<PAGE>   1

                       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,
             EFFECTIVE OCTOBER 7, 1996).

             For the fiscal year ended December 31, 1996

                                      OR

   [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
             THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

             For the transition period from _______ to _______

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

                       Commission file number   000-22298

                        SCIENTIFIC GAMES HOLDINGS CORP.

                             A Delaware Corporation
                              IRS No. 13 361 5274
            1500 Bluegrass Lakes Parkway, Alpharetta, Georgia 30201
                                 (770) 664-3700

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

           Securities registered pursuant to Section 12(b) of the Act
                             and listed on the NYSE
                         Common Stock, $.001 Par Value
          Securities registered pursuant to Section 12(g) of the Act:
                                      None

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

Indicate by check  mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                             Yes  x        No
                                 -----        -----

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

The aggregate market value of the Common Stock of the Registrant held by non
affiliates of the Registrant on March 17, 1997 was $310,203,803.  The aggregate
market value was computed by reference to the closing price of the stock on the
New York Stock Exchange on such date.  For the purposes of this response,
executive officers and directors are deemed to be the affiliates of the
Registrant and the holding by non affiliates was computed as 11,490,856 shares.

The number of shares outstanding of the Registrant's Common Stock as of March
17, 1997 was 12,164,855 shares.

Documents incorporated by reference:

     The Registrant's proxy statement for its Annual Meeting of Stockholders,
to be held May 16, 1997, which will be filed pursuant to Regulation 14A within
120 days of the close of Registrant's fiscal year, is incorporated by reference
in answer to Part III of this report but only to the extent indicated in Part
III herein.  In addition, pages 14 through 31 of Scientific Games Holdings
Corp.'s 1996 Annual Report to Stockholders are incorporated by reference in
answer to Items 6, 7 and 8 of Part II and Item 14(a) of Part IV of this report.



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                                     PART 1

ITEM 1. BUSINESS


GENERAL
     Scientific Games Holdings Corp. (the "Company" or "Scientific Games")
through its wholly owned subsidiaries, principally, Scientific Games Inc.
("SGI") and Scientific Games International, Limited ("SGIL"), is the leading
worldwide manufacturer of instant lottery tickets based upon the number of
instant lottery tickets sold. The Company has production facilities in
Alpharetta, Georgia (suburban Atlanta), Gilroy, California, Albert Lea,
Minnesota and the United Kingdom and employs approximately 1,022 people in
total. Scientific Games' business consists primarily of manufacturing and
selling instant lottery tickets to domestic and foreign governmental lottery
authorities and licensees and providing lottery services to such customers. The
Company also offers its customers a full range of instant lottery services
under cooperative services contracts, including some or all of the following
services: designing and installing game management software, ticket production,
telemarketing, field sales, accounting, ticket distribution, training sales
staff, estimating ticket needs, managing staff, advising with respect to
security, ticket validation and provision of computer hardware, validation
terminals, SciScan Technology validators, maintenance, communication network
and sales agent hot-line service.  Through the acquisition of a pull-tab ticket
business, GameTec, in June 1994, the Company now also manufactures and sells
pull-tab tickets to lotteries and charities.  The GameTec facility is located
in Albert Lea, Minnesota. The Company announced in January 1997 that it had
signed a letter of intent to purchase Tele Control, a Vienna, Austria based
on-line lottery and transaction processing company.

INDUSTRY OVERVIEW
     Lotteries are operated by domestic and foreign governmental authorities
and their licensees in approximately 200 jurisdictions throughout the world.
Currently, 39 jurisdictions in the United States sell instant lottery tickets.
Of the approximately 7.2 billion tickets sold by the Company in 1996,
approximately 27% were sold outside the United States. Governments typically
authorize lotteries as a means of generating revenues without the imposition of
additional taxes. Lottery revenues are frequently being set aside for particular
public purposes, such as education, aid to the elderly, conservation,
transportation and economic development. As lottery ticket sales have become a
significant source of funding for such programs, many jurisdictions have come to
rely on the revenues generated by such sales.

     Although there are many types of lotteries worldwide, government
authorized lotteries may generally be categorized into three principal groups:
instant lotteries, on-line lotteries and the traditional draw-type lotteries.
An instant lottery is one which is typically played by removing a coating from
a preprinted ticket to determine whether it is a winner.  On-line lotteries are
generally pari-mutuel in nature (although fixed prizes are also offered) and
are conducted through a computerized lottery system in which lottery terminals
are connected to a central computer, usually by dedicated telephone lines.
Internationally, the older form of traditional draw-type lottery games, in
which players purchase tickets which are manually processed for a future
drawing for prizes of a fixed amount, is the prevalent form of play. In
addition to the foregoing types of lotteries, there are video lotteries played
on electronic machines featuring keno, "line-up" (cherries, bars, plums, etc.)
and similar video games. Video lotteries are typically targeted to locations
such as horse and dog racing tracks, athletic arenas, certain bars, clubs and
similar establishments.

     There are many promotional (i.e., commercial) game suppliers (including
the Company) in the United States which produce tickets for both sales
promotion companies and their end users. Management believes Scientific Games
is the only company which also offers the commercial market a full line of
support and services similar to those which the Company offers to the
government lottery market. Management believes the total potential commercial
game market may be larger than the instant lottery market and that such market
has shown extensive growth in recent years. While potential lottery customers in
the United States currently are limited to the 39 jurisdictions where such games
are legally permitted, commercial games are believed permitted in substantially
all states. Commercial games are used to promote a manufacturer's or retailer's
products and typically do not involve a cumbersome bidding/procurement process.
Orders for commercial games may vary in quantity from less than 50,000 to more
than 500 million tickets. Commercial games are subject to a variety of state
laws which regulate promotional games of chance. A significant difference
between lottery games and commercial games is the lower level of security


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requirements associated with commercial games which typically offer less
valuable prizes. Tickets for commercial games may not require foil, laminated or
similar paper stock or overprint inks.

BUSINESS STRATEGY
     The Company is the leading worldwide supplier of instant lottery tickets
and support services.  Scientific Games intends to expand this leadership
position by (i) pursuing new instant ticket printing opportunities in both the
domestic and foreign marketplaces, (ii) emphasizing and marketing Scientific
Games' capabilities in cooperative services, (iii) reentering the on-line
lottery business through its acquisition of Tele Control, (iv) continuing the
Company's emphasis on customer service and responsiveness to customer needs
both before and after delivery of products and services, (v) investing in its
facilities while aggressively pursuing practices and methods which reduce
operating costs, and (vi) funding research and development costs that continue
to provide innovations for the Company's customers.

     As state governments face budgetary pressures, they increasingly seek
methods of reducing state spending. A method of reducing spending which is
often considered by states is privatization or outsourcing  of various
operating tasks associated with lottery operations. The Company estimates that
nine domestic lotteries have elected to privatize certain operating functions
related to the management of instant ticket games, including six lotteries with
whom the Company has, or is negotiating, cooperative services contracts. The
Company has significant experience in this field and is well positioned to
offer this privatization or outsourcing option to the industry. The Company
intends to continue to emphasize and invest in its growing cooperative services
business.

     The increased application of computer-based and communications
technologies (including proprietary technologies) to the manufacturing and
servicing of instant tickets (See "Business-New Product Development") continues
to separate the instant ticket from conventional forms of printing. The Company
is generally recognized within the lottery industry as the leader in applying
these technologies to the manufacturing and sale of instant tickets. In order
to maintain its position as a leading innovator within the lottery industry,
the Company intends to continue to explore and develop new technologies and
their application to instant lottery tickets and systems.

     In addition to the internal development of new products, the Company
intends to leverage its management expertise, reputation, and contacts in the
lottery industry by pursuing joint ventures and considering acquisitions which
will provide access to lottery related products and services that the Company
does not currently provide. In January 1997, the Company signed a letter of
intent to purchase Tele Control, an Austria based company providing on-line
lottery and transaction processing to the European market. The Company is
presently evaluating various opportunities to enter other areas of the lottery
business by either utilizing its in-house expertise or by acquisition of, or
combining with, another entity engaged in such areas, or some combination of
the foregoing.

