AMBASSADORS INTERNATIONAL INC, 424B4, 1998-04-24

AMBASSADORS INTERNATIONAL INC
424B4, 1998-04-24
TRANSPORTATION SERVICES

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<PAGE> 1

As filed pursuant to Rule 424(b)(4)
under the Securities Act of 1933
Registration No. 333-49377 and 333-50883

2,658,000 SHARES

[AMBASSADORS INTERNATIONAL, INC. LOGO]

COMMON STOCK

Of the 2,658,000 shares of Common Stock offered hereby, 2,440,000 shares
are being sold by the Company and 218,000 shares are being sold by Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.
The Common Stock is traded on the Nasdaq National Market under the symbol
"AMIE." On April 23, 1998, the last sale price of the Common Stock as reported
by the Nasdaq National Market was $26.75 per share. See "Price Range of Common
Stock."
SEE "RISK FACTORS" COMMENCING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
------------------------

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

<TABLE>
<CAPTION>
Proceeds to
Price Underwriting Proceeds to Selling
to Public Discount(1) Company(2) Stockholders
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share................................. $26.25 $1.31 $24.94 $24.94
- ------------------------------------------------------------------------------------------------------------------------------
Total(3).................................. $69,772,500 $3,481,980 $60,853,600 $5,436,920
</TABLE>

================================================================================
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $335,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 398,700 additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $80,238,375, the Underwriting Discount will
total $4,004,277 and the Proceeds to Company will total $70,797,178. See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein when, as and if delivered to and accepted by the Underwriters and subject
to their right to reject any order in whole or in part. It is expected that
delivery of the certificates representing the shares will be made against
payment therefor at the office of NationsBanc Montgomery Securities LLC on or
about April 29, 1998.
------------------------

NationsBanc Montgomery Securities LLC

Allen & Company Incorporated

Donaldson, Lufkin & Jenrette
Securities Corporation

D.A. Davidson & Co.

April 23, 1998
<PAGE> 2

[Artwork]

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

This Prospectus includes trade names and trademarks of the Company and of
other companies.
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103
OF REGULATION M. SEE "UNDERWRITING."

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere or incorporated by
reference in this Prospectus. In this Prospectus, the words "expects,"
"anticipates," "believes," "intends," "will" and similar expressions identify
forward-looking statements, which speak only as of the date hereof, and are
subject to certain risks and uncertainties. The Company's actual results may
differ materially from the results discussed in such forward-looking statements.
Factors that may cause such a difference include, but are not limited to, those
discussed in "Risk Factors." Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option.
Unless the context otherwise indicates, the "Company" means Ambassadors
International, Inc. and its consolidated subsidiaries.

THE COMPANY

The Company is a leading educational travel, travel services and
performance improvement company. The Company is engaged primarily in (i)
organizing, marketing and operating international educational travel programs on
a worldwide basis for students and adults (the "Education Group"); and (ii)
developing, marketing and managing performance improvement programs that utilize
merchandise awards and incentive travel, providing business meeting management
services, and providing comprehensive housing reservation, registration and
travel services for meetings, conventions, expositions and trade shows (the
"Performance Group").

Since its founding in 1967, the Company has offered educational travel
programs to both students and adults through its People to People Student
Ambassador Programs ("Student Ambassador Programs") and People to People
Ambassador Programs ("Adult Ambassador Programs"). In 1995, John Ueberroth and
Peter Ueberroth became principal stockholders of the Company and members of the
Company's Board of Directors. John Ueberroth was appointed Chief Executive
Officer and President of the Company and Peter Ueberroth was appointed Chairman
of the Board. Under new management, the Company expanded its educational travel
programs, improved operating margins and, through a series of acquisitions,
commenced operations of the Performance Group. As a result of new management's
initiatives and acquisitions, the Company's revenues increased 41% from $18.8
million in 1996 to $26.5 million in 1997, and the Company's net income increased
43% from $3.9 million in 1996 to $5.6 million in 1997.

The Education Group. The Education Group organizes, markets and operates
international educational travel programs for students and adults. The Student
Ambassador Programs provide an opportunity for students in the sixth through
twelfth grades to visit one or more foreign countries to learn about the
politics, economy and culture of such countries. The Adult Ambassador Programs
provide adults with common interests the opportunity to travel abroad to meet
and exchange ideas with foreign citizens who have similar backgrounds, interests
or professions. The Company believes that its programs provide participants with
more enriching experiences and deeper understandings of foreign cultures and
peoples than visits arranged independently or through travel agencies. Since
1983, the Company has organized programs for more than 70,000 students and
45,000 adults in more than 35 countries on 5 continents. In 1997, the Company's
educational travel programs featured visits to such countries as Australia,
China, France, Germany, Great Britain, India, Italy and New Zealand. In 1996 and
1997, approximately 12,200 and 14,000 participants, respectively, traveled on
the Company's educational programs.

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relationship provides the Company with greater access to foreign governmental
agencies, officials and institutions. The Company also believes that its
association with the People to People programs and the recent efforts of
management have provided the foundation for the Company to develop strategic
alliances with Eddie Bauer, Inc., Yosemite National Institutes and the American
Youth Soccer Organization. In addition to providing specialized programs, the
Company believes that these alliances provide additional opportunities for the
Company to expand its product lines and increase its marketing channels.

The Performance Group. The Performance Group develops, markets and manages
performance improvement programs for a nationwide roster of clients. The
programs offer services in three principal areas: (i) performance improvement
programs, (ii) business meeting management services and (iii) comprehensive
housing reservation, registration and travel services. The Company's performance
improvement programs utilize merchandise awards and travel incentives designed
to help clients achieve sales goals, improve productivity and attract and retain
qualified employees. The Company's business meeting management services assist
clients in planning, coordinating and producing business meetings and
conferences. The Company also provides comprehensive housing reservation,
registration and travel services for meetings, conventions, expositions and
trade shows. These services include hotel booking, guest registration,
confirmation, and on-site services.

The Performance Group's clients include both small and large businesses and
organizations, including several Fortune 500 companies and nationally recognized
trade and professional associations.

The Company believes that high quality programs and exceptional customer
service are and will remain key elements of the Company's success. The Company's
strategy is to maintain its quality standards while increasing its volume of
business. To increase its business, the Company intends to (i) expand the
marketing and tour volume of its existing student travel programs, (ii)
introduce new student travel programs and strategic alliances, (iii) broaden its
adult travel programs, (iv) expand the scope of services and increase the market
penetration of the Performance Group, and (v) pursue selective acquisitions of
travel and performance improvement businesses.

The Company was originally incorporated in the State of Washington in 1967
under the name International Ambassador Programs, Inc. to provide international
educational travel programs for students and adults. The Company was
reincorporated in the State of Delaware in 1995. The Company's principal
executive offices are located at Dwight D. Eisenhower Building, 110 S. Ferrall
Street, Spokane, Washington 99202, and its telephone number is (509) 534-6200.

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DEVELOPMENTS SINCE INITIAL PUBLIC OFFERING

Since the Company's initial public offering in August 1995, the Company has
continued to implement its growth strategy through the following initiatives:

Commenced Operations of its Performance Group. The Company commenced
operations of its Performance Group through a series of acquisitions which began
in 1996. Through these acquisitions, the Company has expanded its business to
include performance improvement programs, business meeting management services
and comprehensive housing reservation, registration and travel services. In
1997, Ronald Merriman joined the Company as an Executive Vice President of the
Company and President of the Performance Group. See "Management." The Company
intends to continue to grow its Performance Group both internally and through
selective acquisitions of similar or complementary businesses.

Expanded its Educational Travel Programs. The Company has expanded its
student and adult educational and travel programs by adding new programs and
increasing their frequency. In 1996, the Company also acquired American People
Ambassador Programs, which allows the Company to offer cultural as well as
professional exchanges to adults. The Company has also broadened the geographic
and demographic scope of its marketing efforts.

Entered Into Strategic Alliances. Through a series of strategic alliances,
the Company now offers special travel programs for its Education Group that are
affiliated with Eddie Bauer, Inc., and is implementing pilot programs with
Yosemite National Institutes and the American Youth Soccer Organization. These
strategic alliances provide additional opportunities for the Company to expand
its product lines and increase its marketing channels.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.............. 2,440,000 shares
Common Stock offered by the Selling
Stockholders................................... 218,000 shares
Common Stock to be outstanding after the
Offering....................................... 9,454,779 shares(1)
Use of Proceeds.................................. For future acquisitions and general corporate
purposes.
Nasdaq National Market Symbol.................... AMIE
</TABLE>

- ---------------
(1) Based on shares outstanding as of March 31, 1998. Does not include 494,688
shares of Common Stock issuable upon exercise of outstanding stock options
at a weighted average exercise price of $11.50 per share under the Company's
1995 Equity Participation Plan and 86,676 additional shares reserved for
issuance pursuant to such plan. The Company's Board of Directors has
approved, subject to stockholder approval at the 1998 Annual Meeting of
Stockholders, an increase in the total number of shares issuable under such
plan from 600,000 to 900,000.

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<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA

The following Summary Consolidated Financial Data should be read in
conjunction with the consolidated financial statements, including the notes
thereto, incorporated by reference in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------
ACTUAL AS ADJUSTED(4)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $22,871 $83,390
Total assets................................................ 34,449 94,968
Long-term debt.............................................. 329 329
Total stockholders' equity.................................. 22,556 83,075
</TABLE>

- ---------------
(1) Since 1995, the Company has made several acquisitions which have been
accounted for under the purchase method of accounting. Therefore, the
results of operations of these acquired entities are included in the results
of operations of the Company since their respective dates of acquisition.
The statement of income data for the years ended December 31, 1993, 1994 and
1995 only reflects the Education Group. During 1996, the Company commenced
operations of its Performance Group through the acquisition of two existing
entities engaged in this business. Due to the timing of these acquisitions,
the results of operations for only one of these entities are included in the
Company's results of operations for the year ended December 31, 1996. The
results of operations of the second acquisition are included in the year
ended December 31, 1997. The results of operations for the year ended
December 31, 1997 also include the acquisition in September 1997 of a third
company in the Performance Group.

(2) In connection with the Company's change in ownership and reincorporation in
1995, certain compensation agreements between the Company and certain
stockholders were terminated and new employment agreements were executed.
Also, notes receivable from certain stockholders were repaid. Therefore, the
pro forma net income for the year ended December 31, 1994 reflects
adjustments to (i) reduce certain incentive compensation costs, and (ii)
eliminate interest income on the repayment of notes receivable. The pro
forma net income for the years ended December 31, 1994 and 1995 reflects an
adjustment to record income taxes which would have been paid by the Company
as a C Corporation rather than as an S Corporation.

