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


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

For the fiscal year ended December 31, 2004

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

Securities registered pursuant to Section 12(b) of the Act: NONE

Title of each class Name of each exchange on which registered
Not applicable Not applicable

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

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes / / No /X/

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter. - Not applicable

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980). - Not Applicable







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



PAGE
PART I

ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 13
ITEM 3. LEGAL PROCEEDINGS 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13

PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS 14
ITEM 6. SELECTED FINANCIAL DATA 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 27
ITEM 9A. CONTROLS AND PROCEDURES 27

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 28
ITEM 11. EXECUTIVE COMPENSATION 29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 30
ITEM 14. PRINCIPAL ACCOUNTANT'S FEES AND SERVICES 31

PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 32

Signatures 37





CERTAIN FORWARD LOOKING STATEMENTS

This annual report on Form 10-K contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), including, in particular, the statements about
Waterford Gaming, L.L.C. (the "COMPANY"), Trading Cove Associates ("TCA" or
"TRADING COVE") and the Mohegan Sun Casino's (the "MOHEGAN SUN") 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 "Management's Discussion and Analysis of Financial Condition and
Results of Operations - 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 annual
report on Form 10-K.


PART I

Item 1. BUSINESS

A. THE COMPANY

The Company was formed solely for the purpose of holding its partnership
interest in Trading Cove Associates, a Connecticut general partnership. Trading
Cove is the former manager and original developer of the Mohegan Sun located in
Uncasville, Connecticut, a casino owned by the Mohegan Tribe of Indians of
Connecticut (the "MOHEGAN TRIBE" or the "TRIBE"). The Company's interest in TCA
is its principal asset and source of income and cash flow.

Trading Cove developed the Mohegan Sun and managed the property from its opening
in 1996 until December 31, 1999. On January 1, 2000, Trading Cove turned over
management of the Mohegan Sun to the Mohegan Tribal Gaming Authority (the
"AUTHORITY"). TCA and the Company's principals assisted the Mohegan Tribe in
obtaining federal recognition, negotiating the tribal-state compact with the
State of Connecticut, obtaining numerous governmental approvals, raising debt
financing for the initial construction and development of the Mohegan Sun, and
developing the Project Sunburst expansion (the "PROJECT SUNBURST EXPANSION"), an
approximately $1.0 billion expansion at the Mohegan Sun, the final phase of
which opened in June 2002.

The Company is a wholly owned subsidiary of Waterford Group, L.L.C. ("WATERFORD
GROUP"). The Limited Liability Company Agreement of the Company (the "LLC
AGREEMENT") is effective until September 30, 2020 and may be terminated by the
Company's sole member or upon the occurrence of certain events as stated in the
LLC Agreement.

The LLC Agreement provides for the property, affairs and business of the Company
to be managed by a four-member Board of Directors (the "BOARD OF DIRECTORS"),
which consists of two directors appointed by Slavik Suites, Inc. ("SLAVIK") and
two directors appointed by LMW Investments, Inc. ("LMW"). A quorum for the Board
of Directors requires all four members. LMW and Slavik initially contributed
capital to the Company consisting of all of their respective interests in
Trading Cove.

Prior to the offering of the Company's $65 Million 12.75% Senior Notes (the
"12.75% SENIOR NOTES"), Slavik and LMW were partners of Trading Cove. In
connection with the formation of the Company, Slavik and LMW each contributed to
the Company its interests in Trading Cove in exchange for a 66-2/3 percent and
33-1/3 percent ownership interest, respectively, of the Company. Upon
consummation of the offering of the 12.75% Senior Notes, (i) $6.7 million of the
proceeds of such offering were distributed directly to Slavik for the purpose of
redeeming certain ownership interests in Slavik, and (ii) $3.3 million of the
proceeds were distributed to LMW, which in turn loaned such proceeds to Len and
Mark Wolman, as individuals, who used such funds to purchase certain interests
in Slavik. The Company used $10.6 million of the proceeds from the offering of
the 12.75% Senior Notes to purchase RJH Development Corp.'s ownership interest
in Trading Cove. As a result of these transactions (collectively the
"REORGANIZATION"), Slavik and LMW owned 67.7967 percent and 32.2033 percent of
the Company, respectively. The Company is a managing general partner of Trading
Cove. As a result of the Reorganization, the only two partners of Trading Cove
are the Company and Kerzner Investments Connecticut, Inc. ("KERZNER
INVESTMENTS"), formerly Sun Cove Limited.


1



In connection with the issuance on March 17, 1999 of the $125 Million 9.50%
Senior Notes (the "9.50% SENIOR NOTES"), each of Slavik and LMW contributed
their respective interests in the Company concurrently to Waterford Group.
Waterford Group is now the sole member of the Company. Slavik and LMW own
Waterford Group in the same respective interest as they had in the Company,
which are as follows:



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


Additional capital contributions may be made to the Company by its member,
Waterford Group. If it is determined that the Company requires additional funds,
such funds may be loaned to the Company by its member pursuant to the terms set
forth in the LLC Agreement; however, the indenture governing the $155 Million
8.625% Senior Notes (the "8.625% SENIOR NOTES"), prohibits the Company from
incurring additional indebtedness. The LLC Agreement also provides that any
disputes which arise under the LLC Agreement and which remain unresolved after
30 days will be settled through arbitration.

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

For the fiscal years 2004, 2003 and 2002, the Company had net income of
$13,923,694, $3,891,633 and $12,033,310, respectively. At the end of fiscal
years 2004, 2003 and 2002, the Company had total assets of $34,490,765,
$36,219,560 and $34,178,108, respectively.

As of December 31, 2004, the Company employed one full-time employee and no
part-time employees. The Company's employee is not covered by a collective
bargaining agreement.

B. $155 MILLION 8.625% SENIOR NOTES PAYABLE:

On June 11, 2003, the Company and Waterford Gaming Finance Corp. ("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 15th and September 15th 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 "8.625%
SENIOR NOTES 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.


2



Pursuant to the terms of the 8.625% Senior Notes Indenture, if the Company and
Finance have any Company Excess Cash, as defined in the 8.625% Senior Notes
Indenture, on February 1st or August 1st of any year, they must use such Company
Excess Cash less all Required IRA True-Up Payments, as defined in the 8.625%
Senior Notes 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 15th or September 15th 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%




The Company and Finance have periodically redeemed portions of the 8.625% Senior
Notes with Company Excess Cash pursuant to the terms of the 8.625% Senior Notes
Indenture. The table below summarizes (a) the amount of Company Excess Cash that
the Company and Finance have determined was available for the mandatory
redemption of the 8.625% Senior Notes on February 1st and August 1st of each
applicable year pursuant to the terms of the 8.625% Senior Notes Indenture, (b)
the aggregate principal amount of 8.625% Senior Notes redeemed with such Company
Excess Cash, (c) the date on which such redemption was consummated, and (d) the
redemption price at which such redemption was made.




Date Company Excess Cash Principal Amount of Dates of Redemption Price (expressed as percentage of
(approximately) notes redeemed principal amount being redeemed
- ---------------- ------------------- ------------------- -------------------- ---------------------------------
August 1, 2003 $ 5,568,000 $ 1,912,000 September 15, 2003 108.625%
February 1, 2004 $ 14,534,000 $ 7,302,000 March 15, 2004 108.625%
August 1, 2004 $ 11,695,000 $ 5,025,000 September 15, 2004 107.610%
February 1, 2005 $ 12,098,000 $ 5,600,000 March 15, 2005 107.610%





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 8.625% Senior Notes 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 8.625%
Senior Notes 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 8.625% Senior Notes
Indenture, is less than or equal to 3.0 to 1.0.

3





The fair market value of the Company's long term debt at December 31, 2004 and
2003 is estimated to be approximately $150,614,000 and $163,804,000,
respectively, based on the quoted market price for the 8.625% Senior Notes.

The 8.625% Senior Notes Indenture is filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 2003 (Securities and
Exchange Commission (the "COMMISSION") File No. 333-17795) as accepted by
Commission on August 12, 2003 and is incorporated herein by reference.

C. TRADING COVE ASSOCIATES

TCA was organized on July 23, 1993. The primary purpose of TCA has been,

- - to assist the Tribe and the Authority in obtaining federal recognition, - to
negotiate the tribal-state compact with the State of Connecticut
on behalf of the Tribe,
- - to obtain financing for the initial development of the Mohegan Sun, - to
negotiate the Amended and Restated Gaming Facility Management
Agreement (the "MANAGEMENT AGREEMENT"),
- - to oversee all operations of the Mohegan Sun pursuant to the terms of
the Management Agreement until midnight December 31, 1999, and
- - 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 Mohegan Sun until midnight December 31, 1999, TCA oversaw the Mohegan Sun's
day-to-day operations.

TCA's partnership agreement (the "TCA 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").

TCA's sole source of revenue is payment under the Relinquishment Agreement as
described below.

D. TRADING COVE ASSOCIATES MATERIAL AGREEMENTS

1 - 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 (described below) 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) 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."


4





A summary of relinquishment payments received by TCA for 2004, 2003 and 2002 is
as follows:





DATE SENIOR JUNIOR TOTAL
- ------------------------------------- ------------- ------------- -------------

April 26, 2004 $ 8,196,363 $ -- $ 8,196,363
July 26, 2004 8,477,030 16,673,392 25,150,422
October 25, 2004 9,165,092 -- 9,165,092
January 25, 2005 8,712,261 17,877,353 26,589,614
------------- ------------- -------------
Relinquishment Fees for the year
ended December 31, 2004 $ 34,550,746 $ 34,550,745 $ 69,101,491
============= ============= =============

April 25, 2003 $ 7,433,160 $ -- $ 7,433,160
July 25, 2003 8,101,075 15,534,235 23,635,310
October 27, 2003 8,691,811 -- 8,691,811
January 26, 2004 8,323,731 17,015,541 25,339,272
------------- ------------- -------------
Relinquishment Fees for the year
ended December 31, 2003 $ 32,549,777 $ 32,549,776 $ 65,099,553
============= ============= =============

April 25, 2002 $ 6,228,559 $ -- $ 6,228,559
July 25, 2002 7,104,939 13,333,500 20,438,439
October 25, 2002 8,171,882 -- 8,171,882
January 27, 2003 7,748,971 15,920,852 23,669,823
------------- ------------- -------------
Relinquishment Fees for the year
ended December 31, 2002 $ 29,254,351 $ 29,254,352 $ 58,508,703
============= ============= =============






The amount of Relinquishment Fees reported in this annual report on Form 10-K
are based upon Revenues reported to TCA by the Authority.

The senior and junior relinquishment payments rank behind the Authority's
obligation to pay an annual minimum priority distribution to the Mohegan Tribe
and all of the Authority's existing and future senior secured indebtedness,
including the Authority's bank credit facility. 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 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 until they are paid in full, with respect to the senior
relinquishment payments, and to holders of senior secured indebtedness, with
respect to junior relinquishment payments, instead of to Trading Cove. For that
reason Trading Cove may receive less, ratably, than holders of senior
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.

In the event of an acceleration of any indebtedness of the Authority, the senior
and junior relinquishment payments that are not yet due under the Relinquishment
Agreement would be effectively subordinated to the Authority's indebtedness
since the payment obligations under the Relinquishment Agreement cannot be
accelerated by their terms and have no blockage rights as designated senior debt
of the Authority.


5




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, there is no assurance that, in the event of bankruptcy or financial
difficulty of either Trading Cove or the Authority, the Company would ultimately
recover sufficient (or any) funds to pay amounts outstanding under the 8.625%
Senior Notes.

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

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

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

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

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

Under the Relinquishment Agreement, the Authority and Trading Cove have each
agreed not to solicit any employee of the other party or any affiliate of the
other party for five years.

With certain limitations set forth in the Relinquishment Agreement, both the
Mohegan Tribe and the Authority waive immunity from uncontested suit for certain
enforcement rights of Trading Cove arising under the Relinquishment Agreement.

The Company's right to receive a portion of the relinquishment payments from
Trading Cove is governed by the Amended and Restated Omnibus Termination
Agreement discussed below.

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.

2 - DEVELOPMENT AGREEMENT AND 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 approximately 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 approximately 1,200-hotel rooms opened during June 2002. At December 31,
2004 the Project Sunburst expansion was complete in terms of the Development
Agreement.


6




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.

As of December 31, 2004, TCA had received $14.0 million from the Authority as
Development Fee 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. 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,
excluding capitalized interest, less all costs incurred by TCA in connection
with the Project Sunburst expansion. At December 31, 2004, all of TCA's costs
associated with the Project Sunburst expansion had not been paid, however
reasonable estimates of those costs have been provided for in TCA's financial
statements at December 31, 2004. The Development Services Fee Phase II is paid
in three 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 described below. 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 $15,964,000.

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
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.

On April 26, 2000, July 26, 2000, January 26, 2003 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.

At December 31, 2004 TCA's accrued liability to Kerzner Investments with respect
to such fee was approximately $414,000 pursuant to the Development Service
Agreement Phase II.

The Development Services 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.


7



3 - TCA PARTNERSHIP AGREEMENT

In September 1994, Kerzner Investments, RJH Development Corp., Leisure Resort
Technology, Inc. ("LEISURE"), Slavik and LMW entered into an amended and
restated partnership agreement to, among other things: (i) admit Kerzner
Investments as a partner to the Trading Cove partnership; (ii) act as the
exclusive agent of the Mohegan Tribe to manage and develop an entertainment and
gaming facility on the Mohegan Tribal Reservation; and (iii) engage in any other
activities incidental or related to the foregoing.

In February 1995, the parties entered into an acknowledgment and release
agreement whereby Leisure withdrew from Trading Cove for all purposes, except
that Leisure retained a 5 percent "beneficial interest" in Trading Cove.
Leisure's beneficial interest is defined as the right to receive certain
distributions of excess cash and the organizational and administrative fee on
the earlier to occur of (i) 14 years from the date of commencement of the
Management Agreement and (ii) the termination of the Management Agreement.

