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                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                ---------------
                                   FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED)
                  For the fiscal year ended December 31, 1997
                                      OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
                       Commission File Number 001-13539



                               AMF BOWLING, INC.
            (Exact Name of Registrant as specified in its charter)


<TABLE>
<S>                                         <C>
                 Delaware                        13-3873268
        (State or other jurisdiction of     (I.R.S. Employer)
         incorporation or organization)     Identification No.)
</TABLE>

                                8100 AMF Drive
                           Richmond, Virginia 23111
         (Address of principal executive offices, including zip code)


              Registrant's telephone number, including area code:
                                (804) 730-4000

          Securities registered pursuant to Section 12(b) of the Act:


<TABLE>
<S>                                             <C>
                  Title of Each Class            Name of Each Exchange on Which Registered
---------------------------------------------   ------------------------------------------
     Common Stock, par value $.01 per share               New York Stock Exchange
</TABLE>

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



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

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

     As of March 23, 1998, 59,694,244 shares of Registrant's common stock, par
value $.01, were outstanding. Of the total outstanding shares, 16,034,812 shares
were held by non-affiliates at an aggregate market value of $410.9 million on
March 23, 1998.


                     DOCUMENTS INCORPORATED BY REFERENCE:

     Portions of the Proxy Statement for the Registrant's 1998 Annual Meeting
of Shareholders are incorporated by reference into Part III of this report.
Such Proxy Statement, except for the parts therein that have been specifically
incorporated herein by reference, shall not be deemed "filed" as part of this
report on Form 10-K.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                                    PART I

Item 1.  Business

     General Development of Business

     AMF Bowling, Inc. ("AMF Bowling") was incorporated in Delaware in 1996 by
an investor group led by GS Capital Partners II, L.P. (together with affiliated
investment funds, "GSCP"), an affiliate of Goldman, Sachs & Co. AMF Group
Holdings Inc., a wholly owned subsidiary of AMF Bowling, acquired all of the
outstanding stock of the separate U.S. and foreign corporations that
constituted substantially all of the Company's predecessor (the "Predecessor
Company") for a total purchase price of approximately $1.37 billion (the
"Acquisition").

     AMF Bowling conducts all of its business through subsidiaries and has no
operations of its own. Unless the context indicates otherwise, the terms the
"Company" or "AMF" as used herein refer to AMF Bowling (the registrant) and its
subsidiaries.

     AMF is the largest owner or operator of bowling centers in the United
States and worldwide. In addition, the Company is one of the world's leading
manufacturers of bowling center equipment, accounting for, management believes,
approximately 41% of the world's current installed base of such equipment. AMF
is principally engaged in two business segments: (i) the ownership or operation
of bowling centers, consisting of, as of December 31, 1997, 370 U.S. bowling
centers and 100 international bowling centers ("Bowling Centers") including 14
centers operated by joint ventures with third parties described below and (ii)
the manufacture and sale of bowling equipment such as automatic pinspotters,
automatic scoring equipment, bowling pins, lanes, ball returns, and certain
spare and consumable products, and the resale of allied products such as
bowling balls, bags, shoes and certain other spare and consumable products
("Bowling Products"). The Bowling Products business consists of two categories:
(i) New Center Packages ("NCPs") (all of the equipment necessary to outfit a
new bowling center or expand an existing bowling center); and (ii)
Modernization and Consumer Products (which includes modernization equipment
used to upgrade an existing center, spare parts, supplies and consumable
products essential to maintain operations of an existing center). See "Note 17.
Business Segments" in the Notes to Consolidated Financial Statements.

     In 1996, AMF acquired 57 bowling centers from five unrelated sellers,
including 50 bowling centers from Charan Industries, Inc. ("Charan"). The
combined purchase price, net of cash acquired, was approximately $108.0
million, and was funded with approximately $40.0 million from the sale of
equity by AMF Bowling to its institutional stockholders and one of its
directors and approximately $68.0 million from available borrowings under an
acquisition facility (the "Acquisition Facility") under the bank credit
agreement that was in effect from the closing of the Acquisition until October
1997.

     In 1997, the Company acquired 122 bowling centers from a number of
unrelated sellers, including 43 centers from American Recreation Centers, Inc.,
and fifteen centers from the Conbow Corporation. The 1997 acquisitions included
seven centers in the United Kingdom and two centers in Australia. The combined
purchase price for the 1997 acquisitions, net of cash acquired, was
approximately $214.8 million, and was funded with borrowings under the
Acquisition Facility and the Working Capital Facility (the "Bank Facility")
under the Third Amended and Restated Credit Agreement described below (the
"Credit Agreement"), from the sale of equity by AMF Bowling to its
institutional stockholders and a portion of the proceeds of the Initial Public
Offering (as hereinafter defined).

     From January 1, 1998 through March 13, 1998, the Company acquired 24
centers in the United States, two centers in the United Kingdom and one center
in Australia from unrelated sellers, including fifteen bowling centers in the
U.S. from Active West, Inc. ("Active West"). The aggregate purchase price for
these acquisitions was approximately $36.5 million, including $35.3 million
funded with borrowings under the Bank Facility and, with respect to the Active
West acquisition, 50,000 shares of AMF Bowling common stock valued at the
closing price of $24 3/16 per share on the New York Stock Exchange on the date
of acquisition.

     In April 1997, the Company entered into a joint venture with Hong Leong
Corporation Limited, a Singapore-based conglomerate ("Hong Leong"), to build
and operate bowling centers in the Asia Pacific region. The joint venture
("Hong Leong JV") is owned 50% by the Company and 50% by Hong Leong. The Hong
Leong JV opened its first bowling center during November 1997 in Tianjin,
China. Additional sites are being evaluated for future development.

     In August 1997, the Company entered into a joint venture with Playcenter
S.A., a Sao Paulo-based amusement and entertainment company ("Playcenter") to
build and operate bowling centers in Brazil and Argentina. The joint venture
("Playcenter JV") is owned 50% by the Company and 50% by Playcenter. As of
December 31, 1997, the Playcenter JV operated eleven centers in Brazil and two
centers in Argentina.


                                       1

<PAGE>

     The Company accounts for its investments in Hong Leong JV and Playcenter
JV by the equity method. As of December 31, 1997, the Company's investments in
Hong Leong JV and Playcenter JV were $1.1 million and $8.7 million,
respectively. See "Note 16. Joint Ventures" in the Notes to Consolidated
Financial Statements.

     On October 20, 1997, the Company acquired Michael Jordan Golf Company,
Inc. ("Michael Jordan Golf Company"), a company formed to operate golf practice
ranges in the U.S. Michael Jordan Golf Company currently operates one golf
practice range. The Company agreed to build or acquire two additional golf
practice ranges by the end of 1999.

     As a result of the foregoing acquisitions and joint ventures and after
giving effect to the construction of one center and the closing of eight U.S.
centers and one center in Japan since the Acquisition, the Company operated 394
U.S. bowling centers and 103 international bowling centers as of March 13,
1998.

     In November 1997, AMF Bowling issued 15,525,000 shares of its common stock
at $19.50 per share pursuant to an initial public offering (the "Initial Public
Offering"). See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Capital Resources" and "Note 12. Stockholders'
Equity" in the Notes to Consolidated Financial Statements.


Business Segments

     Bowling Centers

     In the United States, AMF is the largest operator of bowling centers, with
394 bowling centers (as of March 13, 1998) in 39 states and Puerto Rico.
Outside the United States, AMF is also the largest operator of bowling centers,
with (as of March 13, 1998) 103 bowling centers in eleven countries: Australia
(39), the United Kingdom (24), Mexico (9), Japan (4), China (including Hong
Kong) (7), Argentina (2), Brazil (11), France (3), Spain (2), Switzerland (1),
and Canada (1). Of the U.S. centers, 207 were acquired as part of the
Acquisition (eight of which were subsequently closed), 194 were acquired
thereafter and one was constructed. Of the international centers, 78 were
acquired as part of the Acquisition, twelve were acquired thereafter, including
nine in the United Kingdom and three in Australia, and one in Japan was closed.
The foregoing numbers include one center in China, two centers in Argentina and
eleven centers in Brazil which are operated as part of Hong Leong JV and
Playcenter JV, respectively.

     The Company's number of U.S. centers, regional clustering (56 clusters)
and average size (an average of 38 lanes per U.S. center versus an industry
average of 21 lanes per U.S. center) provide both additional revenue
opportunities and economies of scale. These revenue opportunities include (i)
scheduling flexibility, which improves lane utilization, (ii) the ability to
support an expanded food and beverage operation and (iii) more concourse space
for food and beverage offerings, amusement games, billiards and pro shops. Cost
savings resulting from the economies of scale include (a) the ability to
distribute operating and corporate overhead costs (including marketing and
advertising costs) over a larger revenue base and (b) attractive terms from
certain of the Company's suppliers.

     Internationally, AMF's centers also are, on average, larger than those of
its competitors. As with its U.S. operations, the number of centers, geographic
clustering and size result in additional revenue opportunities and economies of
scale.

     The geographic diversity of AMF's Bowling Centers operations across
different regions of the U.S. and across eleven other countries has
historically provided stability to AMF's annual cash flows. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Seasonality and Market Development Cycles".

     The Company has an ongoing modernization program that results in its
bowling centers having more upgraded physical plants and attractive appearances
than those of other operators. Management believes that its historical spending
level of approximately 3.7% of Bowling Centers revenue is adequate to cover
routine capital expenditures. Management estimates that approximately 2% of
Bowling Centers revenue is required for nondiscretionary capital expenditures.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Expenditures".

     The Bowling Centers business derives its revenue and profits from three
principal sources: (i) bowling, (ii) food and beverage and (iii) other sources
such as shoe rental, amusement games, billiards and pro shops. In 1997,
bowling, food and beverage and other revenue represented 60.6%, 25.4%, and
14.0% of total Bowling Centers revenue, respectively.

     Bowling revenue, the largest portion of a bowling center's revenue and
profitability, is derived from league, recreational and tournament play. Food
and beverage sales occur primarily through snack bars that offer snack foods,
soft drinks and, at many centers, alcoholic beverages. AMF has acquired several
centers with large sports bars that provide a large portion of such centers'
revenue. Other revenue is derived from shoe rental and the operation of
amusement games, billiards and


                                       2

<PAGE>

pro shops. The shoe rental business is driven primarily by recreational bowlers
who usually do not own bowling shoes. Recreational bowlers and non-bowling
customers are also the primary users of amusement games and billiards tables.


     Bowling Products

     The Company manufactures and sells bowling center equipment, including
automatic pinspotters, automatic scoring equipment, bowling pins, lanes, ball
returns, and certain spare and modernization parts, and resale products, such
as bowling balls, bags, shoes and other bowlers' aids, sold primarily through
pro shops. The bowling products business consists of two categories: (i) NCPs
and (ii) Modernization and Consumer Products.

     New Center Packages include the bowling equipment necessary to outfit new
or expand existing bowling centers, such as lanes, pinspotters, automatic
scoring, bowler seating, ball returns, masking units and bumpers. AMF is
focused on sales of NCPs into countries with demonstrated strong demand for the
construction of new bowling centers. In addition, AMF believes that certain
markets in South America, Asia Pacific and Eastern Europe hold the potential
for high growth over the next several years, but are currently in the early
stages of the industry's development. As bowling is introduced into a market
and becomes more popular, local developers and entrepreneurs build new bowling
centers which drives demand for NCPs. To stimulate this development cycle, AMF
has entered into the joint ventures with Hong Leong and Playcenter described
under " -- General Development of Business". See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Backlog; Recent
NCP Sales".

     The potential customers for Modernization and Consumer Products include
all bowling centers in operation today. The number of potential customers will
continue to grow as the number of centers increases. In order for a bowling
center to remain competitive and to satisfy its customers, the center operator
must periodically make investments in the center's equipment. Some of these
investments, such as replacing pins, must be made on approximately an annual
basis. These annual investments represent relatively modest expenditures
necessary to maintain the center. Other equipment, such as automatic scoring,
replacement lanes and upgraded automated lane maintenance equipment, require
less frequent but more significant investments by center operators. Management
believes that many of these modernizations are necessary for a center to
maintain its existing customer base.

     In addition to bowling equipment and supplies, AMF manufactures and sells
billiards tables under the Renaissance and PlayMaster brand names.


Business Strategy

     The Company is pursuing a three-part strategy to consolidate the U.S.
bowling center industry, to build a nationally recognized AMF brand of superior
bowling-based family recreation centers, and to capitalize on the demand for
bowling products and centers in certain international markets.

     The Company's acquisition program is designed to acquire additional U.S.
bowling centers from single-center and small and medium-sized chain operators.
Following an acquisition, the Company improves the profitability of the
acquired centers by cost reduction initiatives and programs to increase
revenue. The Company often makes capital and other improvements to upgrade the
acquired centers in order to generate increased revenue.

     The Company is developing a nationally recognized brand of superior
bowling and entertainment centers. These centers generally offer
state-of-the-art bowling equipment including many of the products manufactured
by its Bowling Products business including the XtremeTM package for
glow-in-the-dark bowling, the AMF 8800 Gold pinspotter, high scoring HPL
synthetic lanes, BOSS NT automatic scoring system with animated computer
graphics, Options furniture package for concourse and settee areas, and
DurabowlTM bumpers that ensure young bowlers knock down pins.

     In 1997, the Company launched AMF CARES!, a comprehensive customer
appreciation and rewards system, to deliver a consistent quality, fun
recreational experience to customers of AMF centers throughout the United
States. This program concentrates on customer-focused operating standards,
employee awards and recognition, loyalty-driven marketing programs, enhanced
food and beverage operations and stronger brand identity with new signage and
employee uniforms. To support this program, the Company commits capital
expenditures to modernize its centers and to build new showcase centers such as
Chelsea Piers in 1997, the first new bowling center in Manhattan in thirty
years, and Marina City in Chicago, which is scheduled to open in 1998.

     The Company's well-established brand name, high quality product lines, and
global sales and service network position AMF to take advantage of the
international growth in bowling. New Center Packages, which represented 55.2%
of 1997


                                       3

<PAGE>

Bowling Products sales, were primarily sold to international markets such as
China, Malaysia, Japan, United Kingdom, Germany, Brazil and Argentina. The
Company also focuses on development of selected international markets with
large populations which are in the early stage of growth in the construction of
bowling centers such as India, Poland and Russia. The Company will acquire or
build bowling centers to expand its competitive position in certain
international markets and to serve as a showcase for the sale of its bowling
products in these countries.

     Modernization and Consumer Products, which represented 44.5% of 1997
Bowling Products sales, were sold primarily to more established bowling markets
including the United States, Japan and Western Europe. Leadership in
introducing innovative new products, combined with its established direct sales
force and distribution, positions the Company to service the large worldwide
installed base of AMF-equipped centers and to grow with the increased
popularity of bowling.


Seasonality and Market Development Cycles

     On a consolidated basis, revenue and EBITDA of the Company's businesses
are neither highly seasonal nor highly cyclical. The geographic diversity of
the Company's bowling centers, which operate across different regions of the
U.S. and across eleven other countries, provides stability to the Company's
annual cash flows. Although financial performance of Bowling Centers operations
is seasonal in nature in many countries, with cash flows typically peaking in
the winter months and reaching their lows in the summer months, the geographic
diversity of the Company's bowling centers has helped reduce this seasonality
as bowling centers in certain countries in which AMF operates exhibit different
seasonal sales patterns. As a result of the growing number of U.S. centers
attributable to the Company's acquisition program, however, seasonality may
become more accentuated.

     Modernization and Consumer Products sales display seasonality. The U.S.
market, which is the largest market for Modernization and Consumer Products, is
driven by the beginning of league play in the fall of each year. The NCP
category of bowling products experiences significant fluctuations due to
changes in demand for NCPs as certain markets experience high growth followed
by market maturity, at which time sales to that market decline, sometimes
rapidly. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality and Market Development Cycles" and "Note
17. Business Segments" in the Notes to Consolidated Financial Statements.


Industry and Competition

     Bowling Centers

     Bowling is both a competitive sport and a recreational activity, and faces
competition from numerous alternative activities. The ongoing success of the
Bowling Centers operation is subject to the level of interest in bowling, the
availability and relative cost of other sports, recreational and entertainment
alternatives, the amount of leisure time available to potential players, as
well as various other social and economic factors over which AMF has no
control.

     The Company's centers also compete with other bowling centers. The Company
competes primarily through the quality, appearance and location of its
facilities and through the range of amenities and service level offered. See
"Management's Discussion of Financial Condition and Results of Operations --
Bowling Centers."

     The U.S. bowling center industry is highly fragmented, and consists of two
relatively large bowling center operators, AMF (which had 370 U.S. centers as
of December 31, 1997) and Brunswick Corporation ("Brunswick") (which had
approximately 111 U.S. centers as of December 31, 1997), four medium-sized
chains, which together account for 70 bowling centers, and over 5,300 bowling
centers owned by single-center and small-chain operators, which typically own
four or fewer centers. The top six operators (including AMF) account for less
than 10% of the total number of U.S. bowling centers.

     The international bowling center industry is also highly fragmented. There
are typically few chain operators in any one country and a large number of
single-center operators. AMF generally enjoys a relative size advantage (i.e.,
a larger number of lanes per center), and is competitively well positioned in
countries such as the United Kingdom and Australia.

     In the United States, the operation of bowling centers is a mature
industry characterized by slightly decreasing lineage (games per lane per day)
offset by increasing average price per game and revenue from food and beverage
and other ancillary sources. Management believes that AMF's U.S. lineage has
remained relatively stable in recent years due to AMF's ability to better
maintain existing league bowlers and attract new recreational bowlers.


                                       4

<PAGE>


<TABLE>
<CAPTION>
               U.S. Bowling Center Industry (a)
---------------------------------------------------------------
                                                     Number of
                     Operator                        Locations     % of Total
-------------------------------------------------   -----------   -----------
<S>                                                 <C>           <C>
AMF .............................................        370           6.3%
Brunswick .......................................        111           1.9
Bowl America ....................................         23           0.4
Active West (b) .................................         16           0.3
Mark Voight .....................................         16           0.3
Bowl New England ................................         15           0.2
                                                         ---         -----
 Subtotal .......................................        551           9.4
Single-center and small-chain operators .........      5,302          90.6
                                                       -----         -----
 Total ..........................................      5,853         100.0%
                                                       =====         =====
</TABLE>

---------
 (a) AMF estimate at December 31, 1997.

 (b) On February 13, 1998, the Company acquired fifteen centers from Active
West. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Expenditures" and "Note 15. Acquisitions" in
the Notes to Consolidated Financial Statements.


     Bowling Products

     AMF and Brunswick are the two largest manufacturers of bowling center
equipment, and are the only full-line manufacturers of bowling equipment and
supplies that compete on a global basis. The Company also competes with
smaller, often regionally focused companies in certain product lines.
Management estimates that AMF accounts for approximately 41% of the worldwide
installed base of bowling center equipment.

     Because of bowling equipment's relatively long useful life, used equipment
can be refurbished and sold, often to builders of new centers. The Company
actively purchases and resells its used equipment in order to compete with
refurbishers who often are U.S. based.

     NCP sales follow the trends in the growth of bowling. As bowling is
introduced and becomes popular in new markets, the economics of constructing and
operating bowling centers become attractive to local market developers and
entrepreneurs. Consequently, new bowling center construction drives demand for
NCPs. For at least the last 15 years, the majority of NCP sales has been to
international markets. In recent years, this trend has been fueled by the growth
of bowling in several countries, such as China, Taiwan and South Korea.

     Sales of Modernization and Consumer Products to bowling center operators
who manage the growing installed base of bowling equipment provide a stable
base of recurring revenue. These products include modernization equipment, both
proprietary and standard spare parts for existing equipment and other products
including pins, shoes and supplies. Some of these products, such as bowling
pins, should be replaced on approximately an annual basis to maintain a center,
while certain less frequent investments in other equipment are necessary to
modernize a center and are often required to maintain a customer base.


International Operations

     The Company's international operations are subject to the usual risks
inherent in operating abroad, including, but not limited to, risks with respect
to currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive laws and actions by foreign governments
(such as restrictions on transfer of funds, import and export duties and
quotas, foreign customs, tariffs and VATs and unexpected changes in regulatory
environments), difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
international investment and loans, and foreign tax laws.

     AMF has a history of operating in a number of international markets, in
some cases, for over thirty years. Similar to other U.S.-based manufacturers
with export sales, local currency devaluation increases the cost of the
Company's bowling equipment in that market. As a result, a strengthening U.S.
dollar exchange rate may adversely impact sales volume and profit margins
during such periods.


                                       5

<PAGE>

     Current economic difficulties in certain markets of the Asia Pacific
region have resulted in a reduction in the order rate and backlog for NCPs.
Management believes that many Asia Pacific customers are delaying purchases of
NCP and Modernization equipment as they await economic stability in their
regions. As of March 13, 1998, the NCP backlog was 1,765 which is flat compared
to the same period last year.

     For the year ended December 31, 1997, NCP sales and backlog to China,
Japan and other Asia Pacific markets represented 72.7% and 70.4% of total NCP
unit sales and backlog, respectively.

     Foreign currency exchange rates can also affect the translation of
operating results from international bowling centers, but for the year ended
December 31, 1997, such exchange rates did not materially impact operating
results. For 1997, revenue and EBITDA of international bowling centers
represented 14.6% and 16.0% of consolidated results, respectively.

     Over the longer term, management continues to believe that international
markets, including Asia Pacific, represent attractive opportunities for bowling
equipment sales and bowling center operations. Accordingly, management
continues to pursue its strategy in international markets.


Employees

     Bowling Centers

     As of December 31, 1997, Bowling Centers had approximately 18,415 full-
and part-time employees worldwide. The Company believes that its relations with
its Bowling Centers employees are satisfactory.




<TABLE>
<CAPTION>
                Country                   Number of Employees (a)
--------------------------------------   ------------------------
<S>                                      <C>
United States                                     16,226
                                                  ------
International:
 Australia ...........................             1,202
 United Kingdom ......................               440
 Mexico ..............................               240
 China (including Hong Kong) .........               120
 Japan ...............................                47
 France ..............................                75
 Spain ...............................                32
 Switzerland .........................                 9
 Canada ..............................                24
                                                  ------
   Total International ...............             2,189
                                                  ------
   Total Worldwide ...................            18,415
                                                  ======
</TABLE>

---------
 (a) Numbers vary depending on the time of year.


     Bowling Products

     As of December 31, 1997, Bowling Products had approximately 1,125
full-time employees worldwide. The Company believes that its relations with its
Bowling Products employees are satisfactory. Employees are divided along
functional lines as shown in the table below.




<TABLE>
<CAPTION>
           Segment               Number of Employees
-----------------------------   --------------------
<S>                             <C>
Manufacturing ...............             760
                                          ---
Sales:
 Australia ..................               8
 Americas ...................              48
 Europe .....................              89
 Asia Pacific ...............             123
 Japan ......................              97
                                          ---
   Total Sales ..............             365
                                          ---
   Total Worldwide ..........           1,125
                                        =====
</TABLE>

                                       6

<PAGE>

 Corporate

     As of December 31, 1997, corporate had approximately 170 full-time
employees. The Company believes that its relations with its corporate employees
are satisfactory.


Item 2. Properties

     Bowling Centers

     As of December 31, 1997, AMF operated 370 bowling centers and related
facilities in the United States and 100 centers in eleven other countries. A
regional list of these facilities is set forth below:



<TABLE>
<CAPTION>
                                U.S. Centers*
                                  Number of     Number of
Region                             Clusters     Locations     Owned     Leased
------------------------------   -----------   -----------   -------   -------
<S>                              <C>           <C>           <C>       <C>
Texas ........................         6            34          28         6
Baltimore/Washington .........         3            24          15         9
Northeast ....................         8            60          34        26
Mid-Atlantic .................         7            48          31        17
Southern .....................        11            59          43        16
Great Lakes ..................         7            51          39        12
Midwest ......................         6            37          27        10
Pacific ......................         8            55          24        31
                                      --            --          --        --
 Total .......................        56           368         241       127
                                      ==           ===         ===       ===
</TABLE>

 * AMF operates two centers for an unrelated party. These centers are neither
owned nor leased by AMF and, therefore, are not included in the foregoing
table. In addition, the Company operates a golf practice range in Aurora,
Illinois.



<TABLE>
<CAPTION>
                       International Centers *
                                        Number of
Country                                 Locations     Owned     Leased
------------------------------------   -----------   -------   -------
<S>                                    <C>           <C>       <C>
Australia ..........................        38          23        15
United Kingdom .....................        22           5        17
Mexico .............................         9           5         4
China, including Hong Kong .........         6           0         6
Japan ..............................         4           0         4
France .............................         3           0         3
Spain ..............................         2           0         2
Switzerland ........................         1           0         1
Canada .............................         1           1         0
                                            --          --        --
   Total ...........................        86          34        52
                                            ==          ==        ==
</TABLE>

 * The table excludes one bowling center operated by the Hong Leong JV and
thirteen bowling centers operated by the Playcenter JV. See "Business --
General Development of Business".

     AMF's leases are subject to periodic renewal. Sixty of the U.S. centers
have leases which expire during the next three years. Forty-one of such leases
have renewal options. Twenty-two of the international centers have leases which
expire during the next three years. Six of such leases have renewal options.
The Company generally does not have difficulty renewing leases.


                                       7

<PAGE>

 Bowling Products

     As of December 31, 1997, AMF owned or leased facilities at five locations
in the United States, four of which are used for its Bowling Products business
and one of which is used for its billiards business. AMF also leased the
following facilities at 29 international locations which are used as offices or
warehouses.



<TABLE>
<CAPTION>
                                            U.S. Facilities
                                                                                  Approximate    Owned/
Location                                        Products                        Square Footage   Leased
------------------------ ----------------------------------------------------- ---------------- -------
<S>                      <C>                                                   <C>              <C>
  Richmond, VA ......... World headquarters, pinspotters, automatic scoring,        360,000      Owned
                          synthetic lanes, other capital equipment, consumer         54,000     Leased
                         products, used pinspotters
  Lowville, NY ......... Pins and wood lanes                                        121,000      Owned
                                                                                     50,000      Owned
  Golden, CO ........... Lane maintenance equipment (Century)                        50,000     Leased
  Bland, MO ............ Billiards tables (AMF Billiards and Games)                  37,210      Owned
                                                                                     33,373     Leased
                                                                                     32,000      Owned
                                                                                     24,000      Owned
                                                                                     16,000      Owned
                                                                                     11,000     Leased
  Miami, FL ............ Office                                                         200     Leased
</TABLE>


<TABLE>
<CAPTION>
                             International Facilities
                                                             Approximate    Owned/
Location                                     Functions     Square Footage   Leased
---------------------------------------- ---------------- ---------------- -------
<S>                                      <C>              <C>              <C>
 Emu Plains, Australia .................     Office               400      Leased
                                            Warehouse          10,100      Leased
 Brussels, Belgium .....................     Office             1,000      Leased
 Toronto, Canada .......................     Office             2,100      Leased
                                            Warehouse             400      Leased
 Beijing, China ........................     Office               390      Leased
 Guangzhou, China ......................     Office               380      Leased
                                            Warehouse           1,650      Leased
 Hong Kong .............................     Office             2,500      Leased
                                             Office             1,125      Leased
 Shanghai, China .......................     Office               400      Leased
 Levallois-Perret, France ..............     Office               984      Leased
                                            Warehouse           1,470      Leased
 Mainz-Kastel, Germany .................     Office               656      Leased
                                            Warehouse           1,650      Leased
 Bangalore, India ......................     Office             1,050      Leased
 New Delhi, India ......................     Office             2,000      Leased
 Yokohama, Japan .......................     Office             4,626      Leased
                                            Warehouse           8,808      Leased
                                         Service Center         1,634      Leased
 Seoul, South Korea ....................     Office             5,119      Leased
                                            Warehouse           7,472      Leased
 Mexico City, Mexico ...................     Office             1,300      Leased
                                            Warehouse          11,431      Leased
 Warsaw, Poland ........................     Office               209      Leased
 Granna, Sweden ........................     Office             4,515      Leased
                                            Warehouse          12,705      Leased
 Hemel Hempstead, United Kingdom .......     Office            11,500      Leased
                                            Warehouse          11,770      Leased
</TABLE>

 

                                       8

<PAGE>

Item 3. Legal Proceedings

     The Company currently and from time to time is subject to claims and
actions arising in the ordinary course of its business, including employment
discrimination claims, workers' compensation claims and personal injury claims
from customers of Bowling Centers. In some actions, plaintiffs request punitive
or other damages that may not be covered by insurance. In management's opinion,
the claims and actions in which the Company is involved will not have a
material adverse effect on its financial position or results of operations.
However, it is not possible to assure the outcome of such claims and actions.

     On March 5, 1996, the defendant in an action entitled Northland Bowl and
Sports Center, Inc. and Recreation Association, II v. Golden Giant, Inc., d/b/a
Golden Giant Building Systems, Court of Common Pleas, Centre County,
Pennsylvania, asserted a third-party claim against AMF Bowling Products, Inc.,
a wholly-owned, indirect subsidiary of AMF Bowling ("AMF Bowling Products"),
and other parties. The defendant, Golden Giant, Inc. ("Golden Giant"), a
construction company, was originally named as the sole defendant by a bowling
center (not owned or operated by the Company) in connection with the collapse
of the bowling center's roof in 1994. Golden Giant named AMF Bowling Products
as a defendant, and charged AMF with negligence and breach of implied warranty
for installing scoring monitors (four years before the roof collapsed) in a
portion of the building that allegedly could not adequately support the
additional weight of the monitors. The plaintiff claimed damages in excess of
$2.9 million. Golden Giant asserted that, if the plaintiff is entitled to any
recovery, it should come in whole or in part from AMF Bowling Products. On
March 25, 1997, the court dismissed AMF Bowling Products from the lawsuit,
which continues against the other defendants. The plaintiff appealed the order
dismissing AMF Bowling Products. In October 1997, the appellate court dismissed
the plaintiff's appeal as premature.


Regulatory Matters

     There are no unique federal or state regulations applicable to bowling
center operations or equipment manufacturing. State and local governments
require establishments to hold permits to sell alcoholic beverages, and,
although regulations vary from state to state, once permits are issued, they
generally remain in place indefinitely (except for routine renewals) without
burdensome reporting or supervision.


Environmental Matters

     AMF's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of, certain materials, substances
and wastes. AMF believes that its operations are in material compliance with
the terms of all applicable environmental laws and regulations as currently
interpreted.

     The Company currently and from time to time is subject to environmental
claims. In management's opinion, the claims currently asserted against the
Company are not likely to have a material adverse effect on its financial
position or results of operations. However, it is not possible to assure the
ultimate outcome of such claims. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Environmental Matters".


Item 4.  Submission of Matters to a Vote of Security Holders.

     None.

                                       9

<PAGE>

Executive Officers of AMF Bowling

     The following table sets forth information concerning the individuals who
are the executive officers of AMF Bowling:




<TABLE>
<CAPTION>
Name                              Age    Position
------------------------------   -----   ------------------------------
<S>                              <C>     <C>
  Douglas J. Stanard             51      Director; President and Chief
                                         Executive Officer
  Stephen E. Hare                44      Director; Executive Vice
                                         President; Chief Financial
                                         Officer and Treasurer
  Michael P. Bardaro             47      Vice President; Corporate
                                         Controller and Assistant
                                         Secretary
</TABLE>

     DOUGLAS J. STANARD is the President and Chief Executive Officer of AMF
Bowling. He served as President of AMF Worldwide Bowling Centers from 1993 to
1995.

     STEPHEN E. HARE is the Executive Vice President, Chief Financial Officer
and Treasurer of AMF Bowling. Prior to joining AMF Bowling in 1996, Mr. Hare
was Senior Vice President and Chief Financial Officer of James River
Corporation of Virginia, beginning in 1992.

     MICHAEL P. BARDARO is Vice President, Corporate Controller and Assistant
Secretary of AMF Bowling. He joined AMF after having been Controller at General
Medical Manufacturing Co. in Richmond, Virginia between 1989 and 1994.


                                       10

<PAGE>

                                    PART II

Item 5. Market for AMF Bowling Common Stock and Related Stockholder Matters

     AMF Bowling's Common Stock (the "Common Stock"), $.01 par value, is traded
on the New York Stock Exchange under the symbol "PIN". Prior to the Initial
Public Offering on November 7, 1997, there was no market for the Common Stock.
See "Item 1. Business -- General Development of Business", "Note 12.
Stockholders' Equity" in the Notes to Consolidated Financial Statements, and the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders. The
reported high and low sales prices for the Common Stock for the period from
November 7, 1997, through December 31, 1997 were $25  1/8 and $21  1/2,
respectively. As of March 23, 1998, there were 3,193 holders of record of the
Common Stock.

     AMF Bowling has not since its inception paid any cash dividends on the
Common Stock and intends to retain all earnings, if any, for use in the
Company's business and does not anticipate paying cash dividends in the
foreseeable future. The Company's Credit Agreement (as hereinafter defined)
restricts the payment of cash dividends on the Common Stock.


Item 6. Selected Financial Data

     The selected financial data set forth below for the fiscal years indicated
were derived from AMF Bowling's audited consolidated financial statements for
the year ended December 31, 1997, and the period ended December 31, 1996, and
the audited combined financial statements for the four months ended April 30,
1996, and the years ended December 31, 1995, 1994, and 1993, of the AMF Bowling
Group which represented the Bowling Centers and Bowling Products businesses of
the Predecessor Company. The consolidated pro forma results set forth below are
presented as if the Acquisition had occurred on January 1, 1996, and are based
on the Predecessor Company's statement of operations for the period ended April
30, 1996, AMF Bowling's statement of income from its inception through December
31, 1996 and adjustments giving effect to the Acquisition under the purchase
method of accounting. See "Note 3. Pro Forma Results of Operations" in the
Notes to Consolidated Financial Statements. The data should be read in
conjunction with AMF Bowling's Consolidated Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

     The comparability of the selected financial data is impacted based on the
Company's bowling center acquisition program. In 1996, the Company acquired 57
bowling centers from unrelated sellers. The combined purchase price was $108.0
million. In 1997, the Company acquired 122 bowling centers from a number of
unrelated sellers. The combined purchase price was $214.8 million. See "Item 1.
Business -- General Development of Business".

     The selected financial data include operating results expressed in terms
of EBITDA, which represents earnings before net interest expense, income taxes,
depreciation and amortization, and other income and expenses. EBITDA
information is included because the Company understands that such information
is a standard measure commonly reported and widely used by certain investors
and analysts. EBITDA is not intended to represent and should not be considered
more meaningful than, or an alternative to, other measures of performance
determined in accordance with GAAP.


