ANCHOR GAMING, 424B4, 1997-10-14

ANCHOR GAMING
424B4, 1997-10-14
MISCELLANEOUS AMUSEMENT & RECREATION

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<PAGE>
PROSPECTUS
1,800,000 SHARES

[LOGO]

ANCHOR GAMING
COMMON STOCK
-------------

All of the 1,800,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of Anchor Gaming ("Anchor" or the "Company") offered hereby
(the "Offering") are being sold by certain stockholders (the "Selling
Stockholders") of Anchor. See "Principal and Selling Stockholders." The Company
will not receive any of the proceeds from the sale of shares of Common Stock by
the Selling Stockholders.

The Common Stock is traded on the Nasdaq National Market under the symbol
"SLOT." On October 13, 1997, the last reported sale price for the Common Stock
on the Nasdaq National Market was $93.125 per share. See "Price Range of Common
Stock."

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

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK.
-----------------

NEITHER THE NEVADA STATE GAMING CONTROL BOARD NOR THE GAMING COMMISSION, THE
COLORADO LIMITED GAMING CONTROL COMMISSION, NOR ANY OTHER GAMING
AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) STOCKHOLDERS(2)
<S> <C> <C> <C>
Per Share.............................. $91.00 $4.10 $86.90
Total (3).............................. $163,800,000 $7,380,000 $156,420,000
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Selling Stockholders estimated to
be $445,000.

(3) One of the Selling Stockholders, Stanley E. Fulton, has granted the
Underwriters a 30-day option to purchase in the aggregate up to 270,000
additional shares of Common Stock solely to cover over-allotments, if any.
See "Underwriting." If the Underwriters exercise such option in full, the
total Price to Public, Underwriting Discount, and Proceeds to Selling
Stockholders will be $188,370,000, $8,487,000, and $179,883,000,
respectively.

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

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as, and if delivered to and accepted by the Underwriters,
and subject to approval of certain legal matters by counsel. It is expected that
delivery of the shares of Common Stock subject to the Offering will be made in
New York, New York on or about October 17, 1997.

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

BTALEX.BROWN
MORGAN STANLEY DEAN WITTER
RAYMOND JAMES & ASSOCIATES, INC.

THE DATE OF THIS PROSPECTUS IS OCTOBER 14, 1997
<PAGE>
[Players seated at dedicated proprietary
games installed at casino location.]

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

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK IN
CONNECTION WITH THE OFFERING, INCLUDING OVER-ALLOTMENT, STABILIZING, AND
SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF PENALTY
BIDS. IN ADDITION, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS, IF ANY) MAY
ALSO ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

Double Down Stud-Registered Trademark-, Colorado Central Station
Casino-Registered Trademark-, Silver Strike-Registered Trademark-, and Fast
Track Express-Registered Trademark- are registered trademarks, and Anchor
Coin-TM-, Anchor Gaming-TM-, Anchor Games-TM-, Spin for Cash-TM-, Wheel of
Gold-TM-, Clear Winner-TM-, Colorado Grande-TM-, Totem Pole-TM-, CashBall-TM-,
KenoBucks-TM-, Rock'N'Reels-TM-, Maggie's Slot Club-TM-, and Fast Track Slot
Club-TM- are trademarks of the Company.
<PAGE>
[Inside Gate]

Dedicated Proprietary Games

<TABLE>
<S> <C> <C>
[Five Totem Pole machines [Clear Winner slot machine.]
installed at a casino
location.]

[The Company's dedicated
proprietary games installed
at a casino location.]

[Two Wheel of Gold
[Silver Strike slot machine.] slot machines.]
</TABLE>

<PAGE>
[Inside Cover]

Wide Area Progressive Proprietary Games

<TABLE>
<S> <C> <C>
[Wheel of Fortune machine
installed on a wide area
progressive system.]

[Wheel of Fortune machine
installed at a casino location
on a
wide area progressive system
with
players seated at the
machines.]

[Totem Pole machine installed [Wheel of Gold machine
on a wide area installed on a wide area
progressive system.] progressive system.]
</TABLE>
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED
ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS'
OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED AND THAT NO OUTSTANDING OPTIONS OR
WARRANTS WILL BE EXERCISED. UNLESS OTHERWISE SPECIFIED, YEARS REFERRED TO IN
THIS PROSPECTUS ARE CALENDAR YEARS. THE COMPANY'S FISCAL YEAR ENDS ON JUNE 30.

THE COMPANY

Anchor Gaming ("Anchor" or the "Company") is a diversified gaming company
that seeks to capitalize on its experience as an operator and developer of
gaming machines and casinos by developing gaming oriented businesses. Anchor
develops and distributes unique proprietary games, operates two casinos in
Colorado, including the state's most profitable casino, and operates one of the
largest and one of the most profitable gaming machine routes in Nevada.
Management believes that the Company benefits from, among other factors: (i)
depth of experienced and proven management at both the corporate and operating
levels; (ii) a diversified and stable earnings base with significant recurring
revenue sources; (iii) unique experience in developing and marketing proprietary
games; (iv) proven experience in developing, constructing, and operating
profitable casino enterprises; (v) the ability to effectively and profitably
distribute existing and new proprietary games due to its large established
casino customer base and its licenses in virtually all major domestic gaming
jurisdictions; (vi) a strong balance sheet with which to fund future growth
opportunities; and (vii) attractive existing internal growth opportunities in
its core businesses. Since fiscal year 1990, its first full year of operations,
through fiscal year 1997, Anchor has achieved eight consecutive years of
revenue, net income, and earnings per share growth, with revenue, net income,
and earnings per share during this period growing at compounded annual rates of
44%, 63%, and 43%, respectively. Additionally, Anchor's operating results
through September 30, 1997 reflect 21 consecutive quarters in which revenue, net
income, and earnings per share increased over the comparable period in the prior
year.

PROPRIETARY GAMES

Anchor develops proprietary games, which it both markets to unaffiliated
casinos and uses in its own gaming operations. The Company's strategy is to
develop games that provide casinos with a higher win per machine than their
existing gaming devices while generating significant recurring revenues to the
Company from royalty, revenue participation, or other similar agreements.
Although the Company initially developed proprietary games as a complement to
its own gaming machine operations, since February 1993 the Company has actively
marketed its proprietary games to unaffiliated casinos. The Company currently
provides proprietary games to virtually every major casino in the United States,
as well as its own casinos. In September 1996, the Company entered into a
strategic alliance with International Game Technology ("IGT"), the largest
manufacturer of computerized gaming casino products, to enhance the Company's
ability to develop and distribute proprietary games. See "Business--Proprietary
Games--Anchor IGT Strategic Alliance." Through this strategic alliance the
Company and IGT have formed a joint venture (the "Anchor IGT JV") to develop,
integrate, and distribute proprietary game concepts on a wide area progressive
system ("WAP"). The Company's revenues from proprietary games totaled $49.7
million for the fiscal year ended June 30, 1997, an increase of approximately
132% over fiscal year 1996.

The Company, seeking to capitalize on its established sales and marketing
infrastructure, its extensive base of existing casino customers, and its
licenses in virtually all major domestic gaming jurisdictions, has been actively
developing proprietary games, which can be classified as either a dedicated
proprietary game, a proprietary game on a WAP, or a converted proprietary game.
The Company's proprietary games are designed to increase gaming customer play
levels by either enticing the customer to play longer or to wager more coins per
play. The Company believes that a significant opportunity exists to further
expand and develop the market for proprietary games distributed on a
participation basis.

1
<PAGE>
DEDICATED PROPRIETARY GAMES. The Company has successfully developed or
acquired the rights to five proprietary games that are currently installed and
approved for use in unaffiliated casinos. Anchor's dedicated proprietary games
include Wheel of Gold, Totem Pole, Silver Strike, Clear Winner, and
Rock'N'Reels. All of the machines are placed in casinos free of charge under
royalty, revenue participation, or other similar agreements, allowing the casino
to avoid up-front purchase costs and providing significant recurring revenues to
Anchor. The machines utilize numerous unique concepts and designs in order to
increase overall gaming customer play levels. For example, the Company's two
most popular dedicated proprietary games, Totem Pole and Wheel of Gold, each
incorporate innovative game features that contribute to higher play levels.
Totem Pole comprises three games in one slot machine creating a unique visual
presentation in the casino environment. Greater play levels are realized on
Totem Pole because the player must insert the maximum number of coins to
activate all three games and benefit from the addition of a "wild" symbol.
Players on the Wheel of Gold machine have the opportunity to activate on the
same machine a three dimensional "roulette" type wheel with significantly higher
potential winnings, providing a secondary game event and additional excitement
to the customer through the Company's "game within a game" concept. Anchor's
"game within a game" concept provides the player an incentive to increase play
through the secondary game event, thereby maximizing customer playing time.
Wheel of Gold is the first generation of the Company's "game within a game"
concept that management believes will form the basis of a significant portion of
its future dedicated proprietary game designs. The Company has additional
innovative game machine concepts in various stages of development using the
Company's "game within a game" concept and other unique concepts.

WAP PROPRIETARY GAMES. A WAP is a system that electronically links
individual slot machines among multiple locations, allowing all the machines to
share a common jackpot. The WAP jackpot increases, or progresses, by a certain
percentage of each coin inserted into any one of the machines on the WAP
network, thereby allowing the jackpot to increase rapidly to a significant
amount. Management believes that the larger jackpots offered by WAP machines
attract a distinct portion of a customer's gaming budget as compared to a
non-progressive slot machine. In order to capture this portion of a customer's
gaming budget, the Company has entered into a strategic alliance resulting in
the Anchor IGT JV for the purpose of developing and installing WAP machines
based on both existing dedicated proprietary games and other proprietary
designs. The Company and IGT share in the management of the Anchor IGT JV and
will share equally in its profits and losses. The first WAP machine introduced
by the Anchor IGT JV is the Wheel of Fortune, a game that is very similar to the
Company's Wheel of Gold. Additionally, the Anchor IGT JV has recently introduced
Totem Pole on a WAP and has other WAP concepts at various stages of development.

CONVERSION OPPORTUNITY. The Company's first proprietary game was the video
poker game Double Down Stud, a software conversion kit that the Company installs
in existing third party casino gaming machines. The enhancement created by this
installation provides the Company a daily royalty for each converted machine.
Management believes that as casinos experience pressure to increase "same store
sales" they will seek to enhance the performance of their installed base of
machines by adding new features by means of conversion kits. The Company is
currently developing technology to allow older generation slot machines to
utilize additional features such as the "game within a game" concept. The
Company anticipates that future conversion kits would be installed on a royalty
or similar basis. The Company estimates that there are currently more than
300,000 slot machines installed in the United States. The Company believes that
this installed base of machines represents a substantial opportunity for
installation of conversion kits.

CASINOS

In November 1990, the state of Colorado approved limited stakes gaming
($5.00 or less per wager) in two historic gold mining areas, Black Hawk/Central
City and Cripple Creek. Anchor currently operates a casino in each of these
markets, the Colorado Central Station Casino in Black Hawk and the Colorado

2
<PAGE>
Grande Casino in Cripple Creek. The Colorado gaming market experienced 5%
revenue growth in fiscal year 1997. The Company's revenues from casino
operations totalled $69.2 million for the fiscal year ended June 30, 1997, an
increase of approximately 6.3% over fiscal year 1996.

COLORADO CENTRAL STATION CASINO. On December 25, 1993, the Company opened
the Colorado Central Station Casino in Black Hawk, which is currently the
highest revenue producing and most profitable casino in the state. Approximately
three million people live within a 100-mile radius of the Black Hawk/Central
City area, which is located approximately 40 miles from Denver. After completion
of a 2,750 square foot expansion in 1996, the casino building has approximately
49,000 square feet of main facility area, with 16,637 square feet of gaming
space over three floors. The Colorado Central Station Casino features more than
680 gaming machines, ten blackjack tables, nine poker tables, and a food court
restaurant area. The casino benefits from a favorable location, as it is the
first casino encountered by customers traveling from Denver to the Black
Hawk/Central City area. In addition, the Colorado Central Station Casino offers
convenient parking to its customers, with more than 770 parking spaces, whereas
many other casinos in the Black Hawk/Central City market lack convenient parking
and, as a result, have had difficulty attracting and retaining customers. The
Colorado Central Station Casino is also the closest casino to Black Hawk's 3,000
space public parking facility, located one and one-half miles from the casino,
and is the first stop from the parking facility on the parking lot shuttle bus
route. Anchor believes that the Colorado Central Station Casino's location,
convenient parking, size, and design, and highly successful Fast Track Slot Club
and player tracking system give it a competitive advantage over the other
casinos in the Black Hawk/Central City market. The Colorado Central Station
Casino's net win per device (which includes both gaming machines and table
games) per day was $239 for the fiscal year ended June 30, 1997 as compared to a
reported average net win per device per day of $87 for the other casinos in the
Black Hawk/Central City market for the same period.

CANADIAN OPPORTUNITY. On September 26, 1997, the Ontario provincial
government granted RPC Anchor Gaming permission to own and operate six permanent
full-time and one part-time seasonal charity gaming clubs in Ontario, Canada.
RPC Anchor Gaming is a joint venture (the "Anchor RPC JV") entered into in
January 1997 between Anchor and RPC Gaming, Ltd., a subsidiary of Revenue
Properties Company Limited ("RPC"), for the purpose of submitting a proposal to
own and operate charity casino operations in the Province of Ontario. See
"Business--Casinos--Canadian Opportunity." RPC, an Ontario based public real
estate company, is engaged in the acquisition and ownership of income-producing
properties in Canada and the United States. RPC owns and operates 42 properties
in 20 communities in Canada and was recently granted a nonrestricted gaming
license in the state of Nevada.

The full-time charity gaming clubs awarded to the Anchor RPC JV are located
in Toronto-North York; Fort Erie; Toronto-South Etobicoke/York;
Hamilton/Oakville/Burlington; Kitchner/Waterloo; and Sarnia. The part-time
seasonal gaming club awarded to the Anchor RPC JV is in South Western Ontario
(Brantford). Fort Erie is located directly across the U.S. border from Buffalo,
New York and Sarnia is located directly across the U.S. border from Port Huron,
Michigan.

3
<PAGE>
had substantial success in introducing other regulated gaming locations as
illustrated by the commercial casinos in Windsor and Niagara Falls, Canada. Each
permanent charity gaming club location will be limited to a total of 150 video
lottery terminals and 40 table games. The Province of Ontario anticipates that
the permanent charity gaming clubs will be approximately one-tenth of the size
of a commercial casino such as Niagara Casino. Since its opening on December 9,
1996, through July 31, 1997, the Niagara Casino has reported revenues of
approximately $313.0 million. The permanent charity gaming clubs will be
operated under management agreements with the provincial government, which will
provide the operator with 10% of video lottery terminal revenue, 5% of table
game, retail, and food and beverage revenue, and 10% of net income, as adjusted.
See "Risk Factors -- Risks of Pursuing New Casino Gaming Opportunities--Risks of
Canadian Development."

ROUTE OPERATIONS

Anchor is one of the largest gaming machine route operators in Nevada with
801 gaming machines in 58 locations at June 30, 1997, up from 692 gaming
machines at 50 locations at June 30, 1996. The Company's gaming machine route
operations in Nevada involve the installation, operation, and service of gaming
machines (virtually all video poker machines) under space leases with retail
chains and under revenue participation agreements with local taverns and retail
stores, principally in the Las Vegas area. Management believes that its route
operation contracts provide the Company with a long-term, stable revenue source
and that its route has the highest revenue and profit per machine of any route
operation in the state of Nevada. The Company's revenues from route operations
totalled $33.5 million for the fiscal year ended June 30, 1997, an increase of
approximately 17% over fiscal year 1996.

In 1996, the Company extended its exclusive space lease agreement with
Smith's Food and Drug Centers, Inc. ("Smiths"), its largest route customer, for
an additional five years at current rates through 2010. At June 30, 1997, 716 of
the Company's 801 gaming machines in Nevada were located in or near Las Vegas,
which has been one of the fastest growing cities in the United States in recent
years. Anchor believes that its route operations will benefit from the continued
growth of the Las Vegas area, the associated growth of its existing customers in
that market, and the Company's continued installation of bill validators on its
gaming machines.

RECENT DEVELOPMENTS

Anchor's unaudited results for its first fiscal quarter ended September 30,
1997 are as follows: net income increased 103% to $16.7 million, revenues
increased 55% to $54.5 million, and earnings per share increased 105% to $1.23.
For the first quarter of the previous year net income was $8.2 million, revenues
were $35.2 million, and earnings per share were $0.60. In addition, the
Company's cash balance at September 30, 1997 was approximately $70.0 million in
addition to an unused bank line of credit of $10.0 million.

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

Anchor Gaming, a Nevada corporation, maintains its corporate headquarters at
815 Pilot Road, Suite G, Las Vegas, Nevada 89119, and its telephone number is
(702) 896-7568.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by Selling Stockholders (1)
(2)................................................. 1,800,000 shares

Common Stock to be outstanding after this Offering
(3)................................................. 12,958,607 shares

Nasdaq National Market symbol........................ SLOT
</TABLE>

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

(1) Selling Stockholders are Stanley E. Fulton, who is selling 657,700 shares of
Common Stock; and Mrs. Elizabeth Fulton and the six Fulton children who are
collectively selling 1,142,300 shares of Common Stock.

(2) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."

(3) Excludes 1,069,450 shares of Common Stock issuable upon exercise of stock
options outstanding at October 13, 1997, of which 166,950 were then
exercisable and 196,075 will become exercisable on or before December 30,
1997. See "Risk Factors -- Shares Eligible for Future Sale."

RISK FACTORS

An investment in the Common Stock involves certain risks that a prospective
investor should carefully consider before investing in the Common Stock. See
"Risk Factors."

5
<PAGE>
SUMMARY FINANCIAL DATA

The following summary financial data presented below as of and for the
Company's fiscal years ended June 30, 1993, 1994, 1995, 1996, and 1997 have been
derived from the audited consolidated financial statements of the Company. The
data set forth below are qualified in their entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the consolidated financial statements and the
related notes, and other financial data appearing elsewhere or incorporated by
reference in this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
---------------------------------------------------------
1993 1994 (1) 1995 1996 1997
----------- ----------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Casino operations............................................ $ 3,896 $ 23,713 $ 56,184 $ 65,125 $ 69,223
Proprietary games............................................ 117 4,147 14,159 21,457 49,716
Route operations............................................. 25,018 26,123 25,818 28,651 33,509
Food and beverage............................................ 446 786 1,250 1,233 1,300
----------- ----------- --------- --------- ---------
Total revenues............................................. 29,477 54,769 97,411 116,466 153,749
Total costs and expenses....................................... 21,704 40,657 72,561 82,586 100,555
----------- ----------- --------- --------- ---------
Income from operations......................................... 7,773 14,112 24,850 33,881 53,194
Interest income................................................ 88 379 1,105 2,028 3,793
Interest expense............................................... (954) (1,314) (732) (429) (288)
Other income (expense) (2)..................................... 87 244 244 43 (22)
----------- ----------- --------- --------- ---------
Income before provision for income taxes....................... 6,994 13,421 25,467 35,523 56,677
Historical and pro forma provision for income taxes (3)........ 2,378 4,702 9,486 13,188 21,001
----------- ----------- --------- --------- ---------
Net income and pro forma net income (3)........................ $ 4,616 $ 8,719 $ 15,981 $ 22,335 $ 35,676
----------- ----------- --------- --------- ---------
----------- ----------- --------- --------- ---------
Weighted average common and common equivalent shares
outstanding (4).............................................. 6,459 8,481 11,447 12,153 13,691
Earnings and pro forma earnings per common and common
equivalent share (3)......................................... $ 0.71 $ 1.03 $ 1.40 $ 1.84 $ 2.61

OTHER DATA:
EBITDA (5)..................................................... $ 9,088 $ 16,233 $ 28,065 $ 37,990 $ 61,992
Capital expenditures........................................... 5,142 17,921 7,834 27,916 38,108
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
(IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................ $ 66,427
Total assets..................................................................................... 188,876
Long term notes payable, principal stockholder................................................... 2,800
Stockholders' equity............................................................................. 171,331
</TABLE>

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

(1) Reflects six months of operations at the Company's Colorado Central Station
Casino in Black Hawk, Colorado, which opened December 25, 1993, and five
months of proprietary games operations acquired in conjunction with the
Company's initial public offering in February 1994 (the "IPO").

(2) Other income (expense) consists of minority interest in earnings of
consolidated subsidiary, and other income (expense).

(3) A pro forma provision for federal income taxes (assuming a 34% effective tax
rate through fiscal 1994) has been calculated for all periods prior to the
IPO as if the principal subsidiaries of the Company had not elected to be
treated as S corporations during those periods.

(4) Weighted average shares outstanding are presented as if the reorganization
completed in conjunction with the Company's IPO took place July 1, 1992.

(5) EBITDA consists of income from operations plus depreciation and
amortization. EBITDA is not a measure of performance or financial condition
under generally accepted accounting principles, but is presented solely as
supplemental disclosure because the Company believes that it enhances the
understanding of the ability to service debt. EBITDA should not be
considered in isolation or as a substitute for other measures of financial
performance or liquidity under generally accepted accounting principles.

6
<PAGE>
RISK FACTORS

THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS REFER TO
EVENTS THAT COULD OCCUR IN THE FUTURE OR MAY BE IDENTIFIED BY THE USE OF WORDS
SUCH AS "INTEND," "PLAN," "BELIEVE," CORRELATIVE WORDS, AND OTHER EXPRESSIONS
INDICATING THAT FUTURE EVENTS ARE CONTEMPLATED. SUCH STATEMENTS ARE SUBJECT TO
INHERENT RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF
THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. IN ADDITION
TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS.

RISKS OF PROPRIETARY GAMES

The Company places its proprietary games in casinos at no cost to the
casinos under short-term arrangements, making these games susceptible to
replacement due to pressure from competitors, changes in economic conditions,
obsolescence, and declining popularity. Anchor intends to maintain and expand
the number of installed proprietary games through enhancement of existing games,
introduction of new games, and customer service, but there can be no assurance
that these efforts will be successful.

Introduction of new proprietary games involves significant risks, including
whether the Company will be able to place its games with casinos, the economic
terms on which casinos will accept the machines, the popularity of the games
with gaming patrons, and whether a successful game can maintain its popularity
over the long term. If the Company is not successful in introducing new games,
the effects on Anchor could be adverse.

Anchor has filed trademark and patent applications to protect its
intellectual property rights in certain of its trademarks and innovations on
certain of its proprietary games, respectively. At this time, however, the
United States Patent and Trademark Office has not acted upon all of these
applications. There can be no assurance that the pending patent or trademark
applications will actually issue as patents or trademark registrations or that
any of these rights will not be infringed by others. Certain of the Company's
games, including Silver Strike, Totem Pole, and Clear Winner, do not have
independent protection of the game itself, and it is possible that competitors
could produce a similar game without violating any legal rights of the Company.
Anchor intends to promote aggressively its trademarks to build goodwill and
customer loyalty. In addition, Anchor intends to improve and add innovations to
certain of its games, which may be subject to legal protection. There can be no
assurance, however, that the Company will be successful in these efforts, that
innovations will be subject to legal protection, or that the innovations will
give a competitive advantage to the Company.

Anchor also derives revenues from the sale of souvenir tokens that are paid
out by Silver Strike machines. The primary raw material for the tokens is
silver, the price of which is subject to wide fluctuations. As silver prices
rise, the Company may be unable to pass price increases through to its casino
customers.

COMPETITION

PROPRIETARY GAMES. Intense competition characterizes the market for
proprietary games. Competitors in the game industry include manufacturers of
gaming devices and other companies marketing gaming products and conversion
kits, which compete directly with the Company for the limited gaming spaces
available at casinos. The popularity of any of the Company's games may decline
over time as consumer preferences change or as new, competing games are
introduced. As a result, Anchor must continually anticipate and adapt its
products to consumer preferences in order to maximize the economics of the game
to the Company. There can be no assurance, however, that Anchor will continue to
be successful in developing and marketing its products. If the Company fails to
develop games that achieve market

7
<PAGE>
acceptance or if existing games become obsolete due to the introduction of
popular games by Anchor's competitors the effects on Anchor could be material
and adverse.

