AMERICAN CLASSIC VOYAGES CO, 424B2, 2000-02-17

AMERICAN CLASSIC VOYAGES CO
424B2, 2000-02-17
WATER TRANSPORTATION

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Prospectus Supplement
February 16, 2000
(To Prospectus Dated January 28, 2000)

[American Classic Voyages Co. Logo]

American Classic Voyages Co.
2,000,000 Shares of Common Stock
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AMERICAN CLASSIC VOYAGES CO.:

- - We are the leading provider of overnight passenger cruises among the Hawaiian
Islands and on the Mississippi River system.

- - American Classic Voyages Co.
Two North Riverside Plaza, Suite 200
Chicago, Illinois 60606
(312) 258-1890

- - Nasdaq National Market Symbol: AMCV
THE OFFERING:

- - We are offering to sell 2,000,000 shares of our common stock.

- - The underwriters may also purchase up to an additional 300,000 shares from us
to cover over-allotments.

- - On February 15, 2000, the last reported sale price of our common stock was
$24.81 per share.

- - Closing: February 22, 2000.

CONCURRENT OFFERING:

- - Concurrent with this offering, we are offering by means of a separate
prospectus supplement, 2,000,000 trust preferred securities, excluding 300,000
trust preferred securities to cover over-allotments, of AMCV Capital Trust I,
a Delaware business trust we formed. The preferred securities may be converted
into our common stock. This offering and the preferred securities offering are
not dependent upon each other.

<TABLE>
<CAPTION>
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Per Share Total
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<S> <C> <C>
Public Offering Price: $24.875 $49,750,000
Underwriting Discount: $ 1.305 $ 2,610,000
Proceeds, before expenses, to American Classic Voyages: $23.570 $47,140,000
</TABLE>

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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE S-5.

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Neither the SEC nor any state securities commission has determined whether this
prospectus supplement is truthful or complete. Nor have they made, nor will they
make, any determination as to whether anyone shall buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
CRAIG-HALLUM CAPITAL GROUP, INC.
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Photo

Rendering of New Hawaiian Vessel

Logo

UNITED STATES LINES

Photo

Proposed Reflagged Vessel-ms Patriot

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"EXPERIENCE THE TRUE SPIRIT OF HAWAII"

Photo

Kauai's Na Pali Coast

Map of Hawaiian Islands

Photo Photo

Maui's Iao Valley Kilauea Volcano
on the Big Island

Photo

Diamond Head on Oahu

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Photo

Rendering of New Coastal Vessel

Logo

THE DELTA QUEEN STEAMBOAT

Photo Photo

Delta Queen's River System Routes American Queen,
Mississippi Queen and
Delta Queen
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TABLE OF CONTENTS

<TABLE>
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PROSPECTUS SUPPLEMENT PROSPECTUS
</TABLE>

<TABLE>
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PAGE
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<S> <C>
Prospectus Supplement Summary......... S-1
Risk Factors.......................... S-5
Use of Proceeds....................... S-11
Price Range of Common Stock and
Dividend Policy..................... S-12
Selected Financial Data............... S-13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-15
Business.............................. S-24
Management............................ S-36
Principal Stockholders................ S-39
Underwriting.......................... S-40
Legal Matters......................... S-41
Incorporation By Reference............ S-42
Index to Financial Statements......... F-1
</TABLE>

About This Prospectus................. 1
Where You Can Find Additional
Information......................... 1
Incorporation by Reference............ 1
The Securities We May Offer........... 2
American Classic Voyages Co........... 3
The AMCV Trust........................ 3
Use of Proceeds....................... 5
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred and Preference
Dividend Requirements............... 5
Description of Subordinated Debt
Securities.......................... 5
Description of Capital Stock.......... 16
Description of Preferred Securities of
the AMCV Trust...................... 18
Description of Guarantees............. 20
Plan of Distribution.................. 23
Special Note Regarding Forward-Looking
Statements.......................... 25
Legal Matters......................... 25
Experts............................... 26
</TABLE>
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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights information included elsewhere in this prospectus
supplement and in the prospectus. This summary may not contain all of the
information you should consider before investing in the common stock. You should
read the entire prospectus supplement and the accompanying prospectus carefully,
including the "Risk Factors" section of this prospectus supplement. To the
extent information in this prospectus supplement differs from that in the
prospectus, the information in this prospectus supplement will supercede the
information in the prospectus.

AMERICAN CLASSIC VOYAGES CO.

American Classic Voyages Co. is the leading provider of overnight passenger
cruises among the Hawaiian Islands and on the Mississippi River system. We
currently operate two cruise lines under the names American Hawaii Cruises and
Delta Queen Steamboat Co. American Hawaii offers year-round cruises among the
Hawaiian Islands aboard the S.S. Independence, which has 867 passenger berths. A
berth is the industry term for a bed or sleeping space. Delta Queen operates
year-round cruises on three authentic paddlewheel riverboats, the Delta Queen,
Mississippi Queen and American Queen, which have a total of 1,026 passenger
berths. Delta Queen cruises provide varied itineraries on the Mississippi River
system featuring the culture and history of heartland America.

We intend to substantially increase our presence in the Hawaii market which
will allow us to capitalize on the tremendous growth opportunities in the
Hawaiian Island cruise market. We have contracts to acquire and build new
vessels with more than 5,000 passenger berths for the Hawaii market. We will
operate these vessels under the newly-introduced United States Lines(R) brand
name. In addition, we intend to capitalize on our strong Delta Queen brand to
expand into new markets. We have contracts to build new vessels with more than
600 passenger berths for these markets.

INVESTMENT HIGHLIGHTS

We believe that the following factors are important to understand the
growth potential of our business:

NEW SHIPS. We are significantly expanding our business by acquiring and
building new ships.

- In October 1999, we agreed to purchase the 1,214 passenger berth ms
Nieuw Amsterdam from Holland America Line. We will operate the ship
under the U.S. flag as the ms Patriot. We expect to take delivery of
the ship in October 2000 and introduce it into service in the Hawaii
market in December 2000.

- We are currently building two "world-class" ships for use in the
Hawaii market, each with approximately 1,900 passenger berths. We
expect delivery of the new ships in January 2003 and January 2004.

- We have acquired a new vessel, the Columbia Queen, which we are
converting into a 161 passenger berth vessel. We plan to operate this
vessel on the Columbia River system in the Pacific Northwest. The
first cruise is planned for May 2000.

- We are currently building two 226 passenger berth ships for
introduction into the U.S. coastal cruise market. We expect to take
delivery of these vessels in March and June of 2001.

STATUTORY COMPETITIVE ADVANTAGES. We are the largest owner and operator of
U.S. built, owned and crewed overnight passenger vessels, documented as
"U.S.-flagged" vessels. We believe that our U.S.-flagged status gives us
the following statutory competitive advantages:

- The Passenger Vessel Act of 1886 and related laws prohibit our primary
competitors, who sail foreign-flagged ships, from offering itineraries
consisting exclusively of U.S. ports. U.S. law requires our
foreign-flagged competitors to include at least one foreign port in
each itinerary. We, on the other hand, can offer itineraries featuring
only U.S. ports. This gives us a distinct competitive advantage in
Hawaii because the closest foreign port to Hawaii requires a four day
sail across the Pacific Ocean.

S-1
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- We believe that the U.S. Flag Cruise Ship Pilot Project Statute,
adopted in 1997, gives us the exclusive right to operate large
U.S.-flagged vessels in the Hawaiian Islands, subject to various
conditions, for the life expectancy of our new vessels, which is
approximately 25 years.

ATTRACTIVE CHARACTERISTICS OF CRUISE INDUSTRY. We expect the North
American cruise market to grow for the following reasons:

- the worldwide market for cruise vacations has grown dramatically over
the past three decades;

- there are positive demographic trends impacting the cruise industry
including age and recreational spending;

- we believe that the cruise market has large untapped potential; and

- the cruise industry enjoys high customer satisfaction.

We cannot assure you that the North American cruise market will continue to
grow. Even if the market grows, we cannot assure you that our business will
grow at the same rate.

ATTRACTIVENESS OF THE HAWAII CRUISE MARKET. We currently enjoy a 51% share
of the overnight Hawaii cruise market, based on Hawaii Visitors and
Convention Bureau statistics. We believe the Hawaii cruise market offers
strong potential for growth for the following reasons:

- Hawaii is one of the world's premier tourist destinations with more
than 6.9 million visitors for the twelve month period ended November
30, 1999;

- an extremely small percentage of visitors to Hawaii currently cruise;

- Hawaii visitors and cruisers in general share similar age and spending
profiles; and

- Hawaii offers an exciting new itinerary for experienced cruisers who
have visited other destinations such as the Caribbean and Alaska.

DELTA QUEEN'S MARKET LEADERSHIP AND LOYAL CUSTOMER BASE. According to the
Cruise Industry News Market Report, in 1999 Delta Queen enjoyed a 59%
market share of the available berths within the domestic waterways and
rivers segments of the overnight cruise market. In addition, our Delta
Queen customer base cruises frequently and is loyal to the Delta Queen
brand of cruises. This is evidenced by the significant number of Delta
Queen passengers who have previously taken a Delta Queen cruise.

ACCESS TO ATTRACTIVE DEBT FINANCING. We have received a commitment for
financing guarantee from the U.S. Maritime Administration, an agency of the
U.S. Department of Transportation. We currently expect the Maritime
Administration to guarantee private financing for up to 87.5% of the total
cost of the new Hawaii vessels. With Maritime Administration guarantees, we
anticipate obtaining financing at attractive rates.

Our principal executive offices are located at Two North Riverside Plaza,
Suite 200, Chicago, Illinois 60606, (312) 258-1890.

S-2
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THE OFFERING

The following information regarding shares outstanding is as of February 2,
2000. It does not include a total of 5,954,191 shares of common stock reserved
for issuance under our stock option and purchase plans, of which 3,328,090
shares are subject to outstanding options. Throughout this prospectus
supplement, unless we have stated otherwise, we have assumed that the
over-allotment option for an additional 300,000 shares of common stock has not
been exercised.

Common stock we are
offering................... 2,000,000 shares

Common stock to be
outstanding after the
offering................. 20,621,605 shares

How we will use our
proceeds................... We intend to use the estimated net proceeds of
approximately $46.9 million that we will receive
from this offering for general corporate purposes,
including:
- financing the construction of the new Hawaii
vessels and the new coastal cruise ships;
- providing collateral for a letter of credit
facility issued by our lender in order to replace
guarantees by Equity Group Investments, Inc., our
largest stockholder, and subsequently funding a
part of the purchase price of the ms Patriot;
- paying the purchase price, or any portion of the
purchase price, for vessels we may purchase; or
- repaying all, or a part of, our obligations to
our lenders.

Concurrent Offering........ Concurrent with this offering, we are offering by
means of a separate prospectus supplement,
2,000,000 preferred securities, excluding 300,000
preferred securities to cover over-allotments of
AMCV Capital Trust I, a Delaware business trust we
formed. The preferred securities may be converted
into our common stock.

SUMMARY HISTORICAL FINANCIAL INFORMATION

We have derived the following summary historical financial data from our
audited consolidated financial statements included in our Annual Reports on Form
10-K for the years ended December 31, 1997 and 1998, and our Quarterly Reports
on Form 10-Q for the periods ended September 30, 1998 and September 30, 1999,
each as filed with the Securities and Exchange Commission.

As used in the following table, the following terms have the meanings set
forth below:

- Working capital is current assets minus current liabilities. Due to the
business cycle of the cruise industry, customer deposits are received in
advance of the cruise date and classified as current liabilities.
Therefore, working capital is typically negative. Working capital is
unaudited.

- Weighted average operating days for each cruise line is determined by
dividing capacity passenger nights for each cruise line by the cruise
line's total vessel capacity per day. Capacity passenger nights is
determined by multiplying, for the respective period, the actual
operating days of each vessel by each vessel's capacity per day.

- Vessel capacity per day represents the number of passengers each cruise
line can carry assuming double occupancy for cabins which accommodate
two or more passengers. Some cabins on the S.S. Independence and the
American Queen can accommodate three or four passengers.

- A passenger night represents one passenger spending one night on a
vessel; for example, one passenger taking a three-night cruise would
equal three passenger nights.

- Physical occupancy percentage is passenger nights divided by capacity
passenger nights.

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These results of operations reflect historical performance and results for
any future period may be different. You should carefully read "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
together with the information below for a more complete discussion of our
historical results. The figures in the table below state dollars in thousands,
except for per share information and operating statistics.

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $190,408 $177,884 $192,225 $145,123 $153,226
Cost of operations.......................................... 122,545 111,295 125,595 95,168 98,230
-------- -------- -------- -------- --------
Gross profit................................................ 67,863 66,589 66,630 49,955 54,996
Selling, general and administrative expenses................ 45,367 41,015 44,232 35,544 43,297
Depreciation and amortization expense....................... 14,571 15,590 16,912 12,719 12,472
Impairment write-down(1).................................... 38,390 -- -- -- --
-------- -------- -------- -------- --------
Operating income (loss)..................................... (30,465) 9,984 5,486 1,692 (773)
Interest income............................................. 912 1,028 1,117 786 2,282
Interest expense............................................ 8,111 6,963 6,639 5,002 4,376
Other income................................................ 11,729(2) -- 300 300 --
-------- -------- -------- -------- --------
Income (loss) before income taxes........................... (25,935) 4,049 264 (2,224) (2,867)
Income tax (expense) benefit................................ 8,299 (1,620) (107) 890 1,150
-------- -------- -------- -------- --------
Net income (loss)........................................... $(17,636) $ 2,429 $ 157 $ (1,334) $ (1,717)
======== ======== ======== ======== ========
PER SHARE INFORMATION:
Basic:
Weighted average shares outstanding....................... 13,802 13,952 14,137 14,111 16,694
Earnings (loss) per share................................. $ (1.28) $ 0.17 $ 0.01 $ (0.09) $ (0.10)
Diluted:
Weighted average shares outstanding....................... 13,802 14,338 14,777 14,111 16,694
Earnings (loss) per share................................. $ (1.28) $ 0.17 $ 0.01 $ (0.09) $ (0.10)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................... $ 17,908 $ 19,187 $ 27,004 $ 27,233 $ 69,747
Working capital............................................. (38,745) (41,564) (35,284) (38,825) (9,073)
Total assets................................................ 211,864 210,895 212,792 213,799 293,336
Long-term debt, less current portion........................ 85,898 81,488 77,388 78,226 74,126
Total stockholders' equity.................................. 54,982 59,219 62,014 59,835 126,774
OTHER DATA:
Cash flows provided by operating activities................. 15,016 22,414 18,524 15,904 28,348
Cash flows provided by (used in) investing activities....... 13,891 (17,864) (8,224) (5,539) (46,108)
Cash flows provided by (used in) financing activities....... (17,047) (3,271) (2,483) (2,319) 60,503
OPERATING STATISTICS (UNAUDITED):
Fare revenue per passenger night............................ $ 216 $ 228 $ 224 $ 222 $ 227
Total revenue per passenger night........................... 287 302 314 313 322
Weighted average operating days
Delta Queen............................................... 347 337 341 256 250
American Hawaii........................................... 366 337 365 273 273
Vessel capacity per day (passenger berths)
Delta Queen............................................... 1,024 1,026 1,026 1,026 1,026
American Hawaii........................................... 817 844 867 867 867
Passenger nights............................................ 643,891 588,892 611,624 464,361 476,460
Physical occupancy percentage (passenger berths)............ 98% 94% 92% 93% 97%
</TABLE>

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(1) We removed the S.S. Constitution from service in Hawaii on June 27, 1995 and
recognized an impairment write-down of $38.4 million in 1996, or $1.89 per
share net of tax on a diluted basis.

(2) In October 1996, we sold the Maison Dupuy hotel located in New Orleans,
Louisiana for a gain of $11.7 million, or $0.57 per share net of tax on a
diluted basis.

S-4
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RISK FACTORS

Before you invest in our common stock, you should be aware that there are
various risks, including those described below, that could have a material
adverse effect on our business, including our operating results and financial
condition. The risk factors listed in this section, as well as any cautionary
language in this prospectus supplement, provide examples of risks, uncertainties
and events that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements. You should carefully
consider these risk factors, together with all of the other information included
in this prospectus supplement, before you decide whether to purchase shares of
our common stock.

FORWARD-LOOKING STATEMENTS

This prospectus supplement includes forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth in this section and the following
sections of this prospectus supplement:

- "Prospectus Supplement Summary -- Investment Highlights,"

- "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity, Capital Resources and Financial Condition,"
and

- "Business -- Statutory Competitive Advantages," "-- The Vacation Cruise
Market," "-- The Hawaii Cruise Market," "-- Expansion Plans,"
"-- Current Operations -- Vessels" and "-- Government Regulation."

These forward-looking statements involve substantial risks and
uncertainties which we believe are within the meaning of the Private Securities
Litigation Reform Act of 1995.

Words such as "expect," "anticipate," "intend," "plan," "believe,"
"estimate" and variations of such words and similar expressions are intended to
identify such forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this prospectus
supplement might not occur. See "Special Note Regarding Forward-Looking
Statements" on page 25 of the accompanying prospectus for more information
regarding forward-looking statements.

THE SEC IS CONDUCTING AN INFORMAL INQUIRY OF OUR ACCOUNTING PRACTICES RELATING
TO DIRECT RESPONSE ADVERTISING COSTS

On January 14, 2000, we announced that the SEC is conducting an informal
inquiry into our accounting practices with respect to direct response
advertising costs. The informal inquiry relates to our adoption of a particular
methodology effective as of January 1, 1999 and our subsequent rescission of
that methodology in November, 1999 due to difficulties encountered implementing
the new method. We have restated our financial statements for the first and
second quarters of 1999 and we believe that we are cooperating with the SEC in
their informal inquiry. We are unable to predict the outcome or impact of the
SEC's informal investigation. However, it is possible that the SEC's informal
inquiry or a subsequent formal inquiry could result in penalties or sanctions
against us. Depending upon the resulting penalties, sanctions or orders, if any,
which we cannot predict at this time, our financial performance could be
adversely affected, our ability to conduct our business could be impaired or we
could be required to make further adjustments to our financial statements. For a
more detailed description of the accounting rescission, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Rescission of Accounting Method".

S-5
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CONSTRUCTION AND RENOVATION DELAYS AND DEVIATIONS FROM SPECIFICATIONS FOR THE
HAWAII AND COASTAL CRUISE VESSELS MAY ADVERSELY AFFECT EXPANSION PLANS AND
FUTURE FINANCIAL PERFORMANCE

We have entered into contracts to construct at least two new vessels for
our Hawaii cruise business and two new coastal cruisers for the Delta Queen
line. We have also entered into a contract to acquire and renovate an existing
foreign vessel for use in Hawaii and we have acquired and are converting the
Columbia Queen for Delta Queen to be operated on the Columbia River system.
Without these new ships, our future financial performance may be adversely
impacted. Ingalls Shipbuilding, the builders of the new Hawaii cruise ships, has
never built a modern passenger ship and, because no U.S. shipyard has built a
passenger ship in more than 40 years, there is a limited base of experienced
subcontractors for portions of the ships. We cannot assure you that we will be
able to successfully complete construction, conversion or renovation of the
Hawaii cruise ships or the coastal cruisers or that we will be able to complete
these projects within our budgets or expected time frames. Factors that could
impact the construction, conversion or renovation of the new vessels include:

- construction delays or complications;

- cost overruns;

- labor stoppages, slowdowns or shortages; and

- compliance with U.S. Coast Guard regulations and classification society
requirements.

Our business strategy has been developed on the assumption that we will be
able to put the Hawaii cruise ships and coastal cruisers into service on a
timely basis. We have also assumed that the ships will perform according to
their design specifications. A significant delay in delivering the vessels,
completing the renovation or conversion or a material deviation from the design
specifications could have a material adverse effect on our business. Also,
events out of the control of the shipyards constructing, converting or
renovating the vessels could delay delivery.

IF WE DO NOT OBTAIN SIGNIFICANT AMOUNTS OF CAPITAL TO BUILD, PURCHASE AND
RENOVATE VESSELS, OUR EXPANSION PLANS AND FUTURE OPERATING RESULTS MAY BE
ADVERSELY AFFECTED

Our expansion plans are based in part on the construction of several new
vessels and the acquisition and renovation of existing vessels to be put into
operation in both the Hawaii market and the U.S. coastal and inland waterways
market. Our expansion plans require us to spend significant amounts of capital
in building, purchasing and renovating vessels. The final cost for these vessels
may exceed our initial estimates and we may be required to seek additional
sources of capital in order to complete the vessels. We cannot assure you that
we will be able to obtain additional financing at commercially acceptable levels
to finance this expansion or to pursue strategic business opportunities. Our
failure to obtain enough capital may require us to delay or abandon some of our
expansion plans and could have a material adverse effect on our business.

INCREASED LEVERAGE MAY ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE AND CASH FLOW

We will substantially increase our indebtedness as we finance a significant
portion of the construction costs under existing and contemplated agreements to
acquire, build, convert or renovate new vessels. This higher level of
indebtedness will require us to devote an increased amount of our future cash
flow from operations to the payment of principal and interest on indebtedness.
At December 31, 1999, we had outstanding consolidated total long-term debt of
$80.5 million. We intend to substantially increase our leverage with the debt
required to finance:

- construction costs for each of the two Hawaii cruise ships projected to
be approximately $470 million;

- construction costs for each of the first two coastal cruisers expected
to be approximately $35 million;

S-6
<PAGE> 12

- acquisition and renovation costs for the ms Patriot expected to be
approximately $127 to $131 million; and

- renovation, relocation, start-up and marketing costs for the Columbia
Queen expected to be approximately $22 to $25 million.

We expect that approximately 87.5% of the total cost for the new Hawaii
cruise ships will be financed through Maritime Administration guaranteed private
financing and a substantial portion of Delta Queen's expansion costs may be
financed under a $70 million revolving credit facility from a group of lenders,
with The Chase Manhattan Bank as agent. The seller of the ms Patriot, Holland
America Line, a non-U.S. citizen, has agreed to provide us with financing for
$84.5 million of the purchase price of the ship secured by a preferred mortgage
on the vessel. Under our current expansion plans, and assuming we build,
acquire, renovate and convert all of the ships we currently contemplate, we
could increase our indebtedness to approximately $1.2 billion by 2004. Our
increased leverage could adversely affect our ability to repay debt and reduce
our working capital available for operations.

IF WE ARE UNABLE TO MAINTAIN ADEQUATE MANAGERIAL RESOURCES DURING OUR EXPANSION,
OUR BUSINESS MAY BE ADVERSELY AFFECTED

If we successfully execute our growth strategy, our expansion may place a
significant strain on our managerial resources. Our future performance will
depend upon management's ability to manage our growth effectively, which
includes our ability to:

- expand sales and marketing to fill the passenger berths in our expanded
fleet at profitable rates;

- operate, maintain and support a significantly expanded fleet of vessels;
and

- hire and train additional personnel to staff our expanded fleet and
support operations.

The process of expanding our fleet of vessels may result in unforeseen
operating difficulties and may require management attention that would otherwise
be available for the ongoing operation of our existing fleet of vessels. Our
failure to manage our growth effectively may cause us to delay or abandon some
of our expansion plans and may have a material adverse effect on our business.

IF WE ARE UNABLE TO MANAGE OUR FINANCIAL RESOURCES DURING OUR EXPANSION, OUR
FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED

Our plans for expansion call for significant capital expenditures that will
not produce corresponding revenues in the near term which may place a strain on
our capital resources. The process of expanding our fleet of vessels may require
additional financial resources that would otherwise be available for the ongoing
operation of our existing fleet of vessels. Our failure to manage our financial
resources effectively during our expansion could force us to delay or abandon
some of our expansion plans and may have a material adverse effect on our
business.

IF DEMAND FOR OUR NEW CRUISE PRODUCTS FAILS TO DEVELOP AS EXPECTED OR
COMPETITION INCREASES, OUR BUSINESS MAY BE ADVERSELY AFFECTED

The Hawaii, Pacific Northwest and coastal cruise markets where we intend to
deploy our new vessels currently do not have a large supply of cruise operators.
If demand for our new vessels does not develop, our financial performance may
suffer. Our expected deployment of vessels will increase the supply of available
cruises in these markets significantly. We engaged market research firms to
assist us in making our decision to pursue expansion plans. We cannot assure
you, however, that demand for our new cruise products, services and itineraries
will develop. If the market for these new cruise products fails to develop,
develops more slowly than expected or becomes saturated with competitors, our
business may be adversely affected.

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INCREASED CAPACITY IN HAWAII MAY REDUCE OCCUPANCY ON THE S.S. INDEPENDENCE,
ADVERSELY AFFECTING REVENUES

The introduction of the ms Patriot or our new cruise ships into the Hawaii
cruise market could cause occupancy or revenue levels on the S.S. Independence
to decline. If revenue levels drop so much that the S.S. Independence generates
operating losses, it may reduce our expected benefits from increased capacity in
Hawaii and could have a material adverse effect on our financial condition.

IF WE CANNOT BENEFIT FROM THE EXCLUSIVE RIGHTS OF THE PILOT PROJECT STATUTE, OUR
REVENUE GROWTH IN HAWAII WILL BE ADVERSELY AFFECTED

We believe the Pilot Project Statute provides us with the exclusive right
to operate large U.S.-flagged cruise ships in the Hawaiian Islands for the life
expectancy of our new ships. We will enjoy the benefits of the Pilot Project
Statute, however, only if we comply with its terms. Our competitive advantage
could be eliminated or diminished if the Pilot Project Statute were to be
repealed or amended, if our interpretation of its terms is not upheld or if we
fail to satisfy its requirements. This could have a material adverse effect on
our expansion plans. For a more detailed discussion of the Pilot Project
Statute, see "Business -- Statutory Competitive Advantages."

MODIFICATION OF THE PASSENGER VESSEL ACT MAY ADVERSELY AFFECT OUR BUSINESS

From time to time, proposals are made which would limit or eliminate the
terms of the Passenger Vessel Act. If the Passenger Vessel Act is repealed or
amended to allow foreign-flagged ships the same rights to transport passengers
between U.S. ports as U.S.-flagged ships, we could face considerable competition
in all our lines, including competition from entities with greater financial
resources. Under the Passenger Vessel Act and related laws, only U.S.-flagged
ships may transport passengers between U.S. ports. Consequently, only ships
which are U.S. built, owned, operated and documented may operate between U.S.
ports, including the islands of Hawaii. Foreign-flagged ships may transport
passengers between U.S. ports only if their itineraries include a stop at a
foreign port. This increased competition could have a material adverse effect on
our business. For a more detailed discussion of the Passenger Vessel Act, see
"Business -- Statutory Competitive Advantages."

INCREASED COMPETITION IN THE HAWAII CRUISE MARKET AND FROM OTHER VACATION
ALTERNATIVES MAY ADVERSELY IMPACT OUR FINANCIAL PERFORMANCE

We presently compete against a wide range of vacation alternatives,
including other cruises, destination resorts and sightseeing vacations. Cruise
lines or other entities, including those with greater resources, could introduce
overnight U.S.-flagged vessels in direct competition with our Delta Queen
vessels, which may adversely impact our financial performance. We may also face
additional competition in the Hawaii cruise market from foreign-flagged vessels
as the Hawaii cruise market expands. The entry of direct competition could make
it more difficult for us to maintain or further increase occupancy or prices for
cruise vacations. This could result in lower margins and reduce the
profitability of our business.

AS A MEMBER OF THE VACATION AND LEISURE INDUSTRY, OUR BUSINESS IS SENSITIVE TO
GENERAL ECONOMIC AND BUSINESS CONDITIONS

As a vacation and leisure company providing cruise vacations, we depend on
our customers' leisure spending. Adverse changes in the general economic or
business environment could affect our customers by decreasing the amount of
money they spend on leisure activities such as cruising. A decrease in leisure
spending could affect passenger yields and occupancy rates on our ships, which
could adversely affect our financial performance.

