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


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                            -------------------------


                                    FORM 10-K


        [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
              EXCHANGE ACT OF 1934 (FEE REQUIRED)

                      FOR THE YEAR ENDED DECEMBER 31, 1998

                                       OR

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

                         COMMISSION FILE NUMBER: 0-9264


                          AMERICAN CLASSIC VOYAGES CO.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                    31-0303330
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization) 

 TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS             60606
   (Address of principal executive offices)            (Zip Code)

                                 (312) 258-1890
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

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

                          COMMON STOCK, $.01 PAR VALUE
                                (Title of Class)

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

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

The aggregate market value of voting stock held by non-affiliates of the
registrant was $132.5 million based upon the last reported sale price of $19.00
per share on March 26, 1999 on The Nasdaq Stock Market. Using beneficial
ownership of stock rules adopted pursuant to Section 13 of the Securities
Exchange Act of 1934, certain persons designated as affiliates for purposes of
this computation may not be held to be affiliates upon judicial determination.

As of March 26, 1999, there were 14,327,509 shares of Common Stock outstanding.

                             DOCUMENTS INCORPORATED BY REFERENCE:

PART III        --           Portions of the registrant's definitive Proxy 
                             Statement, which will be filed with the Securities
                             and Exchange Commission by April 30, 1999.

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



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                          AMERICAN CLASSIC VOYAGES CO.



                                      INDEX
<TABLE>
<CAPTION>



     ITEM DESCRIPTION                                                                                             PAGE
     ----------------                                                                                             ----

     Part I
<S>                                                                                                                 <C>
                  Item 1   --    Business........................................................................   3
                  Item 2   --    Properties......................................................................   14
                  Item 3   --    Legal Proceedings...............................................................   14
                  Item 4   --    Submission of Matters to a Vote of Security Holders.............................   14

     Part II
                  Item 5   --    Market for Registrant's Common Equity and Related
                                 Stockholder Matters.............................................................   15
                  Item 6   --    Selected Financial Data.........................................................   15
                  Item 7   --    Management's Discussion and Analysis of Financial
                                 Condition and Results of Operations.............................................   15
                  Item 7A  --    Quantitative and Qualitative Disclosures About Market Risk......................   15
                  Item 8   --    Financial Statements and Supplementary Data.....................................   15
                  Item 9   --    Changes in and Disagreements with Accountants
                                 on Accounting and Financial Disclosure..........................................   15

     Part III
                  Item 10  --    Directors and Executive Officers of the Registrant..............................   16
                  Item 11  --    Executive Compensation..........................................................   16
                  Item 12  --    Security Ownership of Certain Beneficial Owners
                                 and Management..................................................................   16
                  Item 13  --    Certain Relationships and Related Transactions..................................   16

     Part IV
                  Item 14  --    Exhibits, Financial Statement Schedules,
                                 and Reports on Form 8-K.........................................................   17

</TABLE>





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                          AMERICAN CLASSIC VOYAGES CO.

                                     PART I

ITEM 1.    BUSINESS

GENERAL

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

American Classic Voyages Co. is a Delaware corporation incorporated in 1985 as a
holding company that owns and controls The Delta Queen Steamboat Co., which
operates Delta Queen through various subsidiaries, and Great Hawaiian Cruise
Line, Inc., which operates American Hawaii through various subsidiaries.
American Classic Voyages Co.'s principal executive offices are located at Two
North Riverside Plaza, Suite 200, Chicago, Illinois 60606. Delta Queen and
American Hawaii's principal administrative offices are located in New Orleans,
Louisiana.

We are the largest owner and operator of U.S. flag passenger vessels. Under the
Passenger Vessel Act of 1886 and related U.S. laws, only U.S. ships that are (1)
U.S. built, (2) owned by U.S. citizens, (3) operated by U.S. crews and officers,
and (4) U.S.-flagged by the U.S. Coast Guard are permitted to operate
exclusively between U.S. ports, including the islands of Hawaii. We are the only
U.S.-flagged, large scale, overnight cruise line operator providing inter-island
vacations among the Hawaiian Islands. Accordingly, we believe our U.S.-flagged
designation provides us with significant itinerary advantages.

The U.S. Flag Cruise Ship Pilot Project Statute ("Pilot Project Statute") was
enacted in 1997 to develop the U.S.-flagged cruise ship industry and stimulate
commercial construction of cruise ships in U.S. shipyards. In connection with
our execution of a definitive agreement with Ingalls Shipbuilding to construct
at least two new vessels in a U.S. shipyard (see below), we believe that we will
have (1) the exclusive right to operate large U.S.-flagged cruise ships in the
domestic trade among the Hawaiian Islands for the life expectancy of the vessels
and (2) the right to operate a foreign-built cruise ship as a U.S.-flagged ship
in the Hawaiian Islands for a period of two years following delivery of the
final vessel under the contract. We will enjoy the benefits of the Pilot Project
Statute, however, only if we comply with its terms. The Pilot Project Statute
requires, among other things, as a condition to obtaining these rights that the
agreement to construct the new cruise ships provide that (1) the vessels are
built with more than 867 berths each and (2) delivery of the first vessel be
prior to January 1, 2005 and the second vessel prior to January 1, 2008. The
statute does not restrict the activities of small U.S.-flagged cruise ships with
fewer than 275 passengers and less than 10,000 gross tons.

CURRENT OPERATIONS

American Hawaii -- Current Operations

American Hawaii's cruise ship, the S.S. Independence, operates inter-island
cruise vacations among the Hawaiian Islands year round. Built in 1951, the S.S.
Independence has 867 passenger berths. American Hawaii offers primarily seven
day itineraries with ports of call throughout the Hawaiian Islands. In addition,
American Hawaii also offers three and four day itineraries. Many cruise
passengers also choose to extend their stay in Hawaii, purchasing hotel
accommodations through American Hawaii. American Hawaii offers more than 50
optional shore excursion activities to passengers to showcase the spectacular
Hawaiian scenery and local attractions, including the following: helicopter
rides and submarine rides, deep sea fishing, snorkeling, scuba diving and tours
of popular destinations such as Pearl Harbor and the Arizona Memorial, the Fern
Grotto and the historic town of Lahaina. The itinerary also affords an
opportunity to view Mount Kilauea, one of the world's few active volcanoes, and
the soaring sea cliffs of the inaccessible Na Pali coast.







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American Hawaii offers theme cruises organized around specific activities or
seasons, including: "Whales in the Wild" cruises, in which passengers can
observe whales that make Hawaii their winter playground; "Hawaiian Heritage"
cruises, which emphasize native Hawaiian ceremonies and rituals; and "Big Band"
cruises featuring 1940's Big Band orchestra music and "Golden Age of Movies"
film screenings.

Cruise fares on American Hawaii for a seven-night cruise, as stated in the 1999
cruise brochure, range from luxurious suites at $3,280 per person to interior
cabins with a single sofa bed and fold-away upper berth at $1,230 per person,
based on double occupancy. The fare also includes three full service meals per
day, along with mid-afternoon snacks and a late evening buffet, night
entertainment on the vessel and port charges. American Hawaii also offers
seasonal youth programs to attract passengers with children, as the S.S.
Independence has a large number of cabins that can accommodate three and four
passengers.

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

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

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

Delta Queen -- Current Operations

Delta Queen's three paddlewheel steamboats offer cruise itineraries for trips
along the Mississippi, Ohio, Cumberland, Tennessee, Arkansas, Illinois and
Atchafalaya Rivers, as well as the Intracoastal Waterway. Ports of embarkation
and disembarkation, which are typically locations of historical or cultural
significance, include New Orleans, Memphis, St. Louis, St. Paul, Louisville,
Cincinnati, Pittsburgh, Nashville, Chattanooga, and Galveston. Other ports of
call include such towns as Hannibal, Missouri; Prairie du Chien, Wisconsin;
Vicksburg and Natchez, Mississippi; and Shiloh, Tennessee.

According to the Cruise Industry News 1998 Annual Report, Delta Queen had a 53%
share of available beds within the domestic rivers and waterways segments of the
overnight cruise market. Delta Queen is marketed to mature adult travelers as a
unique vacation experience aboard classic steamboats in which the people,
sights, romance and history of heartland America are explored. We believe
individuals are attracted to our paddlewheel steamboat cruises because of the
quality of our service, dining, accommodations and entertainment as well as the
unique characteristics of the steamboat experience, including the connection to
American history.

Delta Queen promotes special cruise packages revolving around specific themes
which allow passengers to participate in activities, meet special guest
lecturers, and enjoy entertainment relevant to the theme. Seasonal theme cruises
include: "Spring Pilgrimage," "Fall Foliage - Autumn in America" and "Old
Fashioned Holidays" while geographic themes include "Dixie Fest," "Mark Twain
Heartland," "Cajun Culture" and "Gardens of the River." Old standbys and
continuing favorites are "Kentucky Derby" cruises that include attendance at the
Kentucky Derby horse race and "The Great Steamboat Race," a reenactment of the
famous 19th Century race between the Natchez and the Robert E. Lee steamboats.
For nostalgia and history lovers, Delta Queen offers "Big Band," "The Year That
Was...," "Civil War" and "Fabulous 50s" theme cruises. In a continuing effort to
upgrade its cruise product, Delta Queen introduced in 1998



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enhancements to the onboard dining, entertainment and shore excursions which 
highlighted America's heartland. In addition, several new theme cruises were 
added, such as "Tramping on the River" cruises featuring impromptu river stops;
and "The History of Steamboatin'," which retraced the 1811 voyage of the first 
successful steamboat voyage down the Ohio and Mississippi Rivers to New Orleans.

The Steamboatin'(TM) cruise fare for an average five-night cruise, as stated in
the 1999/2000 cruise brochure, ranges from luxurious suites at $3,410 per person
to interior cabins with lower and upper passenger berths at $1,390 per person,
based on double occupancy. The fare also includes three full service meals per
day, along with mid-afternoon snacks and a late evening buffet, day and night
entertainment on the vessels and port charges.

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

Delta Queen annually welcomes back a large number of prior passengers through
its relationship marketing program. New passengers are acquired through targeted
direct mail, direct response advertising and other promotional activity. Media
coverage generated by public relations activity is another method of acquiring
new customers and building brand awareness. In 1998, Steamboatin'(TM) vacations
were featured or mentioned in more than 3,000 articles in publications with
national and local circulations. In addition, each year a significant number of
new customers are referred by prior customers. Nearly all Steamboatin'(TM)
vacations are booked via travel agents, who receive frequent communications from
Delta Queen and who are supported with collateral and mailing materials.

Sales and Marketing

We maintain separate field sales and reservation staffs for Delta Queen and
American Hawaii. We sell our cruise products primarily through two major
channels, of which the most significant channel is travel agents operating
throughout the U.S. We have programs which educate travel agents about the
unique nature of our travel experiences, the vessels' itineraries, special
programs, theme cruises and pricing policies. To assist in generating
reservations from travel agents, we engage in both consumer and trade-oriented
advertising, including direct mailings of Delta Queen and American Hawaii
literature to travel agencies. We also maintain contact with travel agents
through each cruise line's field sales personnel who conduct educational
seminars and attend trade shows. Our second major sales channel is group travel
organizers, consisting of clubs, travel agencies and tour operators who arrange
for the sale of cruise vacations at discounted fares. We provide a variety of
incentives to these organizers, including fare discounts and promotional
materials. During fiscal 1998, no single customer accounted for more than 10% of
our consolidated revenues.

Pricing and Advance Reservations

We issue separate full color sales brochures for each of Delta Queen and
American Hawaii, which contain descriptive information, itineraries and fare
schedules, prior to the beginning of each upcoming calendar year. We price our
cruise fares, based on cabin category, using a single pricing schedule for each
cruise line throughout the calendar year. As an inducement for passengers to
book early, we generally offer an early booking discount. In addition, we offer
to group travel organizers and others limited discounts from our published fare
schedules. 

We actively market our cruises up to one year prior to the cruise year and the
level of advance reservations at any given date provides us with an indication
of our future fare revenue. A significant portion of such reservations is booked
more than six months in advance of the cruise date. Generally, customers of each
cruise line must pay a $300 refundable deposit within one week of booking a
cruise with the balance of the cruise fare to be remitted 60 days in advance of
the departure date. Cancellations received after a certain date are subject to a
loss of deposit or a cancellation charge ranging from 25% to 100% of the cruise
fare. For a nominal fee, we also offer trip cancellation insurance through a
third-party insurer which allows the customers to reduce their exposure to
cancellation charges. As of January 1, 1999, advance reservations for the 1999
cruise year for both Delta Queen and American Hawaii combined were $81.6
million. However, we cannot specifically determine the amount of revenues to be
derived from advance reservations as we cannot guarantee that any particular
advance reservation will result in any revenue to us.




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EXPANSION PLANS

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

Hawaii Expansion Plans

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

In order to expedite the introduction of a larger, more modern ship into the
Hawaii cruise market, we intend to obtain and operate a foreign-built vessel as
a U.S.-flagged vessel in the Hawaii market. Our ability to operate a
foreign-built vessel in the Hawaiian Islands arises under the terms of the Pilot
Project Statute.  We have targeted vessels that were built since 1980 and can 
accommodate between 1,200 and 2,000 passengers.  If successful in obtaining a 
foreign-built vessel, we plan to introduce this vessel into service by the end 
of 2000.

We have hired Roderick K. McLeod, a 27-year veteran of the cruise industry, to
manage all aspects of our expansion plans in the Hawaii market. Mr. McLeod will
oversee development of our expanded Hawaii business.

Delta Queen Expansion Plans

In order to capitalize upon its strong market position and brand name
recognition, Delta Queen plans to expand its current business by introducing (1)
a fourth riverboat offering new itineraries and (2) up to five new vessels
capable of offering cruises along U.S. coastal waterways. By extending the Delta
Queen line beyond our country's heartland and inland rivers to underserved
coastal markets, Delta Queen plans to offer its unique cruising experience on
itineraries highlighting historically or culturally interesting or beautiful
U.S. coastal regions.

Coastal Cruises

We believe that there are itineraries along the U.S. coastlines with significant
cruise market potential. As a further extension of Delta Queen's inland waterway
cruise itineraries, we plan to build up to five new ships offering cruises along
the eastern seaboard, in the Pacific Northwest and along the California coast of
the U.S. Possible new destinations identified by Delta Queen include the
following: Eastern seaboard cruise itineraries to explore Halifax, Nova Scotia
and New Brunswick, Maine, and visits to Boston Harbor, Martha's Vineyard and the
Chesapeake Bay, as well as New York City, Baltimore and Annapolis, Maryland,
Washington, D.C., Charleston, South Carolina, Savannah, Georgia and Florida's
beaches. Pacific Northwest itineraries are also planned to feature cruises in
Puget Sound near Seattle, Washington, the Willamette River, Canada's Inside
Passage and along the Alaskan coast. In California, prospective itineraries
include San Francisco and Napa Valley's wine country.

We plan to capture these underserved coastal markets by building up to five new
ships with approximately 226 passenger berths each in the next seven to ten
years to extend the itineraries of the Delta Queen line. We are currently
negotiating with a shipyard to construct the first two new coastal vessels. We
hope that construction on the first vessel can begin as early as mid-1999.
Assuming construction commences at that time, the first ship could be launched
as early as the first half of 2001. Delivery of the second vessel would then be
planned for the second half of 2001.

Each coastal vessel will be approximately 300 feet long, have diesel-electric
propulsion systems and "state-of-the art" safety technology. The total project
cost for each new vessel is estimated at $35 million.