On January 6, 1998, pursuant to the Settlement and Release Agreement described
in Item 3 (Legal Proceedings) the Company paid $5.0 million to Leisure and,
among other things, Leisure gave up (a) its beneficial interest of 5 percent in
certain fees and excess cash flows, as defined, of Trading Cove and (b) any
other claims it may have had against the Company, Kerzner Investments and
Trading Cove's partners and former partner.

As a result of (i) a First Amendment to the Amended and Restated Partnership
Agreement of Trading Cove, dated October 22, 1996 and (ii) an Agreement for
Purchase and Sale of Partnership Interest, dated September 12, 1996 whereby RJH
Development Corp. agreed to sell and the Company agreed to buy RJH Development
Corp.'s partnership interest for $10.6 million, the Company and Kerzner
Investments are the only partners in Trading Cove.

Pursuant to the TCA Partnership Agreement, Trading Cove will continue to exist
until the first to occur of: (i) December 31, 2040; (ii) a final disposition of
Trading Cove's interest in the Mohegan Sun (or any alternative facility that may
be developed or acquired pursuant to the terms of the TCA Partnership
Agreement); (iii) the decision of the managing partners to terminate Trading
Cove; and (iv) any other event which results in dissolution of Trading Cove.

In connection with its entry into the partnership, Kerzner Investments made a
capital contribution in an amount sufficient to equal a 50 percent partnership
interest. The TCA Partnership Agreement provides for additional capital
contributions. In the event that Trading Cove requires additional funds, and
subject to unanimous approval by the partners, the partners may make loans on a
PRO RATA basis, based on their respective partnership interests. Such loans are
non-recourse and unsecured and bear interest at an annual rate of 2 percent
above the prime rate.

In the event that the Company and Kerzner Investments determine that additional
capital is required to fund TCA's obligations, either may make a capital call.
In the event that a capital call is made and Kerzner Investments does not make
the requested additional capital contribution within 30 days, generally Kerzner
Investments is automatically deemed to have withdrawn from Trading Cove. In such
event, Kerzner Investments is not entitled to any return of any of its previous
capital contributions or additional contributions, but it is generally entitled
to receive repayment of any loans.

In the event that a capital call is made and the Company elects not to make the
requested capital contribution, Kerzner Investments may, at its election, pay
such contributions, which payment shall be deemed, at the election of Kerzner
Investments, to be either (i) a loan to the Company or (ii) a capital
contribution by Kerzner Investments, thereby increasing Kerzner Investments'
partnership interest and diluting the Company's partnership interest. The 8.625%
Senior Notes Indenture limits the Company's ability to make further capital
contributions to TCA.

No partner is obligated to restore a capital account deficit.

The partners are required to bring to the attention of the partnership all
opportunities to manage or operate (1) any gaming activities on Native American
reservations and involving Native Americans or (2) any other gaming activity
within 100 miles of the Mohegan Sun. Any such opportunities will be pursued by
an affiliate of Trading Cove, in which the Company will not have any economic
interest. The Company and Kerzner Investments are the managing partners of
Trading Cove, and as such, have the full, exclusive and absolute right, power
and authority to manage and control the partnership and the property, assets and
business thereof. All decisions relating to the management of Trading Cove
require unanimous agreement between the Company and Kerzner Investments.

The TCA Partnership Agreement provides that Howard Kerzner will serve as the
designated representative of Kerzner Investments in its capacity as managing
partner. In the absence of Mr. Kerzner, John Allison will serve as Kerzner
Investments' designated representative. Each designated representative has the
right, power and authority to act for and on behalf of and to bind Kerzner
Investments with respect to all matters relating to the partnership. The TCA
Partnership Agreement grants Mr. Kerzner the right to appoint a proxy upon
written notice to the Company. Len Wolman serves as the designated
representative of the Company.


8



In the event that a dispute arises under the TCA Partnership Agreement, upon
notice by one disputing party to the other, the parties have ten days to resolve
the dispute. If the dispute is not resolved in such ten-day period then, in
accordance with specific notice procedures set forth in the TCA Partnership
Agreement, either party has the right to deliver a buy-out notice to the other
to require such party to elect to either (i) sell their partnership interest to
the party delivering the notice (at a price and under the terms set forth in
such buy-out notice), or (ii) have the other party or its designee purchase the
interest of the party giving notice at the buy-out price. In the event that the
party receiving the buy-out notice fails to respond, such party is deemed to
have agreed to sell its partnership interest to the party delivering such notice
at the buy-out price specified therein. See "Risk Factors--Risks Associated with
the Buy/Sell Option Under Trading Cove Partnership Agreement."

Subject to the following exceptions, Kerzner Investments is generally prohibited
from assigning its partnership interest. Kerzner Investments may assign its
interest to (1) certain of its affiliates and (2) to any party making a bona
fide written offer to purchase any or all of Kerzner Investments' partnership
interest if, after offering its interest to the Company at the same price and on
the same terms and conditions as set forth in such written offer, the Company
elects not to purchase Kerzner Investments' partnership interest.

The Company is generally prohibited from assigning its partnership interest. The
Company may not assign its interest except (1) to an affiliate of the Company,
(2) to any party making a bona fide written offer to purchase all, but not less
than all, of the Company's partnership interest if, after offering its interest
to Kerzner Investments at the same price and on the same terms and conditions as
set forth in such written offer, Kerzner Investments elects not to purchase the
Company's partnership interest.

Except as otherwise permitted by the TCA Partnership Agreement, no partner may
withdraw from the partnership without the consent of the remaining partners. In
the event that a partner withdraws from the partnership in violation of the TCA
Partnership Agreement, such partner will be liable to the remaining partners for
all damages caused by such withdrawal and shall immediately cease to have any
rights (including rights to receive any monies) in the partnership.

The Amended and Restated Partnership Agreement of Trading Cove Associates, dated
as of September 21, 1994, among Sun Cove Limited (now, Kerzner Investments
Connecticut, Inc.), RJH Development Corp., Leisure Resort Technology, Inc.,
Slavik Suites, Inc., and LMW Investments, Inc., and the First Amendment to
Amended and Restated Partnership Agreement of Trading Cove Associates, dated as
of October 22, 1996, among Sun Cove Limited (now, Kerzner Investments
Connecticut, Inc.), Slavik Suites, Inc., RJH Development Corp., LMW Investments,
Inc. and Waterford Gaming, L.L.C. are 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.

4 - MANAGEMENT AGREEMENT

On August 30, 1995, TCA and the Tribe entered into the Management Agreement.
After entering into the Management Agreement, the Tribe assigned it to the
Authority.

Until midnight December 31, 1999, TCA was the exclusive manager of the Mohegan
Sun.

Until January 1, 2000 TCA's primary source of revenue was management fees under
the Management Agreement (the "MANAGEMENT Fees"). The Management Fees were paid
monthly and were calculated in three tiers based upon Net Revenues, as defined
in the Management Agreement, of the Mohegan Sun.

The final management fee was received by TCA from the Authority on January 25,
2000.

The Management Agreement is filed as an exhibit 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 is incorporated herein by reference.


9



5 - 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, 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) the 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 years ended December 31, 2004 and 2003, $1,869,157 ($934,579 to Kerzner
Investments and $934,578 to affiliates of the Company) and, $1,840,346 ($920,173
to each of Kerzner Investments and affiliates of the Company), respectively, had
been incurred by TCA in terms of the first priority.

(b) Second, to return all capital contributions made by the partners of TCA
after September 29, 1995. The Company does not anticipate TCA making further
capital calls to fund expenses related to the development of the Project
Sunburst expansion. From January 1, 2000 to December 31, 2004, these capital
contributions aggregated $8,000,000. From January 1, 2000 to December 31, 2004,
$8,000,000 has been repaid to the partners of TCA, 50 percent to the Company and
50 percent to Kerzner Investments.

As of December 31, 2004, $0 in capital contributions remained outstanding.

(c) Third, to pay any accrued amounts for obligations performed prior to January
1, 2000 under the Financing Arrangement Agreement. 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. No such payments are required or due at December 31, 2004. The
accrued liability to Kerzner Investments with respect to such fee at December
31, 2004 was approximately $414,000.

(e) Fifth, to pay Kerzner Investments an annual fee (in the form of a priority
distribution) of $5.0 million payable in equal quarterly installments of $1.25
million beginning March 31, 2000 and ending December 31, 2006. On January 26,
2005 and on January 27, 2004, $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 sixth 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
(25%) of the relinquishment payments as distributions. On January 26, 2005 and
January 27, 2004, $13,294,808 ($6,647,404 to each of Kerzner Investments and the
Company) and $12,669,636 ($6,334,818 to each of Kerzner Investments and the
Company), respectively, was distributed by TCA in terms of the seventh priority.

(h) Eighth, to distribute all excess cash. On January 26, 2005 and on January
27, 2004, $11,600,000 ($5,800,000 to each of Kerzner Investments and the
Company) and $10,926,597 ($5,463,298 to Kerzner Investments and $5,463,299 to
the Company, respectively was distributed as 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 the TCA 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.

The Amended and Restated Omnibus Termination Agreement is filed as an exhibit to
the Company'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,
and is incorporated herein by reference.

10




6 - AMENDED AND RESTATED OMNIBUS FINANCING AGREEMENT

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

The Amended and Restated Omnibus Financing Agreement is filed as an exhibit to
the Company'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, and is incorporated herein by reference.

E. THE MOHEGAN TRIBAL GAMING AUTHORITY

The Tribe is a federally recognized Indian tribe with an approximately 405-acre
reservation located in southeastern Connecticut. The Tribe established the
Authority on July 15, 1995 with the exclusive power to conduct and regulate
gaming activities for the Tribe. Under the Indian Gaming Regulatory Act of 1988,
as amended ("IGRA"), federally recognized Indian tribes are permitted to conduct
full-scale casino gaming operations on tribal-land, subject to, among other
things, the negotiation of a tribal state compact with the affected state. The
Tribe and the State of Connecticut have entered into such a compact (the
"MOHEGAN COMPACT") that has been approved by the U.S. Secretary of the Interior.
The Authority is governed by a management board (the "MANAGEMENT BOARD"), which
consists of the nine members of the Tribal Council (the governing body of the
Tribe).

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

The Tribe and the Authority have entered into a land lease ("LEASE") pursuant to
which the Tribe is leasing to the Authority the land on which the Mohegan Sun is
located (the "SITE"). The Site is part of the Tribe's approximately 405-acre
reservation which was acquired and is held in trust for the Tribe by the United
States of America with the Tribe retaining perpetual rights to the use of the
Site.

F. THE MOHEGAN SUN

The Authority owns and operates the Mohegan Sun, an approximately 3.0 million
square foot full-service gaming and entertainment complex on a 240-acre site
overlooking the Thames River on the Tribe's reservation in southeastern
Connecticut. The Mohegan Sun is located approximately one mile from the
interchange of Interstate 395 and Route 2A in Uncasville, Connecticut. The
Authority constructed a four-lane access road and entrance/exit ramps off of
Route 2A, providing guests direct access to Interstate 395 and Interstate 95,
the main highways connecting Boston, Providence and New York City. The Mohegan
Sun opened in October 1996. The Mohegan Sun is one of two legally authorized
gaming operations in New England offering both traditional slot machines and
table games.

The full-service gaming and entertainment complex includes the following:

CASINO OF THE EARTH. The Casino of the Earth, the original casino at the Mohegan
Sun, has approximately 179,500 square feet of gaming space and offers
approximately 3,875 slot machines and 180 table games (including, blackjack,
roulette, craps and baccarat). Food and beverage amenities, include three
full-service themed fine dining restaurants with a fourth area featuring cuisine
from all three themes, a 610-seat buffet, a ten-station food court featuring
international and domestic cuisine and multiple service bars, all operated by
the Authority, for a total of approximately 1,400 restaurant seats ( which will
increase to 1,700 restaurant seats upon completion of the new Uncas American
Indian Grill, a 300-seat full-service restaurant and bar concept anticipated to
open in July 2005). An approximately 10,000 square foot, 410-seat lounge
features live entertainment seven days a week. There is an approximately 11,000
square foot simulcasting race book facility, and five retail shops providing
shopping opportunities ranging from Mohegan Sun logo souvenirs to cigars.

CASINO OF THE SKY. The Casino of the Sky has approximately 119,000 square feet
of gaming space and offers approximately 2,400 slot machines and 105 table games
(including, blackjack, roulette, craps and baccarat). Food and beverage
amenities, include two full-service restaurants, two quick-service restaurants,
a 24-hour coffee shop, a 320-seat buffet, a six station food court featuring
international and domestic cuisine and five lounges and bars operated by the
Authority, as well as four full-service and three quick-service restaurants
operated by third-parties, for a total of approximately 2,600 restaurant seats,
Mohegan After Dark, consisting of a nightclub, a lounge and a pub, which are all
operated by a third party, the Mohegan Sun Arena with seating for up to 10,000,
a 350-seat cabaret, a child care facility and an arcade-style recreation area
operated by a third party, The Shops at Mohegan Sun containing approximately 29
different retail shops, six of which are owned by the Authority, an
approximately 1,200-room luxury hotel with room service, an approximately 20,000
square foot spa operated by a third party and approximately 100,000 square feet
of convention space.
11




As of December 31, 2004, Mohegan Sun had parking spaces for approximately 13,000
guests and 3,100 employees. In addition, the Authority operates an approximately
4,000 square foot, 20-pump gasoline station and convenience center located
adjacent to the Mohegan Sun.

The Authority formed the Mohegan Basketball Club, ("MBC") , for the purpose of
holding a membership in the Women's National Basketball Association ("WNBA") and
owning and operating a professional basketball team in the WNBA. MBC entered
into a membership agreement with the WNBA permitting it to operate the
Connecticut Sun basketball team. The team plays its home games in the Mohegan
Sun Arena.