S-8
<PAGE> 14

IF WE DO NOT COMPLETE DRYDOCKINGS OR WET DOCKINGS ON SCHEDULE OR WITHIN BUDGET,
OUR REVENUES MAY BE ADVERSELY IMPACTED

Operation of our vessels is subject to regulations established by the U.S.
Department of Transportation that are enforced by the U.S. Coast Guard. Among
these regulations is the requirement that the vessels be taken out of operation
and removed from the water for inspection of the exterior of the hull on a
periodic basis, referred to as drydocking. When we drydock one of our vessels as
required, we lose the revenue from that vessel's operations for the period it is
out of service. We also incur the additional cost of the drydocking. The S.S.
Independence must be drydocked every 30 months and the Delta Queen vessels must
be drydocked every five years. For its last drydocking, the S.S. Independence
was out of service for 18 days beginning on January 5, 2000. Drydocks of Delta
Queen vessels take place in the winter months when our revenue yield is lowest.
For its last regularly scheduled drydocking, the Mississippi Queen was out of
service for 51 days beginning on December 1, 1995. For its next scheduled
drydocking, we expect the Mississippi Queen to be out of service for a period of
approximately 31 days commencing January 3, 2001. The Delta Queen was out of
service beginning on December 15, 1996 for 30 days for its last scheduled
drydocking. For its next scheduled drydocking, we expect the Delta Queen to be
out of service for a period of 43 days commencing January 4, 2001. The American
Queen, which first entered service in 1995, was out of service for 10 days for
its first drydocking between January 10, 2000 and January 20, 2000. Its next
drydocking will occur in approximately five years. In years that we are not
required to drydock our Delta Queen vessels, we remove each of these vessels
from service to perform routine repairs and maintenance and capital projects. We
refer to the period that each vessel is removed from service as a layup. For its
last regularly scheduled layup, the Mississippi Queen was out of service
beginning January 8, 2000 for 17 days. The Delta Queen began its most recent
layup on January 3, 2000, and is expected to be out of service for 67 days. The
S.S. Independence does not undergo layups in years that it is not drydocked. We
cannot assure you that future drydocks for any of our vessels will be completed
on schedule or within their budgets.

RIVER AND OCEAN CONDITIONS AND WEATHER FACTORS CAN ADVERSELY AFFECT OUR
OPERATIONS AND OUR FINANCIAL PERFORMANCE

River and ocean conditions and weather factors can adversely affect our
operations and the financial performance of the Delta Queen and American Hawaii
lines by disrupting schedules or reducing operating days. As a result of
flooding and restrictions placed upon commercial travel along the inland rivers,
we have, in the past, canceled or re-routed scheduled cruises. We operate the
Hawaii cruise ship in and around the Hawaiian Islands on a year-round basis. As
a result, its schedules are subject to ocean and weather conditions, including
hurricane conditions. Weather conditions could cause us to reschedule or cancel
cruises.

THE LOSS OF VESSELS FROM SERVICE COULD ADVERSELY IMPACT OUR BUSINESS

The loss of any vessel from service due to weather, casualty, mechanical
failure, extended or extraordinary maintenance, or otherwise, could adversely
affect our operating results. We believe we have a commercially reasonable level
of insurance coverage. In the event of a permanent or temporary loss of one or
more of the vessels, however, our insurance would not provide the replacement
costs of the vessels nor fully cover the impact of lost business.

ANTI-TAKEOVER AND TRANSFERABILITY LIMITATIONS OF U.S. OWNERSHIP REQUIREMENTS MAY
MAKE IT DIFFICULT FOR YOU TO SELL YOUR STOCK OR MAY DECREASE THE PRICE AT WHICH
YOU COULD SELL YOUR STOCK

One of the requirements for having U.S.-flagged vessels operating in U.S.
domestic trade is that 75% of our stockholders must be U.S. citizens and that
non-U.S. citizens cannot exercise control of us. We have restrictions in our
certificate of incorporation limiting the transferability of our common stock or
control to non-U.S. citizens to preserve our U.S.-flagged status. These
limitations may have the effect of decreasing the liquidity of our common stock,
thereby making it more difficult for investors to dispose of their shares in an
orderly manner. We have also added legends to our stock certificates to indicate
the citizenship of our stockholders. These provisions and the level of ownership
by Equity Group Investments, Inc. and its affiliates,

S-9
<PAGE> 15

which we refer to as the "Equity Group," may deter a change in control and limit
non-U.S. citizens', including corporations and individuals, purchases of our
common stock.

OUR CONTROLLING STOCKHOLDER MAY TAKE ACTIONS THAT ADVERSELY AFFECT OUR BUSINESS

Affiliates of the Equity Group will own an aggregate of approximately 36.3%
of the outstanding shares of common stock after this offering, or 35.8% if the
underwriters' over-allotment option is exercised in full. The Equity Group's
level of ownership after this offering may permit it to elect the members of our
board of directors who will control our future direction and operations. This
includes decisions regarding the issuance of securities, dividends, acquisitions
and our sale. The Equity Group's stockholders are, directly or indirectly,
trusts created for the benefit of Samuel Zell, Ann Lurie and their respective
families. Mr. Zell is the Chairman of our board of directors.

SALES OF OUR CONTROLLING STOCKHOLDER'S SHARES COULD HAVE AN ADVERSE EFFECT ON
OUR COMMON STOCK PRICE OR OUR ABILITY TO RAISE CAPITAL

The sale of a substantial number of shares of our common stock by the
Equity Group, or the perception that such a sale could occur, could negatively
affect the market price of our common stock. The Equity Group has pledged
4,603,000 of its 7,529,047 shares of our common stock to secure several loans.
If the Equity Group were to default on these loans, the creditors could acquire
the pledged shares. We have been advised by the Equity Group that it is
presently in compliance in all material respects with all covenants and terms of
these loans and has alternative resources with which to service the loans. Any
sale, or the perception that such a sale may occur, could also materially impair
our future ability to raise capital through an offering of equity securities.

OUR CONTROLLING STOCKHOLDER MAY HAVE CONFLICTS OF INTEREST WITH COMPETING
INTERESTS

The Equity Group, our controlling stockholder, is an investor directly or
indirectly in various business enterprises, both publicly and privately held.
Mr. Zell is also a officer and/or director in many of these affiliated
businesses. In addition, Mr. Zell and certain entities affiliated with Mr. Zell
have guaranteed the $30 million letter of credit facility with The Chase
Manhattan Bank we are using for part of the purchase price of the ms Patriot.
For a more detailed description of the terms of the guarantee, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity, Capital Resources and Financial Condition -- Capital
Expenditures and Debt." The Equity Group, Mr. Zell and/or these affiliated
businesses may from time to time receive opportunities in various businesses
which might compete with us in our current or future activities. Conflicts of
interest may result from such opportunities. The Equity Group and Mr. Zell have
informed us that neither it, he nor any of these affiliated businesses presently
intends to make investments which would cause a conflict of interest with us.

S-10
<PAGE> 16

USE OF PROCEEDS

The net proceeds from the sale of the 2,000,000 shares of common stock
offered by us are estimated to be approximately $46.9 million, or approximately
$54.0 million if the underwriters' over-allotment option is exercised in full,
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses. We estimate that our expenses in connection with
this offering and certain related matters will total approximately $200,000. See
"Underwriting" for a discussion of underwriting terms and expenses.

We intend to use our net proceeds from this offering to finance the
construction of our second Hawaii cruise ship and to finance a portion of the
acquisition cost of the ms Patriot. In connection with the acquisition financing
for the ms Patriot, we will replace the Equity Group guarantee with our own
funds, which, when called upon, will be used to pay $30 million of the purchase
price of the ms Patriot. We may also use the proceeds from this offering to pay
the purchase price, or any portion of the purchase price, for vessels we may
purchase, such as repaying Holland America Line for the remaining portion of the
purchase price for the ms Patriot. Pending such use, we intend to invest the net
proceeds of the offering in short-term investment grade securities and
government obligations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity, Capital Resources and
Financial Condition -- Capital Expenditures and Debt."

The amounts actually spent by us and the uses of the net proceeds may vary
significantly and will depend on a number of factors, including our future
revenues and the other factors described under "Risk Factors." For example, if
we do not obtain sufficient financing for the construction, purchase and
renovation of our Hawaii vessels, we may be forced to abandon our Hawaii
expansion plans. If we abandon our Hawaii expansion plans, we will use the
proceeds from this offering for other corporate purposes, such as working
capital.

S-11
<PAGE> 17

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock trades on the Nasdaq National Market tier of the Nasdaq
Stock Market under the symbol AMCV. The following table sets forth, for the
periods indicated, the range of high and low closing sales price information for
shares of our common stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1998
First Quarter............................................. $23.25 $17.25
Second Quarter............................................ $24.63 $14.75
Third Quarter............................................. $17.00 $12.50
Fourth Quarter............................................ $17.63 $11.38
1999
First Quarter............................................. $26.06 $16.25
Second Quarter............................................ $24.00 $15.63
Third Quarter............................................. $24.94 $19.81
Fourth Quarter............................................ $35.25 $21.13
2000
First Quarter (through February 15, 2000)................. $34.88 $24.81
</TABLE>

On February 15, 2000, the last reported closing sale price of the common
stock was $24.81 per share.

We did not pay cash dividends on our common stock during 1998 or 1999. We
currently anticipate that all of our earnings will be retained for planned
construction projects and ongoing business requirements. We do not anticipate
paying any cash dividends in the foreseeable future.

S-12
<PAGE> 18

SELECTED FINANCIAL DATA

We have derived the following summary selected financial data from our
audited consolidated financial statements included in our Annual Reports on Form
10-K for the years ended December 31, 1994, 1995, 1996, 1997 and 1998, and our
Quarterly Reports on Form 10-Q for the periods ended September 30, 1998 and
September 30, 1999, each as filed with the SEC.

As used in the following table, the following terms have the meanings set
forth below:

- A passenger night represents one passenger spending one night on a
vessel; for example, one passenger taking a three-night cruise would
equal three passenger nights.

- Physical occupancy percentage is passenger nights divided by capacity
passenger nights.

S-13
<PAGE> 19

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................ $195,197 $188,373 $190,408 $177,884 $192,225 $145,123 $153,226
Cost of operations.................. 143,628 136,478 122,545 111,295 125,595 95,168 98,230
-------- -------- -------- -------- -------- -------- --------
Gross profit........................ 51,569 51,895 67,863 66,589 66,630 49,955 54,996
Selling, general and administrative
expenses.......................... 43,191 48,613 45,367 41,015 44,232 35,544 43,297
Depreciation and amortization
expense........................... 7,117 11,917 14,571 15,590 16,912 12,719 12,472
Impairment write-down............... -- -- 38,390(1) -- -- -- --
One-time pre-opening costs.......... -- 5,900(2) -- -- -- -- --
Non-recurring charges............... 5,699(3) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............. (4,438) (14,535) (30,465) 9,984 5,486 1,692 (773)
Interest income..................... 1,389 1,706 912 1,028 1,117 786 2,282
Interest expense.................... 717 5,708 8,111 6,963 6,639 5,002 4,376
Other income........................ -- -- 11,729(4) -- 300 300 --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and minority interest............. (3,766) (18,537) (25,935) 4,049 264 (2,224) (2,867)
Income tax (expense) benefit........ 1,451 6,308 8,299 $ (1,620) $ (107) 890 1,150
Minority interest in loss........... 1,332 2,558 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................... $ (983) $ (9,671) $(17,636) $ 2,429 $ 157 $ (1,334) $ (1,717)
======== ======== ======== ======== ======== ======== ========
PER SHARE INFORMATION:
Basic:
Weighted average share
outstanding..................... 14,085(5) 13,763 13,802 13,952 14,137 14,111 16,694
Earnings (loss) per share......... $ (0.07)(5) $ (0.70) $ (1.28) $ 0.17 $ 0.01 $ (0.09) $ (0.10)
Diluted:
Weighted average shares
outstanding..................... 14,085(5) 13,763 13,802 14,338 14,777 14,111 16,694
Earnings (loss) per share......... $ (0.07)(5) $ (0.70) $ (1.28) $ 0.17 $ 0.01 $ (0.09) $ (0.10)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents........... $ 12,224 $ 6,048 $ 17,908 $ 19,187 $ 27,004 $ 27,233 $ 69,747
Working capital..................... (48,756) (48,313) (38,745) (41,564) (35,284) (38,825) (9,073)
Total assets........................ 227,798 247,473 211,864 210,895 212,792 213,799 293,336
Long-term debt, less current
portion........................... 65,000 103,272 85,898 81,488 77,388 78,226 74,126
Total stockholders' equity.......... 82,105 71,413 54,982 59,219 62,014 59,835 126,774
OTHER DATA:
Cash flows provided by (used in)
operating activities.............. $ (4,804) $ (9,947) $ 15,016 $ 22,414 $ 18,524 $ 15,904 $ 28,348
Cash flows provided by (used in)
investing activities.............. (67,866) (35,521) 13,891 (17,864) (8,224) (5,539) (46,108)
Cash flows provided by (used in)
financing activities.............. 47,949 39,292 (17,047) (3,271) (2,483) (2,319) 60,503
OPERATING STATISTICS (UNAUDITED):
Fare revenue per passenger night.... $ 202 $ 208 $ 216 $ 228 $ 224 $ 222 $ 227
Total revenue per passenger night... 297 288 287 302 314 313 322
Weighted average operating days
Delta Queen....................... 339 263 347 337 341 256 250
American Hawaii................... 303 272 366 337 365 273 273
Vessel capacity per day
(passenger berths)
Delta Queen....................... 588 1,024 1,024 1,026 1,026 1,026 1,026
American Hawaii................... 1,544 1,594 817 844 867 867 867
Passenger nights.................... 632,373 628,660 643,891 588,892 611,624 464,361 476,460
Physical occupancy percentage
(passenger berths)................ 95% 90% 98% 94% 92% 93% 97%
</TABLE>

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

(1) We removed the S.S. Constitution from service on June 27, 1995 and
recognized an associated impairment write-down of $38.4 million in 1996, or
$1.89 per share net of tax on a diluted basis.

(2) In 1995, we incurred a $5.9 million, or $0.28 per share net of tax on a
diluted basis, one-time charge that represented costs associated with the
introduction of the American Queen in June of 1995.

(3) In 1994, we incurred a $5.7 million, or $0.20 per share-net of tax on a
diluted basis, one-time charge due to problems related to the renovation of
the S.S. Independence.

(4) In October 1996, we sold the Maison Dupuy hotel located in New Orleans,
Louisiana for a gain of $11.7 million, or $0.57 per share net of tax on a
diluted basis.

(5) Unaudited.

S-14
<PAGE> 20

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

GENERAL

American Classic Voyages Co. is a holding company which owns and controls
The Delta Queen Steamboat Co., Great Hawaiian Cruise Line, Inc. and Project
America, Inc. Through our various subsidiaries, we currently operate two cruise
lines: Delta Queen, which owns and operates the American Queen, Mississippi
Queen and Delta Queen steamboats; and American Hawaii, which owns and operates
the S.S. Independence steamship. We have formed a third cruise line, United
States Lines, to operate the ms Patriot and the new Hawaii cruise vessels.

Our revenues are comprised of:

(1) cruise fares;

(2) onboard revenues, such as those from gift shops and shore excursions;
and

(3) trip cancellation insurance and pre- and post-cruise hotel packages.

Additional revenue is also derived from the sale of airplane tickets to and
from points of embarkation or disembarkation. Our cost for air tickets typically
approximates the revenue we generate from sales of airline tickets, so we
recognize minimal profits from such sales.

Our cost of operations is comprised of:

(1) passenger expenses, such as employee payroll and benefits and the cost
of food and beverages;

(2) vessel operating costs including lay-up and drydocking costs for our
vessels;

(3) insurance costs;

(4) commissions paid to travel agents; and

(5) air ticket and hotel costs.

When we receive deposits from passengers for cruises, we establish a
liability for unearned passenger revenue. We recognize these deposits as revenue
on a pro-rata basis during the associated cruise. Our revenues and some of our
expenses vary considerably when measured on a quarterly basis. This is due to
the seasonality of our Delta Queen revenues, the timing of our Delta Queen and
American Hawaii lay-ups and drydockings, and fluctuations in airfares. These
variations are reflected in our fare revenues per passenger night, which are
commonly referred to as fare per diems, and our occupancy rates.

Delta Queen's operations are seasonal. Historically, we have had greater
passenger interest and higher yields in the spring and fall months of the year.
The vessels typically undergo their annual lay-ups in December or January. While
American Hawaii has historically experienced greater passenger interest in the
summer and fall months of the year, quarterly variations in its revenues are
much smaller than those of Delta Queen. During the summer months, in particular,
American Hawaii tends to have average occupancies in excess of 100% as the
number of families sharing cabins with children increases significantly during
this period.

The following discusses our consolidated results of operations and
financial condition for the three months and nine months ended September 30,
1999 and 1998. This section should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in our Form 10-K for the year ended December 31, 1998 and our Form 10-Q
for the period ended September 30, 1999.

S-15
<PAGE> 21

ACCOUNTING POLICIES

Our significant accounting policies include the following:

- We consider all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

- Inventories consist of provisions, supplies, fuel and gift shop
merchandise carried at the lower of cost (weighted-average) or market.

- Prepaid air tickets consist of air tickets purchased by us and resold to
passengers in advance of sailings.

- We expense substantially all of our advertising costs as incurred except
for brochure costs, which result in tangible assets. We record brochure
costs as prepaid expenses and charge to expense as consumed.

- Property and equipment primarily consist of vessels and leasehold
improvements which we record at cost. We compute depreciation using the
straight-line method based upon the estimated useful lives of the various
classes of assets ranging from 3 to 40 years. We review long-lived
assets, identifiable intangibles, goodwill and reserves for impairment
whenever events or changes in circumstances indicate the carrying amount
of the assets may not be fully recoverable.

- Vessels under construction consists mainly of payments to shipyards as
part of our various new shipbuilding programs. Additional capitalized
costs include technical design, engineering, and architectural fees.
Interest cost associated with vessels under construction are capitalized
during the construction period.

- We capitalize lay-up and drydock expenditures relating to vessel
improvements or betterments. In addition, lay-up and drydock
expenditures relating to cleaning, repairs and maintenance are accrued
evenly over the period to the next scheduled lay-up and/or drydock and
are based on the best available estimate of total costs. The accrual for
these costs is included in other accrued liabilities.

- We recognize deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between carrying amounts and
the tax bases of other assets and liabilities.

- We compute basic earnings per share by dividing net income by the
weighted-average number of common shares outstanding. We compute diluted
earnings per share in a similar manner except that the denominator is
increased to include dilutive potential common shares from stock options
and stock units.

- We account for employee stock-based compensation plans using the
intrinsic value method and we disclose certain fair market value
information with respect to stock option activity in the notes to the
year-end financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 131 "Disclosure about Segments of an Enterprise and
Related Information," which requires the reporting of certain information about
operating segments and related disclosures about products and services,
geographic areas, and major customers. We have reviewed Statement of Financial
Standards No. 131 and have determined that we operate as a single business
segment.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that derivatives be recognized in the balance sheet at fair value and
specifies the accounting for changes in fair value. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133" to defer
the effective date of SFAS No. 133, until fiscal years beginning after June 15,
2000. While

S-16
<PAGE> 22

we currently have no derivative financial instruments and do not currently
engage in hedging activities, we may engage in derivative and hedging activities
in the future, and therefore would be affected by the pronouncement. The impact
of SFAS No. 133 on our consolidated financial statements, however, would depend
on a variety of factors including the level of future hedging activities, the
types of hedging instruments used and the effectiveness of such instruments.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in market prices and
rates. Our principal market risk is due to changes in interest rates which
affects us directly in our borrowing activities. At September 30, 1999, our
long-term variable rate debt had a carrying value of $21.2 million.

We will be issuing up to $1.1 billion in debt related to our shipbuilding
program for the Hawaii cruise vessels. This debt will be subject to the
prevailing market conditions at the time it is issued.

We may manage our interest rate risk through interest rate hedging
techniques. However, we currently do not use such techniques and, if used, may
not be successful in reducing or eliminating our interest rate risk in the
future.

Other market risks to which we are exposed relate to food and fuel
commodity prices, which we do not typically manage through the use of financial
instruments. However, we do not expect changes in food and fuel commodity prices
to materially affect our operating results.

RESCISSION OF ACCOUNTING METHOD

On November 2, 1999 we announced that we had rescinded our prior adoption
of the American Institute of Certified Public Accountants Accounting Standards
Executive Committee's Statement of Position No. 93-7, "Reporting on Advertising
Costs," or SOP 93-7, relating to the deferral of direct response advertising
costs. The deferral method provided for in SOP 93-7 was adopted in 1999, and
made effective as of January 1, 1999. Under SOP 93-7, we deferred recognition of
direct response advertising costs related to direct response advertising efforts
for future cruises. These deferred costs were recognized in the periods that the
cruises promoted by the efforts were completed, and the related cruise revenue
recognized. We rescinded our adoption of SOP 93-7 due to difficulties we
encountered in implementing the new method. In rescinding SOP 93-7, we returned
to our prior method of recognizing expenses for direct response advertising
costs when those costs are incurred. As a result of the rescission of SOP 93-7,
we restated our earnings for the first quarter of 1999 to reflect a loss of $6.3
million, or ($0.44) per share compared to our previously reported loss of $4.5
million, or ($0.32) per share. We have also restated our earnings for the second
quarter of 1999 to $2.5 million, or $0.14 per share, compared to our previously
reported earnings of $2.3 million, or $0.13 per share. For the six months ended
June 30, 1999, we restated our earnings to reflect a loss of $3.8 million, or
($0.24) per share, compared to our previously reported loss of $2.2 million, or
($0.14) per share.

RESULTS OF OPERATIONS

Operations data expressed as a percentage of total revenue for the periods
indicated is as follows:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues.................................................... 100% 100% 100% 100%
Costs and Expenses:
Operating expenses........................................ 62 64 64 66
Selling, general and administrative....................... 24 20 28 24
Depreciation.............................................. 7 8 8 9
Operating income (loss)..................................... 6 7 (1) 1
Net income (loss)........................................... 4 3 (1) (1)
</TABLE>

S-17
<PAGE> 23

Selected operating statistics for the periods indicated are as follows:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fare revenue per passenger night.............. $ 231 $ 222 $ 227 $ 222
Total revenue per passenger night............. $ 325 $ 308 $ 322 $ 313
Weighted average operating days(1):
Delta Queen................................. 92 92 250 256
American Hawaii............................. 92 92 273 273
Vessel capacity per day (passenger berths)(2):
Delta Queen................................. 1,026 1,026 1,026 1,026
American Hawaii............................. 867 867 867 867
Passenger nights(3)........................... 176,805 165,539 476,460 464,361
Physical occupancy percentage (passenger
berths)(4).................................. 102% 95% 97% 93%
</TABLE>

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

(1) Weighted average operating days for each cruise line is determined by
dividing capacity passenger nights for each cruise line by the cruise line's
total vessel capacity per day. Capacity passenger nights is determined by
multiplying, for the respective period, the actual operating days of each
vessel by each vessel's capacity per day.

(2) Vessel capacity per day represents the number of passengers each cruise line
can carry assuming double occupancy for cabins which accommodate two or more
passengers. Some cabins on the S.S. Independence and the American Queen can
accommodate three or four passengers.

(3) A passenger night represents one passenger spending one night on a vessel;
for example, one passenger taking a three-night cruise would generate three
passenger nights.

(4) Physical occupancy percentage is passenger nights divided by capacity
passenger nights.

QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1998

Consolidated third quarter 1999 revenues increased $6.6 million to $57.5
million from $50.9 million for the third quarter 1998. This represented a $4.2
million increase in fare revenues combined with a $2.4 million increase in other
revenues. Delta Queen's fare revenues increased $3.1 million, reflecting a 7%
increase in fare per diems and a 5% increase in occupancy. American Hawaii's
fare revenues increased $1.1 million on an 8% increase in occupancy while fare
per diems were consistent with the prior year. Of the $2.4 million increase in
other revenues, $1.9 million was attributable to increases in passenger air and
hotel revenue corresponding to the occupancy increase at both cruise lines.
American Hawaii's onboard revenue also increased by $0.6 million reflecting an
11% improvement in onboard revenue per passenger night combined with the 8%
occupancy increase.

Consolidated cost of operations increased $3.0 million to $35.8 million for
the third quarter of 1999 from $32.8 million in the comparable period of 1998.
Delta Queen's operating costs increased $1.4 million due to an increase in
passenger, commission, and air and hotel expenses. American Hawaii's operating
costs increased $1.6 million mainly corresponding to the increases in onboard,
air and hotel revenue noted above. Consolidated gross profit increased $3.5
million for the third quarter of 1999 as compared to 1998.

Consolidated selling, general and administrative expenses, before capacity
expansion expenses, increased $2.6 million to $12.1 million for the third
quarter of 1999 from $9.5 million for the same period in 1998. The increase was
a result of higher selling and marketing expenses, which increased by $3.0
million from the prior year. In the third quarter of 1999, both American Hawaii
and Delta Queen began to promote year 2000 sailings, whereas in the third
quarter of 1998, minimal amounts were incurred for 1999 sailings. Capacity
expansion expenses increased $1.0 million to $1.7 million from $0.7 million in
1998. Beginning in the third quarter of 1999, marketing and public relations
expenses for the Columbia Queen were incurred, which amounted to $0.8 million.
Additionally, $0.3 million of compensation expense was recognized in the third
quarter of 1999 for restricted stock vesting. Depreciation expense for the third
quarter of 1999 was consistent with 1998.

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The consolidated operating income for the third quarter of 1999 was $3.7
million as compared to $3.8 million for the comparable period of 1998.

Interest expense decreased by $0.3 million due to the capitalization of
interest expense and a lower outstanding debt balance in the third quarter of
1999. Interest income increased by $0.8 million in the third quarter of 1999 as
a result of proceeds received by us upon the sale of additional common stock in
the second quarter of 1999. Our consolidated effective tax rate was 40% for both
periods in 1999 and 1998.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

Consolidated revenues for the first nine months of 1999 increased $8.1
million to $153.2 million from $145.1 million for the first nine months of 1998
representing a $5.1 million increase in fare revenues combined with a $3.0
million increase in other revenues. Delta Queen's fare revenues increased $2.6
million, reflecting a 6% increase in fare per diems and a 1% increase in
occupancy, offset by a 2% decrease in capacity due to six fewer average
operating days. American Hawaii's fare revenues increased $2.5 million on a 7%
increase in occupancy while fare per diems decreased by 1%. Of the $3.0 million
increase in other revenues, $1.8 million is attributable to an increase in
passenger air and hotel revenue at both cruise lines. American Hawaii's onboard
revenue also increased by $1.4 million reflecting a 9% improvement in onboard
revenues per passenger night combined with a 7% occupancy increase while Delta
Queen's onboard revenue decreased by $0.2 million reflecting the decrease in
capacity.

Consolidated cost of operations for the first nine months of 1999 increased
$3.1 million over the comparable period of 1998. Delta Queen's operating costs
increased by $0.7 million primarily corresponding to the increase in air
revenue. American Hawaii's operating costs increased $2.4 million corresponding
to the increases in onboard, air and hotel revenue noted above. Consolidated
gross profit increased $5.0 million for the first nine months of 1999.

Consolidated selling, general and administrative expenses, before capacity
expansion expenses, increased by $6.7 million to $40.5 million for the first
nine months of 1999 from $33.8 million for the same period in 1998. The increase
was a result of higher selling and marketing expenses, which increased by $6.4
million from the prior year. Increased selling and marketing expenses were
incurred earlier in 1999 to promote cruises occurring in 1999. Higher selling
and marketing expenses in the third quarter of 1999 were incurred to promote
year 2000 sailings. Capacity expansion expenses increased by $1.1 million to
$2.8 million from $1.7 million in the first nine months of 1998. Beginning in
the third quarter of 1999, marketing and public relations expenses for the
Columbia Queen were incurred, which amounted to $0.8 million. The remainder of
the increase is attributable to salary and benefits associated with new
personnel hired during 1999 to run our capacity expansion program. Depreciation
expense for the first nine months of 1999 was consistent with 1998.

The consolidated operating loss for the first nine months of 1999 was $0.8
million as compared to operating income of $1.7 million for the first nine
months of 1998.

Interest expense decreased by $0.6 million due to the capitalization of
interest expense and a lower outstanding debt balance in the first nine months
of 1999. Interest income increased $1.5 million in the first nine months of 1999
as a result of proceeds received by us upon the sale of additional common stock
in late April and early May. In February 1998, we received $0.3 million of final
proceeds from the buyer of the Maison Dupuy hotel which we sold in October 1996.
Our consolidated effective tax rate was 40% for both periods in 1999 and 1998.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

OPERATING ACTIVITIES

For the nine months ended September 30, 1999, cash provided by operations
was $28.3 million compared to $15.9 million for the same period in 1998. The
improvement reflected a greater seasonal increase in unearned passenger
revenues, which increased $22.0 million in 1999, as compared to an increase of
$10.1 million in 1998. The increase in unearned passenger revenues was greater
in 1999 than in 1998 primarily

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due to an improvement in American Hawaii's and Delta Queen's advance bookings
and deposits received in 1999 for millennium charter cruises at Delta Queen.