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

New Riverboat

We have entered into an agreement to acquire a new vessel and plan to convert it
into an overnight passenger vessel with approximately 150 passenger berths for
use as the fourth Delta Queen riverboat. The purchase price for the vessel is
approximately $8.0 million. We have conducted a due diligence review to ensure
the vessel can be effectively and efficiently renovated for passenger use and
that the cost of outfitting the vessel is consistent with our current estimates.
Based on this due diligence review, we are seeking to amend the terms and
conditions of the agreement. We estimate that the total renovation, relocation,
start-up and marketing costs will require an additional $12 million. We expect
that the conversion project will take between six and nine months and that the
vessel will be able to enter into service in the first half of 2000. The current
plans call for the vessel to be operated by Delta Queen in the Pacific
Northwest, including the Columbia River system near Portland, Oregon.

OTHER

Government Regulation

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

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

We are subject to various federal and state regulations which affect the
operations of our vessels. Our U.S.-flagged vessels are subject to regulations
promulgated by the U.S. Department of Transportation and enforced by the Coast
Guard. The Coast Guard conducts both scheduled and unannounced inspections to
determine compliance with these regulations and has the authority to delay or
suspend cruises. The Delta Queen vessels must be drydocked for an inspection of
the hulls' exteriors every five years. Previously, American Hawaii was required
to drydock the S.S. Independence approximately every 18 months for a similar
procedure. The Coast Guard is empowered to increase the interval between
inspections and accordingly, we have requested and received permission from the
Coast Guard to lengthen the interval of the drydocking of the S.S. Independence
to 30 months, subject to annual hull surveys. In May 1997, the S.S. Independence
was out of service for a four-week period and the next drydocking is scheduled
for January 2000.

Like other entities that operate vessels on U.S. waterways, we are also subject
to certain federal, state and local health and safety laws, regulations and
ordinances, including environmental laws. Periodically, we incur expenditures to
keep our vessels in compliance with applicable laws, regulations and ordinances.
We do not anticipate making any material expenditures in 1999 with respect to
environmental matters. However, the coverage and attendant compliance costs
associated with such laws, regulations and ordinances may result in future
additional costs to our operations.


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

The Federal Maritime Commission regulates passenger vessels with 50 or more
passenger berths departing from U.S. ports and requires that operators post
security to be used in the event the operator fails to provide cruise services,
or otherwise satisfy certain financial standards. We have been approved as a
self-insurer by the Federal Maritime Commission, and therefore, subject to
continued approval, are not required to post security for passenger cruise
deposits. The Federal Maritime Commission has reviewed its standards and in June
1996 issued proposed regulations to increase significantly the financial
responsibility requirements. We filed our objection to the proposals, as we
believe that the Federal Maritime Commission's current standards provide
passengers with adequate protection in the event of an operator's
non-performance and that further requirements may impose an undue burden on
operators. At this time, we cannot predict if the proposed changes will be
approved as currently constituted, or at all.


Competition

The vacation industry is highly fragmented and characterized by a significant
degree of competition among a large number of participants, including cruise
lines, land-based destination resorts, sightseeing tours and a wide range of
other vacation options. Our vessels compete against all of these vacation
options. Since leisure spending is discretionary, adverse economic conditions
affecting our customer base, including uncertainty over inflation and interest
rate fluctuations, may negatively impact our performance.

Within the cruise industry, we believe that cruise destination, cruise product,
and pricing are the primary methods of competition. We also believe that our
status as an operator of U.S.-flagged vessels provides us with a competitive
advantage.

American Hawaii is the sole U.S.-flagged overnight cruise ship operator and the
largest provider of cruise vacations among the Hawaiian Islands. American Hawaii
competes with operators of foreign-flagged cruise ships which visit the Hawaiian
Islands on voyages greater than seven days. Under U.S. law, foreign-flagged 
ships must include a foreign port in each of their itineraries. This means that
foreign-flagged ships visiting Hawaii must spend at least four days sailing
across the Pacific Ocean in order to visit a foreign port. Our cruises can visit
and explore the beauty of the various Hawaiian Islands without having to visit a
foreign port.

Delta Queen is the largest provider of overnight cruises in the domestic
waterways and rivers cruise market. There are several other smaller 
U.S.-flagged providers of overnight domestic cruises, including two providers 
who primarily operate overnight river cruises.  We believe that Delta
Queen's principal competitive strengths include its strong brand recognition,
the distinctive nature of its products, its luxurious accommodations, and its
high level of service.

Insurance

We carry marine liability insurance on our vessels through Steamship Mutual
Underwriting Association (Bermuda) Limited ("Steamship Mutual"), a non-profit,
mutual protection and indemnity association. Our marine liability insurance
arrangements are typical of common marine industry practices and, subject to
certain deductibles, provide coverage for losses, other than hull physical
damage losses, including casualty damage by the vessels and claims by crew
members, passengers and other third parties. The policy has no maximum limit of
liability coverage, except for a $500 million limit, per occurrence, for oil
pollution liability claims. As a member of Steamship Mutual, we pay our annual
premiums based largely on our risk characteristics and loss experience, and the
loss experience of other members. In addition, because Steamship Mutual and
other maritime mutual indemnity associations around the world pool a portion of
their loss experience in risk sharing arrangements, Steamship Mutual also may be
affected by the loss experience of other mutual protection and indemnity
organizations.


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Our annual protection and indemnity insurance premium consists of an advance
call which recently has approximated 71% of the expected total annual premium,
and a supplemental call determined by Steamship Mutual's managing directors
later in the year. We may be liable for a supplemental call in excess of the
anticipated amount in the event that Steamship Mutual incurs heavy losses or
experiences unusual circumstances.

We also carry hull and machinery coverage with various insurers, which insures
against physical loss and damage to the vessels, subject to a $750,000
deductible and/or co-payment requirements per occurrence. The vessels are
insured for their appraised value. Although we believe the risk of a total loss
of our vessels is remote, in all likelihood the replacement costs would exceed
these coverage limits.

We believe our insurance coverage is adequate based on our assessment of the
risks to be insured, the probabilities of loss and the relative cost of
available coverages.

Employees

We employed 1,418 persons as of December 31, 1998. Of the vessels' onboard
employees, the American Maritime Officers of the AFL-CIO ("American Maritime
Officers") represented approximately 124 individuals, and the Seafarers
International Union of North America, Atlantic, Gulf, Lakes and Inland Waters
District of the AFL-CIO ("Seafarers") represented approximately 677 individuals.
The American Maritime Officers' contracts for Delta Queen and American Hawaii
expire in February 2004 and May 2000, respectively, and the Seafarers' contracts
for Delta Queen and American Hawaii expire in December 2003 and May 2000,
respectively. Since 1986, we have not experienced any work stoppages, and we
believe relations with our employees are good.

Factors Concerning Forward-Looking Statements

Certain statements in "Risk Factors" and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute
"forward-looking statements" that we believe are within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions.

Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate"
and variations of such words and similar expressions are intended to identify
such forward-looking statements.  We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.  In light of those risks, uncertainties
and assumptions, the forward-looking events discussed herein might not occur.


RISK FACTORS

Our future financial condition, liquidity and operating results may adversely be
affected by a number of factors, including the following:

CONSTRUCTION DELAYS AND DEVIATIONS FROM SPECIFICATIONS FOR THE NEW HAWAII AND
COASTAL VESSELS MAY ADVERSELY AFFECT EXPANSION PLANS AND FUTURE FINANCIAL
PERFORMANCE 

     We have entered into a contract to construct at least two new vessels for
our Hawaii cruise business and currently intend to construct up to five new
coastal cruisers for the Delta Queen line. Without these new ships, our future
financial performance may be adversely impacted. Ingalls Shipbuilding has never
built a modern passenger ship and, because no U.S. shipyard has built a
passenger ship in over 40 years, there is a limited base of experienced
subcontractors for portions of the ships. We cannot assure you that we will be
able to successfully complete construction of the Hawaii cruise ships or the
coastal cruisers or that we will be able to complete these projects within
construction budgets or expected time frames. Factors that could impact
construction of the new vessels include:
 
     - construction delays or complications;
 
     - cost overruns;

     - labor stoppages, slowdowns or shortages; and
 
     - compliance with U.S. Coast Guard regulations and classification society
       requirements.




                                       9
<PAGE>   10
Our business strategy has been developed on the assumption that we will be able
to put the Hawaii cruise ships and coastal cruisers into service on a timely 
basis. We have also assumed that the ships will perform according to their 
design specifications. A significant delay in delivering the vessels or a 
material deviation from the design specifications could have a material 
deviation from the design specifications could have a material adverse effect
on our business. Also, events out of the control of the shipyards constructing
the vessels could delay delivery.
 
IF WE ARE UNABLE TO OBTAIN MARITIME ADMINISTRATION FINANCING GUARANTIES, IT WILL
IMPEDE OUR EXPANSION PLANS AND FUTURE REVENUE GROWTH
 
     We intend to finance a significant portion of the purchase price of the
Hawaiian cruise ships through private financing guarantied by the Maritime
Administration. Without this financing, we may be unable to implement our
current expansion plans and our future revenue growth may be adversely affected.
If granted, guarantied financing through the Maritime Administration would
provide us with favorable financing terms for up to 87.5% of the cost of the
Hawaii cruise ships. While we have filed the formal application with the
Maritime Administration and are currently negotiating terms of the financing
guaranties, we cannot assure you that we will be able to obtain such guarantied
financing for the Hawaii cruise ships. If we do not obtain the Maritime
Administration guaranty, we will have to obtain financing for the Hawaii cruise
ships from other sources. Due to the size of our financing needs, we may be
unable to obtain sufficient financing, regardless of price; and if available,
such alternative financing would likely be at much less favorable rates than
that of the Maritime Administration guarantied financing. If we cannot finance
the construction of the Hawaii cruise ships, then we will have to abandon our
current expansion plans in Hawaii.
 
IF WE DO NOT OBTAIN SIGNIFICANT AMOUNTS OF CAPITAL TO BUILD, PURCHASE AND
RENOVATE VESSELS, OUR EXPANSION PLANS AND FUTURE OPERATING RESULTS MAY BE
ADVERSELY AFFECTED
 
     Our expansion plans are based in part on the construction of several new
vessels and the acquisition and renovation of existing vessels to be put into
operation in both the Hawaii market and the U.S. coastal and inland waterways
market. Our expansion plans require us to spend significant amounts of capital
in building, purchasing and renovating vessels. The final cost for these vessels
may exceed our initial estimates and we may be required to seek additional
sources of capital in order to complete the vessels. We cannot assure you that
we will be able to obtain additional financing at commercially acceptable levels
to finance this expansion or to pursue strategic business opportunities. We
expect to be able to use our cash on hand and cash generated from our future
operations to provide a significant portion of these funding needs. Our failure
to obtain enough capital may require us to delay or abandon some of our
expansion plans and could have a material adverse effect on our business.
 
INCREASED LEVERAGE MAY ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE AND CASH FLOW
 
     We will substantially increase our indebtedness as we finance a significant
portion of the construction costs under existing and contemplated agreements to
build new vessels. This higher level of indebtedness will require us to devote
an increased amount of our future cash flow from operations to the payment of
principal and interest on indebtedness. At December 31, 1998, we had outstanding
consolidated total long-term debt of $77.4 million. With construction costs for
each of the two Hawaii cruise ships projected to be approximately $470 million,
and for each of the five planned coastal cruisers expected to be approximately
$35 million, we intend to substantially increase our leverage. We expect that
approximately 87.5% of the cost for the new Hawaii cruise ships will be financed
through Maritime Administration guarantied private financing, and a substantial
portion of Delta Queen's expansion costs will be financed with debt. Under our
current expansion plans for American Hawaii and Delta Queen, and assuming we
build all of the ships contemplated, we could increase our indebtedness by
approximately $1.1 billion by 2007. Our increased leverage could adversely
affect our ability to repay debt and reduce our working capital available for
operations.
 
IF WE ARE UNABLE TO LOCATE AND INTRODUCE A FOREIGN-BUILT VESSEL IN HAWAII, OUR
GROWTH IN HAWAII WOULD BE DELAYED
 
        The Pilot Project Statute provides that we may operate a foreign-built
cruise ship in Hawaii as a U.S.-flagged vessel after we sign a contract for the
construction of new U.S.-built passenger cruise ships. If we do not operate a
foreign-built cruise ship as permitted, we will not recognize any additional
revenues as a result of the Pilot Project Statute for at least four years. We
currently plan to operate such a ship. However, it is possible that we will not
be able to locate and obtain a suitable ship on commercially reasonable terms.
If we cannot find an acceptable ship, it could take at least four years before
the first of the Hawaii cruise ships we intend to construct is available for
operation. In that case, we would lose the incremental revenue growth gained by
introducing a larger and more modern cruise ship into the Hawaii market until
the new vessels are completed. For a more detailed discussion of the Pilot
Project Statute, see "Business -- General."



                                       10
<PAGE>   11
FAILURE TO ENTER INTO A CONTRACT WITH A SHIPYARD FOR COASTAL CRUISERS WILL
ADVERSELY IMPACT OUR DELTA QUEEN EXPANSION PLANS AND FUTURE REVENUE GROWTH
 
     We currently plan to construct up to five new coastal ships for Delta
Queen. Without these new ships, our future revenue growth may be adversely
impacted. We have not yet entered into a definitive agreement to construct the
coastal ships. We cannot assure you that we will be able to reach agreement with
a shipyard to build the coastal ships on terms acceptable to us. If we cannot
reach such an agreement to build any or all of the five new coastal ships, then
we will not be able to implement our expansion plans or we will have to scale
back our expansion plans.
 
IF WE ARE UNABLE TO MAINTAIN ADEQUATE MANAGERIAL RESOURCES DURING OUR EXPANSION,
OUR BUSINESS MAY BE ADVERSELY AFFECTED
 
     If we successfully execute our growth strategy, our expansion will place a
significant strain on our managerial resources. Our future performance will
depend upon management's ability to manage our growth effectively, which
includes our ability to:
 
     - expand sales and marketing to fill the passenger berths in our expanded
       fleet at profitable rates;
 
     - operate, maintain and support a significantly expanded fleet of vessels;
 
     - hire and train additional personnel to staff our expanded fleet and
       support operations; and
 
     - deploy capital efficiently.
 
     The process of expanding our fleet of vessels may result in unforeseen
operating difficulties and may require management attention that would otherwise
be available for the ongoing operation of our existing fleet of vessels. Our
failure to manage our growth effectively may cause us to delay or abandon some
of our expansion plans and may have a material adverse effect on our business.
 
IF WE ARE UNABLE TO MANAGE OUR FINANCIAL RESOURCES DURING OUR EXPANSION, OUR
FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED
 
     Our plans for expansion call for significant capital expenditures that will
not produce corresponding revenues in the near term which may place a strain on
our capital resources. The process of expanding our fleet of vessels may require
additional financial resources that would otherwise be available for the ongoing
operation of our existing fleet of vessels. Our failure to manage our financial
resources effectively during our expansion could force us to delay or abandon
some of our expansion plans and may have a material adverse effect on our
business.
 
IF DEMAND FOR OUR NEW CRUISE PRODUCTS FAILS TO DEVELOP AS EXPECTED OR
COMPETITION INCREASES, OUR BUSINESS MAY BE ADVERSELY AFFECTED
 
     The Hawaii and coastal cruise markets where we intend to deploy our new
vessels currently do not have a large supply of cruise operators. If demand for
our new vessels does not develop, our financial performance may suffer. Our
expected deployment of vessels will increase the supply of available cruises in
these markets significantly. We engaged market research firms to assist us in
making our decision to pursue expansion plans. We cannot assure you, however,
that demand for our new cruise products, services and itineraries will develop.
If the market for these new cruise products fails to develop, develops more
slowly than expected or becomes saturated with competitors, our business may be
adversely affected.
 