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

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

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

POCONO DOWNS. On January 25, 2005 the Authority and its wholly owned subsidiary,
Mohegan Commercial Ventures PA, LLC acquired from subsidiaries of Penn National
Gaming, Inc. the Pocono Downs Racetrack, a standardbred harness racing facility
located on approximately 400 acres of land in Plains Township, Pennsylvania, or
Pocono Downs, and five Pennsylvania off-track wagering facilities located in
Carbondale, East Stroudsburg, Erie, Hazleton and Lehigh Valley (Allentown). The
$280 million purchase price before closing adjustments and other costs was
funded by the Authority through draws and the Authority's bank credit facility.

The Authority has the right to apply for a Pennsylvania Category One slot
machine license which, if approved, would initially permit the installation and
operation of up to 3,000 slot machines at Pocono Downs. Upon the issuance of a
slot machine license, the Authority will proceed with its plans to open a new
slot machine facility which the Authority anticipates will open in the fall of
2006. The new facility also is expected to include restaurants, lounges and a
small entertainment venue. The Authority anticipates that it will spend up to
$175 million on the construction, furnishing and equipping of the new facility,
in addition to paying a one-time $50 million fee to the Commonwealth of
Pennsylvania upon receipt of a slot machine license.

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

12




G. CONTACT INFORMATION; INTERNET ADDRESS

The principal executive offices of the Company is located at 914 Hartford
Turnpike, Waterford, Connecticut 06385 and its telephone number is (860)
442-4559. The Company's internet address is http://www.waterfordgroup.net. In
light of the limited trading market for the Company's securities, the Company
does not currently make its periodic and current reports available, free of
charge, on its website. The Company's periodic and current reports are
available, however, free of charge, on the Commission's website, at www.sec.gov.
The Company will provide electronic or paper copies of its filings free of
charge upon request.

Item 2. PROPERTIES

The Company does not own or lease any real property.

Item 3. 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, which motion was denied on April 14, 2003.

Fact discovery is completed. On April 15, 2004, the Company and its
co-defendants filed a motion for summary judgment as to all of Leisure's claims.
The Court heard argument on this Motion on June 23, 2004. In an August 4, 2004,
Memorandum of Decision, the Court granted summary judgment for the Defendants as
to each of the remaining three counts of the plaintiffs complaint. The plaintiff
has appealed this decision. Defendants' counterclaims are stayed pending this
appeal.

The Company believes that it has meritorious defenses and, if necessary, 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
pendency of the appeal and the disputed issues of law and/or facts on which the
outcome of this litigation depends.

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

No matters were submitted to the Company's security holders for a vote for the
fiscal year ended December 31, 2004.


13




PART II

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

Not applicable. The Company did not sell any of its equity securities during the
period covered by this report.

Item 6. SELECTED FINANCIAL DATA





FOR THE YEAR ENDED
------------ ------------- ------------ ------------ ------------
2004 2003 2002 2001 2000


Total expenses $ (16,697,545)$ (24,751,861) $ (13,102,082) $ (13,579,600) $ (13,490,367)

Interest and
dividend income 117,608 123,634 534,012 1,330,711 1,894,738

Equity in income of
Trading Cove
Associates 30,503,631 28,519,860 24,601,380 18,823,461 14,068,067
------------ ------------- ------------ ------------ ------------
Net income $ 13,923,694 $ 3,891,633 $ 12,033,310 $ 6,574,572 $ 2,472,438
============ ============= ============ ============ ============


OTHER DATA
Interest expense $ 13,588,087 $ 19,481,783 $ 11,080,139 $ 11,560,994 $ 11,641,049

Net change in cash
and cash
equivalents $ (320,320) $ 233,470 $ 1,087,653 $ (453,072) $( 56,313,596)




YEAR-END STATUS
------------ ------------- ------------ ------------ ------------
2004 2003 2002 2001 2000


Total current assets $ 10,750,950 $ 11,523,049 $ 15,010,697 $ 29,769,455 $ 46,519,473
Trading Cove
Associates-equity
investment 17,052,615 16,965,487 11,972,338 10,639,562 (7,362,921)
Beneficial
Interest-Leisure
Resort
Technology, Inc. 3,784,059 4,162,049 4,540,039 4,918,029 5,296,019
Deferred financing
costs net of
accumulated
amortization 2,903,141 3,568,059 2,643,338 3,010,202 3,377,066
Fixed assets, net
of accumulated
depreciation --- 916 11,696 22,476 33,256
------------ ------------- ------------ ------------ ------------
Total assets $ 34,490,765 $ 36,219,560 $ 34,178,108 $ 48,359,724 $ 47,862,893
============ ============= ============ ============ ============
Total current
liabilities $ 3,728,147 $ 4,038,332 $ 3,133,192 $ 3,400,556 $ 3,481,637
9.50% senior
notes payable --- --- 108,007,000 115,434,000 119,691,000
8.625% senior
notes payable 140,761,000 153,088,000 --- --- ---

------------ ------------- ------------ ------------ ------------
Total liabilities $ 144,489,147 $ 157,126,332 $ 111,140,192 $ 118,834,556 $ 123,172,637
------------ ------------- ------------- ------------ ------------
Member's
deficiency $(109,998,382)$ (120,906,772) $ (76,962,084) $ (70,474,832) $ (75,309,744)
============ ============= ============ ============ ============




14




Item 7. 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 financial statements and the notes thereto
included elsewhere herein.

A - DEVELOPMENT AND OPERATIONAL ACTIVITIES

The Company was formed solely for the purpose of holding its partnership
interest in Trading Cove. Trading Cove is the former manager and original
developer of the Mohegan Sun. The Company's interest in Trading Cove is its
principal asset and source of income and cash flow.

B - 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 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, 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 8.625% Senior Notes
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 and from cash flows (dividend and interest) from temporary investments.

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.

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 December 31, 2004, the Company has an aggregate long-term senior
indebtedness of $140,761,000, consisting of the 8.625% Senior Notes. On March
15, 2005, $5,600,000 of principal amount of 8.625% Senior Notes was redeemed at
the redemption price of 107.610% of the principal amount being redeemed. The
Authority is also highly leveraged. As of December 31, 2004, the Authority had a
total of approximately $1,026 billion of indebtedness outstanding.

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:

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.



15



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 and junior relinquishment payments, and
to holders of senior indebtedness, with respect to junior relinquishment
payments, until they are paid in full, instead of to Trading Cove. For that
reason, Trading Cove may receive less, ratably, than holders of senior unsecured
indebtedness and junior 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.

For the year ending September 30, 2004, the annual minimum priority distribution
to the Mohegan Tribe was $15.4 million. The minimum priority distribution is
adjusted annually to reflect the cumulative increase in the consumer price
index. The Authority will be permitted to borrow substantial additional
indebtedness, including senior secured indebtedness, in the future.

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

The TCA Partnership Agreement 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 TCA 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 TCA 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;


16


(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 (Trading
Cove's accrued liability to Kerzner Investments with respect to such fee at
December 31, 2004 was approximately $414,000), 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.

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 TCA 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 TCA 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 its right to buy under the buy/sell provision of the
TCA 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 8.625% Senior Notes 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 for the Company 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.

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 agreement.


17


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 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
percent 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 percent of all registered voters of the Mohegan Tribe.
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. 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."

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.

18


The gaming industry is highly competitive. The Mohegan Sun currently competes
primarily with Foxwoods Resort Casino ("Foxwoods") and, to a lesser extent, with
casinos in Atlantic City, New Jersey and upstate New York. Foxwoods is located
approximately 10 miles from the Mohegan Sun. Foxwood's recently completed a $99
million casino expansion.

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 race tracks in the state
but not full-scale casino gaming. To date, three separate race tracks operate
approximately 3,000 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 and opened another facility in Salamanca, New York, in early
May 2004. The validity of the New York State statute is currently being
litigated in the state's highest court of appeals.

The Governor of New York recently entered into five land claim settlement
agreements with Indian tribes that will require the State legislature to
increase the number of authorized tribal casinos in the Catskills region from
three (3) to five (5). In the event this is approved and federal legislation is
also enacted, then there is the likelihood that significant competition for New
York patrons will ensue. The Catskills region is about 185 miles from Mohegan
Sun.

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.

In addition, several other federally recognized tribes in New England are
seeking to establish gaming operations. These include the Historic Eastern
Pequot Tribe of Connecticut and the Schaghticoke Tribal Nation of Connecticut.
The status of both tribes is being challenged. In addition 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 continue to explore gaming opportunities. A recent state
wide referendum in Maine rejected any off-reservation Indian casino gaming.

The Narragansett Tribe of Rhode Island has partnered with Harrah's to open a
facility in West Warwick. The proposed casino would be operated under Rhode
Island law and not under the Indian Gaming Regulatory Act. This arrangement was
contained in a statewide ballot measure that was scheduled for a vote in
November 2004. However, the State Supreme Court in August 2004 issued an
advisory opinion that the referendum would violate the State's constitution. At
this writing, the status of the Narragansett/Harrah's effort remains uncertain
but there have been reports that another ballot measure will be offered.

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 Massachusetts, one such group is the Mashpee Wampanoag which 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.


19



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. Worsening economic conditions or a prolonged recession could
hamper the Mohegan Sun's ability to meet expected operating results.

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 Mohegan Sun's
President and Chief Executive Officer, Jeffrey Hartmann, the Mohegan Sun's
Executive Vice President and Chief Operating Officer, and Leo Chupaska, the
Authority's 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 adverse amendments to the Indian
Gaming Regulatory Act have proceeded out of committee hearings to a vote by
either the House or the Senate.


20


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 in 2003, 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.

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. This legislation was
not enacted. However, tax reform is being considered in the 109th Congress and
some leading proposals include taxation of gaming proceeds. If enacted,
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.


21


C - 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
revenues 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 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
and cash received by TCA pursuant to the Relinquishment Agreement with the
Authority. Distributions are recorded when received.

D - TABLE OF CONTRACTUAL OBLIGATIONS

The following table provides an overview of the Company's aggregate contractual
obligations as of the latest fiscal year end balance sheet date.





CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD
- ----------------------- ----------------------
LESS THAN 1 MORE THAN
TOTAL YEAR 1-3 YEARS 3-5 YEARS 5 YEARS
------- ------------- ----------- ----------- -------------
Long-Term Debt
Obligations(1)................. (1) (1) (1) (1) (1)
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
Total.............................. (1) (1) (1) (1) (1)



(1) As of December 31, 2004, the Company's long-term debt consists of
obligations under its 8.625% Senior Notes. $135,161,000 in aggregate principal
amount of 8.625% Senior Notes is currently outstanding. At December 31, 2004,
the Company had an aggregate long-term senior indebtedness of $140,761,000. On
March 15, 2005, $5,600,000 of principal amount of 8.625% Senior Notes was
redeemed at the redemption price of 107.610% of the principal amount being
redeemed. Interest on the outstanding principal amount of 8.625% Senior Notes is
payable by the Company semi-annually in arrears on March 15th and September 15th
at a rate of 8.625% per annum. The outstanding principal amount of 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 15th and September 15th of each year, the Company and Finance must redeem
their 8.625% Senior Notes with any "Company Excess Cash" (as defined in the
8.625% Senior Notes Indenture) at a redemption price expressed as a percentage
of the principal amount of notes being redeemed. Such redemption price declines
annually from 108.625% for redemptions made between September 15, 2003 and
September 14, 2004, to 100% for redemptions made after September 14, 2012. Any
reduction in principal amount of the 8.625% Senior Notes with Company Excess
Cash will lower the interest payments payable by the Company in subsequent
periods.

OFF-BALANCE SHEET ARRANGEMENTS
- ------------------------------

The Company does not have any material off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on the Company's
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.

22



E - 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 payments by the
Authority to TCA.

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

On April 27, 2004, July 27, 2004, October 26, 2004 and January 26, 2005, the
Company received $2,620,000, $11,925,000, $4,073,386 and $12,447,404,
respectively, from TCA as distributions, which represents the Company's share
under the Amended and Restated Omnibus Termination Agreement of approximately
$69,001,000 in Relinquishment Fees earned by TCA pursuant to the Relinquishment
Agreement for the year January 1 through December 31, 2004.

On April 28, 2003, July 28, 2003, October 28, 2003 and January 27, 2004, the
Company received $2,876,707, $6,365,797, $3,512,706 and $11,798,117,
respectively, from TCA as distributions, which represents the Company's share
under the Amended and Restated Omnibus Termination Agreement of approximately
(a) $65,100,000 in Relinquishment Fees earned by TCA pursuant to the
Relinquishment Agreement for the year January 1 through December 31, 2003, and
(b) $168,000 in Development Fee earned by TCA pursuant to the Development
Agreement for the same period.

F - RESULTS OF OPERATIONS

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 2004 AND 2003

Total expenses for the twelve months ended December 31, 2004 were $16,697,545
compared with $24,751,861 for the twelve months ended December 31, 2003. (a)
Interest expense decreased by $5,893,696 and amortization on deferred financing
costs decreased by $2,253,392 due primarily to the redemption of the 9.50%
Senior Notes in the principal amount of $102,349,000 and the issuance of the
8.625% Senior Notes in the principal amount of $155 million in June 2003, (b)
salaries-related parties increased by $316,422 due to (i) the increase in
Revenues of the Mohegan Sun and (ii) effective January 1, 2004 the incentive
compensation in terms of Mr. Len Wolman's employment agreement changed from a
fixed 0.05% of the revenues of the Mohegan Sun to an amount that ranges from
0.00% to 0.10% of the revenues of the Mohegan Sun (for the year ended December
31, 2004, incentive compensation was calculated at 0.07% of the revenues of the
Mohegan Sun) and (c) general and administrative costs increased by $295,628
(primarily attributable to (i) an increase in legal and other expenses related
to the defense of the Leisure litigation as described in PART I: Item 3 LEGAL
PROCEEDINGS, of approximately $303,300, (ii) by an increase in insurance expense
of approximately $5,900, (iii) by an increase in other legal expenses of
approximately $7,300, (iv) by an increase in payroll taxes of approximately
$4,300 and offset by (v) a decrease in Commission filing expenses of
approximately $8,700 and (vi) by a decrease in accounting fees of approximately
$14,500), (d) 9.50% senior notes tender expense decreased by $509,414 due to the
redemption of the 9.50% Senior Notes in June 2003 and (e) depreciation decreased
by $9,864.