INVESTING ACTIVITIES

Upon entering into an agreement with Holland America Line to purchase the
ms Nieuw Amsterdam, we made a $1.0 million deposit into escrow which was
subsequently returned to us. Our capital expenditures of $45.1 million included
$40.5 million for vessels under construction which is comprised mainly of
payments to shipyards. Other capital costs for the new shipbuilding programs
include technical design, engineering and architectural fees. For the Hawaii
cruise ships under construction, we have spent $28.0 million during 1999, while
$12.5 million has been spent in 1999 on the Columbia Queen and Delta Queen
coastal vessels projects. Other capital expenditures of $4.6 million were mainly
related to our existing vessels such as lay-ups for our Delta Queen vessels,
which were completed earlier in 1999.

FINANCING ACTIVITIES

For the nine months ended September 30, 1999, we made scheduled principal
payments of $3.3 million under the American Queen and S.S. Independence ship
financing notes and borrowed and repaid $2.0 million under our credit facility.
In the second quarter of 1999, we completed a public offering of an additional
4,025,000 shares of common stock. The net proceeds we received, after offering
expenses, were approximately $63.5 million and are being used for construction
of the initial Hawaii vessel. Additional proceeds from the issuance of common
stock were received from employee stock option exercises. We also paid $2.2
million for financing efforts related to our new credit facility and Maritime
Administration financing, as discussed below.

CAPITAL EXPENDITURES AND DEBT

For the Hawaii cruise market, we are constructing two new cruise ships over
the next five years and plan to introduce an existing foreign-built cruise ship,
the ms Patriot, which we have a contract to acquire, in the Hawaii market prior
to delivery of the new vessels. On March 9, 1999, we signed a definitive
agreement with Ingalls Shipbuilding to construct two passenger ships, each
containing approximately 1,900 passengers berths, with options to build up to
four additional vessels. The estimated construction cost of the two initial
ships, inclusive of shipyard contract price, shipyard incentives, furniture,
fixtures, and owner-furnished equipment, will be approximately $470 million
each. The agreement provides that the first ship will be delivered in January
2003 and the second ship in January 2004. Over the next twelve months, we expect
to spend approximately $200 million on building the two new Hawaii cruise
vessels, which includes anticipated payments to Ingalls Shipbuilding.

We will finance a significant portion of the construction cost of the
Hawaii cruise ships through the Maritime Administration, which provides
guarantees of private financing for new vessel construction projects conducted
in U.S. shipyards. In April 1999, we received commitments from the Maritime
Administration for financing guarantees for debt up to 87.5% of the cost of the
vessels. The guaranteed debt will be accessed during the construction period,
with net interest payments during that period capitalized as part of the cost of
construction. In the current market, this type of debt generally bears interest
at a rate of 100 to 150 basis points over the comparable U.S. government
obligations and can have a term of up to 25 years from the date of delivery of
the vessel. The loans generally amortize on a straight line basis over the term
of the loan commencing after the delivery date. Fees associated with obtaining
the financing guarantees included a one-time investigation fee of approximately
$1.4 million, which we paid to the Maritime Administration in April 1999. In
addition, the Maritime Administration imposes an annual guarantee fee of not
less than 1/4 of 1% and not more than 1% of the indebtedness, reduced by any
required escrow, based upon the obligor's ratio of long-term debt to
stockholders' equity. The present value of the sum of the annual guarantee fees
is payable at the closing of the Maritime Administration guaranteed financing
and will be capitalized as part of the vessel cost.

On October 15, 1999, we finalized an agreement with Holland America Line to
purchase the ms Nieuw Amsterdam for $114.5 million. The purchase agreement
required us to make an earnest money deposit of

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$18 million by October 18, 1999 and an additional $12 million by January 17,
2000. We have arranged for an unsecured letter of credit facility with The Chase
Manhattan Bank for up to $30 million and have satisfied the deposit requirements
by posting letters of credit for $18 million and $12 million. Outstanding
letters of credit under this facility bear interest at a rate of 2.125% per
annum. We are also required to pay a commitment fee of 0.375% per annum on the
unused portion of the facility. Persons and entities affiliated with Equity
Group, our largest stockholder, guaranteed the letter of credit facility to The
Chase Manhattan Bank thereby allowing us to obtain the facility. We paid Equity
Group a commitment fee of $0.5 million and agreed to pay Equity Group additional
compensation contingent upon appreciation in our common stock. As of December
31, 1999, the value of this additional contingent compensation, if paid, at such
time, would have been $3.0 million. We plan to record this amount as an expense
in the fourth quarter of 1999. Equity Group's rights to receive this additional
compensation will vest, on a monthly basis, during the period that the guarantee
remains outstanding and will increase to the extent that amounts are paid by
Equity Group pursuant to the guarantee. Equity Group may exercise its rights to
receive such payment in the fourth and fifth years, subject to our right to pay
such additional fee at any time within the next three years at escalating
amounts and tied to the rights vested by Equity Group. Under the purchase
agreement, at the closing scheduled for October 2000, we are required to fund
the $30 million deposit. If Equity Group funds the $30 million deposit, we will
pay Equity Group interest at 15% per annum and the obligation will mature 24
months after funding. In addition, Holland America Line has agreed to provide
financing for the remaining portion of the purchase price totaling $84.5 million
for 75 months at the prevailing prime rate. The Holland America Line financing
will be secured by a first preferred ship mortgage. Prior to introducing the ms
Patriot into service in December 2000, we expect to spend approximately $12 to
$16 million on improvements to the ship. This will be funded from one or more of
cash on hand, funds from operations, new borrowings from lenders, and funds from
this offering.

We entered into a construction contract, as of May 1999, with Atlantic
Marine, Inc. of Jacksonville, Florida to construct the first two coastal cruise
vessels for our Delta Queen line. Under the construction contract, the price of
the vessels will be $30 million each. We expect each coastal cruise vessel to
have a total project cost, including furnishing, fixtures and equipment, of
approximately $35 million. The coastal cruise vessels will be approximately 300
feet long and provide accommodations for up to 226 passengers. The contract
provides that the delivery date will be March 2001 for the first vessel and June
2001 for the second vessel. Atlantic Marine will provide a limited warranty for
the work, parts, and components of each vessel fabricated by the yard for one
year after delivery.

Over the next twelve months, we expect to spend approximately $35 million
to $40 million on building the new coastal cruise vessels, which also includes
anticipated payments to Atlantic Marine. We have applied to the Maritime
Administration for financing guarantees for the two coastal cruise vessels now
under construction.

In May 1999, we acquired a substantially complete riverboat originally
built for the casino trade that we are converting and will operate as the fourth
Delta Queen riverboat. We expect that vessel, which will be known as the
Columbia Queen, will enter service in May 2000 operating weekly cruise vacations
out of Portland on the Columbia River system. We originally entered into an
agreement with Nichols Bros. Boat Builders, Inc. to renovate the Columbia Queen.
However, we recently terminated that agreement and entered into an agreement
with Cascade General, Inc. to convert the 218 foot boat into an overnight
passenger vessel with 161 passenger berths. We paid $3.2 million to acquire the
vessel and estimate that the total renovation, relocation, start-up and
marketing costs, inclusive of the $14 million contract with Cascade General, to
be $22 million to $25 million.

In February 1999, The Delta Queen Steamboat Co. entered into a credit
agreement with a group of lenders, with The Chase Manhattan Bank as agent. This
credit agreement provides for a revolving credit facility of up to $70 million
to fund the expansion of our Delta Queen line. This $70 million facility
replaced our prior credit facility with Chase Manhattan. Borrowings under the
new credit facility bear interest at either (1) the greater of Chase Manhattan's
prime rate or alternative base rates plus a margin ranging from 0.50% to 1.50%,
or (2) the London Interbank Offered Rate plus a margin ranging from 1.50% to
2.50%. We are also charged a fee of 0.50% per annum on any unused commitment.
The new credit facility is secured by all of the
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assets of The Delta Queen Steamboat Co., except for the American Queen. The new
credit facility limits the dividends The Delta Queen Steamboat Co. may pay to
between $5 million and $15 million per year when aggregated with investments and
other payments.

In the first quarter of 2000, the three existing Delta Queen vessels will
complete their lay-ups which are expected to cost approximately $6.7 million,
including capital expenditures, repairs and maintenance . These amounts were
funded from working capital and the Delta Queen credit facility. In the fourth
quarter of 1999, we plan to record expenses of $1.7 million related to the
repairs and maintenance portion of this cost. For its most recent drydocking,
the S.S. Independence was out of service for 18 days beginning January 5, 2000.
This drydocking is expected to cost approximately $5.6 million, including
capital expenditures, repairs and maintenance and will be funded from cash on
hand. In the fourth quarter of 1999, we plan to record expenses of $0.9 million
related to the repairs and maintenance portion of this cost.

As of September 30, 1999, we complied with all covenants under our various
debt agreements.

We believe we will have adequate access to capital resources, both
internally and externally, to meet our current short-term and long-term capital
commitments. Such resources may include cash on hand, new borrowings from
lenders, and the ability to secure additional financing through the capital
markets. We continually evaluate opportunities to increase capacity at both
Delta Queen and in Hawaii and to strategically grow our business. Although we
believe that we will be able to obtain sufficient equity and debt financing from
the capital markets to satisfy our financial obligations relating to
construction of the new vessels, and to acquire, renovate and introduce the ms
Patriot into service, we cannot assure you that we will be able to obtain
additional financing at commercially acceptable levels to finance these projects
and, if we so choose, to pursue strategic business opportunities. If we fail to
obtain such financing, we may have to postpone or abandon some of our
construction plans.

In June 1997, our board of directors approved a stock repurchase plan. The
plan authorizes us to repurchase up to one million shares of our stock. These
shares may be purchased from time to time in the public market or through
privately negotiated transactions. As of December 31, 1998, we had repurchased
51,000 shares at an average purchase price of $14.84 per share under the plan.
We have not purchased any additional shares since then and currently have no
intention to repurchase any additional shares of common stock.

IMPACT OF YEAR 2000

Many computer programs were written using two digits rather than four to
define the applicable year. As a result, on January 1, 2000, any of our computer
programs that had time sensitive software might have recognized a date using
"00" as the year 1900 rather than the year 2000.

We previously established internally staffed project teams to address Year
2000 issues. Each team formulated a plan that focused on Year 2000 compliance
efforts for information technology systems and non-information technology
systems. This plan addressed (1) information technology systems software and
hardware such as reservations, accounting and associated systems, personal
computers and software and (2) non-information technology systems such as
embedded chip systems in building facilities, shipboard navigation, control,
power generation systems, and communication systems.

Our total costs for system improvements and the Year 2000 project were
approximately $1 million. These efforts were funded from working capital. Of the
total project cost, approximately $0.6 million was attributable to the
implementation of a new accounting system. This amount included new software,
new hardware, consulting fees and maintenance, of which $0.5 million was
capitalized or classified as prepaid maintenance. Another $0.1 million of
capital outlays was attributable to the upgrading of the S.S. Independence's
onboard financial system. The remaining $0.3 million was expensed as incurred
and did not have a material impact on the results of operations. The Year 2000
project represented less than 10% of our information systems budget.

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CONTINGENCY PLANS

We have adopted contingency plans to identify and determine how to handle
our most probable worst case scenarios.

To date, we have not experienced any material disruptions due to Year 2000
problems.

FACTORS CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
which we believe are within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions.
Such factors include, among others, the following: construction and renovation
delays and deviations from specifications for the Hawaii and coastal vessels may
adversely affect expansion plans and future financial performance; results of an
informal inquiry by the SEC which could have an adverse effect on our financial
performance; failure to obtain significant amounts of capital to build, purchase
and renovate vessels, which may adversely affect our expansion plans and future
operating results; increased leverage may adversely affect our financial
performance and cash flow; inability to maintain adequate managerial resources
may adversely affect our business; inability to manage our financial resources
during our expansion may adversely affect our financial performance; if demand
for our new cruise products fails to develop as expected or competition
increases, our business may be adversely affected; increased capacity in Hawaii
may reduce occupancy at the S.S. Independence, adversely affecting revenues;
loss of exclusive rights of the Pilot Project Statute may adversely affect our
revenue growth in Hawaii; modification of existing governmental regulations may
adversely affect our business; increased competition in the Hawaii cruise market
and from other vacation alternatives may adversely impact our financial
performance; sensitivity of the vacation and leisure industry to general
economic and business conditions; failure to complete drydocking on schedule or
within budget may adversely affect our revenues; weather factors can adversely
affect our operations and our financial performance; anti-takeover and
transferability limitations of U.S. ownership requirements could adversely
affect the price of our stock; the loss of vessels from service would adversely
impact our business; our controlling stockholder may take actions that adversely
affect our business; sales of our controlling stockholder's shares could have an
adverse effect on our ability to raise capital; and our controlling stockholder
may have conflicts of interest with competing interests. See "Forward-Looking
Statements" of this prospectus supplement and "Special Note Regarding Forward-
Looking Statements" on page 25 of the accompanying prospectus for more
information regarding forward-looking statements.

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BUSINESS

GENERAL

American Classic Voyages Co. is the leading provider of overnight passenger
cruises among the Hawaiian Islands and on the Mississippi River system. We
currently operate two cruise lines under the names American Hawaii and Delta
Queen. American Hawaii, acquired in August 1993, operates the S.S. Independence,
a U.S.-flagged ocean liner with 867 total passenger berths. American Hawaii
provides inter-island cruises on a year-round basis among the Hawaiian Islands.
Delta Queen currently operates the Delta Queen, American Queen and Mississippi
Queen, U.S.-flagged paddlewheel steamboats having 1,026 total passenger berths.
Delta Queen provides cruise vacations on the Mississippi, Ohio, Cumberland,
Tennessee, Arkansas, Illinois and Atchafalaya Rivers. We do not offer gaming on
our vessels.

American Classic Voyages is a Delaware corporation incorporated in 1985 as
a holding company that owns and controls The Delta Queen Steamboat Co., which
operates Delta Queen through various subsidiaries, and Great Hawaiian Cruise
Line, Inc., which operates American Hawaii through various subsidiaries.
American Classic Voyages Co. also owns and controls Project America, Inc., which
operates United States Lines(R) through various subsidiaries.

STATUTORY COMPETITIVE ADVANTAGES

PASSENGER VESSEL ACT OF 1886

Under the Passenger Vessel Act and related U.S. laws, only U.S. ships that
are:

- U.S. built,

- owned by U.S. citizens,

- operated by U.S. crews and officers, and

- U.S.-flagged by the U.S. Coast Guard

are permitted to operate exclusively among U.S. ports, including the islands of
Hawaii. We are the only U.S.-flagged, large scale, overnight cruise line
operator providing inter-island vacations among the Hawaiian Islands. Most
cruise line operators, such as Carnival Cruise Lines, Royal Caribbean
International, Princess Cruises and Disney Cruise Line, do not sail U.S.-flagged
vessels. Therefore, they must include a foreign port in each of their
itineraries. Typically, operators of non-U.S.-flagged ships send some of their
ships to Hawaii in late spring or early fall, generally using Vancouver, British
Columbia or Ensenada, Mexico as their foreign ports of call, as they reposition
their cruise ships to or from the Alaska market.

Accordingly, we believe our U.S.-flagged designation provides us with
significant itinerary advantages. Our cruises can visit and explore the beauty
and attractions of the various Hawaiian Islands without having to include a
foreign port in our itineraries, which would involve at least four sailing days
across the Pacific Ocean. On inland U.S. waterways, where Delta Queen operates,
the Passenger Vessel Act requirements effectively prohibit foreign-flagged
vessels from offering competing itineraries.

U.S. FLAG CRUISE SHIP PILOT PROJECT STATUTE

The Pilot Project Statute was enacted in 1997 to develop the U.S.-flagged
cruise ship industry and stimulate commercial construction of cruise ships in
the U.S. In connection with our execution of a definitive agreement with Ingalls
Shipbuilding to construct at least two new vessels in a U.S. shipyard, we
believe that we will have

(1) the exclusive right to operate large U.S.-flagged cruise ships in the
domestic trade among the Hawaiian Islands for the life expectancy of the
vessels, and

(2) the right to operate the ms Patriot as a U.S.-flagged ship in the
Hawaiian Islands for a period of two years following delivery of the
final new vessel under the contract.

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We will enjoy the benefits of the Pilot Project Statute, however, only if
we comply with its terms. The Pilot Project Statute requires, among other
things, as a condition to obtaining these rights, that the agreement to
construct the new cruise ships provide that:

- the vessels are built with more than 867 berths each; and

- delivery of the first vessel be prior to January 1, 2005 and the second
vessel prior to January 1, 2008.

The statute does not restrict the activities of small U.S.-flagged cruise
ships with fewer than 275 passengers and less than 10,000 gross tons.

THE VACATION CRUISE MARKET

The cruise industry is among the fastest growing segments in the
leisure/vacation industry, according to Cruise Line International Association
statistics. We believe that the demand for cruises will continue to expand for
the reasons discussed below.

HISTORICALLY STRONG GROWTH RATES

Cruise Line Association statistics indicate that the cruise industry has
experienced passenger compound annual growth of approximately 9% annually since
1970.

[Graph Showing Growth in North American Cruise Passengers]

* Estimated
Source: Cruise Line Association

Our revenues, however, have not grown historically at the same rate as the
cruise industry. This has been due, in part, to the cruise industry growing by
introducing new and increasingly larger cruise ships. Although we cannot assure
you that our growth rate will increase to or above the growth level of the
industry as a whole through the introduction of additional vessels into Hawaii,
we believe that our introduction of new and renovated cruise ships into Hawaii
will expand our business and increase our revenues.

STRONG DEMOGRAPHICS

The demographics of the U.S. population appear favorable to the cruise
industry. There are 133 million potential cruise passengers in the United States
target market. The U.S. target market is defined by the Cruise Line Association
as adults 25 years of age or older with household incomes in excess of $20,000.

According to the Cruise Line Association, the average age of cruise
passengers currently is 50 years. Between the years 2000 and 2010, the U.S.
population aged 45-54 and 55-64, the prime ages for cruising, is

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expected to grow from 37,030,000 to 43,564,000 and from 23,962,000 to
35,283,000, respectively, according to U.S. Census Bureau statistics. This
growth amounts to increases of over 18% and 47%, respectively. As Americans
continue to live longer, we believe the base of potential new and returning
passengers for the cruise industry should continue to grow.

In addition, consumers have increased their recreational spending.
According to the Bureau of Economic Analysis, recreation expenditures grew at an
average rate of 6.4% between 1975 and 1999, while personal consumption grew at
an average rate of 3.4% and gross domestic product grew at an average rate of
3.3% during the same period.

LARGE UNTAPPED MARKET POTENTIAL

While the cruise market has grown significantly over the past three
decades, we believe that its untapped potential is very large. This is supported
by Cruise Line Association statistics indicating that almost 90% of the U.S.
population has never cruised. In addition, according to a Cruise Line
Association study, 56% of those surveyed in the target market of Americans over
the age of 25 with annual incomes in excess of $20,000 report that they are
interested in cruising. We cannot assure you, however, that we will be able to
capture any of this untapped potential in the future.

HIGH CUSTOMER SATISFACTION

Cruise passengers report very high customer satisfaction with their
vacation experiences. According to the Cruise Line Association, over 90% of
cruisers indicate cruises are better than or as good as other vacations.

These high levels of customer satisfaction are further supported by a high
return rate. According to a Cruise Line Association study, passengers who have
cruised over the past five years have taken an average of 2.4 cruises during
this period.

MODERN SHIPS AND NEW ITINERARIES

We believe that historically the cruise industry has seen a close
correlation between growth in capacity and growth in the number of passengers.
In order to accommodate passenger preferences for the most modern ships
available, the cruise industry has built new ships. In turn, these new ships
have had the effect of attracting new passengers, as well as providing a wider
variety of experiences for the passengers who have cruised before. Based upon
figures contained in public filings, occupancy rates for the major cruise lines
have remained strong. Many of these major cruise lines report occupancy rates
near or above 100%. As occupancy rates are based on double occupancy, these
rates can exceed 100% since many cabins accommodate more than two people. As the
industry continues to increase passenger berth capacity, we believe that
passenger growth will keep pace with the new development.

Cruise lines have also been able to increase customer demand by offering
new itineraries, which have been particularly effective at encouraging
experienced cruisers to take new cruises. Certain itineraries, such as Europe
and the Panama Canal, have experienced substantial growth in the last ten years.
As the Caribbean and other itineraries mature, Hawaii is receiving increased
attention as a market with strong growth potential.

THE HAWAII CRUISE MARKET

Hawaii is one of the world's premier tourist destinations. With its
excellent year-round weather and natural beauty, Hawaii received approximately
6.9 million visitors for the twelve months ended November 30, 1999, 4.5 million
of whom were westbound travelers, as reported by Hawaii Visitors and Convention
Bureau. The Hawaii Visitors Bureau reported that westbound Hawaii visitors have
typically stayed in Hawaii for relatively long visits, averaging 10.3 days for
the twelve months ended November 30, 1999.

Despite the appeal of Hawaii, the Hawaii cruise market is currently
underdeveloped. While 36% of all vacationers to Alaska are cruisers, only 2% of
westbound travelers to Hawaii cruise while visiting the Hawaiian Islands,
according to the Alaska Division of Tourism and the Hawaii Visitors Bureau.
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We believe that the low percentage of cruisers in Hawaii may be
attributable in part to the following factors:

- the itineraries that can be offered by most cruise lines are
significantly limited by the Passenger Vessel Act, which requires
non-U.S.-flagged ships to include a foreign port in their itineraries;
and

- the limited passenger capacity and age of the S.S. Independence, the
only U.S.-flagged passenger vessel currently operating in Hawaii.

Even with these limitations, however, the draw of Hawaii has resulted in an
increase in cruisers visiting Hawaii as non-U.S.-flagged cruise ships have
offered Hawaii as a new itinerary. Based on statistics compiled by the Hawaii
Visitors Bureau, the number of passengers traveling on non-U.S. cruise ships has
increased to an estimated 46,200 for the twelve months ended November 30, 1999
from 14,750 in 1994. For the twelve months ended November 30, 1999, we carried
approximately 47,300 passengers. This represents 51% of approximately 93,500
total Hawaiian Island cruise passengers for the twelve months ended November 30,
1999 as preliminarily reported by the Hawaii Visitors Bureau.

We believe that Hawaii resembles the Caribbean cruise market in its early
stages. Like the Caribbean market, Hawaii has exotic and scenic destinations for
cruises, with year-round warm weather and abundant water activities. The
Caribbean cruise market grew from 7.2 million passenger nights in 1987 to 16.7
million passenger nights in 1999, according to Cruise Line Association
statistics. More developed cruise markets with higher market penetration, such
as the Caribbean, have already been visited by experienced cruisers. We believe
Hawaii will be an attractive new destination for experienced cruisers seeking
new itineraries.

EXPANSION PLANS

We believe that there is significant untapped market potential in the
cruise industry and plan to realize some of this potential by expanding both our
Hawaii and Delta Queen cruise lines. In the Hawaii cruise market, we plan to
leverage our U.S.-flagged designation and the unique competitive advantages
offered to us under the Pilot Project Statute by introducing larger, more modern
vessels into the Hawaii vacation market under the United States Lines banner. We
intend to use this brand name to help us market our Hawaii business. To expand
Delta Queen's position in the U.S. inland waterway cruise market, we plan to
extend our cruise itineraries into the U.S. coastal cruise market with up to
five new coastal cruisers and to introduce a fourth riverboat, the Columbia
Queen, to operate on the Columbia River system in the Pacific Northwest.

HAWAII EXPANSION PLANS

Acquisition and Introduction of ms Patriot

In order to expedite introduction of a larger, more modern ship into the
Hawaii cruise market, we have agreed to acquire a foreign-built vessel and
operate it as a U.S.-flagged vessel in the Hawaii market. Our operation of a
foreign-built vessel in the Hawaiian Islands is permitted under the terms of the
Pilot Project Statute. We have entered into a contract to purchase the ms Nieuw
Amsterdam from Holland America Line for $114.5 million. Under the terms of the
purchase agreement, the vessel will be delivered in October, 2000. We intend to
re-name the 1,214-passenger vessel the ms Patriot. We have scheduled the ms
Patriot's inaugural voyage for December, 2000. The vessel has nine public decks
and 607 passenger staterooms, 68% of which are outside cabins and include 20
suites. It features two outdoor swimming pools, a spa, a gymnasium, a two-deck
main lounge and six additional lounges and bars, as well as a spacious dining
room, an indoor/outdoor cafe, a boutique and seven passenger elevators. Upon
delivery we plan to renovate portions of the vessel for an estimated cost of $12
million to $16 million by adding a destination learning center, family
activities center, and upgrading the conference and meeting facilities and other
passenger facilities on board.

The ms Patriot will offer 7-night cruise vacations throughout the Hawaiian
Islands, sailing from Oahu to Kauai, Maui, and the island of Hawaii. Guests on
the ms Patriot will be able to select numerous shore excursions featuring some
of the Hawaiian Islands' most beautiful attractions. The ms Patriot cruises will
feature American and Hawaiian regional cuisine, a cultural enrichment program
and nightly showplace entertainment.
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<PAGE> 33

New Hawaii Vessels

On March 9, 1999, we executed definitive agreements with Ingalls
Shipbuilding to construct at least two new vessels for the Hawaii cruise market.
The new Hawaii cruise ships are currently estimated to cost $440 million each,
plus approximately $30 million for furnishings, fixtures and equipment. The
contract provides that Ingalls Shipbuilding will deliver the first new ship in
January 2003 and the second ship in January 2004. Litton Industries, Ingalls
Shipbuilding's parent company, has provided a performance guarantee of the
contract. Ingalls Shipbuilding will provide a limited warranty for the design,
material and workmanship of each vessel for one year after delivery. In
addition, the shipbuilding contract provides us an option to build up to four
additional vessels. The estimated contract price of the first option vessel is
$487 million and the contract price for subsequent option vessels will be
negotiated between the parties.

With the assistance of Ingalls Shipbuilding, we have developed a team of
experienced cruise ship designers and builders to participate in the development
and construction process, including:

- Kvaerner-Masa Yards for construction strategy and sub-contractor
supervision,

- Kvaerner-Masa Technology for engineering,

- Yran & Storbraaten for naval design and architecture, and

- Robert Tillberg Design for naval design and architecture.

Ingalls Shipbuilding has agreed in the shipbuilding contract to maintain
the participation of Kvaerner-Masa Yards and Kvaerner-Masa Technology during
construction of the new vessels.

Each of the new vessels is expected to measure approximately 840 feet in
length, with 13 decks and approximately 950 cabins containing at least 1,900
passenger berths. The new vessels have been designed with features that maximize
passenger fare revenue. For example, the ships will have 77% outside cabins with
seaside views, and 69% of the cabins will have their own private balconies.
Outside cabins are highly desirable to passengers and are usually priced at a
premium. Rooms with balconies generally receive an additional premium to outside
cabins. The percentage of outside cabins and balconies on the new vessels
compares very favorably to those of other cruise ships that we believe are
comparable in size. For example, according to Cruise Line Association
statistics, other cruise ships compare as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF
----------------------
CABINS WITH OUTSIDE
SHIP NAME/(YEAR ENTERED SERVICE) BALCONIES CABINS
-------------------------------- ----------- -------
<S> <C> <C>
Our Proposed New Vessels.................................... 69 77
Dawn Princess (1997)........................................ 4 60
Enchantment of the Seas (1997).............................. 22 59
Carnival Paradise (1998).................................... 5 60
Vision of the Seas (1998)................................... 23 59
</TABLE>

Our new cruise ships will contain a host of modern amenities to ensure
passenger comfort and enjoyment. As currently designed, the ships will have
three roomy upper decks, each designed to maximize the sense of spaciousness
on-board while offering magnificent 270 degree views of the islands and the sea.
Panoramic lifts will ascend through the atrium of each ship, delivering
passengers to the top level of the glass pavilion on the uppermost deck. During
the day, passengers will be able to stroll on the sun deck, relax in any of the
ship's whirlpool baths and swim in any of the pools. Consistent with
vacationers' emphasis on fitness and personal care, passengers will be able to
take advantage of extensive health spa and gymnasium facilities aboard the
cruise ship, including aerobic studios. The spa will be a full-service facility
offering massages, facials and aroma therapy. Passengers will also be able to
choose from a variety of different theme bars and restaurants ranging from a
Hawaiian cowboy lounge and pre-dinner patio bar to a two-deck main dining room,
buffet-style restaurant and a specialty restaurant. The new vessels' design
incorporates a 6,000 square foot retail area that will contain a variety of
shops, including a gift shop, beauty salon, jewelry store and clothing stores.

To take advantage of the excellent year-round weather in Hawaii, a 500 seat
outdoor theater will be the main night attraction featuring such events as
Polynesian and western line dancing shows to hula dance

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<PAGE> 34

classes and presentations by the "kumu," the ship's Hawaiian cultural historian.
Each of the new vessels will also have a 600 seat cabaret lounge and a 750 seat
indoor theater which will have the capacity to stage high quality Broadway-style
shows.