PRODUCTS AND SERVICES
     In 1974, the Company introduced the first "secure" instant game ticket.
Today, instant tickets manufactured by the Company are typically printed on
recyclable ticket stock by a series of computer controlled presses and ink-jet
imagers and are believed by management to incorporate the most advanced
technology and security currently available in the industry. Tickets range in
size from 1.5 inches by 3 inches to ticket sizes as large as some greeting
cards; tickets are normally played by removing a coating to determine if they
are winning tickets. The Company markets tickets to domestic lottery
jurisdictions, foreign lottery jurisdictions and commercial customers. The
Company has contracts with 24 of the 39 states/jurisdictions in the U.S. which
currently sell instant lottery tickets. These domestic contracts are typically
at a fixed price per thousand tickets and typically range from one to three
years in duration, although they usually have one or more extension options.
Customers of Scientific Games have exercised extension options in domestic
lottery contracts with the Company a majority of the time. In 1996, the Company
sold approximately 7.2 billion tickets. Such instant ticket sales included more
than 50% of all instant lottery tickets sold by all companies to domestic
lotteries and approximately twice as many instant tickets as were sold by the
Company's next largest domestic competitor.

     The Company currently manufactures tickets for the promotional game
market. Examples of promotional games produced by the Company include games for
European newspapers, major food and beverage companies and games for various
other commercial customers. In the past, Scientific Games was not in a position
to penetrate this market fully because of, among other factors, very short lead
times and plant capacity constraints. The Company believes its installation in
1995, in the Georgia Facility, of an additional press better suited to shorter
press runs than its two existing gravure presses provides it with the capacity
and flexibility necessary to better compete in this



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market. The Company's promotional game operations also have expanded as a result
of its acquisition of SGIL in October 1996 whose sales are approximately 50% to
promotional game customers.

     Scientific Games pioneered the idea of cooperative services as a means of
reducing the operating costs of lotteries while increasing lottery revenues and
is the only instant ticket manufacturer which has a separate lottery ticket
cooperative support services business to supplement its manufacturing
operations. Cooperative services consist of lottery ticket distribution and
support services involving the performing of selected key sales, distribution,
marketing and/or data processing services for lottery jurisdictions. While most
lottery jurisdictions to date have chosen to control the distribution and sales
of tickets, Scientific Games has been successful in demonstrating to a number of
jurisdictions that the Company can perform these functions effectively and at a
lower cost.

     Domestically, the Company has cooperative services agreements with the
states of Georgia, Maine, Nebraska, and West Virginia and is currently
finalizing contracts with the states of Florida and Pennsylvania. Under
cooperative services contracts, the Company typically provides selected
management, distribution services and/or data processing for the jurisdiction's
instant lottery game business and is paid a percentage of the lottery's total
instant ticket revenues. Customers select those services which they desire to
privatize from a menu of services offered, including: designing and installing
game management software, ticket production, telemarketing, field sales,
accounting, ticket distribution, sales staff training, estimating ticket needs,
managing staff, advising with respect to security, ticket validation, and
provision of computer hardware, validation terminals, SciSan Technology
validation units, maintenance, communication network and sales agent hot-line
service. Cooperative services contracts can be associated with large conversion
costs for the lottery, as the lottery would have to hire and/or retrain its
staff and redesign and install a software system to control the instant ticket
lottery business.

     In addition to laminated scratch off instant tickets, the Company's
business also includes the manufacture and sale of pull-tab tickets, a business
the Company entered through the June 1994 acquisition of the assets of GameTec,
a pull-tab manufacturer located in Albert Lea, Minnesota.  The Company
currently sells pull-tab tickets to five lotteries in the U.S. and to
distributors who sell them to charities.

     In January 1997, the Company announced that it had signed a letter of
intent to purchase Tele Control, a subsidiary of Autotote Corporation. Tele
Control is an on-line lottery and transaction processing company in Vienna,
Austria currently serving the European market. Scientific Games' predecessor
company developed and operated on-line systems from 1985 until 1991. During
that period, Scientific Games supplied and operated systems in Iowa, Maine, New
Hampshire, Vermont and West Virginia.

NEW PRODUCT DEVELOPMENT
     Since its inception, Scientific Games has provided many of the innovations
in instant ticket technology, in both manufacturing and game development, which
subsequently became the industry standard. Past examples of new products
developed by Scientific Games include the ink-jet printed instant ticket,
cooperative services (lottery privatization), bar coding on the front and back
of tickets (which facilitates validation), the IL/MVS instant ticket accounting
management and ticket validation software technology and Terra 2000(R) tickets.
The Terra 2000(R) ticket is a recyclable and biodegradable paper ticket which
meets the rigorous security standards demanded by the lottery industry.  The
Company's latest innovation is SciScan Technology(R), a keyless validation
system for retailers which significantly reduces the time requirements of ticket
validation while at the same time improving security of the game. This
technology will also open other opportunities for advanced ticket play-styles
and may also have applications in other industries where currency, check,
credit and debit card and bearer documents verification is required.

     Certain technology associated with these innovations is the subject of
issued patents and patent applications currently pending with the United States
Patent Office and selected other countries outside the United States. The
Company also holds a number of other patents and licenses with respect to
certain technology used in its business. The loss of any such patent or
license, however, would not in the opinion of management have a material
adverse effect on the Company's overall business. Scientific Games is
continually looking for ways to apply its expertise in specialty printing
technologies and security/randomization techniques to develop commercially
viable products for both the lottery industry as well as for other commercial
applications.

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CUSTOMER SERVICE
     The Company has an active professional Customer Service Department which
works closely with its account managers, the lotteries, and Scientific Games'
Graphics and Game Programming Departments in the area of initial game design.
Artwork concepts, game play style and prize structure are assembled, proposed,
and refined. Important manufacturing information is also assembled and
documented in the "working papers" by the Company's customer service
representatives.  This information, when approved by the lottery, becomes the
technical manufacturing specifications for specific ticket orders.

MARKETING
     Scientific Games has been instrumental in the development of marketing
strategies for instant games for domestic and foreign lotteries, including some
of the most successful lotteries in North America.  The Company's involvement
includes all phases of instant game marketing support including: marketing
strategies, prize structures, game rules, delivery schedules, play styles,
telemarketing, ticket ordering and billing, field sales support, research, game
design, working papers, retailer manuals, instant game concepts, ticket
quantities, delivery and promotions.  Scientific Games or its predecessor has
prepared market research analyses of gaming tendencies in most new state
lotteries since 1982, and the company can provide customers with a bank of
lottery-specific consumer and market research data derived from these years of
analyses.

     Instant tickets are believed to have the broadest consumer appeal of any
lottery product. Consumers are generally split equally between men and women,
are distributed evenly between ages 25 and 65, and cover a broad range of
socioeconomic groupings.  This broad-based market is significantly affected by
appropriate advertising and promotion. The most successful lotteries have found
that instant lottery products are largely an impulse item which must be
marketed like other consumer products.

     Sales of instant lottery tickets are based on, among other factors, the
quality of the lottery product, prize structure design and the existence of
efficient retail distribution systems which allow maximum convenience to
consumers. Scientific Games, with its large game library and extensive research
into product design and consumer purchasing habits, has been an industry leader
in producing new products, distribution methodologies and consumer promotions
to enhance sales.

SECURITY
     Scientific Games recognizes that security and integrity are the foundation
of successful lottery organizations. As the incidence and severity of publicly
reported cases of physical and computer crime continue,  major lotteries
periodically reassess key security questions concerning the vulnerability of
lottery games. Attempts to penetrate security measures may come from various
combinations of customers, retailers, vendors, lottery officials and others.
Because the integrity of a lottery is believed essential to its successful
operation, both the vendor and lottery must guard their systems against
unauthorized actions. The Company is unaware of any practical, economically
feasible way to breach the security of its instant lottery tickets which could
result in a material loss to any of its customers, nor is it aware of any
breach thereof which has resulted in any material loss to any of its lottery
customers.

