) in the quarter in which
such fees are earned, as opposed to at the end of every six months, when
such fees became payable; and

iii) reclassify certain payments by TCA to its partners as distributions on its
partnership interests which were previously classified as expenses in the
statement of operations.

The Company's interest in TCA is its principal asset and source of income and
cash flows.



To the extent these changes affected TCA's reported net income, the Company's
net income was affected by its proportionate share of TCA's income recorded
under the equity method. To the extent these changes caused TCA to recognize
income from relinquishment fees earlier than it previously had, the Company's
equity income of TCA was increased by its proportionate share of such income. To
the extent TCA reclassified certain payments to the Company as distributions on
partnership interests, the Company has reclassified such payments by TCA as
distributions, rather than as "Revenue - 25% of relinquishment payments -
Trading Cove Associates" on its statement of income.

The effect of the restatement to TCA is to change the timing of the recognition
of certain revenues and certain liabilities of TCA, owed to its partners and
their affiliates, and not to change the amount of such revenues or such
liabilities or the amounts paid to its partners or their affiliates. As a result
of the restatement by TCA, the Company has restated its financial information
included in each Form 10-K and Form 10-Q filed by the Company from 2000 through
March 2003. The Company has not amended its Annual Reports on Form 10-K or
Quarterly Reports on Form 10-Q for periods affected by the restatement that
ended prior to January 1, 2000, and the financial statements and related
financial information contained in such reports should no longer be relied upon.

As noted above, TCA has changed how it has historically accounted for certain
contractual liabilities it owed to its partners and their affiliates for
services performed under contract. TCA has restated its financial statement to
record a liability for certain previously provided services pursuant to SFAS 5
when it became probable that such liability had been incurred and when it became
reasonably estimable rather than when payment was certain. As a result of this
change, some payments have been recorded as liabilities and expenses on TCA's
financial statements several years before they were, or will become, due and
payable. Previously, these payments were recorded as liabilities only when such
liability became payable. These payments are related to amounts due under (a)
the third, fourth, fifth, seventh, eighth, ninth and eleventh priority
distributions described in the Amended and Restated Omnibus Financing Agreement
and (b) the third and fourth priority distributions described in the Amended and
Restated Omnibus Termination Agreement.

One effect of the change described above is that TCA has restated its financial
statements to recognize an additional loss on the Development Agreement between
it and the Authority, which is accounted for in accordance with Statement of
Position 81-1. This has resulted in a corresponding reduction on the Company's
balance sheet as of December 31, 2002 in "Trading Cove Associates - equity
investment" of $4,496,500 and an increase in member's deficiency of $4,496,500.
Through December 31, 2002 TCA had recorded a cumulative loss of $7,007,000.
After the restatement, it recorded a cumulative loss of $16,000,000 at December
31, 2002. As a result, TCA recorded an additional development loss of $1,200,000
during 2002. The Company's 50% share of the difference is $4,496,500 at December
31, 2002. Prior to making the change described in the this paragraph, TCA would
have recorded this loss in the second quarter of 2003, when the related amount
would have become payable.

Also as noted above, TCA has restated its historical financial statements to
reclassify certain payments to its partners as distributions on TCA's
partnership interests. The payments, the classification of which have changed,
are payments TCA has historically made under the fifth and seventh priorities
under the Amended and Restated Omnibus Termination Agreement, for the periods
commencing January 1, 2000. This reclassification by TCA resulted in the
reclassification by the Company of certain income it received from TCA as
"Equity in income (loss) of Trading Cove Associates" on its statement of income.
Prior to the restatement, the Company had classified such payments on its
statement of operations as "Revenue - 25% of relinquishment payments -Trading
Cove Associates". Such reclassification does not change or affect the Company's
aggregate net income or loss for the period covered by the restated financial
statements. These payments are considered a distribution to the Company on its
partnership interests, rather than revenue from TCA. Accordingly, at December
31, 2002, the restated balance sheet of the Company shows $0 as due from TCA,
and "Trading Cove Associates - equity investment" has been increased by
$11,021,500, which was the amount previously recorded as an amount due from TCA
prior to making the change described in this paragraph. The change in the
development loss described above and the reclassification account for the change
in equity investment on the condensed balance sheet at December 31, 2002.

Also as described above, TCA has changed its historical method of accruing
junior relinquishment payments it receives from the Authority pursuant to the
Relinquishment Agreement. TCA has restated its historical financial statements
to accrue for such payments in each quarter as they are earned. Prior to the
restatement, TCA recognized such payments as revenue as they became payable
every six months. The restatement required the Company to restate its historical
financial statements to record its investment in TCA with a portion of each
junior relinquishment payment being accrued each quarter. There is no impact on
TCA's annual Relinquishment Fee (defined below) revenue.

The Condensed Balance Sheet at December 31, 2002, Condensed Statement of Income
for the three and six-month periods ended June 30, 2002, Condensed Statement of
Changes in Member's Deficiency for the six-month period ended June 30, 2002, and
Condensed Statement of Cash Flows for the six-month period ended June 30, 2002
contained herein have been updated to reflect these restatements.

The following tables show the effect of the restatement on the Company's
Condensed Balance Sheet as of December 31, 2002, as well as the Company's
Condensed Statement of Income for the three and six-month periods ended June 30,
2002, Condensed Statement of Changes in Member's Deficiency, and Condensed
Statement of Cash Flows for the six-month period ended June 30, 2002.

The restatement adjustments outlined below do not impact total cash flows of the
Company or its reported cash balances.

12


Waterford Gaming, L.L.C.

Condensed Balance Sheet





Previously
reported Restated
December 31, December 31,
2002 * 2002
------------ -------------

ASSETS

Current assets
Cash and cash equivalents $ 4,658,602 $ 4,658,602
Restricted investments 10,344,130 10,344,130
Due from Trading Cove Associates 11,021,500 ---
Other current assets 7,965 7,965
------------ -------------

Total current assets 26,032,197 15,010,697
------------ -------------

Trading Cove Associates - equity investment 5,447,338 12,597,338
Beneficial interest - Leisure Resort Technology, Inc. 4,540,039 4,540,039
Deferred financing costs, net of accumulated amortization of $1,391,838 2,643,338 2,643,338
Fixed assets, net of accumulated depreciation of $42,222 11,696 11,696
------------ -------------

Total assets $ 38,674,608 $ 34,803,108
============ =============

LIABILITIES AND MEMBER'S DEFICIENCY

Current liabilities
Accrued expenses and accounts payable $ 111,996 $ 111,996
Accrued interest on senior notes payable 3,021,196 3,021,196
------------ -------------

Total current liabilities 3,133,192 3,133,192
------------ -------------
9.50% senior notes payable 108,007,000 108,007,000
------------ -------------

Total liabilities 111,140,192 111,140,192
------------ -------------

Contingencies
Member's deficiency (72,465,584) (76,337,084)
------------ -------------

Total liabilities and member's deficiency $ 38,674,608 $ 34,803,108
============ =============



* Previously reported in Form 10-K filed by the Company on March 26, 2003

13





Waterford Gaming, L.L.C.

Condensed Statements of Income

(Unaudited)




Previously reported Restated Previously
reported Restated for the three months for
the three months for the six months for the
six months ended June 30, 2002 * ended June
30, 2002 ended June 30, 2002 * ended June
30, 2002
--------------------- -------------------- -------------------- -------------------

Revenue
25% of relinquishment payments -
Trading Cove Associates $ 9,390,000 $ --- $ 11,011,000 $ ---
Interest and dividend income 131,820 --- 326,547 ---
------------- ------------- ------------- --------------

Total revenue 9,521,820 --- 11,337,547 ---
------------- ------------- ------------- --------------

Expenses
Interest expense 2,645,821 2,645,821 5,648,861 5,648,861
Salaries - related parties 204,599 204,599 391,668 391,668
General and administrative 131,117 131,117 245,465 245,465
Amortization of beneficial
interest - Leisure Resort
Technology, Inc. 94,239 94,239 187,442 187,442
Amortization on deferred
financing costs 91,716 91,716 183,432 183,432
Depreciation 2,695 2,695 5,390 5,390
------------ ------------- ------------- --------------

Total expenses 3,170,187 3,170,187 6,662,258 6,662,258
------------- ------------- ------------- --------------
6,351,633 4,675,289

Interest and dividend income --- 131,820 --- 326,547
Equity in income (loss) of
Trading Cove Associates (855,335) 5,420,387 (158,835) 10,252,165
------------- ------------- ------------- --------------

Net income $ 5,496,298 $ 2,382,020 $ 4,516,454 $ 3,916,454
============= ============= ============= ==============


* Previously reported in Form 10-Q filed by the Company on August 8, 2002






Waterford Gaming, L.L.C.

Condensed Statement of Changes in Member's Deficiency

(Unaudited)





Previously reported Restated
for the six months for the six months
ended June 30, 2002 * ended June 30, 2002
--------------------- -------------------


Balance, January 1, 2002 $ (66,978,332) $ (70,474,832)

Distributions (3,342,762) (3,342,762)

Net income 4,516,454 3,916,454

------------- -------------
Balance, June 30, 2002 $ (65,804,640) $ (69,901,140)
============= =============




* Previously reported in Form 10-Q filed by the Company on August 8, 2002

14




Waterford Gaming, L.L.C.

Condensed Statement of Cash Flows

(Unaudited)



Previously reported Restated
for the six months for the six months
ended June 30, 2002 * ended June 30, 2002
---------------------- -------------------

Cash flows from operating activities
Net income $ 4,516,454 $ 3,916,454
------------ ------------

Adjustments to reconcile net income
to net cash provided by operating activities
Amortization 370,874 370,874
Depreciation 5,390 5,390
Equity in (income) loss of Trading Cove Associates 158,835 (10,252,165)
Operating distributions from
Trading Cove Associates --- 9,978,604
Changes in operating assets and liabilities
Increase in due from Trading Cove Associates (1,032,396) ---
Increase in other current assets (42,243) (42,243)
Decrease in accrued expenses and accounts payable (22,248) (22,248)
Decrease in accrued interest on senior notes payable (112,757) (112,757)
------------ ------------
Total adjustments (674,545) (74,545)
------------ ------------
Net cash provided by
operating activities 3,841,909 3,841,909
------------ ------------

Cash flows from investing activities
Contributions to Trading Cove Associates (600,000) (600,000)
Distributions from Trading Cove Associates 950,000 950,000
Sales and (purchases) of restricted investments - net 445,859 445,859
------------ ------------
Net cash provided by
investing activities 795,859 795,859
------------ ------------
Cash flows from financing activities
Redemption of 9.50% senior notes (4,031,000) (4,031,000)
Distributions to member (3,342,762) (3,342,762)
------------ ------------
Net cash used in
financing activities (7,373,762) (7,373,762)
------------ ------------
Net decrease in cash and cash equivalents (2,735,994) (2,735,994)

Cash and cash equivalents at beginning of period 3,570,949 3,570,949

------------ ------------
Cash and cash equivalents at end of period $ 834,955 $ 834,955
============ ============

Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 5,761,617 $ 5,761,617
============ ============



* Previously reported in Form 10-Q filed by the Company on August 8, 2002

15






Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations

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


A - CERTAIN FORWARD LOOKING STATEMENTS

This quarterly report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including, in
particular, the statements about the Company's, TCA's and the Mohegan Sun's
plans, strategies and prospects. Although the Company believes that such
statements are based on reasonable assumptions, these forward-looking statements
are subject to numerous factors, risks and uncertainties that could cause actual
outcomes and results to be materially different from those projected. These
factors, risks and uncertainties include, among others, the risk factors
described below under the heading "Risk Factors" and the following:

a) the financial performance of the Mohegan Sun;

b) changes in laws or regulations (including, without limitation, gaming
laws or regulations);

c) the effects of new competition; and

d) general domestic and global economic conditions.