                                       11

<PAGE>


<TABLE>
<CAPTION>
                                                                                                                      Four Months
                                                                                                                         Ended
                                                              For the year ended December 31,                          April 30,
                                        ---------------------------------------------------------------------------- ------------
                                                        (dollars in millions, except per share data)
                                                                              Pro Forma
                                                                                 AMF
                                                                              Bowling,                                Predecessor
                                                Predecessor Company             Inc.          AMF Bowling, Inc.         Company
                                        ----------------------------------- ------------ --------------------------- ------------
                                            1993        1994        1995       1996(a)      1996(b)         1997        1996(c)
                                        ----------- ----------- ----------- ------------ ------------- ------------- ------------
<S>                                     <C>         <C>         <C>         <C>          <C>           <C>           <C>
 Income Statement Data:
 Operating revenue ....................  $ 427.6     $ 517.8     $ 564.9      $ 548.9      $ 384.8       $ 713.7       $ 164.9
                                         -------     -------     -------      -------      -------       -------       -------
 Cost of goods sold ...................    153.2       196.0       184.1        173.6        130.5         212.6         43.1
 Bowling center operating
  expenses ............................    108.5       115.2       166.5        178.8        123.7         251.2         80.2
 Selling, general and adminis-
  trative expenses ....................     41.9        57.1        50.8         51.0         35.1          64.5         35.5
 Depreciation and amortization ........     21.4        24.8        39.1         73.5         49.4         102.5         15.1
                                         -------     -------     -------      -------      -------       -------       -------
 Operating income (loss) ..............    102.6       124.7       124.4         72.0         46.1          82.9        (  9.0)
 Interest expense, gross ..............      5.0         7.4        15.7        106.2         78.0         118.4          4.5
 Other income (expense),
  net .................................    (  0.1)     (  1.5)       0.2          3.8          3.9         (  8.1)      (  0.1)
                                         --------    --------    -------      -------      -------       --------      -------
 Income (loss) before income
  taxes ...............................     97.5       115.8       108.9        ( 30.4)      ( 28.0)       ( 43.6)      ( 13.6)
 Provision (benefit) for income
  taxes ...............................     15.1        16.5        12.1        (  8.9)      (  8.5)       ( 12.8)      (  1.7)
                                         --------    --------    -------      --------     --------      --------      -------
 Net income (loss) before equity
  in loss of joint ventures and
  extraordinary items .................     82.4        99.3        96.8        ( 21.5)      ( 19.5)       ( 30.8)      ( 11.9)
 Equity in loss of joint
  ventures ............................        --          --          --           --           --        (  1.4)          --
                                         --------    --------    --------     --------     --------      --------      -------
 Net income (loss) before
  extraordinary items .................     82.4        99.3        96.8        ( 21.5)      ( 19.5)       ( 32.2)      ( 11.9)
 Extraordinary items, net of tax ......        --          --          --           --           --        ( 23.4)          --
                                         --------    --------    --------     --------     --------      --------      -------
 Net income (loss) ....................  $  82.4     $  99.3     $  96.8      $  (21.5)    $  (19.5)     $  (55.6)    $  (11.9)
                                         ========    ========    ========     ========     ========      ========     ========
 Net loss per share before
  extraordinary items .................                                       $  (0.55)    $  (0.49)     $  (0.71)
 Per share effect of extraordinary
  items ...............................                                             --           --       (  0.52)
                                                                              --------     --------      --------
 Net loss per share ...................                                       $  (0.55)    $  (0.49)     $  (1.23)
                                                                              ========     ========      ========
 Selected Data:
 EBITDA ...............................  $ 124.0     $ 149.5     $ 163.5      $ 145.5      $  95.5       $ 185.4      $   6.1
 EBITDA margin ........................      29.0%       28.9%       28.9%       26.5  %      24.8  %       26.0  %        3.7%
</TABLE>


<TABLE>
<CAPTION>
                                                       As of December 31,
                                 ---------------------------------------------------------------
                                                      (dollars in millions)
                                         Predecessor Company               AMF Bowling, Inc.
                                 ------------------------------------   ------------------------
                                    1993         1994         1995          1996         1997
Balance Sheet Data:              ----------   ----------   ----------   -----------   ----------
<S>                              <C>          <C>          <C>          <C>           <C>
Working capital (d) ..........   $ 18.9       $ 16.9       $ 29.2       $    7.8      $   43.9
Goodwill, net ................      --           --           --          771.1         772.3
Total assets .................   228.2        410.2        400.4        1,594.0       1,832.1
Total debt ...................    75.7        186.1        167.4        1,091.3       1,060.6
Stockholders' equity .........    88.6        132.4        161.5          408.8         654.0
Total capital ................   164.3        318.5        328.9        1,500.1       1,714.6
</TABLE>

---------
(a) Represents results of operations from January 1, 1996 through December 31,
    1996 on a pro forma basis. See "Note 3. Pro Forma Results of Operations"
    in the Notes to Consolidated Financial Statements.

(b) For the period from the inception date of January 12, 1996 through December
    31, 1996, which includes the results of operations of the acquired
    business from May 1, 1996 through December 31, 1996.

(c) Represents results of operations from January 1, 1996 through April 30,
    1996.

(d) Predecessor Company amounts reflect elimination of affiliate receivables
    and payables.

                                       12

<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
   of Operations

     Information in this report contains forward-looking statements, which are
statements other than historical information or statements of current
condition. Some forward-looking statements may be identified by use of terms
such as "believes", "anticipates", "intends", or "expects". These
forward-looking statements relate to the plans and objectives of the Company
for future operations. In light of the risks and uncertainties inherent in all
future projections, the inclusion of forward-looking statements in this report
should not be regarded as a representation by AMF Bowling or any other person
that the objectives or plans of the Company will be achieved. Many factors
could cause the Company's actual results to differ materially from those in the
forward-looking statements, including, among other things: (i) the Company's
ability to successfully execute acquisition opportunities and to integrate
acquired operations into its business, (ii) the continued development and
growth of new bowling markets and the Company's ability to continue to identify
those markets and to generate sales of products in those markets before market
saturation, (iii) the risk of adverse political acts or developments in the
Company's existing or proposed markets for its products or in which it operates
its bowling centers, (iv) the Company's ability to retain experienced senior
management, (v) the ability of AMF Bowling and its subsidiaries to generate
sufficient cash flow in a timely manner to satisfy principal and interest
payments on their indebtedness and (vi) the popularity of bowling as an
activity in the United States and abroad. In addition, actual results may also
differ materially from forward-looking statements in this report as a result of
factors generally applicable to companies in similar businesses, including,
among other things: (i) a decline in general economic conditions, (ii) an
adverse judgment in pending or future litigation and (iii) increased
competitive pressure from current competitors and future market entrants. The
foregoing review of important factors should not be construed as exhaustive and
should be read in conjunction with other cautionary statements that are
included elsewhere in this report. AMF Bowling undertakes no obligation to
release publicly the results of any future revisions it may make to
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.


Background

     This discussion should be read in conjunction with the information
contained under "Selected Financial Data" and in AMF Bowling's Consolidated
Financial Statements included elsewhere herein.

     Management believes that comparisons of the results of operations for the
years ended December 31, 1997 and 1996, on a pro forma basis, and December 31,
1996, on a pro forma basis, and 1995, are more meaningful than comparisons on an
historical basis. This is due primarily to significant changes in depreciation
and amortization that result from the application of the purchase method of
accounting for the Acquisition and from the increased interest expense due to
the debt incurred related to the Acquisition. Discussion of the results of the
Company's operations for the year ended December 31, 1997, is on an historical
basis. Discussion of the results of the Predecessor Company's operations for the
year ended December 31, 1995, is on an historical basis. See "Note 3. Pro Forma
Results of Operations" in the Notes to Consolidated Financial Statements.


     To facilitate a meaningful comparison, in addition to discussing the
consolidated results of the Company's operations, certain portions of this
Management's Discussion and Analysis of Financial Condition and Results of
Operations discuss results of Bowling Centers and Bowling Products separately.

     The results of operations of Bowling Centers, Bowling Products and the
consolidated group of companies are set forth below. The two European centers
that were not acquired by the Company as part of the Acquisition, as discussed
in "Note 1. Organization" in the Notes to Consolidated Financial Statements,
are included in the 1996 actual Predecessor Company results and excluded from
1996 pro forma results. The two centers have no material impact on the
Company's financial statements or on the information presented in this section.
 

     For 1995, Bowling Centers adopted a calendar year end; accordingly, the
Bowling Centers results of operations for the year ended December 31, 1995
includes the results of U.S. operations for the period from December 26, 1994
through December 31, 1995. Total revenue for the period from December 26, 1994
through December 31, 1994 was approximately $2.0 million.

     The business segment results presented below are before intersegment
eliminations since the Company's management believes that this will provide a
more accurate comparison of performance by segment from year to year. The
intersegment eliminations are not material. Interest expense is presented on a
gross basis.


                                       13

<PAGE>

Performance by Business Segment

     Bowling Centers

     Bowling Centers derives its revenue and profits from three principal
sources: (i) bowling, (ii) food and beverage and (iii) other sources, such as
shoe rental, amusement games, billiards and pro shops. In 1997, bowling, food
and beverage and other revenue represented 60.6%, 25.4% and 14.0% of total
Bowling Centers revenue, respectively.

     The results shown below reflect both U.S. and international Bowling
Centers operations.



<TABLE>
<CAPTION>
                                                            For the year ended December 31,
                                                          ------------------------------------
                                                                 (dollars in millions)
                                                                         Pro Forma
                                                                            AMF        AMF
                                                           Predecessor   Bowling,    Bowling,
                                                             Company       Inc.        Inc.
                                                          ------------- ---------- -----------
                                                               1995       1996(a)      1997
                                                          ------------- ---------- -----------
<S>                                                       <C>           <C>        <C>
      Bowling Centers (before intersegment eliminations):
      Operating revenue .................................   $ 292.3      $ 307.3    $ 429.1
                                                            -------      -------    -------
      Cost of goods sold ................................      26.3         27.5       39.9
      Bowling center operating expenses .................     168.7        177.2      252.5
      Selling, general and administrative expenses ......      10.5          7.0        6.3
      Depreciation and amortization .....................      36.6         56.2       82.8
                                                            -------      -------    -------
      Operating income ..................................   $  50.2      $  39.4    $  47.6
                                                            =======      =======    =======
      Selected Data:
      EBITDA ............................................   $  86.8      $  95.6    $ 130.4
      EBITDA margin .....................................       29.7%        31.1%      30.4%
      Number of centers, end of period ..................        286          341        470
      Number of lanes, end of period ....................      9,430       11,782     16,315
</TABLE>

---------
  (a) Represents pro forma results of operations from January 1, 1996 through
  December 31, 1996. See "Note 3. Pro Forma Results of Operations" in the
  Notes to Consolidated Financial Statements. The pro forma 1996 amount of
  selling, general and administrative expenses has been adjusted to reflect a
  reallocation to corporate of certain general and administrative expenses
  previously allocated to the Bowling Centers segment. The 1995 amounts have
  not been restated to reflect this change.

     Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
Bowling Centers operating revenue increased $121.8 million, or 39.6%. An
increase of $125.8 million was attributable to new centers, of which $116.5
million was from U.S. centers, and $9.3 million was from international centers.
An increase of $1.1 million, or 0.4%, in constant centers (centers in operation
for at least one full fiscal year) revenue was primarily a result of an
increase in revenue in the Northeast region of the United States, a region in
which the Company has a large number of centers and which experienced severe
weather conditions during the first quarter of 1996. The increase in constant
centers revenue for the year ended December 31, 1997 compared to the same
period in 1996 was net of $1.0 million additional revenue in 1996 due to leap
year, a $3.0 million decrease in revenue from the Japanese centers in 1997,
which was primarily caused by recent poor economic conditions in Japan, and a
decrease of $1.0 million in operating revenue in the third quarter of 1997
compared to the same period in 1996 which resulted from pricing specials used
in the U.S. and international centers to overcome lower lineage (defined as
games per lane per day) which resulted from the hot, dry weather in these
regions. Excluding these special items, constant center revenue would have
increased $6.1 million, or 2.2%, in the year ended December 31, 1997 compared
to the same period in 1996. A decrease in operating revenue of $5.1 million was
primarily attributable to the closing of eight U.S. centers in May 1996, and
February, May and December 1997, respectively.

     Cost of goods sold increased $12.4 million, or 45.1%, primarily as a
result of the net increase in the number of centers.

     Operating expenses increased $75.3 million, or 42.5%, of which
approximately $74.6 million was attributable to new centers, including $69.6
million attributable to U.S. centers and $5.0 million attributable to
international centers. As a percentage of its revenue, Bowling Centers
operating expenses were 57.7% for the year ended December 31, 1996, on a pro
forma basis, versus 58.8% for the year ended December 31, 1997.


                                       14

<PAGE>

     A decrease of $0.7 million, or 10.0%, in selling, general and
administrative expenses was attributable to cost controls implemented in
international centers in response to lower lineage discussed above and savings
associated with closed centers, partially offset by additional expenses due to
new centers.

     An increase of $34.8 million, or 36.4%, in EBITDA was attributable to new
centers. EBITDA margin in 1997 was 30.4% compared to 31.1% in 1996, on a pro
forma basis.

     Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Operating revenue increased $15.0 million, or 5.1%. Increases of $19.0 million
attributable to the addition of 57 new centers purchased during the last two
quarters of 1996 and $0.5 million attributable to increases at constant centers
were offset by decreases of $2.2 million attributable to the two bowling
centers which were not acquired as part of the Acquisition and $2.3 million
attributable to the closure of seven of the 106 bowling centers originally
purchased by the Predecessor Company from Fair Lanes. The constant center
revenue increase was attributable to an increase in international revenue of
$2.4 million, offset by a decrease in U.S. constant centers revenue of $1.9
million. The decrease in U.S. constant centers revenue was largely a result of
a decrease in revenue due to the severe weather conditions in the Northeast, a
region in which the Company has a large number of centers, during the first
quarter of 1996. An increase in bowling prices in the U.S. during 1996 was
partially offset by a decrease in U.S. lineage. The increase in international
revenue was primarily a result of an increase in average price per game and
increased food and beverage revenue.

     Cost of goods sold increased $1.2 million, or 4.6%, primarily as a result
of new centers.

     Bowling Centers operating expenses increased by $8.5 million, or 5.0%. An
increase of $10.0 million attributable to new centers and a net increase of
$2.2 million attributable to constant centers were offset by a decrease of $3.7
million primarily attributable to the two centers not acquired in the
Acquisition and the closure of seven Fair Lanes centers. The net increase in
constant centers operating expenses was a result of an increase of $4.1 million
in international centers due to increased rents and payroll expenses, and a
decrease of $1.9 million in U.S. centers resulting from the implementation of
cost reduction plans developed by management after assessing the impact of the
severe weather conditions during the first quarter of 1996. As a percentage of
total revenue, Bowling Centers operating expenses remained constant at 57.7%
during 1996 and 1995.

     Of the $3.5 million decrease in selling, general and administrative
expenses, $3.6 million is due to a reallocation to corporate of certain
selling, general and administrative expenses previously allocated to the
Bowling Centers segment.

     An increase of $8.8 million, or 10.1%, in EBITDA was attributable to new
centers. EBITDA margin in 1996 was 31.1% compared to 29.7% in 1995.


                                       15

<PAGE>

 Bowling Products

     The results shown below reflect Bowling Products operations.



<TABLE>
<CAPTION>
                                                                   For the year ended December 31,
                                                                -------------------------------------
                                                                        (dollars in millions)
                                                                               Pro Forma
                                                                                  AMF         AMF
                                                                 Predecessor    Bowling,    Bowling,
                                                                   Company        Inc.        Inc.
                                                                ------------- ----------- -----------
                                                                     1995       1996(a)       1997
                                                                ------------- ----------- -----------
<S>                                                             <C>           <C>         <C>
       Bowling Products (before intersegment eliminations):
       Operating revenue ......................................   $ 286.5      $ 252.1     $ 299.3
       Cost of goods sold .....................................     166.9        153.3       185.7
                                                                  -------      -------     -------
       Gross profit ...........................................     119.6         98.8       113.6
       Selling, general and administrative expenses ...........      40.3         36.2        42.8
       Depreciation and amortization ..........................       3.6         18.5        19.8
                                                                  -------      -------     -------
       Operating income .......................................   $  75.7      $  44.1     $  51.0
                                                                  =======      =======     =======
       Selected Data:
       Gross profit margin ....................................       41.7%        39.2%       38.0%
       EBITDA .................................................   $  79.3      $  62.6     $  70.8
       EBITDA margin ..........................................       27.7%        24.8%       23.7%
       New Center Packages sold ...............................      4,437        3,029       4,576
       New Center Packages backlog end of period (b) ..........        940        1,426       1,725
</TABLE>

---------
  (a) Represents results of operations from January 1, 1996 through December
  31, 1996 on a pro forma basis. See "Note 3. Pro Forma Results of Operations"
  in the Notes to Consolidated Financial Statements. The pro forma 1996 amount
  of selling, general and administrative expenses has been adjusted to reflect
  a reallocation to corporate of certain overhead expenses previously
  allocated to the Bowling Products segment. The 1995 amounts have not been
  restated to reflect this change.

  (b) NCP orders included in the backlog are sometimes cancelled by customers
  in the normal course of business. Accordingly, the Company has experienced,
  and expects to continue to experience, the cancellation of a portion of such
  orders. The backlog as of March 13, 1998 is 1,765 units, which is flat
  compared to the same period last year. See " -- Backlog; Recent NCP Sales".

     Year Ended December 31, 1997 Compared to Year Ended December 31, 1996.
Bowling Products operating revenue increased $47.2 million, or 18.7%, primarily
due to an increase of $44.7 million, or 37.1%, in NCP revenue, and an increase
of $1.5 million, or 1.1%, in Modernization and Consumer Products revenue. The
increase in NCP revenue was due to an overall increase in NCP sales of 1,547
units which occurred primarily in Asia Pacific, Europe, South America and the
Middle East. See " -- Seasonality and Market Development Cycles".

     Gross profit increased by $14.8 million, or 15.0%. Gross profit margin was
39.2% in 1996, on a pro forma basis, and 38.0% in 1997. Competitive pricing
pressure in certain markets and higher cost of sales, both experienced in the
third and fourth quarter, and unfavorable exchange rates experienced in certain
markets in the fourth quarter, resulted in lower year-to-date margins in 1997.
See " -- International Operations".

     Bowling Products selling, general and administrative expenses increased by
$6.6 million, or 18.2%, primarily as a result of a $4.3 million increase
attributable to payroll and facilities expenses related to opening and staffing
certain of the Company's international sales and service offices, and an
increase of $3.7 million attributable to advertising and promotion expenses.
These increases were offset by a $1.4 million decrease in payroll, facilities
and related expenses at U.S. locations.

     EBITDA increased $8.2 million, or 13.1%, and EBITDA margin decreased from
24.8% in 1996, to 23.7% in 1997. The margin decline was impacted by the pricing
pressure and unfavorable exchange rates discussed above.

     Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Operating revenue decreased by $34.4 million, or 12.0%, primarily due to a
decrease of $35.3 million, or 22.7%, in NCP revenue offset by an increase of
$0.9 million, or 0.7%., in Modernization and Consumer Products revenue. The
decrease in NCP revenue was due to an overall decrease in NCP sales by 1,408
units in 1996 compared to 1995, particularly for maturing markets including
South


                                       16

<PAGE>

Korea and Taiwan, offset in part by an increase in NCP revenue from sales to
China. From 1995 to 1996, total NCP sales to South Korea decreased by 1,165
units and to Taiwan decreased by 1,323 units. Additionally, there was a
moderate increase in NCP units sold in the Americas and southern Europe during
1996. The increase in sales to China occurred during the last six months of
1996. See " -- Seasonality and Market Development Cycles". The increase in
Modernization and Consumer Products revenue was due in part to increased sales
of synthetic lanes and automatic scoring in the United States.

     Gross profit decreased by $20.8 million, or 17.4%. Gross profit margin was
41.7% in 1995 and 39.2% in 1996. Of this 2.5% decrease, 0.8% was attributable
to an increase in certain inventory and warranty reserves in the Modernization
and Consumer Products categories of $2.1 million, and 1.7% was attributable to
the lower margins on decreased revenues, particularly in Japan, due to price
cuts implemented by the Company's management in response to stiffer competition
in the Modernization and Consumer Products category.

     Of the $4.1 million decrease in selling, general and administrative
expenses, $4.2 million was due to a reallocation to corporate of certain
overhead expenses previously allocated to the Bowling Products segment.

     EBITDA decreased $16.7 million, or 21.1%, and EBITDA margin decreased from
27.7% in 1995, to 24.8% in 1996, primarily due to the decreased NCP revenue and
gross profit discussed above.


Consolidated Items

     Depreciation and Amortization. For the year ended December 31, 1997,
depreciation and amortization increased by $29.0 million, or 39.5%, over the
same period in 1996, primarily due to depreciation of property and equipment of
centers acquired since May, 1996 and incremental depreciation expense as a
result of capital expenditures.

     For the year ended December 31, 1996, depreciation and amortization
increased by $34.4 million, or 88.0%, over the same period in 1995, primarily
as a result of recording fixed assets at fair market value and goodwill in
accordance with the purchase accounting method applied for the Acquisition.

     Interest Expense. Gross interest expense increased by $12.2 million, or
11.5%, in the year ended December 31, 1997 compared with the same period in
1996, primarily due to interest paid on increased levels of bank debt as a
result of center acquisitions. See " -- Liquidity" and " -- Capital Resources".
Cash interest paid by the Company for the year ended December 1997 totaled
$83.2 million, while non-cash bond interest amortization totaled $33.6 million.
 

     For the year ended December 31, 1996, gross interest expense increased by
$90.5 million, or 576.4%, compared with the same period in 1995 due to interest
paid on debt incurred to finance the Acquisition and interest on the
Acquisition Facility. Cash interest paid by the Company for the year ended
December 31, 1996 totaled $44.5 million, while non-cash bond interest
amortization totaled $24.7 million.

     Net Income (Loss). Net loss increased $34.1 million, or 158.6%, for the
year ended December 31, 1997 compared with the same period in 1996. Increases
of $39.9 million in EBITDA discussed above on a segment basis and income tax
benefit of $3.9 million were offset by increases of $29.0 million in
depreciation and amortization expense, $12.2 million in interest expense, $23.4
million of extraordinary charges recorded in the fourth quarter as described
below, $11.9 million in other expenses and $1.4 million of equity in loss of
joint ventures.

     The Company incurred after-tax extraordinary charges totaling $23.4 million
in the fourth quarter of 1997 as a result of entering into the Third Amended and
Restated Credit Agreement (the "Credit Agreement"), the premium paid to redeem a
portion of the senior subordinated discount notes with the proceeds of the
Initial Public Offering and the write-off of the portion of deferred financing
costs attributable to the senior subordinated discount notes redeemed. See "Note
9. Long-Term Debt" in the Notes to Consolidated Financial Statements and
"Selected Quarterly Data" included elsewhere herein.

     Of the $11.9 million increase in other expenses, $3.6 million is
attributable to the write down of seven U.S. centers closed in 1997 and three
U.S. centers which the Company will close in 1998, $1.6 million is attributable
to an increase in losses recorded on sales of property and equipment and $3.0
million represents an increase in losses on foreign exchange transactions. In
addition to the increases in these expenses, interest income decreased $3.7
million. Proceeds from the issuance of senior subordinated notes and senior
subordinated discount notes which were used to partially fund the Acquisition
were received by the Company in March 1996, and earned interest income until
May 1, 1996, the date of Acquisition.

     The Company accounts for its investments in Hong Leong JV and Playcenter
JV by the equity method. For the year ended December 31, 1997, the Company
incurred a loss of $1.4 million as equity in loss of joint ventures. See "Note
16. Joint Ventures" in the Notes to Consolidated Financial Statements.


                                       17

<PAGE>

     The decline of $118.3 million, or 122.2%, in net income from $96.8 million
in 1995 to a net loss of $(21.5) million in 1996, on a pro forma basis, was
primarily attributable to a decrease in Bowling Products EBITDA resulting from
the decline in NCP revenue and higher depreciation and amortization and
interest expense resulting from the Acquisition after allowing for an $8.9
million tax benefit.

     Income Taxes. Prior to the Acquisition, certain of the companies within
the Predecessor Company elected S corporation status under the Internal Revenue
Code of 1986, as amended (the "Code"). Upon consummation of the Acquisition,
those companies became taxable corporations under the Code.

     In connection with the Acquisition, the two principal subsidiaries of the
Company elected under Section 338(h)(10) of the Code to treat the stock
purchase as a deemed asset acquisition for the purposes of U.S. income taxes.
These elections permitted both of the affiliated companies to revalue their
assets to fair market value and to treat any amortizable goodwill as tax
deductible over fifteen years.

     As of December 31, 1997, the Company had net operating losses of
approximately $110.0 million and foreign tax credits of $12.4 million which
will carry over to future years to offset U.S. taxes. The foreign tax credits
will begin to expire in the year 2001 and the net operating losses will begin
to expire in the year 2011. The Company had not recorded a valuation reserve as
of December 31, 1997 because the Company expects to utilize these net operating
losses and foreign tax credits prior to their expiration.


Liquidity

     Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

     The following discussion compares AMF Bowling's results for the year ended
December 31, 1997 with the period ended December 31, 1996, on an historical
basis.

     The Company's primary source of liquidity is cash provided by operations
and credit facilities as described below. Working capital on December 31, 1996
was $7.8 million compared with $43.9 million as of December 31, 1997, an
increase of $36.1 million. Accounts receivable increased $31.3 million
primarily as a result of increased NCP revenue, inventory increased $15.6
million in advance of future shipments, deferred taxes and other current assets
increased $5.9 million and the current portion of long-term debt decreased
$15.0 million as a result of principal payments on the Credit Agreement. These
increases in working capital were offset by an increase of $10.0 million in
accounts payable attributable to an increase in production in advance of future
shipments, an increase of $13.9 million caused by changes in other current
liabilities and a decrease in cash of $7.8 million primarily attributable to
payments on debt under the Credit Agreement and internal funding of certain
bowling center acquisitions.

     Net cash flows provided by operating activities were $73.8 million for the
period ended December 31, 1996 compared with net cash provided of $47.7 million
for the year ended December 31, 1997, a decrease of $26.1 million. Net cash was
provided from an increase of $53.1 million in depreciation and amortization as
a result of incremental depreciation recorded on bowling center acquisitions
and capital expenditures of the Company, an increase of $8.8 million which
resulted from amortization of the discount related to the bonds used to
partially fund the Acquisition and an increase of $4.0 million attributable to
loss recorded on the sale of property and equipment. In 1997, net cash of $1.4
million was provided by the equity in loss of joint ventures and $23.4 million
was provided by the after-tax extraordinary charges discussed above. Net cash
used resulted from an increase of $36.1 million in net loss, an increase of
$19.6 million in the change in accounts receivable primarily resulting from the
increased levels of NCP sales compared with the same period in 1996, an
increase of $18.8 million in the change in inventory primarily reflecting the
increased backlog of NCP orders to be shipped after December 31, 1997, an
increase in the change in other assets of $8.9 million, an increase in the
change in net deferred income tax assets of $6.2 million and a decrease of
$27.2 million in the change in accounts payable and other liabilities.

     Net cash flows used in investing activities were $1,467.1 million for the
period ended December 31, 1996 compared with net cash flows used of $288.6
million for the year ended December 31, 1997. During the period ended December
31, 1996, cash flows used for acquisitions of operating units, net of cash
acquired, including the Acquisition, totaled $1,450.9 million, capital spending
was $16.9 million and other investing cash flows provided were $0.7 million.
During the year ended December 31, 1997, acquisitions of bowling centers
totaled $214.8 million, capital spending was $56.7 million, investments in and
advances to the Hong Leong JV and Playcenter JV totaled $21.3 million, and
other cash flows provided by investing activities were $4.2 million
attributable to proceeds form the sale of property. See "Note 15. Acquisitions"
in the "Notes to Consolidated Financial Statements" and " -- Capital
Expenditures".


                                       18

<PAGE>

     Net cash provided by financing activities was $1,438.3 million for the
period ended December 31, 1996 compared with net cash provided of $235.7
million for the year ended December 31, 1997. During the period ended December
31, 1996, the Company had borrowings, net of deferred financing costs, of
$1,059.3 million from debt incurred to finance the Acquisition and from the
Acquisition Facility, and made payments of $38.9 million on this debt.
Additionally, a total of $420.8 million was received as capital contributions
by the institutional stockholders of AMF Bowling and certain of its officers
and directors. Of the total capital contributed, $380.8 million was for the
initial capitalization of the Company and the Acquisition, and $40.0 million
was received as additional capital contributions in connection with the
acquisition of centers from Charan. During 1997, funds were used primarily for
the payment of long-term debt totaling $304.6 million, $14.6 million was
attributable to the premium paid in connection with the redemption of a portion
of the senior subordinated discount notes discussed above, $0.7 million was
attributable to payments on non-compete obligations and $0.5 million was used
for the repurchase of an officer's shares in connection with the termination of
his employment with the Company. Funds were provided in 1997 by borrowings of
long-term debt totaling $240.4 million, $36.6 million of additional capital
contributions used in part to fund acquisitions and for other corporate
purposes and $279.1 million of net proceeds from the Initial Public Offering.
See "Note 12. Stockholders' Equity" and "Note 13. Employee Benefit Plans" in
the Notes to Consolidated Financial Statements.

     As a result of the aforementioned, cash increased by $43.6 million for the
period ended December 31, 1996 compared to a decrease of $7.8 million for the
year ended December 31, 1997.


     Year Ended December 31, 1996 Compared to year Ended December 31, 1995.

     The following discussion compares AMF Bowling's results for the period
ended December 31, 1996, with the Predecessor Company's results for the year
ended December 31, 1995, on an historical basis.

     Net cash flows from operating activities decreased $51.0 million from
$124.8 million for the year ended December 31, 1995 to $73.8 million for the
period ended December 31, 1996. This decrease was primarily due to the decrease
in net income from $96.8 million for the year ended December 31, 1995 to a net
loss of $(19.5) million for the period ended December 31, 1996 and higher
depreciation, amortization and interest expenses as a result of the
Acquisition.

     Net cash flows used in investing activities were $28.3 million for the
year ended December 31, 1995 compared with net cash flows used of $1,467.1
million for the period ended December 31, 1996. The change was due primarily to
the Acquisition. During the year ended December 31, 1995, capital spending was
$30.0 million and other investing cash flows provided were $1.7 million. During
the period ended December 31, 1996, acquisitions of operating units, net of
cash acquired, including the Acquisition, totaled $1,450.9 million, capital
spending was $16.9 million, and other cash flows provided by investing
activities were $0.7 million.

     Net cash used for financing activities was $94.7 million for the year
ended December 31, 1995 compared with net cash provided of $1,438.3 million for
the period ended December 31, 1996. This change primarily resulted from the
issuance of debt and capital contributions related to the Acquisition. During
1995, the Predecessor Company made distributions to its owners of $71.9
million, net payments on notes payable to its owners of $3.8 million, net
payments on credit note agreements and long-term debt of $21.3 million and a
payment for redemption of stock of $4.0 million. Additionally, cash of $8.3
million was received as capital contributions by stockholders.

     During the period ended December 31, 1996, the Company had borrowings, net
of deferred financing costs, of $1,059.3 million from debt incurred to finance
the Acquisition and from the Acquisition Facility, and made payments of $38.9
million on this debt. Additionally, a total of $420.8 million was received as
capital contributions by the institutional stockholders of AMF Bowling and
certain of its officers and directors. Of the total capital contributed, $380.8
million was for the initial capitalization of the Company and the Acquisition,
and $40.0 million was received as additional capital contributions in
connection with the acquisition of centers from Charan. See "Business --
General Development of Business".

     As a result of the aforementioned, cash increased by $1.6 million for the
year ended December 31, 1995 compared with an increase of $43.6 million for the
period ended December 31, 1996.


Capital Resources

     As a result of the Acquisition, the Company's total indebtedness increased
substantially. At December 31, 1997, the Company's debt structure consisted of
$621.3 million of senior debt, $250.0 million of senior subordinated notes and
$189.3 million of senior subordinated discount notes. The Company's senior debt
consisted of $446.2 million of term loans, $173.1 million of revolving credit
advances under the Bank Facility and $2.0 million represented by one mortgage
note. At December 31, 1997, the Company was capitalized with equity of $654.0
million.


                                       19

<PAGE>

     The Company has the ability to borrow for general corporate purposes and
for acquisitions pursuant to the $355.0 million Bank Facility, subject to
certain conditions. Between December 31, 1997 and March 13, 1998, additional
borrowings under the Bank Facility totaled $47.0 million and were used to fund
the acquisitions of centers and increases in working capital. At March 13,
1998, $220.1 million was outstanding under the Bank Facility.

     In September 1997, certain current stockholders of AMF Bowling purchased
an aggregate of 1,780,000 shares of Common Stock for $20.00 per share. The
aggregate $35.6 million capital contribution was used to fund acquisitions.

     In November 1997, AMF Bowling issued 15,525,000 shares of Common Stock at
$19.50 per share pursuant to the Initial Public Offering. The net proceeds of
the Initial Public Offering were approximately $279.1 million after deducting
the underwriting discount and expenses payable by AMF Bowling, and were used to
repay $150.8 million of indebtedness under the Credit Agreement and to redeem
$118.9 million in principal of the senior subordinated discount notes. See
"Note 9. Long-Term Debt" and "Note 12. Stockholders' Equity" in the Notes to
Consolidated Financial Statements.

     The Company funds its cash needs through cash flow from operations,
existing cash balances and the Bank Facility. A substantial portion of the
Company's available cash will be applied to service outstanding indebtedness.
For the year ended December 31, 1997, the Company incurred cash interest
expense of $83.0 million, representing 44.8% of EBITDA of $185.4 million for
the year. For the period from the inception date of January 12, 1996 through
December 31, 1996, the Company incurred cash interest expense of $53.0 million,
representing 55.5% of EBITDA of $95.5 million for the period.

     The Indentures for the senior subordinated notes and the senior
subordinated discount notes and the provisions of the Credit Agreement contain
financial and operating covenants and significant restrictions on the ability
of the Company to pay dividends, incur indebtedness, make investments and take
certain other corporate actions. See "Note 9. Long-Term Debt" in the Notes to
Consolidated Financial Statements.

     The Company's ability to make scheduled payments of principal of, or to
pay interest on, or to refinance its indebtedness depends on its future
performance, which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Based upon the current level of operations and anticipated growth,
management believes that available cash flow, together with available
borrowings under the Credit Agreement and other sources of liquidity, will be
adequate to meet the Company's anticipated future requirements for working
capital, capital expenditures, scheduled payments of principal of, and interest
on, its senior debt, and interest on the senior subordinated notes and senior
subordinated discount notes. There can be no assurance, however, that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available in an amount sufficient to enable the
Company to service its indebtedness or that any refinancing would be available
on commercially reasonable terms or at all.

     On November 7, 1997, the Company's bank credit agreement was amended and
restated as the Third Amended and Restated Credit Agreement, under which the
Acquisition Facility and a portion of the term facilities under the Credit
Agreement were converted into a non-amortizing revolving Bank Facility, the
aggregate size of which was increased to $355.0 million, and a portion of such
revolving credit indebtedness was repaid with proceeds of the Initial Public
Offering. Borrowings under the Bank Facility will provide the Company the
ability to finance acquisitions or new center construction.


Capital Expenditures

     For the year ended December 31, 1997, the Company's actual capital
expenditures were $56.7 million (excluding acquisitions) compared with $23.8
million for the year ended December 31, 1996, on a pro forma basis (capital
expenditures of the acquired business from January 1, 1996 through December 31,
1996.) The increase was primarily due to an ongoing modernization program in
Bowling Centers, a new point-of-sale information system in U.S. Bowling
Centers, new Company-wide information systems, and construction of a new 40
lane, state-of-the-art bowling and family entertainment center at Chelsea Piers
in New York City.

     For the period ended December 31, 1996, the Company's capital expenditures
were $23.8 million. For the year ended December 31, 1995, the Company's capital
expenditures were $30.0 million, including $9.7 million for the construction of
three new centers. The 1996 expenditures level was lower than the 1995 level in
part because in 1995 three new bowling centers were constructed.

     The Company conducts an ongoing modernization and maintenance program that
results in its centers having upgraded physical plants and generally attractive
appearances. Management believes that its historical spending level of
approximately 3.7% of Bowling Centers revenue is fully adequate to cover all
modernization and maintenance capital expenditures. Management estimates that
approximately 2.0% of Bowling Centers revenue is required for nondiscretionary
capital expenditures.


                                       20

<PAGE>

     Bowling Products has relatively modest capital investment requirements,
and the Company has followed a relatively conservative approach to capital
investment. Maintenance and replacement investments have been made when clearly
needed, but as close to the end of the useful lives of assets as possible.
Investment in new product development has received the highest investment
priority and has focused on projects with projected payback periods of one to
three years.

     The Company has the opportunity to acquire and build additional bowling
centers, both in the U.S. and internationally. The Company is prepared to
acquire or build additional bowling centers as opportunities arise and is
engaged in ongoing evaluations of and discussions with third parties regarding
possible acquisitions. Management plans to acquire centers with funding
provided under the Credit Agreement to the extent available. Under the Bank
Facility, as of December 31, 1997, the Company had the ability to borrow up to
an additional $181.9 million for acquisitions or to finance new center
construction, subject to certain conditions. Management's plans to expand the
Bowling Centers operations are subject to the continuation of favorable
economic and financial conditions, which are generally not within the Company's
control.

     Currently, the Company has entered into purchase agreements to acquire 5
U.S. centers from unrelated sellers. The Company has committed to build a
bowling center in Chicago's Marina City development and the Michael Jordan Golf
Center in Charlotte, North Carolina in 1998.

     The Company has funded its capital expenditures from cash generated by
operations and, with respect to the construction and acquisition of new
centers, internally generated cash, the Bank Facility, and issuances of common
equity. See "Note 15. Acquisitions" in the Notes to Consolidated Financial
Statements, " -- Liquidity" and " -- Capital Resources."