(3) Historical net income per share for the year ended December 31, 1993 has not
been presented due to the Company's change in ownership and reincorporation
in 1995.

(4) Adjusted to give effect to the sale of 2,440,000 shares of Common Stock
offered by the Company hereby at the public offering price of $26.25 per
share and the receipt of the estimated net proceeds therefrom. See "Use of
Proceeds" and "Capitalization."

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<PAGE> 7

RISK FACTORS

Certain statements in this Prospectus, including statements included below
and under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere, constitute
"forward-looking statements" 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 the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, but are not limited to,
those discussed below and elsewhere in this Prospectus.

In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
contained in this Prospectus.

INTERNATIONAL OPERATIONS AND NATURAL OCCURRENCES

Because substantially all of the Company's travel programs associated with
its Education Group are conducted outside the United States, the Company's
operations are subject to special risks inherent in doing business
internationally. Such risks include the adverse effects on operations from war,
international terrorism, civil disturbances, political instability, governmental
activities and deprivation of contract rights. Periods of international unrest
may reduce demand for the Company's travel programs and could have a material
adverse effect on the Company's business and results of operations. Examples of
such events which have adversely affected the Company's operations include
terrorist activities generally, the Gulf War in 1991, civil unrest in China in
1989 and the Chernobyl disaster in 1986. In 1997, approximately 34% of the
Company's revenues were derived from its programs in Europe (predominantly the
United Kingdom), 24% of its revenues were derived from its programs in the South
Pacific (predominantly Australia and New Zealand), and 11% of its revenues were
derived from its programs in China. The Company expects gross receipts from
programs to these regions to continue to account for a majority of its gross
receipts in 1998. The occurrence of any of the events described above or other
unforeseen developments in one or more of these regions would have a material
adverse effect on the Company. Demand for the Company's travel programs also may
be adversely affected by natural occurrences such as hurricanes, earthquakes,
epidemics and flooding in geographic regions in which the Company conducts its
travel programs.

ACQUISITIONS; EXPANSION OF BUSINESS

Part of the Company's business strategy is to acquire selected travel and
performance improvement businesses which will complement its existing
businesses. The Company's ability to acquire these businesses is dependent in
part upon management's relationship with the owners of these businesses, many of
which are small and closely held by individual stockholders. In addition, the
Company will be competing for expansion opportunities with other companies, many
of which have greater name recognition, marketing support and financial
resources than the Company, which may result in fewer acquisition opportunities
available to the Company as well as higher acquisition prices. There can be no
assurance that the Company will be able to identify, pursue or acquire any
targeted businesses and, if acquired, there can be no assurance that the Company
will be able to profitably manage additional businesses or successfully
integrate acquired businesses into the Company without substantial costs, delays
and other operational or financial problems.

The Company has engaged in informal acquisition discussions with a number
of companies within the last six months, but the Company is not currently a
party to any agreement with respect to any specific acquisition. If the Company
proceeds with any significant acquisition for cash, a substantial portion of the
Company's available cash could be used in order to consummate any such
acquisition. The Company may also seek to finance any such acquisition through
additional debt or equity financings, and there can be no assurance that such
financings will be available on acceptable terms or at all. If consideration for
an acquisition consists of equity securities, the Company's stockholders could
be diluted.

Acquisitions involve a number of special risks in addition to those
mentioned above, including the diversion of management's attention to the
assimilation of the operations and personnel of the acquired
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companies, the potential loss of key employees of acquired companies, potential
exposure to unknown liabilities of acquired companies, adverse effects on the
Company's reported operating results due to acquisition costs and expenses due
to integrating and assimilating the operations of newly acquired businesses, and
the amortization of acquired intangible assets. No assurance can be given that
any acquisition by the Company will or will not occur, that if an acquisition
does occur that it will not materially and adversely affect the Company or that
any such acquisition will be successful in enhancing the Company's business.

SEASONALITY; FLUCTUATIONS IN QUARTERLY RESULTS

The Company's businesses are highly seasonal. The Company recognizes gross
program receipts, revenues and program pass-through expenses upon the overseas
departure of its Education Group program participants. The majority of the
Education Group's travel programs are scheduled in May through July and October
of each year. Substantially all of the Company's operating income from its
Education Group is generated in this period, which historically has offset the
operating losses incurred during the rest of the year. The Company anticipates
that this trend will continue for the foreseeable future. The Company's annual
results would be adversely affected if the Company's revenues were to be
substantially below seasonal norms during the second and third quarters of the
year. The Company's operating results may fluctuate as a result of many factors,
including the mix of programs and program destinations offered by the Company
and its competitors, the introduction and acceptance of new programs and program
enhancements by the Company and its competitors, timing of program completions,
cancellation rates, competitive conditions in the industry, marketing expenses,
extreme weather conditions, international conflicts, timing of and costs related
to acquisitions, changes in relationships with certain travel providers,
economic factors and other considerations affecting travel. In addition, the
Company records on a quarterly basis unrealized and realized gains and losses on
its forward foreign exchange contracts. As a result of the foregoing, annual or
quarterly operating results may be below the expectations of public market
analysts and investors. In such event, the price of the Common Stock could be
materially and adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

COMPETITION

The travel industry in general, and the educational and performance
incentive segments of the travel industry in particular, are highly competitive.
The Company's student programs compete with other companies that provide similar
educational travel programs for students as well as independent programs
organized and sponsored by local teachers with the assistance of local travel
agents. In addition, People to People retains the right under its contract with
the Company to offer programs to college students for studies abroad and may
grant other entities the right to use its name in connection with adult
educational programs. In addition, the Company's adult travel programs compete
with independent professional associations that sponsor and organize their own
travel programs through the assistance of local travel agents, and other
organizations that design travel programs for adults.

The business of providing employee incentive programs for corporate clients
also is highly competitive. The Company's incentive programs compete with
similar programs offered by other companies, many of which are larger than the
Company and have greater resources than the Company, as well as with the
corporations themselves which may choose to provide these programs "in house."
In addition, the Company competes with other companies that are in the business
of providing comprehensive housing reservation, registration and travel services
for meetings, conventions, expositions and trade shows.

The Company believes that the barriers to entry in each of the fields in
which it operates are relatively low. Certain of the Company's competitors have
substantially greater financial, marketing and sales resources than the Company.
There can be no assurance that the Company's present competitors or competitors
that choose to enter the marketplace in the future will not exert significant
competitive pressures on the Company. Such competition could have a material
adverse effect on the Company. See "Business -- Competition."

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DEPENDENCE ON "PEOPLE TO PEOPLE"

The Company's agreements with People to People give the Company the
exclusive right to develop and conduct programs for kindergarten through college
age students using the People to People name, and the non-exclusive right to
develop and conduct programs for adults using the People to People name. The
Company's agreements with People to People, however, allow People to People to
continue to conduct college and professional seminars and internship programs
and to develop other student activities and adult programs. The contracts expire
in 2005 and may be renewed for successive ten year periods, but either party has
the right to terminate such contracts at the end of any ten year period upon six
months' prior notice. The Company believes that it derives benefit from its
ability to market its programs using the People to People name. If the Company's
agreements with People to People are terminated or if the Company is unable to
use the People to People name to market new programs or destinations, the
Company's business, financial condition and results of operations could be
materially and adversely affected.

DEPENDENCE ON TRAVEL SUPPLIERS

In order to offer its services and products, the Company is dependent on
airlines, hotels and other suppliers of travel services. Consistent with
industry practices, the Company currently has no long-term agreements with its
travel suppliers that obligate such suppliers to sell services or products
through the Company on an ongoing basis. Restricted access to travel suppliers'
capacity or changes in pricing arrangements with travel suppliers could have a
material adverse effect on the Company's business, financial condition and
results of operations.

POTENTIAL EFFECTS OF GENERAL ECONOMIC CONDITIONS

The Company derives a significant portion of its revenues directly or
indirectly from the travel industry. The travel industry, especially leisure
travel, which is dependent on personal discretionary spending levels, is
sensitive to changes in economic conditions and tends to decline during general
economic downturns and recessions. The travel industry is also highly
susceptible to unforeseen events, such as fuel price escalation, travel-related
accidents, unusual weather patterns or other adverse occurrences. Any event that
results in decreased travel generally would likely have a material adverse
effect on the Company's business, financial condition and results of operations.

Performance incentive programs and business meetings are more often
conducted by employers when the economy is strong and when such incentives are
needed to retain and motivate employees. Any significant economic downturn or
recession in the United States could cause the Company's Performance Group
clients to substantially reduce or eliminate entirely their employee incentive
programs, which could result in a material adverse effect on the Company's
business, financial condition and results of operations.

MANAGEMENT OF POTENTIAL GROWTH

The Company's operations and business have expanded substantially in recent
years, with a large increase in employees and business areas in a short period
of time. To manage its rapid growth properly, the Company has been and will be
required to expend significant management and financial resources. There can be
no assurance that the Company's systems, procedures and controls will be
adequate to support the Company's operations as they expand. There also can be
no assurance that the Company's management will be able to manage its growth and
operate a larger organization efficiently or profitably. To the extent that the
Company is unable to manage its growth efficiently and effectively or is unable
to attract and retain additional qualified management personnel, the Company's
business, financial condition and results of operations could be materially and
adversely affected.

FLUCTUATION OF CURRENCY EXCHANGE RATES

Many of the Company's arrangements with its foreign-based suppliers require
payment to be made in foreign currencies. Any decrease in the value of the U.S.
dollar in relation to foreign currencies has the effect of increasing the cost
of the services to be provided. Since late 1993, the Company generally has
purchased
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forward contracts to help manage program costs and hedge against foreign
currency valuation increases. While the ability to utilize forward contracts for
the delivery of foreign currencies can mitigate the effect of increased program
costs and foreign currency exchange fluctuations, there can be no assurance that
increased program costs relating to such currency fluctuations will not be
substantial in future periods. The Company's contract with participants in its
travel programs provides the Company the option, and historically the Company
has attempted, to pass along any increase in program costs resulting from
currency fluctuations to program participants. Nonetheless, there can be no
assurance that the Company will be able to increase program prices to offset any
such cost increases in the future and any failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

CASUALTY LOSSES

Due to the nature of its business, the Company may be subject to liability
claims arising out of accidents or disasters causing injury to participants in
its programs, including claims for serious personal injury or death. The Company
believes that it has adequate liability insurance for risks arising in the
normal course of its business. Although the Company has never experienced a
liability loss for which it did not have adequate insurance coverage, there can
be no assurance that insurance coverage will be sufficient to cover one or more
large claims or that the applicable insurer will be solvent at the time of any
covered loss. The Company has been named as a defendant in a lawsuit in which
the plaintiffs have claimed damages in excess of the Company's current insurance
coverage limits. Further, there can be no assurance that the Company will be
able to obtain insurance coverage at acceptable levels and cost in the future.
Successful assertion against the Company of one or a series of large uninsured
claims, or of one or a series of claims exceeding any insurance coverage, could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Insurance" and "Business -- Legal
Proceedings."