     Scientific Games constantly assesses the adequacy of its security systems,
incorporating various improvements, bar coding and additional layers of
protection. There must be well-planned security measures in place at every
stage of the lottery operation. Scientific Games has pioneered and effected
security safeguards in areas of ticket specifications, production, packaging,
delivery, distribution and accounting. Also, computer function safeguards,
including secure ticket data, control number encryption, winner file data, and
ticket stock control have been incorporated in the Company's data processing
and the computer operations phase.

MANUFACTURING PROCESS
     Using a series of computer-controlled presses and ink-jet imagers,
management believes Scientific Games' tickets incorporate the most advanced
technology and security methodology available in the industry. Its facilities
are designed for efficient, secure production of instant game tickets and
support ink-jet image tape generation, printing, packaging and storage.

     The Company's dedicated computer-controlled printing process is
specifically designed for producing instant lottery game tickets for
governmentally sanctioned lotteries and high volume commercial games. The
process

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is not a business forms press or a direct mail press temporarily diverted to
lottery work. The Company's specialized equipment contributes to the underlying
superior manufacturing and product quality. Instant ticket games are delivered
finished and ready for distribution by the lottery, or by Scientific Games in
the jurisdictions which are part of a cooperative services contract with
Scientific Games.

     Paper and ink are the principal raw materials consumed in the Company's
manufacturing operations. The Company has a variety of sources for both paper
and ink and should, therefore, not be dependent on any particular supplier.

PERSONNEL
     As of December 31, 1996, the Company had approximately 1,022 full-time
employees. None of Scientific Games' employees are represented by a labor union
and the Company believes that its employee relations are good. At the
California Facility (See "Properties"), ticket packaging is performed by a
MBE/W (minority business enterprise/woman) owned subcontractor, the employees
of which are unionized. Scientific Games is, at present, the subcontractor's
only customer. Tele Control's employees are represented by Worker's Councils as
is typical in many European companies.

EXECUTIVE OFFICERS
     The following table sets forth certain information regarding the executive
officers of the Company as of March 1, 1997:


<TABLE>
<CAPTION>
        NAME          AGE                POSITION WITH THE COMPANY
--------------------  ---  -----------------------------------------------------
<S>                   <C>  <C>
William G. Malloy...  50   Director, Chairman, President and Chief
                           Executive Officer
William F. Behm.....  51   Director and Executive Vice President
Thomas F. Little....  52   Senior Vice President-International
Cliff O. Bickell....  54   Vice President, Treasurer and Chief Financial Officer
C. Gray Bethea, Jr..  52   Vice President, Secretary and General Counsel
David A. Bausch.....  62   Vice President
James R. Culver.....  64   Vice President-Marketing and Sales
John J. Kriz........  55   Vice President-Manufacturing
Terry D. Mangold....  56   Vice President-Instant Game Services
</TABLE>

     WILLIAM G. MALLOY transferred from the corporate staff of Bally
Manufacturing Company to the Company in 1987 and became President and Chief
Executive Officer in 1990. Mr. Malloy was elected a Director and Chairman of
the Board in October 1991 when Centre Partners L.P. and certain executive
officers of the Company purchased substantially all of the assets of the
instant lottery ticket sales business, the instant ticket cooperative sales
business and the video lottery business of the predecessor to the Company in a
leveraged buy-out transaction ("Acquisition"). Prior to becoming the Company's
President and Chief Executive Officer, Mr. Malloy served as Vice President,
Treasurer and Chief Financial Officer. Mr. Malloy has over twenty years of
experience in the coin-operated amusement and gaming industry.

     WILLIAM F. BEHM joined the Company in 1978 and was promoted to Executive
Vice President in 1988 and was elected a Director in 1992. Mr. Behm has overall
management responsibility for Scientific Games' research and business
development projects. In addition, he is also responsible for the Company's
product security. Prior to joining Scientific Games, Mr. Behm was an aerospace
engineer with McDonnell Douglas Corporation. Mr. Behm was instrumental in the
development of the Company's former on-line lottery system, the invention of
instant lottery bar codes, and the development of the Company's new
environmental instant ticket. He is co-named as the inventor of  several issued
patents and pending applications and is a regular speaker at trade shows and
conferences on the subject of technology in the lottery industry.

     THOMAS F. LITTLE joined the Company in 1975 and was promoted to Senior
Vice President-International in 1991. Mr. Little has overall management
responsibility for Scientific Games' international marketing and sales efforts.
He is also responsible for the Company's marketing and sales efforts in the
commercial game industry. Prior to joining the Company, Mr. Little was Manager
of Data Processing for First National Bank of Atlanta. Mr. Little's experience
includes the introduction of the first video lottery test in Illinois, the
development of the Company's former on-line lottery system and extensive
contacts with the international lottery industry.

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     CLIFF O. BICKELL joined the Company as Vice President, Treasurer and Chief
Financial Officer in January of 1995.  Mr. Bickell has overall management
responsibility for Scientific Games' corporate financial, accounting, and
administrative affairs, including the Company's human resource function.  Prior
to joining Scientific Games, Mr. Bickell was Vice President, Chief Financial
Officer and Treasurer of Paragon Trade Brands, a multi-national consumer
products manufacturer where he had similar financial responsibilities.  In
addition, Mr. Bickell has held the positions as Senior Vice President,
Corporate Administration - Chief Financial Officer of the W. A. Krueger Co., a
commercial printing company, and Treasurer of Dataproducts Corporation, a
multinational electronics manufacturer.

     C. GRAY BETHEA, JR. joined the Company in 1985 as Vice President,
Secretary and General Counsel. Mr. Bethea has overall management responsibility
for Scientific Games' legal compliance, statutory interpretation, corporate
matters, governmental affairs, and contract preparation. Throughout his
corporate and private practice of law, Mr. Bethea has had extensive experience
in corporate and contract law. Prior to joining Scientific Games, Mr. Bethea
was a partner with the firm of Smith, Gambrell & Russell in Atlanta, Georgia.

     DAVID A. BAUSCH joined the Company in 1988 and has served as Vice
President since that time. Mr. Bausch has overall management responsibility for
Scientific Games' efforts in software systems development, video lottery
operations, and cooperative services operations. Prior to joining Scientific
Games, Mr. Bausch served as Deputy Director of the Illinois Lottery where he
implemented both its instant and on-line games. He was more recently the
Assistant Secretary of the Florida Lottery where he was responsible for that
lottery's overall start-up and ongoing operations.

     JAMES R. CULVER joined the Company in 1984 as an Account Executive and was
promoted to Vice President-Marketing and Sales in 1990. Mr. Culver has overall
management responsibility for Scientific Games' North American marketing and
sales efforts. In addition, he is the Company's Public Relations Officer. Prior
to joining Scientific Games, Mr. Culver was with the Michigan Lottery for over
eight years where he served as Marketing Director and later Acting Director.
Mr. Culver has over twenty years of lottery experience specializing in all
phases of marketing including, advertising, promotions, sales training and
motivation. He is the developer of several industry standards including the
Scientific Games Key Account Program which is currently used by several
lotteries as a model of key account and chain store sales management. Mr.
Culver also has twelve years of television experience both as a producer and
performer and regularly speaks at lottery trade shows and conferences.

     JOHN J. KRIZ joined the Company in 1990 as Vice President-Manufacturing.
Mr. Kriz has overall management responsibility for Scientific Games' instant
ticket printing operations. Prior to joining Scientific Games, Mr. Kriz spent
twenty-six years with Ringier American (formerly W. A. Krueger Co.) in various
executive, operational and technical positions. As Vice President for
Manufacturing Services, Mr. Kriz directed all manufacturing activities for
three divisions for this major publication, commercial and book printer. His
experience includes the design, construction and implementation of printing
operations.

     TERRY D. MANGOLD joined the Company in 1975 and was promoted to Vice
President-Instant Games Services in 1987. Mr. Mangold has overall management
responsibility for Scientific Games' instant ticket game programming
operations, i.e., the generation of games with the proper distribution of
winning and non-winning tickets. Prior to joining Scientific Games, Mr. Mangold
was responsible for computerized systems at First National Bank of Atlanta.

     THE FOLLOWING DISCUSSION OF ASPECTS OF THE COMPANY'S BUSINESS ALSO
CONSTITUTES A CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.