Seasonality and Market Development Cycles

     The U.S. bowling center operations are seasonal. The following table sets
forth AMF's U.S. constant centers revenue for the last four quarters:



<TABLE>
<CAPTION>
                                               Quarter Ending (dollars in millions)
                          ------------------------------------------------------------------------------
                           March 31, 1997     June 30, 1997     September 30, 1997     December 31, 1997
                          ----------------   ---------------   --------------------   ------------------
<S>                       <C>                <C>               <C>                    <C>
Total Revenue .........        $ 58.1             $ 41.1              $ 38.4                $ 50.6
% of Total ............          30.9%              21.8%               20.4%                 26.9%
</TABLE>

     On a consolidated basis, however, revenue and EBITDA of the Company's
businesses are neither highly seasonal nor highly cyclical. The geographic
diversity of the Company's bowling centers, which operate across different
regions of the U.S. and across eleven other countries, has provided stability
to the Company's annual cash flows. Although financial performance of Bowling
Centers operations is seasonal in nature in many countries, with cash flows
typically peaking in the winter months and reaching their lows in the summer
months, the geographic diversity of the Company's bowling centers has helped
reduce this seasonality as bowling centers in certain countries in which AMF
operates exhibit different seasonal sales patterns. As a result of the growing
number of U.S. centers attributable to the Company's acquisition program,
however, the seasonality described above may be accentuated. In Australia,
where AMF has its largest number of international centers, the reversal of
seasons relative to the U.S. helps mitigate the seasonality in worldwide
operations. AMF's cash flows are further stabilized by the location of many
centers in regions where the climates have high average temperatures and high
humidity. In the U.S., during the summer months when league bowling is
generally less active, bowling centers in the southern U.S. continue to show
strong performance. Similarly, in regions with warm summer climates such as
Hong Kong and Mexico, where bowling in air-conditioned centers may be more
attractive than outdoor activities, bowling centers show strong performance.
See "Note 17. Business Segments" in the Notes to Consolidated Financial
Statements.

     Modernization and Consumer Products sales display seasonality. The U.S.
market, which is the largest market for Modernization and Consumer Products, is
driven by the beginning of league play in the fall of each year. Operators
typically sign purchase orders, particularly for replacement equipment, during
the first four months of the year, after they receive winter league revenue
indications. Equipment is shipped and installed during the summer months, when
leagues are generally less active. Sales of modernization equipment, such as
automatic scoring and synthetic lane overlays, are less predictable and
fluctuate more than the replacement equipment because of the four to ten year
life cycles of these major products.

     The NCP category of bowling products experiences significant fluctuations
due to changes in demand for NCPs as certain markets experience high growth
followed by market maturity, at which time sales to that market decline,
sometimes rapidly. Market cycles for individual countries have, in the past,
spanned several years, with periods of high demand for several markets (e.g.,
South Korea and Taiwan) which, in the Company's experience, last five years or
more. These growth patterns do not seem to be closely tied to general economic
cycles.


                                       21

<PAGE>

International Operations

     The Company's international operations are subject to the usual risks
inherent in operating abroad, including, but not limited to, risks with respect
to currency exchange rates, economic and political destabilization, other
disruption of markets, restrictive laws and actions by foreign governments
(such as restrictions on transfer of funds, import and export duties and
quotas, foreign customs, tariffs and VATs and unexpected changes in regulatory
environments), difficulty in obtaining distribution and support,
nationalization, the laws and policies of the United States affecting trade,
international investment and loans, and foreign tax laws.

     AMF has a history of operating in a number of international markets, in
some cases, for over thirty years. Similar to other U.S.-based manufacturers
with export sales, local currency devaluation increases the cost of the
Company's bowling equipment in that market. As a result, a strengthening U.S.
dollar exchange rate may adversely impact sales volume and profit margins
during such periods.

     Current economic difficulties in certain markets of the Asia Pacific
region have resulted in a reduction in the order rate and backlog for NCPs.
Management believes that many Asia Pacific customers are delaying purchases of
NCP and Modernization equipment as they await economic stability in their
regions. As of March 13, 1998, the NCP backlog was 1,765 which is flat compared
to the same period last year.

     For the year ended December 31, 1997, NCP sales and backlog to China,
Japan and other Asia Pacific markets represented 72.7% and 70.4% of total NCP
unit sales and backlog, respectively.

     Foreign currency exchange rates also impact the translation of operating
results from international bowling centers. For the year ended December 31,
1997, revenue and EBITDA of international bowling centers represented 14.6% and
16.0% of consolidated results, respectively.

     Over the longer term, management continues to believe that international
markets, including Asia Pacific, represent attractive opportunities for bowling
equipment sales and bowling center operations. Accordingly, management
continues to pursue its strategy in international markets.


Backlog; Recent NCP Sales

     The total backlog of NCPs (which include all of the bowling equipment
necessary to outfit one new bowling lane) as of December 31, 1997 was 1,725
units and 1,765 units as of March 13, 1998. The current backlog is flat
compared to the same period last year. NCP orders included in the backlog are
sometimes cancelled by customers in the normal course of business. Accordingly,
the Company has experienced, and expects to continue to experience, the
cancellation of a portion of its NCP orders.

     NCP sales for the year ended December 31, 1997 totaled $165.1 million, a
37.1% increase over the same period in 1996. Management believes that the
significant increase was attributable to the market development and sales
programs implemented in mid-1996 which were designed to increase NCP sales
activity in certain markets around the world. While China currently represents
the largest market for NCP sales and backlog, other markets in North and South
America, Asia, Europe and the Middle East are being developed.

     The NCP backlog of approximately 1,426 units as of December 31, 1996
represented an increase of 486 units from the backlog of 940 units at December
31, 1995. This increase was primarily composed of increases in the backlogs in
China, the United States and Malaysia, partially offset by decreases in the
backlogs in Korea and Taiwan.


Impact of Inflation

     The Company has historically offset the impact of inflation through price
increases and expense reductions. Periods of high inflation could have an
adverse effect on the Company to the extent that increased borrowing costs for
floating rate debt may not be offset by increases in cash flow.


Environmental Matters

     The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage and disposal of certain materials, substances and
wastes.


                                       22

<PAGE>

     The Company currently and from time to time is subject to environmental
claims. In management's opinion, the various claims in which the Company
currently is involved are not likely to have a material adverse effect on its
financial position or results of operations. However, it is not possible to
ensure the ultimate outcome of such claims.

     The Company cannot predict with any certainty whether existing conditions
or future events, such as changes in existing laws and regulations, may give
rise to additional environmental costs. Furthermore, actions by federal, state,
local and foreign governments concerning environmental matters could result in
laws or regulations that could increase the cost of producing the Company's
products, or providing its services, or otherwise adversely affect the demand
for its products or services.


Recent Accounting Pronouncements

     Effective for the fiscal year ended December 31, 1998, the Company is
required to adopt Statement of Financial Accounting Standard ("SFAS") No. 130
"Reporting Comprehensive Income" and SFAS No. 131 "Disclosures About Segments
of an Enterprise and Related Information." The Company does not expect that
adoption of these standards will have a material impact on the Company's
financial position or results of operations. The adoption of SFAS No. 130 will
require reporting comprehensive income, which includes the foreign currency
translation adjustment, in an alternative format prescribed by the standard.


Year 2000 Issue

     The Company is currently developing and installing new worldwide
financial, information, retail and operational systems. Worldwide system
implementation is expected to be complete by December 31, 1999. In connection
with this implementation, system programs have been designed so that the year
2000 will be recognized as a valid date and will not affect the processing of
date-sensitive information. As of December 31, 1997, the Company spent a total
of $12.6 million on systems installation. The Company expects to spend an
additional $7.6 million to complete the installation. In addition, the Company
sells automatic scoring that is computerized and has developed a software
program for approximately $50 thousand that will address the year 2000 issue in
its automatic scoring. This software will be made available to customers with
service contracts at no cost and will be sold to customers without service
contracts. The Company believes that the year 2000 issue has been appropriately
addressed through the implementation of these new systems and software
development and does not expect the year 2000 issue to have a material adverse
impact on the financial position, results of operations or cash flows in future
periods.


                                       23

<PAGE>

Item 8. Financial Statements and Supplemental Data


                                     INDEX

Financial Statements



<TABLE>
<CAPTION>
                                                                                              Page
                                                                                             -----
<S>                                                                                          <C>
AMF Bowling, Inc. and Subsidiaries
o Report of Independent Public Accountants ...............................................     25
o Consolidated Balance Sheets as of December 31, 1997 and 1996 ...........................     26
o Consolidated Statements of Income for the Year Ended December 31, 1997, and the Period
  Ended December 31, 1996 ................................................................     27
o Consolidated Statements of Cash Flows for the Year Ended December 31, 1997, and the
  Period Ended December 31, 1996 .........................................................     28
o Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1997,
  and the Period Ended December 31, 1996 .................................................     29
o Notes to Consolidated Financial Statements .............................................     30

AMF Bowling Group (Predecessor Company)
o Report of Independent Accountants ......................................................     59
o Combined Balance Sheets as of April 30, 1996 and December 31, 1995 .....................     60
o Combined Statements of Operations for the Four Months Ended April 30, 1996, and the
  Year Ended December 31, 1995 ...........................................................     61
o Combined Statements of Cash Flows for the Four Months Ended April 30, 1996, and the
  Year Ended December 31, 1995 ...........................................................     62
o Combined Statements of Changes in Stockholders' Equity for the Four Months Ended April
  30, 1996, and the Year Ended December 31, 1995 .........................................     63
o Notes to Combined Financial Statements .................................................     64

AMF Bowling, Inc. and Subsidiaries
o Selected Quarterly Data (unaudited) ....................................................     92


Financial Statement Schedules
AMF Bowling, Inc.
o Report of Independent Public Accountants on Schedule I .................................     99
o Schedule I -- Condensed Financial Information of AMF Bowling, Inc. .....................    100

AMF Bowling Group (Predecessor Company)
o Schedule II -- Valuation and Qualifying Accounts and Reserves ..........................    104
</TABLE>


                                       24

<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
AMF BOWLING, INC.:

     We have audited the accompanying consolidated balance sheets of AMF
Bowling, Inc. (a Delaware corporation, formerly named AMF Holdings Inc.) and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for the year ended
December 31, 1997, and the period from inception (January 12, 1996) through
December 31, 1996. 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 an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles 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, the financial statements referred to above present fairly,
in all material respects, the financial position of AMF Bowling, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for the year ended December 31, 1997, and the
period from inception (January 12, 1996) through December 31, 1996, in
conformity with generally accepted accounting principles.



                                    ARTHUR ANDERSEN LLP



Richmond, Virginia
February 20, 1998


                                       25

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)



<TABLE>
<CAPTION>
                                                                                             As of December 31,
                                                                                       -------------------------------
                                                                                            1997             1996
                                                                                       --------------   --------------
<S>                                                                                    <C>              <C>
ASSETS
CURRENT ASSETS:
 Cash and cash equivalents .........................................................    $    35,790      $    43,568
 Accounts and notes receivable, net of allowance for
   doubtful accounts of $5,012 and $4,492, respectively ............................         73,991           42,625
 Inventories .......................................................................         56,568           41,001
 Deferred taxes and other ..........................................................         17,049           11,178
                                                                                        -----------      -----------
   TOTAL CURRENT ASSETS ............................................................        183,398          138,372
Property and equipment, net ........................................................        750,885          579,308
Leasehold interests, net ...........................................................         47,180           51,488
Deferred financing costs, net ......................................................         18,911           40,595
Goodwill, net ......................................................................        772,348          771,146
Investments in and advances to joint ventures ......................................         19,999               --
Other assets .......................................................................         39,331           13,101
                                                                                        -----------      -----------
   TOTAL ASSETS ....................................................................    $ 1,832,052      $ 1,594,010
                                                                                        ===========      ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Accounts payable ..................................................................    $    41,583      $    31,563
 Accrued expenses ..................................................................         64,865           54,357
 Income taxes payable ..............................................................          5,644            2,276
 Long-term debt, current portion ...................................................         27,376           42,376
                                                                                        -----------      -----------
   TOTAL CURRENT LIABILITIES .......................................................        139,468          130,572
Long-term debt, less current portion ...............................................      1,033,223        1,048,877
Other long-term liabilities ........................................................          5,333            1,851
Deferred income taxes ..............................................................             --            3,895
                                                                                        -----------      -----------
   TOTAL LIABILITIES ...............................................................      1,178,024        1,185,195
                                                                                        -----------      -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
 Common stock (par value $.01 per share, 200,000,000 shares authorized, 59,630,000
   issued and outstanding at December 31, 1997, 42,375,000 issued and outstanding at
   December 31, 1996) ..............................................................            596              424
 Paid-in capital ...................................................................        748,053          429,026
 Retained deficit ..................................................................        (75,048)         (19,484)
 Equity adjustment from foreign currency translation ...............................        (19,573)          (1,151)
                                                                                        -----------      -----------
    TOTAL STOCKHOLDERS' EQUITY .....................................................        654,028          408,815
                                                                                        -----------      -----------
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .....................................    $ 1,832,052      $ 1,594,010
                                                                                        ===========      ===========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                       26

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                     (in thousands, except per share data)



<TABLE>
<CAPTION>
                                                                               Year Ended      Period Ended
                                                                              December 31,     December 31,
                                                                                  1997           1996 (a)
                                                                             --------------   -------------
<S>                                                                          <C>              <C>
Operating revenue ........................................................     $  713,668      $  384,809
                                                                               ----------      ----------
OPERATING EXPENSES:
 Cost of goods sold ......................................................        212,544         130,542
 Bowling center operating expenses .......................................        251,206         123,673
 Selling, general, and administrative expenses ...........................         64,546          35,070
 Depreciation and amortization ...........................................        102,447          49,386
                                                                               ----------      ----------
   Total operating expenses ..............................................        630,743         338,671
                                                                               ----------      ----------
   Operating income ......................................................         82,925          46,138
                                                                               ----------      ----------
NONOPERATING EXPENSES (INCOME):
 Interest expense ........................................................        118,385          77,990
 Other expenses, net .....................................................         10,106           1,912
 Interest income .........................................................         (1,954)         (5,748)
                                                                               ----------      ----------
   Total nonoperating expenses ...........................................        126,537          74,154
                                                                               ----------      ----------
 Loss before income taxes ................................................        (43,612)        (28,016)
 Benefit for income taxes ................................................        (12,776)         (8,532)
                                                                               ----------      ----------
 Net loss before equity in loss of joint ventures and extraordinary items         (30,836)        (19,484)
 Equity in loss of joint ventures ........................................         (1,362)             --
                                                                               ----------      ----------
 Net loss before extraordinary items .....................................        (32,198)        (19,484)
 Extraordinary items, net of tax of $12,778 ..............................        (23,366)             --
                                                                               ----------      ----------
 Net loss ................................................................     $  (55,564)     $  (19,484)
                                                                               ==========      ==========
NET LOSS PER SHARE, BASIC AND DILUTED:
 Net loss per share before extraordinary items ...........................     $    (0.71)     $    (0.49)
 Per share effect of extraordinary items .................................          (0.52)             --
                                                                               ----------      ----------
 Net loss per share ......................................................     $    (1.23)     $    (0.49)
                                                                               ==========      ==========
 Weighted average shares outstanding .....................................         45,249          39,713
                                                                               ==========      ==========
</TABLE>

---------
(a) For the period from the inception date of January 12, 1996 through December
    31, 1996, which includes results of operations of the acquired business
    from May 1, 1996 through December 31, 1996.


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

                                       27

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)



<TABLE>
<CAPTION>
                                                                       Year Ended     Period Ended
                                                                      December 31,    December 31,
                                                                          1997          1996 (a)
                                                                     -------------- ---------------
<S>                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss ..........................................................   $  (55,564)   $    (19,484)
 Adjustments to reconcile net loss to net cash provided
   by operating activities:
   Depreciation and amortization ...................................      102,447          49,386
   Equity in loss of joint ventures ................................        1,362              --
   Extraordinary items, net of tax .................................       23,366              --
   Deferred income taxes ...........................................      (20,221)        (14,040)
   Amortization of bond discount ...................................       33,562          24,731
   Loss on the sale of property and equipment, net .................        4,446             408
   Changes in assets and liabilities:
    Accounts and notes receivable, net .............................      (26,093)         (6,504)
    Inventories ....................................................      (16,971)          1,862
    Other assets ...................................................      (12,897)         (4,010)
    Accounts payable and accrued expenses ..........................       17,782          21,930
    Income taxes payable ...........................................          602             417
    Other long-term liabilities ....................................       (4,089)         19,135
                                                                       ----------    ------------
   Net cash provided by operating activities .......................       47,732          73,831
                                                                       ----------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisitions of operating units, net of cash acquired .............     (214,761)     (1,450,928)
 Investments in and advances to joint ventures .....................      (21,361)             --
 Purchases of property and equipment ...............................      (56,703)        (16,941)
 Proceeds from the sale of property and equipment ..................        4,180             754
                                                                       ----------    ------------
 Net cash used in investing activities .............................     (288,645)     (1,467,115)
                                                                       ----------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from long-term debt, net of deferred financing costs .....      240,406       1,059,277
 Payments on long-term debt ........................................     (304,621)        (38,875)
 Prepayment penalty ................................................      (14,571)             --
 Capital contributions .............................................       36,600         420,750
 Net proceeds from initial public offering of shares ...............      279,071              --
 Repurchase of shares ..............................................         (500)             --
 Noncompete obligations ............................................         (647)         (2,892)
                                                                       ----------    ------------
 Net cash provided by financing activities .........................      235,738       1,438,260
                                                                       ----------    ------------
 Effect of exchange rates on cash ..................................       (2,603)         (1,408)
                                                                       ----------    ------------
NET (DECREASE) INCREASE IN CASH ....................................       (7,778)         43,568
Cash and cash equivalents at beginning of period ...................       43,568              --
                                                                       ----------    ------------
Cash and cash equivalents at end of period .........................   $   35,790    $     43,568
                                                                       ==========    ============
</TABLE>

---------
(a) For the period from the inception date of January 12, 1996, through
    December 31, 1996, which includes the cash flows of the acquired business
    from May 1, 1996 through December 31, 1996.


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

                                       28

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       (in thousands, except share data)



<TABLE>
<CAPTION>
                                                  Common
                                                  Shares                      Paid-in
                                               Outstanding   Common Stock     Capital
                                              ------------- -------------- -------------
<S>                                           <C>           <C>            <C>
BALANCE JANUARY 12, 1996 ....................          --       $ --         $      --
Initial capitalization ......................  38,375,000        384           389,066
Capital contribution by stockholders ........   4,000,000         40            39,960
Net loss ....................................          --         --                --
Equity adjustment from foreign currency
 translation ................................          --         --                --
                                               ----------       ----         ---------
BALANCE DECEMBER 31, 1996 ...................  42,375,000        424           429,026
                                               ----------       ----         ---------
Capital contribution by stockholders ........   1,780,000         18            35,582
Issuance of stock and stock options
 (Note 14) ..................................     100,000          1             5,027
Initial public offering of common stock .....  15,525,000        155           278,916
Repurchase of common stock ..................    (150,000)          (2)           (498)
Net loss ....................................          --         --                --
Equity adjustment from foreign currency
 translation ................................          --         --                --
                                               ----------       ------       ---------
BALANCE DECEMBER 31, 1997 ...................  59,630,000       $ 596        $ 748,053
                                               ==========       ======       =========



<CAPTION>
                                                                 Equity
                                                               Adjustment
                                                              From Foreign       Total
                                                 Retained       Currency     Stockholders'
                                                 Deflicit      Translation      Equity
                                              -------------- -------------- --------------
<S>                                           <C>            <C>            <C>
BALANCE JANUARY 12, 1996 ....................   $       --     $       --     $      --
Initial capitalization ......................           --             --       389,450
Capital contribution by stockholders ........           --             --        40,000
Net loss ....................................      (19,484)            --       (19,484)
Equity adjustment from foreign currency
 translation ................................           --         (1,151)       (1,151)
                                                ----------     ----------     ---------
BALANCE DECEMBER 31, 1996 ...................      (19,484)        (1,151)      408,815
                                                ----------     ----------     ---------
Capital contribution by stockholders ........           --             --        35,600
Issuance of stock and stock options
 (Note 14) ..................................           --             --         5,028
Initial public offering of common stock .....           --             --       279,071
Repurchase of common stock ..................           --             --          (500)
Net loss ....................................      (55,564)            --       (55,564)
Equity adjustment from foreign currency
 translation ................................           --        (18,422)      (18,422)
                                                ----------     ----------     ---------
BALANCE DECEMBER 31, 1997 ...................   $  (75,048)    $  (19,573)    $ 654,028
                                                ==========     ==========     =========
</TABLE>

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

                                       29

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
Note 1. Organization

     AMF Bowling, Inc. ("AMF Bowling") changed its name from AMF Holdings Inc.
in 1997. AMF Bowling and its subsidiaries (collectively, the "Company" or
"AMF") are principally engaged in two business segments: (i) the ownership or
operation of bowling centers, consisting of 370 U.S. bowling centers and 100
international bowling centers ("Bowling Centers"), including fourteen joint
venture centers described in "Note 16. Joint Ventures", as of December 31,
1997, and (ii) the manufacture and sale of bowling equipment such as automatic
pinspotters, automatic scoring equipment, bowling pins, lanes, ball returns,
certain spare parts, and the resale of allied products such as bowling balls,
bags, shoes, and certain other spare parts ("Bowling Products"). The principal
markets for bowling equipment are U.S. and international independent bowling
center operators.

     AMF Bowling Worldwide, Inc., formerly named AMF Group Inc. ("Bowling
Worldwide"), is a wholly owned subsidiary of AMF Group Holdings Inc. ("AMF
Group Holdings"). AMF Group Holdings is a wholly owned subsidiary of AMF
Bowling. AMF Group Holdings and Bowling Worldwide are Delaware corporations
organized by GS Capital Partners II, L.P., and certain other investment funds
(collectively, "GSCP") affiliated with Goldman, Sachs & Co. ("Goldman Sachs"),
to effect the Acquisition (described below). AMF Bowling and AMF Group Holdings
are holding companies. The principal assets in each are comprised of
investments in subsidiaries.

     Pursuant to a Stock Purchase Agreement dated February 16, 1996, between
AMF Group Holdings and the stockholders (the "Prior Owners") of AMF Bowling
Group (the "Predecessor Company"), on May 1, 1996 (the "Closing Date"), AMF
Group Holdings acquired the Predecessor Company through a stock purchase by AMF
Group Holdings' subsidiaries of all the outstanding stock of the separate
domestic and foreign corporations that constituted substantially all of the
Predecessor Company and through the purchase of certain of the assets of the
Predecessor Company's bowling center operations in Spain and Switzerland (the
"Acquisition"). AMF Group Holdings did not acquire the assets of two bowling
centers located in Madrid, Spain, and Geneva, Switzerland (both of which were
retained by the Prior Owners.)

     The purchase price for the Acquisition was approximately $1.37 billion,
less approximately $2.0 million representing debt of the Predecessor Company
which remained in place following the closing of the Acquisition. The
Acquisition was accounted for by the purchase method of accounting, pursuant to
which the purchase price was allocated among the acquired assets and
liabilities in accordance with estimates of fair market value on the date of
Acquisition. The purchase included the payment of $1.323 billion to the Prior
Owners. The Acquisition was funded with $380.8 million of contributed capital,
and $1.015 billion of debt, including bank debt and senior subordinated notes
and discount notes. The purchase price included $8.7 million which represents
warrants to purchase 870,000 shares of AMF Bowling common stock, par value $.01
per share ("Common Stock"), which were issued on the Closing Date to The
Goldman Sachs Group, L.P., an affiliate of Goldman Sachs. See "Note 9.
Long-Term Debt". See also "Note 14. Supplemental Disclosures to the
Consolidated Statements of Cash Flows" which presents the components of the
purchase price allocation.


Note 2. Significant Accounting Policies

     Basis of Presentation

     The results of operations for the year ended December 31, 1997, reflect
the results of the Company from January 1, 1997 ("1997"). The results of
operations for the period ended December 31, 1996, reflect the results of the
Company since the inception date of January 12, 1996, and the subsidiaries
acquired as of May 1, 1996, from the Predecessor Company ("1996"). All
significant intercompany balances and transactions have been eliminated in the
accompanying consolidated financial statements. Certain amounts in the prior
year's financial statements have been reclassified to conform to the current
year presentation. All dollar amounts are in thousands, except where otherwise
indicated.


     Joint Ventures

     Investments in joint ventures are accounted for under the equity method.
These investments are managed as part of the Company's Bowling Centers segment
operations, and the Company's share of joint venture earnings is included in
earnings for the Bowling Centers segment. (See "Note 16. Joint Venures")


                                       30

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
     Use of Estimates

     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 dates of the financial
statements and the reported amounts of revenue and expenses during the
reporting periods. The more significant estimates made by management include
allowances for obsolete inventory, uncollectible accounts receivable,
realization of goodwill and other deferred assets, litigation and claims,
product warranty costs, and self-insurance costs. Actual results could differ
from those estimates.


     Revenue Recognition

     For Bowling Products' sales to customers in the United States, revenue is
generally recognized at the time the products are shipped. For larger contract
orders, Bowling Products generally requires that customers submit a deposit as
a condition of accepting the order. Internationally, revenue is generally
recognized when products arrive at the customer's port of entry. For a
significant portion of international sales, Bowling Products generally requires
the customer to obtain a letter of credit prior to shipment.


     Warranty Costs

     Bowling Products warrants all new products for certain periods up to one
year. Major products are warranted for one year. Bowling Products charges to
income an estimated amount for future warranty obligations, and also offers
customers the option to purchase extended warranties on certain products.
Warranty expense aggregated $3,007 for 1997 and $4,471 for 1996, and is
included in cost of goods sold in the accompanying consolidated statements of
income.


     Cash and Cash Equivalents

     The Company classifies all highly liquid fixed-income investments
purchased with an original maturity of three months or less as cash
equivalents.


     Inventories

     Bowling Products' inventory is valued at the lower of cost or market, cost
being determined using the first-in, first-out ("FIFO") method for U.S. and
international inventories. Bowling Centers' inventory is valued at the lower of
cost or market, with the cost being determined using the actual or average cost
method.


     Long-Lived Assets

     The carrying value of long-lived assets and certain identifiable
intangibles, including goodwill, is reviewed by the Company for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, and an estimate of future undiscounted cash
flows is less than the carrying amount of the asset.


     Property and Equipment

     Property and equipment are stated at cost. Expenditures for maintenance
and repairs which do not improve or extend the life of an asset are charged to
expense as incurred; major renewals or betterments are capitalized. Upon
retirement or sale of an asset, its cost and related accumulated depreciation
are removed from property and equipment, and any gain or loss is recognized.

     As a result of the Acquisition, the carrying value of property and
equipment was adjusted to fair market value in accordance with the purchase
method of accounting. Property and equipment are depreciated over their
estimated useful lives using the straight-line method. Estimated useful lives
of property and equipment are as follows:


                                       31

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


<TABLE>
<S>                               <C>
         Buildings and improvement      5 - 40 years
         Leasehold improvements         lesser of the estimated
                                        useful life or term of the lease
         Bowling and related equipment  5 -  10 years

         Manufacturing equipment        2 -  7 years
         Furniture and fixtures         3 -  8 years
</TABLE>

     Goodwill

     As a result of the Acquisition and subsequent purchases of bowling centers
discussed in "Note 15. Acquisitions", and in accordance with the purchase
method of accounting used for all acquisitions, the Company recorded goodwill
representing the excess of the purchase price over the allocation among the
acquired assets and liabilities in accordance with estimates of fair market
value on the dates of acquisition. Goodwill is being amortized over 40 years.
Amortization expense was $19,827 in 1997 and $13,070 in 1996.


     Income Taxes

     Upon consummation of the Acquisition, the U.S. and international
subsidiaries of AMF Bowling became taxable corporations under the Internal
Revenue Code ("IRC"). Income taxes are accounted for using the asset and
liability method under which deferred income taxes are recognized for the tax
consequences on future years of temporary differences between the financial
statement carrying amounts and the tax bases of assets and liabilities.


     Research and Development Costs

     Expenditures relating to the development of new products, including
significant improvements and refinements to existing products, are expensed as
incurred. Amounts charged against income were approximately $922 in 1997 and
$1,312 in 1996, and are included in cost of goods sold in the accompanying
consolidated statements of income.


     Advertising Costs

     Costs incurred for producing and communicating advertising are expensed
when incurred. The amounts charged against income were approximately $21,642 in
1997 and $9,299 in 1996, with $12,768 and $5,932, respectively, included in
bowling center operating expenses for Bowling Centers, and $8,856 and $3,367,
respectively, included in selling, general and administrative expenses for
Bowling Products and Corporate in the accompanying consolidated statements of
income.


     Earnings Per Share

     In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128 "Earnings per Share" which requires the calculation and
presentation of basic and diluted earnings per share. Basic and diluted net
loss per share for 1997 and 1996 is calculated based on the actual weighted
average shares outstanding. Outstanding stock options and warrants are not
considered as their effect is antidilutive. See "Note 12. Stockholders' Equity"
and "Note 13. Employee Benefit Plans".


     Foreign Currency Translation

     All assets and liabilities of AMF Bowling's international operations are
translated from foreign currencies into U.S. dollars at year-end exchange
rates, except those of Mexico which has a highly inflationary economy.
Adjustments resulting from the translation of financial statements of
international operations into U.S. dollars are included in the equity
adjustment from foreign currency translation on the accompanying consolidated
balance sheets. Revenue and expenses of international operations are translated
using average exchange rates that existed during the year and reflect currency
exchange gains and losses resulting from transactions conducted in other than
local currencies. Net losses from transactions in foreign currencies of $3,537
for 1997 and $488 for 1996 are included in other expenses in the accompanying
consolidated statements of income.


                                       32

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
     Fair Value of Financial Instruments

     The carrying value of financial instruments including cash and cash
equivalents and short-term debt approximate fair value at December 31, 1997 and
1996, because of the short maturity of these instruments. At December 31, 1997
and 1996, fair value of the interest rate cap agreements (to reduce the
interest rate risk of its floating rate debt) was approximately zero and $577,
respectively. The interest rate cap agreements are valued using the estimated
amount that the Company would receive to terminate the cap agreements as of
December 31, 1997 and 1996, based on a quote from the counterparty, taking into
account current interest rates and the credit worthiness of the counterparty.
The Company has no intention of terminating the cap agreements. The fair value
of the Term Facilities under the Senior Debt, as defined in "Note 9. Long-Term
Debt," at December 31, 1997 and 1996, was approximately $467,361 and $623,520,
respectively, based on the fair value of debt with similar maturities and
covenants. The fair value of the Notes, as defined in "Note 9. Long-Term Debt,"
at December 31, 1997 and 1996, was approximately $493,551 and $560,315,
respectively, based on the trading value at December 31, 1997 and 1996.


     Noncompete Agreements

     AMF Bowling, through its subsidiaries, has noncompete agreements with
various individuals. The assets are recorded at cost or at the present value of
payments to be made under these agreements, discounted at annual rates ranging
from 8 percent to 10 percent. The assets are included in other assets on the
accompanying consolidated balance sheets and are amortized on a straight-line
basis over the terms of the agreements. Noncompete obligations at December 31,
1997 and 1996, net of accumulated amortization, totaled approximately $3,171
and $2,498, respectively.

     Annual maturities on noncompete obligations as of December 31, 1997, are
as follows:



<TABLE>
<CAPTION>
Year Ending
December 31,
----------------------
<S>                    <C>
  1998 ...............  $ 1,019
  1999 ...............      512
  2000 ...............      243
  2001 ...............      228
  2002 ...............      185
  Thereafter .........      984
                        -------
                        $ 3,171
                        =======
</TABLE>

     Self-Insurance Programs

     The Company is self-insured up to certain levels for general and product
liability, workers' compensation, certain health care coverage, and property
damage. The cost of these self-insurance programs is accrued based upon
estimated settlements for known and anticipated claims. The Company has
recorded an estimated amount to cover known claims and claims incurred but not
reported as of December 31, 1997 and 1996, which is included in accrued
expenses in the accompanying consolidated balance sheets.


Note 3. Pro Forma Results of Operations

     Pro forma statements of income are presented on the following pages for
the years ended December 31, 1996 and 1995, as if the Acquisition had occurred
on January 1, 1996 and 1995, respectively. AMF Bowling's pro forma statement of
income for the twelve months ended December 31, 1996 is based on the
Predecessor Company's statement of operations for the four-month period ending
April 30, 1996, reported elsewhere in this report, AMF Bowling's statement of
income for the period ended December 31, 1996, and adjustments giving effect to
the Acquisition under the purchase method of accounting as described in the
notes below. AMF Bowling's pro forma statement of income for the twelve months
ended December 31, 1995, is based on the Predecessor Company's results of
operations reported elsewhere in this report and adjustments giving effect to
the Acquisition under the purchase method of accounting as described in the
notes below. The pro forma results are for illustrative purposes only and do
not purport to be indicative of the actual results which occurred, nor are they
indicative of future results of operations.


                                       33

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     Pro Forma Results of Operations (in millions, except per share data)
                                  (unaudited)



<TABLE>
<CAPTION>
                                                                                                                 Pro Forma
                                                    Historical      Predecessor                                     AMF
                                                       AMF            Company                                  Bowling, Inc.
                                                  Bowling, Inc.     Four Months                                Twelve Months
                                                   Period Ended        Ended               Pro Forma               Ended
                                                   12/31/96 (a)       4/30/96             Adjustments            12/31/96
                                                 ---------------   -------------   ------------------------   --------------
<S>                                              <C>               <C>             <C>                        <C>
Operating revenue                                   $  384.8         $  164.9           $     (0.8) (b)         $  548.9
                                                    --------         --------           ----------              --------
Operating expenses:
 Cost of goods sold ..........................         130.5             43.1                   --                 173.6
 Bowling center operating expenses ...........         123.7             80.2               ( 25.1) (b)(c)         178.8
 Selling, general, and administrative
   expenses ..................................          35.1             35.5               ( 19.6) (b)(c)          51.0
 Depreciation and amortization ...............          49.4             15.1                  9.0 (d)              73.5
                                                    --------         --------           ----------              --------
  Total operating expenses ...................         338.7            173.9               ( 35.7)                476.9
                                                    --------         --------           ----------              --------
  Operating income (loss) ....................          46.1          (   9.0)                34.9                  72.0
Nonoperating expenses (income):
 Interest expense ............................          78.0              4.5                 23.7 (e)             106.2
 Other expenses, net .........................           1.9              0.7                   --                   2.6
 Interest income .............................       (   5.8)         (   0.6)                  --                (   6.4)
                                                    --------         --------           ----------              ---------
Income (loss) before income taxes ............       (  28.0)         (  13.6)                11.2                (  30.4)
Provision (benefit) for income taxes .........       (   8.5)         (   1.7)                 1.3 (f)            (   8.9)
                                                    --------         --------           ----------              ---------
 Net income (loss) ...........................     $   (19.5)       $   (11.9)          $      9.9              $   (21.5)
                                                   =========        =========           ==========              =========
Net loss per share ...........................                                                                 $    (0.55)
                                                                                                               ==========
</TABLE>

---------
(a) For the period from the inception date of January 12, 1996 through December
    31, 1996, which includes results of operations of the acquired business
    from May 1, 1996 through December 31, 1996.

(b) To reflect the impact of AMF Group Holdings not acquiring in the
    Acquisition the operations of one bowling center in Switzerland and one
    bowling center in Spain.

(c) To eliminate a one-time charge of $44.0 million for special bonuses and
    payments made by the Prior Owners in April 1996.

(d) To reflect the increase in depreciation and amortization expense resulting
    from the allocation of the purchase price to fixed assets and goodwill and
    a change in the method of depreciation of fixed assets. The Predecessor
    Company principally used the double declining balance method. The amount
    of the pro forma adjustment for depreciation was determined using the
    straight-line method over the estimated lives of the assets acquired.
    Goodwill is being amortized over 40 years.

(e) To reflect the incremental interest expense associated with the issuance of
    debt which partially funded the Acquisition.

(f) To give effect to the change in status of the U.S. and international
    subsidiaries of AMF Bowling from S corporations to taxable corporations
    under the U.S. federal tax laws upon consummation of the Acquisition.