The Company's, TCA's and Mohegan Sun's actual results, performance or
achievements could differ materially from those expressed in, or implied by, the
forward-looking statements contained herein. The Company can give no assurances
that any of the events anticipated by the forward-looking statements will occur
or, if any of them do, what impact they will have on its results of operations
and financial condition. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this quarterly
report on Form 10-Q.

B - DEVELOPMENT AND OPERATIONAL ACTIVITIES

The Company is a special purpose company formed solely for the purpose of
holding its partnership interest, as a general partner, in TCA, a Connecticut
general partnership and the manager (until January 1, 2000) and developer of the
Mohegan Sun.

1 - TRADING COVE ASSOCIATES

TCA was organized on July 27, 1993. The primary purpose of TCA has been,

a) to assist the Mohegan Tribe of Indians of Connecticut (the "Tribe" or
"Mohegan Tribe") and the Authority in obtaining federal recognition,

b) to negotiate the tribal-state compact with the State of Connecticut on
behalf of the Tribe,

c) to obtain financing for the development of the Mohegan Sun,

d) to negotiate the Amended and Restated Gaming Facility Management
Agreement (the "Management Agreement"),

e) to oversee all operations of the Mohegan Sun pursuant to the terms of
the Management Agreement until midnight December 31, 1999, and

f) to participate in the design and development of the Mohegan Sun.

The Mohegan Sun commenced operations on October 12, 1996. From the opening of
the casino until midnight December 31, 1999, TCA oversaw the Mohegan Sun's
day-to-day operations.

TCA's partnership agreement will terminate on December 31, 2040, or earlier, in
accordance with its terms. The Company has a 50 percent partnership interest in
TCA. The remaining 50 percent interest is owned by Kerzner Investments, an
affiliate of Kerzner International Limited ("Kerzner International"). The
complete text of (a) the Amended and Restated Partnership Agreement of Trading
Cove Associates, dated as of September 21, 1994, among Sun Cove Limited (now
Kerzner Investments), RJH Development Corp., Leisure Resort Technology, Inc.,
Slavik Suites, Inc., and LMW Investments, Inc., and (b) the First Amendment to
Amended and Restated Partnership Agreement of Trading Cove Associates, dated as
of October 22, 1996, among Sun Cove Limited, Slavik Suites, Inc., RJH
Development Corp., LMW Investments, Inc. and Waterford Gaming, L.L.C. is filed
as exhibits to the Company's Registration Statement on Form S-4, filed with the
Commission (File No. 333-17795) and declared effective on May 15, 1997 and each
is incorporated herein by reference.

16



2 - TRADING COVE ASSOCIATES - MATERIAL AGREEMENTS

a) RELINQUISHMENT AGREEMENT

On February 7, 1998, TCA and the Authority entered into the Relinquishment
Agreement (the "Relinquishment Agreement"). Under the terms of the
Relinquishment Agreement, TCA continued to manage the Mohegan Sun under the
Management Agreement until midnight December 31, 1999, and on January 1, 2000,
the Management Agreement terminated and the Tribe assumed day-to-day management
of the Mohegan Sun.

Under the Relinquishment Agreement, to compensate TCA for terminating its rights
under the Management Agreement and the Hotel/Resort Management Agreement, the
Authority agreed to pay to TCA a fee (the "Relinquishment Fees") equal to 5
percent of Revenues, as defined in the Relinquishment Agreement, generated by
the Mohegan Sun during the 15-year period commencing on January 1, 2000,
including revenue generated by the Project Sunburst expansion.

The Relinquishment Fees are divided into senior relinquishment payments and
junior relinquishment payments, each of which equals 2.5 percent of Revenues.
Revenues are defined in the Relinquishment Agreement as gross gaming revenues
(other than Class II gaming revenue, including bingo) and all other facility
revenues. Such revenue includes, hotel revenues, food and beverage sales,
parking revenues, ticket revenues and other fees or receipts from the
convention/events center in the Project Sunburst expansion and all rental or
other receipts from lessees, licensees and concessionaires operating in the
facility, but not the gross receipts of such lessees, licensees and
concessionaires. Such revenues exclude revenues generated by any other expansion
of the Mohegan Sun.

Senior relinquishment payments are payable quarterly in arrears commencing on
April 25, 2000 for the quarter ended March 31, 2000, and the junior
relinquishment payments are payable semi-annually in arrears commencing on July
25, 2000 for the six months ended June 30, 2000, assuming sufficient funds are
available after satisfaction of the Authority's senior obligations, as defined
in the Relinquishment Agreement. See section below titled "Risk Factors -
Subordination Trading Cove's right to receive the relinquishment payments from
the Authority is junior to certain payments by the Authority to the Mohegan
Tribe and holders of its indebtedness".

For the six-month periods ended June 30, 2003 and 2002, total Relinquishment
Fees earned were $31,068,470 and $26,666,998, respectively. The amount of
Relinquishment Fees reported in this quarterly report on Form 10-Q are based
upon Revenues reported to TCA by the Authority.

The Relinquishment Agreement is filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1998 (Commission File No.
333-17795), as accepted by the Commission on November 13, 1998, and is
incorporated herein by reference.

17



b) DEVELOPMENT AGREEMENT AND OTHER RELATED AGREEMENTS

On February 7, 1998, TCA and the Authority entered into the Development Services
Agreement (the "Development Agreement"). Pursuant to the Development Agreement,
TCA agreed to oversee the design, construction, furnishing, equipping and
staffing of the Project Sunburst expansion for a $14.0 million development fee
(the "Development Fee").

The first phase of the Project Sunburst expansion, including the Casino of the
Sky, The Shops at Mohegan Sun, and the 10,000-seat Mohegan Sun Arena opened in
September 2001. In April 2002, 734 of the 1,200-hotel rooms in the 34-story
luxury hotel as well as the meeting and convention space and spa opened. The
balance of the 1,200-hotel rooms opened during June 2002. At June 30, 2003 the
Project Sunburst expansion was complete in terms of the Development Agreement.

Pursuant to the Development Agreement, the Authority agreed to pay the
Development Fee to TCA quarterly beginning on January 15, 2000, based on
incremental completion of the Project Sunburst expansion as of each payment
date. A summary of the quarterly Development Fee payments received by TCA in
accordance with the terms of the Development Agreement is as follows:


Date Received by TCA Development Fee Received

January 15, 2000 $ 1,372,000
April 20, 2000 896,000
July 17, 2000 1,260,000
October 13, 2000 1,372,000
January 23, 2001 588,000
April 16, 2001 1,582,000
July 20, 2001 2,212,000
October 17, 2001 1,974,000
January 25, 2002 1,260,000
April 22, 2002 413,000
July 19, 2002 581,000
October 18, 2002 238,000
January 24, 2003 84,000
April 15, 2003 112,000
------------
$ 13,944,000
============

At June 30, 2003 $56,000 in Development Fee was due from the Authority.

As described in Note 6 to the condensed financial statements included in Item 1
of this quarterly report on Form 10-Q, on February 9, 1998, TCA and KIML entered
into the Development Services Agreement Phase II. Pursuant to the Development
Services Agreement Phase II, TCA subcontracted with KIML, who agreed to perform
those services assigned to KIML by TCA in order to facilitate TCA's fulfillment
of its duties and obligations to the Authority under the Development Agreement.
KIML assigned the Development Services Agreement Phase II to Kerzner
Investments.

Pursuant to the Development Services Agreement Phase II, TCA pays to Kerzner
Investments the Development Services Fee Phase II. Such fee equals 3 percent of
the development costs of the Project Sunburst expansion, excluding capitalized
interest, less all costs incurred by TCA in connection with the Project Sunburst
expansion. The Development Services Fee Phase II is paid in installments - on
December 31, 1999, December 31, 2000 and on the Completion Date, as defined in
the Development Agreement - with the final payment being made when the actual
development costs of the Project Sunburst expansion are known. TCA pays the
Development Services Fee Phase II from available cash flow, if any, in
accordance with the Amended and Restated Omnibus Termination Agreement. The
total of the Development Services Fee Phase II and TCA's costs related to the
development of the Project Sunburst expansion will exceed the related revenue
received by TCA under the Development Agreement by approximately $16 million.

Also as described in Note 6 to the condensed financial statements included in
Item 1 of this quarterly report on Form 10-Q, before KIML assigned the
Development Services Agreement Phase II to Kerzner Investments, it entered into
the Local Construction Services Agreement with Construction, pursuant to which
Construction agreed to provide certain of those services assigned to KIML by TCA
pursuant to the Development Services Agreement Phase II. KIML assigned the Local
Construction Services Agreement to Kerzner Investments.

Pursuant to the Local Construction Services Agreement, Kerzner Investments
agreed to pay to Construction, an affiliate of the Company, a fee equal to 20.83
percent of the Development Services Fee Phase II as and when Kerzner Investments
receives payment from TCA pursuant to the Development Services Agreement Phase
II.

Pursuant to a Letter Agreement, Construction has subcontracted with The Slavik
Company, an affiliate of the Company, to provide certain services under the
Local Construction Services Agreement. In exchange for providing such services,
Construction agreed that The Slavik Company would be paid a fee equal to 14.30
percent of its fee under the Local Construction Services Agreement.

18



C - CERTAIN RISK FACTORS

1 - Lack of Operations; Dependence on the Mohegan Sun - The Company is entirely
dependent upon the performance of the Mohegan Sun to meet its operating
obligations including its debt service obligations.

The Company does not conduct any business operations other than in connection
with its role as a general partner of Trading Cove and activities incidental to
the issuance of the 8.625% Senior Notes and the making of restricted and
temporary investments. The Company is prohibited by the terms of the Indenture
from engaging in any other business activities. The Company intends to fund its
operating, debt service and capital needs from cash flows from Trading Cove.