     The Company wishes to caution readers that the following important
factors, among others, in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
quarterly and annual consolidated results for 1997, and beyond, to differ
materially from those expressed in any forward-looking statements made by, or
on behalf of, the Company:


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GOVERNMENTAL REGULATION
     Lotteries are not permitted in the various states/jurisdictions of the
United States unless expressly authorized by law. The ongoing operations of
authorized lotteries in the United States typically are extensively regulated.
Applicable legislation varies from jurisdiction to jurisdiction but, in
addition to authorizing the lottery and creating the applicable regulatory
authority, the lottery statues generally dictate certain broad parameters of
lottery operation, including the percentage of lottery revenues which must be
paid out in prizes. Lottery authorities typically exercise significant control
as to the selection of vendors (such as the Company) and award of lottery
contracts, ticket prices, types of games played and marketing strategy, all of
which can affect the Company's operating results.

     Prior to and after granting a lottery contract, governmental authorities
generally conduct an investigation of the Company and its employees and such
authorities may require removal of an employee deemed to be unsuitable. The
Company has not been disqualified from a lottery contract as a result of any
such investigation. Certain states also require extensive personal and
financial disclosure (including, among other things, submission of
fingerprints, personal financial statements and federal and state income tax
returns) and background checks of control persons and entities beneficially
owning a specified percentage (typically 5% or more) of the Company's
securities. The failure of such beneficial owners to submit to such background
checks and provide such disclosure could jeopardize the award of a lottery
contract to the Company or provide the basis for cancellation of existing
lottery contracts.

     Scientific Games generally retains governmental affair representatives is
various states of the United States to advise legislators and the public
concerning its views on lottery legislation, to monitor any such legislation
and to advise the Company on contract proposals to lottery authorities.
Scientific Games also makes campaign contributions to various state political
parties and political candidates. The Company believes it has complied with
applicable laws and regulations concerning campaign contributions and lobbying
disclosures.

     The award of lottery contracts and ongoing operations of lotteries in
international jurisdictions also are extensively regulated, although this
regulation usually varies from that prevailing in the United States.
Restrictions are frequently imposed on foreign corporations seeking to do
business in such jurisdictions and, as a consequence, the Company has, in a
number of instances, allied itself with a local company when seeking foreign
lottery contracts. Laws and regulations applicable to lotteries in the United
States and foreign jurisdictions are subject to change and the effect of such
changes on the Company's ongoing and potential operations cannot be predicted
with certainty.

LOTTERY CONTRACTS:  PROCUREMENT PROCESS AND REQUIREMENTS
     Lotteries in the United States typically select an instant ticket supplier
by issuing a Request for Proposals ("RFP") which outlines contractual
obligations as well as products and services to be delivered.  An evaluation
committee frequently comprised of key lottery staff evaluates responses based
on various criteria. These criteria usually include quality of product,
security plan and features, experience in the industry, quality of personnel
and services to be delivered and price.  The Company believes that the quality
of its personnel, technical expertise and manufacturing efficiency give it many
advantages relative to the competition when responding to state lottery RFPs.
However, many lotteries still award the contract to the vendor with the lowest
price. Contract awards by lottery authorities in the United States are
sometimes challenged by unsuccessful competitors which can result in costly
legal proceedings for all concerned.

     The Company's domestic lottery contracts typically contain provisions for
payment of liquidated damages for late delivery of tickets or delivery of
defective tickets, which in the aggregate could result in several million
dollars or more per day in penalties to the Company. Although the incurrence of
liquidated damages with respect to on-line lotteries may not be uncommon, the
Company believes it is uncommon for instant lotteries. Scientific Games has not
paid any material liquidated damages under an instant lottery contract,
although it has on occasion negotiated customer allowances which management
does not consider material.

     Substantially all of the Company's revenues are derived from its lottery
and service contracts. The Company's domestic lottery contracts typically have
an initial term of from one to three years and usually provide the customer
with options to extend the contract one or more times under the same terms and
conditions for additional periods generally ranging from one to three years.
The Company's international lottery contracts are less likely to have firm
contract periods and, historically, international lottery ticket customers have
sought competitive bids for such contracts more frequently. Lottery contracts
to which the Company is party typically contain exacting implementation
schedules and performance requirements. Failure to meet these schedules and
requirements can result in substantial monetary liquidated damages, as well as
possible contract termination.

                                       8


<PAGE>   9
NOTE: THE MATERIAL HEREIN MARKED BY BRACKETS AND AN ASTERISK HAS BEEN DEEMED
CONFIDENTIAL BY SCIENTIFIC GAMES HOLDINGS CORP. AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.

     The Company maintains a bonding program for its bid bonds, litigation
bonds and performance bonds through various insurance companies. As of December
31, 1996, $47.3 million was outstanding in aggregate face amount of surety
bonds issued. One or more of these bonds is generally required by a lottery
customer in order to participate in a lottery procurement or to enter into a
contract with the lottery following successful bid. Failure to provide such
bonds would materially and adversely affect the Company's ability to do
business. The Company's bonding program is backed by a blanket indemnity.

     Lottery contracts of the Company periodically expire and/or reach optional
extension dates. Upon the expiration of a contract (including any extensions
thereof), lottery authorities may award new contracts through a competitive
procurement process. There can be no assurance that the Company's contracts
will be extended or that the Company will be awarded new contracts as a result
of competitive procurement processes in the future. The Company's lottery
contracts typically permit a lottery authority to terminate the contract at any
time for failure to perform and other specified reasons, and many of such
contracts permit the lottery authority to terminate the contract at will
without penalty. Depending upon, among other factors, the amount of new revenue
derived by the Company thereunder, the termination, expiration or failure to
renew one or more instant lottery contracts could have a material adverse
effect on the Company's business or prospects.

MARKETS
     With 38 states and the District of Columbia currently operating lotteries
in the United States, the Company's growth in the domestic market depends
primarily on expanded activities of existing lotteries as well as winning new
contract awards, re-bids and contract extensions. Contrasted with the domestic
market, the international market is far from mature, with various countries
viewing lotteries as a source of revenue for a variety of governmental
programs.

     In 1996, only one state [*] accounted for more than 10% of the revenues
of the Company. The Company has two domestic contracts which are scheduled to
expire in 1997. Management believes new contracts for those states will be
awarded through a competitive procurement process in which the Company will
participate. The Company's management estimates that these two states had
aggregate ticket sales equaling approximately 5% of the Company's ticket
shipments in 1996 and that these two states represented approximately 2.7% of
the domestic lottery retail sales of all instant tickets in 1996. In contrast,
management believes that lottery contracts with seven states currently serviced
by its competitors also will expire or extensions will not be granted in 1997
and expects that new contracts for such states will be awarded through the
competitive procurement process in which the Company also expects to
participate. The Company's management estimates that these seven states
aggregate ticket sales equaling approximately 26% of all domestic lottery
instant ticket retail sales in 1996. The Company estimates that the retail
sales value of its domestic customer base was in excess of 50% of total
domestic instant ticket retail sales in 1996.


COMPETITION
     The instant lottery business is highly competitive, and the Company
business faces competition from a number of domestic and foreign instant and
pull-tab manufacturers and other competitors.

     In particular, Scientific Games currently has two primary domestic instant
lottery ticket competitors:  Dittler Brothers, Inc. ("Dittler") and Pollard
Banknote Limited ("Pollard"), which purchased a competitor, Webcraft Games,
Inc. in December 1996. In addition, several Canadian owned companies provide
limited competition for instant tickets in the United States. The Company
estimates that the retail sales value of its domestic customer base was in
excess of 50% of total domestic instant ticket retail sales in 1996 -
approximately twice as many as its next largest competitor. Except as permitted
by the applicable provisions of the North American Free Trade Act with respect
to Canada and Mexico, it is currently illegal to import lottery tickets into the
United States from a foreign country. The Company's business could be adversely
affected should additional foreign competitors be allowed to operate in the U.S.
market.

     Internationally, there are many instant lottery ticket vendors which
provide competition to the Company, including, among others, BABN Technologies
(a subsidiary of Group Francois-Charles Oberthur), Pollard Banknote Limited,
government owned printers in Scandinavia, GPS Honsel, Ciccone Y Limos, Dittler,
Creative Games International Inc., and various other vendors.