                                       34

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
     Pro Forma Results of Operations (in millions, except per share data)
                                  (unaudited)



<TABLE>
<CAPTION>
                                                                                                         Pro Forma
                                                               Predecessor                                  AMF
                                                                 Company                               Bowling, Inc.
                                                              Twelve Months                            Twelve Months
                                                                  Ended              Pro Forma             Ended
                                                                 12/31/95           Adjustments          12/31/95
                                                            -----------------   -------------------   --------------
<S>                                                         <C>                 <C>                   <C>
Operating revenue                                              $   564.9          $      (2.3) (h)      $  562.6
                                                               ---------          -----------           --------
Operating expenses:
 Cost of goods sold .....................................          184.1              (   0.3) (h)         183.8
 Bowling center operating expenses ........... ..........          166.5              (   1.5) (h)         165.0
 Selling, general, and administrative expenses  .........           50.8              (   0.3) (i)          50.5
 Depreciation and amortization ............... ..........           39.1                 27.9 (j)           67.0
                                                               ---------          -----------           --------
  Total operating expenses ................... ..........          440.5                 25.8              466.3
                                                               ---------          -----------           --------
  Operating income (loss) .................... ..........          124.4              (  28.1)              96.3
Nonoperating expenses (income):
 Interest expense ............................ ..........           15.7                 88.6 (k)          104.3
 Other expenses, net ......................... ..........            1.0                   --                1.0
 Interest income ............................. ..........        (   2.2)                  --             (  2.2)
 Foreign currency transaction loss ........... ..........            1.0                   --                1.0
                                                               ---------          -----------           ---------
Income (loss) before income taxes .......................          108.9              ( 116.7)            (  7.8)
Provision (benefit) for income taxes ....................           40.6 (g)          (  30.6) (l)          10.0
                                                               ---------          -----------           ---------
  Net income (loss) .......................... ..........      $    68.3          $     (86.1)          $  (17.8)
                                                               =========          ===========           =========
Net loss per share ......................................                                              $    (0.47)
                                                                                                       ==========
</TABLE>

---------
(g) Reflects the pro forma income tax provision that would have been provided
    had the Predecessor Company consisted of taxable C corporations, rather
    than S corporations.

(h) To reflect the net reduction in revenue and expenses related to the
    following:

     (i) Certain assets of the Predecessor Company not purchased by AMF Group
         Holdings.

    (ii) Impact of AMF Group Holdings not acquiring one bowling center in
         Switzerland and one bowling center in Spain.

   (iii) Concurrent with the Acquisition, amounts due from and payable to the
         Prior Owners and other related parties were cancelled.

(i) To reflect the termination of management fees charged by an affiliate of the
    Prior Owners.

(j) To reflect the increase in depreciation and amortization expense resulting
    from the allocation of the purchase price to fixed assets and goodwill and a
    change in the method of depreciation of fixed assets. The Predecessor
    Company principally used the double declining balance method. The amount of
    the pro forma adjustment for depreciation was determined using the
    straight-line method over the estimated lives of the assets acquired.
    Goodwill is being amortized over 40 years.

(k) To reflect the incremental interest expense associated with the issuance of
    debt which partially funded the Acquisition.

(l) To reflect the pro forma income tax benefit associated with the pro forma
    adjustments.


                                       35

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
Note 4. Inventories

     Inventories at December 31, 1997 and 1996, consist of the following:



<TABLE>
<CAPTION>
                                                    1997        1996
                                                ----------- -----------
<S>                                             <C>         <C>
          Bowling Products, at FIFO:
           Raw materials ......................  $ 15,283    $ 11,683
           Work in progress ...................     2,279       2,335
           Finished goods and spare parts .....    33,082      23,195
          Bowling Centers, at average cost:
           Merchandise inventory ..............     5,924       3,788
                                                 --------    --------
                                                 $ 56,568    $ 41,001
                                                 ========    ========
</TABLE>

Note 5. Deferred Taxes and Other Current Assets

     The components of deferred taxes and other current assets at December 31,
1997 and 1996, consist of the following:



<TABLE>
<CAPTION>
                                             1997       1996
                                          ---------- ----------
<S>                                       <C>        <C>
          Deferred income taxes .........  $  5,547   $  4,847
          Advances or deposits ..........     3,288      2,018
          Other .........................     8,214      4,313
                                           --------   --------
                                           $ 17,049   $ 11,178
                                           ========   ========
</TABLE>

Note 6. Property and Equipment

     Property and equipment, net at December 31, 1997 and 1996, consists of the
following:



<TABLE>
<CAPTION>
                                                               1997         1996
                                                           ------------ -----------
<S>                                                        <C>          <C>
          Land ...........................................  $ 113,629    $  90,512
          Buildings and improvements .....................    280,046      210,298
          Equipment, furniture, and fixtures .............    444,437      304,067
          Other ..........................................      7,282        2,631
                                                            ---------    ---------
                                                              845,394      607,508
          Less: accumulated depreciation and amortization     (94,509)     (28,200)
                                                            ---------    ---------
                                                            $ 750,885    $ 579,308
                                                            =========    =========
</TABLE>

     Depreciation and amortization expense related to property and equipment
was $64,480 for 1997 and $28,200 for 1996.


Note 7. Other Long-Term Assets

     Other long-term assets are primarily composed of deferred income taxes,
long-term rent deposits, long-term portion of noncompete assets, and notes
receivable.


                                       36

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
Note 8. Accrued Expenses

     Accrued expenses at December 31, 1997 and 1996, consist of the following:



<TABLE>
<CAPTION>
                                              1997       1996
                                           ---------- ----------
<S>                                        <C>        <C>
          Accrued compensation ...........  $  9,523   $  9,141
          Accrued interest ...............     8,253      8,640
          League bowling accounts ........    14,237      7,676
          Accrued installation costs .....     4,868      4,451
          Other ..........................    27,984     24,449
                                            --------   --------
                                            $ 64,865   $ 54,357
                                            ========   ========
</TABLE>

Note 9. Long-Term Debt

     Long-term debt at December 31, 1997 and 1996, consists of the following:



<TABLE>
<CAPTION>
                                                        1997            1996
                                                  --------------- ---------------
<S>                                               <C>             <C>
         Bank debt ..............................   $   619,362     $   564,625
         Senior subordinated notes ..............       250,000         250,000
         Senior subordinated discount notes .....       189,261         274,663
         Mortgage and equipment note ............         1,976           1,965
                                                    -----------     -----------
          Total debt ............................     1,060,599       1,091,253
         Current maturities .....................       (27,376)        (42,376)
                                                    -----------     -----------
          Total long-term debt ..................   $ 1,033,223     $ 1,048,877
                                                    ===========     ===========
</TABLE>

     Bank Debt

     The bank debt (the "Senior Debt") was incurred pursuant to a credit
agreement dated as of May 1, 1996, and amended and restated as of November 7,
1997 (the "Credit Agreement"), between Bowling Worldwide and its lenders. The
Credit Agreement provides for (i) senior secured term loan facilities
aggregating $455.3 million (the "Term Facilities") and (ii) a senior secured
revolving credit facility of up to $355.0 million (the "Bank Facility", and
together with the Term Facilities, the "Senior Facilities").

     The Term Facilities consist of the following three tranches: (i) a Term
Loan Facility of $130.0 million, (ii) an Amortization Extended Loans ("AXELs
SM") Series A Facility of $187.5 million, and (iii) an AXELsSM Series B
Facility of $137.8 million. Maturity dates of the three tranches and scheduled
amortization payments are included in tables below.

     The Term Facilities bear interest, at the Company's option, at Citibank's
customary base rate or at Citibank's Eurodollar rate, in each case, plus a
margin that varies in accordance with a performance pricing grid that is based
on the ratio of total debt to EBITDA (defined as earnings before net interest
expense, income taxes, depreciation and amortization, and other income and
expenses) for the rolling period (defined as the four most recent quarters)
then most recently ended. Until November 7, 1998, the margin applicable to
advances under the Term Loan Facility bearing interest based on Citibank's
customary base rate will range from 0.75% to 0.875%, and the margin applicable
to advances under the Term Loan Facility bearing interest based on Citibank's
Eurodollar rate will range from 1.75% to 1.875%. Thereafter, the margin
applicable to advances under the Term Loan Facility bearing interest based on
Citibank's customary base rate will range from 0.00% to 0.875% and the margin
applicable to advances under the Term Loan Facility bearing interest based on
Citibank's Eurodollar rate will range from 0.75% to 1.875%. At December 31,
1997, the applicable margin for advances under the Term Loan Facility bearing
interest based on Citibank's customary base rate was 0.75% and the applicable
margin for advances under the Term Loan Facility bearing interest based on
Citibank's Eurodollar rate was 1.75%. At December 31, 1997, the interest rate
for advances under the Term Loan Facility was 7.6875%.

     Until November 7, 1998, the margin applicable to advances under the AXELs
SMSeries A Facility bearing interest based on Citibank's customary base rate
will range from 1.00% to 1.125% and the margin applicable to advances under the
 


                                       37

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
AXELsSM Series A Facility bearing interest based on Citibank's Eurodollar rate
will range from 2.00% to 2.125%. Thereafter, the margin applicable to advances
under the AXELsSM Series A Facility bearing interest based on Citibank's
customary base rate will range from 0.875% to 1.125% and the margin applicable
to advances under the AXELsSM Series A Facility bearing interest based on
Citibank's Eurodollar rate will range from 1.875% to 2.125%. At December 31,
1997, the applicable margin for advances under the AXELsSM Series A Facility
bearing interest based on Citibank's customary base rate was 1.00% and the
applicable margin for advances under the AXELsSM Series A Facility bearing
interest based on Citibank's Eurodollar rate was 2.00%. At December 31, 1997,
the interest rate for advances under the AXELsSM Series A Facility was 7.9375%.
 

     Until November 7, 1998, the margin applicable to advances under the
AXELsSM Series B Facility bearing interest based on Citibank's customary base
rate will range from 1.25% to 1.375% and the margin applicable to advances
under the AXELsSM Series B Facility bearing interest based on Citibank's
Eurodollar rate will range from 2.25% to 2.375%. Thereafter, the margin
applicable to advances under the AXELsSM Series B Facility bearing interest
based on Citibank's customary base rate will range from 1.125% to 1.375% and
the margin applicable to advances under the AXELsSM Series B Facility bearing
interest based on Citibank's Eurodollar rate will range from 2.125% to 2.375%.
At December 31, 1997, the applicable margin for advances under the AXELsSM
Series B Facility bearing interest based on Citibank's customary base rate was
1.25% and the applicable margin for advances under the AXELsSM Series B
Facility bearing interest based on Citibank's Eurodollar rate was 2.25%. At
December 31, 1997, the interest rate for advances under the AXELsSM Series B
Facility was 8.1875%

     The Bank Facility has an aggregate amount available of $355.0 million, and
will mature on March 31, 2002. The Bank Facility is fully revolving until its
final maturity and bears interest, at the Company's option, at Citibank's
customary base rate or at Citibank's Eurodollar rate, in each case, plus a
margin which varies in accordance with a performance pricing grid which is
based on the ratios of total debt to EBITDA (defined above). Until November 7,
1998, the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's customary base rate will range from 0.75% to
0.875% and the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's Eurodollar rate will range from 1.75% to 1.875%.
Thereafter, the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's customary base rate will range from 0.00% to
0.875% and the margin applicable to advances under the Bank Facility bearing
interest based on Citibank's Eurodollar rate will range from 0.75% to 1.875%.
At December 31, 1997, the applicable margin for advances under the Bank
Facility bearing interest based on Citibank's customary base rate was 0.75% and
the applicable margin for advances under the Bank Facility bearing interest
based on Citibank's Eurodollar rate was 1.75%. At December 31, 1997, the
interest rate for advances under the Bank Facility was 7.6875%.

     The Credit Agreement contains certain covenants, including, but not
limited to, covenants related to cash interest coverage, fixed charge coverage,
payments on other debt, mergers and acquisitions, sales of assets, guarantees
and investments. The Credit Agreement also contains certain provisions which
limit the amount of funds available for transfer from Bowling Worldwide to AMF
Group Holdings, and from AMF Group Holdings to AMF Bowling. Limits exist on,
among other things, the declaration or payment of dividends, distributions of
assets, amount of debt and issuance or sale of capital stock.

     So long as Bowling Worldwide is not in default of the covenants contained
in the Credit Agreement, it may i) declare and pay dividends in common stock;
ii) declare and pay cash dividends to the extent necessary to make payments of
approximately $0.15 million in May 1997 and, to the extent necessary, to make
payments of approximately $0.15 million due in May 1998 under certain noncompete
agreements with the Prior Owners; iii) declare and pay cash dividends for
general administrative expenses not to exceed $0.25 million; and iv) declare and
pay cash dividends not to exceed $2.0 million for the repurchase of Common
Stock. As of December 31, 1997, Bowling Worldwide was in compliance with all of
its covenants.

     The lenders (the "Senior Lenders") of the Senior Debt are secured by
collateral described in the Senior Debt security agreement, intellectual
property security agreement, mortgages and any other agreements with the Senior
Lenders that create a lien in favor of the Senior Lenders. The collateral
includes, but is not limited to stock in subsidiaries of AMF Bowling Worldwide,
cash and cash equivalents, equipment, inventory, investments, intellectual
property and mortgages.


                                       38

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     Mortgage and Equipment Note

     At December 31, 1997 and 1996, a mortgage and equipment note relating to
one U.S. bowling center bore interest at 9.175%.


     Notes

     The senior subordinated notes will mature on March 15, 2006. Interest
accrues from the date of issuance at an annual rate of 10 7/8% and is payable
in cash semiannually in arrears on March 15 and September 15 of each year which
commenced on September 15, 1996.

     Prior to December 15, 1997, the senior subordinated discount notes had a
fully-accreted value of $452.0 million based on a maturity date of March 15,
2006. On December 15, 1997, the Company redeemed $118.9 million in principal
which represented a fully-accreted value of $175.0 million using a portion of
the proceeds received from an initial public offering of AMF Bowling common
stock. See "Note 12. Stockholders' Equity". The remaining balance of senior
subordinated discount notes will mature on March 15, 2006, at a fully-accreted
value of $277.0 million. The senior subordinated discount notes will result in
an effective yield of 12 1/4% per annum, computed on a semiannual bond
equivalent basis. No interest is payable prior to March 15, 2001. Commencing
March 15, 2001, interest will accrue and be payable in cash semiannually in
arrears on March 15 and September 15 of each year beginning with September 15,
2001.

     The Company's payment obligations under the senior subordinated notes and
the senior subordinated discount notes (together, the "Notes") are jointly and
severally guaranteed on a senior subordinated basis by AMF Group Holdings and
each of Bowling Worldwide's subsidiaries identified below in "Note 21.
Condensed Consolidating Financial Statements" (collectively, the "Guarantors").
 

     The guarantees of the Notes are subordinated to the guarantees of the
Senior Debt and the mortgage and equipment note outstanding at December 31,
1997, referred to above. The Notes are general, unsecured obligations of
Bowling Worldwide, are subordinated in right of payment to all Senior Debt of
Bowling Worldwide, and rank pari passu with all existing and future
subordinated debt of Bowling Worldwide. The claims of the holders of the Notes
will be effectively subordinated to all other indebtedness and other
liabilities (including trade payables and capital lease obligations) of Bowling
Worldwide's subsidiaries that are not Guarantors and through which Bowling
Worldwide will conduct a portion of its operations. See "Note 21. Condensed
Consolidating Financial Statements."

     Prior to March 15, 1999, up to $100 million in aggregate principal amount
of senior subordinated notes will be redeemable at the option of Bowling
Worldwide, on one or more occasions, from the net proceeds of public or private
sales of common stock of, or contributions to the common equity capital of,
Bowling Worldwide, at a price of 110.875% of the principal amount of the senior
subordinated notes, together with accrued and unpaid interest, if any, to the
date of redemption; so long as at least $150 million in aggregate principal
amount of senior subordinated notes remains outstanding after such redemption.
Similarly, prior to March 15, 1999, the senior subordinated discount notes will
be redeemable at the option of Bowling Worldwide, on one or more occasions,
from the net proceeds of public or private sales of common stock of, or
contributions to the common equity capital of, Bowling Worldwide, at a price of
112.25% of the accreted value of the senior subordinated discount notes; so
long as at least $150 million in accreted value of senior subordinated discount
notes remains outstanding after such redemption.

     The indenture governing the senior subordinated notes and the indenture
governing the senior subordinated discount notes (the "Note Indentures") contain
certain covenants that, among other things, limit the ability of Bowling
Worldwide and its Restricted Subsidiaries, as defined therein, to incur
additional indebtedness and issue Disqualified Stock, as defined therein, pay
dividends or distributions or make investments or make certain other Restricted
Payments, as defined therein, enter into certain transactions with affiliates,
dispose of certain assets, incur liens securing pari passu and subordinated
indebtedness of Bowling Worldwide and engage in mergers and consolidations. As
of December 31, 1997, Bowling Worldwide was in compliance with all of its
covenants.


                                       39

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
     Annual maturities of long-term debt, including accretion of the senior
subordinated discount notes, as of December 31, 1997, are as follows:



<TABLE>
<CAPTION>
December 31,
----------------------
<S>                    <C>
  1998 ...............  $   27,376
  1999 ...............      32,376
  2000 ...............      34,251
  2001 ...............      83,001
  2002 ...............     279,110
  Thereafter .........     692,246
                        ----------
                        $1,148,360
                        ==========
</TABLE>

     Interest Rate Cap Agreements

     During 1996, Bowling Worldwide entered into an interest rate cap agreement
with Goldman Sachs Capital Markets, L.P., to reduce the interest rate risk of
its Senior Debt. The notional amount of this cap was $300.0 million at December
31, 1997. Under the terms of this agreement, Bowling Worldwide receives payment
if the three-month LIBOR rises above 5.75% through April 1997, above 6.50% from
May 1997 through April 1998 and above 7.5% from May 1998 through October 1998.
No amounts were received under this agreement during 1996 or 1997. During 1997,
Bowling Worldwide entered into a second interest rate cap agreement with
Goldman Sachs Capital Markets, L.P. to further reduce the interest rate risk of
its Senior Debt. The notional amount of this cap was $100.0 million at December
31, 1997. Under the terms of this agreement, Bowling Worldwide receives payment
if the three-month LIBOR rises above 7.00% from July 7, 1997 through March 31,
1998. No amounts were received under this agreement during 1997.

     Bowling Worldwide is exposed to credit-related loss in the event of
non-performance by the counterparty. Bowling Worldwide believes its exposure to
potential loss due to counterparty non-performance is minimized primarily due
to the relatively strong credit rating of the counterparty.

     Average amounts outstanding and average borrowing rates for 1997 were as
follows:




<TABLE>
<CAPTION>
                                                          Outstanding At     Average      Average
                                                           December 31,      Amounts     Borrowing
Description                              Maturity Dates        1997        Outstanding     Rates
-------------------------------------- ----------------- ---------------- ------------- ----------
<S>                                    <C>               <C>              <C>           <C>
Term Loan Facility ...................  March 31, 2002       $ 122,500      $ 205,587       8.27%
AXELSSM A Facility ...................  March 31, 2003         186,750        190,085       8.56
AXELSSM B Facility ...................  March 31, 2004         137,000        138,314       8.73
Bank Facility ........................  March 31, 2002         173,112         32,669       8.75
Mortgage and Equipment Notes ......... October 1, 2013           1,976          1,970       9.18
</TABLE>

     Prior to the Credit Agreement, the Company had borrowings under an
acquisition facility (the "Acquisition Facility") which was included in the
Senior Debt. Average amounts outstanding under the Acquisition Facility between
January 1, 1997 and November 7, 1997 were $77,197, at an average borrowing rate
of 8.72%.


     Deferred Financing Costs

     Costs incurred to obtain bank financing and issue bond financing for the
Acquisition, as discussed above, are amortized over the lives of the various
types of debt. Bank financing costs, which were incurred to obtain bank
financing for the Acquisition, have been amortized over eight years and were
entirely written off in the fourth quarter of 1997 in connection with the
Credit Agreement. Bank financing costs associated with the Credit Agreement are
amortized using the effective interest rate method over approximately 6.5
years. Bond financing costs are amortized over ten years using the effective
interest rate method. An interest rate cap agreement included in deferred
financing costs is amortized over the term of the agreement beginning November
1, 1996, and ending October 31, 1998. Amortization expense for financing costs
was $4,856 in 1997 and $3,252 in 1996. Interest expense for interest rate cap
agreements was $1,823 in 1997 and $304 in 1996.


                                       40

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
     Extraordinary Charges

     The Company recorded after-tax extraordinary charges totaling $23,366 in
the fourth quarter of 1997 as a result of entering into the Credit Agreement,
the premium paid to redeem a portion of the senior subordinated discount notes
and the write-off of the portion of bond financing costs attributable to the
senior subordinated discount notes redeemed.


     Other

     The Company is highly leveraged as a result of indebtedness incurred in
connection with the Acquisition and subsequent acquisitions. Although the
Company believes it will be able to meet its debt obligations, there is no
assurance that the Company will generate sufficient cash flow in a timely
manner to satisfy scheduled principal and interest payments.


Note 10. Income Taxes

     Income (loss) before income taxes at December 31, 1997 and 1996, consists
of the following:



<TABLE>
<CAPTION>
                                        1997           1996
                                   -------------- --------------
<S>                                <C>            <C>
          U.S. ...................   $  (55,695)    $  (28,427)
          International ..........       12,083            411
                                     ----------     ----------
                                     $  (43,612)    $  (28,016)
                                     ==========     ==========
</TABLE>

     The income tax provision (benefit) at December 31, 1997 and 1996, consists
of the following:



<TABLE>
<CAPTION>
                                              1997          1996
                                         -------------- ------------
<S>                                      <C>            <C>
          Current income tax expense
          U.S. Federal .................   $       --    $      --
          State and local ..............           --           --
          International ................        6,965        5,508
                                           ----------    ---------
           Total current provision .....        6,965        5,508

          Deferred tax benefit
          U.S. Federal .................      (18,039)     (12,274)
          State and local ..............       (1,702)      (1,766)
          International ................           --           --
                                           ----------    ---------
           Total deferred benefit ......      (19,741)     (14,040)
                                           ----------    ---------
           Total benefit ...............   $  (12,776)   $  (8,532)
                                           ==========    =========
</TABLE>

                                       41

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

     The tax effects of temporary differences and carryforwards which give rise
to deferred tax assets and liabilities at December 31, 1997 and 1996, are as
follows:



<TABLE>
<CAPTION>
                                                             1997       1996
                                                          ---------- ----------
<S>                                                       <C>        <C>
          Deferred income tax assets
          Current assets
           Reserves not deductible for tax purposes .....  $  5,547   $ 4,847
                                                           --------   -------
          Noncurrent assets
           Net operating losses .........................    38,460     8,225
           Foreign tax credits ..........................    12,417     5,452
           Interest expense on high-yield debt ..........    12,266     8,533
           Financing costs ..............................     7,549        --
           Translation effects ..........................     1,069        --
           Other ........................................       104        --
                                                           --------   -------
          Total noncurrent deferred tax assets ..........    71,865    22,210
                                                           --------   -------
          Total deferred tax assets .....................    77,412    27,057
                                                           --------   -------
          Deferred income tax liabilities
          Goodwill amortization .........................    14,670     5,840
          Depreciation on property and equipment ........    41,569    20,265
                                                           --------   -------
          Total noncurrent deferred tax liabilities .....    56,239    26,105
                                                           --------   -------
          Net deferred tax assets .......................  $ 21,173   $   952
                                                           ========   =======
</TABLE>

     In connection with the Acquisition, the Company has made a joint tax
election with the Prior Owners for certain entities under Section 338 (h) (10)
of the IRC. The effect of this election is the revaluation of the assets and
liabilities of the electing entities, with any residual purchase price
allocated to goodwill. The nonelecting entities were acquired by both stock and
asset purchases.

     The gross amount of net operating losses ("NOLs") the Company may utilize
on future tax returns is $110,007. The NOLs may be carried forward for fifteen
years until expiration. Foreign tax credits eligible for carry forward total
$12,417, and expire in five years. The Company had no valuation allowance
related to income tax assets as of December 31, 1997 and 1996, and there was no
change in the valuation allowance during 1997. Management believes that it is
more likely than not that the tax benefits will be realized.

     The provision for income taxes differs from the amount computed by
applying the statutory rate of 35 percent for 1997 and 1996 to loss before
taxes. The principal reasons for these differences are as follows:



<TABLE>
<CAPTION>
                                                                              1997           1996
                                                                         -------------- -------------
<S>                                                                      <C>            <C>
          U.S. Federal, at statutory rate ..............................   $  (15,264)    $  (9,806)
          Increase resulting from:
           Meals and entertainment .....................................          275           159
           Goodwill relating to acquisition of international bowling
           centers .....................................................        1,658         1,093
           Disallowance of certain high yield debt .....................          260           192
           Other, net ..................................................          295          (170)
                                                                           ----------     ---------
          Total ........................................................   $  (12,776)    $  (8,532)
                                                                           ==========     =========
</TABLE>

                                       42

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
Note 11. Commitments and Contingencies

     Bowling Centers and Bowling Products lease certain facilities and
equipment under operating leases which expire at various dates through 2012.
Bowling Centers has certain ground leases, associated with several centers,
which expire at various dates through 2058. These leases generally contain
renewal options and require payments of taxes, insurance, maintenance, and
other expenses in addition to the minimum annual rentals. Certain leases
require contingent payments based on usage of equipment above certain specified
levels. Such contingent rentals amounted to $1,200 in 1997 and $912 in 1996.
Total rent expense under operating leases aggregated approximately $24,117 in
1997 and $13,737 in 1996.

     Future minimum rental payments under the operating lease agreements as of
December 31, 1997, are as follows:



<TABLE>
<CAPTION>
Year Ending
December 31,
----------------------
<S>                    <C>
  1998 ...............  $  23,845
  1999 ...............     19,960
  2000 ...............     17,350
  2001 ...............     14,904
  2002 ...............     12,857
  Thereafter .........     82,721
                        ---------
                        $ 171,637
                        =========
</TABLE>

     Litigation and Claims

     The Company is involved in certain lawsuits arising out of normal business
operations. The majority of these relate to accidents at bowling centers.
Management believes that the ultimate resolution of such matters will not have
a material adverse effect on the Company's results of operations or financial
position. While the ultimate outcome of the litigation and claims against the
Company cannot presently be determined, management believes the Company has
made adequate provision for possible losses.


Note 12. Stockholders' Equity

     Stockholders Agreement

     On April 30, 1996, AMF Bowling and the institutional stockholders of AMF
Bowling (the "Stockholders") entered into a stockholders agreement (the
"Stockholders Agreement") which regulates the relationship among AMF Bowling
and the Stockholders. The Stockholders Agreement primarily provides for,
subject to certain limitations and exceptions, (a) the establishment and
nomination of the Board of Directors and an Executive Committee; (b) certain of
the Stockholders to purchase additional shares of Common Stock in order to
finance acquisitions, capital expenditures, investments in partnerships or
joint ventures, or any similar transactions or expenditures; (c) Goldman Sachs
to have the exclusive right to perform all consulting, financing, investment
banking and similar services for AMF Bowling and its subsidiaries, for
customary compensation and on terms customary for similar engagements with
unaffiliated third parties; and (d) guidance in the event a Stockholder
determines to sell its shares of Common Stock. The foregoing rights and
obligations will terminate under certain circumstances; and notwithstanding
those circumstances, in the event of any merger, recapitalization,
consolidation, reorganization or other restructuring of AMF Bowling as a result
of which the Stockholders own less than a majority of the outstanding voting
power of the entity surviving such transaction, the Stockholders Agreement will
terminate.


     Registration Rights Agreement

     On April 30, 1996, AMF Bowling and the Stockholders entered into a
registration rights agreement (the "Registration Rights Agreement"). Pursuant
to the Registration Rights Agreement, subject to certain limitations and
exceptions, certain Stockholders may make demands of AMF Bowling to register
shares of Common Stock held by such Stockholders; provided, that AMF Bowling is
not required to so register unless the aggregate offering price is at least $50
million. Upon a demand for registration by certain Stockholders, each of the
other Stockholders is to be given the opportunity to participate on a pro rata
basis in the registration demanded. The Registration Rights Agreement also
provides the Stockholders with


                                       43

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
piggyback registration rights, which allow each of them to include all or a
portion of their shares of Common Stock under a registration statement filed by
AMF Bowling, subject to certain exceptions and limitations.

     In September 1997, AMF Bowling's institutional stockholders purchased an
aggregate of 1,780,000 shares of Common Stock for $20.00 per share. The
aggregate proceeds of $35.6 million were used to fund acquisitions and for
other corporate purposes.

     On August 21, 1997, AMF Bowling filed a registration statement with the
Securities and Exchange Commission for an initial public offering (the "Initial
Public Offering") of Common Stock. On November 7, 1997, AMF Bowling issued
15,525,000 shares of its common stock at $19.50 per share pursuant to the
Initial Public Offering. The net proceeds of the Initial Public Offering were
approximately $279.1 million after deducting the underwriting discount and
expenses payable by AMF Bowling, and were used to repay $150.8 million of
indebtedness under the Credit Agreement and to redeem $118.9 million in
principal of the senior subordinated discount notes of Bowling Worldwide. See
"Note 9. Long-Term Debt".


Note 13. Employee Benefit Plans

     The Company has a defined contribution 401(k) plan to which U.S. employees
may make voluntary contributions based on their compensation. Under the
provisions of the plan, the Company can, at its option, match a discretionary
percentage of employee contributions and make an additional profit-sharing
contribution as determined by the Board of Directors. Employer contributions
vest 100 percent after a five-year period. The amounts charged to expense under
this plan were $1,779 in 1997 and $1,060 in 1996.

     Certain of the Company's international operations have employee benefit
plans covering selected employees. These plans vary as to the funding,
including local government, employee, and employer funding. Each international
operation has provided for pension expense and made contributions to these
plans in accordance with the requirements of the plans and local country
practices. The amounts charged to expense under these plans aggregated $814 in
1997 and $506 in 1996.

     Bowling Worldwide has entered into employment agreements with two
executives, each for a term ending in May 1999. Each agreement calls for
compensation consisting of a salary and an incentive bonus of up to 50 percent
of the executive's annual salary if the Company meets certain operational and
financial targets. Each employment agreement also calls for a continuation of
certain benefits, under specified circumstances, following termination of
employment.

     These two executives were also granted options to purchase a total of
235,000 shares of Common Stock. Unless sooner exercised or forfeited, as
provided, the options expire in May 2006. Twenty percent of the options vest on
each of the first five anniversaries of the Closing Date. The exercise price of
the options is $10.00 per share, which approximated the fair value of the
Common Stock at the date of the grants.

     On February 28, 1997, an executive resigned from all positions with the
Company. As part of the severance arrangement, AMF Bowling repurchased all of
the shares of Common Stock owned by the executive and all options held by the
executive were cancelled.

     In connection with the Acquisition, AMF Bowling adopted a stock incentive
plan (the "1996 Plan") under which AMF Bowling may grant incentive awards in
the form of shares of Common Stock, options to purchase shares of Common Stock
("Stock Options"), and stock appreciation rights to certain officers,
employees, consultants, and nonemployee directors ("Participants") of AMF
Bowling and its affiliates. The total number of shares of Common Stock reserved
and available for grant under the 1996 Plan is 1,767,151. A committee of AMF
Bowling's Board of Directors (the "Committee") is authorized to make grants and
various other decisions under the 1996 Plan and to make determinations as to a
number of the terms of awards granted under the 1996 Plan. In 1997 and 1996,
the Committee granted Stock Options to Participants to purchase a total of
703,500 and 1,119,000 shares of Common Stock, respectively. All such Stock
Options were granted at an exercise price of $10.00 per share. Twenty percent
of the options vest on each of the first five anniversaries of the grant dates.
Stock Options are nontransferable (except under certain limited circumstances)
and, unless otherwise determined by the Committee, have a term of ten years.

     The number of Stock Options outstanding to senior management, other
employees, and directors at December 31, 1997 and 1996, total 1,573,500 and
1,096,500, respectively. In addition to Stock Options outstanding under the
Stock Incentive


                                       44

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
Plan, 130,000 Stock Options granted to Douglas J. Stanard on May 1, 1996 were
outstanding at December 31, 1997 and 1996. Of the total Stock Options awarded
under the 1996 Plan, 265,966 were exercisable during 1997. None of these were
exercised. Of the 130,000 Stock Options granted to Mr. Stanard, 26,000 were
exercisable during 1997 and none of these were exercised. None of the Stock
Options awarded under the 1996 Plan and to Mr. Stanard were exercisable during
1996. Forfeited Stock Options totaled 226,500 and 22,500 in 1997 and 1996,
respectively.

     The 1996 Plan will terminate ten years after its effective date; however,
awards outstanding as of such date will not be affected or impaired by such
termination. AMF Bowling's Board of Directors and the Committee have authority
to amend the 1996 Plan and awards granted thereunder, subject to the terms of
the 1996 Plan.

     In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", and elected to account for its stock options under APB Opinion
No. 25, under which no compensation cost has been recognized. Had compensation
cost for these stock options been determined consistent with SFAS No. 123, the
Company's net losses for 1997 and 1996 would have been increased to $56,503 and
$19,858, respectively and the Company's net losses per share for 1997 and 1996
would have been increased to $1.25 and $0.50, respectively.

     The weighted-average fair value of options granted during 1997 and 1996 is
$6.78 and $3.05 per option, respectively. The 1,703,500 options outstanding at
December 31, 1997 have a weighted-average exercise price of $10.00 and a
weighted-average remaining contractual life of 9 years.

     The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model. The following weighted-average
assumptions were used for grants in 1997: risk-free rate of return of 6.5%;
expected dividend yield of zero; expected time of exercise of five years;
expected volatility of 27.5%. The following weighted-average assumptions were
used for grants in 1996: risk-free rate of return of 6.5%; expected dividend
yield of zero; expected time of exercise of ten years; expected volatility of
zero due to the lack of a public trading market in 1996 for the securities
underlying the options based on the minimum value method.


 1998 Stock Incentive Plan

     Subject to shareholder approval, AMF Bowling's Board of Directors has
approved the 1998 Stock Incentive Plan (the "1998 Plan") under which AMF
Bowling may grant to employees of the Company and its affiliates incentive
awards ("Awards") in the form of Stock Options, stock appreciation rights and
shares of Common Stock that are subject to certain terms and conditions. Two
million shares of Common Stock will be reserved and available for issuance
under the 1998 Plan. In addition, shares of Common Stock that have been
reserved but not issued under the 1996 Plan, and shares which are subject to
awards under the 1996 Plan that expire or otherwise terminate, may be granted
as Awards pursuant to the 1998 Plan. There are 193,651 shares of Common Stock
under the 1996 Plan that are available for grant of awards under that plan.

     Shares allocated to Awards granted under the 1998 Plan which are later
forfeited, expire or otherwise terminate (including shares subject to Stock
Appreciation Rights that are exercised for cash) may again be used for Awards
under the 1998 Plan. No more than two hundred thousand shares of Common Stock
may be allocated to the Awards granted under the 1998 Plan to a Participant in
any one year.

     Awards under the 1998 Plan are contingent on Board and shareholder
approval. As of February 20, 1998, no shares of Common Stock were awarded under
the 1998 Plan. Unless the Board sooner terminates it, the 1998 Plan will
terminate ten years after its effective date.


Note 14. Supplemental Disclosures to the Consolidated Statements of Cash Flows

     Cash paid for interest and income taxes in 1997 and 1996 was as follows:



<TABLE>
<CAPTION>
                                     1997       1996
                                  ---------- ----------
<S>                               <C>        <C>
          Interest ..............  $83,200    $44,465
          Income taxes ..........  $ 5,518    $ 7,990
</TABLE>

                                       45

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

   Net cash used for business acquisitions in 1997 and 1996 consisted of the
   following:



<TABLE>
<CAPTION>
                                                          Bowling
                                                           Center
                                                        Acquisitions
                                                       -------------
<S>                                                    <C>
    Year ended December 31, 1997:
     Working capital, other than cash acquired .......  $    6,876
     Plant and equipment .............................    (200,178)
     Purchase price in excess of the net assets acquired   (20,916)
     Other assets ....................................      (9,106)
     Noncurrent liabilities ..........................       8,563
                                                        ----------
     Net cash used for business acquisitions .........  $ (214,761)
                                                        ==========
</TABLE>


<TABLE>
<CAPTION>
                                                                                              Other
                                                                                             Bowling
                                                                              Charan         Center
                                                          Acquisition      Acquisition    Acquisitions        Total
                                                       ----------------- --------------- -------------- -----------------
 
<S>                                                    <C>               <C>             <C>            <C>
 Period ended December 31, 1996:
  Working capital, other than cash acquired ..........   $     (17,385)    $    (5,028)    $      --      $     (22,413)
  Plant and equipment ................................        (537,827)        (97,857)       (5,182)          (640,866)
  Purchase price in excess of the net assets acquired         (784,217)             --            --           (784,217)
  Other assets .......................................         (18,330)             --            --            (18,330)
  Warrants to purchase shares of Common Stock ........           8,700              --            --              8,700
  Noncurrent liabilities .............................           6,198              --            --              6,198
                                                         -------------     -----------     ---------      -------------
  Net cash used for business acquisitions ............   $  (1,342,861)    $  (102,885)    $  (5,182)     $  (1,450,928)
                                                         =============     ===========     =========      =============
</TABLE>

     Noncash financing activities in 1997 and 1996 were as follows:


<TABLE>
<CAPTION>
                                                                       1997       1996
                                                                    ---------- ----------
<S>                                                                 <C>        <C>
           Issuance of Common Stock and Stock Options in connection
            with a service contract ...............................  $ 4,028         --
           Warrants to purchase shares of Common Stock ............       --    $ 8,700
           Notes receivable from three executive officers for the
            purchase of Common Stock ..............................       --      3,000
</TABLE>

Note 15. Acquisitions

     On October 10, 1996, AMF Bowling Centers, Inc. ("AMF Bowling Centers"), a
Virginia corporation and an indirect, wholly owned subsidiary of Bowling
Worldwide, completed the acquisition (the "Charan Acquisition") of 50 bowling
centers and certain related assets and liabilities from Charan Industries, Inc.
("Charan"), a Delaware corporation, pursuant to an Asset Purchase Agreement
(the "Asset Purchase Agreement"), dated as of September 10, 1996, by and
between AMF Bowling Centers and Charan.