INCREASED CAPACITY IN HAWAII MAY REDUCE OCCUPANCY AT THE S.S. INDEPENDENCE,
ADVERSELY AFFECTING REVENUES
 
     The introduction of a larger, more modern foreign-built vessel or our new
cruise ships into the Hawaii cruise market could cause occupancy or revenue
levels on the S.S. Independence to decline. If revenue levels drop so much that
the S.S. Independence generates operating losses, it may reduce our expected
benefits from increased capacity in Hawaii and could have a material adverse
effect on our financial condition.

                                      11

<PAGE>   12
WE MAY HAVE TO SPEND MORE IN THE FUTURE ON THE S.S. INDEPENDENCE, WHICH MAY
ADVERSELY IMPACT OUR OPERATING RESULTS
 
     Older ships such as the S.S. Independence may cost more to maintain and may
be less efficient than more modern cruise vessels. Older ships may be more prone
to mechanical problems and may require more repairs than modern cruise ships. We
may have to spend more in the future to maintain and to operate the S.S.
Independence, which could have an adverse effect on our operating results.
 
IF WE CANNOT BENEFIT FROM THE EXCLUSIVE RIGHTS OF THE PILOT PROJECT STATUTE, OUR
REVENUE GROWTH IN HAWAII WILL BE ADVERSELY AFFECTED
 
     We believe the Pilot Project Statute provides us with the exclusive right
to operate large U.S.-flagged cruise ships in the Hawaiian Islands for the life
expectancy of our new ships. We will enjoy the benefits of the Pilot Project
Statute, however, only if we comply with its terms. Our competitive advantage
could be eliminated or diminished if the Pilot Project Statute were to be
repealed or amended, if our interpretation of its terms is not upheld or if we
fail to satisfy its requirements. This could have a material adverse effect on
our expansion plans. For a more detailed discussion of the Pilot Project
Statute, see "Business -- General."
 
MODIFICATION OF THE PASSENGER VESSEL ACT MAY ADVERSELY AFFECT OUR BUSINESS
 
     From time to time, proposals are made which would limit or eliminate the
terms of the Passenger Vessel Act. If the Passenger Vessel Act is repealed or
amended to allow foreign-flagged ships the same rights to transport passengers
between U.S. ports as U.S.-flagged ships, we could face considerable competition
in both our Delta Queen and American Hawaii lines, including competition from
entities with greater financial resources. Under the Passenger Vessel Act and
related laws, only U.S.-flagged ships may transport passengers between U.S.
ports. Consequently, only ships which are U.S. built, owned, operated and
documented may operate between U.S. ports, including the islands of Hawaii.
Foreign-flagged ships may transport passengers between U.S. ports only if their
itineraries include a stop at a foreign port. This increased competition could
have a material adverse effect on our business. For a more detailed discussion
of the Passenger Vessel Act, see "Business -- General."
 
INCREASED COMPETITION IN THE HAWAII CRUISE MARKET AND FROM OTHER VACATION
ALTERNATIVES MAY ADVERSELY IMPACT OUR FINANCIAL PERFORMANCE
 
     We presently compete against a wide range of vacation alternatives,
including other cruises, destination resorts and sightseeing vacations. Cruise
lines or other entities, including those with greater resources, could introduce
overnight U.S.-flagged vessels in direct competition with our Delta Queen
vessels, which may adversely impact our financial performance. We may also face
additional competition in the Hawaii cruise market from foreign-flagged vessels
as the Hawaii cruise market expands. The entry of direct competition could make
it more difficult for us to maintain or further increase occupancy or prices for
cruise vacations. This could result in lower margins and reduce the
profitability of our business. 

AS A MEMBER OF THE VACATION AND LEISURE INDUSTRY, OUR BUSINESS IS SENSITIVE TO
GENERAL ECONOMIC AND BUSINESS CONDITIONS
 
     As a vacation and leisure company providing cruise vacations, we depend on
our customers' leisure spending. Adverse changes in the general economic or
business environment could affect our customers by decreasing the amount of
money they spend on leisure activities such as cruising. A decrease in leisure
spending could affect passenger yields and occupancy rates on our ships, which
could adversely affect our financial performance.
 
IF WE DO NOT COMPLETE DRYDOCKING ON SCHEDULE OR WITHIN BUDGET, OUR REVENUES MAY
BE ADVERSELY IMPACTED
 
     Operation of our vessels is subject to regulations established by the U. S.
Department of Transportation that are enforced by the U.S. Coast Guard. Among
these regulations is the requirement that the vessels be taken out of operation
and removed from the water for inspection of the exterior of the hull on a
periodic basis, referred to as drydocking. When we drydock one of our vessels as
required, we lose the revenue from that vessel's operations for the period it is
out of service. We also incur the additional cost of the drydock. The S.S.
Independence must be drydocked every 30 months and the Delta Queen vessels must
be drydocked every five years. Drydocks of Delta Queen vessels take place in the
winter months when our customer demand is weakest. For its last regularly
scheduled drydocking, the Mississippi Queen was out of service for 51 days
beginning on December 1, 1995. The Delta Queen was out of service beginning on
December 15, 1996 for 30 days for its last scheduled drydocking. The American
Queen, which first entered service in 1995, will have its first


                                       12

<PAGE>   13
 
drydocking in January, 2000. The last drydocking for the S.S. Independence 
began on May 17, 1997 and lasted 28 days. We cannot assure you that future 
drydocks for any of our vessels will be completed on schedule or within their 
budgets.
 
RIVER AND OCEAN CONDITIONS AND WEATHER FACTORS CAN ADVERSELY AFFECT OUR
OPERATIONS AND OUR FINANCIAL PERFORMANCE
 
     River or ocean conditions and weather factors can adversely affect our
operations and the financial performance of the Delta Queen and American Hawaii
lines by disrupting schedules or reducing operating days. As a result of
flooding and restrictions placed upon commercial travel along the inland rivers,
we have, in the past, canceled or re-routed scheduled cruises. We operate the
Hawaii cruise ship in and around the Hawaiian Islands. As a result, its
schedules are subject to ocean and weather conditions, including hurricane
conditions. Weather conditions could cause us to reschedule or cancel cruises.
 
THE LOSS OF VESSELS FROM SERVICE WOULD ADVERSELY IMPACT OUR BUSINESS
 
     The loss of any vessel from service due to weather, casualty, mechanical
failure, extended or extraordinary maintenance, or otherwise, could adversely
affect our operating results. We believe we have a commercially reasonable level
of insurance coverage. In the event of a permanent or temporary loss of one or
more of the vessels, however, our insurance would not provide the replacement
costs of the vessels nor fully cover the impact of lost business.
 
ANTI-TAKEOVER AND TRANSFERABILITY LIMITATIONS OF U.S. OWNERSHIP REQUIREMENTS MAY
ADVERSELY AFFECT THE LIQUIDITY OF OUR COMMON STOCK
 
     One of the requirements for having U.S.-flagged vessels operating in U.S.
domestic trade is that 75% of our stockholders must be U.S. citizens. We have
restrictions in our certificate of incorporation limiting the transferability of
our common stock to non-U.S. citizens to preserve our U.S.-flagged status. These
limitations may have the effect of decreasing the liquidity of our common stock,
thereby making it more difficult for investors to dispose of their shares in an
orderly manner. We have also added legends to our stock certificates to indicate
the citizenship of our stockholders. These provisions and the level of ownership
by Equity Group Investments, Inc. and its affiliates, which we refer to as the
"Equity Group," may deter a change in control and limit non-U.S. citizens',
including corporations and individuals, purchases of our common stock.
 
OUR CONTROLLING STOCKHOLDER MAY TAKE ACTIONS THAT ADVERSELY AFFECT OUR BUSINESS
 
     Affiliates of the Equity Group will own an aggregate of approximately 42.2%
of the outstanding shares of common stock after this offering, or 41.0% if the
underwriter's over-allotment option is exercised in full. The Equity Group's
level of ownership after this offering may permit it to elect the members of our
board of directors who will control our future direction and operations. This
includes decisions regarding the issuance of securities, dividends, acquisitions
and our sale. The Equity Group's stockholders are, directly or indirectly,
trusts created for the benefit of Samuel Zell, Ann Lurie and their respective
families. Mr. Zell is the Chairman of our board of directors.
 
SALES OF OUR CONTROLLING STOCKHOLDER'S SHARES COULD HAVE AN ADVERSE EFFECT ON
OUR COMMON STOCK PRICE OR OUR ABILITY TO RAISE CAPITAL
 
     The sale of a substantial number of shares of our common stock by the
Equity Group, or the perception that such a sale could occur, could negatively
affect the market price of our common stock. The Equity Group has pledged
4,603,000 of its 7,530,747 shares of our common stock to secure several loans.
If the Equity Group were to default on these loans, the creditors could acquire
the pledged shares. We have been advised by the Equity Group that it is
presently in compliance in all material respects with all covenants and terms of
these loans and has alternative resources with which to service the loans. Any
sale, or the perception that such a sale may occur, could also materially impair
our future ability to raise capital through an offering of equity securities.


                                       13
<PAGE>   14
ITEM 2.    PROPERTIES

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



CURRENT VESSELS

<TABLE>
<CAPTION>

                                   YEAR VESSEL                  PASSENGER          PRIMARY AREAS
                               ENTERED INTO SERVICE             CAPACITY(1)         OF OPERATION
                               --------------------             -----------         ------------
VESSEL                                                          
------                                                          

<S>                                   <C>                          <C>            <C>                   
S.S. Independence(2)                  1951                         867             Hawaii

American Queen                        1995                         436             Mississippi River System

Mississippi Queen                     1976                         416             Mississippi River System

Delta Queen                           1926                         174             Mississippi River System

</TABLE>
 
--------------------
        (1)      Based on double occupancy per cabin.
        (2)      Substantially renovated in 1994.


ITEM 3.    LEGAL PROCEEDINGS

There are no material legal proceedings to which we are a party or of which any
of our property is the subject, other than ordinary routine litigation and
claims incidental to the business. We believe we maintain adequate insurance
coverage and reserves for such claims.

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

None.




                                       14
 
 
<PAGE>   15

                                     PART II


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

(a)   Our common stock trades on the Nasdaq National Market tier of The Nasdaq
      Stock Market under the symbol: "AMCV". On March 26, 1999, the last
      reported sale price for our common stock was $19.00 per share. The
      following table indicates the high and low sales price information for
      shares of our common stock as reported by The Nasdaq Stock Market:

<TABLE>
<CAPTION>

                                                                            High               Low
              ---------------------------------------------------------------------------------------
                <S>                <C>                                    <C>              <C>       
                QUARTER ENDED:     December 31, 1998................      $  17.63         $  11.38  
                                   September 30, 1998...............         17.00            12.50
                                   June 30, 1998....................         24.63            14.75
                                   March 31, 1998...................         23.25            17.25

                QUARTER ENDED:     December 31, 1997...............       $  19.25         $  16.00  
                                   September 30, 1997...............         18.25            10.25
                                   June 30, 1997....................         11.88             9.88
                                   March 31, 1997...................         13.00            10.13
</TABLE>


(b)   The number of stockholders of record of common stock on March 26, 1999 was
      approximately 620.

(c)   We did not pay cash dividends on our common stock during 1997 or 1998. We
      currently anticipate that all of our earnings will be retained for planned
      construction projects and ongoing business requirements. We do not
      anticipate paying any cash dividends in the foreseeable future.


ITEM 6.    SELECTED FINANCIAL DATA

Information with respect to our selected financial data is set forth under
"Selected Financial Data" on page 20.


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

Management's discussion and analysis is set forth under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on page 21.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are principally exposed to market risks from fluctuations in interest rates.
At December 31, 1998, long-term variable rate debt had a carrying value of $24.4
million (See Note 6 to the Consolidated Financial Statements). We do not manage
this risk through derivative financial instruments as we do not expect changes
in interest rates to materially affect our operating results.

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

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and supplementary data are as set forth in
the "Index to Consolidated Financial Statements" on page 19.

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

None.



                                       15
<PAGE>   16




                                    PART III


ITEMS  10, 11, 12 AND 13   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
                           EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
                           BENEFICIAL OWNERS AND MANAGEMENT AND CERTAIN
                           RELATIONSHIPS AND RELATED TRANSACTIONS

We will file a definitive proxy statement with the Securities and Exchange
Commission, pursuant to Regulation 14A under the Securities Exchange Act of 1934
(the "Proxy Statement") and relating to the Company's Annual Meeting of
Stockholders to be held on June 24, 1999, not later than April 30, 1999.
Information required by Items 10 through 13 will appear in the Proxy Statement
and is incorporated herein by reference.




                                       16
<PAGE>   17





                                     PART IV

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

(a)(1)         Financial Statements.

               The consolidated financial statements of the Company are set
               forth in the "Index to Consolidated Financial Statements" on page
               19.

(a)(2)         Financial Statement Schedules.

               Financial Statement Schedules, except those indicated in the
               "Index to Consolidated Financial Statements" on page 19, have
               been omitted because they are not applicable, not required under
               the instructions, or all the information required is set forth in
               the financial statements or the notes to the financial
               statements.

(a)(3)         Exhibits are as set forth in the "Index to Exhibits" on page 48.

(b)            Reports on Form 8-K:

               None.




                                       17
<PAGE>   18



                                                          

                                   SIGNATURES


Pursuant to the requirements of Section 13 and 15(d) of the Securities and
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Date      March 31, 1999          
          --------------------------
                                              AMERICAN CLASSIC VOYAGES CO.