Trading Cove's only material source of revenue and cash flows is the
Relinquishment Fees it receives from the Authority. There can be no assurance
that the Mohegan Sun will continue to generate sufficient revenues for the
Authority to be profitable or to service its debt obligations, or to pay
Relinquishment Fees. The Company's ability to meet its obligations under the
8.625% Senior Notes is entirely dependent upon the performance of the Mohegan
Sun, which is subject to matters over which Trading Cove and the Company have no
control, including, without limitation, general economic conditions, effects of
competition, political, regulatory and other factors, the actual number of
gaming customers and the amount wagered.

In addition, Trading Cove has entered into subcontracts with Kerzner Investments
(who has further subcontracted with certain of our affiliates) in connection
with the development and construction of the Project Sunburst expansion. Under
the subcontracts, Trading Cove has agreed to pay a Development Services Fee
Phase II equal to 3 percent of the total costs of the Project Sunburst
expansion, excluding capitalized interest, which is estimated to be
approximately $1.0 billion, less Trading Cove's actual costs relating to the
Project Sunburst expansion. The Company expects Trading Cove will pay Kerzner
Investments and our affiliates a Development Services Fee Phase II of
approximately $20 million pursuant to these subcontracts. Pursuant to the
Amended and Restated Omnibus Termination Agreement, Trading Cove is required to
pay the Development Services Fee Phase II prior to making certain distributions
to its partners, including the Company. To date, Trading Cove has paid
approximately $20 million to Kerzner Investments under the Development Services
Agreement. Any further payment of the Development Services Fee Phase II reduces
amounts available to be distributed to the Company.

The Company cannot assure you that its future operating cash flow will be
sufficient to cover its expenses, including interest on the 8.625% Senior Notes.

2 - Leverage - The Company's and the Authority's substantial indebtedness could
adversely affect the Company's ability to fulfill its obligations under the
8.625% Senior Notes.

As of June 30, 2003, the Company has an aggregate long-term senior indebtedness
of $155,000,000, consisting of the 8.625% Senior Notes. At December 31, 2002,
the Company had an aggregate long-term senior indebtedness of $108,007,000
consisting of the $125 Million Senior Notes which were redeemed on June 11,
2003. The Authority is also highly leveraged. Trading Cove's agreements with the
Authority do not prohibit the Authority from incurring additional indebtedness.

The degree to which the Authority is leveraged could have significant
consequences for the holders of the 8.625% Senior Notes, including, without
limitation, the following at June 30, 2003:

a) making it more difficult for the Authority to pay the fees owed to
Trading Cove under the Relinquishment Agreement; and

b) the Authority's high degree of leverage may make it vulnerable to an
economic downturn, which may hamper the Mohegan Sun's ability to meet
expected operating results.

3 - Subordination - Trading Cove's right to receive the relinquishment payments
from the Authority is junior to certain payments by the Authority to the Mohegan
Tribe and holders of its indebtedness.

The senior and junior relinquishment payments from the Authority to Trading Cove
rank behind all of the Authority's obligations to pay the minimum priority
distributions to the Mohegan Tribe and all of the Authority's existing and
future senior secured indebtedness.

As a result, upon any distribution by the Authority to its creditors in a
bankruptcy, liquidation, reorganization or similar proceeding relating to the
Authority or its property, the priority distributions owed to the Mohegan Tribe
and the holders of the Authority's senior secured indebtedness will be entitled
to be paid in full and in cash before any senior or junior relinquishment
payments may be made to Trading Cove. In addition, the junior relinquishment
payments rank behind all of the Authority's existing and future senior
indebtedness. As a result, in any such proceedings, the holders of the
Authority's senior indebtedness will be entitled to be paid in full and in cash
before any junior relinquishment payments may be made to Trading Cove.

In addition, all relinquishment payments will be blocked in the event of a
payment default on senior secured indebtedness of the Authority, and all junior
relinquishment payments will be blocked in the event of a payment default on
senior indebtedness of the Authority and, in each case, may be blocked for up to
179 of 360 consecutive days in the event of certain non-payment defaults on
senior secured indebtedness or senior indebtedness of the Authority, as
applicable.

In the event of a bankruptcy, liquidation, reorganization or similar proceeding
relating to the Authority, Trading Cove will receive distributions (if at all)
on a pari passu basis with all other holders of the Authority's senior unsecured
indebtedness with respect to the senior relinquishment payments from the assets
remaining after the Authority has paid all of its senior secured indebtedness
and with all other holders of subordinated indebtedness with respect to the
junior relinquishment payments from the assets remaining after the Authority has
paid all of its senior indebtedness. However, the Relinquishment Agreement
requires that amounts otherwise payable to Trading Cove in a bankruptcy or
similar proceeding of the Authority be paid to holders of senior secured
indebtedness, with respect to the senior relinquishment payments, and to holders
of senior indebtedness until they are paid in full, with respect to junior
relinquishment payments, instead of to Trading Cove. For that reason, Trading
Cove may receive less, ratably, than holders of senior unsecured indebtedness of
the Authority in any such proceeding. In any of these cases, the Authority may
not have sufficient funds to pay all of its creditors and Trading Cove may
receive less, ratably, than the holders of the Authority's senior indebtedness.

19


4 - Risks Associated with Trading Cove and the Trading Cove Partnership
Agreement - The Company would not be a creditor of Trading Cove and it has no
rights to the assets of the Authority in the event of a bankruptcy or similar
proceeding against either Trading Cove or the Authority. The Company does not
have the power under Trading Cove's partnership agreement to cause Trading Cove
to make any distributions to the Company.

If Trading Cove becomes the debtor in a bankruptcy or similar proceeding, the
Company would have the status of an equity holder, not a creditor, and would not
be entitled to receive any distributions until all of Trading Cove's creditors
were paid in full.

If the Authority became the debtor in a bankruptcy or similar proceeding,
Trading Cove's rights and recovery would depend on numerous factors, including
the type and outcome of the proceeding. If the Authority ceased operations and
liquidated, under chapter 7 of the Bankruptcy Code or otherwise, Trading Cove's
claim would likely be limited to the amount of unpaid Relinquishment Fees as of
the time of liquidation. If the Authority reorganized under chapter 11 of the
Bankruptcy Code, Trading Cove's claim would likely be based on an estimate of
the Mohegan Sun's future revenues for the term of the Relinquishment Agreement.
In any event, any recovery by Trading Cove on its claims for senior or junior
relinquishment fees would be subject to the prior payment in full of all
indebtedness senior thereto.

As a result, the Company cannot give any assurance that, in the event of
bankruptcy or financial difficulty of either Trading Cove or the Authority, it
would ultimately recover sufficient (or any) funds to pay amounts outstanding
under the 8.625% Senior Notes.

The 8.625% Senior Notes are not secured by a pledge of the Company's partnership
interest in Trading Cove. Accordingly, in the event of an acceleration under the
Indenture, the trustee under the Indenture will not be able to foreclose upon
the equity in Trading Cove.

The partnership agreement with respect to Trading Cove requires consent by both
partners in order to take any action. Accordingly, neither the Company nor
Kerzner Investments has the authority to cause Trading Cove to make any
distributions, and Kerzner Investments has the ability to block any action taken
by Trading Cove. Although the partnership agreement requires Trading Cove to
make distributions of excess cash, the distributions are reduced by certain
undefined, discretionary amounts, including foreseeable needs of cash,
obligations to third parties, adequate working capital and reserves and the
amount needed by the partnership to conduct its business and carry out its
purposes. A dispute between the partners as to the appropriate amount of such
reductions could result in no or limited distributions by Trading Cove, which
could have a material adverse effect on the Company's ability to make required
payments of interest, principal and premium on the 8.625% Senior Notes.

Under the partnership agreement and certain other existing agreements, Trading
Cove must pay expenses and make certain payments and priority distributions
prior to making distributions to the Company. Such expenses, payments and
priority distributions include,

(1) operating expenses and to the extent operating expenses are less than
$2.0 million annually, payment of the difference to each of Kerzner
Investments and the principals of the Company;

(2) the development fee to be paid to Kerzner Investments, Construction,
and The Slavik Company and related development expenses equal to 3
percent of the total cost of the Project Sunburst expansion, excluding
capitalized interest, less Trading Cove's actual costs relating to the
Project Sunburst expansion (a development fee payment, of
approximately $9.2 million, was made in July 2003. Trading Cove's
accrued liability to Kerzner Investments with respect to such fee
after such payment was approximately $848,000), and

(3) a $5.0 million annual payment to Kerzner Investments, payable
quarterly until December 31, 2006.

All of these amounts reduce the amounts distributable to the Company. Finally,
the Company and Trading Cove are party to litigation with a former partner of
Trading Cove, which, if adversely determined, could materially and adversely
affect its future distributions from Trading Cove. For a description of the
complaint, see PART II--OTHER INFORMATION, Item 1--Legal Proceedings to this
Form 10Q.

5 - Risks Associated with the Buy/Sell Option Under Trading Cove Partnership
Agreement - If a dispute occurs between the Company and Kerzner Investments, the
buy/sell provision of the partnership agreement could be invoked. If the
buy/sell provision is invoked, the Company cannot assure you that it would have
sufficient funds to buy out Kerzner Investments or, if the Company agreed to
sell to Kerzner Investments, that the selling price would be sufficient to pay
all amounts due on the 8.625% Senior Notes.

In the event of any dispute between the partners in Trading Cove, either partner
could invoke the buy/sell provision contained in the partnership agreement.
Pursuant to the buy/sell provision, the party invoking the buy/sell provision
would deliver a notice to the other party requiring it to sell its interest or
buy the invoking party's interest, in each case at the price set forth in such
notice. The party receiving the notice must make the election within 45 days of
receipt of the notice or be deemed to have accepted the offer to sell. If the
offer to buy is elected, the party must close the purchase within 75 days of the
end of the 45-day period. Any party may terminate the option at any time prior
to closing by accepting the position of the other party. In the event Kerzner
Investments were to invoke the buy/sell provision, the Company could:

a) buy Kerzner Investments' interest;

b) sell its interest; or

c) agree with Kerzner Investments on the point of dispute.

The Company may transfer it right to buy under the buy/sell provision of the
partnership agreement to the Waterford Group or the Waterford Group may fund the
purchase of Kerzner Investments' partnership interest. If the Company were to
elect to buy Kerzner Investments' partnership interest other than with funds
provided by the Waterford Group, the Indenture requires the Company to redeem
the 8.625% Senior Notes; however the Company cannot assure you that it would be
able to raise funds sufficient to redeem the 8.625% Senior Notes on satisfactory
terms, or at all.

If the Company were to sell its partnership interest in Trading Cove, it is
possible that the amount the Company receives would be insufficient to pay all
amounts due on the 8.625% Senior Notes. If the Company were to concur with
Kerzner Investments with respect to the point of dispute, it cannot assure you
that Kerzner Investments' position would not have a material adverse effect on
the Company's ability to pay principal, interest and premium on the 8.625%
Senior Notes.