     The purchase price of the Charan Acquisition, net of cash acquired, was
approximately $102.9 million, subject to certain adjustments. The Charan
Acquisition was funded with approximately $40.0 million from the sale of equity
by AMF Bowling to its institutional stockholders and one of its directors, and
with approximately $62.9 million from available borrowings under Bowling
Worldwide's then existing Acquisition Facility.

     The following unaudited pro forma information has been prepared assuming
the Charan Acquisition had occurred as of January 1, 1996 and 1995, respectively
and is based on pro forma AMF Bowling results of operations presented in "Note
3. Pro Forma Results of Operations." The pro forma information is presented for
information purposes only and is not necessarily indicative of what would have
occurred if the acquisition had occurred as of those dates. In addition, the pro
forma information is not intended to be a projection of future results of
operations.


                                       46

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

                   Pro Forma Consolidated Data (unaudited):



<TABLE>
<CAPTION>
                                                        Year Ended
                                                       December 31,
                                                 -------------------------
                                                 (in millions, except per
                                                        share data)
                                                     1996         1995
                                                 ------------ ------------
<S>                                              <C>          <C>
       Operating revenue .......................  $  595.5     $  622.7
       Operating income ........................  $   80.0     $  105.2
       Loss before income taxes ................  $   (26.9)   $    (4.9)
       Net loss ................................  $   (19.5)   $   (16.1)

       Net loss per share ...................... $    (0.50)  $    (0.42)
       Weighted average shares outstanding .....     39,293       38,375
</TABLE>

     Other Acquisitions

     Since the Acquisition and prior to December 31, 1997, AMF Bowling Centers
purchased an aggregate of 179 bowling centers from various unrelated sellers
including Charan. The combined purchase price, net of cash acquired, was
approximately $322.8 million, and was funded with approximately $40.0 million
from the sale of equity by AMF Bowling to its institutional stockholders and one
of its directors, and with $282.8 million from available borrowing under Bowling
Worldwide's then existing Acquisition Facility and current Bank Facility. The
results of operations for acquired bowling centers and certain related assets
and liabilities other than the Charan Acquisition were not material in relation
to the Company's consolidated results of operations or financial position.

     Subsequent to December 31, 1997, the Company acquired an additional 24
bowling centers in the United States, two bowling centers in the United Kingdom
and one center in Australia from unrelated sellers, including fifteen bowling
centers in the U.S. from Active West, Inc. ("Active West"). The aggregate
purchase price for these acquisitions was approximately $36.5 million, including
$35.3 million funded with borrowings under the Bank Facility and, with respect
to the Active West acquisition, 50,000 shares of Common Stock valued at the
closing price of $24 3/16 per share on the New York Stock Exchange on the date
of acquisition.


Note 16. Joint Ventures

     In April 1997, the Company entered into a joint venture with Hong Leong
Corporation Limited, a Singapore-based conglomerate ("Hong Leong"), to build and
operate bowling centers in the Asia Pacific region. The joint venture ("Hong
Leong JV") is owned 50% by the Company and 50% by Hong Leong. The Hong Leong JV
opened its first bowling center during November 1997 in Tianjin, China.
Additional sites are being evaluated for future development.

     In August 1997, the Company entered into a joint venture with Playcenter
S.A., a Sao Paulo-based amusement and entertainment company ("Playcenter"), to
build and operate bowling centers in Brazil and Argentina. The joint venture
("Playcenter JV") is owned 50% by the Company and 50% by Playcenter. As of
December 31, 1997, Playcenter JV operated eleven centers in Brazil and two
centers in Argentina.

     The Company accounts for its investments in Hong Leong JV and Playcenter JV
by the equity method. The joint ventures' operations and the Company's equity in
earnings of the joint ventures are presented below (in thousands, unaudited):



<TABLE>
<CAPTION>
                                                  Joint venture
                                            -------------------------
Joint Venture Operations                     Hong Leong   Playcenter     Total
------------------------------------------- ------------ ------------ -----------
<S>                                         <C>          <C>          <C>
      Operating revenue ...................     $297       $  4,894    $  5,191
      Operating income (loss) .............       15         (1,215)     (1,200)
      Income (loss) before income taxes ...       15         (1,546)     (1,531)
      Income (loss) after income taxes ....        1         (1,608)     (1,607)
</TABLE>

                                       47

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        

<TABLE>
<CAPTION>
                                                                             Joint venture
                                                                       -------------------------
AMF Equity in Earnings                                                  Hong Leong   Playcenter      Total
---------------------------------------------------------------------- ------------ ------------ ------------
<S>                                                                    <C>          <C>          <C>
      AMF equity in income (loss) ....................................    $   --      $   (804)    $   (804)
      Elimination of 50% gross profit on sales to joint ventures .....      (354)         (204)        (558)
                                                                          ------      --------     --------
      Equity in earnings of joint ventures ...........................    $ (354)     $ (1,008)    $ (1,362)
                                                                          ======      ========     ========
</TABLE>

     The joint ventures' financial position as of December 31, 1997, and the
Company's investments in the joint ventures and amounts due from Playcenter JV
as of December 31, 1997, are presented below (in thousands, unaudited):



<TABLE>
<CAPTION>
                                               Joint Venture
                                         --------------------------
Joint Venture Financial Position          Hong Leong     Playcenter
--------------------------------------   ------------   -----------
<S>                                      <C>            <C>
      Current assets .................     $ 1,240        $ 4,004
      Noncurrent assets ..............       5,946         25,153
      Current liabilities ............         493          2,734
      Noncurrent liabilities .........       2,242         23,238
      Stockholders' equity ...........        4.451         3,185
</TABLE>


<TABLE>
<CAPTION>
                                                                Joint Venture
                                                     -----------------------------------
Investments/Amounts Due From Joint Ventures           Hong Leong   Playcenter    Total
---------------------------------------------------- ------------ ------------ ---------
<S>                                                  <C>          <C>          <C>
      Investments in joint ventures ................    $1,149       $ 8,669    $ 9,818
      Note receivable due from joint venture .......        --         3,781      3,781
      Loan to joint venture ........................        --         6,400      6,400
                                                        ------       -------    -------
      Total investment/due from joint ventures .....    $1,149       $18,850    $19,999
                                                        ======       =======    =======
</TABLE>

     The Company's investment in Playcenter JV includes the unamortized excess
of the Company's investment over its equity in the joint venture's net assets.
This excess was $7,076 at December 31, 1997, and is being amortized on a
straight-line basis over the estimated life of the joint venture of ten years.
The note receivable due from Playcenter JV represents the balance due for sales
of equipment to the joint venture through a Brazilian distributor. The balance
due on the equipment sales and the loan to Playcenter JV bear interest at 12%
through November 21, 1997, and 8% thereafter. Principal and interest will be
repaid to the Company by the joint venture from its operating cash flow in
excess of capital expenditures required to build additional bowling centers.
Subsequent to December 31, 1997, the Company lent Playcenter JV an additional
$1,600 under the same terms.


                                       48

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
Note 17. Business Segments

     The Company operates in two major lines of business: operation of bowling
centers and manufacturing and sale of bowling and related products. Information
concerning operations in these business segments for 1997 and 1996 is presented
below:



<TABLE>
<CAPTION>
                                                            AMF Bowling, Inc.
                              -----------------------------------------------------------------------------
                                                      Year Ended December 31, 1997
                                                              (in millions)
                                         Bowling Centers                        Bowling Products
                              -------------------------------------- --------------------------------------
                                              Inter-        Sub-                     Inter-        Sub-
                                  U.S.       national       Total        U.S.       national       total
                              ------------ ------------ ------------ ------------ ------------ ------------
<S>                           <C>          <C>          <C>          <C>          <C>          <C>
Revenue from unaffiliated
  customers .................  $   324.7    $   104.4    $   429.1    $   105.7    $   178.9    $   284.6
Intersegment sales ..........         --           --           --          9.4          5.3         14.7
Operating income (loss) .....       36.5         11.1         47.6         36.6         14.4         51.0
Identifiable assets .........      810.5        309.1      1,119.6        631.1         69.9        701.0
Depreciation and
amortization ................       64.3         18.5         82.8         18.6          1.2         19.8
Capital expenditures ........       33.4          6.0         39.4          8.1          1.1          9.2
Research and development
  expense ...................         --           --           --          0.9           --          0.9



<CAPTION>
                                       AMF Bowling, Inc.
                              -----------------------------------
                                 Year Ended December 31, 1997
                                         (in millions)
                                             Elim-
                               Corporate   inations      Total
                              ----------- ---------- ------------
<S>                           <C>         <C>        <C>
Revenue from unaffiliated
  customers .................  $     --    $    --    $   713.7
Intersegment sales ..........        --         --         14.7
Operating income (loss) .....      (16.8)       1.1        82.9
Identifiable assets .........       10.3        1.2     1,832.1
Depreciation and
amortization ................        1.4       (1.5)      102.5
Capital expenditures ........        8.6       (0.5)       56.7
Research and development
  expense ...................        --         --          0.9
</TABLE>


<TABLE>
<CAPTION>
                                                                AMF Bowling, Inc.
                                    --------------------------------------------------------------------------
                                                          Period Ended December 31, 1996
                                                                  (in millions)
                                              Bowling Centers                      Bowling Products
                                    ------------------------------------ -------------------------------------
                                                   Inter-       Sub-                    Inter-        Sub-
                                        U.S.      national      Total        U.S.      national       total
                                    ------------ ---------- ------------ ----------- ------------ ------------
<S>                                 <C>          <C>        <C>          <C>         <C>          <C>
Revenue from unaffiliated
 customers ........................  $   132.3    $   67.4   $   199.7    $   69.1    $   116.0    $   185.1
Intersegment sales ................         --          --          --         3.7          2.3          6.0
Operating income (loss) ...........       10.8         6.8        17.6        26.1         10.9         37.0
Depreciation and amortization .....       25.6        12.1        37.7        12.1          0.5         12.6
Capital expenditures ..............        8.1         5.0        13.1         1.5          1.7          3.2
Research and development
 expense ..........................         --          --          --         1.3           --          1.3



<CAPTION>
                                             AMF Bowling, Inc.
                                    -----------------------------------
                                      Period Ended December 31, 1996
                                               (in millions)
                                                   Elim-
                                     Corporate   inations      Total
                                    ----------- ---------- ------------
<S>                                 <C>         <C>        <C>
Revenue from unaffiliated
 customers ........................   $    --    $    --    $   384.8
Intersegment sales ................        --         --          6.0
Operating income (loss) ...........      (8.6)        0.1        46.1
Depreciation and amortization .....        --       (0.9)        49.4
Capital expenditures ..............        1.3      (0.7)        16.9
Research and development
 expense ..........................        --         --          1.3
</TABLE>

 

                                       49

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
Note 18. Geographic Segments

     Information about the Company's operations in different geographic areas
for 1997 and 1996, and identifiable assets at December 31, 1997 and 1996, are
presented below:

     Operating revenue:


<TABLE>
<CAPTION>
                                                  1997           1996
                                              ------------   -----------
<S>                                           <C>            <C>
      United States .......................    $ 439,800      $205,800
      China, including Hong Kong ..........       82,400        60,700
      Japan ...............................       54,700        36,800
      Australia ...........................       49,500        33,500
      United Kingdom ......................       44,100        15,900
      Sweden ..............................        9,100         7,400
      Mexico ..............................        8,800         5,400
      Korea ...............................       14,100        14,300
      Spain ...............................        3,300           900
      Canada ..............................          600           200
      Other European countries ............       21,300         9,900
      Middle East .........................          700            --
      Eliminations ........................      (14,700)       (6,000)
                                               ---------      --------
                                               $ 713,700      $384,800
                                               =========      ========
</TABLE>

     Operating revenue for the U.S. Bowling Products operation has been reduced
by $104,900 in 1997 and $63,400 in 1996 to reflect the elimination of
intracompany sales between the U.S. Bowling products operation and the Bowling
Products international sales and service branches.

     Operating income (loss):


<TABLE>
<CAPTION>
                                                  1997         1996
                                              -----------   ----------
<S>                                           <C>           <C>
      United States .......................    $ 56,300      $28,200
      China, including Hong Kong ..........       8,300        7,600
      Japan ...............................       4,500        4,000
      Australia ...........................       6,700        4,900
      United Kingdom ......................       4,400          600
      Sweden ..............................       1,300        1,000
      Mexico ..............................       1,300          500
      Korea ...............................         200          100
      Spain ...............................        (200)        (100)
      Canada ..............................        (100)        (100)
      Middle East .........................          --           --
      Other European countries ............        (900)        (700)
      Eliminations ........................       1,100          100
                                               --------      -------
                                               $ 82,900      $46,100
                                               ========      =======
</TABLE>

     Operating income for the U.S. Bowling Products operation has been
increased by $2,300 in 1997 and reduced by $1,000 in 1996 to reflect the
elimination of intracompany gross profit between the U.S. Bowling Products
operations and the Bowling Products international sales and service branches.


                                       50

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
   Identifiable assets:



<TABLE>
<CAPTION>
                                             1997            1996
                                        --------------   ------------
<S>                                     <C>              <C>
United States .......................    $ 1,451,900      1,246,700
China, including Hong Kong ..........         36,900         32,700
Japan ...............................         38,300         40,200
Australia ...........................        112,300        138,000
United Kingdom ......................        115,900         72,300
Sweden ..............................          3,900          3,000
Mexico ..............................         17,200         15,200
Korea ...............................          5,400          4,600
Spain ...............................          6,300          7,300
Canada ..............................          3,400          3,700
Middle East .........................            200             --
Other European countries ............         39,200         30,200
Eliminations ........................          1,200            100
                                         -----------      ---------
                                         $ 1,832,100      1,594,000
                                         ===========      =========
</TABLE>

     Identifiable assets for the international sales and service branches have
been reduced by $3,200 at December 31, 1997, and $5,500 at December 31, 1996 to
reflect the elimination of intracompany gross profit in inventory between the
U.S. Bowling Products operations and the Bowling Products international sales
and service branches.


Note 19. Related Parties

     Goldman Sachs and its affiliates have certain interests in the Company in
addition to being the initial purchasers of the Notes of the Company in
connection with the Acquisition. Richard A. Friedman and Terence M. O'Toole,
each of whom is a Managing Director of Goldman Sachs, and Peter M. Sacerdote,
who is a limited partner of The Goldman Sachs Group, L.P., are directors of AMF
Bowling, AMF Group Holdings and Bowling Worldwide. Goldman Sachs and its
affiliates together currently beneficially own a majority of the outstanding
voting equity of AMF Bowling; thus Goldman Sachs will be deemed to be an
"affiliate" of the Company. Goldman Sachs received an underwriting discount of
approximately $19.0 million in connection with the purchase and resale of the
Notes. Goldman Sachs also served as financial advisor to the Prior Owners in
connection with the Acquisition and received a fee in the form of 10-year
warrants to purchase 870,000 shares of Common Stock. The warrants were valued
for accounting purposes at approximately $8.7 million. In addition, Goldman
Sachs is entitled to the reimbursement of its expenses and is indemnified in
connection with its services.

     In connection with the bank credit agreement which partially funded the
Acquisition, Goldman Sachs Credit Partners, L.P., acted as Syndication Agent;
Goldman Sachs Credit Partners, L.P., and Citicorp Securities, Inc. acted as
Arrangers; and Citibank, N.A. is acting as Administrative Agent. Goldman Sachs
Credit Partners, L.P., was also a lender under the bank credit agreement.
Goldman Sachs received a fee of approximately $9.5 million and was reimbursed
for expenses in connection with such services. Goldman Sachs also received a
cash fee of $5.0 million from the Company in connection with the Acquisition
and was reimbursed for related expenses.

     Under the Credit Agreement, Goldman Sachs Credit Partners, L.P., acted as
Syndication Agent; Goldman Sachs Credit Partners, L.P., and Citicorp
Securities, Inc., acted as Arrangers; Citibank, N.A. is acting as
Administrative Agent and Citicorp USA, Inc. is acting as Collateral Agent.
Total fees payable to Goldman Sachs Credit Partners, L.P. in connection with
its services under the Credit Agreement aggregated approximately $900, and such
entity was reimbursed for expenses in connection with such services.

     Goldman Sachs acted as the Company's lead underwriter in connection with
the Initial Public Offering. Underwriting discounts paid to the entire
underwriting syndicate in the Initial Public Offering totaled $18,941.

     In 1997, the Company paid a fee of $300 to Goldman Sachs for its
representation of the Company in connection with the Company's lease of its new
bowling center at Chelsea Piers in New York.


                                       51

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
     Pursuant to the two employment agreements with executives of the Company
discussed in "Note 13. Employee Benefit Plans,"AMF Bowling issued to each
executive 150,000 shares of Common Stock at a purchase price of $10.00 per
share. One executive was granted an initial employment bonus of $166,667 which
he used to partially fund his purchase of shares of Common Stock. Each
executive has borrowed $1.0 million from AMF Bowling in order to fund the
portion of his purchase of Common Stock. These notes are due in May 2003 and
accrue interest, compounded annually, on the unpaid principal amount at 7
percent per annum.

     Pursuant to the Stock Subscription Agreement dated April 30, 1996, Charles
M. Diker, a director of AMF Bowling, AMF Group Holdings, and Bowling Worldwide,
purchased 125,000 shares of Common Stock, at a purchase price of $10.00 per
share. Pursuant to an option agreement (the "Diker Option Agreement") dated May
1, 1996, Mr. Diker was granted, pursuant to the 1996 Plan, non-qualified Stock
Options to purchase 100,000 shares of Common Stock at an exercise price of
$10.00 per share. One third of such options vested on May 1, 1996, one-third
vested on May 1, 1997, and the remaining options vest on May 1, 1998. The Diker
Option Agreement also provides, among other things, for repurchase of all of
the shares held by him for fair market value as of a specified date upon
certain conditions. Mr. Diker is a party to the Stockholders Agreement and any
shares of Common Stock held by Mr. Diker will be subject to the terms of that
agreement.


Note 20. Recent Accounting Pronouncements

     Effective for the fiscal year ended December 31, 1998, the Company is
required to adopt SFAS No. 130 "Reporting Comprehensive Income" and SFAS No.
131 "Disclosures about Segments of an Enterprise and Related Information." The
Company does not expect that adoption of these standards will have a material
impact on the Company's financial position or results of operations. The
adoption of SFAS No. 130 by the Company will require reporting comprehensive
income, which includes the foreign currency translation adjustment, in an
alternative format prescribed by the standard.


Note 21. Condensed Consolidating Financial Statements

     The following condensed consolidating information presents:

   o Condensed consolidating balance sheets as of December 31, 1997 and 1996,
     and condensed consolidating statements of income and cash flows for 1997
     and 1996.

   o Elimination entries necessary to combine the entities comprising AMF
     Bowling.

     The Notes are jointly and severally guaranteed on a full and unconditional
basis by AMF Group Holdings and by the first- and second-tier subsidiaries of
Bowling Worldwide (the "Guarantors"). Third-tier subsidiaries of Bowling
Worldwide, all of which are wholly owned subsidiaries of AMF Worldwide Bowling
Centers Holdings Inc., a second-tier subsidiary of Bowling Worldwide, have not
provided guarantees (the "Non-Guarantors").


                                       52

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

                       AMF BOWLING, INC. AND SUBIDIARIES

                     CONDENSED CONSOLIDATING BALANCE SHEET
                            As of December 31, 1997
                                  (unaudited)
                                (in thousands)



<TABLE>
<CAPTION>
                                                                                     Non-
                                                                   Guarantor      Guarantor
                                                                   Companies      Companies     Eliminations     Consolidated
                                                                 -------------   -----------   --------------   -------------
<S>                                                              <C>             <C>           <C>              <C>
                          ASSETS
Current assets:
 Cash and cash equivalents ...................................    $   33,451      $   2,339     $        --      $   35,790
 Accounts and notes receivable, net of allowance for doubtful
   accounts ..................................................        71,652          2,339              --          73,991
 Accounts receivable - intercompany ..........................         6,682          1,963          (8,645)             --
 Inventories .................................................        54,765          1,803              --          56,568
 Deferred taxes and other ....................................        14,345          2,704              --          17,049
                                                                  ----------      ---------     -----------      ----------
  Total current assets .......................................       180,895         11,148          (8,645)        183,398
Notes receivable - intercompany ..............................        15,482          1,663         (17,145)             --
Property and equipment, net ..................................       712,032         37,845           1,008         750,885
Investment in subsidiaries ...................................        24,499        628,355        (652,854)             --
Goodwill and other assets ....................................       891,011          6,758              --         897,769
                                                                  ----------      ---------     -----------      ----------
 Total assets ................................................    $1,823,919      $ 685,769     $  (677,636)     $1,832,052
                                                                  ==========      =========     ===========      ==========
               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable ............................................    $   38,513      $   3,070     $        --      $   41,583
 Accounts payable - intercompany .............................         1,934          6,711          (8,645)             --
 Accrued expenses ............................................        59,495          5,370              --          64,865
 Income taxes payable ........................................         3,237          2,407              --           5,644
 Long-term debt, current portion .............................        27,376             --              --          27,376
                                                                  ----------      ---------     -----------      ----------
  Total current liabilities ..................................       130,555         17,558          (8,645)        139,468
Long-term debt ...............................................     1,033,223             --              --       1,033,223
Notes payable - intercompany .................................         2,990         14,155         (17,145)             --
Other long-term liabilities ..................................         5,333             --              --           5,333
Deferred income taxes ........................................        (1,036)         1,036              --              --
                                                                  ----------      ---------     -----------      ----------
 Total liabilities ...........................................     1,171,065         32,749         (25,790)      1,178,024
                                                                  ----------      ---------     -----------      ----------
Commitments and contingencies
Stockholders' equity:
 Common stock ................................................            --            596              --             596
 Paid-in capital .............................................       747,145        746,049        (745,141)        748,053
 Retained earnings (deficit) .................................       (74,718)       (74,052)         73,722         (75,048)
 Equity adjustment from foreign currency translation .........       (19,573)       (19,573)         19,573         (19,573)
                                                                  ----------      ---------     -----------      ----------
 Total stockholders' equity ..................................       652,854        653,020        (651,846)        654,028
                                                                  ----------      ---------     -----------      ----------
 Total liabilities and stockholders' equity ..................    $1,823,919      $ 685,769     $  (677,636)     $1,832,052
                                                                  ==========      =========     ===========      ==========
</TABLE>


                                       53

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
                       AMF BOWLING, INC. AND SUSIDIARIES

                     CONDENSED CONSOLIDATING BALANCE SHEET
                            As of December 31, 1996
                                  (unaudited)
                                (in thousands)



<TABLE>
<CAPTION>
                                                                                      Non-
                                                                    Guarantor      Guarantor
                                                                    Companies      Companies    Eliminations    Consolidated
                                                                 --------------- ------------- -------------- ---------------
<S>                                                              <C>             <C>           <C>            <C>
                           ASSETS
Current assets:
 Cash and cash equivalents .....................................   $    39,660     $   3,908    $        --     $    43,568
 Accounts and notes receivable, net of allowance
   for doubtful accounts .......................................        41,266         1,359             --          42,625
 Accounts receivable - intercompany ............................         3,365         1,259         (4,624)             --
 Inventories ...................................................        39,609         1,392             --          41,001
 Deferred taxes and other ......................................         9,491         1,687             --          11,178
                                                                   -----------     ---------    -----------     -----------
 Total current assets ..........................................       133,391         9,605         (4,624)        138,372
Notes receivable - intercompany ................................         1,998         1,663         (3,661)             --
Property and equipment, net ....................................       548,218        30,139            951         579,308
Investment in subsidiaries .....................................        29,628       378,074       (407,702)             --
Goodwill and other assets ......................................       875,250         1,080             --         876,330
                                                                   -----------     ---------    -----------     -----------
 Total assets ..................................................   $ 1,588,485     $ 420,561    $  (415,036)    $ 1,594,010
                                                                   ===========     =========    ===========     ===========
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable ..............................................   $    30,198     $   1,365    $        --     $    31,563
 Accounts payable - intercompany ...............................           773         3,851         (4,624)             --
 Accrued expenses ..............................................        50,460         3,897             --          54,357
 Income taxes payable ..........................................         1,676           600             --           2,276
 Long-term debt, current portion ...............................        42,376            --             --          42,376
                                                                   -----------     ---------    -----------     -----------
   Total current liabilities ...................................       125,483         9,713         (4,624)        130,572
 Long-term debt ................................................     1,048,877            --             --       1,048,877
 Notes payable - intercompany ..................................         1,663         1,998         (3,661)             --
 Other long-term liabilities ...................................         1,851            --             --           1,851
 Deferred income taxes .........................................         2,828         1,067             --           3,895
                                                                   -----------     ---------    -----------     -----------
  Total liabilities ............................................     1,180,702        12,778         (8,285)      1,185,195
                                                                   -----------     ---------    -----------     -----------
 Commitments and contingencies
 Stockholders' equity:
   Common stock ................................................            --           424             --             424
   Paid-in capital .............................................       427,446       427,022       (425,442)        429,026
   Retained earnings (deficit) .................................       (18,512)      (18,512)        17,540         (19,484)
   Equity adjustment from foreign currency translation .........        (1,151)       (1,151)         1,151          (1,151)
                                                                   -----------     ---------    -----------     -----------
   Total stockholders' equity ..................................       407,783       407,783       (406,751)        408,815
                                                                   -----------     ---------    -----------     -----------
   Total liabilities and stockholders' equity ..................   $ 1,588,485     $ 420,561    $  (415,036)    $ 1,594,010
                                                                   ===========     =========    ===========     ===========
</TABLE>

 

                                       54

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
                      AMF BOWLING, INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                      For the Year Ended December 31, 1997
                                  (unaudited)
                                (in thousands)



<TABLE>
<CAPTION>
                                                                                Non-
                                                             Guarantor        Guarantor
                                                             Companies        Companies      Eliminations     Consolidated
                                                           -------------   --------------   --------------   -------------
<S>                                                        <C>             <C>              <C>              <C>
Operating revenue ......................................    $  673,714       $   42,205       $  (2,251)      $  713,668
                                                            ----------       ----------       ---------       ----------
Operating expenses:
 Cost of goods sold ....................................       207,820            6,230          (1,506)         212,544
 Bowling center operating expenses .....................       229,629           22,188            (611)         251,206
 Selling, general, and administrative expenses .........        61,421            3,125              --           64,546
 Depreciation and amortization .........................        96,812            5,826            (191)         102,447
                                                            ----------       ----------       ---------       ----------
  Total operating expenses .............................       595,682           37,369          (2,308)         630,743
                                                            ----------       ----------       ---------       ----------
  Operating income .....................................        78,032            4,836              57           82,925
                                                            ----------       ----------       ---------       ----------
Nonoperating expenses (income):
 Interest expense ......................................       117,804              581              --          118,385
 Other expenses, net ...................................         6,054            2,225           1,827           10,106
 Interest income .......................................        (1,631)            (323)             --           (1,954)
 Equity in loss of subsidiaries ........................         1,043           53,336         (54,379)              --
                                                            ----------       ----------       ---------       ----------
   Total nonoperating expenses .........................       123,270           55,819         (52,552)         126,537
                                                            ----------       ----------       ---------       ----------
   Income (loss) before income taxes ...................       (45,238)         (50,983)         52,609          (43,612)
   Provision (benefit) for income taxes ................       (15,587)           2,811              --          (12,776)
                                                            ----------       ----------       ---------       ----------
   Net loss before equity in loss of joint ventures and
    extraordinary items ................................       (29,651)         (53,794)         52,609          (30,836)
   Equity in loss of joint ventures ....................        (1,362)              --              --           (1,362)
                                                            ----------       ----------       ---------       ----------
   Net loss before extraordinary items .................       (31,013)         (53,794)         52,609          (32,198)
   Extraordinary items, net of tax .....................       (23,366)              --              --          (23,366)
                                                            ----------       ----------       ---------       ----------
   Net loss ............................................    $  (54,379)      $  (53,794)      $  52,609       $  (55,564)
                                                            ==========       ==========       =========       ==========
</TABLE>

 

                                       55

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
                       AMF BOWLING, INC. AND SUSIDIARIES

                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                     For the Period Ended December 31, 1996
                                  (unaudited)
                                (in thousands)



<TABLE>
<CAPTION>
                                                                                Non-
                                                             Guarantor        Guarantor
                                                             Companies        Companies      Eliminations     Consolidated
                                                           -------------   --------------   --------------   -------------
<S>                                                        <C>             <C>              <C>              <C>
Operating revenue ......................................    $  364,095       $   21,768       $  (1,054)      $  384,809
                                                            ----------       ----------       ---------       ----------
Operating expenses:
 Cost of goods sold ....................................       127,623            3,566            (647)         130,542
 Bowling center operating expenses .....................       112,318           11,780            (425)         123,673
 Selling, general, and administrative expenses .........        33,444            1,626              --           35,070
 Depreciation and amortization .........................        46,198            3,260             (72)          49,386
                                                            ----------       ----------       ---------       ----------
  Total operating expenses .............................       319,583           20,232          (1,144)         338,671
                                                            ----------       ----------       ---------       ----------
  Operating income .....................................        44,512            1,536              90           46,138
                                                            ----------       ----------       ---------       ----------
Nonoperating expenses:
 Interest expense ......................................        77,968               22              --           77,990
 Other (income) expense, net ...........................           (39)           1,029             922            1,912
 Interest income .......................................        (5,480)            (268)             --           (5,748)
 Equity in loss of subsidiaries ........................           499           18,234         (18,733)              --
                                                            ----------       ----------       ---------       ----------
   Total nonoperating expenses .........................        72,948           19,017         (17,811)          74,154
                                                            ----------       ----------       ---------       ----------
   Income (loss) before income taxes ...................       (28,436)         (17,481)         17,901          (28,016)
   Provision (benefit) for income taxes ................        (9,703)           1,171              --           (8,532)
                                                            ----------       ----------       ---------       ----------
   Net loss ............................................    $  (18,733)      $  (18,652)      $  17,901       $  (19,484)
                                                            ==========       ==========       =========       ==========
</TABLE>

 

                                       56

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
                       AMF BOWLING, INC. AND SUSIDIARIES

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                      For the Year Ended December 31, 1997
                                  (unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                            Guarantor
                                                                            Companies
                                                                         --------------
<S>                                                                      <C>
Cash flows from operating activities:
 Net loss ..............................................................   $  (54,379)
 Adjustments to reconcile net loss to net cash provided by
   (used in) operating activities:
   Depreciation and amortization .......................................       96,812
   Equity in loss of joint ventures ....................................        1,362
   Extraordinary items, net of tax .....................................       23,366
   Deferred income taxes ...............................................      (20,227)
   Amortization of bond discount .......................................       33,562
   Equity in loss of subsidiaries ......................................        1,043
   Dividends from guarantor companies ..................................         (500)
   Dividends from non-guarantor companies ..............................        1,327
   Loss on the sale of property and equipment, net .....................        4,417
   Changes in assets and liabilities:
    Accounts and notes receivable, net .................................      (25,218)
    Receivables and payables - affiliates ..............................      (12,745)
    Inventories ........................................................      (16,570)
    Other assets .......................................................      (13,375)
    Accounts payable and accrued expenses ..............................       14,522
    Income taxes payable ...............................................       (1,152)
    Other long-term liabilities ........................................       (4,089)
                                                                           ----------
   Net cash provided by (used in) operating activities .................       28,156
                                                                           ----------
Cash flows from investing activities:
 Acquisitions of operating units, net of cash acquired .................     (197,271)
 Investment in subsidiary ..............................................           --
 Investments in and advances to joint ventures .........................      (21,361)
 Purchases of property and equipment ...................................      (53,911)
 Proceeds from sale of property and equipment ..........................        4,123
                                                                           ----------
  Net cash provided by (used in) investing activities ..................     (268,420)
                                                                           ----------
Cash flows from financing activities:
 Proceeds from long-term debt, net of deferred financing costs .........      231,406
 Payments on long-term debt ............................................     (295,621)
 Prepayment penalty ....................................................      (14,571)
 Capital contribution ..................................................      315,671
 Net proceeds from initial public offering of shares ...................           --
 Repurchase of shares ..................................................           --
 Noncompete obligations ................................................         (647)
                                                                           ----------
   Net cash provided by (used in) financing activities .................      236,238
                                                                           ----------
   Effect of exchange rates on cash ....................................       (2,183)
                                                                           ----------
   Net decrease in cash ................................................       (6,209)
   Cash and cash equivalents at beginning of period ....................       39,660
                                                                           ----------
   Cash and cash equivalents at end of period ..........................   $   33,451
                                                                           ==========



<CAPTION>
                                (in thousands)
                                                                              Non-
                                                                            Guarantor
                                                                            Companies    Eliminations   Consolidated
                                                                         -------------- -------------- -------------
<S>                                                                      <C>            <C>            <C>
Cash flows from operating activities:
 Net loss ..............................................................   $  (53,794)   $    52,609    $  (55,564)
 Adjustments to reconcile net loss to net cash provided by
   (used in) operating activities:
   Depreciation and amortization .......................................        5,826           (191)      102,447
   Equity in loss of joint ventures ....................................           --             --         1,362
   Extraordinary items, net of tax .....................................           --             --        23,366
   Deferred income taxes ...............................................            6             --       (20,221)
   Amortization of bond discount .......................................           --             --        33,562
   Equity in loss of subsidiaries ......................................       53,336        (54,379)           --
   Dividends from guarantor companies ..................................          500             --            --
   Dividends from non-guarantor companies ..............................       (1,327)            --            --
   Loss on the sale of property and equipment, net .....................           29             --         4,446
   Changes in assets and liabilities:
    Accounts and notes receivable, net .................................         (875)            --       (26,093)
    Receivables and payables - affiliates ..............................       12,745             --            --
    Inventories ........................................................         (401)            --       (16,971)
    Other assets .......................................................       (1,797)         2,275       (12,897)
    Accounts payable and accrued expenses ..............................        3,260             --        17,782
    Income taxes payable ...............................................        1,754             --           602
    Other long-term liabilities ........................................           --             --        (4,089)
                                                                           ----------    -----------    ----------
   Net cash provided by (used in) operating activities .................       19,262            314        47,732
                                                                           ----------    -----------    ----------
Cash flows from investing activities:
 Acquisitions of operating units, net of cash acquired .................      (17,490)            --      (214,761)
 Investment in subsidiary ..............................................     (315,671)       315,671            --
 Investments in and advances to joint ventures .........................           --             --       (21,361)
 Purchases of property and equipment ...................................       (2,926)           134       (56,703)
 Proceeds from sale of property and equipment ..........................           57             --         4,180
                                                                           ----------    -----------    ----------
  Net cash provided by (used in) investing activities ..................     (336,030)       315,805      (288,645)
                                                                           ----------    -----------    ----------
Cash flows from financing activities:
 Proceeds from long-term debt, net of deferred financing costs .........        9,000             --       240,406
 Payments on long-term debt ............................................       (9,000)            --      (304,621)
 Prepayment penalty ....................................................           --             --       (14,571)
 Capital contribution ..................................................       37,048       (316,119)       36,600
 Net proceeds from initial public offering of shares ...................      279,071             --       279,071
 Repurchase of shares ..................................................         (500)            --          (500)
 Noncompete obligations ................................................           --             --          (647)
                                                                           ----------    -----------    ----------
   Net cash provided by (used in) financing activities .................      315,619       (316,119)      235,738
                                                                           ----------    -----------    ----------
   Effect of exchange rates on cash ....................................         (420)            --        (2,603)
                                                                           ----------    -----------    ----------
   Net decrease in cash ................................................       (1,569)            --        (7,778)
   Cash and cash equivalents at beginning of period ....................        3,908             --        43,568
                                                                           ----------    -----------    ----------
   Cash and cash equivalents at end of period ..........................   $    2,339    $        --    $   35,790
                                                                           ==========    ===========    ==========
</TABLE>


                                       57

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
                                        
                       AMF BOWLING, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                     For the Period Ended December 31, 1996
                                  (unaudited)
                                (in thousands)



<TABLE>
<CAPTION>
                                                                                         Non-
                                                                        Guarantor      Guarantor
                                                                        Companies      Companies    Eliminations    Consolidated
                                                                     -------------- -------------- -------------- ---------------
<S>                                                                  <C>            <C>            <C>            <C>
Cash flows from operating activities:
 Net loss ..........................................................  $    (18,733)   $  (18,652)    $  17,901     $    (19,484)
 Adjustments to reconcile net loss to net cash provided by
   operating activities:
   Depreciation and amortization ...................................        46,198         3,260           (72)          49,386
   Deferred income taxes ...........................................       (14,040)           --            --          (14,040)
   Amortization of bond discount ...................................        24,731            --            --           24,731
   Equity in loss of subsidiaries ..................................           499        18,234       (18,733)              --
   Dividends from non-guarantor companies ..........................           922          (922)           --               --
   Loss on the sale of property and equipment, net .................           390            18            --              408
   Changes in assets and liabilities:
    Accounts and notes receivable, net .............................        (6,663)          159            --           (6,504)
    Receivables and payables - affiliates ..........................           399          (399)           --               --
    Inventories ....................................................         1,830            32            --            1,862
    Other assets ...................................................        (4,332)         (582)          904           (4,010)
    Accounts payable and accrued expenses ..........................        21,631           299            --           21,930
    Income taxes payable ...........................................           662          (245)           --              417
    Other long-term liabilities ....................................        18,918           217            --           19,135
                                                                      ------------    ----------     ---------     ------------
   Net cash provided by operating activities .......................        72,412         1,419            --           73,831
Cash flows from investing activities:
 Acquisitions of operating units, net of cash acquired .............    (1,454,213)        3,285            --       (1,450,928)
 Purchases of property and equipment ...............................       (15,930)       (1,011)           --          (16,941)
 Proceeds from sales of property and equipment .....................           584           170            --              754
                                                                      ------------    ----------     ---------     ------------
 Net cash provided by (used in) investing activities ...............    (1,469,559)        2,444            --       (1,467,115)
Cash flows from financing activities:
 Proceeds from long-term debt, net of deferred financing costs .....     1,059,277            --            --        1,059,277
 Payments on long-term debt ........................................       (38,875)           --            --          (38,875)
 Capital contribution ..............................................       420,750            --            --          420,750
 Noncompete obligations ............................................        (2,892)           --            --           (2,892)
                                                                      ------------    ----------     ---------     ------------
   Net cash provided by financing activities .......................     1,438,260            --            --        1,438,260
                                                                      ------------    ----------     ---------     ------------
   Effect of exchange rates on cash ................................        (1,453)           45            --           (1,408)
                                                                      ------------    ----------     ---------     ------------
   Net increase in cash ............................................        39,660         3,908            --           43,568
   Cash and cash equivalents at beginning of period ................            --            --            --               --
                                                                      ------------    ----------     ---------     ------------
   Cash and cash equivalents at end of period ......................  $     39,660    $    3,908     $      --     $     43,568
                                                                      ============    ==========     =========     ============
</TABLE>

                                       58

<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and the Stockholders
AMF Bowling Group

     In our opinion, the combined financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of AMF Bowling Group at April 30, 1996 and December 31, 1995, and the
results of its operations and its cash flow for the four months ended April 30,
1996 and for the year ended December 31, 1995, in conformity with generally
accepted accounting principles. These finanical statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.