                                              By  /s/  Philip C. Calian      
                                                  -----------------------------
                                                  Philip C. Calian
                                                  Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Samuel Zell                     Chairman of the Board
------------------------------
Samuel Zell


/s/ Philip C. Calian                President and Chief Executive Officer
------------------------------      (Principal Executive Officer), Director
Philip C. Calian                    


/s/ Randall L. Talcott              Vice President-Finance and Treasurer
------------------------------      (Principal Financial and Accounting Officer)
Randall L. Talcott                  


/s/ Arthur A. Greenberg             Director
------------------------------
Arthur A. Greenberg


/s/ Mark Slezak                     Director
------------------------------
Mark Slezak


/s/ Jeffrey Watanabe                Director
------------------------------
Jeffrey Watanabe


/s/ Emanual Rouvelas                Director
------------------------------
Emanual Rouvelas


/s/ Jerry R. Jacob                  Director
------------------------------
Jerry R. Jacob


/s/ Joseph P. Sullivan              Director
------------------------------
Joseph P. Sullivan





                                       18
<PAGE>   19




                          AMERICAN CLASSIC VOYAGES CO.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


                                                                                                           Page
                                                                                                          Number
                                                                                                         -------

<S>                                                                                                         <C>
        Selected Financial Data.......................................................................      20
        Management's Discussion and Analysis of Financial Condition and Results of Operations.........      21
        Independent Auditors' Report..................................................................      28
        Consolidated Financial Statements
             Consolidated Balance Sheets..............................................................      29
             Consolidated Statements of Operations....................................................      30
             Consolidated Statements of Cash Flows....................................................      31
             Consolidated Statements of Changes in Stockholders' Equity...............................      32
             Notes to Consolidated Financial Statements...............................................      33
             Financial Statement Schedules
                 Schedule I - Condensed Financial Information of Registrant...........................      44

</TABLE>



                                      19


<PAGE>   20



                          AMERICAN CLASSIC VOYAGES CO.
                             SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                                         Years Ended December 31,
                                                       1998          1997           1996           1995           1994
                                                  -------------- ------------- -------------- -------------- --------------
INCOME STATEMENT DATA
(In thousands)
<S>                                                <C>            <C>           <C>            <C>            <C>       
   Revenues...............................         $  192,225     $  177,884    $  190,408     $  188,373     $  195,197
                                                   ------------------------------------------------------------------------
   Gross profit...........................             66,630         66,589        67,863         51,895         51,569
                                                   ------------------------------------------------------------------------
   One-time charges(1)....................                 --             --        38,390          5,900          5,699
                                                   ------------------------------------------------------------------------
   Operating income (loss) ...............              5,486          9,984       (30,465)       (14,535)        (4,438)
                                                   ------------------------------------------------------------------------
   Other income (2).......................                300             --        11,729             --             --
                                                   ------------------------------------------------------------------------
   Net interest (expense) income..........             (5,522)        (5,935)       (7,199)        (4,002)           672
                                                   ------------------------------------------------------------------------
   Net income (loss)  ....................         $      157    $     2,429    $  (17,636)    $   (9,671)    $     (983)
                                                   ------------------------------------------------------------------------

PER SHARE INFORMATION
   Basic earnings (loss) per share........         $     0.01     $     0.17    $    (1.28)    $    (0.70)    $    (0.07)
   Diluted earnings (loss) per share.......        $     0.01     $     0.17    $    (1.28)    $    (0.70)    $    (0.07)
   Cash dividends per share................        $       --     $       --    $       --     $     0.08     $     0.16

OPERATING STATISTICS
   Fare revenue per passenger night.......         $      224     $      228    $      216     $      208     $      202
   Total revenue per passenger night......         $      314     $      302    $      287     $      288     $      297
   Weighted average operating days(3):
        DELTA QUEEN.......................                341            337           347            263            339
        AMERICAN HAWAII...................                365            337           366            272            303
   Vessel capacity per day (berths)(4):
        DELTA QUEEN.......................              1,026          1,026         1,024          1,024            588
        AMERICAN HAWAII...................                867            844           817          1,594          1,544
   Passenger nights(5) ...................            611,624        588,892       643,891        628,660        632,373
   Physical occupancy percentage(6) ......                 92%            94%           98%            90%            95%

BALANCE SHEET DATA (at period end)
(In thousands)
   Total assets...........................         $  212,792     $  210,895    $  211,864     $  247,473     $  227,798
   Current portion of long-term debt......              4,100          4,100         4,100          3,746             --
   Long-term debt.........................             77,388         81,488        85,898        103,272         65,000
   Total stockholders' equity.............             62,014         59,219        54,982         71,413         82,105
</TABLE>

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

(1)  In 1996, we decided not to renovate and return the S.S. Constitution to
     service, resulting in write-down costs of $38.4 million ($1.89 per share -
     net of tax on both a basic and diluted basis). In 1995, we incurred a $5.9
     million ($0.28 per share - net of tax on both a basic and diluted basis)
     one-time charge that represented costs associated with the introduction of
     the American Queen in June of 1995. In 1994, we incurred $5.7 million
     ($0.20 per share-net of tax on both a basic and diluted basis) in one-time
     charges due to problems related to the renovation of the Independence.

(2)  In 1996, we sold the Maison Dupuy Hotel located in New Orleans, Louisiana 
     for a gain of $11.7 million ($0.57 per share - net of tax on both a basic
     and diluted basis). In 1998, we received $0.3 million ($0.01 per share -
     net of tax on both a basic and diluted basis) of final proceeds under a
     profit participation agreement associated with the 1996 sale.

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

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

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

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




                                       20
<PAGE>   21



                          AMERICAN CLASSIC VOYAGES CO.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

American Classic Voyages Co. is a holding company which owns and controls The
Delta Queen Steamboat Co. and Great Hawaiian Cruise Line, Inc. Through our
various subsidiaries, we operate two cruise lines: Delta Queen, which owns and
operates the American Queen, Mississippi Queen and Delta Queen steamboats; and
American Hawaii, which owns and operates the S.S. Independence steamship.

Our revenues are comprised of:

(1)  cruise fares,

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

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

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

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

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

(3)  insurance costs,

(4)  commissions paid to travel agents, and

(5)  air ticket and hotel costs.

When we receive deposits from passengers for cruises, we establish a liability
for unearned passenger revenue. We recognize revenue when the passengers take
their cruises and make a corresponding reduction in our unearned passenger
revenues. Our revenues and some of our expenses vary considerably when measured
on a quarterly basis. This is due to the seasonality of our Delta Queen
revenues, the timing of our layups and drydockings, and fluctuations in
airfares. These variations are reflected in our fare revenues per passenger
night, which are commonly referred to as fare per diems, and our occupancy
rates.

Seasonality

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





                                       21

<PAGE>   22


Selected quarterly data

As a result of seasonality, timing of vessel lay-ups and drydocking and the
factors affecting our revenues, results of operations vary on a quarterly basis.
The following tables set forth selected unaudited quarterly data for 1996, 1997
and 1998. We cannot assure you that our historical quarterly results of
operations will be indicative of our future performance. The figures in the
tables below state dollars in thousands, except per share data, fare revenue and
percentages.

<TABLE>
<CAPTION>

                                                                                     1996 - Quarters Ended
                                                                                     ---------------------
                                                           March 31       June 30        September 30       December 31
                                                           --------       -------        ------------       -----------

         <S>                                           <C>              <C>              <C>              <C>
         Revenues..................................    $    41,628      $    49,021      $    49,776      $    49,983
         Gross profit..............................         13,556           17,721           17,950           18,636
         Operating (loss) income...................        (41,784)(1)        2,323            4,834            4,162
         Net (loss) income.........................        (43,271)(1)          381            2,851           22,403(2)
         Diluted (loss) income per share...........          (3.14)            0.03             0.20             1.59
         Fare revenue per passenger night..........            204              218              209              230
         Physical occupancy percentage.............             95%              98%             102%              98%

<CAPTION>

                                                                                     1997 - Quarters Ended
                                                                                     ---------------------
                                                          March 31         June 30        September 30      December 31
                                                          --------         -------        ------------      -----------

         <S>                                           <C>              <C>              <C>              <C>
         Revenues .................................    $    40,372      $    42,356      $    49,746      $    45,410
         Gross profit..............................         13,233           17,661           19,606           16,089
         Operating (loss) income ..................         (1,869)           3,451            6,098            2,304
         Net (loss) income.........................         (1,988)           1,177            2,770              470
         Diluted (loss) income.....................          (0.14)            0.08             0.19             0.03
         Fare revenue per passenger night..........            221              245              224              223
         Physical occupancy percentage.............             91%              94%              96%              93%

<CAPTION>

                                                                                     1996 - Quarters Ended
                                                                                     ---------------------
                                                           March 31        June 30         September 30      December 31
                                                           --------        -------         ------------      -----------

         <S>                                           <C>              <C>              <C>              <C>
         Revenues .................................     $    40,668      $    53,535      $    50,920     $    47,102
         Gross profit..............................          11,209           20,562           18,184          16,675
         Operating (loss) income ..................          (6,143)           4,037            3,798           3,794
         Net (loss) income.........................          (4,362)           1,574            1,454           1,491
         Diluted (loss) income.....................           (0.31)            0.11             0.10            0.10
         Fare revenue per passenger night..........             211              231              222             230
         Physical occupancy percentage.............              87%              97%              95%             88%

</TABLE>


(1)      In the first quarter of 1996, we decided not to renovate and return the
         S.S. Independence to service, resulting in write-down costs of $38.4
         million, $2.79 per share on a diluted basis before any associated tax
         benefit. The tax benefit associated with this write-down was recognized
         in the fourth quarter of 1996. Had such tax benefit been recognized in
         the first quarter of 1996, the per share write-down costs net of tax on
         a diluted basis would have been $1.89.

(2)      In the fourth quarter of 1996, we sold the Maison Dupuy hotel located
         in New Orleans, Louisiana for a gain of $11.7 million or $0.57 per
         share, net of tax on a diluted basis. The fourth quarter also includes
         a year-to-date adjustment of the federal tax benefit based on our
         review of our tax position.




                                       22
<PAGE>   23


The following discusses our consolidated results of operations and financial
condition for the years ended December 31, 1998, 1997 and 1996 (referred to
herein as 1998, 1997 and 1996).

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Consolidated revenues for 1998 increased $14.3 million to $192.2 million from
$177.9 million for 1997. This represents a $2.7 million increase in fare
revenues combined with an $11.6 million increase in other revenues. American
Hawaii's fare revenues increased $4.1 million on a 14% increase in passenger
nights mainly due to an 11% increase in capacity associated with additional
operating days in 1998. The number of operating days was higher in 1998 than in
1997 because the S.S. Independence was out of service for a four-week drydock in
1997. American Hawaii's fare per diems, however, decreased by 5%. Delta Queen's
fare revenues decreased $1.4 million, attributable to a 5% decrease in
occupancy, offset by a 3% increase in fare per diems. Consolidated fare per
diems for 1998 decreased 2% to $224, as the decrease in fare per diems at
American Hawaii more than offset the increase in fare per diems at Delta Queen.
The $11.6 million increase in other revenues was mainly due to an increase in
passenger nights at American Hawaii and an increase in passengers electing to
purchase air through American Hawaii under various air promotions. As a result,
consolidated total revenue per passenger night increased 4% to $314. As
discussed below, the increase in air revenue was offset by a corresponding
increase in related air expenses.

Consolidated cost of operations for 1998 increased $14.3 million to $125.6
million from $111.3 million for 1997. American Hawaii's operating costs
increased $15.0 million primarily as a result of additional operating days and
an increase in air package expenses. The increase in air package expenses was
directly related to the increase in air revenue, as noted above. Delta Queen's
operating costs decreased by $0.7 million reflecting the decrease in occupancy.

Consolidated selling, general and administrative expenses, before capacity
expansion costs, increased $2.0 million to $41.9 million for 1998 from $39.9
million in 1997. The increase in selling, general and administrative expenses
reflects additional selling and marketing spending at both cruise lines in the
first half of the year. Capacity expansion costs of $2.3 million in 1998 were
$1.2 million higher than in the prior year. Capacity expansion expenses were
incurred for a full year during 1998 for both cruise lines, whereas in 1997,
these expenses were incurred in the second half of the year for American Hawaii
only. The $1.3 million increase in depreciation and amortization expense was
attributable to capital expenditures incurred during the 1997 S.S. Independence
drydock and Delta Queen vessel lay-ups completed earlier in 1998.

As a result of increases in expenses as detailed above, consolidated operating
income for 1998 was $5.5 million as compared to $10.0 million for 1997.

Interest expense decreased slightly due to a lower outstanding debt balance
during 1998 while our effective tax rate remained unchanged from the prior year.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Consolidated revenues for 1997 decreased $12.5 million to $177.9 million from
$190.4 million for 1996 representing a $6.6 million decrease in cruise revenues
combined with a $5.9 million decrease in hotel revenues as a result of the sale
of the Maison Dupuy hotel. Delta Queen owned and operated the hotel, located in
New Orleans, prior to its sale in October 1996. Delta Queen's cruise revenues
increased $7.1 million, reflecting a 12% increase in fare per diems combined
with an 11% increase in revenue from air and land packages. The increase in fare
per diems as compared to 1996 was attributable to a reduction in the use of
discounts to fill open inventory close to a sailing date. American Hawaii's
revenues decreased $13.7 million as a result of an 8% decrease in operating days
due to the S.S. Independence drydock combined with a 3% decrease in fare per
diems and a 9% decrease in occupancy. Consolidated fare per diems for 1997
increased 6% to $228, and consolidated total revenue per passenger night
increased 5% to $302, as the increase in fare per diems at Delta Queen more than
offset the decrease in fare per diems at American Hawaii.

Consolidated cost of operations decreased $11.2 million to $111.3 million for
1997 from $122.5 million for 1996. Hotel-related costs of operations represented
$1.9 million of the 1996 costs. American Hawaii's operating costs decreased $9.2
million primarily as a result of the S.S. Independence drydock while Delta
Queen's cruise operating costs decreased $0.1 million. Savings in Delta Queen's
passenger and vessel expenses were offset by an increase in air and land package
expense corresponding to the increased sales of air and land packages.


                                     
                                     23
<PAGE>   24

Consolidated selling, general and administrative expenses decreased $4.4 million
to $41.0 million for 1997 from $45.4 million for 1996. Of the $4.4 million
decrease, $2.3 million was attributable to the hotel, with the remainder of the
decrease primarily due to cost savings at Delta Queen. Also included in selling,
general and administrative expenses for 1997 were $1.6 million of American
Hawaii's office relocation costs and costs incurred for planning for capacity
expansion in Hawaii. The $1.0 million increase in depreciation and amortization
expense was primarily attributable to the S.S. Independence drydock and capital
improvements on Delta Queen vessels during lay-ups earlier in 1997.

In the first quarter of 1996, we recognized an impairment write-down of $38.4
million related to our decision not to renovate or return the S.S. Constitution
to service. As the vessel was sold in November 1997 for net sale proceeds of
$1.8 million, the salvage value of the vessel was written down from $2.5 million
to $1.8 million. This write-down was offset by a reduction in the reserve set-up
for the estimated costs to be incurred on behalf of the vessel until its
eventual disposition.

Consolidated cruise operating income for 1997 was $10.0 million as compared to
cruise operating income of $6.5 million, excluding the S.S. Constitution
write-down and hotel operations in 1996. Hotel operating income in 1996 was $1.4
million.

Interest expense decreased $1.1 million due to a lower outstanding debt balance
in 1997. Our consolidated effective tax rate increased to 40% in 1997 from 32%
in 1996 as we recognized additional state tax expenses in 1997.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Operating Activities

For the year ended December 31, 1998, cash provided by operations was $18.5
million compared to $22.4 million in 1997. The decrease reflected the decline in
operating income as mentioned earlier and changes in other working capital
accounts. Offsetting the decrease was an increase in unearned passenger
revenues, representing passenger cruise deposits, which increased $5.6 million
in 1998 as compared to an increase of $2.0 million in 1997. The increase in
unearned passenger revenues was greater in 1998 than in 1997 due to (1) the
timing of Delta Queen's 1998/1999 lay-ups, as discussed below, which occurred
later than the 1997/1998 lay-ups and (2) deposits received in 1998 for the
millennium charter cruises for both cruise lines.

Investing Activities

During 1998, we made expenditures of $8.8 million on capital projects, of which
$5.6 million related to our existing vessels. $3.8 million of the $5.6 million
related to the Delta Queen and American Queen lay-ups, which were completed in
the first quarter of 1998. The remaining $1.8 million related to vessel
improvement projects and costs incurred for the Mississippi Queen lay-up which
began December 13, 1998. Other significant capital expenditures included $3.0
million related to design fees and costs associated with new shipbuilding
programs at American Hawaii and Delta Queen, as discussed below.

In February 1998, we received $0.3 million of final proceeds from the buyer of
the Maison Dupuy hotel which we sold in October 1996. Additionally, $0.3 million
of cash pledged under a letter of credit became unrestricted during 1998 upon
the cancellation of the letter of credit.