To maximize demand, the new vessels have been designed to accommodate the
differing needs and desires of a broad range of passengers. For example, we
expect to attract a significant amount of meeting, conference and incentive
travel business as a result of the Hawaii destination and the tax advantages to
an employer sponsoring or individual attending a meeting on a U.S.-flagged ship.
Internal Revenue Code Section 274(h) allows a deduction of up to $2,000 per
person each calendar year for business-related meetings and conventions held
aboard U.S.-flagged cruise vessels sailing among U.S. ports. As a result, the
design of the new vessels allocates specific portions of the ship for
conferences, meetings and other functions. The new ships are also designed to be
"family friendly" and will have large spaces dedicated to both young children
and teenagers.

We plan to operate the ms Patriot and the new Hawaii vessels under the
United States Lines banner. We acquired the rights to the United States Lines
name in October, 1999. We believe that the United States Lines was a prominent
passenger shipping line in America from the turn of the century through the
early 1960's.

DELTA QUEEN EXPANSION PLANS

In order to capitalize upon its strong market position and brand name
recognition, Delta Queen plans to expand its current business by introducing:

- a fourth riverboat, the Columbia Queen, offering new itineraries on the
Columbia River system in the Pacific Northwest; and

- at least two new vessels capable of offering cruises along U.S. coastal
waterways.

By extending the Delta Queen line beyond our country's heartland to the
underserved Pacific Northwest and coastal markets, Delta Queen plans to offer
its unique cruising experience on itineraries highlighting historically or
culturally interesting or beautiful destinations.

New Riverboat

We have acquired a substantially complete riverboat for $3.2 million and
are currently converting this riverboat into an overnight passenger vessel with
161 passenger berths. When it is complete, we plan to operate it on the Columbia
River system as the Columbia Queen, the fourth member of our Delta Queen fleet.
We have engaged Cascade General, Inc. to perform the conversion work. We have
scheduled the vessel to enter service in May 2000. The total cost to renovate,
relocate, start-up and market the new vessel is estimated to be $22 to $25
million. The Columbia Queen will operate approximately 10 months out of the year
from its homeport of Portland, Oregon, and will traverse the Columbia, Snake and
Willamette Rivers in the Pacific Northwest. Itineraries focus on providing
passengers with an adventurous and educational cruise experience. Its 8-night
vacation package features an overnight stay in Portland, a visit to Mount St.
Helens National Monument, a 7-night cruise and many adventurous excursions from
the coastal town of Astoria, Ore., to the exciting Hells Canyon in Lewiston,
Idaho.

As of January 28, 2000, $10.8 million in advance reservations for the 2000
cruise year for the Columbia Queen has been sold. However, we cannot
specifically determine the amount of revenues to be derived from advance
reservations as there can be no assurance that any particular advance
reservation will result in any revenue to us. In addition, if we encounter any
delays in the delivery of the Columbia Queen, we may have to cancel cruises and
return deposits, and the canceled advance reservations will not result in
revenue to us.

Coastal Cruise Vessels

We believe that there are itineraries along the U.S. coastlines with
significant cruise market potential. We plan to capture underserved coastal
markets by building at least two new ships with approximately

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<PAGE> 35

226 passenger berths each. We have entered into a construction contract with
Atlantic Marine, Inc. of Jacksonville, Florida to construct the first two
coastal cruise vessels for our Delta Queen line. Under the construction
contract, the first coastal cruise vessel is scheduled to be delivered in early
March 2001 and the second vessel is scheduled for delivery in June 2001. Each
coastal vessel will be approximately 300 feet long, have diesel-electric
propulsion systems and "state-of-the art" safety technology. The total project
cost for each new vessel is approximately $35 million.

The new Delta Queen coastal cruise vessels will have an historic design
inspired by the Fall River Line vessels which traveled between New York and New
England from 1847 through 1937 and became symbolic of elegant transportation and
gracious service. The new vessels will be decorated in classic New England
federal and nautical decor reminiscent of turn-of-the-century coastal ships,
featuring the "first-class" amenities for which Delta Queen steamboats have come
to be known. Approximately 90% of the passenger berths on each of the vessels
will be in outside cabins. The new vessels will each have the following
features:

- elegant dining rooms with fine artwork, architectural embellishments and
windows,

- a grand salon for entertainment,

- two bars, and

- other services typically offered on Delta Queen steamboats

Possible new destinations identified by Delta Queen include the following:

- EASTERN SEABOARD
Halifax, Nova Scotia
New Brunswick, Maine
Boston Harbor
Martha's Vineyard
Chesapeake Bay
New York City
Baltimore
Annapolis, Maryland
Washington, D.C.
Charleston, South Carolina
Savannah, Georgia
Florida's beaches
- - CALIFORNIA
San Francisco
Napa Valley's wine country

- - PACIFIC NORTHWEST AND ALASKA
Puget Sound
Canada's Inside Passage
The Alaskan coast

Delta Queen coastal cruises also plan to offer shore excursions to
highlight the unique and historically significant destinations in its new
itineraries and may also offer special cruise packages revolving around specific
themes, similar to those offered by Delta Queen's steamboat river cruises.
Further, we believe that this expansion into coastal cruise itineraries will
appeal to a younger and more physically active customer. Then, as those
customers age, we will have the opportunity to transition these same customers
to Delta Queen river cruises. By extending the Delta Queen line into coastal
cruise itineraries, it will allow Delta Queen to increase gradually the number
and range of itineraries it can offer and to attract a broader base of
passengers.

We believe that destinations and shore tours will be the key reasons for
customer interest in coastal cruise itineraries. New destinations are
particularly important for frequent cruisers, who are always seeking new cruise
experiences. Cruise destinations which can easily be reached by car are less
appealing to potential cruise customers than those which are more distant or
difficult to reach by other means. Shore tours that capitalize on the unique
characteristics of each destination also appear to appeal to potential coastal
cruise customers. For example, Cruise Line Association statistics indicated that
in 1998, over 70% of all cruise passengers purchased at least one shore
excursion and approximately 90% went sightseeing on shore at some time during
their cruise vacation. Prospective customers have expressed interest in spending
longer periods of time in selected destinations. Unique or proprietary shore
tour events may also afford Delta Queen an opportunity to distinguish its
coastal cruises from those of its competitors. While not the primary reason for
selecting a cruise, we believe that the character of the proposed vessels also
appears to be an element
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<PAGE> 36

consumers consider in selecting a cruise. The design of the ships may lend
uniqueness to the cruise experience and offers a platform for historical theme
cruises.

CURRENT OPERATIONS

AMERICAN HAWAII -- CURRENT OPERATIONS

American Hawaii's cruise ship, the S.S. Independence, operates inter-island
cruise vacations among the Hawaiian Islands year round. Built in 1951, the S.S.
Independence has 867 passenger berths. American Hawaii offers primarily seven
day itineraries with ports of call throughout the Hawaiian Islands. The
itinerary affords an opportunity to view Mount Kilauea, one of the world's few
active volcanoes, and the soaring sea cliffs of the inaccessible Na Pali coast.
Many cruise passengers also choose to extend their stay in Hawaii, purchasing
hotel accommodations through American Hawaii. American Hawaii offers more than
50 optional shore excursion activities to passengers to showcase the spectacular
Hawaiian scenery and local attractions.

Cruise fares on American Hawaii for a seven-night cruise, as stated in the
2000 cruise brochure, range from luxurious suites at $3,435 per person to
interior cabins with a single sofa bed and fold-away upper berth at $1,335 per
person, based on double occupancy. Fare also includes three full service meals
per day, along with mid-afternoon snacks and a late evening buffet, night
entertainment on the vessel and port charges. American Hawaii also offers
seasonal youth programs to attract passengers with children, as the S.S.
Independence has a large number of cabins that can accommodate three and four
passengers.

American Hawaii offers additional services and products to its passengers,
including bar services, beauty salon services, photography services, shore
excursions and gift shop products. American Hawaii also distributes a line of
specialty products through its onboard gift shops utilizing the "American Hawaii
Cruises" logo. In order to facilitate and simplify passengers' travel planning
process, American Hawaii offers air transportation arrangements to and from the
Hawaiian Islands through agreements with several major commercial airlines as
well as trip cancellation insurance.

American Hawaii is marketed as "the best and most convenient" way to
experience the Hawaiian Islands. We accomplish this by focusing on onboard
dining, entertainment, and offering an extensive package of shore excursions at
all stops along the itinerary, as well as by providing a wide variety of
activities, demonstrations and lectures designed to enhance passengers' overall
experience of the unique Hawaiian culture. Additionally, the Hawaii vacation
package is promoted as a convenient and rewarding alternative to land-based
multi-island vacations.

American Hawaii's marketing efforts target consumers who are interested in
Hawaii, cruise enthusiasts and other consumers who fit desirable demographic or
geographic profiles. American Hawaii sends out more than six million pieces of
direct mail annually to reach these potential customers in an effort to develop
cruise sales. These direct mailings are made throughout the year to drive
business during specific time frames. American Hawaii also sends out the Holokai
Hui News newsletter, aimed at generating repeat passengers, and sends
cooperative direct mail to travel agents to promote cruise sales. The travel
agency community also receives periodic fax broadcasts and a quarterly
newsletter, the Kuaihelani. American Hawaii also places advertisements in
specialized publications such as Islands, Hawaii, Modern Maturity, Car and
Travel and Endless Vacation magazines and has been the subject of numerous
feature articles in national travel and leisure magazines and newspaper travel
sections.

DELTA QUEEN -- CURRENT OPERATIONS

Delta Queen's three paddlewheel steamboats offer cruise itineraries for
trips along the Mississippi, Ohio, Cumberland, Tennessee, Arkansas, Illinois and
Atchafalaya Rivers, as well as the Intracoastal Waterway. Ports of embarkation
and disembarkation are typically locations of historical or cultural
significance.

According to the Cruise Industry News Market Report, in 1999 Delta Queen
enjoyed a 59% market share of the available berths within the domestic waterways
and rivers segments of the overnight cruise market. Delta Queen is marketed to
mature adult travelers as a unique vacation experience aboard classic

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steamboats in which the people, sights, romance and history of heartland America
are explored. We believe individuals are attracted to our paddlewheel steamboat
cruises because of the quality of our service, dining, accommodations and
entertainment as well as the unique characteristics of the steamboat experience,
including the connection to American history.

Delta Queen promotes special cruise packages revolving around seasonal,
geographic or historical themes which allow passengers to participate in
activities, meet special guest lecturers, and enjoy entertainment relevant to
the theme.

The Steamboatin(TM) cruise fare for an average five-night cruise, as stated
in the 2000/2001 cruise brochure, ranges from luxurious suites at $3,345 per
person to interior cabins with lower and upper passenger berths at $1,445 per
person, based on double occupancy. The fare also includes three full service
meals per day, along with mid-afternoon snacks and a late evening buffet, day
and night entertainment on the vessels and port charges.

To attract additional customers, Delta Queen has developed products which
combine its steamboat cruises with escorted tours and overnight stays at
historic port cities. As a convenience to its passengers, Delta Queen will also
arrange hotel accommodations and air and land transportation to and from the
cruise embarkation and disembarkation points.

Delta Queen annually welcomes back a large number of prior passengers
through its relationship marketing program. New passengers are acquired through
targeted direct mail, direct response advertising and other promotional
activity. Media coverage generated by public relations activity is another
method of acquiring new customers and building brand awareness. In 1999,
Steamboatin(TM) vacations were featured or mentioned in more than 2,600 articles
in publications with national and local circulations. In addition, each year a
significant number of new customers are referred by prior customers. Nearly all
Steamboatin(TM) vacations are booked via travel agents, who receive frequent
communications from Delta Queen and who are supported with collateral and
mailing materials.

VESSELS

We currently operate four ships with a total of 1,893 passenger berths. The
following table represents a list of our ships, the year they entered into
service, their estimated passenger capacity based upon double occupancy per
cabin, and their areas of operation:

CURRENT VESSELS

<TABLE>
<CAPTION>
YEAR VESSEL
ENTERED PASSENGER
VESSEL INTO SERVICE CAPACITY
------ -------------------------- ------------------
<S> <C> <C>
S.S. Independence................................... 1951 (1) 867
American Queen...................................... 1995 436
Mississippi Queen................................... 1976 416
Delta Queen......................................... 1926 174
</TABLE>

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

(1) Substantially renovated in 1994

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<PAGE> 38

The following table represents a list of the new vessels we currently plan
to build or obtain, together with their estimated delivery dates, and based upon
double occupancy per cabin, their estimated passenger capacity:

PLANNED VESSELS

<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
DATE ENTERING INTO SERVICE PASSENGER CAPACITY
-------------------------- ------------------
<S> <C> <C>
United States Lines Vessels:
ms Patriot........................................ December 2000 1,214
Newbuild #1....................................... January 2003 1,900
Newbuild #2....................................... January 2004 1,900
Delta Queen Vessels:
Columbia Queen.................................... May 2000 161
Coastal Cruiser #1................................ March 2001 226
Coastal Cruiser #2................................ June 2001 226
</TABLE>

SALES AND MARKETING

We maintain one field sales team and a common reservation location for
Delta Queen, American Hawaii and United States Lines. We sell our cruise
products primarily through two major channels, of which the most significant
channel is travel agents operating throughout the U.S. We have programs which
educate travel agents about the unique nature of our travel experiences, the
vessels' itineraries, special programs, theme cruises and pricing policies. To
assist in obtaining reservations from travel agents, we engage in both consumer
and trade-oriented advertising, including direct mailings of our cruise lines'
literature to travel agencies. We also maintain contact with travel agents
through each cruise line's field sales personnel who conduct educational
seminars and attend trade shows. Our second major sales channel is group travel
organizers, consisting of clubs, travel agencies and tour operators who arrange
for the sale of cruise vacations at discounted fares. We provide a variety of
incentives to these organizers, including fare discounts and promotional
materials. During 1999, no single customer accounted for more than 10% of our
consolidated revenues.

PRICING AND ADVANCE RESERVATIONS

We issue separate full color sales brochures for each of Delta Queen,
American Hawaii and United States Lines, which contain descriptive information,
itineraries and fare schedules, prior to the beginning of each upcoming calendar
year. We price our cruise fares, based on cabin category, using a single pricing
schedule for each cruise line throughout the calendar year except for the
Columbia Queen, which is priced seasonally. As an inducement for passengers to
book early, we generally offer an early booking discount which typically
consists of the current year's fares to passengers who book more than six to
eight months in advance for the upcoming year. In addition, we offer to group
travel organizers and others limited discounts from our published fare
schedules.

We actively market our cruises up to one year prior to the cruise year and
the level of advance reservations at any given date provides us with an
indication of our future fare revenue. A significant portion of such
reservations is booked more than six months in advance of the cruise date.
Generally, customers of each cruise line must pay a $300 refundable deposit
within one week of booking a cruise with the balance of the cruise fare to be
remitted 60 days in advance of the departure date. Depending upon the proximity
of a cancellation to the cruise date, customers may lose some or all of their
deposits or cruise fares. For a nominal fee, we also offer trip cancellation
insurance through a third-party insurer which allows the customers to reduce
their exposure to cancellation charges. As of January 28, 2000, advance
reservations for the 2000 cruise year for Delta Queen, American Hawaii and
United States Lines combined were $110.5 million. However, we cannot
specifically determine the amount of revenues to be derived from advance
reservations as there can be no assurance that any particular advance
reservation will result in any revenue to us.

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GOVERNMENT REGULATION

Federal maritime law prohibits non-U.S.-flagged vessels from receiving and
discharging passengers at any two U.S. ports without stopping at an intervening
non-U.S. port. Periodically there has been debate about the potential amendment
or repeal of this law and the broader cabotage laws encompassed under the
Passenger Vessel Act and related U.S. laws. In August 1995, we joined the
Maritime Cabotage Task Force, a broad national coalition of 415 companies,
associations and unions representing all modes of domestic transportation. The
task force is responsible for monitoring potential adverse changes in
legislation that could affect the U.S. maritime industry and publicizing the
economic and national security issues relevant to maintaining a strong
U.S.-flagged vessel industry. Through the coalition's efforts, numerous
legislators and key Congressional staff members have been made aware of the
substantive issues and positions surrounding any changes to this legislation. In
1997 and 1998, bills were introduced to the Senate to modify the Passenger
Vessel Act, including allowing foreign-flagged ships into a limited number of
itineraries where there was no existing U.S.-flagged ship in service. None of
these bills were approved by the relevant subcommittees or committees of the
Senate or the House of Representatives.

One of the criteria for operating U.S.-flagged vessels in U.S. domestic
trade is that holders of at least 75% of our shares must be U.S. citizens. In
order to preserve the status of our U.S.-flagged vessels, our certificate of
incorporation contains a provision restricting the transfer of shares of our
common stock to non-U.S. citizens. In addition, we have created separate forms
of stock certificates with legends to indicate whether the stockholder is a U.S.
or non-U.S. citizen.

We are subject to various Federal and state regulations which affect the
operations of our vessels. Our U.S.-flagged vessels are subject to regulations
promulgated by the U.S. Department of Transportation and enforced by the U.S.
Coast Guard. The Coast Guard conducts both scheduled and unannounced inspections
to determine compliance with these regulations and has the authority to delay or
suspend cruises. The Delta Queen vessels must be drydocked for an inspection of
the hulls' exteriors every five years. Previously, American Hawaii was required
to drydock the S.S. Independence approximately every 18 months for a similar
procedure. The Coast Guard is empowered to increase the interval between
inspections and accordingly, we have requested and received permission from the
Coast Guard to lengthen the interval of the drydocking of the S.S. Independence
to 30 months, subject to annual hull surveys. The S.S. Independence was out of
service for an 18-day period beginning January 5, 2000.

Like other entities that operate vessels on U.S. waterways, we are also
subject to federal, state and local health and safety laws, regulations and
ordinances, including environmental laws. Periodically, we incur expenditures to
keep our vessels in compliance with applicable laws, regulations and ordinances.
We do not anticipate making any material expenditures in 2000 with respect to
environmental matters. However, the coverage and attendant compliance costs
associated with such laws, regulations and ordinances may result in future
additional costs to our operations.

Federal law requires that vessels for 50 or more overnight passengers be
constructed of fire retardant materials. Since 1968 Congress has granted the
Delta Queen eight consecutive Congressional exemptions from this requirement
because of fire prevention and safety enhancements made to the vessel and the
Delta Queen's historic status. The statute exempting the Delta Queen requires us
to notify potential passengers that the Delta Queen does not comply with
applicable fire standards and prohibits us from disclaiming liability for loss
due to fire caused by our negligence. The current exemption has been extended to
November 1, 2008. Our ability to operate the Delta Queen is dependent upon
retaining our current Congressional exemption and obtaining additional
exemptions subsequent to 2008. Ocean-going passenger vessels were required to
make enhancements to life safety systems by October 1, 1997 in order to comply
with federal law. The S.S. Independence was brought into compliance during its
spring 1997 drydock.

The Federal Maritime Commission regulates passenger vessels with 50 or more
passenger berths departing from U.S. ports and requires that operators post
security to be used in the event the operator fails to provide cruise services,
or otherwise satisfy required financial standards. We have been approved as a
self-insurer by the Federal Maritime Commission, and therefore, subject to
continued approval, are not required to post security for passenger cruise
deposits. The Federal Maritime Commission has reviewed its standards
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<PAGE> 40

and in June 1996 issued proposed regulations to increase significantly the
financial responsibility requirements. We filed our objection to the proposals,
as we believe that the Federal Maritime Commission's current standards provide
passengers with adequate protection in the event of an operator's
non-performance and that further requirements may impose an undue burden on
operators. At this time we cannot predict if the proposed changes will be
approved as currently constituted, or at all.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and their ages as of the date of this
prospectus supplement are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel Zell.......................... 58 Chairman of the Board of Directors
Philip C. Calian..................... 37 Director and Chief Executive Officer
Roderick K. McLeod................... 59 President and Chief Operating Officer
Jordan B. Allen...................... 37 Executive Vice President, Secretary and General
Counsel
Randall L. Talcott................... 39 Vice President -- Finance, Treasurer and Chief
Accounting Officer
Todd Allen........................... 41 Senior Vice President -- Corporate Development
Townsend E. Carman................... 61 Senior Vice-President -- Marine Operations
Heinz Niedermaier.................... 57 Senior Vice President -- Hotel Operations, Hawaii
David Simmons........................ 43 Senior Vice President -- Hotel Operations, Delta Queen
Ronald W. Sieman..................... 55 Vice President -- Information Technology and Chief
Information Officer
John R. Berry........................ 60 Director
Bradbury Dyer, III................... 57 Director
Laurence S. Geller................... 52 Director
Arthur A. Greenberg.................. 59 Director
Jerry R. Jacob....................... 66 Director
Emanuel L. Rouvelas.................. 55 Director
Mark Slezak.......................... 40 Director
Joseph P. Sullivan................... 66 Director
Jeffrey N. Watanabe.................. 57 Director
</TABLE>

Samuel Zell. Chairman of the Board of Directors of American Classic
Voyages since August 1993; Director of American Classic Voyages since 1980;
previously Chairman of the Board of American Classic Voyages from 1984 through
1988; Chairman of the Board of Equity Group Investments, L.L.C., Anixter
International Inc., Capital Trust, Inc., Chart House Enterprises, Inc., Davel
Communications, Inc., Manufactured Home Communities, Inc., and Danielson Holding
Corporation; Chairman of the Board of Trustees of Equity Office Properties Trust
and Equity Residential Properties Trust; and Director of Ramco Energy plc.

Philip C. Calian. Director and Chief Executive Officer of American Classic
Voyages since February 1995; President of American Classic Voyages from February
1995 until October 1999; Executive Vice President and Chief Operating Officer of
American Classic Voyages from December 1994 until February 1995; Director,
Chairman of the Board and Chief Executive Officer of Delta Queen and Great
Hawaiian Cruise Line, Inc., American Classic Voyages' primary operating
subsidiary for American Hawaii since February 1995; Chairman of the Board of CFI
Industries, Inc. from March 1995 until August 1996; Co-Chairman and Chief
Executive Officer of CFI Industries, Inc. from September 1994 until March 1995;
Acting President and Chief Executive Officer of CFI Industries, Inc. from
January 1994 until September 1994; Vice President, Chief Financial Officer and
Treasurer of CFI Industries, Inc. from September 1993 until September 1994; and
Director of Mergers and Acquisitions of Great American Management and
Investment, Inc. from May 1990 until December 1994.

Roderick K. McLeod. President and Chief Operating Officer of American
Classic Voyages since October 1999; Executive Vice President of American Classic
Voyages from February 1999 until October 1999; Senior Vice
President -- Marketing of Carnival Corporation from July 1997 through February
1999; Executive Vice President of Sales, Marketing and Passenger Services of
Royal Caribbean Cruises Ltd. from

S-36
<PAGE> 42

January 1972 through August 1986 and October 1988 through June 1996; and
President and Chief Operating Officer of Norwegian Cruise Line from August 1986
through October 1988.

Jordan B. Allen. Executive Vice President of American Classic Voyages
since January 1998; Senior Vice President of American Classic Voyages from June
1995 until January 1998; Vice President of American Classic Voyages from August
1993 until June 1995; General Counsel of American Classic Voyages since August
1993; Secretary of American Classic Voyages since February 1997; and a member of
Rosenberg & Liebentritt, P.C. from September 1990 until December 1996.

Randall L. Talcott. Vice President -- Finance, Treasurer and Chief
Accounting Officer of American Classic Voyages since October 1998; and Treasurer
of ANTEC Corporation from July 1994 through September 1998.

Todd Allen. Senior Vice President -- Corporate Development of American
Classic Voyages since May 1998; independent consultant to American Classic
Voyages from October 1997 until April 1998; principal of Mercer Management
Consulting, Inc. from January 1990 until September 1997; and Associate at Mercer
Management Consulting, Inc. from June 1985 until December 1989.

Townsend E. Carman. Senior Vice President -- Marine Operations of American
Classic Voyages since October 1999; Executive Vice President -- Honolulu
Operations of American Hawaii since September 1998; Senior Vice
President -- Marine Operations of American Hawaii from March 1997 until
September 1998; Vice President -- Marine Operations of Delta Queen from
September 1989 until January 1995; and Senior Project Manager of Guido Perla &
Associates, a naval architect firm, from February 1995 until April 1996 and from
September 1996 until March 1997.

Heinz Niedermaier. Senior Vice President -- Hotel Operations, Hawaii of
American Classic Voyages since January 2000; Vice President, Hotel Operations of
Royal Caribbean Cruises, Ltd. from 1991 until January 1999; and Vice
President -- Food and Beverage of Royal Caribbean Cruises, Ltd. from 1986 to
1991, Director of Operations of Poxidon Services, from 1971 to 1986.

David Simmons. Senior Vice President -- Hotel Operations, Delta Queen of
American Classic Voyages since October 1998; Vice President -- Hotel Operations,
Delta Queen of American Classic Voyages from October 1996 until October 1998;
and Regional Director, far west division, Bristol Hotels from January 1995 until
May 1996.

Ronald W. Sieman. Vice President -- Information Technology and Chief
Information Officer of American Classic Voyages since January 2000; Vice
President -- Information Technology of Royal Caribbean Cruises, Ltd. from
October 1989 until February 1999; and Vice President -- Information Technology
Systems of Budget Rent-A-Car from March 1984 until October 1989.

John R. Berry. Director of American Classic Voyages since December 1999;
Partner, Heidrick & Struggles since February 1995; and President and Chief
Executive Officer of Holland America Line from 1977 through 1983.

Bradbury Dyer, III. Director of American Classic Voyages since December
1999; General Partner, Paragon Associates since May 1972; Director of Bay
Financial Corporation from 1985 until 1987, Great American Management and
Investment, Inc. from 1985 until 1996, Farm & Home Financial Corporation from
1987 until 1995 and Roosevelt Financial Group, Inc. from 1995 until 1997.

Laurence S. Geller. Director of American Classic Voyages since December
1999; Chief Executive Officer of Strategic Hotel Capital since May 1997;
Chairman of Geller & Co. from 1989 to May 1997; Executive Vice President and
Chief Operating Officer of Hyatt Development Corporation from 1984 until 1989;
Finance and Development consultant for Marriott Corporation from 1981 through
1985; and Director of Grand Metropolitan Hotels from 1971 until 1976.

Arthur A. Greenberg. Director of American Classic Voyages since December
1999; Director of American Classic Voyages since 1982; Vice President and
Assistant Treasurer of American Classic Voyages from January 1990 until June
1995; Director of Delta Queen and American Hawaii since August 1993; Vice

S-37
<PAGE> 43

President and Assistant Treasurer of Delta Queen and American Hawaii from August
1993 until June 1995; Senior Vice President of American Hawaii from June 1993
until August 1993; principal of Arthur A. Greenberg, C.P.A. and Senior Tax
Advisor of Equity Group since 1997; President of the accounting firm of
Greenberg & Pociask, Ltd. from 1971 until 1997; and Executive Vice President of
Equity Group from 1986 through 1996.

Jerry R. Jacob. Director of American Classic Voyages since 1991 and a
private investor; Chairman of the Board of Midway Airlines Corporation from
August 1994 until February 1997; and Vice President of American Airlines, Inc.
from 1974 to June 1993; and Director of Syratech Corp.

Emanuel L. Rouvelas. Director of American Classic Voyages since 1998;
senior partner of Preston Gates Ellis & Rouvelas Meeds LLP in Washington, D.C.
since 1974; Vice Chairman and Trustee of the American College of Greece; and
Director of Kale Consultants, Inc.

Mark Slezak. Director of American Classic Voyages since 1998; Director,
Chief Financial Officer and Treasurer of Lurie Investments, Inc., a private
investment management company, since March 1995; Senior Vice President of Equity
Group from January 1991 until January 1997; Treasurer of Equity Group from
January 1990 until January 1996; and Director of Equity Group.

Joseph P. Sullivan. Director of American Classic Voyages since July 1997;
Chairman of the Board of IMC Global Inc. since October 1999 and Director of IMC
Global, Inc. since March 1996; Chairman of the Executive Committee of IMC
Global, Inc. since March 1996; Chairman of the Board of The Vigoro Corporation
from March 1991 until February 1996; and Chief Executive Officer of The Vigoro
Corporation from March 1991 until September 1994.

Jeffrey N. Watanabe. Director of American Classic Voyages since 1998;
partner and principal of Watanabe, Ing & Kawashima since 1971; and Director of
American Savings Bank, Grace Pacific Corporation, Hawaiian Electric Industries,
Inc., First Insurance Company of Hawaii, Ltd., and The Children's Television
Workshop.

S-38
<PAGE> 44

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of February 4, 2000, information about
the amount and nature of stock ownership with respect to each person or entity
who is known by our management to be the beneficial owner of more than 5% of the
outstanding shares of our common stock. The number of shares of our common stock
indicated as beneficially owned is reported on the basis of regulations of the
SEC governing the determination of beneficial ownership of securities.