PRICE WATERHOUSE LLP


Norfolk, Virginia
June 28, 1996

                                       59

<PAGE>

                               AMF BOWLING GROUP

                            COMBINED BALANCE SHEETS
                           (in thousands of dollars)



<TABLE>
<CAPTION>
                                                                                        April 30,     December 31,
                                                                                           1996           1995
                                                                                       -----------   -------------
<S>                                                                                    <C>           <C>
                                                                   ASSETS
Currents assets:
 Cash and cash equivalents .........................................................    $ 21,913       $  9,732
 Accounts and notes receivable, net of allowance for doubtful accounts of $3,110 and
   $3,373, respectively ............................................................      33,887         39,026
 Accounts and notes receivable-affiliates ..........................................         166          3,979
 Inventories .......................................................................      43,296         39,821
 Prepaid expenses and other ........................................................       6,113          5,182
                                                                                        --------       --------
    Total current assets ...........................................................     105,375         97,740
Notes receivable -- affiliates .....................................................          --         22,941
Property and equipment, net ........................................................     251,544        259,724
Other assets .......................................................................      18,330         19,973
                                                                                        --------       --------
    Total assets ...................................................................    $375,249       $400,378
                                                                                        ========       ========
                                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liablities:
 Accounts payable ..................................................................    $ 23,670       $ 23,641
 Book overdrafts ...................................................................       5,724          2,362
 Accrued expenses and deposits .....................................................      34,916         30,328
 Accounts and notes payable -- affiliates ..........................................          --          1,989
 Long-term debt, current portion ...................................................          10          1,084
 Income taxes payable ..............................................................       1,757          7,129
                                                                                        --------       --------
    Total current liabilities ......................................................      66,077         66,533
Long-term debt .....................................................................       1,958         19,550
Notes payable -- affiliates ........................................................          --        146,727
Other liabilities ..................................................................       2,811          5,856
Deferred income taxes ..............................................................       1,429            174
                                                                                        --------       --------
    Total liabilities ..............................................................      72,275        238,840
                                                                                        ========       ========
Commitments and contingencies (Note 9)
Stockholders' equity:
 Common stock ......................................................................         454          1,538
 Paid-in capital ...................................................................     251,770         63,781
 Retained earnings .................................................................      52,302        101,080
 Equity adjustment from foreign currency translation ...............................      (1,552)        (3,400)
 Notes receivable stock subscription ...............................................          --         (1,461)
                                                                                        --------       --------
    Total stockholders' equity .....................................................     302,974        161,538
                                                                                        --------       --------
    Total liabilities and stockholders' equity .....................................    $375,249       $400,378
                                                                                        ========       ========
</TABLE>

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

                                       60

<PAGE>

                               AMF BOWLING GROUP

                       COMBINED STATEMENTS OF OPERATIONS
                           (in thousands of dollars)



<TABLE>
<CAPTION>
                                                                             Four Months
                                                                                Ended        Year Ended
                                                                              April 30,     December 31,
                                                                                1996            1995
                                                                            ------------   -------------
<S>                                                                         <C>            <C>
Operating revenues:
  Sales of products and services ........................................    $ 164,371       $ 563,998
  Revenue from operating lease activities ...............................          573             926
                                                                             ---------       ---------
    Total operating revenues ............................................      164,944         564,924
                                                                             ---------       ---------
Operating expenses:
  Cost of sales, excluding depreciation of $791 and $2,531, respectively        43,118         184,129
  Bowling center operations .............................................       80,156         166,465
  Selling, general and administrative ...................................       35,557          50,778
  Depreciation and amortization .........................................       15,097          39,139
                                                                             ---------       ---------
    Total operating expenses ............................................      173,928         440,511
                                                                             ---------       ---------
    Operating (loss) income .............................................       (8,984)        124,413
Nonoperating income (expenses):
  Interest expense ......................................................       (4,504)        (15,711)
  Other expenses, net ...................................................         (692)         (1,043)
  Interest income .......................................................          611           2,184
  Foreign currency transaction loss .....................................          (29)           (979)
                                                                             ---------       ---------
(Loss) income before income taxes .......................................      (13,598)        108,864
Income tax benefit (expense) ............................................        1,731         (12,098)
                                                                             ---------       ---------
    Net (loss) income ...................................................    $ (11,867)      $  96,766
                                                                             =========       =========
</TABLE>

Pro Forma Financial Information (unaudited):



<TABLE>
<CAPTION>
                                                                             Four Months
                                                                                Ended        Year Ended
                                                                              April 30,     December 31,
                                                                                1996            1995
                                                                            ------------   -------------
<S>                                                                         <C>            <C>
Net (loss) income before income taxes and pro forma adjustments .........    $ (13,598)      $ 108,864
Pro forma C Corporation -- tax benefit (provision) ......................        5,065         (40,616)
                                                                             ---------       ---------
Pro forma net (loss) income .............................................    $  (8,533)      $  68,248
                                                                             =========       =========
</TABLE>

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

                                       61

<PAGE>

                               AMF BOWLING GROUP

                       COMBINED STATEMENTS OF CASH FLOWS
                           (in thousands of dollars)



<TABLE>
<CAPTION>
                                                                                 Four Months
                                                                                    Ended        Year Ended
                                                                                  April 30,     December 31,
                                                                                    1996            1995
                                                                                ------------   -------------
<S>                                                                             <C>            <C>
Cash flows from operating activities:
 Net (loss) income ..........................................................    $ (11,867)      $  96,766
 Adjustments to reconcile net (loss) income to net cash provided by operating
   activities:
   Depreciation and amortization ............................................       15,097          39,139
   Deferred income taxes ....................................................          414            (830)
   Loss on sale of property and equipment, net ..............................           --             567
   Changes in assets and liabilities, net of effects from companies acquired:
    Accounts and notes receivable, net ......................................        4,784          10,630
    Receivables and payables -- affiliates ..................................        1,535           6,147
    Inventories .............................................................       (3,631)         (5,996)
    Other assets and liabilities ............................................       (2,673)           (101)
    Accounts payable and accrued expenses ...................................        8,713         (18,741)
    Income taxes payable ....................................................       (5,745)         (2,830)
                                                                                 ---------       ---------
    Net cash provided by operating activities ...............................        6,627         124,751
                                                                                 ---------       ---------
Cash flows from investing activities:
 Purchase of property and equipment .........................................       (6,874)        (29,965)
 Proceeds from sales of property and equipment ..............................           --           1,410
 Other ......................................................................        2,989             229
                                                                                 ---------       ---------
    Net cash used for investing activities ..................................       (3,885)        (28,326)
                                                                                 ---------       ---------
Cash flows from financing activities:
 Payments on credit note agreements, net ....................................           --         (11,057)
 Distributions to stockholders ..............................................      (36,721)        (71,851)
 Payment of long-term debt ..................................................       (3,812)        (10,285)
 Payment for redemption of stock ............................................           --          (3,960)
 Proceeds (payments) on notes payable --  stockholders, net .................        1,236          (3,793)
 Capital contributions by stockholders ......................................       24,805           8,329
 Collection of notes receivable -- affiliates ...............................       19,408              --
 Other ......................................................................        3,988          (2,056)
                                                                                 ---------       ---------
    Net cash provided by (used for) financing activities ....................        8,904         (94,673)
    Effect of exchange rates on cash ........................................          535            (194)
                                                                                 ---------       ---------
Net increase in cash ........................................................       12,181           1,558
Cash at beginning of period .................................................        9,732           8,174
                                                                                 ---------       ---------
Cash at end of period .......................................................    $  21,913       $   9,732
                                                                                 =========       =========
</TABLE>

   See Note 11 for supplemental disclosures to the Combined Statements of Cash
                 Flows.





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

                                       62

<PAGE>

                               AMF BOWLING GROUP

            COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                           (in thousands of dollars)



<TABLE>
<CAPTION>
                                                                         Equity
                                                                       Adjustment
                                                                      From Foreign                   Total
                                   Common     Paid-in     Retained      Currency                 Stockholders'
                                   Stock      Capital     Earnings     Translation     Other        Equity
                                ----------- ----------- ------------ -------------- ----------- --------------
<S>                             <C>         <C>         <C>          <C>            <C>         <C>
Balance,
 December 31, 1994 ............  $  1,536    $ 57,975    $  76,165      $ (3,302)    $     --     $ 132,374
 Net income ...................        --          --       96,766            --           --        96,766
 Distribution to
   stockholders ...............        --          --      (71,851)           --           --       (71,851)
 Redemption of stock ..........        --      (3,960)          --            --           --        (3,960)
 Decrease in equity
   adjustment from foreign
   currency translation .......        --          --           --           (98)          --           (98)
 Sale of stock ................         2       1,479           --            --       (1,479)            2
 Capital contributions ........        --       8,329           --            --           --         8,329
 Other ........................        --         (42)          --            --           18           (24)
                                 --------    --------    ---------      --------     --------     ---------
Balance,
 December 31, 1995 ............     1,538      63,781      101,080        (3,400)      (1,461)      161,538
 Net loss .....................        --          --      (11,867)           --           --       (11,867)
 Distribution to
   stockholders ...............        --          --      (36,721)           --           --       (36,721)
 Increase in equity
   adjustment from foreign
   currency translation .......        --          --           --         1,665           --         1,665
 Payment of notes
   receivable
   officer/stockholder ........        --          --           --            --        1,461         1,461
 Capital contributions ........       102     187,989           --            --           --       188,091
 Other ........................    (1,186)         --         (190)          183           --        (1,193)
                                 --------    --------    ---------      --------     --------     ---------
Balance, April 30, 1996 .......  $    454    $251,770    $  52,302      $ (1,552)    $     --     $ 302,974
                                 ========    ========    =========      ========     ========     =========
</TABLE>

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

                                       63

<PAGE>

                               AMF BOWLING GROUP

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                 (in thousands of dollars, except share data)


Note 1. Organization

     AMF Bowling Group ("the Combined Companies") consisted of the following
entities:


S Corporations

o AMF Bowling, Inc. ("AMF Bowling")

o AMF Bowling Centers, Inc. ("AMF Bowling Centers")

o AMF Beverage Company of Oregon, Inc.

o King Louie Lenexa, Inc.

o AMF Bowling Centers (Aust) International Inc.

o AMF Bowling Centers (Canada) International Inc.

o AMF BCO-France One, Inc.

o AMF BCO-France Two, Inc.

o AMF Bowling Centers (Hong Kong) International Inc.

o AMF Bowling Centers International Inc.-Japan

o AMF Bowling Mexico Holding, Inc.

o Boliches AMF, Inc.

o AMF Bowling Centers II Inc.-Switzerland

o AMF BCO-U.K. One, Inc.

o AMF BCO-U.K. Two, Inc.

o AMF BCO-China, Inc.

o AMF Bowling Centers China, Inc.

Other

o AMF Catering Services Pty, Ltd.

o Bush River Corporation

     Pursuant to a Stock Purchase Agreement dated February 16, 1996 between AMF
Group Holdings, Inc. and the stockholders of AMF Bowling Group (the "Combined
Companies"), on May 1, 1996, AMF Group Holdings, Inc. (the "Company"), through
its subsidiaries, acquired the Combined Companies in a stock purchase of all
the outstanding stock of the separate domestic and foreign corporations that
constitute substantially all of the Combined Companies and through the purchase
of certain assets of the Combined Companies' bowling center operations in Spain
and Switzerland. Prior to the acquisition, the Combined Companies were
controlled by the Virginia Investment Trust.

     The Combined Companies operated bowling centers in the United States and
in 9 foreign countries and manufactured and distributed a full line of bowling
and leisure related products. The principal markets for bowling and leisure
related equipment are domestic and foreign independent bowling center
operators. The accompanying combined financial statements have been prepared
for the purpose of presenting the financial position and results of operations
of the bowling related operations of the various entities.

     The Company did not acquire the assets of two bowling centers located in
Madrid, Spain and Geneva, Switzerland (both of which were retained by the
sellers) and, accordingly, the April 30, 1996 combined financial statements
exclude the assets of these centers. As a result of the acquisition, the
Company, at May 1, 1996, owns or operates 205 of the Combined


                                       64

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


Companies' domestic bowling centers and 78 international bowling centers (205
domestic bowling centers and 80 international bowling centers at December 31,
1995). The purchase price for the acquisition was approximately $1,300,000,
subject to certain postclosing adjustments, less approximately $2,000
representing debt of the Combined Companies which remained in place following
the closing of the acquisition (the "Closing").

     The revaluation, in accordance with Accounting Principles Board Opinion
No. 16, of the Combined Companies' assets and liabilities as a result of the
Stock Purchase Agreement has not been reflected in the accompanying combined
financial statements. In addition, no adjustments have been recorded to reflect
any tax liability resulting from the stock purchase and the related Section 338
(h) (10) election.


Note 2. Summary of Significant Accounting Policies

     Basis of presentation

     The accompanying combined financial statements have been prepared on the
accrual basis of accounting and conform in all material respects to accounting
principles generally accepted in the United States. The accompanying combined
financial statements are stated in U.S. dollars. All significant intercompany
and intracompany balances and transactions have been eliminated in the
accompanying combined financial statements.


     Use of estimates

     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, the
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. The more significant estimates made by management include
allowances for obsolete inventory, uncollectable accounts receivable, product
warranty costs and litigation and claims. Actual results could differ from
those estimates.


     Fiscal year

     The entities included in the accompanying combined financial statements
operate on fiscal years ending on December 31, except for AMF Bowling Centers,
which operated on a 52-week period ended on the the last Sunday in December
during 1994, and the Fair Lanes operation which operated on a fiscal period
ended on December 29, 1994. For 1995, AMF Bowling Centers, including the
acquired Fair Lanes operation, adopted a calendar month-end; accordingly, the
results of operations for the period ended December 31, 1995 include AMF
Bowling Centers' operations for the period December 26, 1994 (December 30, 1994
with respect to Fair Lanes operations) through December 31, 1995.


     Revenue recognition

     Revenue is generally recognized from the sale of products at the time the
products are shipped. For larger contract orders, the Combined Companies
generally require that customers submit a deposit as a condition of accepting
the order. For nonaffiliate international sales, the Combined Companies
generally require the customer to obtain a letter of credit prior to shipment.


     Warranty costs

     AMF Bowling offers warranties for its various products and provides, by a
current charge to income, an amount it estimates will be needed to cover future
warranty obligations for products sold. Warranty expense aggregated
approximately $1,313 for the four months ended April 30, 1996 and $2,748 for
the year ended December 31, 1995.


     Cash and cash equivalents

     For the purpose of the statement of cash flows, the Combined Companies
consider all highly liquid debt instruments purchased with an original maturity
of three months or less at the date of purchase to be cash equivalents.


                                       65

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



     Inventories

     Manufacturing inventory is valued at the lower of cost or market, cost
being determined using the last-in, first-out ("LIFO") method for domestic
inventories and the first-in, first-out ("FIFO") method for foreign
inventories.

     Bowling center inventory is valued at the lower of cost or market with the
cost being determined using the actual or average cost method.


     Property and equipment

     Property and equipment are stated at cost. Expenditures for maintenance
and repairs which do not improve or extend the life of an asset are charged to
expense as incurred; major renewals or betterments are capitalized to the
property accounts. Upon retirement or sale of an asset, its cost and related
accumulated depreciation are removed from the property accounts, and any gain
or loss is recognized.

     Property and equipment are depreciated over their estimated useful lives
using straight-line and accelerated methods. Estimated useful lives of property
and equipment for financial reporting purposes are as follows:


<TABLE>
<S>                                      <C>
            Buildings and improvements . 5 - 40 years
            Bowling and related
             equipment.................. 5 - 10 years
            Manufacturing equipment .... 2 - 7 years
            Furniture and fixtures ..... 3 - 8 years
</TABLE>

     In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," ("SFAS No.
121"). SFAS No. 121 is effective for fiscal year 1996 for the Company. This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets.
The adoption of SFAS No. 121 did not have a material effect on the financial
position or results of operations of the Company.


     Income taxes

     Certain of the Combined Companies included in the accompanying combined
financial statements have elected S Corporation status under the Internal
Revenue Code (see Note 1). As an S Corporation, the companies may be liable for
U.S. federal income taxes under certain circumstances and liable for state
income taxes in certain jurisdictions; all other domestic income taxes are the
responsibility of the Combined Companies' stockholders.

     The foreign branches of the S Corporations and other foreign entities file
income tax returns and pay taxes in their respective countries. The
stockholders receive a tax credit, subject to certain limitations, in their
U.S. federal income tax returns for foreign taxes paid by the foreign branches
of the U.S. Corporation and certain other foreign entities.

     The Combined Companies account for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," ("SFAS No. 109"). SFAS No. 109 mandates the liability method for
computing deferred income taxes. Because the Combined Companies have elected S
Corporation status, deferred income taxes are only provided with respect to
state and foreign income taxes.


     Research and development costs

     Expenditures relating to the development of new products, including
significant improvements and refinements to existing products, are expensed as
incurred. The amounts charged against income were approximately $875 for the
four months ended April 30, 1996 and $3,600 for the year ended December 31,
1995.


     Advertising costs

     Costs incurred for producing and communicating advertising are expensed
when incurred. The amounts charged against income were approximately $3,575 for
the four months ended April 30, 1996 and $12,250 for the year ended December
31, 1995.


                                       66

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



     Foreign currency

     In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," all assets and liabilities of the Combined
Companies' foreign operations are translated from foreign currencies into U.S.
dollars at year-end exchange rates. Revenues and expenses of foreign operations
are translated using average exchange rates that existed during the year and
reflect currency exchange gains and losses resulting from transactions
conducted in nonlocal currencies. Adjustments resulting from the translation of
financial statements of foreign operations into U.S. dollars are included in
the equity adjustment from foreign currency translation on the accompanying
combined balance sheets. Gains and losses arising from transactions in foreign
currencies are included as a separate item in the accompanying combined
statement of operations.


     Fair value of financial instruments

     The carrying value of financial instruments including cash and cash
equivalents, accounts receivable, accounts payable and short-term debt
approximated fair value at April 30, 1996 and December 31, 1995 because of the
short maturity of these instruments. The carrying value of long-term
receivables and payables approximated fair value as of April 30, 1996 and
December 31, 1995 based upon market rates for similar instruments.


     Noncompete agreements

     The Combined Companies have certain noncompete agreements with
individuals. The assets are recorded at cost or at the present value of
payments to be made under these agreements, discounted at annual rates ranging
from 8%-10%. The assets are included in other current and noncurrent assets and
are amortized on a straight-line basis over the terms of the agreements.
Noncompete obligations were $3,095 at April 30, 1996 and $3,300 at December 31,
1995.


     Common stock

     The common stock account represents the aggregate number of shares
outstanding for all the Combined Companies multiplied by the respective par
value at each of the Combined Companies.


Note 3. Related Party Transactions

     The Combined Companies had related party transactions with several
companies which are affiliated through common ownership and with certain of its
officers, directors and stockholders. The majority of balances with affiliated
companies were liquidated on or prior to April 30, 1996. Interest income and
expense during the four months ended April 30, 1996 were not significant to the
operating results of the Combined Companies. A summary of the significant
balances and transactions with related parties follows.

     Accounts and notes receivable -- affiliates, including accrued interest, at
April 30, 1996 and December 31, 1995 consisted of the following:



<TABLE>
<CAPTION>
                                                                    April 30,     December 31,
                                                                       1996           1995
                                                                   -----------   -------------
<S>                                                                <C>           <C>
      Accounts receivable -- affiliates ........................       $166        $  2,084
                                                                       ====        ========
      Notes receivable -- AMF Reece ............................       $ --        $ 12,910
      Notes receivable -- stockholders .........................         --          11,130
      Note receivable -- AMF Machinery Systems ("AMS") .........         --             796
                                                                       ----        --------
                                                                         --          24,836
      Current maturities .......................................         --          (1,895)
                                                                       ----        --------
                                                                       $ --        $ 22,941
                                                                       ====        ========
</TABLE>

     Notes receivable -- AMF Reece represented various notes, plus accrued and
unpaid interest income, between AMF Bowling and AMF Reece, and affiliated
company. The notes earned interest monthly based on the LIBOR rate plus .75%,
which was 6.48% at December 31, 1995. Interest income was $762 for the year
ended December 31, 1995.


                                       67

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


     Notes receivable -- stockholders represented notes of $9,394 plus accrued
and unpaid interest income, between the Combined Companies and its
stockholders. Interest on the notes was at the LIBOR rate plus .75%, which was
6.48% at December 31, 1995. Interest income for the year ended December 31,
1995 was $602.

     Accounts and notes payable -- affiliates at April 30, 1996 and December
31, 1995 consisted of the following:



<TABLE>
<CAPTION>
                                                      April 30,     December 31,
                                                         1996           1995
                                                     -----------   -------------
<S>                                                  <C>           <C>
      Accounts payable -- stockholders ...........   $ --          $    322
      Accounts payable -- AMS ....................     --             1,619
      Accounts payable -- CCA Industries .........     --                48
                                                     ----          --------
                                                     $ --          $  1,989
                                                     ====          ========
      Notes payable -- stockholders ..............   $ --          $117,022
      Note payable -- Fair Lanes, Inc. ...........     --            24,096
      Notes payable -- AMS .......................     --             5,609
      Capital lease obligations -- Commonwealth
        Leasing Corporation ("CLC") ..............     --                --
                                                     ----          --------
                                                       --           146,727
                                                     ----          --------
      Current maturities .........................     --                --
      Long-term portion ..........................   $ --          $146,727
                                                     ====          ========
</TABLE>

     Notes payable -- stockholders included $88,323, plus accrued and unpaid
interest, at December 31, 1995 of 9.5% of Fair Lanes, Inc. ("Fair Lanes") notes
which were acquired by certain stockholders in conjunction with the acquisition
of Fair Lanes. A portion of the notes were acquired by the stockholders as a
result of the plan of reorganization (Note 14). The note balance included
interest from the period July 15, 1994 through January 15, 1995 which was paid
through the issuance of additional notes. The notes were assumed by AMF Bowling
Centers in connection with the acquisition of the assets of Fair Lanes on July
2, 1995. The notes, originally payable in 2001, were paid prior to April 30,
1996, pursuant to the purchase of the Combined Companies. Interest expense for
the year ended December 31, 1995 was approximately $8,053.

     Notes payable -- stockholders included $16,773, plus accrued and unpaid
interest, on a $60,000 revolving line of credit between AMF Bowling Centers and
its stockholders which originally matured on December 31, 1998. The notes were
repaid on or prior to April 30, 1996, pursuant to the purchase of the Combined
Companies. Interest on the notes was at the lesser of the prime rate or the
LIBOR rate plus 0.50% (6.23% at December 31, 1995). The note was repaid on or
prior to April 30, 1996, pursuant to the purchase of the Combined Companies.
Interest expense on these notes was $562 for the year ended December 31, 1995.

     Also, included in notes payable -- stockholders was a $1,943 note, plus
accrued and unpaid interest, which represented the balance outstanding on a
$16,000 revolving line of credit between AMF Bowling and its stockholders.
Interest on the note was at the prime rate (8.50% at December 31, 1995). The
note was repaid on or prior to April 30, 1996, pursuant to the purchase of the
Combined Companies. Interest expense on this note was $179 for the year ended
December 31, 1995.

     The average amount outstanding under the various lines of credit was
$7,865 during fiscal 1995. The maximum amount outstanding under these
agreements was $21,246 during fiscal 1995. The average interest rate on the
outstanding debt was 7.5% during fiscal 1995.

     Note payable -- Fair Lanes related to the acquisition of Fair Lanes net
assets by AMF Bowling Centers from the AMF stockholders. Interest on the note
was at prime (8.50% at December 31, 1995). The note, originally payable on
December 31, 1998, was repaid on or prior to April 30, 1996, pursuant to the
purchase of the Combined Companies. Interest expense for the year ended
December 31, 1995 was $1,187.

     The notes payable of $5,609 to AMS consisted of various notes plus accrued
and unpaid interest (at 8.5%-11%) and were payable on demand. The notes were
repaid on or prior to April 30, 1996, pursuant to the purchase of the Combined
Companies. Interest expense on these notes was $417 for the year ended December
31, 1995.


                                       68

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



     Other related party transactions

     The Combined Companies were charged $512 for the four months ended April
30, 1996 and $1,622 for the year ended December 31, 1995 in management fees for
certain consulting and administrative services performed by affiliated
companies.

     In May 1995, the Combined Companies began purchasing health insurance from
CCA Industries, an affiliated company, on a fully insured basis. Total premiums
for the four months ended April 30, 1996 were $411 and for the period from May
1995 to December 31, 1995 aggregated $889.

     During the year ended December 31, 1995, Fair Lanes acquired equipment
which was leased from Commonwealth Leasing Corporation ("CLC"), an affiliated
company, for $1,367. The difference between the capitalized lease obligation
and the purchase price was treated as an adjustment of the notes payable --
Fair Lanes.

     The Combined Companies purchased used bowling equipment from CLC for
$1,429 during the year ended 1995.

     The Combined Companies charged service fees and sales commissions of $53
for the year ended December 31, 1995 to CLC. These charges have been treated as
reductions in selling, general and administrative expenses.

     The Combined Companies lease equipment from CCA Financial, an affiliated
company. Rent expense was $203 for the four months ended April 30, 1996 and
$444 for the year ended December 31, 1995.


Note 4. Inventories

     Inventories at April 30, 1996 and December 31, 1995 consist of the
following:



<TABLE>
<CAPTION>
                                                  April 30,     December 31,
                                                     1996           1995
                                                 -----------   -------------
<S>                                              <C>           <C>
      Raw materials ..........................     $10,325       $ 10,590
      Work-in-progress .......................       2,084          1,522
      Finished goods and spare parts .........      28,661         24,920
      Merchandise inventory ..................       3,033          4,045
                                                   -------       --------
                                                    44,103         41,077
      Inventory valuation reserves ...........        (807)        (1,256)
                                                   -------       --------
                                                   $43,296       $ 39,821
                                                   =======       ========
</TABLE>

     Inventories were determined using the following methods at April 30, 1996
and December 31, 1995:



<TABLE>
<CAPTION>
                                                 April 30,     December 31,
                                                    1996           1995
                                                -----------   -------------
<S>                                             <C>           <C>
      LIFO (Domestic manufacturing) .........     $27,128        $24,389
      FIFO (Foreign manufacturing) ..........      13,135         11,387
      Other (Merchandise inventory) .........       3,033          4,045
                                                  -------        -------
                                                  $43,296        $39,821
                                                  =======        =======
</TABLE>

     If LIFO inventories had been valued at current costs, they would have been
greater by $2,527 at April 30, 1996 and $2,496 at December 31, 1995.


                                       69

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



Note 5. Property and Equipment

     Property and equipment at April 30, 1996 and December 31, 1995 consist of
the following:



<TABLE>
<CAPTION>
                                                      April 30,      December 31,
                                                         1996            1995
                                                    -------------   -------------
<S>                                                 <C>             <C>
      Land ......................................    $   25,891      $   25,692
      Buildings and improvements ................       143,147         138,448
      Equipment, furniture and fixtures .........       256,308         251,936
      Construction in progress ..................           110           1,925
                                                     ----------      ----------
                                                        425,456         418,001

      Less: accumulated depreciation and
        amortization ............................      (173,912)       (158,277)
                                                     ----------      ----------
                                                     $  251,544      $  259,724
                                                     ==========      ==========
</TABLE>

     Depreciation expense was $14,523 for the four months ended April 30, 1996
and $37,889 for the year ended December 31, 1995.


Note 6. Accrued Expenses and Deposits

     Accrued expenses and deposits at April 30, 1996 and December 31, 1995
consist of the following:



<TABLE>
<CAPTION>
                                           April 30,     December 31,
                                              1996           1995
                                          -----------   -------------
<S>                                       <C>           <C>
      Accrued compensation ............     $ 9,714        $ 7,152
      League bowling accounts .........       3,776          6,368
      Other ...........................      21,426         16,808
                                            -------        -------
                                            $34,916        $30,328
                                            =======        =======
</TABLE>

Note 7. Long-term Debt

     Long-term debt at April 30, 1996 and December 31, 1995 consists of the
following:



<TABLE>
<CAPTION>
                                                      April 30,     December 31,
                                                         1996           1995
                                                     -----------   -------------
<S>                                                  <C>           <C>
      Notes payable to bank -- guaranteed.........     $   --        $  3,764
      Mortgage and equipment notes ...............      1,968          14,469
      Industrial development bond ................         --           1,354
      Other ......................................         --           1,047
                                                       ------        --------
                                                        1,968          20,634
      Current Maturities .........................        (10)         (1,084)
                                                       ------        --------
      Long-term portion ..........................     $1,958        $ 19,550
                                                       ======        ========
</TABLE>

     Notes payable to bank -- guaranteed represented a credit agreement entered
into between AMF Bowling Centers and a bank under which up to $32,750 could be
borrowed. An additional $25,000 could be borrowed from one or more additional
financial institutions. Interest was payable at a rate equal to the lesser of
the prime rate or the LIBOR rate plus .50% (6.23% at December 31, 1995). The
notes were secured by certain tangible personal property of AMF Bowling Centers
and were guaranteed by certain stockholders. The agreement also required AMF
Bowling Centers to meet certain financial covenants, including maximum debt to
equity ratios, minimum tangible net worth requirements and minimum earnings to
charge ratios. At December 31, 1995, AMF Bowling Centers was in violation of
certain requirements which were subsequently


                                       70

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


waived by the bank through March 31, 1997. The notes payable were repaid on or
prior to April 30, 1996, pursuant to the purchase of the Combined Companies.

     The mortgage and equipment notes were secured by first deeds of trust on
various bowling centers. The notes generally required monthly payments and
matured at various times through October 2008. Interest rates on these notes
were generally fixed and ranged from 3% to 12%. The notes were repaid on or
prior to April 30, 1996, except for one.

     The Industrial Development Bond was secured by a first deed of trust on one
of the bowling centers. Interest on the bond was at a fluctuating rate based on
the prime rate of the lending bank (6.947% at December 31, 1995). Monthly
principal and interest payments were originally due through August 2001. The
bond was repaid on or prior to April 30, 1996, pursuant to the purchase of the
Combined Companies.

     AMF Bowling had an agreement with a bank under which up to $15,000 could be
borrowed. This arrangement expired on April 30, 1996. There were no borrowings
at December 31, 1995 under the agreement. Interest was payable monthly at the
lower of the bank's prime rate or the adjusted LIBOR rate plus 0.50% (6.23% at
December 31, 1995). This agreement required certain financial covenants to be
met, including maximum debt to equity ratios, minimum tangible net worth
requirements and minimum earnings to charge ratios.

     AMF Bowling had a $3,500 revolving credit line with a bank which was due
to expire on June 30, 1996. No balance was outstanding at December 31, 1995.
Interest on outstanding borrowings was payable quarterly at the lower of the
bank's prime rate or the adjusted LIBOR rate plus 0.50% (6.23% at December 31,
1995). Under this line were two standby letters of credit with amounts
outstanding at December 31, 1995 of $1,138, expiring on December 1, 1996, and
of $12 expiring on August 19, 1996.

     The average amount outstanding under the various lines of credit was
$21,807 during fiscal 1995. The maximum amount outstanding under these credit
arrangements was $39,454 during fiscal 1995. The average interest rate on these
credit arrangements was 6.43% during fiscal 1995.

     AMF Bowling had available a foreign exchange line of $5,000 and a letter
of credit line of $1,000. No balances were outstanding at December 31, 1995.
One standby letter of credit with an amount at December 31, 1995 of $535, which
expired on January 18, 1996, and four import letters of credit totaling $142
were outstanding under these lines.


Note 8. Income Taxes

Income (loss) before income taxes consists of the following:



<TABLE>
<CAPTION>
                                 Four Months
                                    Ended        Year Ended
                                  April 30,     December 31,
                                    1996            1995
                                ------------   -------------
<S>                             <C>            <C>
      United States .........    $  (7,757)       $ 77,931
      Foreign ...............       (5,841)         30,933
                                 ---------        --------
                                 $ (13,598)       $108,864
                                 =========        ========
</TABLE>

                                       71

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


   The income tax benefit (provision) consists of the following:



<TABLE>
<CAPTION>
                                          Four Months
                                             Ended        Year Ended
                                           April 30,     December 31,
                                             1996            1995
                                         ------------   -------------
<S>                                      <C>            <C>
      Current tax benefit (provision)
      U.S. federal ...................      $   --        $      --
      State and local ................         205           (1,065)
      Foreign ........................       1,940          (11,961)
                                            ------        ---------
      Total current ..................       2,145          (13,026)
                                            ------        ---------
      Deferred tax benefit (provision)
      U.S. federal ...................          --               --
      State and local ................          --               32
      Foreign ........................        (414)             896
                                            ------        ---------
      Total deferred .................        (414)             928
                                            ------        ---------
      Total benefit ..................      $1,731        $ (12,098)
                                            ======        =========
</TABLE>

     Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are as follows:



<TABLE>
<CAPTION>
                                                         April 30,     December 31,
                                                            1996           1995
                                                        -----------   -------------
<S>                                                     <C>           <C>
      Deferred tax assets
      Current assets ................................    $    815       $  1,198
      Noncurrent assets .............................         799            799
                                                         --------       --------
      Total deferred tax assets .....................       1,614          1,997
                                                         --------       --------
      Deferred tax liabilities
      Noncurrent liabilities ........................      (1,429)        (1,998)
                                                         --------       --------
      Total deferred tax liabilities ................      (1,429)        (1,998)
                                                         --------       --------
      Net deferred tax assets (liabilities) .........    $    185       $     (1)
                                                         ========       ========
</TABLE>

     The primary determination of the deferred tax assets are book accruals not
deductible for tax purposes, such as the allowance for bad debts, inventory
reserves and various other accruals. Deferred tax liabilities are a result of
accelerated depreciation methods used for tax purposes.