Financing Activities

We made scheduled principal payments of $4.1 million under the American Queen
and S.S. Independence ship financing notes during 1998. We repurchased $0.8
million of our common stock during 1998 under the stock repurchase plan, as
discussed below. We received $2.9 million during 1998 from the issuance of our
common stock, principally from stock options exercised by our employees. We paid
$0.5 million during 1998 for financing efforts related to our new shipbuilding
programs.




                                       24

<PAGE>   25
Capital Expenditures and Debt

On January 21, 1999, the Mississippi Queen completed a 39-day lay-up. The
American Queen also completed a 15-day lay-up on February 10, 1999. The Delta
Queen completed a 54-day lay-up on February 27, 1999. The lay-ups for the three
vessels, including repairs and maintenance, cost approximately $5.5 million and
were funded from working capital.

In October 1997, we announced plans to expand capacity in the Hawaii cruise
market. We intend to construct two new cruise ships over the next five years and
plan to introduce an existing foreign-built cruise ship in the Hawaii market
while awaiting construction of the new vessels. On March 9, 1999, we signed a
definitive agreement with Ingalls Shipbuilding to construct two passenger ships,
each containing approximately 1,900 passengers berths, with options to build up
to four additional vessels. The estimated construction cost of the two initial
ships will be approximately $470 million each. The agreement provides that the
first ship will be delivered in January 2003 and the second ship in January 
2004. See "Business - Expansion Plans - Hawaii Expansion Plans" for a discussion
on the material terms of the construction contract with Ingalls Shipbuilding.

In 1999, we expect to spend between $80 million and $100 million on building the
two new Hawaii cruise vessels, which includes anticipated payments to Ingalls
Shipbuilding.

In April 1998, we announced plans to expand capacity at Delta Queen. For the
Delta Queen fleet, we intend to build up to five new small coastal ships over
the next seven to 10 years. The ships will each accommodate approximately 226
passengers and cruise in coastal areas and other itineraries not currently
served by existing Delta Queen vessels. These include such U.S. locations as the
Eastern Coastline and the Pacific Northwest. We have completed naval contract
designs and are presently negotiating with a U.S. shipyard. The estimated
construction cost of the ships will be $35 million each. If we decide to go
forward with the expansion plan and enter into a shipyard contract, construction
of the first new vessel will begin in mid-1999 with a targeted introduction of
the first coastal cruiser into service in mid-2001.

We have entered into an agreement to acquire a new vessel and plan to convert it
into an overnight passenger vessel with approximately 150 passenger berths for
use as the fourth Delta Queen riverboat. The purchase price is approximately
$8.0 million. We have conducted a due diligence review to ensure the vessel can
be effectively and efficiently renovated for passenger use and that the cost of
outfitting the vessel is consistent with our current estimates. Based on this
due diligence review, we are seeking to amend the terms and conditions of the
agreement. We estimate that the total renovation, relocation, start-up and
marketing costs will require an additional $12 million. We expect that the
conversion project will take between six and nine months and that the vessel
will be able to enter into service in the first half of 2000.

Assuming we proceed with our expansion plans for the Delta Queen line, we expect
to spend between $15 million and $20 million in 1999 on building the new coastal
cruise vessels, which also includes anticipated payments to the shipyard. We
estimate that costs to be incurred in 1999 to acquire and outfit the fourth
riverboat will be $18.0 million.

We intend to finance a significant portion of the construction cost of the
Hawaii cruise ships through the Maritime Administration, which provides
guaranties of private financing for new vessel construction projects conducted
in U.S. shipyards. We have applied for financing guaranties for debt for up to
87.5% of the cost of the vessels. The guarantied debt would be accessed during
the construction period, with interest payments during that period capitalized
as part of the cost of construction. In the current market, this type of debt
generally bears interest at a rate of 100 to 150 basis points over the
comparable U.S. government obligations and can have a term of up to 25 years
from the date of delivery of the vessel. The loans generally amortize on a
straight line basis over the term of the loan commencing after the delivery
date. Fees associated with the financing guaranties include a one-time
investigation fee equal to 1/2 of 1% of the indebtedness of $10 million and 1/8
of 1% of the amount in excess of $10 million. In addition, the Maritime
Administration imposes an annual guarantee fee of not less than 1/4 of 1% and
not more than 1% of the indebtedness, reduced by any required escrow, based upon
the obligor's ratio of long-term debt to stockholders' equity. The present value
of the annual guaranty fees is payable at the closing of the Maritime
Administration guarantied financing and capitalized as part of the vessel cost.
See "Risk Factors -- If we are unable to obtain Maritime Administration
financing guaranties, it will impede our expansion plans and future revenue
growth" for more detail regarding the impact on us if we do not obtain Maritime
Administration financing guaranties. We currently have several Maritime
Administration guarantied loans outstanding, secured by the S.S. Independence
and the American Queen.

In June 1997, our board of directors approved a stock repurchase plan. The plan
authorizes us to repurchase up to one million shares of our stock. These shares
may be purchased from time to time in the public market or through privately
negotiated transactions. As of December 31, 1998, we had repurchased 51,000
shares at an average purchase price of $14.84 per share under the plan. We
currently have no intention to repurchase any additional shares of common stock.


                                       25

<PAGE>   26

As of December 31, 1998, we complied with all covenants under our various debt
agreements.

On February 25, 1999, The Delta Queen Steamboat Co. entered into a credit
agreement with a group of lenders, with The Chase Manhattan Bank as agent. This
credit agreement provides for a revolving credit facility of up to $70 million
to fund the expansion of our Delta Queen line. This new $70 million facility
replaced our prior credit facility with Chase Manhattan. Borrowings under the
new credit facility bear interest at either (1) the greater of Chase Manhattan's
prime rate or alternative base rates plus a margin ranging from 0.50% to 1.50%,
or (2) the London Interbank Offered Rate plus a margin ranging from 1.50% to
2.50%. We are also charged a fee of 0.50% per annum on any unused commitment.
The new credit facility is secured by all of the assets of The Delta Queen
Steamboat Co., except for the American Queen. The new credit facility limits the
dividends The Delta Queen Steamboat Co. may pay to between $5 million and $15
million per year when aggregated with investments and other payments.

Subject to Maritime Administration guarantied financing, we believe we will have
adequate access to capital resources, both internally and externally, to meet
our current short-term and long-term capital commitments. Such resources may
include cash on hand and the ability to secure additional financing through the
capital markets. We continually evaluate opportunities to increase capacity at
both Delta Queen and in Hawaii and to strategically grow our business. As
discussed earlier, we announced plans to expand capacity at Delta Queen and in
the Hawaiian market. On February 22, 1999, we filed a Registration Statement on
Form S-3 with the Securities and Exchange Commission relating to a proposed
public offering of up to 3,450,000 shares of our common stock. Although we
believe that we will be able to obtain sufficient equity and debt financing from
the capital markets to construct the new vessels, we cannot assure you that we
will be able to obtain additional financing at commercially acceptable levels to
finance such new construction and, if we so choose, to pursue strategic business
opportunities.

Impact of Year 2000

Many computer programs have been written using two digits rather than four to
define the applicable year. Any of our computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure, miscalculations
and/or other unanticipated problems.

         State of Readiness

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

Our Year 2000 plan addresses the Year 2000 issues in various phases for both
types of systems including: (1) inventory of our systems, equipment and
suppliers that may be vulnerable to Year 2000 issues; (2) assessment of
inventoried items to determine the risks associated with their possible failure
to be Year 2000 compliant; (3) testing of systems and components to determine if
they are Year 2000 compliant, both prior to and subsequent to remediation; (4)
remediation and implementation of new systems; and (5) contingency planning to
address reasonably likely worst case scenarios.

For information technology systems, inventories and risk assessments have been
substantially completed for all our shoreside software applications, hardware
and operating systems. Most of our reservations systems functions have been
tested and were found to be compliant. The remaining functions will be tested
and remediated, if necessary, by mid-1999. We have also determined that our
shoreside phone system and onboard financial systems on the Delta Queen vessels
are Year 2000 compliant. The S.S. Independence's onboard financial system and
our shoreside accounting system, however, are not Year 2000 compliant. We will
utilize both internal and external resources to continue testing, reprogramming
and replacing our information technology systems that require Year 2000
modifications. We anticipate completing the system improvements and the Year
2000 project no later than September 30, 1999. This is prior to any anticipated
impact on our operating systems. We anticipate that these modifications and
improvements will enable our information systems to function properly with
respect to dates in the Year 2000 and thereafter.

Inventories and risk assessments are currently being performed for all
non-information technology systems and are expected to be finalized by April 30,
1999. The process of testing, remediation and implementation is expected to be
completed by September 30, 1999.


                                       26
<PAGE>   27
         Risks of Year 2000 Issues

If any of our suppliers or travel partners do not, or if we do not, successfully
deal with the Year 2000 issue, we could experience delays in scheduled cruises
which could result in lost revenues or increases in costs and could subject us
to claims and damages. To determine the most reasonably likely sources of these
risks, we have been communicating with our major suppliers and travel partners
on their Year 2000 compliance issues. For example, our external air ticketing
and credit card processing software have been determined to be Year 2000
compliant.

Based on these procedures, management believes that the most reasonably likely
sources of risk to us include (1) the disruption of transportation channels
relevant to our operations, including ports and transportation vendors,
primarily airlines, as a result of a general failure of support systems and
necessary infrastructure; (2) the disruption of travel agency and other sales
distribution systems; and (3) the inability of principal product suppliers to
deliver goods and services. The severity of these possible problems would depend
on the nature of these problems and how quickly they could be corrected or
alternatives implemented.

Our major suppliers and travel partners consists of our transportation vendors,
our primary external airline ticketing vendors, and our primary credit card
processing software vendors. Our primary external airline ticketing vendor has
certified that its systems are Year 2000 complaint. Our primary credit card
processing software vendors have also certified that their systems are Year 2000
complaint. We have not received written assurance from our transportation
vendors indicating that they will be Year 2000 complaint before the end of 1999.
Because we have no contingency plan to transport our customers long distance to
and from our embarkation and disembarkation points, failure by our
transportation vendors to provide transportation services could have a material
adverse effect on our operations and our financial condition.

Some risks of the Year 2000 issue are beyond our control and our other travel
partners and suppliers. For example, no preparations or contingency plan will
protect us from a downturn in economic activity caused by the possible ripple
effect throughout the entire economy that could be caused by problems of others
with Year 2000 issues.

         Costs

We have estimated our total costs for system improvements and the Year 2000
project to be approximately $1.0 million. These efforts are being funded from
working capital. Of the total project cost, approximately $0.5 million is
attributable to the implementation of a new accounting system. This amount
includes new software, new hardware, and consulting fees, all of which will be
capitalized. Another $0.3 million of capital outlays is attributable to the
upgrading of the S.S. Independence's onboard financial system and to the
replacement of imbedded chip systems in several of our vessels. The remaining
$0.2 million is expected to be expensed as incurred and is not expected to have
a material impact on the results of operations. The Year 2000 project represents
less than 10% of our information systems budget. To date, we have incurred and
expensed approximately $75,000 related to our systems improvements and the Year
2000 project. These costs do not include costs incurred by us as a result of the
failure of any third parties, including suppliers, to become Year 2000 compliant
or costs to implement any contingency plans.

The costs of the project and the date on which we believe we will complete the
Year 2000 modifications are based on our best estimates given presently
available information. These estimates were derived utilizing numerous
assumptions of future events, including the continued availability of the
resources we rely on, third party modification plans and other factors. We
cannot assure you, however, that these estimates will be achieved, and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, and similar uncertainties.

         Contingency Plans

We are preparing our contingency plans to identify and determine how to handle
our most probable worst case scenarios. Preliminary contingency plans are
currently being reviewed. Comprehensive contingency plans are estimated to be
complete by mid-1999.


                                       27
<PAGE>   28
                          INDEPENDENT AUDITORS' REPORT




The Board of Directors and Stockholders
American Classic Voyages Co.

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

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Classic
Voyages Co. and subsidiaries as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.

                                                                    /s/ KPMG LLP

                                                                        KPMG LLP



Chicago, Illinois
February 19, 1999



                                       28
<PAGE>   29
                          AMERICAN CLASSIC VOYAGES CO.
                           CONSOLIDATED BALANCE SHEETS
                   (In thousands except shares and par value)


<TABLE>
<CAPTION>
                                                                                                 December 31,
                                                                                         1998                    1997
                                                                                ----------------------- -----------------------
<S>                                                                                  <C>                     <C>          
ASSETS
Cash and cash equivalents................................................            $      27,004           $      19,187
Restricted short-term investments........................................                       60                     325
Accounts receivable......................................................                    1,989                   1,299
Inventory................................................................                    2,413                   2,274
Prepaid air tickets......................................................                    2,527                   1,982
Prepaid expenses and other current assets................................                    4,113                   3,557
                                                                                ----------------------- -----------------------
     Total current assets................................................                   38,106                  28,624

Property and equipment, net..............................................                  162,129                 171,105
Deferred income taxes, net...............................................                   10,011                   9,564
Other assets.............................................................                    2,546                   1,602
                                                                                ----------------------- -----------------------
     Total assets........................................................            $     212,792           $     210,895
                                                                                ======================= =======================
LIABILITIES
Accounts payable.........................................................            $      13,493           $      14,282
Other accrued liabilities................................................                   16,500                  18,093
Current portion of long-term debt........................................                    4,100                   4,100
Unearned passenger revenues..............................................                   39,297                  33,713
                                                                                ----------------------- -----------------------
     Total current liabilities...........................................                   73,390                  70,188

Long-term debt, less current portion.....................................                   77,388                  81,488
                                                                                ----------------------- -----------------------
     Total liabilities...................................................                  150,778                 151,676
                                                                                ======================= =======================
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value (5,000,000 shares authorized, none                                      
   issued and outstanding)...............................................                       --                      --
Common stock, $0.01 par value (20,000,000 shares authorized,
   14,293,931 and 14,006,015 shares issued, respectively)................                      143                     140
Additional paid-in capital...............................................                   80,451                  77,059
Accumulated deficit......................................................                  (17,823)                (17,980)
Common stock in treasury, at cost (51,000 shares)........................                     (757)                     --
                                                                                ----------------------- -----------------------
     Total stockholders' equity..........................................                   62,014                  59,219
                                                                                ----------------------- -----------------------
                                                                                     $     212,792           $     210,895
                                                                                ======================= =======================
</TABLE>



  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.



                                       29
<PAGE>   30
                          AMERICAN CLASSIC VOYAGES CO.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)





<TABLE>
<CAPTION>
                                                                                  Years Ended December 31,
                                                                      1998                  1997                  1996
                                                              --------------------- --------------------- ---------------------
<S>                                                                <C>                   <C>                   <C>         
Revenues                                                           $    192,225          $    177,884          $    190,408

Cost of operations (exclusive of depreciation and
   amortization shown below)............................                125,595               111,295               122,545
                                                              --------------------- --------------------- ---------------------

Gross profit............................................                 66,630                66,589                67,863

Selling, general and administrative expenses............                 44,232                41,015                45,367
Depreciation and amortization expense...................                 16,912                15,590                14,571
Impairment write-down (Note 4)..........................                     --                    --                38,390
                                                              --------------------- --------------------- ---------------------

Operating income (loss).................................                  5,486                 9,984               (30,465)

Interest income.........................................                  1,117                 1,028                   912
Interest expense........................................                  6,639                 6,963                 8,111
Other income............................................                    300                    --                11,729
                                                              --------------------- --------------------- ---------------------

Income (loss) before income taxes ......................                    264                 4,049               (25,935)

Income tax (expense) benefit............................                   (107)               (1,620)                8,299
                                                              --------------------- --------------------- ---------------------

Net income (loss).......................................           $        157          $      2,429          $    (17,636)
                                                              ===================== ===================== =====================
PER SHARE INFORMATION
Basic:
     Basic weighted average shares outstanding..........                 14,137                13,952                13,802
     Earnings (loss) per share..........................           $       0.01          $       0.17          $      (1.28)

Diluted:
     Diluted weighted average shares outstanding........                 14,777                14,338                13,802
     Earnings (loss) per share..........................           $       0.01          $       0.17          $      (1.28)
</TABLE>

  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.