<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ------------------------------------ ----------------- ----------------
<S> <C> <C>
Samuel Zell, Ann Lurie Revocable Trust and Entities
Controlled by Samuel Zell and/or Ann Lurie:(1)(2)(3)
EGI Holdings, Inc. ....................................... 3,641,873
EGIL Investments, Inc..................................... 3,641,874
Samstock, L.L.C. ......................................... 52,500
Anda Partnership.......................................... 52,500
Samuel Zell............................................... 126,800
Ann Lurie Revocable Trust................................. 13,500
Total.................................................. 7,529,047 40.16%
Two N. Riverside Plaza Chicago, IL 60606
Wallace R. Weitz & Company(4)............................... 2,281,700 12.25%
1125 S. 103rd Street, Suite 600
Omaha, NE 68124-6008
</TABLE>

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

(1) The referenced entities or individuals are each the beneficial owner of the
shares of common stock shown next to their name. EGI Holdings, Inc. and EGIL
Investments, Inc. are both Illinois corporations and wholly owned by Equity
Group Investments, Inc., an Illinois corporation. The stockholders of Equity
Group are trusts created for the benefit of Samuel Zell and his family and
Ann Lurie and her family. One of the co-trustees of certain of the trusts
created for the benefit of Mrs. Lurie and her family is Mark Slezak.
Samstock, L.L.C. is a Delaware limited liability company and wholly owned by
SZ Investments, L.L.C., a Delaware limited liability company. The sole
managing member of SZ Investments, L.L.C. is a corporation whose sole
stockholder is a trust of which Mr. Zell is the trustee and beneficiary; the
non-managing members are two partnerships whose partners are trusts created
for the benefit of Mr. Zell and his family. Anda Partnership is a Nevada
general partnership whose partners are trusts created for the benefit of
Mrs. Lurie and her family of which Mrs. Lurie and Mr. Slezak are
co-trustees. Mrs. Lurie is the trustee and beneficiary of the Ann Lurie
Revocable Trust.

The above chart includes 6,800 stock units beneficially owned by Mr. Zell
which convert to 6,800 shares of common stock at a time determined by Mr.
Zell at the time of the grant. The chart also includes options to purchase
120,000 shares of common stock beneficially owned by Mr. Zell which are
currently exercisable.

Mr. Zell disclaims beneficial ownership of 3,641,874 shares beneficially
owned by the subsidiaries of Equity Group; 52,500 shares beneficially owned
by Anda Partnership and 13,500 shares beneficially owned by the Ann Lurie
Revocable Trust. Mrs. Lurie disclaims beneficial ownership of 3,641,873
shares beneficially owned by the subsidiaries of Equity Group; 52,500
shares beneficially owned by Samstock, L.L.C.; 6,800 stock units
beneficially owned by Mr. Zell; and options to purchase 120,000 shares
beneficially owned by Mr. Zell.

(2) 3,603,000 of the shares owned by EGI Holdings are held at four financial
institutions as collateral for loans. Under the various loan agreements, the
institutions cannot vote or exercise any ownership rights relating to the
pledged shares unless there is an event of default.

(3) 1,000,000 of the shares owned by EGIL Investments are held at a financial
institution as collateral for a loan. Under the loan agreement, the
institution cannot vote or exercise any ownership rights relating to the
pledged shares unless there is an event of default.

(4) According to a Schedule 13G dated February 4, 2000 filed with the SEC by
Wallace R. Weitz & Company. The common stock reported herein is beneficially
owned by Wallace R. Weitz & Company, a Nebraska corporation and a registered
investment adviser.

S-39
<PAGE> 45

UNDERWRITING

Under the terms and conditions contained in an underwriting agreement,
dated February 15, 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Craig-Hallum Capital
Group, Inc., have severally agreed to purchase from us the number of shares of
common stock set forth opposite their names below:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 558,000
Goldman, Sachs & Co......................................... 558,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 558,000
Craig-Hallum Capital Group, Inc............................. 126,000
A.G. Edwards & Sons, Inc.................................... 40,000
Wasserstein Perella Securities, Inc. ....................... 40,000
Conifer Securities LLC...................................... 40,000
D.A. Davidson & Co. ........................................ 40,000
Ryan, Beck & Co. ........................................... 40,000
---------
Total.................................................. 2,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock in
this offering are conditioned upon approval by their counsel of legal matters
concerning this offering and satisfaction of conditions precedent by us. The
underwriters are obligated to purchase and accept delivery of all the shares of
common stock in this offering, other than those shares covered by the
over-allotment option described below, if any are purchased.

The underwriters initially propose to offer some of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus supplement and some of the shares to dealers at the
public offering price less a concession not in excess of $0.78 per share. The
underwriters may allow, and those dealers may re-allow, a concession not in
excess of $0.10 per share on sales to other dealers. After the initial offering
of the common stock to the public, the representatives may change the public
offering price and concession.

The following table shows the underwriting fees to be paid by us in
connection with this offering. This information is presented assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares of our common stock.

<TABLE>
<CAPTION>
WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT
OPTION OPTION
-------------- --------------
<S> <C> <C>
Per share................................................... $ 1.305 $ 1.305
Total....................................................... $2,610,000 $3,001,500
</TABLE>

We will pay the offering expenses, estimated to be approximately $200,000.
We will pay to the underwriters underwriting discounts and commissions in an
amount equal to the public offering price per share of common stock less the
amount the underwriters pay to us for each share of common stock sold by us.

We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus supplement, to purchase up to 300,000
additional shares of common stock at the public offering price less the
underwriting discounts and commissions. The underwriters may exercise this
option solely to cover over-allotments, if any, made in connection with this
offering. To the extent the underwriters exercise this option, each underwriter
will be obligated, upon satisfaction of certain conditions, to purchase a number
of additional shares approximately proportionate to that underwriter's initial
purchase commitment.

We have agreed to indemnify the underwriters against some liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriters may be required to make for these liabilities.

S-40
<PAGE> 46

For a period ending 90 days from the date of this prospectus, we and our
executive officers, directors and some of our stockholders have agreed not to,
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation:

- offer, pledge, sell, contract to sell or sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or

- enter into any swap, or other arrangement that transfers all or a
portion of the economic consequences associated with the ownership of
any common stock, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash, or
otherwise.

In addition, during such lock-up period, we have also agreed not to file any
registration statement relating to, and each of our executive officers and
directors and some of our stockholders have agreed not to make any demand for,
or exercise any right relating to, the registration of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.

Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares included in this offering may not be offered or sold,
directly or indirectly, nor may this prospectus supplement or any other offering
material or advertisements in connection with the offer and sale of any shares
of common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus supplement
and the accompanying prospectus are advised to inform themselves about and to
observe any restrictions relating to this offering and the distribution for this
prospectus supplement. This prospectus supplement and the accompanying
prospectus are not an offer to sell or a solicitation of an offer to buy any
shares of common stock in any jurisdiction where that would not be permitted or
legal.

The underwriters and dealers may engage in passive market making
transactions, bids for and purchases of our common stock on the Nasdaq National
Market in accordance with Regulation M under the Securities Exchange Act of 1934
during the period before the commencement of offers and sales of common stock
hereunder.

In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot this offering
creating a syndicate short position. The underwriters may bid for and purchase
our shares of common stock in the open market to cover such syndicate short
positions or to stabilize the price of our common stock. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.

Some of the underwriters and their affiliates engage in transactions with,
and perform services for, us and other entities owned or controlled by Mr. Zell
in the ordinary course of business and have engaged, and may in the future
engage, in commercial and investment banking transactions and financial advisory
services for us and other entities owned or controlled by Mr. Zell, for which
they have received customary compensation.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Illinois. In
connection with this offering, Sidley & Austin, Chicago, Illinois, will pass
upon legal matters for the underwriters.

S-41
<PAGE> 47

INCORPORATION BY REFERENCE

We have filed the following documents with the SEC under the Exchange Act,
which are incorporated herein by reference:

1. Annual Report on Form 10-K, for the year ended December 31, 1998;

2. Quarterly Reports on Form 10-Q for the period ended March 31, 1999,
as amended on Form 10-Q/A dated November 9, 1999, for the period
ended June 30, 1999, as amended on Form 10-Q/A dated November 9,
1999, and for the period ended September 30, 1999;

3. Current Reports on Form 8-K dated February 22, 1999, April 14, 1999,
March 26, 1999, as amended on Form 8-K/A dated April 21, 1999,
November 3, 1999 and January 14, 2000;

4. Information Statement on Schedule 14C dated March 8, 1999; and

5. The description of the common stock, contained in our Registration
Statement on Form S-1 (Registration No. 33-45139), all amendments
thereto and reports filed for the purpose of updating such
description.

All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act (1) subsequent to the initial filing of this prospectus
supplement and prior to the date it is declared effective and (2) subsequent to
the date of this prospectus supplement and prior to the termination of this
offering are incorporated by reference and become a part of this prospectus
supplement and are to be a part hereof from their date of filing.

Any statement contained in this prospectus supplement or in a document
incorporated by reference are modified or superseded for purposes of this
prospectus supplement to the extent that a statement contained in any such
document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus supplement.

On written or telephone request, we will provide free of charge to each
person, including any beneficial owner, to whom a copy of this prospectus
supplement is delivered, a copy of any or all of the documents incorporated by
reference in this prospectus supplement but not delivered with this prospectus
supplement. Written or telephone requests for such copies should be directed to
our principal office: American Classic Voyages Co., Two North Riverside Plaza,
Suite 200, Chicago, Illinois 60606, Attention: Investor Relations, Telephone:
(312) 258-1890.

S-42
<PAGE> 48

AMERICAN CLASSIC VOYAGES CO.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.......................... F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1998, 1997 and 1996...... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 49

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
American Classic Voyages Co.

We have audited the consolidated balance sheets of American Classic Voyages
Co. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1998. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule. These consolidated financial
statements and financial statement schedule are the responsibility of management
of American Classic Voyages Co. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Classic Voyages Co. and subsidiaries as of December 31, 1998 and 1997 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG LLP

Chicago, Illinois
February 19, 1999

F-2
<PAGE> 50

AMERICAN CLASSIC VOYAGES CO.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PAR VALUE)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 27,004 $ 19,187
Restricted short-term investments........................... 60 325
Accounts receivable......................................... 1,989 1,299
Inventory................................................... 2,413 2,274
Prepaid air tickets......................................... 2,527 1,982
Prepaid expenses and other current assets................... 4,113 3,557
-------- --------
Total current assets................................... 38,106 28,624
Property and equipment, net................................. 162,129 171,105
Deferred income taxes, net.................................. 10,011 9,564
Other assets................................................ 2,546 1,602
-------- --------
Total assets........................................... $212,792 $210,895
======== ========
LIABILITIES
Accounts payable............................................ $ 13,493 $ 14,282
Other accrued liabilities................................... 16,500 18,093
Current portion of long-term debt........................... 4,100 4,100
Unearned passenger revenues................................. 39,297 33,713
-------- --------
Total current liabilities.............................. 73,390 70,188
Long-term debt, less current portion........................ 77,388 81,488
-------- --------
Total liabilities...................................... 150,778 151,676
======== ========
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value (5,000,000 shares
authorized, none issued and outstanding).................. -- --
Common stock, $0.01 par value (20,000,000 shares authorized,
14,293,931 and 14,006,015 shares issued, respectively).... 143 140
Additional paid-in capital.................................. 80,451 77,059
Accumulated deficit......................................... (17,823) (17,980)
Common stock in treasury, at cost (51,000 shares)........... (757) --
-------- --------
Total stockholders' equity............................. 62,014 59,219
-------- --------
$212,792 $210,895
======== ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-3
<PAGE> 51

AMERICAN CLASSIC VOYAGES CO.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... $192,225 $177,884 $190,408
Cost of operations (exclusive of depreciation and
amortization shown below)................................. 125,595 111,295 122,545
-------- -------- --------
Gross profit................................................ 66,630 66,589 67,863
Selling, general and administrative expenses................ 44,232 41,015 45,367
Depreciation and amortization expense....................... 16,912 15,590 14,571
Impairment write-down (Note 4).............................. -- -- 38,390
-------- -------- --------
Operating income (loss)..................................... 5,486 9,984 (30,465)
Interest income............................................. 1,117 1,028 912
Interest expense............................................ 6,639 6,963 8,111
Other income................................................ 300 -- 11,729
-------- -------- --------
Income (loss) before income taxes........................... 264 4,049 (25,935)
Income tax (expense) benefit................................ (107) (1,620) 8,299
-------- -------- --------
Net income (loss)........................................... $ 157 $ 2,429 $(17,636)
======== ======== ========
PER SHARE INFORMATION
Basic:
Basic weighted average shares outstanding................. 14,137 13,952 13,802
Earnings (loss) per share................................. $ 0.01 $ 0.17 $ (1.28)
Diluted:
Diluted weighted average shares outstanding............... 14,777 14,338 13,802
Earnings (loss) per share................................. $ 0.01 $ 0.17 $ (1.28)
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-4
<PAGE> 52

AMERICAN CLASSIC VOYAGES CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $ 157 $ 2,429 $(17,636)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization expense....................... 16,912 15,590 14,571
Impairment write-down (Note 4).............................. -- -- 38,390
Gain on sale of assets...................................... (300) -- (11,729)
Changes in certain working capital accounts and other
Accounts receivable....................................... (690) 2,435 (2,600)
Accounts payable.......................................... (789) 3,599 (2,305)
Other accrued liabilities................................. (529) (5,344) (289)
Other assets.............................................. (258) 1,576 (6,400)
Unearned passenger revenues............................... 5,584 2,044 3,137
Prepaid expenses and other................................ (1,563) 85 (123)
------- -------- --------
Net cash provided by operating activities................... 18,524 22,414 15,016
------- -------- --------
INVESTING ACTIVITIES
Decrease in restricted investments.......................... 265 2,632 7,724
Capital expenditures........................................ (8,789) (22,326) (15,355)
Proceeds from sale of assets................................ 300 1,830 21,522
------- -------- --------
Net cash (used in) provided by investing activities......... (8,224) (17,864) 13,891
------- -------- --------
FINANCING ACTIVITIES
Proceeds from borrowings.................................... -- -- 6,903
Repayments of borrowings.................................... (4,100) (4,410) (23,923)
Purchase of common stock.................................... (757) -- --
Issuance of common stock.................................... 2,907 1,139 368
Deferred financing fees..................................... (533) -- (395)
------- -------- --------
Net cash used in financing activities....................... (2,483) (3,271) (17,047)
------- -------- --------
Increase in cash and cash equivalents....................... 7,817 1,279 11,860
Cash and cash equivalents, beginning of period.............. 19,187 17,908 6,048
------- -------- --------
Cash and cash equivalents, end of period.................... $27,004 $ 19,187 $ 17,908
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 6,438 $ 6,791 $ 7,952
Income taxes.............................................. $ 232 $ 249 $ 450
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-5
<PAGE> 53

AMERICAN CLASSIC VOYAGES CO.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
STOCK CAPITAL DEFICIT STOCK EQUITY
------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995.................. $138 $74,048 $ (2,773) $ -- $ 71,413
Net loss.................................... -- -- (17,636) -- (17,636)
Stock issued under option and benefit
plans..................................... 1 1,204 -- -- 1,205
---- ------- -------- ----- --------
Balance, December 31, 1996.................. 139 75,252 (20,409) -- 54,982
Net income.................................. -- -- 2,429 -- 2,429
Stock units issued to Directors, net........ -- 219 -- -- 219
Stock issued under option and benefit
plans..................................... 1 1,588 -- -- 1,589
---- ------- -------- ----- --------
Balance, December 31, 1997.................. 140 77,059 (17,980) -- 59,219
Net income.................................. -- -- 157 -- 157
Stock units issued to Directors, net........ -- 138 -- -- 138
Stock issued under option and benefit
plans..................................... 3 3,254 -- -- 3,257
Purchase of treasury stock.................. -- -- -- (757) (757)
---- ------- -------- ----- --------
Balance, December 31, 1998.................. $143 $80,451 $(17,823) $(757) $ 62,014
==== ======= ======== ===== ========
</TABLE>

The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-6
<PAGE> 54

AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

American Classic Voyages Co., through its subsidiaries, operates two cruise
lines under the names of The Delta Queen Steamboat Co. and American Hawaii
Cruises. The Delta Queen Steamboat Co., through its subsidiaries, owns and
operates the American Queen, Mississippi Queen and Delta Queen steamboats which
conduct overnight cruise operations on certain U.S. inland waterways ("Delta
Queen"). Delta Queen also owned and operated the Maison Dupuy Hotel (the
"Hotel") located in New Orleans, prior to its sale in October 1996. American
Hawaii Cruises, through its subsidiaries owns and operates the S.S. Independence
steamship providing overnight cruises among the Hawaiian Islands. American
Hawaii also owned the S.S. Constitution steamship which was removed from service
in June 1995 and was sold on November 4, 1997.

PRINCIPLES OF CONSOLIDATION

The accompanying Consolidated Financial Statements include the accounts of
American Classic Voyages Co. ("AMCV") and its wholly owned subsidiaries, The
Delta Queen Steamboat Co. ("DQSC"), and Great Hawaiian Cruise Line, Inc.
("GHCL") (collectively with such subsidiaries, the "Company"). The accompanying
Consolidated Financial Statements have been prepared in accordance with
generally accepted accounting principles. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain previously
reported amounts have been reclassified to conform to the 1998 presentation.

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 liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

All highly liquid investments purchased with an original maturity of three
months or less are considered cash equivalents.

RESTRICTED SHORT-TERM INVESTMENTS

As of December 31, 1998 and 1997, restricted short-term investments
reflected cash pledged as collateral on outstanding letters of credit related to
certain contracts with vendors.

INVENTORIES

Inventories consists of provisions, supplies, fuel and gift shop
merchandise carried at the lower of cost (weighted-average) or market.

PREPAID AIR TICKETS

Prepaid air tickets consists of air tickets purchased by the Company and
resold to passengers in advance of sailings.

F-7
<PAGE> 55
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment primarily consists of vessels and leasehold
improvements which are recorded at cost. Construction-in-progress represents
expenditures for the vessels under construction, renovation, lay up and/or
drydock. Depreciation is computed using the straight-line method based upon the
estimated useful lives of the various classes of assets ranging from 3 to 40
years. Lay-up and drydock expenditures relating to vessel improvements or
betterments are capitalized. In addition, lay-up and drydock expenditures
relating to cleaning, repairs and maintenance are accrued evenly over the period
to the next scheduled lay-up and/or drydock and are included in other accrued
liabilities. Interest costs incurred during vessel construction periods were
capitalized into the cost of the related vessels. The Company reviews long-lived
assets, identifiable intangibles, goodwill, and reserves for impairment whenever
events or changes in circumstances indicate the carrying amount of the assets
may not be fully recoverable. In 1997, the Company reduced the cost of the S.S.
Constitution to its salvage value as further discussed in Note 4.

GOODWILL

In August 1993, the Company acquired substantially all the assets and
certain liabilities of American Global Line Inc. ("the GHCL Acquisition"). The
GHCL Acquisition was accounted for as a purchase. In connection with this
purchase, goodwill was recorded for the excess of purchase price over the fair
value of the net assets acquired and was being amortized over its estimated
useful life of 25 years using the straight-line method. In 1996, in connection
with its decision not to return the S.S. Constitution to service, the Company
wrote-off the remaining goodwill balance (see Note 4). Amortization expense for
1996 was $52,000.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the expected future
tax consequences of temporary differences between carrying amounts and the tax
bases of other assets and liabilities.

REVENUE AND EXPENSE RECOGNITION

The Company generally receives passenger fares up to 60 days prior to the
cruise date. Prepaid passenger fares are deferred and recognized as revenue
during the associated cruise. The Company is self-insured in respect of
guaranteeing the Company's passenger cruise deposits. Advertising costs are
expensed as incurred and are included in selling expense.

EARNINGS PER SHARE INFORMATION

Basic earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding. Diluted earnings per share
is computed in a similar manner except that the denominator is increased to
include dilutive potential common shares from stock options and stock units. See
Note 2 for a reconciliation of basic and diluted earnings per share.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include restricted short-term
investments, accounts receivable, accounts payable, other accrued expenses and
long-term debt. At December 31, 1998 and 1997, the fair values of all financial
instruments were not materially different from their carrying or contract
values.

STOCK-BASED COMPENSATION PLANS

The Company has elected to account for employee stock-based compensation
plans in accordance with Accounting Principles Board Opinion No. 25, as
permitted under Statement of Financial Standards

F-8
<PAGE> 56
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

("SFAS") No. 123, "Accounting for Stock-Based Compensation". See Note 10 for pro
forma effect for the fair value accounting method, as defined in SFAS No. 123.

NEW ACCOUNTING PRONOUNCEMENT

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosure about Segments of an Enterprise and Related Information", which
requires the reporting of certain information about operating segments and
related disclosures about products and services, geographic areas, and major
customers. The Company has reviewed SFAS 131 and has determined that the Company
operates as a single business segment.

RISK AND UNCERTAINTIES

The Company is subject to varying degrees of risk and uncertainty. The
Company insures its vessels and other business assets against insurable risks in
a manner it deems appropriate. The Company believes there is no concentration of
risk with any single customer or supplier, or small group of customers or
suppliers, whose failure or non-performance would materially affect the
Company's results.

NOTE 2. EARNINGS PER SHARE

The earnings per share reconciliations presented below for the years ended
December 31, 1998 and 1997 have been prepared pursuant to the requirements of
SFAS No. 128 (in thousands, except per share amount):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997
------------------------------- -------------------------------
PER PER
NUMERATOR DENOMINATOR SHARE NUMERATOR DENOMINATOR SHARE
--------- ----------- ----- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share.............. $157 14,137 $0.01 $2,429 13,952 $0.17
===== =====
Additional shares assuming exercise of
dilutive stock options and immediate
vesting of stock units.............. -- 640 -- 386
---- ------ ------ ------
Diluted earnings per share............ $157 14,777 $0.01 $2,429 14,338 $0.17
==== ====== ===== ====== ====== =====
</TABLE>

For the years ended December 31, 1998 and 1997, options to purchase 858,000
and 523,000 shares of common stock, respectively, at prices ranging from $15.00
to $20.00 were outstanding during 1998 and 1997, but were not included in the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market prices of the common shares.

As the Company reported a net loss for the year ended December 31, 1996,
diluted earnings per share was computed in the same manner as basic earnings per
share. Therefore, at December 31, 1996, outstanding options to purchase
1,730,553 shares of common stock at prices ranging from $3.25 to $20.00, were
not included in the computation of diluted earnings per share.

F-9
<PAGE> 57
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consisted of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Vessels..................................................... $218,649 $211,231
Buildings................................................... 7,704 8,590
Construction-in-progress.................................... 813 2,674
Other....................................................... 10,756 8,003
-------- --------
237,922 230,498
Less accumulated depreciation............................. (75,793) (59,393)
-------- --------
$162,129 $171,105
======== ========
</TABLE>

At December 31, 1998, other property and equipment included $3.0 million of
technical consulting and design fees related to capacity expansion at American
Hawaii and Delta Queen. During 1998, $1.4 million of leasehold improvements were
written-off along with $0.5 million of related accumulated depreciation upon the
amendment to the lease covering the Company's Chicago headquarters facilities.
This write-off was offset by a receivable from the landlord for the value of the
undepreciated leasehold improvements (see Note 9 for further information).
During 1997, $0.8 million of fully depreciated assets that were no longer in use
were written-off along with the related accumulated depreciation.

NOTE 4. IMPAIRMENT WRITE-DOWN

The S.S. Constitution was removed from service on June 27, 1995 and was
placed in wet berth at a shipyard in Portland, Oregon. In 1996, after evaluating
the scope and cost of the S.S. Constitution reconstruction project as well as
considering various alternatives, the Company decided not to renovate or return
the S.S. Constitution to service. The Company recognized an impairment
write-down of $38.4 million, composed of (i) $36.1 million directly related to
the write-down of the vessel and its allocated goodwill to an estimated salvage
value of $2.5 million, and (ii) $2.3 million which represented the remaining
goodwill balance from the GHCL Acquisition. The Company reserved for the
estimated costs to be incurred on behalf of the S.S. Constitution until its
eventual disposition.

On November 4, 1997, the Company sold the vessel for net sale proceeds of
$1.8 million and as such, the salvage value of the vessel was written down from
$2.5 million to $1.8 million. This write-down was offset by a reduction in the
reserve set-up for the estimated costs to be incurred on behalf of the vessel,
as mentioned above.

NOTE 5. DISPOSITION OF ASSETS

In October 1996, the Company sold its subsidiary which owned the Hotel in
New Orleans for $22.0 million in cash. In addition, the Company entered into a
Profit Participation Agreement with the buyer which provided for future payments
based on the future performance of the Hotel. The agreement was terminated in
February 1998 when the Company received final proceeds of $0.3 million from the
buyer.

Upon the sale of the Hotel, the Company paid down its then outstanding
borrowings, which were $9.5 million under its prior credit agreement with a
group of financial institutions with The Chase Manhattan Bank, as agent (the
"Credit Agreement"). The balance of the Hotel sale proceeds were used for
general corporate purposes.

F-10
<PAGE> 58
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6. LONG-TERM DEBT

Long-term debt consists of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
U.S. Government Guaranteed Ship Financing Note, American
Queen Series, LIBOR+0.25% floating rate notes due
semi-annually beginning February 24, 1996 through August
24, 2005.................................................. $16,809 $19,233
U.S. Government Guaranteed Ship Financing Bond, American
Queen Series, 7.68% fixed rate, sinking fund bonds due
semi-annually beginning February 24, 2006 through June 2,
2020...................................................... 36,198 36,198
U.S. Government Guaranteed Ship Financing Note, S.S.
Independence Series A, LIBOR+0.27% floating rate notes due
semi-annually beginning June 7, 1996 through December 7,
2005...................................................... 9,248 10,570
U.S. Government Guaranteed Ship Financing Bond, S.S.
Independence Series A, 6.84% fixed rate sinking fund bonds
due semi-annually beginning June 7, 2006 through December
7, 2015................................................... 13,215 13,215
U.S. Government Guaranteed Ship Financing Note, S.S.
Independence Series B, LIBOR+0.27% floating rate notes due
semi-annually beginning December 7, 1996 through December
7, 2005................................................... 2,478 2,832
U.S. Government Guaranteed Ship Financing Bond, S.S.
Independence Series B, 7.46% fixed rate sinking fund bonds
due semi-annually beginning June 7, 2006 through December
7, 2015................................................... 3,540 3,540
------- -------
81,488 85,588
Less current portion................................... 4,100 4,100
------- -------
$77,388 $81,488
======= =======
</TABLE>

Required principal payments on long-term debt over the next five years are
$4.1 million for each of the years from 1999 to 2003. For the years ended
December 31, 1998 and 1997, the weighted-average interest rate on outstanding
borrowings was approximately 7.0% and 6.9%, respectively.

The American Queen Series and the S.S. Independence Series A and B debt are
guaranteed by the U.S. Government through the Maritime Administration ("MARAD")
and are secured by first mortgages on the American Queen and the S.S.
Independence, respectively. These Series contain various covenants which, among
other things, require the compliance with certain financial ratios at the end of
each year.

Upon the issuance of the S.S. Independence Series A and B debt in 1995 and
1996, $2.2 million was deposited into an account representing six months of debt
service. The debt service deposit was released to the Company in 1997 as GHCL
had met the required cash flow and debt to equity ratios as of December 31,
1996.

As of December 31, 1996, the Company's restricted short-term investments
included an escrow account for remaining American Queen construction costs in
the amount of $0.3 million, which was released to the Company in October 1997
and was used to pay down the principal balance of the American Queen Series.

As of December 31, 1998, the Company had a revolving credit facility under
the Credit Agreement which provided for borrowings of up to $15.0 million with a
final maturity on March 31, 1999. In 1998, no borrowings were outstanding at any
time under this facility. Borrowings bear interest, at the option of the
Company, equal to either a LIBOR rate or prime rate basis. The Company is also
required to pay a commitment fee on the unused portion of the facility at a rate
ranging from 0.375% to 0.500% per annum. The Credit Agreement is guaranteed by
AMCV and secured by substantially all the assets of DQSC, excluding

F-11
<PAGE> 59
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the American Queen. The Credit Agreement contains various limitations,
restrictions and financial covenants which, among other things, requires
maintenance of certain financial ratios, restricts additional indebtedness,
limits intercompany advances to $20.0 million and limits the payment of
dividends from DQSC to AMCV to $2.0 million per annum. See Note 12 for further
information.

As of December 31, 1998, the Company complied with all covenants under its
various debt agreements.