DEPENDENCE ON KEY PERSONNEL

The Company's performance is substantially dependent on the continued
services and performance of its senior management and certain other key
personnel. The loss of the services of any of its executive officers or other
key employees could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not have
long-term employment agreements with any of its executive officers. The
Company's future success also depends on its ability to identify, attract, hire,
train, retain and motivate other highly skilled managerial, marketing and
customer service personnel. The failure to retain and attract necessary
managerial, marketing and customer service personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.

CONTINUED CONTROL OF THE COMPANY BY CERTAIN STOCKHOLDERS

Upon completion of this offering, John Ueberroth and Peter Ueberroth will
beneficially own in the aggregate approximately 28.5% of the outstanding shares
of the Company's Common Stock. Accordingly, they will likely be able to exercise
effective voting control of the Company, and would likely be able to elect all
of the Company's directors and be able to determine the outcome of any matter
being voted upon by the Company's stockholders, including any merger, sale of
assets or other change in control of the Company. The Ueberroths' ownership
position, together with the antitakeover effects of certain provisions contained
in the Company's Certificate of Incorporation and Bylaws, may have the effect of
delaying or preventing a change of control of the Company. See "Principal and
Selling Stockholders."

USE OF PROCEEDS

All of the net proceeds from this offering will remain unallocated and the
Company intends to use such proceeds for future acquisitions and general
corporate purposes. Accordingly, management will have broad discretion with
respect to the expenditure of all of the proceeds from this offering. See "Use
of Proceeds."

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POTENTIAL VOLATILITY OF STOCK PRICE

Since its initial public offering in 1995, the Common Stock has often
experienced low daily trading volumes and there can be no assurance that a more
active trading market for the Common Stock will be developed as a result of this
offering or, if developed, that it will be sustained. The market price of the
Common Stock could be subject to significant fluctuations in response to
quarter-to-quarter variations in the Company's operating results, announcements
of new products or services by the Company or its competitors, and other events
or factors. For example, a shortfall in revenues or net income, or an increase
in losses, from levels expected by securities analysts, could have an immediate
and significant adverse effect on the market price of the Common Stock. In
addition, the stock market in recent years has experienced extreme price and
volume fluctuations that have particularly affected the market prices of many
emerging growth companies and that have often been unrelated or disproportionate
to the operating performance of companies. These fluctuations, as well as
general economic and market conditions, may adversely affect the market price
for the Common Stock.

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USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,440,000 shares of
Common Stock being offered by the Company are estimated to be approximately
$60.5 million (approximately $70.5 million if the Underwriters' over-allotment
option is exercised in full), based upon the public offering price of $26.25 per
share and after deducting the underwriting discount and estimated offering
expenses payable by the Company.

The Company intends to use the net proceeds from this offering for future
acquisitions of travel and performance improvement companies and related
businesses and for general corporate purposes. The Company has engaged in
informal acquisition discussions with a number of companies within the last six
months, but the Company is not currently a party to any agreement with respect
to any specific acquisition. See "Risk Factors -- Acquisitions; Expansion of
Business." Pending such uses, the Company intends to invest the funds in
short-term, interest bearing investment grade securities.

The Company will not receive any of the proceeds from the sale of shares
sold by the Selling Stockholders. See "Principal and Selling Stockholders."

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "AMIE" since August 3, 1995. Prior to such date, there was no
public trading market for the Company's equity securities. The last reported
sale price of the Common Stock on the Nasdaq National Market on April 23, 1998
was $26.75.

The following table sets forth for the calendar periods indicated the high
and low sale prices of a share of the Company's Common Stock as reported on the
Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996:
Quarter ended March 31, 1996.............................. $13.25 $ 8.50
Quarter ended June 30, 1996............................... 16.13 9.88
Quarter ended September 30, 1996.......................... 14.25 7.88
Quarter ended December 31, 1996........................... 11.00 8.00

1997:
Quarter ended March 31, 1997.............................. $12.50 $ 9.00
Quarter ended June 30, 1997............................... 13.75 8.75
Quarter ended September 30, 1997.......................... 22.00 12.25
Quarter ended December 31, 1997........................... 26.75 17.25

1998:
Quarter ended March 31, 1998.............................. $26.75 $17.50
Quarter ended June 30, 1998 (through April 23, 1998)...... 29.88 24.50
</TABLE>

As of March 31, 1998, there were approximately 48 holders of record of the
Common Stock. This number does not include beneficial owners holding shares
through nominee or "street" name.

DIVIDEND POLICY

The Company has not paid any dividends since the consummation of its
initial public offering of securities in 1995 and intends to continue to retain
its earnings for use in the operation and expansion of its business and
therefore does not anticipate declaring any cash dividends in the foreseeable
future. The payment of dividends in the future will be at the discretion of the
Board of Directors and will be dependent upon the Company's financial condition,
results of operations, capital requirements and such other factors as the Board
of Directors deems relevant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

12
<PAGE> 13

CAPITALIZATION

The following table sets forth as of December 31, 1997: (i) the actual
capitalization of the Company; and (ii) the capitalization as adjusted to give
effect to the sale of the 2,440,000 shares of Common Stock offered by the
Company hereby at the public offering price of $26.25 per share and the receipt
of the estimated net proceeds therefrom as described under "Use of Proceeds."
This table should be read in conjunction with the selected consolidated
financial data included elsewhere in this Prospectus and the historical
consolidated financial statements of the Company and the related notes thereto
which are incorporated herein by reference. See "Incorporation of Certain
Documents by Reference."

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.............................................. $ 329 $ 329
------- --------
Stockholders' equity:
Preferred stock, $0.01 par value per share; 2,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, $0.01 par value per share; 20,000,000 shares
authorized; 6,768,223 shares issued and outstanding,
actual; 9,208,223 shares issued and outstanding, as
adjusted(1)............................................ 68 92
Additional paid-in capital................................ 13,761 74,256
Retained earnings......................................... 8,727 8,727
------- --------
Total stockholders' equity............................. 22,556 83,075
------- --------
Total capitalization.............................. $22,885 $ 83,404
======= ========
</TABLE>

- ---------------
(1) Excludes 447,052 shares of Common Stock issuable upon exercise of
outstanding stock options as of December 31, 1997, and 138,612 additional
shares reserved for issuance under the Company's 1995 Equity Participation
Plan as of such date. The Company's Board of Directors has approved, subject
to stockholder approval at the 1998 Annual Meeting of Stockholders, an
increase in the total number of shares issuable under such plan from 600,000
to 900,000.

13
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth for the periods indicated certain selected
consolidated financial information and operating data for the Company. The
selected consolidated financial data set forth below for the Company as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997 are derived from the consolidated financial statements which
have been audited by Coopers & Lybrand L.L.P., independent public accountants,
which are incorporated by reference herein. The selected consolidated financial
data set forth below as of December 31, 1993, 1994 and 1995 and for each of the
two years in the period ended December 31, 1994 are derived from audited
consolidated financial statements not included or incorporated by reference
herein. The following selected financial and operating data are qualified by the
more detailed consolidated financial statements of the Company and the notes
thereto incorporated by reference in this Prospectus and should be read in
conjunction with such consolidated financial statements and notes and the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA
AND PROGRAM PARTICIPANTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(1):
Revenue.................................. $14,334 $16,990 $17,133 $18,843 $26,541
Operating expenses:
Selling and tour promotion............. 8,361 9,407 8,694 8,420 9,826
General and administrative............. 4,983 5,380 4,676 5,770 8,210
------- ------- ------- ------- -------
Total operating expenses....... 13,344 14,787 13,370 14,190 18,036
------- ------- ------- ------- -------
Operating income......................... 990 2,203 3,763 4,653 8,505
Other income (expense):
Interest expense....................... (39) (14) (2) (1) (9)
Interest and dividend income........... 555 545 786 1,080 1,588
Realized and unrealized gain (loss) on
investments......................... 7 (555) 278 290 (1,102)
Other, net............................. (65) (52) (8) (41) 1
------- ------- ------- ------- -------
458 (76) 1,054 1,328 478
------- ------- ------- ------- -------
Income before income taxes............... 1,448 2,127 4,817 5,981 8,983
Income tax provision (benefit)........... 306 -- (340) 2,034 3,346
------- ------- ------- ------- -------
Net income............................... $ 1,142 $ 2,127 $ 5,157 $ 3,947 $ 5,637
======= ======= ======= ======= =======
Pro forma net income(2).................. -- $ 3,152 $ 3,179 -- --
======= =======
Net income per share -- basic(3)......... -- $ 0.63 $ 0.57 $ 0.60 $ 0.83
======= ======= ======= =======
Net income per share -- diluted(3)....... -- $ 0.63 $ 0.56 $ 0.59 $ 0.82
======= ======= ======= =======
SELECTED OPERATING DATA:
Gross program receipts (rounded to the
nearest million)....................... $40,000 $45,000 $47,000 $57,000 $80,000
Total Education Group program
participants (rounded to the nearest
hundred)............................... 9,400 11,200 11,600 12,200 14,000
</TABLE>

14
<PAGE> 15

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(4):
Cash and cash equivalents................ $ 674 $ 6,634 $12,974 $18,281 $22,871
Total assets............................. 6,247 9,637 16,016 27,269 34,449
Long-term debt........................... 25 17 6 -- 329
Total stockholders' equity............... 1,829 1,829 11,135 16,783 22,556
</TABLE>

- ---------------
(1) Since 1995, the Company has made several acquisitions which have been
accounted for under the purchase method of accounting. Therefore, the
results of operations of these acquired entities are included in the results
of operations of the Company since their respective dates of acquisition.
The statement of income data for the years ended December 31, 1993, 1994 and
1995 only reflects the Education Group. During 1996, the Company commenced
operations of its Performance Group through the acquisition of two existing
entities engaged in the business. Due to the timing of these acquisitions,
the results of operations for only one of these entities are included in the
Company's results of operations for the year ended December 31, 1996. The
results of operations of the second acquisition are included in the year
ended December 31, 1997. The results of operations for the year ended
December 31, 1997 also include the acquisition in September 1997 of a third
company in the Performance Group.