Anchor's strategy of creating recurring revenues from its proprietary games
by placing the games in casinos under a royalty, revenue participation, or
similar agreements involves a departure from the traditional practice of casinos
of owning or leasing gaming devices. To the extent that casinos are reluctant to
enter into arrangements that generate recurring revenues for suppliers of casino
games, the market for Anchor's proprietary games could be limited. Competition
within the market for games that generate recurring revenues could intensify as
other suppliers of gaming devices enter this market or offer competitive
products or terms.

COLORADO CASINOS. Intense competition also characterizes the Black
Hawk/Central City and Cripple Creek markets. Since limited stakes gaming was
instituted in Colorado in 1991, a number of Colorado casinos have ceased
operations and others have filed for protection under Chapter 11 of the
Bankruptcy Code. Others have closed temporarily or reduced the number of
employees, and many casinos may not be operating profitably. Several proposals
have been made to open new casinos or to expand existing casinos in Black Hawk,
some of which have been abandoned or modified. Two casinos are being developed
in Black Hawk located across the intersection from the Company's Colorado
Central Station Casino. Casino America and Nevada Gold & Casinos have commenced
construction of a casino scheduled to open in early 1999, which facility is
expected to include 1,100 slot machines, 24 table games, and a 1,000 car parking
garage. Riviera Holdings Corporation has announced that it plans to develop a
gaming facility with 1,000 slot machines, 14 table games, and a 500 space
covered parking garage, scheduled to open in the Spring of 1999. A joint venture
between Black Hawk Gaming & Development Company, Inc. and Jacobs Entertainment
Ltd. is constructing a gaming facility located near Colorado Central Station.
The facility is scheduled to be completed in June 1998 and is expected to
include 800 slot machines, 20 table games, and 500 parking spaces. In addition,
construction is proceeding on a third major intersection off State Highway 119,
which will provide access directly to one of the new casinos from State Highway
119, which is the primary access from the Denver metropolitan area. From time to
time other casino companies have publicly expressed an interest in pursuing
development or expansion in the Black Hawk/Central City market, and proposals to
develop competitive projects are ongoing.

It appears that national, regional, state, and local competition for the
casino gaming market in general will remain extremely high during the
foreseeable future, as casino gaming activities expand in traditional gaming
states and in new jurisdictions. In addition, passage of the Indian Gaming
Regulatory Act in 1988 has led to rapid increases in Native American gaming
operations, and the Company's two casinos may compete for customers with casinos
located on Indian reservations in southwestern Colorado. The Company expects
many competitors to enter new jurisdictions that authorize gaming, some of whom
may have greater financial and other resources than the Company. Such
proliferation of gaming activities could adversely affect the Company's
business. In particular, the legalization of casino gaming in or near any
metropolitan area, such as Denver, Colorado, from which the Company draws
customers would have a material adverse effect on the Company's business. The
Company believes, however, that proliferation of gaming activities into new
jurisdictions presents an opportunity for it to expand its proprietary games
operations.

CANADIAN OPPORTUNITY. The Company anticipates that the charity gaming clubs
in Ontario, Canada will experience intense competition and certain competitors
may have greater financial and other resources than the Company. Anchor RPC JV's
seven locations will compete with the other charity gaming clubs in the
province, along with other casinos in Canada and the United States.

8
<PAGE>
from numerous small gaming machine route operators and some large operators,
located principally in Las Vegas and Reno, Nevada, and their surrounding areas.
The principal methods of competition for gaming machine locations are the lease,
sublease, license, or revenue sharing terms, the service provided by the route
operator, the reputation of the route operator, and the financial strength of
the route operator. As existing space lease and revenue participation
arrangements expire, competition for renewals can be expected to increase the
amounts payable to location owners as compared to amounts payable under existing
agreements.

RISKS OF PURSUING NEW CASINO GAMING OPPORTUNITIES

GENERAL. The Company is actively seeking to expand its casino operations
into jurisdictions that have legalized or are expected to legalize gaming in the
future. There can be no assurance, however, that the Company will be able to
identify suitable casino projects in which to invest or will be able to complete
any such project as scheduled or contemplated. The Company's ability to complete
and operate new casino projects will be dependent on a number of factors, many
of which are beyond Anchor's control, including identifying suitable investment
partners (if appropriate), negotiating acceptable terms, securing required
state, foreign, and local licenses, permits, and approvals, securing adequate
financing on acceptable terms, identifying and securing suitable locations
(which management expects will be limited and in high demand), voter and other
political approvals, demographic trends, and consumers' gaming preferences. As a
result, there can be no assurance that the Company will be able to develop new
or expand its current casino operations. In addition, the Company may incur
costs in connection with pursuing new gaming opportunities that it cannot
recover and may be required to expense certain of these costs, which may
negatively affect the Company's reported operating performance for the periods
during which such costs are expensed.

RISKS OF CANADIAN DEVELOPMENT. On September 26, 1997, the provincial
government of Ontario, Canada granted the Anchor RPC JV permission to own and
operate six permanent full-time and one part-time seasonal charity gaming clubs
in Ontario, Canada. The ability of the Anchor RPC JV to commence operation of
the gaming clubs is subject to approval by various governmental authorities,
including municipalities, land-use authorities, zoning authorities, and other
regulatory authorities, which have power to prohibit, regulate, tax, and to
place conditions on the location, construction, and operation of the gaming
clubs. Failure of the Anchor RPC JV to obtain required regulatory licenses and
approvals on acceptable terms or a timely basis could prevent or delay opening
of the gaming clubs, which could have an adverse effect on the Anchor RPC JV.
Failure by the Anchor RPC JV to select successful sites or to acquire rights to
the sites on advantageous terms could adversely effect the results of the Anchor
RPC JV. Two of the sites awarded to the Anchor RPC JV are adjacent to the states
of New York and Michigan. Expansion of gaming in these states could adversely
effect the results of the Anchor RPC JV. If the Anchor RPC JV is not successful
in attracting, training, and retaining suitable personnel on an acceptable
basis, it could have a material adverse effect on the Anchor RPC JV.
Construction of the gaming clubs will involve certain risks, including shortages
of skilled labor and materials, unforseen engineering and construction problems,
work stoppages, adverse weather, and unanticipated cost increases. As start-up
enterprises, the gaming clubs are subject to all the risks typical for new
businesses in new areas with no history of operations. There can be no assurance
that the gaming clubs will be profitable.

RISKS OF DEPENDENCE ON SUPPLIERS

The Company utilizes outside vendors, some of which are competitors of the
Company, to manufacture a significant portion of its proprietary game machines
and parts. An inability to obtain gaming machines and components, production
parts, and replacement parts on reasonable terms or on a timely basis could have
an adverse effect on Anchor.

9
<PAGE>
GAMING REGULATIONS AND TAXES

The Company's operations are subject to extensive state and local regulation
and taxation in Nevada, Colorado, and other jurisdictions in which Anchor
operates, and any future activities in additional jurisdictions, such as
Ontario, Canada, will be similarly regulated and taxed. State and local
authorities require various licenses, permits, and approvals to be held by the
Company, and these authorities may, among other things, revoke the license of
any entity licensed as a gaming corporation, the registration of any entity
registered as a holding company of a gaming corporation, or the license of any
individual licensed as an officer, director, control person, employee, or
stockholder of a licensed or registered entity. Gaming licenses and related
approvals are deemed to be privileges under Nevada and Colorado law and the laws
of other jurisdictions, and no assurances can be given that existing licenses
will not be revoked. Regulatory changes or increases in applicable taxes or fees
in Nevada or Colorado or the laws of other jurisdictions in which the Company
operates could have a material adverse effect on the Company. There can be no
assurance that regulations adopted or taxes imposed by Nevada, Colorado, or
other jurisdictions will not have a material adverse effect on the Company. See
"Regulation."

Colorado law requires statewide voter approval of an amendment to the State
Constitution for any expansion of limited gaming into additional locations and,
depending on the authorization approved by the statewide vote, requires, in
addition, voter approval from the locality in question. In 1994, Colorado voters
defeated by a margin of 93% to 7% a proposal to permit gaming in Manitou Springs
(located near Colorado Springs and Cripple Creek) and slot machines in airports.
On November 5, 1996, Colorado voters defeated by a margin of 69% to 31% a
proposal to allow gaming in the community of Trinidad, located on the New Mexico
border. Recently, the state legislature passed, but the Governor vetoed, a bill
that would have permitted video lottery terminals at dog and horse racetracks
under certain terms and conditions. Several cities within Colorado have active
citizens' lobbies that were able to place gaming initiatives on recent statewide
ballots. Although these initiatives have failed, new initiatives could be
introduced on future statewide ballots to allow expansion of gaming in Colorado
or prohibit gaming in the particular markets in Colorado where the Company
operates. Future initiatives, if passed, could significantly increase the
competition for gaming customers, thereby adversely affecting the Company's
operations in Colorado. Additionally, there can be no assurance that future
legislation will not be enacted that would impose additional restrictions or
prohibitions on, or assess additional fees with respect to, the Company's
business.

Each of the Company's proprietary games must be approved and licensed in
each jurisdiction in which it is placed. The Company must still obtain approvals
for certain of its games in certain gaming jurisdictions before it can fill all
of its orders to place machines. Obtaining required licenses can be time
consuming and costly and there can be no assurance that any game will be
successfully licensed in any jurisdiction.

Any beneficial holder of the Common Stock may be subject to investigation by
gaming authorities in Nevada, Colorado, and other jurisdictions in which Anchor
does business if such authorities have reason to believe that such ownership may
be inconsistent with a state's gaming policies. Persons who acquire beneficial
ownership of more than certain designated percentages of the Common Stock may be
subject to certain reporting and qualification procedures. The Company's
Articles of Incorporation provide that all transfers of voting securities are
subject to the regulations of each regulatory body to which the Company's
activities are subject and provide for a mandatory repurchase of Common Stock if
a stockholder is found unsuitable. In addition, changes in control of the
Company and certain other corporate transactions may not be effected without the
prior approval of gaming authorities in Nevada, Colorado, and other
jurisdictions in which the Company does business. Such provisions could
adversely affect the marketability of the Common Stock or prevent certain
corporate transactions, including mergers or other business combinations. See
"Regulation."

10
<PAGE>
In August 1996, the United States Congress passed legislation creating the
National Gambling Impact and Policy Commission to conduct a comprehensive study
of all matters relating to the economic and social impact of gaming in the
United States. The legislation provides that, not later than two years after the
enactment of such legislation, the commission must issue a report to the
President and to Congress containing its findings and conclusions, together with
recommendations for legislation and administrative actions. Any such
recommendations, if enacted into law, could adversely impact the gaming industry
and have a material adverse effect on the Company's business or results of
operations. The Company is unable to predict whether this study will result in
legislation that would impose additional regulations on gaming industry
operators, including the Company, or whether such legislation, if any, would
have a material adverse effect on the Company. Additionally, from time to time,
certain federal legislators have proposed the imposition of a federal tax on
gaming revenues. Any such tax could have a material adverse effect on the
Company's financial condition or results of operations.

RISKS OF EXISTING COLORADO OPERATIONS

ACCESS TO BLACK HAWK AND CRIPPLE CREEK. The cities of Black Hawk and
Cripple Creek are located in the Colorado Rockies and each is serviced by
winding mountain roads that require extremely cautious driving, especially in
bad weather. These roads also have tunnels that are subject to closure.
Congestion on the roads leading into Black Hawk and Cripple Creek is not
uncommon during the peak summer season, holidays, and other times of the year,
and such congestion may discourage potential customers from traveling to the
Company's casinos. In addition, concerns about the overall availability of
convenient parking in Black Hawk and, to a lesser extent, Cripple Creek may
discourage some potential customers. Further, Black Hawk and, to a lesser
extent, Cripple Creek have experienced unanticipated demands for their municipal
systems, including water and sewage treatment facilities. Increased levels of
activity in the area may exacerbate old or pose new municipal and environmental
problems, the costs of which could be imposed on the gaming industry and in part
on the Company.

ENVIRONMENTAL CONSIDERATIONS. The Colorado Central Station Casino is
located in an area that has been designated by the Environmental Protection
Agency (the "EPA") as a superfund site on the National Priorities List, known as
the Central City-Clear Creek Superfund Site (the "Site"), as a result of
contamination from historic mining activity in the area. The EPA is entitled to
proceed against owners and operators of properties located within the Site for
remediation and response costs associated with their properties and with the
entire Site. The Colorado Central Station Casino is located within the drainage
basin of North Clear Creek and is therefore subject to potentially contaminated
surface and ground water from upstream mining-related sources. Soil and ground
water samples on the Site indicate that several contaminants exist in
concentrations exceeding drinking water standards. Records relating to
historical uses of the Site are uncertain as to whether mining actually occurred
below the Company's property. Records do indicate, however, that an ore loading
dock for a railroad depot was once located on adjacent property, and railroad
tracks were present on the Company's property. Management is not aware of any
environmental issues associated with these activities.

DEPENDENCE ON KEY PERSONNEL

The success of Anchor is largely dependent on the efforts and skills of
Stanley E. Fulton, its Chairman of the Board, and other key officers and
employees of Anchor. The loss of Mr. Fulton's or such other key officers' or
employees' services could have a material adverse effect on Anchor. The
expansion of Anchor's businesses may require additional managers with gaming
industry experience, as well as additional skilled employees. A shortage of
skilled management personnel exists in the gaming industry, which may make it
more difficult and expensive to attract and retain qualified managers and
employees. In addition, some of the Company's key employees perform their
services under contracts that do not contain covenants not to compete with the
Company, and it is therefore possible that competitors could attempt to hire
certain of the Company's key employees. One of the Company's key game
development employees has a contract

11
<PAGE>
that allows him to pursue certain gaming related businesses for an entity not
controlled by Anchor, and it is therefore possible that this key employee could
devote substantial attention to enterprises other than Anchor. See "Management
- -- Employment Contracts, Termination of Employment, and Change-in-Control
Arrangements."

CONTROL OF THE COMPANY

Upon completion of this Offering, the officers and directors of the Company
and members of their respective families will own beneficially approximately
40.5% of the outstanding Common Stock (38.4% if the Underwriters' over-allotment
option is exercised in full). The ability to vote these shares gives such
persons the ability to exert substantial influence over any matter coming to a
vote of stockholders of the Company, including the election of directors and
certain mergers, asset sales, or other major corporate transactions affecting
the Company. All six of Mr. Fulton's children and a third party have granted him
an irrevocable proxy expiring on December 31, 1998 to vote their shares of
Common Stock. As a result, Mr. Fulton will have voting control of 39.2% of the
Common Stock to be outstanding after this Offering. Such voting power, together
with certain anti-takeover provisions included in the Company's Articles of
Incorporation and Bylaws and a Shareholder Rights Plan, could have the effect of
delaying or discouraging an unsolicited takeover of the Company. See "Principal
and Selling Stockholders"; "Description of Capital Stock -- Rights Plan"; and
"Description of Capital Stock -- Certain Provisions Relating to Changes in
Control."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 12,958,607 shares of
Common Stock outstanding (assuming no exercise of outstanding options and
warrants). The 1,800,000 shares of Common Stock sold in this Offering will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended (the "Securities Act"), except for shares purchased by
affiliates of the Company. Virtually all shares of Common Stock outstanding
prior to this Offering are freely tradeable or generally may be freely sold in
"brokers transactions" under Rule 144 under the Securities Act by the holders
thereof that have not been "affiliates" of the Company for a period of 90 days.
At October 13, 1997 there were outstanding options to purchase 1,069,450 shares
of Common Stock, of which 166,950 were exercisable at October 13, 1997 and
196,075 of which will become exercisable on or before December 30, 1997. In
connection with this Offering, the Selling Stockholders have agreed not to sell
any Common Stock for a period of 90 days following the date of the final
Prospectus without the prior written consent of the Representatives of the
Underwriters. See "Underwriting." The sale or availability for sale of
substantial amounts of Common Stock in the public market after this Offering
could adversely affect the market price of the Common Stock.

12
<PAGE>
PRICE RANGE OF COMMON STOCK

The Common Stock was listed on the Nasdaq National Market on January 28,
1994 and trades under the symbol "SLOT." The following table sets forth the
range of high and low closing prices per share of the Common Stock on the Nasdaq
National Market for the indicated periods.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
------------------
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED JUNE 30, 1995
First quarter................................................................................. $19 1/2 $11 1/4
Second quarter................................................................................ 19 1/4 14 1/4
Third quarter................................................................................. 19 15 1/4
Fourth quarter................................................................................ 23 5/8 15 1/4

YEAR ENDED JUNE 30, 1996 HIGH LOW
------- -------
<S> <C> <C>
First quarter................................................................................. $26 1/2 $20 1/2
Second quarter................................................................................ 25 1/4 18 7/8
Third quarter................................................................................. 32 1/4 21 3/4
Fourth quarter................................................................................ 69 32 3/4
<CAPTION>

YEAR ENDED JUNE 30, 1997 HIGH LOW
------- -------
<S> <C> <C>
First quarter................................................................................. $68 3/4 $50 1/2
Second quarter................................................................................ 64 1/2 30 1/8
Third quarter................................................................................. 40 3/4 27 7/8
Fourth quarter................................................................................ 47 3/4 25
<CAPTION>

YEAR ENDED JUNE 30, 1998 HIGH LOW
------- -------
<S> <C> <C>
First quarter................................................................................. $90 1/2 $47 1/4
Second quarter (through October 13, 1997)..................................................... 95 1/8 84
</TABLE>

On October 13, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $93.125 per share, and there were approximately 4,000
beneficial holders of the Common Stock.

DIVIDEND POLICY

The Company has not declared any dividends since the time of the IPO. The
board of directors of the Company intends to retain any earnings of the Company
to support operations and to finance expansion and does not intend to pay cash
dividends on the Common Stock in the foreseeable future. The Company is a party
to a revolving credit agreement with a bank that prohibits the payment of
dividends. Subject to contractual restrictions, any future determinations as to
the payment of dividends will be at the discretion of the board of directors of
the Company and will depend on the Company's financial condition, results of
operations, capital requirements, and such other factors as the board of
directors of the Company deems relevant.

13
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION

The following selected financial and operating information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes included elsewhere or incorporated by reference in this Prospectus. The
income statement and balance sheet data for each of the five fiscal years ended
June 30, 1997 are derived from the audited consolidated financial statements of
the Company.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------------------
1993 1994 (1) 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Casino operations........................................... $ 3,896 $ 23,713 $ 56,184 $ 65,125 $ 69,223
Proprietary games........................................... 117 4,147 14,159 21,457 49,716
Route operations............................................ 25,018 26,123 25,818 28,651 33,509
Food and beverage........................................... 446 786 1,250 1,233 1,300
--------- --------- --------- --------- ---------
Total revenues............................................ 29,477 54,769 97,411 116,466 153,749
Total costs and expenses:
Casino operations........................................... 1,326 8,199 21,500 26,830 29,100
Proprietary games........................................... 141 3,047 9,851 12,114 11,039
Route operations............................................ 14,869 15,416 15,659 17,158 19,905
Food and beverage........................................... 478 768 1,387 1,300 1,432
Selling, general, and administrative........................ 3,573 10,375 20,949 21,074 28,164
Preopening costs............................................ -- 731 -- -- --
Project cost write-downs.................................... -- -- -- -- 2,117
Depreciation and amortization............................... 1,317 2,121 3,215 4,110 8,798
--------- --------- --------- --------- ---------
Total costs and expenses.................................. 21,704 40,657 72,561 82,586 100,555
--------- --------- --------- --------- ---------

Income from operations........................................ 7,773 14,112 24,850 33,881 53,194
Interest income............................................... 88 379 1,105 2,028 3,793
Interest expense.............................................. (954) (1,314) (732) (429) (288)
Other income (expense) (2).................................... 87 244 244 43 (22)
--------- --------- --------- --------- ---------
Income before provision for income taxes...................... 6,994 13,421 25,467 35,523 56,677
Historical and pro forma provision for income taxes (3)....... 2,378 4,702 9,486 13,188 21,001
--------- --------- --------- --------- ---------
Net income and pro forma net income (3)....................... $ 4,616 $ 8,719 $ 15,981 $ 22,335 $ 35,676
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common and common equivalent shares
outstanding (4)............................................. 6,459 8,481 11,447 12,153 13,691
Earnings and pro forma earnings per common and common
equivalent share (3)........................................ $ 0.71 $ 1.03 $ 1.40 $ 1.84 $ 2.61

OTHER DATA:
EBITDA (5).................................................... $ 9,088 $ 16,233 $ 28,065 $ 37,990 $ 61,992
Capital expenditures.......................................... 5,142 17,921 7,834 27,916 38,108
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30,
-----------------------------------------------------
1993 1994 (1) 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 3,872 $ 10,472 $ 26,132 $ 78,113 $ 66,427
Total assets.................................................. 22,576 58,903 79,266 162,312 188,876
Long term notes payable, principal stockholder................ 17,243 6,927 5,989 3,650 2,800
Stockholders' equity (6)...................................... 3,840 47,001 64,832 146,307 171,331
</TABLE>

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

(2) Other income (expense) consists of minority interest in earnings of
consolidated subsidiary, and other income (expense).

14
<PAGE>
(3) A pro forma provision for federal income taxes (assuming a 34% effective tax
rate through fiscal 1994) has been calculated for all periods prior to the
IPO as if the principal subsidiaries of the Company had not elected to be
treated as S corporations during those periods.

(4) Weighted average shares outstanding are presented as if the reorganization
completed in conjunction with the Company's IPO took place July 1, 1992.

(6) Because the principal subsidiaries of the Company elected to be treated as S
corporations prior to the Company's IPO, a substantial portion of the
Company's net income prior to the IPO was distributed to its stockholders.
Subsequent to its IPO, earnings have been retained to support operations and
to finance expansion.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

In February 1994, Anchor completed its IPO of 3,162,500 shares of Common
Stock at a price of $12 per share. Simultaneously with the closing of the IPO,
Anchor became the holding company for its subsidiaries, Anchor Coin, Colorado
Grande Enterprises, Inc., C.G. Investments, Inc., and D D Stud, Inc., each of
which had been operated under different ownership structures controlled
primarily by Stanley E. Fulton, the Chairman of the Board, Chief Executive
Officer, and acting Chief Financial Officer of Anchor. Also at the time of the
IPO, the Company acquired all of the beneficial ownership of Global Gaming
Products, L.L.C. and certain related assets from Global Distributors, Inc. (the
"Acquisition"), which were primarily involved in the distribution of the
proprietary game Silver Strike. Stanley E. Fulton also owned 50% of Global
Gaming Products, L.L.C. prior to the Acquisition. The financial position and
operating results of Colorado Grande Enterprises, Inc. are included in the
consolidated financial statements as an 80% consolidated subsidiary.

On April 23, 1996, the Company completed a secondary offering of 2.3 million
shares of Common Stock at a price of $37 per share. Of these shares, 1.55
million were sold by the Company (the "Secondary Offering") and the remaining
750,000 shares were sold by selling stockholders. Net proceeds to the Company
from the Secondary Offering were $53.9 million.

The following table sets forth the percentage of Anchor's total revenues
attributable to casino operations, proprietary games operations, gaming machine
route operations, and food and beverage operations during the fiscal years ended
June 30, 1995, 1996, and 1997. The growth in proprietary games revenue as a
percentage of total revenues is attributable primarily to the Company's
introduction of the new proprietary game Wheel of Gold, which began generating
revenue in the third quarter of fiscal 1996 and to a lesser extent, the
commencement of the Company's strategic alliance with IGT during the second half
of fiscal 1997. The Company's food and beverage revenues are derived primarily
from its casino operations and, to a lesser extent, from its route operations.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
-------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
SOURCES OF REVENUES:
Casino operations....................................................... 57.7% 55.9% 45.0%
Proprietary games operations............................................ 14.5 18.4 32.4
Route operations........................................................ 26.5 24.6 21.8
Food and beverage operations............................................ 1.3 1.1 0.8
----- ----- -----
Total revenues...................................................... 100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996

REVENUES. Total revenues were $153.7 million for the fiscal year ended June
30, 1997, an increase of $37.2 million or 31.9% from $116.5 million for the
fiscal year ended June 30, 1996.