Equity in income of Trading Cove Associates for the year ended December 31, 2004
was $30,503,631 compared with $28,519,860 for the year ended December 31, 2003.
The Company has included amortization of purchased interests of $440,028 in each
year's equity income. The Company's share of TCA's results fluctuates based upon
revenues earned by TCA under the Relinquishment Agreement. In addition, interest
and dividend income decreased by $6,026.

As a result of the foregoing factors, the Company experiences net income of
$13,923,694 for the year ended December 31, 2004, compared with net income of
$3,891,633 for the year ended December 31, 2003.

23




COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002

Total expenses for the twelve months ended December 31, 2003 were $24,751,861
compared with $13,102,082 for the twelve months ended December 31, 2002. (a)
Interest expense increased by $8,401,644 due primarily to the redemption of the
9.50% Senior Notes in the principal amount of $102,349,000 at the tender premium
of approximately $7,164,000 and the issuance of the 8.625% Senior Notes in the
principal amount of $155 million, (b) salaries-related parties increased by
$65,912 due to the increase in Revenues of the Mohegan Sun, (c) general and
administrative costs increased by $121,363 (primarily attributable to (i) an
increase in legal and other expenses related to the defense of the Leisure
litigation, as described in PART I: Item 3 LEGAL PROCEEDINGS, of approximately
$106,900, (ii) an increase in insurance expense of approximately $8,800, (iii)
an increase in Commission filing expense of approximately $8,900, (iv) an
increase in accounting fees of approximately $15,400 and (v) by an increase in
rating agency fees of approximately $9,600 and offset by (vi) a decrease in bank
sweep fees of approximately $15,900 and (vii) by a decrease in other legal
expenses of approximately $11,400), (d) 9.50% senior notes tender expense
increased by $509,414 due to the redemption of the 9.50% senior notes and (e)
amortization on deferred financing costs increased by $2,551,446 due primarily
to the redemption of the 9.50% Senior Notes, the issuance of the 8.625% Senior
Notes and the additional amortization due to the mandatory redemption of the
8.625% Senior Notes on September 15, 2003.

Equity in income of Trading Cove Associates for the year ended December 31, 2003
was $28,519,860, compared with $24,601,380 for the year ended December 31, 2002.
The Company has included amortization of purchased interests of $440,028 in each
year's equity income. The Company's share of TCA's results fluctuates based upon
revenues earned by TCA under the Relinquishment Agreement and the Development
Agreement. In addition, interest and dividend income decreased by $410,378.

As a result of the foregoing factors the Company experienced net income of
$3,891,633 for the year ended December 31, 2003, compared with net income of
$12,033,310 for the year ended December 31, 2002.


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 12.75% 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 12.75% 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 million 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 9.50% Senior Notes, the Company used
approximately $72 million to repurchase the 12.75% 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 9.50% 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.

On January 4, 2000 also in accordance with the terms of the 9.50% 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 9.50% Senior Notes
indenture.

In connection with the offering of the 8.625% Senior Notes, the Company used
approximately $111.8 million to repurchase the 9.50% Senior Notes and
distributed $44.5 million to Waterford Group.


24




Tax distributions totaling approximately $14,861,000 were made by the Company
during 1999, 2000, 2001, 2002, 2003 and 2004 in accordance with the terms of the
applicable indentures. On January 10, 2005 a tax distribution of approximately
$2,875,000 was made by the Company.

The Company distributed the following amounts to Waterford Group in accordance
with the terms of the 8.625% Senior Notes Indenture.

Date of Distribution Amount Distributed
---------------------- --------------------
September 15, 2003 $98,080

March 15, 2004 $349,247

September 15, 2004 $249,567

March 15, 2005 $294,585

Accordingly, after taking into consideration net income (loss) since inception
the Company has a member's deficit of approximately $109,998,000 and
$120,907,000 at December 31, 2004 and 2003, respectively.

For the years ended December 31, 2004 and 2003, net cash provided by operating
activities (as shown in the Statements of Cash Flows) was $14,502,894 and
$3,111,417, respectively.

Current assets decreased from $11,523,049 at December 31, 2003 to $10,750,950 at
December 31, 2004. The decrease was primarily attributable to (i) the scheduled
semi-annual payment of interest on March 15, 2004 and September 15, 2004 on the
8.625% Senior Notes in the amounts of approximately $6,602,000 and $6,287,000,
respectively, (ii) by the redemption on March 15, 2004 of 8.625% Senior Notes in
the principal amount of $7,302,000, at the redemption price of 108.625% of the
principal amount being redeemed, (iii) by the redemption on September 15, 2004
of 8.625% Senior Notes in the principal amount of $5,025,000, at the redemption
price of 107.610% of the principal amount being redeemed, (iv) by distributions
to Waterford Group on March 15, 2004 and September 15, 2004 of approximately
$349,200 and $249,600, respectively and (v) by tax distributions, to Waterford
Group on June 11, 2004 and December 27, 2004 of approximately $2,005,700 and
$410,800, respectively, and offset by (i) approximately $14,502,900 of cash
provided by operating activities and (ii) by distributions by TCA in terms of
the Amended and Restated Omnibus Termination Agreement.

Current liabilities decreased from $4,038,332 at December 31, 2003 to $3,728,147
at December 31, 2004. The decrease was primarily attributable to (i) a decrease
in accrued interest on Senior Notes payable of approximately $313,000 (during
the year 2004, 8.625% Senior Notes in the principal amount of $12,327,000 were
redeemed) and offset by (ii) an increase in accrued expenses and accounts
payable of approximately $2,900 primarily attributable to (a) an increase in
amount due for salaries-related parties of approximately $30,700, (b) by an
increase in amounts due for other legal services of approximately $4,600, (c) by
an increase in amounts due for insurance of approximately $2,700 and offset by
(d) a decrease in legal and other expenses related to the defense of the Leisure
Litigation, as detailed under PART I: Item 3 LEGAL PROCEEDINGS, of approximately
$28,200 and (e) by a decrease in amounts due for accounting services of
approximately $6,300.

For the years ended December 31, 2004 and 2003 net cash provided by investing
activities (as shown in the Statements of Cash Flows) was $519,090 and
$3,720,405, respectively. The net cash provides by investing activities in 2004
was the result of net maturities and purchases of restricted investments of
approximately $519,100. The net cash provided by investing activities in 2003
was primarily the result of net maturities and purchases of restricted
investments of approximately $3,720,400 and distributions from TCA of $450,000
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).

25




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 Sunburst expansion at the Mohegan Sun). As of December 31, 2004
$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 twelve months ended December 31, 2004 and 2003, net cash used in
financing activities (as shown in the Statements of Cash Flows) was $15,342,304
and $6,598,352, respectively. The net cash used in financing activities in 2004
was primarily the result of the redemption of the 8.625% Senior Notes on March
15, 2004 and September 15, 2004 in the principal amounts of $7,302,000 and
$5,025,000, respectively, and by distributions to Waterford Group of $3,015,304.
The net cash used in financing activities in 2003 was primarily the result of
the redemption of the 9.50% Senior Notes in the principal amount of $5,658,000
on March 15, 2003, by the redemption of the 9.50% Senior Notes on June 11, 2003
in the principal amount of $102,349,000, by the redemption of the 8.625% Senior
Notes on September 15, 2003 in the principal amount of $1,912,000, by deferred
financing costs of approximately $3,843,000 and by distributions to Waterford
Group of $47,836,321 and offset by the proceeds from the 8.625% Senior Notes
issuance in the principal amount of $155,000,000.

Pursuant to the terms of the 8.625% Senior Notes Indenture, if the Company and
Finance have any Company Excess Cash, as defined in the 8.625% Senior Notes
Indenture, on February 1st or August 1st of any year, they must use such Company
Excess Cash less all Required IRA True-Up Payments, as defined in the 8.625%
Senior Notes 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 15th or September 15th following such dates. Any such
redemption will be made at a price equal to a percentage of the principal amount
being redeemed.

The Company and Finance have periodically redeemed portions of the 8.625% Senior
Notes with Company Excess Cash pursuant to the terms of the 8.625% Senior Notes
Indenture. The table below summarizes (a) the amount of Company Excess Cash that
the Company and Finance have determined was available for the mandatory
redemption of the 8.625% Senior Notes on February 1st and August 1st of each
applicable year pursuant to the terms of the 8.625% Senior Notes Indenture, (b)
the aggregate principal amount of 8.625% Senior Notes redeemed with such Company
Excess Cash, (c) the date on which such redemption was consummated, and (d) the
redemption price at which such redemption was made.




Date Company Excess Cash Principal Amount of Dates of Redemption Price (expressed as percentage of
(approximately) notes redeemed principal amount being redeemed
- ---------------- ------------------- ------------------- -------------------- ---------------------------------
August 1, 2003 $ 5,568,000 $ 1,912,000 September 15, 2003 108.625%
February 1, 2004 $ 14,534,000 $ 7,302,000 March 15, 2004 108.625%
August 1, 2004 $ 11,695,000 $ 5,025,000 September 15, 2004 107.610%
February 1, 2005 $ 12,098,000 $ 5,600,000 March 15, 2005 107.610%



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 and
additional investments in TCA that may be required in connection with the
Project Sunburst expansion at the Mohegan Sun. No assurance, however, can be
given that the operating cash flow will be sufficient for that purpose.


26


Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

For fixed rate debt, changes in interest rates generally affect the fair market
value of the debt instrument, but not earnings or cash flows. Therefore,
interest rate risk and changes in the fair market value of fixed rate debt
should not have a significant impact on earnings or cash flows until such debt
is refinanced, if necessary. For variable rate debt, changes in interest rates
generally do not impact the fair market value of the debt instrument, but do
affect future earnings and cash flows. The Company did not have any variable
rate debt outstanding at December 31, 2004 and 2003. The fair market value of
the Company's long-term debt at December 31, 2004 and 2003 is estimated to be
approximately $150,614,000 and $163,804,000, respectively, based on the quoted
market price for the same issue.


The Company is exposed to market risks from fluctuations in interest rates and
the effects of those fluctuations on market values of the Company's cash
equivalents and restricted investments. Cash equivalents generally consist of
overnight investments while the restricted investments at December 31, 2004 are
principally comprised of an investment in a Federal Home Loan Bank Discount Note
which was purchased at a discount of 1.82% and matured March 2, 2005 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's financial statements and notes thereof are filed as part of this
report and appear in this annual report on Form 10-K beginning on page 35.

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

None.

Item 9A. 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 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 period 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.
27




PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following tables sets forth certain information with respect to persons who
are members of the Board of Directors of the Company or who are Executive
Officers of the Company.

NAME AGE POSITION
- ---- --- --------
Len Wolman 50 Chairman of the Board and Chief
Executive Officer
Alan Angel 48 Chief Financial Officer
Del J. Lauria 56 Director and Secretary
Mark Wolman 47 Director
Stephan F. Slavik 58 Director
Richard Slavik 54 Vice President


LEN WOLMAN. Mr. Len Wolman has been the Chairman of the Board of Directors and
the Chief Executive of the Company since its formation. Since 1986, Mr. Len
Wolman has been the Chairman of the Board of Directors and the Chief Executive
Officer of the Waterford Hotel Group, Inc. Mr. Len Wolman is the Company's
designated representative to TCA under the TCA Partnership Agreement. Mr. Len
Wolman was instrumental in the formation of the relationship between Trading
Cove and the Mohegan Tribe and had been actively working with the Mohegan Tribe
in connection with obtaining federal recognition, acquiring the site for the
Mohegan Sun and obtaining the financing to construct the Mohegan Sun. Mr. Len
Wolman was actively involved in the development, construction and operation of
the Mohegan Sun. Mr. Len Wolman has served as President and Chief Executive
Officer of Finance since its inception. Mr. Len Wolman is a Director and Officer
of Slavik, one of the Waterford Group's members. Mr. Len Wolman is the brother
of Mr. Mark Wolman. Mr. Len Wolman's wife and Mr. Angel's wife are sisters.

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

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

MARK WOLMAN. Mr. Mark Wolman became a Director of the Company upon its
formation. Mr. Mark Wolman is the president of Wolman Homes, Inc. Wolman Homes,
Inc. is a commercial development and construction firm based in Eastern
Connecticut. Mr. Mark Wolman has been working with the Mohegan Tribe since 1992
and had been instrumental in assisting the Mohegan Tribe in obtaining a number
of governmental approvals in connection with the development and construction of
the Mohegan Sun. Mr. Mark Wolman is a Director of Slavik. Mr. Mark Wolman is the
brother of Mr. Len Wolman.

STEPHAN F. SLAVIK. Mr. Slavik was appointed a Director of the Company on April
9, 2001. Mr. Slavik is the President of Michigan based Slavik Builders. Mr.
Slavik has over 30 years of experience with all phases of land planning, product
design, estimating and site construction in single family, multiple and
commercial design/build developments. Mr. Slavik is a Director and Vice
President of Slavik. Mr. Slavik is the brother of Mr. Richard Slavik.

MR. RICHARD SLAVIK. Mr. Richard Slavik was appointed a Vice President of the
Company on April 9, 2001. Mr. Richard Slavik is Chief Operating Officer of the
Fourmidable Group, Inc., a Michigan based real estate management firm. Mr.
Richard Slavik has over 20 years of constructing and operating commercial
residential real estate experience. Mr. Richard Slavik is President of Slavik.
Mr. Richard Slavik is the brother of Mr. Stephan F. Slavik.

In light of the Company's limited operations and the fact that the Company's
interest in TCA is its principal asset and source of income and cash flow, the
Company has not adopted a code of ethics that applies to the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions.

28




Item 11. EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to the Directors and the
named Executive Officers of the Company.