(2) In connection with the Company's change in ownership and reincorporation in
1995, certain compensation agreements between the Company and certain
stockholders were terminated and new employment agreements were executed.
Also, notes receivable from certain stockholders were repaid. Therefore, the
pro forma net income for the year ended December 31, 1994 reflects
adjustments to (i) reduce certain incentive compensation costs and (ii)
eliminate interest income on the repayment of notes receivable. The pro
forma net income for the years ended December 31, 1994 and 1995 reflects an
adjustment to record income taxes which would have been paid by the Company
as a C Corporation rather than as an S Corporation.

(3) Historical net income per share for the year ended December 31, 1993 has not
been presented due to the Company's change in ownership and reincorporation
in 1995.

(4) All of the Company's acquisitions have been accounted for under the purchase
method of accounting. Therefore, the balance sheet data include the accounts
of the acquired entities as of their respective dates of acquisition. Since
one of the acquisitions occurred effective December 31, 1996, the balance
sheet data includes the accounts of this entity as of December 31, 1996;
however, the results of operations of this entity are not included in the
statement of income data until the year ended December 31, 1997.

15
<PAGE> 16

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

The following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto incorporated by
reference in this Prospectus. Certain statements contained herein that are not
related to historical results, including, without limitation, statements
regarding the Company's business strategy and objectives, future financial
position, expectations about pending litigation and estimated cost savings, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and involve
risks and uncertainties. Actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and under "Risk Factors." All forward-looking statements contained in this
Prospectus are qualified in their entirety by this statement.

GENERAL

The Company is engaged primarily in (i) organizing, marketing and operating
international educational travel programs on a worldwide basis for students and
adults and (ii) developing, marketing and managing performance improvement
programs that utilize merchandise awards and incentive travel, providing
business meeting management services and providing comprehensive housing
reservations, registration and travel services for meetings, conventions,
expositions and trade shows.

Since its initial public offering in August 1995, the Company has expanded
its operations primarily through internal growth and a series of acquisitions of
businesses within the travel and performance improvement industries. Prior to
1996, the Company's business was conducted through its Education Group.

In January 1996, the Company completed the acquisition of The Helin
Organization and commenced operations of the Performance Group. This acquisition
was followed in February 1996 by the acquisition of certain assets of Marc L.
Bright & Associates, which expanded the business of the Company's already
existing Education Group. In December 1996, the Company acquired Bitterman &
Associates, Inc.; in September 1997, the Company acquired certain of the assets
of Debol & Associates; and in February 1998, the Company acquired certain of the
assets of Rogal America, Co. and the stock of Travel Incentives, Inc., further
expanding its Performance Group. All of these acquisitions were accounted for
under the purchase method of accounting. Therefore, the results of operations of
the acquired businesses are included in the Company's results of operations
since their respective dates of acquisition.

Gross program receipts reflect the total payments received by the Company
from Education Group participants and Performance Group clients. Gross program
receipts less program pass-through expenses constitute the Company's revenues.
Program pass-through expenses include all direct costs associated with the
Company's programs, including costs related to airfare, ships, hotels, meals,
ground transportation, guides, professional exchanges, changes in currency
exchange rates and merchandise costs. The Company recognizes gross program
receipts, pass-through expenses and revenues upon the departure of the program
participant or as the Performance Group service is rendered. Operating expenses,
which are expensed by the Company as incurred, are the costs related to the
creation of programs, promotional materials and marketing costs, salaries, rent,
other general and administrative expenses and all of the Company's ordinary
expenses. The Company's policy is to obtain payment for substantially all travel
services prior to entering into commitments for incurring expenses relating to
such travel.

The Company's businesses are highly seasonal. The majority of the Company's
travel programs occur in May through July and October of each year.
Substantially all of the Company's operating income is generated in these
periods, which historically has offset the operating losses incurred during the
rest of the year. The Company anticipates that this trend will continue for the
foreseeable future. The Company's annual results would be adversely affected if
the Company's revenues were to be substantially below seasonal norms during
these periods. The Company's operating results may fluctuate as a result of many
factors, including the mix of Education Group and Performance Group programs and
services, the mix of programs and program destinations offered by the Company
and its competitors, the introduction and acceptance of new programs
16
<PAGE> 17

and program enhancements by the Company and its competitors, timing of program
completions, cancellation rates, competitive conditions in the industry,
marketing expenses, extreme weather conditions, international conflicts, timing
of and costs relating to acquisitions, changes in relationships with certain
travel providers, economic factors and other considerations affecting travel.

The substantial majority of the Company's programs takes place outside of
the United States and most foreign suppliers require payment in local currency
rather than U.S. dollars. Accordingly, the Company is exposed to foreign
currency risks in certain countries as foreign currency exchange rates between
those currencies and the U.S. dollar fluctuate. To manage these risks, the
Company enters into forward foreign exchange contracts and foreign currency
option contracts. These foreign exchange contracts and options are entered into
to support normal recurring purchases, and accordingly, are not entered into for
speculative purposes. The Company is exposed to credit risk under the forward
contracts and options to the extent that the counterparty is unable to perform
under the agreement. The Company anticipates hedging the majority of its foreign
currency risk in future periods. There can be no assurance that the Company's
hedging strategies will be successful in mitigating the impact of foreign
currency fluctuations. The Company records its forward foreign exchange
contracts at market value on a quarterly basis. Unrealized and realized gains
and losses on these securities are recognized in the statement of income.

RESULTS OF OPERATIONS

The following table is derived from the selected consolidated financial
data set forth under "Selected Consolidated Financial Data" and sets forth, for
the periods indicated, the relative percentages that certain income and expense
items bear to revenues.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0%
Operating expenses:
Selling and tour promotion................................ 50.7 44.7 37.0
General and administrative................................ 27.3 30.6 31.0
----- ----- -----
Total operating expenses.......................... 78.0 75.3 68.0
----- ----- -----
Operating income............................................ 22.0 24.7 32.0
Other income (expense)...................................... 6.1 7.0 1.8
----- ----- -----
Income before income taxes.................................. 28.1 31.7 33.8
Income tax provision (benefit).............................. (2.0) 10.8 12.6
----- ----- -----
Net income........................................ 30.1% 20.9% 21.2%
===== ===== =====
Pro forma information:(1)
Income before income taxes.................................. 28.1%
Pro forma income tax provision.............................. 9.5
-----
Pro forma net income........................................ 18.6%
=====
</TABLE>

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

(1) The pro forma net income for the year ended December 31, 1995 reflects an
adjustment to record income taxes which would have been paid by the Company
as a C Corporation rather than as an S Corporation for such year. The
Company's S Corporation status terminated in 1995.

COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996

The Company is organized in two operating divisions: the Education Group
and the Performance Group. For the year ended December 31, 1997, the Education
Group increased its productivity by growth within the core product lines while
realizing efficiencies through the sales and marketing process. The Performance
Group contribution resulted from its acquisitions and additional sales of
incentive travel programs and business meeting management services.

17
<PAGE> 18

Gross program receipts increased 42% in 1997 over 1996, from $56.7 million
to $80.3 million, and net revenue increased 41% from $18.8 million in 1996 to
$26.5 million in 1997. These increases were driven by an increase in the number
of Education Group program participants, the addition of new acquisitions, and
improved cross-selling in the Performance Group.

The overall gross margins (revenues as a percentage of gross program
receipts) for the 1997 year remained consistent with the prior year at 33%. This
reflects a strengthening of the Education Group margins, combined with the
margins achieved by the new acquisitions in the Performance Group. Gross margins
of the Performance Group are expected to be slightly lower than those achieved
in the Education Group.

Selling and tour promotion expenses increased during 1997 when compared to
1996 by $1.4 million, or 17%. Most of this increase results from an acquisition
in late 1996 within the Performance Group. As a percentage of revenues, selling
and tour expenses decreased to 37% in 1997 from 45% in 1996, as a result of
sales and marketing efficiencies and the benefits of a cost management program.

General and administrative expenses increased from $5.8 million to $8.2
million between 1996 and 1997. Most of this increase is due to the assumption of
continuing expenses associated with the Performance Group acquisitions.

Operating income increased 83% in the year ended December 31, 1997 compared
to the year ended December 31, 1996.

Other income includes interest income and unrealized foreign currency gains
or losses. Other income decreased from $1.3 million in 1996 to $0.5 million in
1997. The cash component of other income, interest income, increased to $1.6
million from $1.1 million, a 47% increase on a 25% increase in year-end cash
balances. This increase in interest income is the effect of improved cash
management practices implemented in 1997. The overall net decrease in other
income can be attributed to the non-cash component of other income, unrealized
foreign exchange losses. In 1997, the Company incurred $0.7 million of net
unrealized losses compared to an insignificant amount in 1996. The face amount
of forward foreign exchange contracts outstanding at December 31, 1997, was
$17.4 million.

The Company's income before taxes in 1997 increased 50% over 1996 as a
result of the foregoing factors. The Company has recorded an income tax
provision of $3.3 million for 1997 which represents an effective tax rate of
37%. The tax provision has increased over the prior year's provision of $2.0
million due to the effect of certain non-deductible expenses as well as the
increase in state income taxes with the expansion of the Company through
acquisitions.

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995

The expansion of the Company's programs in 1996 resulted in a 24% increase
in the number of participants from 11,635 in 1995 to 14,377 in 1996, which
increased the Company's gross program receipts 21%, from $46.7 million in 1995
to $56.7 million in 1996. Revenues also increased to $18.8 million or 10% over
1995 revenues.

The Company maintained a 33% gross margin for the year, even with the
addition of the expected lower margins of the Performance Group.

Selling and tour promotion expenses decreased approximately $0.3 million in
1996 when compared to 1995. The Company's marketing efforts were more effective
and efficient than in prior years. This more targeted effort contributed to the
increase in revenues for 1996. Company policy is to expense all promotional
expenses as they are incurred.

In 1996, these expenses included the integration of American People
Ambassador Programs, The Helin Organization, and the developmental costs related
to Eddie Bauer Travel.