Revenues from casino operations were $69.2 million for the fiscal year ended
June 30, 1997, an increase of $4.1 million or 6.3% from $65.1 million for the
fiscal year ended June 30, 1996. The increase is primarily due to increased
revenues at the Colorado Central Station Casino and, to a lesser extent, due to
increased revenues at the Colorado Grande Casino.

Revenues from proprietary games operations were $49.7 million for the fiscal
year ended June 30, 1997, an increase of $28.2 million or 131.2% from $21.5
million for the fiscal year ended June 30, 1996. The increase is primarily due
to revenues generated from the Company's proprietary game, Wheel of

16
<PAGE>
Gold, introduced December 29, 1995, as well as revenues from the Company's
strategic alliance with IGT and, to a lesser extent, from its newest proprietary
game, Totem Pole, and increased revenues generated from the proprietary game
Clear Winner. These increases were offset to some extent by decreased revenues
generated from the proprietary game Silver Strike.

Revenues from route operations were $33.5 million for the fiscal year ended
June 30, 1997, an increase of $4.8 million or 16.7% from $28.7 million for the
fiscal year ended June 30, 1996. Machines on route increased to 801 at June 30,
1997, from 692 at June 30, 1996, while average machines on route during fiscal
1997 were 106 machines greater than fiscal 1996.

COSTS AND EXPENSES. Total costs and expenses were $100.6 million for the
fiscal year ended June 30, 1997, an increase of $18.0 million or 21.8% from
$82.6 million for the fiscal year ended June 30, 1996. Total costs and expenses
as a percentage of total revenues decreased to 65.5% during fiscal 1997 from
70.9% during fiscal 1996.

Costs and expenses of casino operations were $29.1 million for the fiscal
year ended June 30, 1997, an increase of $2.3 million or 8.6% from $26.8 million
for the fiscal year ended June 30, 1996. Casino costs and expenses as a
percentage of casino revenue increased to 42.0% during fiscal year 1997 from
41.2% during fiscal year 1996. The increase in casino costs and expenses was
primarily due to increased gaming taxes and promotions at both of the Company's
casinos.

Costs and expenses of proprietary games operations were $11.0 million for
the fiscal year ended June 30, 1997, a decrease of $1.1 million or 9.1% from
$12.1 million for the fiscal year ended June 30, 1996. Prior to the introduction
of Wheel of Gold, most of the proprietary games operations' costs were
associated with the production of Silver Strike tokens. Costs and expenses of
proprietary games operations decreased primarily due to a decrease in Silver
Strike token sales in fiscal year 1997 compared to fiscal year 1996. Proprietary
games costs and expenses as a percentage of proprietary games revenues decreased
to 22.1% during fiscal year 1997 from 56.3% during fiscal year 1996. The
decrease in proprietary games costs and expenses as a percentage of revenue is a
result of increased revenues from the Company's newer proprietary games, which
incur less costs and expenses as a percentage of revenue than the Company's
Silver Strike game, which previously accounted for most of the Company's
proprietary games revenue.

Costs and expenses of route operations were $19.9 million for the fiscal
year ended June 30, 1997, an increase of $2.7 million or 15.7% from $17.2
million for the fiscal year ended June 30, 1996. Costs and expenses of route
operations as a percentage of route revenue remained fairly constant at 59.4%
during fiscal year 1997 compared to 59.9% during fiscal year 1996. The increase
in route costs and expenses was primarily due to increased location costs and,
to a lesser extent, increased direct payroll costs, both related to increased
machines on route.

Selling, general, and administrative ("SG&A") expenses were $28.2 million
for the fiscal year ended June 30, 1997, an increase of $7.1 million or 33.7%
from $21.1 million for the fiscal year ended June 30, 1996. SG&A expenses as a
percentage of total revenue remained fairly constant at 18.4% during fiscal year
1997 compared to 18.1% during fiscal year 1996. The increase in total SG&A
expenses is primarily due to increased expenses in the Company's proprietary
games operations of approximately $4.7 million primarily due to increased
research, development, and licensing costs and an increase in SG&A expenses at
the Colorado Central Station Casino of approximately $2.0 million.

In November 1996, the Company announced it was re-evaluating the scope and
nature of its proposed addition of a new casino across the street from the
Colorado Central Station Casino. During the fourth quarter of fiscal year 1997,
the Company determined it was necessary to recognize a project cost write-down
of $2.1 million. The project costs were specifically related to architectural
fees, building design costs, and deferred rent that were determined to have no
future benefit.

Depreciation and amortization expense was $8.8 million for the fiscal year
ended June 30, 1997, an increase of $4.7 million or 114.6% from $4.1 million for
the fiscal year ended June 30, 1996. This increase

17
<PAGE>
is primarily due to increased depreciation and amortization expense incurred in
the Company's proprietary games operations.

INCOME FROM OPERATIONS. As a result of the factors discussed above, income
from operations was $53.2 million for the fiscal year ended June 30, 1997, an
increase of $19.3 million or 56.9% from $33.9 million for the fiscal year ended
June 30, 1996. As a percentage of total revenues, income from operations
increased to 34.6% during fiscal year 1997 from 29.1% during fiscal year 1996.

INTEREST INCOME. Interest income was $3.8 million for the fiscal year ended
June 30, 1997, an increase of $1.8 million or 90.0% from $2.0 million for the
fiscal year ended June 30, 1996. The increase is due to increased short-term
investments resulting from an increase in working capital generated from
operations as well as cash invested from the Secondary Offering.

INTEREST EXPENSE. Interest expense was $288,000 for the fiscal year ended
June 30, 1997, a decrease of $141,000 or 32.9% from $429,000 for the fiscal year
ended June 30, 1996. The decrease is due to reduced average notes payable during
fiscal year 1997 as compared to fiscal year 1996.

NET INCOME. As a result of the factors discussed above, net income was $35.7
million for the fiscal year ended June 30, 1997, an increase of $13.4 million or
60.1% from $22.3 million for the fiscal year ended June 30, 1996.

FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995

REVENUES. Total revenues were $116.5 million for the fiscal year ended June
30, 1996, an increase of $19.1 million or 19.6% from $97.4 million for the
fiscal year ended June 30, 1995.

Revenues from casino operations were $65.1 million for the fiscal year ended
June 30, 1996, an increase of $8.9 million or 15.8% from $56.2 million for the
fiscal year ended June 30, 1995. The increase is primarily due to increased
revenue at the Colorado Central Station Casino and, to a lesser extent, due to
increased revenues at the Colorado Grande Casino.

Revenues from proprietary games operations were $21.5 million for the fiscal
year ended June 30, 1996, an increase of $7.3 million or 51.4% from $14.2
million for the fiscal year ended June 30, 1995. The increase is primarily due
to revenues generated from the Company's proprietary game, Wheel of Gold,
introduced December 29, 1995, as well as increased revenues generated from the
proprietary games Clear Winner and Silver Strike.

Revenues from route operations were $28.7 million for the fiscal year ended
June 30, 1996, an increase of $2.9 million or 11.2% from $25.8 million for the
fiscal year ended June 30, 1995. Machines on route increased to 692 at June 30,
1996, from 606 at June 30, 1995, while average machines on route during fiscal
year 1996 were 70 machines greater than fiscal year 1995.

COSTS AND EXPENSES. Total costs and expenses were $82.6 million for the
fiscal year ended June 30, 1996, an increase of $10.0 million or 13.8% from
$72.6 million for the fiscal year ended June 30, 1995. Total costs and expenses
as a percentage of total revenues decreased to 70.9% during fiscal 1996 from
74.5% during fiscal 1995.

Costs and expenses of casino operations were $26.8 million for the fiscal
year ended June 30, 1996, an increase of $5.3 million or 24.7% from $21.5
million for the fiscal year ended June 30, 1995. Casino costs and expenses as a
percentage of casino revenue increased to 41.2% during fiscal year 1996 from
38.3% during fiscal year 1995. The increase in casino costs and expenses was
primarily due to increased gaming taxes, direct payroll, and promotions at both
of the Company's casinos.

Costs and expenses of proprietary games operations were $12.1 million for
the fiscal year ended June 30, 1996, an increase of $2.2 million or 22.2% from
$9.9 million for the fiscal year ended June 30, 1995. Proprietary games costs
and expenses as a percentage of proprietary games revenues decreased to

18
<PAGE>
56.3% during fiscal year 1996 from 69.7% during fiscal year 1995. The decrease
in proprietary games costs as a percentage of revenue is a result of the
introduction during fiscal year 1996 of Wheel of Gold which incurs less costs
and expenses as a percentage of revenue than the Company's other proprietary
games.

Costs and expenses of route operations were $17.2 million for the fiscal
year ended June 30, 1996, an increase of $1.5 million or 9.6% from $15.7 million
for the fiscal year ended June 30, 1995. Costs and expenses of route operations
as a percentage of route revenue decreased to 59.9% during fiscal year 1996 from
60.9% during fiscal year 1995. The increase in route costs and expenses was
primarily due to increased location costs, related to increased machines on
route and, to a lesser extent, increased direct payroll costs.

SG&A expenses were $21.1 million for the fiscal year ended June 30, 1996, an
increase of $125,000 or 0.6% from $20.9 million for the fiscal year ended June
30, 1995. SG&A expenses as a percentage of total revenue decreased to 18.1%
during fiscal year 1996 from 21.5% during fiscal year 1995. The increase in SG&A
expenses is primarily due to increased expenses at the Company's Colorado
Central Station Casino of approximately $1.2 million and an increase in SG&A
expenses in the Company's proprietary games operations of approximately
$828,000, mostly offset by a reduction in corporate development costs. The
Company incurred $269,000 in development costs during the fiscal year ended June
30, 1996 as compared to approximately $2.1 million during the fiscal year ended
June 30, 1995.

Depreciation and amortization expense was $4.1 million for the fiscal year
ended June 30, 1996, an increase of $895,000 or 28.0% from $3.2 million for the
fiscal year ended June 30, 1995. The increase is primarily due to increased
depreciation and amortization expense incurred in the Company's proprietary
games operations.

INCOME FROM OPERATIONS. As a result of the factors discussed above, income
from operations was $33.9 million for the fiscal year ended June 30, 1996, an
increase of $9.0 million or 36.1% from $24.9 million for the fiscal year ended
June 30, 1995. As a percentage of total revenues, income from operations
increased to 29.1% during fiscal year 1996 from 25.6% during fiscal year 1995.

INTEREST INCOME. Interest income was $2.0 million for the fiscal year ended
June 30, 1996, an increase of $923,000 or 83.9% from $1.1 million for the fiscal
year ended June 30, 1995. The increase is due to increased short-term
investments resulting from an increase in working capital generated from
operations as well as cash invested from the Secondary Offering.

INTEREST EXPENSE. Interest expense was $429,000 for the fiscal year ended
June 30, 1996, a decrease of $303,000 or 41.4% from $732,000 for the fiscal year
ended June 30, 1995. The decrease is due to reduced average notes payable during
fiscal year 1996 as compared to fiscal year 1995.

NET INCOME. As a result of the factors discussed above, net income was $22.3
million for the fiscal year ended June 30, 1996, an increase of $6.3 million or
39.4% from $16.0 million for the fiscal year ended June 30, 1995.

LIQUIDITY AND CAPITAL RESOURCES

Anchor's principal sources of liquidity have been cash flows from operations
and the net proceeds from the Secondary Offering in April 1996 and the IPO in
February 1994. Net proceeds to the Company from the Secondary Offering were
$53.9 million, and net proceeds from the IPO were $34.1 million. Net cash
provided by operating activities was $43.4 million during fiscal year 1997 and
$28.8 million during fiscal year 1996. At June 30, 1997, the Company had cash
and cash equivalents of $66.4 million, working capital of $64.6 million, and a
$10.0 million unsecured revolving bank line of credit (the "Bank Revolver").

In fiscal year 1997, the Company spent $38.1 million on capital
expenditures, primarily related to the purchase of gaming devices and equipment
for use in its proprietary games operations of approximately $30.0 million. In
addition, the Company spent $5.7 million during fiscal year 1997 related to
projects in

19
<PAGE>
Colorado including the expansion of the existing Colorado Central Station Casino
to accommodate an additional 65 gaming machines, the expansion and improvement
of parking facilities at the Colorado Central Station Casino, and the planned
development of a second casino in Black Hawk, Colorado. The Company spent $2.1
million on architectural and design costs for the planned development of the
second casino in fiscal year 1997 and fiscal year 1996 which was ultimately
written off in fiscal year 1997. The Company anticipates that capital
expenditures for the fiscal year ending June 30, 1998 will be at least $17.0
million, which will consist primarily of expenditures to purchase gaming devices
and equipment for use in its proprietary games operations.

In April 1997, the board of directors authorized a repurchase of up to
1,000,000 shares of Common Stock. At June 30, 1997, the Company had repurchased
336,000 shares of Common Stock at a cost of $13.5 million.

During fiscal year 1997, the Company made $3.1 million in advances to a 50%
owned joint venture engaged in the operation of proprietary gaming devices.

In November 1996, the Company's $20 million secured bank line of credit
expired. In April 1997, the Company entered into the Bank Revolver, which
expires November 30, 1998. The Bank Revolver bears interest at the prime rate of
interest or LIBOR plus 2%, at the Company's option. The Company has agreed to
maintain certain financial and non-financial covenants customary with lending
arrangements of this type. The Company has complied with the covenants
throughout the term of the expired credit facility and the Bank Revolver. During
fiscal year 1997 the Company did not borrow under the Bank Revolver or the line
of credit.

The Company believes its principal liquidity requirements will be the
purchase of additional proprietary gaming machines in formats that have already
been introduced to the market, the development and purchase of proprietary
gaming machines in formats that have not yet been introduced, and depending upon
the outcome of the Company's re-evaluation of the scope and nature of its
Colorado expansion options, the funding of such an expansion. At June 30, 1997,
the Company had commitments to purchase gaming equipment for approximately $5.6
million. The Company believes that cash on hand, cash flow from operations, and
available borrowings under the Bank Revolver will be sufficient to fund its
currently planned capital projects and operations.

The Company continually seeks opportunities to expand its gaming oriented
businesses in new and existing gaming jurisdictions. If successful in pursuing
another opportunity in any gaming oriented business and depending on the amount
of funding required, the Company may be required to obtain additional financing.

RECENTLY ADOPTED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS 121 is effective for
fiscal years beginning after December 15, 1995. Adoption of SFAS 121 in the
current year did not have a material effect on the consolidated financial
statements of the Company.

In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which establishes financial accounting
and reporting standards for stock-based employee compensation plans and for
transactions in which an entity issues its equity instruments to acquire goods
or services from nonemployees. The Company continues to account for stock based
compensation arrangements in accordance with Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees," and therefore the adoption of SFAS
123 had no effect on the financial position or results of

20
<PAGE>
operations of the Company. The Company has included additional disclosures about
stock-based employee compensation plans as required by SFAS 123 in its financial
statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the FASB issued Statement No. 128, "Earnings per Share."
This statement establishes standards for computing and presenting earnings per
share and is effective for financial statements issued for periods ending after
December 15, 1997. Earlier application of this statement is not permitted and
upon adoption requires restatement (as applicable) of all prior-period earnings
per share data presented. Management believes that the implementation of this
standard will not have a significant effect on earnings per share.

In February 1997, the FASB issued Statement No. 129, "Disclosure of
Information about Capital Structure." This statement establishes standards for
disclosing information about an entity's capital structure. Management intends
to comply with the disclosure requirements of this statement, which are
effective for periods ending after December 15, 1997.

In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). This statement requires companies to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for financial statements issued for
fiscal years beginning after December 15, 1997. Management does not believe that
SFAS 130 will have a material effect on Anchor's financial statements.

In June 1997, the FASB issued Statement No. 131, "Disclosure About Segments
of an Enterprise and Related Information" ("SFAS 131"). This statement
establishes additional standards for segment reporting in the financial
statements and is effective for fiscal years beginning after December 15, 1997.
The Company believes the segment information required to be disclosed under SFAS
131 will be more comprehensive than previously provided, including expanded
disclosure of income statement and balance sheet items for each of its
reportable segments under SFAS 131. However, the Company has not yet completed
its analysis of which operating segments will be subject to this reporting
requirement.

21
<PAGE>
BUSINESS

GENERAL

Anchor is a diversified gaming company that seeks to capitalize on its
experience as an operator and developer of gaming machines and casinos by
developing gaming oriented businesses. Anchor develops and distributes unique
proprietary games, operates two casinos in Colorado, including the state's most
profitable casino, and operates one of the largest and one of the most
profitable gaming machine routes in Nevada. Management believes that the Company
benefits from, among other factors: (i) depth of experienced and proven
management at both the corporate and operating levels; (ii) a diversified and
stable earnings base with significant recurring revenue sources; (iii) unique
experience in developing and marketing proprietary games; (iv) proven experience
in developing, constructing, and operating profitable casino enterprises; (v)
the ability to effectively and profitably distribute existing and new
proprietary games due to its large established casino customer base and its
licenses in virtually all major domestic gaming jurisdictions; (vi) a strong
balance sheet with which to fund future growth opportunities; and (vii)
attractive existing internal growth opportunities in its core businesses. Since
fiscal year 1990, its first full year of operations, through fiscal year 1997,
Anchor has achieved eight consecutive years of revenue, net income, and earnings
per share growth, with revenue, net income, and earnings per share during this
period growing at compounded annual rates of 44%, 63%, and 43%, respectively.
Additionally, Anchor's operating results through September 30, 1997 reflect 21
consecutive quarters in which revenue, net income, and earnings per share
increased over the comparable period in the prior year.

PROPRIETARY GAMES

Anchor develops proprietary games, which it both markets to unaffiliated
casinos and uses in its own gaming operations. The Company's strategy is to
develop games that provide casinos with a higher win per machine than their
existing gaming devices while generating significant recurring revenues to the
Company from royalty, revenue participation, or other similar agreements.
Although the Company initially developed proprietary games as a complement to
its own gaming machine operations, since February 1993 the Company has actively
marketed its proprietary games to unaffiliated casinos. The Company currently
provides proprietary games to virtually every major casino in the United States,
as well as its own casinos. In September 1996, the Company entered into a
strategic alliance with IGT to enhance the Company's ability to develop and
distribute proprietary games. Through this strategic alliance the Company and
IGT have formed the Anchor IGT JV to develop, integrate, and distribute
proprietary game concepts on a WAP system. The strategic alliance also
contemplates that in certain circumstances and in specified jurisdictions, the
proprietary game concepts may be developed and distributed on a stand alone
basis. The Company's revenues from proprietary games totaled $49.7 million for
the fiscal year ended June 30, 1997, an increase of approximately 132% over
fiscal year 1996.

DEDICATED PROPRIETARY GAMES. The Company has successfully developed or
acquired the rights to five proprietary games that are currently installed and
approved for use in unaffiliated casinos. Anchor's dedicated proprietary games
include Wheel of Gold, Totem Pole, Silver Strike, Clear Winner, and
Rock'N'Reels. All of the machines are placed in casinos free of charge under
royalty, revenue participation, or other similar agreements, allowing the casino
to avoid up-front purchase costs and providing significant recurring revenues to
Anchor. The machines utilize numerous unique concepts and designs in

22
<PAGE>
order to increase overall gaming customer play levels. For example, the
Company's two most popular dedicated proprietary games, Totem Pole and Wheel of
Gold, each incorporate innovative game features that contribute to higher play
levels. Totem Pole comprises three games in one slot machine creating a unique
visual presentation in the casino environment. Greater play levels are realized
on Totem Pole because the player must insert the maximum number of coins to
activate all three games and benefit from the addition of a "wild" symbol.
Players on the Wheel of Gold machine have the opportunity to activate on the
same machine a three dimensional "roulette" type wheel with significantly higher
potential winnings, providing a secondary game event and additional excitement
to the customer through the Company's "game within a game" concept. Anchor's
"game within a game" concept provides the player an incentive to increase play
through the secondary game event, thereby maximizing customer playing time.
Wheel of Gold is the first generation of the Company's "game within a game"
concept that management believes will form the basis of a significant portion of
its future dedicated proprietary game designs. The Company has additional
innovative game machine concepts in various stages of development using the
Company's "game within a game" concept and other unique concepts.

WAP PROPRIETARY GAMES. A WAP is a system that electronically links
individual slot machines among multiple locations, allowing all the machines to
share a common jackpot. The WAP jackpot increases, or progresses, by a certain
percentage of each coin inserted into any one of the machines on the WAP
network, thereby allowing the jackpot to increase rapidly to a significant
amount. Management believes that the larger jackpots offered by WAP machines
attract a distinct portion of a customer's gaming budget as compared to a
non-progressive slot machine. In order to capture this portion of a customer's
gaming budget, the Company has entered into a strategic alliance resulting in
the Anchor IGT JV for the purpose of developing and installing WAP machines
based on both existing dedicated proprietary games and other proprietary
designs. The Company and IGT share in the management of the Anchor IGT JV and
will share equally in its profits and losses. The first WAP machine introduced
by the Anchor IGT JV is the Wheel of Fortune-TM-, a game that is very similar to
the Company's Wheel of Gold. Additionally, the Anchor IGT JV has recently
introduced Totem Pole on a WAP and has other WAP concepts at various stages of
development.

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<PAGE>
The following is a description of the Company's proprietary games that are
currently being distributed.

<TABLE>
<S> <C>
- - DOUBLE DOWN STUD Double Down Stud is a software conversion kit introduced in 1993 that
is installed in casino customers' gaming machines to allow players to
play a unique version of video poker.

- - SILVER STRIKE Silver Strike is a standard slot machine, the rights to which were
acquired at the time of the IPO in 1994, that pays out souvenir tokens
for certain winning combinations. Anchor furnishes Silver Strike
machines free of charge to its casino customers, who agree to purchase
the silver tokens exclusively from the Company.

- - CLEAR WINNER Clear Winner is a standard slot machine introduced in 1995 that is
remanufactured into a clear cabinet so that players can observe all of
its inner workings. The game includes state of the art signage and a
custom designed cabinet.

- - WHEEL OF GOLD Wheel of Gold is a standard slot machine introduced in 1995 that has
the added dimension of giving players the opportunity to activate on
the same machine a three-dimensional "roulette" type wheel with
significantly higher potential winnings, providing additional
excitement to the player through the Company's "game within a game"
concept.

- - TOTEM POLE Introduced in 1996, Totem Pole incorporates three games in one device,
each of which is activated by inserting two coins. Each successive game
played provides the possibility of greater payback to the player. When
the player activates all three games by playing six coins, the player
is rewarded with a "wild" symbol common to all three games.

- - ROCK'N'REELS Introduced in 1996, Rock'N'Reels is a specially packaged standard slot
machine designed to evoke the image of a vintage juke box. The game is
enhanced with state of the art sound and signage.
</TABLE>

The Company derives recurring revenues on these machines in various forms,
including daily or similar royalties, revenue participation agreements, and
other similar agreements with casinos, and, in the case of Silver Strike, by
selling the souvenir tokens to casinos.

DEVELOPMENT. Anchor is continually engaged both in the development of new
proprietary games and in the improvement of existing games. After the Company
has identified the basic concept for a new game, it works to refine the new game
to maximize player appeal. The Company's efforts include computer simulated
studies of the game probabilities to determine the optimal pay schedules;
research of, and application for, any significant intellectual property rights
that can be claimed; design of packaging for the game; establishment of a
pricing strategy for the game; and application for the necessary regulatory
approvals. Anchor then solicits feedback from potential casino customers to
further refine the game. At the production stage, Anchor and the manufacturer
refine the technology and construction of the game. Prior to the release of any
new game, Anchor must receive necessary regulatory approvals.

DISTRIBUTION. Anchor has an established sales organization with offices in
Nevada, Missouri, Mississippi, Louisiana, and New Jersey servicing an
established customer base of over 200 casinos at June 30, 1997. The Company
distributes its proprietary games primarily through a direct sales effort in
which sales representatives call on casinos and other potential customers.
Anchor also uses distributors in a limited number of jurisdictions.

ANCHOR IGT STRATEGIC ALLIANCE. In September 1996, the Company entered into
an agreement with IGT (the "Strategic Alliance"). The Company believes that the
Strategic Alliance will facilitate both the

24
<PAGE>
expansion of their proprietary games business and the Company's ability to
develop and distribute additional proprietary games on a WAP.