20


6 - Difficulties in Enforcing Obligations Against the Authority - The ability to
enforce obligations against the Authority and the Mohegan Tribe is limited by
the Mohegan Tribe's sovereign immunity.

Although the Mohegan Tribe and the Authority have sovereign immunity and may not
be sued without their consent, both the Mohegan Tribe and the Authority have
granted a limited waiver of sovereign immunity and consent to suit in connection
with the Relinquishment Agreement, including suits against the Authority to
enforce the obligation to pay fees due under the Relinquishment Agreement. In
the event that such waiver of sovereign immunity is held to be ineffective,
Trading Cove could be precluded from judicially enforcing its rights and
remedies. Generally, waivers of sovereign immunity have been held to be
enforceable against Indian tribes such as the Mohegan Tribe. In addition, the
Company has no standing to enforce the Relinquishment Agreement and therefore
would have to rely on Trading Cove to enforce such agreements.

The Relinquishment Agreement provides that disputes shall be resolved in any
court of competent jurisdiction including the Gaming Disputes Court of the
Mohegan Tribe, which was established under the Mohegan Tribe's constitution to
rule on disputes with respect to the Mohegan Sun. Appeals of the decisions of
the Trial Division are heard by the Appellate Branch of the Gaming Disputes
Court. Matters as to which applicable federal or state courts have jurisdiction
may be brought in such courts. However, the federal courts may not have
jurisdiction over disputes not arising under federal law, and the state courts
may not have jurisdiction over any disputes arising on the Mohegan Tribe's
reservation. Moreover, the federal and state courts, under the doctrines of
comity and exhaustion of tribal remedies, may be required to (1) defer to the
jurisdiction of the Gaming Disputes Court or (2) require that any plaintiff
exhaust its remedies in the Gaming Disputes Court before bringing any action in
the federal or state court. Thus, there may be no federal or state court forum
with respect to a dispute with the Authority or the Mohegan Tribe relating to
the Relinquishment Agreement. In addition, the Authority may not be subject to
the federal bankruptcy laws. Thus, no assurance can be given that, if an event
of default occurs, any forum will be available other than an arbitration panel
of the Gaming Disputes Court. In the Gaming Disputes Court, there are few
guiding precedents for the interpretation of Mohegan Tribal law. Any execution
of a judgment of the Gaming Disputes Court will require the cooperation of the
Mohegan Tribe's officials in the exercise of their police powers. Thus, to the
extent that a judgment of the Gaming Disputes Court must be executed on Mohegan
Tribal lands, the practical realization of any benefit of such a judgment will
be dependent upon the willingness and ability of the Mohegan Tribal officials to
carry out such judgment. In addition, the land under the Mohegan Sun is owned by
the United States in trust for the Mohegan Tribe, and creditors of the Authority
or the Mohegan Tribe may not force or obtain title to the land.

The Mohegan Tribe is permitted to amend the provisions of its constitution that
establish the Authority and the Gaming Disputes Court with the approval of
two-thirds of the members of the Tribal Council and a ratifying vote of a
two-thirds majority of all of the members of the Mohegan Tribe, with at least
40% of the registered voters of the Mohegan Tribe voting. However, prior to the
enactment of any such amendment by the Tribal Council, any non-tribal party will
have the opportunity to seek a ruling from the Appellate Branch of the Gaming
Disputes Court that the proposed amendment would constitute an impermissible
impairment of contract. Further, the Mohegan Tribe's constitution prohibits the
Mohegan Tribe from enacting any law that would impair the obligations of
contracts entered into in furtherance of the development, construction,
operation and promotion of gaming on Mohegan Tribal lands. Amendments to this
provision of the Mohegan Tribe's constitution require the affirmative vote of
75% of all registered voters of the Mohegan Tribe. As of September 30, 2002, the
Mohegan Tribe had approximately 934 registered voters. Amendment to any of such
provisions of the Mohegan Tribe's constitution could adversely affect the
ability of Trading Cove to enforce the obligations of the Authority, which, in
turn would adversely affect the Company's ability to pay principal, interest and
premium on the 8.625% Senior Notes.

7 - Future Expansion of the Mohegan Sun - In the event that the Mohegan Tribe
decides to expand the Mohegan Sun, Trading Cove has no rights associated with
such expansion.

The Mohegan Tribe may in the future decide to expand the Mohegan Sun. Under the
terms of the Relinquishment Agreement, Trading Cove is entitled to 5 percent of
all revenues derived directly or indirectly from the Mohegan Sun, including the
Project Sunburst expansion but excluding revenues derived from any future
expansions and from Class II gaming activities (including bingo). If the Mohegan
Sun is further expanded, Trading Cove, under the terms of the Relinquishment
Agreement will not be entitled to any of the revenues generated by the
incremental expansion. The Relinquishment Agreement does not describe how the
Authority would allocate which revenues were covered by the Relinquishment
Agreement and which revenues were not. In addition, Trading Cove has no rights
to act as developer of any such expansion. The Company cannot assure you that
any future expansion of the Mohegan Sun will not have a material adverse affect
on the Authority, including by disrupting the current operations of the Mohegan
Sun thereby affecting revenues and the Authority's ability to pay Relinquishment
Fees to Trading Cove. In addition, the Company cannot assure you that any future
expansion will not draw guests to those portions of the Mohegan Sun from which
Trading Cove is not entitled to a percentage of revenues, thereby impacting the
Relinquishment Fees. If the Mohegan Tribe were to take any action that would
prejudice or have a material adverse effect on the rights of Trading Cove under
the Relinquishment Agreement, Trading Cove could sue the Mohegan Tribe for
breach of contract. The Company cannot assure you that any such lawsuit would be
successful. See "Difficulties in Enforcing Obligations Against the Authority."

21


8 - Competition from Other Gaming Operations -The Mohegan Sun may face
significant competition from other persons who may receive approval to engage in
gaming in the region.

The gaming industry is highly competitive. The Mohegan Sun currently competes
primarily with the Foxwoods Resort Casino and, to a lesser extent, with casinos
in Atlantic City, New Jersey and upstate New York. Foxwoods, which is located
approximately 10 miles from the Mohegan Sun, recently announced its intention to
build a $99 million casino expansion. With the completion of the Project
Sunburst expansion of the Mohegan Sun, the two facilities are comparable in
gaming space as well as in amenities such as hotel accommodations and non-gaming
entertainment.

Currently, other than Atlantic City, New Jersey, casino gaming in the
Northeastern United States is conducted only by federally recognized Indian
tribes operating under federal Indian gaming law. The New York State legislature
authorized certain limited machine gaming at several racetracks in the state but
not full-scale casino gaming. To date, none of the racetracks have installed
these machines. The legislature also authorized three Indian casinos in the
Catskills region of New York (Sullivan and Ulster counties) and three casinos to
be operated by the Seneca Nation of Indians in the Niagara/Buffalo area. The
Seneca Nation opened a facility in Niagara Falls in late December 2002. The
validity of the New York State statute is currently being litigated in state
court.

The Oneida Indian Nation operates Turning Stone Casino Resort in Verona, New
York, approximately 270 miles from the Mohegan Sun. The St. Regis Mohawk Tribe
in Hogansburg, New York has entered into a gaming compact with the State of New
York to conduct gaming on its reservation near the Canadian border. There are
several proposals to develop casinos in the Catskills region of New York. To
date, only three tribes, the St. Regis Mohawk Tribe, the Cayuga Tribe and the
Stockbridge-Munsee Band of Mohican Indians (the "Stockbridge-Munsee Tribe"),
have submitted Land into Trust Applications to the United States Department of
the Interior. In addition, public reports indicate that several other tribes
have expressed interest in developing a casino in the Catskills region. The St.
Regis Mohawk Tribe recently signed a memorandum of understanding with the State
of New York to conduct full scale gaming in the Catskills region, but newly
elected tribal leaders are questioning the efficacy of that agreement. The
Cayuga Nation of New York recently partnered with Empire Resorts, Inc. to
develop a gaming business in the Catskills region. Federal and state approvals
are still needed for all projects in the Catskills region.

In addition, several other federally recognized tribes in New England are
seeking to establish gaming operations, including the Historic Eastern Pequot
Tribe of Connecticut (whose status is being challenged), the Narragansett Tribe
of Rhode Island, the Aquinnah Wampanoag Tribe of Massachusetts and all four of
the tribes in the State of Maine: the Penobscot, Passamaquoddy, Houlton Band and
Micmac Tribes.

There are several other groups in New England seeking federal recognition as
tribes. If successful, these groups will most likely seek to establish casino
operations. In Connecticut, these include the Schaghticoke Nation and the Golden
Hill Paugussett Tribe; in Massachusetts, the groups include the Mashpee
Wampanoag and the two Nipmuck Bands that border on the State of Connecticut -
the Hassanamisco Band and the Chaubunagungamaug Band. Both the Golden Hill and
the Schaghticoke groups have received proposed negative determinations and are
in an extended response period (i.e., beyond the initial 180 day response
period) after which the Department of the Interior will issue its final
determination. The Nipmuck Bands both received proposed negative findings and
have submitted responses. They are awaiting final determinations from the
Department of the Interior; the Mashpee is awaiting a proposed finding.

A number of states in the region are projecting budget shortfalls and are
considering permitting forms of gaming to provide state revenues. In an effort
to address its state budget shortfalls, the Governor of Massachusetts and other
leaders in that state have indicated interest in both Indian gaming and
non-Indian commercial gaming.

The Mohegan Sun also competes with other forms of gaming, including on-track and
off-track wagering, state lotteries and Internet gaming, as well as with
non-gaming leisure activities.

9 - Effect of General Economic Conditions - The U.S. economy is experiencing a
downturn, which could have an adverse impact on the financial performance of the
Mohegan Sun.

The Mohegan Sun is affected by general economic conditions. The events of
September 11th and the war in Iraq further exacerbated difficult conditions in
the U.S. economy and the gaming industry generally. The effects of these events
have included a decline in vacation travel and tourism due to, among other
factors, fears regarding additional acts of terrorism. The magnitude and
duration of these effects or any future acts of terrorism is unknown and cannot
be predicted. In addition, the recent outbreak of severe acute respiratory
syndrome (SARS) has affected international air travel. Worsening economic
conditions or a prolonged recession could hamper the Mohegan Sun's ability to
meet expected operating results.

22



10 - Dependence on Key Personnel; Significant Change in Tribal Management - The
loss of any key management member or any significant change in the makeup of the
Tribal Council could have a material adverse effect on the Mohegan Sun.