                                       9


<PAGE>   10


     Both in the domestic market and internationally, factors which influence
the award of lottery contracts in addition to price, are believed to include,
among others, the ability to optimize lottery revenues through game design and
technical capability, quality of the product, dependability, production
capacity, marketing experience, financial condition and reputation of the
bidder, the security and integrity of the bidder's production operations,
products and services and the satisfaction of various other requirements and
qualifications imposed by specific jurisdictions.

     Scientific Games' position as a leading worldwide producer of instant
lottery tickets and its reputation as a developer of state-of-the-art
technology and marketing concepts, as well as its experience in the industry,
are believed to enhance significantly the Company's competitive position. The
large capital investment necessary to purchase, customize and install an
instant ticket printing operation, the high level of security required in the
lottery industry and the fact that all states in the U.S. which have lotteries
have typically required potential suppliers to have prior lottery experience
are all factors which tend to limit the number of firms which are willing to,
or are in the position to, enter the instant lottery ticket production
business. The Company's business could be adversely affected should its
competitor's research and development activities result in reduced
technological differentiation between the products of the Company and its
competitors. Similarly, in the event technological developments materially
reduce the capital investment required to finance secure lottery ticket
printing operations, the Company's business could be adversely affected by
increased competition. Management does not anticipate any material reduction in
the level of capital financing required for entry into the lottery ticket
product business in the foreseeable future.

     In the cooperative services business, the Company believes it has no
current competitor in the U.S. market which both produces instant lottery
tickets and offers a full range of cooperative services to state lotteries.
Competitors have typically either manufactured only instant tickets or provided
only certain services which comprise cooperative services, such as software for
the management systems, marketing assistance or other specific duties. However,
an on-line vendor in cooperation with an instant ticket supplier may be
considered a competitor or potential competitor in cooperative services. In
addition, an on-line vendor not in cooperation with an instant ticket supplier
may nonetheless provide various cooperative services, including data processing
services. Scientific Games has two primary domestic and international
competitors in this regard:  GTech Corporation and Video Lottery Technologies,
Inc.

     The Company's pull-tab ticket business is subject to competition from a
number of competitors. Pull-tab tickets are primarily marketed to the charity
industry. Although the Company is not a significant supplier of pull-tab
tickets, it currently has 5 contracts with state lotteries for pull-tab tickets
and, the Company believes it is desirable to offer pull-tab tickets to its
lottery customers to maintain a full range of products and services.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
     The Company's operating results may vary significantly from period to
period. Revenues and capital expenditures may be difficult to forecast because
the Company's sales cycle may vary and depend upon facts such as the size and
timing of awarded contracts, changes in customer budgets, delays in customer
orders, changes in lottery marketing strategies and ticket ordering patterns
and general economic conditions. Contracts with governmental entities operating
newly authorized instant lotteries tend to generate higher levels of ticket
sales in the initial months.

     Operating results also may be affected by the working capital requirements
associated with preparing facilities and equipment, establishing the
distribution system and printing tickets for a recently awarded contract,
and by the amount of time elapsing before the receipt and/or recognition of
revenues from the sale of instant lottery tickets and the provision of
cooperative services. In addition, operating results may be affected by
utilization of overtime labor and the Company's ability to smoothly generate
new and/or upgraded production equipment with its existing production
operations. Revenues from the sale of tickets, cooperative services, software
and hardware development may be recognized based upon ticket shipment, a
percentage of the lottery's sales to the public, a contracted price or any
combination of the foregoing. Accordingly, quarter to quarter fluctuations in
revenues may be expected.

     Additionally, circumstances encountered in international markets,
including the substantial amount of time involved in bidding on any
international contract, the evaluation of such bid and the resultant contract
award or rejection can vary significantly from that originally anticipated when
the bid is prepared. All of these factors may make it difficult to forecast
revenues and expenditures related to the Company's operations over extended
periods and may result in fluctuations in the Company's quarterly financial
results.


                                       10


<PAGE>   11


RELIANCE ON SENIOR MANAGEMENT
     The Company believes it has benefited and continues to benefit
substantially from the skills, experience and efforts of its senior management
(See "Executive Officers'). The loss of the services of members of the
Company's senior management could have a material adverse effect on the
Company's business and prospects.

ADDITIONAL RISK FACTORS AND INVESTMENT CONSIDERATIONS
     Additional or related factors which could affect the Company's actual
results and could cause the Company's actual consolidated results for the first
quarter of 1997, and beyond, to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company include:

     Continued or increased pressure to change the selling prices for the
Company's products, and the resulting effects on margins, the Company's actions
in connection with continued and increasing competition in many product areas,
including, but not limited to, price competition and fluctuating demand for
certain lottery tickets products by one or more lottery customers;

     Difficulties or delays in the development, production, testing and
marketing of products, including, but not limited to, a failure to ship new
products utilizing SciScan Technology and/or other technologies when
anticipated, the failure of customers to accept these products or technologies
when planned, any defects in products and a failure of manufacturing economies
to develop when planned;

     Occurrences affecting the Company's ability to reduce product and other
costs, and to increase productivity;

     Inability to offset pricing competition with production efficiencies and
economies of sales; underutilization of the Company's plants and factories
resulting in production inefficiencies and higher costs; start-up expenses and
inefficiencies and delays and increased depreciation costs in connection with
the start of production in new plants and expansions;

     The amount, and rate of growth in, the Company's selling, general and
administrative expenses, and the impact of unusual items resulting from the
Company's ongoing evaluation of its business strategies, asset valuations and
organizational structures;

     The compromise or breach or perceived compromise or breach of the
Company's production security and integrity or the security and integrity of
its products or services;

     Difficulties in obtaining raw materials, supplies, power and natural
resources and any other items needed for production of lottery tickets and
other products;

     The acquisition of fixed assets and other assets, including inventories
and receivables, and the making or incurring of any expenditures and expenses,
including, but not limited to, depreciation and research and development
expenses, any revaluation of assets or related expenses and the amount of, and
any changes to, tax rates;


     The effects of, and changes in, trade, monetary and fiscal policies, laws
and regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, such as trade restrictions
or prohibitions, inflation and monetary fluctuations, import and other changes
or taxes, the ability or inability of the Company to obtain, or hedge against,
foreign currency, foreign exchange rates and fluctuations in those rates, loss
of international contracts or lower international revenue resulting from
increased expenses associated with overseas operations, the impact of foreign
labor laws and disputes, adverse effects arising out of political unrest,
terrorist activity, nationalizations and unstable governments and legal
systems, and intergovernmental disputes, as well as actions affecting
frequency, use and availability of lottery products and licensing of lotteries
for business;

     The costs and other effects of legal or administrative cases and
proceedings (whether civil, such as environmental and product-related, or
criminal), settlements and investigations, claims, and changes in those items;
developments or assertions by or against the Company relating to intellectual
property rights and intellectual property licenses; adoptions of new, or
changes in, accounting policies and practices and the application of such
policies and practices;

                                       11


<PAGE>   12


     The effects of changes within the Company's organization or in
compensation and benefit plans; any activities of parties with which the
Company has an agreement or understanding, including any issues affecting any
investment or joint venture in which the Company has an interest; the amount,
type and cost of the financing which the Company has, and any changes to that
financing; and

     The ability to integrate acquisitions into the Company's existing
operations and unexpected difficulties or problems with such acquired entities
including inadequate production equipment, inadequate production capacity or
quality, outdated or incompatible technologies or an inability to realize
anticipated synergies and efficiencies, whether within anticipated time frames
or at all.