As part of the Strategic Alliance, Anchor and IGT have formed an initial
joint venture. The Company and IGT share in the management of the joint venture
and will share equally in its profits and losses. IGT's WAP system is being used
within the joint venture for a variety of the Company's dedicated proprietary
game concepts including Wheel of Gold and Totem Pole. IGT's Wheel of Fortune-TM-
game is also covered under the Strategic Alliance. Property, including
intellectual property, developed through the joint venture is owned by the joint
venture. The joint venture agreement has an initial duration of ten years and
terminates unless the parties thereto agree to an extension. After the initial
ten year term, either party may terminate the joint venture upon at least one
year's prior notice. The joint venture does not acquire any rights to the
intellectal property rights of each of Anchor and IGT that are developed outside
of the joint venture.

The Company believes the Strategic Alliance will enhance the profitability
of games developed by the Company in the future through either an expansion of
the initial joint venture or similar joint venture agreements with IGT, or both.
In the event that any particular state jurisdiction prohibits the equal share of
profits and losses, management responsibility, or allocation of expenses in the
joint venture, it is contemplated that alternative arrangements will be made to
satisfy such regulatory objections.

INTELLECTUAL PROPERTY RIGHTS. Anchor has secured and endeavors to secure,
to the extent possible, exclusive rights in its games, primarily through federal
and foreign intellectual property rights, such as patents and trademarks. The
United States Patent and Trademark Office has issued four patents covering the
Double Down Stud games in the United States. These patents expire on March 31,
2009. The United States Patent and Trademark Office has issued one patent
covering innovations of the Silver Strike game in the United States, but there
is no independent protection of the game itself. This patent expires on March
14, 2012. In 1993, the Company received a U.S. patent relating to a system it
developed that allows players of gaming devices to participate in a group game,
such as bingo, without leaving the gaming device they are playing. In order to
protect potential foreign sources of income, the Company has filed patent
applications and trademark applications in strategically selected foreign
countries. There can be no assurance that any of the pending U.S. or foreign
patent or trademark applications will issue as patents or trademark
registrations, respectively, or that any of these rights will not be infringed
by others or that already issued patents or trademark registrations will not be
invalidated or canceled. None of the foregoing measures provides assurance that
Anchor's proprietary games or the concepts incorporated in the games could not
be successfully duplicated by third parties. Third parties could infringe on
Anchor's rights, or Anchor's proprietary games could be successfully duplicated
without infringing on Anchor's legal rights. Many elements incorporated in
Anchor's proprietary games are in the public domain or otherwise not susceptible
to legal protection, and the steps taken by Anchor will not, in and of
themselves, preclude competition with Anchor's proprietary games.

Double Down Stud, Colorado Central Station Casino, Silver Strike, and Fast
Track Express are registered trademarks of Anchor. Anchor also has applications
pending on several other trademarks and/ or service marks, including Anchor
Coin, Anchor Gaming, Anchor Games, Spin for Cash, Wheel of Gold, Clear Winner,
Colorado Grande, Totem Pole, CashBall, KenoBucks, Rock'N'Reels, Maggie's Slot
Club, and Fast Track Slot Club. There can be no assurance that the pending
trademark or patent applications will be issued, that the Company's applications
will not be opposed by a third party, or that Anchor will not face third
parties' claims to prior use of one or more of these marks or patents.

CASINOS

GENERAL. In November 1990, the state of Colorado approved limited stakes
gaming ($5.00 or less per wager) in two historic gold mining areas, Black
Hawk/Central City and Cripple Creek. Because of the $5.00 maximum bet, Anchor's
casinos in Colorado emphasize gaming machine play. Anchor currently

25
<PAGE>
operates a casino in each of these markets, the Colorado Central Station Casino
in Black Hawk and the Colorado Grande Casino in Cripple Creek. Black Hawk and
Central City are contiguous and are located approximately 40 miles from Denver
and 10 miles from Interstate 70, the main highway connecting Denver to many of
Colorado's major ski resorts. Cripple Creek is located approximately 45 miles
from Colorado Springs and 75 miles from Pueblo. Casinos located in the Black
Hawk/Central City area serve primarily the residents of Denver and Boulder,
Colorado and surrounding communities, an area with a total population in excess
of 1.8 million. Approximately three million people live within a 100-mile radius
of the Black Hawk/Central City area. Casinos located in Cripple Creek serve
primarily the residents of Colorado Springs, Pueblo, and surrounding
communities. More than two million people live within a 100-mile radius of
Cripple Creek.

The following table sets forth statistical information related to casinos in
the state of Colorado, the Black Hawk/Central City market, Cripple Creek, and
the Company's casinos during the fiscal years ended June 30, 1995, 1996, and
1997 compiled from data published by the Colorado Limited Gaming Control
Commission.

COMBINED COLORADO
BLACK HAWK/ CENTRAL COLORADO
CENTRAL STATION CRIPPLE GRANDE
FISCAL YEARS ENDED JUNE 30, COLORADO CITY CASINO CREEK CASINO
--------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenue per device per day (1):
1997.................................... $ 86 $ 99(2) $ 239 $ 63 $ 119
1996.................................... 87 96(2) 253 69 105
1995.................................... 81 88(2) 225 65 80

Aggregate gaming revenue (in thousands):
1997.................................... $ 423,432 $ 315,983 $ 60,284 $ 107,449 $ 9,170
1996.................................... 401,864 302,971 57,698 98,893 7,522
1995.................................... 358,861 270,282 50,763 88,579 5,583

Average number of gaming devices in
operation(1):
1997.................................... 13,435 8,758 689 4,677 212
1996.................................... 12,607 8,691 625 3,917 196
1995.................................... 12,117 8,394 617 3,723 192

Average number of casinos in operation:
1997.................................... 56 32 -- 25 --
1996.................................... 57 32 -- 25 --
1995.................................... 59 34 -- 24 --
</TABLE>

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

(1) Devices include gaming machines and table games.

(2) Revenue per device per day for the combined Black Hawk/Central City market
excluding the Colorado Central Station Casino was $87, $83, and $77 for the
fiscal years ended June 30, 1997, 1996, and 1995, respectively.

COLORADO CENTRAL STATION CASINO. On December 25, 1993, the Company opened
the Colorado Central Station Casino in Black Hawk at a cost of approximately
$25.0 million. The Colorado Central Station Casino is currently the highest
revenue producing and most profitable casino in the state. After completion of a
2,750 square foot expansion in 1996, the casino building has approximately
49,000 square feet of main facility area, with 16,637 square feet of gaming
space over three floors. The Colorado Central Station Casino features more than
680 gaming machines, ten blackjack tables, nine poker tables, and a food court
restaurant area. The casino benefits from a favorable location, as it is the
first casino encountered by customers traveling from Denver to the Black
Hawk/Central City area. In addition, the Colorado Central Station Casino offers
convenient parking to its customers, with more than 770 parking spaces, whereas
many other casinos in the Black Hawk/Central City market lack convenient parking
and,

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as a result, have had difficulty attracting and retaining customers. The
Colorado Central Station Casino is also the closest casino to Black Hawk's 3,000
space public parking facility, located one and one-half miles from the casino,
and is the first stop from the parking facility on the parking lot shuttle bus
route. Anchor believes that the Colorado Central Station Casino's location,
convenient parking, size and design, and highly successful Fast Track Slot Club
and player tracking system give it a competitive advantage over the other
casinos in the Black Hawk/Central City market. The Colorado Central Station
Casino is situated on approximately 1.8 acres of land on the south end of Black
Hawk, near Main Street and Colorado State Highway 119. The Colorado Central
Station Casino's net win per device (which includes both gaming machines and
table games) per day was $239 for the fiscal year ended June 30, 1997 as
compared to a reported average net win per device per day of $87 for the other
casinos in the Black Hawk/Central City market for the same period.

The Colorado Central Station Casino is fashioned in the style of a 19th
century mining town railroad station. According to information on file with the
Colorado Historic Preservation Office, the Colorado Central Station Casino
property is within the Black Hawk Registered Historic District and meets the
historical guidelines for use as a gaming establishment. Most casinos in
Colorado occupy buildings that were originally constructed for uses other than
gaming. In contrast, the Colorado Central Station Casino was constructed
specifically for gaming activities, and as a result offers a more open, spacious
gaming area, while using the maximum square footage allowed under Colorado law,
which limits the square footage of a casino that may be used for gaming
activities to 35% of the building and 50% of any one floor. At June 30, 1997,
the Colorado Central Station Casino employed approximately 444 people and by law
is allowed to be open seven days a week from 8:00 a.m. to 2:00 a.m.

All gaming machines at the Colorado Central Station Casino offer bill
validators that accept $1, $5, $10, $20, $50, and $100 bills. Management
believes that bill validators increase revenues from its machines by allowing
faster play and eliminating waiting time for change. In addition, the Company
has installed an automated player tracking system at the casino that is tied
into the Company's accounting system to provide detailed management reports
regarding gaming machine use. The system facilitates the casino's Fast Track
Slot Club, which is designed to attract and retain gaming patrons by enabling
the Company to identify, market to, and reward its loyal customers. For the year
ended June 30, 1997, over 65% of all money wagered at gaming machines at the
Colorado Central Station Casino was from Fast Track Slot Club members.

COLORADO GRANDE CASINO. The Company operates (through an 80% owned
subsidiary) the Colorado Grande Casino in Cripple Creek, which is located
approximately 45 miles from Colorado Springs and 75 miles from Pueblo. The
Colorado Grande Casino, which opened October 11, 1991, is located at one of the
principal intersections in Cripple Creek and features more than 210 gaming
machines, 44 adjacent parking spaces, and a full service restaurant and bar. In
August 1995, the Company completed the installation of an automated player
tracking system and a player slot club, "Maggie's Slot Club." Maggie's Slot Club
and the player tracking system have enabled the casino to implement marketing
programs designed to attract and increase the number of loyal casino customers.
At June 30, 1997, Maggie's Slot Club had more than 50,000 members, a 108%
increase over the prior year. Primarily as a result of a continual building of a
customer base through the slot club and player tracking system, along with
monthly Maggie's Slot Club promotions, slot revenue at the Colorado Grande
Casino increased approximately 24% during fiscal year ended June 30, 1997 as
compared to fiscal year ended June 30, 1996. At June 30, 1997, the Colorado
Grande Casino employed approximately 101 people and by law is allowed to be open
seven days a week from 8:00 a.m. to 2:00 a.m.

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CANADIAN OPPORTUNITY. On September 26, 1997 the Ontario provincial
government granted the Anchor RPC JV permission to own and operate six permanent
full-time and one part-time seasonal charity gaming clubs in Ontario, Canada.
The Anchor RPC JV is a joint venture entered into in January 1997 between Anchor
and RPC Gaming, Ltd., a subsidiary of RPC, for the purpose of submitting a
proposal to own and operate charity casino operations in the Province of
Ontario. RPC, an Ontario based public real estate company, is engaged in the
acquisition and ownership of income-producing properties in Canada and the
United States. RPC owns and operates 42 properties in 20 communities in Canada
and was recently granted a nonrestricted gaming license in the state of Nevada.

These charity gaming clubs will replace the current three-day roving Monte
Carlo events and are being introduced by the Ontario provincial government as a
way to both stabilize funding to charities and to increase control, supervision,
and accountability in this gaming sector. The provincial government has had
substantial success in introducing other regulated gaming locations as
illustrated by the commercial casinos in Windsor and Niagara Falls, Canada. Each
permanent charity gaming club location will be limited to a total of 150 video
lottery terminals and 40 table games. The Province of Ontario anticipates that
the permanent charity gaming clubs will be approximately one-tenth of the size
of a commercial casino such as Niagara Casino. Since its opening on December 9,
1996, through July 31, 1997, the Niagara Casino has reported revenues of $313
million. The permanent charity gaming clubs will be operated under management
agreements with the provincial government, which will provide the operator with
10% of video lottery terminal revenue, 5% of table game, retail, and food and
beverage revenue, and 10% of net income, as adjusted.

The charity gaming clubs by law will be able to operate seven days a week up
to 24 hours a day depending upon market conditions and will have a minimum table
gaming bet of $2 and a maximum of $100. In addition, credit will not be
available to customers and the charity gaming clubs will have restrictions on
exterior signage and advertising.

ROUTE OPERATIONS

Anchor is one of the largest gaming machine route operators in Nevada with
801 gaming machines in 58 locations at June 30, 1997, up from 692 gaming
machines in 50 locations at June 30, 1996. The Company's gaming machine route
operations in Nevada involve the installation, operation, and service of gaming
machines (virtually all video poker machines) under space leases with retail
chains and under revenue participation agreements with local taverns and retail
stores, principally in the Las Vegas area. Management believes that its route
operation contracts provide the Company with a long-term, stable revenue source
and that its route has the highest revenue and profit per machine of any route
operation in the state of Nevada. In 1996, the Company extended its exclusive
space lease agreement with Smiths, its largest route customer, for an additional
five years at current rates through 2010. At June 30, 1997, 716 of the Company's
801 gaming machines in Nevada were located in or near Las Vegas, which has been
one of the fastest growing cities in the United States in recent years. Anchor
believes that its route operations will benefit from the continued growth of the
Las Vegas area, the associated growth of its existing customers in that market,
and the Company's continued installation of bill validators on its gaming
machines.

Anchor's agreements for its locations generally are in the form of either
written space lease agreements or revenue sharing contracts and generally give
Anchor the exclusive right to install gaming machines at such locations. Two of
the Company's gaming route agreements are space leases with major retail chains
that require payments of fixed monthly fees based on the amount of space used or
the number

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of gaming machines installed at each location. The remainder of the Company's
gaming route agreements are revenue participation arrangements, which provide
for the payment to the location owner of a percentage of revenues generated by
Anchor's machines at such location. A location owner is not permitted to receive
a percentage of revenues unless such owner is licensed by the Nevada Gaming
Commission. See "Regulation -- Nevada."

In 1996, Anchor extended its space lease agreement with its largest gaming
machine route customer, Smiths, which was scheduled to expire in the year 2005,
for five additional years at current rates through 2010. Anchor paid $5.0
million to Smiths for this extension. The agreement with Smiths provides for a
fixed monthly rental fee per store throughout the term of the agreement and
grants Anchor the exclusive right to install gaming machines at all Smiths
stores in Nevada, including stores opened in the future.

Anchor's space leases and revenue participation arrangements generally
require Anchor to pay all installation, maintenance, and insurance expenses
related to its operations at each location. Applicable taxes are paid by Anchor
under space leases and are generally shared on the same basis as revenues under
revenue participation arrangements. The leases generally provide that if Anchor
fails to pay the required rental or license fees or defaults in the performance
of any of its other obligations, the location operator can terminate the lease.
Anchor believes that it is not in default under any of its present space leases
or revenue participation arrangements. Generally, in the ordinary course of
business, Anchor has lease and other security deposits, prepaid rent, and
advances held by the owners of chain stores and other location operators.

Anchor attempts to attract and retain gaming machine route patrons by
offering an attractive selection of gaming machines. Prior to installing
machines at a location, Anchor studies the market potential and customer base
and determines the appropriate machine mix for the location. Progressive
jackpots are also offered at most of the Company's locations. Virtually all of
the gaming machines operated by the Company's route operation are video poker
machines because Anchor believes that interactive electronic games, such as
video poker, are more attractive to its gaming machine route patrons than
simple, mechanical reel-type slot machines.

In marketing its services to the owners of retail stores and taverns, the
Company also emphasizes quality service. The Company operates and services its
machines using its own employees, who routinely repair and maintain the
Company's gaming machines in order to improve reliability and in-service time.
Management believes that the Company's gaming machines and related equipment are
well maintained and in good working condition. In addition to physical service
of the gaming machines, employees of the Company remove coins from the machines,
refill machines that have exhausted their supply of coins, and provide payment
of jackpots in excess of machine limits. Anchor also operates change booths at
certain of its retail store locations.

SUPPLIERS

Anchor has contracted with several manufacturers to develop both Anchor's
existing and future product requirements. To date, the Company has purchased
substantially all of the gaming machines used in its route operations from IGT.
Silver Strike machines are currently produced by either IGT or Sigma Game, Inc.
The primary components of Wheel of Gold are purchased from Bally Gaming
International, Inc. and Acres Gaming. Totem Pole was originally manufactured for
the Company by Universal Distributing of Nevada, Inc. Since that time, the
Company has also contracted with Bally Gaming International, Inc. and IGT for
the manufacture of Totem Pole. The Company is expected to continue its reliance
on third parties for the manufacture of its proprietary games. An inability to
obtain quality gaming machines, production parts, and replacement parts on
reasonable terms or on a timely basis could have an adverse effect on Anchor.

COMPETITION

Anchor is subject to intense competition in all of its markets, and
management believes that national, regional, state, and local competition in the
gaming industry in general will be extremely high during the

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foreseeable future, as gaming activities continue to expand in both traditional
and new gaming jurisdictions. In addition, many of the Company's competitors
have greater financial resources than the Company.

PROPRIETARY GAMES. Intense competition characterizes the market for
proprietary games. Management believes that the primary bases for competition in
the casino game market are price and potential profit to gaming location
operators that install the games. The perceived popularity of games with casino
patrons as well as the economics of the game are, management believes, factors
considered by potential casino customers. The popularity of any of the Company's
games may decline over time as consumer preferences change or as new, competing
games are introduced. As a result, Anchor must continually anticipate and adapt
its products to consumer preferences to maximize the economics of the game to
the Company. There can be no assurance, however, that Anchor will continue to be
successful in developing and marketing its products. If the Company fails to
develop games that achieve market acceptance or if existing games become
obsolete due to the introduction of popular games by Anchor's competitors the
effects on Anchor could be material and adverse. Competitors in the game
industry include manufacturers of gaming devices and other companies marketing
gaming products and conversion kits that compete directly with the Company for
the limited gaming spaces available at casinos.

CASINOS. Intense competition also characterizes the Black Hawk/Central City
and Cripple Creek markets. Since limited stakes gaming was instituted in
Colorado in 1991, a number of Colorado casinos have ceased operations and others
have filed for protection under Chapter 11 of the Bankruptcy Code. Others have
closed temporarily or reduced the number of employees, and many casinos may not
be operating profitably. Several proposals have been made to open new casinos or
to expand existing casinos in Black Hawk, some of which have been abandoned or
modified. Two casinos are being developed in Black Hawk located across the
intersection from the Company's Colorado Central Station Casino. Casino America
and Nevada Gold & Casinos have commenced construction of a casino scheduled to
open in early 1999, which facility is expected to include 1,100 slot machines,
24 table games, and a 1,000 car parking garage. Riviera Holdings Corporation has
announced that it plans to develop a gaming facility with 1,000 slot machines,
14 table games, and a 500 space covered parking garage, scheduled to open in the
Spring of 1999. A joint venture between Black Hawk Gaming & Development Company,
Inc. and Jacobs Entertainment Ltd. is constructing a gaming facility located
near Colorado Central Station. The facility is scheduled to be completed in June
1998 and is expected to include 800 slot machines, 20 table games, and 500
parking spaces. In addition, construction is proceeding on a third major
intersection off State Highway 119, which will provide access directly to one of
the new casinos from State Highway 119, which is the primary access from the
Denver metropolitan area. From time to time other casino companies have publicly
expressed an interest in pursuing development or expansion in the Black
Hawk/Central City market, and proposals to develop competitive projects are
ongoing.

Colorado law requires an amendment to the State Constitution followed by
local voter approval for any expansion of limited gaming. State and local public
initiatives regarding limited stakes gaming in

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Colorado are being actively pursued by many persons. Several cities within
Colorado have active citizens' lobbies that were able to place limited gaming
initiatives on the November 1994 and November 1996 statewide ballots. Although
these initiatives failed by substantial margins, new initiatives could be
introduced on future statewide ballots to allow expansion of gaming in Colorado.
Future initiatives, if passed, could significantly increase the competition for
gaming customers, thereby adversely affecting Anchor's current casino operations
in Colorado. In addition, Anchor's casinos in Colorado compete with casinos in
other parts of the United States, as legalized gambling continues to
proliferate.

CANADIAN OPPORTUNITY The Company anticipates that the charity gaming clubs
in Ontario, Canada will experience intense competition and certain competitors
may have greater financial and other resources than the Company. Anchor RPC JV's
seven locations will compete with the other charity gaming clubs in the
province, along with other casinos in Canada and the United States.

ROUTE OPERATIONS. Gaming machines and gaming of all types are available in
Nevada casinos and in restricted gaming locations similar to those in which the
Company operates gaming machines, and all of these gaming establishments compete
directly or indirectly with Anchor's route operations. In addition, Anchor is
subject to substantial competition for the operation of gaming machines in
approved locations from numerous small gaming machine route operators and some
large operators, located principally in Las Vegas and Reno, Nevada, and their
surrounding areas. The principal methods of competition for gaming machine
locations are the lease, sublease, license, or revenue sharing terms, the
service provided by the route operator, the reputation of the route operator,
and the financial strength of the route operator. As existing space lease and
revenue participation arrangements expire, competition for renewals can be
expected to increase the amounts payable to location owners as compared to
amounts payable under existing agreements. Anchor's route is the only route
operation that features Double Down Stud, as the Company does not offer the game
to competing route operators. Providing a proprietary game in its route
operation is one of the ways Anchor differentiates itself from its competitors.

SECURITY

Anchor's casino and gaming machine route operations generate, and require
the Company to maintain, a large supply of available cash. In order to mitigate
the risks of loss associated with maintaining such a supply, the Company employs
physical security measures and utilizes strict internal accounting and custodial
controls on receipts and disbursements. There can be no assurance, however, that
the Company's precautions, internal controls, and physical security will provide
security for its employees or prevent cash shortages resulting from employee
errors or from theft. In addition, the Company maintains insurance to mitigate
this risk.

EMPLOYEES

At June 30, 1997, Anchor employed 869 persons, the substantial majority of
whom are nonmanagement personnel. Of this total, approximately 545 people worked
at the Colorado Central Station Casino and the Colorado Grande Casino. The
balance of the Company's nonmanagement employees is involved in route and
proprietary games operations. None of Anchor's employees is covered by a
collective bargaining agreement, and Anchor believes that it has satisfactory
employee relations.

SEASONALITY

The Company's operations as a whole are not subject to significant seasonal
variations. However, in general, the highest levels of business activity at its
Colorado casinos occur during the tourist season from July to October of each
year. In addition, operations at the Colorado casinos during the winter months
could be significantly affected by weather and road conditions in Colorado. The
Company's proprietary games operations typically have their highest levels of
business during the summer tourist season when its casino customers experience
heavier tourist traffic.

LITIGATION

From time to time the Company is a defendant in various lawsuits in routine
matters incidental to its business. Management does not believe that the outcome
of any such litigation will have a material effect on Anchor.

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REGULATION

NEVADA

The manufacturing and distribution of gaming devices and the ownership and
operation of gaming machine routes in Nevada are subject to (i) the Nevada
Gaming Control Act and the regulations promulgated thereunder (collectively, the
"Nevada Act") and (ii) various local regulations. Generally, gaming activities
may not be conducted in Nevada unless licenses are obtained from the Nevada
Gaming Commission (the "Nevada Commission") and appropriate county and city
licensing agencies. The Nevada Commission, the Nevada State Gaming Control Board
(the "Nevada Board"), and the various county and city licensing agencies are
collectively referred to as the "Nevada Gaming Authorities."

The laws, regulations, and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy that are concerned
with, among other things, (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping, and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) providing a source of state and local
revenues through taxation and licensing fees. Changes in such laws, regulations,
and procedures could have an adverse effect on Anchor.

Anchor Coin, which is the Company's subsidiary engaged in the distribution
of gaming devices and route operations, is licensed by the Nevada Gaming
Authorities. Anchor Coin is also licensed as a manufacturer to enable it to
develop its proprietary games. Anchor Coin's gaming licenses require the
periodic payment of fees and taxes and are not transferable. Anchor is
registered by the Nevada Commission as a publicly traded corporation
("Registered Corporation") and, as such, is required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information that the Nevada Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, Anchor Coin
without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and Anchor Coin have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits, and licenses required
in order to engage in gaming activities in Nevada.