                                       30

<PAGE>   31
                          AMERICAN CLASSIC VOYAGES CO.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                        1998                 1997                  1996
                                                                 -------------------- -------------------- ---------------------
<S>                                                                <C>                  <C>                  <C>             
OPERATING ACTIVITIES
     Net income (loss)....................................         $           157      $         2,429      $       (17,636)

ADJUSTMENTS TO RECONCILE
NET INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
     Depreciation and amortization expense................                  16,912               15,590               14,571
     Impairment write-down (Note 4).......................                      --                   --               38,390
     Gain on sale of assets...............................                    (300)                  --              (11,729)
     Changes in certain working
         capital accounts and other
              Accounts receivable.........................                    (690)               2,435               (2,600)
              Accounts payable............................                    (789)               3,599               (2,305)
              Other accrued liabilities...................                    (529)              (5,344)                (289)
              Other assets................................                    (258)               1,576               (6,400)
              Unearned passenger revenues.................                   5,584                2,044                3,137
              Prepaid expenses and other..................                  (1,563)                  85                 (123)
                                                                 -------------------- -------------------- ---------------------
     Net cash provided by operating activities............                  18,524               22,414               15,016
                                                                 -------------------- -------------------- ---------------------

INVESTING ACTIVITIES
     Decrease in restricted investments...................                     265                2,632                7,724
     Capital expenditures.................................                  (8,789)             (22,326)             (15,355)
     Proceeds from sale of assets.........................                     300                1,830               21,522
                                                                 -------------------- -------------------- ---------------------
     Net cash (used in) provided by investing activities..                  (8,224)             (17,864)              13,891
                                                                 -------------------- -------------------- ---------------------

FINANCING ACTIVITIES
     Proceeds from borrowings.............................                      --                   --                6,903
     Repayments of borrowings.............................                  (4,100)              (4,410)             (23,923)
     Purchase of common stock.............................                    (757)                  --                   --
     Issuance of common stock.............................                   2,907                1,139                  368
     Deferred financing fees..............................                    (533)                  --                 (395)
                                                                 -------------------- -------------------- ---------------------
     Net cash used in financing activities................                  (2,483)              (3,271)             (17,047)
                                                                 -------------------- -------------------- ---------------------

     Increase in cash and cash equivalents................                   7,817                1,279               11,860
     Cash and cash equivalents, beginning of period.......                  19,187               17,908                6,048
                                                                 -------------------- -------------------- ---------------------
     Cash and cash equivalents, end of period.............         $        27,004      $        19,187      $        17,908
                                                                 ==================== ==================== =====================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
     Cash paid during the period for:
         Interest ........................................         $         6,438      $         6,791      $         7,952
         Income taxes.....................................         $           232      $           249      $           450
</TABLE>



  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.


                                       31
<PAGE>   32
                          AMERICAN CLASSIC VOYAGES CO.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (In thousands)



<TABLE>
<CAPTION>

                                                                                               
                                                                  Additional                                             Total
                                                                    Paid-in        Accumulated        Treasury       Stockholders'
                                               Common Stock         Capital          Deficit            Stock           Equity
                                            -----------------    ------------    --------------    --------------    -------------
<S>                                         <C>                  <C>             <C>               <C>               <C>
Balance, December 31, 1995................    $      138           $   74,048      $   (2,773)       $       --         $ 71,413
Net loss..................................            --                   --         (17,636)               --          (17,636)
Stock issued under option and                                     
    benefit plans.........................             1                1,204              --                              1,205
                                            -----------------    ------------    --------------    -------------     ------------
Balance, December 31, 1996................           139               75,252         (20,409)               --           54,982
Net income................................            --                   --           2,429                --            2,429
Stock units issued to Directors, net......            --                  219              --                --              219
Stock issued under option and                
    benefit plans.........................             1                1,588              --                              1,589
                                            -----------------    ------------    --------------    -------------     ------------
Balance, December 31, 1997                           140               77,059          (17,980)              --           59,219
Net income................................            --                  --              157                --              157
Stock units issued to Directors, net......            --                  138              --                --              138
Stock issued under option and
    benefit plans.........................             3                3,254              --                --            3,257
Purchase of treasury stock................            --                   --              --              (757)            (757)
                                            -----------------    ------------    --------------    -------------     ------------
Balance, December 31, 1998                    $      143           $   80,451      $  (17,823)       $     (757)       $   62,014
                                            =================    ============    ==============    =============     ============
</TABLE>

  The accompanying notes are an integral part of these Consolidated Financial
                                  Statements.



                                       32
<PAGE>   33
                          AMERICAN CLASSIC VOYAGES CO.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

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

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

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

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

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




                                       33
<PAGE>   34
GOODWILL
In August 1993, the Company acquired substantially all the assets and certain
liabilities of American Global Line Inc. ("the GHCL Acquisition"). The GHCL
Acquisition was accounted for as a purchase. In connection with this purchase,
goodwill was recorded for the excess of purchase price over the fair value of
the net assets acquired and was being amortized over its estimated useful life
of 25 years using the straight-line method. In 1996, in connection with its
decision not to return the S.S. Constitution to service, the Company wrote-off
the remaining goodwill balance (see Note 4). Amortization expense for 1996 was
$52,000.

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

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

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

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

STOCK-BASED COMPENSATION PLANS
The Company has elected to account for employee stock-based compensation plans
in accordance with Accounting Principles Board Opinion No. 25, as permitted
under Statement of Financial Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". See Note 10 for pro forma effect for the fair value
accounting method, as defined in SFAS No. 123.

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

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



                                       34
<PAGE>   35


NOTE 2.  EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                            1998                                      1997
                                           ---------------------------------     ---------------------------------
                                                                        Per                                   Per
                                            Numerator  Denominator     Share     Numerator    Denominator    Share
                                           ---------------------------------     ---------------------------------
<S>                                            <C>      <C>            <C>       <C>            <C>          <C>  
Basic earnings per share...................... $157     14,137         $0.01     $2,429         13,952       $0.17
                                                                       =====                                 =====
Additional shares assuming exercise of
dilutive stock options and immediate
vesting of stock units........................   --        640                       --            386
                                               ----     ------                   ------         ------

Diluted earnings per share.... ............... $157     14,777         $0.01     $2,429         14,338       $0.17
                                               ====     ======         =====     ======         ======       =====
</TABLE>


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

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

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consisted of (in thousands):

<TABLE>
<CAPTION>
                                                                   December 31,

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


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

NOTE 4. IMPAIRMENT WRITE-DOWN

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

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


                                       35
<PAGE>   36

NOTE 5. DISPOSITION OF ASSETS

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

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

NOTE 6. LONG-TERM DEBT

Long-term debt consists of (in thousands):

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


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

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

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

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



                                       36
<PAGE>   37

As of December 31, 1998, the Company had a revolving credit facility under the
Credit Agreement which provided for borrowings of up to $15.0 million with a
final maturity on March 31, 1999. In 1998, no borrowings were outstanding at any
time under this facility. Borrowings bear interest, at the option of the
Company, equal to either a LIBOR rate or prime rate basis. The Company is also
required to pay a commitment fee on the unused portion of the facility at a rate
ranging from 0.375% to 0.500% per annum. The Credit Agreement is guaranteed by
AMCV and secured by substantially all the assets of DQSC, excluding the American
Queen. The Credit Agreement contains various limitations, restrictions and
financial covenants which, among other things, requires maintenance of certain
financial ratios, restricts additional indebtedness, limits intercompany
advances to $20.0 million and limits the payment of dividends from DQSC to AMCV
to $2.0 million per annum. See Note 12 for further information.

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

NOTE 7. COMMITMENTS AND CONTINGENCIES

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

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

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


                                       37
<PAGE>   38
NOTE 8. INCOME TAXES

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

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


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

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



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

<TABLE>
<CAPTION>
                                                                                December 31,
     Deferred tax assets:                                                  1998              1997
                                                                     ---------------------------------------
         <S>                                                         <C>                <C>
         Insurance costs and reserves.........................        $         1,097   $         1,198
         Non-recurring executive compensation.................                    490               809
         Benefit cost accruals................................                    491               483
         Alternative minimum tax
           credit carryforwards...............................                  2,196             2,196
         Drydock accruals.....................................                    967               820
         Net operating loss carryforward......................                 35,090            33,041
         Goodwill, due to basis differences...................                  1,270             1,248
                                                                     ---------------------------------------
         Total deferred tax assets............................                 41,601            39,795
                                                                     ---------------------------------------

     Deferred tax liabilities:
         Capital construction fund............................                  1,237             1,472
         Property plant and equipment, due to
           basis differences and depreciation, net............                 30,353            28,759
                                                                     ---------------------------------------
         Total deferred tax liabilities.......................                 31,590            30,231
                                                                     ---------------------------------------

         Net deferred tax asset...............................        $        10,011   $         9,564     
                                                                     =======================================
</TABLE>


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



                                       38
<PAGE>   39

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

NOTE 9. RELATED PARTIES

As of December 31, 1998, the largest stockholders of the Company's common stock
were certain affiliates of Equity Group Investments ("EGI"), including EGI
Holdings, Inc. and EGIL Investments, Inc., which owned an aggregate of 53% of
the Company's common stock. EGI and its affiliates provided certain
administrative support services for the Company, including but not limited to
legal, accounting, tax, benefit and insurance brokerage services. In addition,
as previously mentioned in Note 7, the Company leases office space from an
affiliate of EGI. In the aggregate, the fees charged by EGI and its affiliates
for such services and rent were approximately $0.4 million, $0.7 million, and
$1.5 million for the years ended December 31, 1998, 1997 and 1996, respectively.
These arrangements with EGI and its affiliates are subject to approval by a
majority of the non-affiliated members of the Company's Board of Directors, and
are conducted on terms no less favorable to the Company than could be obtained
from unaffiliated third parties.

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

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

NOTE 10. EMPLOYEE BENEFIT PLANS

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

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

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



                                       39
<PAGE>   40
EMPLOYEE STOCK PURCHASE PLAN
The American Classic Voyages Co. 1995 Employee Stock Purchase Plan (the "ESP
Plan") allows eligible employees to purchase common stock of the Company,
through payroll deductions, at a discounted price from the market price. The
exercise price under the ESP Plan is deemed to be 85% of the lesser of (i) the
market value of the Company's common stock on the last business day of the
offering period or (ii) the greater of (a) the average market value during the
offering period and (b) the market value on the first business day of the
offering period. There is a maximum of 500,000 shares authorized under the ESP
Plan. There were 11,622, 9,718 and 12,297 shares issued during 1998, 1997 and
1996, respectively, at an average price of $13.38, $10.70 and $7.13 per share
for 1998, 1997 and 1996, respectively. At December 31, 1998, approximately
461,000 shares were available for offering under the ESP Plan.

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

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

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

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

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

The Company applies APB No. 25 in accounting for its plans and, accordingly, no
compensation cost has been recognized for its stock options in the financial
statements. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's net
income (loss) and earnings (loss) per share would have been adjusted to the pro
forma amounts indicated below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                    1998            1997            1996
                                                             -------------------------------------------------
<S>                                         <C>                  <C>            <C>               <C>
Net income (loss)                           As reported          $     157      $   2,429       $ (17,636)
                                            Pro forma               (2,487)         1,422         (18,033)

Basic earnings (loss) per share             As reported          $    0.01       $   0.17        $  (1.28)
                                            Pro forma                (0.18)          0.10           (1.31)

Diluted earnings (loss) per share           As reported          $    0.01       $   0.17        $  (1.28)
                                            Pro forma                (0.18)          0.10           (1.31)
</TABLE>



                                       40
<PAGE>   41

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

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


<TABLE>
<CAPTION>

                                        Executive Stock                                                 
                                          Option Plan                   1992 Plan                       Weighted-Average 
                                        ---------------    ------------------------------------------    Exercise Price
                                             Shares           Shares            Shares        Shares       for Options
                                           Subject to       Subject to        Subject to    Subject to      and SARs
                                            Options           Options        Stock Units       SARs           only 
                                        ---------------    ------------     --------------  ----------      --------

<S>                                          <C>              <C>            <C>               <C>         <C>     
Balance at December 31, 1995.........        323,971          1,179,410               --       280,000     $  13.04
      Granted........................             --            895,680               --            --         9.50
      Canceled.......................             --           (582,668)              --      (280,000)       15.36
      Exercised......................        (85,840)                --               --            --         3.25
                                        ---------------    ------------     --------------  ----------        -----

Balance at December 31, 1996                 238,131          1,492,422               --            --        10.54
      Granted........................             --             62,000           24,500            --        12.36
      Canceled.......................             --            (71,753)          (1,450)           --        11.43
      Exercised......................        (43,006)           (60,290)              --            --         7.90
      Converted......................             --                 --           (2,650)           --           --
                                        ---------------    ------------     --------------  ----------     ---------

Balance at December 31, 1997                 195,125          1,422,379           20,400            --        10.74
      Granted........................             --          1,618,000           14,000            --        17.10
      Canceled.......................        (19,512)          (151,236)              --            --        13.44
      Exercised......................        (50,000)          (215,047)              --            --         9.29
      Converted......................             --                 --           (7,000)           --           --
                                        ---------------    ------------     --------------  ----------     --------
Balance at December 31, 1998                 125,613          2,674,096           27,400            --     $  14.39
                                        ===============    ============     ==============  ==========     ========
</TABLE>


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

<TABLE>
<CAPTION>

                                            Options Outstanding                              Options Exercisable
                        -----------------------------------------------------------  ----------------------------------
                                         Weighted-Average          Weighted-                               Weighted-
   Range of            Outstanding          Remaining               Average             Exercisable         Average
 Exercise Price         at 12/31/98      Contractual Life       Exercise Price          at 12/31/98      Exercise Price
----------------       ------------    -------------------     ----------------      ----------------    --------------
<S>                    <C>               <C>                 <C>                     <C>               <C>     
       $3.25              125,613                3                   $  3.25                 125,613           $   3.25
  7.97 -   9.88           441,855                8                      8.96                 365,997               8.88

 10.25 -  15.00           408,451                7                     11.65                 370,446              11.70

 15.32 -  20.00         1,823,790                9                     17.08                 637,123              17.16
---------------        ----------      -------------------     ----------------      ----------------    --------------

$ 3.25 - $20.00         2,799,709                8                   $ 14.39               1,499,179           $  12.63
===============        ==========      ===================     ================      ================    ==============
</TABLE>



                                       41
<PAGE>   42

NOTE 11. UNAUDITED QUARTERLY RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
    Year Ended December 31, 1998                             March 31,        June 30,       September 30,     December 31,
    (In thousands, except per share data)                      1998             1998             1998              1998
                                                          ---------------- ---------------- ---------------- -----------------
         <S>                                              <C>               <C>              <C>              <C>
         Revenues..................................         $    40,668      $    53,535      $    50,920      $    47,102
         Gross profit..............................              11,209           20,562           18,184           16,675
         Operating (loss) income...................              (6,143)           4,037            3,798            3,794
         Pre-tax (loss) income.....................              (7,262)           2,614            2,424            2,488
         Net (loss) income.........................              (4,362)           1,574            1,454            1,491
         Basic (loss) earnings per share...........               (0.31)            0.11             0.10             0.10
         Diluted (loss) earnings per share.........               (0.31)            0.11             0.10             0.10
</TABLE>


<TABLE>
<CAPTION>
    Year Ended December 31, 1997                             March 31,        June 30,       September 30,     December 31,
    (In thousands, except per share data)                      1997             1997             1997              1997
                                                          ---------------- ---------------- ---------------- -----------------
<S>                                                         <C>              <C>              <C>              <C>        
         Revenues .................................         $    40,372      $    42,356      $    49,746      $    45,410
         Gross profit..............................              13,233           17,661           19,606           16,089
         Operating (loss) income ..................              (1,869)           3,451            6,098            2,304
         Pre-tax (loss) income.....................              (3,314)           1,962            4,617              784
         Net (loss) income.........................              (1,988)           1,177            2,770              470
         Basic (loss) earnings per share...........               (0.14)            0.08             0.20             0.03
         Diluted (loss) earnings per share.........               (0.14)            0.08             0.19             0.03
</TABLE>


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

NOTE 12. SUBSEQUENT EVENTS (UNAUDITED)

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

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

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



                                       42
<PAGE>   43
CONSTRUCTION CONTRACT 
On March 9, 1999, the Company executed definitive agreements with Ingalls
Shipbuilding, Inc. to construct at least two new vessels for the Hawaii cruise
market. The new Hawaii cruise ships will have the capacity to accommodate
approximately 1,900 passengers each and are currently estimated to cost $440
million each, plus approximately $30 million for furnishings, fixtures and
equipment. The contract provides that Ingalls Shipbuilding will deliver the
first new ship in January 2003 and the second ship in January 2004. In addition,
the shipbuilding contract provides the Company an option to build up to four
additional vessels. The estimated contract price of the first option vessel is
$487 million and the contract price for the subsequent option vessels will be
negotiated between the parties. Ingalls Shipbuilding will provide a limited
warranty for the design, material and workmanship of each vessel for one year
after delivery. 