NAME YEAR ENDED SALARY
- ---- ---------- ------
Len Wolman(i) 2004 $ 1,217,420
2003 $ 900,998
2002 $ 835,086

Del Lauria 2004 $ -
2003 $ -
2002 $ -

Stephan F. Slavik 2004 $ -
2003 $ -
2002 $ -

Mark Wolman 2004 $ -
2003 $ -
2002 $ -

Alan Angel 2004 $ -
2003 $ -
2002 $ -

Richard Slavik 2004 $ -
2003 $ -
2002 $ -

(i) As detailed in Item 13, Mr. Len Wolman has an employment contract with the
Company. For the years ended December 31, 2004, 2003 and 2002, $1,217,420,
$900,998 and $835,086, respectively, was incurred by the Company pursuant to the
employment contract.

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

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

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

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


NAME OF % OWNERSHIP
BENEFICIAL OWNER IN THE COMPANY
- ---------------- --------------
LMW Investments, Inc.(i).................................. 32.2033%
Slavik Suites, Inc.(ii)................................... 67.7967%
--------------
100.0000%
==============

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

(ii) Messrs. Len and Mark Wolman each own approximately 11.875% of the
outstanding shares of Slavik Suites, Inc. Messrs. Stephan F. Slavik and Richard
Slavik each own approximately 14.35% of the outstanding shares of Slavik Suites,
Inc. The address for Slavik Suites, Inc. is 32605 West 12 Mile Road, Suite 350,
Farmington Hills, Michigan 48334.

The Company does not currently have in place any equity compensation plans.


29


Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

DEVELOPMENT SERVICES AGREEMENT PHASE II AND RELATED AGREEMENTS AND PAYMENTS

As noted in the section above entitled "Business - Trading Cove Associates
Material Agreements - Development Agreement and Related Agreements", on February
9, 1998, TCA and KIML, an affiliate of Kerzner Investments, the Company's
partner in TCA, 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, which 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. At December 31, 2004 all of TCA's costs associated with the Project
Sunburst expansion had not been paid, however reasonable estimates of those
costs have been provided for in TCA's financial statements at December 31, 2004.
The Development Services Fee Phase II is paid in three 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 $15,964,000.

Before KIML assigned the Development Services Agreement Phase II to Kerzner
Investments, it entered into the Local Construction Services Agreement with
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.

At December 31, 2004 the accrued liability to Kerzner Investments pursuant to
the Development Services Agreement Phase II was approximately $414,000.

The Development Services Agreement Phase II and the Local Construction Services
Agreement are each filed as an exhibit to the Company'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, and each is incorporated herein by
reference.


30



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 the TCA
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 pay to 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
0.00 percent to 0.10 percent) to be determined using a formula attached to the
employment agreement, which compares actual revenues to predetermined revenue
targets. For the years ended December 31, 2004, 2003 and 2002, the Company
incurred $1,217,420, $900,998 and $835,086, respectively, as an expense pursuant
to Len Wolman's employment agreement.

OTHER RELATED PARTY TRANSACTIONS

For the years ended December 31, 2004, 2003, and 2002 approximately $42,000,
$42,000 and $46,000, respectively, was paid and incurred by TCA to the
principals and affiliates of the Company as part of TCA's operating expenses. In
addition, in 2004, 2003 and 2002 TCA incurred approximately $935,000, $920,000
and, $0, respectively, to the principals of the Company in connection with the
first priority payments set forth under the section "Business - 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 depreciated over five years. Expense for the
years ended December 31, 2004, 2003 and 2002 was $553, $6,480 and $6,480,
respectively.

Waterford Group, Slavik Suites, Inc. 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.

ITEM 14. PRINCIPAL ACCOUNTANT'S FEES AND SERVICES

For the year ended December 31, 2004

Audit fees $ 44,250
Tax fees 750
All other fees
Excess cash certification 2,250

Total ---------
$ 47,250
=========

For the year ended December 31, 2003

Audit fees $ 264,000
Tax fees 2,250
All other fees
Analyses of proposed buyout of a contract 17,250
---------
Total $ 283,500
=========



31





PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a) EXHIBITS

Exhibit No. Description
3.1 Certificate of Formation, as amended, of Waterford
Gaming, LLC (i)
3.2 Certificate of Incorporation of Waterford Gaming
Finance Corp. (i)
3.3 Bylaws of Waterford Gaming Finance
Corp. (i)
4.1 Indenture, dated as of November 8, 1996, between
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., the issuers, and Fleet National
Bank, as trustee, relating to $65,000,000 12-3/4%
Senior Notes due 2003. (i)
4.1.1 First Supplemental Indenture, dated as of March 4,
1999, among Waterford Gaming, L.L.C. and Waterford
Gaming Finance, Corp., as issuers, and State
Street Bank and Trust Company, as trustee,
relating to $65,000,000 12-3/4% Senior Notes due
2003. (vi)
4.2 Indenture, dated as of March 17, 1999, among
Waterford Gaming, L.L.C. and Waterford Gaming
Finance Corp., as issuers, and State Street Bank
and Trust Company, as trustee, relating to
$125,000,000 9-1/2% Senior Notes
due 2010. (vi)
4.2.1 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)



32



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)
31 Certifications. (ix)


33




(i) Incorporated by reference to the Registrant's Registration Statement
on Form S-4, 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)Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 2003, Commission File No. 333-17795
as accepted by the Commission on August 12, 2003.

(ix) Filed herewith.


34



b) FINANCIAL STATEMENTS SCHEDULES



INDEX TO FINANCIAL STATEMENTS


WATERFORD GAMING, L.L.C.
Report of Independent Registered Public Accounting Firm F-1
Financial Statements:
Balance Sheets as of December 31, 2004 and 2003 F-2
Statements of Income for the years ended
December 31, 2004, 2003 and 2002 F-3
Statements of Changes in Member's Deficiency for the
years ended December 31, 2004, 2003 and 2002 F-4
Statements of Cash Flows for the years ended
December 31, 2004, 2003 and 2002 F-5
Notes to Financial Statements F-6

TRADING COVE ASSOCIATES
Report of Independent Registered Public Accounting Firm F-18
Financial Statements:
Balance Sheets as of December 31, 2004 and 2003 F-19
Statements of Operations for the years ended
December 31, 2004, 2003 and 2002 F-20
Statements of Changes in Partners' Capital
for the years ended
December 31, 2004, 2003 and 2002 F-21
Statements of Cash Flows for the years ended
December 31, 2004, 2003 and 2002 F-22
Notes to Financial Statements F-23



35



REPORT OF INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM


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

In our opinion, the accompanying balance sheets and the related statements of
income, changes in member's deficiency and of cash flows present fairly, in all
material respects, the financial position of Waterford Gaming, L.L.C. (the
"Company") at December 31, 2004 and 2003 and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2004
in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers, LLP
Hartford, CT
March 15, 2005


F-1





Waterford Gaming, L.L.C.

Balance Sheets

December 31, 2004 and 2003

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





2004 2003
--------------- ---------------

ASSETS

Current assets
Cash and cash equivalents $ 4,571,752 $ 4,892,072
Restricted investments 6,104,635 6,623,725
Other current assets 74,563 7,252
--------------- ---------------

Total current assets 10,750,950 11,523,049
--------------- ---------------

Trading Cove Associates - equity investment 17,052,615 16,965,487
Beneficial interest - Leisure Resort Technology, Inc. 3,784,059 4,162,049
Deferred financing costs, net of accumulated amortization of $939,890
and $274,972 at December 31, 2004 and 2003, respectively 2,903,141 3,568,059
Fixed assets, net of accumulated depreciation of $53,918 and $53,002 at
December 31, 2004 and 2003, respectively --- 916
--------------- ---------------

Total assets $ 34,490,765 $ 36,219,560
=============== ===============


LIABILITIES AND MEMBER'S DEFICIENCY

Current liabilities
Accrued expenses and accounts payable $ 153,404 $ 150,535
Accrued interest on senior notes payable 3,574,743 3,887,797
--------------- ---------------

Total current liabilities 3,728,147 4,038,332
--------------- ---------------

8.625% senior notes payable 140,761,000 153,088,000
--------------- ---------------

Total liabilities 144,489,147 157,126,332
--------------- ---------------

Commitments and contingent liabilities

Member's deficiency (109,998,382) (120,906,772)
--------------- ---------------

Total liabilities and member's deficiency $ 34,490,765 $ 36,219,560
=============== ===============



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

F-2








Waterford Gaming, L.L.C.

Statements of Income

For the years ended December 31, 2004, 2003 and 2002


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


2004 2003 2002
------------- ------------- -------------


Expenses
Interest expense $ 13,588,087 $ 19,481,783 $ 11,080,139
Salaries - related parties 1,217,420 900,998 835,086
General and administrative 848,214 552,586 431,223
9.50% senior notes tender expense --- 509,414 ---
Amortization of beneficial interest -
Leisure Resort Technology, Inc. 377,990 377,990 377,990
Amortization on deferred financing costs 664,918 2,918,310 366,864
Depreciation 916 10,780 10,780
------------- ------------- -------------

Total expenses 16,697,545 24,751,861 13,102,082
------------- ------------- -------------


Interest and dividend income 117,608 123,634 534,012
Equity in income of
Trading Cove Associates 30,503,631 28,519,860 24,601,380
------------- ------------- -------------

Net income $ 13,923,694 $ 3,891,633 $ 12,033,310
============= ============= =============


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

F-3






Waterford Gaming, L.L.C.

Statements of Changes in Member's Deficiency

For the years ended December 31, 2004, 2003 and 2002


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




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

Distributions (18,520,562)

Net income 12,033,310
---------------

Balance, December 31, 2002 (76,962,084)

Distributions (47,836,321)

Net income 3,891,633
---------------

Balance, December 31, 2003 (120,906,772)

Distributions (3,015,304)

Net income 13,923,694
---------------

Balance, December 31, 2004 $ (109,998,382)
===============



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

F-4






Waterford Gaming, L.L.C.

Statements of Cash Flows

For the years ended December 31, 2004, 2003 and 2002


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


2004 2003 2002
------------- ------------- -------------

Cash flows from operating activities
Net income $ 13,923,694 $ 3,891,633 $ 12,033,310
------------- ------------- -------------

Adjustments to reconcile net income
to net cash provided by operating activities
Amortization 1,042,908 3,296,300 744,854
Depreciation 916 10,780 10,780
Equity in income of Trading Cove Associates (30,503,631) (28,519,860) (24,601,380)
Operating distributions from Trading Cove Associates 30,416,503 23,526,711 22,718,604
Changes in operating assets and liabilities
Other current assets (67,311) 713 1,107
Accrued expenses and accounts payable 2,869 38,539 (59,614)
Accrued interest on senior notes payable (313,054) 866,601 (207,750)
------------- ------------- -------------
Total adjustments 579,200 (780,216) (1,393,399)
------------- ------------- -------------

Net cash provided by
operating activities 14,502,894 3,111,417 10,639,911
------------- ------------- -------------

Cash flows from investing activities
Maturities and (purchases) of restricted investments - net 519,090 3,720,405 15,845,304
Contributions to Trading Cove Associates --- (450,000) (1,000,000)
Distributions from Trading Cove Associates --- 450,000 1,550,000
------------- ------------- -------------
Net cash provided by
investing activities 519,090 3,720,405 16,395,304
------------- ------------- -------------

Cash flows from financing activities
Redemption of 8.625% senior notes payable (12,327,000) (1,912,000) ---
Distributions to member (3,015,304) (47,836,321) (18,520,562)
Proceeds from 8.625% senior notes issuance --- 155,000,000 ---
Deferred financing costs --- (3,843,031) ---
Redemption of 9.50% senior notes payable --- (108,007,000) (7,427,000)
------------- ------------- -------------
Net cash used in
financing activities (15,342,304) (6,598,352) (25,947,562)
------------- ------------- -------------

Net change in cash and cash equivalents (320,320) 233,470 1,087,653

Cash and cash equivalents

Beginning of year 4,892,072 4,658,602 3,570,949
------------- ------------- -------------
End of year $ 4,571,752 $ 4,892,072 $ 4,658,602
============= ============= =============


Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 13,901,141 $ 18,615,181 $ 11,287,889
============= ============= =============


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

F-5





WATERFORD GAMING, L.L.C.

NOTES TO FINANCIAL STATEMENTS

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

Waterford Gaming, L.L.C. (the "Company"), a Delaware limited liability company,
was formed on September 30, 1996. The Company initially acquired and owns a
partnership interest in Trading Cove Associates ("TCA"), a Connecticut general
partnership, and invested in certain notes issued by the Mohegan Tribal Gaming
Authority (the "Authority"). The Company is governed by a Board of Directors
pursuant to the limited liability company agreement (the "Agreement"). 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 9.5% Senior Notes due 2010 (the "$125 Million Senior Notes"). In
March 1999, the Company together with Finance had issued the $125 Million 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 issuance by the Company's and Finance's $125 Million Senior
Notes, each of Slavik Suites, Inc. ("Slavik") and LMW Investments, Inc. ("LMW")
contributed their respective interests in the Company as of March 17, 1999 to a
Delaware limited liability company, Waterford Group, L.L.C. ("Waterford Group").
Waterford Group is now the sole member of the Company. Slavik and LMW own
Waterford Group in the same respective interest as they had in the Company which
are as follows:


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


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

Fianance has no activity and maintains only $100 in cash. Therefore, it is not
consolidated in the accompanying financial statements of the Company.

In connection with the $125 Million Senior Notes offering, the Company
distributed $37,050,000 to Waterford Group, L.L.C. during March 1999. During
December 1999, the Company received a payment on notes it held due from the
Authority and a distribution from TCA. As contemplated in the $125 Million
Senior Notes offering, the Company distributed approximately $34,672,000 to
Waterford Group during January 2000. On November 1, 2002 the Company distributed
$15,000,000 to Waterford Group in accordance with the terms of the indenture
relating to the $125 Million Senior Notes. In connection with the 8.625% Senior
Notes offering, the Company distributed approximately $44,500,000 to Waterford
Group during June 2003. Tax distributions totaling approximately $14,861,000
were made by the Company during 1999, 2000, 2001, 2002, 2003 and 2004. On
January 10, 2005 a tax distribution of approximately $2,875,000 was made by the
Company. In addition the Company distributed the following amounts to Waterford
Group in accordance with the terms of the indenture relating to the 8.625%
senior notes (the "8.625% Senior Notes Indenture").