ITEM 2. PROPERTIES

     The Company currently has four instant ticket manufacturing sites: a
71,000 square foot leased facility in Gilroy, California (the "California
Facility"), a 185,000 square foot owned headquarters and manufacturing facility
in Alpharetta, Georgia (the "Georgia Facility"), a 112,000 square foot leased
facility in Leeds, United Kingdom (the "Leeds Facility"), and a 30,000 square
foot leased facility in Bradford, United Kingdom (the "Bradford Facility").
Sales support, research, product development and graphics are located in the
Company's corporate headquarters at the Georgia Facility.  The four
manufacturing facilities have a combined maximum production capacity of
approximately 14 billion "standard sized" (2 by 4 inch) tickets per year.
However, at maximum production capacity, the Company incurs substantial
overtime expense and can encounter reduced efficiencies. The California
Facility consists of office and production space equipped with a modern gravure
press with multiple ink-jet imagers.  The California Facility lease expires
April 30, 2005. Currently, annual rents for the California Facility are
approximately $680,000.  Approximately 2,200 square feet of the California
Facility are subleased to the Company's exclusive packaging subcontractor. In
addition, the Company separately leases in California an approximately 14,000
square foot ink production facility under a lease expiring April 30, 1999 with
annual rents of approximately $90,000. The Leeds Facility consists of office
and production space equipped with five sheet-fed offset presses. The
administrative and game development  departments for both the Leeds and
Bradford Facilities are in this location. The Leeds Facility subleases offices
to a firm which provides the graphics for all games produced at the Leeds and
Bradford Facilities. The Leeds Facility lease expires October 31, 2001 with
annual rents of approximately $368,000. The Bradford Facility includes office
and production space and is equipped with three separate printing processes:
offset, inkjet and rotary screen. The Bradford Facility lease expires June 30,
2016 with annual rents of approximately $212,000. Should it chose to do so, the
Company does not anticipate any material difficulty in re-leasing any of its
leased facilities.

     Scientific Games' headquarters and printing facility in Georgia began
operation in February 1992. The Georgia Facility operates two presses,
including a modern 15 station gravure press. The Company invested approximately
$20 million to initially build and equip the Georgia Facility.  Included in
such amount was approximately $9.4 million to purchase and install printing
equipment and approximately $10.6 million to purchase the land and construct
the building.

     The Georgia Facility's gravure press is equipped with a state-of-the-art
register control system, designed to reduce overall waste while achieving high
quality. The press has four reversible stations providing color flexibility
including potential four-color back printing in selected situations and is
designed to accommodate alternative printing technology on a station-by-station
basis. The press is designed to dry both water-based and solvent-based inks at
full press speed. Currently, the use of water-based inks is increasing as the
printing industry moves to reduce its output of volatile organic compounds
(VOC's) created as the result of drying solvent based inks.

     In 1994-95, after an analysis of projected future manufacturing
requirements, the Company installed new imagers, data stations and related
equipment incorporating significantly advanced technology for its existing
presses in its California and Georgia facilities at a total cost of
approximately $5 million. Such imagers materially increased the efficiency and
flexibility (and thus capacity) of the Company's existing presses.

     In 1995, the Company also installed an additional custom-designed printing
press, including new imagers, data stations and related equipment, in its
Georgia Facility. The total cost of the equipment and building expansion was
approximately $15.5 million. The new press is designed to employ both offset
and flexographic printing technologies and allows Scientific Games to more
economically produce smaller print runs than the existing two gravure presses,
by, among other things, reducing press set-up costs versus the existing two
gravure presses. The


                                       12


<PAGE>   13




savings in operation of the third press are attributable to, among other
factors, the flexographic and offset technologies which use photopolymer and
aluminum plates rather than the engraved chrome plated cylinders used in the
gravure process.

     In October 1996, the Company purchased SGIL which has presses at the Leeds
and Bradford Facilities. The Leeds Facility has five sheet-fed offset presses
as well as imaging and silk screen equipment. The Bradford Facility utilizes
three separate printing processes, which are an offset, inkjet and rotary
screen.

     The Company also has a pull-tab ticket manufacturing facility in Albert
Lea, Minnesota which it acquired in June 1994.  The pull-tab facility is 20,000
square feet and is leased from the city of Albert Lea, Minnesota.  GameTec is a
sheet feed printing operation with two presses and the related collating,
gluing, and packaging equipment.  The pull-tab facility has the capacity to
print approximately 1 billion tickets annually.  Currently, annual rents for
the GameTec facility are approximately $65,000.  In addition, GameTec has a
product distribution center located in Minneapolis, Minnesota.  The facility is
14,000 square feet and is leased. Certain pull-tab tickets, primarily those
purchased by charitable organizations, are distributed from this location.  The
annual rents for this facility are approximately $50,000.




ITEM 3. LEGAL PROCEEDINGS

     The Company's SGI subsidiary owns a minority interest in Wintech de
Colombia S.A. ("Wintech"), which has operated the Colombian national lottery
under contract with Empresa Colombian de Recuros para la Salud, S.A.
("Ecosalud"), an agency of the Colombian government. The contract projected
that certain levels of lottery ticket sales would be attained, and provided a
penalty against Wintech, SGI and the other shareholders of up to $5,000,000 if
such levels were not achieved. In addition, with respect to the further
guarantee of performance under the contract with Ecosalud, SGI delivered to
Ecosalud a $4,000,000 bond issued by a Colombian surety. Wintech started the
instant lottery in Colombia but, due to difficulties beyond its control, the
projected sales level was not met for the year ending 1993. On July 1, 1993,
Ecosalud adopted resolutions declaring, among other things, that the contract
was in default and asserted various claims for compensation and penalties
against Wintech, SGI and shareholders of Wintech. As the Company has previously
disclosed in its filings with the Commission, litigation is pending in Colombia
concerning various claims among Ecosalud, Wintech and the Company relating to
the termination of the contracts with Ecosalud (the "Colombian Litigation").
Ecosalud's claims in the Colombian Litigation are for, among other things,
realization on the full amount of the penalty plus interest and costs of the
bond.

     SGI has consulted with Colombian counsel and been advised that SGI has
various legal defenses to Ecosalud's claims. SGI also has certain cross
indemnities and undertakings from the two other private shareholders of Wintech
for their respective shares of any liability to Ecosalud. That obligation is
secured in part by a $1,500,000 confirmed letter of credit in favor of SGI. The
Colombian surety which issued a $4,000,000 bond to Ecosalud under the contract
has reportedly paid $2,400,000 to Ecosalud under the bond, and made demand upon
SGI for that amount under the indemnity agreement entered into by the surety and
SGI. SGI declined to make or authorize any such payment and notified the surety
that any payment in response to Ecosalud's demand on the bond is at the surety's
risk. No suit by the Colombian surety has been filed to date. No assurance can
be given that the other shareholders of Wintech will, or have sufficient assets
to, honor their indemnity undertakings to SGI when the claims by Ecosalud
against SGI and Wintech are resolved in the even such claims result in any
liability.

     In June 1996, Ecosalud filed a complaint against the Company in the Unites
States District Court for the Northern District of Georgia, Atlanta Division
(the "Georgia Litigation"). Total damages claimed in the original Complaint
were "not less than $84,423,267." The Complaint also sought reasonable
attorneys' fees and costs allegedly pursuant to the contract. In response to
the complaint, SGI filed a motion to dismiss the action on multiple grounds,
including the mandatory arbitration clause contained within the contract.
Ecosalud then filed an "Amended Complaint" in which it withdrew its claim for
in excess of $84,000,000 and, instead, is seeking $5,000,000 under an
"Executive Title," a purported joint and several guarantee by the Company,
Wintech and other shareholders in Wintech that projected levels of lottery
sales would be attained. In addition, Ecosalud also seeks attorneys' fees and
interest on the claim. SGI has filed a motion to dismiss the Amended Complaint
on the ground, inter alia, that litigation involving the same subject matter is
pending in Colombia, the dispute is subject to an arbitration clause and



                                       13


<PAGE>   14


forum non conveniens. On March 17, 1997 the United States District Court entered
an order dismissing the complaint in the Georgia Litigation based upon, among
other things, Ecosalud's failure to state a claim upon which relief could be
granted. Judgment was entered in favor of SGI on March 19, 1997. Ecosalud has
thirty days from such date to file an appeal.

     SGI intends to vigorously defend the Colombian Litigation and any further
proceedings in the Georgia Litigation and has been advised by counsel that the
Company has numerous defenses on the merits, as well as procedural defenses to
the litigation. Although it is not possible to determine the outcome of the
litigation, either in Georgia or Colombia, or the other related surety and
indemnity claims, management believes based upon, among other things, the
advice of counsel, that adequate provision has been made for such claims and
the disposition thereof should not materially adversely affect the Company's
consolidated financial condition or consolidated results of operations.