The Mohegan Sun's success depends in large part on the continued service of
certain key management personnel, particularly William Velardo, the Authority's
President and Chief Executive Officer, Mitchell Etess, the Authority's Executive
Vice President of Marketing, and Jeffrey Hartmann, the Authority's Executive
Vice President, Finance and Chief Financial Officer. The loss of the services of
one or more of these individuals or other key personnel could have a material
adverse effect on the Authority's business, operating results and financial
condition which, in turn, would have a material adverse effect on the Company's
ability to meet its obligations under the 8.625% Senior Notes.

Additionally, Mark F. Brown serves as Chairman of the Tribal Council of the
Mohegan Tribe and Chairman of the Management Board of the Authority. The Members
of the Tribal Council, including the Chairman, are elected by the Mohegan Tribe
every five years. The next election is in October 2005. The loss of Mr. Brown's
services, as well as a significant change in the composition of the Tribal
Council, could have a material adverse effect on the Authority which, in turn,
would have a material adverse effect on the Company's ability to meet its
obligations under the 8.625% Senior Notes.


11 - Highly Regulated Industry - Changes in the law could have a material
adverse effect on the Authority's ability to conduct gaming.

Gaming on the Mohegan Tribe's reservation is extensively regulated by federal,
state and tribal regulatory bodies, including the National Indian Gaming
Commission and agencies of the State of Connecticut (for example, the Division
of Special Revenue, the State Police and the Department of Liquor Control). As
is the case with any casino, changes in applicable laws and regulations could
limit or materially affect the types of gaming that the Authority can conduct
and the revenues they realize. Congress has regulatory authority over Indian
affairs and can establish and change the terms upon which Indian tribes may
conduct gaming. Currently, the operation of all gaming on Indian lands is
subject to the Indian Gaming Regulatory Act of 1988. For the past several years,
legislation has been introduced in Congress with the intent of modifying a
variety of perceived problems with the Indian Gaming Regulatory Act. Certain
bills have also been proposed which would have the effect of repealing many of
the key provisions of the Indian Gaming Regulatory Act and prohibiting the
continued operation of certain classes of gaming on certain Indian reservations
in states where such gaming is not otherwise allowed on a commercial basis.
However, none of the substantive proposed amendments to the Indian Gaming
Regulatory Act have proceeded out of committee hearings to a vote by either the
House or the Senate.

In the event that Congress passes prohibitory legislation that does not include
any grandfathering exemption for existing tribal gaming operations, and if such
legislation is sustained in the courts against tribal challenge, the Authority's
ability to meet its obligations to creditors, such as Trading Cove under the
Relinquishment Agreement, would be doubtful. If the Authority were unable to
meet its obligations, it would have a material adverse effect on the Company's
ability to make payments of principal, interest and premiums on the 8.625%
Senior Notes.

Under federal law, gaming on Indian land is dependent on the permissibility
under state law of certain forms of gaming or similar activities. If the State
of Connecticut were to make various forms of gaming illegal or against public
policy, such action may have an adverse effect on the ability of the Authority
to conduct gaming. In fact, the State of Connecticut repealed the Las Vegas
Casino Nights statute earlier this year, but the state attorney general has
opined that this will not affect the two existing Indian gaming compacts.

12 - Possible Environmental Liabilities - Risks of material environmental
liability may exist as a result of possibly incomplete remediation of known
environmental hazards and the existence of unknown environmental hazards.

The site on which the Mohegan Sun is located was formerly occupied by United
Nuclear Corporation, a naval products manufacturer of, among other things,
nuclear reactor fuel components. Prior to the decommissioning of United Nuclear
Corporation facilities on the site, extensive remediation of contaminated soils
and additional investigations were completed. The site currently meets federal
and state remediation requirements. Notwithstanding the foregoing, the Company
cannot assure you that:

a) the various environmental reports or any other existing environmental
studies revealed all environmental liabilities;

b) any prior owners or tenants did not create any material environmental
condition not known to the Company;

c) future laws, ordinances or regulations will not impose any material
environmental liability; or

d) a material environmental condition does not otherwise exist on the
site.


23


13 - Taxation of Indian Gaming - A change in the Authority's current tax-exempt
status could have a material adverse effect on the Authority's ability to make
capital improvements and repay its indebtedness.

Based on current interpretations of the Internal Revenue Code of 1986, as
amended (the "Code"), neither the Mohegan Tribe nor the Authority is a taxable
entity for purposes of federal income taxation. There can be no assurance that
Congress will not reverse or modify the exemption for Indian tribes from federal
income taxation.


Efforts were made in Congress in the mid-1990s to amend the Code to provide for
taxation of the net income of tribal business entities. These have included a
House bill which would have taxed gaming income earned by Indian tribes as
unrelated business income subject to corporate tax rates. Although this
legislation was not enacted, future legislation in this area could materially
and adversely affect the Authority's ability to make capital improvements and
repay its indebtedness which, in turn, would have a material adverse effect on
the Company's ability to meet its obligations under the 8.625% Senior Notes.

D - SIGNIFICANT ACCOUNTING POLICIES

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

In the opinion of management, the Company does not have any individual
accounting policy that is critical in the preparation of its financial
statements. This is due to the definitive nature of the business in which the
Company is engaged. Also, in many cases, the Company must use an accounting
policy or method because it is the only policy or method permitted under
accounting principles generally accepted in the United States of America.

The following is a review of the more significant accounting policies and
methods used by the Company:

1 - Concentration of Credit Risk - The Company's interest in TCA is its
principal asset and source of income and cash flow. The Company anticipates
regular distributions from TCA based upon the operating results of the Authority
and the related Relinquishment Fees, and Development Fee, paid and to be paid by
the Authority.

2 - Equity Investments - The Company's equity investment in TCA is accounted for
utilizing the equity method. Included in the investment is the purchase price
paid to a corporation for its 12.5 percent interest in TCA. This amount is
amortized over the term of the related agreement. The Company receives
distributions from TCA in accordance with an Amended and Restated Omnibus
Termination Agreement. The amount of distributions relies upon the fees earned
by TCA pursuant to the Relinquishment Agreement and the Development Agreement
with the Authority. Distributions are recorded when received.

24


E - Table of Contractual Obligations

The following table provides an overview of the Company's aggregate contractual
obligations as of June 30, 2003.




Payments Due By Period

Less Than 1
Contractual Obligations Total Year 1-3 Years 3-5 Years More than 5

Long-Term Debt Obligations (i) (i) (i) (i) (i)
Capital Lease Obligations 0 0 0 0 0
Operating Lease Obligations) 0 0 0 0 0
Purchase Obligations 0 0 0 0 0
Other Long-Term Liabilities on the
Registrant's Balance Sheet under GAAP 0 0 0 0 0
Totals (i) (i) (i) (i) (i)



(i) As of June 30, 2003, the Company's long-term debt consists of obligations
under the 8.625% Senior Notes. On June 30, 2003, approximately $155 million
in aggregate principal amount of 8.625% Senior Notes was outstanding.
Interest on the outstanding principal amount of 8.625% Senior Notes is
payable by the Company semi-annually in arrears on March 15 and September
15 at a rate of 8.625% per annum. The outstanding principal amount of the
8.625% Senior Notes is due and payable in full on September 15, 2012. In
addition to making payments of principal and interest as described in the
preceding sentences, on March 15 and September 15 of each year, the Company
and Finance must redeem their 8.625% Senior Notes with any Company Excess
Cash (as defined in the Indenture) less all Required IRA True-Up Payments
(as defined in the Indenture) and less any amount set aside for the payment
of accrued and unpaid interest on the interest payment date that
corresponds to the redemption date for which the determination is being
made at a redemption price expressed as a percentage of the principal
amount of notes being redeemed. Such redemption price declines annually
from 8.625% for redemptions made between September 14, 2003 and September
14, 2004, to 100% for redemptions made after September 14, 2012. Any
reduction in principal amount of 8.625% Senior Notes with Company Excess
Cash (as defined in the Indenture) less all Required IRA True-Up Payments
(as defined in the Indenture) and less any amount set aside for the payment
of accrued and unpaid interest on the interest payment date that
corresponds to the redemption date for which the determination is being
made will lower the interest payments payable by the Company in subsequent
periods.

F - OVERVIEW OF CURRENT AND FUTURE CASH FLOWS

The Company expects to fund its operating, debt service and capital needs from
cash flows from the Company's distributions from TCA, and from the Company's
available cash. Based upon the Company's anticipated future operations,
management believes that available cash flow will be sufficient to meet the
Company's anticipated requirements for future operating expenses, future
scheduled payments of principal and interest on the 8.625% Senior Notes and
additional investments in TCA that may be required in connection with the
Project Sunburst expansion. No assurance, however, can be given that the
operating cash flow will be sufficient for that purpose.

1 - SOURCES OF INCOME AND CASH FLOWS

The Company has one primary source of income and cash flow: equity income and
distributions from TCA. The Company anticipates regular payments from TCA based
on the results of the Mohegan Sun and Relinquishment Fees and Development Fee
payments by the Authority to TCA.

2 - PAYMENTS OF DISTRIBUTIONS ON THE COMPANY'S PARTNERSHIP INTEREST IN TCA

The Company expects that TCA's major source of revenue for 2003 will be
Relinquishment Fees payable by the Authority.

On April 28, 2003 the Company received $2,876,707 and on July 28, 2003 the
Company received $6,365,797 from TCA as distributions, which represents the
Company's share under the Amended and Restated Omnibus Termination Agreement of
approximately (a) $31,068,000 in Relinquishment Fees earned by TCA pursuant to
the Relinquishment Agreement for the period January 1 through June 30, 2003 and
(b) $168,000 in Development Fee earned by TCA pursuant to the Development
Agreement for the same period. On April 26, 2002 the Company received $1,821,000
and on July 26, 2002 the Company received $9,790,000 from TCA as distributions,
which represents the Company's share under the Amended and Restated Omnibus
Termination Agreement of approximately (a) $26,667,000 in Relinquishment Fees
earned by TCA pursuant to the Relinquishment Agreement for the period January 1
through June 30, 2002 and (b) $994,000 in Development Fee earned by TCA pursuant
to the Development Agreement for the same period.

25



3 - AMENDED AND RESTATED OMNIBUS TERMINATION AGREEMENT

Effective March 18, 1999, the Amended and Restated Omnibus Termination Agreement
(the " Amended and Restated Omnibus Termination Agreement") was entered into by
TCA, Kerzner International, the Company, KIML, LMW Investments, Inc., Kerzner
Investments, Slavik and Construction. The Amended and Restated Omnibus
Termination Agreement (i) terminated the Memorandum of Understanding dated
February 7, 1998; and (ii) effective January 1, 2000 terminated a) the Amended
and Restated Omnibus Financing Agreement, b) Completion Guarantee and Investment
Banking and Financing Arrangement Fee Agreement (the "Financing Arrangement
Agreement"); c) the Management Services Agreement; d) the Organizational and
Administrative Services Agreement; e) the Marketing Services Agreement; and f) a
Letter Agreement relating to expenses dated October 19, 1996.