General and administrative expenses increased from $4.7 million in 1995 to
$5.8 million in 1996 primarily due to the acquisitions of The Helin Organization
and American People Ambassador Programs in early 1996.

18
<PAGE> 19

Other income includes interest income and foreign currency gains or losses.
During 1996, other income increased 26% from $1.1 million to $1.3 million. This
increase was due to improved cash management systems, as well as a full year's
benefit of investing the proceeds from the initial public offering. These two
factors increased interest income from $0.8 million in 1995 to $1.1 million in
1996.

Also included in other income are gains from foreign currency contracts and
options which are marked to market. The Company enters into forward foreign
exchange contracts and foreign currency option contracts to offset certain
operational exposures from changes in foreign currency exchange rates. These
foreign exchange contracts and options are entered into to support normal
recurring purchases, and accordingly are not entered into for speculative
purposes. Forward foreign exchange contracts are utilized to manage the risk
associated with currency fluctuations on certain purchase commitments. The face
amount of forward foreign exchange contracts outstanding as of December 31,
1996, was $6.7 million.

The Company has recorded an income tax provision of $2.0 million for 1996
which represents an effective tax rate of 34%. The income tax benefit of $0.3
million in 1995 reflected the benefit of the net operating loss incurred by the
Company which was generated after the Company became a C Corporation in
mid-1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company's business is not capital intensive. However, the Company does
retain funds for working capital purposes in order to conduct sales and
marketing efforts for future programs and services.

Net cash provided by operations for the years ended December 31, 1995, 1996
and 1997 was $1.8 million, $6.1 million and $6.2 million, respectively. The
increase in cash flow from operations between 1996 and 1997 resulted primarily
from the increase in net income. The increase from 1995 to 1996 can be
attributed to the increase in cash receipts from Education Group participants in
1996 and the payment in 1995 of approximately $2.4 million of incentive
compensation for the 1994 year to previous owners of the Company.

Net cash used in investing activities for the years ended December 31,
1995, 1996 and 1997 was $0.4 million, $0.8 million and $1.5 million,
respectively. The investing activities during 1997 were due primarily to
leasehold improvements in the corporate headquarters facilities as well as the
purchase of a company in the third quarter of the year. The $0.4 million
increase from 1995 to 1996 was due to the acquisition of subsidiaries and
purchase of other investments. The Company does not have any material capital
expenditure commitments for 1998. However, the Company is continuing to pursue
further acquisitions of related travel and performance improvement businesses
that may require the use of cash and cash equivalents. The Company had no
significant long- or short-term debt as of December 31, 1996; however, at
December 31, 1997, the Company had $0.3 million in long-term debt as a result of
an acquisition during 1997. Subsequent to December 31, 1997, the Company
utilized $7.5 million in cash to fund acquisitions.

Net cash provided by financing activities in 1995 was $5.0 million as a
result of the reorganization of the Company and the initial public offering. Net
cash used in financing activities in 1996 and 1997 was insignificant.

The Company has a credit facility available with Seafirst Bank for up to
$23.0 million U.S. dollars for foreign currency purchases and forward contracts.
Although this facility expires in July 1998, the Company expects it to be
renewed.

At December 31, 1997, the Company had approximately $22.9 million of cash
and cash equivalents, including participant deposits of $7.4 million. Under the
Company's cancellation policy, a participant may be entitled to a refund of a
portion of his or her deposit (less certain fees) depending on the time of
cancellation. Management believes existing cash and cash equivalents and cash
flows from operations, together with the net proceeds of this offering, will be
sufficient to fund the Company's anticipated future acquisitions, operating
needs and capital expenditures at least through 1998.

19
<PAGE> 20

YEAR 2000 ISSUES

The nature of the Company's business systems is such that the year 2000 is
expected to have a minimal impact on the Company's operations or financial
performance. However, there can be no assurance that the systems of other
parties upon which the Company's businesses also rely will address the year 2000
problem adequately.

NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share," was issued. SFAS No. 128 established standards for
computing and presenting earnings per share ("EPS"). It requires the dual
presentation and a reconciliation of basic and diluted EPS. The Company adopted
the provisions of SFAS No. 128 in 1997, which had no effect on EPS as previously
reported.

In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued,
which requires the reporting of comprehensive income. Comprehensive income is
defined as the change in equity of a business enterprise arising from non-owner
sources. This Statement is effective for fiscal years beginning after December
15, 1997. Management does not believe that the implementation of SFAS No. 130
will have a material impact on the presentation of its consolidated financial
statements.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments for an Enterprise and Related Information." This
Statement requires presentation of segment information in reports to
stockholders, including disclosures about the products and services an entity
provides and its major customers. The Statement is effective for fiscal years
beginning after December 15, 1997. Management of the Company has not determined
the disclosure to be made upon implementation of SFAS No. 131.

20
<PAGE> 21

BUSINESS
OVERVIEW

A majority of the Education Group's programs are organized in connection
with People to People International ("People to People"), a private, non-profit
organization dedicated to the promotion of world peace through cultural
exchange. People to People was founded by President Dwight D. Eisenhower in 1956
and was originally administered by the U.S. State Department. Seven Presidents
since President Eisenhower have served as Honorary Chairman of People to People,
including President Bill Clinton, who currently holds that position. Subject to
certain exceptions, the Company's agreements with People to People give the
Company the exclusive right to develop and conduct programs for kindergarten
through college age students using the People to People name and the
non-exclusive right to develop and conduct programs for adults using the People
to People name. The Company believes that its long association with People to
People has been a major factor in its ability to provide quality educational
student and adult travel programs, and that this relationship provides the
Company with greater access to foreign governmental agencies, officials and
institutions. The Company also believes that its association with the People to
People programs and the recent efforts of management have provided the
foundation for the Company to develop strategic alliances with Eddie Bauer,
Inc., Yosemite National Institutes and the American Youth Soccer Organization.
In addition to providing specialized programs, the Company believes that these
alliances provide additional opportunities for the Company to expand its product
lines and increase its marketing channels.

21
<PAGE> 22

housing reservation, registration and travel services. The Company's performance
improvement programs utilize merchandise awards and travel incentives designed
to help clients achieve sales goals, improve productivity and attract and retain
qualified employees. The Company's business meeting management services assist
clients in planning, coordinating and producing business meetings and
conferences. The Company also provides comprehensive housing reservation,
registration and travel services for meetings, conventions, expositions and
trade shows. These services include hotel booking, guest registration,
confirmation, and on-site services.

The Performance Group's clients include both small and large businesses and
organizations, including several Fortune 500 companies and nationally recognized
trade and professional associations.

GROWTH STRATEGY

Expand the Marketing and Tour Volume of Existing Student Travel
Programs. U.S. Census data projects that there will be more than 27.3 million
people in the 12 to 18 year old age range by 1999. The Company believes that a
large number of qualified students in this age group are not aware of the
Company's student travel programs. In light of these factors, the Company
intends to improve its marketing techniques by targeting additional age groups,
making greater use of referrals from teachers, parents and past student
travelers, and expanding and refining its extensive databases of potential
participants.

Introduce New Student Travel Programs and Strategic Alliances. The Company
continually seeks to develop and introduce additional innovative, educational
travel experiences. The Company intends to continue to maintain its contacts
with foreign governmental agencies and officials and intends to continue to use
its People to People and other foreign contacts to organize opportunities for
its program participants that other travel programs do not currently offer. In
addition, the Company intends to introduce new youth travel programs organized
around common extracurricular activities such as sports, science and nature. For
instance, the Company is implementing pilot programs with Yosemite National
Institutes and the American Youth Soccer Organization.

Broaden Adult Travel Programs. According to U.S. Census data, the number of
Americans 45 to 74 years old is expected to grow substantially, increasing to
more than 89.4 million people in 2005 from 71.0 million people in 1995. This
trend is expected to benefit the Company, since this population segment
historically has been the most likely to participate in one of the Company's
adult travel programs. In addition, the Company believes that American adults
increasingly seek the convenience and unique experiences offered by prepackaged
vacation tours. Consequently, the Company believes that the opportunity exists
to expand its adult educational travel programs by continuing to improve the
quality and number of its specialty adult programs and by exploring new country
destinations. The Company also intends to develop alliances with partners that
have strong brand recognition and access to well defined customer segments. For
example, the Company recently implemented an alliance with Eddie Bauer, Inc.,
which offers outdoor recreational travel experiences under the name "Eddie Bauer
Travel."

Expand the Scope of Services and Market Penetration of the Performance
Group. The Company believes that several trends are increasing the opportunities
for growth by its Performance Group. These include the general trends toward
corporate outsourcing and the increasing concern of employers to retain and
motivate employees. Management also believes that the performance improvement
industry is benefiting from the broader use of incentive programs beyond their
traditional sales force applications. In order to capitalize on these trends,
the Company intends to expand, integrate and cross-sell its complementary
service offerings. In addition, the Company intends to increase the size and
industry expertise of its sales force, serve new
22
<PAGE> 23

geographic areas and broaden the scope of services offered. In executing its
expansion strategy, the Company will seek to create broader market recognition
and brand awareness.

Pursue Acquisition Opportunities. The Company believes that the industries
encompassed by the Education Group and the Performance Group are large and
fragmented and present attractive acquisition opportunities. For instance, more
than $22 billion was spent on performance improvement programs in 1996,
according to Incentive Magazine, an industry trade publication. The Company
believes that the industry's large size and fragmentation will facilitate
acquisitions of businesses that are either compatible with the Company's current
business or represent a developing specialty segment not currently addressed by
the Company's operations. The Company believes that the industry experience
collectively held by the Ueberroths and the Company's management will be
valuable in identifying promising acquisition candidates. By executing its
acquisition strategy, the Company believes that it can obtain a competitive
advantage through economies of scale, heightened opportunities for
cross-selling, expanded product offerings and an increased market presence.

THE EDUCATION GROUP

Through its Education Group, the Company provides educational travel
programs for students and adults, principally using the People to People name.
The Company has the exclusive right to develop and conduct programs for
kindergarten through college age students using the People to People name. The
Company also has the non-exclusive right to develop, market and operate programs
for adults using the People to People name; however, at the present time the
Company is the only entity that has been given this right by People to People.
These rights have been granted pursuant to agreements with People to People,
which expire in 2005. The agreements will be automatically renewed for an
additional 10 years unless either party elects otherwise.