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under operating leases.
The Company currently leases approximately 21,000 square feet from a partnership
controlled by an affiliated company, at an annual rate of approximately $99,000.
In addition, the DQSC and GHCL headquarters is maintained pursuant to an
assignment from local authorities. The Company paid approximately $165,000 and
$160,000 under this arrangement for the years ended December 31, 1998 and 1997,
respectively. This arrangement may be terminated at any time by the local
authorities upon determination that a superior maritime use is deemed to exist.
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $842,000, $916,000 and $848,000, respectively.

The future minimum lease commitments for the next five years and thereafter
under all noncancelable operating leases, excluding assignment payments, as of
December 31, 1998, are $322,000, $374,000, $396,000, $348,000, $323,000 and
$243,000.

The Company is subject to litigation in the ordinary course of business. In
the opinion of management, the outcome of such litigation will not have a
material effect on the results of operations or financial position of the
Company as most is covered by insurance, net of a deductible.

NOTE 8. INCOME TAXES

The provision (benefit) for income taxes consisted of (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
----- ------ -------
<S> <C> <C> <C>
Current tax provision (benefit):
Federal................................................... $ -- $ -- $ --
State..................................................... 213 163 (458)
----- ------ -------
213 163 (458)
----- ------ -------
Deferred tax provision (benefit):
Federal................................................... 89 1,323 (9,073)
State..................................................... (195) 134 1,232
----- ------ -------
(106) 1,457 (7,841)
----- ------ -------
Total tax provision (benefit).......................... $ 107 $1,620 $(8,299)
===== ====== =======
</TABLE>

F-12
<PAGE> 60
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision (benefit) for income taxes differs from amounts computed by
applying the U.S. statutory Federal income tax rate. The differences are
summarized as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
----- ------ -------
<S> <C> <C> <C>
35% 35% 35%
----- ------ -------
Tax provision (benefit) at statutory rate................... $ 93 $1,417 $(9,076)
State income taxes (net of Federal benefit)................. 12 193 503
Non-deductible expenses..................................... 221 313 121
Other....................................................... (219) (303) 153
----- ------ -------
Total tax provision (benefit).......................... $ 107 $1,620 $(8,299)
===== ====== =======
</TABLE>

The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Insurance costs and reserves.............................. $ 1,097 $ 1,198
Non-recurring executive compensation...................... 490 809
Benefit cost accruals..................................... 491 483
Alternative minimum tax credit carryforwards.............. 2,196 2,196
Drydock accruals.......................................... 967 820
Net operating loss carryforward........................... 35,090 33,041
Goodwill, due to basis differences........................ 1,270 1,248
------- -------
Total deferred tax assets.............................. 41,601 39,795
------- -------
Deferred tax liabilities:
Capital construction fund................................. 1,237 1,472
Property plant and equipment, due to basis differences and
depreciation, net...................................... 30,353 28,759
------- -------
Total deferred tax liabilities......................... 31,590 30,231
------- -------
Net deferred tax asset................................. $10,011 $ 9,564
======= =======
</TABLE>

At December 31, 1998, consolidated net operating losses of approximately
$3.0 million, $10.0 million, $36.0 million, $14.0 million, $29.0 million and
$5.0 million expiring in 2008, 2009, 2010, 2011, 2012 and 2018, respectively,
were available to offset future taxable income of the Company.

In 1993, the Company established a capital construction fund (the "CCF")
pursuant to Section 607 of the Merchant Marine Act of 1936, into which it
deposited approximately $12.0 million. This fund was primarily used to pay
liabilities assumed in the Acquisition and allowed the Company to accelerate
recognition of certain deductions for qualified capital expenditures for income
tax purposes. As a result of the CCF, the Company has approximately a $2.2
million alternative minimum tax credit carryforward available with no expiration
date.

NOTE 9. RELATED PARTIES

As of December 31, 1998, the largest stockholders of the Company's common
stock were certain affiliates of Equity Group Investments ("EGI"), including EGI
Holdings, Inc. and EGIL Investments, Inc., which owned an aggregate of 53% of
the Company's common stock. EGI and its affiliates provided certain
administrative support services for the Company, including but not limited to
legal, accounting, tax, benefit and insurance brokerage services. In addition,
as previously mentioned in Note 7, the Company leases office

F-13
<PAGE> 61
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

space from an affiliate of EGI. In the aggregate, the fees charged by EGI and
its affiliates for such services and rent were approximately $0.4 million, $0.7
million, and $1.5 million for the years ended December 31, 1998, 1997 and 1996,
respectively. These arrangements with EGI and its affiliates are subject to
approval by a majority of the non-affiliated members of the Company's Board of
Directors, and are conducted on terms no less favorable to the Company than
could be obtained from unaffiliated third parties.

In late 1997, the Company subleased approximately 13,000 square feet of
Chicago office space (the "sublease area") to Equity Office Properties Trust, an
affiliate of EGI. For the years ended December 31, 1998 and 1997, approximately
$78,000 and $23,000, respectively, was received by the Company under the
sublease at a rate which it believes to be competitive for comparable space for
an unaffiliated party. In mid-1998, the Company entered into an amended lease
agreement covering the Chicago office space whereby the subleased area was
removed from the lease. The Company was granted a $0.6 million reduction in
future rent on its remaining office space, representing the value of
undepreciated leasehold improvements of the sublease area.

The Company paid approximately $768,000 for legal services to Preston Gates
Ellis & Rouvelas Meeds ("Preston Gates") during 1998. Mr. Rouvelas, a Director
of the Company, is a partner of Preston Gates. The Company paid approximately
$113,000 for legal services to Watanabe, Ing & Kawashima ("WIK") during 1998.
Mr. Watanabe, a Director of the Company, is a partner of WIK.

NOTE 10. EMPLOYEE BENEFIT PLANS

RETIREMENT PLANS

The Company's non-union employees are eligible to participate in the
ADVANTAGE Retirement Savings Plan (as amended and restated October 1, 1987,
"ADVANTAGE Plan"), a profit-sharing plan with a salary deferral feature that
qualifies under Section 401 of the Internal Revenue Code of 1986, as amended.
The ADVANTAGE Plan allows participants to defer a portion of their eligible
compensation on a pre-tax basis. Participant contributions are 100% vested at
the time the contribution is made. Matching contributions are made by the
Company in an amount equal to 100% of the amount of a participant's contribution
with a maximum of 4% of such participant's annual eligible wages, subject to
Internal Revenue Service maximums. In addition, the Company may make
discretionary profit-sharing contributions which are allocated to eligible
employees based on eligible compensation. Company contributions vest over a
five-year period. Matching and profit-sharing contributions approximated
$497,000, $550,000 and $708,000 for the years ended December 31, 1998, 1997 and
1996, respectively.

The Company also maintains a non-qualified deferred compensation plan (the
"Restoration Plan"), effective August 1, 1998. The purpose of the Restoration
Plan is to provide deferrals for eligible employees that may not be made to the
ADVANTAGE Plan because of certain restrictions and limitations in the Code.
Benefits will be paid from employee contributions. The Company's liability under
the Restoration Plan as of December 31, 1998 was $30,000.

The Company also contributes, under collective bargaining agreements, to
funds designed to provide pension and health benefits for its union employees.
The Company contributed $2,203,000, $2,147,000 and $2,337,000 to such plans for
the years ended December 31, 1998, 1997 and 1996, respectively.

EMPLOYEE STOCK PURCHASE PLAN

The American Classic Voyages Co. 1995 Employee Stock Purchase Plan (the
"ESP Plan") allows eligible employees to purchase common stock of the Company,
through payroll deductions, at a discounted price from the market price. The
exercise price under the ESP Plan is deemed to be 85% of the lesser of (i) the
market value of the Company's common stock on the last business day of the
offering period or (ii) the greater of (a) the average market value during the
offering period and (b) the market value on the

F-14
<PAGE> 62
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

first business day of the offering period. There is a maximum of 500,000 shares
authorized under the ESP Plan. There were 11,622, 9,718 and 12,297 shares issued
during 1998, 1997 and 1996, respectively, at an average price of $13.38, $10.70
and $7.13 per share for 1998, 1997 and 1996, respectively. At December 31, 1998,
approximately 461,000 shares were available for offering under the ESP Plan.

STOCK-BASED COMPENSATION PLANS

The Company granted, as of January 1, 1992, fully vested options to the
Company's then senior executive officers, to purchase shares of common stock, in
lieu of bonus payments (the "Executive Stock Option Plan"). These options are
exercisable, in whole or in part, at any time prior to January 2, 2002, at an
exercise price of $3.25 per share.

The Company adopted the 1992 Stock Option Plan effective January 2, 1992
(the "1992 Plan"). Pursuant to the 1992 Plan, certain officers, directors, key
employees, and consultants will be offered the opportunity to acquire shares of
the Company's common stock via stock option grants. In addition, the 1992 Plan
provides for the granting of stock units and stock appreciation rights ("SARs").
The exercise price of options granted under the 1992 Plan cannot be less than
the fair market value of the Company's common stock at the date of grant. As of
December 31, 1998, 2,703,198 shares of the Company's common stock have been
reserved for issuance under the 1992 Plan. Options granted under the 1992 Plan
generally vest over a three-year period and expire 10 years from the date of
grant. The per share weighted-average fair value of stock options granted during
1998, 1997 and 1996 was $7.86, $4.25 and $3.48, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1998, 1997 and 1996 respectively: expected
volatility of 53%, 52% and 50%, risk-free interest rates of 4.6%, 5.7% and 6.0%,
expected lives of three years and dividend yield of 0% for all years.

In 1998 and 1997, under the terms of the 1992 Plan, the Company paid each
non-employee director stock units as an annual retainer. The stock units in
general vest at a rate of 25% on the first day of each calendar quarter. The
fully vested stock units will be converted into an equal number of common stock
shares at any time as selected by each director prior to each grant.

In 1995, the Company granted SARs to key employees. All of the SARs were
canceled in 1996.

During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock Based Compensation," which defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the method of accounting
prescribed by APB No. 25, "Accounting for Stock Issued to Employees." Entities
electing to remain with the accounting in APB No. 25 must make pro forma
disclosures of net income and earnings per share, as if the fair value based
method of accounting defined in this Statement has been applied.

The Company applies APB No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the grant date for its stock options under SFAS No. 123, the
Company's net

F-15
<PAGE> 63
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

income (loss) and earnings (loss) per share would have been adjusted to the pro
forma amounts indicated below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
1998 1997 1996
------- ------ --------
<S> <C> <C> <C> <C>
Net income (loss)................................. As reported $ 157 $2,429 $(17,636)
Pro forma (2,487) 1,422 (18,033)
Basic earnings (loss) per share................... As reported $ 0.01 $ 0.17 $ (1.28)
Pro forma (0.18) 0.10 (1.31)
Diluted earnings (loss) per share................. As reported $ 0.01 $ 0.17 $ (1.28)
Pro forma (0.18) 0.10 (1.31)
</TABLE>

Pro forma net income (loss) and earnings (loss) per share reflect only
options granted since 1995. Therefore, the full impact of calculating
compensation cost for stock options under SFAS No. 123 is not reflected in the
pro forma amounts presented above because compensation cost is reflected over
the options' vesting period which is generally three years and compensation cost
for options granted prior to January 1, 1995 is not considered.

The table below summarizes the activities for 1996, 1997 and 1998:

<TABLE>
<CAPTION>
EXECUTIVE STOCK
OPTION PLAN 1992 PLAN
--------------- ------------------------------------- WEIGHTED-AVERAGE
SHARES SHARES SHARES SHARES EXERCISE PRICE
SUBJECT TO SUBJECT TO SUBJECT TO SUBJECT TO FOR OPTIONS
OPTIONS OPTIONS STOCK UNITS SARS AND SARS ONLY
--------------- ---------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1995....................... 323,971 1,179,410 -- 280,000 $13.04
Granted.................... -- 895,680 -- -- 9.50
Canceled................... -- (582,668) -- (280,000) 15.36
Exercised.................. (85,840) -- -- -- 3.25
------- --------- ------ -------- ------
Balance at December 31,
1996....................... 238,131 1,492,422 -- -- 10.54
Granted.................... -- 62,000 24,500 -- 12.36
Canceled................... -- (71,753) (1,450) -- 11.43
Exercised.................. (43,006) (60,290) -- -- 7.90
Converted.................. -- -- (2,650) -- --
------- --------- ------ -------- ------
Balance at December 31,
1997....................... 195,125 1,422,379 20,400 -- 10.74
Granted.................... -- 1,618,000 14,000 -- 17.10
Canceled................... (19,512) (151,236) -- -- 13.44
Exercised.................. (50,000) (215,047) -- -- 9.29
Converted.................. -- -- (7,000) -- --
------- --------- ------ -------- ------
Balance at December 31,
1998....................... 125,613 2,674,096 27,400 -- $14.39
======= ========= ====== ======== ======
</TABLE>

The following table summarizes information about options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED-
AVERAGE
REMAINING AVERAGE EXERCISABLE AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE AT EXERCISE
RANGE OF AT 12/31/98 LIFE PRICE 12/31/98 PRICE
EXERCISE PRICE ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 3.25................................... 125,613 3 $ 3.25 125,613 $ 3.25
7.97 - 9.88.......................... 441,855 8 8.96 365,997 8.88
10.25 - 15.00.......................... 408,451 7 11.65 370,446 11.70
15.32 - 20.00.......................... 1,823,790 9 17.08 637,123 17.16
--------- -- ------ --------- ------
$ 3.25 - $20.00.......................... 2,799,709 8 $14.39 1,499,179 $12.63
========= == ====== ========= ======
</TABLE>

F-16
<PAGE> 64
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11. UNAUDITED QUARTERLY RESULTS OF OPERATIONS

Summarized unaudited quarterly results of operations for 1998 and 1997 are
as follows:

<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998 1998
--------- -------- ------------- ------------
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues....................................... $40,668 $53,535 $50,920 $47,102
Gross profit................................... 11,209 20,562 18,184 16,675
Operating (loss) income........................ (6,143) 4,037 3,798 3,794
Pre-tax (loss) income.......................... (7,262) 2,614 2,424 2,488
Net (loss) income.............................. (4,362) 1,574 1,454 1,491
Basic (loss) earnings per share................ (0.31) 0.11 0.10 0.10
Diluted (loss) earnings per share.............. (0.31) 0.11 0.10 0.10
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998 1998
--------- -------- ------------- ------------
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues....................................... $40,372 $42,356 $49,746 $45,410
Gross profit................................... 13,233 17,661 19,606 16,089
Operating (loss) income........................ (1,869) 3,451 6,098 2,304
Pre-tax (loss) income.......................... (3,314) 1,962 4,617 784
Net (loss) income.............................. (1,988) 1,177 2,770 470
Basic (loss) earnings per share................ (0.14) 0.08 0.20 0.03
Diluted (loss) earnings per share.............. (0.14) 0.08 0.19 0.03
</TABLE>

The sum of quarterly (loss) earnings per common share may differ from
full-year amounts due to changes in the number of shares outstanding during the
year.

NOTE 12. SUBSEQUENT EVENTS (UNAUDITED)

REGISTRATION STATEMENT

On February 22, 1999, the Company filed a Registration Statement on Form
S-3 with the Securities and Exchange Commission relating to a proposed public
offering of up to 3,450,000 shares of common stock. The expected proceeds of
this issuance will be used to fund capacity expansion in the Hawaiian cruise
market. No assurances can be given, however, that this offering will be
consummated.

F-17
<PAGE> 65
AMERICAN CLASSIC VOYAGES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CHASE CREDIT AGREEMENT

In the first quarter of 1999, DQSC, as borrower, closed on a new long-term
credit facility with The Chase Manhattan Bank, as agent, and several participant
banks (the "Chase Facility"). The Chase Facility, which is a $70 million
revolving credit facility maturing in February 2004, replaces the Credit
Facility. Borrowings under the new facility bear interest at a rate, at the
option of the Company, equal to either (1) the greater of Chase's prime rate or
certain alternative base rates plus a margin ranging from 0.50% to 1.50%, or (2)
the London Interbank Offered Rate plus a margin ranging from 1.50% to 2.50%. The
Company is also required to pay an unused commitment fee at a rate of 0.50% per
annum.

The Chase Facility will be used to fund the acquisition of the fourth Delta
Queen riverboat, the construction of the first two coastal vessels, and Delta
Queen working capital. The new facility is secured by all of the assets of DQSC
except the American Queen, and has various limitations and restrictions on
investments, additional indebtedness, the construction costs of the new vessels,
and other capital expenditures. The Chase Facility also limits dividends by
DQSC, when aggregated with investments and certain other payments, to amounts
ranging from $5 million to $15 million per annum. DQSC is required to comply
with certain financial covenants, including maintenance of minimum interest
coverage ratios and maximum leverage ratios.

CONSTRUCTION CONTRACT

On March 9, 1999, the Company executed definitive agreements with Ingalls
Shipbuilding, Inc. to construct at least two new vessels for the Hawaii cruise
market. The new Hawaii cruise ships will have the capacity to accommodate
approximately 1,900 passengers each and are currently estimated to cost $440
million each, plus approximately $30 million for furnishings, fixtures and
equipment. The contract provides that Ingalls Shipbuilding will deliver the
first new ship in January 2003 and the second ship in January 2004. In addition,
the shipbuilding contract provides the Company an option to build up to four
additional vessels. The estimated contract price of the first option vessel is
$487 million and the contract price for the subsequent option vessels will be
negotiated between the parties. Ingalls Shipbuilding will provide a limited
warranty for the design, material and workmanship of each vessel for one year
after delivery.

F-18
<PAGE> 66

PROSPECTUS

AMERICAN CLASSIC VOYAGES CO.
COMMON STOCK, PREFERRED STOCK AND SUBORDINATED DEBT SECURITIES

AMCV CAPITAL TRUST I
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED BY AMERICAN CLASSIC VOYAGES CO.

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

We will provide the specific terms of the particular securities issued
under this prospectus in a prospectus supplement for each security. You should
read this prospectus and any prospectus supplement carefully before investing.

The amount of the securities issued under this prospectus will be limited
to a total of U.S. $250,000,000 or the equivalent amount if denominated in
foreign currencies.

Our common stock is quoted on the Nasdaq National Market under the symbol
"AMCV."

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this prospectus is January 28, 2000.
<PAGE> 67

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 1
Where You Can Find Additional Information................... 1
Incorporation by Reference.................................. 1
The Securities We May Offer................................. 2
American Classic Voyages Co. ............................... 3
The AMCV Trust.............................................. 3
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred and Preference
Dividend Requirements..................................... 5
Description of Subordinated Debt Securities................. 5
Description of Capital Stock................................ 16
Description of Preferred Securities of the AMCV Trust....... 18
Description of Guarantees................................... 20
Plan of Distribution........................................ 23
Special Note Regarding Forward-Looking Statements........... 25
Legal Matters............................................... 25
Experts..................................................... 26
</TABLE>
<PAGE> 68

ABOUT THIS PROSPECTUS

In this prospectus, American Classic Voyages Co. may be referred to as
"American Classic Voyages" or "we." This prospectus is part of a registration
statement that we and AMCV Capital Trust I, referred to in this prospectus as
the "AMCV Trust," filed with the Securities and Exchange Commission utilizing a
"shelf" registration process. Under this shelf process, we may sell any
combination of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $250,000,000. This prospectus provides
you with a general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with additional
information described under the heading "Where You Can Find Additional
Information."

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We file reports, proxy statements and other information with the SEC. Those
reports, proxy statements and other information may be obtained:

- At the Public Reference Room of the SEC, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549;

- At the public reference facilities at the SEC's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 or 500
West Madison Street, Suite 1400, Chicago, Illinois 60661;

- By writing to the SEC, Public Reference Section, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549 or calling the SEC at
1-800-SEC-0330;

- At the offices of the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street, N.W., Washington, DC 20006; or

- From the Internet site maintained by the SEC at http://www.sec.gov which
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.

Some locations may charge prescribed or modest fees for copies.

We and the AMCV Trust have filed with the SEC a registration statement on
Form S-3 under the Securities Act of 1933 covering the securities offered by
this prospectus. As permitted by the SEC, this prospectus, which constitutes a
part of the registration statement, does not contain all the information
included in the registration statement. Such additional information may be
obtained from the locations described above. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete. You should refer to the contract or other document for all
the details.

INCORPORATION BY REFERENCE

We have filed the following documents with the SEC under the Exchange Act,
which are incorporated herein by reference:

1. Annual Report on Form 10-K, for the year ended December 31, 1998;

2. Quarterly Reports on Form 10-Q for the period ended March 31, 1999,
as amended on Form 10-Q/A dated November 9, 1999, for the period ended June
30, 1999, as amended on Form 10-Q/A dated November 9, 1999 and for the
period ended September 30, 1999;

3. Current Reports on Form 8-K dated February 22, 1999, March 26,
1999, as amended on Form 8-K/A dated April 21, 1999, April 14, 1999,
November 3, 1999 and January 14, 2000;
<PAGE> 69

4. Information Statement on Schedule 14C dated March 8, 1999; and

5. The description of the common stock, contained in our Registration
Statement on Form S-1 (Registration No. 33-45139), all amendments thereto
and reports filed for the purpose of updating such description.

All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act (1) subsequent to the initial filing of this prospectus and
prior to the date it is declared effective and (2) subsequent to the date of
this prospectus and prior to the termination of this offering are incorporated
by reference and become a part of this prospectus and are to be a part hereof
from their date of filing.

Any statement contained in this prospectus or in a document incorporated by
reference is modified or superseded for purposes of this prospectus to the
extent that a statement contained in any such document modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.

On written or telephone request, we will provide free of charge to each
person, including any beneficial owner, to whom a copy of this prospectus is
delivered, a copy of any or all of the documents incorporated by reference in
this prospectus but not delivered with this prospectus. Written or telephone
requests for such copies should be directed to our principal office: American
Classic Voyages Co., Two North Riverside Plaza, Suite 200, Chicago, Illinois
60606, Attention: Investor Relations, Telephone: (312) 258-1890.

THE SECURITIES WE MAY OFFER

We may offer and sell from time to time, in one or more series,

- common stock,

- preferred stock, which may be convertible into common stock or other of
our securities, and

- subordinated debt securities, which may be convertible into common stock
or other of our securities.

In addition, the AMCV Trust may offer, from time to time, preferred
securities representing preferred undivided beneficial interests in the assets
of the AMCV Trust, referred to in this prospectus as "preferred securities." The
preferred securities may be convertible into our common stock. We will guarantee
the payment of periodic cash distributions on preferred securities out of moneys
held by the AMCV Trust, and payments on liquidation, redemption or otherwise
with respect to the preferred securities to the extent described in this
prospectus or the applicable prospectus supplement. We will directly or
indirectly acquire common securities representing undivided beneficial interests
in the assets of the AMCV Trust, referred to in this prospectus as "common
securities." We may issue subordinated debt securities in one or more series to
the AMCV Trust as part of the investment of the proceeds from the offering of
preferred securities and common securities of the AMCV Trust. The subordinated
debt securities purchased by the AMCV Trust may be subsequently distributed on a
proportionate basis to holders of preferred securities and common securities in
connection with the dissolution of the AMCV Trust. If the preferred securities
are convertible into our common stock, the subordinated debt securities that we
issue to the AMCV Trust will also be convertible into our common stock.

2
<PAGE> 70

AMERICAN CLASSIC VOYAGES CO.

American Classic Voyages Co. is the leading provider of overnight passenger
cruises among the Hawaiian Islands and on the Mississippi River system. We
currently operate two cruise lines under the names American Hawaii Cruises and
The Delta Queen Steamboat Co. American Hawaii offers year-round cruises among
the Hawaiian Islands aboard the S.S. Independence, which has 867 passenger
berths. A berth is the industry term for a bed or sleeping space. Delta Queen
operates year-round cruises on three authentic paddlewheel riverboats, the Delta
Queen, Mississippi Queen and American Queen, which have a total of 1,026
passenger berths. Delta Queen cruises provide varied itineraries on the
Mississippi River system featuring the culture and history of heartland America.

We are preparing to operate a third cruise line, United States Lines, in
Hawaii, with newly built cruise ships. We are currently building two new cruise
ships for United States Lines to operate in Hawaii. We have also agreed to
purchase and will renovate an existing cruise ship for United States Lines to
operate in Hawaii. In addition, we are building new coastal cruise ships for
Delta Queen to operate on the U.S. coastal waterways and we are converting a
ship we recently purchased for Delta Queen to operate on the Columbia River
system in the Pacific Northwest.

We are the largest owner and operator of U.S. built, owned and crewed
overnight passenger vessels, documented as "U.S.-flagged" vessels. U.S. law
requires our foreign-flagged competitors to include at least one foreign port in
each itinerary. We, on the other hand, can offer itineraries featuring only U.S.
ports. This gives us a distinct competitive advantage in Hawaii because the
closest foreign port to Hawaii requires a four day sail across the Pacific
Ocean.

Our principal executive offices are located at Two North Riverside Plaza,
Suite 200, Chicago, Illinois 60606, (312) 258-1890.

THE AMCV TRUST

The AMCV Trust is a statutory business trust formed under Delaware law. The
AMCV Trust exists for the exclusive purposes of:

- issuing and selling the preferred securities and the common securities;

- using the proceeds from the sale of the preferred securities and common
securities to acquire our subordinated debt securities; and

- engaging in only those other activities that are related to those
purposes.

All of the common securities will be directly or indirectly owned by
American Classic Voyages. The common securities will rank equally, and payments
will be made proportionally, with the preferred securities, except that, if an
event of default under the declaration of trust of the AMCV Trust has occurred
and is continuing, the rights of the holders of the common securities to payment
of distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the preferred securities. We will
directly or indirectly acquire common securities in an amount equal to at least
3% of the total capital of the AMCV Trust.

The AMCV Trust has a perpetual term, but may be terminated as provided in
the declaration of trust. The AMCV Trust's business and affairs will be
conducted by the trustees appointed by us as the direct or indirect holder of
all of the common securities. We will be entitled to appoint, remove or replace
any of, or increase or reduce the number of, the trustees of the AMCV Trust. The
declaration of trust will set forth the duties and obligations of the trustees.
The majority of the trustees of the AMCV Trust will be employees or officers of
or persons who are affiliated with American Classic Voyages, who will be
referred to as "administrative trustees." One trustee of the AMCV Trust will be
an institution, referred to as the "property trustee," that is not affiliated
with American Classic Voyages and has a minimum amount of combined capital and
surplus of not less than $50,000,000, which will act as property trustee and as
indenture trustee for the purposes of compliance with the provisions of the
Trust Indenture Act of 1939,
3
<PAGE> 71

under the terms of the prospectus supplement. In addition, unless the property
trustee maintains a principal place of business in the State of Delaware and
otherwise meets the requirements of applicable law, one trustee of the AMCV
Trust will be an institution having a principal place of business in, or a
natural person resident of, the State of Delaware, referred to as the "Delaware
trustee." American Classic Voyages will pay all fees and expenses related to the
AMCV Trust and the offering of the preferred securities and the common
securities.

Unless otherwise specified in the applicable prospectus supplement, the
property trustee for the AMCV Trust will be The Bank of New York. Unless
otherwise specified in the applicable prospectus supplement, the Delaware
trustee for the AMCV Trust will be The Bank of New York (Delaware) and its
address in the State of Delaware is White Clay Center, Route 273, Newark,
Delaware, 19711. The principal place of business of the AMCV Trust is c/o
American Classic Voyages Co., Two North Riverside Plaza, Suite 200, Chicago,
Illinois, 60606 telephone (312) 258-1890.

4
<PAGE> 72

USE OF PROCEEDS

Unless otherwise indicated in the accompanying prospectus supplement, we
expect to use the net proceeds we receive from the sale of the securities
offered by this prospectus for general corporate purposes, which may include,
without limitation,

- financing the construction, conversion or renovation of additional cruise
ships,

- paying the purchase price, or any portion of the purchase price, for
vessels we may purchase, or that we have already purchased,

- repaying all, or a part of, our obligations to our lenders, or

- replacing third party guarantees of our obligations.

The proceeds from the sale of preferred securities by the AMCV Trust will be
invested in our subordinated debt securities. Any specific allocation of the
proceeds to a particular purpose that has been made at the date of any
prospectus supplement will be described in the prospectus supplement.

RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED AND
PREFERENCE STOCK DIVIDEND REQUIREMENTS

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
-------------------
1994 1995 1996 1997 1998 1998(C) 1999(C)
---- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and ratio
of earnings to combined fixed charges and
preferred and preference stock dividend
requirements(a)............................. (b) (b) (b) 1.56 1.04 (b) (b)
</TABLE>

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

(a) The ratio of earnings to combined fixed and preferred and preference stock
dividend requirements for the periods presented is the same as the ratio of
earnings to fixed charges since we have no outstanding preferred stock or
preference stock and, therefore, have no dividend requirements.