     The benefit (provision) for income taxes differs from the amount computed
by applying the statutory rate of 35% for the four months ended April 30, 1996
and the year ended December 31, 1995 to income (loss) before income taxes. The
principal reasons for this difference are follows:



<TABLE>
<CAPTION>
                                                       Four Months
                                                          Ended
                                                        April 30,        Year Ended
                                                          1996        December 31, 1995
                                                      ------------   ------------------
<S>                                                   <C>            <C>
      Tax benefit (provision) at
        federal statutory rate ....................     $  4,759         $ (38,102)
      (Increase) decrease in rates resulting from:
        S Corporation election for U.S. federal tax
         purposes .................................       (4,759)           38,102
        State and local taxes .....................          205            (1,033)
        Foreign income taxes ......................        1,526           (11,065)
                                                        --------         ---------
        Total .....................................     $  1,731         $ (12,098)
                                                        ========         =========
</TABLE>

                                       72

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



     Pro forma provision for income taxes (unaudited)

     As a result of the Stock Purchase Agreement, the Combined Companies will
no longer be treated as an S Corporation for income tax purposes in the United
States and in certain state jurisdictions.

     Accordingly, the combined statements of operations include a pro forma
adjustment for income taxes which would have been recorded if the Combined
Companies had not been an S Corporation based on tax laws in effect during
these periods. The pro forma adjustment was computed separately for each entity
and then combined, except for purposes of computing the utilization of foreign
tax credits related to the worldwide bowling center operations, the domestic
and worldwide bowling center operations were considered in the aggregate.


     Pro forma tax benefit (provision) is as follows:



<TABLE>
<CAPTION>
                                              Four Months
                                                 Ended           Year Ended
                                               April 30,        December 31,
                                                  1996              1995
                                            ---------------   ---------------
<S>                                         <C>               <C>
                                               (unaudited)       (unaudited)
      Current
      U.S. federal ......................    $      3,222      $    (26,404)
      State and local ...................             329            (3,491)
      Foreign ...........................           1,940           (11,961)
                                             ------------      ------------
      Total current .....................           5,491           (41,856)
                                             ------------      ------------
      Deferred
      U.S. federal ......................             (85)              317
      State and local ...................              73                27
      Foreign ...........................            (414)              896
                                             ------------      ------------
      Total deferred ....................            (426)            1,240
                                             ------------      ------------
      Total provision (benefit) .........    $      5,065      $    (40,616)
                                             ============      ============
</TABLE>

     Temporary differences and carryforwards which give rise to pro forma
deferred tax assets and liabilities at April 30, 1996 and December 31, 1995 are
as follows:



<TABLE>
<CAPTION>
                                                           April 30,        December 31,
                                                              1996              1995
                                                        ---------------   ---------------
<S>                                                     <C>               <C>
                                                           (unaudited)       (unaudited)
      Deferred tax assets
      Current assets ................................    $      3,851      $      6,178
      Noncurrent assets .............................             192             7,124
                                                         ------------      ------------
      Total deferred tax assets .....................           4,043            13,302
                                                         ------------      ------------
      Deferred tax liabilities
      Noncurrent liabilities ........................          (6,170)           (2,707)
                                                         ------------      ------------
      Total deferred tax liabilities ................          (6,170)           (2,707)
                                                         ------------      ------------
      Net deferred tax (liabilities) assets .........    $     (2,127)     $     10,595
                                                         ============      ============
</TABLE>

     Pro forma deferred income taxes relate primarily to timing differences
between financial and income tax reporting for depreciation and certain
accruals which are not currently deductible for income tax purposes.


                                       73

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


     A reconciliation of the Combined Companies' pro forma United States Income
tax benefit (provision) computed by applying the statutory United States
federal income tax rate of 35% to the Combined Companies' income (loss) before
income taxes is presented in the following table:



<TABLE>
<CAPTION>
                                                  Four Months
                                                     Ended            Year Ended
                                                   April 30,         December 31,
                                                      1996               1995
                                               -----------------   ---------------
<S>                                            <C>                 <C>
                                                  (unaudited)         (unaudited)
      Tax benefit (provision) at federal
        statutory rate .....................     $     4,759        $    (38,102)
      (Increase) decrease in rates resulting
        from:
        State and local taxes, net .........             402              (2,272)
        Foreign income taxes ...............           1,526             (11,065)
        Foreign tax credits ................          (1,526)             11,065
        Other business credits .............              --                  --
        Nondeductible items ................             (91)               (171)
        Environmental tax ..................              --                (102)
        Other ..............................              (5)                 31
                                                 --------------     ------------
                                                 $     5,065        $    (40,616)
                                                 =============      ============
</TABLE>

Note 9. Commitments and Contingencies

     Leases

     The Combined Companies lease certain facilities and equipment under
operating leases which expire at various dates through 2011. These leases
generally contain renewal options and require the Combined Companies to pay
taxes, insurance, maintenance and other expenses in addition to the minimum
annual rentals. Certain leases require contingent payments based on usage of
equipment above certain specified levels. Such contingent rentals amounted to
$293 for the four months ended April 30, 1996 and $1,517 for the year ended
December 31, 1995.

     Future minimum rental payments under the operating lease agreements are as
follows:



<TABLE>
<CAPTION>
Period ending
December 31,
-------------------------------
<S>                             <C>
  1996 (eight months) .........  $ 15,200
  1997 ........................    14,900
  1998 ........................    12,800
  1999 ........................    10,900
  2000 ........................     8,900
  Thereafter ..................    49,600
                                 --------
                                 $112,300
                                 ========
</TABLE>

     Total rent expense under operating leases aggregated approximately $7,487
for the four months ended April 30, 1996 and $19,250 for the year ended
December 31, 1995.


                                       74

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



     Litigation and claims

     AMF Bowling's Pins and Lanes division was the defendant in an
administrative proceeding related to a labor dispute. This claim was resolved
in favor of the division during 1995 and the related reserve of approximately
$1,100 was reversed.

     AMF Bowling terminated its Korean distributorship agreement. The Korean
distributor filed suit against the company in Korea seeking an injunction
against AMF Bowling's Seoul Korea branch to prevent AMF Bowling from selling
bowling and bowling related products in Korea. The Korean Court dismissed the
suit on jurisdiction grounds subsequent to year-end. Such a decision is subject
to an appeal.

     On January 10, 1996, the Korean distributor filed a second suit in the
Supreme Court of the State of New York against AMF Bowling and AMF Bowling
Centers. The suit alleges a number of complaints related to the conduct and
termination of the Korean distributorship agreement and alleges that the
defendants caused the Korean distributor's insolvency. The Korean distributor
is seeking compensatory damages of at least $41,759 and punitive damages of at
least $100,000 or ten times the amount of compensatory damages awarded,
whichever is greater, under each of seven causes of action set forth in the
suit.

     Management believes that the Korean distributorship agreement was properly
terminated. Management intends to vigorously defend against this claim and
believes the resolution of such claim will not have a significant effect on the
Combined Companies' combined financial position or results of operations. Under
terms of the sale agreement (Note 1), the current AMF shareholders have agreed
to indemnify the buyers for any loss related to this litigation.

     On March 5, 1996, the defendant in an action entitled Northland Bowl and
Sports Center, Inc. and Recreation Associates, II v. Golden Giant, Inc., d/b/a
Golden Giant Building System, Court of Common Pleas, Centre County, Pa. (Index
No. 96-75), asserted a third-party claim against AMF Bowling and other parties.
Defendant, Golden Giant, a construction company, was previously named as
defendant by a bowling center (not owned or operated by the Combined Companies)
in connection with the collapse of the center's roof in early 1994. Golden Giant
has now named AMF Bowling, charging it with negligence and breach of implied
warranty for installing scoring monitors (four years before the roof collapsed)
on a portion of the building that allegedly could not adequately support the
additional weight of the equipment. The bowling center plaintiff claims total
damages in amounts exceeding $3,500, and Golden Giant asserts that, if plaintiff
is entitled to any recovery, it should be in whole or part against AMF Bowling.

     AMF Bowling is involved in two patent infringement suits. The plaintiff in
the first case, a competitor of AMF Bowling's Century division, obtained a
summary judgment on the issue of liability in December 1994. The court recently
issued an order which will permit AMF to appeal. The plaintiff claims damages in
the range of $3,000 to $9,000. A trial on damages will not occur unless and
until the liability issue is resolved against AMF Bowling. Management intends to
vigorously contest the claim and believes the resolution of such claim will not
have a significant effect on the Combined Companies' combined financial position
or results of operations.

     The second patent infringement suit relates to AMF Bowling's Pins and Lanes
division. Management has settled this claim for $250 during the four months
ended April 30, 1996.

     AMF Bowling Centers and AMF Bowling are defendants in a wrongful death suit
related to an employee. The employee's estate is seeking compensatory damages up
to $3,000 plus $3,000 in punitive damages. However, the plaintiff's counsel has
verbally offered to settle the case for $350. Management expects to vigorously
contest the claim and believes the resolution of such claim will not have a
significant effect on the Combined Companies' combined financial position or
results of operations.

     In addition, the Combined Companies are involved in certain other lawsuits
and claims arising out of normal business operations. The majority of these
relate to accidents at the Combined Companies' bowling centers. Management
believes that the ultimate resolution of such matters will not materially affect
the Combined Companies' results of operations or financial position.

     While the ultimate outcome of the litigation and claims against the
Combined Companies cannot presently be determined, management believes the
Combined Companies have made adequate provision for possible losses. At April
30, 1996


                                       75

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


and December 31, 1995, the Combined Companies had recorded reserves aggregating
approximately $2,900 and $2,800, respectively for litigation and claims.


Note 10. Employee Benefit Plans and Bonus

     The Combined Companies have a defined contribution 401(k) plan to which
domestic employees may make voluntary contributions based on their
compensation. Under the provisions of the plan, the Combined Companies can, at
their option, match a discretionary percentage of employee contributions and
make an additional contribution as determined by their Board of Directors.
Contributions vest 100% after a five-year period. The amounts charged to
expense under this plan were approximately $410 for the four months ended April
30, 1996 and $1,122 for the year ended December 31, 1995.

     One of the Combined Companies has a Stock Performance Plan (the "Plan")
for certain key employees. Under the terms of the Plan, eligible employees earn
Stock Performance Units as a result of the Company meeting certain operating
performance conditions, as defined by the Plan, relating to (1) sales, (2) cash
flow and (3) operating results. Benefits under the Plan vest over a five-year
period and will be paid in installments over a ten-year period without interest
(or less if specified by the Company's Board of Directors) upon the termination
of an eligible employee. The Plan can be terminated or amended at any time by
the Company's Board of Directors. The amount charged to expense under this plan
was approximately $1,479 for the four months ended April 30, 1996 and $622 for
the year ended December 31, 1995. The agreement contains a provision which
would accelerate the payout of the benefits from ten years to five years upon a
change-of-control event and would require that interest be paid on the unpaid
balance. On April 30, 1996, the Combined Companies made payments of $3,085
related to these plans and the plans were terminated.

     Certain of the Combined Companies' foreign operations have employee
benefit plans covering selected employees. These plans vary as to the funding,
including local government, employee and employer funding. Each company has
provided pension expense and made contributions to these plans in accordance
with the requirements of the plans and local country practices. The amounts
charged to expense under these plans aggregated $291 for the four months ended
April 30, 1996 and $806 for the year ended December 31, 1995.

     On April 30, 1996, the Combined Companies paid bonuses and special
payments to employees, former employees and former directors of $43,760 in
recognition of their services.


Note 11. Supplemental Disclosures to the Combined Statements of Cash Flows



<TABLE>
<CAPTION>
                                                           Four Months
                                                              Ended        Year Ended
                                                            April 30,     December 31,
                                                              1996            1995
                                                          ------------   -------------
<S>                                                       <C>            <C>
      Cash paid during the year for:
        Interest ......................................     $ 12,862        $ 5,909
        Income taxes ..................................     $  5,359        $16,922
      Noncash capital contribution by the stockholders:
        Debt forgiveness ..............................     $163,184        $    --
</TABLE>

                                       76

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



Note 12. Business Segments

     The Combined Companies operate in two major lines of business: operation
of bowling centers and manufacturing of bowling and related products.
Information concerning operations in these business segments for the four
months ended April 30, 1996 and the year ended December 31, 1995 and
identifiable assets at April 30, 1996 and December 31, 1995 are presented
below:



<TABLE>
<CAPTION>
                                              Four Months
                                                 Ended        Year Ended
                                               April 30,     December 31,
                                                 1996            1995
                                             ------------   -------------
<S>                                          <C>            <C>
      Revenues from unaffiliated customers
        Bowling centers
         Domestic ........................    $  75,000      $ 192,400
         International ...................       33,500         99,900
        Manufacturing ....................       56,400        272,600
                                              ---------      ---------
                                              $ 164,900      $ 564,900
                                              =========      =========
      Intersegment sales
        Bowling centers
         Domestic ........................    $      --      $      --
         International ...................           --             --
        Manufacturing ....................        4,600         13,900
                                              ---------      ---------
                                              $   4,600      $  13,900
                                              =========      =========
      Operating (loss) income
      Intersegment sales
        Bowling centers
         Domestic ........................    $   3,600      $  26,500
         International ...................       (2,500)        23,700
        Manufacturing ....................       (9,600)        75,700
                                              ---------      ---------
        Eliminations .....................         (500)        (1,500)
                                              ---------      ---------
                                              $  (9,000)     $ 124,400
                                              =========      =========
</TABLE>

 

                                       77

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)




<TABLE>
<CAPTION>
                                                Four Months
                                                   Ended         Year Ended
                                                 April 30,      December 31,
                                                   1996             1995
                                              --------------   -------------
<S>                                           <C>              <C>
      Identifiable assets
        Bowling centers
         Domestic .........................     $  218,300       $ 224,500
         International ....................         65,400          64,600
        Manufacturing .....................        101,500         119,800
        Eliminations ......................     $  (10,000)      $  (8,500)
                                                ----------       ---------
                                                $  375,200       $ 400,400
                                                ==========       =========
      Depreciation and amortization expense
        Bowling centers
         Domestic .........................     $   11,800       $  29,100
         International ....................          2,500           7,500
        Manufacturing .....................          1,200           3,600
        Eliminations ......................           (400)         (1,000)
                                                ----------       ---------
                                                $   15,100       $  39,200
                                                ==========       =========
      Capital expenditures
        Bowling centers
         Domestic .........................     $    5,100       $  17,800
         International ....................          2,300          10,200
        Manufacturing .....................            400           4,500
        Eliminations ......................           (900)         (2,500)
                                                ----------       ---------
                                                $    6,900       $  30,000
                                                ==========       =========
</TABLE>

                                       78

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



Note 13. Geographic Segments

     Information about the Combined Companies' operations in different
geographic areas for the four months ended April 30, 1996 and the year ended
December 31, 1995 and identifiable assets at April 30, 1996 and December 31,
1995 are presented below:



<TABLE>
<CAPTION>
                                              Four Months
                                                 Ended        Year Ended
                                               April 30,     December 31,
                                                 1996            1995
                                             ------------   -------------
<S>                                          <C>            <C>
      Net operating revenue:
        United States ....................     $103,800       $ 371,400
        Japan ............................       13,700          50,300
        Hong Kong ........................       14,000          40,800
        Korea ............................        5,800           6,000
        Australia ........................       14,700          47,100
        United Kingdom ...................        7,300          26,100
        Mexico ...........................        2,100           7,800
        Sweden ...........................        1,200          10,000
        Canada ...........................          300             600
        Spain ............................        1,000           2,700
        Other European countries .........        5,200          16,000
        China ............................          400              --
        Eliminations .....................       (4,600)        (13,900)
                                               --------       ---------
                                               $164,900       $ 564,900
                                               ========       =========
</TABLE>

     Net operating revenues for the United States manufacturing operation has
been reduced by approximately $21,500 for the four months ended April 30, 1996
and $61,000 for the year ended December 31, 1995 to reflect the elimination of
intercompany sales between the domestic manufacturing operation and the
manufacturing foreign sales and service branches.



<TABLE>
<CAPTION>
                                              Four Months
                                                 Ended        Year Ended
                                               April 30,     December 31,
                                                 1996            1995
                                             ------------   -------------
<S>                                          <C>            <C>
      Operating (loss) income:
        United States ....................     $ (2,900)      $ 92,200
        Japan ............................       (1,400)         8,800
        Hong Kong ........................          800          6,200
        Korea ............................         (300)        (1,200)
        Australia ........................       (1,300)        13,300
        United Kingdom ...................       (1,100)         2,400
        Mexico ...........................         (200)         1,500
        Sweden ...........................         (500)         1,500
        Canada ...........................           --             --
        Spain ............................         (100)          (100)
        Other European countries .........       (1,300)         1,300
        China ............................         (200)            --
        Eliminations .....................         (500)        (1,500)
                                               --------       --------
                                               $ (9,000)      $124,400
                                               ========       ========
</TABLE>

                                       79

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


     Operating (loss) income for the United States manufacturing operation has
been reduced by approximately $1,300 for the four months ended April 30, 1996
and $900 for the year ended December 31, 1995 to reflect the elimination of
intercompany gross profit between the domestic manufacturing operation and the
manufacturing foreign sales and service branches.



<TABLE>
<CAPTION>
                                              April 30,     December 31,
                                                 1996           1995
                                             -----------   -------------
<S>                                          <C>           <C>
      Identifiable assets:
        United States ....................    $ 290,400      $311,300
        Japan ............................       17,200        22,100
        Hong Kong ........................        7,700         8,500
        Korea ............................        4,500         2,900
        Australia ........................       34,800        31,600
        United Kingdom ...................       12,200        11,800
        Mexico ...........................        5,100         4,500
        Sweden ...........................        2,200         2,600
        Canada ...........................          900         1,200
        Spain ............................          200         2,000
        Other European countries .........        7,700         8,400
        China ............................        2,300         2,000
        Eliminations .....................      (10,000)       (8,500)
                                              ---------      --------
                                              $ 375,200      $400,400
                                              =========      ========
</TABLE>

     Identifiable assets for the foreign sales and service branches have been
reduced by approximately $5,700 at April 30, 1996 and $4,400 at December 31,
1995 to reflect the elimination of intercompany gross profit in inventory
between the domestic manufacturing operations and the manufacturing foreign
sales and service branches.


Note 14. Business Combinations
     Fair Lanes, Inc. ("Fair Lanes") operated 106 bowling centers in the United
States and Puerto Rico. On June 22, 1994, Fair Lanes and its parent Fair Lanes
Entertainment, Inc. ("FLE"), each filed voluntary petitions for relief under
Chapter 11 of Title 11 of the United States Code ("Chapter 11"). Fair Lanes'
operating subsidiaries did not file for Chapter 11 protection. At the time of
filing, liabilities subject to compromise consisted of Fair Lanes' $138,000
senior secured notes, which were publicly traded, and FLE's debt in the form of
$48,000 variable rate and zero coupon notes (these notes were also publicly
traded). The Bankruptcy Court approved the plan of reorganization effective
September 29, 1994 whereby the holders of FLE's $48,000 of notes received
approximately 6% of Fair Lanes' equity and the holders of Fair Lanes' $138,000
of notes received approximatey 94% of Fair Lanes' equity and $90,350 of new
9.5% notes. The former Fair Lanes' equityholders' interests were eliminated as
a result of the reorganization. Through September 29, 1994, AMF's shareholders
had purchased old Fair Lanes' and FLE's notes which resulted in the AMF
shareholders obtaining approximately 56% of the voting shares of Fair Lanes.
One other shareholder held approximately 35% of the new stock and the remaining
9% was held by other shareholders. The AMF shareholders were able to acquire
the shares held by the 35% shareholder on January 7, 1996 and an additional 2%
of the shares from other shareholders in open market purchases. On February 7,
1996, the AMF shareholders affected a cash merger and bought out the remaining
shareholders.

     The Fair Lanes' acquisition was accounted for as a purchase. As a result
of the relatively short acquisition period and the fact that the minority
shareholders' interest was not affected for losses during the acquisition
period, the combined financial statements include the results of operations for
period subsequent to September 29, 1994.


                                       80

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


   The assets acquired and liabilities assumed were recorded at their
                         estimated fair value as follows:

<TABLE>
<S>                                <C>
  Current assets .................  $    3,059
  Property and equipment .........     141,785
  Other assets ...................      12,643
  Current liabilities ............     (22,672)
  Long-term liabilities ..........    (116,174)
                                    ----------
  Purchase price .................  $   18,641
                                    ==========
</TABLE>

Note 15. Stockholders' Equity



<TABLE>
<CAPTION>
                                                      April 30, 1996
                                          --------------------------------------
                                                          Issued and     Common
                                           Authorized     Outstanding     Stock
                                          ------------ ---------------- --------
<S>                                       <C>          <C>              <C>
AMF Bowling, Inc ........................     10,000          950.6689    $  1
AMF Bowling Centers, Inc. ...............     15,000        9,485.1000       9
AMF Beverage Company of
 Oregon, Inc. ...........................     10,000           94.8510      --
King Louie Lenexa, Inc. .................     30,000           94.8510      --
AMF Catering Services Pty Ltd. ..........    100,000      100,000.0000      82
AMF Bowling Centers (Aust)
 International, Inc. ....................     10,000          948.5100       1
AMF Bowling Centers (Canada)
 International, Inc. ....................     10,000          948.5100       1
AMF BCO -- France One, Inc. .............     10,000        1,000.0000       1
AMF BCO -- France Two, Inc. .............     10,000        1,000.0000       1
AMF Bowling Centers (Hong Kong)
 International, Inc. ....................     10,000          948.5100       1
AMF Bowling Centers International,
 Inc. --  Japan .........................     10,000        9,485.1000      10
AMF Bowling Mexico Holding, Inc.               1,000           75.6972     322
Boliches AMF Inc. .......................     10,000          100.0000       1
AMF Bowling Centers II
 Inc. -- Switzerland ....................                                   --
AMF BCO -- U.K. One, Inc. ...............     10,000          100.0000       1
AMF BCO -- U.K. Two, Inc. ...............     10,000          100.0000       1
AMF BCO -- China, Inc. ..................     10,000        1,000.0000       1
AMF Bowling Centers China, Inc. .........     10,000        1,000.0000       1
Bush River Corporation ..................    100,000       18,895.1919      20
Eliminations ............................         --               --       --
                                                                          ----
Totals ..................................                                 $454
                                                                          ====



<CAPTION>
                                                                 April 30, 1996
                                          ------------------------------------------------------------
                                                                     Equity
                                                                   Adjustment
                                                                  from Foreign               Total
                                            Paid in    Retained     Currency             Stockholders'
                                            Capital    Earnings    Translation   Other      Equity
                                          ----------- ---------- -------------- ------- --------------
<S>                                       <C>         <C>        <C>            <C>     <C>
AMF Bowling, Inc ........................  $ 51,778    $ 15,639     $   593       $--      $ 68,011
AMF Bowling Centers, Inc. ...............   183,780       8,825          --        --       192,614
AMF Beverage Company of
 Oregon, Inc. ...........................        --          --          --        --            --
King Louie Lenexa, Inc. .................        --          --          --        --            --
AMF Catering Services Pty Ltd. ..........        --          --          --        --            82
AMF Bowling Centers (Aust)
 International, Inc. ....................       492      24,327       1,645        --        26,465
AMF Bowling Centers (Canada)
 International, Inc. ....................     2,109      (1,238)         85        --           957
AMF BCO -- France One, Inc. .............       220         533         (93)       --           661
AMF BCO -- France Two, Inc. .............       595       1,440        (250)       --         1,786
AMF Bowling Centers (Hong Kong)
 International, Inc. ....................       532       2,175          --        --         2,708
AMF Bowling Centers International,
 Inc. --  Japan .........................     1,210       4,446         505        --         6,171
AMF Bowling Mexico Holding, Inc.              1,856       2,563      (3,056)       --         1,685
Boliches AMF Inc. .......................       493         682        (814)       --           362
AMF Bowling Centers II
 Inc. -- Switzerland ....................        --         205         171        --           376
AMF BCO -- U.K. One, Inc. ...............     1,597        (350)        (86)       --         1,162
AMF BCO -- U.K. Two, Inc. ...............     4,357        (956)       (235)       --         3,167
AMF BCO -- China, Inc. ..................       577        (159)         (4)       --           415
AMF Bowling Centers China, Inc. .........     2,174        (600)        (13)       --         1,562
Bush River Corporation ..................        --          --          --        --            20
Eliminations ............................        --      (5,230)         --        --        (5,230)
                                           --------    --------     ---------     ---      --------
Totals ..................................  $251,770    $ 52,302     $(1,552)      $--      $302,974
                                           ========    ========     =========     ===      ========
</TABLE>



                                       81

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)




<TABLE>
<CAPTION>
                                              December 31, 1995
                               -----------------------------------------------
                                               Issued and    Common   Paid in
                                Authorized    Outstanding     Stock   Capital
                               ------------ --------------- -------- ---------
<S>                            <C>          <C>             <C>      <C>
AMF Bowling, Inc .............     10,000      950.6689      $    1   $28,213
AMF Bowling Centers,
 Inc. ........................     15,000    9,485.1000           9    29,122
AMF Beverage Company
 of Oregon, Inc. .............     10,000       94.8510          --        --
King Louie Lenexa, Inc. ......     30,000       94.8510          --        --
AMF Bowling Centers
 (Aust) International, Inc.        10,000      948.5100           1       492
AMF Bowling Centers
 (Canada) International,
 Inc. ........................     10,000      948.5100           1     2,109
AMF BCO -- France One,
 Inc. ........................     10,000    1,000.0000           1        31
AMF BCO -- France Two,
 Inc. ........................     10,000    1,000.0000           1        83
AMF Bowling Centers
 (Hong Kong)
 International, Inc. .........     10,000      948.5100           1        57
AMF Bowling Centers
 International, Inc. --
 Japan .......................     10,000    9,485.1000          10       156
AMF Bowling Mexico
 Holding, Inc. ...............      1,000       75.6972       1,507       226
Boliches AMF Inc. ............     10,000      100.0000           1        60
AMF Bowling Centers II
 Inc. -- Switzerland .........      1,000      100.0000           1        --
AMF BCO -- U.K. One,
 Inc. ........................     10,000      100.0000           1       129
AMF BCO -- U.K. Two,
 Inc. ........................     10,000      100.0000           1       352
AMF BCO -- China, Inc. .......     10,000    1,000.0000           1       577
AMF Bowling Centers
 China, Inc. .................     10,000    1,000.0000           1     2,174
Bush River Corporation .......    100,000   18,895.1919          --        --
Eliminations .................         --           --           --        --
                                                             ------   -------
Totals .......................                               $1,538   $63,781
                                                             ======   =======



<CAPTION>
                                                  December 31, 1995
                               --------------------------------------------------------
                                                               Notes
                                                            Receivable        Total
                                 Retained      Deferred        Stock      Stockholders'
                                 Earnings    Translation   Subscription      Equity
                               ------------ ------------- -------------- --------------
<S>                            <C>          <C>           <C>            <C>
AMF Bowling, Inc .............   $ 54,463     $   593     $    --           $ 83,270
AMF Bowling Centers,
 Inc. ........................     13,436         --         (726)            41,841
AMF Beverage Company
 of Oregon, Inc. .............        382         --           --                382
King Louie Lenexa, Inc. ......        859         --           --                859
AMF Bowling Centers
 (Aust) International, Inc.        25,251        (74)        (503)            25,167
AMF Bowling Centers
 (Canada) International,
 Inc. ........................     (1,286)        85           --                909
AMF BCO -- France One,
 Inc. ........................        681        (44)          --                669
AMF BCO -- France Two,
 Inc. ........................      1,842       (119)          --              1,807
AMF Bowling Centers
 (Hong Kong)
 International, Inc. .........      2,420         --          (62)             2,416
AMF Bowling Centers
 International, Inc. --
 Japan .......................      4,285        611         (170)             4,892
AMF Bowling Mexico
 Holding, Inc. ...............      2,753     (3,258)          --              1,228
Boliches AMF Inc. ............        814       (815)          --                 60
AMF Bowling Centers II
 Inc. -- Switzerland .........        617         61           --                679
AMF BCO -- U.K. One,
 Inc. ........................       (186)      (113)          --               (169)
AMF BCO -- U.K. Two,
 Inc. ........................       (509)      (310)          --               (466)
AMF BCO -- China, Inc. .......        (97)        (4)          --                477
AMF Bowling Centers
 China, Inc. .................       (367)       (13)          --              1,795
Bush River Corporation .......        230         --           --                230
Eliminations .................     (4,508)        --           --             (4,508)
                                 --------     -------     -------           --------
Totals .......................   $101,080    $(3,400)     $(1,461)          $161,538
                                 ========     =======     =======           ========
</TABLE>


                                       82

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



Note 16. Condensed Consolidated Financial Statements

     On February 16, 1996, the stockholders of the Combined Companies executed
a Stock Purchase Agreement, subject to certain closing conditions, to sell the
stock and certain assets of the individual companies to AMF Group Holdings,
Inc., through its subsidiaries. On May 1, 1996, the sale transaction was
completed.

     In conjunction with the acquisition of the Combined Companies, AMF Bowling
Worldwide, Inc. (formerly AMF Group Inc.), a subsidiary of AMF Group Holdings,
Inc., issued Senior Subordinated Notes and Senior Subordinated Discount Notes
on March 21, 1996. On May 1, 1996, AMF Bowling Worldwide, Inc. executed a bank
credit agreement and certain additional subsidiaries of AMF Bowling Worldwide,
Inc. became guarantors of the Senior Subordinated Notes and the Senior
Subordinated Discount Notes. These financing arrangements provide for
guarantees by the following companies which became indirect subsidiaries of AMF
Bowling Worldwide, Inc., which is the borrower and issuer of the notes
evidencing such indebtedness. Guarantor companies include the following:

     o AMF Bowling Centers, Inc.

     o Bush River Corporation

     o King Louie Lenexa, Inc.

     o AMF Beverage Company of Oregon, Inc.

     o AMF Bowling, Inc.

     o AMF Bowling Centers (Aust) International Inc.

     o AMF Bowling Centers (Canada) International Inc.

     o AMF BCO -- France One, Inc.

     o AMF BCO -- France Two, Inc.

     o AMF Bowling Centers (Hong Kong) International Inc.

     o AMF Bowling Centers International Inc. -- Japan

     o AMF Bowling Mexico Holding, Inc.

     o Boliches AMF, Inc.

     o AMF BCO -- U.K. One, Inc.

     o AMF BCO -- U.K. Two, Inc.

     o AMF BCO -- China, Inc.

     o AMF Bowling Centers China, Inc.

     Included with the guarantor companies at April 30, 1996 are AMF Bowling
Centers Switzerland Inc. and AMF Bowling Centers Spain Inc., newly formed
subsidiaries of AMF Bowling Worldwide, Inc., which, respectively, purchased
assets of one bowling center and two bowling centers from AMF Bowling Centers
II, Inc. (Switzerland) and AMF Bowling S.A., former Subsidiary of AMF Bowling
Mexico Holdings, Inc.


                                       83

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)


     Included with the guarantor companies at December 31, 1995 is AMF Bowling
Centers II, Inc. (Switzerland) which sold assets of one bowling center, as
discussed above, to a newly formed subsidiary of AMF Bowling Worldwide, Inc.,
which became a guarantor.

     Non-guarantor companies at April 30, 1996 include the following foreign
subsidiaries of certain guarantor companies:

     o AMF Bowling (Unlimited)

     o Worthington North Properties Limited

     o AMF Bowling France SNC

     o AMF Bowling de Paris SNC

     o AMF Bowling de Lyon La Part Dieu SNC

     o Boliches y Compania

     o Operadora Mexicana de Boliches, S.A.

     o Promotora de Boliches, S.A. de C.V.

     o Immeubles Obispado, S.A.

     o Immeubles Minerva, S.A.

     o Boliches Mexicano, S.A.

     o AMF Bowling Centers (China) Company

     o AMF Garden Hotel Bowling Center Company

     Included in the non-guarantor companies at December 31, 1995 is AMF
Bowling S.A. which sold assets of two bowling centers in Spain to a newly
formed subsidiary of AMF Bowling Worldwide, Inc., which became a guarantor
company.

     The following condensed combining information presents:

   o Condensed combining balance sheets as of April 30, 1996 and December 31,
    1995 and the related condensed combining statements of operations and of
    cash flows for the four months ended April 30, 1996 and the year ended
    December 31, 1995.

     o Elimination entries necessary to combine the entities comprising the
    Combined Companies.