Anchor Coin's operator's license enables it to operate gaming machines on
premises owned by others. At locations with 15 or fewer gaming machines, the
operation is considered to be a "restricted" gaming location. At locations with
more than 15 gaming machines, the operation is considered to be a
"nonrestricted" gaming location. Only one of the Company's route locations is a
nonrestricted location. The nonrestricted regulatory requirements are reduced to
some extent because no more than 35 gaming machines, and no table games, are
operated at this location. Slot machines operated at restricted and
nonrestricted locations are subject to various fixed fees and per-machine taxes
levied on a quarterly and annual basis by the Nevada Gaming Authorities.
Nonrestricted locations are subject to a tax on their gross revenues (the
difference between amounts wagered by casino patrons and payments to casino
patrons) that ranges from 3.0% to 6.25%. In its space lease agreements with
retail chains, Anchor has agreed to pay all taxes and fees relating to the
operation of gaming machines, and in its participation arrangements, taxes and
fees are typically shared on the same basis as revenues. Significant increases
in the fixed fees or taxes currently levied per machine or the tax currently
levied on gross revenues could have a material adverse effect on the Company.

The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Anchor
Coin in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors, and
certain key employees of Anchor Coin must file applications with the Nevada
Gaming Authorities and are

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required to be licensed by the Nevada Gaming Authorities. Officers, directors,
and key employees of the Company who are actively and directly involved in the
gaming activities of Anchor Coin may be required to be licensed or found
suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may
deny an application for licensing or a finding of suitability for any cause they
deem reasonable. A finding of suitability is comparable to licensing, and both
require submission of detailed personal and financial information followed by a
thorough investigation. The applicant for licensing or a finding of suitability
must pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities, and, in addition to their
authority to deny an application for a finding of suitability or licensure, the
Nevada Gaming Authorities have jurisdiction to disapprove a change in a
corporate position.

If the Nevada Gaming Authorities were to find an officer, director, or key
employee unsuitable for licensing or to have a continuing relationship with the
Company or Anchor Coin, the companies involved would have to sever all
relationships with such person. In addition, the Nevada Commission may require
the Company or Anchor Coin to terminate the employment of any person who refuses
to file appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.

The Company and Anchor Coin are required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all material loans,
leases, sales of securities, and similar financing transactions by Anchor Coin
must be reported to or approved by, the Nevada Commission.

If it were determined that the Nevada Act was violated by Anchor Coin, the
gaming licenses it holds could be limited, conditioned, suspended, or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, Anchor Coin, the Company, and the persons involved could be subject to
substantial fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could be appointed by
the Nevada Commission to operate the Company's nonrestricted locations, and,
under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
property) could be forfeited to the state of Nevada. Limitation, conditioning,
or suspension of any gaming license or the appointment of a supervisor could
(and revocation of any gaming license would) materially and adversely affect
Anchor.

Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his or her suitability as a beneficial holder of the Company's voting
securities determined if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
state of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than five percent of
the Company's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of
the Company's voting securities apply to the Nevada Commission for a finding of
suitability within thirty days after the Chairman of the Nevada Board mails a
written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, that acquires more than
10% but not more than 15% of the Company's voting securities, may apply to the
Nevada Commission for a waiver of such finding of suitability if such
institutional investor holds the voting securities for investment purposes only.
An institutional investor will not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter or bylaws, management, policies, or operations of the Company
or any of its gaming affiliates, or any other action that the Nevada Commission
finds to be inconsistent with holding the Company's voting securities for
investment purposes only. Activities that are not deemed to be inconsistent

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with holding voting securities for investment purposes only include (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies, or
operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial holder
of voting securities that must be found suitable is a corporation, partnership,
or trust, it must submit detailed business and financial information including a
list of its beneficial owners. The applicant is required to pay all costs of
investigation.

Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board may be found unsuitable. The same restrictions
apply to a record owner if the record owner, after request, fails to identity
the beneficial owner. Any stockholder found unsuitable and who holds, directly
or indirectly, any beneficial ownership of the common stock of a Registered
Corporation beyond such period of time as may be prescribed by the Nevada
Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company or Anchor
Coin, the Company (i) pays that person any dividend or interest upon voting
securities of the Company; (ii) allows that person to exercise, directly or
indirectly, any voting right conferred through securities held by that person;
(iii) pays remuneration in any form to that person for services rendered or
otherwise; or (iv) fails to pursue all lawful efforts to require such unsuitable
person to relinquish his or her voting securities for cash at fair market value.
Additionally, the Clark County, Nevada Liquor and Gaming Licensing Board has
taken the position that it has the authority to approve all persons owning or
controlling the stock of any corporation controlling a gaming license.

The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated, and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation, or similar
transaction.

The Company is required to maintain a current stock ledger in Nevada that
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that such securities are subject to the Nevada Act. However,
to date, the Nevada Commission has not imposed such a requirement on the
Company.

The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire, or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Since the Company will not receive any of the proceeds from the sale
of shares of Common Stock by the Selling Stockholders pursuant to this Offering,
this Offering is not subject to the prior approval of the Nevada Gaming
Commission. There has been no finding, recommendation, or approval by the Nevada
Commission or the Nevada Board as to the accuracy or adequacy of the Prospectus
or the investment merits of the securities. Any representation to the contrary
is unlawful.

Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains

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control, may not occur without the prior approval of the Nevada Commission.
Entities seeking to acquire control of a Registered Corporation must satisfy the
Nevada Board and the Nevada Commission concerning a variety of stringent
standards prior to assuming control of such Registered Corporation. The Nevada
Commission may also require controlling stockholders, officers, directors, and
other persons having a material relationship or involvement with the entity
proposing to acquire control to be investigated and licensed as part of the
approval process of the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities, and corporate defense tactics
affecting Nevada gaming licensees and Registered Corporations that are
affiliated with those operations may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
board of directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purpose of acquiring control of the
Registered Corporation.

Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation by
the Nevada Board of the Licensees' participation in such foreign gaming. The
revolving fund is subject to increase or decrease in the discretion of the
Nevada Commission. Thereafter, Licensees are also required to comply with
certain reporting requirements imposed by the Nevada Act. Licensees are also
subject to disciplinary action by the Nevada Commission if they knowingly
violate any laws of the foreign jurisdiction pertaining to the foreign gaming
operation, fail to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming operations, engage
in activities that are harmful to the state of Nevada or its ability to collect
gaming taxes and fees, or employ a person in the foreign operation who has been
denied a license or a finding of suitability in Nevada on the ground of personal
unsuitability.

The placement and number of gaming machines that may be operated in various
locations are subject to limitation and control by local city and county laws
and ordinances. Acting through their zoning powers and their powers to regulate
gaming, local government entities determine the number of gaming machines that
may be operated at non-casino locations and the types of locations where gaming
operations may be conducted. Accordingly, changes in such local zoning laws and
ordinances could have a material adverse effect on Anchor.

COLORADO

The ownership and operation of gaming facilities in Colorado are subject to
extensive state and local regulation. No gaming may be conducted in Colorado
unless licenses are obtained from the Colorado Limited Gaming Control Commission
(the "Colorado Commission"). In addition, the State of Colorado created the
Division of Gaming (the "Colorado Division") within its Department of Revenue to
license, implement, regulate, and supervise the conduct of limited stakes
gaming. The Director (the "Colorado Director") of the Colorado Division, under
the supervision of the Colorado Commission, has been granted broad powers to
ensure compliance with the law and regulations. The Colorado Commission, the
Colorado Division, the Colorado Director, and city authorities in Black Hawk,
Central City, and Cripple Creek that have responsibility for regulation of
gaming are collectively referred to as the "Colorado Gaming Authorities."

35
<PAGE>
The laws, regulations, and supervisory procedures of the Colorado Gaming
Authorities seek to maintain public confidence and trust that licensed limited
gaming is conducted honestly and competitively, that the rights of the creditors
of licensees are protected, and that gaming is free from criminal and corruptive
elements. It is the stated policy of the Colorado Gaming Authorities that public
confidence and trust can be maintained only by strict regulation of all persons,
locations, practices, associations, and activities related to the operation of
licensed gaming establishments and the manufacture or distribution of gaming
devices and equipment.

The Colorado Commission is empowered to issue five types of gaming and
gaming related licenses. Anchor's casinos in Colorado each require a retail
gaming license, which must be renewed each year, and the Colorado Division has
broad discretion to revoke, suspend, condition, limit, or restrict a licensee at
any time. No person or entity can have an ownership interest in more than three
retail gaming licenses. The Colorado Grande Casino and the Colorado Central
Station Casino have each obtained the required retail gaming licenses.

In addition to retail gaming licenses for its casinos, all of Anchor's
casino employees involved in gaming activities must apply for and receive a
support gaming license prior to commencing employment. "Key" employees, which
are defined as any executive, employee, or agent of a licensee having the power
to exercise a significant influence over decisions concerning any part of the
operations of any licensee, must obtain key licenses. At least one key license
holder must be on the premises of each casino at all times. Anchor pays the cost
of obtaining and maintaining key licenses. All licenses are revocable,
nontransferable, and valid only for the particular location initially
authorized, except that support and key employee licenses move with the approved
individual and are not location specific.

Any person or group of related persons that acquires beneficial ownership of
between 5.0% and 9.99% of the outstanding Common Stock must report the
acquisition to the Colorado Commission within ten days of acquiring such
interest and may be required to provide additional information to the Colorado
Commission and be found suitable. Any person or group of related persons that
acquires beneficial ownership of 10% (or, with respect to institutional
investors, 15%) or more of the outstanding Common Stock must apply to the
Colorado Commission within 45 days after acquiring such interest and submit to
investigation for suitability by the Colorado Commission. Certain qualifying
institutional investors, at the Colorado Commission's discretion, may acquire up
to 15% ownership before a finding of suitability is required if such investors
provide certain information to the Colorado Commission regarding investment
intent and other matters. In order to be found suitable, a stockholder must be a
person of good moral character, honesty, integrity, and, in general terms, must
be free from previous criminal or unsavory convictions or similar acts. The
Colorado Commission may require substantial information in connection with a
suitability investigation, including personal background and financial
information, source of funding information, and a sworn statement that such
person or entity is not holding the Common Stock for any other party, and also
may require fingerprints. Until a finding of suitability occurs for a
stockholder who is undergoing a suitability investigation, Anchor cannot pay any
dividends to such stockholder nor may the stockholder exercise any voting rights
with respect to the Common Stock. A stockholder that is found to be unsuitable
must transfer its Common Stock to a suitable person within 60 days after the
finding of unsuitability. Otherwise, Anchor may offer such person the lesser of
the cash equivalent of such person's investment in the Common Stock or the
current market price of the Common Stock as of the date of the finding of
unsuitability, and the stockholder will be required to sell his or her Common
Stock to Anchor. Anchor's Articles of Incorporation include a statement that all
transfers of voting securities are subject to the regulations of the Colorado
Commission and each other regulatory body to which the Company's activities are
subject and detail the possibility of a repurchase if a stockholder is found
unsuitable.

The Colorado Commission has adopted comprehensive rules and regulations that
require Anchor to maintain adequate books and records and prescribe minimum
operating, security, and payoff procedures. Regulated operating procedures
include hours of operation and rules of play. Rules regarding gaming, cheating,
and fraudulent practices have also been adopted, which Anchor is obligated to
police and

36
<PAGE>
enforce. Upon request, Anchor must submit copies of all written gaming contracts
and summaries of all oral gaming contracts to which it is a party or intends to
become a party. Anchor and its subsidiaries must also promptly inform the
Colorado Commission of any change in their officers or directors and any such
new officer or director will be subject to possible investigation prior to
approval. Further, if any casino employee possessing a support license changes
employment, is terminated, or resigns, Anchor must notify the Colorado Director.

Anchor may not make a public offering of its securities without notifying
the Colorado Commission. The notification must occur within 10 business days
after the initial filing of a registration statement with the Securities and
Exchange Commission or, if the offering will not be registered with the
Securities and Exchange Commission, 10 days prior to the public use or
distribution of any offering document. The notification procedures apply to any
offering by Anchor where the proceeds will be used or intended for use (i) in
constructing gaming facilities; (ii) in financing the operation of gaming
facilities by any licensee; (iii) in acquiring any direct or indirect interest
in Colorado gaming facilities; or (iv) in retiring or extending obligations
incurred for any of the above purposes. The notification must disclose, among
other things, a description of the securities to be offered, the proposed terms
of the offering, its anticipated gross and net proceeds, and the use of the
proceeds. Anchor will file the requisite notice with the Colorado Commission.

The sale of alcoholic beverages at Anchor's casinos is subject to licensing,
control, and regulation by the applicable state and local authorities. All
alcoholic beverages licenses are revocable and are not transferable. The
agencies involved have full power to limit, condition, suspend, or revoke any
such license, and any such disciplinary action could (and revocation would) have
a material adverse effect on Anchor.

The State of Colorado has enacted an annual tax on adjusted gross proceeds,
as defined under Colorado law ("AGP") (gross gaming revenue being defined
generally as the total amount wagered minus the total amount paid out in prizes)
of 2% of the first $2.0 million of AGP, 4% from $2.0 million to $4.0 million of
AGP, 14% from $4.0 million to $5.0 million of AGP, 18% from $5.0 million to
$10.0 million of AGP, and 20% of amounts in excess of $10.0 million of AGP.

During the first year of gaming, casinos operated under a three-tiered tax
system in which they paid 4% on the first $440,000 of AGP, 8% from $440,000 to
$1.2 million of AGP, and 15% above $1.2 million of AGP. During the second gaming
year, October 1, 1992 to September 30, 1993, casinos paid 2% on the first $1.0
million of AGP and 20% on any amount above $1.0 million of AGP. In the third
year, October 1, 1993 to September 30, 1994, casinos paid 2% on the first $1.0
million of AGP, 8% from $1.0 million to $2.0 million of AGP, 15% from $2.0
million to $3.0 million of AGP, and 18% above $3.0 million of AGP. During the
fourth and fifth years, October 1, 1994 through September 30, 1996, casinos paid
2% on the

37
<PAGE>
first $2.0 million of AGP, 8% from $2.0 million to $4.0 million of AGP, 15% from
$4.0 million to $5.0 million of AGP, and 18% above $5.0 million of AGP. During
the sixth year, October 1, 1996 through September 30, 1997, casinos paid 2% on
the first $2.0 million of AGP, 4% from $2.0 million to $4.0 million of AGP, 14%
from $4.0 million to $5.0 million of AGP, 18% from $5.0 million to $10.0 million
of AGP, and 20% of amounts in excess of $10.0 million of AGP. Effective October
1 of each year, the Colorado Gaming Commission establishes the gross gaming
revenue tax for the following 12 months. Under the Colorado Constitution, the
Commission is authorized to increase the gaming tax rate to as much as 40%.
There can be no assurance that the taxes or fees applicable to the Company will
not be increased in the future, either by the Colorado electorate, legislation,
or action by the Colorado Commission resulting in an adverse effect on the
Company's operations.

In addition, a "device fee" is required for each gaming device (i.e., each
gaming machine and each gaming table). The State of Colorado currently imposes
an annual fee of $75 per device (reduced from $100 effective October 1, 1994),
and Black Hawk and Cripple Creek currently impose annual fees per device of $750
and $1,200, respectively. Black Hawk and Cripple Creek also impose liquor
licensing fees, restaurant fees, and parking impact fees. Further, Anchor has
paid, and in the future may be required to pay, local parking and other
municipal "impact fees" based on the square footage of its facilities.
Significant increases in the applicable taxes or fees, or the imposition of new
taxes or fees, could have a material adverse effect on Anchor, and it is not
unreasonable to expect that such taxes or fees could be increased or new taxes
or fees imposed.

PROPRIETARY GAMES APPROVAL

Anchor is licensed in several gaming jurisdictions as a distributor or
manufacturer of gaming machines. These jurisdictions exert substantial
regulatory controls over the Company and may impose restrictions on ownership of
the Company's securities and require findings of suitability of individuals
associated with the Company. Each of the Company's games must be approved and
licensed in each jurisdiction in which it is played. Obtaining required
approvals and licenses can be time consuming and costly and there can be no
assurance of success. In addition, there can be no assurance that regulations
adopted or taxes imposed by other states will permit profitable operations by
the Company.

OTHER JURISDICTIONS

The Federal Gambling Devices Act of 1962 (the "Federal Act") makes it
unlawful, in general, for a person to manufacture, deliver, or receive gaming
machines, gaming machine type devices, and components across state lines or to
operate gaming machines unless that person has first registered with the
Attorney General of the United States. The Federal Act does not apply to the
Company's proprietary table games but does apply to the Company's proprietary
gaming machines. Anchor has registered under the Federal Act and must renew its
registration annually. In addition, various record keeping and equipment
identification requirements are imposed by the Federal Act. Violation of the
Federal Act may result in seizure and forfeiture of the equipment, as well as
other penalties. Any expansion of Anchor's gaming activities in Nevada and
Colorado may require, and any expansion into other jurisdictions would require,
additional approvals, licenses, and permits from various gaming authorities.

In August 1996, the United States Congress passed legislation creating the
National Gambling Impact and Policy Commission to conduct a comprehensive study
of all matters relating to the economic and social impact of gaming in the
United States. The legislation provides that, not later than two years after the
enactment of such legislation, the commission must issue a report to the
President and to Congress containing its findings and conclusions, together with
recommendations for legislation and administrative actions. Any such
recommendations, if enacted into law, could adversely impact the gaming industry
and have a material adverse effect on the Company's business or results of
operations. The Company is unable to predict whether this study will result in
legislation that would impose regulations on gaming industry operators,
including the Company, or whether such legislation, if any, would have a
material adverse effect on the Company. Additionally, from time to time, certain
federal legislators have proposed the imposition

38
<PAGE>
of a federal tax on gaming revenues. Any such tax could have a material adverse
effect on the Company's financial condition or results of operations.

The activities of the Anchor RPC JV will be extensively regulated by
provincial and local authorities in Ontario, Canada. The Alcohol and Gaming
Commission of Ontario has been granted broad powers to ensure control,
supervision, and accountability in the charitable gaming sector. Opening of
gaming clubs in Ontario, Canada will also be subject to extensive local
regulation. See "Risk Factors--Risks of Pursuing New Casino Gaming
Opportunities--Risks of Canadian Development."

39
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information about the current
directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ----------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Stuart D. Beath 38 Director

Michael B. Fulton 38 Director

Stanley E. Fulton 66 Chairman of the Board, Chief Executive Officer, and acting
Chief Financial Officer

Glen J. Hettinger 40 Director

Elizabeth F. Jones 41 Director

Thomas J. Matthews 31 Executive Vice President and Secretary

Joseph Murphy 46 Vice President Casino Operations

Michael D. Rumbolz 43 President, Chief Operating Officer, and Director

Geoffrey A. Sage 37 Corporate Controller

Garret A. Scholz 57 Director
</TABLE>

STUART D. BEATH. Mr. Beath was elected as a director of the Company in
April 1994. Mr. Beath has been a private consultant since March 1997. Mr. Beath
served as First Vice President at Stifel, Nicolaus & Company, Incorporated, an
investment bank, from April 1993 until March 1997. Prior to that time, Mr. Beath
served in the corporate finance department at A.G. Edwards & Sons, Inc. for six
years, in various capacities, with the most recent being as an officer of the
firm.

MICHAEL B. FULTON. Mr. Fulton was elected as a director of the Company in
August 1995. Mr. Fulton has served as President of IllumiQuest, Inc., a
developer of educational based entertainment products, since January 1994. Prior
to that time, Mr. Fulton served as Executive Vice President and director of
Anchor Coin, a subsidiary of the Company responsible for its gaming machine
route operations and development of the Colorado Central Station Casino, from
March 1993 to December 1993. Prior to that time, Mr. Fulton was a tax attorney
with the Internal Revenue Service from December 1990 to March 1993 and an
independent consultant of tax and corporate law from January 1989 to November
1990. Mr. Fulton is the son of the Chairman of the Board of the Company.

STANLEY E. FULTON. Mr. Fulton serves as Chairman of the Board, Chief
Executive Officer, and acting Chief Financial Officer of the Company. Prior to
the IPO, Mr. Fulton also served as President of the Company. Mr. Fulton has also
served as Chairman of the Board, President, and Chief Executive Officer of
Anchor Coin, a subsidiary of the Company responsible for the Company's gaming
machine route operations and development of the Colorado Central Station Casino,
since its inception in 1988. Immediately prior to forming Anchor Coin, Mr.
Fulton was Chairman of the Board and President of Gaming and Technology, Inc.,
the predecessor of Alliance Gaming Corporation.

GLEN J. HETTINGER. Mr. Hettinger was elected as a director of the Company
in August 1997. Mr. Hettinger is a partner at the law firm of Hughes & Luce,
L.L.P., Dallas, Texas, where he has practiced corporate and securities law since
1984.

ELIZABETH F. JONES. Ms. Jones was elected as a director of the Company in
April 1994. Since November 1988, Ms. Jones has been principally engaged as a
private investor. Ms. Jones is the daughter of the Chairman of the Board of the
Company.

40
<PAGE>
THOMAS J. MATTHEWS. Since January 1994, Mr. Matthews has served as
Executive Vice President of the Company. In September 1994, he was elected
Secretary of the Company. Mr. Matthews served as President of Global
Distributors, Inc. ("Global Distributors") from August 1992 to January 1994.
Prior to that time, Mr. Matthews was General Manager of Global Distributors from
1990 until 1992, and was sales director of Mikohn Gaming Corporation from 1987
until 1990.

JOSEPH MURPHY. Mr. Murphy has served as Vice President Casino Operations of
the Company since February 1996. Prior to that time, Mr. Murphy served as
General Manager of Gaming Operations of the Company since January 1994. Mr.
Murphy managed the gaming operations of Global Distributors from May 1993 until
January 1994. From 1990 until 1993, Mr. Murphy served as General Manager of
IGT's gaming machine route operations, which operated more than 1,800 machines.
Mr. Murphy held similar positions with Sunset Coin from 1989 to 1990, United
Gaming from 1988 to 1989, and IGT from 1985 to 1988.

MICHAEL D. RUMBOLZ. Mr. Rumbolz was elected as a director of the Company in
August 1995. Mr. Rumbolz serves as the President and Chief Operating Officer of
the Company, positions he has held since August 1995. Prior to joining the
Company, Mr. Rumbolz was Director of Corporate Development for Circus Circus
Enterprises, Inc. from December 1992 to July 1995. During that time, Mr. Rumbolz
was also President of Windsor Casino Limited from January to September 1994 and
Canadian Gaming & Entertainment Corp. from February to July 1995. Windsor Casino
Limited was the Circus Circus/Hilton/ Caesar's consortium that opened and
operated Windsor Casino. From June 1993 to July 1995, Mr. Rumbolz was also a
director of Darling Casino Limited, an affiliate of Circus Circus Enterprises,
Inc., responsible for new project development in Australia. Prior to that time,
Mr. Rumbolz was Executive Vice President of Anchor Coin and DD Stud, Inc.,
subsidiaries of the Company responsible for gaming machine route operations,
development of the Colorado Central Station Casino, and distribution of the
proprietary game Double Down Stud from July 1992 to December 1992. Prior to that
time, Mr. Rumbolz was an independent consultant to Donald Trump from February
1992 to June 1992, Executive Vice President of Trump Castle Associates from
January 1991 to January 1992, and President and Chief Operating Officer of Trump
Nevada, Inc. from January 1989 to January 1991. Mr. Rumbolz is a former Chairman
and Board member of the State of Nevada Gaming Control Board.

GEOFFREY A. SAGE. Mr. Sage, a certified public accountant, joined Anchor in
July 1989 and serves as Corporate Controller of the Company. Before joining the
Company, Mr. Sage was the Controller for Frontier Savings and Loan Association
in Las Vegas for one year. Prior to that time, Mr. Sage was a senior auditor at
Citibank (Nevada), N.A. for three and one-half years and an auditor in the Las
Vegas office of Laventhol & Horwath.

GARRET A. SCHOLZ. Mr. Scholz was elected as a director of the Company in
February 1994. Mr. Scholz, a private investor, was until September 1995, Vice
President Finance with McKesson Corporation, an international distributor of
pharmaceutical and health care products and provider of health care management
services. He previously was its Vice President and Treasurer and had served with
McKesson Corporation since 1973 in various financial capacities.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS

In July 1995, the Company entered into a five-year agreement with Michael D.
Rumbolz providing for minimum annual compensation of $460,000.