(b) No ratio is presented for 1994, 1995 and 1996, and the nine months ended
September 30, 1998 and 1999 as the earnings for these periods were
$4,966,000, $20,784,000, $25,934,000, $2,224,000, and $3,345,000,
respectively, less than the fixed charges.

(c) Because of the seasonal nature of our business, the ratio for the nine month
period may not necessarily be indicative of the ratio that will result for
the full year.

DESCRIPTION OF SUBORDINATED DEBT SECURITIES

We may offer one or more series of subordinated debt securities. Unless
otherwise specified in the applicable prospectus supplement, the subordinated
debt securities will be issued under the subordinated indenture or the junior
convertible subordinated indenture, in each case between us and the trustee
identified in the indenture, forms of which have been filed as exhibits to the
registration statement of which this prospectus forms a part. The subordinated
debt securities we will issue to the AMCV Trust will be issued under the junior
convertible subordinated indenture and all other subordinated debt securities
will be issued under the subordinated indenture.

We have summarized below the material provisions of the indentures and the
subordinated debt securities, or indicated which material provisions will be
described in the applicable prospectus supplement. These descriptions are only
summaries, and you should refer to the indentures which describe completely the
terms and definitions summarized below and contain additional information
regarding the subordinated debt securities.

5
<PAGE> 73

The subordinated debt securities will be unsecured obligations of American
Classic Voyages. The subordinated indenture does not limit the aggregate amount
of subordinated debt securities that we may issue, while the junior convertible
subordinated indenture will provide for the issuance of a single series of a
limited aggregate amount of subordinated debt securities. The indentures do not
limit the incurrence or issuance by us of other secured or unsecured debt. The
subordinated debt securities issued under the indentures will be subordinate and
junior in right of payment, to the extent and in the manner set forth in the
indentures, to all of our senior indebtedness. See "-- Subordination under the
Indentures."

The applicable prospectus supplement will describe the specific terms of
the series of subordinated debt securities being offered. The following terms
may be included:

- the title, designation and purchase price, of the subordinated debt
securities;

- whether the subordinated debt securities will be issued under the
subordinated indenture, the junior convertible subordinated indenture or
another indenture described in the prospectus supplement;

- any limit upon the aggregate principal amount of the subordinated debt
securities;

- the date or dates on which the principal of and premium, if any, on the
subordinated debt securities will mature or the method of determining or
resetting the date or dates;

- the rate or rates, which may be fixed or variable, at which the
subordinated debt securities will bear interest, if any, or the method of
calculating or resetting the rate or rates;

- the date or dates from which interest, if any, will accrue or the method
by which the date or dates will be determined;

- the date or dates on which interest, if any, will be payable and the
record date or dates for payment of interest;

- the place or places where principal of, premium, if any, and interest, if
any, on the subordinated debt securities will be payable;

- our right, if any, to defer payment of interest on subordinated debt
securities and the maximum length of any permitted deferral period;

- the period or periods within which, the price or prices at which, the
currency or currencies, including currency unit or units, in which, and
the terms and conditions upon which, the subordinated debt securities may
be redeemed, in whole or in part, at our option;

- our obligation, if any, to redeem or purchase the subordinated debt
securities under any sinking fund or similar provisions or upon the
happening of a specified event and the period or periods within which,
the price or prices at which and the other terms and conditions upon
which, the subordinated debt securities will be redeemed or purchased, in
whole or in part, under these obligations;

- the authorized denominations of the subordinated debt securities;

- the currency or currency unit for which subordinated debt securities may
be purchased or in which subordinated debt securities may be denominated
and/or the currency or currencies, including currency unit or units, in
which principal of, premium, if any, and interest, if any, on the
subordinated debt securities will be payable and whether we or the
holders of any subordinated debt securities may elect to receive payments
in respect of the subordinated debt securities in a currency or currency
unit other than that in which the subordinated debt securities are stated
to be payable;

- if other than the principal amount of the subordinated debt securities,
the portion of the principal amount of the subordinated debt securities
which will be payable upon declaration of the acceleration of the
maturity thereof or the method by which that portion will be determined;

- the person to whom any interest on any subordinated debt security will be
payable if other than the person in whose name the subordinated debt
security is registered on the applicable record date;
6
<PAGE> 74

- any addition to, or modification or deletion of, any event of default or
any of our covenants specified in the indenture for the subordinated debt
securities;

- the application, if any, of defeasance or covenant defeasance provisions
to the subordinated debt securities;

- whether the subordinated debt securities are to be issued in whole or in
part in the form of one or more temporary or permanent global securities
and, if so, the identity of the depositary for the global security or
securities;

- any federal income tax considerations applicable to holders of the
subordinated debt securities;

- whether the subordinated debt securities are convertible or exchangeable
into our common stock or other securities and any provisions relating to
the conversion or exchange; and

- any other special terms relating to the subordinated debt securities.

Unless otherwise specified in the applicable prospectus supplement, the
subordinated debt securities will not be listed on any securities exchange.
Subordinated debt securities will be issued in fully-registered form without
coupons.

If we issue subordinated debt securities to the AMCV Trust in connection
with the issuance of preferred securities by the trust, those subordinated debt
securities could be subsequently issued to holders of preferred securities if
the AMCV Trust is dissolved. We will only issue one series of subordinated debt
securities to the AMCV Trust in connection with an issuance of preferred
securities by the AMCV Trust.

Subordinated debt securities may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Federal income tax consequences
and special considerations applicable to these subordinated debt securities, or
to subordinated debt securities issued at par that are treated as having been
issued at a discount, will be described in the applicable prospectus supplement.

If the purchase price of any of the subordinated debt securities is payable
in one or more foreign currencies or currency units or if any subordinated debt
securities are denominated in one or more foreign currencies or currency units
or if the principal of, premium, if any, or interest, if any, on any
subordinated debt securities is payable in one or more foreign currencies or
currency units, or by reference to commodity prices, equity indices or other
factors, the restrictions, elections, federal income tax considerations,
specific terms and other information about the issue of subordinated debt
securities and the foreign currency or currency units or commodity prices,
equity indices or other factors will be set forth in the applicable prospectus
supplement. In general, holders of these series of subordinated debt securities
may receive a principal amount on any principal payment date, or a payment of
premium, if any, on any premium interest payment date or a payment of interest
on any interest payment date, that is greater than or less than the amount of
principal, premium, if any, or interest otherwise payable on the payment dates,
depending on the value on the payment dates of the applicable currency,
commodity, equity index or other factor.

PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE

Unless otherwise provided in the applicable prospectus supplement, payments
with respect to the subordinated debt securities will be made in the designated
currency at the office or agency maintained for that purpose that we may
designate from time to time, except that, at our option, interest payments, if
any, on subordinated debt securities in registered form may be made (1) by
checks mailed to the holders of subordinated debt securities entitled to receive
these payments at their registered addresses or (2) by wire transfer to an
account maintained by the person entitled to receive these payments as specified
in the register maintained to record the holders of the subordinated debt
securities and transfer of subordinated debt securities. Unless otherwise
indicated in the applicable prospectus supplement, payment of any installment of
interest on subordinated debt securities in registered form will be made to the
person in

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whose name the debt security is registered at the close of business on the
regular record date for payment of interest.

Unless otherwise provided in the applicable prospectus supplement,
subordinated debt securities in registered form will be transferable or
exchangeable at the agency maintained for this purpose that we will designate
from time to time. Subordinated debt securities may be transferred or exchanged
without service charge, other than any tax or other governmental charge imposed
in connection with the transfer or exchange.

GLOBAL SUBORDINATED DEBT SECURITIES

Unless otherwise specified in the applicable prospectus supplement, the
subordinated debt securities of a series may be issued in whole or in part in
the form of one or more global securities that will be deposited with the
depositary or with a nominee for the depositary identified in the applicable
prospectus supplement. In this event, one or more global securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of outstanding subordinated debt securities of the
series to be represented by the global security or securities. In the event the
subordinated debt securities are convertible into our preferred or common stock,
we will describe in the applicable prospectus supplement the arrangements we
will make with respect to the issuance of any global securities to assure that
we do not violate the terms of our certificate of incorporation limiting foreign
ownership of our voting stock. For a description of the restrictions on foreign
ownership of our voting stock, please see "Description of Our Capital
Stock -- Provisions of Our Certificate of Incorporation, Bylaws and Applicable
Corporate Laws" below. Except as described in the applicable prospectus
supplement, unless and until it is exchanged in whole or in part for
subordinated debt securities in definitive certificated form, a global security
may not be registered for transfer or exchange except as a whole by:

- the depositary for the global security to a nominee of the depositary;

- a nominee of the depositary to the depositary or another nominee of the
depositary; or

- the depositary or any nominee to a successor depositary for the series or
a nominee of the successor depositary.

The specific terms of the depositary arrangement for any portion of a
series of subordinated debt securities to be represented by a global security
will be described in the applicable prospectus supplement. Unless otherwise
specified in the applicable prospectus supplement, we expect that the following
provisions will apply to the depositary arrangements.

Ownership of beneficial interests in a global security will be limited to
persons that have accounts with the depositary or a nominee of the depositary,
referred to as "participants," or persons that may hold interests through
participants. Upon the issuance of any global security, and the deposit of the
global security with or on behalf of the depositary for the global security, the
depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the subordinated debt securities represented by
the global security to the accounts of participants. The accounts to be credited
will be designated by the underwriters or agents engaging in the distribution of
the subordinated debt securities or by us, if the subordinated debt securities
are offered and sold directly by us. Ownership of beneficial interests by
participants in the global security will be shown on, and the transfer of these
beneficial interests will be effected only through, records maintained by the
depositary for the global security or by its nominee. Ownership of beneficial
interests in a global security by persons that hold through participants will be
shown on, and the transfer of these beneficial interests within the participants
will be effected only through, records maintained by the participants. The laws
of some jurisdictions require that some purchasers of securities take physical
delivery of securities in certificated form. The limitations described above and
these laws may impair the ability to transfer beneficial interests in the global
security.

So long as the depositary for a global security, or its nominee, is the
registered owner of the global security, the depositary or the nominee, as the
case may be, will be considered the sole owner or holder of

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the subordinated debt securities represented by the global security for all
purposes under the applicable indenture. Unless otherwise specified in the
applicable prospectus supplement and except as specified below, owners of
beneficial interests in the global security will not be entitled to have
subordinated debt securities of the series represented by the global security
registered in their names, will not receive or be entitled to receive physical
delivery of subordinated debt securities of that series in certificated form and
will not be considered the holders of the subordinated debt securities for any
purposes under the relevant indenture. Accordingly, each person owning a
beneficial interest in a global security must rely on the procedures of the
depositary and, if the person is not a participant, on the procedures of the
participant through which the person owns its interest, to exercise any rights
of a holder under the relevant indenture. The depositary may grant proxies and
otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a holder
is entitled to give or take under the relevant indenture. We understand that,
under existing industry practices, if we request any action of holders or if any
owner of a beneficial interest in a global security desires to give any notice
or take any action which a holder is entitled to give or take under the relevant
indenture, the depositary would authorize the participants to give the notice or
take the action, and the participants would authorize beneficial owners owning
through the participants to give the notice or take the action or would
otherwise act upon the instructions of beneficial owners owning through them.

Unless otherwise specified in the applicable prospectus supplement,
payments of principal, premium, if any, and interest, if any, on subordinated
debt securities represented by a global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee, as the
case may be, as the registered owner of the global security. We expect that the
depositary for any subordinated debt securities represented by a global
security, upon receipt of any payment of principal, premium or interest, will
immediately credit participants' accounts with payments in amounts proportionate
to their respective beneficial interests in the principal amount of the global
security as shown on the records of the depositary. We also expect that payments
by participants to owners of beneficial interests in a global security held
through the participants will be governed by standing instructions and customary
practices, as is now the case with the securities held for the accounts of
customers registered in "street names," and will be the responsibility of the
participants. Neither we nor the trustees nor any agent of ours or the trustees
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial interests of a global security, or
for maintaining, supervising or reviewing any records relating to the beneficial
interests.

Unless otherwise specified in the applicable prospectus supplement, if the
depositary for any subordinated debt securities represented by a global security
is at any time unwilling or unable to continue as depositary or ceases to be a
clearing agency registered under the Securities Exchange Act of 1934 and a duly
registered successor depositary is not appointed by us within 90 days, we will
issue these subordinated debt securities in definitive certificated form in
exchange for the global security. In addition, we may at any time and in our
sole discretion determine not to have any of the subordinated debt securities of
a series represented by one or more global securities and, in that event, will
issue subordinated debt securities of the series in definitive certificated form
in exchange for all of the global security or securities representing the
subordinated debt securities.

CONSOLIDATION, MERGER OR SALE BY AMERICAN CLASSIC VOYAGES

Unless otherwise specified in the applicable prospectus supplement, we will
not consolidate with or merge into any other corporation or sell our assets
substantially as an entirety, unless:

- the corporation formed by the consolidation or into which we are merged
or the corporation which acquires our assets is organized in the United
States;

- in the case of a merger, we are the surviving entity, or the corporation
formed by the consolidation or into which we are merged or which acquires
our assets substantially as an entirety expressly assumes all of our
obligations under each indenture; and

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- immediately after giving effect to the transaction, no default or event
of default under the applicable indenture has happened and is continuing.

Upon the consolidation, merger or sale, the successor corporation formed by
the consolidation, or into which we are merged or to which the sale is made,
will succeed to, and be substituted for us under each indenture.

EVENTS OF DEFAULT, NOTICE AND RIGHTS ON DEFAULT

Each indenture provides that, if an event of default occurs relating to the
subordinated debt securities of any series and is continuing, the trustee for
the series or the holders of 25% in aggregate principal amount of all of the
outstanding subordinated debt securities of that series, by written notice to us
and to the trustee for the series, if notice is given by the holders of
subordinated debt securities, may declare the principal of or, if the
subordinated debt securities of that series provide for an amount that is more
or less than the principal amount of the subordinated debt securities to be due
and payable upon a declaration of maturity of the subordinated debt securities
upon an event of default, that portion of the principal amount specified in the
prospectus supplement, and accrued interest on all the subordinated debt
securities of that series to be due and payable; provided, that the payment of
principal and interest on the subordinated debt securities will remain
subordinated to the extent provided in the applicable indenture.

Unless otherwise specified in the applicable prospectus supplement, events
of default for subordinated debt securities of any series are defined in each
indenture as being:

- default for 30 days in payment of any interest on any debt security of
that series, whether or not prohibited by the subordination provisions of
the subordinated debt securities, or any additional amount payable on
subordinated debt securities of that series as specified in the
applicable prospectus supplement, when due;

- default in payment of principal, or premium, if any, at maturity, whether
or not prohibited by the subordination provisions of the subordinated
debt securities;

- default for 60 days after written notice to us by the trustee for that
series, or by the holders of 25% in aggregate principal amount of the
subordinated debt securities of that series then outstanding, in the
performance, or breach, of any term, covenant or warranty contained in
the applicable indenture for the subordinated debt securities;

- our bankruptcy, insolvency or reorganization; and

- in the case of subordinated debt securities issued to the AMCV Trust in
connection with an issuance of preferred securities, a voluntary or
involuntary dissolution, winding-up or termination of the AMCV Trust,
except if the subordinated debt securities are distributed to the holders
of the preferred securities in a liquidation of the AMCV Trust or if
there is a redemption or conversion of all of the outstanding preferred
securities and common securities by the AMCV Trust in connection with a
merger or consolidation permitted by the AMCV Trust.

The indentures provide that if an event of default with respect to
subordinated debt securities of a series has occurred and is continuing, either
the trustee for the subordinated debt securities or the holders of not less than
25% in principal amount of the series of subordinated debt securities then
outstanding may declare the principal amount of all subordinated debt securities
of the series to be due and payable immediately upon giving written notice as
provided in the applicable indenture. The indentures provide that the holders of
a majority in principal amount of the subordinated debt securities of the series
may rescind and annul the declaration and its consequences under circumstances
set forth in the indentures.

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If there is an event of default with respect to subordinated debt
securities we issue to the AMCV Trust in connection with an issuance of
preferred securities by the trust, we may not

- declare or pay dividends on, make distributions regarding, or redeem,
purchase, acquire or make a liquidation payment regarding, any of our
capital stock, other than:

(1) purchases of our common stock related to the issuance of our common
stock under any of our benefit plans for our directors, officers or
employees,

(2) as a result of a reclassification of our capital stock or the
exchange or conversion of one series or class of our capital stock
for another series or class of our capital stock,

(3) the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or the security being converted or exchanged; and

(4) redemptions or purchases of any rights pursuant to a stockholder
rights plan and the issuance of our capital stock pursuant to these
rights.

- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by us that rank junior to
or pari passu with the subordinated debt securities, other than any
redemption, liquidation, interest, principal or guarantee payment by us
where the payment is made by way of securities (including our capital
stock) that rank junior to or pari passu with the securities on which
such redemption, interest, principal or guarantee payment is being made;
or

- make any guarantee payments regarding the foregoing, other than payments
under our guarantee of the preferred securities or the common securities.

Events of default for a specified series of subordinated debt securities
may be added to the subordinated indenture and, if so added, will be described
in the applicable prospectus supplement. Each indenture provides that the
trustee will, within 90 days after the occurrence of a default for the
subordinated debt securities of any series, give to the holders of the
subordinated debt securities of that series notice of all defaults known to it
unless the default has been cured or waived; provided that except in the case of
a default in payment on the subordinated debt securities of that series, the
trustee may withhold the notice if and so long as its board of directors or a
committee of its officers determines that withholding the notice is in the
interests of the holders of the subordinated debt securities of that series.
Each indenture provides that the holders of a majority in aggregate principal
amount of the subordinated debt securities of each series affected, with each
series voting as a class, may, subject to limited conditions, direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee for the series, or exercising any trust or power conferred on the
trustee. Each indenture includes a covenant that we will file annually with the
trustee a certificate as to our compliance with all conditions and covenants of
the indenture. The holders of a majority in aggregate principal amount of any
series of subordinated debt securities by notice to the trustee for the series
may waive, on behalf of the holders of all subordinated debt securities of the
series, any past default or event of default for that series and its
consequences, except a default or event of default in the payment of the
principal of, premium, if any, or interest, if any, on any subordinated debt
security, and except for an event of default resulting from the breach of a
covenant or provision of either indenture which, under the applicable indenture,
cannot be amended or modified without the consent of the holders of each
outstanding debt security of the series affected.

OPTION TO DEFER INTEREST PAYMENTS

If provided in the applicable prospectus supplement, we will have the right
at any time and from time to time during the term of subordinated debt
securities issued under the junior convertible subordinated indenture to defer
the payment of interest for the number of consecutive interest payment periods
specified in the applicable prospectus supplement, subject to the terms,
conditions and covenants, if any, specified in
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the prospectus supplement. However, in no event may the deferral period extend
beyond the stated maturity of the subordinated debt securities. Material United
States federal income tax consequences and special considerations applicable to
these subordinated debt securities will be described in the applicable
prospectus supplement. Unless otherwise specified in the applicable prospectus
supplement, at the end of the deferral period, we will pay all interest then
accrued and unpaid together with interest on accrued and unpaid interest
compounded semiannually at the rate specified for the subordinated debt
securities to the extent permitted by applicable law. During the deferral period
with respect to any subordinated debt securities issued under the junior
convertible subordinated indenture, we may not:

- declare or pay dividends on, make distributions regarding, or redeem,
purchase, acquire or make a liquidation payment regarding, any of our
capital stock, other than:

(1) purchases of our common stock related to the issuance of our common
stock under any of our benefit plans for our directors, officers or
employees,

(2) as a result of a reclassification of our capital stock or the
exchange or conversion of one series or class of our capital stock
for another series or class of our capital stock,

(3) the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or the security being converted or exchanged; and

(4) redemptions or purchases of any rights pursuant to a stockholder
rights plan and the issuance of our capital stock pursuant to these
rights.

- make any guarantee payments regarding the foregoing, other than payments
under our guarantee of the preferred securities or the common securities.

Prior to the termination of any deferral period with respect to
subordinated debt securities issued under the junior convertible subordinated
indenture, we may further defer payments of interest by extending the interest
payment period for a limited duration; provided, however, that, the deferral
period, including all previous and further extensions, may not extend beyond the
maturity of the subordinated debt securities.

Upon the termination of any deferral period with respect to subordinated
debt securities issued under the junior convertible subordinated indenture and
the payment of all amounts then due, we may commence a new deferral period,
subject to the terms set forth in this section. No interest during a deferral
period with respect to subordinated debt securities issued under the junior
convertible subordinated indenture, except at the end thereof, will be due and
payable, but we may prepay at any time all or any portion of the interest
accrued during a deferral period. We have no present intention of exercising our
right to defer payments of interest with respect to subordinated debt securities
issued under the junior convertible subordinated indenture by extending the
interest payment period on the subordinated debt securities. If the property
trustee is the sole holder of the subordinated debt securities, we will give the
administrative trustees and the property trustee notice of our selection of a
deferral period one business day before the earlier of (1) the date
distributions on the preferred securities are payable or (2) the date the
administrative trustees are required to give notice to the Nasdaq Stock Market
or other applicable self-regulatory organization, or to holders of the preferred
securities of the record or payment date of the distribution. The administrative
trustees will give notice of our selection of the deferral period to the holders
of the preferred securities. If the property trustee is not the sole holder of
the subordinated debt

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securities, we will give the holders of the subordinated debt securities notice
of our selection of a deferral period ten business days before the earlier of
(1) the interest payment date or (2) the date upon which we are required to give
notice to the Nasdaq Stock Market or other applicable self-regulatory
organization, or to holders of the subordinated debt securities of the record or
payment date of the related interest payment.

Certain Additional Covenants

If we issue subordinated debt securities to the AMCV Trust in connection
with an issuance of preferred securities, we will covenant in the junior
convertible subordinated indenture that as long as the preferred securities are
outstanding we will:

- not convert the subordinated debt securities except upon receipt of
notice of conversion of the underlying preferred securities;

- directly or indirectly own 100% of the common securities of the AMCV
Trust;

- not voluntarily terminate, wind up or liquidate the AMCV Trust, except if
the subordinated debt securities are distributed to the holders of the
preferred securities in a liquidation of the AMCV Trust, of if there is a
redemption of the preferred securities by the AMCV Trust or in connection
with a merger or consolidation permitted by the declaration of trust;

- use our commercially reasonable efforts to make sure that the AMCV Trust

- remains a grantor business trust; and

- remains classified as an entity not taxable as a corporation or
partnership in the U.S.; and

- honor all of our obligations relating to the conversion or exchange of
the preferred securities and common securities into or for our common
stock or subordinated debt securities

Modification of the Indentures

Unless otherwise specified in the applicable prospectus supplement, each
indenture contains provisions permitting us and the trustee to enter into one or
more supplemental indentures without the consent of the holders of any of the
subordinated debt securities in order to:

- evidence the succession of another corporation to American Classic
Voyages and the assumption of our covenants by the successor;

- add to our covenants or surrender any of our rights or powers;

- add additional events of default for any series of subordinated debt
securities;

- change or eliminate any provision affecting only subordinated debt
securities not yet issued;

- provide for security for the subordinated debt securities;

- to establish the form or terms of subordinated debt securities;

- evidence and provide for successor trustees;

- cure any ambiguity, correct or supplement any inconsistent provisions,
comply with any applicable provisions of law, or to make any other
provisions concerning matters or questions arising under the indenture,
provided that the action does not adversely affect the interests of
holders of subordinated debt securities of any series in any material
respect; or

- modify, eliminate or add to the provisions of an indenture as required to
qualify the indenture under the Trust Indenture Act of 1939, or any
similar federal statute.

Unless otherwise specified in the applicable prospectus supplement, each
indenture also contains provisions permitting us and the trustee, with the
consent of the holders of a majority in aggregate
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principal amount of the outstanding subordinated debt securities affected by a
supplemental indenture, and with the subordinated debt securities of each series
voting as a class, to execute supplemental indentures adding any provisions to
or changing or eliminating any of the provisions of the indenture or any
supplemental indenture or modifying the rights of the holders of subordinated
debt securities of that series, except that, without the consent of the holder
of each debt security so affected, no supplemental indenture may:

- change the time for payment of principal or premium, if any, or interest
on any debt security;

- reduce the principal of, or any installment of principal of, or premium,
if any, or interest on any debt security, or change the manner in which
they are determined;

- reduce the percentage in principal amount of the outstanding subordinated
debt securities affected by the supplemental indenture the consent of
whose holders is required for amendment of the indenture or for waiver of
compliance with provisions of the indenture or for waiver of defaults;

- change our obligation to maintain an office or agency in the places and
for the purposes specified in the indenture; or

- modify the provisions relating to waiver of defaults or any of the
provisions set forth above.

SUBORDINATION UNDER THE INDENTURES

The subordinated indenture and the junior convertible subordinated
indenture each provide that any subordinated debt securities issued under them
are subordinate and junior in right of payment to all of our debt except for
debt that is by its terms subordinated to or pari passu with the subordinated
debt securities.

If we default in the payment of any principal, or premium, if any, or
interest on any senior indebtedness when the same becomes due and payable,
whether at maturity or at a date fixed for prepayment or declaration or
otherwise, then unless and until full payment on account of the senior
indebtedness has been made or duly provided for, no payment will be made on
account of the subordinated debt securities or interest on the subordinated debt
securities or with respect to any repayment, redemption, retirement, purchase or
other acquisition of subordinated debt securities.

In the event of any distribution of our assets upon any dissolution,
winding up, liquidation or reorganization of American Classic Voyages, then

- holders of senior indebtedness shall receive payment of all principal,
premium, and interest due on senior indebtedness before holders of
subordinated debt securities are entitled to receive any payment of
principal, premium or interest;

- any payment or distribution of our assets to which a holder of
subordinated debt securities or the trustee for the subordinated debt
securities would be entitled shall be paid directly to holders of senior
indebtedness or their representatives or the trustee under the indenture
relating to the senior indebtedness in proportion to the amount of unpaid
principal, premium and interest on the senior indebtedness held by each
holder, and

- if any payment or distribution of our assets is received by the holders
of subordinated debt securities or the trustee for the subordinated debt
securities before all senior indebtedness is paid in full, then the
holders or the trustee shall pay over the payment or distribution to the
holders of senior indebtedness or their representatives or the trustee
under the indenture relating to the senior indebtedness.

Upon payment in full of all senior indebtedness, the holders of
subordinated debt securities will be subrogated to all the rights of any holders
of senior indebtedness to receive any further payments or distributions
applicable to the senior indebtedness until all subordinated debt securities are
paid in full.

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The subordinated indenture provides that the subordination provisions
described in this section, to the extent as they relate to any particular issue
of subordinated debt securities, may be changed before the issuance of the
subordinated debt securities. Any change of this nature would be described in
the applicable prospectus supplement relating to the subordinated debt
securities.

DEFEASANCE AND COVENANT DEFEASANCE OF SUBORDINATED DEBT SECURITIES UNDER
SUBORDINATED INDENTURE

If indicated in the applicable prospectus supplement, we may elect either
to defease and be discharged from any and all obligations with respect to the
subordinated debt securities of or within any series issued under the
subordinated indenture, referred to as "defeasance," or to be released from our
obligations with respect to selected covenants applicable to the subordinated
debt securities of or within any series, referred to as "covenant defeasance."
We may only exercise our defeasance or covenant defeasance options if we deposit
with the appropriate trustee, in trust for that purpose, money and/or U.S.
government obligations which through the payment of principal and interest in
accordance with their terms will provide money in an amount sufficient, to pay
the principal of and any premium or interest on the subordinated debt securities
to maturity or redemption, as the case may be, and any mandatory sinking fund or
similar payments on the subordinated debt securities. As a condition to
defeasance or covenant defeasance, we must deliver to the trustee an opinion of
counsel to the effect that the holders of the subordinated debt securities will
not recognize income, gain or loss for federal income tax purposes as a result
of the defeasance or covenant defeasance and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if the defeasance or covenant defeasance had not occurred.
The opinion of counsel, in the case of defeasance, must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable federal
income tax law occurring after the date of the subordinated indenture. In
addition, in order for a defeasance or covenant defeasance to occur, there must
be no event of default under the subordinated indenture and, if the subordinated
debt securities are redeemable prior to maturity, we must have given notice of
the redemption, unless the redemption will be made pursuant to a mandatory
sinking fund. If indicated in the applicable prospectus supplement, in addition
to obligations of the United States or an agency or instrumentality of the
United States, government obligations may include obligations of the government
or an agency or instrumentality of the government issuing the currency or
currency unit in which subordinated debt securities of the series are payable.