Student Ambassador Programs. The Student Ambassador Programs provide an
opportunity for students in the sixth through twelfth grades to visit one or
more foreign countries to learn about the politics, economy and culture of such
countries. The Company markets its Student Ambassador Programs through a
combination of direct mail and local informational meetings. Representatives of
the Company review candidate applications and conduct informational meetings
throughout the country from September through April, after which selected
applicants register to participate in the program.

Student Ambassador Program delegations depart during the summer and
generally travel for approximately 21 days, during which time each delegation
visits one or more foreign countries. Each delegation generally consists of
approximately 35 students and several teachers, who act as the delegation's
leaders. Teachers and students comprising a delegation generally come from the
same locale.

Programs are designed by the Company's staff of international planners and
researchers to provide an educational and entertaining travel experience by
exposing students to the history, government, economy and culture of the country
or countries visited. In each country the Company contracts with overseas
program coordinators to provide day-to-day oversight of the programs.
Additionally, a guide trained by the Company accompanies the group throughout
the duration of its program. In most instances, the Company also arranges to
provide students the opportunity for a "homestay" (a brief stay with a host
family), which gives students a glimpse of daily life in the visited country.
Other interesting opportunities for students may include meeting with a member
of the British Parliament, visiting a U.S. Embassy and participating in a review
of different types of governments. The Company believes that it provides a
unique, safe and well-chaperoned opportunity for participants to learn in a
global setting.

Students who complete certain written assignments and other projects can
receive high school and university credit for their participation in the
program. Universities which recognize academic credit include Stanford
University, University of California at Los Angeles, and Georgetown University.

Adult Ambassador Programs. The Adult Ambassador Programs provide adults
with common interests the opportunity to travel abroad to meet and exchange
ideas with foreign citizens who have similar backgrounds, interests or
professions. The Company markets its Adult Ambassador Programs through a direct
mail marketing effort throughout the year. Programs originate from the Company's
internal marketing and

23
<PAGE> 24

research staff who identify potential delegation topics and leaders. Adult
programs have been conducted in such areas as agriculture, economics, education,
medicine and science.

The Company believes that its Adult Ambassador Programs provide
participants with enriching experiences and deeper understandings of foreign
cultures and people than visits arranged independently or through travel
agencies. The Adult Ambassador Programs operate year-round and are generally
designed to provide a more specialized adult educational experience. Adult
programs generally last from ten days to two weeks and are designed to provide
adults with similar backgrounds or common interests the opportunity to exchange
information and ideas with their counterparts in other countries. Unlike travel
programs provided by travel agencies, these professional exchanges are intended
largely as working trips, with a significant amount of the participants' time
involved in organized meetings, seminars and round-table discussions with their
foreign counterparts, inspection visits to major foreign facilities and
institutions and informal gatherings with foreign counterparts. Each program is
led by a delegation leader chosen by the Company based upon his or her
recognition in the field and expertise regarding the special focus of the
particular program.

Strategic Alliances. The Company also operates travel programs pursuant to
alliances with Eddie Bauer, Inc., a direct mail and retail company, and Yosemite
National Institutes, a non-profit organization with operations in Yosemite
National Park, Olympic National Park and Golden Gate National Recreation Area.
Under its agreement with Eddie Bauer, Inc., the Company recently began to offer
outdoor recreational travel experiences under the name "Eddie Bauer Travel." The
agreement with Yosemite National Institutes is exclusive, except that Yosemite
National Institutes may conduct its own programs. The Company also has an
agreement with the American Youth Soccer Organization to provide international
travel for its players. The initial program includes travel to Paris, London and
Amsterdam to play soccer matches against local teams.

THE PERFORMANCE GROUP

The Performance Group develops, markets and manages performance improvement
programs for a nationwide roster of clients. The programs offer services in
three principal areas: (i) performance improvement programs, (ii) business
meeting management services, and (iii) comprehensive housing reservation,
registration and travel services. The Company's Performance Group commenced
operations through a series of acquisitions commencing in 1996.

In offering performance improvement programs and business meeting
management services, the Performance Group follows a strategy aimed at
developing and implementing programs tailored to each client's objectives. The
Company's employees first meet with existing or potential clients to determine
their business objectives and performance enhancement opportunities. Once a
client agrees to pursue a program, the Company works with the client to
determine the scope of the program by identifying concepts and parameters in
terms of purpose, costs, time and employee participation. Subsequently, the
Company's employees develop and provide customized services that fall within the
identified parameters.

Employees of the Performance Group participate in various aspects of a
client's program development. The staff of creative writers and graphic
designers often delivers promotional campaigns and materials that are complete
from concept through production, including design, printing, collating, labeling
and mailing. The Company has developed computerized monitoring systems and
provides each client with lists generated by internally-designed software
programs which track the program participants and enable the client to know the
status of each participant at any time. Additionally, the Company provides a
program coordinator to formulate, maintain and finalize each aspect of the
client's event.

For its services, the Company is usually paid a percentage markup of the
program components including air and ground transportation, promotional gifts,
meals and hotel accommodations. In addition, the Company is reimbursed for
expenses incurred in organizing the program.

The Company also provides comprehensive housing reservation, registration
and travel services for meetings, conventions, expositions and trade shows. The
contracts for these services generally cover an annual meeting or event and may
be for a term of one to several years. Pursuant to these agreements, the Company

24
<PAGE> 25

provides a wide range of services associated with booking hotel space and guest
registration including securing sufficient and appropriate hotel room
inventories, coordinating blocking and booking of all hotel rooms, monitoring
the status and volume of reservations, accepting individual and group
reservations, mailing reservation confirmations and providing an on-site housing
services desk at a meeting site to coordinate attendees' housing needs. For
providing these and other services, the Company generally receives a fixed
commission, which is paid directly by the hotels.

ACQUISITIONS

In January 1996, the Company acquired all of the capital stock of The Helin
Organization, a company engaged in the performance incentives and meeting
management businesses.

In February 1996, the Company completed the acquisition of certain assets
from Marc L. Bright, d/b/a M.L. Bright Associates, American People Ambassador
Programs and Missions in Understanding. Mr. Bright operated adult education and
exchange travel programs under the "People to People" name.

In December 1996, the Company acquired all of the issued and outstanding
shares of capital stock of Bitterman & Associates Inc., a merchandise incentive
and performance improvement company.

In September 1997, the Company acquired certain of the assets of Debol &
Associates, a company engaged in the performance incentives and meeting
management businesses.

In February 1998, the Company acquired certain of the assets of Rogal
America, Co., a company engaged in providing comprehensive housing reservation,
registration and travel services for meetings, conventions, expositions and
trade shows.

In February 1998, the Company further expanded the operations of its
Performance Group through its acquisition of the capital stock of Travel
Incentives, Inc., a company engaged in the performance incentives and meeting
management businesses.

COMPETITION

The travel industry in general, and the educational segment of the travel
industry in particular, is highly competitive. The Company's student programs
compete with similar educational travel programs operated by other individuals
and organizations, as well as independent programs organized and sponsored by
local teachers with the assistance of local travel agents. The Company's adult
travel programs also compete with independent professional associations that
sponsor and organize their own travel programs through the assistance of local
travel agents, and other organizations that design travel programs for adults.

The Company believes that the barriers to entry for any future competitors
are relatively low. Certain organizations engaged in the travel business have
substantially greater financial, marketing and sales resources than the Company.
There can be no assurance that the Company's present competitors or competitors
that choose to enter the marketplace in the future will not exert significant
competitive pressures on the Company.

The Company believes that the principal bases of competition in the
educational segment of the market are the quality and uniqueness of the
educational program offered, customer service, reputation and program cost. The
Company believes that its agreements with People to People, as well as its years
of experience organizing student educational programs and established
relationships with public officials, organizations and residents in countries in
which it provides programs, allow the Company to provide an educational
opportunity that is not easily duplicated by competitors' programs.

The Performance Group also competes in segments of the travel industry that
are highly competitive. In the meeting management and incentives businesses, the
Company competes with companies which are larger and have greater resources. The
Company believes that, although some potential clients will focus on price
alone, other clients will also be interested in the quality of the programs
developed by the Performance Group and customer service. The Company believes
that its programs are not easily duplicated by its competitors.

25
<PAGE> 26

SERVICEMARKS

The Company has registered a variety of service and trademarks, including
the names "High School Student Ambassador Program" and "Citizen Ambassador
Program." In addition, the Company has the right, subject to certain exceptions,
to use People to People's name, servicemark and logo for use in marketing
student and adult programs. In February 1996, the Company acquired the exclusive
rights to the names "American People Ambassador Programs" and "Missions in
Understanding." The Company believes that the strength of its service and
trademarks is valuable to its business and intends to continue to protect and
promote its marks as appropriate. However, the Company believes that its
business is not dependent upon any trademark or servicemark.

INSURANCE

The Company maintains insurance coverage in amounts it believes are
adequate for its business, including a $5 million professional liability policy
and a $5 million umbrella policy. The Company also maintains a $1 million
general liability and property coverage policy. The Company has not experienced
difficulty in obtaining adequate insurance coverage. There is no assurance that
the insurance maintained by the Company will be adequate in the event of a
claim, or that such insurance will continue to be available in the future.

EMPLOYEES

At February 28, 1998, the Company had approximately 302 employees, of which
288 were full-time employees. Of the Company's total employees, 118 are located
in Spokane, Washington, 17 are located in Newport Beach, California, 3 are
located in Winnebago, Illinois, 50 are located in Minneapolis, Minnesota, 86 are
located in Watertown, Massachusetts, 5 are located in Alexandria, Virginia, and
23 are located in Westlake, California. The Company has 76 full-time employees
engaged in marketing and sales and 226 in operations, administration and
finance. The Company also occasionally employs temporary labor on a seasonal
basis to assist it with its direct marketing efforts in recognition of the fact
that the Company's student travel programs are seasonal in nature. None of the
Company's employees is subject to collective bargaining agreements or is
represented by a union. The Company believes that its labor relations are good.

PROPERTIES

The principal executive offices of the Company, consisting of approximately
41,000 square feet, are located in Spokane, Washington and are occupied pursuant
to a lease dated January 3, 1995 that expires December 31, 2004. The lease
currently provides for monthly rental payments of $36,992. The Company may
cancel the lease without penalty (upon one year's prior notice) and also may
extend the term of the lease for an additional ten year period upon providing
written notice to the Lessor of its intention to exercise such option at least
six months prior to the end of the initial term. If the Company elects to
exercise the extension option, the monthly rental during the renewal period will
be the fair market rental value of the leased premises as of the date the option
is exercised (as determined based on market rentals of similar properties in the
Spokane, Washington area). The owner of the premises is a partnership consisting
of two former principals of the Company, who subsequently sold their interest in
the Company in January 1995.