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

(a) First, to pay all unpaid amounts which may be due under the terminated
letter agreement and to pay certain affiliates of the Company and to
Kerzner Investments a percentage of an annual fee of $2.0 million less
the actual expenses incurred by TCA during such year. Such annual fee
is payable in equal quarterly installments beginning March 31, 2000
and ending December 31, 2014. For the six months ended June 30, 2003
and 2002, $915,992 ($457,996 to Kerzner Investments and $457,996 to
affiliates of the Company), and $0, respectively, had been paid and
incurred by TCA in terms of this first priority.

(b) Second, to return all capital contributions made by the partners of
TCA after September 29, 1995. TCA anticipates making capital calls to
fund expenses related to the development of the Project Sunburst
expansion, and these capital calls will be repaid, based on cash flow,
in the quarter following the quarter in which the capital call was
made. From January 1, 2000 to June 30, 2003 these capital
contributions aggregated $8,000,000. From January 1, 2000 to June 30,
2003 $7,100,000 had been repaid to the partners of TCA, 50% to the
Company and 50% to Kerzner Investments. As of June 30, 2003, $900,000
in capital contributions remained outstanding. On July 28, 2003, a
cash distribution of $450,000 was made to each partner.

(c) Third, to pay any accrued amounts for obligations performed prior to
January 1, 2000 under the Financing Arrangement Agreement. All such
required payments were made during 2000.

(d) Fourth, to make the payments set forth in the agreements relating to
the Development Services Agreement Phase II and the Local Construction
Services Agreement. On July 28, 2003, $9,157,000 was paid in terms of
the fourth priority. The accrued liability to Kerzner Investments with
respect to such fee after such payment was approximately $848,000.

(e) Fifth, to pay Kerzner Investments an annual fee of $5.0 million
payable in equal quarterly installments of $1.25 million beginning
March 31, 2000 and ending December 31, 2006. On each of July 28, 2003
and July 26, 2002, $1,250,000 was distributed in terms of the fifth
priority.

(f) Sixth, to pay any accrued amounts for obligations performed with
respect to periods prior to January 1, 2000 under the Management
Services Agreement, the Organizational and Administrative Services
Agreement and the Marketing Services Agreement. The final required
payments under this priority were made during 2001.

(g) Seventh, for the period beginning March 31, 2000 and ending December
31, 2014, to pay each of Kerzner Investments and the Company
twenty-five percent of the relinquishment payments as distributions.
On July 28, 2003 and July 26, 2002, $11,831,593, ($5,915,797 to
Kerzner Investments and $5,915,796 to the Company) and $18,780,000,
($9,390,000 to Kerzner Investments and $9,390,000 to the Company),
respectively, was distributed by TCA in terms of the seventh priority.

(h) Eighth, to distribute all excess cash.

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

To the extent TCA does not have adequate cash to make the payments pursuant to
the Amended and Restated Omnibus Termination Agreement, such amount due shall be
deferred without the accrual of interest until TCA has sufficient cash to pay
them.
26



G - RESULTS OF OPERATIONS

COMPARISON OF OPERATING RESULTS FOR THE QUARTERS ENDED JUNE 30, 2003 AND 2002

Total expenses for the three months ended June 30, 2003 was $13,302,653 compared
with $3,170,187 for the three months ended June 30, 2002. Interest expense
increased by $7,151,931 and amortization on deferred financing costs increased
by $2,481,483 due primarily to the redemption of the $125 Million Senior Notes
and the issuance of the 8.625% Senior Notes, salaries-related parties increased
by $19,923 due to the increase in Revenues of the Mohegan Sun, 9.50% senior
notes tender expense increased by $495,962 due to the redemption of the $125
Million Senior Notes and general and administrative costs decreased by $16,833
(primarily attributable to a decrease in legal and other expenses related to the
defense of the Leisure litigation, as detailed under PART II OTHER INFORMATION:
Item I--Legal Proceedings of approximately $25,000, by a decrease in accounting
fees of approximately $4,200 and by a decrease in other legal expenses of
approximately $3,300 and offset by an increase in insurance expense of
approximately $2,000, by an increase in Commission filing expenses of
approximately $8,900, by an increase in miscellaneous expenses of approximately
$2,500 and by an increase in federal and state payroll taxes of approximately
$1,300).

Equity in income of Trading Cove Associates for the three months ended June 30,
2003 was $7,106,875 compared with $5,420,387 for the three months ended June 30,
2002. The Company has included amortization of purchased interests of $110,007
in each quarter's equity income. The Company's share of TCA's results fluctuates
based upon revenues earned by TCA under the Relinquishment Agreement and
distributions and payments made by TCA under the Amended and Restated Omnibus
Termination Agreement. In addition, interest and dividend income decreased by
$101,397.

As a result of the foregoing factors, the Company experienced a net loss of
$6,165,355 for the three months ended June 30, 2003 compared with net income of
$2,382,020 for the three months ended June 30, 2002.


COMPARISON OF OPERATING RESULTS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2003
AND 2002


Total expenses for the six months ended June 30, 2003 was $16,683,426 compared
with $6,662,258 for the six months ended June 30, 2002. Interest expense
increased by $7,032,194 and amortization on deferred financing costs increased
by $2,481,483 due primarily to the redemption of the $125 Million Senior Notes
and the issuance of the 8.625% Senior Notes, salaries-related parties increased
by $44,017 due to the increase in Revenues of the Mohegan Sun, 9.50% Senior Note
tender expense increased by $495,962 due to the redemption of the $125 Million
Senior Notes and general and administrative costs decreased by $32,488
(primarily attributable to a decrease in legal and other expenses related to the
defense of the Leisure litigation, as detailed under PART II--OTHER INFORMATION:
Item I--Legal Proceedings totaling approximately $33,700, by a decrease in bank
sweep fees of approximately $11,600, by a decrease in accounting fees of
approximately $4,200 and by a decrease in other legal expenses of approximately
$3,600 and offset by an increase in insurance expense of approximately $5,100,
by an increase in Commission filing expenses of approximately $8,900, by an
increase in miscellaneous expenses of approximately $4,500 and by an increase in
federal and state payroll taxes of approximately $800).

Equity in income of Trading Cove Associates for the six months ended June 30,
2003 was $13,529,185 compared with $10,252,165 for the six months ended June 30,
2002. The Company has included amortization of purchased interests of $220,014
in each period's equity income. The Company's share of TCA's results fluctuates
based upon revenues earned by TCA under the Relinquishment Agreement and
distributions and payments made by TCA under the Amended and Restated Omnibus
Termination Agreement. In addition, interest and dividend income decreased by
$243,521.

As a result of the foregoing factors, the Company experienced a net loss of
$3,071,215 for the six months ended June 30, 2003 compared with net income of
$3,916,454 for the six months ended June 30, 2002.

27



H - Liquidity and Capital Resources

The initial capital of the Company consists of the partnership interests in TCA
contributed by Slavik and LMW Investments, Inc. in forming the Company. In
connection with the offering of the $65 Million Senior Notes, the Company used
approximately $25.1 million to purchase from Kerzner International $19.2 million
in principal amount of Authority subordinated notes plus accrued and unpaid
interest and subordinated notes fee amounts. In addition, TCA distributed
approximately $850,000 in principal amount of Authority subordinated notes to
the Company. In addition, the Company used approximately $10.6 million of the
proceeds from the $65 Million Senior Notes to purchase RJH Development Corp.'s
interests in TCA.

During September 1997 and on October 12, 1998 and 1999, the Company purchased
from Kerzner International $2.5 million Authority subordinated notes plus
accrued and unpaid interest and completion guarantee fee amounts (total cost
approximately $2.8 million for each transaction).

On January 6, 1998 the Company paid $5,000,000 to Leisure whereby Leisure gave
up its beneficial interest of 5 percent of the organizational and administrative
fee and excess cash of TCA and any other claims it may have had against the
Company, TCA and TCA's partners and former partner.

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

On December 30, 1999, the Authority paid to the holders of the Authority
subordinated notes, an amount to satisfy all obligations of such Authority
subordinated notes. The Company received $44,403,517 from the Authority. On
December 30, 1999, TCA distributed $10,536,543 to its partners. The Company
received $5,268,272.

On January 4, 2000 in accordance with the terms of the $125 Million Senior Notes
Indenture, dated as of March 17, 1999 between the Company and Finance, as
issuers, and State Street Bank and Trust Company, as trustee, and the Security
and Control Agreement, dated as of March 17, 1999 between the Company and
Finance and State Street Bank and Trust Company, $15,000,000 was transferred to
restricted investments ("Interest Reserve Account").

On January 4, 2000 also in accordance with the terms of the $125 Million Senior
Notes Indenture, the Company distributed $34,671,789 to its member Waterford
Group.

On November 1, 2002, the Company distributed $15,000,000 to Waterford Group, as
a Permitted Dividend, in accordance with the terms of the $125 Million Senior
Notes Indenture.

In connection with the offering of the 8.625% Senior Notes, the Company used
approximately $111.8 million to repurchase the $125 Million Senior Notes and
distributed $44.5 million to Waterford Group.

During 1999, 2000, 2001, 2002, on January 13, 2003 and April 10, 2003 the
Company distributed $886,285, $3,059,393, $1,739,660, $3,520,562, $1,290,900 and
$1,947,341, respectively, to Waterford Group as tax distributions, in accordance
with the terms of the applicable indentures.

Accordingly, after taking into consideration net income (loss) since inception
the Company has a member's deficit of approximately $127,772,000 and $69,901,000
at June 30, 2003 and 2002, respectively.

For the six months ended June 30, 2003 and 2002, net cash (used in) provided by
operating activities (as shown in the Condensed Statements of Cash Flows) was
$(1,769,467) and $3,841,909, respectively.

Current assets decreased from $15,010,697 at December 31, 2002 to $9,101,950 at
June 30, 2003. The decrease was primarily attributable to the scheduled
semi-annual payment of interest on March 15, 2003 on the $125 Million Senior
Notes in the amount of approximately $5,130,000, by the redemption on March 15,
2003 of $125 Million Senior Notes in the principal amount of $5,658,000, by the
redemption on June 11, 2003 of $125 Million Senior Notes, by the distributions
to Waterford Group during the period of $47,738,241 and by approximately
$1,769,000 of cash used in operations and offset by distributions by TCA in
terms of the Amended and Restated Omnibus Termination Agreement and by proceeds
from the 8.625% Senior Notes issuance.