                                       84

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



                       Condensed Combining Balance Sheets
                       Four Months Ended April 30, 1996



<TABLE>
<CAPTION>
                                                                             Non-
                                                            Guarantor     Guarantor                       Combined
                                                            Companies     Companies     Eliminations      Companies
                                                           -----------   -----------   --------------   ------------
<S>                                                        <C>           <C>           <C>              <C>
                         ASSETS
Current assets:
 Cash and cash equivalents .............................    $ 18,628      $  3,285       $      --        $ 21,913
 Accounts and notes receivable, net of allowance for
   doubtful accounts ...................................      32,316         1,571              --          33,887
 Accounts and notes receivable -- affiliates ...........       2,463           380          (2,677)            166
 Inventories ...........................................      41,831         1,465              --          43,296
 Prepaid expenses and other ............................       4,856         1,257              --           6,113
                                                            --------      --------       ---------        --------
    Total current assets ...............................     100,094         7,958          (2,677)        105,375
Property and equipment, net ............................     241,968        10,518            (942)        251,544
Investment in subsidiaries .............................      10,643            --         (10,643)             --
Other assets ...........................................      17,399           931              --          18,330
                                                            --------      --------       ---------        --------
    Total assets .......................................    $370,104      $ 19,407       $ (14,262)       $375,249
                                                            ========      ========       =========        ========
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable ......................................    $ 21,760      $  1,910       $      --        $ 23,670
 Book overdrafts .......................................       5,724            --              --           5,724
 Accrued expenses and deposits .........................      32,185         2,731              --          34,916
 Accounts and notes payable -- affiliates ..............          14         2,663          (2,677)             --
 Long-term debt, current portion .......................          10            --              --              10
 Income taxes payable ..................................       1,078           679              --           1,757
                                                            --------      --------       ---------        --------
    Total current liabilities ..........................      60,771         7,983          (2,677)         66,077
Long-term debt .........................................       1,958            --              --           1,958
Other liabilities ......................................       2,811            --              --           2,811
Deferred income taxes ..................................         648           781              --           1,429
                                                            --------      --------       ---------        --------
    Total liabilities ..................................      66,188         8,764          (2,677)         72,275
                                                            --------      --------       ---------        --------
Commitments and contingencies
Stockholders' equity:
 Common stock ..........................................         454         3,940          (3,940)            454
 Paid-in capital .......................................     251,770         5,003          (5,003)        251,770
 Retained earnings .....................................      53,244         6,247          (7,189)         52,302
 Equity adjustment from foreign currency
 translation ...........................................      (1,552)       (4,547)          4,547          (1,552)
                                                            --------      --------       ---------        --------
    Total stockholders' equity .........................     303,916        10,643         (11,585)        302,974
                                                            --------      --------       ---------        --------
    Total liabilities and stockholders' equity .........    $370,104      $ 19,407       $ (14,262)       $375,249
                                                            ========      ========       =========        ========
</TABLE>

                                       85

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



                      Condensed Combining Balance Sheets
                         Year Ended December 31, 1995



<TABLE>
<CAPTION>
                                                                                   Non-
                                                                  Guarantor     Guarantor                       Combined
                                                                  Companies     Companies     Eliminations      Companies
                                                                 -----------   -----------   --------------   ------------
<S>                                                              <C>           <C>           <C>              <C>
                          ASSETS
Current assets:
 Cash and cash equivalents ...................................    $  8,843      $    889       $      --        $  9,732
 Accounts and notes receivable, net of allowance for
   doubtful accounts .........................................      37,499         1,527              --          39,026
 Accounts and notes receivable -- affiliates .................       4,477         7,465          (7,963)          3,979
 Inventories .................................................      38,042         1,779              --          39,821
 Prepaid expenses and other ..................................       3,944         1,238              --           5,182
                                                                  --------      --------       ---------        --------
    Total current assets .....................................      92,805        12,898          (7,963)         97,740
Notes receivable -- affiliates ...............................      22,941            --              --          22,941
Property and equipment, net ..................................     250,637        10,582          (1,495)        259,724
Other assets .................................................      29,869           822         (10,718)         19,973
                                                                  --------      --------       ---------        --------
    Total assets .............................................    $396,252      $ 24,302       $ (20,176)       $400,378
                                                                  ========      ========       =========        ========
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable ............................................    $ 22,313      $  1,403       $     (75)       $ 23,641
 Book overdrafts .............................................       2,362            --              --           2,362
 Accrued expenses and deposits ...............................      28,203         2,125              --          30,328
 Accounts and notes payable -- affiliates ....................       1,821         7,033          (6,865)          1,989
 Long-term debt, current portion .............................       1,084            --              --           1,084
 Income taxes payable ........................................       5,930         1,199              --           7,129
                                                                  --------      --------       ---------        --------
    Total current liabilities ................................      61,713        11,760          (6,940)         66,533
Long-term debt ...............................................      19,550            --              --          19,550
Notes payable -- affiliates ..................................     146,639         1,076            (988)        146,727
Other liabilities ............................................       5,282           748              --           6,030
                                                                  --------      --------       ---------        --------
    Total liabilities ........................................     233,184        13,584          (7,928)        238,840
                                                                  --------      --------       ---------        --------
Commitments and contingencies (Note 9)
Stockholders' equity:
 Common stock ................................................       1,538         3,941          (3,941)          1,538
 Paid-in capital .............................................      63,781         4,153          (4,153)         63,781
 Retained earnings ...........................................     102,610         7,300          (8,830)        101,080
 Equity adjustment from foreign currency translation .........      (3,400)       (4,676)          4,676          (3,400)
 Notes receivable stock subscription .........................      (1,461)           --              --          (1,461)
                                                                  --------      --------       ---------        --------
    Total stockholders' equity ...............................     163,068        10,718         (12,248)        161,538
                                                                  --------      --------       ---------        --------
    Total liabilities and stockholders' equity ...............    $396,252      $ 24,302       $ (20,176)       $400,378
                                                                  ========      ========       =========        ========
</TABLE>

                                       86

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



                 Condensed Combining Statements of Operations
                       Four Months Ended April 30, 1996



<TABLE>
<CAPTION>
                                                                                    Non-
                                                                 Guarantor       Guarantor                        Combined
                                                                 Companies       Companies      Eliminations      Companies
                                                               -------------   -------------   --------------   ------------
<S>                                                            <C>             <C>             <C>              <C>
Operating revenue:
 Sales of products and services ............................     $ 154,500       $10,731           $ (860)       $ 164,371
 Revenue from operating lease activities ...................           323           250               --              573
                                                                 ---------        -------          ------        ---------
    Total operating revenues ...............................       154,823        10,981             (860)         164,944
                                                                 ---------        -------          ------        ---------
Operating expenses:
 Cost of goods sold, excluding depreciation of $791.........        42,242         1,445             (569)          43,118
 Bowling center operations .................................        71,289         8,985             (118)          80,156
 Selling, general and administrative .......................        34,875           682               --           35,557
 Depreciation and amortization .............................        14,380           802              (85)          15,097
                                                                 ---------        -------          ------        ---------
    Total operating expenses ...............................       162,786        11,914             (772)         173,928
                                                                 ---------        -------          ------        ---------
    Operating loss .........................................        (7,963)         (933)             (88)          (8,984)
Nonoperating income (expenses):
 Interest expense ..........................................        (4,501)           (3)              --           (4,504)
 Other expenses, net .......................................          (634)          (58)              --             (692)
 Interest income ...........................................           574            37               --              611
 Equity in earnings of subsidiaries ........................          (707)           --              707               --
 Foreign currency transaction gain (loss) ..................          (179)          150               --              (29)
                                                                 ---------        --------         ------        ---------
Loss before income taxes ...................................       (13,410)         (807)             619          (13,598)
Income tax benefit .........................................         1,631           100               --            1,731
                                                                 ---------        --------         ------        ---------
    Net loss ...............................................     $ (11,779)       $ (707)          $  619        $ (11,867)
                                                                 =========        ========         ======        =========
</TABLE>

                                       87

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



                 Condensed Combining Statements of Operations
                         Year Ended December 31, 1995



<TABLE>
<CAPTION>
                                                                              Non-
                                                             Guarantor     Guarantor                       Combined
                                                             Companies     Companies     Eliminations      Companies
                                                            -----------   -----------   --------------   ------------
<S>                                                         <C>           <C>           <C>              <C>
Operating revenues:
 Sales of products and services .........................    $ 532,349      $34,197        $ (2,548)      $ 563,998
 Revenue from operating lease activities ................          926           --              --             926
                                                             ---------      -------        --------       ---------
    Total operating revenues ............................      533,275       34,197          (2,548)        564,924
                                                             ---------      -------        --------       ---------
Operating expenses:
 Cost of sales, excluding depreciation of $2,531.........      180,980        4,730          (1,581)        184,129
 Bowling center operations ..............................      149,535       16,930              --         166,465
 Selling, general and administrative ....................       47,218        4,046            (486)         50,778
 Depreciation and amortization ..........................       36,723        2,650            (234)         39,139
                                                             ---------      -------        --------       ---------
    Total operating expenses ............................      414,456       28,356          (2,301)        440,511
                                                             ---------      -------        --------       ---------
    Operating income ....................................      118,819        5,841            (247)        124,413
Nonoperating income (expenses):
 Interest expense .......................................      (15,569)        (142)             --         (15,711)
 Other expenses, net ....................................         (600)        (443)             --          (1,043)
 Interest income ........................................        1,837          347              --           2,184
 Equity in earnings of subsidiaries .....................        3,444           --          (3,444)             --
 Foreign currency transaction loss ......................         (465)        (514)             --            (979)
                                                             ---------      -------        --------       ---------
Income before income taxes ..............................      107,466        5,089          (3,691)        108,864
Income tax expense ......................................       10,453        1,645              --          12,098
                                                             ---------      -------        --------       ---------
    Net income ..........................................    $  97,013      $ 3,444        $ (3,691)      $  96,766
                                                             =========      =======        ========       =========
</TABLE>

                                       88

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



                 Condensed Combining Statements of Cash Flows
                       Four Months Ended April 30, 1996



<TABLE>
<CAPTION>
                                                                                  Non-
                                                                Guarantor      Guarantor                        Combined
                                                                Companies      Companies     Eliminations      Companies
                                                              -------------   -----------   --------------   -------------
<S>                                                           <C>             <C>           <C>              <C>
Cash flows from operating activities:
 Net loss .................................................     $ (11,072)     $   (707)       $    (88)       $ (11,867)
 Adjustments to reconcile net loss to net cash
   provided by operating activities:
   Depreciation and amortization ..........................        14,380           802             (85)          15,097
   Deferred income taxes ..................................           435           (21)             --              414
   Equity in earnings of subsidiaries .....................          (707)           --             707               --
   Change in assets and liabilities:
    Accounts and notes receivable, net ....................         4,821           (37)             --            4,784
    Receivables and payables -- affiliates ................           593           942              --            1,535
    Inventories ...........................................        (3,655)           24              --           (3,631)
    Other assets and liabilities ..........................        (3,476)          (34)            837           (2,673)
    Accounts payable and accrued expenses .................         7,634         1,079              --            8,713
    Income taxes payable ..................................        (5,442)         (303)             --           (5,745)
                                                                ---------      --------        --------        ---------
    Net cash provided by operating activities .............         3,511         1,745           1,371            6,627
                                                                ---------      --------        --------        ---------
Cash flows from investing activities:
 Purchase of property and equipment .......................        (6,046)       (1,001)            173           (6,874)
 Other ....................................................         2,989            --              --            2,989
                                                                ---------      --------        --------        ---------
    Net cash used for investing activities ................        (3,057)       (1,001)            173           (3,885)
                                                                ---------      --------        --------        ---------
Cash flows from financing activities:
 Distributions to stockholders ............................       (36,721)         (622)            622          (36,721)
 Payment of long-term debt ................................        (3,812)           --              --           (3,812)
 Proceeds from notes payable -- stockholders, net .........         1,236            --              --            1,236
 Capital contributions by stockholders ....................        24,805         2,252          (2,252)          24,805
 Collection of notes receivable -- affiliates .............        19,408            --              --           19,408
 Other ....................................................         3,902            --              86            3,988
                                                                ---------      --------        --------        ---------
    Net cash provided by financing activities .............         8,818         1,630          (1,544)           8,904
    Effect of exchange rates on cash and cash
     equivalents ..........................................           330           205              --              535
                                                                ---------      --------        --------        ---------
Net increase in cash and cash equivalents .................         9,602         2,579              --           12,181
Cash and cash equivalents at beginning of period ..........         9,026           706              --            9,732
                                                                ---------      --------        --------        ---------
Cash and cash equivalents at end of period ................     $  18,628      $  3,285        $     --        $  21,913
                                                                =========      ========        ========        =========
</TABLE>

                                       89

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



                 Condensed Combining Statements of Cash Flows
                         Year Ended December 31, 1995



<TABLE>
<CAPTION>
                                                                                      Non-
                                                                    Guarantor      Guarantor                       Combined
                                                                    Companies      Companies     Eliminations      Companies
                                                                 --------------   -----------   --------------   ------------
<S>                                                              <C>              <C>           <C>              <C>
Cash flows from operating activities:
 Net income ..................................................     $ 97,013        $  3,444        $ (3,691)      $  96,766
 Adjustments to reconcile net income to net cash
   provided by operating activities: .........................
   Equity in earnings of subsidiaries ........................       (3,444)             --           3,444              --
   Dividends from non-guarantor companies ....................        3,133              --          (3,133)             --
   Depreciation and amortization .............................       36,661           2,682            (204)         39,139
 Deferred income taxes .......................................          215          (1,045)             --            (830)
 Loss on sale of property and equipment, net .................          567              --              --             567
    Change in assets and liabilities, net of effects from
     companies acquired:
     Accounts and notes receivable, net ......................       11,864          (1,234)             --          10,630
     Receivables and payables--affiliates ....................        7,262          (1,115)             --           6,147
     Inventories .............................................       (5,596)           (400)             --          (5,996)
     Other assets and liabilities ............................       (2,484)           (369)          2,752            (101)
     Accounts payable and accrued expenses ...................      (19,187)            446              --         (18,741)
     Income taxes payable ....................................       (2,039)           (791)             --          (2,830)
                                                                   --------        --------        --------       ---------
     Net cash provided by operating activities ...............      123,965           1,618            (832)        124,751
                                                                   --------        --------        --------       ---------
Cash flows from investing activities:
 Purchase of property and equipment ..........................      (26,411)         (4,005)            451         (29,965)
 Proceeds from sales of property and equipment ...............          494             916              --           1,410
 Other .......................................................          229              --              --             229
                                                                   --------        --------        --------       ---------
     Net cash used for investing activities ..................      (25,688)         (3,089)            451         (28,326)
                                                                   --------        --------        --------       ---------
Cash flows from financing activities:
 Dividends to guarantor companies ............................           --          (3,133)          3,133              --
 Payments on credit note agreements, net .....................      (11,057)             --              --         (11,057)
 Distributions to stockholders ...............................      (71,851)             --              --         (71,851)
 Payment of long-term debt ...................................      (10,605)            320              --         (10,285)
 Payment for redemption of stock -- ..........................       (3,960)             --              --          (3,960)
   stockholders, net .........................................       (4,882)          1,089              --          (3,793)
 Capital contributions by stockholders .......................        8,329              --              --           8,329
 Capital contributions from guarantor ........................           --           2,752          (2,752)             --
 Other .......................................................       (2,056)             --              --          (2,056)
                                                                   --------        --------        --------       ---------
    Net cash (used for) provided by financing
     activities ..............................................      (96,082)          1,028             381         (94,673)
    Effect of exchange rates on cash and cash
     equivalents .............................................           (5)           (189)             --            (194)
                                                                   -----------     --------        --------       ---------
Net increase (decrease) in cash and cash equivalents .........        2,190            (632)             --           1,558
Cash and cash equivalents at beginning of year ...............        6,653           1,521              --           8,174
                                                                   ----------      --------        --------       ---------
Cash and cash equivalents at end of year .....................     $  8,843        $    889        $     --       $   9,732
                                                                   ==========      ========        ========       =========
</TABLE>


                                       90

<PAGE>

                               AMF BOWLING GROUP

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
                  (in thousands of dollars, except share data)



Note 17. Subsequent Event (Unaudited)

     On October 10, 1996, AMF Bowling Centers, Inc., completed the acquisition
of 50 bowling centers and certain related assets and liabilities from Charan
Industries, Inc. pursuant to an Asset Purchase Agreement, dated as of September
10, 1996.

     The purchase was approximately $106,500, including certain adjustments and
transaction costs. It was funded with approximately $40,000 from the sale of
equity by AMF Group Holdings Inc., a wholly-owned subsidiary of AMF Holdings
Inc., to its institutional stockholders and one of its directors and with
$66,500 from available borrowing under the Company's Acquisition Facility.

     The April 30, 1996 combined financial statements do not reflect any
adjustments or cost associated with the acquisition.

                                       91

<PAGE>

                      AMF BOWLING, INC. AND SUBSIDIARIES

                      Selected Quarterly Data (unaudited)
                 (dollars in millions, except per share data)



<TABLE>
<CAPTION>
                                                                                       AMF Bowling, Inc.
                                                                     -----------------------------------------------------
                         1997 Quarters Ended                           March 31      June 30    September 30   December 31
-------------------------------------------------------------------- ------------ ------------ -------------- ------------
<S>                                                                  <C>          <C>          <C>            <C>
Net sales ..........................................................  $  157.6     $  160.5      $  187.5      $   208.1
Operating income ...................................................      29.7         12.7          17.5           23.0
Net income (loss) before extraordinary items .......................       0.1       ( 12.3)        (10.2)          (9.8)
Extraordinary items, net of tax (b) ................................         --           --           --          (23.4)
Net income (loss) ..................................................       0.1       ( 12.3)        (10.2)         (33.2)
Net income (loss) per share before extraordinary items (a) .........  $   0.00     $  (0.29)     $  (0.24)    $    (0.18)
Per share effect of extraordinary items (a) (b) ....................         --           --           --          (0.44)
                                                                      ---------   ----------    ----------    ----------
Net income (loss) per share (a) ....................................  $   0.00     $  (0.29)     $  (0.24)    $    (0.62)
                                                                      =========   ==========    ==========    ==========
</TABLE>


<TABLE>
<CAPTION>
                                       Predecessor Company                  AMF Bowling, Inc.
                                      --------------------- --------------------------------------------------
                                                     One        Two      Pro Forma
                                                    Month      Months     Quarter
         1996 Quarters Ended           March 31   April 30    June 30     June 30   September 30   December 31
------------------------------------- ---------- ---------- ----------- ---------- -------------- ------------
<S>                                   <C>        <C>        <C>         <C>        <C>            <C>
Net sales ...........................  $  123.3   $  41.6    $   73.4    $  114.8     $  131.8      $  179.6
Operating income (loss) .............      27.9     (36.9)        4.0         5.3         14.3          27.8
Net income (loss) ...................      21.6     (33.4)      (11.9)      (13.6)        (5.3)         (2.1)
Net income (loss) per share (a) .....    N/A        N/A        ( 0.31)      (0.36)       (0.14)        (0.05)
</TABLE>

---------
      (a) Basic and diluted. Outstanding stock options and warrants are not
considered as their effect is antidilutive.

  (b) Costs incurred in connection with the use of proceeds of the Initial
  Public Offering. See "Note 9. Long-Term Debt" and "Note 12. Stockholders'
  Equity" in the Notes to Consolidated Financial Statements.



Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

     Arthur Andersen LLP has served as the Company's independent public
accountants since 1996. Results for 1997 and 1996 have been audited by Arthur
Andersen LLP.

     The Predecessor Company engaged Price Waterhouse LLP as its independent
accountants. Results for the four months ended April 30, 1996 and the year
ended December 31, 1995 have been audited by Price Waterhouse LLP.


                                       92

<PAGE>

                                   PART III

Item 10. Directors and Executive Officers

     The information required by this item is incorporated by reference to the
sections entitled "Item 1 -- Election of Board of Directors -- General," " --
Nominees for Election as Directors" and "Meetings and Committees of the Board
-- Section 16(a) Beneficial Ownership Reporting Compliance" on pages 2, 3 and 4
of the proxy statement filed since the close of the fiscal year ended December
31, 1997 (the "Proxy Statement") pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended. Pursuant to Item 401(b) of Regulation S-K,
certain information regarding the executive officers of the Registrant is
reported in Part I, of this report.


Item 11. Executive Compensation

     The information required by this item is incorporated by reference to the
sections entitled "Executive Compensation -- Summary Compensation Table," " --
Stock Option Grants in Last Fiscal Year," " -- Aggregated Stock Option Exercises
and Fiscal Year-End Option Value," " -- Employment Agreements," "Meetings and
Committees of the Board -- Compensation of Directors" and " -- Compensation
Committee Interlocks and Insider Participation" on pages 3, 4, 5, 6 and 7 of the
Proxy Statement. The information contained in "Executive Compensation -- Report
of the Compensation Committee" and "Performance Graph" shall not be deemed
"filed" as part of this report on Form 10-K.


Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information required by this item is incorporated by reference to the
section entitled "Securities Owned by Management and Certain Beneficial Owners"
on pages 10 and 11 of the Proxy Statement.


Item 13. Certain Relationships and Related Transaction

     The information required by this item is incorporated by reference to the
section entitled "Certain Relationships and Related Transactions" on pages
12-14 of the Proxy Statement.


                                       93

<PAGE>

                                    PART IV

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a) Financial Statements and Schedules

     See "Item 8. Financial Statements and Supplemental Data".


(b) Reports on Form 8-K

  None


(c) Exhibits


<TABLE>
<S>          <C>
   2.1       Stock Purchase Agreement, dated as of February 16, 1996, by and among AMF Group Holdings Inc.
             and the owners of the Predecessor Company. (1)
   2.2       Agreement, dated as of April 11, 1996, by and among AMF Group Holdings Inc. and the owners of
             the Predecessor Company amending certain terms of the Stock Purchase Agreement. (2)
   3.1       Restated Certificate of Incorporation of the Company. (3)
   3.2       By-Laws of the Company. (4)
   3.3       Certificate of Incorporation, as amended, of American Recreation Centers, Inc.
   3.4       By-Laws of American Recreation Centers, Inc.
   3.5       Certificate of Incorporation of Burleigh Recreation, Inc.
   3.6       Amended and Restated By-Laws of Burleigh Recreation, Inc.
   3.7       Certificate of Incorporation of 300, Inc.
   3.8       By-Laws of 300, Inc.
   3.9       Certificate of Incorporation, as amended, of Michael Jordan Golf Company, Inc.
   3.10      By-Laws of Michael Jordan Golf Company, Inc.
   3.11      Certificate of Incorporation of Michael Jordan Golf-Water Tower, Inc.
   3.12      By-Laws of Michael Jordan Golf-Water Tower, Inc.
   3.13      Certificate of Incorporation of MJG -- O'Hare, Inc.
   3.14      By-Laws of MJG -- O'Hare, Inc.
   3.15      Certificate of Incorporation of Lake Grove Centers, Inc.
   3.16      By-Laws of Lake Grove Centers, Inc.
   3.17      Certificate of Limited Liability Company of MBI No. 1, LLC.
   3.18      Limited Liability Company Agreement of MBI No. 1, LLC.
   3.19      Certificate of Limited Liability Company of AWI No. 1, LLC.
   3.20      Limited Liability Company Agreement of AWI No. 1, LLC.
   3.21      Certificate of Incorporation of AMF Bowling India Private LTD.
   3.22      Articles of Association of AMF Bowling India Private LTD.
   3.23      Articles of Association of AMF Bowling Poland Sp.zo.o
   3.24      R.Q.P. Partnership Agreement
   3.25      Joint Venture Agreement of Broadway Grand Properties
   4.1       Specimen of Common Stock Certificate.
   4.2       Indenture, dated as of March 21, 1996, as supplemented, by and among AMF Group Inc., the parties
             listed on Exhibit C thereto, as guarantors, and IBJ Schroder Bank & Trust Company with respect to
             the Senior Subordinated Notes. (5)
   4.3       Indenture, dated as of March 21, 1996, as supplemented, by and among AMF Group Inc., the parties
             listed on Exhibit C thereto, as guarantors, and American Bank National Association with respect to the
             Senior Subordinated Discount Notes. (6)
   4.4       Form of Senior Subordinated Note. (7)
   4.5       Form of Senior Subordinated Discount Note. (8)
  10.1       Registration Rights Agreement, dated as of March 21, 1996, by and among the Company, the
             Guarantors and Goldman, Sachs & Co. (9)
  10.2       Third Amended and Restated Credit Agreement among AMF Group Inc. and the Initial Lenders and
             Initial Issuing Banks and Goldman, Sachs & Co., as Syndication Agent, and Citibank, N.A., as
             Administrative Agent.
  10.3       AMF Holdings Inc. 1996 Stock Incentive Plan. (10)
  10.4       Stockholders Agreement, dated as of April 30, 1996, by and among the Company and the
             Stockholders. (11)
  10.5       Amendment No. 1, dated as of May 28, 1996, to the Stockholders Agreement. (12)
  10.6       Amendment No. 2, dated as of May 31, 1996, to the Stockholders Agreement. (13)
  10.7       Amendment No. 3, dated as of January 17, 1997, to the Stockholders Agreement. (14)
  10.8       Amendment No. 4, dated as of January 17, 1997, to the Stockholders Agreement. (15)
  10.9       Amendment No. 5, dated as of July 31, 1997, to the Stockholders Agreement. (16)
  10.10      Amendment No. 6, dated as of December 31, 1997, to the Stockholders Agreement.
  10.11      Amendment No. 7, dated as of January 1, 1998, to the Stockholders Agreement.
  10.12      Registration Rights Agreement, dated as of April 30, 1996, by and among the Company and the
             Stockholders. (17)
  10.13      Amendment No. 1, dated as of May 28, 1996, to the Registration Rights Agreement. (18)
  10.14      Amendment No. 2, dated as of January 17, 1997, to the Registration Rights Agreement. (19)
</TABLE>

                                       94

<PAGE>


<TABLE>
<S>           <C>
  10.15       Amendment No. 3, dated as of January 17, 1997, to the Registration Rights Agreement. (20)
  10.16       Amendment No. 4, dated as of July 31, 1997, to the Registration Rights Agreement. (21)
  10.17       Amendment No. 5, dated as of September 30, 1997, to the Registration Rights Agreement.
  10.18       Warrant Agreement, dated as of May 1, 1996, between the Company and The Goldman Sachs Group,
              L.P. (22)
  10.19       Employment Agreement, dated as of May 1, 1996, by and among the Company, AMF Bowling, Inc.
              and Robert L. Morin. (23)
  10.20       Employment Agreement, dated as of May 1, 1996, between the Company and Douglas J. Stanard. (24)
  10.21       Stock Option Agreement, dated as of May 1, 1996, between the Company and Charles M. Diker. (25)
  10.22       Employment Agreement, dated as of May 28, 1996, by and among the Company, AMF Group Inc. and
              Stephen E. Hare. (26)
  10.23       Asset Purchase Agreement, dated as of September 10, 1996, by and between AMF Bowling Centers,
              Inc. and Charan Industries, Inc. (27)
  10.24       Termination Agreement, dated as of February 28, 1997, by and among the Company, AMF Bowling,
              Inc. and Robert L. Morin. (28)
  10.25       Stock Subscription Agreement, dated as of October 9, 1996, by and among the Company and the
              Purchasers (as defined therein). (29)
  10.26       Agreement and Plan of Merger, dated as of January 17, 1997, by and among AMF Bowling Centers,
              Inc., Noah Acquisition and American Recreation Centers, Inc. (30)
  10.27       Waiver and Amendment No. 1, dated as of March 24, 1997, to Amended and Restated Credit
              Agreement dated as of December 20, 1996. (31)
  10.28       Amendment No. 2 to the Amended and Restated Credit Agreement, dated as of June 30, 1997. (32)
  10.29       Interest Rate Cap Agreement, dated July 2, 1997. (33)
  10.30       AMF Bowling, Inc. 1998 Stock Incentive Plan.
  11.1        Computation of earnings per share.
  21.1        Subsidiaries of the Company.
  23.1        Consent of Arthur Andersen LLP.
  23.2        Consent of Price Waterhouse LLP.
  27.1        Financial Data Schedule.
</TABLE>

 

                                       95

<PAGE>

     Notes to Exhibits:


<TABLE>
<S>           <C>
        (1)   Incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-4 of AMF Group Inc.
              (File No. 333-4877).
        (2)   Incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-4 of AMF Group Inc.
              (File No. 333-4877).
        (3)   Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
        (4)   Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
        (5)   Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of AMF Group Inc.
              (File No. 333-4877).
        (6)   Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-4 of AMF Group Inc.
              (File No. 333-4877).
        (7)   Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of AMF Group Inc.
              (File No. 333-4877).
        (8)   Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-4 of AMF Group Inc.
              (File No. 333-4877).
        (9)   Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (10)   Incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (11)   Incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (12)   Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
       (13)   Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
       (14)   Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
       (15)   Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
       (16)   Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1 of AMF Bowling,
              Inc. (File No. 333-34099).
       (17)   Incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (18)   Incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-1 of AMF
              Bowling, Inc. (File No. 333-34099).
       (19)   Incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 of AMF
              Bowling, Inc. (File No. 333-34099).
       (20)   Incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-1 of AMF
              Bowling, Inc. (File No. 333-34099).
       (21)   Incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-1 of AMF
              Bowling, Inc. (File No. 333-34099).
       (22)   Incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (23)   Incorporated by reference to Exhibit 10.7 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (24)   Incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (25)   Incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (26)   Incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-4 of AMF Group
              Inc. (File No. 333-4877).
       (27)   Incorporated by reference to Exhibit 1 to the Current report on Form 8-K of AMF Group Inc., dated
              October 24, 1996 (File No. 001-12131).
       (28)   Incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K of AMF Group Inc. for
              the fiscal year ended December 31, 1996 (File No. 001-12131).
       (29)   Incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K of AMF Group Inc. for
              the fiscal year ended December 31, 1996 (File No. 001-12131).
</TABLE>

                                       96

<PAGE>


<TABLE>
<S>          <C>
       (30)  Incorporated by reference to Exhibit 1 to the Current report on Form 8-K of AMF Group Inc., dated
             January 17, 1997 (File No. 001-12131).
       (31)  Incorporated by reference to Exhibit 10.16 to Post-Effective Amendment No. 2 to the Registration
             Statement on Form S-4 of AMF Group Inc. (File No. 333-4877).
       (32)  Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of AMF Group Inc.
             for the quarterly period ended June 30, 1997 (File No. 001-12131).
       (33)  Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of AMF Group Inc.
             for the quarterly period ended June 30, 1997 (File No. 001-12131).
</TABLE>

 

                                       97

<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, as of the 27th day of March, 1998.


                                        AMF BOWLING, INC.

                                        /s/  DOUGLAS J. STANARD
                                      ----------------------------------------
                                               Douglas J. Stanard
                                                     Director
                                        President/Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of the 27th day of March, 1998.



<TABLE>
<CAPTION>
               Signatures                                           Title
---------------------------------------  -----------------------------------------------------------
<S>                                      <C>
 /s/   RICHARD A. FRIEDMAN                                  Chairman of the Board
 ----------------------------------
 Richard A. Friedman
 /s/   TERENCE M. O'TOOLE                                          Director
 ----------------------------------
 Terence M. O'Toole
 /s/   PETER M. SACERDOTE                                          Director
 ----------------------------------
 Peter M. Sacerdote
 /s/   CHARLES M. DIKER                                            Director
 ----------------------------------
 Charles M. Diker
 /s/   PAUL B. EDGERLEY                                            Director
 ----------------------------------
 Paul B. Edgerley
 /s/   HOWARD A. LIPSON                                            Director
 ----------------------------------
 Howard A. Lipson
 /s/   THOMAS R. WALL, IV                                          Director
 ----------------------------------
 Thomas R. Wall, IV
 /s/   DOUGLAS J. STANARD                         Director/President/Chief Executive Officer
 ----------------------------------
 Douglas J. Stanard
 /s/   STEPHEN E. HARE                    Director/Executive Vice President/Chief Financial Officer/
 ----------------------------------                                Treasurer
 Stephen E. Hare
 /s/   MICHAEL P. BARDARO                            Vice President/Corporate Controller/
 ----------------------------------
 Michael P. Bardaro                              Assistant Secretary/Chief Accounting Officer
</TABLE>

                                       98

<PAGE>

            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE I


                               AMF BOWLING, INC.

To the Stockholders and Board of Directors of
AMF Bowling, Inc.:

     We have audited in accordance with generally accepted auditing standards
the consolidated financial statements included in the Form 10-K Annual Report
of AMF Bowling, Inc. and subsidiaries for the year ended December 31, 1997, and
for the period from inception (January 12, 1996) through December 31, 1996, and
have issued our report thereon dated February 20, 1998. Our audits were made
for the purpose of forming an opinion on the basic financial statements taken
as a whole. Schedule I filed as part of the Company's Form 10-K Annual Report
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. The schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.




ARTHUR ANDERSEN LLP

Richmond, Virginia
February 20, 1998


                                       99

<PAGE>

       SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.


                           CONDENSED BALANCE SHEETS
                                (in thousands)



<TABLE>
<CAPTION>
                                         As of December 31,
                                     ---------------------------
                                         1997           1996
                                     ------------   ------------
<S>                                  <C>            <C>
               ASSETS
Investment in subsidiary .........    $ 653,862      $ 408,734
Other noncurrent assets ..........          239            137
                                      ---------      ---------
 Total assets ....................    $ 654,101      $ 408,871
                                      =========      =========
</TABLE>


<TABLE>
<S>                                                     <C>            <C>
        LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities ...........................    $      73      $      56
Stockholders' equity ................................      654,028        408,815
                                                         ---------      ---------
 Total liabilities and stockholders' equity .........    $ 654,101      $ 408,871
                                                         =========      =========
</TABLE>

The accompanying notes are an integral part of these condensed balance sheets.

                                      100

<PAGE>

       SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.


                      CONDENSED STATEMENTS OF OPERATIONS
                                (in thousands)



<TABLE>
<CAPTION>
                                                         Year Ended      Period Ended
                                                        December 31,     December 31,
                                                            1997         1996 (Note 3)
                                                       --------------   --------------
<S>                                                    <C>              <C>
Interest income ....................................     $      102       $      137
Provision for income taxes .........................             17               56
                                                         ----------       ----------
Income before equity in loss of subsidiary .........             85               81
Equity in loss of subsidiary .......................        (55,649)         (19,565)
                                                         ----------       ----------
Net loss ...........................................     $  (55,564)      $  (19,484)
                                                         ==========       ==========
</TABLE>

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

                                      101

<PAGE>

       SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.


                      CONDENSED STATEMENTS OF CASH FLOWS
                                (in thousands)



<TABLE>
<CAPTION>
                                                                         Year Ended      Period Ended
                                                                        December 31,     December 31,
                                                                            1997         1996 (Note 3)
                                                                       --------------   --------------
<S>                                                                    <C>              <C>
Cash flows from operating activities:
 Net Loss ..........................................................     $  (55,564)      $  (19,484)
 Adjustments to reconcile net loss to net cash provided by operating
   activities:
   Interest income, net ............................................           (102)            (137)
   Equity in loss of subsidiary ....................................         55,649           19,565
   Change in current liabilities ...................................             17               56
                                                                         ----------       ----------
   Net cash provided by operating activities .......................             --               --
Net cash used in investing activities:
   Investment in subsidiary ........................................       (315,671)        (420,750)
                                                                         ----------       ----------
Net cash provided by financing activities:
   Capital contributions ...........................................         36,600          420,750
   Net proceeds from initial public offering of shares .............        279,071               --
                                                                         ----------       ----------
   Net cash provided by financing activities .......................        315,671          420,750
                                                                         ----------       ----------
   Net change in cash and cash equivalents .........................             --               --
   Cash and cash equivalents at beginning of period ................             --               --
                                                                         ----------       ----------
   Cash and cash equivalents at end of period ......................     $       --       $       --
                                                                         ==========       ==========
</TABLE>

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

                                      102

<PAGE>

       SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF AMF BOWLING, INC.


           NOTES TO AMF BOWLING, INC. CONDENSED FINANCIAL STATEMENTS

1. These notes to the AMF Bowling, Inc. ("AMF Bowling") condensed financial
   statements should be read in conjunction with the Notes to Consolidated
   Financial Statements of AMF Bowling and subsidiaries included in Part II,
   Item 8 of the Form 10-K Annual Report (the "Notes"). AMF Bowling Worldwide,
   Inc., formerly named AMF Group Inc. ("Bowling Worldwide") is a wholly owned
   subsidiary of AMF Group Holdings Inc. ("AMF Group Holdings"). AMF Group
   Holdings is a wholly owned subsidiary of AMF Bowling. All dollar amounts
   are in thousands, except where otherwise indicated.

2. The senior subordinated notes and senior subordinated discount notes are
   jointly and severally guaranteed on a full and unconditional basis by AMF
   Group Holdings and by the first and second-tier subsidiaries of Bowling
   Worldwide, as discussed in "Note 21. Condensed Consolidating Financial
   Statements" in the Notes.

3. The results of operations for the period ended December 31, 1996, reflect
   the results of AMF Bowling since its inception date of January 12, 1996.

4. Restricted assets of AMF Group Holding and Bowling Worldwide:

  The Credit Agreement and AMF Group Holdings' guarantee contain certain
  covenants, including, but not limited to, covenants related to cash interest
  coverage, fixed charge coverage, payments on other debt, mergers and
  acquisitions, sales of assets, guarantees and investments. The Credit
  Agreement also contains certain provisions which limit the amount of funds
  available for transfer from Bowling Worldwide to AMF Group Holdings, and
  from AMF Group Holdings to AMF Bowling. Limits exist on, among other things,
  the declaration or payments of dividends, distribution of assets, and
  issuance or sale of capital stock.

  So long as Bowling Worldwide is not in default of the covenants contained in
  the Credit Agreement, it may, i) declare and pay dividends in common stock;
  ii) declare and pay cash dividends, to make payments of approximately $0.15
  million in May 1997 and, to the extent necessary, to make payments of
  approximately $0.15 million due in May 1998 under certain noncompete
  agreements with the Prior Owners, iii) declare and pay cash dividends for
  general administrative expenses not to exceed $0.25 million; and iv) declare
  and pay cash dividends not to exceed $2.0 million for the repurchase of
  Common Stock.

5. Total assets and liabilities:

  At December 31, 1997 and 1996, assets represent AMF Bowling's investment in
  AMF Group Holdings and other assets related to shareholder receivables which
  are related to subscription of AMF Bowling's Common Stock. At December 31,
  1997 and 1996, liabilities represent federal income taxes payable arising
  from interest earned on the shareholder receivables previously described.


                                      103

<PAGE>

                                  SCHEDULE II


                               AMF BOWLING GROUP
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES



<TABLE>
<CAPTION>
                    Column A                      Column B             Column C                Column D       Column E
----------------------------------------------- ------------ ----------------------------- ---------------- -----------
                                                                       Additions
                                                             -----------------------------
                                                 Balance at   Charged to     Charged to                      Balance at
                                                  Beginning    Costs and   Other Accounts   Deductions --      End of
Description                                       of Period    Expenses      -- Describe      Write-Offs       Period
----------------------------------------------- ------------ ------------ ---------------- ---------------- -----------
<S>                                             <C>          <C>          <C>              <C>              <C>
 Accounts Receivable -- Allowance for Doubtful
  Accounts
  Year ended December 31, 1995 ................    $1,898       $2,118                          $ (643)        $3,373
  Four months ended April 30, 1996 ............    $3,373       $  (17)                         $ (246)        $3,110
 Inventory -- Reserves
  Year ended December 31, 1995 ................    $  800       $  954                          $ (498)        $1,256
  Four months ended April 30, 1996 ............    $1,256       $  104                          $ (553)        $  807
</TABLE>


                                      104