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

     No matter was submitted to a vote of security holders at any time during
the fourth quarter of the year ended December 31, 1996.











                                       14


<PAGE>   15


                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The information presented under the caption "Corporate Information" on
page 33 of the Company's 1996 Annual Report to Shareholders is incorporated
herein by reference.


ITEM 6 SELECTED FINANCIAL DATA

     The information presented under the caption "Five-Year Selected Financial
Data" on page 14 of the Company's 1996 Annual Report to Shareholders is
incorporated herein by reference.


ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
       OF OPERATIONS

     The information presented under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 15 through
18 of the Company's 1996 Annual Report to Shareholders is incorporated herein
by reference.


ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information presented under the caption's "Consolidated Statements of
Income", "Consolidated Balance Sheets", "Consolidated Statements of Cash
Flows", "Consolidated Statements of Shareholders' Equity", and "Notes to
Consolidated Financial Statements", on pages 19 - 30 of the Company's 1996
Annual Report to Shareholders is incorporated herein by reference.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE

        Not Applicable




                                       15


<PAGE>   16


                                    PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     This information required by Item 10 is incorporated by reference from the
information in Registrant's proxy statement (filed or to be filed pursuant to
Regulation 14A) for its Annual Meeting of Stockholders to be held May 16, 1997,
except as to biographical information on Executive Officers which is contained
in Item 1 of this Annual Report on Form 10-K.



ITEM 11 EXECUTIVE COMPENSATION

     The information required by Item 11 is incorporated by reference from the
information in Registrant's proxy statement (filed or to be filed pursuant to
Regulation 14A) for its Annual Meeting of Stockholders to be held May 16, 1997.




ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 12 is incorporated by reference from the
information in Registrant's proxy statement (filed or to be filed pursuant to
Regulation 14A) for its Annual Meeting of Stockholders to be held May 16, 1997.



ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 is incorporated by reference from the
information in Registrant's proxy statement (filed or to be filed pursuant to
Regulation 14A) for its Annual Meeting of Stockholders to be held May 16, 1997.









                                       16


<PAGE>   17


                                    PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Consolidated Financial Statements

     The following financial statements and notes thereto of Scientific Games
Holdings Corp. are incorporated in Item 8 by reference from the Company's 1996
Annual Report to Shareholders:


<TABLE>
<CAPTION>

                                                              Page in Annual
                                                          Report to Shareholders
                                                          ----------------------

<S>                                                               <C>
        Consolidated Statements of Income, Years ended
        December 31, 1996, 1995 and 1994                             19

        Consolidated Balance Sheets-- December 31, 1996 and 1995     20

        Consolidated Statements of Cash Flows  -- Years ended
        December 31, 1996, 1995 and 1994                             21

        Consolidated Statements of Shareholders' Equity, Years
        ended December 31, 1996, 1995 and 1994                       22

        Notes to Consolidated Financial Statements --
        December 31, 1996                                         23-30

        Report of Independent Auditors                               31

(a)(2) Financial Statement Schedules
</TABLE>

     The following reports and consolidated financial statement schedules of
Scientific Games Holdings Corp. and subsidiaries are filed herewith:



     Schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

(a)(3) Reports on Form 8-K

     Form 8-K/A-1 was filed October 15, 1996 relating to the acquisition of
Opax International Limited, a United Kingdom company, renamed Scientific Games
International Limited.
     Form 8-K/A-2 was filed December 18, 1996 in order to disclose the required
financial statements related to the acquisition of Opax International Limited,
renamed Scientific Games International Limited.

(a)(4) Listing of Exhibits

     The exhibits listed below are filed with or incorporated by reference into
this annual report on Form 10-K.



<TABLE>
<CAPTION>

EXHIBIT NO.  DESCRIPTION OF EXHIBIT
-----------  -------------------------------------------------------------------
<S>          <C>          <C>
3. 1          --          First Amended and Restated Certificate of
                          Incorporation of Scientific Games Holdings Corp. with
                          certificate of Retirement (5)
3.2           --          Second Amended and Restated By-Laws of Scientific
                          Games Holdings Corp. (4)
10.1          --          New York State Lottery Distribution Services Agreement
                          by and between The State of New York, the New York
                          State Division of the Lottery and Scientific Games,
                          Inc. (1)
10.2          --          Agreement by and between the Massachusetts State
                          Lottery Commission and Scientific Games, Inc. dated
                          December 18, 1987 and extensions thereto (1)
</TABLE>

                                       17


<PAGE>   18
<TABLE>
<S>          <C>          <C>
10.6          --          Employment Agreement ("Malloy Employment Agreement")
                          dated as of October 1, 1991 between Scientific Games
                          operating Corp. (now known as Scientific Games Inc.)
                          and William G. Malloy (1)
10.7          --          Employment Agreement ("Behm Employment Agreement")
                          dated as of October 1, 1991 between Scientific Games
                          Operating Corp. (now known as Scientific Games Inc.)
                          and William F. Behm (1)
10.8          --          Employment Agreement ("Little Employment Agreement")
                          dated as of October 1, 1991 between Scientific Games
                          Operating Corp. (now known as Scientific Games Inc.)
                          and Thomas F. Little (1)
10.10         --          Form of Promissory Note evidencing loans to Management
                          Stockholders (1)
10.11         --          Form of Pledge Agreement dated as of October 1, 1991
                          between Management Stockholders and Scientific Games
                          Operating Corp. (now known as Scientific Games Inc.)
                          (1)
10.14         --          License Agreement dated as of October 1, 1991 between
                          Bally Manufacturing Corporation and Scientific Games
                          Operating Corp. (now known as Scientific Games Inc.)
                          (1)
10.15         --          Non-Competition Agreement dated as of October 1, 1991
                          between Bally Manufacturing Corporation and Scientific
                          Games Operating Corp. (now known as Scientific Games
                          Inc.) (1)
10.16         --          Second Amendment to Asset Purchase Agreement dated as
                          of October 1, 1991 between Bally Manufacturing
                          Corporation and Scientific Games Operating Corp. (now
                          known as Scientific Games Inc.) (re: Earnout) (1)
10.17         --          Stockholders' Agreement dated as of July 1, 1993, as
                          amended (1)
10.18         --          Amended First 1991 Management Stock Option Plan (1)
10.19         --          Amended Second 1991 Management Stock Option Plan (1)
10.20         --          1993 Management Stock Option Plan (1)
10.21         --          Industrial Real Estate Lease dated December 4, 1984
                          between Arroyo One as Landlord and Scientific Games
                          Inc. as Tenant (Gilroy Lease), as amended (1)
10.22         --          Lease dated April 27, 1987 between Kishimura Bros. and
                          Scientific Games of California, Inc. (Scientific Games
                          of California, Inc. assigned its leasehold interest to
                          Scientific Games Operating Corp., now known as
                          Scientific Games, Inc.), as amended (1)
10.23         --          Form of Amendment to Malloy Employment Agreement (1)
10.24         --          Form of Amendment to Behm Employment Agreement (1)
10.25         --          Form of Amendment to Little Employment Agreement (1)
10.26         --          Instant Ticket and Associated Products and Services
                          Agreement dated May 4, 1993 by and between Georgia
                          Lottery Corporation and Scientific Games, Inc. (4)
10.27         --          Loan Agreement for Loans From First Union National
                          Bank of Georgia to Scientific Games Holdings Corp. and
                          Scientific Games, Inc., dated October 6, 1993 (2)
10.28         --          Contract #1092RR dated November 18, 1993 between
                          Scientific Games, Inc. and Hamilton-Stevens Group,
                          Inc. (new press) (3) (4)
10.29         --          Purchase Agreement dated as of December 22, 1993
                          between Scientific Games, inc. and Scitex Digital
                          Printing, Inc. (Alpharetta imagers) (4)
10.30         --          Purchase Agreement dated as of January 4, 1994 between
                          Scientific Games, Inc. and Scitex Digital Printing,
                          Inc. (Gilroy imager) (4)
10.31         --          Form of revised Severance Benefits Agreement (4)
10.32         --          Amendment to Amended First 1991 Management Stock
                          Option Plan (4)
10.33         --          Amendment to Amended Second 1991 Management Stock
                          Option Plan (4)
10.34         --          Amendment to 1993 Management Stock Option Plan (4)
10.35         --          First Amended and Restated 1993 Directors' Stock
                          Option Plan (4)
10.36         --          Contract dated August 1, 1994 between Scientific Games
                          Inc. and M.G. Patton Construction Company for building
                          expansion (6)
10.37         --          1994 Management Stock Option Plan (6)
10.38         --          1995/1996 Management Stock Option Plan (6)
10.39         --          Key Employee Restricted Stock Option Plan (6)
10.40         --          Severance Benefits Agreement dated as of May 5, 1995,
                          between Scientific Games Holdings Corp. and Cliff O.
                          Bickell (7)
</TABLE>