In March 1998, the Company entered into a new lease for general
administrative offices in Newport Beach, California. The lease commences on or
about June 15, 1998 and is for a term of seven years. The initial base rental is
$28,346 per month. The premises consist of approximately 26,996 square feet.

The Company leases 900 square feet of office space in Winnebago, Illinois
pursuant to a lease that expires in August 2000. The Company also leases 4,500
square feet of office space in Newport Beach, California. The lease expires in
June 2000, and currently provides for monthly rental payments of $4,742. In
addition, the Company leases approximately 10,690 square feet of office and
warehouse space in Plymouth, Minnesota, pursuant to a lease which expires in
1999 and provides for current monthly rental payments of $9,101.

26
<PAGE> 27

In February 1998, the Company assumed two additional leases for office
space in connection with its acquisition of certain of the assets of Rogal
America, Co. One lease is for approximately 15,900 square feet in Watertown,
Massachusetts, with a current monthly rental of $15,640, which lease expires in
2003, and a second lease is for approximately 1,805 square feet in Alexandria,
Virginia, with a currently monthly rental of $2,074, which lease expires in
November 1998; however, the Company has an option to extend the term for three
years.

In February 1998, the Company assumed a month-to-month lease for office
space in connection with its acquisition of Travel Incentives, Inc. The lease is
for approximately 4,841 square feet with a current monthly rental of $6,051.

Management believes that its existing facilities are sufficient to meet its
present needs and anticipated needs for the foreseeable future. However,
additional facilities may be required in connection with future business
acquisitions.

LEGAL PROCEEDINGS

On September 22, 1997, Sarah Buffington and certain other individuals, for
themselves and on behalf of their children, six teenage students (the
"Plaintiffs"), filed a lawsuit in the District Court of Harris County, Texas,
against People to People and three individual tour leaders. In February 1998,
the lawsuit was amended to include the Company (the original named defendants
and the Company are collectively referred to as the "Defendants"). The basis for
the Plaintiffs' claim is their allegation that, while the six teenagers were in
Europe in June 1997 as part of a tour involving 31 students, three of the tour
leaders behaved in an inappropriate manner toward the six teenagers. The
Plaintiffs allege breach of contract, negligence, negligent hiring and retention
of the tour leaders, slander, intentional infliction of emotional distress, and
assault and battery. The Plaintiffs seek at least $15 million in punitive and
exemplary damages against the Defendants, together with unspecified actual
damages, attorneys' fees, court costs and other incidental costs. The Company
believes that it has meritorious defenses to this lawsuit and intends to defend
itself vigorously.

Except for the foregoing, the Company is not a party to any pending legal
proceedings other than ordinary routine litigation incidental to its business,
the outcome of which the Company believes will not have a material adverse
effect on its business, financial condition or results of operations.

27
<PAGE> 28

MANAGEMENT

The Company has a classified Board of Directors, which is divided into
three classes, consisting of two Class I Directors, two Class II Directors, and
two Class III Directors. At each annual meeting of stockholders, directors are
elected for a term of three years to succeed those directors whose terms expire
on the annual meeting dates.

The following table sets forth certain information regarding the Company's
executive officers and directors:

<TABLE>
<CAPTION>
TERM
NAME AGE POSITION CLASS EXPIRES
---- --- -------- ----- -------
<S> <C> <C> <C> <C>
John A. Ueberroth....... 54 Chief Executive Officer, President and II 2000
Director
Jeffrey D. Thomas....... 31 Executive Vice President, Chief Financial -- --
Officer and Secretary
Ronald L. Merriman...... 53 Executive Vice President -- --
Peter V. Ueberroth...... 60 Chairman of the Board of Directors I 1998
James L. Easton......... 62 Director II 2000
Rafer L. Johnson........ 62 Director III 1999
John C. Spence.......... 68 Director III 1999
Richard D.C. Whilden.... 64 Director I 1998
</TABLE>

John A. Ueberroth has served as President, Chief Executive Officer and a
director of the Company since 1995. Since 1989, Mr. Ueberroth has been a
principal of The Contrarian Group, a business management company. From 1990 to
1993, he served as Chairman and Chief Executive Officer of Hawaiian Airlines.
Hawaiian Airlines filed for bankruptcy protection pursuant to Chapter 11 of the
Bankruptcy Code in 1993 and emerged from bankruptcy in 1994. From 1980 to 1989,
Mr. Ueberroth served as President of Carlson Travel Group. In addition, Mr.
Ueberroth has served as Chairman of the Travel Industry Association of America
(1986-1987) and President of the United States Tour Operator Association
(1987-1988).

Jeffrey D. Thomas has served as Chief Financial Officer, Vice President of
Finance and Secretary of the Company since January 1996, and from October 1995
to December 1995 he was Assistant Vice President of Finance of the Company. Mr.
Thomas also serves as President (since August 1996) of Ambassador Education
Group, Inc., and Vice President, Secretary and Treasurer (since January 1996) of
Ambassador Performance Group, Inc., both wholly-owned subsidiaries of the
Company. From July 1994 to October 1995, Mr. Thomas was Director of Business
Development for Adia Personnel Services, one of the largest personnel companies
in the world. From September 1993 to July 1994, Mr. Thomas was employed by The
Contrarian Group, a business management company, and from 1989 to 1993, he was a
consultant for Corporate Decisions, Inc., an international business consulting
firm.

Ronald L. Merriman has served as Executive Vice President of the Company
and President of Ambassador Performance Group, Inc. since August 1997. From 1967
to August 1997, Mr. Merriman was with KPMG Peat Marwick ("KPMG"), the
international accounting and consulting firm, where he was a partner from July
1977 to August 1997, and served on KPMG's National Management Committee from
October 1990 to August 1997. Mr. Merriman also served as KPMG's National and
International Managing Partner -- Health Care from July 1993 to August 1997, and
as Area Managing Partner for the Western Region from October 1990 to June 1993.
Previously, he served on KPMG's Board of Directors and as International
Partner-In-Charge of KPMG's transportation and tourism business.

Peter V. Ueberroth has served as Chairman of the Board of the Company since
1995. Since 1989, Mr. Ueberroth has been serving as Managing Director of The
Contrarian Group, a business management company. From 1984 to 1989, Mr.
Ueberroth served as the sixth Commissioner of Major League Baseball. From 1979
to 1984, he served as President and Chief Executive Officer of the Los Angeles
Olympic Organizing Committee. Mr. Ueberroth founded First Travel Corporation in
1962, and sold it to the Carlson

28
<PAGE> 29

Travel Group in 1979. Mr. Ueberroth currently serves as a director of The
Coca-Cola Company, CB Commercial Real Estate Services Group, Inc., Promus Hotel
Corp., and Transamerica Corporation.

James L. Easton has served as a director of the Company since 1995. Since
1973, Mr. Easton has served as Chairman and President of J.D. Easton Inc. and
Easton Sports Inc., a diversified international sporting goods company. He is
one of only three United States citizens to serve as a member of the
International Olympic Committee. He also serves as President of Federation
Internationale de Tir a l'Arc (FITA -- International Archery Association), is a
member of the Board of Visitors of John E. Anderson Graduate School of
Management at the University of California at Los Angeles, and is an Executive
Board Member of the Salt Lake City Organizing Committee and the U.S. Olympic
Committee.

Rafer L. Johnson has served as a director of the Company since 1995. Mr.
Johnson is a World and Olympic record holder in the decathlon. Mr. Johnson
devotes a substantial amount of his time to mentally and physically handicapped
children and adults. He has been associated with California Special Olympics
since its inception in 1969, served as the President of its Board of Directors
for ten years, and currently is Chairman of its Board of Governors. He has been
appointed to national and international foundations and Presidential
Commissions, with a concentration on youth development. Mr. Johnson also is
National Head Coach for Special Olympics International and a member of its Board
of Directors, and, in addition, serves on a variety of special boards and
committees in the world of sports and community services.

John C. Spence has served as a director of the Company since 1995. From
April 1993 to January 1998, Mr. Spence was President of Avco Insurance Services,
a provider of credit and credit-related insurance to financial institutions, and
a wholly-owned subsidiary of Avco Financial Services, Inc. Since January 1998,
Mr. Spence has been Chairman of the Board of Avco Insurance Services. From
October 1990 to April 1993, he served as President of Endovascular Instruments,
Inc., a manufacturer of medical devices. Prior to that time, Mr. Spence was an
independent business consultant. He is also a director of Avco Financial
Services, Inc., a wholly-owned subsidiary of Textron, Inc.

Richard D.C. Whilden has served as a director of the Company since 1995.
Since 1990, Mr. Whilden has been a principal of The Contrarian Group, a business
management company. He is also Chairman of the Board, President and Chief
Executive Officer of Internet Travel Network, an Internet software service
bureau. From April 1993 to August 1994, Mr. Whilden was the Chairman of the
Board of Directors of Caliber Bank in Phoenix, Arizona and, from December 1993
to August 1994, he was the Chief Executive Officer, President and Chairman of
the Board of Directors of the bank's holding company, Independent Bankcorp of
Arizona, Inc. In addition, Mr. Whilden remained as a director of the holding
company and of the bank until they were sold in 1995. From 1959 to 1989, Mr.
Whilden was employed by TRW, Inc., during which time he served as Executive Vice
President from 1984 to 1989.

John A. Ueberroth and Peter V. Ueberroth are brothers. Jeffrey D. Thomas is
the son-in-law of Peter V. Ueberroth. Other than these relationships, there are
no family relationships among the directors and executive officers of the
Company.