Date of Distribution Amount Distributed
-------------------- ------------------

September 15, 2003 $ 98,080
March 15, 2004 $ 349,247
September 15, 2004 $ 249,567
March 15, 2005 $ 294,585


1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Accounting Method

The accrual method of accounting is used in the preparation of the financial
statements.

Cash and Cash Equivalents

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

Restricted Investments

Restricted investments at December 31, 2004 are principally comprised of an
investment in a Federal Home Loan Bank Discount Note, which was purchased at a
discount of 1.82% and matured March 2, 2005 and an investment in the First
American Treasury Obligations Fund and at December 31, 2003 are principally
comprised of an investment in a Federal Home Loan Bank Discount Note, which was
purchased at a discount of 1.01% and matured March 10, 2004, and an investment
in the First American Treasury Obligations Fund. The investments represent a
restricted investment fund that has been established with a trustee in terms of
the 8.625% Senior Notes Indenture and is reported at cost plus accrued interest,
which approximates market.


F-6


Trading Cove Associates - Equity Investment

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

The Company receives distributions from TCA in accordance with an Amended and
Restated Omnibus Termination Agreement. The amount of distributions received
relies on the fees earned by TCA pursuant to its Relinquishment Agreement with
the Authority. Distributions are recorded when received.

Deferred Financing Costs

All costs incurred with the issuance of the Company's and Finance's 8.625%
Senior Notes, were capitalized and are amortized on a straight-line basis over
the term of the 8.625% Senior Notes. Additional amortization is recorded when
the 8.625% Senior Notes are redeemed. The additional amortization is the amount
that the redeemed 8.625% Senior Notes represents of the total deferred financing
costs net of accumulated amortization.

Fixed Assets

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

Income Taxes

The Company, as a wholly owned subsidiary of Waterford Group, does not file
federal or state income tax returns. As a result, no provision for federal and
state income taxes has been made in the accompanying financial statements.

Concentration of Credit Risk

The Company'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 payments of the related Relinquishment
Fees, as defined, by the Authority.

Financial instruments, which potentially subject the Company to a concentration
of credit risk, principally consist of cash in excess of the financial
institutions' insurance limits. The Company invests available cash with high
credit quality institutions.

Fair Value of Financial Instruments

Fair value of the Company's debt is based on quoted market prices.

Use of Estimates

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


2. TRADING COVE ASSOCIATES:

TCA was organized on July 23, 1993. The primary purpose of TCA has been,

a) to assist the Mohegan Tribe of Indians of Connecticut (the "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 initial development of the Mohegan Sun
Casino (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.


F-7



The Mohegan Sun commenced operations on October 12, 1996. From the opening of
Mohegan Sun until January 1, 2000, TCA oversaw the Mohegan Sun's day-to-day
operations.

TCA's Partnership Agreement (the "TCA 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 Connecticut, Inc. ("Kerzner Investments"), formerly
Sun Cove Limited, an affiliate of Kerzner International Limited ("Kerzner
International").

As of December 31, 2004, 2003 and 2002 the following summary information relates
to TCA. Total revenues and net income are for the years ended December 31, 2004,
2003 and 2002.






2004 2003 2002
------------- ------------- -------------
Total current assets $ 27,322,651 $ 26,143,405 $ 24,501,961
============= ============= =============

Total assets $ 29,539,425 $ 28,582,603 $ 27,166,723
Total liabilities (973,228) (1,070,719) (10,521,195)
------------- ------------- -------------
Partners' capital $ 28,566,197 $ 27,511,884 $ 16,645,528
============= ============= =============

Total revenues $ 69,144,891 $ 69,797,608 $ 59,065,491
============= ============= =============

Net income $ 66,887,319 $ 62,919,777 $ 55,082,815
============= ============= =============


As of December 31, 2004, 2003 and 2002, the following summarizes the Company's
investment in TCA.





2004 2003 2002
------------ ----------- ------------
Trading Cove Associates -
equity investment, beginning of year $ 16,965,487 $ 11,972,338 $ 10,639,562
Contributions --- 450,000 1,000,000
Distributions (30,416,503) (23,976,711) (24,268,604)
------------ ------------ ------------

(13,451,016) (11,554,373) (12,629,042)
------------ ------------ ------------
Income from Trading Cove
Associates 30,943,659 28,959,888 25,041,408
Amortization of interests
purchased (440,028) (440,028) (440,028)
------------ ------------ ------------
Equity in income of
Trading Cove Associates 30,503,631 28,519,860 24,601,380
------------ ----------- ------------
Trading Cove Associates -
equity investment, end of year $ 17,052,615 $ 16,965,487 $ 11,972,338
============ ============ ============



F-8






TRADING COVE ASSOCIATES - MATERIAL AGREEMENTS


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 project (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) 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.

For the years ended December 31, 2004, 2003 and 2002 the Relinquishment Fees
earned were $69,101,491, $65,099,553 and $58,508,703, respectively. The amount
of Relinquishment Fees reported are based upon Revenues reported to TCA by the
Authority.

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 approximately 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 approximately 1,200-hotel rooms opened during June
2002. At December 31, 2004 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. As of December 31, 2004, the Authority had paid TCA $14.0 million as
Development Fee payments in accordance with the terms of the Development
Agreement.

On February 9, 1998, TCA and Kerzner International Management Limited ("KIML),
an affiliate of Kerzner Investments, 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. KIML assigned the Development Services
Agreement Phase II to Kerzner Investments.

F-9




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,
excluding capitalized interest, less all costs incurred by TCA in connection
with the Project Sunburst expansion. At December 31, 2004, all of TCA's costs
associated with the Project Sunburst expansion had not been paid, however
reasonable estimates of those costs have been provided for in TCA's financial
statements at December 31, 2004. The Development Services Fee Phase II is paid
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 an 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 $15,964,000. At
December 31, 2004, the accrued liability to Kerzner Investments pursuant to the
Development Agreement Phase II was approximately $414,000.

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"), 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 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.

MANAGEMENT AGREEMENT

On August 30, 1995 TCA and the Tribe entered into the Management Agreement.
After entering into the Management Agreement, the Tribe assigned it to the
Authority.

Until midnight December 31, 1999, TCA was the exclusive manager of the Mohegan
Sun and earned a management fee from the Authority pursuant to the Management
Agreement (the "Management Fees"). The Management Fees were paid monthly (the
final payment was received by TCA from the Authority on January 25, 2000) and
were calculated in three tiers based upon net revenues of the Mohegan Sun.

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, 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)the 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 years ended December 31, 2004,
and 2003, $1,869,157 ($934,579 to Kerzner Investments and $934,578 to
affiliates of the Company)and $1,840,346 ($920,173 to each of Kerzner
Investments and affiliates of the Company), respectively, had been
incurred by TCA in terms of the first priority.

(b) Second, to return all capital contributions made by the partners of
TCA after September 29, 1995. The Company does not anticipate TCA
making further capital calls to fund expenses related to the
development of the Project Sunburst expansion. From January 1, 2000 to
December 31, 2004 these capital contributions aggregated $8,000,000.
From January 1, 2000 to December 31, 2004 $8,000,000 has been repaid
to the partners of TCA, 50 percent to the Company and 50 percent to
Kerzner Investments.

As of December 31, 2004, $0 in capital contributions remained
outstanding.
F-10



(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. No such payments are required or due at December
31, 2004. The accrued liability to Kerzner Investments with respect to
such fee at December 31, 2004 was approximately $414,000.

(e) Fifth, to pay Kerzner Investments an annual fee (in the form of a
priority distribution) of $5.0 million payable in equal quarterly
installments of $1.25 million beginning March 31, 2000 and ending
December 31, 2006. On January 26, 2005 and on January 27, 2004,
$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 (25%) of the relinquishment payments as
distributions. On January 26, 2005 and January 27, 2004, $13,294,808
($6,647,404 to each of Kerzner Investments and the Company)and
$12,669,636 ($6,334,818 to each of Kerzner Investments and the
Company), respectively, was distributed by TCA in terms of the seventh
priority.

(h) Eighth, to distribute all excess cash. On January 26, 2005, and
January 27, 2004, $11,600,000 ($5,800,000 to each of Kerzner
Investments and the Company)and $10,926,597 ($5,463,298 to Kerzner
Investments and $5,463,299 to the Company), respectively, was
distributed as excess cash.

In addition, TCA shall 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 the TCA 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.

AMENDED AND RESTATED OMNIBUS FINANCING AGREEMENT

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


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 gave up (a) 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, 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 by TCA.
In connection with the settlement of all matters related to such suit, pursuant
to a 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 percent of the Organizational and Administrative fee, as defined in
the Organizational and Administrative Services Agreement, and 5 percent of TCA's
Excess Cash as defined in the TCA 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
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. As a result of the
Relinquishment Agreement becoming effective, the remaining balance will be
amortized over 189 months beginning March 18, 1999. Accumulated amortization at
December 31, 2004 and 2003, amounts to $3,273,152 and $2,895,162 respectively.

F-11


4. DEFERRED COSTS:

Deferred costs consist of the following at December 31, 2004:

Deferred financing costs $3,843,031
Less accumulated amortization 939,890
----------
$2,903,141
==========

Amortization of deferred financing cost totaling $664,918, $2,918,310 and
$366,864 were expensed for the years ending December 31, 2004, 2003 and 2002,
respectively.

The Company's estimate of amortization expense for each of the succeeding five
years and thereafter is as follows:

Year ending December 31,

2005 $ 376,562
2006 376,562
2007 376,562
2008 377,593
2009 376,562
Thereafter 1,019,300
----------
$2,903,141
==========

F-12



5. $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 15th and September 15th 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 8.625% Senior Notes 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.

Pursuant to the terms of the 8.625% Senior Notes Indenture, if the Company and
Finance have any Company Excess Cash, as defined in the 8.625% Senior Notes
Indenture, on February 1st or August 1st of any year, they must use such Company
Excess Cash less all Required IRA True-Up Payments, as defined in the 8.625%
Senior Notes 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 15th or September 15th 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%




F-13



The Company and Finance have periodically redeemed portions of the 8.625% Senior
Notes with Company Excess Cash pursuant to the terms of the 8.625% Senior Notes
Indenture. The table below summarizes (a) the amount of Company Excess Cash that
the Company and Finance have determined was available for the mandatory
redemption of the 8.625% Senior Notes on February 1st and August 1st of each
applicable year pursuant to the terms of the 8.625% Senior Notes Indenture, (b)
the aggregate principal amount of 8.625% Senior Notes redeemed with such Company
Excess Cash, (c) the date on which such redemption was consummated, and (d) the
redemption price at which such redemption was made.




Date Company Excess Cash Principal Amount of Dates of Redemption Price (expressed as percentage of
(approximately) notes redeemed principal amount being redeemed
- ---------------- ------------------- ------------------- -------------------- ---------------------------------
August 1, 2003 $ 5,568,000 $ 1,912,000 September 15, 2003 108.625%
February 1, 2004 $ 14,534,000 $ 7,302,000 March 15, 2004 108.625%
August 1, 2004 $ 11,695,000 $ 5,025,000 September 15, 2004 107.610%
February 1, 2005 $ 12,098,000 $ 5,600,000 March 15, 2005 107.610%





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 8.625% Senior Notes 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 8.625%
Senior Notes 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 8.625% Senior Notes
Indenture, is less than or equal to 3.0 to 1.0.

The fair market value of the Company's long term debt at December 31, 2004 and
2003 is estimated to be approximately $150,614,000 and $163,804,000,
respectively, based on the quoted market price for the 8.625% Senior Notes.


6. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION:

The following is a reconciliation of net income for financial statement purposes
to net income for federal income tax purposes for the years ended December 31,
2004, 2003 and 2002.





2004 2003 2002
------------ ----------- ------------

Financial Statement
net income $ 13,923,694 $ 3,891,633 $ 12,033,310
Financial statement equity in
(income) loss of Trading Cove Associates over tax basis equity in (income) loss
of
Trading Cove Associates 16,064 (4,581,809) 562,075
Other (1,981) 6,124 7,263
------------ ----------- ------------
Federal income tax basis
net income (loss) $ 13,937,777 $ (684,052) $ 12,602,648
============ =========== ============



F-14





The following is a reconciliation of member's deficiency for financial statement
purposes to member's deficiency for federal income tax purposes as of December
31, 2004, 2003 and 2002.







2004 2003 2002
--------------- --------------- --------------
Financial statement member's
deficiency $ (109,998,382) $ (120,906,772) $ (76,962,084)
Adjustment for cumulative
difference between tax basis
of Trading Cove Associates-
equity investment and GAAP
basis of Trading Cove
Associates-equity investment 757,944 837,129 4,764,291
Current year financial
statement net income (over)
under federal income tax
basis net income (loss) 14,083 (4,575,685) 569,338
--------------- --------------- --------------
Federal income tax basis
member's deficiency $ (109,226,355) $ (124,645,328) $ (71,628,455)
=============== =============== ==============





7. COMMITMENTS AND CONTINGENT LIABILITIES:

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, which motion was denied on April 14, 2003.

Fact discovery is completed. On April 15, 2004, the Company and its
co-defendants filed a motion for summary judgment as to all of Leisure's claims.
The Court heard argument on this Motion on June 23, 2004. In an August 4, 2004,
Memorandum of Decision, the Court granted summary judgment for the Defendants as
to each of the remaining three counts of the plaintiffs complaint. The plaintiff
has appealed this decision. Defendants' counterclaims are stayed pending this
appeal.

The Company believes that it has meritorious defenses and, if necessary, 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
pendency of the appeal and the disputed issues of law and/or facts on which the
outcome of this litigation depends.


F-15



8. CERTAIN RELATIONSHIPS and RELATED TRANSACTIONS:

DEVELOPMENT SERVICES AGREEMENT PHASE II AND RELATED AGREEMENTS AND PAYMENTS

On February 9, 1998, TCA and KIML, an affiliate of Kerzner Investments, the
Company's partner in TCA, 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 a fee, as subcontractor, equal to 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. At
December 31, 2004, all of TCA's costs associated with the Project Sunburst
expansion had not been paid, however reasonable estimates of those cost have
been provided for in TCA's financial statements at December 31, 2004. 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.