                                       18


<PAGE>   19

<TABLE>
<S>          <C>          <C>
10.41         --        1995/1996 Management Stock Option Plan (6)
10.42         --        Key Employee Restructed Stock Plan (6)
10.43         --        Form of Key Employee Restricted Stock Plan Restricted
                        Stock Award Agreement (7)
10.44         --        Loan Agreement for Line of Credit From First Union
                        National Bank of Georgia to Scientific Games Holdings
                        Corp. and Scientific Games Inc. Date Closed:  August 16,
                        1995 (8)
10.45         --        Instant Lottery Tickets Scientific Games Inc. and
                        Camelot Group plc, dated June 15, Supply Agreement
                        between 1995. (3)(8) Thomas De La Rue Limited,
10.46         --        Credit Agreement for Line of Scientific Games Holdings
                        Corp. and Scientific Games Inc. Credit From First Union
                        National Bank of Georgia to Dated:  December 20, 1996
11.0          --        Statement re: computation of per share earnings (loss)
13.1          --        1996 Annual Report to Shareholders pages 14, 15-30 and
                        33 only
21.0          --        List of Subsidiaries of Registrant
23.0          --        Consent of Ernst & Young LLP
27.0          --        Financial Data Schedule (for SEC use only).
</TABLE>

------------------
<TABLE>
      <S> <C>
      (1) Previously filed with Registration Statement No. 33-65582, filed on
          July 2, 1993 or as subsequently amended on July 28, 1993, August 9,
          1993 or August 20, 1993.

      (2) Previously filed with the Company's Quarterly Report on Form 10-Q for
          the Quarter Ended September 30, 1993.

      (3) Portions of Exhibits 10.28 and 10.43 deemed confidential by the
          Company have been omitted, were filed separately with the Commission
          and confidential treatment has been granted for portions of these
          exhibits.

      (4) Previously filed with the Company's Registration Statement No.
          33-75168, filed on February 11, 1994 or as subsequently amended on
          March 4, 1994.

      (5) Previously filed with the Company's Annual Report on Form 10-K for the
          year ended December 31, 1993.

      (6) Previously filed with the Company's Annual Report on Form 10-K for the
          year ended December 31, 1994.

      (7) Previously filed with the Company's Quarterly Report on Form 10-Q for
          the quarter ended June 30, 1995.

      (8) Previously filed with the Company's Quarterly Report on Form 10-Q for
          the quarter ended September 30, 1995.


(b) Reports on Form 8-K:  none.

(c) Executive Compensation Plans and Arrangements.

             (i)    Employment Agreement ("Malloy Employment
                    Agreement") dated as of October 1, 1991 between Scientific
                    Games Operating Corp. (now known as Scientific Games Inc.)
                    and William G. Malloy, Exhibit 10.6 (1)
             (ii)   Employment Agreement ("Behm Employment
                    Agreement") dated as of October 1, 1991 between Scientific
                    Games Operating Corp. (now known as Scientific Games Inc.)
                    and William F. Behm, Exhibit 10.7 (1)
             (iii)  Employment Agreement ("Little Employment
                    Agreement") dated as of October 1, 1991 between Scientific
                    Games Operating Corp. (now known as Scientific Games Inc.)
                    and Thomas F. Little, Exhibit 10.8 (1)
             (iv)   Amended First 1991 Management Stock Option
                    Plan, Exhibit 10.18 (1)
             (v)    Amended Second 1991 Management Stock Option
                    Plan, Exhibit 10.19 (1)
             (vi)   1993 Management Stock Option Plan, Exhibit 10.20 (1)
             (vii)  Form of Amendment to Malloy Employment Agreement, Exhibit
                    10.23 (1)
             (viii) Form of Amendment to Behm Employment Agreement, Exhibit
                    10.24 (1)
             (ix)   Form of Amendment to Little Employment Agreement, Exhibit
                    10.25 (1)
</TABLE>

                                       19

<PAGE>   20

<TABLE>
          <S>       <C>
          (x)       Form of revised Severance Benefits Agreement,
                    Exhibit 10.31 (2)
          (xi)      Amendment to Amended First 1991 Management
                    Stock Option Plan, Exhibit 10.32 (2)
          (xii)     Amendment to Amended Second 1991 Management Stock Option
                    Plan, Exhibit 10.33 (2)
          (xiii)    Amendment to 1993 Management Stock Option Plan, Exhibit
                    10.34 (2)
          (xiv)     1994 Management Stock Option Plan, Exhibit 10.37 (3)
          (xv)      1995/1996 Management Stock Option Plan, Exhibit 10.38 (3)
          (xvi)     Severance Benefits Agreement dated as of May 5, 1995,
                    between
                    Scientific Games Holdings Corp and Cliff O. Bickell,
                    Exhibit 10.40 (4)
          (xvii)    Key Employee Restricted Stock Plan, Exhibit 10.42 (3)

          (xviii)   Form of Key Employee Restricted Stock Plan Restricted Stock
                    Award Agreement, Exhibit 10.43 (4)
     ------------------------------------
          (1)       Previously filed with Registration Statement No. 33-65582,
                    filed on July 2, 1993 or as subsequently amended on July 28,
                    1993, August 9, 1993 or August 20, 1993.
          (2)       Previously filed with Registration Statement No. 33-75168,
                    filed on February 11, 1994 or as subsequently amended on
                    March 4, 1994.
          (3)       Previously filed December 31, 1994. with the Company's
                    Annual Report on Form 10-K for the year ended
          (4)       Previously filed June 30, 1995. with the Company's Annual
                    Report on Form 10-Q for the quarter ended
</TABLE>





                                       20


<PAGE>   21



                                 SIGNATURE PAGE

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Scientific Games Holdings Corp. has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Alpharetta, and State of Georgia on this 31st
day of March, 1997.
                                        Scientific Games Holdings Corp.



                                        By: /s/ William G. Malloy
                                            ----------------------------
                                        William G. Malloy, Chairman
                                        of the Board, President, and
                                        Chief Executive Officer


     Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons on behalf of the Registrant,
Scientific Games Holdings Corp. in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
Signature              Title                                    Date
---------              -----                                    ----

<S>                    <C>                                      <C>
/s/ William G. Malloy  Chairman of the Board, President,        March 31, 1997
---------------------
William G. Malloy      and Chief Executive Officer
                       (Principal Executive Officer)



/s/ Cliff O. Bickell   Chief Financial Officer,                 March 31, 1997
---------------------  Vice President and Treasurer
Cliff O. Bickell       (Principal Financial and Accounting
                       Officer)




/s/ Paul F. Balser     Director                                 March 31, 1997
---------------------
Paul F. Balser



/s/ William F. Behm    Director                                 March 31, 1997
---------------------
William F. Behm



/s/ Mark E. Jennings   Director                                 March 31, 1997
---------------------
Mark E. Jennings
</TABLE>
                                       21


<PAGE>   22



<TABLE>
<S>                    <C>                                      <C>
/s/ Frank S. Jones     Director                                 March 31, 1997
---------------------
Frank S. Jones




/s/ Edith K. Manns     Director                                 March 31, 1997
---------------------
Edith K. Manns




/s/ Dennis L. Whipple  Director                                 March 31, 1997
---------------------
Dennis L. Whipple

</TABLE>




                                       22