Current liabilities decreased from $3,133,192 at December 31, 2002 to $1,907,163
at June 30, 2003. The decrease was primarily attributable to a decrease in
accrued interest on senior notes payable of approximately $2,278,500 and offset
by an increase in accrued expenses and accounts payable of approximately
$1,052,500 (primarily attributable to an increase in amounts due for deferred
financing costs of approximately $644,500, by an increase in amounts due for
Commission filing expense of approximately $8,800, by an increase in amounts due
for accounting services of approximately $7,400 and by an increase in amounts
due for 9.50% senior notes tender expense of approximately $407,400 and offset
by a decrease in the amount due for legal fees of approximately $11,600 and by a
decrease in the amount due for legal and other expenses related to the defense
of the Leisure litigation, as detailed under PART II--OTHER INFORMATION: Item
I--Legal Proceedings of approximately $5,900.

For the six months ended June 30, 2003 and 2002 net cash provided by investing
activities (as shown in the Condensed Statements of Cash Flows) was $207,785 and
$795,859, respectively. The net cash provided by investing activities in 2003
was primarily the result of sales and (purchases) of restricted investments-net
of approximately $3,656,000 and distributions from TCA of $200,000 and offset by
contributions to TCA of $450,000(to fund certain of TCA's development expenses
in connection with the Project Sunburst expansion at the Mohegan Sun) and by
deferred financing costs of approximately $3,199,000. The net cash provided by
investing activities in 2002 was primarily the result of sales and (purchases)
of restricted investments-net of approximately $446,000, distributions from TCA
of $950,000 and offset by contributions to TCA of $600,000 (to fund certain of
TCA's development expenses in connection with the Project Sunburst expansion at
the Mohegan Sun).

The Company anticipates that no additional contributions will have to be made by
the Company to TCA (to fund certain of TCA's development expenses in connection
with the Project at the Mohegan Sun). As of June 30, 2003 $5,000,000 had been
contributed by the Company to TCA to fund certain of TCA's development expenses
in connection with the Project Sunburst expansion at the Mohegan Sun.

For the six months ended June 30, 2003 and 2002, net cash used in financing
activities (as shown in the Condensed Statements of Cash Flows) was $745,241 and
$7,373,762, respectively. The net cash used in financing activities in 2003 was
primarily the result of the redemption of the $125 Million Senior Notes in the
principal amounts of $5,658,000 on March 15, 2003, by the redemption of the $125
Million Senior Notes on June 11, 2003 in the principal amount of $102,349,000
and by distributions to Waterford Group of $47,738,241 and offset by the
proceeds from the 8.625% Senior Notes issuance in the principal amount of
$155,000,000. The net cash used in financing activities in 2002 was primarily
the result of the redemption of the $125 Million Senior Notes in the principal
amount of $4,031,000 on March 15, 2002 and distributions to Waterford Group of
$3,342,762.

Pursuant to the terms of the Indenture, if the Company and Finance have any
Company Excess Cash, as defined in the Indenture, on February 1 or August 1 of
any year, they must use such Company Excess Cash less all Required IRA True-Up
Payments, as defined in the Indenture, and less any amount set aside for the
payment of accrued and unpaid interest on the interest payment date that
corresponds to the redemption date for which the determination is being made, to
redeem the 8.625% Senior Notes on the March 15 or September 15 following such
dates. Any such redemption will be made at a price equal to a percentage of the
principal amount being redeemed. On August 1, 2003 the Company and Finance had
Company Excess Cash, (which totaled $5,568,186), as defined in the Indenture,
and after deducting i) all required IRA True-Up Payments, as defined in the
Indenture, (which totaled $0) and ii) the amount set aside for the payment of
accrued and unpaid interest on the interest payment date that corresponds to the
redemption date for which the determination is being made (which totaled
$3,490,729), the amount available for a mandatory redemption of the 8.625%
Senior Notes totaled $2,077,457, and accordingly on September 15, 2003 the
Company and Finance intends to make a mandatory redemption of the 8.625% Senior
Notes in the principal amount of $1,912,000 at the redemption price of 108.625%.
Such redemption price is expressed as a percentage of the principal amount being
redeemed.

The Company expects to fund its operating, debt service and capital needs from
cash flows from the Company's share of payments from TCA, and from the Company's
available cash. Based upon the Company's anticipated future operations,
management believes that available cash flow will be sufficient to meet the
Company's anticipated requirements for future operating expenses, future
scheduled payments of principal and interest on the 8.625% Senior Notes. No
assurance, however, can be given that the operating cash flow will be sufficient
for that purpose.
28



Item 3 -- Quantitative and Qualitative Disclosures about Market Risk

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

For fixed rate debt, changes in interest rates generally affect the fair market
value of the debt instrument, but not earnings or cash flows. Therefore,
interest rate risk and changes in the fair market value of fixed rate debt
should not have a significant impact on earnings or cash flows until such debt
is refinanced, if necessary. For variable rate debt, changes in interest rates
generally do not impact the fair market value of the debt instrument, but do
affect future earnings and cash flows. The Company did not have any variable
rate debt outstanding at June 30, 2003 and December 31, 2002. The fair market
value of the Company's long-term debt at June 30, 2003 and December 31, 2002 is
estimated to be approximately $161,200,000 and $111,787,000, respectively, based
on the quoted market price for the same issue.

The Company is exposed to market risks from fluctuations in interest rates and
the effects of those fluctuations on market values of the Company's cash
equivalents and restricted investments. Cash equivalents generally consist of
overnight investments while the restricted investments at June 30, 2003 are
principally comprised of an investment in a Federal Home Loan Bank Discount Note
which was purchased at a discount of 0.96%, and matures September 12, 2003 and
an investment in the First American Treasury Obligations Fund. These investments
are not significantly exposed to interest rate risk, except to the extent that
changes in interest rates will ultimately affect the amount of interest income
earned and cash flow from these investments.

The Company does not currently have any derivative financial instruments in
place to manage interest costs, but that does not mean that the Company will not
use them as a means to manage interest rate risk in the future. The Company does
not use foreign currency exchange forward contracts or commodity contracts and
does not have foreign currency exposure in its operations.

Item 4 -- Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports, is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms and that
such information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In
designing, and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
objectives, and management is required to apply its judgment in evaluating the
cost benefit relationship of possible controls and procedures.

As required by the Commission Rule 13a-15(b), the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of the end of the quarter
covered by this report. Based on the foregoing evaluation, the Company's Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective at the reasonable assurance
level.

(b) Changes in Internal Controls

There has been no change in the Company's internal controls over financial
reporting during the Company's most recent quarter that has materially affected,
or is reasonably likely to materially affect, the Company's internal controls or
financial reporting.

29


PART II -- OTHER INFORMATION

Item 1 -- Legal Proceedings:

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

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, L.L.C., Trading Cove
Associates, LMW Investments, Inc., Slavik Suites, Inc., Waterford Group, L.L.C.,
Len Wolman and Mark Wolman (collectively, the "Defendants"). The matter has been
transferred to the complex litigation docket and is pending in State Court in
Waterbury, Connecticut. The complaint alleged breach of fiduciary duties,
fraudulent non-disclosure, violation of Connecticut Statutes Section 42-110a, et
seq. and unjust enrichment in connection with the negotiation by certain of the
Defendants of the settlement and release agreement. The complaint also brought a
claim for an accounting. The complaint seeks unspecified legal and equitable
damages.

On February 29, 2000, Defendants filed a Motion to Strike and a Motion for
Summary Judgment, each with respect to all claims. The Court granted Defendants'
Motion to Strike in part and denied Defendants' Motion for Summary Judgment, on
October 13, 2000. The Court's order dismissed the claim for an accounting and
the claim under Connecticut Statutes Section 42-110a, et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites, Inc., Len Wolman and Mark Wolman. In a decision dated August 6,
2001, the Court dismissed all claims against LMW Investments, Inc., Slavik
Suites, Inc., Len Wolman and Mark Wolman.

On November 15, 2000, the Company and its co-defendants answered the complaint.
In addition, the Company and Trading Cove Associates asserted counterclaims for
breach of the settlement and release agreement and breach of the implied
covenant of good faith against Leisure and its president, Lee Tyrol. In a
decision dated June 6, 2001, the Court dismissed the counterclaims against Lee
Tyrol. Leisure moved for summary judgment seeking dismissal of the counter
claims in full. This motion for summary judgment was denied on April 14, 2003.


Discovery has commenced. Pursuant to the current scheduling order, all
depositions of fact witnesses are to be completed by September 15, 2003. A trial
date has not been set.

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

30



Item 2 -- Changes in Securities:

On April 15, 2003, the Company and Finance commenced an offer to purchase all of
their $125 Million Senior Notes prior to maturity and a solicitation of consents
to amend the indenture governing such notes and terminate the security and
control agreement granting a security interest in the interest reserve account
to the trustee as securities intermediary. Such amendments eliminate
substantially all of the restrictive covenants and security provisions relating
to the $125 Million Senior Notes.

On May 15, 2003, the Company and Finance announced an extension of their tender
offer to 12:00 midnight, New York City time, on June 11, 2003, unless further
extended or terminated. On June 4, 2003, the Company and Finance announced an
extension of their consent solicitation to 5:00 p.m., New York City time, on
June 6, 2003, unless further extended or terminated. Holders of the $125 Million
Senior Notes had the right to withdraw their previous tenders and consents until
5:00 p.m., New York City time, on June 6, 2003.

By June 6, 2003, the Company and Finance had received duly executed tenders from
holders of $102,349,000 in principal amount of the $125 Million Senior Notes,
representing 100% of the aggregate principal amount of the issued and
outstanding $125 Million Senior Notes. On June 6, 2003, the Company purchased
all of the $125 Million Senior Notes tendered, and pursuant to a supplemental
indenture, the amendments to the $125 Million Senior Notes eliminating
substantially all of the restrictive covenants and security provisions relating
to the $125 Million Senior Notes became effective.