Before KIML assigned the Development Services Agreement Phase II to Kerzner
Investments, it entered into the Local Construction Services Agreement with
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.

At December 31, 2004 TCA has accrued a liability to Kerzner Investments of
approximately $414,000, pursuant to the Development Services Agreement Phase II.


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 the TCA
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 to
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
0.00 percent to 0.10 percent) to be determined using a formula attached to the
employment agreement which compares actual revenues to predetermined revenue
targets. For the years ended December 31, 2004, 2003 and 2002 the Company
incurred,$1,217,420, $900,998 and $835,086, respectively, as an expense pursuant
to Len Wolman's employment agreement.


F-16




OTHER RELATED PARTY TRANSACTIONS

For the years ended December 31, 2004, 2003 and 2002, approximately $42,000,
$42,000 and $46,000, respectively, was incurred to the principals and affiliates
of the Company as part of TCA's operating expenses. In addition in 2004, 2003
and 2002 TCA incurred approximately $935,000, $920,000 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 depreciated over five years. Expense for the
years ended December 31, 2004, 2003 and 2002 was $553, $6,480 and $6,480,
respectively.

Waterford Group, 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.


F-17




Report of Independent Registered Public Accounting Firm



To the Partners of Trading Cove Associates



In our opinion, the accompanying balance sheets and the related statements of
operations, changes in partners' capital and of cash flows present fairly, in
all material respects, the financial position of Trading Cove Associates (the
"Partnership") at December 31, 2004 and 2003, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2004, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.





PricewaterhouseCoopers, LLP
Hartford, CT
March 15, 2005


F-18




Trading Cove Associates
Balance Sheets
December 31, 2004 and 2003
--------------------------


2004 2003
---- ----
Assets
Current assets
Cash and cash equivalents $ 732,886 $ 798,602
Relinquishment fee receivable 26,589,614 25,339,272
Other current assets 151 5,531
------------ ------------

Total current assets 27,322,651 26,143,405
------------ ------------

Deferred costs, net of accumulated amortization
of $3,282,551 and $3,060,427 at December 31, 2004
and 2003, respectively 2,216,390 2,438,514
Property and equipment, net of accumulated depreciation
of $14,951 and $14,651 at December 31, 2004
and 2003, respectively 384 684
------------ ------------

Total assets $ 29,539,425 $ 28,582,603
============ ============


Liabilities and Partners' Capital
Current liabilities
Accounts payable and accrued expenses $ 93,538 $ 88,972
Subcontracted services payable 465,930 474,767
Estimated contract costs due related
party 413,760 506,980
------------ ----------

Total current liabilities 973,228 1,070,719
------------ ------------

Commitments and contingent liabilities

Partners' capital 28,566,197 27,511,884
------------ ------------

Total liabilities and partners' capital $ 29,539,425 $ 28,582,603
============ ============




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


F-19





Trading Cove Associates
Statements of Operations
For the Years Ended December 31, 2004, 2003 and 2002
----------------------------------------------------



2004 2003 2002
---- ---- ----

Revenue
Relinquishment fee $ 69,101,491 $ 65,099,553 $ 58,508,703
Development services revenue 43,400 4,698,055 556,788
------------ ------------ ------------

Total revenues 69,144,891 69,797,608 59,065,491
------------ ------------ ------------


Expenses
Subcontract payments to partners and
their affiliates 1,869,157 1,840,346 ---
Cost of development services revenue 43,400 4,662,055 1,756,788
Amortization and depreciation 222,424 221,818 221,818
General and administrative 130,843 159,653 2,017,350
------------ ------------ ------------

Total expenses 2,265,824 6,883,872 3,995,956
------------ ------------ ------------

Interest and dividend income 8,252 6,041 13,280
------------ ------------ ------------

Net income $ 66,887,319 $ 62,919,777 $ 55,082,815
============ ============ ============




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

F-20




Trading Cove Associates
Statements of Changes in Partners' Capital For the Years
Ended December 31, 2004, 2003 and 2002
----------------------------------------------------



Kerzner Investments Waterford
Connecticut Inc. Gaming, L.L.C. Total
------------------- -------------- -----

Partners' capital, January 1, 2002 $ 7,174,961 $ 5,924,961 $ 13,099,922

Net income 30,041,407 25,041,408 55,082,815

Contributions 1,000,000 1,000,000 2,000,000

Distributions (29,268,604) (24,268,605) (53,537,209)
------------ ------------ ------------

Partners' capital, December 31, 2002 8,947,764 7,697,764 16,645,528

Net income 33,959,889 28,959,888 62,919,777

Contributions 450,000 450,000 900,000

Distributions (28,976,711) (23,976,710) (52,953,421)
------------ ------------ ------------

Partners' capital, December 31, 2003 14,380,942 13,130,942 27,511,884

Net income 35,943,660 30,943,659 66,887,319

Distributions (35,416,503) (30,416,503) (65,833,006)
------------ ------------ ------------

Partners' capital, December 31, 2004 $ 14,908,099 $ 13,658,098 $ 28,566,197
============ ============ ============



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

F-21




Trading Cove Associates
Statements of Cash Flows
For the Years Ended December 31, 2004, 2003 and 2002
----------------------------------------------------




2004 2003 2002
---- ---- ----


Cash flows from operating activities
Net income $ 66,887,319 $ 62,919,777 $ 55,082,815
------------ ------------- ------------

Adjustments to reconcile net income
to net cash provided by operating activities
Amortization 222,124 221,518 221,518
Depreciation 300 3,303 7,641
Loss on disposal of property and equipment --- 743 ---
Gain on sale of property and equipment --- (1,750) ---
Change in operating assets and liabilities
Relinquishment fee receivable (1,250,342) (1,669,449) (4,983,247)
Development fee receivable --- 84,000 1,176,000
Other current assets 5,380 (1,531) (4,000)
Accounts payable and accrued expenses 4,566 (25,884) (64,237)
Subcontracted services payable (8,837) 474,767 (430,791)
Estimated contract costs due related party (93,220) (9,899,359) 593,578
------------ ------------- ------------
Total adjustments (1,120,029) (10,813,642) (3,483,538)
------------ ------------- ------------

Net cash provided by operating activities 65,767,290 52,106,135 51,599,277
------------ ------------- ------------

Cash flows from investing activities
Proceeds from sale of property and equipment --- 1,750 ---
------------ ------------- ------------
Net cash provided by investing activities --- 1,750 ---
------------ ------------- ------------

Cash flows from financing activities
Distributions (65,833,006) (52,953,421) (53,537,209)
Partners' contributions --- 900,000 2,000,000
------------ ------------- ------------
Net cash used in financing activities (65,833,006) (52,053,421) (51,537,209)
------------ ------------- ------------

Net change in cash and cash equivalents (65,716) 54,464 62,068

Cash and cash equivalents

Beginning of year 798,602 744,138 682,070
------------ ------------- ------------
End of year $ 732,886 $ 798,602 $ 744,138
============ ============= ============




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

F-22






TRADING COVE ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

1. Organization, Partnership Agreement and Other Material Agreements

(a) Organization and Partnership Agreement

Trading Cove Associates (the "Partnership"), a Connecticut general
partnership, was organized on July 23, 1993. The primary purpose of
the Partnership has been:

(i) to assist the Mohegan Tribe of Indians of Connecticut (the
"Tribe") and the Mohegan Tribal Gaming Authority (the
"Authority") in obtaining federal recognition;

(ii) to negotiate the tribal-state compact with the State of
Connecticut on behalf of the Tribe;

(iii)to obtain financing for the initial development of the Mohegan
Sun Casino (the "Mohegan Sun");

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

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

(vi) 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 Mohegan Sun, and until January 1, 2000, the
Partnership oversaw the Mohegan Sun's day-to-day operations.

The Partnership will terminate on December 31, 2040, or earlier,
in accordance with the terms of the partnership agreement (the
"Partnership Agreement").

The original partners of the Partnership were RJH Development
Corp. ("RJH"), a New York corporation, Leisure Resort Technology,
Inc. ("Leisure"), a Connecticut corporation, Slavik Suites, Inc.
("Slavik"), a Michigan corporation, and LMW Investments, Inc.
("LMW"), a Connecticut corporation. On September 21, 1994, the
Partnership Agreement was amended and restated to admit Kerzner
Investments Connecticut, Inc. ("Kerzner Investments"), a
Connecticut corporation, formerly Sun Cove Limited, as a partner.

On February 3, 1995, Leisure entered into an acknowledgement and
release agreement to withdraw as a partner of the Partnership and
hold its interest in the Partnership as a beneficial interest. On
August 6, 1997, Leisure filed a lawsuit against the Partnership,
Kerzner Investments, RJH and Waterford Gaming L.L.C. ("Waterford
Gaming") and its owners, claiming breach of contract, breach of
fiduciary duties and other matters in connection with the
development of the Mohegan Sun. On January 6, 1998, pursuant to
the settlement and release agreement described in Note 6 below,
Waterford Gaming paid $5,000,000 to Leisure and, among other
things, Leisure gave up, (a) its beneficial interest of 5% of
certain fees and excess cash flows, as defined, of the
Partnership and (b) any other claims it may have had against the
Partnership, Kerzner Investments, RJH, Waterford Gaming and its
owners. In connection with the settlement of all matters related
to such suit, pursuant to the settlement and release agreement,
Waterford Gaming agreed to acquire Leisure's interests in the
Partnership. 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 the Partnership's Excess Cash as defined in
the Partnership Agreement, and Waterford Gaming is now entitled
to such fees and cash. During March 1999, Waterford Gaming's
$65,000,000 senior notes were retired and, on March 18, 1999,
Waterford Gaming 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 Partnership and
certain other defendants.

F-23




For a description of the complaint, see Note 6 to these financial
statements.

On November 8, 1996, Slavik, LMW and RJH withdrew from the
Partnership and, concurrently, consented to the admission of
Waterford Gaming to the Partnership. Waterford Gaming,
simultaneously, purchased RJH's interest in the Partnership.
Waterford Gaming is owned by Waterford Group, LLC. Waterford
Group, LLC is owned by Slavik and LMW.

The partners' percentage interest in the Partnership as of
November 8, 1996 was as follows:

Percentage
Partner Interest
------- ----------
Kerzner Investments Connecticut, Inc. 50.0%
Waterford Gaming, L.L.C. 50.0%


(b) Other Material Agreements

Relinquishment Agreement

On February 7, 1998, the Partnership and the Authority entered
into the Relinquishment Agreement (the "Relinquishment
Agreement"). Under the terms of the Relinquishment Agreement the
Partnership 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 the Partnership
for terminating its rights under the Management Agreement and the
Hotel/Resort Management Agreement, the Authority agreed to pay to
the Partnership a fee (the "Relinquishment Fees") equal to 5% 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 "Project Sunburst expansion").

The Relinquishment Fees are divided into senior relinquishment
payments and junior relinquishment payments, each of which equals
2.5% of "Revenues". Revenues are defined as gross gaming revenues
(other than Class II gaming revenue) 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.

Development Agreement

On February 7, 1998 the Partnership and the Authority entered into the
Development Services Agreement (the "Development Agreement"), which made the
Partnership the exclusive developer of the Project Sunburst expansion. Pursuant
to the Development Agreement, the Partnership agreed to oversee the planning,
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 approximately 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 approximately 1,200-hotel rooms opened during June
2002. As of December 31, 2004, the Project Sunburst expansion was complete in
terms of the Development Agreement.


F-24




Management Agreement

The Partnership entered into the Management Agreement with the Tribe pursuant to
which the Tribe granted to the Partnership the exclusive right and obligation to
develop, manage, operate and maintain the Mohegan Sun. The Management Agreement
was amended and restated effective September 29, 1995 (the "Effective Management
Agreement Date"). The Partnership's obligations under this agreement began five
days after the Effective Management Agreement Date and were originally intended
to end on October 11, 2003, seven years from the opening of the Mohegan Sun.
Pursuant to the Management Agreement the Partnership received a management fee
that was calculated in three tiers based upon the Net Revenues, as defined in
the Management Agreement, of the Mohegan Sun. The Management Agreement
terminated at midnight on December 31, 1999. The final management fee was
received by the Partnership from the Authority on January 25, 2000.


Agreements with Partners and/or their Affiliates

Agreement Relating to Development Services

On February 9, 1998, the Partnership and Kerzner International Management
Limited ("KIML"), entered into the Agreement Relating to Development Services
(the "Development Services Agreement Phase II"). Pursuant to the Development
Services Agreement Phase II, the Partnership subcontracted with KIML who agreed
to perform those services assigned to KIML by the Partnership in order to
facilitate the Partnership's fulfillment of its duties and obligations to the
Authority under the Development Agreement. KIML subsequently assigned the
Development Services Agreement Phase II to Kerzner Investments.

Pursuant to the Development Services Agreement Phase II, the Partnership pays to
Kerzner Investments a fee, as subcontractor (the "Development Services Fee Phase
II"), equal to 3% of the development costs of the Project Sunburst expansion,
excluding capitalized interest, less all costs incurred by the Partnership in
connection with the Project Sunburst expansion. At December 31, 2004, all of the
Partnership's costs associated with the Project Sunburst expansion had not been
paid, however reasonable estimates of those costs have been provided for in
these financial statements. The Development Services Fee Phase II shall be paid
in installments due on December 31, 1999 and 2000 and on the Completion Date, as
defined in the Development Agreement, with a final payment being made when the
actual development costs of the Project Sunburst expansion are known. The
Partnership pays the Development Services Fee Phase II, from available cash
flow, if any, in accordance with the Amended and Restated Omnibus Termination
Agreement. At December 31, 2004, the total of the Development Services Fee Phase
II and the Partnership's costs related to the development of the Project
Sunburst expansion exceeded the development services revenue from the Authority
by approximately $15,964,000.

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, LLC
("Construction") pursuant to which Construction agreed to provide certain of
those services assigned to KIML by the Partnership 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% of the Development Services Fee Phase II as and when Kerzner Investments
receives payment from the Partnership in accordance with the Development
Services Agreement Phase II.