Concurrent with the IPO, the Company entered into a five-year employment
agreement with each of Thomas J. Matthews and Joseph Murphy providing for
minimum annual compensation of $175,000. Each of these agreements was amended in
March 1997 to provide for (i) base compensation of $200,000 per year; (ii) a one
time bonus of $150,000 in July 1997; (iii) annual bonuses based on the
consolidated net income of Anchor; and (iv) an additional bonus payable in the
event of a change-of-control transaction or disposition of the Company's
proprietary games business substantially as an entirety.

41
<PAGE>
Also in March 1997, the Company granted to each of Messrs. Matthews and
Murphy options to purchase 200,000 shares of Common Stock at an exercise price
of $31.875 per share. Under each option agreement, options to purchase 75,000
shares vest in twelve equal quarterly increments beginning March 31, 1999. The
options with respect to the remaining 125,000 shares vest based upon Anchor's
achieving specified growth in earnings per share in calendar years 1997 through
2001. If the specified earnings per share growth targets are not achieved, the
options vest on June 30, 2005, so long as the named persons are employed by
Anchor at that time. A maximum of 25,000 shares per year can vest under this
formula. The options have a term of ten years.

Pursuant to option agreements entered into between the Company and each of
Thomas J. Matthews, Joseph Murphy (other than the options granted to Mr. Murphy
and Mr. Matthews in March 1997, as described above), and Geoffrey A. Sage, each
such officer's options will vest and become immediately exercisable if Stanley
E. Fulton is not the Chief Executive Officer of the Company. Pursuant to an
option agreement between the Company and Michael D. Rumbolz, Mr. Rumbolz's
options will vest and become immediately exercisable upon a change in control,
as defined in the agreement, or on December 31, 1998 in the event that Mr.
Rumbolz is not appointed as the Chief Executive Officer of the Company before
such date.

Each of the employment agreements described above provides that such officer
can only be terminated for "cause" as defined in the agreement, although the
agreements with Messrs. Matthews and Murphy can be terminated by the Company at
any time if the Company pays three months' severance pay, and Mr. Rumbolz's can
be terminated at any time if the Company pays one year's severance pay. The
agreements contain restrictive covenants regarding the treatment of the
Company's proprietary information. Certain key executives of the Company are not
bound by noncompetition agreements. The Company is also party to an arrangement
with one of its key employees that permits the employee to develop and sell
certain gaming machine related devices to entities not controlled by Anchor
during the term of his employment with the Company. See "Risk Factors --
Dependence on Key Personnel."

In no event will the Company be required to make to any of the foregoing
executives any payment under such agreements that would result, in the opinion
of tax counsel, in an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended, and the imposition of an
excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended.

42
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, at October 13, 1997, certain information
with respect to the beneficial ownership of Common Stock and as adjusted to give
effect to the sale of the Common Stock offered by this Prospectus for (i) each
director of the Company; (ii) each executive officer of the Company; (iii) the
Company's directors and executive officers as a group; (iv) each stockholder
known to the Company to own beneficially more than five percent of the Common
Stock; and (v) each Selling Stockholder. Notwithstanding their family
relationships, except as disclosed in footnote (4) to the table below, each
Fulton family member disclaims beneficial ownership of the shares of Common
Stock directly or indirectly owned or controlled by all other Fulton family
members.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE THE OFFERING (1) AFTER THE OFFERING
----------------------------- -----------------------------
NUMBER OF NUMBER OF
NAME AND ADDRESS SHARES OF PERCENT OF SHARES OF PERCENT OF
OF BENEFICIAL OWNER COMMON STOCK CLASS COMMON STOCK CLASS
- ---------------------------------------------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Stuart Beath (2).......................................... 13,000 * 13,000 *
FMR Corp (3).............................................. 1,482,490 11.3% 1,482,490 11.3%
Michael B. Fulton (4)(5).................................. 495,300 3.8% 300,000 2.3%
Stanley E. Fulton (5)(6).................................. 6,887,544 52.4% 5,157,544 39.2%
Glen J. Hettinger......................................... - * - *
Elizabeth F. Jones (5)(7)................................. 502,500 3.8% 300,000 2.3%
Thomas J. Matthews (8).................................... 33,750 * 33,750 *
Joseph Murphy (9)......................................... 12,500 * 12,500 *
Michael D. Rumbolz (10)................................... 87,500 * 87,500 *
Geoffrey A. Sage (11)..................................... 2,500 * 2,500 *
Garret A. Scholz (12)..................................... 15,800 * 15,800 *
Deborah J. Fulton (5)(13)................................. 479,500 3.6% 300,000 2.3%
Elizabeth M. Fulton (5)................................... 170,000 1.3% 100,000 *
Stanley M. Fulton (5)(14)................................. 482,500 3.7% 300,000 2.3%
Virginia L. Fulton (5)(15)................................ 482,500 3.7% 300,000 2.3%
Lucinda Fulton Tischer (5)(16)............................ 430,000 3.3% 300,000 2.3%
All executive officers & directors as a group (10 persons)
(17)..................................................... 7,052,594 53.6% 5,322,594 40.0%
</TABLE>

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

* Less than one percent.

(1) Unless otherwise noted, and subject to community property laws, where
applicable, the persons in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them. The address for each listed person is c/o Anchor Gaming, 815 Pilot
Road, Suite G, Las Vegas, Nevada 89119.

(2) Includes 1,000 shares with respect to which Mr. Beath shares voting and
dispositive power with his wife. Includes 12,000 shares that may be
acquired upon the exercise of options exercisable within the next 60 days.

(3) FMR Corp. is the holding company for an institutional investor, Fidelity
Management & Research Company. The information included herewith is based
upon publicly available information. FMR Corp.'s address is 82 Devonshire
Street, Boston, MA 02109-3614.

(4) Includes 495,300 shares before the Offering and 300,000 shares after the
Offering as to which Mr. Fulton's father, Stanley E. Fulton, exercises
voting power pursuant to an irrevocable proxy.

(5) Selling Stockholder.

(6) Includes 2,880,300 shares before the Offering and 1,808,000 shares after
the Offering owned by Stanley E. Fulton's six children and an unaffiliated
third party for which Mr. Fulton exercises voting power pursuant to
irrevocable proxies.

43
<PAGE>
(7) Includes 502,500 shares before the Offering and 300,000 shares after the
Offering as to which Ms. Jones' father, Stanley E. Fulton, exercises voting
power pursuant to an irrevocable proxy.

(8) Includes 21,250 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.

(9) Includes 10,000 shares with respect to which Mr. Murphy shares voting and
dispositive power with his wife. Includes 2,500 shares that may be acquired
upon the exercise of options exercisable within the next 60 days.

(10) Includes 87,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.

(11) Includes 2,500 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.

(12) Includes 1,000 shares held in a trust for which Mr. Scholz acts as trustee.
Includes 13,800 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.

(13) Includes 479,500 shares before the Offering and 300,000 shares after the
Offering as to which Ms. Fulton's father, Stanley E. Fulton, exercises
voting power pursuant to an irrevocable proxy.

(14) Includes 482,500 shares before the Offering and 300,000 shares after the
Offering as to which Mr. Fulton's father, Stanley E. Fulton, exercises
voting power pursuant to an irrevocable proxy.

(15) Includes 482,500 shares before the Offering and 300,000 shares after the
Offering as to which Ms. Fulton's father, Stanley E. Fulton, exercises
voting power pursuant to an irrevocable proxy.

(16) Includes 430,000 shares before the Offering and 300,000 shares after the
Offering as to which Ms. Tischer's father, Stanley E. Fulton, exercises
voting power pursuant to an irrevocable proxy.

(17) Includes 139,550 shares that may be acquired upon the exercise of options
exercisable within the next 60 days.

CERTAIN TRANSACTIONS

A relative of the children of Stanley E. Fulton, the principal stockholder,
Chairman of the Board, Chief Executive Officer, and acting Chief Financial
Officer of the Company, loaned $2.0 million to the Company in June 1993 for use
in connection with construction of the Colorado Central Station Casino. The
principal amount of this loan was payable in a single installment in 1998 and
bore interest at 12% payable monthly. As additional consideration for this loan,
the Company granted an option to purchase 40,000 shares of Common Stock at the
IPO price of $12.00 per share. Mr. Fulton personally guaranteed this loan. This
loan was paid in full on July 6, 1995.

At June 30, 1997, the Company had outstanding unsecured notes payable to
Stanley E. Fulton in the aggregate principal amount of $2,800,000, which is due
and payable on July 1, 1998 and bears interest at the rate of 8%. See Note 6 of
Notes to Consolidated Financial Statements.

Stanley E. Fulton owned 100% of the common stock of an Anchor slot route
location. On January 31, 1996, Stanley E. Fulton sold the location to an
unaffiliated third party. For providing the gaming machines and slot route
services, the Company received a percentage of the net win of the location
similar to other route locations. The Company held a note receivable from the
slot route operation in the amount of $284,704 at January 31, 1996 of which
$257,562 was assumed by the new owner. The remaining balance of the loan due
from Stanley E. Fulton at June 30, 1996 of $27,142 was paid in full on July 11,
1996. The slot route operation, under the ownership of Stanley E. Fulton,
accounted for $295,502 and $180,822 of gaming revenue during the years ended
June 30, 1995 and 1996, respectively and $279,059 and $145,684 of route costs
during the years ended June 30, 1995 and 1996, respectively.

In August 1996, the Company made certain payments to an entity controlled by
an employee of the Company. These funds were used to repay a debt of $500,000
owed by the employee and his affiliate to Stanley E. Fulton.

Mr. Hettinger is a director of the Company and a partner at Hughes & Luce,
L.L.P., which has rendered legal services to the Company in the past and is
expected to continue to do so in the future.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 50,000,000 shares of Common Stock, $.01
par value per share. At October 13, 1997, 12,958,607 shares of Common Stock are
issued and outstanding and beneficially owned by approximately 4,000
stockholders. An additional 1,069,450 shares are reserved for issuance in
connection with employee, director, and other stock options at an average
exercise price of $26.93 per share at October 13, 1997.

Subject to the rights of the holders of any outstanding shares of preferred
stock and any restrictions that may be imposed by any lender to the Company,
holders of Common Stock are entitled to receive such dividends, if any, as may
be declared by the board of directors out of legally available funds. In the
event of the liquidation, dissolution, or winding up of the Company, holders of
Common Stock are entitled to share equally and ratably, based on the number of
shares held, in the assets, if any, remaining after payment of all of the
Company's debts and liabilities and the liquidation preference of any
outstanding preferred stock. Certain gaming statutes and regulations may limit
the rights of holders of Common Stock under certain circumstances. See
"Regulation."

Holders of Common Stock are entitled to one vote per share for each share
held of record on any matter submitted to the holders of Common Stock for a
vote. Because holders of Common Stock do not have cumulative voting rights, the
holders of a majority of the shares of Common Stock represented at a meeting can
elect all the directors. Holders of Common Stock do not have preemptive rights
to subscribe for or purchase any additional shares of capital stock issued by
the Company. All outstanding shares of the Common Stock are, and the shares of
Common Stock offered by this Prospectus will be, when issued, duly authorized,
validly issued, fully paid, and nonassessable.

PREFERRED STOCK

In connection with the authorization of the Rights Plan (discussed below),
the board of directors has authorized the designation of 50,000 shares of
Preferred Stock as Series A Junior Participating Preferred Stock (the "Series A
Preferred"). The shares of Series A Preferred have been reserved for issuance
pursuant to the Rights Plan. The following summarizes the terms of the Series A
Preferred.

The holders of shares of Series A Preferred will generally be entitled to
receive quarterly dividends payable in cash commencing on the first quarterly
dividend payment date after the first issuance of Series A Preferred, in an
amount per share (rounded to the nearest cent) equal to the greater of (i) $0.01
or (ii) subject to adjustment, an amount equal to one thousand times the per
share amount of any distributions or dividends made with respect to the Common
Stock.

Subject to adjustment, each share of Series A Preferred will entitle the
holder to a number of votes on all matters submitted to a vote of the
stockholders of the Company equal to one thousand times the number of votes per
share to which shares of Common Stock are entitled. Except as otherwise provided
by law, the holders of shares of Series A Preferred and the holders of shares of
Common Stock will generally vote together as one class on all matters submitted
to a vote of stockholders of the Company. If at any time dividends on any Series
A Preferred are in arrears in an amount equal to six quarterly dividends, the
occurrence of such contingency will mark the beginning of a period (a "default
period") that will extend until such time when all accrued and unpaid dividends
for all previous quarterly dividend periods and for the current quarterly
dividend period on all shares of Series A Preferred then outstanding have been
declared and paid or set apart for payment. During each default period, all
holders of Series A Preferred

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<PAGE>
Stock with dividends in arrears in an amount equal to six quarterly dividends
thereon, voting as a class, irrespective of series, will have the right to elect
two directors.

During the period of dividend arrearages the Company will be prevented from
declaring dividends on or making distributions to, or repurchasing, redeeming,
or otherwise acquiring, any stock ranking on parity with or junior to the Series
A Preferred.

Upon any liquidation, dissolution, or winding up of the Company, no
distribution will be made to the holders of shares of stock ranking junior to
the Series A Preferred unless, prior thereto, the holders of shares of Series A
Preferred have received an amount equal to one thousand times the Purchase Price
for the Rights referred to below, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions will be made to the holders of shares of Series A Preferred
unless, prior thereto, the holders of shares of Common Stock have received an
amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately
adjusted). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Preferred and Common Stock, respectively, holders of Series A Preferred
and holders of shares of Common Stock will receive their ratable and
proportionate share of the remaining assets to be distributed.

It is not possible to state the actual effect of the authorization and
issuance of other series of preferred stock on the rights of holders of Common
Stock until the board of directors determines the specific terms, rights, and
preferences of a series of such preferred stock. Such effects, however, might
include, among other things, restricting dividends on the Common Stock, diluting
the voting power of the Common Stock, or impairing liquidation rights of the
Common Stock. Other series of preferred stock could be authorized and issued by
the Company without further action by holders of Common Stock. In addition,
under certain circumstances, the issuance of preferred stock may render more
difficult or tend to discourage a merger, tender offer, or proxy contest, the
assumption of control by a holder of a large block of the Company's securities,
or the removal of incumbent management. See "-- Certain Provisions Relating to
Changes in Control." At October 13, 1997, no shares of preferred stock are
issued or outstanding.

RIGHTS PLAN

The board of directors of Anchor has authorized the Company to enter into a
Stockholder Rights Plan (the "Rights Plan") providing that one right (a "Right")
will be attached to each share of Common Stock as of October 20, 1997 (the
"Record Date"). Each Right will entitle the registered holder to purchase from
the Company a unit (a "Unit") consisting of one one-thousandth of a share of
Series A Preferred at a Purchase Price of $400.00 per Unit (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are to
be set forth in the Rights Agreement (the "Rights Agreement"), between the
Company and The Chase Manhattan Bank, as Rights Agent (the "Rights Agent").

Initially, the Rights will be attached to all Common Stock certificates
representing shares outstanding as of the Record Date, and no separate
certificate (a "Rights Certificate") will be distributed. The Rights will
separate from the Common Stock and a "Distribution Date" will occur upon the
earlier of (i) 10 days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"); (ii) 10
business days following the commencement of a tender offer or exchange offer
that would result in a person or group beneficially owning 15% or more of such
outstanding shares of Common Stock; or (iii) 10 business days after the board of
directors of the Company determines that any person or entity or group has
become the beneficial owner of an amount of Common Stock that the board of
directors determines to be substantial (which amount will in no event be less
than 10% of the shares of Common Stock outstanding) and that (a) such

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<PAGE>
person or entity or group intends to cause the Company to repurchase the Common
Stock beneficially owned by such person or entity or group or to exert pressure
against the Company to take any action or enter into any transaction or series
of transactions with the intent or the effect of providing such person or entity
or group with short-term gains or profits under circumstances in which the board
of directors determines that the long-term interests of the Company and its
stockholders would not be served by taking such action or entering into such
transactions or series of transactions, or (b) beneficial ownership by such
person or entity or group is reasonably likely to have a material adverse effect
on the business, competitive position, prospects, or financial condition of the
Company and its subsidiaries (an "Adverse Person"). Until the Distribution Date,
(i) the Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates; (ii) new Common
Stock certificates will contain a notation incorporating the Rights Agreement by
reference; and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. The Rights Agreement
provides that Stanley E. Fulton, and certain of his transferees, donees, or
successors, who together were beneficial owners of more than 52.4% of the Common
Stock of the Company outstanding on September 15, 1997, are excluded from the
definition of "Acquiring Person." Mr. Fulton is also excluded from the
definition of "Adverse Person."

The Rights are not exercisable until the Distribution Date and will expire
at the close of business on the tenth anniversary of the Rights Agreement,
unless earlier redeemed by the Company as described below.

As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Common Stock as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. Except as otherwise determined by the board of
directors, only shares of Common Stock outstanding prior to the Distribution
Date will be issued with Rights.

In the event that (i) the Company is the surviving corporation in a merger
or combination with any Acquiring Person or any Adverse Person, or any associate
or affiliate of any Acquiring Person or Adverse Person, and its Common Stock
remains outstanding; (ii) any Acquiring Person or any Adverse Person, or any
associate or affiliate of any Acquiring Person or Adverse Person, engages in one
or more "self-dealing" transactions to be set forth in the Rights Agreement;
(iii) an Acquiring Person becomes the beneficial owner of 15% or more of the
then outstanding shares of Common Stock (unless such acquisition is made
pursuant to a tender or exchange offer for all outstanding shares of the
Company, at a price determined by a majority of the Continuing Directors of the
Company (as defined below) who are not representatives, nominees, affiliates, or
associates of an Acquiring Person, to be fair and otherwise in the best interest
of the Company and its stockholders); (iv) during such time as there is an
Acquiring Person or Adverse Person an event occurs that results in such
Acquiring Person's or Adverse Person's ownership interest being increased by
more than 1% (E.G., a reverse stock split or recapitalization); or (v) the board
of directors determines that a person is an Adverse Person, each holder of a
Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property, or other securities of the
Company), having a value equal to two times the Exercise Price of the Right. The
Exercise Price is the Purchase Price times the number of shares of Common Stock
associated with each Right (initially, one). Notwithstanding any of the
foregoing, following the occurrence of any of the events set forth in this
paragraph (the "Flip-In Events"), all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person or any Adverse Person, or an associate or affiliate of any
Acquiring Person or Adverse Person, will be null and void. However, Rights are
not exercisable following the occurrence of any of the Flip-In Events set forth
above until such time as the Rights are no longer redeemable by the Company as
set forth below.

In the event that following the Stock Acquisition Date, (i) the Company is
acquired in a merger or consolidation in which the Company is not the surviving
corporation (other than a merger that follows a tender offer that the board of
directors has found to be fair to the stockholders of the Company, as

47
<PAGE>
described above); or (ii) 50% or more of the Company's assets or earning power
is sold or transferred, each holder of a Right (except Rights which have
previously been voided as set forth above) will thereafter have the right to
receive, upon exercise of the Right, Common Stock of the acquiring company
having a value equal to two times the Exercise Price of the Right.

The Purchase Price payable, and the number of Units of Series A Preferred or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination, or reclassification of, the Series A
Preferred; (ii) if holders of the Series A Preferred are granted certain rights
or warrants to subscribe for Series A Preferred or convertible securities at
less than the current market price of the Series A Preferred; or (iii) upon the
distribution to holders of the Series A Preferred of evidences of indebtedness
or assets (excluding regular quarterly cash dividends) or of subscription rights
or warrants (other than those referred to above).

With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Series A Preferred on the
last trading date prior to the date of exercise.

At any time until 10 days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price of $.01 per Right.
The ten day redemption period may be extended by the board of directors so long
as the Rights are still redeemable. Under certain circumstances, the decision to
redeem will require the concurrence of a majority of the Continuing Directors
referred to below. Immediately upon the action of the board of directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.01 redemption price.

The term "Continuing Director" means any member of the board of directors of
the Company who was a member of the board of directors prior to the adoption of
the Rights Plan and any person who is subsequently elected to the board of
directors if such person is recommended or approved by a majority of the
Continuing Directors, but will not include an Acquiring Person or any Adverse
Person, or an affiliate or associate of an Acquiring Person or Adverse Person,
or any representative of the foregoing entities.

Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company as set
forth above.

Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
board of directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
board of directors (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, to make changes which do
not adversely affect the interests of holders of Rights (excluding the interest
of any Acquiring Person or any Adverse Person), or to shorten or lengthen any
time period under the Rights Agreement; provided that no amendment to adjust the
time period governing redemption will be made at such time as the Rights are not
redeemable.

The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in certain circumstances. Accordingly, the existence of the Rights may deter
certain acquirors from making takeover proposals or tender offers. However, the
Rights are not intended to prevent a takeover, but rather are designed to
enhance the ability of the board of directors to negotiate with an acquiror on
behalf of all of the shareholders.

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<PAGE>
TRANSFER AGENT AND REGISTRAR

ChaseMellon Shareholder Services has been appointed as the transfer agent
and registrar for the Common Stock.

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

The Company's Articles of Incorporation and Bylaws, described below, contain
several provisions that may make the acquisition of control of the Company by
means of a tender offer, open market purchases, proxy contest, or otherwise more
difficult. In addition, upon completion of this Offering, the officers and
directors of the Company and members of their respective families will own
beneficially approximately 40.5% of the outstanding Common Stock and, therefore,
will be able to exert substantial influence over substantially all actions
requiring stockholder approval, including a proposed acquisition or the adoption
of additional charter and bylaw provisions that could make acquisition of
control of the Company more difficult. In addition, all six of Stanley E.
Fulton's children and a third party, who, after giving effect to this Offering,
will own a total of 1,808,000 shares of Common Stock, granted irrevocable
proxies to Mr. Fulton, which will allow him to vote such shares of Common Stock
through December 31, 1998. As a result, Mr. Fulton will have voting control of
39.2% of the Common Stock to be outstanding after this Offering.

AUTHORIZED BUT UNISSUED STOCK. As of the closing of this Offering, after
giving effect to the sale of the shares offered hereby, the Company will have
more than 35,900,000 authorized but unissued and unreserved shares of Common
Stock and 950,000 authorized, unissued, and unreserved shares of preferred stock
(after giving effect to the authorization of the Series A Preferred in
connection with the Rights Agreement). These additional shares may be utilized
for a variety of corporate purposes, including future public or private
offerings to raise additional capital and for facilitating corporate
acquisitions. The Company does not currently have any plans to issue additional
shares of Common Stock or Preferred Stock. One of the effects of authorized but
unissued shares of capital stock may be to enable the board of directors to
render more difficult or discourage an attempt to obtain control of the Company
by means of a merger, tender offer, proxy contest, or otherwise, and thereby to
protect the continuity of the Company's management. If, in the due exercise of
its fiduciary obligations, for example, the board of directors determines that a
takeover proposal is not in the Company's best interest, such shares could be
issued by the board of directors without stockholder approval in one or more
private transactions or other transactions that might prevent or render more
difficult or costly the completion of the takeover transaction by diluting the
voting or other rights of the proposed acquirer or insurgent stockholder group,
by creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent board of directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS. The Company's Bylaws
establish advance notice procedures with regard to stockholder proposals and the
nomination, other than by or at the direction of the board of directors or a
committee thereof, of candidates for election as directors. The Company may
reject a stockholder proposal or nomination that is not made in accordance with
such procedures.

AMENDMENT OF THE BYLAWS. The Company's Articles of Incorporation provide
that the Bylaws may be amended only by the board of directors or by an
affirmative vote of the holders of at least two-thirds of the outstanding shares
of capital stock then entitled to vote on the matter. These voting requirements
will have the effect of making more difficult any amendment to the Bylaws by the
Company's stockholders, even if a majority of the stockholders favors such an
amendment.

