BASIS OF PRESENTATION:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In management's opinion, all adjustments, including normal recurring accruals and adjustments, necessary for a fair statement of the Authority's operating results for the interim period, have been included. The Authority's operating results for the three months and six months ended March 31, 2013 are not necessarily indicative of results for the fiscal year ending September 30, 2013.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Authority's Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Authority and its majority and wholly-owned subsidiaries and entities. In accordance with authoritative guidance issued by the Financial Accounting Standards Board (the “FASB”) pertaining to consolidation of variable interest entities, the accounts of Salishan-Mohegan are consolidated into the accounts of Mohegan Ventures-NW, as Mohegan Ventures-NW is deemed to be the primary beneficiary. In addition, the accounts of MG&H, Mohegan Resorts and its subsidiaries were consolidated into the accounts of MTGA Gaming, as MTGA Gaming was deemed to be the primary beneficiary. However, on March 29, 2013, MG&H purchased and acquired all of the Tribe's membership interests in MG&H and retired the membership interests (refer to Note 1). In consolidation, all intercompany balances and transactions were eliminated.

Long-Term Receivables

Long-term receivables consist primarily of receivables from affiliates and tenants and others. The following table presents a reconciliation of long-term receivables and the related reserves for doubtful collection of these long-term receivables (in thousands):



	Long-Term Receivables
	Affiliates		Tenants and Others			Total
Balance, December 31, 2012 (1)	$	51,794	$	3,527		$	55,321
Additions:
Issuance of affiliate advances and tenant loans, including interest receivable	1,884		27			1,911
Deductions:
Payments received	—		(34		)	(34		)
Balance, March 31, 2013 (1)	$	53,678	$	3,520		$	57,198

Balance, September 30, 2012 (1)	$	49,841	$	3,533		$	53,374
Additions:
Issuance of affiliate advances and tenant loans, including interest receivable	3,837		55			3,892
Deductions:
Payments received	—		(68		)	(68		)
Balance, March 31, 2013 (1)	$	53,678	$	3,520		$	57,198

__________


(1)	Includes interest receivable of $24.3 million, $25.7 million and $22.9 million as of December 31, 2012, March 31, 2013 and September 30, 2012, respectively. The WTG receivables no longer accrue interest pursuant to a release and reimbursement agreement entered into in September 2010.



	Reserves for Doubtful Collection of Long-Term Receivables
	Affiliates		Tenants and Others			Total
Balance, December 31, 2012	$	22,393	$	68		$	22,461
Additions:
Charges to bad debt expense	565		—			565
Deductions:
Adjustments	—		(3		)	(3		)
Balance, March 31, 2013	$	22,958	$	65		$	23,023

Balance, September 30, 2012	$	21,807	$	70		$	21,877
Additions:
Charges to bad debt expense	1,151		—			1,151
Deductions:
Adjustments	—		(5		)	(5		)
Balance, March 31, 2013	$	22,958	$	65		$	23,023

Fair Value of Financial Instruments

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

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


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


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


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

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

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



	March 31, 2013
	Carrying Value		Fair Value
Bank Credit Facility	$	395,000	$	395,988
Term Loan Facility	$	221,489	$	232,031
2009 11 1/2% Second Lien Senior Secured Notes	$	195	$	217
2012 11 1/2% Second Lien Senior Secured Notes	$	194,610	$	216,783
2012 10 1/2% Third Lien Senior Secured Notes	$	417,771	$	412,549
2004 7 1/8% Senior Subordinated Notes	$	21,156	$	20,627
2005 6 7/8% Senior Subordinated Notes	$	9,654	$	9,063
2012 11 % Senior Subordinated Notes	$	344,190	$	299,445

The estimated fair values of the Authority's financing facilities and notes were based on Level 2 inputs (quoted market prices or prices of similar instruments) on or about March 31, 2013.

Severance Costs and Expenses

In September 2012, the Authority implemented a workforce reduction of approximately 330 positions in Uncasville, Connecticut, in an effort to further streamline its organization and better align operating costs with current market and business conditions. In addition, in March 2013, the Authority also implemented a workforce reduction at its Pennsylvania Facilities. The costs associated with related post-employment severance benefits were expensed at the time the termination was communicated to the employees. Cash payments related to the September 2012 workforce reduction commenced in October 2012 and are anticipated to be completed in September 2014. Cash payments related to the March 2013 workforce reduction commenced in March 2013 and are anticipated to be completed in July 2013. The Authority does not anticipate incurring any additional severance charges in connection with these workforce reductions, other than charges that may arise from adjustments to the initial estimates utilized under the plans. The following table presents a reconciliation of the related severance liability by business segment (in thousands):



	Mohegan Sun			Corporate			Mohegan Sun at Pocono Downs			Total
Balance, December 31, 2012	$	7,750		$	—		$	—		$	7,750
Accrued severance at measurement date	—			—			124			124
Adjustments	33			—			—			33
Cash payments	(3,811		)	—			(25		)	(3,836		)
Balance, March 31, 2013	$	3,972		$	—		$	99		$	4,071

Balance, September 30, 2012	$	12,497		$	24		$	—		$	12,521
Accrued severance at measurement date	—			—			124			124
Adjustments	(146		)	—			—			(146		)
Cash payments	(8,379		)	(24		)	(25		)	(8,428		)
Balance, March 31, 2013	$	3,972		$	—		$	99		$	4,071

Investments in Unconsolidated Affiliates

In October 2012, the Authority, through its indirect wholly-owned subsidiary, MGA Holding NJ, LLC, acquired a 10% ownership interest in Resorts Atlantic City. The Authority's investment in Resorts Atlantic City is accounted for under the equity method as the Authority has significant influence.