31



Item 3 -- Defaults upon Senior Securities:

None

Item 4 -- Submission of Matters to a Vote of Security Holders:
None

Item 5 -- Other Information:

None

Item 6 -- Exhibits and Reports on Form 8-K:

32



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

Exhibit No. Description
3.1 Certificate of Formation, as amended, of Waterford
Gaming, LLC (i)
3.2 Certificate of Incorporation of Waterford Gaming
Finance Corp. (i)
3.3 Bylaws of Waterford Gaming Finance
Corp. (i)
4.1 Indenture, dated as of November 8, 1996, between
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., the issuers, and Fleet National
Bank, as trustee, relating to $65,000,000 12-3/4%
Senior Notes due 2003. (i)
4.1.1 First Supplemental Indenture, dated as of March 4,
1999, among Waterford Gaming, L.L.C. and Waterford
Gaming Finance, Corp., as issuers, and State
Street Bank and Trust Company, as trustee,
relating to $65,000,000 12-3/4% Senior Notes due
2003. (vi)
4.2 Indenture, dated as of March 17, 1999, among
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., as issuers, and State Street Bank
and Trust Company, as trustee, relating to
$125,000,000 9-1/2% Senior Notes
due 2010. (vi)
4.2.1 First Supplemental Indenture, dated as of June 6,
2003, among Waterford Gaming, L.L.C. and Waterford
Gaming Finance Corp., as issuers, and U.S. Bank
National Association, as trustee, relating to
$125,000,000 9-1/2% Senior Notes due 2010. (viii)
4.3 Security and Control Agreement, dated as of March
17, 1999, among Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp., as pledgors and
State Street Bank and Trust Company, as securities
intermediary. (vi)
4.3.1 Termination Agreement, dated as of June 11,
2003, among Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp., and
U.S. Bank National Association, as securities
intermediary. (viii)
4.4 Specimen Form of 9-1/2% Senior Notes due 2010
(included in Exhibit 4.2). (vi)
4.5 Indenture, dated as of June 11, 2003, among
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., as issuers, and U.S. Bank National
Association, as trustee, relating to $155,000,000
8-5/8% Senior Notes due 2012. (viii)
4.6 Security and Control Agreement, dated as of
June 11, 2003, among Waterford Gaming, L.L.C. and
Waterford Gaming Finance Corp., as pledgors and
U.S. Bank National Association, as securities
intermediary. (viii)
4.7 Specimen Form of 8-5/8% Senior Notes due 2012
(included in Exhibit 4.5). (viii)
10.1 Omnibus Financing Agreement, dated as of September
21, 1995, between Trading Cove Associates and Sun
International Hotels Limited. (i)
10.2 First Amendment to the Omnibus Financing
Agreement, dated as of October 19, 1996, among
Trading Cove Associates, Sun International Hotels
Limited and Waterford Gaming, L.L.C. (i)
10.2.1 Amended and Restated Omnibus Financing Agreement
dated September 10, 1997 (ii)
10.2.2 Omnibus Termination Agreement, dated as of March
18, 1999, among Sun International Hotels Limited,
Trading Cove Associates, Waterford Gaming,
L.L.C., Sun International Management Limited, LMW
Investments, Inc., Sun Cove Limited, Slavik
Suites, Inc., and Wolman Construction, L.L.C.(vi)
10.2.3 Amended and Restated Omnibus Termination
Agreement, dated as of January 1, 2000 and
effective as of March 18, 1999, among Sun
International Hotels Limited, Trading Cove
Associates, Waterford Gaming, L.L.C., Sun
International Management Limited, LMW
Investments, Inc., Sun Cove Limited, Slavik
Suites, Inc., and Wolman Construction, L.L.C.(vii)
10.3 Amended and Restated Partnership Agreement of
Trading Cove Associates, dated as of September 21,
1994, among Sun Cove Limited, RJH Development
Corp., Leisure Resort Technology, Inc., Slavik
Suites , Inc., and LMW Investments, Inc. (i)
10.4 First Amendment to Amended and Restated
Partnership Agreement of Trading Cove Associates,
dated as of October 22, 1996, among Sun Cove
Limited, Slavik Suites, Inc., RJH Development
Corp., LMW Investments, Inc. and Waterford Gaming,
L.L.C. (i)
10.5 Purchase Agreement, dated as of March 10, 1999,
among Waterford Gaming, L.L.C., Waterford Gaming
Finance Corp., Bear, Stearns & Co., Inc., Merrill
Lynch, Pierce, Fenner and Smith Inc. and Salomon
Smith Barney. (vi)
10.5.1 Agreement with Respect to Redemption or Repurchase
of Subordinated Notes, dated September 10,
1997 (ii)
10.6 Amended and Restated Limited Liability Company
Agreement of Waterford Gaming, L.L.C., dated as of
March 17, 1999 by Waterford Group, L.L.C. (vi)
10.7 Note Purchase Agreement, dated as of October 19,
1996, among Sun International Hotels Limited,
Waterford Gaming, L.L.C. and Trading Cove
Associates. (i)
10.8 Note Purchase Agreement, dated as of September 29,
1995, between the Mohegan Tribal Gaming Authority
and Sun International Hotels Limited relating to
the Subordinated Notes. (i)
10.9 Management Agreement, dated as of July 28, 1994,
between the Mohegan Tribe of Indians of
Connecticut and Trading Cove Associates. (i)
10.10 Management Services Agreement, dated September 10,
1997. (ii)
10.11 Development Services Agreement, dated September
10, 1997. (ii)
10.12 Subdevelopment Services Agreement, dated September
10, 1997. (ii)
10.13 Completion Guarantee and Investment Banking and
Financing Arrangement Fee Agreement, dated
September 10, 1997. (ii)
10.14 Settlement and Release Agreement, dated January 6,
1998, by and among Leisure Resort Technology,
Inc., Lee R. Tyrol, Trading Cove Associates,
Slavik Suites, Inc., LMW Investments, Inc., RJH
Development Corp., Waterford Gaming, L.L.C. and
Sun Cove Limited. (iii)
10.15 Waiver and Acknowledgment of Noteholder. (iv)
10.16 Relinquishment Agreement, dated February 7, 1998,
between the Mohegan Tribal Gaming Authority and
Trading Cove Associates. (v)
10.17 Development Services Agreement, dated February 7,
1998, between the Mohegan Tribal Gaming Authority
and Trading Cove Associates. (v)
10.18 Agreement, dated September 28, 1998, by and among,
Waterford Gaming, L.L.C., Slavik Suites, Inc., LMW
Investments, Inc., Len Wolman, Mark Wolman,
Stephan F. Slavik, Sr. and Del J. Lauria (Len
Wolman's Employment Agreement). (v)
10.19 Agreement Relating to Development Services, dated
as of February 9, 1998, between Trading Cove
Associates and Sun International Management
Limited. (vi)
10.20 Local Construction Services Agreement, dated as of
February 9, 1998 between Sun International
Management Limited and Wolman Construction,
L.L.C. (vi)
10.21 Escrow Deposit Agreement, dated as of the 3rd day
of March 1999, by and among the Mohegan Tribal
Gaming Authority and First Union National Bank, as
Defeasance Agent. (vi)
21.1 Subsidiaries of Waterford Gaming,
L.L.C. (i)
21.2 Subsidiaries of Waterford Gaming Finance Corp. (i)
99.1 Quarterly report, for the period ended June 30,
2003, on Form 10-Q of the Mohegan Tribal Gaming
Authority (the "Authority") dated August 7, 2003,
incorporated by reference to the Authority's
electronic filing of such report on Form 10-Q,
Securities and Exchange Commission file

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

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

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

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

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

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

(vii) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the period ended March 31, 2001, Commission File No.
333-17795 as accepted by the Commission on May 14, 2001.

(viii)Filed herewith.
33



(b) REPORTS ON FORM 8-K


(i) Form 8-K filed on June 23, 2003

Item 5.

On June 20, 2003, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, announcing that the Authority has
commenced a cash tender offer and consent solicitation for any and all
of its $300,000,000 aggregate principal amount of 8.75% Senior
Subordinated Notes due 2009, a copy of which has been filed as an
exhibit to this report and is incorporated by reference to the
Authority's electronic filing of such report on Form 8-K, Securities
and Exchange Commission file reference no. 033-80655.

Date of Report: June 20, 2003


(ii) Form 8-K filed on June 30, 2003

Item 5.

On June 27, 2003, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 10-K/A, for the purpose of amending and
restating in their entirety Item 6 of, and Exhibit 12.1 to, the
Registrant's Form 10-K for the fiscal year ended September 30, 2002
filed on December 19, 2002, a copy of which has been filed as an
exhibit to this report and is incorporated by reference to the
Authority's electronic filing of such report on Form 10-K/A,
Securities and Exchange Commission file reference no. 033-80655.


On June 27, 2003, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, relating to an amendment to its Annual
Report on Form 10-K for the fiscal year ended September 30, 2002 and
the modification of certain of the terms of its cash tender offer and
consent for its $300,000,000 8.75% Senior Subordinated Notes due 2009
previously announced on June 19, 2003, a copy of which has been filed
as an exhibit to this report and is incorporated by reference to the
Authority's electronic filing of such report on Form 8-K, Securities
and Exchange Commission file reference no. 033-80655.

Date of Report: June 27, 2003


(iii) Form 8-K filed on July 1, 2003

Item 5.

On July 1, 2003, the Mohegan Tribal Gaming Authority (the "Authority")
filed a press release report on Form 8-K, announcing its preliminary
operating results for the quarter ended June 30, 2003, a copy of which
has been filed as an exhibit to this report and is incorporated by
reference to the Authority's electronic filing of such report on Form
8-K, Securities and Exchange Commission file reference no. 033-80655.

Date of Report: July 1, 2003


(iv) Form 8-K filed on July 3, 2003

Item 5.

On July 1, 2003, the Mohegan Tribal Gaming Authority (the "Authority")
filed Form 8-K, relating to its cash tender offer and consent for its
$300,000,000 8.75% Senior Subordinated Notes due 2009, a copy of which
has been filed as an exhibit to this report and is incorporated by
reference to the Authority's electronic filing of such report on Form
8-K, Securities and Exchange Commission file reference no. 033-80655.

Date of Report: July 1, 2003


(v) Form 8-K filed on July 10, 2003

Item 5.

On July 9, 2003, the Mohegan Tribal Gaming Authority (the "Authority")
filed Form 8-K, relating to the closing of a Rule 144A private
placement of $330 million, 6 3/8% Senior Subordinated Notes, a copy of
which has been filed as an exhibit to this report and is incorporated
by reference to the Authority's electronic filing of such report on
Form 8-K, Securities and Exchange Commission file reference no.
033-80655.

Date of Report: July 9, 2003


(vi) Form 8-K filed on July 18, 2003

Item 5.

On July 15, 2003, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, relating to the posting on its website of
its Slot Machine Statistical Report, a copy of which has been filed as
an exhibit to this report and is incorporated by reference to the
Authority's electronic filing of such report on Form 8-K, Securities
and Exchange Commission file reference no. 033-80655.

Date of Report: July 15, 2003


(vii) Form 8-K filed on July 18, 2003

Item 5.

On July 18, 2003, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, relating to its cash tender offer and
consent for its $300,000,000 8.75% Senior Subordinated Notes, a copy
of which has been filed as an exhibit to this report and is
incorporated by reference to the Authority's electronic filing of such
report on Form 8-K, Securities and Exchange Commission file reference
no. 033-80655.

Date of Report: July 18, 2003


(viii) Form 8-K filed on August 4, 2003

Item 5.

On July 31, 2003, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, announcing its third quarter ended June
30, 2003 operating results, a copy of which has been filed as an
exhibit to this report and is incorporated by reference to the
Authority's electronic filing of such report on Form 8-K, Securities
and Exchange Commission file reference no. 033-80655.

Date of Report: July 31, 2003


34



SIGNATURES

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




Date: August 12, 2003 By: /s/ Len Wolman
Len Wolman, Chief Executive Officer




Date: August 12, 2003 By: /s/ Alan Angel
Alan Angel, Chief Financial Officer




35