                                       43
<PAGE>   44
                                                                      Schedule I


                          AMERICAN CLASSIC VOYAGES CO.
         CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
                                 BALANCE SHEETS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                     1998                  1997
                                                                             -------------------------------------------
<S>                                                                              <C>                   <C>         
ASSETS
Cash and cash equivalents............................................            $        458          $      3,304
Prepaid expenses and other current assets............................                   1,948                   301
Property and equipment, net..........................................                   2,771                 1,385
Investment in and advances to subsidiaries...........................                  60,667                59,850
                                                                             -------------------------------------------
                                                                                 $     65,844          $     64,840
                                                                             ===========================================
LIABILITIES
Other liabilities....................................................            $      3,830          $      5,621
                                                                             -------------------------------------------

STOCKHOLDERS' EQUITY
Common stock.........................................................                     143                   140
Paid-in capital......................................................                  80,451                77,059
Accumulated deficit..................................................                 (17,823)              (17,980)
Treasury stock.......................................................                    (757)                   --
                                                                             -------------------------------------------
Total stockholders' equity...........................................                  62,014                59,219
                                                                             -------------------------------------------
                                                                                 $     65,844          $     64,840
                                                                             ===========================================
</TABLE>


            See accompanying notes to Condensed Financial Statements.


                                       44
<PAGE>   45
                                                                      Schedule I


                          AMERICAN CLASSIC VOYAGES CO.
  CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED)
                            STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                        1998                 1997                  1996
                                                           ------------------------------------------------------------------
<S>                                                          <C>                  <C>                   <C>            
Miscellaneous (expense) revenues....................           $      (1,700)        $       (290)         $         16

Depreciation expense................................                    (880)                (713)                 (793)

Income tax benefit .................................                   1,068                  547                   295

Equity in earnings (losses) of subsidiaries.........                   1,669                2,885               (17,154)
                                                           ------------------------------------------------------------------

Net income (loss)...................................           $         157         $      2,429          $    (17,636)
                                                           ==================================================================
</TABLE>


            See accompanying notes to Condensed Financial Statements.


                                       45
<PAGE>   46
                                                                      Schedule I

                          AMERICAN CLASSIC VOYAGES CO.
  CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) - (CONTINUED)
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>



                                                                                    Years Ended December 31,
                                                                         1998                 1997                 1996
                                                                  -------------------- -------------------- --------------------
<S>                                                                   <C>                  <C>                  <C>         
OPERATING ACTIVITIES
Net income (loss)...........................................          $       157          $     2,429          $   (17,636)

ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES
   Depreciation.............................................                  880                  713                  793
   Equity in (earnings) losses of subsidiaries, net.........               (1,669)              (2,885)              17,154
   (Increase) decrease in advances to subsidiaries..........                 (570)                 438                1,817
   (Increase) decrease in prepaid expenses and other........                 (514)                 168                 (128)
   (Decrease) increase in other liabilities.................               (1,326)                (465)                (743)
                                                                  --------------------------------------------------------------
   Net cash (used in) provided by operating activities......               (3,042)                 398                1,257
                                                                  --------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures........................................               (1,421)                (178)                 (87)
                                                                  --------------------------------------------------------------
Net cash used in investing activities.......................               (1,421)                (178)                 (87)
                                                                  --------------------------------------------------------------

FINANCING ACTIVITIES
Issuance of common stock....................................                2,907                1,139                  368
Purchase of common stock....................................                 (757)                  --                   --
Deferred financing fees.....................................                 (533)                  --                   --
                                                                  -------------------------------------------------------------- 
Net cash provided by financing activities...................                1,617                1,139                  368
                                                                  --------------------------------------------------------------

(Decrease) increase in cash and cash equivalents............               (2,846)               1,359                1,538
Cash and cash equivalents, beginning of period..............                3,304                1,945                  407
                                                                  -------------------------------------------------------------- 
Cash and cash equivalents, end of period....................          $       458          $     3,304          $     1,945
                                                                  ==============================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investment activities:
  Conversion of advances to subsidiaries into
    investment in subsidiaries.............................           $       --           $       --           $    30,000 
</TABLE>


            See accompanying notes to Condensed Financial Statements.


                                       46
<PAGE>   47
                                                                      Schedule I

                          AMERICAN CLASSIC VOYAGES CO.
   NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY) -
                                  (CONTINUED)



BASIS OF PRESENTATION

The Condensed Financial Information of American Classic Voyages Co. ("AMCV") has
been prepared pursuant to Securities and Exchange Commission ("SEC") rules and
regulations and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto for the years ended December 31, 1998, 1997 and
1996 included herein this Form 10-K. The balance sheets as of December 31, 1998
and 1997, respectively, and the related statements of operations and cash flows
have been prepared on an unconsolidated basis. AMCV's investment in its
subsidiaries is recorded on the equity basis.

DIVIDENDS FROM SUBSIDIARIES

No dividends were paid to AMCV for the years ended December 31, 1998, 1997 and
1996.

COMMITMENTS

AMCV has guaranteed the credit agreement between one of its subsidiaries and a
group of financial institutions which provides for a borrowing facility to such
subsidiary for general corporate purposes. For information related to this
credit agreement, see Note 6 of "Notes to Consolidated Financial Statements"
included in this Form 10-K.

The Federal Maritime Commission ("FMC") regulates passenger vessels with 50 or
more berths departing from U.S. ports and requires that operators post security
to be used in the event the operator fails to provide cruise services, or
otherwise satisfy certain financial standards. The Company has been approved as
a self-insurer by the FMC, and therefore, subject to continued approval, is not
required to post security for passenger cruise deposits. The FMC has reviewed
its standards and in June 1996 issued proposed regulations to significantly
increase the financial responsibility requirements. The Company filed its
objection on the proposals, as it believes that the FMC's current standards
provide passengers with adequate protection in the event of an operator's
non-performance and that further requirements may impose an undue burden on
operators. At this time, the Company cannot predict if the proposed changes will
be approved as currently constituted, or at all.

INCOME TAXES

AMCV has also entered into tax sharing agreements with its subsidiaries which
require each subsidiary to compute its Federal income tax liability on a
separate company basis and to pay amounts so computed to AMCV.  No payments 
were made under the tax sharing agreement for the years ended December 31, 
1998, 1997 and 1996.

In 1993, AMCV established a capital construction fund ("CCF") pursuant to 
section 607 of the Merchant Marine Act of 1936.  The CCF allows AMCV to 
accelerate recognition of Federal income tax deductions for capital 
expenditures related to the American Hawaii vessels.  A substantial portion of 
the income generated by AMCV is eligible for deposit into the CCF; however; 
expenditures for the vessels of DQSC are not qualified for this tax treatment.  
As such, on a consolidated tax return basis, AMCV was able to obtain the 
accelerated deduction treatment on a substantial portion of its taxable income.



                                       47
<PAGE>   48
                          AMERICAN CLASSIC VOYAGES CO.
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NUMBER                             DESCRIPTION

  <S>             <C>
    3.(i)         Second Amended and Restated Certificate of Incorporation of
                  the Company

    3.(ii)        Second Amended and Restated By-Laws of the Company.

 **4.(i)          Proof of Common Stock Certificate (filed on February 14, 1992
                  as Exhibit 4.(i) to Amendment No. 2 to the Company's
                  Registration Statement on Form S-1 (Registration No. 33-45139)
                  and incorporated herein by reference).

    4.(ii)(a)(1)  Credit Agreement, dated as of February 25, 1999, among the
                  Delta Queen Steamboat Co. (the "Borrower"), the financial
                  institutions from time to time parties thereto as Lenders (the
                  "Lenders"), The Chase Manhattan Bank, as Issuing Bank and as
                  Administrative Agent thereunder (the "Agent"), and Hibernia
                  National Bank, as Documentation Agent.

    4.(ii)(a)(2)  Security Agreement, dated as of February 25, 1999, executed by
                  the Borrower in favor of the Agent for the benefit of the
                  Agent and the Lenders.

                  The following entities also have entered into a similar
                  security agreement with the Agent:

                  (i)   DQSB II, Inc.;
                  (ii)  Great Ocean Cruise Line, L.L.C.;
                  (iii) Cruise America Travel, Incorporated;
                  (iv)  Great River Cruise Line, L.L.C.; and 
                  (v)   DQSC Property Co.

   4.(ii)(a)(3)   Stock Pledge Agreement, dated as of February 25, 1999,
                  executed by the Borrower in favor of the Agent, evidencing the
                  pledge by the Borrower of all of its 100% interest in the
                  capital stock of each of Cruise America Travel, Incorporated,
                  DQSC Property Co. and DQSB II, Inc.

   4.(ii)(a)(4)   Limited Liability Company Pledge Agreement, dated as of
                  February 25, 1999, executed by the Borrower in favor of the
                  Agent evidencing the pledge by the Borrower of its 99%
                  membership interest in each of Great River Cruise Line, L.L.C.
                  and Great Ocean Cruise Line, L.L.C.

   4.(ii)(a)(5)   Guaranty executed by Cruise America Travel, Incorporated, DQSC
                  Property Co., DQSB II, Inc., Great Ocean Cruise Line, L.L.C.
                  and Great River Cruise Line, L.L.C. in favor of the Agent
                  evidencing the guarantees of the obligations of the Borrower.

   4.(ii)(a)(6)   Trust Indenture among the Agent, the Lenders, Great River
                  Cruise Line, L.L.C. and The Chase Manhattan Bank as trustee
                  (the "DQ Trustee") covering the Delta Queen (a substantially
                  identical Trust Indenture covering the Mississippi Queen has
                  also been executed).

   4.(ii)(a)(7)   Preferred Ship Mortgage covering the Delta Queen executed by
                  Great River Cruise Line, L.L.C. in favor of the DQ Trustee for
                  the benefit of the Agent and the Lenders (a substantially
                  identical Preferred Ship Mortgage covering the Mississippi
                  Queen has also been executed).

**4.(ii)(b)(1)    Commitment to Guaranty Obligations by the United States of
                  America accepted by Great AQ Steamboat Co. dated as of August
                  24, 1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(1)
                  to the Company's Form 10-Q dated September 30, 1995 and
                  incorporated herein by reference).

**4.(ii)(b)(2)    Great AQ Steamboat Co. United States Government Guaranteed
                  Ship Financing Obligations, American Queen Series Purchase
                  Agreement dated August 24, 1995 (filed on November 14, 1995 as
                  Exhibit 4.(ii)(c)(2) to the Company's Form 10-Q dated
                  September 30, 1995 and incorporated herein by reference).
</TABLE>


                                       48
<PAGE>   49

**4.(ii)(b)(3)    Trust Indenture relating to United States Government
                  Guaranteed Ship Financing Obligations, American Queen Series,
                  between Great AQ Steamboat Co. and the Bank of New York, dated
                  as of August 24, 1995 (the "Trust Indenture") along with
                  Schedule A and Exhibit 1 (filed on November 14, 1995 as
                  Exhibit 4.(ii)(c)(3) to the Company's Form 10-Q dated
                  September 30, 1995 and incorporated herein by reference).

**4.(ii)(b)(4)    Form of 2005 Note, Guarantee and Trustee's Authentication
                  Certificate Specimen Note as it relates to the United States
                  Government Guaranteed Ship Financing Obligation, American
                  Queen Series (filed on November 14, 1995 as Exhibit
                  4.(ii)(c)(4) to the Company's Form 10-Q dated September 30,
                  1995 and incorporated herein by reference).

**4.(ii)(b)(5)    Form of 2020 Bond, Guarantee and Trustee's Authentication
                  Certificate Specimen Bond as it relates to United States
                  Government Guaranteed Ship Financing Bond, American Queen
                  Series (filed on November 14, 1995 as Exhibit 4.(ii)(c)(5) to
                  the Company's Form 10-Q dated September 30, 1995 and
                  incorporated herein by reference).

**4.(ii)(b)(6)    Authorization Agreement between the United States of America
                  as represented by the Secretary of Transportation and the Bank
                  of New York as Indenture Trustee under the Trust Indenture
                  between it and Great AQ Steamboat Co. dated as of August 24,
                  1995 (filed on November 14, 1995 as Exhibit 4.(ii)(c)(6) to
                  the Company's Form 10-Q dated September 30, 1995 and
                  incorporated herein by reference).

**4.(ii)(b)(7)    Security Agreement relating to the United States Government
                  Guaranteed Ship Financing Obligation between Great AQ
                  Steamboat Co. and the United States of America dated as of
                  August 24, 1995 (the "Security Agreement") along with Exhibit
                  1 and the Schedule of Definitions (filed on November 14, 1995
                  as Exhibit 4.(ii)(c)(7) to the Company's Form 10-Q dated
                  September 30, 1995 and incorporated herein by reference).

**4.(ii)(b)(8)    $60,589,000 Promissory Note dated August 24, 1995 by and
                  between Great AQ Steamboat Co. and the United States of
                  America (filed on November 14, 1995 as Exhibit 4.(ii)(c)(8) to
                  the Company's Form 10-Q dated September 30, 1995 and
                  incorporated herein by reference).

**4.(ii)(b)(9)    Title XI Reserve Fund and Financial Agreement among Great AQ
                  Steamboat Co. and the United States of America dated as of 
                  August 24, 1995 along with the General Provisions (filed on 
                  November 14, 1995 as Exhibit 4.(ii)(c)(9) to the Company's 
                  Form 10-Q dated September 30, 1995 and incorporated herein by
                  reference).