APPROVAL OF NEW DIRECTORS AND STOCKHOLDERS. The Company's Articles of
Incorporation provide that newly elected directors may be required to be found
suitable or qualified by state gaming authorities with jurisdiction over the
Company. In addition, in general, any person who acquires or proposes to acquire

49
<PAGE>
more than specified percentages of the outstanding shares of Common Stock (and
other stockholders, under certain circumstances) must be found suitable or
qualified by the Nevada Commission and the Colorado Commission. Anchor's
Articles of Incorporation also include a statement that all transfers of voting
securities are subject to the regulations of each regulatory body to which the
Company's activities are subject and detail the possibility of a repurchase if a
stockholder is found unsuitable. The gaming laws and regulations of Nevada and
Colorado, as well as other jurisdictions in which the Company conducts or may
conduct business, include numerous other provisions that may make it difficult
for a third party to acquire control of Anchor. See "Regulation."

NEVADA LEGISLATION

Nevada's "Combination with Interested Stockholders Statute" and "Control
Share Acquisition Statute" may have the effect of delaying or making it more
difficult to effect a change in control of the Company.

The Combination with Interested Stockholders Statute prevents an "interested
stockholder" and a covered Nevada corporation from entering into a
"combination," unless certain conditions are met. A "combination" means any
merger or consolidation with an "interested stockholder," or any sale, lease,
exchange, mortgage, pledge, transfer, or other disposition, in one transaction
or a series of transactions with an "interested stockholder," having (i) an
aggregate market value equal to five percent or more of the aggregate market
value of the assets of the corporation; (ii) an aggregate market value equal to
five percent or more of the aggregate market value of all outstanding shares of
the corporation; or (iii) representing 10% or more of the earning power or net
income of the corporation, or an affiliate or associate thereof. A corporation
to which the statute applies may not engage in a "combination" within five years
after the interested stockholder acquired such person's shares unless the
combination or purchase is approved by the board of directors before the
interested stockholder acquires such shares. If this approval is not obtained,
then after the expiration of the five-year period, the business combination may
be consummated with the approval of the board of directors or a majority of the
voting power held by disinterested stockholders, or if the consideration to be
paid by the interested stockholder is at least equal to the higher of (i) the
highest price per share paid by the interested stockholder within the five years
immediately preceding the date of the announcement of the combination or in the
transaction in which such person became an interested stockholder, whichever is
higher; (ii) the market value per common share on the date of announcement of
the combination or the date the interested stockholder acquired the shares,
whichever is higher; or (iii) if higher for the holders of preferred stock, the
highest liquidation value of the preferred stock.

Nevada's Control Share Acquisition Statute prohibits an acquirer, under
certain circumstances, from voting shares of a target corporation's stock after
crossing certain threshold ownership percentages, unless the acquirer obtains
the approval of the target corporation's disinterested stockholders. The Control
Share Acquisition Statute specifies three thresholds: one-fifth or more but less
than one-third, one-third but less than a majority, and a majority or more, of
the outstanding voting power. All other stockholders who do not vote in favor of
authorizing voting rights to the Control Shares are entitled to demand payment
for the fair value of their shares. The board of directors is to notify the
stockholders as soon as practicable after such an event has occurred that they
have the right to receive the fair value of their shares in accordance with
statutory procedures established generally for dissenters' rights.

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UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), the Selling Stockholders have agreed to sell to
the underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom BT Alex. Brown Incorporated, Morgan Stanley & Co. Incorporated, and
Raymond James & Associates, Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Selling
Stockholders, the aggregate number of shares of Common Stock (the "Shares") set
forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
BT Alex. Brown Incorporated.......................................................................... 600,000
Morgan Stanley & Co. Incorporated.................................................................... 600,000
Raymond James & Associates, Inc. .................................................................... 600,000
----------
Total............................................................................................ 1,800,000
----------
----------
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Shares offered by
this Prospectus (other than those subject to the over-allotment option described
below) if any such Shares are purchased. In the event of a default by the
Underwriters, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.

Stanley E. Fulton has granted to the Underwriters an option, exercisable by
the Representatives during the 30-day period after the date of this Prospectus,
to purchase up to 270,000 shares of Common Stock at the same price per share as
the initial shares of Common Stock to be purchased by the Underwriters. The
Representatives may exercise such option only to cover over-allotments in the
sale of the shares of Common Stock. To the extent that the Representatives
exercise such option, the Underwriters will have a firm commitment, subject to
certain conditions, to purchase the same proportion of such additional shares of
Common Stock as the number of shares of Common Stock to be purchased and offered
by such Underwriters in the above table bears to the total number of shares in
the above table.

The Selling Stockholders have been advised by the Representatives that the
Underwriters propose initially to offer the Shares to the public at the offering
price set forth on the cover page of this Prospectus, and through the
Representatives to certain dealers at such price less a concession not in excess
of $2.30 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $.10 per share to certain other dealers. After the
Offering, the public offering price and other selling terms may be changed.

The Selling Stockholders, holding in the aggregate approximately 39.9% of
the shares of Common Stock outstanding after completion of this Offering
(including options and warrants of such persons exercisable during the period of
the agreement), have agreed that they will not offer, sell, contract to sell, or
otherwise dispose of, directly or indirectly, any shares of Common Stock, or any
interests therein, or any securities convertible into, or exchangeable for,
shares of Common Stock, or rights to acquire the same, for a period of 90 days
from the date of this Prospectus without the prior written consent of the
Representatives, except pursuant to the Underwriting Agreement.

The Company and Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions, "passive" market making, and purchases to cover
syndicate short positions created in connection with the Offering.

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<PAGE>
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the Common
Stock. Syndicate short positions involve the sale by the Underwriters of a
greater number of shares of Common Stock than they are required to purchase from
the Selling Stockholders in the Offering. The Underwriters also may impose a
penalty bid, whereby the syndicate may reclaim selling concessions allowed to
syndicate members or other broker dealers in respect of the Common Stock sold in
the Offering for their account if the syndicate repurchases the shares in
stabilizing or covering transactions. These activities may stabilize, maintain,
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market. These
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.

As permitted by Rule 103 of Regulation M under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), Underwriters or prospective
Underwriters that are market makers (passive market makers) in the Common Stock
may make bids for or purchases of shares of Common Stock on the Nasdaq National
Market until such time, if any, when a stabilizing bid for such securities has
been made. Rule 103 generally provides that (i) a passive market maker's net
daily purchases of the Common Stock may not exceed 30% of its average daily
trading volume in such securities for the two full consecutive calendar months
(or any 60 consecutive days ending within the 10 days) immediately preceding the
filing date of the registration statement of which this Prospectus forms a part;
(ii) a passive market maker may not effect transactions or display bids for the
Common Stock at a price that exceeds the highest independent bid for shares of
Common Stock by persons who are not passive market makers; and (iii) bids made
by passive market makers must be identified as such.

Each Representative has represented and agreed that (i) it will not offer or
sell any shares of Common Stock to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing,
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances that will not involve an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 ("the Regulations"); (ii) it will comply with all
applicable provisions of the Financial Services Act 1986 and the Regulations
with respect to anything done by it in relation to the shares of Common Stock
in, from, or otherwise involving the United Kingdom; and (iii) it will only
issue or pass on to any person in the United Kingdom any document received by it
in connection with the offering of the shares of Common Stock if that person is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.

No action has been or will be taken in any jurisdiction by the Selling
Stockholders, the Company, or the Representatives that would permit an offering
to the general public of the shares of Common Stock offered by this Prospectus
in any jurisdiction other than the United States.

From time to time, BT Alex. Brown Incorporated has provided investment
banking services to the Company, including acting as lead manager in the
Company's Secondary Offering in April 1996, for which it has received customary
underwriting fees. From time to time, Morgan Stanley & Co. Incorporated and
Raymond James & Associates, Inc. also have provided investment banking services
to the Company for which they have received customary fees.

LEGAL MATTERS

The validity of the shares of Common Stock offered by this Prospectus and
certain legal matters in connection with the Offering for the Selling
Stockholders will be passed upon by Hughes & Luce, L.L.P., Dallas, Texas. Glen
Hettinger, a member of the board of directors of the Company, is a partner in
Hughes & Luce, L.L.P. and the beneficial owner of options to purchase 25,000
shares of Common Stock. Certain legal matters in connection with the Offering
will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.

52
<PAGE>
EXPERTS

The consolidated financial statements of Anchor Gaming and subsidiaries as
of June 30, 1996 and 1997, and for each of the three years in the period ended
June 30, 1997 included in this Prospectus, and the related financial statement
schedule included elsewhere in the registration statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the registration statement, and are included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.

The information provided under the caption "Business -- Proprietary Games --
Intellectual Property Rights" and "Risk Factors -- Risks of Proprietary Games"
has been reviewed by Daniel P. Burke, Hauppauge, New York, special patent
counsel to the Company, and is included in this Prospectus in reliance on his
authority as an expert in intellectual property law.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements, information
statements, and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements, and other information filed
by the Company with the Commission may be inspected without charge at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and will also be available for inspection
and copying at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048, and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials may be obtained from the Public Reference Section of the Commission
upon payment of certain prescribed fees. Electronic registration statements, as
well as reports, proxy, and information statements, and other information made
through the Electronic Data Gathering, Analysis, and Retrieval system are
publicly available through the Commission's web site (http://www.sec.gov), which
is maintained by the Commission.

The Company has filed with the Commission a Registration Statement (which
term encompasses any amendment to the Registration Statement) under the
Securities Act with respect to the Common Stock offered by this Prospectus. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto, to which reference is hereby made. With respect to each
contract, agreement, or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a detailed description of the
matter involved.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed with the Commission (File No. 0-23124)
pursuant to the Exchange Act are incorporated in this Prospectus by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1997.

2. The Company's Current Reports on Form 8-K dated October 14, 1997 and
September 10, 1997.

3. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering.

All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act prior to the termination of the Offering
will be deemed to be incorporated by reference in this Prospectus and will be
part of this Prospectus from the date of filing of such documents. Any statement
contained in this Prospectus or in any document incorporated or deemed to be
incorporated by reference in this Prospectus will be deemed to be modified or
superseded for purposes of this Prospectus to the

53
<PAGE>
extent that a statement contained in this Prospectus or in any subsequently
filed document that also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described in
this Prospectus (not including exhibits to those documents unless such exhibits
are incorporated by reference into the information incorporated into this
Prospectus). Requests for such copies should be directed to Anchor Gaming, 815
Pilot Road, Suite G, Las Vegas, Nevada 89119, Attention: Corporate Secretary.

54
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2

Consolidated Balance Sheets as of June 30, 1996 and 1997................................................... F-3

Consolidated Statements of Income for the Years Ended June 30, 1995, 1996, and 1997........................ F-4

Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 1995, 1996, and 1997.......... F-5

Consolidated Statements of Cash Flows for the Years Ended June 30, 1995, 1996, and 1997.................... F-6

Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Anchor Gaming and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Anchor
Gaming and subsidiaries (the "Company") as of June 30, 1996 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended June 30, 1997. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principals used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Anchor Gaming and subsidiaries
at June 30, 1996 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended June 30, 1997 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Las Vegas, Nevada
August 1, 1997

F-2
<PAGE>
ANCHOR GAMING
CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
JUNE 30,
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 78,112,530 $ 66,427,369
Accounts receivable, net....................................................... 4,720,689 6,358,052
Current portion of notes receivable, net....................................... 881,173 45,619
Inventory...................................................................... 3,197,955 3,196,918
Prepaid expenses............................................................... 1,739,263 1,835,913
Other current assets........................................................... 300,761 400,180
-------------- --------------
Total current assets....................................................... 88,952,371 78,264,051
Property and equipment, net...................................................... 57,776,237 85,033,436
Long-term notes receivable, net.................................................. 311,856 1,543,159
Intangible assets, net........................................................... 2,054,710 2,128,306
Deposits and other............................................................... 13,216,623 21,907,417
-------------- --------------
Total assets............................................................... $ 162,311,797 $ 188,876,369
-------------- --------------
-------------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion, long-term notes payable....................................... $ 100,000 $ --
Accounts payable............................................................... 4,574,213 2,663,156
Accrued salaries, wages and vacation pay....................................... 2,488,014 2,712,764
Income tax payable............................................................. 281,886 2,138,934
Other current liabilities...................................................... 3,530,130 6,103,394
-------------- --------------
Total current liabilities.................................................. 10,974,243 13,618,248
Long-term notes payable, principal stockholder................................... 2,800,000 2,800,000
Long-term notes payable, net of current portion.................................. 850,000 --
Other long-term liabilities...................................................... 707,318 143,691
Minority interest in consolidated subsidiary..................................... 672,955 983,562
-------------- --------------
Total liabilities and minority interest in consolidated subsidiary......... 16,004,516 17,545,501
-------------- --------------
Commitments and contingencies.................................................... -- --
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized, 0 shares issued
and outstanding at June 30, 1996 and 1997.................................... -- --
Common stock, $.01 par value, 25,000,000 shares authorized, 13,474,150 issued,
and 13,283,382 outstanding at June 30, 1996; 50,000,000 shares authorized,
13,579,575 issued, and 13,052,807 outstanding at June 30, 1997............... 134,742 135,796
Additional paid-in capital..................................................... 104,448,080 107,267,684
Treasury stock at cost, 190,768 shares at June 30, 1996, 526,768 shares at June
30, 1997..................................................................... (3,095,830) (16,569,329)
Retained earnings.............................................................. 44,820,289 80,496,717
-------------- --------------
Total stockholders' equity................................................. 146,307,281 171,330,868
-------------- --------------
Total liabilities and stockholders' equity................................. $ 162,311,797 $ 188,876,369
-------------- --------------
-------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
ANCHOR GAMING
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Casino operations............................................. $ 56,183,629 $ 65,125,194 $ 69,223,321
Proprietary games operations.................................. 14,158,737 21,457,135 49,715,779
Route operations.............................................. 25,818,170 28,650,989 33,509,497
Food and beverage............................................. 1,250,593 1,233,003 1,300,002
-------------- -------------- --------------
Total revenues.............................................. 97,411,129 116,466,321 153,748,599
-------------- -------------- --------------
Costs and expenses:
Casino operations............................................. 21,500,172 26,830,475 29,100,285
Proprietary games operations.................................. 9,850,963 12,113,595 11,039,227
Route operations.............................................. 15,659,336 17,158,172 19,904,608
Food and beverage............................................. 1,386,438 1,300,012 1,431,734
Selling, general and administrative........................... 20,949,047 21,073,631 28,163,608
Project cost write-downs...................................... -- -- 2,116,968
Depreciation and amortization................................. 3,215,017 4,109,835 8,798,163
-------------- -------------- --------------
Total costs and expenses.................................... 72,560,973 82,585,720 100,554,593
-------------- -------------- --------------
Income from operations.......................................... 24,850,156 33,880,601 53,194,006
-------------- -------------- --------------
Other income (expense):
Interest income............................................... 1,105,212 2,028,347 3,792,739
Interest expense.............................................. (731,954) (428,991) (287,711)
Other income.................................................. 405,831 260,439 288,703
Minority interest in earnings of consolidated subsidiary...... (162,262) (217,793) (310,607)
-------------- -------------- --------------
Total other income (expense)................................ 616,827 1,642,002 3,483,124
-------------- -------------- --------------
Income before provision for income taxes........................ 25,466,983 35,522,603 56,677,130
Income tax provision............................................ 9,486,451 13,187,559 21,000,702
-------------- -------------- --------------
Net income...................................................... $ 15,980,532 $ 22,335,044 $ 35,676,428
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average common and common equivalent shares
outstanding................................................... 11,446,646 12,153,419 13,691,158
-------------- -------------- --------------
-------------- -------------- --------------
Earnings per common and common equivalent share................. $ 1.40 $ 1.84 $ 2.61
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
ANCHOR GAMING

CONSOLIDATED STATEMENTS OF

STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
------------------------ ---------------------- ADDITIONAL
SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL
----------- ----------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Balance -- July 1, 1994....... 11,377,100 $ 113,771 (163,789) $ (1,799,830) $ 42,181,989
Stock issued for exercise of
options................... 128,450 1,285 1,544,615
Tax effects of stock option
transactions.............. 304,495
Net income..................
----------- ----------- -------- ------------ ---------------
Balance -- June 30, 1995...... 11,505,550 115,056 (163,789) (1,799,830) 44,031,099
Stock issued for exercise of
warrants and options...... 418,600 4,186 (26,979) (1,296,000) 5,694,414
Shares issued in public
offering.................. 1,550,000 15,500 53,859,015
Tax effects of stock option
transactions.............. 863,552
Net income..................
----------- ----------- -------- ------------ ---------------
Balance -- June 30, 1996...... 13,474,150 134,742 (190,768) (3,095,830) 104,448,080
Stock issued for exercise of
warrants and options...... 105,425 1,054 1,285,403
Treasury shares purchased... (336,000) (13,473,499)
Tax effects of stock option
transactions.............. 1,534,201
Net income..................
----------- ----------- -------- ------------ ---------------
Balance -- June 30, 1997...... 13,579,575 $ 135,796 (526,768) $(16,569,329) $107,267,684
----------- ----------- -------- ------------ ---------------
----------- ----------- -------- ------------ ---------------

RETAINED
EARNINGS TOTAL
----------- ------------
<S> <C> <C>
Balance -- July 1, 1994....... $ 6,504,713 $ 47,000,643
Stock issued for exercise of
options................... 1,545,900
Tax effects of stock option
transactions.............. 304,495
Net income.................. 15,980,532 15,980,532
----------- ------------
Balance -- June 30, 1995...... 22,485,245 64,831,570
Stock issued for exercise of
warrants and options...... 4,402,600
Shares issued in public
offering.................. 53,874,515
Tax effects of stock option
transactions.............. 863,552
Net income.................. 22,335,044 22,335,044
----------- ------------
Balance -- June 30, 1996...... 44,820,289 146,307,281
Stock issued for exercise of
warrants and options...... 1,286,457
Treasury shares purchased... (13,473,499)
Tax effects of stock option
transactions.............. 1,534,201
Net income.................. 35,676,428 35,676,428
----------- ------------
Balance -- June 30, 1997...... $80,496,717 $171,330,868
----------- ------------
----------- ------------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
ANCHOR GAMING

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................................ $ 15,980,532 $ 22,335,044 $ 35,676,428
------------ ------------ ------------
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on disposal of assets, including project cost write-downs........... (140,022) -- 2,208,878
Depreciation and amortization................................................... 3,337,356 4,085,573 8,955,446
Provision for doubtful accounts and notes....................................... 10,000 105,000 364,000
Minority interest in earnings of consolidated subsidiary........................ 162,262 217,793 310,607
(Increase) decrease in assets:
Accounts receivable............................................................. (1,206,323) (1,802,054) (2,001,363)
Inventory....................................................................... (472,432) (842,765) 1,037
Other current assets............................................................ 836,890 34,772 (83,898)
Prepaid expenses................................................................ 40,788 (105,769) (96,650)
Deposits and other assets....................................................... 1,490,739 58,925 (5,606,169)
Increase (decrease) in liabilities:
Accounts payable................................................................ 828,756 2,763,320 (1,911,057)
Accrued salaries, wages and vacation pay........................................ 593,835 380,048 224,750
Income tax payable.............................................................. 1,173,316 776,683 2,955,801
Other liabilities............................................................... 1,015,529 762,794 2,394,423
------------ ------------ ------------
Total adjustments............................................................. 7,670,694 6,434,320 7,715,805
------------ ------------ ------------
Net cash provided by operating activities........................................... 23,651,226 28,769,364 43,392,233
------------ ------------ ------------
Cash flows from investing activities:
Acquisition and construction of property and equipment............................ (7,834,258) (27,916,341) (38,108,284)
Expenditures for intangible assets................................................ (250,000) (274,013) (488,715)
Proceeds from sale of equipment................................................... 514,166 530,377 117,254
Issuance of notes receivable...................................................... (252,557) (114,614) (1,405,157)
Principal reductions on notes receivable.......................................... 973,243 947,678 1,009,408
Payments to extend operating leases............................................... (1,750,000) (5,000,000) --
Advances to joint venture......................................................... -- -- (3,100,000)
------------ ------------ ------------
Net cash used in investing activities........................................... (8,599,406) (31,826,913) (41,975,494)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds from sale of stock and warrants...................................... 1,545,900 58,277,115 1,321,600
Treasury stock purchases.......................................................... -- -- (13,473,500)
Principal payments on loans from related parties.................................. (937,393) (3,189,447) --
Principal payments on other loans................................................. -- (50,000) (950,000)
------------ ------------ ------------
Net cash provided by financing activities....................................... 608,507 55,037,668 (13,101,900)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents................................ 15,660,327 51,980,119 (11,685,161)
Cash and cash equivalents, beginning of period...................................... 10,472,084 26,132,411 78,112,530
------------ ------------ ------------
Cash and cash equivalents, end of period............................................ $ 26,132,411 $ 78,112,530 $ 66,427,369
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosure of cash flow information:
Cash paid for interest............................................................ $ 636,602 $ 392,643 $ 257,994
------------ ------------ ------------
------------ ------------ ------------
Cash paid for income taxes........................................................ $ 7,710,000 $ 12,404,763 $ 18,044,900
------------ ------------ ------------
------------ ------------ ------------
Supplemental schedule of noncash investing and financing transactions:
Stock issued for warrants in cashless exercise.................................... $ 1,296,000
------------
------------
Property and equipment acquired by assuming debt.................................. $ 1,000,000
------------
------------
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Anchor Gaming was formed July 28, 1993 and completed its initial public
offering ("IPO") in February 1994. Simultaneous with the closing of the IPO,
Anchor became the holding company of Anchor Coin, C.G. Investments, Inc.
("CGI"), Colorado Grande Enterprises, Inc. ("Colorado Grande") and D D Stud,
Inc. ("DD Stud") (collectively the "Subsidiaries"), which had been operated
under different ownership structures controlled primarily by Stanley E. Fulton,
the Chairman of the Board, Chief Executive Officer and principal stockholder of
Anchor. Also at the time of the IPO, the Company acquired all of the beneficial
ownership of Global Gaming Products, L.L.C. and certain related assets from
Global Distributors, Inc. (the "Acquisition"), which were primarily involved in
the distribution of the proprietary game Silver Strike. The accounts of the
Subsidiaries are consolidated in the accompanying financial statements. All
significant intercompany accounts and transactions have been eliminated. The
financial position and operating results of Colorado Grande Enterprises, Inc.
are included in the consolidated financial statements as an 80% consolidated
subsidiary.

On April 23, 1996, Anchor completed a secondary offering of 2.3 million
shares of common stock at a price of $37 per share, with 1.55 million of these
shares being sold by the Company (the "Secondary Offering") and the remaining
750,000 shares being sold by selling stockholders. Net proceeds to the Company
from the Secondary Offering were $53.9 million.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid investments purchased with
maturities of three months or less.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company's cash and cash equivalents, trade
receivables, and trade payables approximates fair value because of the short
maturities of these instruments. The Company estimates fair value on its
long-term obligations based on quoted market prices or on the current rates
offered to the Company for debt of the same remaining maturities. The estimated
fair values of the obligations closely approximated the carrying values at June
30, 1996 and 1997.

INVESTMENTS IN DEBT SECURITIES

The Company's investment securities, along with certain cash and cash
equivalents that are not deemed securities under Statement No. 115 ("SFAS 115"),
are carried on the consolidated balance sheets in the cash and cash equivalents
category. Management determines the appropriate classification of its investment
securities at the time of purchase as either held-to-maturity, trading, or
available for sale and re-evaluates such determination at each balance sheet
date. The Company has classified its investment securities as of June 30, 1996
and 1997 as held-to-maturity. Held-to-maturity securities are required to be

F-7
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carried at amortized cost. The securities classified as held-to-maturity consist
of the following amortized costs at June 30:

<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Debt securities issued by the U.S. Treasury and other U.S.
government agencies.......................................... $ 34,915,000 $ 52,734,000
Repurchase agreements.......................................... 30,013,000 --
------------- -------------
$ 64,928,000 $ 52,734,000
------------- -------------
------------- -------------
</TABLE>

All of the Company's investment securities mature in three months or less
from the date of purchase. The estimated fair value of the Company's portfolio
of investment securities at June 30, 1996 and 1997 closely approximated
amortized cost because of the short term nature of the portfolio.

ACCOUNTS RECEIVABLE

Accounts receivable result from the sale of products and services to gaming
properties primarily in the United States. The Company performs credit
evaluations of its customers and does not require collateral. Management reviews
customer balances for potential credit losses and maintains an allowance for
amounts deemed uncollectible. The amounts reserved at June 30, 1996 and 1997
were $278,821 and $665,605, respectively.