We may exercise our defeasance option for the subordinated debt securities
in spite of our earlier exercise of our covenant defeasance option. If we
exercise our defeasance option, payment of the subordinated debt securities may
not be accelerated because of a default or an event of default. If we exercise
our covenant defeasance option, payment of the subordinated debt securities may
not be accelerated by reason of a default or an event of default under the
covenants to which the covenant defeasance is applicable. However, if the
acceleration occurs by reason of another event of default, the realizable value
at the acceleration date of the money and government obligations in the
defeasance trust could be less than the principal and interest then due on the
subordinated debt securities, because the required deposit in the defeasance
trust is based upon scheduled cash flow rather than market value, which will
vary depending upon interest rates and other factors.

THE TRUSTEE

Unless otherwise specified in the applicable prospectus supplement, The
Bank of New York will be the trustee under the indentures. We may also maintain
banking and other commercial relationships with the trustee and its affiliates
in the ordinary course of business.

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock was 45,000,000 shares as of January 13, 2000
consisting of:

- 5,000,000 shares of preferred stock, of which none were outstanding; and

- 40,000,000 shares of common stock, of which 18,614,355 shares were
outstanding.

In general, our authorized preferred stock is afforded preferences
regarding dividends and liquidation rights over our common stock. Our board of
directors is empowered, without approval of our stockholders, to cause the
preferred stock to be issued in one or more series, with the numbers of shares
of each series and the rights, preferences and limitations of each series to be
determined by the board including, without limitation:

- the dividend rights,

- conversion rights,

- redemption rights, and

- liquidation preferences,

if any, of any wholly unissued series of preferred stock, or of the entire class
of preferred stock if none of the shares have been issued. Our board of
directors is also empowered, without approval of our stockholders, to determine
the terms and conditions of the issue of each series of preferred stock. The
following is a summary of the terms of our preferred stock and common stock and
provisions of our articles of incorporation, bylaws and statutes that affect our
preferred stock and common stock and is subject to the actual provisions of the
articles of incorporation, bylaws and these statutes.

PREFERRED STOCK

The applicable prospectus supplement will describe the following terms of
any preferred stock offered pursuant to this prospectus, to the extent
applicable to the preferred stock:

- the specific designation, number of shares, seniority and purchase price;

- any liquidation preference per share;

- any date of maturity;

- any redemption, repayment or sinking fund provisions;

- any dividend rate or rates and the dates on which any dividends will be
payable, or the method by which the rates or dates will be determined;

- any voting rights;

- if other than the currency of the United States, the currency or
currencies, including composite currencies, in which the preferred stock
is denominated and/or in which payments will or may be payable;

- the method by which amounts with respect to the preferred stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to the calculation;

- whether the preferred stock is convertible or exchangeable and, if so,
the securities or rights into which the preferred stock is convertible or
exchangeable, which may include other preferred stock, subordinated debt
securities, common stock or other securities or rights of American
Classic Voyages, including rights to receive payment in cash or
securities based on the value, rate or price of one or more specified
commodities, currencies or indices, or a combination any of these, and
the terms and conditions upon which the conversions or exchanges will be
effected, including the initial

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conversion or exchange prices or rates, the conversion or exchange period
and any other related provisions;

- the place or places where dividends and other payments on the preferred
stock will be payable; and

- any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.

All shares of preferred stock offered by this prospectus, or issuable upon
conversion, exchange or exercise of securities, will, when issued, be fully paid
and non-assessable.

COMMON STOCK

The prospectus supplement relating to an offering of common stock will
describe relevant terms, including the number of shares offered, the initial
offering price, market price and dividend information.

Dividends. Holders of common stock are entitled to receive dividends and
other distributions in cash, stock or property, when, as and if declared by the
board of directors out of our assets or funds legally available for payment of
dividends or other distributions and will share equally on a per share basis in
all dividends and other distributions, subject to the rights of holders of
preferred stock. We do not currently anticipate paying any dividends in the
foreseeable future.

Voting Rights. At every meeting of stockholders, every holder of common
stock is entitled to one vote per share. Subject to any voting rights which may
be granted to holders of preferred stock, any action submitted to stockholders
is approved if the number of votes cast in favor of the action exceeds the
number of votes against, except where other provision is made by law and subject
to applicable quorum requirements.

Liquidation Rights. If there is any liquidation, dissolution or winding-up
of American Classic Voyages, whether voluntary or involuntary, the holders of
common stock are entitled to share equally in the assets available for
distribution after payment of all liabilities and provision for the liquidation
preference of any shares of preferred stock then outstanding.

The holders of common stock have no preemptive rights, cumulative voting
rights, subscription rights, or conversion rights and the common stock may not
be redeemed. The transfer agent and registrar for the common stock is EquiServe
LP. The common stock is traded on the Nasdaq National Market under the symbol
"AMCV." All shares of common stock offered by this prospectus, or issuable upon
conversion, exchange or exercise of securities, will, when issued, be fully paid
and non-assessable.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BY-LAWS AND APPLICABLE CORPORATE
LAWS

Some provisions of our certificate of incorporation and bylaws may make it
more difficult to sell your shares of common or preferred stock. The most
important of those provisions are described below.

In order to offer itineraries featuring only U.S. ports, U.S. maritime laws
require us to use only "U.S.-flagged" vessels. A U.S.-flagged vessel is a vessel
that is U.S. built, owned and crewed. To maintain U.S-flagged status, at least
75% of our stockholders must be U.S. citizens. In order to assure that we
maintain that level of U.S. ownership, our certificate of incorporation contains
limitations on the transferability of our stock to non-U.S. citizens. The
certificate of incorporation limits non-U.S. ownership of our stock to 25% of
our total voting stock and provides for the transfer of stock purchased in
violation of that rule back to the transferor. These restrictions may have the
effect of decreasing the liquidity of our common stock, thereby making it more
difficult for investors to dispose of their shares in an orderly manner.

In addition, in our certificate of incorporation we elect not to be
governed by Section 203 of the Delaware General Corporation Law. Section 203 of
the Delaware General Corporation Law generally restricts some types of
transactions and business combinations between a company and interested
stockholders, unless the board of directors approves the transaction before it
occurs, or 66 2/3% of the
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uninterested stockholders ratify the transaction after the board of directors
has approved it or if the interested stockholder owned at least 85% of the
voting stock of the Company at the time of the transaction. The statute
expressly permits companies to elect not to be governed by Section 203. However,
we do have a restriction on interested stockholder transactions in our bylaws.
Article III, Section 15 of our bylaws requires that a majority of the
disinterested members of our board of directors approve any business transaction
between us and a director or a person affiliated with or under common control of
a director. The only interested person business transactions that do not require
such board approval are the sale, lease or exchange of property or the provision
of services pursuant to an Administrative Services Agreement between us and
Equity Group Investments, Inc., an entity that, with its affiliates, is our
controlling stockholder. Our bylaws define a "disinterested director" as a
person who is not

(1) an employee, director, officer, trustee, general partner, 5% or
more stockholder or fiduciary of a person (other than us) who is
affiliated or under common control with an interested person; or

(2) any employee, director, officer, trustee, partner or fiduciary of
any of the above.

Our bylaws may be amended by majority vote of the board of directors or a
majority vote of the stockholders. The board of directors may not repeal or
amend any provision which has been approved by a majority of the stockholders.

As discussed above, our preferred stock may be issued from time to time in
one or more series with the rights, preferences, limitations and restrictions
that may be determined by the board of directors. The issuance of preferred
stock could be used, under some circumstances, as a method of delaying or
preventing a change of control of American Classic Voyages and could have a
detrimental effect on the rights of holders of common stock, including loss of
voting control.

DESCRIPTION OF PREFERRED SECURITIES OF THE AMCV TRUST

The AMCV Trust may issue, from time to time, only one series of preferred
securities having terms described in the prospectus supplement. The declaration
of trust of the AMCV Trust authorizes the administrative trustees of the AMCV
Trust to issue on behalf of the AMCV Trust one series of preferred securities.
The declaration of trust will be qualified as an indenture under the Trust
Indenture Act. The property trustee, an independent trustee, will act as
indenture trustee for the preferred securities for purposes of compliance with
the provisions of the Trust Indenture Act. The preferred securities will have
the terms, including distributions, redemption, voting, liquidation rights,
maturity date or dates and the other preferred, deferred or other special rights
or restrictions as are established by the administrative trustees in accordance
with the declaration of trust or as are set forth in the declaration of trust or
made part of the declaration of trust by the Trust Indenture Act. The prospectus
supplement relating to the preferred securities of the AMCV Trust will set forth
the specific terms of the preferred securities, including, to the extent
applicable:

- the distinctive designation of the preferred securities;

- the number of preferred securities issued by the AMCV Trust;

- the annual distribution rate, or method of determining the rate, for
preferred securities issued by the AMCV Trust and the date or dates upon
which distributions will be payable; provided, however, that
distributions on the preferred securities will, subject to any deferral
provisions and any provisions for payment of defaulted distributions, be
payable on a quarterly basis to holders of the preferred securities as of
a record date in each quarter during which the preferred securities are
outstanding and any provisions relating to the resetting or adjustment of
the distribution rate;

- any right of the AMCV Trust to defer quarterly distributions on the
preferred securities as a result of an interest deferral right exercised
by us on the subordinated debt securities held by the AMCV Trust;

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<PAGE> 86

- whether distributions on preferred securities will be cumulative, and, in
the case of preferred securities having cumulative distribution rights,
the date or dates or method of determining the date or dates from which
distributions on preferred securities will be cumulative;

- the amount or amounts which will be paid out of the assets of the AMCV
Trust to the holders of preferred securities upon voluntary or
involuntary dissolution, winding-up or termination of the AMCV Trust;

- the obligation or option, if any, of the AMCV Trust to purchase or redeem
preferred securities and the price or prices at which, the period or
periods within which and the terms and conditions upon which preferred
securities will be purchased or redeemed, in whole or in part, under this
obligation or option with the redemption price or formula for determining
the redemption price to be specified in the applicable prospectus
supplement;

- the voting rights, if any, of preferred securities in addition to those
required by law, including the number of votes per preferred security and
any requirement for the approval by the holders of preferred securities
as a condition to specified action or amendments to the declaration of
trust;

- whether the preferred securities are convertible or exchangeable into our
common stock or other securities, including the initial conversion or
exchange price or rate, the conversion or exchange period and any other
related provisions;

- the terms and conditions, if any, upon which subordinated debt securities
held by the AMCV Trust may be distributed to holders of preferred
securities; and

- any other relevant terms, rights, preferences, privileges, limitations or
restrictions of preferred securities consistent with the declaration of
trust or applicable law.

All preferred securities offered by the prospectus will be guaranteed by us to
the extent set forth below under "Description of Guarantees." The guarantee
issued by us to the AMCV Trust, when taken together with our back-up
undertakings, consisting of our obligations under the declaration of trust,
including the obligation to pay expenses of the AMCV Trust, the applicable
indenture and any applicable supplemental indentures and the subordinated debt
securities issued to the AMCV Trust will provide a full and unconditional
guarantee by us of amounts due on the preferred securities issued by the AMCV
Trust. The payment terms of the preferred securities will be the same as the
subordinated debt securities issued to the AMCV Trust by us.

The declaration of trust authorizes the administrative trustee to issue on
behalf of the trust one series of common securities having terms, including
distributions, redemption, voting and liquidation rights, and restrictions that
are established by the administrative trustee in accordance with the declaration
of trust or that are otherwise set forth in the declaration of trust. The terms
of the common securities issued by the AMCV Trust will be substantially
identical to the terms of the preferred securities issued by the AMCV Trust, and
the common securities will rank equally, and payments will be made on the common
securities on a proportionate basis, with the preferred securities except that,
if an event of default under the declaration of trust has occurred and is
continuing, the rights of the holders of the common securities to payment of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the preferred securities. The
common securities will also carry the right to vote and to appoint, remove or
replace any of the trustees of the AMCV Trust. We will own directly or
indirectly all of the common securities of the AMCV Trust.

We anticipate that the financial statements of the AMCV Trust issuing
preferred securities will be reflected in our consolidated financial statements
with the preferred securities shown as company-obligated mandatorily-redeemable
preferred securities of a subsidiary trust under minority interest in
consolidated subsidiaries. In this case, we anticipate that we will include in a
footnote to our audited financial statements, statements that the AMCV Trust is
wholly-owned by us and that the sole asset of the AMCV Trust is the subordinated
debt securities, indicating the principal amount, interest rate and maturity
date of the subordinated debt securities.
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DESCRIPTION OF GUARANTEES

Set forth below is a summary of information concerning the guarantees that
will be executed and delivered by us for the benefit of the holders, from time
to time, of preferred securities. Each guarantee will be qualified as an
indenture under the Trust Indenture Act. Unless otherwise specified in the
applicable prospectus supplement, The Bank of New York will act as the preferred
securities guarantee trustee. The terms of each guarantee will be set forth in
the guarantee and will include the terms made part of the guarantee by the Trust
Indenture Act. The following is a summary of the material terms of the
guarantees. You should refer to the provisions of the form of guarantee, a copy
of which has been filed as an exhibit to the registration statement of which
this prospectus is a part, and the Trust Indenture Act. Each guarantee will be
held by the preferred securities guarantee trustee for the benefit of the
holders of the preferred securities of the AMCV Trust.

Unless otherwise specified in the applicable prospectus supplement, we will
agree, to the extent set forth in each guarantee, to pay in full to the holders
of the preferred securities, the payments and distributions to be made with
respect to the preferred securities, except to the extent paid by the AMCV
Trust, as and when due, regardless of any defense, right of set-off or
counterclaim which the AMCV Trust may have or assert. The following payments or
distributions with respect to the preferred securities, to the extent not paid
by the AMCV Trust, will be subject to the guarantee, without duplication:

- any accrued and unpaid distributions that are required to be paid on the
preferred securities, to the extent the AMCV Trust has funds available to
make the payment;

- the redemption price, including all accumulated and unpaid distributions
to the date of redemption, to the extent the AMCV Trust has funds
available to make the payment, for any preferred securities called for
redemption by the AMCV Trust; and

- upon a voluntary or involuntary dissolution, winding-up or termination of
the AMCV Trust, other than in connection with the distribution of
subordinated debt securities to the holders of preferred securities or
the redemption of all of the preferred securities upon maturity or
redemption of the subordinated debt securities, the lesser of (1) the sum
of the liquidation amount and all accrued and unpaid distributions on the
preferred securities to the date of payment, to the extent the AMCV Trust
has funds available to make the payment and (2) the amount of assets of
the AMCV Trust, after satisfaction of all liabilities, remaining for
distribution to holders of the preferred securities in liquidation of the
AMCV Trust.

Our obligation to make a guarantee payment may be satisfied by our direct
payment of the required amounts to the holders of preferred securities or by
causing the AMCV Trust to pay the amounts to the holders.

Each guarantee will not apply to any payment of distributions except to the
extent the AMCV Trust has funds available to make the payment. If we do not make
interest or principal payments on the subordinated debt securities purchased by
the AMCV Trust, the AMCV Trust will not pay distributions on the preferred
securities issued by the AMCV Trust and will not have funds available to make
the payment.

We have also agreed to guarantee the obligations of the AMCV Trust with
respect to the common securities issued by the AMCV Trust to the same extent as
the guarantee with respect to the preferred securities, except that, if an event
of default under the subordinated indenture has occurred and is continuing,
holders of preferred securities guaranteed by us will have priority over holders
of the common securities guaranteed by us with respect to distributions and
payments on liquidation, redemption or otherwise.

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COVENANTS OF AMERICAN CLASSIC VOYAGES

Unless otherwise specified in the applicable prospectus supplement, in each
guarantee of the payment obligations of the AMCV Trust with respect to preferred
securities, we will covenant that, so long as any preferred securities issued by
the AMCV Trust remain outstanding, if for any distribution period:

- full distributions on a cumulative basis on any preferred securities have
not been paid or declared and set apart for payment for any distribution
period,

- there has occurred any event of default under the guarantee or under the
declaration of trust of the AMCV Trust,

- we are in default of our obligations under the preferred securities
guarantee or the common securities guarantee, or

- we have given notice of our selection of an extension period for payment
of interest on the subordinated debt securities and not rescinded such
notice or extension,

then we will not:

- declare or pay any dividend on, make any other distributions on, or
redeem, purchase, acquire or make a liquidation payment regarding, any of
our capital stock, except:

(1) purchases of our common stock related to the issuance of our common
stock under any of our benefit plans for our directors, officers or
employees,

(2) as a result of a reclassification of our capital stock or the
exchange or conversion of one series or class of our capital stock
for another series or class of our capital stock,

(3) the purchase of fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of the capital
stock or the security being converted or exchanged; and

(4) redemptions or purchases of any rights pursuant to a shareholder
rights plan and the issuance of our capital stock pursuant to these
rights.

- make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by us which rank junior
to or pari passu with the subordinated debt securities issued to the AMCV
Trust, other than any redemption, liquidation, interest, principal or
guarantee payment by us where the payment is made by way of securities
(including our capital stock) that rank junior to or pari passu with the
securities on which such redemption, interest, principal or guarantee
payment is being made; and

- make any guarantee payments regarding the foregoing, other than under a
guarantee of the payment obligations of the AMCV Trust with respect to
preferred securities or the common securities.

MODIFICATION OF THE GUARANTEES; ASSIGNMENT

Except for any changes that do not adversely affect the rights of holders
of preferred securities, in which case no consent of the holders will be
required, each guarantee of the payment obligations of the AMCV Trust with
respect to preferred securities may be amended only with the prior approval of
the holders of at least a majority in liquidation amount of the outstanding
preferred securities of the AMCV Trust. The manner of obtaining any approval of
holders of the preferred securities will be described in an accompanying
prospectus supplement. All guarantees and agreements contained in a guarantee of
the obligations of the AMCV Trust with respect to preferred securities will bind
the successors, assigns, receivers, trustees and representatives of American
Classic Voyages and will inure to the benefit of the holders of the preferred
securities of the AMCV Trust then outstanding.

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EVENTS OF DEFAULT

An event of default under a preferred securities guarantee will occur upon
our failure to perform any of our payment or other obligations under the
guarantee. The holders of a majority in liquidation amount of the preferred
securities to which the preferred securities guarantee relates will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the preferred securities guarantee trustee with respect to
the guarantee or to direct the exercise of any trust or power conferred upon the
preferred securities guarantee trustee under the guarantee.

If the preferred securities guarantee trustee fails to enforce the
guarantee, any record holder of preferred securities to which the guarantee
relates may institute a legal proceeding directly against us to enforce the
preferred securities guarantee trustee's rights under the guarantee without
first instituting a legal proceeding against the AMCV Trust, the preferred
securities guarantee trustee or any other person or entity. If we have failed to
make a guarantee payment under a guarantee, a record holder of preferred
securities to which the guarantee relates may directly institute a proceeding
against us for enforcement of the guarantee for the payment to the record holder
of the preferred securities to which the guarantee relates of the principal of
or interest on the applicable subordinated debt securities on or after the
respective due dates specified in the subordinated debt securities, and the
amount of the payment will be based on the holder's proportionate share of the
amount due and owing on all of the preferred securities to which the guarantee
relates. We have waived any right or remedy to require that any action be
brought first against the AMCV Trust or any other person or entity before
proceeding directly against us. The record holder in the case of the issuance of
one or more global preferred securities certificates will be The Depository
Trust Company, or its nominee, acting at the direction of the beneficial owners
of the preferred securities.

We will be required to provide annually to the preferred securities
guarantee trustee a statement as to the performance of our obligations under
each outstanding preferred securities guarantee and as to any default in our
performance.

INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE

The preferred securities guarantee trustee, before the occurrence of a
default under a preferred securities guarantee, undertakes to perform only the
duties that are specifically set forth in the guarantee and, after a default
under a guarantee, will exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to this
provision, the preferred securities guarantee trustee is under no obligation to
exercise any of the powers vested in it by a preferred securities guarantee at
the request of any holder of preferred securities to which the guarantee relates
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred by the preferred securities guarantee trustee
in exercising any of its powers.

TERMINATION

Each preferred securities guarantee will terminate as to the preferred
securities issued by the AMCV Trust upon

- full payment of the redemption price of all preferred securities of the
AMCV Trust,

- distribution of subordinated debt securities held by the AMCV Trust to
the holders of all of the preferred securities of the AMCV Trust,

- full payment of the amounts payable in accordance with the declaration of
trust of the AMCV Trust upon liquidation of the AMCV Trust, or

- upon conversion of all preferred securities under the declaration of
trust.

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<PAGE> 90

Each preferred securities guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of preferred
securities issued by the AMCV Trust must restore payment of any sums paid under
the preferred securities or the preferred securities guarantee.

STATUS OF THE GUARANTEES

The preferred securities guarantees will constitute our unsecured
obligations and will rank:

- subordinate and junior in right of payment to all of our other
liabilities, other than our obligations under our guarantee of the common
securities, which are subordinate and junior to the guarantee of the
preferred securities to the extent provided in the preferred securities
guarantee;

- equivalently with the most senior preferred or preference stock now or
hereafter issued by us and with any guarantee now or hereafter entered
into by us in respect of any preferred or preference stock of any of our
affiliates; and

- senior to our common stock.

The terms of the preferred securities provide that each holder of preferred
securities by acceptance of the preferred securities agrees to the subordination
provisions and other terms of our guarantee relating to the preferred
securities.

Each preferred securities guarantee will constitute a guarantee of payment
and not of collection. This means that the guaranteed party may institute a
legal proceeding directly against us to enforce its rights under the guarantee
without instituting a legal proceeding against any other person or entity.

PLAN OF DISTRIBUTION

We and/or the AMCV Trust may sell any of the securities being offered
hereby in any one or more of the following ways from time to time:

- through agents;

- to or through underwriters;

- through dealers; or

- directly to purchasers.

The prospectus supplement for the securities will set forth the terms of
the offering of the securities, including the name or names of any underwriters,
dealers or agents; the purchase price of the securities and the proceeds to us
and/or the AMCV Trust from the sale; any underwriting discounts and commissions
or agency fees and other items constituting underwriters' or agents'
compensation; any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchange on which the
securities may be listed. Any initial public offering price, discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.

The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices or at negotiated prices.

Offers to purchase securities may be solicited by agents designated by us
from time to time. Any agent involved in the offer or sale of the securities in
respect of which this prospectus is delivered will be named, and any commissions
payable by us and/or the AMCV Trust to the agent will be set forth, in the
applicable prospectus supplement. Unless otherwise indicated in the prospectus
supplement, any agent will be acting on a reasonable best efforts basis for the
period of its appointment. Any agent may be deemed to be an underwriter, as that
term is defined in the Securities Act of 1933, of the securities so offered and
sold.

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If securities are sold by means of an underwritten offering, we and/or the
AMCV Trust will execute an underwriting agreement with an underwriter or
underwriters at the time an agreement for the sale is reached, and the names of
the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transaction, including commissions, discounts
and any other compensation of the underwriters and dealers, if any, will be set
forth in the prospectus supplement which will be used by the underwriters to
make resales of the securities in respect of which this prospectus is delivered
to the public. We and/or the AMCV Trust may also agree with an underwriter or
underwriters to enter into an underwriting agreement or conduct an underwritten
offering, in each case, at some future date. If underwriters are utilized in the
sale of the securities with respect to which this prospectus is delivered, the
securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices determined by
the underwriter at the time of sale. Securities may be offered to the public
either through underwriting syndicates represented by managing underwriters or
directly by the managing underwriters. If any underwriter or underwriters are
utilized in the sale of the securities, unless otherwise indicated in the
prospectus supplement, the underwriting agreement will provide that the
obligations of the underwriters are subject to specific conditions and that the
underwriters for a sale of securities will be obligated to purchase all of the
securities of a series if any are purchased.

If a dealer is utilized in the sales of the securities with respect to
which this prospectus is delivered, we and/or the AMCV Trust will sell the
securities to the dealer as principal. The dealer may then resell the securities
to the public at varying prices to be determined by the dealer at the time of
resale. Any dealer may be deemed to be an underwriter, as the term is defined in
the Securities Act of 1933, of the securities so offered and sold. The name of
the dealer and the terms of the transaction will be set forth in the prospectus
supplement relating to the sale of securities.

Offers to purchase securities may be solicited directly by us and/or the
AMCV Trust and the sale of securities may be made by us and/or the applicable
AMCV Trust directly to institutional investors or others, who may be deemed to
be underwriters within the meaning of the Securities Act of 1933 for any resale
of securities. The terms of any sales will be described in the prospectus
supplement relating to the sale of securities.

Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by us and/or the AMCV Trust against specified
liabilities, including liabilities under the Securities Act of 1933.

Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, us and our subsidiaries in the
ordinary course of business.

If so indicated in the applicable prospectus supplement, we and/or the AMCV
Trust may authorize agents, underwriters or dealers to solicit offers by
specified types of institutions to purchase securities from us and/or the AMCV
Trust at the public offering prices set forth in the applicable prospectus
supplement under delayed delivery contracts providing for payment and delivery
on a specified date or dates in the future. A commission indicated in the
applicable prospectus supplement will be paid to underwriters, dealers and
agents soliciting purchases of securities under the delayed delivery contracts
accepted by us and/or the AMCV Trust.

No dealer, salesman or other individual has been authorized to give any
information or to make any representations not contained in this prospectus, any
accompanying prospectus supplement or the documents incorporated or deemed
incorporated into this prospectus by reference. If given or made, the
information or representations must not be relied upon as having been authorized
by us or any underwriter, dealer or agent. This prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, any securities other
than the registered securities to which it relates, or an offer to sell or a
solicitation of an offer to buy those securities to which it relates, in any
jurisdiction where, or to any person to whom, it is unlawful to make the offer
or solicitation. Neither the delivery of this prospectus or any prospectus
supplement nor any sale made under this prospectus should, under any
circumstances, create any

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implication that there has not been any change in the facts set forth in this
prospectus or in our affairs since the date of this prospectus.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements, trend analyses and other information contained in this
prospectus, any prospectus supplement or any document incorporated into this
prospectus by reference relative to our growth plans, markets for our products
and trends in our operations or financial results, as well as other statements
including words like "anticipate," "believe," "plan," "estimate," "expect,"
"intend," "should," "could," "goal," "target," and other similar expressions,
constitute forward-looking statements under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to known and
unknown risks, uncertainties and other factors which may cause actual results to
be materially different from those contemplated by the forward-looking
statements. These factors include, among other things:

- general economic and business conditions which may affect, among other
things, our customers' leisure spending levels and affect our passenger
yields and occupancy rates, which could adversely affect our financial
performance

- our ability to build new vessels as scheduled and within budget and to
deploy the new vessels on schedule, which may affect our growth plans and
future performance

- our ability to obtain additional capital to build, purchase and renovate
vessels, which may affect our expansion plans and future operating
results

- increases in our indebtedness which may affect our financial performance
and cash flow

- our ability to manage our financial and managerial resources during our
expansion, which could affect our growth and financial performance

- demand for our new cruise products, which could affect our business or
revenue growth

- changes in the regulations and statutes regulating the ability of
foreign-flagged vessels to operate between U.S. ports, which could affect
our revenue growth or business

- increasing competition in the Hawaii cruise market and competition from
other vacation alternatives, which could affect our financial performance

- timely maintenance of our vessels within allocated budgets as well as
river, weather and ocean conditions, which could affect our revenues

- actions by our controlling stockholder, such as sales of its shares of
our stock, which may affect our business, stock price or our ability to
raise capital and

- the risk factors or uncertainties listed from time to time in any
prospectus supplement or any document incorporated into this prospectus
by reference

LEGAL MATTERS

Unless otherwise indicated in the applicable prospectus supplement, the
validity of the shares of the securities, other than the preferred securities,
offered hereby will be passed upon for us by Seyfarth, Shaw, Fairweather &
Geraldson, Chicago, Illinois. Matters of Delaware law relating to the validity
of the preferred securities will be passed upon for the AMCV Trust by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to the
AMCV Trust and American Classic Voyages.

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EXPERTS

The historical consolidated financial statements of American Classic
Voyages Co. as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, have been incorporated by reference
herein from our Annual Report on Form 10-K for the year ended December 31, 1998
in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.

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- --------------------------------------------------------------------------------
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FEBRUARY 16, 2000

[AMERICAN CLASSIC VOYAGES CO. LOGO]

AMERICAN CLASSIC VOYAGES CO.

2,000,000 SHARES OF COMMON STOCK

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PROSPECTUS SUPPLEMENT
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DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
CRAIG-HALLUM CAPITAL GROUP, INC.

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus supplement and the accompanying
prospectus or to make representations as to matters not stated in this
prospectus supplement and the accompanying prospectus. You must not rely on
unauthorized information. This prospectus supplement and the accompanying
prospectus is not an offer to sell these securities or our solicitation of your
offer to buy the securities in any jurisdiction where that would not be
permitted or legal. Neither the delivery of this prospectus supplement and the
accompanying prospectus nor any sales made hereunder after the date of this
prospectus supplement shall create an implication that the information contained
herein or the affairs of American Classic Voyages Co. have not changed since the
date hereof.
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