Construction has subcontracted with The Slavik Company to provide certain
services under the Local Construction Services Agreement. In connection with
this, Construction agreed that The Slavik Company would be paid a fee equal to
14.30% of its fee under the Local Construction Services Agreement.

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
the Partnership, Kerzner International Limited ("Kerzner International"),
Waterford Gaming, KIML, LMW, 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) the
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.


F-25



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

(i) First, to pay all unpaid amounts which may be due under the
terminated Letter Agreement and to pay to certain affiliates of
Waterford Gaming and to Kerzner Investments a percentage of an
annual fee of $2.0 million less the actual expenses incurred by
the Partnership during such year. Such annual fee shall be
payable in equal quarterly installments beginning March 31, 2000
and ending December 31, 2014. For the years ended December 31,
2004, 2003 and 2002, $1,869,157, $1,840,346 and $0, respectively,
had been incurred by the Partnership in terms of the first
priority;

(ii) Second, to return all capital contributions made by the partners
of the Partnership after September 29, 1995. The Partnership does
not anticipate making further capital calls to fund expenses
related to the development of the Project Sunburst expansion.
From January 1, 2000 to December 31, 2004 these contributions
aggregated $8,000,000.

From January 1, 2000 to December 31, 2004 $8,000,000 had been
repaid to the partners of the Partnership;

As of December 31, 2004, no capital contributions remained
outstanding;

(iii)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;

(iv) Fourth, to make the payments set forth in the agreements relating
to the Development Services Agreement Phase II and the Local
Construction Services Agreement as detailed under the Agreement
Relating to Development Services above. No such payments are
required or due at December 31, 2004. The accrued liability to
Kerzner Investments with respect to such fee at December 31, 2004
was approximately $414,000;

(v) Fifth, to pay Kerzner Investments an annual fee (in the form of a
priority distribution) of $5 million payable in equal quarterly
installments of $1.25 million beginning March 31, 2000 and ending
December 31, 2006. On January 26, 2005 and on January 27, 2004,
$1.25 million was distributed in terms of the fifth priority;

(vi) 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;

(vii)Seventh, for the period beginning March 31, 2000 and ending
December 31, 2014, to pay each of Kerzner Investments and
Waterford Gaming twenty-five percent (25%) of the relinquishment
payments as distributions. On January 26, 2005 and January 27,
2004, $13,294,808 ($6,647,404 to each of Kerzner Investments and
Waterford Gaming) and $12,669,636 ($6,334,818 to each of Kerzner
Investments and Waterford Gaming), respectively, was distributed
by the Partnership in terms of the seventh priority; and

(viii) Eighth, to distribute all excess cash. On January 26, 2005 and
January 27, 2004, $11,600,000 ($5,800,000 to each of Kerzner
Investments and Waterford Gaming) and $10,926,597 ($5,463,298 to
Kerzner Investments and $5,463,299 to Waterford Gaming),
respectively, was distributed as excess cash.


In addition, the Partnership shall 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 the partners tax
obligations as described in Section 3.03a(1) of the Partnership Agreement less
twice the amount of all other funds paid or distributed to Waterford Gaming
during such year pursuant to the Amended and Restated Omnibus Termination
Agreement.

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

F-26



Amended and Restated Omnibus Financing Agreement

Until January 1, 2000, the Partnership's primary source of revenue and cash flow
was management fees. Those fees were utilized by the Partnership to make
subcontract payments to partners and affiliates pursuant to the Amended and
Restated Omnibus Financing Agreement, which was terminated effective January 1,
2000.

2. Significant Accounting Policies

Cash and Cash Equivalents

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

Relinquishment Fees

Revenue is generated in accordance with the terms of the Relinquishment
Agreement and recognized quarterly based upon the Revenues of the Authority.

Development Services Revenue and Cost Recognition

Revenue generated from services performed in accordance with the terms of the
Development Agreement are recognized on the percentage-of-completion basis,
determined by the percentage of costs incurred to date to estimated total costs
for the contract. This method is used because management considers cost incurred
to be the best available measure of progress on the contract.

Costs of development services revenue performed include all direct labor costs
and those indirect costs related to services such as subcontractors,
consultants, supplies, depreciation and other costs. Changes in performance,
requirements and estimated profitability may result in revisions to costs and
income and will be recognized in the period in which the revisions are
determined. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.

Deferred Costs

Costs associated with acquiring the Management Agreement were amortized on a
straight-line basis over the 84-month period of the Management Agreement through
March 3, 1999. As a result of the Relinquishment Agreement becoming effective,
the remaining balance will be amortized over 189 months beginning March 4, 1999.

Property and Equipment

Office equipment, computer equipment and furniture and fixtures are stated at
cost. Depreciation is charged against income over a 3-year estimated life of the
office and computer equipment and over a 5-year estimated life of furniture and
fixtures. Depreciation expense for the years ended December 31, 2004, 2003 and
2002 amounted to $300, $3,303 and $7,641, respectively, of which $0, $3,003 and
$7,341 were included in the cost of development services revenue, respectively.

Income Taxes

No income tax provision or benefit is recorded on the books of the Partnership,
as the respective share of taxable income or loss is reportable by the partners
on their individual tax returns.

Concentration of Credit Risk

The Partnership's principal source of revenues and cash flows are the payments
received and to be received pursuant to the Relinquishment Agreement. The
Partnership anticipates regular payments of the Relinquishment Fees from the
Authority based upon the operating results of the Authority.

Financial instruments, which potentially subject the Partnership to a
concentration of credit risk, principally consist of cash in excess of the
financial institutions' insurance limits. The Partnership invests available cash
with high credit quality institutions.

Use of Estimates

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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Payments to Partners and their Affiliates

Payments are made to the partners and/or their affiliates in accordance with the
terms of the Amended and Restated Omnibus Termination Agreement for certain
subcontracted services rendered and are accounted for as expenses of the
Partnership.

Reclassification

Certain 2002 and 2003 balances have been reclassified to conform with the 2004
presentation.

F-27



3. Deferred Costs

Certain costs borne by the Partnership in connection with obtaining the
Management Agreement and the opening of the Mohegan Sun totaling $5,498,941 were
capitalized. Amortization commenced upon the opening of the Mohegan Sun.
Amortization expense for the years ended December 31, 2004, 2003 and 2002 was
$222,124, $221,518 and $221,518, respectively.

The Partnership's estimate of amortization expense for each of the succeeding
five years and thereafter is as follows:


Year Ending December 31,

2005 $ 221,518
2006 221,518
2007 221,518
2008 222,124
2009 221,518
Thereafter 1,108,194
-----------
$2,216,390
===========





4. Relinquishment Fees

The Partnership entered into a Relinquishment Agreement with the Authority,
which entitles the Partnership to receive a relinquishment fee of 5% of the
Revenues generated by the Mohegan Sun including revenue generated by the Project
Sunburst Expansion.

For the years ended December 31, 2004, 2003 and 2002, Relinquishment Fees earned
were $69,101,491, $65,099,553 and $58,508,703, respectively. The amounts of
Relinquishment Fees reported in these financial statements are based upon
Revenues reported to the Partnership by the Authority. These amounts were paid
by the Authority as follows:

Date received by the Partnership Amount
-------------------------------- --------

April 26, 2004 $ 8,196,363

July 26, 2004 25,150,422

October 25, 2004 9,165,092

January 25, 2005 26,589,614
-------------

Relinquishment Fees earned 2004 $ 69,101,491
=============



April 25, 2003 $ 7,433,160

July 25, 2003 23,635,310

October 27, 2003 8,691,811

January 26, 2004 25,339,272
-------------

Relinquishment Fees earned 2003 $ 65,099,553
=============


April 25, 2002 $ 6,228,559

July 25, 2002 20,438,439

October 25, 2002 8,171,882

January 27, 2003 23,669,823
-------------

Relinquishment Fees earned 2002 $ 58,508,703
=============
F-28



5. Reconciliation of Financial Statements and Tax Information



2004 2003 2002
---- ---- ----

Financial statement net income $ 66,887,319 $ 62,919,777 $ 55,082,815

Guaranteed payments to partners (39,550,748) (39,941,567) (55,765,000)

Financial statement depreciation and
amortization (greater than) less than tax
basis depreciation and amortization 305 (3,028) 1,560

Percentage of completion accounting
difference (49,505) (9,236,479) 991,712

Other 572 (4,865) 50,093
------------ ------------ ------------

Federal income tax basis net income $ 27,287,943 $ 13,733,838 $ 361,180
============ ============ ============





6. Commitments and Contingent Liabilities

Litigation

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

By complaint dated January 7, 2000, as amended February 4, 2000, Leisure filed a
four count complaint naming as defendants Waterford Gaming, the Partnership, LMW
Investments, Inc., Slavik Suites, Inc., Waterford Group, LLC, Len Wolman and
Mark Wolman (collectively, the "Defendants"). The matter has been transferred to
the complex litigation docket and is pending 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
Judgement, each with respect to all claims. The Court granted Defendants' Motion
to Strike in part and denied Defendants' Motion for Summary Judgement, on
October 13, 2000. The Court's order dismissed the claim for an accounting and
the claim under Connecticut Statutes Section 42-110a, et seq. The Court also
struck the alter ego allegations in the complaint against LMW Investments, Inc.,
Slavik Suites, Inc., Len Wolman and Mark Wolman. In a decision dated August 6,
2001, the Court dismissed all claims against LMW, Slavik, Len Wolman and Mark
Wolman.

On November 15, 2000, the Partnership and its co-defendants answered the
complaint. In addition, the Partnership and Waterford Gaming 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
counterclaims in full. This motion for the summary judgment was denied on April
14, 2003.

Fact discovery is completed. On April 15, 2004, the Partnership and its
co-defendants filed a motion for summary judgment as to all of Leisure's claims.
The Court heard argument on this Motion on June 23, 2004. In an August 4, 2004,
Memorandum of Decision, the Court granted summary judgment for the Defendants as
to each of the remaining three counts of the plaintiffs compliant. The plaintiff
has appealed this decision. Defendant's counterclaims are stayed pending this
appeal.

The Partnership believes that it has meritorious defenses and, if necessary,
intends to vigorously contest the claims in this action and to assert all
available defenses. At the present time, the Partnership 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 Partnership as a result of this
litigation due to the pendency of the appeal and the disputed issues of law
and/or facts on which the outcome of this litigation depends.

F-29


c) REPORTS ON FORM 8-K


(i) Form 8-K filed on November 18, 2004

Item 8.01

(i) On November 16, 2004, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form S-4/A, Amendment No. 1 to Form S-4
Registration Statement under The Securities Act of 1933, 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 S-4/A, Securities and Exchange Commission file reference no.
033-80655.



(ii) On November 16, 2004, the Mohegan Tribal Gaming Authority (the
"Authority") filed a copy of a press release on Form 8-K, announcing
its operating results for the fourth quarter and fiscal year 2004, 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: November 16, 2004



(ii) Form 8-K filed on December 23, 2004

Item 8.01

On December 22, 2004, the Mohegan Tribal Gaming Authority (the
"Authority") filed its annual report on Form 10-K for the year ended
September 30, 2004, a copy of which has been filed as an exhibit to
this report and is incorporated by reference to the Authority's
electronic filing of such report on Form 10-K, Securities and Exchange
Commission file reference no. 033-80655.


Date of Report: December 22, 2004



(iii)Form 8-K filed on January 20, 2005

Item 8.01

On January 18, 2005, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, relating to the posting on January 18,
2005, on its website of its Slot Machine Statistical Report on a
monthly basis for the three months ended December 31, 2004 and fiscal
year ended September 30, 2004, 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: January 18, 2005



(iv) Form 8-K filed on January 28, 2005

Item 8.01

On January 27, 2005, the Mohegan Tribal Gaming Authority (the
"Authority") filed a copy of a press release dated January 25, 2005 on
Form 8-K, announcing that it had completed its acquisition from
subsidiaries of Penn National Gaming, Inc. of the entities owning
Pocono Downs, 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: January 27, 2005



(v) Form 8-K filed on February 7, 2005

Item 8.01

On February 4, 2005, the Mohegan Tribal Gaming Authority (the
"Authority") filed a copy of a press release on Form 8-K, announcing
its preliminary operating results for the first quarter of fiscal year
2005, 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: February 4, 2005

36


(vi) Form 8-K filed on February 17, 2005


Item 8.01

(i) On February 14, 2005, the Mohegan Tribal Gaming Authority (the
"Authority") filed Form 8-K, stating;

(a) that on February 8, 2005, the Authority closed a private
placement under Rule 144A of the Securities Act of $250 million
senior notes due 2013 and $150 million senior subordinated notes
due 2015. The Authority used the net proceeds from this offering
to repay amounts outstanding under its bank credit facility and
to pay fees and expenses associated with the issuance, and

(b) that on February 8, 2005, the Authority issued a press release,
announcing its operating results for the quarter ended December
31, 2004 and held a live conference call available to the general
public addressing these results,

copies of which have been filed as exhibits to this report and are
incorporated by reference to the Authority's electronic filing of such
reports on Form 8-K, Securities and Exchange Commission file reference no.
033-80655.

(ii) On February 14, 2005, the Authority filed its quarterly report on Form
10-Q for the quarter ended December 31, 2004, a copy of which has been
filed as an exhibit to this report and is incorporated by reference to the
Authority's electronic filing of such report on Form 10-Q, Securities and
Exchange Commission file reference no. 033-80655.

Date of Report: February 14, 2005


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



WATERFORD GAMING, L.L.C.




Date: March 29, 2005 By: /s/ Len Wolman
------------------------------------
Len Wolman, Chairman of the Board of
Directors, Chief Executive Officer


Date: March 29, 2005 By: /s/ Alan Angel
------------------------------------
Alan Angel, Chief Financial Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on March 29, 2005.




SIGNATURE TITLE


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


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


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


/s/ Stephen F. Slavik Member of the Board of Directors
- ---------------------------
Stephen F. Slavik


37