INVENTORY

Inventory consists of silver and silver tokens, parts for gaming machines,
and food and beverage items. Silver inventory of $1,092,671 and $594,615 at June
30, 1996 and 1997, respectively, is classified as raw material. The remainder of
inventory is classified as finished goods. All inventories are stated at the
lower of cost (first-in, first-out) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Ordinary maintenance and
repairs are charged to expense as incurred. Costs that materially increase the
life or value of existing assets are capitalized. Assets that have been placed
in service are depreciated over their estimated useful lives or amortized over
lease terms using either straight-line or accelerated methods. Estimated useful
lives for furniture and equipment are 5 to 7 years, for leasehold improvements
are 4 1/2 years to 31 1/2 years and for buildings and improvements are 30 years.

INTANGIBLE ASSETS

Intangible assets include goodwill associated with the Acquisition, which is
amortized on a straight-line basis over 10 years. Intangible assets also include
amounts paid to acquire leases for route locations and casino property, amounts
to acquire route participation agreements, costs of patents issued, and
organization costs. These amounts are amortized on a straight-line basis over
the lives of the leases or agreements ranging from 2 to 15 years.

F-8
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EQUITY INVESTMENTS

Equity investments in joint ventures and other entities that are 20% to 50%
owned are included in deposits and other assets and are accounted for using the
equity method. Income from the joint ventures is included in proprietary games
revenue on the income statements. During fiscal year 1997, the Company made $3.1
million in advances to a 50% owned Joint Venture.

REVENUE RECOGNITION

In accordance with industry practice, the Company recognized gaming revenues
as the net win from gaming operations, which is the difference between amounts
wagered by customers and payments to customers. Proprietary games revenue is
derived from royalty, revenue participation, or other similar short-term
recurring revenue arrangements.

Revenues exclude the retail value of complimentary food and beverage
furnished gratuitously to customers. The estimated departmental costs of
providing such goods and services as included in casino expense are $822,467,
$1,162,495, and $1,365,897 for the fiscal years ended June 30, 1995, 1996, and
1997, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred and are included in
selling, general, and administrative costs.

EARNINGS PER SHARE

Earnings per share on the income statement is computed by dividing net
income by the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares include the effect of shares issuable upon
the exercise of warrants and stock options. Fully diluted earnings per share
amounts are substantially the same as primary per share amounts for the periods
presented.

ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally
accepted accounting principles 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 and the reported amounts of revenues and expenses during the
reporting period. Significant estimates in the financial statements include the
estimated depreciable lives of property and equipment and certain estimated
liabilities and valuation reserves. Actual results could differ from those
estimates.

RECENTLY ADOPTED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS 121 is effective for
fiscal years beginning after December 15, 1995. Adoption of SFAS 121 in the
current year did not have a material impact on the consolidated financial
statements of the Company.

F-9
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In October 1995, the FASB issued Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123"), which establishes financial accounting
and reporting standards for stock-based employee compensation plans and for
transactions in which an entity issues its equity instruments to acquire goods
or services from nonemployees. The Company continues to account for stock based
compensation arrangements in accordance with Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees", and therefore the adoption of SFAS
123 had no effect on the financial position or results of operations of the
Company. The Company has included additional disclosures about stock-based
employee compensation plans as required by SFAS 123 (see Note 8).

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the FASB issued Statement No. 129, "Disclosure of
Information about Capital Structure." This statement establishes standards for
disclosing information about an entity's capital structure. Management intends
to comply with the disclosure requirements of this statement which are effective
for periods ending after December 15, 1997.

In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). This statement requires companies to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for financial statements issued for
fiscal years beginning after December 15, 1997. Management does not believe this
new standard will have a material impact on the Company's financial statements.

In June 1997, the FASB issued Statement No. 131 "Disclosure About Segments
of an Enterprise and Related Information" ("SFAS 131"). This statement
establishes additional standards for segment reporting in the financial
statements and is effective for fiscal years beginning after December 15, 1997.
The Company believes the segment information required to be disclosed under SFAS
131 will be more comprehensive than previously provided, including expanded
disclosure of income statement and balance sheet items for each of its
reportable segments under SFAS 131. However, the Company has not yet completed
its analysis of which operating segments it will report on.

3. NOTES RECEIVABLE

Notes receivable include notes due from an unaffiliated gaming company and
its stockholders for business development, which accrue interest at the prime
rate (8.5% at June 30, 1997) and notes due from various slot route location
owners with interest rates ranging from 8% to 12% to be paid over periods
ranging from three months to 5 years. At June 30, 1996, notes receivable also
include a note due from an unaffiliated Nevada gaming company with route
operations in Louisiana with interest accruing at the

F-10
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. NOTES RECEIVABLE (CONTINUED)
prime rate plus a percentage of net cash flow (as defined in the loan
documents). This note was paid in full during the year ended June 30, 1997.
Notes receivable consist of the following at June 30:

<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Loans to unaffiliated gaming companies............................ $ 1,418,338 $ 610,905
Location loans for operating rights............................... 662,918 700,435
Loans to employees................................................ -- 1,200,000
Loans to related parties.......................................... 27,142 --
------------ ------------
2,108,398 2,511,340

Less allowance for doubtful accounts.............................. 915,369 922,562
------------ ------------
1,193,029 1,588,778
------------ ------------
Less current portion:.............................................
Loans to unaffiliated gaming companies.......................... 829,315 --
Location loans for operating rights............................. 24,716 45,619
Loans to related parties........................................ 27,142 --
------------ ------------
Notes receivable, current......................................... 881,173 45,619
------------ ------------
Long-term notes receivable, net................................... $ 311,856 $ 1,543,159
------------ ------------
------------ ------------
</TABLE>

Loans to related parties at June 30, 1996 consist of advances made by the
Company to a slot route operation owned by the principal stockholder of the
Company, which were paid in full on July 11, 1996.

Loans to employees at June 30, 1997 consist of a $1.2 million line of credit
arrangement with an entity controlled by an employee of the Company. Loans
outstanding under the line of credit bear interest at prime rate plus 1%.
Payment of all principal and accrued interest is due on August 13, 1998 if
certain licensing events have not occurred as of that date. If the licensing
events have occurred, payment terms may be extended.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at June 30:

<TABLE>
<CAPTION>
1996 1997
------------- --------------
<S> <C> <C>
Land and improvements......................................... $ 14,725,645 $ 15,316,178
Buildings and improvements.................................... 11,326,850 13,023,440
Gaming equipment.............................................. 30,276,982 61,641,351
Furniture, fixtures and equipment............................. 3,953,544 5,144,212
Leasehold improvements........................................ 3,657,726 6,143,415
Construction in progress...................................... 3,362,235 1,496,089
------------- --------------
67,302,982 102,764,685
Less accumulated depreciation................................. 9,526,745 17,731,249
------------- --------------
Total..................................................... $ 57,776,237 $ 85,033,436
------------- --------------
------------- --------------
</TABLE>

F-11
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. PROPERTY AND EQUIPMENT (CONTINUED)
On November 11, 1996, the Company announced that it was re-evaluating the
scope and nature of its proposed addition of a new casino across the street from
the Colorado Central Station Casino. During the fourth quarter of the year ended
June 30, 1997, the Company determined that it was necessary to recognize a
write-down of costs associated with the new casino in the amount of $2,116,968.
The costs were specifically related to architectural fees, building design
costs, and deferred rent that were determined to have no future benefit.
Although the Company has proceeded with this asset write-down, it has not
abandoned the concept of an expansion and will continue to re-evaluate its
Colorado expansion options.

5. INTANGIBLE ASSETS

Intangible assets consist of the following at June 30:

<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Lease acquisition costs........................................... $ 2,085,857 $ 2,312,951
Goodwill.......................................................... 1,134,865 1,134,865
Patents........................................................... 98,595 98,595
Organization costs and other...................................... 221,310 221,310
------------ ------------
3,540,627 3,767,721
Less accumulated amortization..................................... 1,485,917 1,639,415
------------ ------------
Total......................................................... $ 2,054,710 $ 2,128,306
------------ ------------
------------ ------------
</TABLE>

6. NOTES PAYABLE

Notes payable consist of the following at June 30:

<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
PRINCIPAL STOCKHOLDER
Unsecured note payable to principal stockholder, interest at 8%,
due July 1, 1998(a)........................................... $ 2,300,000 $ 2,300,000
Unsecured note payable to principal stockholder, interest at 8%,
due July 1, 1998.............................................. 500,000 500,000
------------ ------------
Long-term notes payable, principal stockholder.................. $ 2,800,000 $ 2,800,000
------------ ------------
------------ ------------
OTHER
Note payable secured by land, interest at 6%, due in 120 equal
monthly principal installments plus interest, final payment
due December 2005. Paid in full during the year ended June 30,
1997.......................................................... $ 950,000 $ --
Less current portion............................................ 100,000 --
------------ ------------
Long-term portion............................................... $ 850,000 $ --
------------ ------------
------------ ------------
</TABLE>

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

(a) At June 30, 1997, the stockholder amended the terms of the notes to be due
July 1, 1998.

F-12
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. NOTES PAYABLE (CONTINUED)
Notes payable to the principal stockholder and related party resulted in
interest expense of $623,060, $289,373, and $223,693 for the years ended June
30, 1995, 1996, and 1997, respectively, and accrued interest payable of $18,400
at June 30, 1996 and 1997.

7. OTHER DEBT

In April 1997, the Company entered into a $10 million unsecured revolving
bank line of credit (the "Bank Revolver") expiring November 30, 1998. The Bank
Revolver bears interest at the prime rate, or LIBOR plus 2%, at the Company's
option. The Company has agreed to maintain certain financial and non-financial
covenants customary with lending arrangements of this type. Financial covenants
include maintenance of minimum cash and cash equivalent balances, tangible net
worth, annual EBITDA, and maximum funded debt to EBITDA ratio. The covenants
also restrict payment of cash dividends. The Company has remained in compliance
with the covenants throughout the term of the Bank Revolver and the previous
credit facility. As of June 30, 1997, the Company had not borrowed under the
Bank Revolver.

8. OPTIONS AND WARRANTS

As of June 30, 1997, 1,085,000 shares of common stock were reserved for
issuance upon exercise of employee and director stock options under an employee
stock option plan. Employee and director options to purchase 930,500 shares at
the fair market values at the grant dates have been granted as of June 30, 1997.
As of June 30, 1997, options to purchase 402,475 shares had been exercised. Of
the 930,500 options, 100,000 vest in equal quarterly increments over two years,
93,000 vest in equal annual increments over five years, 50,000 vest in a single
installment six months after issuance, 20,000 vest in decreasing annual
increments over five years, 250,000 vest in varying increments and periods over
five years, 8,000 vest at the end of three years and the remainder vest in equal
quarterly increments over five years.

An additional 40,000 shares are reserved for issuance upon exercise of
vested options at the IPO price that were granted to a relative of certain
minority stockholders (none of which were exercised at June 30, 1997), and
250,000 shares are reserved for issuance upon exercise of vested warrants
granted to the managing underwriters of the IPO (and their designees)
exercisable at 120% of the IPO price, all of which were exercised at June 30,
1997.

Options to purchase an additional 600,000 shares were granted at the fair
market value at the grant date to certain employees outside of the employee
stock option plan. These options vest in varying increments over periods from
nine months to eight years.

F-13
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. OPTIONS AND WARRANTS (CONTINUED)
Summarized information for all options is as follows for the years ended
June 30:

<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of the
year............................. 954,500 $ 12.80 820,300 $ 12.95 670,700 $ 17.79
Granted......................... 8,000 16.81 288,000 25.07 600,000 31.88
Exercised....................... (128,450) 12.18 (418,600) 13.57 (105,425) 12.54
Canceled........................ (13,750) 12.00 (19,000) 12.00 (32,250) 44.44
---------- ---------- ----------
Outstanding, end of the year...... 820,300 12.95 670,700 17.79 1,133,025 24.98
---------- ---------- ----------
---------- ---------- ----------
Exercisable at end of the year.... 453,950 13.44 148,050 12.31 245,475 16.11
---------- ---------- ----------
---------- ---------- ----------
Options available for grant....... 26,250 107,250 189,500
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The following table summarizes information about the options outstanding at
June 30, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- --------------------------
NUMBER WEIGHTED NUMBER WEIGHTED
OUTSTANDING WEIGHTED AVERAGE AVERAGE EXERCISABLE AVERAGE
AT JUNE 30, REMAINING EXERCISE AT JUNE 30, EXERCISE
RANGE OF EXERCISE PRICES 1997 CONTRACTUAL LIFE PRICE 1997 PRICE
- ----------------------------------- ------------- ------------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$12.00 - $13.50 268,125 6.6 $ 12.13 142,375 $ 12.14
14.75 - 21.75 256,900 8.0 21.61 103,100 21.60
31.88 - 46.88 608,000 9.7 32.07 -- --
------------- -------------
1,133,025 8.6 24.98 245,475 16.11
------------- -------------
------------- -------------
</TABLE>

The Company is authorized to issue 1,000,000 shares of preferred stock, $.01
par value per share (the "Preferred Stock"), in one or more series, and to
designate the rights, preferences, limitations, and restrictions of and upon
shares of each series, including voting, redemption, and conversion rights. The
board of directors of the Company also may designate dividend rights and
preferences in liquidation. The board of directors of Anchor has authorized the
Company to designate a series of Series A Junior Participating Preferred Stock
in connection with the Rights Plan discussed in Note 12. In connection with the
authorization of the Rights Plan, the board of directors of the Company has
authorized the designation of 50,000 shares of Preferred Stock as Series A
Junior Participating Preferred Stock.

The Company has adopted the disclosures-only provision of Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). The Company applies APB
Opinion No. 25 and related interpretations in accounting for its stock options.
Under APB 25, no compensation cost has been recognized in the financial
statements for the Stock Option Plan or other stock options granted. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. Had compensation cost for the stock option
grants been determined based on the fair value at the date of grant for awards
consistent with the provision of SFAS 123, the Company's net income per common
and

F-14
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. OPTIONS AND WARRANTS (CONTINUED)
common equivalent share would have been decreased to the pro forma amounts
indicated below for the years ended June 30:

<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Net income--as reported........................................ $ 22,335,044 $ 35,676,428
Net income--pro forma.......................................... 21,758,657 34,940,303

Earnings per common and common
equivalent shares--as reported............................... $ 1.84 $ 2.61
Earnings per common and common
equivalent shares--pro forma................................. 1.79 2.55
</TABLE>

The fair value of each option granted in fiscal year 1996 and 1997 was
estimated using the following assumptions for the Black-Scholes option pricing
model: (i) no dividends; (ii) expected volatility for both years of 50%; (iii)
risk free interest rates averaging 6% for both years; and (iv) the expected
average life of 3.2 years for 1996 and 3.6 years for 1997. The weighted average
fair value of the options granted in 1996 and 1997 were $9.03 and $9.82,
respectively. Because the SFAS 123 method of accounting has not been applied to
options granted prior to July 1, 1995, the resulting pro forma net income may
not be representative of that to be expected in future years.

9. OTHER RELATED PARTY TRANSACTIONS

The principal stockholder of the Company owned 100% of the common stock of
an Anchor Gaming slot route location. On January 31, 1996, the principal
stockholder sold the location to an unaffiliated third party. For providing the
gaming machines and slot route services, the Company received a percentage of
the net win of the location similar to other route locations. The Company held a
note receivable from the slot route operation in the amount of $284,704 at
January 31, 1996 of which $257,562 was assumed by the new owner. The remaining
balance of the loan due from the principal stockholder at June 30, 1996 of
$27,142 was paid in full on July 11, 1996. The slot route operation, under the
ownership of the principal stockholder, accounted for $295,502 and $180,822 of
gaming revenue during the years ended June 30, 1995 and 1996, respectively and
$279,059 and $145,684 of route costs during the years ended June 30, 1995 and
1996, respectively.

F-15
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES

The provision (benefit) for income taxes for the years ended June 30, 1995,
1996 and 1997 are as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------------ ------------- -------------
<S> <C> <C> <C>
Currently payable per tax return:
Federal........................................ $ 8,976,859 $ 11,750,029 $ 20,066,284
State.......................................... 474,051 846,278 1,369,887
------------ ------------- -------------
9,450,910 12,596,307 21,436,171
------------ ------------- -------------
Deferred:
Federal........................................ (381,402) 579,569 (399,219)
State.......................................... 416,943 11,683 (36,250)
------------ ------------- -------------
35,541 591,252 (435,469)
------------ ------------- -------------
Total........................................ $ 9,486,451 $ 13,187,559 $ 21,000,702
------------ ------------- -------------
------------ ------------- -------------
</TABLE>

The historical provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to pre-tax income from continuing operations as a result of the following
differences:

<TABLE>
<CAPTION>
1995 1996 1997
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S. tax rate...................... $ 8,913,449 35.0% $ 12,432,911 35.0% $ 19,836,995 35.0%
Increase (decrease) in tax resulting from:
State income taxes, net of federal tax
effect................................... 579,147 2.3 557,674 1.6 866,864 1.5
Other, net................................... (6,145) (.1) 196.974 .5 296,843 .6
------------- ----- ------------- ----- ------------- -----
Actual provision for income taxes............ $ 9,486,451 37.2% $ 13,187,559 37.1% $ 21,000,702 37.1%
------------- ----- ------------- ----- ------------- -----
------------- ----- ------------- ----- ------------- -----
</TABLE>

Statement No. 109 "Accounting for Income Taxes" requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or income tax
returns. Deferred income taxes included in other current assets, deposits and
other, and other long-term liabilities on the consolidated balance sheets
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting

F-16
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES (CONTINUED)
purposes and the amounts used for income tax purposes. The tax items comprising
the Company's net deferred tax asset as of June 30, 1996 and 1997 are as
follows:

<TABLE>
<CAPTION>
1996 1997
------------ -------------
<S> <C> <C>
Deferred tax assets:
Receivable reserve............................................. $ 478,000 $ 617,000
Pre-opening expenditures....................................... 140,000 86,000
Reserves not currently deductible.............................. 229,000 417,000
------------ -------------
847,000 1,120,000

Deferred tax liabilities:
Difference between book and tax basis of property.............. (1,038,000) (876,000)
------------ -------------
Net deferred tax asset (liability)............................... $ (191,000) $ 244,000
------------ -------------
------------ -------------
</TABLE>

11. COMMITMENTS AND CONTINGENCIES

NON-CANCELABLE OPERATING LEASES:

The Company leases parking lot space, office space, casino space, and slot
route locations under non-cancelable operating leases. The original terms of the
leases range from 3 to 15 years with various renewal options from 1 to 15 years.

The casino space lease has contingent rentals based on gaming revenues of
the casino occupying the space. The lease provides for a monthly payment of the
greater of a base amount of $12,000 or 5% of adjusted gross gaming revenue, with
a payment ceiling of $400,000 per year. Contingent rentals paid above base
amounts were $100,898, $184,312, and $254,472 for the years ended June 30, 1995,
1996, and 1997, respectively.

Future minimum rentals under non-cancelable operating leases at June 30,
1997 are:

<TABLE>
<S> <C>
Year ending June 30,
1998...................................................... $ 10,656,000
1999...................................................... 10,571,000
2000...................................................... 7,990,000
2001...................................................... 7,875,000
2002...................................................... 7,864,000
Thereafter................................................ 57,230,000
-------------
$ 102,186,000
-------------
-------------
</TABLE>

Operating lease rental expense was $7,706,000, $9,539,000, and $10,940,000
for the fiscal years ended June 30, 1995, 1996, and 1997, respectively.

Included in deposits at June 30, 1996 and 1997 is a space lease deposit of
$3,300,000, which is held by the lessor of several slot route locations pursuant
to an agreement that provides that the deposit, or any portion thereof, may, at
the option of the Company, be applied against rents owing during the last two
years of the lease agreement. Also included in deposits are payments totaling
$10,750,000 to this lessor to extend the lease term for these locations through
the year 2010. The lease extension payments are

F-17
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
amortized to rent expense on a straight-line basis over the remaining term of
the lease. The Company's slot route operations at locations leased from this
lessor accounted for more than 10% of the Company's total revenues for the years
ended June 30, 1995, 1996, and 1997.

GAMING REGULATIONS

The Company's route operations are subject to the licensing and regulatory
requirements of the Nevada State Gaming Control Board and the Nevada Gaming
Commission. The Company's casino operations are subject to the licensing and
regulatory requirements of the Colorado Limited Gaming Control Commission. The
Company's proprietary games operations are subject to the licensing and
regulatory requirements of multiple jurisdictions throughout the United States
and Canada including the Nevada and Colorado requirements. The Company's gaming
licenses are subject to certain conditions and periodic renewal. Management
believes that the conditions will continue to be satisfied and that subsequent
license renewals will be granted.

ENVIRONMENTAL MATTERS

The Colorado Central Station Casino is located in an area that has been
designated by the Environmental Protection Agency ("EPA") as a superfund site on
the National Priorities List, known as the Central City-Clear Creek Superfund
Site (the "Site") as a result of contamination from historic mining activity in
the area. The EPA is entitled to proceed against owners and operators of
properties located within the Site for remediation and response costs associated
with their properties and with the entire Site. The Colorado Central Station
Casino is located within the drainage basin of North Clear Creek and is
therefore subjected to potentially contaminated surface and ground water from
upstream mining-related sources. Soil and ground water samples on the Site
indicate that several contaminants exist in concentrations exceeding drinking
water standards. Records relating to historical uses of the Site are uncertain
as to whether mining actually occurred below the Company's property. Records do
indicate that an ore loading dock for a railroad depot was once located on an
adjacent property, and railroad tracks were present on the Company's property.
Management is not aware of any environmental issues associated with these
activities.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with seven executives and
top management personnel. The agreements vary in starting date and are for
periods ranging from two to five years. Agreements with aggregate annual
salaries of $1,435,000 are terminable at the Company's option with 90 days to
one year severance pay.

LITIGATION

The Company is party to several routine lawsuits arising from normal
operations. Management does not believe that the outcome of such litigation in
the aggregate will have a material adverse effect on the consolidated financial
statements of the Company.

PURCHASE COMMITMENTS

At June 30, 1997, the Company had entered into various purchase agreements
to purchase gaming equipment for approximately $5,594,000.

F-18
<PAGE>
ANCHOR GAMING AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. SUBSEQUENT EVENT

In August 1997, the board of directors of Anchor authorized the Company to
enter into a Stockholder Rights Plan (the "Rights Plan") providing that one
right (a "Right") will be attached to each share of Common Stock as of October
20, 1997 (the "Record Date"). Each Right will entitle the registered holder to
purchase from the Company a unit (a "Unit") consisting of one one-thousandth of
a share of Series A Junior Participating Preferred Stock, par value $20.00 per
share, to be authorized by the Company at a Purchase Price of $400.00 per Unit,
subject to adjustment. The Rights convert in certain circumstances into a right
to purchase Common Stock or securities of a successor entity. The description
and terms of the Rights are to be set forth in the Rights Agreement, between the
Company and The Chase Manhattan Bank, as Rights Agent.

F-19
<PAGE>
[Inside back cover]

<TABLE>
<S> <C> <C>
[Winners of a progressive
[Interior of the Colorado jackpot at a Smiths Food King
Central Station Casino.] slot route location.]

[Exterior aerial view of
the Colorado Central
Station Casino.]

</TABLE>

<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS WILL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION IN THIS
PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 7
Price Range of Common Stock.................... 13
Dividend Policy................................ 13
Selected Financial and Operating Information... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business....................................... 22
Regulation..................................... 32
Management..................................... 40
Principal and Selling Stockholders............. 43
Certain Transactions........................... 44
Description of Capital Stock................... 45
Underwriting................................... 51
Legal Matters.................................. 52
Experts........................................ 53
Available Information.......................... 53
Incorporation of Certain Information by
Reference..................................... 53
Index to Consolidated Financial Statements..... F-1
</TABLE>

1,800,000 SHARES

[LOGO]

ANCHOR GAMING

COMMON STOCK

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

PROSPECTUS
--------------

BTALEX.BROWN

MORGAN STANLEY DEAN WITTER

RAYMOND JAMES & ASSOCIATES, INC.
OCTOBER 14, 1997

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