**4.(ii)(b)(10)   Guaranty Agreement dated August 24, 1995 made by the Delta 
                  Queen Steamboat Co. in favor of the United States of America
                  (filed on November 14, 1995 as Exhibit 4.(ii)(c)(10) to the
                  Company's Form 10-Q dated September 30, 1995 and incorporated
                  herein by reference).

**4.(ii)(b)(11)   Assumption and Supplement No. 1 to First Preferred Ship 
                  Mortgage effective as of December 31, 1996 made by and among
                  Great AQ Steamboat, L.L.C., Great AQ Steamboat Co. and the
                  United States of America, represented by the Secretary of
                  Transportation, acting by and through the Maritime
                  Administrator (filed on May 13, 1997 as Exhibit 4.(ii)(c)(11)
                  to the Company's Form 10-Q dated March 31, 1997 and
                  incorporated herein by reference).

**4.(ii)(b)(12)   Modification and Assumption Agreement entered into March 25, 
                  1997, effective as of December 31, 1996, among The United
                  States of America, represented by the Secretary of
                  Transportation, acting by and through the Maritime
                  Administrator, Great AQ Steamboat, L.L.C., and The Bank of New
                  York (filed on May 13, 1997 as Exhibit 4.(ii)(c)(12) to the
                  Company's Form 10-Q dated March 31, 1997 and incorporated
                  herein by reference).

**4.(ii)(b)(13)   Confirmation of Guaranty Agreement effective as of December 
                  31, 1996 made by The Delta Queen Steamboat Co. in favor of the
                  United States of America, represented by the Secretary of
                  Transportation, acting by and through the Maritime
                  Administrator (filed on May 13, 1997 as Exhibit 4. (ii)(c)(13)
                  to the Company's Form 10-Q dated March 31, 1997 and
                  incorporated herein by reference). 


                                       49
<PAGE>   50
**4.(ii)(b)(14)   Endorsement No. 1 to Secretary's Note from Great AQ Steamboat,
                  L.L.C. to the United States of America executed on March 25,
                  1997, effective as of December 31, 1996 (filed on May 13, 1997
                  as Exhibit 4.(ii)(c)(14) to the Company's Form 10-Q dated
                  March 31, 1997 and incorporated herein by reference).

**4.(ii)(b)(15)   Subordination Agreement dated as of March 25, 1997 made by and
                  among Great AQ Steamboat, L.L.C., The Delta Queen Steamboat
                  Co. and DQSB II, Inc. and the United States of America,
                  represented by the Secretary of Transportation, acting by and
                  through the Maritime Administrator (filed on May 13, 1997 as
                  Exhibit 4.(ii)(c)(15) to the Company's Form 10-Q dated March
                  31, 1997 and incorporated herein by reference).

**4.(ii)(c)(1)    Commitment to Guaranty Obligations by the United States of
                  America Accepted by Great Independence Ship Co. dated as of
                  December 7, 1995 (filed on April 1, 1996 as Exhibit
                  4.(ii)(d)(1) to the Company's Form 10-K dated December 31,
                  1995).

**4.(ii)(c)(2)    Great Independence Ship Co. United States Government
                  Guaranteed Ship Financing Obligations, Independence Series A
                  Purchase Agreement dated December 7, 1995 (filed on April 1,
                  1996 as Exhibit 4.(ii)(d)(2) to the Company's Form 10-K dated
                  December 31, 1995).

**4.(ii)(c)(3)    Trust Indenture relating to United States Government
                  Guaranteed Ship Financing Obligations, Independence Series A,
                  between Great Independence Ship Co. and the Bank of New York,
                  dated as of December 7, 1995 (the "Trust Indenture") along
                  with Schedule A and Exhibit 1 (filed on April 1, 1996 as
                  Exhibit 4.(ii)(d)(3) to the Company's Form 10-K dated December
                  31, 1995).

**4.(ii)(c)(4)    Forms of 2005 Note, Guarantee and Trustee's Authentication
                  Certificate Specimen Note as it relates to the United States
                  Government Guaranteed Ship Financing Obligation, Independence
                  Series A (filed on April 1, 1996 as Exhibit 4.(ii)(d)(4) to
                  the Company's Form 10-K dated December 31, 1995).

**4.(ii)(c)(5)    Forms of 2015 Bond, Guarantee and Trustee's Authentication
                  Certificate Specimen Bond as it relates to United States
                  Government Guaranteed Ship Financing Bond, Independence Series
                  A (filed on April 1, 1996 as Exhibit 4.(ii)(d)(5) to the
                  Company's Form 10-K dated December 31, 1995).

**4.(ii)(c)(6)    Authorization Agreement between the United States of America
                  represented by the Secretary of Transportation and the Bank of
                  New York as Indenture Trustee under the Trust Indenture
                  between it and Great Independence Ship Co. dated as of
                  December 7, 1995 (filed on April 1, 1996 as Exhibit
                  4.(ii)(d)(6) to the Company's Form 10-K dated December 31,
                  1995).

**4.(ii)(c)(7)    Security Agreement relating to the United States Government
                  Guaranteed Ship Financing Obligation between Great
                  Independence Ship Co. and the United States of America dated
                  as of December 7, 1995 (the "Security Agreement") along with
                  Exhibit 1 and the Schedule of Definitions (filed on April 1,
                  1996 as Exhibit 4.(ii)(d)(7) to the Company's Form 10-K dated 
                  December 31, 1995).

**4.(ii)(c)(8)    $26,429,000 Promissory Note dated December 7, 1995 by and 
                  between Great Independence Ship Co. and the United States of 
                  America (filed on April 1, 1996 as Exhibit 4.(ii)(d)(8) to 
                  the Company's Form 10-K dated December 31, 1995).

**4.(ii)(c)(9)    Title XI Reserve Fund and Financial Agreement between Great 
                  Independence Ship Co. and the United States of America dated 
                  as of December 7, 1995 along with the General Provisions 
                  (filed on April 1, 1996 as Exhibit 4.(ii)(d)(9) to the 
                  Company's Form 10-K dated December 31, 1995).

**4.(ii)(c)(10)   Guaranty and Security Agreement dated December 7, 1995 made 
                  by the Great Independence Ship Co., Great Hawaiian Cruise 
                  Line, Inc. and Great Hawaiian Properties Corporation in favor 
                  of the United States of America (filed on April 1, 1996 as 
                  Exhibit 4.(ii)(d)(10) to the Company's Form 10-K dated 
                  December 31, 1995).

**4.(ii)(c)(11)   Amendment to Commitment to Guarantee Obligations by the 
                  United States of America Accepted by Great Independence Ship 
                  Co. dated as of March 28, 1996 (filed on May 15, 1996 as 
                  Exhibit 4.(ii)(d)(11) to the Company's Form 10-Q dated March 
                  31, 1996). 
  
                                       50
<PAGE>   51
**4.(ii)(c)(12)   Great Independence Ship Co. United Stated Government
                  Guaranteed Ship Financing Obligations, Independence Series B
                  Purchase Agreement dated March 28, 1996 (filed on May 15, 1996
                  as Exhibit 4.(ii)(d)(12) to the Company's Form 10-Q dated
                  March 31, 1996).

**4.(ii)(c)(13)   Supplemental Indenture No. 1 relating to United States
                  Government Guaranteed Ship Financing Obligations, Independence
                  Series B, between Great Independence Ship Co. and the Bank of
                  New York, dated as of March 28, 1996 (filed on May 15, 1996 as
                  Exhibit 4.(ii)(d)(13) to the Company's Form 10-Q dated March
                  31, 1996).

**4.(ii)(c)(14)   Form of 2005 Note, Guarantee and Trustee's Authentication
                  Certificate Specimen Note as it relates to the United States
                  Government Guaranteed Ship Financing Obligation, Independence
                  Series B (filed on May 15, 1996 as Exhibit 4.(ii)(d)(14) to
                  the Company's Form 10-Q dated March 31, 1996).

**4.(ii)(c)(15)   Form of 2015 Bond, Guarantee and Trustee's Authentication
                  Certificate Specimen Bond as it relates to United States
                  Government Guaranteed Ship Financing Bond, Independence Series
                  B (filed on May 15, 1996 as Exhibit 4.(ii)(d)(15) to the
                  Company's Form 10-Q dated March 31, 1996).

**4.(ii)(c)(16)   Amendment No. 1 to Authorization Agreement between the United
                  States of America represented by the Secretary of
                  Transportation and the Bank of New York as Indenture Trustee
                  under the Trust Indenture between it and Great Independence
                  Ship Co. dated as of March 28, 1996 (filed on May 15, 1996 as
                  Exhibit 4.(ii)(d)(16) to the Company's Form 10-Q dated March
                  31, 1996).

**4.(ii)(c)(17)   Amendment No. 1 to Security Agreement relating to the United
                  States Government Guaranteed Ship Financing Obligation between
                  Great Independence Ship Co. and the United States of America
                  dated as of March 28, 1996 (the "Security Agreement") (filed
                  on May 15, 1996 as Exhibit 4.(ii)(d)(17) to the Company's Form
                  10-Q dated March 31, 1996).

**4.(ii)(c)(18)   Endorsement to $6,903,000 Promissory Note dated March 28, 1996
                  by and between Great Independence Ship Co. and the United
                  States of America (filed on May 15, 1996 as Exhibit
                  4.(ii)(d)(18) to the Company's Form 10-Q dated March 31,
                  1996).

**4.(ii)(c)(19)   Amendment No. 1 to Title XI Reserve Fund and Financial
                  Agreement between Great AQ Steamboat Co. and the United States
                  of America effective as of January 1, 1996 (filed on August
                  14, 1996 as Exhibit 4.(ii)(d)(19) to the Company's Form 10-Q
                  dated June 30, 1996).

   9.             Not applicable.

**10.(i)(a)(1)    Administrative Services Agreement by and between the Company
                  and Equity Group Investments, Inc. (filed on March 2, 1993 as
                  Exhibit 10.(i)(A) to Amendment No. 3 to the Company's
                  Registration Statement on Form S-1 (Registration No. 33-45139)
                  and incorporated herein by reference).

**10.(ii)(a)(1)   Preferential Assignment Agreement dated September 27, 1984, by
                  and between the Board of Commissioners of the Port of New
                  Orleans and the Company, including Assignment thereof and
                  Amendments thereto (filed on January 17, 1992 as Exhibit
                  10.(ii)(D)(2) to the Company's Registration Statement on Form
                  S-1 (Registration No. 33-45139) and incorporated herein by
                  reference).

**10.(ii)(a)(2)   Lease dated May 30, 1995 by and between Equity Office
                  Properties, Inc., as agent for beneficial owner, as Landlord,
                  and Great Hawaiian Properties Corporation, d/b/a American
                  Hawaii Cruises, as Tenant (filed on April 1, 1996 as Exhibit
                  10.(ii)(D)(3) to the Company's Form 10-K dated December 31,
                  1995).

   10.(ii)(a)(3)  First Amendment dated March 12, 1997 by and between Equity
                  Office Properties, Inc., as agent for beneficial owner, as
                  Landlord, and Great Hawaiian Properties Corporation, d/b/a
                  American Hawaii Cruises, as Tenant.

  10.(ii)(a)(4)   Assignment and Assumption of Lease dated January 1, 1998
                  between Great Hawaiian Properties Corporation, d/b/a American
                  Hawaii Cruises, as Assignor, and American Classic Voyages Co.,
                  as Assignee.

  10.(ii)(a)(5)   Second Amendment dated August 10, 1998 by and between Equity
                  Office Properties, Inc., as agent for beneficial owner, as
                  Landlord, and American Classic Voyages Co., as Tenant.



                                       51
<PAGE>   52

   10.(ii)(a)(6)  Lease dated October 16, 1998 by and between MFD Partners, as
                  Landlord, and American Hawaii Properties Corporation, as
                  Tenant.

**10.(iii)(a)(1)  Performance Management Objectives Bonus Plan (filed on January
                  17, 1992 as Exhibit 10.(iii)(A)(2) to the Company's
                  Registration Statement on Form S-1 (Registration No.
                  333-44225) and incorporated herein by reference).

**10.(iii)(a)(2)  Executive Bonus Plan (filed on January 17, 1992 as Exhibit
                  10.(iii)(a)(4) to the Company's Registration Statement on Form
                  S-1 (Registration No. 33-45139) and incorporated herein by
                  reference).

**10.(iii)(a)(3)  American Classic Voyages Co. S. Cody Engle Stock Option
                  Agreement (filed on January 17, 1992 as Exhibit 10.(iii)(A)(6)
                  to the Company's Registration Statement on Form S-1
                  (Registration No. 33-45139) and incorporated herein by
                  reference).

**10.(iii)(a)(4)  American Classic Voyages Co. Dividend Reinvestment and Common
                  Stock Purchase Plan (filed on June 22, 1994 as part of the
                  Company's Registration Statement on Form S-3 (Registration No.
                  33-80614) and incorporated herein by reference).

**10.(iii)(a)(5)  American Classic Voyages Co. 1992 Stock Option Plan (filed on
                  January 14, 1998 as part of the Company's Registration
                  Statement on Form S-8 (Registration No. 333-44225) and
                  incorporated herein by reference).

  10.(iii)(a)(6)  American Classic Voyages Co. Deferred Compensation Plan.

 **10.(iv)(a)(1)  Asset Purchase and Sale Agreement dated as of November 11,
                  1998 by and among The Delta Queen Steamboat Co., and Richard
                  C. Breeden as bankruptcy trustee of bankruptcy estate of the
                  Bennett Funding Group, Inc., Bennett Receivables Corporation,
                  Bennett Receivables Corporation II, Bennett Management &
                  Development Corporation, The Processing Center, Inc., Resort
                  Service Company, Inc., American Marine International, Ltd. and
                  Aloha Capital Corporation (filed as Exhibit 1 to the Company's
                  Form 8-K dated February 22, 1999 and incorporated herein by
                  reference).

 **10.(iv)(a)(2)  Master Shipbuilding Contract for Construction of Two Passenger
                  Vessels by and between Ingalls Shipbuilding, Inc. and Project
                  America, Inc. for Hulls No. 7671 and 7672, dated March 9,
                  1999.

                  Exhibit A - Shipbuilding Contract for Construction of One
                  Passenger Vessel by and between Ingalls Shipbuilding, Inc. and
                  Project America, Inc. for Hull No. 7671, dated March 9, 1999
                  (a substantially identical Shipbuilding Contract has been
                  entered into for hull no.7672, with a delivery date of January
                  2004). (filed as Exhibit 10 to the Company's Form 8-K dated
                  March 26, 1999 and incorporated herein by reference).

  11.             Not applicable.

  12.             Not applicable.

  13.             Not applicable.

  16.             Not applicable.

  18.             Not applicable.

  21.             Subsidiaries of the Company.

  22.             Not applicable.

  23.             Consent of KPMG LLP

  24.             Not applicable.

  27.             Financial Data Schedule.

  28.             Not applicable.



                                       52
<PAGE>   53

  99.(i)          Agreement by certain shareholders with the Company dated
                  February 22, 1999 regarding amendment of the Company's Amended
                  and Restated Certificate of Incorporation to increase the
                  number of authorized shares of common stock of the Company.

  99.(ii)         American Classic Voyages Amended and Restated 1995 Employee
                  Stock Purchase Plan financial statements as of and for the
                  year ended December 31, 1998.




**Previously filed.




                                       53