29
<PAGE> 30

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1998, and as adjusted to
reflect the sale of Common Stock offered hereby by the Company and the Selling
Stockholders (assuming no exercise of the Underwriters' over-allotment option)
by (i) each director of the Company, (ii) each executive officer of the Company,
(iii) the Selling Stockholders, (iv) all executive officers and directors of the
Company as a group, and (v) each person known by the Company to own beneficially
5% or more of the outstanding Common Stock.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1)
-------------------- SHARES BEING --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Peter V. Ueberroth(2)................. 1,352,575 19.3% -- 1,352,575 14.3%
John A. Ueberroth(3).................. 1,541,585 22.0% 200,000 1,341,585 14.2%
Jeffrey D. Thomas(4).................. 130,100 1.9% -- 130,100 1.4%
Ronald L. Merriman(5)................. 50,000 * -- 50,000 *
James L. Easton(6).................... 5,000 * -- 5,000 *
John C. Spence(7)..................... 6,000 * -- 6,000 *
Rafer L. Johnson(8)................... 5,000 * -- 5,000 *
Richard D. C. Whilden(9).............. 7,620 * -- 7,620 *
Rogal America, Co..................... 140,187 2.0% 18,000 122,187 1.3%
The Kaufmann Fund, Inc.(10)........... 1,000,000 14.3% -- 1,000,000 10.6%
T. Rowe Price Associates, Inc.(11).... 793,600 11.3% -- 793,600 8.4%
All executive officers and directors
as a group (8 persons).............. 3,097,880 44.2% 200,000 2,897,880 30.5%
</TABLE>

- ---------------
* Less than 1%

(1) Includes shares issuable upon the exercise of options or warrants that are
exercisable within 60 days of March 31, 1998. The shares underlying such
options or warrants are deemed to be outstanding for the purpose of
computing the percentage of outstanding stock owned by such persons
individually and by each group of which they are a member, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.

(2) Chairman of the Board of the Company. These shares are held in a family
trust of which Mr. Ueberroth is a co-trustee. Mr. Ueberroth's address is
500 Newport Center Drive, Suite 900, Newport Beach, CA 92660.

(3) President and Chief Executive Officer of the Company. Mr. Ueberroth's
address is One Corporate Plaza, Newport Beach, CA 92660.

(4) Executive Vice President, Secretary and Chief Financial Officer of the
Company. Consists of 111,350 shares of Common Stock held in a family trust
and 18,750 shares of Common Stock issuable upon exercise of employee stock
options. Mr. Thomas' address is 110 South Ferrall Street, Spokane, WA
99202.

(5) Executive Vice President of the Company. Includes 37,500 shares of Common
Stock underlying a restrictive stock award to Mr. Merriman, which shares
vest in three equal annual installments commencing January 1, 1999 and as
to which Mr. Merriman has sole voting rights currently. Mr. Merriman's
address is One Corporate Plaza, Newport Beach, CA 92660.

(6) Director. Consists of 5,000 shares of Common Stock issuable upon exercise
of director options. Mr. Easton's address is 7855 Haskell Avenue, Van Nuys,
CA 91406.

(7) Director. Includes 5,000 shares of Common Stock issuable upon exercise of
director options. Mr. Spence's address is 18581 Teller Avenue, Irvine, CA
92715.

(8) Director. Consists of 5,000 shares of Common Stock issuable upon exercise
of director options. Mr. Johnson's address is 6071 Bristol Parkway, #100,
Culver City, CA 90230.

30
<PAGE> 31

(9) Director. Includes 5,000 shares of Common Stock issuable upon exercise of
director options. Mr. Whilden's address is 106 Poinsettia Avenue, Manhattan
Beach, CA 90266.

(10) As reported in a Schedule 13G filed with the Securities and Exchange
Commission by The Kaufmann Fund, Inc., whose address is 140 E. 45th Street,
43rd Floor, New York, NY 10017.

(11) As reported in a Schedule 13G filed with the Securities and Exchange
Commission by T. Rowe Price Associates, Inc., whose address is 100 East
Pratt Street, Baltimore, MD 21202. According to such Schedule 13G, these
securities are owned by various individual and institutional investors,
including T. Rowe Price New Horizon Funds, Inc. (which owns 433,000
shares), for which T. Rowe Price Associates, Inc. serves as an investment
advisor with power to direct investments and/or sole power to vote the
securities. T. Rowe Price Associates, Inc. expressly disclaims that it is
the beneficial owner of such securities.

31
<PAGE> 32

UNDERWRITING

NationsBanc Montgomery Securities LLC, Allen & Company Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and D.A. Davidson & Co.
(collectively, the "Underwriters") have severally agreed, subject to the terms
and conditions contained in the Underwriting Agreement, to purchase from the
Company and the Selling Stockholders the number of shares of Common Stock
indicated below opposite their respective names, at the public offering price
less the underwriting discount set forth on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all of the shares of Common Stock if they purchase any.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
NationsBanc Montgomery Securities LLC....................... 797,400
Allen & Company Incorporated................................ 797,400
Donaldson, Lufkin & Jenrette Securities Corporation......... 797,400
D.A. Davidson & Co. ........................................ 265,800
---------
Total............................................. 2,658,000
=========
</TABLE>

The Underwriters have advised the Company and the Selling Stockholders that
they propose initially to offer the Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow selected
dealers a concession of not more than $0.75 per share, and the Underwriters may
allow, and such dealers may reallow, a concession of not more than $0.10 per
share to certain other dealers. After the offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters and to certain other
conditions, including the right to reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 398,700
additional shares of Common Stock to cover over-allotments, if any, at the same
price per share as the initial 2,658,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with the offering.

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

Each director and officer of the Company and each Selling Stockholder has
agreed, for a period of 90 days from the date of this Prospectus, that they will
not, directly or indirectly, offer to sell, sell, contract or grant any option
to sell, pledge or otherwise dispose of or transfer any shares of Common Stock
or any securities convertible into or exchangeable for Common Stock without the
consent of NationsBanc Montgomery Securities LLC. The Company has agreed not to,
directly or indirectly, offer to sell, sell, contract or grant any option to
sell, pledge or otherwise dispose of or transfer any shares of Common Stock or
any securities convertible into or exchangeable for Common Stock for a period of
90 days from the date of this Prospectus without the prior written consent of
NationsBanc Montgomery Securities LLC, except that the Company may, without such
consent, grant stock options pursuant to its 1995 Equity Participation Plan,
issue shares of Common Stock upon exercise of outstanding stock options and
issue unregistered shares as consideration for acquired businesses.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission (the "Commission") may limit the ability of
the Underwriters and certain selling group members to bid for and purchase the
Common Stock. As an exception to these rules, an Underwriter is permitted to
engage in certain transactions that stabilize the price of the Common Stock.
Such transactions

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consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock. If the Underwriters create a short position in
the Common Stock in connection with the offering, i.e., if they sell more shares
of Common Stock than are set forth on the cover page of this Prospectus, the
Underwriters may reduce that short position by purchasing Common Stock in the
open market. The Underwriters may also elect to reduce any short position by
exercising all or part of the over-allotment option described above. The
Underwriters may also impose a penalty bid on certain selling group members.
This means that if the Underwriters purchase shares of Common Stock in the open
market to reduce their short position or to stabilize the price of the Common
Stock, they may reclaim the amount of the selling concession from the selling
group members who sold those shares as part of the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.

In connection with this offering, certain Underwriters may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market immediately prior to the commencement of sales in this offering, in
accordance with Rule 103 under Regulation M. Passive market making consists of
displaying bids on the Nasdaq National Market that are limited by the bid prices
of independent market makers and completing purchases in response to order flow
at prices limited by such bids. Net purchases by a passive market maker on each
day are limited to a specified percentage of the passive market maker's average
daily trading volume in the Common Stock during a specified period and must be
discontinued for any day in which such limit is reached. Passive market making
may stabilize the market price of the Common Stock at a level above that which
might otherwise prevail and, if commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Richman, Lawrence, Mann, Chizever &
Phillips, Beverly Hills, California. Pillsbury Madison & Sutro LLP, San
Francisco, California, is acting as counsel for the Underwriters in connection
with certain legal matters relating to the shares of the Common Stock offered
hereby.

EXPERTS

The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997
incorporated by reference in this Prospectus have been incorporated herein in
reliance on the report, which includes an explanatory paragraph for the change
in accounting for impairment of long-lived assets in 1996, of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.

The financial statements with respect to the acquisition of Rogal America,
Co. incorporated in this Prospectus by reference to the Company's Current Report
on Form 8-K dated February 12, 1998 (as amended on Form 8-K/A dated April 2,
1998) have been audited by Starr, Finer, Starr LLP, independent auditors, as
stated in their report incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.

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AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby. As
used herein, the term "Registration Statement" means the initial Registration
Statement and any and all amendments thereto. This Prospectus omits certain
information contained in said Registration Statement as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto. Statements herein
concerning the contents of any contract or other document are not necessarily
complete and in each instance reference is made to such contract or other
document filed with the Commission as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.

The Company is subject to the reporting requirements of the Exchange Act
and files reports, proxy statements and other information with the Commission in
accordance therewith. Such reports, proxy statements, and other information
filed by the Company are available for inspection and copying at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by the Company (File No.
0-26420) are incorporated by reference in this Prospectus:

1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997;

2. The Company's Current Report on Form 8-K dated February 12, 1998
(as amended on Form 8-K/A dated April 2, 1998); and

3. The description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed under Section 12 of the
Exchange Act, dated July 12, 1995, including any amendment or report
updating such description.

In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents (such documents, and the documents enumerated above, being
hereinafter referred to as "Incorporated Documents"). Any statement contained
herein or in an Incorporated Document shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed Incorporated 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.

The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of any such
person, a copy of any and all of the Incorporated Documents, other than exhibits
to such documents, unless such exhibits are specifically incorporated by
reference therein. Requests should be directed to Investor Relations,
Ambassadors International, Inc., 110 S. Ferrall Street, Spokane, Washington
99202, Attention: Jeffrey D. Thomas, telephone number (509) 534-6200. The
information relating to the Company contained in this Prospectus does not
purport to be comprehensive and should be read together with the information
contained in the Incorporated Documents.

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[Inside Cover]

[Artwork]

35
<PAGE> 36

======================================================

No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with this offering and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or the Selling Stockholders or any Underwriter. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs of
the Company since such date.

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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................ 3
Risk Factors...................... 7
Use of Proceeds................... 12
Price Range of Common Stock....... 12
Dividend Policy................... 12
Capitalization.................... 13
Selected Consolidated Financial
Data............................ 14
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 16
Business.......................... 21
Management........................ 28
Principal and Selling
Stockholders.................... 30
Underwriting...................... 32
Legal Matters..................... 33
Experts........................... 33
Available Information............. 34
Incorporation of Certain Documents
By Reference.................... 34
========================================
</TABLE>

======================================================

2,658,000 SHARES

[AMBASSADORS INTERNATIONAL, INC. LOGO]

COMMON STOCK
------------------------

PROSPECTUS
------------------------
NationsBanc Montgomery
Securities LLC

Allen & Company Incorporated

Donaldson, Lufkin & Jenrette
Securities Corporation

D.A. Davidson & Co.

April 23, 1998

======================================================